14 November 2019
2QFY20 Results Update | Sector: Utilities
CESC
Buy
BSE SENSEX
40,286
Bloomberg
Equity Shares (m)
M.Cap.(INRb)/(USDb)
52-Week Range (INR)
1, 6, 12 Rel. Per (%)
12M Avg Val (INR M)
Free float (%)
S&P CNX
11,872
CESC IN
133
100.7 / 1.4
855 / 631
-8/9/-3
325
50.1
CMP: INR760
TP: INR957 (+26%)
S/A gen. muted; Noida up on carrying cost recovery
FCF generation increasing; Reiterate Buy
S/A PAT grew ~2% YoY to INR2.8b (in-line). Sales were up just ~2% YoY to 2.9BU.
T&D losses are estimated at ~9%. Consol. PAT was up ~13% YoY to INR3.6b in the
quarter on carrying cost recovery at Noida (~INR150-200m). For 1HFY20, PAT was
up 8% YoY to INR4.9b.
Profits at Noida rose YoY to INR790m (v/s est. INR450m) on favorable order
leading to carrying cost recovery.
Distribution franchisees’ net loss was slightly higher YoY at INR30m (v/s est.
INR20m). This was largely on account of flood-like situation at Kota.
Crescent and Surya (RE)’s PAT was higher YoY at INR170m (v/s est. INR160m).
Dhariwal’s net loss stood at INR250m. While YoY (INR630m loss in 2QFY19), the
loss may appear lower; the company has noted that it is on account of re-
classification and possible adjustments in the previous year. Generation at
Dhariwal was 14% lower YoY at 504MUs.
Financials & Valuations (INR b)
FY19 FY20E FY21E
Y/E Mar
106.6 104.8 106.8
Net Sales
33.9
32.9
33.1
EBITDA
11.8
12.2
13.3
PAT
88.9
91.9
99.5
EPS (INR)
43.1
3.4
8.2
Gr. (%)
673.6 741.5 813.4
BV/Sh (INR)
13.6
13.0
12.8
RoE (%)
9.1
8.9
8.9
RoCE (%)
8.6
8.3
7.7
P/E (x)
1.1
1.0
0.9
P/BV (x)
FCF generation increasing; Maintain Buy
Estimate change
TP change
Rating change
Dhariwal has signed a PPA with Maharashtra for 170MW supply of power from
Nov’19 for a one-year period. We expect performance of DFs to also improve as it
gains better understanding of the circles and leverages its experience in Kolkata.
CESC’s existing distribution business is high RoE and is delivering steady growth.
Generation assets are generating healthy FCF. Untied generation capacity and
scale-up of DFs have a potential to boost earnings. The stock trades attractively at
~8x FY21E P/E even as visibility of earnings at Dhariwal and DFs improve, and
factoring in the tightening of norms at Haldia and S/A. We roll forward and value
the stock at 10x 1-year forward P/E at INR957/share. Maintain
Buy.
Quarterly Performance (Standalone) – INR m
Y/E March
Sales
EBITDA
Change (%)
As of % Sales
Depreciation
Interest
Other Income
Regulatory (inc)/exp
PBT
Tax
Effective Tax Rate (%)
Reported PAT
Adjusted PAT
Change (%)
1Q
21,650
4,960
-18.3
22.9
1,100
1,200
200
500
2,360
520
22.0
1,840
1,840
3.4
FY19
2Q
3Q
22,200 17,070
5,110
2,010
1.2
-36.0
23.0
11.8
1,110
1,090
1,200
1,170
280
450
-370
-2,000
3,450
2,200
740
480
21.4
21.8
2,710
1,720
2,710
1,720
9.7
11.7
4Q
16,620
1,500
-28.2
9.0
1,030
1,090
720
-3,830
3,930
840
21.4
3,090
3,090
9.2
1Q
23,590
4,420
-10.9
18.7
1,090
1,300
230
-500
2,760
590
21.4
2,170
2,170
17.9
FY20
2Q
3QE
22,460 17,769
4,630
3,919
-9.4
95.0
20.6
22.1
1,080
1,131
1,270
1,154
450
460
-480
0
3,210
2,094
460
300
14.3
14.3
2,750
1,794
2,750
1,794
1.5
4.3
FY19
4QE
14,793
6,621
341.4
44.8
1,187
877
628
980
4,206
858
20.4
3,347
3,347
8.3
77,540
13,576
-17.5
17.5
4,326
4,664
1,649
-5,700
11,935
2,574
21.6
9,361
9,361
6.5
FY20
78,612
19,590
44.3
24.9
4,488
4,601
1,769
0
12,270
2,209
18.0
10,061
10,061
7.5
FY20
2QE
21,151
5,441
6.5
25.7
1,151
1,184
298
0
3,405
592
17.4
2,813
2,813
3.8
Aniket Mittal – Research Analyst
(Aniket.Mittal@MotilalOswal.com); +91 22 61291572
Investors are advised to refer through important disclosures made at the last page of the Research Report.
Motilal Oswal research is available on www.motilaloswal.com/Institutional-Equities, Bloomberg, Thomson Reuters, Factset and S&P Capital.
 Motilal Oswal Financial Services
CESC
Exhibit 1: Standalone – operating metrics
Units sold
change yoy
Realization
T&D loss
Gross generation
change yoy
Generation fuel cost
Power purchase
Power purchase cost
MU
%
INR/kWh
%
MU
%
INR/kWh
MU
INR/kWh
1QFY18
2,853
2.6
7.7
11.1
1,736
-9.2
2.2
1,605
4.8
2QFY18
2,759
4.0
7.6
10.8
1,738
1.3
2.2
1,509
5.1
3QFY18
2,345
12.2
7.3
10.8
1,357
16.0
2.3
1,322
5.5
4QFY18
2,393
20.0
7.5
5.5
1,506
24.0
2.2
1,202
5.7
1QFY19
2,840
-0.5
7.6
9.7
1,709
-1.6
2.3
1,608
5.2
2QFY19
2,873
4.1
7.7
9.7
1,732
-0.3
2.5
1,603
5.1
3QFY19
2,295
-2.1
7.4
9.8
1,365
0.6
2.5
740
10.0
4QFY19
2,291
-4.3
7.3
6.9
1,493
-0.9
2.6
1QFY20
3,057
7.6
7.7
9.7
1,718
0.5
2.7
1,774
5.0
2QFY20
2,923
1.7
7.7
9.0
1,713
-1.1
0.0
1,657
5.1
Source: MOSL, Company
Exhibit 2: Consolidated PAT break-up – INR m
Standalone
Haldia
Dhariwal
Cresent & Surya
DFs
Noida
Others
Minority
Consolidated PAT
2QFY19
2,710
900
-630
160
-20
140
-10
-20
3,230
2QFY20
2,750
910
-250
170
-30
330
-220
-20
3,640
Source: MOSL, Company
14 November 2019
2
 Motilal Oswal Financial Services
CESC
Financials and Valuations
Y/E Mar
Net Sales
Change (%)
EBITDA
EBITDA Margin (%)
Depreciation
EBIT
Interest
Other Income
Extraordinary items
PBT
Tax
Tax Rate (%)
Min. Int. & Assoc. Share
Reported PAT
Adjusted PAT
Change (%)
Income Statement
2014
101,109
33.8
16,226
16.0
4,714
11,512
5,660
1,734
0
7,585
1,856
24.5
813
4,916
4,916
17.7
2015
110,666
9.5
18,945
17.1
5,889
13,056
9,565
1,490
0
4,981
1,992
40.0
1,004
1,985
1,985
-59.6
2016
121,242
9.6
29,792
24.6
7,665
22,128
14,943
2,637
-40
9,781
3,130
32.0
666
5,985
6,024
203.5
2017
83,634
-31.0
27,845
33.3
7,148
20,697
13,724
2,300
0
9,273
3,210
34.6
710
5,354
5,354
-11.1
2018
102,749
22.9
29,991
29.2
7,515
22,477
13,030
2,520
0
11,967
3,562
29.8
129
8,276
8,276
54.6
2019
106,641
3.8
33,867
31.8
7,638
26,230
13,247
2,043
0
15,025
3,737
24.9
-552
11,840
11,840
43.1
2020E
104,764
-1.8
32,890
31.4
7,856
25,034
12,613
2,263
0
14,684
2,880
19.6
-444
12,248
12,248
3.4
(INR Million)
2021E
106,809
2.0
33,053
30.9
8,033
25,020
11,871
2,642
0
15,791
2,908
18.4
-371
13,254
13,254
8.2
Y/E Mar
Share Capital
Reserves
Net Worth
Debt
Consumer Security Deposits
Deferred Tax
Total Capital Employed
Net Fixed Assets
Investments
Current Assets
Inventory
Debtors
Cash & Bank
Loans & Adv, Others
Curr Liabs & Provns
Curr. Liabilities
Provisions
Net Current Assets
Total Assets
Balance Sheet
Million)
(INR
2014
1,256
55,094
56,350
119,164
0
332
184,925
119,719
737
50,798
5,383
15,302
12,422
17,692
64,838
64,838
0
-14,040
184,925
2015
1,332
58,958
60,290
142,020
0
832
213,146
186,270
735
65,858
6,625
17,066
16,453
25,714
66,235
66,235
0
-377
213,146
2016
1,332
104,705
106,037
148,676
0
38,307
303,939
243,065
3,537
93,781
6,967
14,132
17,894
54,788
63,993
63,993
0
29,789
303,939
2017
1,332
104,895
106,227
155,994
0
38,873
313,194
266,262
4,224
104,322
8,454
15,596
22,931
57,340
65,533
65,533
0
38,789
313,194
2018
1,332
82,870
84,202
145,778
0
36,410
267,083
238,535
6,673
82,499
5,826
15,374
17,003
44,296
62,791
62,791
0
19,708
267,083
2019
1,332
88,406
89,738
144,721
0
39,404
274,684
236,485
6,724
89,859
7,005
17,389
15,437
50,029
60,000
60,000
0
29,860
274,684
2020E
1,332
97,457
98,789
136,713
0
39,404
275,877
236,296
7,319
89,609
6,490
13,875
19,370
49,875
58,961
58,961
0
30,649
275,877
2021E
1,332
107,034
108,366
128,436
0
39,404
277,328
235,932
7,841
91,433
6,588
14,243
20,727
49,875
59,492
59,492
0
31,940
277,328
14 November 2019
3
 Motilal Oswal Financial Services
CESC
Financials and Valuations
Ratios
Y/E Mar
Basic (INR)
EPS
Cash EPS
Book Value
DPS
Payout (incl. Div. Tax.)
Valuation(x)
P/E
Cash P/E
Price / Book Value
EV/Sales
EV/EBITDA
Dividend Yield (%)
Profitability Ratios (%)
RoE
RoCE
Turnover Ratios (%)
Asset Turnover (x)
Debtors (No. of Days)
Inventory (No. of Days)
Leverage Ratios (%)
Net Debt/Equity (x)
2014
39.1
76.7
448.6
8.0
20.4
12.8
6.5
1.1
0.0
11.0
1.6
9.1
6.7
2015
14.9
59.1
452.6
9.0
60.4
40.4
10.2
1.3
0.0
11.4
1.5
3.4
6.3
2016
45.2
102.8
796.0
10.0
22.1
10.5
4.6
0.6
0.0
6.9
2.1
7.2
8.4
2017
40.2
93.8
797.4
10.0
24.9
20.9
9.0
1.1
0.0
9.2
1.2
5.0
6.4
2018
62.1
118.5
632.0
12.0
19.3
12.3
6.4
1.2
0.0
7.7
1.6
8.7
7.4
2019
88.9
146.2
673.6
17.5
19.7
8.6
5.2
1.1
0.0
6.8
2.3
13.6
9.1
2020E
91.9
150.9
741.5
20.0
21.8
8.3
5.1
1.0
0.0
6.7
2.6
13.0
8.9
2021E
99.5
159.8
813.4
23.0
23.1
7.7
4.8
0.9
0.0
6.4
3.0
12.8
8.9
0.5
55
19
1.6
0.5
56
22
1.8
0.4
43
21
1.1
0.3
68
37
1.1
0.4
55
21
1.5
0.4
60
24
1.4
0.4
48
23
1.2
0.4
49
23
1.0
Cash Flow Statement
Y/E Mar
Adjusted EBITDA
Non cash opr. exp (inc)
(Inc)/Dec in Wkg. Cap.
Tax Paid
Other operating activities
CF from Op. Activity
(Inc)/Dec in FA & CWIP
Free cash flows
(Pur)/Sale of Invt
Others
CF from Inv. Activity
Inc/(Dec) in Net Worth
Inc / (Dec) in Debt
Interest Paid
Divd Paid (incl Tax) & Others
CF from Fin. Activity
Inc/(Dec) in Cash
Add: Opening Balance
Closing Balance
2014
16,226
1,125
7,301
-2,141
0
22,511
-34,209
-11,698
0
1,582
-32,627
37
19,282
-11,134
40
8,225
-1,891
14,314
12,422
2015
18,945
2,729
-10,274
-2,506
0
8,895
-19,509
-10,614
0
1,337
-18,172
5,021
20,980
-11,978
-714
13,309
4,031
12,422
16,453
2016
29,792
4,128
-5,805
-3,311
0
24,804
-12,675
12,129
0
1,121
-11,554
117
6,390
-15,303
-3,014
-11,809
1,441
16,453
17,894
2017
27,845
3,081
-918
-3,457
0
26,552
-14,720
11,832
0
804
-13,915
158
8,622
-15,036
-1,343
-7,599
5,037
17,894
22,931
2018
29,991
4,393
-6,336
-3,727
0
24,321
-8,944
15,377
0
-6,815
-15,760
22
854
-13,828
-1,537
-14,490
-5,928
22,931
17,003
2019
33,867
2,019
-9,779
-3,168
0
22,939
-8,317
14,622
0
2,615
-5,702
0
-1,246
-13,336
-2,790
-17,373
-135
17,003
16,868
2020E
32,890
0
3,144
-2,880
0
33,154
-7,666
25,488
0
2,263
-5,403
0
-8,008
-12,613
-3,197
-23,819
3,933
15,437
19,370
(INR Million)
2021E
33,053
0
65
-2,908
0
30,210
-7,670
22,540
0
2,642
-5,028
0
-8,278
-11,871
-3,677
-23,825
1,357
19,370
20,727
14 November 2019
4
 Motilal Oswal Financial Services
CESC
Explanation of Investment Rating
Investment Rating
BUY
SELL
NEUTRAL
UNDER REVIEW
NOT RATED
Expected return (over 12-month)
>=15%
< - 10%
< - 10 % to 15%
Rating may undergo a change
We have forward looking estimates for the stock but we refrain from assigning recommendation
*In case the recommendation given by the Research Analyst is inconsistent with the investment rating legend for a continuous period of 30 days, the Research Analyst shall within following 30
days take appropriate measures to make the recommendation consistent with the investment rating legend.
Disclosures
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Motilal Oswal Financial Services Ltd. (MOFSL) is a SEBI Registered Research Analyst having registration no. INH000000412. MOFSL, the Research Entity (RE) as defined in the Regulations,
is engaged in the business of providing Stock broking services, Investment Advisory Services, Depository participant services & distribution of various financial products. MOFSL is a subsidiary
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(erstwhile Motilal Oswal Securities Limited - MOSL) is registered with the Securities & Exchange Board of India (SEBI) and is a registered Trading Member with National Stock Exchange of
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Schedule of Financial Advisors Act (CAP 110) provided to MOCMSPL by Monetary Authority of Singapore. Persons in Singapore should contact MOCMSPL in respect of any matter arising
from, or in connection with this report/publication/communication. This report is distributed solely to persons who qualify as “Institutional Investors”, of which some of whom may consist of
"accredited" institutional investors as defined in section 4A(1) of the Securities and Futures Act, Chapter 289 of Singapore (“the SFA”). Accordingly, if a Singapore person is not or ceases to be
such an institutional investor, such Singapore Person must immediately discontinue any use of this Report and inform MOCMSPL.
Specific Disclosures
1 MOSL, Research Analyst and/or his relatives does not have financial interest in the subject company, as they do not have equity holdings in the subject company.
2 MOSL, Research Analyst and/or his relatives do not have actual/beneficial ownership of 1% or more securities in the subject company
3 MOSL, Research Analyst and/or his relatives have not received compensation/other benefits from the subject company in the past 12 months
4 MOSL, Research Analyst and/or his relatives do not have material conflict of interest in the subject company at the time of publication of research report
5 Research Analyst has not served as director/officer/employee in the subject company
6 MOSL has not acted as a manager or co-manager of public offering of securities of the subject company in past 12 months
7 MOSL has not received compensation for investment banking/ merchant banking/brokerage services from the subject company in the past 12 months
8 MOSL has not received compensation for other than investment banking/merchant banking/brokerage services from the subject company in the past 12 months
9 MOSL has not received any compensation or other benefits from third party in connection with the research report
10 MOSL has not engaged in market making activity for the subject company
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The associates of MOFSL may have:
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financial interest in the subject company
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actual/beneficial ownership of 1% or more securities in the subject company
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received compensation/other benefits from the subject company in the past 12 months
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 Motilal Oswal Financial Services
CESC
other potential conflict of interests with respect to any recommendation and other related information and opinions.; however the same shall have no bearing whatsoever on the specific
recommendations made by the analyst(s), as the recommendations made by the analyst(s) are completely independent of the views of the associates of MOFSL even though there
might exist an inherent conflict of interest in some of the stocks mentioned in the research report.
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acted as a manager or co-manager of public offering of securities of the subject company in past 12 months
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be engaged in any other transaction involving such securities and earn brokerage or other compensation or act as a market maker in the financial instruments of the company(ies)
discussed herein or act as an advisor or lender/borrower to such company(ies)
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received compensation from the subject company in the past 12 months for investment banking / merchant banking / brokerage services or from other than said services.
The associates of MOFSL has not received any compensation or other benefits from third party in connection with the research report
Above disclosures include beneficial holdings lying in demat account of MOFSL which are opened for proprietary investments only. While calculating beneficial holdings, It does not consider
demat accounts which are opened in name of MOFSL for other purposes (i.e holding client securities, collaterals, error trades etc.). MOFSL also earns DP income from clients which are not
considered in above disclosures.
Analyst Certification
The views expressed in this research report accurately reflect the personal views of the analyst(s) about the subject securities or issues, and no part of the compensation of the research
analyst(s) was, is, or will be directly or indirectly related to the specific recommendations and views expressed by research analyst(s) in this report.
Terms & Conditions:
This report has been prepared by MOFSL and is meant for sole use by the recipient and not for circulation. The report and information contained herein is strictly confidential 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 of MOFSL. The report is
based on the facts, figures and information that are considered true, correct, reliable and accurate. The intent of this report is not recommendatory in nature. The information is obtained from
publicly available media or other sources believed to be reliable. Such information has not been independently verified and no guaranty, representation of warranty, express or implied, is made
as to its accuracy, completeness or correctness. All such information and opinions are subject to change without notice. The report is prepared solely for informational purpose and does not
constitute an offer document or solicitation of offer to buy or sell or subscribe for securities or other financial instruments for the clients. Though disseminated to all the customers
simultaneously, not all customers may receive this report at the same time. MOFSL will not treat recipients as customers by virtue of their receiving this report.
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. MOFSL, 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 MOFSL. 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 MOFSL 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 MOFSL or any of its affiliates or employees from, any and all responsibility/liability arising from such misuse and agrees not
to hold MOFSL or any of its affiliates or employees responsible for any such misuse and further agrees to hold MOFSL 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 71934200/ 022-71934263; Website
www.motilaloswal.com.CIN no.: L67190MH2005PLC153397.Correspondence Office Address: Palm Spring Centre, 2nd Floor, Palm Court Complex, New Link Road, Malad(West), Mumbai-
400 064. Tel No: 022 7188 1000.
Registration Nos.: Motilal Oswal Financial Services Limited (MOFSL)*: INZ000158836(BSE/NSE/MCX/NCDEX); CDSL and NSDL: IN-DP-16-2015; Research Analyst: INH000000412. AMFI:
ARN - 146822; Investment Adviser: INA000007100; Insurance Corporate Agent: CA0579;PMS:INP000006712. Motilal Oswal Asset Management Company Ltd. (MOAMC): PMS (Registration
No.: INP000000670); PMS and Mutual Funds are offered through MOAMC which is group company of MOFSL. Motilal Oswal Wealth Management Ltd. (MOWML): PMS (Registration No.:
INP000004409) is offered through MOWML, which is a group company of MOFSL. Motilal Oswal Financial Services Limited is a distributor of Mutual Funds, PMS, Fixed Deposit, Bond,
NCDs,Insurance Products and IPOs.Real Estate is offered through Motilal Oswal Real Estate Investment Advisors II Pvt. Ltd. which is a group company of MOFSL. Private Equity is offered
through Motilal Oswal Private Equity Investment Advisors Pvt. Ltd which is a group company of MOFSL. Research & Advisory services is backed by proper research. Please read the Risk
Disclosure Document prescribed by the Stock Exchanges carefully before investing. There is no assurance or guarantee of the returns. Investment in securities market is subject to market risk,
read all the related documents carefully before investing. Details of Compliance Officer: Name: Neeraj Agarwal, Email ID: na@motilaloswal.com, Contact No.:022-71881085.
* MOSL has been amalgamated with Motilal Oswal Financial Services Limited (MOFSL) w.e.f August 21, 2018 pursuant to order dated July 30, 2018 issued by Hon'ble National Company Law
Tribunal, Mumbai Bench.
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