17 August 2017
Annual Report Update | Sector: Automobiles
Maruti Suzuki
BSE SENSEX
31,771
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9,897
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CMP: INR7,702
TP: INR8,819 (+15%)
Several initiatives to further deepen, build moats
Buy
Hybrids as a step towards full EV, supported by Suzuki’s Li-ion battery JV
MSILs FY17 annual report gives insights on MSILs approach to Electric Vehicle (EV) and
strategic investments in land, apart from update on other strategic initiatives. Also, MSIL
has further increased disclosures on Sustainability, which highlights its holistic approach
to business. Insights from FY17 annual report instills confidence in longevity of growth for
MSIL, as it deepens it existing moats and create new ones by a) further strengthening
distribution network, b) increase dealer viability through strategic investments in land for
dealerships, c) building loyalty as well as control residual value of MSIL used cars through
higher focus on True Value network and d) increase local capabilities in R&D. MSIL has
increased its dividend payout policy, with upper limit for the payout at 40%, higher than
30% earlier. Key highlights from MSIL’s FY17 annual report:
Stock Info
Bloomberg
Equity Shares (m)
52-Week Range (INR)
1, 6, 12 Rel. Per (%)
M.Cap. (INR b)
M.Cap. (USD b)
Avg Val, INRm
Free float (%)
MSIL IN
302.1
7920 / 4770
3/16/45
2,326.5
36.3
3653
43.8
Financials Snapshot (INR b)
Y/E Mar
2018E 2019E 2020E
Sales
806.0 953.5 1,100.3
EBITDA
119.2 153.4 177.4
Adj. PAT
83.4 111.3 128.4
Adj. EPS (INR)* 281.7 374.5 431.5
EPS Gr. (%)
13.3
32.9
15.2
BV/Sh. (INR)
1,371 1,620 1,912
RoE (%)
20.1
22.8
22.2
RoCE (%)
28.0
30.8
30.1
P/E (x)
27.3
20.6
17.9
P/CE (x)
20.5
16.0
14.0
*Consolidated.
Shareholding pattern (%)
As On
Jun-17 Mar-17 Jun-16
Promoter
56.2
56.2
56.2
DII
11.8
12.3
13.6
FII
25.0
24.6
23.6
Others
7.0
7.0
6.6
FII Includes depository receipts
Hybrid vehicles – stepping stone toward electric vehicles:
MSIL will introduce
EVs as soon as it sees signs of readiness at the customer end. In interim, it is
focusing on hybrid technology, and sees it as a step toward electric mobility. Li-
ion battery plant, which is being set-up by JV between Suzuki, Toshiba and
Denso, would help to reduce cost of hybrids and EVs. Also, global alliance with
Toyota would also address future technologies issues.
Strategic investments in land – creating another moat:
It has initiated
strategic investments in land at prominent and upcoming locations for
expansion of sales and service outlets (to improve viability of new & existing
dealership). In FY17, 77 land parcels were identified, which are at various
stages of the commercial and regulatory approval process. In FY18, it is
targeting to acquire 400-500 sites.
Distribution – further strengthening its network:
Based on MSIL’s assessment,
it would require at least 3,500 sales outlets (from ~2,300 as of Mar-17) and
~5,000 workshops (from ~3,300) over the next few years. Along with network
expansion, MSIL is focusing on upgrading the quality of network through better
infrastructure and superior customer experience.
True Value – revamping used-car business to target new first-time car buyers:
MSIL is implementing lessons from the successful NEXA channel to upgrade the
True Value channel. Unlike the past, it is planning to set-up 150 independent
True Value outlets by Mar-18, which will be expanded to 300 outlets in the
next few years. It already has 1,184 True Value outlets (added 177 outlets in
FY17). It sold ~350k used cars in FY17, with plans to sell ~600k by FY20.
Valuations & view:
We remain positive on MSIL, considering a) multi-year
favorable product lifecycle, b) improvement in product mix (increasing share of
premium products) aiding realizations and consequently margins, c) reducing
JPY exposure, d) lower capex intensity, e) improvement in FCF conversion and
f) high FCF generation & sharp improvement in RoIC. We value MSIL at 25x Jun-
19 Core EPS - at 35% premium 5yr/10yr LPA. The stock trades at 27.3x/20.6x
FY18E/19E EPS. Maintain Buy with a TP of INR8,819 (~25x Jun-19 Core EPS +
INR1,383 cash/share). MSIL is one of our top-picks in the Auto sector.
Jinesh Gandhi
(Jinesh@MotilalOswal.com); +91 22 6129 1524
Deep A Shah
(Deep.S@MotilalOswal.com); +91 22 30784701
Motilal Oswal research is available on www.motilaloswal.com/Institutional-Equities, Bloomberg, Thomson Reuters, Factset and S&P Capital.
Investors are advised to refer through important disclosures made at the last page of the Research Report.

Maruti Suzuki
Stock Performance (1-year)
Hybrid vehicles – stepping stone toward electric vehicles
MSIL aims to ensure that it is aligned with the government’s vision of 100% e-
vehicle nation, and believes that electrification is the way forward for India.
MSIL will introduce EVs as soon as it sees signs of readiness at the customer end.
In endeavor to improve fuel efficiency, MSIL is focusing on hybrid technology,
and sees it as a step toward electric mobility. As a starting point for developing
an ecosystem for EVs, a lithium-ion battery pack plant is also being established
by Suzuki in a JV with Toshiba and Denso. This would help to reduce cost of
hybrids and EVs.
Further, a partnership has been forged between Suzuki Japan and Toyota Japan
to deal with issues of future technologies. Toyota is the global leader in the
number of patents held for hybrid and EV technology.
Strategic investments in land – creating another moat
Based on MSIL’s assessment, it would require at least 3,500 sales outlets (from
~2,300 as of Mar-17) and ~5,000 workshops (from ~3,300) over the next few
years.
MSIL sees potential threat to customer satisfaction in future if the dealerships
need to relocate to a remote location due to unaffordable land lease rentals. To
obviate this risk and support dealers, it has initiated strategic investments in
land at prominent and upcoming locations for expansion of sales and service
outlets.
For this, it has set-up a separate realty business function, with professionals
from the realty sector. The acquired land will be allocated to dealers on a
reasonable long- term lease.
In FY17, 77 land parcels were identified, which are at various stages of the
commercial and regulatory approval process. In FY18, it is targeting to acquire
400-500 sites.
Distribution – further strengthening its network
Based on MSIL’s assessment, it would require at least 3,500 sales outlets (from
~2,300 as of Mar-17) and ~5,000 workshops (from ~3,300) over the next few
years. Along with network expansion, MSIL is focusing on upgrading the quality
of network through better infrastructure and superior customer experience.
In FY17, MSIL added 365 outlets (to 2,312 outlets), including 125 Nexa outlets
(to 252 outlets) and launched commercial channel with 40 outlets (for Super
Carry LCV).
Apart from service network expansion, MSIL is taking several initiatives to take
after-sales service close to the customer. MSIL added 215 new dealer workshops
during the year, taking the network to 3,200 workshops across 1,556 cities.
In addition, a fleet of 1,423 Maruti Mobile Support vehicles offered doorstep car
service and maintenance to over 94,000 customers on an average every month.
In all, ~1.45m customers were provided after-sales service every month, on an
average. Further, it conducted ~19,662 service camps across India, reaching
nearly 709k customers.
In order to improve service time, it expanded the number of ‘Express Bays,’
which offer the facility of faster service and early delivery of vehicles. At the end
17 August 2017
2

Maruti Suzuki
of the year, 1,659 workshops were operating 7 days a week; 930 workshops for
more than 12 hours a day; and 76 workshops on a two-shift basis.
Exhibit 1: MSIL’s distribution network getting stronger
Existing Dealer (Ex Nexa)
Nexa
Commercial
Total Sales outlet
2,312
1,947
1,619
1,100
1,100
FY12
1,204
1,310
1,619
127
252
40
1,204
FY13
1,310
1,820
2,020
FY14
FY15
FY16
FY17
Source: Company, MOSL
Exhibit 2: Sales outlets cover over 1,650 cities
Existing Dealer (Ex Nexa)
Dealer - Cities Covered
1,652
1,471
1,290
Exhibit 3: Service outlets cover 1,570 cities
Service Outlets
1,408
1,423
1,445
Serivce - Cities Covered
1,570
1,506
1,471
801
874
980
FY12
FY13
FY14
FY15
FY16
FY17
FY12
FY13
FY14
FY15
FY16
FY17
Source: Company, MOSL
Source: Company, MOSL
True Value – revamping used-car business to target new 1
st
time car buyers
The idea is to create delight
for these used car buyers
and give them the same
experience as a new car and
get them hooked on to the
Maruti Suzuki brand for life.
That is what this revamp of
True Value is aimed at. The
market is growing faster
than new cars.
RS Kalsi, Executive Director
(Sales & Mktg), MSIL
The pre-owned car market is largely unorganized and it presents a vast
opportunity to serve new first-time car buyers – the size of used car market is
estimated at ~3.6m units as of FY17 (v/s ~3m new cars).
MSIL is implementing lessons from the successful NEXA channel to upgrade the
True Value channel, with objective of improving customer experience and
broadening addressable customer base.
It intends to induct first-time buyers into True Value to build loyalty toward
Maruti, as 70-75% of True Value customers upgrade to new vehicles within 1-2
years.
Unlike the past, MSIL is planning to set-up 150 new True Value outlets by Mar-
18, which will be expanded to 300 outlets in the next few years. These new True
Value outlets would be standalone, and not attached with new car showrooms.
It already has 1,184 True Value outlets (added 177 outlets in FY17). True Value
sold ~350k used cars in FY17, and the target is to sell ~600k by FY20.
17 August 2017
3

Maruti Suzuki
Exhibit 5: Revamped True Value outlets to be independent
units
Exhibit 4: True Value outlets growing rapidly
TrueValue Outlets
1,007
1,184
867
409
450
600
FY12
FY13
FY14
FY15
FY16
FY17
Source: Company, MOSL
Source: Company, MOSL
Rohtak R&D center to increase India’s contribution to R&D
Rohtak R&D center has augmented MSIL’s capability in vehicle design and
development, and would enable MSIL to meet the specific needs of Indian
customers.
Rohtak R&D center, which has 1,400 engineers, is an integrated facility with 33
different test tracks, requisite testing and safety labs, helping it to
conceptualize, design and develop new products and upgrade the existing
portfolio at a faster pace. It would also help in testing and validating products to
meet newer regulations.
While India will move to new safety and emission regulations over the next 2-3
years, six of MSIL models (Vitara Brezza, Ignis, Baleno, Ertiga, Ciaz and S-Cross)
are already certified and approved for advanced vehicle safety regulations,
ahead of the deadline.
In FY17, MSIL filed for 63 patents, and 44 technical papers were presented at
various national and international conferences.
Exhibit 6: R&D investment growing slower than sales
R&D Capitalized
5,146
3,717
1.04
2,226
1491
1.18
2613
2,533
R&D Expensed
6,576
2,265
1.5
4,311
6,560
3,340
1.3
3220
Total R&D
5,935
2,646
1.0
3289
% of Sales
6,404
2,913
0.9
3491
Source: Company, MOSL
Exports – Improved mix in a challenging external environment
MSIL exported ~124k units (flat volumes) in FY17, as the impact of an adverse
external environment in certain markets was offset by the launch of Baleno.
Exports to Latin America and Africa were impacted by political or economic
instability. Drop in volumes in these markets was compensated by growth in
17 August 2017
4

Maruti Suzuki
European markets, supported by new launches. Europe now contributes ~36%
of exports (v/s 6% in FY16).
It launched models like Baleno, S-Cross, Ignis and Super Carry in export markets.
Export mix improved considerably, driven by Baleno (~40% of exports).
Exhibit 8: …as weakness in traditional markets was offset by
ramp-up in Europe led by Baleno
Non-Europe
34
23
28
Europe
13
6
26
Exhibit 7: Exports were flat in FY17…
Exports (units)
11.2
10.3
8.8
Export (% of Total Vols)
9.4
8.7
7.9
66
127,379
FY12
120,388
FY13
101,352
FY14
121,701
FY15
123,850
FY16
124,062
FY17
77
72
87
94
74
Source: Company, MOSL
Source: Company, MOSL
Exhibit 9: Export product mix improved sharply in FY17
FY16
Others Baleno
9
11
Ertiga
7
DZIRE
6
Celerio
11
Swift
12
Source: Company, MOSL
Alto
44
FY17
6
Celerio
8
Others
14
Ertiga
5
DZIRE
Baleno
40
Swift
11
Alto
17
Source: Company, MOSL
Continued focus on cost control
MSIL saved INR335m by localization and INR1.9b by implementing Value
Analysis/Value Engineering (VA/VE) proposals.
The employees’ suggestion scheme, ‘Sujhav Sangrehika’, contributed new ideas
for efficiency and cost optimization. In FY17, 737k suggestions were generated,
resulting in savings of INR1.8b.
Further, it brought down energy cost for in-house manufacturing operations by
INR205m.
For outbound logistics, MSIL primarily uses roads currently. In FY17, it took steps
to increase the share of railways in the medium term. It worked with the Indian
Railways to bring down transportation time substantially. It has also started
utilizing railways to transport vehicles to the North-East region.
MSIL has outlined a path to “Zero- defect”. At the core of it lies the focus on
quality, from product design to customer interface at the sales and service
network. Enhancing operations on shop-floors and strengthening capability of
suppliers are integral to this effort.
17 August 2017
5

Maruti Suzuki
Exhibit 10: Focus on improvement in yields across value chain
Vendor participation in yield improvement activities
71
75
77
41
45
57
69
FY11
FY12
FY13
FY14
FY15
FY16
FY17
Source: Company, MOSL
Sustainability – efforts to make operations more environmentally conscious
Since 2005, MSIL has improved CO2 emissions for its entire fleet (weighted
average) by 20%. This has been partly aided by increasing acceptance of
alternate fuel (LPG & CNG) and hybrid vehicles. In the last 10 years, it has
cumulatively sold 763k such vehicles, saving ~697 tons of CO2 (tCO2) emissions.
All vehicles offered by MSIL are compliant to European End-of-Life Vehicle (ELV)
Directive, which means that vehicles are free from hazardous substances and
over 85% materials used can be recycled.
100% of MSIL’s suppliers have signed Green Procurement Guidelines meeting
European Union’s End-of-Life Vehicle Standards for auto parts and components.
Also, 86% of supplier plants are ISO 14001 certified, adopting environmentally
conscious practices in supply chain.
MSIL sources ~95% of its energy requirement from cleaner sources (natural
gas/solar).
Exhibit 12: Weighted average CO2 percentage improvement
for entire fleet (Indexed to base year FY06)
100 99.2 98.5 97.2 96
92.8 91.9 89.4
85.5 84.8 80.8
80
Exhibit 11: Cumulative CO2 avoidance from usage of
alternate fuel vehicles
Cum. tCO2 reduction due to Alt vehicles
Cum. Sales of Alt Fuel vehicles ('000 units)
763
382
437
502
604
800000
600000
400000
200000
0
62 113
260
168 219
322
Source: Company, MOSL
Source: Company, MOSL
17 August 2017
6

Maruti Suzuki
Exhibit 13: Total volume of reused water after recycling
constitutes 60% of total water
Exhibit 14: Greening of supply chain – All tier-1 suppliers
have signed the Green Procurement Guidelines
Source: Company, MOSL
Source: Company, MOSL
Others highlights
MSIL has changed its dividend payout policy, with upper limit for the payout at
40%, higher than 30% earlier.
MSIL has been #1 in J.D. Power Customer Satisfaction Index study for the 17
th
year in a row. High customer satisfaction with after-sales service has been
contributing to high referral and repurchase of new vehicles.
Vitara Brezza won over 25 prominent awards from automobile writers and
experts, including ICOTY (Indian Car of the Year).
The part and accessories business registered growth of 17.7% during the year.
MSIL introduced a vehicle personalization initiative, i Create, providing
customers with several attractive alternatives to personalize their cars. This
initiative has been launched first in Vitara Brezza.
Work for a second assembly plant in Hansalpur has already started.
Incrementally, SMG had also committed investment for an engine and
transmission line in Hansalpur.
The share of vehicles bought on loan was 79.8%, the highest in the last 10 years.
The company’s sales to fleet operators stood at 83,346 units in FY17, growth of
34% YoY, on the back of good demand from taxi aggregators.
Exhibit 15: Forex sensitivity - Impact on P&L for the year (INR m)
For 10% INR depreciation against
JPY
USD
EUR
FY17
-1,494
-253
-213
% of EPS
-2.0
-0.3
-0.3
FY16
-1,632
83
-161
% of EPS
-3.0
0.2
-0.3
Source: Company, MOSL
17 August 2017
7

Maruti Suzuki
Exhibit 16: MSIL’s share of diesel stable, despite decline in diesel share for the industry
Industry
48
33
13
34
15
35
19
36
18
24
37
Maruti
58
53
32.3
48
30
44.1
30
40.5
31
Source: Company, MOSL
Exhibit 17: MSIL’s finance penetration at highest levels
% of domestic sales
80
72
68
74
75
77
Exhibit 18: MSIL’s sales to taxi segment grew 34% YoY
Sales to taxi segment
Taxi sales as a % of dom. PV sales
5.8
4.8
3.4
40,300
FY12
FY13
FY14
FY15
FY16
FY17
FY15
62,199
FY16
83,346
FY17
Source: Company, MOSL
Source: Company, MOSL
Exhibit 19: Spare sales/service income can potentially grow faster under GST due to shift away from unorganized sector
Spare Parts (INR b)
66
Growth (%)
Service Income (INR b)
31
11
47
19
17
0
1.7
2.3
3.1
4.1
-17
3.9
38
32
3.4
0
24
40
5
42
14
Growth (%)
56
65
Note: Ind-AS from FY16 onwards & hence distorted FY16 growth
Source: Company, MOSL
Source: Company, MOSL
Exhibit 20: MSIL’s working capital continues to improve
No. of Days of Inventory
No. of Days of Creditors
No. of Days of Debtors
Cash Conversion cycle (Days)
FY12
18
34
10
-6.3
FY13
15
35
12
-7.6
FY14
14
41
12
-14.8
FY15
20
41
8
-13.7
FY16
20
47
8
-18.7
FY17
18
45
6
-21.0
Source: Company, MOSL
17 August 2017
8

Maruti Suzuki
Exhibit 21: MSIL has seen higher increase in contractual/temporary manpower
FY12
Asst Supervisor & above
Associates/technicians
Trainees
Total Regular manpower
Apprentices
Contractual/Temporary
Total Manpower
Total Contract Manpower
Contract Manpower as % of Total
Manpower
4178
3098
1872
9148
625
9081
18854
9706
51.5
FY13
4648
3029
1744
9421
936
8554
18911
9490
50.2
FY14
5878
5222
1447
12547
1099
6578
20224
7677
38.0
FY15
6617
5354
814
12785
1164
8527
22476
9691
43.1
FY16
6981
5553
725
13259
1276
10626
25161
11902
47.3
FY17
7583
5699
896
14178
2548
12643
29369
15191
51.7
Source: Company, MOSL
Valuation and view
Multi-year favorable product lifecycle for MSIL:
We believe MSIL could emerge
as the biggest beneficiary of the impending demand recovery, considering its
stronghold in the worst-impacted entry-level segment as well as favorable
product lifecycle. MSIL’s new launches targeted toward filling gaps in its
portfolio are likely to improve its overall product mix. We believe MSIL would
gain market share further, driven by 13.8% volume CAGR over FY17-19E. This,
coupled with an improvement in mix and a reduction in discounts, would drive
revenue CAGR of ~18.4% over FY17-19E.
EBIT margin bottoms out in 1QFY18 with worst of cost pressures and Gujarat
plant impact behind:
We believe MSIL’s EBIT margin will see continuous
improvement from 1QFY18 level of ~9.4%, as the worst of commodity cost
pressures and Gujarat plant impact is behind us. MSIL’s EBIT margin is estimated
to expand from 9.4% in 1QFY18 to ~12.7% in FY19, due to a) ramp-up at Gujarat
plant, b) discounts reduction with demand revival, b) mix improvement, c)
benefits of operating leverage, and d) favorable JPY/INR.
Strong margin, asset-light model to drive strong FCF generation, RoE
improvement:
The Gujarat plant arrangement with its parent Suzuki will make
MSIL’s business asset-light, allowing management to focus more on marketing.
We expect strong cumulative FCF generation of ~INR127b over FY18-19, after
budgeting for annual capex of ~INR45b. RoE is estimated to improve 250bp to
~22.8%, while RoIC is likely to improve ~29.4pp to ~90.2% by FY19.
Structural improvement in business to drive further re-rating:
All
business/financial parameters have substantially improved over the last few
years, and are expected to strengthen further (refer Exhibit 22 and 23). Business
parameters such as industry consolidation, market share improvement, reduced
JPY exposure and improving share of premium products have improved MSIL’s
positioning considerably. Further, we see headroom for further improvement in
dividend payout. Consequently, we expect the financial parameters to exhibit
improvements over the next five years. In summary, the moat for MSIL is
expected to strengthen further, which should lead to re-rating of the stock.
Buy with TP of ~INR8,819:
We remain positive on MSIL, considering a) multi-
year favorable product lifecycle, b) improvement in product mix (increasing
share of premium products) aiding realizations and consequently margins, c)
9
17 August 2017

Maruti Suzuki
reducing JPY exposure, d) lower capex intensity, e) improvement in FCF
conversion and f) high FCF generation and sharp improvement in RoIC. We value
MSIL at 25x Jun-19E core EPS, at ~35% premium 5Y/10Y LPA. The stock trades at
27.3x/20.6x FY18E/19E EPS. Maintain
Buy
with a target price of INR8,819 (~25x
Jun-19 Core EPS + ~INR1,383 cash/share). MSIL is one of our top picks in the
auto sector.
Exhibit 22: Paradigm shift in every operating parameters
Parameters
New Entrants (# of players)
Market share (%)
Rural contribution (%)
Contribution from premium segment
Gross Margins (%)
EBITDA Margins (%)
Net JPY Exposure (% of sales)
R&D (% of sales)
Capex (% of sales)
FCF conversion (FCF as % of PAT)
RoE (%)
Dividend Payout (%)
1 year forward PE (x)
2010-16
4
41
27
0
26
11.5
18
1
7
57
16
16
18.6
2017-22
1
45-48
38-40
25
32-34
16
<10
1.5-2
4
~95
23
23-25
20-25
Exhibit 23: Despite superior positioning v/s consumer durable companies, MSIL trades at
25-50% discount
Voltas Whirlpool
Category
Category Penetration (% of Population)
Category Growth 5 yrs (FY11-16, CAGR %)
Market Share (%) *
Level of consolidation (Sh. of Top-5 players) *
Gross Fixed Asset Turnover (x)
Working cap cycle (Days)
ROIC
ROCE
ROE
Valuation
PE
FCF Yield
A/C
4
7.6
22
75
13
37
45.6
16.9
18.1
29.3
2.9
Fridge
31
17
12
94
3.5
-1
18.6
22.9
31.0
2.2
Crompton
Havells Maruti
Consumer
Fans
Fans
PV
85
85
2
11.3
11.3
9
20
12
47
56
56
85
9
4
2.2
-8
27
-57
55
68
72
39
26.2
31
90
25.4
23
31.7
5
33.4
3.6
20.2
5
* Including unorganized Source: MOSL, Company
Exhibit 24: MSIL 1Y forward core P/E (x) near highs
31
22
13
4
Core PE (x)
5 Yrs Avg
10 Yrs Avg
27.8
Exhibit 25: MSIL 1Y forward P/B (x) at premium to LPA
5.8
5.0
4.2
P/B (x)
5 Yrs Avg(x)
10 Yrs Avg(x)
5.2
18.6
18.0
3.4
2.6
1.8
1.0
2.9
2.8
Source: MOSL
Source: MOSL
17 August 2017
10

Maruti Suzuki
Exhibit 26: Comparative valuation
Auto OEM's
Bajaj Auto
Hero MotoCorp
TVS Motor
M&M
Maruti Suzuki
Tata Motors
Ashok Leyland
Eicher Motors
Auto Ancillaries
Bharat Forge
Exide Industries
Amara Raja Batteries
BOSCH
CMP Rating
TP
P/E (x)
(INR)*
(INR) FY18E FY19E
2,851 Buy
3,281
20.8
17.4
4,018 Neutral 3,818
21.2
20.2
586 Buy
612
40.7
24.7
1,369 Buy
1,618
20.0
16.6
7,702 Buy
8,819
27.3
20.6
389 Buy
542
17.3
6.5
105 Buy
118
20.2
15.0
30,590 Buy
35,854
35.9
28.0
1,188 Buy
1,353
207 Buy
269
813 Buy
986
22,293 Neutral 21,994
32.6
22.5
28.8
40.7
23.5
18.8
21.4
31.6
EV/EBITDA (x)
FY18E FY19E
15.0
12.4
13.8
13.2
26.0
16.6
14.3
12.2
17.2
13.4
4.4
2.6
10.1
7.7
27.6
23.7
18.0
14.0
15.8
25.5
14.3
11.8
11.7
19.9
RoE (%)
FY18E FY19E
22.2
24.0
34.6
31.5
25.7
33.6
13.9
14.9
20.1
22.8
12.3
26.6
23.2
27.0
37.0
35.4
19.2
14.1
17.3
18.0
22.8
15.0
19.9
20.7
Div Yield (%)
FY18E FY19E
2.3
2.8
2.2
2.2
0.5
0.8
1.5
1.5
1.1
1.3
0.1
0.1
1.9
2.2
0.5
0.6
0.7
1.1
0.5
0.8
0.9
1.1
0.7
1.1
EPS CAGR (%)
FY17-19E
11.2
8.5
42.1
23.2
22.7
73.7
23.7
33.6
39.0
16.3
16.4
22.1
Source: MOSL
17 August 2017
11

Maruti Suzuki
Story in charts: Expect EPS CAGR of ~22.7% over FY17-19E
Exhibit 27: Market leader in most segments
FY13
Mini
Compact
Compact-Sedan
Mid-Size
UV1
Domestic PV
75.4
34.2
80.6
2.7
27.4
39.4
FY14
76.7
37.6
63.8
2.2
21.1
42.1
FY15
81.4
43.1
53.7
15.4
21.4
45.0
FY16
79.8
42.0
58.1
25.2
25.6
46.8
FY17
67.8
46.2
54.8
32.8
38.2
47.4
(10.8)
FY12
FY13
FY14
FY15
FY16
FY17 FY18E FY19E FY20E
Source: Company, MOSL
3.3
(1.4)
Exhibit 28: Expect ~13% volume CAGR over FY17-19E, led by
ramp-up in Guj. plant and product refreshes
Total volumes ('000 units)
11.9
10.6
9.8
Growth (%)
13.6
13.0
13.6
Source: Company, MOSL
Exhibit 29: MSIL to operate at peak utilization
Capacity ('000 units)
95
104
84
109
102
90 93
86
Cap. Util (%) - RHS
103
95 98 94
Exhibit 30: Mix to improve in favor of premium products
over next couple of years
Upto 400k
Price 600-800k
2
11
22
1
23
23
52
FY13
0
24
24
52
FY14
3
23
26
47
FY15
6
26
23
44
FY16
Price 400-600k
Price 800k and above
6
34
20
40
5
40
16
39
5
39
17
39
76
65
FY12
Source: Company, MOSL
FY17E FY18E FY19E
Source: Company, MOSL
Exhibit 31: JPY/INR exposure to reduce gradually
JPY/INR Exposure (%) of sales
20
18
16
11
10
8
Exhibit 32: Discounts to moderate over next two years
Discounts (INR/Car)
4.0
3.8
as a % of Realizations
5.0
4.7
4.5
3.8
3.3
3.3
3.3
3.2
2.8
At constant currency
Source: Company, MOSL
Source: Company, MOSL
17 August 2017
12

Maruti Suzuki
Exhibit 33: Fixed cost as % of sales
Fixed Cost as % Sales
7.7%
8.6% 8.6%
9.7%
8.9%
8.7% 8.0%
13.3
9.7
7.1
22
9.7
Exhibit 34: EBITDA margins and EBITDA per car
EBITDA (INR '000/car)
13.4
EBITDA Margins (%)
15.4 15.4 14.8 16.1
5.5% 5.5%
7.1%
11.8
39
28
36
45
52
62
67
66
76
Source: Company, MOSL
Source: Company, MOSL
Exhibit 35: EPS (INR) and growth in EPS
88.0
EPS
Growth (%) - RHS
44.5 38.4
12.3
Exhibit 36: Dividend Payout (%) and Cash Balance (INR b)
Cash (INR b)
Dividend Payout (%)
37.1 37.0
32.6
39.9
46.1
-21.1
-7.8
86.7 79.9
56.6
-29.2
16.3
33.4
33.5
9.7
8.1
11.0
15.4
12.2
15.2
24.5
23.7
79.2 92.1 122.9177.6245.8276.1368.5
Source: MOSL, Company
Source: MOSL, Company
Exhibit 37: Despite significant capex, FCF to remain strong
(INR b)
FCF conversion (FCF as % of PAT)
7.7
4.9
79
-6
8.3 8.7 8.0
Capex (% of sales)
Exhibit 38: ROE v/s ROIC (%)
100
80
ROE
ROIC
6.5
6.3
5.6
4.7 4.1
4.6 5.0
109 93
58
75
70
60
40
20
0
43
-25
24
51
85
Source: Company, MOSL
Source: Company, MOSL
17 August 2017
13

Maruti Suzuki
Revenue Model - Snapshot
000 units
A1 (M800)
Growth (%)
% of Dom vols
MPV (Vans)
Growth (%)
% of Dom vols
A2 (other hatchbacks)
Growth (%)
% of Dom vols
A3 (Dzire, Ciaz)
Growth (%)
% of Dom vols
Uvs (Ertiga, Compact SUV)
Growth (%)
% of Dom vols
Total Domestic
Growth (%)
% of Total vols
Exports
Growth (%)
% of Total vols
Total Volumes
Growth (%)
ASP (INR 000/unit)
Growth (%)
Net Sales (INR b)
Growth (%)
FY12
23
2.3
144
-10.3
14.3
704
-12.9
69.9
128
-2.4
12.7
7
15.2
0.6
1,006
-11.2
88.8
127
-8
11
1,134
-10.8
290
-0.1
369
25
FY13
18
1.7
111
-23.3
10.5
667
-5.2
63.5
176
37.6
16.8
79
1,113.7
7.5
1,051
4.4
89.7
120
-5
10
1,171
3.3
314
8.1
356
-4
FY14
17
1.6
102
-7.6
9.7
672
0.7
63.8
202
14.4
19.1
61
-22.8
5.8
1,054
0.2
91.2
101
-16
9
1,155
-1.4
372
18.5
436
22
FY15
0
0.0
129
26.3
11.0
730
8.6
62.3
244
20.9
20.8
68
11.6
5.8
1,171
11.1
90.6
122
20
9
1,292
11.9
379
1.9
438
0
FY16
0
0.0
143
11.2
11.0
779
6.8
59.7
288
18.3
22.1
94
38.4
7.2
1,305
11.5
91.3
124
2
9
1,429
10.6
387
2.0
500
14
FY17
1
0.1
152
6.0
10.5
832
6.7
57.6
264
-8.4
18.3
196
107.3
13.6
1,445
10.7
92.1
124
0
8
1,569
9.8
403
4.1
575
15
FY18E
6
0.4
164
8.0
9.8
958
15.2
57.4
295
11.6
17.7
246
25.9
14.8
1,670
15.6
93.1
124
0
7
1,794
14.4
434
7.7
680
18
FY19E
9
0.4
172
5.0
9.1
1,107
15.6
58.3
336
14.0
17.7
274
11.3
14.4
1,899
13.7
93.5
132
6
6
2,031
13.2
449
3.6
806
18
FY20E
10
0.5
185
7.5
8.6
1,235
11.5
57.0
386
14.6
17.8
349
27.1
16.1
2,164
14.0
93.9
140
6
6
2,304
13.5
469
4.5
954
18
17 August 2017
14

Maruti Suzuki
Financials and Valuations
Income Statement
Y/E March
Net Op Income
Change (%)
EBITDA
EBITDA Margins (%)
Depreciation
EBIT
EBIT Margins (%)
Interest
Other Income
Non-recurring Expense
Def Revenue Exp. / Others
PBT
Tax
Effective tax Rate (%)
PAT
Change (%)
% of Net Sales
Adj. PAT
Change (%)
2015
499,706
14.1
67,129
13.4
24,703
42,426
8.5
2,060
8,316
0
0
48,682
11,570
23.8
37,112
33.4
7.6
37,112
33.4
2016
575,381
15.1
88,844
15.4
28,202
60,642
10.5
815
14,610
0
0
74,437
20,794
27.9
53,643
44.5
9.5
53,643
44.5
2017
680,348
18.2
104,710
15.4
26,021
78,689
11.6
894
22,798
1,180
0
99,413
26,036
26.2
73,377
36.8
11.0
74,248
38.4
2018E
806,050
18.5
118,137
14.7
28,393
89,744
11.1
1,100
27,738
0
0
116,382
33,751
29.0
82,631
12.6
10.4
82,631
11.3
2019E
953,510
18.3
152,094
16.0
32,201
119,893
12.6
1,050
32,385
0
0
151,229
40,832
27.0
110,397
33.6
11.8
110,397
33.6
(INR Million)
2020E
1,100,250
15.4
175,908
16.0
35,737
140,170
12.7
1,000
35,233
0
0
174,403
47,089
27.0
127,314
15.3
11.8
127,314
15.3
Balance Sheet
Y/E March
Share Capital
Reserves
Net Worth
Loans
Deferred Tax Liability
Capital Employed
Application of Funds
Gross Fixed Assets
Less: Depreciation
Net Fixed Assets
Capital WIP
Investments
Curr.Assets, Loans
Inventory
Sundry Debtors
Cash & Bank Balances
Loans & Advances
Others
Current Liab. & Prov.
Sundry Creditors
Provisions
Net Current Assets
Appl. of Funds
E: MOSL Estimates
2015
1,510
252,709
254,219
1,802
884
256,905
147,111
26,989
120,122
18,169
139,514
74,809
26,859
11,157
183
2,639
33,971
95,709
84,106
11,603
-20,900
256,905
2016
1,510
297,332
298,842
774
1,943
301,559
153,218
28,118
125,100
10,069
199,322
84,909
31,321
13,222
391
1,744
38,231
117,841
105,748
12,093
-32,932
301,559
2017
1,510
360,201
361,711
4,836
4,640
371,187
186,558
53,666
132,892
12,523
282,284
82,234
32,622
11,992
131
1,216
36,273
138,746
126,001
12,745
-56,512
371,187
2018E
1,510
411,968
413,479
4,836
4,640
422,955
234,081
82,059
152,022
10,000
282,284
138,211
39,750
17,667
43,305
1,216
36,273
159,562
141,704
17,858
-21,351
422,955
2019E
1,510
486,055
487,566
4,836
4,640
497,042
279,081
114,260
164,821
10,000
282,284
221,263
47,022
20,899
115,853
1,216
36,273
181,326
159,884
21,442
39,937
497,042
(INR Million)
2020E
1,510
573,429
574,939
4,836
4,640
584,415
324,081
149,997
174,084
10,000
282,284
320,756
54,259
24,115
204,893
1,216
36,273
202,708
177,975
24,733
118,048
584,415
17 August 2017
15

Maruti Suzuki
Financials and Valuations
Ratios
Y/E March
Basic (INR)
Adjusted EPS
EPS Growth (%)
Consol EPS
Cash EPS
Book Value per Share
DPS
Div. payout (%)
Valuation (x)
Consol. P/E
Cash P/E
EV/EBITDA
EV/Sales
P/BV
Dividend Yield (%)
FCF Yield (%)
Profitability Ratios (%)
RoIC
RoE
RoCE
Turnover Ratios
Debtors (Days)
Inventory (Days)
Creditors (Days)
Work. Cap. (Days)
Asset Turnover (x)
Leverage Ratio
Debt/Equity (x)
2015
122.9
33.4
126.0
207.8
842
25.0
24.5
61.1
37.1
32.6
4.5
9.2
0.3
2016
177.6
44.5
182.0
275.3
989
35.0
23.7
42.3
28.0
23.9
3.8
7.8
0.5
2.5
39.9
18.0
25.0
8
23
100
-69
1.9
0.0
2017
245.8
38.4
248.6
334.8
1,197
75.0
37.1
31.0
23.0
19.6
3.1
6.4
1.0
3.0
60.9
20.3
27.3
6
21
98
-72
1.8
0.0
2018E
276.1
12.3
281.7
375.7
1,371
85.0
37.0
27.3
20.5
16.8
2.5
5.6
1.1
2.1
69.3
20.1
28.0
7
21
92
-64
1.9
0.0
2019E
368.5
33.5
374.5
481.1
1,620
100.0
32.6
20.6
16.0
12.6
2.1
4.8
1.3
3.4
90.2
22.8
30.8
7
21
88
-60
1.9
0.0
2020E
425.0
15.3
431.5
549.8
1,912
110.0
31.1
17.9
14.0
10.4
1.7
4.0
1.4
4.1
105.6
22.2
30.1
7
21
85
-56
1.8
0.0
26.7
14.6
19.8
8
23
88
-57
1.9
0.0
Cash Flow Statement
Y/E March
Profit before Tax
Interest
Depreciation
Direct Taxes Paid
(Inc)/Dec in WC
Other Items
CF from Oper.Activity
(Inc)/Dec in FA
Free Cash Flow
(Pur)/Sale of Invest.
CF from Inv. Activity
Change in Networth
Inc/(Dec) in Debt
Interest Paid
Dividends Paid
CF from Fin. Activity
Inc/(Dec) in Cash
Add: Op. Balance
Closing Balance
2015
48,682
2,060
24,703
-10,407
7,457
-9,288
63,207
-31,487
31,720
-12,613
-44,100
0
-13,282
-2,098
-4,241
-19,621
-514
697
183
2016
74,437
815
28,202
-19,099
14,631
-14,141
84,845
-26,327
58,518
-45,947
-72,274
0
-2,353
-921
-9,090
-12,364
207
183
390
2017
99,413
894
26,021
-23,173
21,940
-22,248
102,847
-33,723
69,124
-58,092
-91,815
0
2,527
-1,095
-12,725
-11,293
-261
391
130
2018E
117,480
1,100
28,393
-34,069
8,124
-27,738
93,290
-45,000
48,290
27,738
-17,262
0
0
-1,100
-30,864
-31,964
44,064
131
44,195
2019E
152,492
1,050
32,201
-41,173
11,268
-32,385
123,453
-45,000
78,453
32,385
-12,615
0
0
-1,050
-36,310
-37,360
73,478
44,196
117,674
(INR Million)
2020E
175,863
1,000
35,737
-47,483
10,948
-35,233
140,832
-45,000
95,832
35,233
-9,767
0
0
-1,000
-39,941
-40,941
90,124
117,674
207,798
17 August 2017
16

Maruti Suzuki
NOTES
17 August 2017
17

Disclosures:
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Maruti Suzuki
Disclosure of Interest Statement
Analyst ownership of the stock
Maruti Suzuki
No
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For Hong Kong:
This report is distributed in Hong Kong by Motilal Oswal capital Markets (Hong Kong) Private Limited, a licensed corporation (CE AYY-301) licensed and regulated by the Hong Kong Securities and Futures Commission (SFC)
pursuant to the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong) “SFO”. As per SEBI (Research Analyst Regulations) 2014 Motilal Oswal Securities (SEBI Reg No. INH000000412) has an agreement with
Motilal Oswal capital Markets (Hong Kong) Private Limited for distribution of research report in Hong Kong. This report is intended for distribution only to “Professional Investors” as defined in Part I of Schedule 1 to SFO. Any
investment or investment activity to which this document relates is only available to professional investor and will be engaged only with professional investors.” Nothing here is an offer or solicitation of these securities,
products and services in any jurisdiction where their offer or sale is not qualified or exempt from registration. The Indian Analyst(s) who compile this report is/are not located in Hong Kong & are not conducting Research
Analysis in Hong Kong.
For U.S.
Motilal Oswal Securities Limited (MOSL) is not a registered broker - dealer under the U.S. Securities Exchange Act of 1934, as amended (the"1934 act") and under applicable state laws in the United States. In addition MOSL is
not a registered investment adviser under the U.S. Investment Advisers Act of 1940, as amended (the "Advisers Act" and together with the 1934 Act, the "Acts), and under applicable state laws in the United States.
Accordingly, in the absence of specific exemption under the Acts, any brokerage and investment services provided by MOSL, including the products and services described herein are not available to or intended for U.S.
persons. This report is intended for distribution only to "Major Institutional Investors" as defined by Rule 15a-6(b)(4) of the Exchange Act and interpretations thereof by SEC (henceforth referred to as "major institutional
investors"). This document must not be acted on or relied on by persons who are not major institutional investors. Any investment or investment activity to which this document relates is only available to major institutional
investors and will be engaged in only with major institutional investors. In reliance on the exemption from registration provided by Rule 15a-6 of the U.S. Securities Exchange Act of 1934, as amended (the "Exchange Act") and
interpretations thereof by the U.S. Securities and Exchange Commission ("SEC") in order to conduct business with Institutional Investors based in the U.S., MOSL has entered into a chaperoning agreement with a U.S.
registered broker-dealer, Motilal Oswal Securities International Private Limited. ("MOSIPL"). Any business interaction pursuant to this report will have to be executed within the provisions of this chaperoning agreement.
The Research Analysts contributing to the report may not be registered /qualified as research analyst with FINRA. Such research analyst may not be associated persons of the U.S. registered broker-dealer, MOSIPL, and
therefore, may not be subject to NASD rule 2711 and NYSE Rule 472 restrictions on communication with a subject company, public appearances and trading securities held by a research analyst account.
For Singapore
Motilal Oswal Capital Markets Singapore Pte Limited is acting as an exempt financial advisor under section 23(1)(f) of the Financial Advisers Act(FAA) read with regulation 17(1)(d) of the Financial Advisors Regulations and is a
subsidiary of Motilal Oswal Securities Limited in India. This research is distributed in Singapore by Motilal Oswal Capital Markets Singapore Pte Limited and it is only directed in Singapore to accredited investors, as defined in
the Financial Advisers Regulations and the Securities and Futures Act (Chapter 289), as amended from time to time. In respect of any matter arising from or in connection with the research you could contact the following
representatives of Motilal Oswal Capital Markets Singapore Pte Limited:
Disclaimer:
The report and information contained herein is strictly confidential and meant solely for the selected recipient and may not be altered in any way, transmitted to, copied or distributed, in part or in whole, to any other person
or to the media or reproduced in any form, without prior written consent. This report and information herein is solely for informational purpose and may not be used or considered as an offer document or solicitation of
offer to buy or sell or subscribe for securities or other financial instruments. Nothing in this report constitutes investment, legal, accounting and tax advice or a representation that any investment or strategy is suitable or
appropriate to your specific circumstances. The securities discussed and opinions expressed in this report may not be suitable for all investors, who must make their own investment decisions, based on their own investment
objectives, financial positions and needs of specific recipient. This may not be taken in substitution for the exercise of independent judgment by any recipient. Each recipient of this document should make such investigations
as it deems necessary to arrive at an independent evaluation of an investment in the securities of companies referred to in this document (including the merits and risks involved), and should consult its own advisors to
determine the merits and risks of such an investment. The investment discussed or views expressed may not be suitable for all investors. Certain transactions -including those involving futures, options, another derivative
products as well as non-investment grade securities - involve substantial risk and are not suitable for all investors. No representation or warranty, express or implied, is made as to the accuracy, completeness or fairness of
the information and opinions contained in this document. The Disclosures of Interest Statement incorporated in this document is provided solely to enhance the transparency and should not be treated as endorsement of the
views expressed in the report. This information is subject to change without any prior notice. The Company reserves the right to make modifications and alternations to this statement as may be required from time to time
without any prior approval. MOSL, its associates, their directors and the employees may from time to time, effect or have effected an own account transaction in, or deal as principal or agent in or for the securities
mentioned in this document. They may perform or seek to perform investment banking or other services for, or solicit investment banking or other business from, any company referred to in this report. Each of these entities
functions as a separate, distinct and independent of each other. The recipient should take this into account before interpreting the document. This report has been prepared on the basis of information that is already
available in publicly accessible media or developed through analysis of MOSL. The views expressed are those of the analyst, and the Company may or may not subscribe to all the views expressed therein. This document is
being supplied to you solely for your information and may not be reproduced, redistributed or passed on, directly or indirectly, to any other person or published, copied, in whole or in part, for any purpose. This report is not
directed or intended for distribution to, or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction, where such distribution, publication, availability or use would
be contrary to law, regulation or which would subject MOSL to any registration or licensing requirement within such jurisdiction. The securities described herein may or may not be eligible for sale in all jurisdictions or to
certain category of investors. Persons in whose possession this document may come are required to inform themselves of and to observe such restriction. Neither the Firm, not its directors, employees, agents or
representatives shall be liable for any damages whether direct or indirect, incidental, special or consequential including lost revenue or lost profits that may arise from or in connection with the use of the information.
The
person accessing this information specifically agrees to exempt MOSL or any of its affiliates or employees from, any and all responsibility/liability arising from such misuse and agrees not to hold MOSL or any of its affiliates or
employees responsible for any such misuse and further agrees to hold MOSL or any of its affiliates or employees free and harmless from all losses, costs, damages, expenses that may be suffered by the person accessing this
information due to any errors and delays.
Registered Office Address: Motilal Oswal Tower, Rahimtullah Sayani Road, Opposite Parel ST Depot, Prabhadevi, Mumbai-400025; Tel No.: 022-3980 4263; www.motilaloswal.com. Correspondence Address: Palm Spring
Centre, 2nd Floor, Palm Court Complex, New Link Road, Malad (West), Mumbai- 400 064. Tel No: 022 3080 1000. Compliance Officer: Neeraj Agarwal, Email Id:
na@motilaloswal.com,
Contact No.:022-30801085.
Registration details of group entities.: MOSL: NSE (Cash): INB231041238; NSE (F&O): INF231041238; NSE (CD): INE231041238; BSE (Cash): INB011041257; BSE(F&O): INF011041257; BSE(CD); MSE(Cash): INB261041231;
MSE(F&O): INF261041231; MSE(CD): INE261041231; CDSL: IN-DP-16-2015; NSDL: IN-DP-NSDL-152-2000; Research Analyst: INH000000412. AMFI: ARN 17397. Investment Adviser: INA000007100. Motilal Oswal Asset
Management Company Ltd. (MOAMC): PMS (Registration No.: INP000000670) offers PMS and Mutual Funds products. Motilal Oswal Wealth Management Ltd. (MOWML): PMS (Registration No.: INP000004409) offers wealth
management solutions. *Motilal Oswal Securities Ltd. is a distributor of Mutual Funds, PMS, Fixed Deposit, Bond, NCDs, Insurance and IPO products. * Motilal Oswal Commodities Broker Pvt. Ltd. offers Commodities
Products. * Motilal Oswal Real Estate Investment Advisors II Pvt. Ltd. offers Real Estate products. * Motilal Oswal Private Equity Investment Advisors Pvt. Ltd. offers Private Equity products
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