21 May 2020
Update | Sector: Metals
Hindalco
BSE SENSEX
30,933
S&P CNX
9,106
CMP: INR130
TP: INR175 (+35%)
Buy
Well placed to tide over COVID-19 disruption
Hindalco (HNDL) has corrected ~40% in CY20 due to the double whammy of weaker
aluminum demand and margins on account of the COVID-19 pandemic and higher leverage
owing to Aleris’ acquisition. We believe the correction is overdone and reiterate our Buy
rating based on: (1) strength in Novelis’ beverage can business where volumes should not
be much impacted from COVID-19, (2) long-dated debt maturity profile and ample liquidity
in hand (~USD2b), which should help HNDL tide over the current crisis comfortably, (3)
consistent FCF generation (even in FY21), which should aid deleveraging, and (4) attractive
valuation with the stock trading at 0.7x Adj. P/B value and 5.3x FY22E EV/EBITDA.
Stock Info
Bloomberg
Equity Shares (m)
M.Cap.(INRb)/(USDb)
52-Week Range (INR)
1, 6, 12 Rel. Per (%)
12M Avg Val (INR M)
Free float (%)
HNDL IN
2,229
291 / 3.6
221 / 85
20/-8/-13
1634
65.4
Novelis – Beverage cans resilient, but weak auto sector to impact EBITDA
Beverage cans constitute nearly two-third of volumes for Novelis (ex-Aleris), which
has not seen much impact from COVID-19 due to strong at-home consumption trend.
Novelis’ auto finishing lines that constitute ~20% of its volumes, however, have been
impacted as its auto customers are either shut or operating at low production levels.
With weak outlook for automotive, we have built in sharply lower volumes for
Novelis in FY21 in this segment. This would also impact blended margin as auto is a
high margin business. As a result, we expect Novelis’ volumes to decline by 10% YoY
and EBITDA per ton to fall by 14% YoY to USD380/t in FY21, leading to a 23% YoY fall
in FY21E EBITDA to USD1.1b. We expect both volumes and margins to recover in
FY22E as auto sales normalize driving an expected 17% YoY EBITDA growth.
Financials Snapshot (INR b)
2020E 2021E 2022E
Y/E MARCH
1,184.3 1,177.4 1,347.9
Net Sales
142.6 129.1 158.8
EBITDA (Rs b)
44.9
20.9
42.0
NP
20.2
9.4
18.9
EPS
-18.4 -53.5 101.1
EPS Gr (%)
185.7 169.9 180.0
BV/Share (Rs)
6.4
13.8
6.9
P/E (x)
0.7
0.8
0.7
P/BV (x)
11.2
5.3
10.8
RoE (%)
8.5
5.8
7.6
RoCE (%)
Shareholding pattern (%)
As On
Mar-20 Dec-19 Mar-19
Promoter
34.7
34.7
34.7
DII
26.7
25.3
22.4
FII
18.9
21.0
23.9
Others
19.7
19.1
19.1
FII Includes depository receipts
Stock Performance (1-year)
Hindalco Inds.
Sensex - Rebased
260
210
160
110
60
Lower LME to impact profitability of Indian operations
Due to demand concerns on account of COVID-19, LME Aluminum has declined by
~15% YTDCY20 to USD1,450/t and hit fresh 10-year lows (USD1,422/t). Lower LME
has a direct adverse impact on HNDL’s Indian operations, which is a commodity
aluminum supplier. While cost benefits (lower energy cost, higher linkage coal
supply, lower caustic soda cost, etc.) should help partly cushion the impact on
margin, we still estimate India EBITDA to decline 26% YoY in FY21 due to lower
volumes and LME price. We also expect LME to improve gradually from current 10-
year lows due to supply curtailments and average USD1,575/t in FY21 and USD1700/t
in FY22E. At current LME prices, >10% of the global smelters are operating at cash
losses, which we believe is unsustainable and would result in supply curtailments
bringing market balance. Moreover, hedged LME positions (19% volumes for FY21
hedged at a higher level of USD1,836/t) imply hedge premium of USD56/t in FY21E.
We estimate India EBITDA per ton at USD308/t in FY21E and USD383/t in FY22E.
Hit to SOTP from Aleris’ acquisition priced in
We estimate an adverse impact of INR33/share on HNDL’s SOTP from the Aleris
acquisition, based on 6.0x FY22E EV/EBITDA. Though the Aleris acquisition gives
HNDL a meaningful presence in the lucrative aerospace business, it has happened at
an inopportune time as aerospace has been impacted by COVID-19 and Max-737
issues for Aleris’ key customer Boeing. We estimate EBITDA of USD210/USD250m
(ex-Duffel) in FY21/22E, which makes the deal valuation look expensive at 11.7x/ 9.9x
FY21E/FY22E EV/EBITDA. However, given the sharp correction in HNDL’s stock price,
we believe this adverse impact on SOTP is already priced in.
Amit Murarka - Research analyst
(Amit.Murarka@motilaloswal.com) +91 22 6129 1538
Basant Joshi - Research analyst
(Basant.Joshi@motilaloswal.com)
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
Hindalco
Net debt has peaked, FCF to drive deleveraging
With the acquisition of Aleris for USD2.8b (USD2.5b net of Duffel plant sale), HNDL’s
net debt has increased to ~USD7.8b, implying 4.5x net debt/ EBITDA. We expect net
debt to decline to USD7.6/USD7.2b by Mar’21/Mar’22E aided by FCF generation
even in a weak economic environment. We estimate net debt to EBITDA to decline
to 3.5x in FY22E as the global economy recovers from the impact of COVID-19.
Moreover, HNDL does not have any debt repayments scheduled in FY21, which
coupled with the USD2b cash and cash equivalents at its disposal, should help it
comfortably tide over the current crisis.
Valuation and view
HNDL’s share of commodity business has declined to 25% post the Aleris acquisition
with the higher margin converter business accounting for 75% of EBITDA. We expect
the COVID-19 impact to ease in FY22E. Also, we forecast FY22E EBITDA to rise 23%
YoY to INR159b (nearly same as FY20 ex-Aleris). We value HNDL on SOTP based on
FY22 EV/EBITDA of 5.0x to India operations (commodity business), 6.0x to Novelis
(high margin converter business) and 6.0x to Aleris. We also add HNDL’s investment
in listed market securities at 10% discount to the market price. Accordingly, we
arrive at a target price of INR175/share. The stock trades at an attractive valuation
of 5.3x EV/EBITDA and 6.9x P/E on FY22E. Reiterate
Buy.
21 May 2020
2
 Motilal Oswal Financial Services
Hindalco
LME Aluminum – market surplus to correct in CY21
Aluminum prices below USD1,500/t, near 10-year lows
LME aluminum prices slid below USD1,500/t levels in 1QCY20 from ~USD1,700 at
the start of CY20. This was due to 8% YoY decline in primary aluminum consumption
during 1QCY20, driven by a combination of ~10% decline in China and ~7% world-
wide (excl.-China). Currently, LME Aluminum price is hovering ~USD1,450/t level.
Exhibit 1: Aluminum premium prices at 10-year lows
LME Aluminium (USD/t)
3,400
2,900
2,400
1,900
1,400
900
Source: MOFSL
Aluminum market in surplus; inventories rise to ~75 days of consumption
During CY19, deficit in the primary aluminum market narrowed to ~1mt against
deficit of 1.7mt in CY18. According to Norsk Hydro, one of the largest aluminum
producers globally, primary aluminum consumption has declined 8% YoY in 1QCY20,
driven by decline of 10% in China and ~7% world-wide (excl. China). This was in
contrast to the 2.0% YoY increase in global production during 1QCY20, resulting in
the primary aluminum market being in surplus of ~2.0mt (supply v/s consumption)
in 1QCY20. We estimate global aluminum was in surplus of 1mt at end-1QCY20.
Exhibit 2: Market balance in surplus in 1QCY20; inventories rise to ~75 days of consumption
Source: Norsk Hydro Presentation
21 May 2020
3
 Motilal Oswal Financial Services
Hindalco
Global inventories have also increased to ~75 days of consumption from ~60 days at
end-CY19. Total global stocks increased by 1.9mt during 1QCY20 to reach 12.8mt.
Market surplus to reduce in FY22, improving LME price
We expect global aluminum market to remain in surplus of ~2mt in FY21 which
reduce gradually in FY22 as demand normalizes. Moreover, at current LME price,
>10% of the global smelters are operating at cash losses, which we believe is
unsustainable and would result in supply curtailments bringing market balance.
We
have factored in average aluminum price of USD1,575/t (down 10% YoY) for FY21E
and USD1,700/t (+8% YoY) for FY22E.
Exhibit 3:
Demand growth projection (%)
Ex-China
China
Exhibit 4: Supply growth projection (%)
Ex-China
3.0
2.0
China
Exhibit 5: Market balance (mt)
Global metal balance projections - mt
Ex-China
China
3.5
2.7 2.5
2.1
1
0.4
-3.0
-6.0
-6.0
-5.0
1.0
-10.0
-12.0
CRU
Harbour
Aluminium
Wood
Mackenzie
Source: Industry
-1.0
CRU
Harbour
Aluminium
-1.0 -1.0
Wood
Mackenzie
Source: Industry
CRU
Harbour
Aluminium
Wood
Mackenzie
Source: Industry
21 May 2020
4
 Motilal Oswal Financial Services
Hindalco
India aluminum – INR depreciation and lower cost to
help offset part of LME decline
Expect volumes to decline 5% YoY in FY21E to 1,227kt
During the ongoing nationwide lockdown, HNDL has been operating its smelters in
India at lower capacity. It has however shut its downstream capacities which we
believe will be partly compensated by higher exports. We expect the share of
exports in standalone volumes to thus rise to ~70% in FY21 as against the usual level
of 50%. Due to the weak domestic demand, we expect 5% decline in its India
aluminum volumes despite higher exports.
Exhibit 6: Aluminum volumes to decline 5% YoY in FY21E
1146
809
1249
1278
1274
1291
1227
1291
FY15
FY16
FY17
FY18
FY19
FY20E
FY21E
FY22E
Source: MOFSL
LME decline to be partly offset by hedged positions and weaker INR
While LME aluminum has corrected ~15% YTDCY20, the impact on HNDL’s India
realization should be lower due to hedged LME positions and 6% depreciation of INR
against USD. HNDL has hedged 19% of its aluminum volumes at USD1,836/t and 1%
volumes at INR170,640/t for FY21. We estimate this should result in a gain of
USD56/t on our FY21 LME assumption of USD1,575/t. Hedging also resulted in a
estimated gain of ~USD75/t in FY20.
Exhibit 7: Currency depreciation to partly cushion India realization in FY21E
Realisation
LME
Premium
INR/USD
Realisation - INR/t
Change (%)
Realisation - USD/t
INR/USD
Realisation - INR/t
FY18
2,517
2,044
473
64.5
1,62,272
FY19
2,652
2,035
618
69.9
1,85,371
5.4
8.4
14.2
FY20E
2,376
1,750
626
71.0
1,68,638
-10.4
1.6
-9.0
FY21E
2,099
1,575
524
75.4
1,58,258
-11.6
6.2
-6.2
FY22E
2,225
1,700
525
76.0
1,69,100
6.0
0.8
6.9
Source: MOFSL
21 May 2020
5
 Motilal Oswal Financial Services
Hindalco
Exhibit 8: Hindalco’s Aluminum realization trend (USD/t)
LME
2,517
2,652
2,376
618
626
2,099
524
2,225
525
Premium
Realisation
Exhibit 9: Hindalco’s Aluminum realization trend (INR/t)
'000
Realisation - INR/t
473
185
2,044
2,035
1,750
1,575
1,700
162
169
158
FY19
FY20E
FY21E
FY22E
Source: MOFSL
169
FY18
FY19
FY20E
FY21E
FY22E
Source: MOFSL
FY18
Cost tailwinds to cushion margins
We expect costs at Indian aluminum operations to decline this year on account of
(1) improved linkage coal availability reducing power cost, (2) lower cost of raw
materials (caustic soda, etc), (3) benefit of lower renewal power obligation, and (4)
efficiency improvement from expansion of low cost Utkal alumina refinery by 500kt
in FY22E.
(1) Improved coal availability
We expect linkage coal availability for industrial use to remain high during FY21 due
to lower demand from power utilities and high inventory build-up (~50mt at end-
Apr’20) with Coal India. HNDL’s coal linkage stands at 75% of its annual requirement
i.e. ~12.2mt but the availability is usually lower at 60-65%. HNDL balance coal
requirement is met through e-auction coal (~20% of mix) and the rest through
captive coal (5%) and imports (~10%) which are all much more expensive. For every
10% increase in linkage coal, we estimate that HNDL’s coal cost declines by ~5% as
linkage coal is cheaper by 30-40% v/s rest of the coal mix. We expect HNDL to meet
~70% of its coal requirement in FY21 through linkage coal, which would reduce its
dependence on higher cost captive mines and imported coal.
Exhibit 10: Linkage coal availability to improve in FY21E
Coal sourcing
Consumption
Linkage
E-auction
Captive
Import
(%)
Linkage
E-auction
Captive
Import
1Q20
4.00
2.5
1.0
0.4
0.1
63.0
24.0
10.0
3.0
2Q20
4.00
2.4
1.0
0.2
0.4
60.0
25.0
4.0
11.0
3Q20
4.50
3.1
0.7
0.2
0.5
69
15
4.0
11.0
4Q20E
4.00
2.76
0.6
0.16
0.44
69
15
4
11
FY19
16.5
8.30
3.45
2.49
2.31
50
21
15
14
FY20E
16.5
10.79
3.24
0.90
1.50
65
20
5
9
FY21E
15.8
11.7
3.2
0.6
0.3
74
20
4
2
FY22E
16.5
11.6
3.3
0.8
0.8
70
20
5
5
Source: MOFSL
In 2HFY21, HNDL should also start coal mining from its Dumri block, which has
reserves of 46mt. Hindalco won the Dumri coal block in 2015 at a premium of
INR2,127/t. Dumri mine getting operational should lower the premium on coal
extraction from captive mines by ~INR275/t at full capacity. The blended cost
21 May 2020
6
 Motilal Oswal Financial Services
Hindalco
benefit to HNDL from this would however be low due to limited envisaged volumes
from captive coal mines.
Exhibit 11: Captive coal mines; average premium paid for coal to decline by ~INR275 after
Dumri mine starts in 2HFY21
Coal mines
Gare Palma IV/4
Gare Palma IV/5
Kathautia mine
Dumri mine
Total
Location
Chhattisgarh
Chhattisgarh
Jharkhand
Jharkhand
Reserves (mt)
65
50
26
46
Capacity (mt)
1.0
1.0
0.8
2.8
1.0
3.8
Premium (INR/t)
3001
3502
2860
3,140
2,100
2,866
Source: MOFSL
Utkal expansion by 500kt to reduce alumina cost FY22E onwards
HNDL sources ~1.5mt alumina from Utkal and ~1.4mt from its other alumina
refineries. Cost of production (CoP) from Utkal refinery is lower at ~USD150/t
(whereas alumina CoP from other refineries ranges between USD280-300/t) due to
(1) newer technology, (2) proximity to bauxite mines, and (3) higher quality of
bauxite. Expansion of the Utkal alumina refinery (through de-bottlenecking) would
lead to replacement of costlier alumina capacity, leading to savings of ~USD20/t of
alumina at full capacity of 500kt.
Exhibit 12: HNDL’s alumina cost to decline FY22E onwards due to 500ktpa Utkal expansion
Alumina production
Utkal
Other refineries
Import
Cost/t
Utkal cost (USD/t)
Others
Import
Blended cost/t
Incremental Savings (USD/t)
FY19
1.5
1.4
0.0
150
300
222
FY20E
1.5
1.1
0.3
150
300
350
228
FY21E
1.5
1.3
0.0
150
300
218
9
FY22E
1.9
1.0
0.0
150
300
202
17
Source: MOFSL
Lower RPO cost and other input costs
Due to lower renewable power purchase obligation (RPO), HNDL has benefitted by
INR430m in 3QFY20 and INR720m in 1HFY20. We expect HNDL’s production cost to
positively benefit in FY21E due to lower RPO cost coupled with lower input
commodity costs like furnace oil, caustic soda, etc. and availability of the Muri
refinery (for full-year FY21).
HNDL’s aluminum CoP has reduced by 3% YoY in FY20E to INR140,159/t despite
higher alumina cost and break-down of Muri refinery. The reduction was achieved
largely through higher linkage coal in mix and lower RPO. With further improvement
in linkage coal availability, restart of Muri refinery (eliminating alumina purchases)
and decline in input commodity prices, we expect HNDL’s cost of Indian operations
to reduce by 4% YoY to INR135,060/t in FY21E.
21 May 2020
7
 Motilal Oswal Financial Services
Hindalco
Exhibit 13: India aluminum cost to decline in FY21E
Cost/t - INR
145
126
FY18
FY19
140
135
140
FY20E
FY21E
FY22E
Source: MOFSL
As a result, despite an expected USD175/t (or 10%) YoY decline in LME aluminum
price in FY21, we expect EBITDA decline to be lower at USD93/t (or 23%) to
USD308/t in FY21. Moreover, we expect EBITDA/t to improve to USD383/t in FY22
supported by higher LME price and ramp-up of expanded Utkal refinery.
Exhibit 14: EBITDA/t to decline in FY21E
EBITDA/t - INR
570
584
401
308
36,714
40,832
46,920
Exhibit 15: EBITDA to decline 23% YoY in FY21E
EBITDA - INR m
EBITDA/t - USD
383
52,020
36,773
28,479
23,198
29,105
37,581
28,460
FY18
FY19
FY20E
FY21E
FY22E
Source: MOFSL
FY18
FY19
FY20E
FY21E
FY22E
Source: MOFSL
21 May 2020
8
 Motilal Oswal Financial Services
Hindalco
India copper – Lower Tc/rc to drag EBITDA
Volume growth missing, however, share of wire-rods to go up
HNDL shut down its copper smelters during Apr’20, but has restarted one smelter in
May’20. However, we do not expect HNDL to make up for the lost volumes in FY21
due to frequent smelter breakdowns. As a result, we expect copper volumes to
decline by 10% YoY to 295kt in FY21E but improve to 330kt in FY22E. We expect
share of copper wire-rods to increase to 85% of overall volumes.
Exhibit 16: Share of copper wire-rod volumes to increase
Copper volumes - kt
Wire-rods as % of total
77
387
40
380
41
375
41
407
40
68
359
328
330
85
85
295
FY15
FY16
FY17
FY18
FY19
FY20
FY21
FY22
Source: MOFSL
EBITDA to decline on lower Tc/Rc and by-product prices
HNDL’s EBITDA from the copper segment consists of (a) Tc/Rc margins, (b) value-
added products and premium, and (c) sale of by-products like sulphuric acid and
DAP with nearly 50% contribution from Tc/Rc and ~25% each from value-added
products and by-products. Tc/Rc margins for CY20 have been settled 23% lower due
to tight supply in the copper concentrate market. Further, due to impact of COVID-
19, we expect by-product prices to decline too. As a result, we expect margins from
the copper segment to decline 18% YoY to USD345/t in FY21E; however, the same
should improve 7% YoY in FY22E.
Exhibit 17: EBITDA/t (USD) to decline in FY21E on lower Tc/Rc
Copper - EBITDA/t
606
584
422
345
369
FY18
FY19
FY20
FY21
FY22
Source: MOFSL
21 May 2020
9
 Motilal Oswal Financial Services
Hindalco
Novelis (ex-Aleris) – high margin converter business
Novelis, Hindalco’s 100% owned subsidiary, is the world’s largest producer of flat-
rolled aluminum products with operations spread over North America, South
America, Europe and Asia. Novelis’s product mix consists of beverage cans,
automotive sheets and specialty metal. Novelis uses ~60% of recycled input in
production, which requires 95% lower energy than primary aluminum production
thereby saving costs.
Resilient Beverage can demand to support Novelis’ volume in FY21
Novelis’s product mix consists of beverage cans (66%), automotive sheets (19%) and
specialty metal (15%).
Novelis’ automotive sheet facilities have been shut since end-Mar’20 owing to
shutdowns taken by auto OEMs due to the COVID-19 pandemic. The medium term-
outlook for aluminum auto sheets is strong due to an increase in demand for light-
weight vehicles (owing to higher fuel-efficiency, reduced emissions and shift toward
hybrid/electric vehicles). However, demand outlook for autos is uncertain in North
America and Europe due to the high unemployment owing to the COVID-19
pandemic. We expect volumes to decline ~25% for Novelis’s automotive segment in
FY21E. However, with a normalized business environment in FY22E, we expect
Novelis to increase share of auto sheets in its volume mix helped by the
commencement of its 200ktpa Kentucky facility in United States.
Despite the COVID-19 pandemic, beverage can demand remains resilient in North
America and Europe due to strong in-house consumption trends. The same could
get impacted in Asia and South America owing to trade restrictions, lower tourism
and decline in consumer spending. We expect beverage can demand to grow in the
medium term due to shift in the packaging trend from steel to aluminum. Moreover,
increase in aluminum auto sheet demand is likely to tighten supply in the beverage
can market, which bodes well for the growing packaging demand. We have factored
in ~5% decline for Novelis’ beverage can segment volumes in FY21E and have
factored in nil growth for FY22E over FY20.
Due to prevailing uncertainties, we have factored in 15% decline in specialty
volumes for FY21E. As a result, we expect Novelis’ volumes to decline 10% in FY21E
to 2,936kt, with beverage can volume share rising to 70%. However, with Kentucky
auto facility coming on line, we expect share of auto sheets to increase 11% YoY in
FY22E to 21% of total volumes of 3,273kt.
21 May 2020
10
 Motilal Oswal Financial Services
Hindalco
Exhibit 18: Share of auto volumes to go up in FY22E
Beverage and food cans
15%
19%
Auto
14%
16%
Specialities
13%
21%
Exhibit 19: Volumes to normalize in FY22 post 10% decline
in FY21
Total ('000t)
3188
3274
3,273
Growth (%)
3,273
11
4
3
2,936
(0)
20%
20%
17%
20%
60%
63%
66%
70%
66%
(10)
FY18
FY19
FY20
FY21
FY22
Source: MOFSL
FY18
FY19
FY20
FY21
FY22
Source: MOFSL
Lower auto volumes in mix to lower EBITDA margin
In Novelis’s operating segments, auto contributes the highest margin followed by
beverage can and specialty. During FY20, Novelis reported EBITDA/t of USD441 on
favorable scrap-metal spreads and strong demand for automotive sheet in the US.
However, with weak outlook for the auto segment and lower LME, we expect
Novelis’ margins to decline. Novelis is looking to cut its fixed cost by USD250m in
FY21E (~17% of FY20 adj. EBITDA) in order to reduce costs. We have built in lower
EBITDA per ton of USD380/t in FY21E. We expect EBITDA/t to improve to USD400/t
in FY22E as auto volumes gradually normalize.
Exhibit 20: Novelis’ EBITDA to decline 23% in FY21E due to 14% decline in margins
EBITDA - USD m
441
418
400
381
Adj. EBITDA/t - USD
380
1,215
FY18
1,368
FY19
1,443
FY20
1,116
FY21E
1,309
FY22E
Source: MOFSL
21 May 2020
11
 Motilal Oswal Financial Services
Hindalco
Aleris – going through a rough patch
Novelis has completed the acquisition of US-based Aleris for an EV of USD2.8b
(including debt of USD2.0b), implying 7.2x CY19 EV/EBITDA (EBITDA – USD388m in
CY19). Novelis has funded the acquisition through debt of USD2.3b (including
USD0.4b raised in Jan’20) and utilized USD0.5b from internal accruals and the bridge
loan facility. The transaction closure however required sale of auto finishing lines:
At Duffel plant in Belgium to Liberty Group for USD0.34b (at ~7x EV/EBITDA) –
approved by the European Commission and due to be closed soon
At Lewisport facility in the US – US Department of Justice (DoJ) to define the
timeline (likely 9-12 months) and terms for the divestment.
Even though Aleris’ auto capacities in US and Europe would largely be divested as
part of the regulatory requirement for the acquisition, the acquisition still gives
Novelis an entry into the high margin aerospace segment. It would also position
Novelis as a leader in the Building and Construction segment in the US. Also, Novelis
expects synergy benefits of USD150m p.a. in 3-5 years from the Aleris acquisition.
However, we have not built that in our estimates.
Aleris’ financial performance
Aleris’ CY19 financial performance improved with adj. EBITDA increasing 41% YoY to
USD388m, primarily due to improved metal spreads in North America. However,
during 4QCY19, adj. EBITDA declined 30% QoQ to USD81m due to 14% QoQ decline
in volumes to 187kt and 18% QoQ decline in EBITDA/t to USD431. Decline in
volumes and margins can be attributed to seasonality and lower automotive
volumes in the European business.
Exhibit 21: Aleris’ financial performance
Shipments - '000 tonnes
North America
Europe
Asia Pacific
Transfers
Revenue (US$mn)
Revenue/t (US$)
LME
Premium
Adj. EBITDA (US$mn)
North America
Europe
Asia Pacific
Inter-company
EBITDA/t (US$)
North America
Europe
Asia Pacific
CY18Q1 CY18Q2 CY18Q3 CY18Q4 CY19Q1 CY19Q2 CY19Q3 CY19Q4 Change
209
235
225
203
221
232
218
187
(QoQ)
-14.5
120
140
139
119
128
142
134
114
-15.1
85
87
81
77
86
82
77
65
-15.7
6
9
7
8
9
8
9
9
3.4
-2
-1
-1
-1
-1
-1
-2
-2
-25.0
802
931
911
802
877
917
857
726
-15.3
3,833
3,960
4,045
3,953
3,961
3,955
3,927
3,888
-1.0
2,162
2,254
2,056
1,967
1,861
1,792
1,762
1,752
-0.6
1,671
1,706
1,989
1,986
2,100
2,163
2,165
2,136
-1.3
54
85
77
61
85
108
115
81
-30.0
34
55
42
32
50
77
78
52
-32.6
27
34
38
31
36
32
36
22
-37.6
2
6
6
7
9
9
11
14
33.3
-10
-10
-8
-9
-10
-9
-9
-9
-7.6
256
361
342
299
383
466
527
431
-18.1
285
390
300
266
394
539
581
461
-20.6
315
386
464
399
417
383
461
340
-26.1
328
753
913
974
989
1,073
1,213
1,565
29.0
CY18
873
518
330
29
-5
3,446
3,949
2,110
1,839
276
162
129
22
-37
316
313
390
755
CY19 Change
858
(YoY)
-1.7
517 0.0
311 -5.9
35 19.4
-5 12.8
3,376 -2.0
3,935 -0.4
1,792 -15.1
2,143 16.5
388 41.0
257 58.5
125 -2.8
43 92.3
-37 -0.8
452 43.0
497 58.6
403 3.3
1,217 61.1
Source: MOFSL
21 May 2020
12
 Motilal Oswal Financial Services
Hindalco
Exhibit 22: Aleris’ revenue mix (before divestment) consists largely of Automotive, Building
and Construction, and Aerospace
N. America
Building and
Construction, 22
Distribution, 12
Other, 7
Heat Exchanger, 6
Truck trailer, 8
Regional plate
and sheet, 7
Aerospace, 15
Source: MOFSL
Automotive, 23
Aleris’ EBITDA to decline due to weak aerospace segment
Aleris’ operating profits are expected to decline in FY21 due to lower aerospace
volumes on account of the COVID-19 impact as well as Boeing 737 Max production
curtailment. Automotive volumes would also be lower on weak auto sales volumes.
We estimate adj. EBITDA of USD210m/USD250m in FY21E/FY22E against adj. EBITDA
of USD338m in CY19 (adj. of USD50m of Duffel facility’s EBITDA).
Aleris’ acquisition to add high-margin Aerospace/Building and Construction
segment to Novelis’ portfolio
Exhibit 23: Novelis: Pre-Aleris Portfolio
Speciality,
17
Exhibit 24: Novelis: Post-Aleris portfolio*
Aerospace
4%
Automotive,
20
Speciality
19%
B&C, Truck
trailer
8%
Can
47%
Can, 63
Source: Company
Automotive
22%
Source: Company; *pro-forma including Duffel and Lewis Port;
Aleris acquisition is value dilutive by INR33/sh
Though the Aleris acquisition has added Aerospace/Business and Construction
segment to Novelis’ portfolio, timing of the Aleris’ acquisition could not have been
worse as outlook for the Aerospace segment remains uncertain in FY21E due to the
COVID-19 impact and max-737 issues. Novelis expects synergy run-rate of USD150m
p.a. after 3-5 years due to the combination of Aleris’ auto facility in Asia with its own
facilities but we have not factored it in our estimates. We expect EBITDA of
USD210m (ex-Duffel) and USD250m in FY21E and FY22E, respectively, which makes
the deal valuation look expensive at 11.7x/9.9x FY21E/FY22E EV/EBITDA. The Aleris
21 May 2020
13
 Motilal Oswal Financial Services
Hindalco
acquisition adversely affects HNDL’s fair value by INR41/share on FY21 and
INR33/share on FY22E basis at 6.0x EV/EBITDA multiple.
Exhibit 25: Aleris acquisition affects HNDL valuation negatively
USD m
EBITDA
Consideration
EV/EBITDA
EV based on 6.0x EBITDA
Excess value paid
Value per share (USD)
Value per share (INR)
FY21
210
2463
11.7
1,262
-1,201
-0.54
-41
FY22
250
2463
9.9
1,498
-965
-0.43
-33
Source: MOFSL
21 May 2020
14
 Motilal Oswal Financial Services
Hindalco
Net debt has peaked, FCF to drive deleveraging
Net debt/ EBITDA should decline from 4.5x currently to 3.5x by Mar’22
With the acquisition of Aleris for USD2.8b (USD2.5b net of Duffel plant sale), HNDL’s
net debt has increased to ~USD7.8b, implying 4.5x net debt/ EBITDA. We expect net
debt to decline to USD7.6/USD7.2b by Mar’21/Mar’22E aided by FCF generation
even in a weak economic environment. We estimate net debt to EBITDA to decline
to 3.5x in FY22E as the global economy recovers from the impact of COVID-19.
Exhibit 26: Leverage to decline gradually from peak levels currently (INR b)
Net-Debt
465
3.7
401
388
2.5
394
Net-Debt/EBITDA
574
550
4.4
3.5
2.9
2.8
FY17
FY18
FY19
FY20
FY21
FY22
Source: MOFSL
No near-term debt repayments and available liquidity provide comfort
HNDL does not have any debt repayments scheduled in FY21, which coupled with
the USD2b cash and cash equivalents at its disposal, should help it comfortably tide
over the current crisis. The bridge loan of USD1.1b used to finance Aleris’
transaction is due for repayment in Apr’21, which we expect to be funded by (a) sale
proceeds of Duffel and Lewis Port, and (b) refinancing of the balance portion
through long-term debt. HNDL however has few scheduled repayment in FY23 (a)
INR60b bonds in standalone entity due in 1HFY23E, and (b) USD1.75b term loan
facility in Novelis due in Jun’22. Beyond these, there are no significant repayments
to be made till FY26.
Exhibit 27: HNDL’s debt repayment schedule – well spaced out with no near term repayment
Repayment (INR m)
Standalone (a)
Utkal (b)
Novelis (US$mn)
Novelis (c)
Total
FY21
120
0
0
0
120
FY22
3,160
0
1,100
83,600
86,760
FY23
61,823
0
1,750
1,33,000
1,94,823
FY24
120
0
0
0
120
FY25
9,812
0
0
0
9,812
FY26
9,812
3,161
2,275
1,72,900
1,85,873
FY27
16,956
4,635
29
2,204
23,795
FY28
16,896
4,635
0
0
21,531
FY29
16,836
4,635
0
0
21,471
FY30
16,836
4,635
1,600
1,21,600
1,43,071
Source: Company
21 May 2020
15
 Motilal Oswal Financial Services
Hindalco
Exhibit 28: EBITDA to deliver 6% CAGR over FY20-22E to INR159b with incremental EBITDA coming from Aleris business
Consolidated EBITDA break-up (INR m)
Standalone + Utkal
Novelis
Aleris
Novelis + Aleris (b)
Others and consolidation adjustments (c)
Consolidated (a+b+c)
FY18
62,860
78,325
78,325
-2,981
1,38,204
FY19
65,986
95,608
95,608
-6,489
1,55,105
FY20E
46,608
1,02,435
1,02,435
-6,489
1,42,554
FY21E
36,129
83,672
15,772
99,444
-6,489
1,29,084
FY22E
46,839
99,447
18,976
1,18,424
-6,489
1,58,773
Source: MOFSL
Exhibit 29: Expect FCF generation even in FY21
(
USD m
)
1,689
782
1,714
OCF
Capex
Interest (net)
FCF
1,582
433
1,454
504
114
(413)
(927)
FY20E
1,435
94
(465) (441)
FY18
(350)
(859)
FY19
(862)
(479)
(690)
(460)
FY21E
FY22E
Source: MOFSL
21 May 2020
16
 Motilal Oswal Financial Services
Hindalco
Valuation
HNDL has corrected ~40% in CY20 due to the double whammy of weaker aluminum
demand and margins on account of the COVID-19 pandemic and higher leverage
owing to Aleris’ acquisition. This correction has however resulted in significant de-
rating in the implied valuation multiples despite building in sharply lower earnings
for FY21 and FY22. At CMP of INR117/share, HNDL is trading at 6.7x/ 5.3x FY21E/
FY22E EV/EBITDA which are at a significant discount to 10-year average of 7.3x.
The current valuation is comparable to the trough of 5x EV/EBITDA seen four years
back. However, HNDL’s earning mix has improved substantially since then as ~75%
of EBITDA now comes from relatively stable conversion business (Novelis + Aleris) as
against only 50-55% three years back which should improve the attributable
valuation multiple to the company. Moreover, RoE currently (5.3% in FY21E) is far
better than the trough RoE of 2.2% seen in FY16. We also expect RoE to improve to
10.8% in FY22E on expectation of gradual normalization of COVID-19 impact.
Exhibit 30: HNDL EV/EBITDA – 10% below 10 yr average
EV/EBITDA (x)
Min (x)
12.0
10.1
9.0
6.0
5.0
6.5
5.9
8.7
7.3
Avg (x)
+1SD
Max (x)
-1SD
3.0
2.3
Exhibit 31: HNDL P/B – currently ~50% below 10 yr average
P/B (x)
Min (x)
Avg (x)
+1SD
Max (x)
-1SD
2.8
1.7
0.8
1.3
0.5
0.7
1.5
0.8
0.0
3.0
Exhibit 32: RoE to increase in FY22E after a dip in FY21E
23.5
20.3
18.0
11.6
11.7
7.1
2.2
FY11
FY12
FY13
FY14
FY15
FY16
FY17
FY18
FY19
FY20E
FY21E
FY22E
Source: MOFSL
12.8
14.5
11.2
5.3
10.8
Exhibit 33: EBITDA from converter business increases to 75% in FY22E from 57% in FY18
EBITDA Break-up
Standalone + Utkal
Novelis
Aleris
Novelis + Aleris (b)
Others and consolidation adjustments (c)
Consolidated (a+b+c)
Share of Novelis EBITDA (%)
FY18
62,860
78,325
78,325
-2,981
1,38,204
56.7
FY19
65,986
95,608
95,608
-6,489
1,55,105
61.6
FY20E
46,608
1,02,435
1,02,435
-6,489
1,42,554
71.9
FY21E
36,129
83,672
15,772
99,444
-6,489
1,29,084
77.0
FY22E
46,839
99,447
18,976
1,18,424
-6,489
1,58,773
74.6
Source: MOFSL
21 May 2020
17
 Motilal Oswal Financial Services
Hindalco
Valuation and view
With global demand for primary aluminum depleting, LME aluminum trades
near historical lows. Though cost pressure has subsided due to lower
commodity prices, at current LME, several global aluminum smelters would still
be in losses, which we believe is unsustainable. Given its low-cost integrated
production, HNDL is well placed to benefit as LME recovers.
We remain conservative on profitability and build in lower EBITDA margin of
USD380/t for FY21E and USD400/t for FY22E (v/s USD441/t in FY20) for Novelis.
We have also reduced volumes by 9% for FY21E and expect normalized volumes
in FY22E.
We have factored in EBITDA of USD210m/USD250m from Aleris’ operations and
have factored in earnings of Lewis Port due to lack of clarity on Lewis Port’s
profitability.
With ~75% EBITDA contribution from non-LME business i.e. the conversion
business (Novelis + Aleris), we see stability in HNDL’s earnings.
The stock trades at an attractive valuation of 5.3x EV/EBITDA and 6.9x P/E on
FY22E. We value it at INR175/share based on SOTP. Re-iterate
Buy.
Exhibit 34: SoTP valuation
INR m
India operations
Aleris
Novelis
Enterprise Value
Net-Debt
Equity Value (a)
Investment in Listed securities @10% discount (b)
Target Price INR/sh. (a+b)
Multiple
x
5.0
6.0
6.0
FY22E
EBITDA
40,349
18,976
99,447
EV
2,01,747
1,13,858
5,96,684
9,12,288
5,49,926
3,62,363
25,748
INR Per
share
91
51
268
410
247
163
12
175
Source: MOFSL
Target Price and FY22E EPS sensitivity to LME and INR/USD
A USD50/t movement in
LME Aluminum assumption
impacts out target price by
INR11/share whereas INR
depreciation against the
USD by INR1 leads to an
increase in our target price
by INR9/share and vice-
versa.
A USD50/t movement in
our LME Aluminum
assumption impacts FY22E
EPS by 8%-10% whereas INR
depreciation against the
USD by INR1 leads to an
increase in FY22E EPS by
6%-7%.
Exhibit 35:
Target price sensitivity to LME and INR/USD
Target Price
175
74
75
76
77
78
1600
134
142
151
160
168
1650
145
154
163
171
180
FY22E LME
1700
157
166
175
183
192
1750
168
177
186
195
205
1800
180
189
198
207
217
Source: MOFSL
Exhibit 36:
FY22E EPS sensitivity to LME and INR/USD
EPS
18.9
74
75
76
77
78
1600
1650
FY22E LME
1700
1750
1800
13.2
14.4
15.7
16.9
18.1
14.8
16.0
17.3
18.5
19.8
16.3
17.6
18.9
20.1
21.4
17.9
19.2
20.5
21.8
23.1
19.4
20.8
22.1
23.4
24.7
Source: MOFSL
21 May 2020
18
 Motilal Oswal Financial Services
Hindalco
Financials and Valuations
Income Statement
Y/E March
Net sales
Change (%)
Total Expenses
EBITDA
% of Net Sales
Depn. & Amortization
EBIT
Net Interest
Other income
PBT before EO
EO income (exp)
PBT after EO
Current tax
Deffered tax (net)
Tax
Rate (%)
Reported PAT
Minority interests
Share of asso.
Adjusted PAT
Change (%)
2016
9,87,589
-4.1
9,01,047
86,542
8.8
43,468
43,074
51,338
11,888
3,624
-5,765
-2,141
10,095
-5,110
4,984
-232.8
-7,125
-4,508
1,715
4,863
-82.6
2017
10,01,838
1.4
8,77,479
1,24,359
12.4
44,572
79,786
57,424
11,110
33,472
-76
33,395
13,210
1,116
14,326
42.9
19,069
-174
-251
19,069
-22.9
2018
11,51,717
15.0
10,13,513
1,38,204
12.0
45,062
93,141
39,107
10,046
64,080
17,742
81,821
15,855
4,887
20,742
25.4
61,080
-1
-1,251
42,088
120.7
2019
13,05,423
13.3
11,50,317
1,55,105
11.9
47,770
1,07,335
37,780
11,271
80,826
80,826
19,104
6,777
25,881
32.0
54,945
-7
5
54,957
30.6
2020E
11,84,301
-9.3
10,41,747
1,42,554
12.0
49,144
93,410
37,258
7,921
64,073
-16,957
47,116
15,382
3,846
19,228
40.8
27,888
-7
5
44,857
-18.4
2021E
11,77,407
-0.6
10,48,323
1,29,084
11.0
60,425
68,659
43,515
7,586
32,731
-12,750
19,981
9,495
2,374
11,869
59.4
8,112
-7
5
20,873
-53.5
(INR M)
2022E
13,47,882
14.5
11,89,109
1,58,773
11.8
61,370
97,402
43,026
8,088
62,465
-13,620
48,845
16,396
4,099
20,495
42.0
28,349
-7
5
41,981
101.1
Balance Sheet
Y/E March
Share Capital
Reserves
Net Worth
Minority Interest
Total Loans
Deferred Tax Liability
Capital Employed
Gross Block
Less: Accum. Deprn.
Net Fixed Assets
Goodwill
Capital WIP
Investments
Working capital Assets
Inventory
Account Receivables
Cash and Bank Balance
Others (incl. LT)
Working capital liability
Account Payables
Others (incl. LT)
Net Working Capital
Appl. of Funds
2016
2,049
4,04,017
4,06,066
3,813
6,74,754
20,970
11,05,603
10,57,871
3,78,494
6,79,377
1,77,353
42,138
47,488
4,65,104
1,67,873
79,184
1,20,962
97,085
3,05,857
1,50,598
1,55,259
1,59,247
11,05,603
2017
2,227
4,58,361
4,60,588
62
6,37,515
20,168
11,18,333
10,40,510
3,64,991
6,75,518
1,71,350
18,139
62,057
5,29,543
1,82,914
82,748
1,72,129
91,752
3,38,275
1,78,581
1,59,694
1,91,269
11,18,333
2018
2,229
5,46,289
5,48,518
86
5,20,155
31,333
11,00,092
10,82,644
4,10,054
6,72,590
1,78,294
20,629
68,778
5,29,846
2,16,314
99,598
1,19,612
94,322
3,70,046
2,04,392
1,65,655
1,59,800
11,00,092
2019
2,224
5,72,793
5,75,017
95
5,24,150
36,505
11,35,767
11,30,670
4,57,824
6,72,846
1,85,746
40,971
51,567
5,67,157
2,21,938
1,14,598
1,36,419
94,203
3,82,520
2,07,244
1,75,276
1,84,637
11,35,767
2020E
2,224
5,96,459
5,98,683
95
6,05,145
40,351
12,44,274
11,68,424
5,06,968
6,61,457
1,85,746
79,018
51,572
6,36,437
2,20,637
1,10,318
2,11,278
94,203
3,69,956
1,94,680
1,75,276
2,66,481
12,44,273
(INR Million)
2021E
2,224
6,00,802
6,03,026
95
7,18,754
42,725
13,64,599
14,05,922
5,67,393
8,38,529
2,25,121
49,782
51,577
5,68,413
2,19,353
1,09,676
1,45,181
94,203
3,68,823
1,93,546
1,75,276
1,99,590
13,64,599
2022E
2,224
6,23,158
6,25,382
95
7,21,987
46,824
13,94,288
14,68,847
6,28,763
8,40,083
2,25,121
42,493
51,582
6,31,855
2,43,727
1,21,863
1,72,062
94,203
3,96,846
2,21,570
1,75,276
2,35,009
13,94,288
21 May 2020
19
 Motilal Oswal Financial Services
Hindalco
Financials and Valuations
Ratios
Y/E March
Basic (INR)
EPS
Cash EPS
BV/Share (adj.)
DPS
Payout (%)
Valuation (x)
P/E
Cash P/E
P/BV
EV/Sales
EV/EBITDA
Dividend Yield (%)
Return Ratios (%)
EBITDA Margins (%)
Net Profit Margins (%)
RoE
RoCE (pre-tax)
RoIC (pre-tax)
Working Capital Ratios
Fixed Asset Turnover (x)
Asset Turnover (x)
Debtor (Days)
Inventory (Days)
Payable (Days)
Leverage Ratio (x)
Current Ratio
Interest Cover Ratio
Debt/Equity
2016
2.4
17.7
111.6
1.0
49.3
49.3
6.6
1.0
0.8
9.2
0.9
8.8
0.5
2.2
4.9
5.0
35.6
0.9
0.9
29.3
62.0
55.7
1.5
0.8
2.4
2017
8.6
28.6
129.9
1.1
15.0
13.7
4.1
0.9
0.7
5.8
0.9
12.4
1.9
7.1
8.2
9.1
31.7
1.0
0.9
30.1
66.6
65.1
1.6
1.4
1.6
2018
18.9
47.6
166.1
1.4
8.7
6.2
2.5
0.7
0.6
4.8
1.2
12.0
3.7
12.8
9.3
10.8
35.3
1.1
1.0
31.6
68.6
64.8
1.4
2.4
1.1
2019
24.7
46.2
175.0
2.4
11.4
4.7
2.5
0.7
0.5
4.2
2.1
11.9
4.2
14.5
10.6
11.9
36.2
1.2
1.1
32.0
62.1
57.9
1.5
2.8
1.0
2020E
34.6
185.7
1.6
9.3
34.6
6.4
3.7
0.7
0.6
4.8
1.2
12.0
3.8
11.2
8.5
10.3
1.0
1.0
34.0
68.0
60.0
1.7
2.5
1.0
2021E
30.8
169.9
1.7
21.2
30.8
13.8
4.2
0.8
0.7
6.7
1.3
11.0
1.8
5.3
5.8
6.8
0.8
0.9
34.0
68.0
60.0
1.5
1.6
1.5
2022E
40.3
180.0
2.7
16.7
40.3
6.9
3.2
0.7
0.6
5.3
2.1
11.8
3.1
10.8
7.6
8.7
0.9
1.0
33.0
66.0
60.0
1.6
2.3
1.4
Cash Flow Statement
Y/E March
EBITDA
XO Exp. (income)
tax paid
Change in WC
CF from Op. Activity
(Inc)/Dec in FA + CWIP
Free Cash Flow to firm
(Pur)/Sale of Inv. & yield
Others & M&A
CF from Inv. Activity
Equity raised/(repaid)
Debt raised/(repaid)
Interest
Dividend (incl. tax)
CF from Fin. Activity
(Inc)/Dec in Cash
Add: Opening Balance
Closing Balance
2016
86,542
1,543
-12,291
41,083
1,16,877
-42,452
74,426
15,859
6
-26,586
1
-36,003
-50,057
-2,558
-88,619
1,673
1,19,289
1,20,962
2017
1,24,359
3,622
-7,797
6,691
1,26,875
-29,376
97,499
5,667
3,524
-20,185
33,141
-25,430
-60,754
-2,479
-55,523
51,167
1,20,962
1,72,129
2018
1,38,204
2,617
-14,081
-17,862
1,08,877
-30,008
78,870
24,685
8,052
2,730
162
-1,22,863
-38,486
-2,938
-1,64,124
-52,517
1,72,129
1,19,612
2019
1,55,105
439
-18,883
-16,865
1,19,795
-60,053
59,742
6,615
5,063
-48,375
-1,176
-14,443
-35,766
-3,229
-54,613
16,807
1,19,612
1,36,419
2020E
1,42,554
-16,950
-15,382
-6,984
1,03,237
-65,794
37,443
7,921
-57,873
70,988
-37,258
-4,234
29,496
74,860
1,36,419
2,11,279
2021E
1,29,084
-12,743
-9,495
793
1,07,639
-64,652
42,987
7,586
-1,84,725
-2,41,791
1,15,350
-43,515
-3,781
68,055
-66,097
2,11,278
1,45,181
(INR M)
2022E
1,58,773
-13,613
-16,396
-8,538
1,20,226
-52,402
67,824
8,088
-44,314
-43,026
-6,005
-49,031
26,881
1,45,181
1,72,062
21 May 2020
20
 Motilal Oswal Financial Services
Hindalco
Explanation of Investment Rating
Investment Rating
Expected return (over 12-month)
BUY
>=15%
SELL
< - 10%
NEUTRAL
< - 10 % to 15%
UNDER REVIEW
Rating may undergo a change
NOT RATED
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
The following Disclosures are being made in compliance with the SEBI Research Analyst Regulations 2014 (herein after referred to as the Regulations).
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 company of Passionate Investment Management Pvt. Ltd.. (PIMPL). MOFSL is a listed public company, the details in respect of which are
available on www.motilaloswal.com. MOFSL (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 India Ltd. (NSE) and Bombay Stock Exchange Limited (BSE), Multi Commodity Exchange of India Limited (MCX) and
National Commodity & Derivatives Exchange Limited (NCDEX) for its stock broking activities & is Depository participant with Central Depository Services Limited (CDSL) National
Securities Depository Limited (NSDL),NERL, COMRIS and CCRL and is member of Association of Mutual Funds of India (AMFI) for distribution of financial products and Insurance
Regulatory & Development Authority of India (IRDA) as Corporate Agent for insurance products.
Details of associate entities of Motilal Oswal Financial Services Limited are
available on the website at
http://onlinereports.motilaloswal.com/Dormant/documents/List%20of%20Associate%20companies.pdf
MOFSL and its associate company(ies), their directors and Research Analyst and their relatives may; (a) from time to time, have a long or short position in, act as principal in, and
buy or sell the securities or derivatives thereof of companies mentioned herein. (b) 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) or may have
any 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
MOFSL and / or its affiliates do and seek to do business including investment banking with companies covered in its research reports. As a result, the recipients of this report
should be aware that MOFSL may have a potential conflict of interest that may affect the objectivity of this report. Compensation of Research Analysts is not based on any specific
merchant banking, investment banking or brokerage service transactions. Details of pending Enquiry Proceedings of Motilal Oswal Financial Services Limited are available on the
website at
https://galaxy.motilaloswal.com/ResearchAnalyst/PublishViewLitigation.aspx
A graph of daily closing prices of securities is available at
www.nseindia.com, www.bseindia.com.
Research Analyst views on Subject Company may vary based on Fundamental
research and Technical Research. Proprietary trading desk of MOFSL or its associates maintains arm’s length distance with Research Team as all the activities are segregated
from MOFSL research activity and therefore it can have an independent view with regards to Subject Company for which Research Team have expressed their views.
Regional Disclosures (outside India)
This report is not directed or intended for distribution to or use by any person or entity resident in a state, country or any jurisdiction, where such distribution, publication, availability
or use would be contrary to law, regulation or which would subject MOFSL & its group companies to registration or licensing requirements within such jurisdictions.
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 Financial Services Limited (MOFSL) 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 MOFSL 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 MOFSL , 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., MOFSL 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
In Singapore, this report is being distributed by Motilal Oswal Capital Markets Singapore Pte Ltd (“MOCMSPL”) (Co.Reg. NO. 201129401Z) which is a holder of a capital markets
services license and an exempt financial adviser in Singapore.As per the approved agreement under Paragraph 9 of Third Schedule of Securities and Futures Act (CAP 289) and
Paragraph 11 of First 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 MOFSL, 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 MOFSL, Research Analyst and/or his relatives do not have actual/beneficial ownership of 1% or more securities in the subject company
3 MOFSL, Research Analyst and/or his relatives have not received compensation/other benefits from the subject company in the past 12 months
4 MOFSL, 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 MOFSL has not acted as a manager or co-manager of public offering of securities of the subject company in past 12 months
7 MOFSL has not received compensation for investment banking/ merchant banking/brokerage services from the subject company in the past 12 months
8 MOFSL has not received compensation for other than investment banking/merchant banking/brokerage services from the subject company in the past 12 months
9 MOFSL has not received any compensation or other benefits from third party in connection with the research report
10 MOFSL has not engaged in market making activity for the subject company
21 May 2020
21
 Motilal Oswal Financial Services
Hindalco
********************************************************************************************************************************
The associates of MOFSL may have:
- financial interest in the subject company
- actual/beneficial ownership of 1% or more securities in the subject company
- received compensation/other benefits from the subject company in the past 12 months
- 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.
- acted as a manager or co-manager of public offering of securities of the subject company in past 12 months
- 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)
- 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.
21 May 2020
22