Jaypee Infratech: The value DNA

Initiating Coverage | 18 September 2012

Sector: Real Estate

Jaypee Infratech

BSE SENSEX

S&P CNX

18,496

5,600

CMP: INR49

The value DNA

TP: INR60

Buy

Synergistic benefits, FCF visibility, but some gray areas too



Bloomberg

JPIN IN

Equity Shares (m)

1,388.9

52-Week Range (INR)

66/33

1,6,12 Rel. Perf. (%)

-1/-11/-12

M.Cap. (INR b)

67.7

M.Cap. (USD b)

1.3



JPIN offers a unique synergistic business model of infrastructure development (Yamuna

Expressway) and real estate value unlocking.

Expect free cash flow (FCF) beginning FY13 itself, given (1) expressway going ex-capex,

and (2) strong operating performance in real estate. FCF will be Utilizied for debt

repayment and potential growth in payout.

Value unlocking story is sustainable, though negated by prevailing concerns over (a)

traffic growth at expressway, (b) relative weakness in market mix, and (c) risk of policy

actions. Some of the concerns are easing off.

Valuations are inexpensive; Buy with a target price of INR60 (23% upside).

Financial summary (INR b)

Y/E March

2012 2013E 2014E

Net Sales

31.6 38.1 47.3

EBITDA

16.5 17.5 21.7

12.9

9.3 10.0

EPS (INR)

9.3

6.7

7.2

EPS Gr. (%)

-10.1 -27.6

7.0

BV/Sh. (INR)

41.6 47.2 53.2

P/E (x)

5.3

7.2

6.8

P/BV (x)

1.2

1.0

0.9

EV/EBITDA (x)

8.1

7.6

6.0

EV/ Sales (x)

4.2

3.5

2.7

RoE (%)

24.5 15.2 14.3

RoCE (%)

13.8 12.2 14.0

Unique business model with synergistic value unlocking:

Jaypee Infratech (JPIN)

offers a unique blend of infrastructure and real estate development through (a)

Yamuna Expressway (165km, the longest access-controlled six-lane BOT project

connecting Agra to Greater Noida), and (b) five proposed integrated townships

in surrounding land parcels, with huge development potential of ~6,175 acres

(~530msf). We expect its business model to enjoy strong synergistic benefits,

with the expressway commencing operations in August 2012, aiding robust

connectivity and increasing economic activity in the surrounding areas.

Steady FCF visibility - rare in liquidity-strapped sector:

With capex for Yamuna

Expressway (YE) already over, JPIN is set to generate steady free cash flows

(FCF) beginning FY13 itself. This will be driven by (1) superior operating

performance (strong pre-sales of ~INR151b, INR64b receivable), (2) execution

focus and steady collections (57% of pre-sales), and (3) annuity stream from YE

(expect annualized toll of ~INR2.7b). We estimate net surplus (FCF - interest) of

~INR2.1b/5.2b in FY13/14, which would preferably be utilized for repayment of

YE debt over the next 12-13 years, along with potential growth in payout.

Value unlocking story partially constrained by prevailing uncertainties:

JPIN

offers an excellent play on sustainable value unlocking from huge real estate

potential. However, immediate upside may be constrained by prevailing

concerns over (a) traffic growth at YE, (b) relative weakness in market-mix, and

concerns over YE and market mix are easing off. JPIN being the cash cow of JP

Group, confidence over beneficial usage of cash surplus would be a key positive.

Convincing potential, steady cash, subsiding concerns; Buy:

Post recent

correction, JPIN offers a good entry point. The stock trades at (a) P/E of 7.2x

FY13E and 6.8x FY14E, (b) P/BV of 1x FY13E and 0.9x FY14E vis-à-vis RoE of ~15%.

Valuations are inexpensive and operational outlook is improving. We initiate

coverage with

Buy,

and SOTP-based target price of INR60 (23% upside).

Shareholding pattern %

As on

Jun-12 Mar-12 Jun-11

Promoter

83.3

Dom. Inst

9.0

9.7

Foreign

0.9

0.7

0.6

Others

6.8

7.1

6.4

Stock performance (1 year)

Jaypee Infratech

Story in charts Synergistic play; strong operating performance

JPIN's business model offers a unique blend of

infrastructure building and real estate

development through destination creation.

Yamuna Expressway and surrounding land parcels

offer value unlocking story with strong synergistic

bearings.

Expressway commenced operations in August

2012. We expect toll revenue to render ~INR2.7b

of annualized stream in FY14

Jaiprakash Associates Ltd.

83.1%

Real estate projects in Jaypee Greens Wish Town,

(Noida) and Sports City (GB Nagar) have been

enjoying strong pre-sales and collections.

Historically and even during the downturn, JPIN

emerged among the best performers in terms of

sales among real estate players.

Change in debtors as a percentage of revenue

suggests that JPIN enjoys superior cash

collections over peers.

#1 Combination of infrastructure and real estate

#2 Expect synergistic impact in growth of individual verticals

Jaypee Infratech Limited

Expressway

Development of Expressway

on BOOT Basis (165 km

Yamuna Expressway)

Real Estate Development

along Yamuna Expressway

Noida (NCR) - 885 Acres

Jaganpur (NCR) - 1,235 Acres

Mirzapur (NCR) - 1,235 Acres

Tappal - 1,235 Acres

Agra - 1,235 Acres

#3 Yamuna Expressway to render ~INR2.7b of annuity stream

Length (Km)

Existing PCUs

Noida - Greater Noida

NH2

Traffic estimates (FY14 PCUs)

Growth (%)

FY13-15

FY16-25

FY26-48

Toll rate (INR)

Growth (%)

FY14 Toll (INR m)

165

60,000-70,000

50,000

21,000

343

2,683

#4 Healthy cash conversion along with steady sales(INR b)

#5 Consistently been the best performer in sales (INR b)

#6 JPIN had better customer collection than peers

Change in debtors as a % of revenue

Source: Company/MOSL

18 September 2012

Jaypee Infratech

Story in charts

FCF visibility, inexpensive valuations partially eclipsed by uncertainty

#10

Valuations seem inexpensive at (a) P/E of 7.2x

Ex-capex YE and surplus cash from real estate offer

FCF visibility from FY13.

Operating surplus would primarily be utilized

towards repayment of Yamuna Expressway debt,

along with potential growth in payout

Despite growth in cash earnings, PAT to post

negative 12% CAGR over FY12-14, due to

commencement of depreciation and interest

FY12

30.3

19.6

10.6

-23.8

1.5

-14.6

1.4

-16.0

3.3

-19.3

-17.9

FY13E

33.8

21.4

12.4

-1.0

1.8

9.9

5.4

2.4

2.1

7.5

1.4

FY14E

39.0

23.9

15.1

2.3

2.1

15.5

7.8

2.6

5.2

13.0

1.7

FY13E and 6.8x FY14E, (b) P/BV of 1x FY13E and

0.9x FY14E vis-à-vis RoE of ~15%.

#11

SOTP value suggests that ongoing land parcels at

Noida and Parcel-3 offer cushion to downside risk.

#12

Some macro and micro indicators have to turn

favorable and encouraging to overcome

prevailing concerns.

#8 Operational surplus to moderate gearings (INR b)

#7 Expect JPIN to generate positive FCF from FY13

Cash based P&L

CF from Real Estate

Construction cost

Net cash from Real Estate

Steady State YE annuity

Operating expense

Gross cash profit

Interest payment

Cash PBT

Tax

Cash PAT

FCF

FCF / Interest (x)

#9 PAT to post de-growth due to depreciation and interest

#10 JPIN's valuations seem inexpensive compared to peers

RoE (%)

#11 Ongoing projects offer cushion to downside

#12 Awaiting re-rating triggers

Comfort on new Government's

development policies

General improvement in

Noida market outlook

Certainty over expressway traffic

Usage of operating cash surplus

Source: Industry, Company, MOSL

18 September 2012

Jaypee Infratech

Unique business model with synergistic value unlocking

Creating destinations by building infrastructure, developing real estate



JPIN offers a unique blend of infrastructure building and real estate development through

(a) Yamuna Expressway and (b) five proposed integrated townships in surrounding land

parcels of ~6,175 acres.

The land parcels have the potential to generate ~530msf (~59% in NCR) of real estate

development and almost 98% of these lands is already acquired.

We expect JPIN to enjoy strong synergistic benefits of both the verticals – the expressway

aiding robust connectivity, and in turn, increasing economic activity around Jaypee Sports

City at Gautam Budh Nagar (Formula-1 event, proposed Special Development Zone, etc).

Agra-Noida connectivity to have positive bearing on real estate

Jaypee Infratech (JPIN) offers a unique business model, with synergistic benefits

between infrastructure building and real estate development. Its 165km-long access

controlled six-lane BOT project connecting Agra to Greater Noida, the Yamuna

Expressway (YE) commenced operations in August 2012. JPIN would have the right of

toll collection for 36 years for the YE as well as for the existing 23.8km Noida-Greater

Noida Expressway. YE is likely to reduce travel time by ~50% as compared with NH2

and also passes through future destinations like proposed SDZ, formula-1 track in

peripheral regions, which should aid steady traffic growth, along with economic

interest in surrounding real estate. The potential time saving owing to smooth traffic

JPIN’s proposed townships along Yamuna Expressway are surrounded by existing/upcoming infrastructure developments

Agra:

Possible take

off in FY14. Initial

marketing started

GB Nagar:

Monetization

started in 3QFY12 with

encouraging response

Tappal:

Near term

monetization

plan dimmed

due to scrap of

proposed airport

Noida:

~55% monetization done

with robust pre-sales of ~INR140b.

Execution and delivery from FY13

onwards

Source: Company, MOSL

18 September 2012

Jaypee Infratech

movement at the access control expressway would offer strong marketability for the

real estate projects in its integrated sports city (5,000 acres) at Gautam Budh Nagar.

Real estate development: Medium-term value unlocking potential

Rising activity post

expressway

commencement and

peripheral developments

to enhance marketability

of land parcels

JPIN’s real estate projects of over 6,000 acres across the expressway are divided into

five proposed integrated townships projects. The development potential is huge

(~530msf) and ~59% of the area is located in the NCR. Almost 98% of the land has

already been acquired at a very competitive price (implied cost of ~INR30/sf) and is

ready for monetization. With rising economic activity and better connectivity through

expressway, we expect the land parcels to generate meaningful interest among buyers,

investors and various companies (especially IT/ITES) to set up office spaces. This

implies significant value unlocking potential over the medium-to-long term. The

recent success in ongoing projects has been encouraging; further, positive bias on

UP’s growth expectations under the new government should provide additional

momentum.

Superior track record in established market

JPIN has consistently

been among the top

three real estate players

in terms of annual sales,

despite several

challenges in operating

market

JPIN started developing its Noida land parcel – “Jaypee Greens Township” in 2009,

and witnessed strong response over the last 3-4 years with cumulative sales of ~43msf

(~INR141b) of the total area of 78msf. With this, the company has consistently been

among the top three real estate players since FY10 in terms of annual sales (both

volume and value). While the initial momentum in sales (i.e. FY09 to early FY11) can

be attributed to the overall upswing in the Noida market, JPIN has shown

commendable resilience even during the downturn of FY11-12.

JPIN has consistently been the best performer in terms of annual sales

Volume (msf)

Value (INR b)

Source: Company, MOSL

Noida has been a very competitive market with the presence of a large number of

local developers. However, we believe JPIN’s projects enjoy superior saleability

compared to peers due to its (a) balanced product mix, with mid/high-end focus, (b)

superior product proposition, and (c) stronger execution track record. Pricing flexibility

on the back of low cost land (~INR30/sf) offers additional edge.

18 September 2012

Jaypee Infratech

Propositions attractive in new parcels – initial sales encouraging

Relatively cheaper

option and ease of

commuting should also

bolster demand for IT/

ITES based commercial

offices in the Sport City,

which has witnessed

impressive initial

response

During 3QFY12, JPIN began monetizing GB Nagar parcel-3 as a flagship project

christened “Sports City”. The project is planned to be part of the mega 5,000 acres

township project, combining 2,500 acres of JPIN (parcel 2 & 3) and 2,500 acres of

parent company across 15km frontage stretch of expressway and contiguous to each

other. The Sports City offers attractive marketability due to strong infrastructure and

connectivity to be provided by congestion-free expressway (would take 20 minutes

from Noida parcel which is 20km away) and emerging destinations like Formula 1

track, etc. Relatively cheaper option and ease of commuting should also bolster

demand for IT/ITES based commercial offices.

JPIN has also started preliminary marketing activities for its Agra project, where it

plans to launch plotted sales initially. With this, visibility has emerged for four out of

five land parcels. Parcel-4 (Tappal) is the only one which faces a setback, due to

recent shifting of proposed airport from Jewar.

Execution back-up commendable

JPIN outsources the construction of its projects to its parent, JP Associates, which has

40+ years of experience in the EPC business. Its execution prowess is evident in the

Yamuna Expressway (YE), Fomula-1 race track, etc. Robust execution track record and

slew of deliveries scheduled over FY13-14 should bolster demand for its projects. We

do not see any conflict of interest in outsourcing construction to the parent, as it

operates under cost+mid-teen margin basis, a common industry practice.

18 September 2012

Jaypee Infratech

FCF visibility – rare in liquidity strapped sector

Estimate surplus cash flow of INR2.1b/5.2b in FY13/14



JPIN will generate meaningful free cash flows from FY13, with Expressway going ex capex.

This will be driven by (1) superior operating performance (strong pre-sales of ~INR151b,

INR64b receivable), (2) execution focus and steady collections (57% of pre-sales), and (3)

annuity stream from YE (expect annualized toll of ~INR2.7b).

We estimate net surplus (FCF - interest) of ~INR2.1b/5.2b in FY13/14, which would

preferably be utilized towards repayment of YE debt over the next 12-13 years, along

with potential growth in payout.

Expressway commencement has a lot more to offer beyond annuity stream

Yamuna Expressway (YE) has commenced operations in August 2012. It is expected to

generate a steady and growing annualized revenue stream of ~INR2.7b (~12% CAGR

assumed over FY13-15). However toll revenue apart, we expect the expressway to

have a larger synergistic impact on the demand potential and value accretion of

surrounding real estate projects (as discussed in the previous section).

Annuity streams - certainty to emerge over FY13

In the absence of any

true comparables, our

traffic estimates are

largely based on

qualitative assumptions

In the absence of any true comparables, our traffic estimates are largely based on

qualitative assumptions, coupled with associated risks. Key assumptions:



Traffic growth:

We assume ~20,000 equivalent PCUs (passenger car units) for YE in

FY13, with ~8% YoY traffic growth till FY15, moderating to 6% YoY (v/s 50-60,000

PCUs per day for toll-free NH2). Our recent interaction with the management

suggests initial PCUs of ~10,000 in the month of August 2012. Traffic growth, coupled

with ~4% YoY growth in toll rates should result in ~12% CAGR in annuity steam

over FY13-15. As per the concession agreement, JPIN is also allowed to collect toll

from the 23.8km existing Noida-Greater Noida Expressway. However, we have

not assumed any revenue from this due to lack of clarity commuters have been

objecting to the toll.

Toll rates:

Industrial Development Authority had recommended INR2.10 as toll

tax per km for cars and jeeps, INR3.23 for mini buses, INR6.60 for buses and trucks

and INR10.10 for other heavy vehicles. The rates have been given an in-principle

approval by the state government. However, these rates are the ceiling that has

Our assumptions for Yamuna Expressway

Length (Km)

165

Existing PCUs

Noida - Greater Noida

60,000-70,000

NH2

50,000

Traffic estimates (FY14 PCUs)

21,000

Growth (%)

FY13-15

FY16-25

FY26-44

Toll rate (INR)

343

Growth (%)

FY14 Toll (INR m)

2,683



Key milestones of Yamuna Expressway project



Yamuna Expressway was conceived in 2003, but was stalled for a long period

till 2007, before it revived with a deadline of 2013.

The deadline was advanced to 2010 in view of the Commonwealth Games, but

farmers' agitation in places against allotment of land delayed the project by

a year.

The expressway has six interchanges, 70 vehicular underpasses, 41 minor

bridges, 76 cart track underpasses and 183 culverts. To ensure commuters'

safety, CCTV cameras have been installed at regular intervals.

While there are five proposed inter-junctions, initially, the toll will start at

three out of five plazas at Greater Aligarh, Mathura and Agra.

The concession on the 24km Noida-Greater Noida Expressway could be

delayed/reviewed due to objections from commuters against toll

18 September 2012

Jaypee Infratech

been fixed by the state government and JPIN can charge less, if it wishes. The

management has guided for an average effective toll rate of INR2/km (for 165km).

Recent channel checks on

YE have revealed positive

feedback on the travel

time and high fuel

efficiency



Channel checks indicate positive feedback on time/ fuel efficiency:

The travel

time from Delhi to Agra through YE is expected to be reduced by ~50% (~2 hours)

compared with NH2, which runs through various congested towns. Post

commencement of the expressway, our interactions with travel agency drivers,

individuals have revealed positive feedback on the travel time and high fuel

efficiency. However, a few indicated that when one includes travel time on

connecting roads to both ends of the expressway, the effective time saving could

be lower than 2 hours.

Rise in economic activities key to migration of commercial vehicles:

We expect

the near-term PCU growth to be driven largely by passenger vehicles, while traffic

migration from commercial vehicles (not so time sensitive) could be slower.

Growth in commercial traffic would also depend on rise in economic activities in

neighboring areas, along with induced demand from (a) real estate development

in Sports City and several other launches along side the expressway by other

developers, and (b) future land parcels, which could emerge as attractive

destination for IT/ITES related offices. Initial success in GB Nagar launches, Formula

1 race track, proposed SDZ (Special Development Zone), etc are some positive

signs, which should incentivize the government to induce further growth

elements.

Certainty on toll revenue to emerge over FY13:

We expect meaningful clarity over

toll income to emerge in its first 6-9months of operations. Any delay or slowdown

in real estate activities in the proposed townships and other infrastructure plans

could have negative bearing on the annuity stream from the toll project.



Encouraging recovery in real estate sales since 2HFY12 …

After a subdued 1HFY12 (quarterly sales run rate down 60-70%), there has been an

impressive recovery in sales volume since 2HFY12. Despite prevailing weakness in

the Noida real estate market, JPIN's 2HFY12/1QFY13 sales momentum was

commendable, with 2.5x jump in bookings run-rate. JPIN achieved sales of 9.5msf/

2.5msf (~INR39b/INR9.3b) in FY12/1QFY13, taking total pre-sales to ~46msf (~INR151b),

Encouraging sales recovery since 2HFY12

Collection run-rate has been impressive as well (INR b)

Source: Company, MOSL

18 September 2012

Jaypee Infratech

Strong revenue booking indicates commensurate execution

JPIN had better customer collection than peers

Change in debtors as

% of revenue

Change in debtors

% revenue

Source: Company, MOSL

JPIN is entering into ex-

capex phase in

Expressway project. This,

coupled with cash

positive real estate

vertical to make the

company FCF generator

FY13 onward

from its Noida and GB Nagar land parcel. In 3QFY12, it started monetizing its GB Nagar

land (parcel-3), with encouraging sales response. Over the past 6 months, it has

achieved encouraging sales of ~INR7b in parcel-3, including (a) Plotted (0.1m sq yards

at INR3.5-4b), and (b) Commercial shops plus office space (~INR2.5b). Stronger sales

and focus on execution have also improved revenue booking run rate.

… augurs well for healthy collections and strong demand

JPIN has maintained a robust collection run-rate - largely commensurate with sales

momentum (collected almost 57% of presales). Steady execution pace in ongoing

construction has been the key attributable factor. The management intends to

prioritize execution over new launches in 1HFY13, before reviving fresh projects in

2HFY13. While the strategy could lead to lower sales during 1HFY13, with meaningful

delivery lined up over FY13-15, JPIN projects are likely to gain significant interest,

going forward. We expect superior connectivity following the commencement of the

expressway to play a strong role in improving the marketability of new parcels. We

estimate sales of ~INR40b/44b (3-4msf of quarterly volume run-rate) in FY13/14 v/s

INR39b in FY12.

Healthy cash conversion to continue, backed by steady

customer collection (INR b)

Expect INR40b+ sales run-rate over FY13-14

Source: Company. MOSL

18 September 2012

Jaypee Infratech

Operational concerns are weakening

Our sales expectations for JPIN come with concerns on (1) relative weakness in the

Noida market, (2) untested new land parcels, and (2) high proportion of brokers'

underwriting in NCR markets. However, we believe there are reasonably strong

mitigants as well.

Noida and Gr. Noida among

worst performing markets



Outlook of Noida market improving; JPIN has shown resilience

JPIN's core market, Noida has been impacted with several operational and political

overhangs over the past two years. This has resulted in its severe under-performance

in recent times. The rosy growth story of Noida/ Greater Noida over FY08-11 has been

severely diluted due to (a) oversupply concern and severe execution slippages, (b)

slow and incommensurately low commercial development, and (c) political risks owing

to events like farmers' protest, changing government, etc.

Despite weakness in general sentiment over Noida market, JPIN has managed to

maintain superior sales performance in recent times. This is largely attributable to

the fact that Noida has been a very scattered market, with the presence of a large

number of local developers, which makes the negative impact uneven. The political

risk over land protests had been more chronic in Noida extension villages, while

JPIN's land parcel is located in the less affected expressway zone. Additionally, JPIN's

stronger brand, better products, and execution have been the key to steady

operations.

Moreover, there are signs of broad based recovery for Noida/Greater Noida markets,

with (a) developers (Unitech, Jaypee) posting better sales over the past six months,

and (b) NCR Planning Board (NCRPB) approving the Master Plan-2021 for Greater Noida.

Ongoing projects enjoying decent demand

Project

Launched

Sold

Sold Avg. price

(msf)

(%)

(INR)

Aman Apartment I

3.3

100

3,000

Aman Apartment II

1.3

100

3,000

Klassic Apartment

5.5

5.2

3,400

Kosmos

8.5

8.3

3,500

Kensington Park

2.9

2.8

3,003

Kensington Boulevard

2.9

2.8

3,288

Kingswood Oriental

0.2

3,300

Kasa Isles

2.4

2.3

3,413

Kube Appts

1.5

1.4

3,413

Krescent Homes

4.3

4.2

4,314

Orchard

2.7

2.6

4,904

Anant

1.9

0.3

3,000

Pebble Beach

0.3

10,785

Garden Isle

4.9

2.7

4,131

Sports City (Built-up)

1.1

0.4

6,000

Residential Plots

6.0

5.9

2,700

Commercial Plots

3.1

100

2,600

Total

52.8

47.0

* Gross value before price discount; updated till 1QFY13

Value

Delivery

(INR b)

Date

2012

2013

2014

2015

163*

Source: Company, MOSL

Source: Industry

18 September 2012

Jaypee Infratech



Untested new parcels - flurry of upcoming projects a step towards market maturity

While JPIN's recent launch at Sports City (GB Nagar) can be termed as entry to a new

market, we believe with improving connectivity and several projects announced

alongside the expressway, these locations moving towards market maturity. Besides

JPIN's Sports City, other ongoing projects include (a) Upcountry and Golf Country

(Supertech): two integrated townships of 100 acres each, (b) Lotus City (3C), (c) NRI

Yamuna Township (SDS), (d) Earth Sapphire (Earth Infrastructure) etc. While the

average rate for plotted development is hovering around ~INR30,000/sq yard,

apartments and commercial spaces are trading at INR3000/sf+ and INR6,000/sf +. A

few projects have already witnessed 25-30% appreciation since launch 1.5-2 years

ago. We expect the JP brand to be preferred and enjoy early mover advantage on

account of the execution credibility it has established in the surroundings.



Broker sale a common practice, but JPIN's steady collection dilutes risk

Higher proportion of broker sales has been a common practice in the NCR. The biggest

impact of such practice is delayed cash conversion, despite strong pre-sales. While

this could raise concerns on the quality of large sales achieved by JPIN, a healthy

collection run-rate should mitigate the risk. The company has collected almost 57% of

its ~INR151b pre-sales, with delivery periods of these projects set for FY13-15.

Commensurate collection

mitigates the concerns

over delayed cash

conversion in a typical

broker sales practice

Rare FCF visibility in stressed sector

We see JPIN as one of the few free cash flow (FCF) generators in the liquidity-strapped

realty sector. Severe cost over-run in the YE project (~INR36b over past 12 months) has

dented FY12 cash flows. However with toll road commencing operations, we expect

ex-capex annualized toll revenue of ~INR2.7b (FY14), coupled with cash-positive real

estate operations (~INR64b receivable from pre-sales) to render visibility to healthy

cash generation. Steady execution and new launches in ongoing projects are likely to

improve cash conversion to INR9b-10b/quarter (v/s INR7.5b-8.5b/quarter currently).

We estimate positive FCF of INR7.5b/13b in FY13/14, which translates into 1.4/1.7x

interest expense.

Expect JPIN to generate positive FCF from FY13

Cash based P&L

Cash flow from Real Estate

Construction cost

Net cash from Real Estate

YE Annuity income

Opex and Capex

Steady State YE annuity

Operating expense

Other income

Gross cash profit

Interest payment

Cash PBT

Tax

Cash PAT

Dividend Payment

Debt repayment

FCF

FCF / Interest (x)

FY12

30.3

19.6

10.6

0.0

23.8

-23.8

1.5

0.1

-14.6

1.4

-16.0

3.3

-19.3

1.6

-7.8

-17.9

FY13E

FY14E

33.8

39.0

21.4

23.9

12.4

15.1

1.2

2.7

2.2

0.4

-1.0

2.3

1.8

2.1

0.2

9.9

15.5

5.4

7.8

2.4

2.6

2.1

5.2

1.6

0.5

3.6

7.5

13.0

1.4

1.7

Source: Company, MOSL

Our estimated FCF

translates into 1.4-1.7x

interest expense

18 September 2012

Jaypee Infratech

Operational surplus to moderate gearing

Expectation of a strong dividend payment, led by visibility over operating surplus,

has been an integral part JPIN's story. However, we believe the dividend story could

be deferred and partially diluted owing to the management's preferred plan to de-

leverage. While cost escalations in the YE project have led to a significant increase in

debt-equity to 1.1x (net debt of ~INR65.7b), we expect no major capex commitment

from FY13. This would free up the entire positive surplus from real estate projects to

address de-leveraging, along with potential improvement in dividend payout. JPIN's

infra debt of ~INR60b (for YE) is scheduled to be repaid from the 11th year of concession

period. However, given the visibility of operating surplus, the management plans to

retire the entire debt early (we assume repayment over the next 13 years).

Operational surplus to moderate gearing (INR b)

Focus on debt reduction

could defer dividend

growth expectations

Source: Company, MOSL

18 September 2012

Jaypee Infratech

Value unlocking partially constrained

YE traffic risks | Weaker market mix | New UP government policy



JPIN’s integrated business model renders substantial comfort on the potential value

unlocking opportunity over the medium to longer term.

Yet, near-term upside could be constrained by prevailing concerns over (a) traffic growth

at YE, (b) relative weakness in market-mix, and (c) risk of policy actions by the new

government in UP. Some of the concerns over YE and market-mix are easing off.

JPIN, being the cash cow of JP Group, confidence over beneficial usage of cash surplus

would be a key positive.

Growth story partly eclipsed by near-term concerns

While JPIN’s synergistic business model and long-term growth potential offers

meaningful comfort, near-term upside could be curbed by some prevailing concerns.



Downside risks to expressway traffic growth assumptions

Our traffic assumptions for the Yamuna Expressway (YE) are conservative, but they

are qualitatively decided due to the absence of any true comparables. Growth in

traffic is also a factor of economic development in surrounding areas. Any delay or

slowdown in real estate activities in the proposed townships and other infrastructure

plans could have significant negative bearing on the annuity stream from the toll

project. We also understand from discussions that as per the concession agreements,

the government shall not permit any other expressway or road between Noida and

Agra without mutual agreement and in case the competing road facility is provided,

adversely affecting the revenues of the company, then the concession period shall

be increased to compensate for the loss.

Sensitivity of Yamuna Expressway valuation to traffic assumptions

The illustration suggests

strong sensitivity of value

addition by toll project

to traffic growth

assumptions

FY13/14

PCUs assumption

20% Lower

Base case (21,000/day)

20% Higher

Annuity Stream (INR b)

EPS (INR)

FY14E

FY13E

FY14E

2.1

2.7

3.2

6.6

6.7

6.9

7.2

7.5

FCF - Interest (INR b)

FY13E

FY14E

1.9

2.1

2.3

4.8

5.2

5.6

Yamuna Expressway NPV (INR/share)

PCU Growth over FY16-25

10%

Base Case

10%

-0.1

-5.6

-10.3

-14.4

PCU Growth over FY13-15

-2.5

-4.8

-7.7

-9.7

-12.1

-13.9

-16.0

-17.5

-7.0

-11.6

-15.6

-19.0

Source: MOSL

Recent media report suggests that SP government has scrapped the Greenfield international

airport project at Jewar (near JPIN’s land parcel 4) owing to unavailability of the Center ’s

clearance. The airport is now being proposed between Mathura and Agra (towards the end of

the 165km expressway). While this could have an adverse effect on monetization of land

parcel-4 (although this land parcel has not been under immediate plan), it could as well

impact the medium term traffic growth expectation for Yamuna Expressway. Developments

like this could augment the uncertainty factor to our growth estimates.

18 September 2012

Jaypee Infratech

We require more clarity on the near-term revenue visibility of the YE project, which is

likely to emerge over the next 6-12 months, post commencement.



Subdued Noida market still in recovery stage

Although JPIN has posted strong operating performance and encouraging sales

recovery over 2HFY12, the broader outlook of the Noida market has not yet turned

positive. The market has been impacted by issues like oversupply, several delivery

backlogs, protests by farmers, and other political uncertainties. While there are early

signs indicating resolution of some of these issues, any major delay in the recovery of

market sentiment could negatively impact our sales assumptions for JPIN.

Noida market growth story diluted, with ebbing sales (msf) and rising inventory

Noida and other land

parcels, despite offering

the most affordable

product proposition in

NCR, coupled with

established

infrastructure, fell in prey

of uncertain operational

and political headwinds

However, early signs of

receding overhangs and

improving absorption/

price appreciation are

positives

Source: Prop Equity Data from Industry sources

However, risk perception seems to be improving

Unitech's Noida sales also

improved over past 9months

(msf)

Noida offers attractive mid-segment proposition:

We believe that Noida and other

expressway land parcels of JPIN offer the most attractive value and product

proposition with mid-segment affordability, when compared with competing

markets like Gurgaon. Given a large number of projects with unit ticket sizes of

INR4-5m, we expect demand drive to remain strong. Good road infrastructure and

better connectivity through expressway would further augment attractiveness.

Recent healthy offtake and price rises in JPIN’s own projects substantiate the same.

Higher visibility on resolution of land acquisition issues:

There are visible signs

that some land issues are getting resolved: (1) higher compensation to farmers, (2)

recent news on NCR Planning Board (NCRPB) approving Greater Noida 2012 master

plan, (3) some fast-track steps undertaken by the new government, etc. We believe

any definite development in this regard would boost buyers/investors’ lost

confidence in the Noida market, with spin-off benefits to JPIN.

Expressway, Formula-1 could change the dynamics of YE area:

The success of the

Formula 1 race in GB Nagar, which happens to be an annual event, should boost

interest level in Sports City real estate. The commencement of the expressway has

lot more to offer beyond toll revenue, in terms of improving connectivity and

economic activity in the surrounding regions over medium term. This coupled with

favorable government initiatives would provide the necessary thrust to JPIN’s

growth story.

Source: Company, MOSL

18 September 2012

Jaypee Infratech



Policy risk matters, but expect growth agenda to sustain

Change of political equation in UP is a risk, as future government action could have a

strong bearing on real estate potential. However, current dynamics appear to have

had lower-than-expected impact on JPIN, unlike in the past. [The company had faced

significant difficulties in land acquisition for the Yamuna Expressway in 2003 under

the Samajwadi Party (SP) government.] But growth has been the agenda for the success

of newly elected governments in neighboring states. We expect this to hold true in

UP as well, mitigating the political risk for JPIN.

18 September 2012

Jaypee Infratech

Convincing potential, steady cash, subsiding concerns

Buy with target price of INR60 (23% upside)



Post recent correction, JPIN trades at inexpensive valuations — FY13/14 P/E of 7.2/6.8x

and P/BV of 1x/0.9x vis-a-vis RoE of 15%.

We are assigning a Buy rating to JPIN (SOTP based target price of INR60), due to its

sustainable value unlocking story, steady operations and inexpensive valuations.

We understand that near-term upside potential is linked with some macro indicators

(comfort over government's policy, Noida market) and micro factors (certainty over toll

revenue, usage of operating cash surplus) turning favorable and encouraging.

Earnings growth to be capped by YE depreciation and interest

We expect JPIN's steady pre-sales, execution and slated delivery to drive ~22%

revenue CAGR over FY12-14. Revenue from GB Nagar projects is likely to cross

recognition threshold partially by 2HFY13. We expect EBITDA margin to stabilize at 45-

46% over FY13/14, translating into ~15% EBITDA CAGR. However, PAT is likely to post a

compounded annual de-growth of ~12% over FY12-14 on account of commencement

of depreciation and interest expense related to the Yamuna Expressway (YE) project.

This would lead to moderation in RoCE/RoE from 13.8%/24.3% to 14%/14.3% in FY14.

Nonetheless, we expect the cash profit and FCFE to improve meaningfully over FY12-

14, with (a) the completion of YE capex, and (b) strong visibility of cash flows from

core real estate operations.

Margins to moderate amidst steady revenue growth

PAT to post de-growth due to depreciation and interest

Source: Company, MOSL

Valuations are inexpensive; SOTP-based target price of INR60/share

JPIN trades at (a) P/E of 7.2x FY13E and 6.8x FY14E, (b) P/BV of 1x FY13E and 0.9x FY14E

vis-à-vis RoE of ~15%. Asset based valuations are inexpensive (20% discount to

medium-term average P/B) when compared to peers, although its earning based

valuations are hovering almost at par with the historical average of 7x. However,

when adjusted for expressway-led depreciation, its cash P/E is at below the historical

average (6.2x FY13E and 5.4x FY14E). We value JPIN at INR60/share based on 20%

discount to our SOTP-based value of INR74, which captures land parcels with near-to-

medium term visibility (parcels 1, 2 & 3 and 5) based on NPV and excludes parcel-4.

18 September 2012

Jaypee Infratech

Estimate JPIN’s SOTP value at INR74/share

NAV Calculations

Ongoing Parcels

Parcel 1 (Noida)

Parcel 3 (Mirzapur)

Parcels with high near-to-medium term visibility

Parcel 2 (Jaganpur)

Parcel 5 (Agra)

NPV based value

Land cost based value

Parcels with less near-to-medium term visibility

Parcel 4 (Tappal)

NPV based value

Land cost based value

GAV from Real estate

Less: Tax

Less: Operating Exp

Less: Ex YE debt

NAV

Yamuna Expressway

SOTP

(INR m)

77,627

38,558

38,508

30,121

12,875

18,041

2,900

184,814

40,659

18,481

5,679

119,395

-16,839

102,555

NAV/Share

% of NAV

133

100

-12

-9

Source: Company, MOSL

P/E at par with historical average, albeit cash P/E cheaper; appears attractive when compared with peers

Source: Company, MOSL

Initiating with Buy, awaiting re-rating triggers…

We are assigning a

Buy

rating to JPIN (TP of INR60), due to its convincing story, steady

operations and inexpensive valuations. However, we understand that for JPIN's growth

story to gain investor confidence, some macro and micro indicators have to turn

favorable and encouraging.

Key macro indicators:

(1) Comfort on new government's development policies

(2) General improvement in Noida market outlook

Key micro factors:

(1) Certainty over expressway toll revenue

(2) Usage of operating cash surplus FY13 onwards

Easing of above mentioned concerns and faster monetization in remaining land parcels

are the potential re-rating triggers.

18 September 2012

Jaypee Infratech

Our asset-based SOTP value suggests that ongoing land parcels at Noida and Parcel-3

offer cushion to downside risk at current market price, while the remaining parcels

aid strong potential value unlocking with economic growth and subsiding overhangs.

Ongoing projects offer cushion to downside

Potential value unlocking from remaining parcels

Source: Company, MOSL

… to steer growth towards true asset valuations

JPIN's long-term outlook is largely dependent on its ability to transform some

unexplored locations into attractive real estate destinations. The initial process has

started encouragingly, with infrastructure developments like expressway connectivity,

F-1 track and various others proposed developments. Therefore, its true asset value

unlocking is likely to play out only with the success in demand creation over medium

term. Demand visibility over Parcel 2/4/5 and steady sales at ongoing parcels could

place the company in a strong position over next 3-5years.

Higher clarity on development potential to unlock significant real estate value (INR/sh)

EV: 173

Ability to transform

some unexplored

locations into attractive

real estate destinations

could place the company

in a strong position over

the next 3-5years

Current EV: 96

EV: 122

Disc Rt 13.6%

Not valued

Disc Rt

16%

Disc Rt 14%

Disc Rt 13.6%

NPV based

Disc Rt 18%

Disc Rt 16%

Disc Rt

14%

Disc Rt 14%

Source: Company, MOSL

18 September 2012

Jaypee Infratech

Annexure

REALITY CHECK: Interactions with IPCs on Noida market

Demand supply dynamics improving gradually

Noida has been one of the worst affected realty markets in the recent downturn.

Other than overall sluggishness in the realty space, the pain was further aggravated

by strong farmers’ protests over land acquisition in Noida Extension. The protests

had a strong bearing on sales and execution momentum of several ongoing projects,

and thwarted the quantum upsurge story of this market over FY08-10. We interacted

with real estate consultants and developers to get a sense of the current happenings

and outlook.

Our key takeaways



Uproar over farmers’ agitations significantly impacted the Noida Extension projects

in FY12. Absorption run-rate has declined by 80-90% in Greater Noida region.

Oversupply and execution risk are the biggest concerns in the area. However, the

plummeting sales in remaining locations are more cyclical in nature.

Nonetheless, volumes at Expressway projects have been better and these projects

have seen 8-10% price appreciation also. Prices are expected to remain stagnant

with only a slow volume recovery.

Effects of the Noida Extension agitations are unlikely to flow to other locations.

Spillover demand from Extension projects should benefit locations like Faridabad,

Ghaziabad, etc.

Despite adversities, Noida market offers some of the best affordable propositions

in NCR markets with flurry of projects with average ticket sizes of INR3-6m. This

should revive the buyers' interests once concerns subside.

Success of the formula-1 race as an annual event is likely to improve interest for

township projects across the Yamuna Expressway (YE). Monetization of industrial

land around the YE also offers long-term growth potential.

Flashback: Encouraging growth over 2008-10 …

The Noida real estate growth story has largely been attributed to the emergence

of Noida Extension in 2008-09 as a key supply engine. While projects within the

main city and on Noida Expressway offer higher-end opportunities, the subsidized

land bank that several developers obtained from the government led to a flurry

of launches (30-40 projects/quarter) in the mid-income segments.



This resulted in a massive growth in absorption (~4k/annum in 2007-08 to 35k/

annum in 2010-11) and inventory levels (25-30k in 2008 to 100k in 2010-11). Easy

connectivity with Delhi, good infrastructure and plethora of affordable houses

(wide price difference with Gurgaon) were the major USPs of Noida Extension

projects.



… but sharp slowdown since FY11 thwarted momentum



Launches by numerous local developers with limited track record resulted in

concerns of oversupply and execution risk. The concerns transformed into genuine

sluggishness, with the eruption of farmers’ agitations (on compensation by the

government, land usage, etc) and subsequent unfavorable judgment against the

UP government’s land acquisition.

18 September 2012

Jaypee Infratech



While the court’s decision to de-notify land or award higher compensation led to

uncertainty among buyers and developers, it also stalled the progress of under-

construction projects.

Is the problem contagious to other parts of Noida? Unlikely

Overall sales in Noida/Greater Noida slowed down in FY12 and the deterioration

is mainly attributable to continuing decline in the high volume Noida Extension

market. With limited clarity and confidence among buyers, only a few sales have

opened up (barring a few developers like Amrapali, Supertech, etc).



Land acquisition-linked agitation has also erupted on a smaller scale in other

micro-markets of Noida. However, they haven’t been as vocal and contemporary

as Noida Extension. Structurally also, the issues in Noida extension were different

due to the typicality of land acquisition process followed over there. Thus, the

contagious effect of litigation/protests is unlikely to play havoc in other parts of

Noida. Projects at Noida Expressway have seen comparatively better absorption,

with even price appreciation of 8-10%.



Can spillover demand from Extension area benefit rest of Noida?

The spillover demand from Noida Extension is unlikely to significantly benefit

Noida Expressway projects due to difference in price points in these two micro-

markets. The actual demand would flow down to tier-III cities, viz. Ghaziabad and

Faridabad.



After the success of the formula-1 race as an annual event, even land parcels

across the Yamuna Expressway have been witnessing improvement in interest

and activity.



Summing up…

Gradual recovery expected:

The oversupply concern likely to subside gradually

due to new launches over past 12months. The market momentum has started

turning positive over past 2-3quarters with developers like Jaypee, Unitech

posting improvement in Noida-market sales. Overall prices are likely to remain

unaltered in the near-term, albeit prices may increase in Noida extension

because of factors such as hike in compensation to farmers and rising input

cost.



Some structural challenges:

Despite being an affordable market, recent pricing

uptick in Expressway projects suggests growing investor participation.

Incommensurately slower commercial growth (unlike Gurgaon) remains a key

concern for Noida market, which is a critical factors behind residential demand

growth on a sustainable basis.



Some positive flavor:

Commencement of expressway, and rising economic

activity around formula-1 location should uplift interest level for both

residential, and industrial demand. Approval of Greater Noida Master Plan by

NCR authorities is a key positive development, which is expected to revive the

stalled execution and new launches.



18 September 2012

Jaypee Infratech

Financials and Valuation

Income Statement

Y/E March

Net Sales

Change (%)

Construction expenses

Staff Cost

Selling & Adminstrative exp

EBITDA

% of Net Sales

Depreciation

Interest

Other Income

PBT

Tax

Rate (%)

Reported PAT

Adjusted PAT

Change (%)

2009

5,546

-43.1

1,722

626

3,159

57.0

140

3,036

369

12.1

2,667

304.6

2010

6,407

15.5

367

5,921

92.4

162

122

5,874

999

17.0

4,875

82.8

2011

27,787

333.7

9,215

352

18,134

65.3

101

199

18,146

3,796

20.9

14,351

194.4

2012

31,559

13.6

14,598

127

343

16,492

52.3

632

130

15,974

3,077

19.3

12,897

-10.1

2013E

38,097

20.7

20,125

139

377

17,456

45.8

1,550

4,373

219

11,753

2,409

20.5

9,343

-27.6

(INR Million)

2014E

47,293

24.1

25,059

153

415

21,666

45.8

2,583

6,721

214

12,575

2,578

20.5

9,997

7.0

Balance Sheet

Y/E March

Share Capital

Reserves

Net Worth

Loans

Capital Employed

Gross Fixed Assets

Less: Depreciation

Net Fixed Assets

Capital WIP

Curr. Assets

Inventory

Debtors

Cash & Bank Balance

Loans & Advances

Other current asset

Current Liab. & Prov.

Creditors

Provisions

Net Current Assets

Application of Funds

E: MOSL Estimates

2009

9,660

2,794

12,454

18,675

31,129

588

235

353

25,363

10,402

5,501

1,909

2,976

4,989

4,616

373

5,413

31,129

2010

12,260

7,669

19,929

57,210

77,139

628

396

232

51,883

44,858

19,100

1,026

17,830

6,869

20,123

18,746

1,377

24,735

77,139

2011

13,889

33,740

47,629

63,321

110,951

645

481

164

68,306

73,785

33,378

5,379

18,509

16,151

369

31,304

25,065

6,239

42,481

110,951

2012

13,890

43,887

57,777

71,096

128,873

769

497

272

92,026

75,447

45,284

4,096

5,417

20,349

303

38,873

28,778

10,095

36,574

128,873

(INR Million)

2013E

13,890

51,605

65,495

70,596

136,091

93,769

2,047

91,722

87,234

49,477

6,342

5,536

25,577

303

42,865

31,760

11,105

44,369

136,091

2014E

13,890

59,978

73,867

66,596

140,463

93,769

4,630

89,139

96,565

54,360

7,911

5,149

28,843

303

45,240

33,025

12,215

51,324

140,463

18 September 2012

Jaypee Infratech

Financials and Valuation

Ratios

Y/E March

Basic (INR)

Adjusted EPS

Growth (%)

Cash EPS

Book Value

DPS

Payout (incl. Div. Tax.)

Valuation (x)

P/E

Cash P/E

EV/EBITDA

EV/Sales

Price/Book Value

Dividend Yield (%)

Profitability Ratios (%)

RoE

RoCE

Turnover Ratios

Debtors (Days)

Inventory (Days)

Creditors. (Days)

Asset Turnover (x)

Leverage Ratio

Net Debt/Equity (x)

2009

2.8

2.9

12.9

1.0

42.4

2010

4.0

44.0

4.1

16.3

1.0

29.4

2011

10.3

159.8

10.4

34.3

1.3

14.2

2012

9.3

-10.1

9.3

41.6

1.0

12.6

2013E

6.7

-27.6

7.8

47.2

1.0

17.4

2014E

7.2

7.0

9.1

53.2

1.0

16.3

5.3

5.2

8.1

4.2

1.2

2.1

7.2

6.2

7.6

3.5

1.0

2.1

6.8

5.4

6.0

2.7

0.9

2.1

21.4

9.8

30.1

10.9

42.5

19.4

24.5

13.8

15.2

12.2

14.3

14.0

706

0.0

750

2,969

0.1

560

1,577

0.2

484

795

0.2

497

619

0.3

444

511

0.3

1.3

2.0

0.9

1.1

1.0

0.8

Cash Flow Statement

Y/E March

2009

PBT before Extraordinary Items 3,036

Add: Depreciation

140

Interest

Less : Direct Taxes Paid

369

(Inc)/Dec in WC

3,504

CF from Operations

-777

(Inc)/Dec in FA

(Pur)/Sale of Investments

CF from Investments

(Inc)/Dec in Net Worth

(Inc)/Dec in Debt

Less: Interest Paid

Dividend Paid

CF from Fin. Activity

Inc/Dec of Cash

Add: Beginning Balance

Closing Balance

E: MOSL Estimates

-25,856

10,916

18,675

1,130

28,462

1,829

1,909

2010

5,874

162

999

3,402

1,643

-26,561

3,746

38,535

1,434

40,838

15,920

1,909

17,830

2011

18,146

101

3,796

17,067

-2,528

-16,441

15,670

6,111

101

2,031

19,649

680

17,830

18,510

2012

15,974

632

3,077

7,185

6,361

-23,845

-1,124

7,775

632

1,625

4,393

-13,091

18,509

5,417

(INR Million)

2013E

11,753

1,550

4,373

2,409

7,675

7,590

-974

-500

4,373

1,625

-6,498

118

5,417

5,535

2014E

12,575

2,583

6,721

2,578

7,343

11,959

-4,000

6,721

1,625

-12,346

-388

5,536

5,149

18 September 2012

Jaypee Infratech

N O T E S

18 September 2012

Disclosures

This report is for personal information of the authorized recipient and does not construe to be any investment, legal or taxation advice to you. This research report does not constitute an offer, invitation or inducement

to invest in securities or other investments and Motilal Oswal Securities Limited (hereinafter referred as MOSt) is not soliciting any action based upon it. This report is not for public distribution and has been

furnished to you solely for your information and should not be reproduced or redistributed to any other person in any form.

Unauthorized disclosure, use, dissemination or copying (either whole or partial) of this information, is prohibited. The person accessing this information specifically agrees to exempt MOSt or any of its affiliates

or employees from, any and all responsibility/liability arising from such misuse and agrees not to hold MOSt or any of its affiliates or employees responsible for any such misuse and further agrees to hold MOSt

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.

The information contained herein is based on publicly available data or other sources believed to be reliable. While we would endeavour to update the information herein on reasonable basis, MOSt and/or its

affiliates are under no obligation to update the information. Also there may be regulatory, compliance, or other reasons that may prevent MOSt and/or its affiliates from doing so. MOSt or any of its affiliates or

employees shall not be in any way responsible and liable for any loss or damage that may arise to any person from any inadvertent error in the information contained in this report . MOSt or any of its affiliates

or employees do not provide, at any time, any express or implied warranty of any kind, regarding any matter pertaining to this report, including without limitation the implied warranties of merchantability, fitness

for a particular purpose, and non-infringement. The recipients of this report should rely on their own investigations.

This report is intended for distribution to institutional investors. Recipients who are not institutional investors should seek advice of their independent financial advisor prior to taking any investment decision

based on this report or for any necessary explanation of its contents.

MOSt and/or its affiliates and/or employees may have interests/positions, financial or otherwise in the securities mentioned in this report. To enhance transparency, MOSt has incorporated a Disclosure of Interest

Statement in this document. This should, however, not be treated as endorsement of the views expressed in the report.

Disclosure of Interest Statement

1. Analyst ownership of the stock

2. Group/Directors ownership of the stock

3. Broking relationship with company covered

4. Investment Banking relationship with company covered

Jaypee Infratech

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. The research analysts, strategists, or research associates principally responsible

for preparation of MOSt research receive compensation based upon various factors, including quality of research, investor client feedback, stock picking, competitive factors and firm revenues.

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 MOSt & its group companies to registration or licensing requirements within such jurisdictions.

For U.K.

This report is intended for distribution only to persons having professional experience in matters relating to investments as described in Article 19 of the Financial Services and Markets Act 2000 (Financial

Promotion) Order 2005 (referred to as "investment professionals"). This document must not be acted on or relied on by persons who are not investment professionals. Any investment or investment activity to

which this document relates is only available to investment professionals and will be engaged in only with such persons.

For U.S.

MOSt is not a registered broker-dealer in the United States (U.S.) and, therefore, is not subject to U.S. rules. 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.,

Motilal Oswal has entered into a chaperoning agreement with a U.S. registered broker-dealer, Marco Polo Securities Inc. ("Marco Polo"). Any business interaction pursuant to this report will have to be executed

within the provisions of this Chaperoning agreement.

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.

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, Marco

Polo 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.

Motilal Oswal Securities Ltd

Motilal Oswal Tower, Level 9, Sayani Road, Prabhadevi, Mumbai 400 025

Phone: +91 22 3982 5500 E-mail: reports@motilaloswal.com