Crompton Gr. Con: In-line operational performance; gross margin at new high

Crompton Gr. Con

BSE SENSEX

36,162

Bloomberg

Equity Shares (m)

M.Cap.(INRb)/(USDb)

52-Week Range (INR)

1, 6, 12 Rel. Per (%)

Avg Val, INRm

Free float (%)

S&P CNX

11,086

CROMPTON IN

In-line operational performance; gross margin at new high

627



In-line results:

CG Consumer Electricals’ (CROMPTON) 3QFY18 results were

156.7/2.5

broadly in line with estimates. Sales grew 6.7% YoY (12.2% YoY adjusted for

295/147

excise duty on sourced products) to INR9.4b, driven by healthy growth in the

-13/8/13

lighting division (+14% YoY, +23% YoY LTL). However, the electrical

249

consumer durables (ECD) segment reported a subdued 7.4% LTL growth, as:

65.6

24 January 2018

3QFY18 Results Update | Sector: Capital Goods

CMP: INR250

TP: INR305(+23%)

Buy

Financials & Valuations (INR b)

2018E 2019E

Y/E Mar

Net Sales

41.4

46.6

EBITDA

5.2

6.4

PAT

3.2

4.1

EPS (INR)

5.1

6.5

Gr. (%)

9.8

26.1

BV/Sh (INR)

11.7

14.3

RoE (%)

50.6

49.8

RoCE (%)

28.5

30.8

P/E (x)

48.7

38.6

P/BV (x)

21.4

17.5

Estimate change

TP change

Rating change

2020E

52.6

7.2

4.8

7.7

18.4

17.4

48.4

34.5

32.6

14.4

(a) water heater segment registered decline of 3% YoY, and (b) domestic

pumps segment witnessed pricing pressure on increased competitive

intensity in East/North India. Within ECD, strong traction was witnessed in

the premium fans category (+28% YoY, 20% of overall fans sales). EBITDA

improved 19.8% YoY to INR1.2b, with EBIDTA margin improving 130bp YoY

to 12.4%, led by better revenue mix. Net profit of INR0.7b was in line with

our estimate.



Gross margin at all-time high on account of better revenue mix:

Gross

margin expanded 250bp YoY to 33.1%, led by (a) revenue mix improvement,

(b) continued cost reduction exercise, and (c) price hike of around 1.5% in

the fans category to mitigate the raw material price increase. EBITDA of

INR1.2b (+20% YoY) was marginally ahead of our estimate. Operating margin

was 12.4% v/s 11.1% in 3QFY17 and rose 130bp YoY despite (a) increase in

employee cost, led by ESOP provisioning of INR140m during the quarter

(INR85m in 3QFY17) and lateral hiring done by the company, and (b) higher

ad spend (INR160m v/s INR90m in 3QFY17). Lighting business, which

contributed 35% of revenue (v/s 32% in 3QFY17), registered 290bp margin

improvement YoY to 13.8%. ECD, which accounted for 65% of revenue (v/s

68% in 3QFY17), registered 210bp margin improvement YoY to 18.2%.

Valuation and view:

We like CROMPTON for its strong product portfolio,

established brand, market leadership, wide distribution network and a robust

RoCE profile (31%/35% in FY19/20). We maintain our

Buy

rating, with a target

price of INR305 (40x FY20E EPS of INR7.7). Please refer to our recent

Corner

Office

post our meeting with CEO/MD for more details.

FY17

8,737 8,792 10,762 10,554

8.5

7.4

-3.7

1,012

972 1,386 1,294

17.4

9.0 -17.8

11.6

11.1

12.9

12.3

161

162

153

162

865

834 1,273 1,198

286

290

388

395

33.1

34.8

30.5

33.0

579

544

885

802

28.3

16.6 (14.2)

(4.5)

- (20.7)

574

544

864

802

32.0

29.8 (14.2)

FY18

FY17 FY18 Vs Est.

4QE

9,597 9,382 11,650 39,759 41,438 9,600

9.8

6.7

8.3 119.5

4.2

8.0

1,207 1,165 1,536 4,902 5,202 1,140

19.3

19.8

10.9 134.0

6.1 14.8

12.6

12.4

13.2

12.3

12.6 11.9

110

116

157

158

125

655

658

150

128

195

326

1,054 1,040 1,519 4,331 4,754 1,040

346

345

450 1,399 1,536

350

32.8

33.2

29.6

32.3

32.3 33.7

708

695 1,069 2,932 3,218

690

22.3

27.9

20.8 138.7

9.8 20.3

708

695 1,069 2,907 3,218

690

23.3

27.9

23.7 166.9

10.7 20.3

Quarterly Estimates (Standalone)

Y/E March

Sales

Change (%)

EBITDA

Change (%)

As of % Sales

Depreciation

Interest

Other Income

PBT

Tax

Effective Tax Rate (%)

Adjusted PAT

Change (%)

Extra-ordinary Income (net)

Reported PAT

Change (%)

10,962

1,573

14.4

180

1,400

465

33.2

935

(INR M)

Var.

(%)

-2.3%

2.2%

0.0%

0.7%

Ankur Sharma – Research Analyst

(Ankur.VSharma@MotilalOswal.com); +91 22 6129 1556

Amit Shah – Research Analyst

(Amit.Shah@MotilalOswal.com); +91 22 6129 1543

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.

Crompton Gr. Con

Revenue growth impacted by weak electronic consumer durables segment

performance



CG Consumer Electricals (CGCEL) reported revenue growth of 7% YoY (+12.2%

YoY on excise adjusted basis. Revenue growth during the quarter was impacted

by weak performance from the electronic consumer durables segment (Fans,

pumps and appliance) which reported 1% decline on YoY basis (+7.4% on excise

adjusted basis) whereas Lighting segment registered a healthy growth of 14%

YoY (+23% on excise adjusted basis).

ECD segment performance was impacted on account of a) Loss of market share

in the domestic pump segment which saw intense competitive pressure in the

East/North India by competitors launching low and mid-price domestic pumps

and b) decline in water heater segment of 3% YoY. Within ECD, strong traction

was witnessed in the premium fans category (+28% YoY). Premium fans has

been the key growth driver of fans category, and its share in the overall fans

segment sales now stands at 20% as compared to 7% earlier. Electrical

consumer durables constitute 65% of overall sales for the company.

Water heaters sales during the quarter saw a 3% volume decline driven by a)

Intense competitive pressures, b) Lack of a innovative product portfolio in water

heaters. Management expects to launch a new range by the next winter season.

Lighting segment witnessed robust growth of 14.2% YoY (23% YoY adjusting for

excise duty on the manufactured and sourced products) to INR3.3b. LED sales

which now forms 71% registered 57% growth YoY. On the volume front lighting

sales registered 30% growth indicating realization pressure on the product

category

EBITDA rose 19.8% YoY to INR1.2b, and EBIDTA margin improved 130bp YoY to

12.4% led by better revenue mix, cost rationalization measures and price hike

taken in the fans segment to mitigate the raw material price hike.

Exhibit 2: Electrical consumer durables segment reported

1% decline YoY

Electrical consumer durables

3,378 3,265

5,383

8,816

7,107

6,075 6,188

7,694 8,061

6,219 6117

Exhibit 1: Lighting sales reported growth of 14.2% YoY

Lighting (INR m)

2,717 2,910

2,491

2,924 2,859 3,068 2,748

Source: MOSL, Company

Gross margin at all time high on account of better revenue mix and focus on

premiumization



Gross margin expanded 250bp YoY to 33.1%, led by a) revenue mix

improvement b) cost reduction exercise and c) price hike take of around 1.5% in

the fans category. Operating margin stood at 12.4% v/s 11.1% in 3QFY17.

Despite increase in employee cost led by ESOP provisioning of INR140m during

24 January 2018

Crompton Gr. Con



the quarter, lateral hiring done by the company and higher ad spend (INR160m

vs INR90m in 3QFy17, EBIDTA margin improved by 130bps YoY.

Electrical consumer durables which accounted for 65% (v/s 68% in 3QFY17)

registered 210bps margin improvement YoY to 18.2%. Margin improvement was

led by focus on premiumization

Lighting business which contributed 35% of revenue (v/s 32% in 3QFY17)

registered 290bps margin improvement YoY to 13.8%.

Exhibit 4: Electrical consumer durables segment EBIT margin

improved 210bp YoY to 18.2%

Electrical consumer durables(Fans,Pumps,Appliance) (%)

18.1

12.8

18.2

14.4

16.1

19.3

17.5

17.8

18.2

Exhibit 3: Lighting segment EBIT margins improved 290bp

YoY to 13.8%

Lighting (%)

11.2

6.4

5.9

11.7

10.9

7.5

8.0

12.6

13.8

Source: MOSL, Company

Concall highlights



Overall business environment and GST impact

Post GST market is setting down along with the channel - Retail audit reveals

that CG is gaining share across categories

Are present in categories where they are not in top 3 (Water heater and coolers)

- they would like to replicate the success as in fans/lighting and get to No2. Will

introduce new products in these.

Are looking at adjacent categories to sustain growth - once existing categories

are in No2 and will launch once they have the right proposition to get to No2

player, These products will not be a "Me too" product, Cost competitive to be

price competitive, Invest in adv. to create awareness of the product,

Competitive distribution.



Fans and Consumer Durables – saw de-growth in water heaters while

residential pumps saw pricing pressure



LTL growth of 7.4% - value growth was slightly more than volume growth and a

+ve mx as premium fans went up, Fans growth rate was in line with historical

trends.

Driving premium fans and these were +28% YoY; 20% of overall fan sales vs. 6-

7% in 2 years back and a leading premium fan player with a small gap (7-8%)

with the market leader.

Subdued growth in ECD segment during the quarter as: a) Residential pumps -

CG is leader but saw significant competition in North/East India due to mid/low

tier pumps. CG also introduced low/mid-price pumps under the brand "Crest"

and rolled out pan India and seeing good results, b) b) Water Heaters - these de-

24 January 2018

Crompton Gr. Con



grew during the quarter as they did not have the right product in the market

and lost share to competition.

Water heater/ Coolers - Working with a 3rd party for water heaters and coolers

and will bring new products in coolers in the market.

Fans – Last 12 months fan industry is flat YoY, Post demon market was down but

getting better and will go back to 6-8% volume growth, In Q318, CG fans grew in

line with historical trends.

Lighting – strong growth in LED



LTL growth of 23% YoY and volume growth was 30% YoY; slight price erosion

was there.

LED is >70% of overall lighting sales, LED grew 57% YoY.

Focus is on LED since past 2 years - were a small player in lighting (5/6th player)

and now in LED they are the 2nd largest player in India post Phillips.

EESL is still active in lighting - CG supplied both lamps and baton, Expect LED

lamps to come down, CG has Rs500m of order backlog and booked Rs220m in

streetlights to EESL.

Margins – ESOP and higher advertising costs during the quarter



ESOP charge is INR140m in Q318 which is same as Q218 (Q217: INR85m).

Employee costs

- had identified gaps 2 years back and hiring externally and also

developing internally. Some provisining of sales incentives also provided during

the quarter.

Advertising costs at INR160m vs. INR90m in Q317.

Raw Material

- overall basket was up 2% QoQ so while not all cannot be passed

they are offset by a)cost reduction, b) price increase in fans by 1-1.5%

Unallocable expenses

- one off costs related to capability building and will

revert to Q218 levels of ~INR300-320m.

Distribution – partnered with Future supply chain



Working with BCG on scaling up distribution network and started this in

Western India - roll out sales force automation to collect real time data

with Future Supply Chain which have a hub and spoke model and good

automation and implemented in North India

Water heater

- electrical channel is the same and want to fill the product gaps

and bring unique features to the market

Coolers

- is a different channel and will need to develop new partners

Valuation and view

We like CGCEL for its strong product portfolio, established brand, market leadership,

wide distribution network and a robust RoCE profile (31%/35% in FY19/20). We

maintain our Buy rating on the stock, with a target price of INR305 (40x its FY20E

EPS of INR7.7).

24 January 2018

Crompton Gr. Con

Financials and valuations

Income Statement

Y/E March

Total Revenues

Change (%)

Raw Materials

Staff Cost

Other Expenses

EBITDA

% of Total Revenues

Depreciation

Other Income

Interest

PBT

Tax

Rate (%)

Adjusted PAT

Extra-ordinary Income (net)

Reported PAT

Change (%)

Adj. Consolidated PAT

Change (%)

FY16

18,117

12,702

1,005

2,315

2,095

11.6

355

1,716

525

30.6

1,191

-139

1,052

-96.7

1,052

-96.7

FY17

39,759

119.5

27,349

2,252

5,257

4,902

12.3

110

195

655

4,331

1,399

32.3

2,932

-25

2,907

176.3

2,907

176.3

FY18E

41,438

4.2

28,641

2,854

4,741

5,202

12.6

116

326

658

4,754

1,536

32.3

3,218

10.7

3,218

10.7

FY19E

46,607

12.5

31,736

3,185

5,336

6,351

13.6

126

400

658

5,967

1,910

32.0

4,057

26.1

4,057

26.1

(INR Million)

FY20E

52,602

12.9

35,940

3,537

5,900

7,224

13.7

136

482

506

7,064

2,261

32.0

4,803

18.4

4,803

18.4

Balance Sheet

Y/E March

Share Capital

Reserves

Net Worth

Loans

Deferred Tax Liability

Capital Employed

Gross Fixed Assets

Less: Depreciation

Net Fixed Assets

Capital WIP

Goodwill

Investments

Curr. Assets

Inventory

Debtors

Cash & Bank Balance

Loans & Advances

Other Assets

Current Liab. & Prov.

Current Liabilities

Provisions

Net Current Assets

Application of Funds

FY16

1,254

1,034

2,287

6,445

-43

8,689

2,024

1,238

786

7,794

7,907

2,100

4,165

900

742

7,798

7,373

425

109

8,689

FY17

1,254

4,138

5,392

6,500

-182

11,710

2,147

1,326

821

7,794

3,185

9,167

2,348

5,434

700

685

9,258

8,448

811

-91

11,710

FY18E

1,254

6,082

7,335

6,500

-182

13,654

2,347

1,441

905

7,794

3,185

11,418

2,447

5,664

2,592

714

9,649

8,804

845

1,768

13,653

FY19E

1,254

7,705

8,958

6,500

-182

15,277

2,547

1,567

979

7,794

3,185

14,170

2,753

6,370

4,244

803

10,853

9,902

951

3,317

15,276

(INR Million)

FY20E

1,254

9,626

10,879

3,500

-182

14,198

2,747

1,703

1,043

7,794

3,185

14,423

3,107

7,190

3,220

907

12,249

11,176

1,073

2,174

14,197

24 January 2018

Crompton Gr. Con

Financials and valuations

Ratios

Y/E March

Basic (INR)

Adj EPS

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

RoIC

Turnover Ratios

Debtors (Days)

Inventory (Days)

Creditors. (Days)

Asset Turnover (x)

Leverage Ratio

Debt/Equity (x)

FY16

1.9

2.0

3.6

0.0

FY17

4.7

4.9

8.6

1.5

32.7

FY18E

5.1

5.3

11.7

1.7

33.0

FY19E

6.5

6.7

14.3

3.2

50.0

FY20E

7.7

7.9

17.4

3.8

50.0

132.1

125.5

77.7

9.0

68.8

53.7

51.7

33.3

4.1

29.2

0.6

48.9

47.2

31.0

3.9

21.4

0.7

38.8

37.6

25.1

3.4

17.6

1.3

32.8

31.9

21.8

3.0

14.5

1.5

52.1

27.4

18.0

2.1

76.4

32.5

40.5

3.4

50.6

28.5

42.7

3.0

49.8

30.8

52.7

3.1

48.4

34.5

60.4

3.7

2.8

1.2

0.9

0.7

0.3

Cash Flow Statement

Y/E March

PBT before EO Items

Depreciation

Interest

Direct Taxes Paid

(Inc)/Dec in WC

CF from Operations

EO Income

CF from Oper. Incl. EO Items

(Inc)/Dec in FA

Free Cash Flow

Investment & Others

CF from Investments

(Inc)/Dec in Networth

(Inc)/Dec in Debt

Interest Paid

Dividend Paid

Others

CF from Fin. Activity

Inc/Dec of Cash

Add: Beginning Balance

Closing Balance

E: MOSL Estimates

FY16

1,716

355

-525

(229)

1,379

209

1,588

209

(18)

-316

-355

(689)

899

900

FY17

4,331

110

655

-1,399

(1)

3,697

(122)

3,575

(3,324)

-3,446

1,338

-655

-1,140

-49

(451)

(200)

900

700

FY18E

4,754

116

658

-1,536

4,025

(200)

3,825

-200

-658

-1,274

(1,933)

1,893

700

2,592

FY19E

5,967

126

658

-1,910

103

4,944

(200)

4,744

-200

-658

-2,434

(3,092)

1,651

2,592

4,244

(INR Million)

FY20E

7,064

136

506

-2,261

119

5,565

(200)

5,365

-200

-3,000

-506

-2,882

(6,388)

(1,023)

4,244

3,220

24 January 2018

Crompton Gr. Con

NOTES

24 January 2018

Explanation of Investment Rating

Investment Rating

BUY

SELL

NEUTRAL

UNDER REVIEW

NOT RATED

Expected return (over 12-month)

>=15%

< - 10%

< - 10 % to 15%

Rating may undergo a change

We have forward looking estimates for the stock but we refrain from assigning recommendation

Crompton Gr. Con

*In case the recommendation given by the Research Analyst becomes inconsistent with the investment rating legend, the Research Analyst shall within 28 days of the inconsistency, 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 Securities Ltd. (MOSL) is a SEBI Registered Research Analyst having registration no. INH000000412. MOSL, 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. MOSL is a subsidiary company of Motilal Oswal Financial Service Ltd. (MOFSL). MOFSL is a listed public company, the details in respect of

which are available on

www.motilaloswal.com.

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

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SEBI pursuant to a complaint from client Shri C.R. Mohanraj alleging unauthorized trading, issued a letter dated 29th April 2014 to MOSL notifying appointment of an Adjudicating Officer as per SEBI regulations to hold inquiry and

adjudge violation of SEBI Regulations; MOSL requested SEBI to provide all documents, records, investigation report relied upon by SEBI which were referred in Show Cause Notice. The matter is closed and MOSL had to pay Rs. 2

lakhs towards penalty for misplacement of original POA of client.

MOSL, it’s associates, Research Analyst or their relative may have any financial interest in the subject company. MOSL and/or its associates and/or Research Analyst may have beneficial ownership of 1% or more securities in the subject company at

the end of the month immediately preceding the date of publication of the Research Report.

MOSL 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 MOSL even though there

might exist an inherent conflict of interest in some of the stocks mentioned in the research report.

Research Analyst may have served as director/officer, etc. in the subject company in the last 12 month period. MOSL and/or its associates may have

received any compensation from the subject company in the past 12 months.

In the last 12 months period ending on the last day of the month immediately preceding the date of publication of this research report, MOSL or any of its associates may have:

managed or co-managed public offering of securities from subject company of this research report,

received compensation for investment banking or merchant banking or brokerage services from subject company of this research report,

received compensation for products or services other than investment banking or merchant banking or brokerage services from the subject company of this research report.

Subject Company may have been a client of MOSL or its associates during twelve months preceding the date of distribution of the research report.

MOSL and it’s associates have not received any compensation or other benefits from the subject company or third party in connection with the research report. To enhance transparency, MOSL 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. MOSL 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 MOSL 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.

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This report has been prepared by MOSL 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 MOSL. 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. MOSL will not treat recipients as customers by

virtue of their receiving this report.

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.

Disclosure of Interest Statement

Analyst ownership of the stock

Crompton Gr. Con

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 MOSL or

its associates maintains arm’s length distance with Research Team as all the activities are segregated from MOSL 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

MOSL & 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 Securities Limited (MOSL) is not a registered broker - dealer under the U.S. Securities Exchange Act of 1934, as amended (the"1934 act") and under applicable state laws in the United States. In addition MOSL is not a registered

investment adviser under the U.S. Investment Advisers Act of 1940, as amended (the "Advisers Act" and together with the 1934 Act, the "Acts), and under applicable state laws in the United States. Accordingly, in the absence of specific exemption

under the Acts, any brokerage and investment services provided by MOSL, including the products and services described herein are not available to or intended for U.S. persons. This report is intended for distribution only to "Major Institutional

Investors" as defined by Rule 15a-6(b)(4) of the Exchange Act and interpretations thereof by SEC (henceforth referred to as "major institutional investors"). This document must not be acted on or relied on by persons who are not major institutional

investors. Any investment or investment activity to which this document relates is only available to major institutional investors and will be engaged in only with major institutional investors. In reliance on the exemption from registration provided by Rule

15a-6 of the U.S. Securities Exchange Act of 1934, as amended (the "Exchange Act") and interpretations thereof by the U.S. Securities and Exchange Commission ("SEC") in order to conduct business with Institutional Investors based in the U.S.,

MOSL has entered into a chaperoning agreement with a U.S. registered broker-dealer, Motilal Oswal Securities International Private Limited. ("MOSIPL"). Any business interaction pursuant to this report will have to be executed within the provisions of

this chaperoning agreement.

The Research Analysts contributing to the report may not be registered /qualified as research analyst with FINRA. Such research analyst may not be associated persons of the U.S. registered broker-dealer, MOSIPL, and therefore, may not be subject

to NASD rule 2711 and NYSE Rule 472 restrictions on communication with a subject company, public appearances and trading securities held by a research analyst account.

For Singapore

Motilal Oswal Capital Markets Singapore Pte Limited is acting as an exempt financial advisor under section 23(1)(f) of the Financial Advisers Act(FAA) read with regulation 17(1)(d) of the Financial Advisors Regulations and is a subsidiary of Motilal

Oswal Securities Limited in India. This research is distributed in Singapore by Motilal Oswal Capital Markets Singapore Pte Limited and it is only directed in Singapore to accredited investors, as defined in the Financial Advisers Regulations and the

Securities and Futures Act (Chapter 289), as amended from time to time. In respect of any matter arising from or in connection with the research you could contact the following representatives of Motilal Oswal Capital Markets Singapore Pte Limited:

Disclaimer:

The report and information contained herein is strictly confidential and meant solely for the selected recipient and may not be altered in any way, transmitted to, copied or distributed, in part or in whole, to any other person or to the media or reproduced

in any form, without prior written consent. This report and information herein is solely for informational purpose and may not be used or considered as an offer document or solicitation of offer to buy or sell or subscribe for securities or other financial

instruments. Nothing in this report constitutes investment, legal, accounting and tax advice or a representation that any investment or strategy is suitable or appropriate to your specific circumstances. The securities discussed and opinions expressed in

this report may not be suitable for all investors, who must make their own investment decisions, based on their own investment objectives, financial positions and needs of specific recipient. This may not be taken in substitution for the exercise of

independent judgment by any recipient. Each recipient of this document should make such investigations as it deems necessary to arrive at an independent evaluation of an investment in the securities of companies referred to in this document

(including the merits and risks involved), and should consult its own advisors to determine the merits and risks of such an investment. The investment discussed or views expressed may not be suitable for all investors. Certain transactions -including

those involving futures, options, another derivative products as well as non-investment grade securities - involve substantial risk and are not suitable for all investors. No representation or warranty, express or implied, is made as to the accuracy,

completeness or fairness of the information and opinions contained in this document. The Disclosures of Interest Statement incorporated in this document is provided solely to enhance the transparency and should not be treated as endorsement of the

views expressed in the report. This information is subject to change without any prior notice. The Company reserves the right to make modifications and alternations to this statement as may be required from time to time without any prior approval.

MOSL, its associates, their directors and the employees may from time to time, effect or have effected an own account transaction in, or deal as principal or agent in or for the securities mentioned in this document. They may perform or seek to perform

investment banking or other services for, or solicit investment banking or other business from, any company referred to in this report. Each of these entities functions as a separate, distinct and independent of each other. The recipient should take this

into account before interpreting the document. This report has been prepared on the basis of information that is already available in publicly accessible media or developed through analysis of MOSL. The views expressed are those of the analyst, and

the Company may or may not subscribe to all the views expressed therein. This document is being supplied to you solely for your information and may not be reproduced, redistributed or passed on, directly or indirectly, to any other person or

published, copied, in whole or in part, for any purpose. This report is not directed or intended for distribution to, or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction, where such

distribution, publication, availability or use would be contrary to law, regulation or which would subject MOSL to any registration or licensing requirement within such jurisdiction. The securities described herein may or may not be eligible for sale in all

jurisdictions or to certain category of investors. Persons in whose possession this document may come are required to inform themselves of and to observe such restriction. Neither the Firm, not its directors, employees, agents or representatives shall

be liable for any damages whether direct or indirect, incidental, special or consequential including lost revenue or lost profits that may arise from or in connection with the use of the information.

The person accessing this information specifically agrees

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

or any of its affiliates or employees free and harmless from all losses, costs, damages, expenses that may be suffered by the person accessing this information due to any errors and delays.

Registered Office Address: Motilal Oswal Tower, Rahimtullah Sayani Road, Opposite Parel ST Depot, Prabhadevi, Mumbai-400025; Tel No.: 022-3980 4263; www.motilaloswal.com. Correspondence Address: Palm Spring Centre, 2nd Floor, Palm

Court Complex, New Link Road, Malad (West), Mumbai- 400 064. Tel No: 022 3080 1000. Compliance Officer: Neeraj Agarwal, Email Id:

na@motilaloswal.com,

Contact No.:022-30801085.

Registration details of group entities.: MOSL: SEBI Registration: INZ000158836 (BSE/NSE/MSE); CDSL: IN-DP-16-2015; NSDL: IN-DP-NSDL-152-2000; Research Analyst: INH000000412. AMFI: ARN 17397. Investment Adviser: INA000007100.

Motilal Oswal Asset Management Company Ltd. (MOAMC): PMS (Registration No.: INP000000670) offers PMS and Mutual Funds products. Motilal Oswal Wealth Management Ltd. (MOWML): PMS (Registration No.: INP000004409) offers wealth

management solutions. *Motilal Oswal Securities Ltd. is a distributor of Mutual Funds, PMS, Fixed Deposit, Bond, NCDs, Insurance and IPO products. * Motilal Oswal Commodities Broker Pvt. Ltd. offers Commodities Products. * Motilal Oswal Real

Estate Investment Advisors II Pvt. Ltd. offers Real Estate products. * Motilal Oswal Private Equity Investment Advisors Pvt. Ltd. offers Private Equity products

24 January 2018