Motilal Oswal Financial Services

Sector Update | 24 October 2019

Oil & Gas

Green revolution 2.0

Toward higher industrial usage of natural gas



Our earlier GAIL update



The first green revolution in the 1960s was introduced to counter frequent famines,

the lack of financing and to increase India’s agricultural productivity, thus making the

country self-sufficient.

Due to air pollution, China suffered high total welfare losses (~10% of GDP) in 2013.

This led to China waging a war against air pollution, with natural gas playing a central

role in the battle. Similar to China, India too suffered total welfare losses (~8% of GDP)

in 2013. Though delayed, India appears to be moving in a similar direction as China –

efforts to curb pollution by using natural gas.

We have already seen a good focus on CNG so far. Natural gas adoption by industries

in India could result in Green Revolution 2.0 in the country. This bodes well for a few

CGDs and all gas transporters/LNG importers.

China’s action plan to defend the blue sky by 2020

China introduced the

Air Pollution Prevention & Control Action

in 2013, setting

specific indicators. A clear 10-point strategy including focus on usage of natural

gas resulted in a sharp reduction in pollution levels. Beijing-Tianjin-Hebei region,

for example, recorded 39.6% reduction in PM2.5 v/s the targeted 25%.

Post expiry of the 2013 plan, China came up with the

Three-Year Action Plan for

Winning the Blue Sky War,

which aims to achieve at least 80% good-air days in

a year in cities.

As a result, share of natural gas in China’s primary energy mix is expected to

increase – from ~7.4% in 2018 to 10% by 2020.



India finally flexing its muscle against industrial pollution



Our earlier PLNG update



In Apr’19, the National Green Tribunal (NGT) ordered the Gujarat State Pollution

Control Board (GPCB) to shut all coal gasifiers at Morbi, the second largest tile

manufacturing zone globally.

In Jul’19, the NGT asked the respective State PCBs to take action against

critically and severely polluting industrial areas within three months and assess

the compensation to be recovered from polluting industries for the past five

years.

We have already seen strict implementation at Morbi and the order may see

wide adoption of gas from the industrial segment.

With a meager 6.2% share, natural gas in India has a long way to go



As a signatory of COP21, India is aiming to double the share of natural gas in its

primary energy mix; however, no measurable measures over stated.

As a result, natural gas accounts for a meager 6.2% market share. Currently the

largest consumers of natural gas in the country are industries in the Fertilizer

(~28%), Power (~22%), and Refinery & Petrochemical (~20%) sector. Over the

past few years, consumption growth has been driven mostly by the CGDs, which

Swarnendu Bhushan – Research Analyst

(Swarnendu.Bhushan@MotilalOswal.com); +91 22 6129 1529

Sarfraz Bhimani – Research Analyst

(Sarfraz.Bhimani@MotilalOswal.com); +91 22 6129 1566

Investors

2019

advised to refer through important disclosures made at the last page of the Research Report.

24 October

are

Motilal Oswal research is available on www.motilaloswal.com/Institutional-Equities, Bloomberg, Thomson Reuters, Factset and S&P Capital.

Oil & Gas



saw a CAGR of ~12% over FY17-19 (constituting ~17% of total natural gas

consumption in FY19).

So far, major bottlenecks for the slow growth in natural gas consumption are:

(a) the lack of sufficient availability of both domestic and imported gas, (b) the

lack of gas pipeline infrastructure, and (c) the lack of market driven pricing in

certain sectors like Power.

However, recent judiciary driven actions combined with possible increase in gas

availability and infrastructure are likely to result in a sharp increase in natural

gas consumption. A case in point is Morbi, which witnessed doubling in gas

consumption within days of the recent ban on coal gasifiers.

Valuation and view



Estimating the potential demand of natural gas is difficult. However, going by

the old Mercados report, demand in 2015 was estimated at 380mmscmd

against consumption of 165mmscmd in FY19.

Some progress has been witnessed in the Mehsana-Bhatinda and the

Mallavaram-Bhilwara pipelines while the Jagdishpur-Haldia-Bokaro-Dhamra

Pipeline (JHBDPL) is also seeing partial commissioning of certain segments.

The ninth and tenth CGD rounds are expected to increase the penetration of

natural gas from ~19% to ~70% by 2025.

KG basin itself is expected to add 45mmscmd of gas (15 from ONGC and the rest

from RIL). Additionally, LNG capacity at Dahej (+2.5mmtpa), Dabhol

(+3.4mmtpa), Ennore (+5mmtpa), Mumdra (+5mmtpa) and Dhamra (+5mmtpa)

is expected to be online in the next five years.

We believe that judiciary activism would boost adoption of natural gas in the

country, aided by better availability of gas and infrastructure.

Biggest beneficiaries are expected to be the transporters- GAIL and GSPL. Since

demand would outstrip domestic production in the foreseeable future,

importers would also benefit immensely.

CGDs should also benefit. However, listed CGD firms face other problems.

Metros like Delhi and Mumbai have been witnessing lower industrial activity

due to rising real estate cost. Additionally, CGDs have won very few

geographical areas (GAs) during the ninth and tenth rounds. Regulatory

concerns also appear imminent with possible loss of market share and adverse

impact on margins.

We upgrade GSPL (TP: INR245) to Buy. We reiterate Buy on GAIL (TP: INR166)

and Petronet (TP: INR336) and remain Neutral on all CGDs.

24 October 2019

Oil & Gas

China – Blue Sky Reforms

The story of grey sky and economic development



China has experienced exponential growth over the past few decades. It is often

known as the ‘world factory’ given its strong manufacturing base and huge exports.

Along with its success story, the country faced a severe increase in air pollution.

Increase in urbanization, inefficient use of resources by industries and vehicular

population led to degradation of the air quality.

Air pollution control measures were initiated by the "Blue Sky Project" in 1998, when

the only focus was on point source emission and pollution control.

Later, during the preparation for the Olympic Games in 2004, the Integrated Regional

Prevention of Air Pollution Control was introduced. This led to a decrease in air

pollution – the lowest in a month – during the 2008 Olympic Games.

Later in 2011, when the US embassy in Beijing revealed data that the PM2.5

concentration was beyond the index on the United States Environmental Protection

Agency (US EPA's) air quality index, many international/national public concerns were

raised.

Evolution of 12

Five Year Plan (12FYP)

The fight against air pollution was

hugely successful in reducing air

pollution by ~10% in 2018 (from



2017 levels) across cities in China.

According to data released by the

Chinese government in Mar’18,



all the measures resulted in

~4.8m households (out of the

~5.3m households targeted)



switching from coal to gas or

electricity by end-2017.



The Air Pollution Prevention and Control Action Plan set nationwide goals for a

five-year period (2012-17), aiming to decrease the urban concentration of

Particulate Matter (PM10) by 10%.

Various efforts of comprehensive air pollution control on industrial enterprises

were adopted, such as (a) switching from coal to gas, (b) banning small coal-

based burners, and (c) desulfurization (SO2 control)/denitrification (NOx

control)/dust removal (PM control).

Also, adoption of new energy vehicles accelerated, such as 60% of new buses

used clean energy, phasing out of diesel engines and elimination of yellow-

sticker (old) vehicles by 2017.

However, government had to face an imbalance in handling the environmental

concerns v/s tackling the slowing growth and development on the economic

front, along with serious employment issues.

Exhibit 1:

Major inflection in SO2 and NOx matrix post 2013

Source: Ministry of Ecology and Environment, People’s Republic of China, MOFSL

24 October 2019

Oil & Gas

13FYP (2016-20) and the Three Year Action Plan (2018)



The 13

Five Year Plan

set a target of lowering SO2 and NOx emissions by 15%

compared to 2015 levels and lowering PM2.5 by 18%, with deceleration of

annual energy consumption to <3%.

The Three Year Action Plan (2018)

had an objective to (a) reduce total

emissions of either SO2 or NOx by 15%, (b) reduce heavy/severe pollution days

by 25% from 2015 levels, and (c) have clean air for 80% days annually.

Following six measures were adopted:



Promotion of green industrial development by optimizing industrial layout

and controlling production capacity of highly polluting industries.



Controlling coal consumption and accelerating the adjustment of energy mix

towards clean and low carbon fuels.



Increasing adoption of public transport by raising share of railway cargo

transport and tightening pollution control measures on mobile sources.



Optimizing land use structure by afforestation, management of open mines

and controlling flying dust.



Launching major campaigns to control air pollution in key regions during

autumn/winter and curbing usage of diesel trucks, kilns and furnaces.

Exhibit 2: Strengthening regional cooperation on control of heavy air pollution.

Major air quality control strategies since 2012

Type

Plan

Law

Plan

Standard

Plan

Standard

Law

Plan

Standard

Plan

Standard

Plan

Issue/Execute date

2011-15

Executed 07/2012

Issued 10/2012

Executed 05/2013

Executed 06/2013

Published 06/2013

Issued 09/2013

Executed 08/2018

Amended 04/2014

Passed 04/2014

Executed 01/2016

Issued 07/2014

Executed 01/2016

Executed 08/2017

Varied

2016-20

Measures

12th Five-Year Plan

Clean Production Promotion law

The 12th FYP on Prevention and Control of Air Pollution in Key Regions

Rules on the standard for compulsory retirement of motor vehicles

Gasoline for motor vehicles Automobile diesel fuels (V)

National 10 measures

Air pollution prevention and control action plan

Limits and measurement methods for emissions from light-duty vehicles (V)

Environmental protection law

Air pollution prevention and control law

Performance Assessment Measures for Air Pollution

Prevention and Control Action Plan

National Ambient Air Quality Standard

Action Plan to Comprehensive Control Autumn and Winter Air Pollution in

Beijing-Tianjin-Hebei and Surrounding Regions 2017–2018

Emission standard of air pollutants for industries

13th Five-Year Plan

Issued by*

State Council

NPC

MEP, NDFC, MoF

MoC, NDFC, MoPS,

MEP

AQSIQ, SA

State Council

MEP, AQSIQ

NPC

State Council

MEP

MEP, AQSIQ

State Council

*Abbreviations: NPC-National People’s Congress; MEP-Ministry of Environmental Protection of the People’s Republic of China; MoF-Ministry of Finance; NDFC-

National Development and Reform Commission; MoPS-Ministry of Public Security; MoC-Ministry of Commerce; AQSIQ-General Administration of Quality

Supervision, Inspection and Quarantine; SA-Standardization Administration.

Source: International Journal of Environmental Research and Public Health, MOFSL

24 October 2019

Oil & Gas

Coal control



Increase in usage of ULE

units leads to increase in

production cost, narrowing

coal to gas differentials.

This also makes firing of

gas-based power plants

more economically viable.



In 2014, Chinese Premier Li Keqiang declared a "war on pollution," which he

described as "nature's red-light warning against the model of inefficient and

blind development”. Even various public protests over the years aided the

government’s efforts for ground level implementation.

In 2014, an Air Pollution Prevention & Control law was announced, outlining the

policy and plan for power generation plants and boilers. The main highlights of

the plan were:



Reduce the share of coal in the energy mix by 6% to 58%, by reducing coal-

based power generating capacity and cancelling/postponing new

constructions.



Coal-to-gas switching (of 189,000t/h) of boiler capacity (expected to

generate NatGas demand of 45bcm). Promote city gas usage and increase

share of natural gas in the total energy mix to ~10% by 2020.



Also, increase the share of non-fossil fuels to 15% by 2020.

The expected results were still disappointing and many factories were shut,

schools were closed and Beijing airport operations were affected. The situation

was more serious in winter and there was a need for stronger action to combat

air pollution in winter.

In Jul-Aug’16, an Action Plan for Comprehensive Control during Autumn/Winter

Air Pollution in Beijing-Tianjin-Hebei and surrounding regions (2017–18) was

announced. The measures under the action plan were re-emphasized as in the

strategic action plan of 2014 along with:



Adjusting production of factories during Nov-Jan and enhancing actions on

coal-fired power plants and reforms in iron and steel sector.



Tightening supervision, inspecting regions and developing emergency

measures in the event of worsening of air pollution.

Exhibit 4: Share of coal in energy mix declined to 58% from

72% in a decade

NatGas Consumption

Coal Consumption

Total energy consumption (mtoe)

Exhibit 3: Focus on shifting to Ultra-Low-Emission (ULE) coal

usage for coal-based power generation

72% 72% 70% 70% 68% 67% 65% 63% 62% 60% 58%

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Source: Ministry of Ecology and Environment, People’s Republic of

China, MOFSL

Source: BP Statistical review 2019, MOFSL

24 October 2019

Oil & Gas

Gas Growth



Switching to gas was considered the key strategy for the 12FYP, which led to

increased LNG imports. The government also developed pricing mechanism to

boost domestic production and to facilitate reasonable relationship between

gas and alternative fuels.

Exhibit 5: Average annual growth (%)

Year

GDP

Total Energy Consumption

Natural Gas Consumption

Natural Gas Production

Domestic Production Lag

2000-13

2014-16

2017

6.9

8.4

1.4

2.8

16.2

6.8

15.1

12.8

1.8

8.5

-21%

-74%

-44%

Source: China Energy Statistics Yearbook 2017, MOFSL



The consumption of natural gas saw double-digit growth during 2000-13 and

2017-18, while lack of reforms (comprehensive adjustments) during 2014-16

saw reduced gas consumption.

Push towards coal-to-gas switch led to higher single-digit growth for the

Industrial and Power sector. Also, draught-affected hydropower plants and

limitations on approvals of new coal-based power plants supported the boost in

LNG demand.

The domestic production lagged demand by ~23-31% during 20011-15 period,

which led to various problems, such as:



LNG prices affected operations and led to temporary shutdown of

industries,



Insufficient gas supply to homes affected heating during winter days, and



CNG vehicle drivers faced long queues at filling stations.

The NRC published guidelines in Dec’17 to facilitate natural gas supply as:



Natural gas supply was diverted from power plants (10mmscmd) and

industrial sector (15mmscmd) to residential,



Increasing supply by ~30% (to 80mmscmd) from underground storage.

Exhibit 6: China gas consumption story for a decade

Source: BP Statistical review 2019, MOFSL

24 October 2019

Oil & Gas

India – NGT Reforms…

…a roadmap to vision 2030 (increasing gas mix to 15%)



The roots of air pollution control tracks back to 2009-10 when the Central Pollution

Control Board (CPCB) carried out a study of industrial clusters in the country with

reference to the Comprehensive Environmental Pollution Index (CEPI).

As a signatory of COP21, though India aimed to double market share of natural gas in

its primary energy mix, no measurable measures were stated.

The recent involvement of National Green Tribunal (NGT) for curbing air pollution has

seen some strict enforcement.

We believe a shift from dirty fuels to usage of natural gas is an important tool to

reduce air pollution along with other measures.

Timeline in reforms of India’s air pollution control



A study carried out in 2009-10 by CPCB and State PCBs notified 88 industrial

clusters as Polluted Industrial Areas (PIAs), of which 43 were classified as

critically polluted areas (CPA, CEPI >70) and 32 as severely polluted areas (SPA,

CEPI 60-70).

The CPAs and SPAs were asked to formulate and implement an action plan to

bring the pollution levels within the norms in a year’s time or more. CPCB

revised the criteria for formulating CEPI in 2016.

Later in Apr’16, CPCB issued direction under section 18 of the Air & Water Act to

~16 areas requiring continuous environmental quality monitoring and

installation of monitoring stations according to the revised CEPI score in two

months’ time (15

Jun’16). The polluting sources were required to place various

data in public domain and keep in check the permissible limits for further setting

up or expanding industries.

A study in 2017-18 by CPCB highlighted that the number of polluted industrial

clusters increased to 100 (38 CPA, 31 SPA and 31 others).

The Tribunal vide order dated 13

Dec’18 directed all the State PCBs/PCCs to

finalize an action plan in three months’ time.

Exhibit 7: Timeline – Reforms in India’s air pollution control

Source: MOFSL

24 October 2019

Oil & Gas



The National Green Tribunal (NGT) in action



In Mar'19, the NGT passed an order banning all coal gasifiers in Morbi. As a

result, consumption of gas almost doubled in that region.



In Jul'19, the NGT passed another order for the CPCB to file compliance

report on critically and severely polluted industrial clusters across India

within three months.



The NGT has directed the CPCB to assess the compensation to be recovered

from polluting units for the last five years, in accordance with state PCBs.

The compensation should be due to cost of restoration and cost of damage

to public health and environment and other deterrence elements.

Ceramic manufactures at Morbi (Gujarat)



The tribunal asked all the ceramic manufacturing units at Morbi to stop

using coal gasifiers. It asked the GPCB to immediately initiate steps to

comply and coordinate for the suggested action plan.



Recently in the 1QFY20 results, GUJGA and GUJS saw an increase in gas

volumes to Morbi, facilitated by the shifting of all units to PNG.



The Gujarat State Pollution Control Board (GPCB) fined 608 ceramic units at

Morbi with a total penalty of INR4b on 13

Sep’19. The fine is recovery of

the retrospective environmental impact, which is calculated at

INR5,000/day and is based on the number of days from the start of using

the coal gasifier till shutting them down completely.



Other measures taken by the NGT



Taloja Industrial Area (Navi Mumbai) – Ranked 51 based on CEPI score

The Maharashtra State PCB and CPCB gave notice to 92 industries for closure,

further requiring the CETP operations to deposit a sum of INR10cr. The tribunal

allowed only those companies, which were fully compliant with the norms and

the ones, which were not to close (within two weeks) to operate.

Textile units in Tronica City (Ghaziabad)

The tribunal asked 53 textile units to shut down, in lieu of untreated effluents,

until the time CETP was functional. Later, only those units with proper

compliance were allowed to start operations.

Leather industries at Jajmau, Banthar and Unnao

The tribunal asked the activities of the leather industry to be shut immediately

until they comply with the norms, after it found illegal discharge of untreated

sewer and industrial effluents in the river Ganga.

24 October 2019

Oil & Gas

Industrial Clusters in proximity to the Gas Grid



We have tried to plot the severely (28) and critically (32) polluted industrial

clusters on the Gas Grid map of India.

Out of the total 60 aforementioned clusters in respect to air pollution, ~40

clusters are close to existing/imminent pipelines.

The three months deadline to NGT’s Jul’19 order is expected to see further

actions by Nov-Dec’19; and we believe that any stringent order (like NGT Mar’19

order at Morbi) may see a huge emphasis on Industrial gas usage in India.

FY19 consumption of FO & LSHS stands at 6.5mmt (which is ~6.8bcm - ~12% of

current total gas consumption).

Exhibit 8: Clusters mapped on the gas grid

Source: MOFSL

24 October 2019

Oil & Gas

Indian government’s push toward gas economy



Natural gas consumption stands at ~6-6.5% in India’s total energy mix v/s China

at ~8%, much below the global average of ~24%. This leaves huge room for

increasing consumption prospects of gas in various avenues.

PNGRB aims to increase the share of gas in the total energy mix by creating

infrastructure to support and maintain the interest of consumers, transporters

and producers of natural gas.

New pipeline capacity in execution is ~11,900km, which is growth of ~40% to

the current capacity of 16,500km in operation.

Around 35 GAs were awarded before incorporation of PNGRB. Before 9

CGD

round, ~56 were awarded (106 offered).

Over the last one year, PNGRB conducted two rounds of CGD bidding, i.e. the 9

round (86 GAs were awarded) and the 10

round (50 GAs were awarded),

increasing the penetration of gas to ~70% of the population.

In Jun’19, PNGRB floated concept paper for common carrier of gas to the GAs

where marketing exclusivity rights have ended. This will aid third party players

to sell gas in the GAs, which will open up to competition and increase gas usage

with improved gas economies.

Domestic gas production should also increase from FY21 with ONGC production

expected to increase by 15mmscmd and RIL by 30-35mmscmd. We expect

increased availability of domestic gas will facilitate sufficient allocation to

various industries like CGD, Power and Fertilizers.

India currently has 37.5mmtpa of existing terminal capacity, with total capacity

expected in near future at ~51.5mmtpa (~185mmscmd).

PLNG plans to set up two more tanks (in addition to six currently) at Dahej

(capex: INR13b) and build a Jetty (capex: INR10b), increasing throughput to

~19.5mtpa over the next 2-3 years.

Exhibit 9: China gas consumption story for a decade

Source: BP Statistical review 2019, MOFSL

24 October 2019

Oil & Gas

Exhibit 10: India - LNG terminal

PLNG:

Assuming CAGR of ~8% for

the next 10 years, this

capacity is sufficient to aid

60% of the total imports in

the country.

Though for PLNG,

competition from Mundra

LNG and Ennore LNG

terminals and the Jaigarh

FSRU remains at the bay.

Terminal

Existing

Dahej

Kochi

Hazira

Ennore

Dabhol

Mundra

Jaigrah (FSRU)

Dhamra

Company

PLNG

Royal Dutch Shell

IOC

GAIL, NTPC

Constructed completed

GSPC, Adani

Under Construction

H Energy

Adani

Total

Capacity (MMTPA)

37.5

17.5

5.0

9.0

4.0

5.0

51.5

Source: Petronet LNG, MOFSL

GAIL:

We believe the capped limit

on supply of gas for CGDs will

benefit GAIL (to supply bigger

volumes to an industrial

cluster directly).

Annexure to the list of severely and critically polluted clusters



The following list of clusters is plotted against the CGD Geographical Areas

(GAs), in respect to allotments under different bidding rounds.

However, the increased demand from industrial clusters might not fall in the

purview of CGDs, as the gas supply limit for a CGD company is capped at

50,000scmd/consumer.

32 critical polluted clusters

Exhibit 11:

28 severe polluted clusters

Source: PNGRB, MOFSL

24 October 2019

Oil & Gas

Valuation and Recommendation



GAIL and GSPL will be biggest beneficiaries through higher transmission and

sales of natural gas.

CGDs also to benefit, although it is difficult to estimate the quantum as they can

supply only till 50,000scmd.

GSPL:

We revise our FY21 transmission volumes to 38.5mmscmd (up 4% from

FY20E volumes of 37msmcmd), with implied tariff unchanged at INR1,477/scm.

We value the stock at 8x FY21E EPS of INR19.5 to arrive at a price target of

INR245 (from earlier INR222), implying 17% upside to current market price.

GAIL

is trading at 40% discount to its long term average of 13.9x. Stock has

underperformed recently due to concerns on restructuring. Our interactions

suggest that pipeline assets might not be taken out of the firm.

The stock trades attractively at 7.6x FY21E EPS of INR16.9 and PBV of 1.1x FY21E

BV of INR117. It maintains a strong dividend payout of ~37%, yielding 3.3% per

share. We value GAIL at 8x FY21E EPS adjusted for other income and then add

value of investments. We reiterate our Buy rating, with a target price of INR166,

implying ~33% upside to the current market price.

Exhibit 12: GAIL 1 Yr. Fwd. PE

P/E (x)

28.0

Avg (x)

Max (x)

Min (x)

+1SD

-1SD

26.4

20.0

17.4

13.9

10.3

8.0

12.0

4.0

8.0

Source: MOFSL

Exhibit 13: Valuation screener

Company

GAIL (India)

Gujarat Gas

Guj.St.Petronet

Indraprastha Gas

Mahanagar Gas

Petronet LNG

FY19

14.0

6.2

14.1

11.2

55.3

14.4

EPS (INR)

FY20E

15.0

11.3

17.4

15.0

67.7

17.9

FY21E

16.9

9.4

16.7

16.0

65.1

21.7

P/E (x)

P/BV (x)

EV/EBITDA (x)

ROE (%)

FY19 FY20E FY21E

14.3 14.7 15.0

21.1 31.0 21.2

14.7 15.9 13.4

20.6 23.2 20.8

24.3 25.8 21.7

21.8 25.6 28.7

Div.

Yield

FY19

3.3

0.6

0.8

0.5

2.1

3.3

FY19 FY20E FY21E FY19 FY20E FY21E FY19 FY20E FY21E

9.2

8.6

7.6

1.3

1.2

1.1

6.8

6.4

5.5

28.7 15.9 19.0

5.6

4.4

3.7 14.3 9.1

9.8

15.1 12.2 12.8

2.1

1.8

1.6

5.7

4.9

4.8

32.5 24.3 22.9

6.2

5.2

4.4 19.9 16.0 14.4

17.2 14.1 14.6

3.9

3.4

3.0

9.5

8.5

18.7 15.1 12.4

4.0

3.7

3.4 11.1 9.4

7.8

Source: MOFSL

24 October 2019

Oil & Gas

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.

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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 MOSL, Research Analyst and/or his relatives does not have financial interest in the subject company, as they do not have equity holdings in the subject company.

2 MOSL, Research Analyst and/or his relatives do not have actual/beneficial ownership of 1% or more securities in the subject company

3 MOSL, Research Analyst and/or his relatives have not received compensation/other benefits from the subject company in the past 12 months

4 MOSL, Research Analyst and/or his relatives do not have material conflict of interest in the subject company at the time of publication of research report

5 Research Analyst has not served as director/officer/employee in the subject company

6 MOSL has not acted as a manager or co-manager of public offering of securities of the subject company in past 12 months

7 MOSL has not received compensation for investment banking/ merchant banking/brokerage services from the subject company in the past 12 months

8 MOSL has not received compensation for other than investment banking/merchant banking/brokerage services from the subject company in the past 12 months

9 MOSL has not received any compensation or other benefits from third party in connection with the research report

10 MOSL has not engaged in market making activity for the subject company

24 October 2019

Oil & Gas

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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.

24 October 2019