Sector Update | 23 April 2020
Retail
Retail
Control the controllable
Survival of the fittest
With the Retail sector being at the forefront in the current COVID-19 crisis, we foresee an
impact on retailers not just during the lockdown but much after, given the prolonged
weakness in spending. In this report, we discuss the potential areas of impact on retailers,
likely mitigating factors, and how to think about stocks post a 50% correction from yearly
highs.
Cost of retailing to drop 5–
7%; rental exemption
during lockdown would be a
major relief.
Cost of retailing to drop, but by how much?
Most apparel retailers generate gross margins of 30–50%, implying an average cost
of retailing at 30–40%. In an ideal scenario, when sales are at a standstill, the above-
mentioned cost of retailing should ideally flow to the bottom line. However, our
channel checks and management discussion indicate half this cost, 15–20pp, could
be saved by cutting marketing/advertising activity and from variable rental cost and
savings from closed stores. Furthermore, even rental cost is expected to see some
waiver given the negotiations underway, as per our channel checks. Hence, the cost
of retailing can be further reduced by 5–7pp,
in effect reducing cash burn to 10–
15% of revenue during lockdown.
Grocery retailers such as DMart incur barely 6–
7% cost of retailing (GM 15% and EBITDA 8%), given their ownership model, high
throughput, and limited marketing cost. This too should reduce by 50–60% on
account of stores being closed (50%) and SG&A savings.
Prolonged recovery to delay new store openings and create labor issues
Even once the prevalent lockdown is lifted, the risks of COVID-19, coupled with
weakness in spending, should extend the impact on store footfall as consumers
would curb mall visits and indulgent spending. China saw 30% of normal sales in the
first few weeks. Grocery chains such as DMart could see a lower impact, as sales
from non-essential items (~30% of revenue) are impacted due to store closures.
New store additions would also be drastically reduced as retailers may curb
expansion to ease the strain on the balance sheet and demand slackness. Mall
owners are likely to stall new projects, and vacancies may rise even with delayed
openings. Furthermore, the impact of migrant workers and low employee turnout
may hit product availability and store operations. Subsequently, we believe there
could be a potential 20–25% revenue impact, which may intensify if issues last
beyond two to three months.
Inventory could turn out to
be a key pain point once
normalcy returns as
inventory typically
comprises 30–45% of
retailers’ balance sheets
(FY19).
Inventory management – Discount or no discount?
This could turn out to be a key pain point once normalcy returns as inventory
typically comprises 30–45% of retailers’ balance sheets (FY19). The extent of the
impact on each company would depend on: a) the number of private labels and
brand ownerships, b) astute inventory management, and c) the extent of inventory
holding capacity. Weaker retailers may endeavor to shift the pain on vendors,
Research Analyst: Aliasgar Shakir
(Aliasgar.Shakir@motilaloswal.com); +91 22 6129 1565
Suhel Shaikh
(Suhel.Ahmad@MotilalOswal.com); +91 22 5036 2611 /
Anshul Aggarwal
(Anshul.Aggarwal@motilaloswal.com); +91 22 6129 1559
23 April 2020
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.
1
 Motilal Oswal Financial Services
Retail
stretching his liquidity, and thus face supply and store freshness issues. We foresee
a 5–7% potential impact, due to either sharp discounting or inventory write-downs,
as players feel the pinch of a bloated inventory cycle. However, another school of
thought is that if inventory is sold quickly, inventory would be exhausted, and
manufacturers may commence fresh production after two to three months for the
festive season only after receiving firm orders. Players such as Trent could see a
higher impact given that private labels form over 90% of its revenue. However, its
astute inventory management should help mitigate some of the impact. ABFRL has
65% private labels in Pantaloons and the Lifestyle segment’s inventory, but a high
proportion of consignment sales. It runs on a 12-season cycle with quick turnaround,
thus reducing system-wide inventory bloating. Shoppers Stop is best placed as 75%+
of its inventory is on a consignment basis. V-Mart holds complete inventory risk,
with procurement on an outright basis. On the other hand, nearly 80% of Future
Lifestyle’s business is consignment-based (sales or return), but the remaining 20%
has a stretched working capital.
Companies with strong
balance sheet and cash
position (D-Mart/Trent)
would tide over the crisis
Balance sheet – A recipe for smooth sailing
At a time when retailers are witnessing a severe cash crunch and inventory risks, we
would prefer to bank on companies with low leverage and strong parentage. Trent is
best placed, with INR9b cash on the books post the recent preferential issue to TATA
Sons. ABFRL’s debt of INR15b is on the higher side and hence in a precarious
situation; however, its free cash flow on a stable-state basis despite the healthy
pace of store additions leaves it in a relatively better position. V-Mart and Shoppers
Stop are cash neutral and FCF positive. What gives us confidence is that V-Mart,
since its IPO in FY13, has fueled its expansion entirely through internal sources.
Future Retail and Future Lifestyle could witness issues due to their leveraged
balance sheets and high debt at the promoter level, which could accentuate
concerns at a time when banks turn extra cautious in doling out new loans.
Valuation view: Stay with the fittest
Although the Retail sector has commanded very high multiples in the recent past, it
is likely to witness a setback due to the current crisis. Even after the sharp earnings
revision, stocks are trading at ~20x FY22EV/EBDITA, with uncertain growth in the
near term; hence, the valuation is not particularly cheap even after the recent sharp
correction. Another way to look at the stocks is that even after the washout in FY21,
things may start to look better in FY22. Still, against 20% earnings revision for FY22,
stocks have corrected 40–50%, thus the multiple has been cut by 20-25%.
Nevertheless, recovery in stocks may depend on future growth performance; so,
even if stocks may not fall further, we may see time correction. However, it may be
wise to bet on players with sound execution capabilities and stable balance sheets,
who could take advantage once the cycle revives. We prefer, TRENT, ABFRL, and
VMART. ABFRL‘s high leverage is a dampener in the current weak market, but it has
a strong parentage and remains a dominant force in the apparel market with
consistently delivering strong growth at a healthy ROCE. TRENT has best in class
execution with healthy balance sheet – INR5.5b net cash and lean working capital.
VMART is a strong force in the regional market, with deep penetration, lowest cost
of retailing garners and healthy ROCE.
23 April 2020
2
 Motilal Oswal Financial Services
Retail
Exhibit 1: Considering the COVID-19 impact thus far, we have revised our revenue/profitability outlook for FY21–22E, as
follows:
(INR b)
Companies
ABFRL
DMart
FLFL
FRL
Reliance Retail
SHOP
Trent
V-Mart
ABFRL
DMart
FLFL
FRL
Reliance Retail
SHOP
Trent
V-Mart
ABFRL
DMart
FLFL
FRL
Reliance Retail
SHOP
Trent
V-Mart
ABFRL
DMart
FLFL
FRL
Reliance Retail
SHOP
Trent
V-Mart
Our Revised Estimates for FY21E/FY22E
FY19
FY20E
FY21E
FY22E
81
87
83
105
200
247
282
355
57
61
57
67
202
196
167
192
1,019
1,257
1,551
2,103
35
33
29
34
26
34
36
52
14
16
17
23
5.5
6.0
5.4
8.3
16.3
21.4
23.5
30.7
5.3
5.4
3.7
5.3
10.4
9.8
6.8
10.3
59.2
72.8
78.2
114.3
2.5
2.4
1.8
2.1
2.3
2.5
2.0
4.7
1.3
1.3
1.2
1.9
6.8%
6.8%
6.4%
7.9%
8.2%
8.7%
8.3%
8.7%
9.2%
8.8%
6.6%
7.9%
5.1%
5.0%
4.1%
5.4%
5.8%
5.8%
5.0%
5.4%
7.3%
7.2%
6.2%
6.2%
8.7%
7.5%
5.7%
9.1%
9.3%
8.0%
7.0%
8.3%
3.2
0.2
0.9
3.0
9.0
13.8
15.7
20.9
1.9
1.1
-0.3
0.7
7.3
5.3
1.9
4.4
31.4
47.9
52.0
78.3
1.0
-0.1
0.1
0.2
1.0
1.5
2.3
5.1
0.7
0.8
0.6
1.1
FY20E
8%
23%
7%
-3%
23%
-4%
29%
15%
8%
31%
2%
-5%
23%
-5%
12%
-1%
0bps
51bps
-39bps
-13bps
-1bps
-3bps
-116bps
-125bps
-93%
53%
-44%
-27%
53%
-107%
54%
11%
YoY Growth
FY21E
-5%
14%
-7%
-15%
23%
-12%
5%
1%
-10%
10%
-31%
-30%
7%
-24%
-20%
-12%
-39bps
-33bps
-223bps
-92bps
-76bps
-100bps
-182bps
-102bps
328%
14%
-127%
-65%
8%
-230%
53%
-24%
FY22E
26%
26%
18%
15%
36%
16%
46%
38%
55%
31%
43%
50%
46%
15%
134%
63%
148bps
31bps
136bps
127bps
39bps
-7bps
342bps
130bps
225%
33%
-339%
137%
51%
154%
123%
81%
Sales
EBITDA
EBITDA Margins
PAT
Source: Company, MOFSL
Exhibit 2: We have sharply cut our estimates for FY21–22E v/s the pre-COVID-19 era, as follows
Revised Estimates
(INR b)
ABFRL
Revenue
EBITDA
EBITDA Margin
PAT
Revenue
EBITDA
EBITDA Margin
PAT
Revenue
EBITDA
EBITDA Margin
PAT
Revenue
EBITDA
EBITDA Margin
PAT
Revenue
EBITDA
EBITDA Margin
PAT
Pre-COVID-19
FY21E
FY22E
103.8
118.2
8.7
10.4
8.3%
8.8%
3.4
4.5
328.2
401.5
29.5
35.8
9.0%
8.9%
20.2
24.6
70.8
79.4
6.4
7.3
9.0%
9.2%
1.6
2.1
217.1
242.5
13.2
15.1
6.1%
6.2%
8.2
8.4
2,035.3
2,384.3
120.7
145.0
5.9%
6.1%
Post-COVID-19
FY21E
FY22E
83.3
105.1
5.4
8.3
6.4%
7.9%
0.9
3.0
262.7
346.0
22.2
30.5
8.4%
8.8%
14.7
20.8
56.7
67.0
3.7
5.3
6.6%
7.9%
(0.3)
0.7
167.3
191.7
6.8
10.3
4.1%
5.4%
1.9
4.4
1,760.3
2,103.4
78.2
114.3
4.4%
5.4%
Change in Estimates
FY21E
FY22E
-20%
-11%
-38%
-20%
-191bps
-88bps
-72%
-32%
-20%
-14%
-25%
-15%
-56bps
-11bps
-28%
-15%
-20%
-16%
-41%
-27%
-241bps
-129bps
-117%
-68%
-23%
-21%
-48%
-32%
-198bps
-88bps
-77%
-48%
-14%
-12%
-35%
-21%
-149bps
-65bps
DMart
FLFL
FRL
Reliance Retail
83.8
101.3
52.0
78.3
-38%
-23%
3
23 April 2020
 Motilal Oswal Financial Services
Retail
Revised Estimates
(INR b)
SHOP
Revenue
EBITDA
EBITDA Margin
PAT
Revenue
EBITDA
EBITDA Margin
PAT
Revenue
EBITDA
EBITDA Margin
PAT
Trent
V-Mart
Pre-COVID-19
FY21E
FY22E
37.1
39.5
2.9
3.2
7.9%
8.0%
0.8
0.8
42.7
54.5
6.7
8.8
15.8%
16.1%
2.5
3.9
21.6
26.5
1.9
2.3
8.8%
8.9%
1.1
1.4
Post-COVID-19
FY21E
FY22E
29.5
34.2
1.8
2.1
6.2%
6.2%
0.1
0.2
33.1
49.3
4.4
7.9
13.4%
15.9%
0.5
2.9
16.6
22.9
1.2
1.9
7.0%
8.3%
0.6
1.1
Change in Estimates
FY21E
FY22E
-21%
-13%
-38%
-33%
-169bps
-184bps
-90%
-73%
-22%
-10%
-34%
-10%
-234bps
-16bps
-81%
-25%
-23%
-14%
-39%
-19%
-180bps
-55bps
-46%
-21%
Exhibit 3: Estimate revisions to adversely impact return ratios
Companies
ABFRL
DMart
FLFL
FRL
SHOP
Trent
V-Mart
ABFRL
DMart
FLFL
FRL
SHOP
Trent
V-Mart
FY19
10.1
17.6
9.8
21.1
10.4
6.0
18.9
23.8
16.8
11.7
17.7
8.6
6.4
18.1
FY20E
10.6
21.9
5.2
10.4
(0.7)
4.3
17.7
1.4
21.1
7.3
9.7
(0.7)
6.1
18.4
FY21E
6.3
20.3
(1.3)
2.9
0.9
3.2
11.7
7.3
19.7
1.7
6.2
1.4
5.3
12.2
FY22E
17.9
21.9
3.1
6.5
2.2
11.3
18.1
13.8
21.3
4.9
7.3
2.7
9.6
18.6
Source: Company, MOFSL
RoE (%)
RoCE (%)
Exhibit 4: Leverage position remains comfortable for DMart/Trent/SHOP
Fixed Cost + Net Interest
Monthly Expense FY20E
INR m % of sales (steady state)
ABFRL
2,038
27%
DMart
797
4%
Future Lifestyle
1,104
21%
Future Retail
4,064
23%
Shoppers Stop
664
23%
Trent
1,154
40%
V-Mart
301
22%
Exhibit 5: Drop in share prices sharper than sales/EBITDA cut over FY21–22E
Sales
Changes in Estimate due to COVID-19
ABFRL
DMart
Future Lifestyle
Future Retail
Shoppers Stop
Trent
V-Mart
FY21E
-20%
-14%
-20%
-23%
-20%
-21%
-23%
FY22E
-11%
-12%
-16%
-21%
-13%
-9%
-14%
FY21E
-38%
-20%
-41%
-48%
-37%
-31%
-39%
EBITDA
FY22E
-20%
-14%
-27%
-32%
-33%
-10%
-19%
FY21E
-72%
-22%
-117%
-77%
-93%
-70%
-46%
Net Debt
(INR m)
16,609
-36,444
-1,957
-6,330
-2,155
-4,138
-1,094
Net Debt/
EBITDA (x)
2.8
-1.7
-0.4
-0.6
-0.9
-2.0
-0.8
Source: MOFSL, Company
PAT
FY22E
-32%
-15%
-68%
-48%
-76%
-22%
-21%
Correction in
Share Prices
(YTD)
-39
21
-70
-76
-46
-10
5
Source: MOFSL, Company
23 April 2020
4
 Motilal Oswal Financial Services
Retail
Exhibit 6: Retail sector snapshot
CMP
(INR)
124
2296
149
98
194
498
1720
MCap
(INR b)
169.5
1418.6
19.0
35.1
17.6
159.5
31.5
Reco
Buy
Sell
UR
UR
Neutral
Buy
Buy
Target
Price
240
1,750
NA
NA
260
575
2,060
FY20E
18.8
111.6
115.8
127.2
107.7
80.9
270.1
EPS (INR)
FY21E
20.0
136.8
112.5
130.9
108.3
83.6
303.7
FY22E
23.9
170.3
114.2
139.7
110.5
93.6
364.3
FY20E
62.7
104.0
26.8
9.2
NM
189.5
39.1
PE (x)
FY21E
102.3
91.2
NM
26.6
318.3
203.2
51.3
FY22E
31.5
68.4
42.4
11.2
88.9
53.3
28.4
EV/EBITDA
FY20E FY21E FY22E
18.9
20.7
13.1
67.2
60.7
46.4
5.5
7.9
5.5
4.7
5.7
3.7
7.5
9.4
7.9
35.1
38.4
22.5
23.3
25.8
15.7
Source: MOFSL, Company
Aditya Birla Fashion
Avenue Supermarts
Future Lifestyle
Future Retail
Shoppers Stop
Trent
V-Mart Retail
Slackness in demand to be prolonged
As per RAI, 25–30% retailers
may need capital infusion to
survive if the impact
prolongs for 9–12 months.
The nationwide lockdown has brought the retail business to a standstill, and
recovery may be prolonged in the aftermath of the COVID-19 situation. A weak
economic environment and employment uncertainty may hurt consumer spending.
Most of the members of the Retailers Association of India (RAI) believe the impact
of COVID-19 may last at least 9–12 months and revenue may be impacted by 30–
50% over nine months (2Q–4QFY21). As per RAI, 25–30% of retailers may need
capital infusion to survive if the impact prolongs for 9–12 months. This could have
multiple repercussions on the overall industry, consumer sentiment, and new
retail/mall properties. On the flip side, cash would be in high demand in such
situations, as well-capitalized retailers could take advantage of prevailing lower cost
/ rental rates, and gain disproportionately once the industry revives.
Pent-up demand for small-ticket items?
With the country being in lockdown for such a long period, there is the possibility
that pent-up demand may be witnessed; once the lockdown is over, consumers may
have the urge to venture out gradually, and we may witness some amount of
activity at retail malls and other shopping destinations as a consequence. Indian
consumers may not embark on a shopping spree of non-essential goods
immediately once the lockdown has been lifted, but if consumers refrain from
buying bigger ticket items, demand for small-ticket items could certainly go up,
potentially supporting footfall.
Inventory management – The discount debate
Through our conversations with retailers and industry bodies, we have discovered
that there are two dominant opinions across the association. One is that apparel
retailers should bring forward their end-of-season sales (EOSS) and offer discounts
to make up for lost time, along with getting rid of the inventory. So, as soon as
lockdown has been lifted, retailers should first look at liquidating their inventory,
even offer discounts if needed. Another opinion is that if inventory gets sold out
quickly and is exhausted, the supply chain would be disrupted as manufacturing
fresh inventory would take time due to the current halt in production.
Manufacturers may commence fresh production after two to three months, except
for products that are already in the manufacturing stage, as retailers may wait for
the festive season to place fresh orders.
23 April 2020
5
 Motilal Oswal Financial Services
Retail
Exhibit 7:
SSSG (%) to drop for retailers post COVID-19 over FY20–21E, and recover in FY22E
FY19
FY20E
FY21E
FY22E
30
18
12
4
11
1
(3)
(11)
Brand Factory
(13)
Shoppers Stop
(9)
Pantaloons
3
4
17
9
5
18
12
10
15
15
6
1
10
14
11
(10)
Central
(6)
(3)
(8)
V-Mart
(6)
Westside
D-Mart
(3)
(7)
Big Bazaar/FBB
Source: MOFSL, Company
23 April 2020
6
 Motilal Oswal Financial Services
Retail
New store openings to be far and few
Expect mall vacancies to
rise next year as retailers
could shy away from
opening new stores.
Retailers to be cautious
Before the COVID-19 crisis, malls across the top seven cities had an overall vacancy
rate of around 14%, which has declined steadily in the last few years. This is now
expected to increase to about 15%. Amid the current COVID-19 situation, we believe
fresh store openings may be significantly fewer as retailers may look to limit their
capex; there are likely to be restrictions on footfall at retail destinations with a high
population density even post the lockdown as social distancing norms may be
extended.
Our discussion with industry experts indicates both domestic and global brands may
defer new deals, considering the uncertainty surrounding the time it may take to
witness stability in footfall as social distancing norms may be extended for malls
with a high population density. Also, there may be polarized growth in the retail
sector as the absorption of malls at good locations or in areas less impacted by
COVID-19 may result in higher occupancy; conversely, retailers may exit weaker
consumption and lower footfall areas.
Exhibit 8:
Expect FY21 to put a speed bump in the pace of new store additions; pace would pick up in FY22
FY19
FY20E
FY21E
FY22E
50
43
30
20
13
4 6 3 4
Central
8
0
9
5 6
V-Mart
Westside
Zudio
33
25
25
25
15
35
35
33
35
21
27
10
3
D-Mart
Big
Bazaar/FBB
30
20
65
53
40
25
70
70
70
Brand Factory Shoppers Stop Pantaloons
Source: MOFSL, Company
Mall owners likely to postpone new projects
As per pre-COVID-19 ANAROCK estimates, there were plans to complete an around
8.4 mn sqft mall space across the top seven cities in 2020. However, now given the
possible delay in new store openings and dearth of labor needed to complete the
projects, the planned new completions across the top seven cities may drop to 30–
50% of the overall expectation in FY20. This is as there may be minimal activity in
1HFY20 and the subsequent second half may also remain fairly muted. Also,
developers and investors may postpone new mall additions in tier-2 cities as
investment or acquisition opportunities may emerge in tier I cities.
23 April 2020
7
 Motilal Oswal Financial Services
Retail
Exhibit 9: Leasing activity trends in malls; expect new mall completion and absorption to drop over 2020
14.1
11
8.5 8.5
6.6
3.7
4.4 4.8
5.4 4.8
1.6 1.9
3.3 3
2.9
0.5
-1
2016
2.9
4.9 5.5
8.4
6.2
5.9
4.3
4.2
3.1
New Completion
Net Absorption
2010
2011
2012
2013
2014
2015
2017
2018
2019
2020 (Pre
Covid-19)
2020
(Base
case)
2020
(Bear
case)
**Data from top seven Indian cities for Grade A malls only
Source: ANAROCK Property Consultants
Exhibit 10: Rental relief announced by mall owners across cities thus far; expect others to follow suit
Malls
Waivers announced
Lulu, Cochin
Forum Mall, Mangalore
Forum Value Mall
Forum Mall, Koramangala
Forum Mall, Mysore
Forum Mall, Chennai
Forum Mall, Hyderabad
Xperia Mall, Mumbai
Vegas Mall, Dwarka
City Centre, Guwahati
One Awadh Center, Lucknow
Celebration Mall, Udaipur
GMR Airport, Hyderabad
Unity Group – All Malls
1MG, Bangalore
Phoenix Palassio, Lucknow
Phoenix – Palladium/HSP/Kurla/Pune/Bangalore
100% rent waiver during shutdown period
100% rent waiver during shutdown period
100% rent waiver during shutdown period
100% rent waiver during shutdown period
100% rent waiver during shutdown period
100% rent waiver during shutdown period
100% rent waiver during shutdown period
100% rent waiver during shutdown period
100% rent waiver during shutdown period
100% rent waiver during shutdown period
100% rent waiver during shutdown period
100% rent waiver during shutdown period
100% MG waived; only revenue sharing to be paid for March and April
No rent charged for April
100% rent waiver during shutdown period
Mall opening delayed; rent invoice on hold (no waiver announced)
Rent invoice on hold (no waiver announced)
Source: MOFSL
Exhibit 11:
Mall vacancies to rise 1% in 2020
20%
14% 15%
Exhibit 12:
India’s final consumption expenditure trend (USDt)
1.9
1.6
1.4
1.2
1.1
1.2
1.3
1.5
1.9
2010
2012
2014
2016
2018
2020
2010 2011 2012 2013 2014 2015 2016 2017 2018
Source: ANAROCK Property Consultants
Source: ANAROCK Property Consultants
23 April 2020
8
 Motilal Oswal Financial Services
Retail
Strong cost-cutting measures to cushion impact
Our discussion with a host of retailers and other parties in the retail value chain
indicates the overall cost of retailing is likely to drop by 10–15% on account of
significant efforts undertaken to reduce discretionary and other SG&A expenses,
and rental cost; on the other hand, employee cost may also see graded
rationalization for higher positions.
Rental waivers and renegotiations may cushion blow
We may witness increased vacancies across malls, with many retailers turning
unviable, and a sharp slowdown in new store openings. Based on our discussion
with mall owners and retailers across categories, most retail chains are already in
discussions with mall owners for a possible exemption or rebate in rentals of 10–
15% in 2020. This could amplify as retailers are restructuring deals on revenue-
sharing arrangements with mall owners to mitigate risks arising from decline in
footfall in such unprecedented crises. Also, retailers are increasing focus on their
omni-channel presence to cater to consumers who continue practicing social
distancing and be prepared for such future incidences.
Retail chains are already in
discussions with mall
owners for a possible
exemption or rebate in
rentals of 10–15% in 2020.
Expect the industry to move
to a rent-sharing model for
the next 12 months.
However, we could see resistance to renegotiations and the possible consolidation
of retail real estate as many mall owners too may have liquidity woes. Many mall
owners have taken lease rental discounting from banks for 9–10 years. If rental
declines, mall owners may need to top it up to avoid bank defaults or ask the banks
to spread/extend the discounting tenure. This too is complicated as RBI intervention
may be needed to restrict it for classification as NPA. Unfortunately, even other
asset classes such as residential and commercial are going to be in pain, unlike in
2009, when residential recovered quickly.
SG&A cost reduction
Retailers have already rationalized discretionary spends such as marketing and
advertisement. They are further looking to cut other overheads such as office space
consolidation, travel expense entertainment, and other others.
Employee cost reduction
India’s modern retail salary is around USD500m per month, as per RAI. Once the
lockdown is lifted, retailers may opt for graded salary cuts with higher and mid-level
employees witnessing a higher proportion of salary cuts than the lower level. Again,
it would be most critical not to lose good talent.
Our discussion with a host of retailers and other parties in the retail value chain
indicates the overall cost of retailing is likely to fall by 10–15pp of sales on account
of serious efforts being undertaken to reduce discretionary, SG&A, rental, and store
cost; employee cost too may see graded rationalization for higher positions.
23 April 2020
9
 Motilal Oswal Financial Services
Retail
Industry demand for government support
Our discussion with industry bodies and members of the retail association suggests
retailers are requesting government support for tax deferment, property
tax/minimum electricity waivers and wage subsidies, and longer interest
moratorium or tenures for payments.
Deferment of statutory payments would create liquidity for fixed costs such as
salaries at a time when revenues are nil. Furthermore, the credit period should
be extended and the RBI should work with banks to relax credit terms.
The government would have to shift its focus from DBT to the underprivileged
class to help industries survive and maintain employee generation. Arranging
working capital loans without collaterals or providing interest subsidies on loans
or longer term moratorium beyond six to nine months would help achieve this.
Banks are currently providing overdraft facilities; however, they are not allowing
companies to use these facilities for salary, but only for vendor payments. Also,
interest moratorium is a good step, but the Retail and Garments industry uses
many instruments, such as bill discounting, which have stuck the liquidity in the
value chain.
The government needs to support mall owners so they can help retailers. For
example, property taxes and minimum electricity charges should be waived for
the duration of the lockdown, and extended interest moratorium and loan relief
should be offered to mall owners so they can support retailers. Furthermore,
the government should support the waiving of lease payments. In Singapore,
the government has waived lease payments for government-owned properties
and many others.
The government could co-share wages, similar to Bangladesh, or provide loans
at a lower rate to offer wages with the option of moratorium.
The government could also reduce GST rates, currently at 12–18%, which could
be passed on to customers to boost demand.
Exhibit 13: Fixed/Variable rent expenses for retailers form ~66%/33% of total rent expense
Fixed Rent as % of Total Rent (LHS)
Total Rent as % of revenues
14%
12%
9%
6%
6%
12%
Variable Rent as % of Total Rent (LHS)
100%
75%
50%
25%
0%
0%
ABFRL
D-Mart
FLFL
FRL
SHOP
Trent
V-Mart
Source: MOFSL, Company
23 April 2020
10
 Motilal Oswal Financial Services
Retail
Exhibit 14: Cost of retailing (as a % of sales, FY20E)
Emp Expenses
15%
5%
5%
9%
12%
ABFRL
1%
0%
2%
D-Mart
11%
6%
FLFL
5%
5%
FRL
Fixed rent
8%
3%
10%
Variable Rent
7%
3%
3%
Fixed SG&A
8%
6%
4%
12%
10%
SHOP
Varibale SG&A
9%
7%
5%
10%
11%
Trent
10%
7%
2%
6%
V-Mart
Source: MOFSL, Company
Exhibit 15: Apparel retailers to cut cost of retailing (MOFSL
Retail coverage, INR b)
Emp. Cost
232
Rentals
SG&A
222
34
26
23
FY20
32
25
24
FY21E
Source: MOFSL, Company
Sales
Exhibit 16: Apparel retailers cost of retailing (MOFSL Retail
coverage, as % of sales)
Emp. Cost
Rentals
SG&A
14.8%
14.3%
11.0%
9.8%
FY20
11.3%
10.8%
FY21E
Source: MOFSL, Company
Exhibit 17: Grocery retailers’ cost of retailing (MOFSL Retail
coverage, INR b)
Emp. Cost
308
19
Rentals
SG&A
Sales
338
21
Exhibit 18: Grocery retailers’ cost of retailing (MOFSL Retail
coverage, as % of sales)
Emp. Cost
Rentals
SG&A
6.1%
6.1%
7
8
FY20
7
9
FY21E
Source: MOFSL, Company
2.2%
2.7%
FY20
2.0%
2.6%
FY21E
Source: MOFSL, Company
23 April 2020
11
 Motilal Oswal Financial Services
23 April
Retail
2020
Company Update | Sector: Retail
ABFRL
BSE SENSEX
31,863
S&P CNX
9,314
CMP: INR124
TP: INR240 (+94%)
Buy
Dominant player, spread across value chain
Stock Info
Bloomberg
Equity Shares (m)
M.Cap.(INRb)/(USDb)
52-Week Range (INR)
1, 6, 12 Rel. Per (%)
12M Avg Val (INR M)
Free float (%)
ABFRL IN
772
95.9 / 1.2
285 / 121
-46/-21/-25
144
40.9
Aditya Birla Fashion and Retail Limited (ABFRL), with revenues of ~INR87b
(FY20E), is among the largest players in the industry, with nearly INR54b from
Branded Apparel and INR35b from Value Retail. Being a dominant player, ABFRL
is an anchor tenant and top brand in most retail spaces and may therefore have
a stronger bargaining power with real estate players, suppliers, and other
stakeholders to cushion the cost burden. The company has generated healthy
ROCE of 24% (FY19) and consistent FCF over the last five years.
Financials & Valuations (INR b)
FY20E FY21E FY22E
Y/E MARCH
Sales
87.4
83.3 105.1
EBITDA
6.0
5.4
8.3
Adj. PAT
1.5
0.9
3.0
EBITDA Margin %
6.8
6.4
7.9
Adj. EPS (INR)
2.0
1.2
3.9
EPS Gr. (%)
20.1 -38.7 224.8
BV/Sh. (INR)
18.8
20.0
23.9
Ratios
Net D:E
1.1
1.0
0.7
RoE (%)
10.6
6.3
17.9
RoCE (%)
1.4
7.3
13.8
Payout (%)
0.0
0.0
0.0
Valuations
P/E (x)
62.7 102.3
31.5
EV/EBITDA (x)
18.9
20.7
13.1
EV/Sales (X)
1.3
1.3
1.0
Div. Yield (%)
0.0
0.0
0.0
FCF Yield (%)
1.1
2.2
2.8
Shareholding pattern (%)
As On
Dec-19
Sep-19
Promoter
59.1
59.1
DII
21.1
20.8
FII
9.7
9.7
Others
10.1
10.4
FII Includes depository receipts
Stock Performance (one-year)
High leverage a cause for concern
ABFRL’s key concern is its debt of INR16b, with net debt to EBITDA Of 3x (FY20).
With declining EBITDA and negative FCF in the current period, leverage should
increase, resulting in concerns of dilution. However, with a strong parentage,
ABFRL should weather the current situation better than most retailers.
Revise revenue/EBITDA downwards by 20%/38% for FY21E
We have cut our revenue/EBITDA sharply, given that Branded Apparel as a
lifestyle category with a higher ticket size could see a more pronounced impact
and prolonged recovery in the current environment.
Inventory risk
ABFRL holds higher inventory risk as it is a brand owner and also has 65% private
labels in Pantaloons, which is bought on an outright basis, and thus holds
complete inventory risk. However, this is partly cushioned by: a) over 50% sales
on an outright basis and b) the fact that it follows a ‘12 seasons in a year’ cycle,
which may leave limited inventory in the distribution network, thus reducing the
risk of sales returns. It has a very lean working capital cycle of 14 days.
Dec-18
59.2
18.9
9.5
12.3
23 April 2020
12
 Motilal Oswal Financial Services
Retail
Exhibit 19: FY22 SOTP valuation
Particulars
Lifestyle Brands (gross EBITDA)
Pantaloons (gross EBITDA)
Others (gross sales)
Total EV (net)
Less: Net Debt
Equity Value
No of Shares (m)
Target Price (INR)
CMP (INR)
Upside (%)
EBITDA/Sales (INR m)
5,975
3,364
11,567
Multiple (x)
20
19
1
Value (INR m)
121,891
65,258
13,881
201,029
15,112
185,917
774
240
124
94%
Source: MOFSL, Company
Exhibit 20: ABFRL’s expected cash burn as % of sales
Emp. Cost
Rentals
11%
20%
14%
13%
1QFY20
16%
24%
6
1QFY21
19%
14%
12%
FY20
18%
14%
13%
FY21E
Source: MOFSL, Company
SG&A
Cost of retailing (INRb)
40
38
10
Exhibit 21: ABFRL’s revenue growth to be muted in FY21E
(INR b)
FY20
23
23
FY21E
26
28
21
18
12
Exhibit 22: ABFRL’ EBITDA to be subdued in FY21E (INR b)
FY20
FY21E
21
1.4
-0.1
1.6
1.6
2.2
2.2
0.7
1.7
1Q
2Q
3Q
4Q
1Q
2Q
3Q
4Q
Source: MOFSL, Company
Source: MOFSL, Company
Exhibit 23: Revenue to grow at 10% CAGR over FY20–22E
Revenue (INR b)
YoY growth (%)
13%
9%
8%
-5%
26%
Exhibit 24: EBITDA to grow at 18% CAGR over FY20–22E
EBITDA (INR b)
EBITDA margin (%)
7.9%
6.3%
3.9%
2.0%
6.7%
6.5%
6.8%
6.8%
6.4%
9%
17
19
60
66
72
81
87
83
105
0
FY14
1
FY15
4
FY16
4
FY17
5
FY18
6
6
5
8
FY14 FY15 FY16 FY17 FY18 FY19 FY20E FY21E FY22E
Source: MOFSL, Company
FY19 FY20E FY21E FY22E
Source: MOFSL, Company
23 April 2020
13
 Motilal Oswal Financial Services
Retail
Exhibit 25: PAT to remain subdued over FY20–22E
PAT (INR b)
1%
-2%
(2)
(2)
-11% -12%
(1)
1
PAT margin (%)
4%
2%
1
3
0%
0
1%
1
3%
Exhibit 26: Profitability trend over FY20–22E
50
25
3
0
-25
-50
RoE (%)
RoCE (%)
RoIC (%)
Source: Company, MOFSL
Source: Company, MOFSL
Exhibit 27: FCF to remain low over FY20–22E
FCF (INR b)
0.6% -0.1%
-4.1%
1.0
-0.5
-1.5
-0.2
2.7
2.5
1.2
2.5
3.0
FCF yield (%)
Exhibit 28: High debt to pose challenges
Net Debt (INR b)
2.1
1.7
1.6
1.6
Net Debt/Equity (x)
1.4% 1.3% 0.6% 1.3% 1.6%
1.7
-1.6%
1.1
1.1
1.0
0.7
10.0
16.6
15.2
19.9
17.8
16.4
16.6
15.1
12.8
Source: MOFSL, Company
Source: MOFSL, Company
Exhibit 29: ABFRL – one-year forward P/E band
320
240
160
80
0
P/E (x)
Min (x)
Avg (x)
+1SD
Max (x)
-1SD
244.3
195.1
126.1
57.1
32.6
32.6
Exhibit 30: ABFRL – one-year forward EV/EBITDA band
EV/EBITDA (x)
Avg (x)
Max (x)
Min (x)
60
+1SD
-1SD
44.2
40
33.8
24.5
15.2
20
0
6.8
22.4
Source: MOFSL, Company
Source: MOFSL, Company
23 April 2020
14
 Motilal Oswal Financial Services
Retail
Financials and Valuations
Standalone - Income Statement
Y/E March
Total Income from Operations
Change (%)
Raw Materials
Employees Cost
Rent
Other Expenses
Total Expenditure
% of Sales
EBITDA
Margin (%)
Depreciation
EBIT
Int. and Finance Charges
Other Income
PBT bef. EO Exp.
EO Items
PBT after EO Exp.
Total Tax
Tax Rate (%)
Reported PAT
Adjusted PAT
Change (%)
Margin (%)
FY14
16,612
NA
9,523
1,497
2,503
2,755
16,278
98.0
334
2.0
1,090
-756
1,173
51
-1,877
0
-1,877
0
0.0
-1,877
-1,877
NA
-11.3
FY15
18,507
11.4
10,004
1,837
2,825
3,114
17,780
96.1
727
3.9
1,835
-1,108
1,202
28
-2,281
0
-2,281
0
0.0
-2,281
-2,281
21.5
-12.3
FY16
60,339
226.0
27,518
6,205
9,032
13,801
56,555
93.7
3,784
6.3
3,381
403
1,765
264
-1,098
0
-1,098
0
0.0
-1,098
-1,098
-51.9
-1.8
FY17
66,029
9.4
30,070
7,058
10,871
13,638
61,637
93.3
4,392
6.7
2,425
1,967
1,797
382
552
0
552
0
0.0
552
552
-150.3
0.8
FY18
71,721
8.6
33,901
7,723
10,429
14,985
67,038
93.5
4,683
6.5
2,805
1,878
1,716
328
490
0
490
-688
-140.5
1,178
494
-10.5
0.7
FY19
81,177
13.2
39,250
9,130
11,104
16,153
75,637
93.2
5,541
6.8
2,823
2,717
1,874
648
1,491
0
1,491
-1,721
-115.4
3,212
1,273
157.7
1.6
FY20E
87,361
7.6
41,621
10,614
12,141
17,023
81,400
93.2
5,961
6.8
2,567
3,394
2,047
648
1,995
0
1,995
1,776
89.0
219
1,529
20.1
1.7
FY21E
83,349
-4.6
39,677
11,127
11,776
15,407
77,986
93.6
5,362
6.4
3,112
2,250
1,681
680
1,249
0
1,249
312
25.0
937
937
-38.7
1.1
(INR m)
FY22E
105,120
26.1
50,184
13,666
13,653
19,298
96,800
92.1
8,320
7.9
3,570
4,750
1,406
714
4,059
0
4,059
1,015
25.0
3,044
3,044
224.8
2.9
Standalone - Balance Sheet
Y/E March
Equity Share Capital
Total Reserves
Net Worth
Total Loans
Deferred Tax Liabilities
Capital Employed
Gross Block
Less: Accum. Deprn.
Net Fixed Assets
Capital WIP
Total Investments
Curr. Assets, Loans & Adv.
Inventory
Account Receivables
Cash and Bank Balance
Loans and Advances
Curr. Liability & Prov.
Account Payables
Other Current Liabilities
Provisions
Net Current Assets
Appl. of Funds
FY14
933
4,862
5,795
10,155
0
15,949
19,905
3,504
16,401
179
60
4,892
3,584
170
108
1,031
5,583
3,756
1,673
154
-691
15,949
FY15
928
9,211
10,139
16,864
0
27,003
29,868
5,187
24,681
157
0
19,796
11,503
4,085
270
3,938
17,631
12,415
4,621
595
2,165
27,003
FY16
7,688
1,367
9,055
15,436
0
24,491
24,943
1,711
23,232
254
0
22,338
14,105
3,124
192
4,917
21,334
14,298
6,290
746
1,005
24,491
FY17
7,705
1,876
9,582
20,446
0
30,028
27,575
2,704
24,871
250
0
25,238
14,313
4,522
497
5,907
20,331
14,578
3,823
1,929
4,907
30,028
FY18
7,717
3,214
10,931
18,615
-688
28,857
30,667
4,844
25,823
459
42
30,326
16,912
5,518
728
7,168
27,793
20,093
5,780
1,920
2,533
28,858
FY19
7,735
6,554
14,289
17,029
-2,634
28,684
33,222
7,667
25,555
224
42
37,756
19,213
7,866
574
10,103
34,893
23,986
8,885
2,023
2,863
28,684
FY20E
7,735
6,773
14,508
16,529
0
31,036
37,922
10,234
27,688
224
0
35,675
20,676
7,180
-80
7,898
32,551
23,934
6,223
2,393
3,124
31,036
FY21E
7,735
7,710
15,445
14,029
0
29,473
40,622
13,346
27,276
224
0
32,573
19,727
6,851
-1,083
7,079
30,599
22,835
5,480
2,284
1,974
29,473
(INR m)
FY22E
7,735
10,754
18,489
11,529
0
30,017
44,122
16,916
27,206
224
0
41,179
24,879
8,640
-1,268
8,928
38,592
28,800
6,912
2,880
2,587
30,017
23 April 2020
15
 Motilal Oswal Financial Services
Retail
Financials and Valuations
Ratios
Y/E March
Basic (INR)
EPS
Cash EPS
BV/Share
DPS
Payout (%)
Valuation (x)
P/E
Cash P/E
P/BV
EV/Sales
EV/EBITDA
Dividend Yield (%)
FCF per share
Return Ratios (%)
RoE
RoCE
RoIC
Working Capital Ratios
Fixed Asset Turnover (x)
Asset Turnover (x)
Inventory (Days)
Debtor (Days)
Creditor (Days)
Leverage Ratio (x)
Current Ratio
Interest Cover Ratio
Net Debt/Equity
FY14
-2.4
-1.0
7.5
0.0
0.0
FY15
-3.0
-0.6
13.2
0.0
0.0
-41.9
-213.7
9.4
1.5
38.6
0.0
-16.4
-28.6
-5.0
-5.3
0.6
0.7
227
81
245
1.1
-0.9
1.6
FY16
-1.4
3.0
11.8
0.0
0.0
-87.0
41.8
10.5
1.8
29.2
0.0
1.3
-11.4
2.6
1.6
2.4
2.5
85
19
86
1.0
0.2
1.7
FY17
0.7
3.9
12.4
0.0
0.0
173.0
32.1
10.0
1.7
26.3
0.0
-0.3
5.9
8.6
7.4
2.4
2.2
79
25
81
1.2
1.1
2.1
FY18
0.6
4.3
14.2
0.0
0.0
193.3
28.9
8.7
1.6
24.2
0.0
3.5
4.8
17.8
15.9
2.3
2.5
86
28
102
1.1
1.1
1.6
FY19
1.6
5.3
18.5
0.0
0.0
75.3
23.3
6.7
1.4
20.3
0.0
3.2
10.1
23.8
21.1
2.4
2.8
86
35
108
1.1
1.4
1.1
FY20E
2.0
5.3
18.8
0.0
0.0
62.7
23.4
6.6
1.3
18.9
0.0
1.6
10.6
1.4
1.3
2.3
2.8
86
30
100
1.1
1.7
1.1
FY21E
1.2
5.2
20.0
0.0
0.0
102.3
23.7
6.2
1.3
20.7
0.0
3.2
6.3
7.3
5.5
2.1
2.8
86
30
100
1.1
1.3
1.0
FY22E
3.9
8.6
23.9
0.0
0.0
31.5
14.5
5.2
1.0
13.1
0.0
3.9
17.9
13.8
11.6
2.4
3.5
86
30
100
1.1
3.4
0.7
0.0
-5.1
-32.4
NA
NA
0.8
1.0
79
4
83
0.9
-0.6
1.7
Standalone - Cash Flow Statement
Y/E March
OP/(Loss) before Tax
Depreciation
Interest & Finance Charges
Direct Taxes Paid
(Inc)/Dec in WC
CF from Operations
Others
CF from Operating incl EO
(Inc)/Dec in FA
Free Cash Flow
(Pur)/Sale of Investments
Others
CF from Investments
Issue of Shares
Inc/(Dec) in Debt
Interest Paid
Dividend Paid
Others
CF from Fin. Activity
Inc/Dec of Cash
Opening Balance
Closing Balance
FY14
-1,877
1,090
1,173
-29
408
763
-62
701
-1,175
-473
7,968
20
6,813
0
-6,802
-857
0
0
-7,659
-144
253
108
FY15
-2,281
1,835
1,202
-15
-1,096
-357
-3
-359
-1,163
-1,522
75
198
-889
0
2,602
-1,191
0
0
1,411
162
108
271
FY16
-1,098
3,381
1,765
-19
-741
3,288
-179
3,109
-2,076
1,033
0
219
-1,857
-16
508
-1,821
0
0
-1,330
-78
270
192
FY17
535
2,425
1,761
-30
-573
4,118
134
4,252
-4,499
-247
4
40
-4,455
11
1,948
-1,450
0
0
509
306
190
496
FY18
490
2,805
1,669
-10
760
5,714
237
5,951
-3,271
2,680
-36
58
-3,250
12
-1,832
-649
0
0
-2,469
233
495
727
FY19
1,491
2,823
1,846
-196
-937
5,028
249
5,276
-2,792
2,484
22
6
-2,763
9
-1,576
-1,098
0
0
-2,664
-151
725
574
FY20E
1,995
2,567
2,047
-1,776
1,718
6,551
-648
5,903
-4,700
1,203
42
651
-4,007
0
-500
-2,047
0
0
-2,547
-651
571
-80
FY21E
1,249
3,112
1,681
-312
147
5,877
-680
5,197
-2,700
2,497
0
683
-2,017
0
-2,500
-1,681
0
0
-4,181
-1,001
-83
-1,083
(INR m)
FY22E
4,059
3,570
1,406
-1,015
-799
7,221
-714
6,506
-3,500
3,006
0
717
-2,783
0
-2,500
-1,406
0
0
-3,906
-182
-1,086
-1,268
23 April 2020
16
 Motilal Oswal Financial Services
Retail
Avenue Supermarts
BSE SENSEX
31,863
S&P CNX
9,314
CMP: INR2,296
TP: INR1,750 (-24%)
Sell
DMart: Catering largely to non-discretionary spends
Stock Info
Bloomberg
Equity Shares (m)
M.Cap.(INRb)/(USDb)
52-Week Range (INR)
1, 6, 12 Rel. Per (%)
12M Avg Val (INR M)
Free float (%)
DMART IN
624
1487.6 / 19.5
2559 / 1226
3/39/95
1349
22.7
DMart recently announced 50% of its outlets had been closed due to lockdown
and the rest would sell only essential supplies; as a result, the company is
expected to post 65% lower revenues for the lockdown period, contrary to stock
performance, which seems to factor limited impact. However, once the
lockdown is lifted, nearly 70% of the business mix catering to the Non-
Discretionary category should see swift recovery.
Financials Snapshot (INR b)
FY20E FY21E FY22E
Y/E MARCH
Sales
246.5 281.6 354.6
EBITDA
21.4 23.5 30.7
Adj. PAT
13.8 15.7 20.9
EBITDA Margin (%)
8.7
8.3
8.7
Adj. EPS (INR)
22.1 25.2 33.6
EPS Gr. (%)
52.6 14.1 33.2
BV/Sh. (INR)
111.6 136.8 170.3
Ratios
Net D:E
0.1
-0.1 -0.1
RoE (%)
21.9 20.3 21.9
RoCE (%)
21.1 19.7 21.3
Payout (%)
0
0
0
Valuations
P/E (x)
104.0 91.2 68.4
EV/EBITDA (x)
67.2 60.7 46.4
EV/Sales (X)
5.8
5.1
4.0
Div. Yield (%)
0
0
0
FCF Yield (%)
-0.3
0.8
0.0
Shareholding pattern (%)
As On
Dec-19 Sep-19
Promoter
79.7
80.2
DII
4.7
4.8
FII
6.2
6.0
Others
9.3
9.0
FII Includes depository receipts
Stock Performance (one-year)
Lowest cost retailer
DMart’s cost of retailing is a mere 7% of its revenues at around INR17b monthly.
This is by far the lowest in the industry for a company that generates revenues
of nearly ~INR246b (FY20E). This is primarily attributed to: a) its ownership
model, which saves rent at a time when all other retailers are reeling under
severe pressures of high rental cost, and b) its lean stores and lower opex, which
leverage cost, in addition to providing high revenue throughput.
Estimate revision
We have revised revenue/EBITDA by 14%/20% for FY21E on revenue loss due to
lockdown and the likelihood of slowdown in new store additions. This should
also impact FY22 revenue/EBITDA by 12%/14% for FY22E.
Valuation
In the last one month since the lockdown, the stock has risen ~8% against the
potential impact of 20%/14% on EBITDA and 22%/15% on PAT over FY21/FY22E.
Thus, the stock has performed well. It is currently trading at EV/EBITDA of 46x
and P/E of 68x on FY22E. Subsequently, we believe the stock could see some
downward pressure in the near term until there is clarity on the lockdown
situation. We retain our Sell rating, with TP of INR1,750, assigning 35x
EV/EBITDA on FY22E.
Dec-18
81.2
3.1
5.9
9.8
23 April 2020
17
 Motilal Oswal Financial Services
Retail
Exhibit 31: Valuation based on FY22E EBITDA
EBITDA
Less Net debt
Total Value
Shares o/s (m)
CMP (INR)
Upside (%)
Methodology
FY22 EV/EBITDA
Driver (INR b)
31
Multiple
35
Fair Value (INR b)
1,086
-7
1,092
624
Value/sh (INR)
1,740
-11
1,750
2,296
-24
Source: MOFSL, Company
Exhibit 32: DMart’s expected cost of retailing as % of sales
Emp. Cost
Rentals
SG&A
Cost of retailing (INRb)
20
5%
0%
2%
FY21E
Source: MOFSL, Company
17
5%
5%
4
2%
1QFY20
0%
0%
4
2%
5%
0%
2%
FY20
1QFY21
Exhibit 33: DMart’s revenue growth at slower pace in FY21E
(INR b)
FY20
72
58
50
60
FY21E
84
68
60
76
Exhibit 34: DMart’s EBITDA to grow slowly in FY21E (INR b)
FY20
FY21E
7.4
5.8
4.0
4.9
5.9
5.7
5.0
6.2
1Q
2Q
3Q
4Q
1Q
2Q
3Q
4Q
Source: MOFSL, Company
Source: MOFSL, Company
Exhibit 35: Expect 20% consol. revenue CAGR over FY20–22
Revenue (INR b)
YoY growth (%)
Exhibit 36: Consol. EBITDA margin to remain flat
EBITDA (INR b)
EBITDA margin (%)
51%
40% 37%
33%
39%
26%
33%
23%
282
26%
14%
355
6.3% 6.4%
7.3% 7.1%
7.7%
8.2%
9.0%
8.2%
8.7% 8.3% 8.7%
22
33
47
64
86
119 150 200 247
1.4
2.2
3.4
4.6
6.6
9.8 13.5 16.3 21.4 23.5 30.7
Source: MOFSL, Company
Source: MOFSL, Company
23 April 2020
18
 Motilal Oswal Financial Services
Retail
Exhibit 37:
Expect 23% consol. PAT CAGR over FY20–22
PAT (INR b)
PAT margin (%)
5.4% 4.5% 5.6% 5.6% 5.9%
Exhibit 38:
Return ratios to decline in FY22
RoE (%)
30.0
RoCE (%)
RoIC (%)
4.0%
2.7% 2.8% 3.4% 3.3% 3.7%
20.0
10.0
0.6
0.9
1.6
2.1
3.2
4.8
8.1
9.0 13.8 15.7 20.9
0.0
Source: MOFSL, Company
Source: MOFSL, Company
Exhibit 39:
FCF trend over FY20–22E (INR b)
FCF (INR b)
0%
0%
0%
0%
0%
0%
FCF yield (%)
1%
0%
0%
0%
11.9
-1.4
-1.2 -1.1 -0.7 -2.5 -2.0
-1.8 -1.8
-5.9
2.2
0%
Exhibit 40:
Cash position to remain strong due to QIP
Net Debt (INR b)
2.2
2.1
4.5
1.7
5.7
1.9
1.7
1.9
-4.4 -1.9
-0.4
-0.1
0.1
0.2
-0.3 -0.3
3.6
-8.1 -10.1
Net Debt/EBITDA (x)
3.1
8.5 11.3
Source: MOFSL, Company
Source: MOFSL, Company
Exhibit 41: DMart’s one-year forward P/E band
115
95
75
55
35
P/E (x)
Min (x)
Avg (x)
+1SD
Max (x)
-1SD
Exhibit 42: DMart’s one-year forward EV/EBITDA band
75
65
55
EV/EBITDA (x)
Max (x)
+1SD
Avg (x)
Min (x)
-1SD
100.0
88.0
75.0
62.1
63.9
71.2
49.4
45
35
25
55.3
47.1
39.0
29.3
59.1
Source: MOFSL, Company
Source: MOFSL, Company
23 April 2020
19
 Motilal Oswal Financial Services
Retail
Financials and Valuation
Consolidated - Income Statement
Y/E March
Total Income from Operations
Change (%)
Raw Materials
Gross Profit
Margin (%)
Employees Cost
Other Expenses
Total Expenditure
% of Sales
EBITDA
Margin (%)
Depreciation
EBIT
Int. and Finance Charges
Other Income
PBT bef. EO Exp.
EO Items
PBT after EO Exp.
Total Tax
Tax Rate (%)
Minority Interest
Reported PAT
Adjusted PAT
Change (%)
Margin (%)
FY14
46,865
40.3
39,845
7,020
15.0
873
2,729
43,448
92.7
3,417
7.3
570
2,847
557
158
2,449
0
2,449
835
34.1
0
1,614
1,614
71.9
3.4
FY15
64,394
37.4
54,879
9,515
14.8
1,341
3,592
59,811
92.9
4,583
7.1
815
3,768
724
183
3,226
0
3,226
1,109
34.4
0
2,117
2,117
31.2
3.3
FY16
85,838
33.3
73,035
12,802
14.9
1,490
4,676
79,201
92.3
6,636
7.7
984
5,652
913
179
4,918
0
4,918
1,715
34.9
1
3,202
3,202
51.3
3.7
FY17
1,18,977
38.6
1,00,810
18,167
15.3
1,925
6,429
1,09,165
91.8
9,812
8.2
1,278
8,534
1,220
286
7,600
0
7,600
2,683
35.3
129
4,788
4,788
49.5
4.0
FY18
1,50,332
26.4
1,26,356
23,976
15.9
2,826
7,622
1,36,804
91.0
13,528
9.0
1,590
11,938
595
693
12,036
0
12,036
4,158
34.5
-185
8,063
8,063
68.4
5.4
FY19
2,00,045
33.1
1,70,008
30,037
15.0
3,554
10,150
1,83,712
91.8
16,333
8.2
2,125
14,208
472
484
14,219
0
14,219
5,195
36.5
-1
9,025
9,025
11.9
4.5
FY20E
246,547
23.2
208,281
38,266
15.5
4,561
12,327
225,169
91.3
21,378
8.7
2,701
18,676
473
300
18,503
0
18,503
4,729
25.6
0
13,774
13,774
52.6
5.6
(INR Million)
FY21E
281,613
14.2
238,180
43,434
15.4
5,013
14,926
258,118
91.7
23,495
8.3
3,236
20,260
473
240
20,026
0
20,026
4,306
21.5
0
15,721
15,721
14.1
5.6
FY22E
354,580
25.9
299,606
54,975
15.5
6,205
18,084
323,895
91.3
30,686
8.7
3,836
26,850
473
300
26,677
0
26,677
5,735
21.5
0
20,941
20,941
33.2
5.9
Consolidated - Balance Sheet
Y/E March
Equity Share Capital
Total Reserves
Net Worth
Total Loans
Deferred Tax Liabilities
Capital Employed
Gross Block
Less: Accum. Deprn.
Net Fixed Assets
Capital WIP
Total Investments
Curr. Assets, Loans&Adv.
Inventory
Account Receivables
Cash and Bank Balance
Loans and Advances
Curr. Liability & Prov.
Account Payables
Other Current Liabilities
Provisions
Net Current Assets
Deferred Tax assets
Appl. of Funds
E: MOFSL Estimates
FY14
5,468
4,088
9,556
6,408
265
16,229
13,969
2,252
11,717
888
155
5,316
3,783
95
554
884
1,847
1,226
533
89
3,469
0
16,229
FY15
5,615
6,377
11,992
9,043
305
21,340
18,321
3,041
15,281
981
152
7,134
5,396
71
380
1,287
2,208
1,185
843
179
4,926
0
21,340
FY16
5,615
9,589
15,204
11,923
399
27,527
21,918
983
20,935
817
293
8,970
6,717
84
351
1,818
3,488
1,944
1,487
56
5,482
0
27,527
FY17
6,241
32,177
38,418
14,973
505
53,898
27,764
2,260
25,504
1,529
531
30,629
9,479
210
18,843
2,097
4,295
2,607
1,605
84
26,334
0
53,897
FY18
6,241
40,450
46,691
4,393
452
51,541
37,223
4,006
33,217
1,471
682
20,330
11,634
335
5,602
2,758
4,942
3,173
1,642
127
15,387
1
51,541
FY19
6,241
49,634
55,875
4,298
633
60,811
49,352
6,131
43,221
3,768
165
22,118
16,087
644
2,191
3,197
9,246
4,633
4,474
139
12,872
2
60,811
FY20E
6,241
63,408
69,649
4,298
633
74,585
65,726
8,832
56,893
3,768
165
24,428
19,972
797
577
3,082
11,454
6,277
4,931
247
12,973
2
74,585
(INR Million)
FY21E
6,241
79,129
85,370
4,298
633
90,306
71,972
12,068
59,904
3,768
165
38,776
22,839
910
12,210
2,816
13,092
7,178
5,632
282
25,684
2
90,306
FY22E
6,241
100,070
106,311
4,298
633
111,247
91,273
15,905
75,369
3,768
165
47,636
28,729
1,146
14,214
3,546
16,475
9,029
7,092
355
31,160
2
111,247
23 April 2020
20
 Motilal Oswal Financial Services
Retail
Financials and Valuation
Ratios
Y/E March
Basic (INR)
EPS (diluted from FY17)
Cash EPS (diluted from FY17)
BV/Share (diluted from FY17)
DPS
Payout (%)
Valuation (x)
P/E
Cash P/E
P/BV
EV/Sales
EV/EBITDA
Dividend Yield (%)
FCF per share
Return Ratios (%)
RoE
RoCE
RoIC
Working Capital Ratios
Fixed Asset Turnover (x)
Asset Turnover (x)
Inventory (Days)
Debtor (Days)
Creditor (Days)
Leverage Ratio (x)
Current Ratio
Interest Cover Ratio
Net Debt/Equity
FY14
3.0
3.9
17.5
0.0
0.0
FY15
3.8
5.2
21.4
0.0
0.0
FY16
5.7
7.5
27.1
0.0
0.0
FY17
7.7
9.7
61.6
0.0
0.0
299.3
236.3
37.3
12.0
145.7
0.0
-2.8
17.9
14.2
18.7
4.3
2.2
34
1
9
7.1
7.0
-0.1
FY18
12.9
15.5
74.8
0.0
0.0
177.8
148.5
30.7
9.5
105.9
0.0
-2.9
18.9
15.8
20.4
4.0
2.9
34
1
9
4.1
20.0
0.0
FY19
14.5
17.9
89.5
0.0
0.0
158.8
128.5
25.6
7.2
87.9
0.0
-9.5
17.6
16.8
18.3
4.1
3.3
35
1
10
2.4
30.1
0.0
FY20E
22.1
26.4
111.6
0.0
0.0
104.0
87.0
20.6
5.8
67.2
0.0
-2.3
21.9
21.1
22.3
3.8
3.3
35
1
11
2.1
39.5
0.1
FY21E
25.2
30.4
136.8
0.0
0.0
91.2
75.6
16.8
5.1
60.7
0.0
19.0
20.3
19.7
22.1
3.9
3.1
35
1
11
3.0
42.8
-0.1
FY22E
33.6
39.7
170.3
0.0
0.0
68.4
57.8
13.5
4.0
46.4
0.0
3.5
21.9
21.3
25.2
3.9
3.2
35
1
11
2.9
56.8
-0.1
0.0
-1.2
18.5
13.6
14.4
3.4
2.9
35
1
11
2.9
5.1
0.6
0.0
-4.1
19.6
14.0
14.3
3.5
3.0
36
0
8
3.2
5.2
0.7
0.0
-3.6
23.6
15.8
16.0
3.9
3.1
34
0
10
2.6
6.2
0.7
Consolidated - Cash Flow Statement
Y/E March
OP/(Loss) before Tax
Depreciation
Interest & Finance Charges
Direct Taxes Paid
(Inc)/Dec in WC
CF from Operations
Others
CF from Operating incl EO
(Inc)/Dec in FA
Free Cash Flow
(Pur)/Sale of Investments
Others
CF from Investments
Issue of Shares
Inc/(Dec) in Debt
Interest Paid
Dividend Paid
Others
CF from Fin. Activity
Inc/Dec of Cash
Opening Balance
Closing Balance
FY14
2,449
570
557
-750
-827
1,998
-17
1,981
-2,706
-724
7
8
-2,691
46
1,148
-552
0
11
652
-57
614
557
FY15
3,226
815
724
-1,000
-1,520
2,245
-25
2,220
-4,770
-2,549
31
8
-4,731
326
2,634
-621
0
5
2,345
-166
546
380
FY16
4,918
984
913
-1,642
-685
4,489
-154
4,335
-6,350
-2,015
-151
183
-6,318
0
2,898
-934
0
0
1,964
-19
370
351
FY17
7,600
1,278
1,220
-2,586
-2,697
4,815
-237
4,578
-6,354
-1,775
-229
244
-6,339
18,406
3,050
-1,203
0
0
20,253
18,492
351
18,843
FY18
12,036
1,590
595
-4,027
-2,427
7,767
-467
7,300
-9,087
-1,787
-247
383
-8,951
0
-10,791
-800
0
0
-11,591
-13,242
18,843
5,601
FY19
14,219
2,125
472
-5,018
-3,507
8,292
-224
8,068
-14,084
-6,015
517
150
-13,417
0
2,600
-510
0
0
2,090
-3,259
5,602
2,343
FY20E
18,503
2,701
473
-4,729
-1,715
15,233
-300
14,933
-16,374
-1,441
0
300
-16,074
0
0
-473
0
0
-473
-1,614
2,191
577
(INR Million)
FY21E
20,026
3,236
473
-4,306
-1,077
18,352
-240
18,113
-6,246
11,866
0
239
-6,008
0
0
-473
0
0
-473
11,632
577
12,209
FY22E
26,677
3,836
473
-5,735
-3,472
21,778
-300
21,478
-19,301
2,177
0
299
-19,002
0
0
-473
0
0
-473
2,003
12,210
14,213
23 April 2020
21
 Motilal Oswal Financial Services
Retail
Reliance Retail
BSE SENSEX
31,863
S&P CNX
9,314
Essentials to support sales
Non-Discretionary to be impacted
Reliance Retail, the largest player in the Retail category, is likely to witness the
impact of COVID-19 on nearly 70% of its core business, i.e., Consumer Durables
and Fashion & Lifestyle; on the other hand, Grocery would operate at a lower
scale given the risk of store closures in several locations and low employee
turnout.
Earnings revision
We have revised revenue/EBITDA downwards by 15%/35% for FY21E and
13%/21% for FY22E due to a stronger impact witnessed on businesses catering
to the Non-Discretionary category and slowdown in new store additions.
Valuation
We have revised down our TP for Reliance Retail to INR400, against INR500
earlier in the pre-COVID-19 period, on account of earnings cut.
Exhibit 43: Reliance Retail’s valuation
FY22 Valuation
Core EBITDA
Petro and Connectivity
Total
Less Net Debt
Equity Value
No of Shares (in b)
TP
EBITDA
114
7
Multiple
21
4
EV (INR b)
2,442
26.9
2,469
100
2,369
5.9
400
Source: Company, MOFSL
Exhibit 44: Reliance Retail’s revenue growth at slower pace
in FY21E (INR b)
FY20
247
215
152
272
FY21E
322
271
208
265
Exhibit 45: Reliance Retail’s EBITDA to grow slowly in FY21E
(INR b)
FY20
FY21E
26
19
3
19
20
29
25
8
1Q
2Q
3Q
4Q
1Q
2Q
3Q
4Q
Source: MOFSL, Company
Source: MOFSL, Company
23 April 2020
22
 Motilal Oswal Financial Services
Retail
Exhibit 46: Expect 29% revenue CAGR over FY20–22E
Net Revenue (INR b)
95% 98%
1,257
1,019
264
515
1,551
36%
YoY growth (%)
2,103
Exhibit 47: Consol. EBITDA margin to be flat in FY21E
Core Revenue (INR b)
Core EBITDA margin (%)
7.0%
7.7%
7.6%
9.1%
4.7%
4.3%
3.9%
6.0%
39%
127
27%
161
183
14%
44%
23% 23%
166
190
273
437
735
941
1,011 1,257
Source: MOFSL, Company
Exhibit 48:
Expect 28% PAT CAGR over FY20–22
PAT (INR b)
PAT margin (%)
3%
4%
3%
4%
6%
5%
12
31
48
52
78
28
42
95
42
61
86
4%
4%
51
115
108
72
227
139
Source: MOFSL, Company
Exhibit 49:
Segment-wise revenue (INR b)
Food & Grocery
Fashion and Lifestyle
Consumer Electronics
Core EBITDA margin (%)
9%
8%
8%
7%
107
136
110
392
234
485
320
139
477
396
555
596
1%
-1%
-1
1
2%
3
2%
3
2%
2%
5
Source: MOFSL, Company
Source: MOFSL, Company
23 April 2020
23
 Motilal Oswal Financial Services
Retail
Reliance Retail: Financials and valuations
Standalone - Income Statement
Y/E March
Total Income from Operations
Change (%)
Total Expenditure
% of Sales
EBITDA
Margin (%)
Depreciation
EBIT
Int. and Finance Charges
Other Income
PBT bef. EO Exp.
EO Items
PBT after EO Exp.
Total Tax
Tax Rate (%)
Reported PAT
Adjusted PAT
Change (%)
Margin (%)
FY16
183,300
13.8
174,180
95.0
9,120
5.0
3,243
5,877
1,177
191
4,891
-81
4,810
1,836
38.2
2,974
3,024
9.9
1.6
FY17
264,376
44.2
252,744
95.6
11,632
4.4
3,686
7,946
773
355
7,528
-411
7,117
3,103
43.6
4,014
4,246
40.4
1.6
FY18
514,562
94.6
490,919
95.4
23,643
4.6
4,342
19,301
1,010
456
18,747
0
18,747
6,315
33.7
12,431
12,431
192.8
2.4
FY19
1,019,465
98.1
960,264
94.2
59,201
5.8
6,017
53,185
6,117
1,120
48,188
0
48,188
16,805
34.9
31,383
31,383
NA
3.1
FY20E
1,256,812
23.3
1,183,992
94.2
72,820
5.8
6,145
66,675
3,558
946
64,063
0
64,063
16,125
25.2
47,938
47,938
NA
3.8
(INR Million)
FY21E
1,551,088
23.4
1,472,936
95.0
78,152
5.0
6,989
71,163
3,558
1,853
69,458
0
69,458
17,483
25.2
51,975
51,975
NA
3.4
FY22E
2,103,409
35.6
1,989,142
94.6
114,267
5.4
7,875
106,392
3,558
1,853
104,687
0
104,687
26,350
25.2
78,337
78,337
NA
3.7
Standalone - Balance Sheet
Y/E March
Equity Share Capital
Eq. Share Warrants & App. Money
Preference Capital
Total Reserves
Net Worth
Total Loans
Deferred Tax Liabilities
Capital Employed
Gross Block
Less: Accum. Deprn.
Net Fixed Assets
Capital WIP
Total Investments
Curr. Assets, Loans&Adv.
Inventory
Account Receivables
Cash and Bank Balance
Loans and Advances
Curr. Liability & Prov.
Account Payables
Other Current Liabilities
Provisions
Net Current Assets
Appl. of Funds
FY16
49,895
0
0
11,345
61,240
10,901
-10,014
62,127
34,742
14,447
20,295
5,328
4,848
64,347
52,495
2,179
476
9,197
32,691
27,682
4,990
19
31,656
62,127
FY17
49,895
0
0
18,300
68,195
277
-8,519
59,953
39,973
17,456
22,517
7,290
8,263
70,134
50,965
7,301
2,523
9,345
48,252
39,267
8,728
257
21,883
59,953
FY18
49,895
0
0
40,769
90,665
34,478
-6,204
118,939
52,976
21,387
31,590
41,464
5,344
156,243
104,653
22,157
1,561
27,872
115,702
82,319
33,154
229
40,542
118,939
FY19
49,895
0
0
75,979
125,874
128,006
0
253,880
97,681
26,096
71,585
25,331
35,761
211,098
112,918
43,302
3,297
51,581
89,896
41,221
48,388
287
121,202
253,880
FY20E
49,895
0
0
123,917
173,812
44,478
0
218,290
73,059
32,773
40,285
25,331
5,344
362,817
171,942
62,524
50,195
78,155
215,487
136,772
78,155
560
147,330
218,290
FY21E
49,895
0
0
175,892
225,788
44,478
0
270,266
82,254
39,762
42,492
25,331
5,344
472,686
221,846
91,632
62,752
96,455
275,587
178,442
96,455
691
197,099
270,266
FY22E
49,895
0
0
254,230
304,125
44,478
0
348,603
92,737
47,637
45,100
25,331
5,344
602,131
265,087
109,493
112,296
115,255
329,303
213,222
115,255
825
272,828
348,603
23 April 2020
24
 Motilal Oswal Financial Services
Retail
Shoppers Stop
BSE SENSEX
31,863
S&P CNX
9,314
CMP: INR194
TP: INR240 (+24%)
Neutral
Revenue recovery could be prolonged
Bloomberg
Equity Shares (m)
M.Cap.(INRb)/(USDb)
52-Week Range (INR)
1, 6, 12 Rel. Per (%)
12M Avg Val (INR M)
Free float (%)
SHOP IN
88
17.1 / 0.2
510 / 172
-25/-32/-40
17
36.1
Financials & Valuations(INR b)
FY20E FY21E FY22E
Y/E MARCH
Sales
34.7 31.0 35.9
EBITDA
2.4
1.9
2.2
Adj. PAT
-0.2
0.1
0.2
EBIT Margin (%)
7.0
6.1
6.0
Adj. EPS (INR)
-1.8
0.6
2.2
EPS Gr. (%)
-123.7 -133.1 257.9
BV/Sh. (INR)
107.7 108.3 110.5
Ratios
Net D:E
0.1
0.0
-0.3
RoE (%)
-1.7
0.6
2.0
RoCE (%)
-1.8
1.2
2.6
Payout (%)
0.0
0.0
0.0
Valuations
P/E (x)
NM 318.3 88.9
EV/EBITDA (x)
7.5
9.4
7.9
EV/Sales (x)
0.5
0.6
0.5
Div. Yield (%)
7.5
9.4
7.9
FCF Yield (%)
-6.9
2.3
3.1
Shareholding Pattern (%)
As On
Dec-19 Sep-19
Promoter
63.9
63.7
DII
22.8
22.9
FII
7.0
6.9
Others
6.4
6.4
FII Includes depository receipts
Stock Performance (one-year)
Shoppers Stop, which operates primarily in the Third-party Branded Lifestyle
category, could see prolonged revenue pressure once the lockdown is lifted,
due to: a) higher ticket size products catering to the Lifestyle segment, which
may see a more pronounced impact in a weak market environment, and b)
limited product exclusivity and increasing social distancing practices, which
could shift customers to online market place websites. However, Shoppers
Stop’s plans to expand its online capabilities should hold it in good stead.
Low inventory risk, healthy balance sheet
Shoppers Stop’s ~70% revenues are on a consignment (sales or return) basis,
largely reducing the risk of inventory. Shoppers Stop’s highly liquid balance
sheet with -16 negative working capital days and a net cash position of INR2.1b
enhance its capability at a time when many small retailers are squeezed for
cash.
Earnings revision
We have revised revenue/EBITDA by 21%/38% for FY21E and build a strong
impact in even FY22, with revenue/EBITDA revision of 13%/33%, as we believe
the Third-party Branded Lifestyle retailer should see a prolonged impact.
Valuation
Shoppers Stop’s slow growth and flattish same-store sales growth (SSSG) has
been a cause for concern. The stock has fallen more than 50% since the peak of
INR427 in Jan’20, against earnings revision of 33% for FY22E, resulting in
further de-rating. It trades at 8x FY22E EV/EBITDA, yet we retain our Neutral
rating with TP of INR240 given the risk of a prolonged recovery.
Dec-18
63.7
12.9
11.8
11.7
23 April 2020
25
 Motilal Oswal Financial Services
Retail
Exhibit 50: Shoppers Stop – SOTP valuation
Methodology
Standalone (Shoppers Stop)
EV/EBITDA
Crossword
EV/Sales
Total Enterprise Value
Less Net debt
Equity Value
Shares o/s (m)
CMP (INR)
Upside (%)
Driver (INR b)
2
1
Multiple
12
1
1
Fair Value (INR b)
22
1
23
0
23
88.0
Value/sh (INR)
251
11
262
3
240
194
24
Source: MOFSL, Company
Exhibit 51: Shopper Stop’s expected cost of retailing as % of sales
Emp. Cost
3
16%
11%
10%
1QFY20
1QFY21
Rentals
SG&A
Cost of retailing (INRb)
12
14%
14%
20%
2
14%
12%
10%
FY20
11
13%
12%
12%
FY21E
Source: MOFSL, Company
Exhibit 52: Shopper Stop’s revenue growth to be muted in
FY21E (INR b)
FY20
FY21E
9.9
8.3
4.3
8.5
7.8
10.2
6.6
7.3
Exhibit 53: Shopper Stop’s EBITDA to be subdued in FY21E
(INR b)
FY20
FY21E
1.3
1.0
0.5
-0.2
0.5
0.4
0.4
0.3
1Q
2Q
3Q
4Q
1Q
2Q
3Q
4Q
Source: MOFSL, Company
Exhibit 54: Revenue CAGR of 5% over FY20–22E
Net Revenue (INR b)
20%
16% 17%
12%
10% 9%
33.4 31.5
-5%
-2% -3%
-4%
19.3 22.5 27.1 30.4 33.5 36.5 35.9 34.8
-6%
36.5
-11%
1.3
1.5
1.9
2.0
16%
YoY growth (%)
Source: MOFSL, Company
Exhibit 55: EBITDA CAGR of 6% over FY20–22E
EBITDA (INR b)
22% 23%
8%
-6%
10%
-4%
-14%
1.9
2.1
2.5
2.4
2.1
2.7
YoY growth (%)
20%
31%
1.4
Source: MOFSL, Company
23 April 2020
Source: MOFSL, Company
26
 Motilal Oswal Financial Services
Retail
Exhibit 56: PAT to remain muted over FY20–22E
PAT (INR b)
YoY growth (%)
579%
156%
-15% -39% -6% 10% -44%
-107%
-187% -158%
0.6 0.4 0.4 0.4 0.2
0.3
0.1 0.8
(0.2)
(0.1)
-573%
Exhibit 57: Return ratios to be subdued over FY20–22E
RoE (%)
40.0
30.0
20.0
0.7
10.0
0.0
-10.0
RoCE (%)
RoIC (%)
Source: MOFSL, Company
Exhibit 58: FCF to remain low over FY20–22E
FCF (INR b)
9%
4%
-1%
-1.1
1%
-0.5
1%
-0.2
2%
1.8
-0.5
1.3
0.4
-1.2
-5%
2%
3%
0.9
-0.3 -0.1
0.0
0.0
FCF Yield (%)
Source: MOFSL, Company
Exhibit 59: Comfortable cash position over FY20–22E
Net debt (INR b)
0.1
0.1
1.1
0.2
0.2
-0.2 -0.3 -0.2 -0.3 -0.3
Net debt/equity (x)
0.5
1.8
1.6
-2.4
-3.1
-2.2
-2.6
-3.5
Source: MOFSL, Company
Exhibit 60: SHOP: one-year forward P/E band
P/E (x)
Avg (x)
Min (x)
+1SD
100.0
50.0
0.0
50.8
15.0
Source: MOFSL, Company
Exhibit 61: SHOP: one-year forward EV/EBITDA band
Max (x)
-1SD
45.0
30.0
EV/EBITDA (x)
Max (x)
Avg (x)
Min (x)
92.4
70.6
38.3
27.0
20.8
14.7
8.7
31.0
20.9
20.9
0.0
9.2
Source: Bloomberg, MOFSL
Source: Bloomberg, MOFSL
23 April 2020
27
 Motilal Oswal Financial Services
Retail
Financials and valuations – consolidated
Consolidated - Income Statement
Y/E March
Total Income from Operations
Change (%)
Raw Materials
Employees Cost
Lease Rentals
Other Expenses
Total Expenditure
% of Sales
EBITDA
Margin (%)
Depreciation
EBIT
Int. and Finance Charges
Other Income
PBT bef. EO Exp.
EO Items
PBT after EO Exp.
Total Tax
Tax Rate (%)
Minority Interest
Loss from discontinued operations
Reported PAT
Adjusted PAT
Change (%)
Margin (%)
FY14
37,783
18.9
24,464
2,918
0
9,068
36,449
96.5
1,334
3.5
981
353
653
62
-239
-7
-245
257
-104.7
-420
-0.9
-83
-68
-31.6
-0.2
FY15
42,869
13.5
26,925
3,157
0
10,107
40,189
93.7
2,680
6.3
1,253
1,427
781
133
778
0
778
288
37.0
66
0.1
424
424
-723.7
1.0
FY16
44,320
3.4
28,632
3,330
0
10,566
42,529
96.0
1,791
4.0
1,297
494
848
285
-69
0
-69
334
-482.1
-427
0.1
24
24
-94.3
0.1
FY17
49,101
10.8
31,892
3,886
0
11,581
47,359
96.5
1,743
3.5
1,510
233
874
188
-453
-128
-581
203
-34.9
-411
-0.1
-373
-200
-925.4
-0.4
FY18
36,967
-24.7
22,679
3,157
4,188
4,828
34,852
94.3
2,115
5.7
1,149
966
377
180
769
2,160
2,929
176
6.0
-297
-608.2
2,442
1,020
-610.6
2.8
FY19
35,779
-3.2
20,782
3,296
4,045
5,199
33,323
93.1
2,457
6.9
1,406
1,051
138
187
1,099
0
1,099
449
40.9
0
-0.1
650
650
-36.3
1.8
FY20E
34,691
-3.0
19,818
3,535
3,837
5,088
32,279
93.0
2,412
7.0
1,835
577
78
304
803
0
803
956
119.2
0
0.0
-154
-154
-123.7
-0.4
(INR Million)
FY21E
30,969
-10.7
17,618
3,590
3,426
4,449
29,084
93.9
1,885
6.1
1,884
2
82
150
70
0
70
19
27.3
0
0.0
51
51
-133.1
0.2
FY22E
35,922
16.0
20,439
3,851
4,626
4,842
33,758
94.0
2,164
6.0
2,023
142
85
194
250
0
250
68
27.3
0
0.0
182
182
257.9
0.5
Consolidated - Balance Sheet
Y/E March
Equity Share Capital
Total Reserves
Net Worth
Minority Interest
Total Loans
Deferred Tax Liabilities
Capital Employed
Gross Block
Less: Accum. Deprn.
Net Fixed Assets
Goodwill on Consolidation
Capital WIP
Total Investments
Curr. Assets, Loans&Adv.
Inventory
Account Receivables
Cash and Bank Balance
Loans and Advances
Curr. Liability & Prov.
Account Payables
Other Current Liabilities
Provisions
Net Current Assets
Appl. of Funds
E: MOFSL Estimates
FY14
416
4,489
4,905
15
6,449
100
11,468
11,716
4,139
7,577
1,019
367
0
8,808
4,490
480
279
3,559
6,302
4,387
1,795
120
2,505
11,468
FY15
417
4,867
5,284
261
7,512
96
13,153
13,162
5,151
8,012
1,019
276
0
10,509
5,063
1,015
199
4,231
6,661
4,688
1,844
130
3,847
13,153
FY16
417
4,734
5,151
-12
8,290
-36
13,393
8,954
861
8,093
976
333
390
10,489
5,792
519
103
4,075
6,889
4,944
1,863
81
3,601
13,393
FY17
418
4,375
4,792
52
8,851
-43
13,652
9,749
1,501
8,248
976
200
199
10,898
5,776
568
76
4,478
6,869
4,908
1,861
100
4,029
13,653
FY18
440
8,605
9,044
0
1,253
-198
10,100
8,687
2,057
6,630
97
182
2,825
7,946
3,563
477
60
3,845
7,578
5,191
2,305
82
367
10,100
FY19
440
8,707
9,147
0
322
-320
9,149
9,514
3,463
6,050
97
351
2,584
15,354
10,719
472
174
3,988
15,286
12,771
2,418
97
68
9,149
FY20E
440
8,553
8,993
0
322
-320
8,996
5,283
5,998
97
351
2,584
6,447
460
-826
3,574
6,480
4,465
1,918
98
-33
8,996
440
8,553
(INR Million)
FY21E
440
8,604
9,044
0
322
-320
9,047
7,151
5,605
97
351
2,584
6,159
416
-358
3,168
5,749
4,012
1,638
98
410
9,047
440
8,604
FY22E
440
8,786
9,226
0
322
-320
9,229
9,158
5,211
97
351
2,584
5,769
484
209
1,664
4,782
4,662
119
1
987
9,229
440
8,786
23 April 2020
28
 Motilal Oswal Financial Services
Retail
Financials and valuations - consolidated
Ratios
Y/E March
Basic (INR)
EPS
Cash EPS
BV/Share
DPS
Payout (%)
Valuation (x)
P/E
Cash P/E
P/BV
EV/Sales
EV/EBITDA
Dividend Yield (%)
FCF per share
Return Ratios (%)
RoE
RoCE
RoIC
Working Capital Ratios
Fixed Asset Turnover (x)
Asset Turnover (x)
Inventory (Days)
Debtor (Days)
Creditor (Days)
Leverage Ratio (x)
Current Ratio
Interest Cover Ratio
Net Debt/Equity
FY14
-0.8
10.9
58.7
0.7
-88.3
FY15
5.1
20.1
63.3
0.7
17.7
38.2
9.7
3.1
0.5
8.8
0.4
-6.2
8.3
8.1
7.6
3.3
3.3
43
9
40
1.6
1.8
1.4
FY16
0.3
15.8
61.7
0.7
310.3
668.8
12.3
3.1
0.5
13.6
0.4
-2.0
0.5
34.6
22.8
4.9
3.3
48
4
41
1.5
0.6
1.5
FY17
-2.4
15.7
57.4
0.8
-20.2
-81.0
12.4
3.4
0.5
14.3
0.4
-5.7
-4.0
4.2
2.4
5.0
3.6
43
4
36
1.6
0.3
1.8
FY18
12.2
26.0
108.3
0.8
3.2
15.9
7.5
1.8
0.5
8.6
0.4
20.9
14.7
9.0
9.0
4.3
3.7
35
5
51
1.0
2.6
-0.2
FY19
7.8
24.6
109.5
0.8
11.9
24.9
7.9
1.8
0.5
7.0
0.4
14.8
7.1
7.4
9.5
3.8
3.9
109
5
130
1.0
7.6
-0.3
FY20E
-1.8
20.1
107.7
0.0
0.0
-105.3
9.6
1.8
0.5
7.5
0.0
-13.9
-1.7
-1.8
-1.7
3.1
3.9
34
5
47
1.0
7.4
-0.2
FY21E
0.6
23.2
108.3
0.0
0.0
318.3
8.4
1.8
0.6
9.4
0.0
4.6
0.6
1.2
0.0
2.4
3.4
35
5
47
1.1
0.0
-0.2
FY22E
2.2
26.4
110.5
0.0
0.0
88.9
7.3
1.8
0.5
7.9
0.0
5.2
2.0
2.6
1.6
2.5
3.9
35
5
47
1.2
1.7
-0.3
0.4
-13.1
-1.4
8.0
7.1
3.2
3.3
43
5
42
1.4
0.5
1.3
Consolidated - Cash Flow Statement
Y/E March
OP/(Loss) before Tax
Depreciation
Interest & Finance Charges
Direct Taxes Paid
(Inc)/Dec in WC
CF from Operations
Others
CF from Operating incl EO
(Inc)/Dec in FA
Free Cash Flow
(Pur)/Sale of Investments
Others
CF from Investments
Issue of Shares
Inc/(Dec) in Debt
Interest Paid
Dividend Paid
Others
CF from Fin. Activity
Inc/Dec of Cash
Opening Balance
Closing Balance
FY14
-240
981
653
-248
-400
747
138
884
-1,979
-1,095
-111
76
-2,014
51
1,463
-649
-73
390
1,182
52
227
279
FY15
778
1,253
781
-231
-1,499
1,083
24
1,107
-1,624
-517
0
49
-1,576
41
1,079
-774
-73
182
455
-14
210
196
FY16
-95
1,297
848
-425
-69
1,556
-3
1,554
-1,722
-169
0
35
-1,687
25
874
-850
-151
207
105
-28
132
104
FY17
-581
1,187
600
-241
-502
462
178
640
-1,114
-474
0
1,333
218
9
13
-597
0
476
-98
760
-684
76
FY18
2,320
1,149
377
-356
1,749
5,239
-2,258
2,981
-1,141
1,840
644
536
39
1,814
-3,178
-416
-75
145
-1,710
1,310
-1,250
60
FY19
1,099
1,406
138
-449
291
2,485
-187
2,299
-996
1,303
241
577
-178
-547
-931
-138
0
0
-1,616
504
-330
175
FY20E
803
1,835
78
-956
-900
860
-304
556
-1,783
-1,227
0
694
-1,088
0
0
-78
0
0
-78
-611
-215
-826
(INR Million)
FY21E
70
1,884
82
-19
25
2,041
-150
1,892
-1,491
401
0
540
-952
0
0
-82
0
0
-82
859
-1,216
-358
FY22E
250
2,023
85
-68
-10
2,280
-194
2,086
-1,628
458
0
584
-1,045
0
0
-85
0
0
-85
957
-748
209
23 April 2020
29
 Motilal Oswal Financial Services
Retail
Trent
BSE SENSEX
31,863
S&P CNX
9,314
CMP: INR498
TP: INR575 (+16%)
Buy
Best-in-class player
Stock Info
Bloomberg
Equity Shares (m)
M.Cap.(INRb)/(USDb)
52-Week Range (INR)
1, 6, 12 Rel. Per (%)
12M Avg Val (INR M)
Free float (%)
TRENT IN
332
176.9 / 2.2
804 / 347
0/13/58
171
63.0
Trent’s consistent SSSG in the last five years, best-in-class throughputs, and
superior EBITDA margin, indicate its strong execution capability. The company
has a healthy balance sheet, with a net cash position of ~INR5.5b (1HFY20) and
lean working capital of 37 days. These limit the risk of liquidity in the current
environment and would also allow it to take advantage of a market in which
other players would be vulnerable.
Financials Snapshot (INR b)
Y/E March
FY20E FY21E FY22E
Sales
34.0 35.8 52.2
EBITDA
5.5
5.0
8.4
Adj. PAT
0.9
0.9
3.3
EBITDA Margin (%)
16.2 13.9 16.1
Adj. EPS (INR)
2.6
2.4
9.3
EPS Gr. (%)
-10.1 -6.7 281.5
BV/Sh. (INR)
80.9 83.6 93.6
Ratios
Net D:E
0.3
0.2
0.1
RoE (%)
4.3
3.2 11.3
RoCE (%)
6.1
5.3
9.6
Payout (%)
0.0
0.0
0.0
Valuations
P/E (x)
189.5 203.2 53.3
EV/EBITDA (x)
35.1 38.4 22.5
EV/Sales (X)
5.7
5.3
3.6
Div . Yield (%)
0.0
0.0
0.0
FCF Yield (%)
-11.4
1.5
1.5
Earnings revision
We have revised revenue by 22%/10% for FY21/22E on account of the following
factors: a) Trent earlier had an aggressive store addition plan, which would now
get derailed, b.) lower SSSG of -6% in FY21 (earlier expectation of 9%) in the
Westside stores, and c) ~20% decline in Zudio’s revenue throughputs, which has
one of the best LTL sales throughput across retailers. We have cut EBITDA by
34%/10% for FY21/22E on a 230bps/20bps margin impact, partly cushioned by
lower SG&A and rental.
Inventory risk
Trent holds a 100% inventory risk as it procures inventory on an outright basis
given its complete private label model. It has among the highest full-price sales,
but given the higher inventory risk, the company could either increase
discounting or risk inventory write-downs, thereby impacting margins.
Valuation remains rich, but we believe risk reward is favorable
After a 10% cut in FY22E EBITDA and 15% fall in the stock price (YTD), Trent
remains richly valued at EV/EBITDA of 22x on FY22. The stock could witness time
Shareholding pattern (%)
correction with limited growth visibility, but superior market standing should lead
As On
Dec-19 Sep-19 Dec-18
the revival. Retain Buy.
Promoter
37.0
37.0
32.6
DII
FII
Others
15.9
20.9
26.2
15.9
21.0
26.1
15.8
23.1
28.5
FII Includes depository receipts
Stock Performance (one-year)
23 April 2020
30
 Motilal Oswal Financial Services
Retail
Exhibit 62: SOTP valuation
Particulars
Standalone
Star
Zara
Total Enterprise Value
Net Debt
Equity Value
Shares (m)
Target Price (INR)
CMP (INR)
Upside (%)
Financial metric
FY22E EBITDA
FY22E Sales
FY22E EBITDA
Multiple (x)
EBITDA/Sales (INR b)
Value (INR b)
35
1.5
35
3.1
7.2
1.7
109
11
61
181
-16
196
355
575
498
16%
Source: MOFSL, Company
Exhibit 63: Trent’s expected cost of retailing as % of sales
Emp. Cost
Rentals
15%
15%
3
15%
1QFY21
3
SG&A
Cost of retailing (INRb)
11
14%
6%
11%
FY20
11
15%
6%
11%
FY21E
Source: MOFSL, Company
15%
14%
10%
1QFY20
Exhibit 64: Trent’s revenue growth to be muted in FY21E
(INR b)
FY20
FY21E
9.9
8.0
5.8
8.5
8.6
11.0
7.5
10.4
Exhibit 65: Trent’s EBITDA to be subdued in FY21E (INR b)
FY20
FY21E
1.0
0.5
0.2
1Q
2Q
3Q
4Q
1Q
2Q
0.2
0.9
1.1
0.5
0.2
3Q
4Q
Source: MOFSL, Company
Source: MOFSL, Company
Exhibit 66: Revenue CAGR of 24% over FY20–22E
Consol. revenues (INR b)
YoY Growth (%)
46%
16%
9%
15% 18% 22%
-2%
-30%
21.3 23.3 22.8 15.9 18.3 21.6 26.3 34.0 35.8 52.2
29%
5%
Exhibit 67: EBITDA CAGR of 24% over FY20–22E
Consol. EBITDA (INR b)
EBITDA Margin (%)
16.2%
5.8% 6.9%
9.3% 8.7%
5.5
0.9
1.3
2.0
2.3
5.0
8.4
13.9%
16.1%
-0.6% 0.4%
-0.1
0.1
3.2%
0.7
Source: MOFSL, Company
23 April 2020
Source: MOFSL, Company
31
 Motilal Oswal Financial Services
Retail
Exhibit 68: PAT to remain muted in FY21E
Consol. PAT (INR b)
-29% -31%
1.3
0.6
-0.3
-0.2
-797%
0.8
0.9
1.0
0.9
0.9
3.3
-57%
54%
2%
YoY Growth (%)
12%
-4%
-7%
282%
Exhibit 69: Return ratios to be subdued in FY21E
RoE (%)
15
10
5
0
RoCE (%)
RoIC (%)
Source: MOFSL, Company
Exhibit 70: FCF to remain low over FY20–22E
FCF (INR b)
0.3
-2.5
-0.7 -1.8 -1.7 -0.2
-0.3 -1.7
67
-21.0
70
80
85
93
2.8
2.7
Source: MOFSL, Company
Exhibit 71: Store addition pace to be slow
Westside
235
185
107
125
150
200
Source: MOFSL, Company
Exhibit 72: TRENT: One-year forward P/E band
P/E (x)
Avg (x)
Min (x)
+1SD
140
121.4
120
100.7
100
80
60
40
71.7
55.0
86.2
Source: MOFSL, Company
Exhibit 73: TRENT: One-year forward EV/EBITDA band
Max (x)
-1SD
EV/EBITDA (x)
78
63
48
33
Max (x)
Avg (x)
67.3
47.1
Min (x)
38.4
22.0
29.7
55.0
18
34.0
Source: MOFSL, Company
Source: MOFSL, Company
23 April 2020
32
 Motilal Oswal Financial Services
Retail
Financials and valuations - consolidated
Consolidated - Income Statement
Y/E March
Total Income from Operations
Change (%)
Raw Materials
Employees Cost
Rent and lease expenses
Advertising & Sales Promotion
Other Expenses
Total Expenditure
% of Sales
EBITDA
Margin (%)
Depreciation
EBIT
Int. and Finance Charges
Other Income
PBT bef. EO Exp.
EO Items
PBT after EO Exp.
Total Tax
Tax Rate (%)
Minority Interest
Reported PAT
Adjusted PAT
Change (%)
Margin (%)
FY15
22,843
-2.1
13,290
2,079
1,156
475
5,122
22,121
96.8
722
3.2
743
-21
107
972
843
1,152
1,995
701
35.1
1
1,293
546
-206.9
2.4
FY16
15,893
-30.4
7,956
1,638
1,924
440
3,007
14,966
94.2
928
5.8
386
542
376
573
739
79
818
347
42.4
-79
550
505
-7.5
3.2
FY17
18,339
15.4
9,028
1,925
2,317
481
3,331
17,082
93.1
1,257
6.9
413
844
338
605
1,112
258
1,370
431
31.4
91
849
672
33.0
3.7
FY18
21,575
17.6
10,315
2,305
2,725
418
3,800
19,563
90.7
2,012
9.3
455
1,557
306
442
1,693
0
1,693
596
35.2
227
870
870
29.5
4.0
FY19
26,302
21.9
13,114
2,868
3,165
0
4,878
24,025
91.3
2,277
8.7
517
1,761
368
408
1,801
0
1,802
736
40.9
95
970
970
11.6
3.7
FY20E
33,960
29.1
17,877
3,634
2,047
0
4,907
28,465
83.8
5,495
16.2
2,469
3,026
2,472
1,347
1,901
0
1,901
957
50.4
10
933
933
-3.8
2.7
FY21E
35,785
5.4
19,325
4,060
2,228
0
5,197
30,810
86.1
4,975
13.9
2,686
2,289
2,472
1,347
1,163
0
1,163
293
25.2
0
871
871
-6.7
2.4
(INR m)
FY22E
52,205
45.9
28,446
5,220
2,959
0
7,152
43,778
83.9
8,427
16.1
2,863
5,564
2,472
1,347
4,439
0
4,439
1,117
25.2
0
3,321
3,321
281.5
6.4
Consolidated - Balance Sheet
Y/E March
Equity Share Capital
Total Reserves
Net Worth
Total Loans
Deferred Tax Liabilities
Capital Employed
Gross Block
Less: Accum. Deprn.
Net Fixed Assets
Goodwill on Consolidation
Capital WIP
Total Investments
Curr. Assets, Loans&Adv.
Inventory
Account Receivables
Cash and Bank Balance
Loans and Advances
Curr. Liability & Prov.
Account Payables
Other Current Liabilities
Provisions
Net Current Assets
Appl. of Funds
FY15
332
13,887
14,220
2,669
-21
16,893
9,506
2,822
6,685
0
921
7,397
7,042
3,299
177
555
3,011
5,151
2,213
1,181
1,758
1,890
16,893
FY16
332
14,312
14,644
3,998
-26
18,719
6,535
2,024
4,511
261
537
10,670
5,554
2,792
130
269
2,363
2,821
1,662
997
162
2,733
18,719
FY17
332
15,145
15,477
3,917
90
19,491
7,492
2,266
5,226
262
55
10,800
5,823
3,054
59
343
2,367
2,673
1,422
1,056
195
3,150
19,491
FY18
332
15,621
15,954
3,914
193
20,068
8,341
2,478
5,864
261
96
10,229
6,904
3,448
151
328
2,977
3,286
2,084
997
205
3,618
20,068
FY19
332
16,133
16,465
3,942
255
20,632
9,354
2,994
6,360
261
872
8,828
9,265
4,970
165
542
3,587
4,955
2,450
2,293
212
4,311
20,632
FY20E
355
26,543
26,898
24,237
255
51,362
33,846
4,885
28,961
261
850
8,828
18,372
5,954
173
8,215
4,030
5,912
2,934
2,766
212
12,460
51,361
FY21E
355
27,414
27,769
24,237
255
52,232
35,480
7,571
27,909
261
850
8,828
20,407
6,170
181
9,882
4,173
6,024
2,904
2,908
212
14,383
52,232
(INR m)
FY22E
355
30,735
31,090
24,237
255
55,554
38,396
10,434
27,962
261
850
8,828
26,381
9,054
270
11,464
5,594
8,730
4,189
4,329
212
17,651
55,553
23 April 2020
33
 Motilal Oswal Financial Services
Retail
Financials and valuations - consolidated
Ratios
Y/E March
Basic (INR)
EPS
Cash EPS
BV/Share
DPS
Payout (%)
Valuation (x)
P/E
Cash P/E
P/BV
EV/Sales
EV/EBITDA
Dividend Yield (%)
FCF per share
Return Ratios (%)
RoE
RoCE
RoIC
Working Capital Ratios
Fixed Asset Turnover (x)
Asset Turnover (x)
Inventory (Days)
Debtor (Days)
Creditor (Days)
Leverage Ratio (x)
Current Ratio
Interest Cover Ratio
Net Debt/Equity
FY15
1.6
3.9
42.8
10.0
257.0
302.8
128.3
11.6
7.3
232.0
2.0
-5.0
4.5
4.1
-0.2
2.4
1.4
53
3
35
1.4
-0.2
-0.4
FY16
1.5
2.7
44.1
9.0
543.6
327.5
185.6
11.3
10.6
182.3
1.8
-0.6
3.5
3.6
4.1
2.4
0.8
64
3
38
2.0
1.4
-0.5
FY17
2.0
3.3
46.6
1.0
39.2
246.3
152.5
10.7
9.2
134.4
0.2
1.0
4.5
5.2
7.5
2.4
0.9
61
1
28
2.2
2.5
-0.5
FY18
2.6
4.0
48.0
1.1
43.9
190.2
124.8
10.4
7.8
84.0
0.2
-0.9
5.5
6.6
11.4
2.6
1.1
58
3
35
2.1
5.1
-0.4
FY19
2.9
4.5
49.5
1.3
53.7
170.4
111.2
10.0
6.4
74.1
0.3
-5.2
6.0
6.4
10.5
2.8
1.3
69
2
34
1.9
4.8
-0.3
FY20E
2.6
10.2
80.9
0.0
0.0
189.5
48.6
6.1
5.7
35.1
0.0
-59.1
4.3
6.1
6.8
1.0
0.7
64
2
32
3.1
1.2
0.3
FY21E
2.4
10.7
83.6
0.0
0.0
203.2
46.5
6.0
5.3
38.4
0.0
7.9
3.2
5.3
5.2
1.0
0.7
63
2
30
3.4
0.9
0.2
FY22E
9.3
18.6
93.6
0.0
0.0
53.3
26.7
5.3
3.6
22.5
0.0
7.6
11.3
9.6
12.4
1.4
0.9
63
2
29
3.0
2.3
0.1
Consolidated - Cash Flow Statement
Y/E March
OP/(Loss) before Tax
Depreciation
Interest & Finance Charges
Direct Taxes Paid
(Inc)/Dec in WC
CF from Operations
Others
CF from Operating incl EO
(Inc)/Dec in FA
Free Cash Flow
(Pur)/Sale of Investments
Others
CF from Investments
Issue of Shares
Inc/(Dec) in Debt
Interest Paid
Dividend Paid
Others
CF from Fin. Activity
Inc/Dec of Cash
Opening Balance
Closing Balance
FY15
843
743
-100
-134
-613
740
-841
-101
-1,555
-1,656
-2,177
671
-3,062
3,500
-9
-110
-272
-11
3,099
-64
619
555
FY16
785
387
174
-199
313
1,460
-366
1,094
-1,307
-213
-60
383
-984
840
-4
-213
-756
0
-133
-23
292
269
FY17
1,354
413
128
-384
-244
1,268
-244
1,024
-686
339
146
103
-437
-2,002
1,864
-365
-11
0
-514
74
269
343
FY18
1,467
455
88
-501
-643
866
-98
769
-1,068
-300
928
100
-40
-1,024
1,000
-317
-403
0
-743
-15
343
328
FY19
1,685
517
165
-791
-1,352
223
-14
210
-1,953
-1,743
2,253
-670
-370
0
1,061
-227
-459
0
375
214
328
542
FY20E
1,901
2,469
2,472
-957
-477
5,408
-1,357
4,051
-25,049
-20,998
0
1,347
-23,702
9,500
20,296
-2,472
0
0
27,324
7,673
542
8,215
FY21E
1,163
2,686
2,472
-293
-255
5,774
-1,347
4,427
-1,634
2,793
0
1,347
-287
0
0
-2,472
0
0
-2,472
1,667
8,215
9,882
(INR m)
FY22E
4,439
2,863
2,472
-1,117
-1,687
6,969
-1,347
5,622
-2,916
2,706
0
1,347
-1,569
0
0
-2,472
0
0
-2,472
1,581
9,882
11,464
23 April 2020
34
 Motilal Oswal Financial Services
Retail
V-Mart
BSE SENSEX
31,863
S&P CNX
9,314
CMP: INR1,720
TP: INR2,060 (+20%)
Buy
Low-cost player
Stock Info
Bloomberg
Equity Shares (m)
M.Cap.(INRb)/(USDb)
52-Week Range (INR)
1, 6, 12 Rel. Per (%)
12M Avg Val (INR M)
Free float (%)
VMART IN
18
31.2 / 0.4
2840 / 1294
3/6/-19
52
48.0
Financials Snapshot (INR b)
FY20E FY21E FY22E
Y/E MARCH
Sales
16.4 16.6 22.9
EBITDA
1.3
1.2
1.9
Adj. PAT
0.8
0.6
1.1
EBITDA Margin (%)
8.0
7.0
8.3
Adj. EPS (INR)
44.0 33.5 60.6
EPS Gr. (%)
11.4 -23.8 80.7
BV/Sh. (INR)
270.1 303.7 364.3
Ratios
Net D:E
-0.2 -0.3 -0.3
RoE (%)
17.7 11.7 18.1
RoCE (%)
18.4 12.2 18.6
Payout (%)
0.0
0.0
0.0
Valuations
P/E (x)
39.1 51.3 28.4
EV/EBITDA (x)
23.3 25.8 15.7
EV/Sales (x)
1.9
1.8
1.3
Div. Yield (%)
0.0
0.0
0.0
FCF Yield (%)
1.0
2.0
0.3
Shareholding pattern (%)
As On
Dec-19 Sep-19
Promoter
52.0
52.0
DII
10.3
8.1
FII
26.1
28.3
Others
11.7
11.6
FII Includes depository receipts
Stock Performance (one-year)
V-Mart, despite being at a lower scale compared with national value retailers,
remains a strong force in the regional market in the North and Eastern belt,
with deep penetration in lower tier cities. It has the lowest cost of retailing
among retailers in the region, allowing it to generate higher margins and ROCE
(18% in FY19). With this, the company has ensured it will be the last man
standing in a market that is already in the consolidation phase and contains
weak players already facing severe financial woes. This should also allow V-
Mart to gain market share.
Disciplined player with strong balance sheet
Since its IPO, V-Mart has expanded its footprint entirely from internal accruals,
ensuring that its average 20% store addition is linked to its operating cash flow,
with no debt on the books. It has an efficient working capital, although it has
most of its inventory on an outright basis, thus leaving the total risk of
inventory on its books.
Revenue estimate revision
V-Mart’s revenue/EBITDA is revised down by 23%/39% for FY21E and 14%/19%
for FY22E on declining SSSG and pace of store additions.
Valuation
Against EBITDA revision of 19% (for FY22), the stock has fallen 33% since its
peak in Feb’20, thus reducing multiples by 15–16%. We retain Buy, with a
revised TP of INR2,060, given V-Mart’s strong market standing.
Dec-18
54.0
4.7
30.0
11.4
23 April 2020
35
 Motilal Oswal Financial Services
Retail
Exhibit 74: Valuation based on FY22E EBITDA
EBITDA
Less Net debt
Total Value
Shares o/s (m)
CMP (INR)
Upside (%)
Methodology
FY22 EV/EBITDA
Driver (INR m)
1,897
Multiple
19
Fair Value (INR m)
35,470
37,211
Value/sh (INR)
1,960
-1,741
2,060
18.1
1,720
20
Source: MOFSL, Company
Exhibit 75: V-Mart’s expected cost of retailing as % of sales
Emp. Cost
Rentals
8%
9%
5%
1
8%
1QFY20
15%
1
1QFY21
6%
SG&A
Cost of retailing (INRb)
4
4
9%
6%
10%
FY20
9%
6%
10%
FY21E
Source: MOFSL, Company
Exhibit 76: V-Mart’s revenue growth to be muted in FY21E
(INR b)
FY20
FY21E
5.6
4.5
2.8
3.1
3.3
3.1
6.1
4.3
Exhibit 77: V-Mart EBITDA to be subdued in FY21E (INR b)
FY20
FY21E
0.9
0.4
0.1
-0.1
2Q
0.0
3Q
0.8
0.1
4Q
0.3
1Q
2Q
3Q
4Q
1Q
Source: MOFSL, Company
Source: MOFSL, Company
Exhibit 78: Revenue CAGR of 18% over FY20–22E
Revenue (INR b)
50%
YoY growth (%)
Exhibit 79: EBITDA CAGR of 20% over FY20–22E
EBITDA (INR b)
10.9%
9.1% 8.8%
22.9
7.7%
8.5%
9.3%
8.0%
7.0%
8.3%
EBITDA margin (%)
25%
12%
5.7
7.2
8.1
24%
22%
15%
8%
27%
16%
16.6
0.5
0.6
0.6
0.8
1.3
1.3
1.3
10.0
12.2
14.3
16.4
1.2
1.9
Source: MOFSL, Company
Source: MOFSL, Company
23 April 2020
36
 Motilal Oswal Financial Services
Retail
Exhibit 80: PAT CAGR of 17% over FY20–22E
PAT (INR b)
40% 49%
-26%
59%
77%
-21%
YoY growth (%)
29%
-24%
81%
Exhibit 81: Return ratios to be subdued over FY20–22E
RoE (%)
40
30
20
10
RoCE (%)
RoIC (%)
0.3
0.4
0.3
0.4
0.8
0.6
0.8
0.6
1.1
0
Source: MOFSL, Company
Exhibit 82: FCF to remain low over FY20–22E
FCF (INR m)
0.2% 0.6%
1.7%
FCF yield (%)
2.0%
0.3%
0.6
0.3
0.1
72
0.0
Source: MOFSL, Company
Exhibit 83: Comfortable cash position to aid operations
Net Debt (INR b)
0.0
54
0.0
-97
-391
-0.1
-530
-0.2
-772 -1,094 -1,741 -1,879
-0.2
-0.2
Net Debt/Equity (x)
-0.7%
0.5% 1.2% 1.0%
0.4
0.1
-0.2
0.2
0.5
0.2
-0.3
-0.3
Source: MOFSL, Company
Exhibit 84: V-Mart: One-year forward P/E band
P/E (x)
Avg (x)
85
Min (x)
+1SD
71.9
65
45
25
5
43.8
29.1
14.3
8.6
Source: MOFSL, Company
Exhibit 85: V-Mart: One-year forward EV/EBITDA band
Max (x)
-1SD
EV/EBITDA (x)
50
40
30
20
Max (x)
Avg (x)
42.8
27.3
Min (x)
24.1
10
0
17.2
7.1
4.4
24.4
Source: MOFSL, Company
Source: MOFSL, Company
23 April 2020
37
 Motilal Oswal Financial Services
Retail
Financials and Valuations
Standalone - Income Statement
Y/E March
Total Income from Operations
Change (%)
Raw Materials
Employees Cost
Rent and lease expenses
Advertising & Sales Promotion
Other Expenses
Total Expenditure
% of Sales
EBITDA
Margin (%)
Depreciation
EBIT
Int. and Finance Charges
Other Income
PBT bef. EO Exp.
EO Items
PBT after EO Exp.
Total Tax
Tax Rate (%)
Minority Interest
Reported PAT
Adjusted PAT
Change (%)
Margin (%)
FY15
7,202
25.3
5,143
489
328
148
457
6,566
91.2
636
8.8
46
590
42
22
571
-17
553
180
32.5
0
374
385
53.2
5.4
FY16
8,093
12.4
5,712
623
400
191
547
7,472
92.3
620
7.7
190
430
31
12
411
12
423
147
34.7
0
276
268
-30.4
3.3
FY17
10,017
23.8
7,028
783
452
0
908
9,170
91.5
848
8.5
186
662
35
41
668
0
668
229
34.3
0
439
439
63.7
4.4
FY18
12,224
22.0
8,303
984
526
0
1,083
10,896
89.1
1,328
10.9
229
1,099
15
41
1,125
0
1,125
348
30.9
0
777
777
76.9
6.4
FY19
14,337
17.3
9,703
1,257
658
394
996
13,008
90.7
1,329
9.3
276
1,053
16
59
1,096
-98
998
382
38.3
0
616
715
-8.0
5.0
FY20E
16,421
14.5
11,101
1,585
908
427
1,084
15,104
92.0
1,317
8.0
330
987
37
65
1,015
0
1,015
218
21.5
0
796
796
11.4
4.8
FY21E
16,576
0.9
11,205
1,674
995
381
1,160
15,415
93.0
1,160
7.0
381
779
37
90
832
0
832
225
27.0
0
607
607
-23.8
3.7
(INR M)
FY22E
22,853
37.9
15,449
2,194
1,371
503
1,440
20,956
91.7
1,897
8.3
447
1,450
37
90
1,502
0
1,502
406
27.0
0
1,097
1,097
80.7
4.8
Standalone - Balance Sheet
Y/E March
Equity Share Capital
Total Reserves
Net Worth
Minority Interest
Total Loans
Deferred Tax Liabilities
Capital Employed
Net Fixed Assets
Capital WIP
Total Investments
Curr. Assets, Loans&Adv.
Inventory
Account Receivables
Cash and Bank Balance
Loans and Advances
Curr. Liability & Prov.
Account Payables
Other Current Liabilities
Provisions
Net Current Assets
Appl. of Funds
FY15
180
1,869
2,049
0
306
-6
2,349
981
7
218
2,077
1,832
0
34
212
935
752
115
68
1,143
2,349
FY16
181
2,127
2,307
0
270
-42
2,535
1,103
23
324
2,340
2,044
0
43
253
1,255
956
217
82
1,085
2,535
FY17
181
2,520
2,700
0
357
-79
2,979
1,173
12
718
2,925
2,692
0
29
204
1,850
1,599
220
31
1,075
2,979
FY18
181
3,293
3,474
0
6
-92
3,388
1,447
35
340
3,584
3,071
0
196
317
2,019
1,668
309
42
1,565
3,388
FY19
181
3,911
4,093
0
0
-118
3,975
1,655
40
607
3,898
3,290
0
166
443
2,225
1,483
645
97
1,673
3,975
FY20E
181
4,708
4,889
0
0
-118
4,771
1,911
40
607
4,773
3,779
0
487
507
2,560
1,710
739
111
2,213
4,771
FY21E
181
5,315
5,496
0
0
-118
5,378
1,855
40
607
5,460
3,815
0
1,134
512
2,584
1,726
746
112
2,876
5,378
(INR M)
FY22E
181
6,411
6,593
0
0
-118
6,475
2,154
40
607
7,237
5,259
0
1,272
705
3,563
2,379
1,029
155
3,674
6,475
23 April 2020
38
 Motilal Oswal Financial Services
Retail
Financials and Valuations
Ratios
Y/E March
Basic (INR)
EPS
Cash EPS
BV/Share
DPS
Payout (%)
Valuation (x)
P/E
Cash P/E
P/BV
EV/Sales
EV/EBITDA
Dividend Yield (%)
FCF per share
Return Ratios (%)
RoE
RoCE
RoIC
Working Capital Ratios
Fixed Asset Turnover (x)
Asset Turnover (x)
Inventory (Days)
Debtor (Days)
Creditor (Days)
Leverage Ratio (x)
Current Ratio
Interest Cover Ratio
Net Debt/Equity
FY15
21.3
23.8
113.2
1.5
8.7
80.8
72.2
15.2
4.4
49.4
0.1
3.5
20.6
18.4
20.8
7.3
3.1
93
0
38
2.2
14.2
0.0
FY15
553
46
0
-167
-227
205
195
399
-335
64
145
7
-183
9
-150
-40
-18
0
-199
17
16
34
FY16
14.8
25.3
127.5
1.3
9.9
116.1
67.9
13.5
3.9
50.5
0.1
11.1
12.3
11.7
13.3
7.3
3.2
92
0
43
1.9
13.8
0.0
FY16
423
190
0
-149
-207
257
204
461
-260
201
-101
12
-349
8
-20
-35
-48
0
-96
16
26
43
FY17
24.3
34.5
149.2
0.0
0.0
70.9
49.8
11.5
3.1
37.1
0.0
30.0
17.5
16.4
19.9
8.5
3.4
98
0
58
1.6
18.8
-0.1
FY17
668
179
35
-243
69
709
-22
687
-145
542
-337
-245
-727
0
87
-37
-2
0
49
9
20
29
FY18
42.9
55.6
192.0
0.0
0.0
40.1
30.9
9.0
2.5
23.3
0.0
9.2
25.2
24.1
30.1
8.4
3.6
92
0
50
1.8
71.9
-0.2
FY18
1,125
222
15
-381
-346
635
8
643
-478
166
395
-10
-92
9
-351
-15
-27
0
-384
167
29
196
FY19
39.5
54.8
226.1
1.7
6.0
43.6
31.4
7.6
2.2
23.3
0.1
19.7
18.9
18.1
21.8
8.7
3.6
84
0
38
1.8
65.3
-0.2
FY19
993
268
16
-332
-270
674
89
763
-407
357
-339
55
-691
19
-3
-16
-44
0
-44
28
137
166
FY20E
44.0
62.3
270.1
0.0
0.0
39.1
27.6
6.4
1.9
23.3
0.0
16.2
17.7
18.4
22.8
8.6
3.4
84
0
38
1.9
26.4
-0.2
FY20E
1,015
330
37
-218
-219
945
-65
880
-587
294
0
108
-479
0
0
-37
0
0
-37
364
123
487
FY21E
33.5
54.6
303.7
0.0
0.0
51.3
31.5
5.7
1.8
25.8
0.0
32.8
11.7
12.2
15.7
8.9
3.1
84
0
38
2.1
20.8
-0.3
FY21E
832
381
37
-225
-16
1,009
-90
919
-325
594
0
133
-192
0
0
-37
0
0
-37
690
444
1,134
FY22E
60.6
85.3
364.3
0.0
0.0
28.4
20.2
4.7
1.3
15.7
0.0
4.7
18.1
18.6
26.0
10.6
3.5
84
0
38
2.0
38.8
-0.3
Standalone - Cash Flow Statement
Y/E March
OP/(Loss) before Tax
Depreciation
Interest & Finance Charges
Direct Taxes Paid
(Inc)/Dec in WC
CF from Operations
Others
CF from Operating incl EO
(Inc)/Dec in FA
Free Cash Flow
(Pur)/Sale of Investments
Others
CF from Investments
Issue of Shares
Inc/(Dec) in Debt
Interest Paid
Dividend Paid
Others
CF from Fin. Activity
Inc/Dec of Cash
Opening Balance
Closing Balance
(INRm)
FY22E
1,502
447
37
-406
-660
921
-90
831
-746
85
0
133
-613
0
0
-37
0
0
-37
181
1,091
1,272
23 April 2020
39
 Motilal Oswal Financial Services
Retail
NOTES
23 April 2020
40
 Motilal Oswal Financial Services
Retail
Explanation of Investment Rating
Investment Rating
Expected return (over 12-month)
BUY
>=15%
SELL
< - 10%
NEUTRAL
< - 10 % to 15%
UNDER REVIEW
Rating may undergo a change
NOT RATED
We have forward looking estimates for the stock but we refrain from assigning recommendation
*In case the recommendation given by the Research Analyst is inconsistent with the investment rating legend for a continuous period of 30 days, the Research Analyst shall within
following 30 days take appropriate measures to make the recommendation consistent with the investment rating legend.
Disclosures
The following Disclosures are being made in compliance with the SEBI Research Analyst Regulations 2014 (herein after referred to as the Regulations).
Motilal Oswal Financial Services Ltd. (MOFSL) is a SEBI Registered Research Analyst having registration no. INH000000412. MOFSL, the Research Entity (RE) as defined in the
Regulations, is engaged in the business of providing Stock broking services, Investment Advisory Services, Depository participant services & distribution of various financial
products. MOFSL is a subsidiary company of Passionate Investment Management Pvt. Ltd.. (PIMPL). MOFSL is a listed public company, the details in respect of which are
available on www.motilaloswal.com. MOFSL (erstwhile Motilal Oswal Securities Limited - MOSL) is registered with the Securities & Exchange Board of India (SEBI) and is a
registered Trading Member with National Stock Exchange of India Ltd. (NSE) and Bombay Stock Exchange Limited (BSE), Multi Commodity Exchange of India Limited (MCX) and
National Commodity & Derivatives Exchange Limited (NCDEX) for its stock broking activities & is Depository participant with Central Depository Services Limited (CDSL) National
Securities Depository Limited (NSDL),NERL, COMRIS and CCRL and is member of Association of Mutual Funds of India (AMFI) for distribution of financial products and Insurance
Regulatory & Development Authority of India (IRDA) as Corporate Agent for insurance products.
Details of associate entities of Motilal Oswal Financial Services Limited are
available on the website at
http://onlinereports.motilaloswal.com/Dormant/documents/List%20of%20Associate%20companies.pdf
MOFSL and its associate company(ies), their directors and Research Analyst and their relatives may; (a) from time to time, have a long or short position in, act as principal in, and
buy or sell the securities or derivatives thereof of companies mentioned herein. (b) be engaged in any other transaction involving such securities and earn brokerage or other
compensation or act as a market maker in the financial instruments of the company(ies) discussed herein or act as an advisor or lender/borrower to such company(ies) or may have
any other potential conflict of interests with respect to any recommendation and other related information and opinions.; however the same shall have no bearing whatsoever on the
specific recommendations made by the analyst(s), as the recommendations made by the analyst(s) are completely independent of the views of the associates of MOFSL even
though there might exist an inherent conflict of interest in some of the stocks mentioned in the research report
MOFSL and / or its affiliates do and seek to do business including investment banking with companies covered in its research reports. As a result, the recipients of this report
should be aware that MOFSL may have a potential conflict of interest that may affect the objectivity of this report. Compensation of Research Analysts is not based on any specific
merchant banking, investment banking or brokerage service transactions. Details of pending Enquiry Proceedings of Motilal Oswal Financial Services Limited are available on the
website at
https://galaxy.motilaloswal.com/ResearchAnalyst/PublishViewLitigation.aspx
A graph of daily closing prices of securities is available at
www.nseindia.com, www.bseindia.com.
Research Analyst views on Subject Company may vary based on Fundamental
research and Technical Research. Proprietary trading desk of MOFSL or its associates maintains arm’s length distance with Research Team as all the activities are segregated
from MOFSL research activity and therefore it can have an independent view with regards to Subject Company for which Research Team have expressed their views.
Regional Disclosures (outside India)
This report is not directed or intended for distribution to or use by any person or entity resident in a state, country or any jurisdiction, where such distribution, publication, availability
or use would be contrary to law, regulation or which would subject MOFSL & its group companies to registration or licensing requirements within such jurisdictions.
For Hong Kong:
This report is distributed in Hong Kong by Motilal Oswal capital Markets (Hong Kong) Private Limited, a licensed corporation (CE AYY-301) licensed and regulated by the Hong
Kong Securities and Futures Commission (SFC) pursuant to the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong) “SFO”. As per SEBI (Research Analyst
Regulations) 2014 Motilal Oswal Securities (SEBI Reg No. INH000000412) has an agreement with Motilal Oswal capital Markets (Hong Kong) Private Limited for distribution of
research report in Hong Kong. This report is intended for distribution only to “Professional Investors” as defined in Part I of Schedule 1 to SFO. Any investment or investment activity
to which this document relates is only available to professional investor and will be engaged only with professional investors.” Nothing here is an offer or solicitation of these
securities, products and services in any jurisdiction where their offer or sale is not qualified or exempt from registration. The Indian Analyst(s) who compile this report is/are not
located in Hong Kong & are not conducting Research Analysis in Hong Kong.
For U.S.
Motilal Oswal Financial Services Limited (MOFSL) is not a registered broker - dealer under the U.S. Securities Exchange Act of 1934, as amended (the"1934 act") and under
applicable state laws in the United States. In addition MOFSL is not a registered investment adviser under the U.S. Investment Advisers Act of 1940, as amended (the "Advisers
Act" and together with the 1934 Act, the "Acts), and under applicable state laws in the United States. Accordingly, in the absence of specific exemption under the Acts, any
brokerage and investment services provided by MOFSL , including the products and services described herein are not available to or intended for U.S. persons. This report is
intended for distribution only to "Major Institutional Investors" as defined by Rule 15a-6(b)(4) of the Exchange Act and interpretations thereof by SEC (henceforth referred to as
"major institutional investors"). This document must not be acted on or relied on by persons who are not major institutional investors. Any investment or investment activity to which
this document relates is only available to major institutional investors and will be engaged in only with major institutional investors. In reliance on the exemption from registration
provided by Rule 15a-6 of the U.S. Securities Exchange Act of 1934, as amended (the "Exchange Act") and interpretations thereof by the U.S. Securities and Exchange
Commission ("SEC") in order to conduct business with Institutional Investors based in the U.S., MOFSL has entered into a chaperoning agreement with a U.S. registered broker-
dealer, Motilal Oswal Securities International Private Limited. ("MOSIPL"). Any business interaction pursuant to this report will have to be executed within the provisions of this
chaperoning agreement.
The Research Analysts contributing to the report may not be registered /qualified as research analyst with FINRA. Such research analyst may not be associated persons of the U.S.
registered broker-dealer, MOSIPL, and therefore, may not be subject to NASD rule 2711 and NYSE Rule 472 restrictions on communication with a subject company, public
appearances and trading securities held by a research analyst account.
For Singapore
In Singapore, this report is being distributed by Motilal Oswal Capital Markets Singapore Pte Ltd (“MOCMSPL”) (Co.Reg. NO. 201129401Z) which is a holder of a capital markets
services license and an exempt financial adviser in Singapore.As per the approved agreement under Paragraph 9 of Third Schedule of Securities and Futures Act (CAP 289) and
Paragraph 11 of First Schedule of Financial Advisors Act (CAP 110) provided to MOCMSPL by Monetary Authority of Singapore. Persons in Singapore should contact MOCMSPL
in respect of any matter arising from, or in connection with this report/publication/communication. This report is distributed solely to persons who qualify as “Institutional Investors”,
of which some of whom may consist of "accredited" institutional investors as defined in section 4A(1) of the Securities and Futures Act, Chapter 289 of Singapore (“the
SFA”). Accordingly, if a Singapore person is not or ceases to be such an institutional investor, such Singapore Person must immediately discontinue any use of this Report and
inform MOCMSPL.
Specific Disclosures
1 MOFSL, Research Analyst and/or his relatives does not have financial interest in the subject company, as they do not have equity holdings in the subject company.
2 MOFSL, Research Analyst and/or his relatives do not have actual/beneficial ownership of 1% or more securities in the subject company
3 MOFSL, Research Analyst and/or his relatives have not received compensation/other benefits from the subject company in the past 12 months
4 MOFSL, Research Analyst and/or his relatives do not have material conflict of interest in the subject company at the time of publication of research report
5 Research Analyst has not served as director/officer/employee in the subject company
6 MOFSL has not acted as a manager or co-manager of public offering of securities of the subject company in past 12 months
7 MOFSL has not received compensation for investment banking/ merchant banking/brokerage services from the subject company in the past 12 months
8 MOFSL has not received compensation for other than investment banking/merchant banking/brokerage services from the subject company in the past 12 months
9 MOFSL has not received any compensation or other benefits from third party in connection with the research report
10 MOFSL has not engaged in market making activity for the subject company
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41
 Motilal Oswal Financial Services
Retail
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.
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