“AVOID” to

Metropolis Healthcare Ltd.

Fully priced issue, anticipating pricing pressure in near term

Salient features of the IPO: • The diagnostics company, Metropolis Healthcare Ltd. (MHL) is

planning to raise around Rs. 12bn through an IPO by offering 13.69mn shares between the price range Rs. 877 - 880 per share.

• The IPO consists of only OFS, thus the company will not receive any proceeds from it.

Key competitive strengths: • One of the leading diagnostics company in India • Widespread operational network, young patient touch point network

and asset light growth of service network • Comprehensive test menu with wide range of clinical laboratory tests

and profiles • Strong and established brand with a focus on quality and customer

service • Robust information technology infrastructure with focus on

improving efficiency • Established track record of successful acquisition and integration in

India and overseas Risk and concerns: • Decline in quality and efficiency of clinical laboratory tests • Adverse government regulations and policies • Unfavorable revenue mix • Inability to maintain margins • Competition Peer comparison and valuation: At the higher price band of Rs. 880 per share, MHL’s share is valued at a P/E multiple of 43.2x (to its restated FY18 EPS of Rs. 20.4), which is at a premium to its peer average of 40.7x. Below are few key observations of the issue: (continued in next page) • According to Frost & Sullivan, the Indian diagnostics market was

valued at approximately Rs. 596bn in FY18, and is projected to grow to approximately Rs. 802bn by FY20 (a 16% CAGR over the period), driven by favorable changes in demographics, improvements in health awareness, increased spend on preventive care & wellness, increase in medical tourists, increase in lifestyle-related ailments and rising penetration of insurance in India.

• MHL is one of the leading diagnostic company in India. In terms of revenue in FY18, it is ranked third and in terms of EBITDA margin it is ranked second among the pan-India diagnostic chains. It has a widespread presence across 19 states in India, with leadership position in West and South India.

• The company conducts its operations through a ‘hub and spoke’ model for quick and efficient delivery of services through its widespread laboratory and service network, which covers 197 cities in India. As of 31st Dec. 2018, MHL’s laboratory network consisted of 115 clinical laboratories, comprising a global reference laboratory located in Mumbai, which is the main ‘hub’, 14 regional reference laboratories, 56 satellite laboratories and 44 express laboratories.

• Its service network caters to individual patients as well as institutional customers. As of 31st Dec. 2018, the company serviced individual patients through 1,631 patient touch points, including 256 patient service centers owned by it and 1,375 third party patient service centers. The company serviced its institutional customers through approximately 9,552 institutional touch points, including approximately 9,000 pick-up points and 552 assisted referral centers, which are exclusive third party referral centers.

30th Mar. 2019

1

Recommendation AVOID

Price Band (Rs.) Rs. 877 - 880 per Share

Face Value (Rs.) Rs. 2

Shares for Fresh Issue (mn)

Nil

Shares for OFS (mn) 13.69mn Shares

Fresh Issue Size (Rs. mn) N/a

OFS Issue Size (Rs. mn) Rs. 12,001.8 - 12,042.9mn

Total Issue Size (Rs. mn) 13.69mn Shares (Rs. 12,001.8 - 12,042.9mn)

Bidding Date 03rd Apr. - 05th Apr. 2019

Reservation for MHL’s Employees

0.3mn Shares

Net Offer for Sales (mn Shares)

13.39mn Shares (Rs. 11,738.7 - 11,778.9mn)

MCAP at Higher Price Band

Rs. 44,157mn

Enterprise Value at Higher Price Band

Rs. 42,881mn

Book Running Lead Manager

JM Financial Ltd., Credit Suisse Securities (India) Pvt. Ltd., Goldman Sachs (India) Securities Pvt. Ltd., HDFC Bank Ltd. and Kotak Mahindra Capital Company Ltd.

Registrar Link Intime India Pvt. Ltd.

Sector/Industry Healthcare Services

Promoters Dr. Sushil Kanubhai Shah, Ameera Sushil Shah and METZ Advisory LLP

Pre and post - issue shareholding pattern

Pre – Issue Post - Issue

Promoter and Promoter Group

67.80% 55.30%

Public 32.20% 44.70%

Total 100.00% 100.00%

Retail application money at higher cut-off price per lot

Number of Shares per Lot 17

Application Money Rs. 14,960 per Lot

Analyst

Rajnath Yadav

Research Analyst (022 - 6707 9999; Ext: 912)

Email: rajnath.yadav@choiceindia.com

• MHL reported a 4.1x growth in the individual patients network during FY16-18. Moreover, 75% of the existing individual service centers were added during FY16-18. Thus, the company has young individual patients network with an average age of 1-1.5 years. Normally, a service center matures at around four years, thus with this young network, there is an immense growth opportunities for the company in short and medium term.

• To grow the service network, the company adopted an asset light business model, thereby enabling it to service individual patients with limited capex. Around 90% of the incremental individual patients touch points added in last two years were third party.

• Through its wide laboratory and service network, the company offered a broad range of approximately 3,487 clinical laboratory tests and 530 profiles, which is highest among the pan-India players. Over FY16-18, number of tests performed by MHL increased by 9.3% CAGR to 16mn in FY18.

• Over FY16-18, the company reported 6.5% CAGR rise in revenue per test to Rs. 402 in FY18. This was achieved through higher proportion of specialized and semi-specialized tests. According to the management, 40% of the revenue was from specialized tests, which shows the level of trust and credibility among the medical practitioners. Average revenue per patient increased by 10.1% CAGR over the same period to Rs. 836 in FY18. Thus, a decent per test cost with quality almost matches with the affordability of the customers, which can be demonstrated by 5.6% CAGR rise in the patient visits.

© CHOICE INSTITUTIONAL RESEARCH

Peer comparison and valuation (Contd…):

• MHL has presence in major cities, which are the highest GDP cities in India. The company has leadership position in most of the cities located in West and South India. It derived 62.8% of the revenue from cities like Mumbai, Bengaluru, Chennai, Surat, Pune, which are considered as ‘Focus Cities’ by MHL. The company further intends to strengthen its dominant position in these markets by expanding presence and operations in these cities. Currently, it has a market share of 10-15% in these cities. There are other eight ‘Seeding Cities’ for the company, which is characterized by high growth potential in medium to long term and potential to become a Focus Cities in future for the company. Currently, MHL derives 19.1% of the revenue from these Seeding Cities.

• According to the management, 43% of the revenue is derived from B2B channel, while the rest is from B2C channel. Higher share of direct customers bodes well for the company in maintaining and expanding its profitability.

• Indian diagnostics industry is largely unorganized, with organized market share of 10-15%. Over FY15-18, the industry has grew by 15%, while, the company has reported an industry in-line growth of 16% CAGR over the same period. A consolidation in the industry would benefit organized players like MHL, which has large number of diagnostic tests, wide presence across the operating region, relatively higher business from specialized tests and higher focus on maintain quality & accuracy in various tests & services.

• The financial performance was stable in short reporting period of FY16-18. During the period, with the increase in number of clinical laboratories, number of patients and test conducted, MHL reported a 16.3% CAGR rise in consolidated operating revenue to Rs. 6,435.7mn in FY18. Total operating expenditure increased in-line to top-line, thereby leading to a 16.8% CAGR rise in consolidated EBITDA over FY16-18 to Rs. 1,725.4mn in FY18. Average EBITDA margin stood at 27.1% during the period. Reported PAT increased by 15.4% CAGR to Rs. 1,022.7mn in FY18. Average PAT margin during the period stood at 16.9%. Cash flow from operations was positive over FY16-18 and increased by 6.6% CAGR. Average annual operating cash flow during the period stood at around Rs. 1bn. Average return on invested capital over FY16-18 stood at 25.5%. Average RoE was at around 26.5%, while average RoCE was around 36% during the period. Overall, the performance of the company was in-line with the industry performance over FY16-18.

• 9M FY19 top-line stood at Rs. 5,593.1mn, with EBITDA and PAT margin of 25.6% and 15.3%, respectively. Reported profitability margin are lower than past three years average, demonstrating a prevailing pricing pressure environment. We are cautious of the company’s ability in maintaining the profitability margins above the historical levels.

• Going forward, we are estimating a 16.3% rise in revenue in FY19E to Rs. 7,487.4mn. EBITDA and PAT margin are expected at 25.8% and 14.9%, respectively, in FY19E as against a respective margins of 27.1% and 16.9% in FY18. Similarly, FY20E top-line is forecasted to be at Rs. 8,663.3mn (a growth of 15.7% over FY19E), while EBITDA and PAT margin is anticipated to be at 26% and 15%, respectively.

• Coming to the valuation, based on the higher price band, MHL is demanding a P/E valuation of 43.2x (to its FY18 EPS of Rs. 20.4), which is a premium to peer average of 40.7x. Based on FY19E and FY20E EPS, the company is demanding a P/E valuation of 39.6x and 33.9x, respectively, which again is at premium to FY19E and FY20E peer P/E valuation. Thus, considering the above observations we feel that the issue is fully priced, thereby providing a “AVOID” rating. With strong fundamentals and leadership position in the operating regions, long term investors can enter in this script at lower price if possible post listing.

Note: All financials and ratio based on FY18 data; Source: Choice Broking Research

Company Name Face

Value (Rs.)

CMP (Rs.)

MCAP (Rs. mn)

EV (Rs. mn)

Stock Return (%) Total Operating Revenue (Rs. mn)

EBITDA (Rs. mn)

PAT (Rs. mn)

EBITDA Margin

(%)

PAT Margin

(%) 1M 3M 6M 1Y

Metropolis Healthcare Ltd. 2 880 44,157 42,881 6,435.7 1,725.4 1,022.7 26.8% 15.9% Dr. Lal Pathlabs Ltd. 10 1,055 87,884 83,301 6.9% 18.1% 12.5% 22.8% 10,569.2 2,640.0 1,707.7 25.0% 16.2% Thyrocare Technologies Ltd. 10 531 27,992 26,978 0.2% -2.7% -18.9% -13.0% 3,563.2 1,449.9 934.4 40.7% 26.2% Average 32.8% 21.2%

Company Name EPS (Rs.)

BVPS (Rs.)

DPS (Rs.)

Debt Equity Ratio

Fixed Asset Turnover

Ratio

RoE (%)

RoCE (%)

P / E (x)

P / B (x)

EV / Sales (x)

EV / EBITDA

(x)

MCAP / Sales (x)

Earning Yield (x)

Metropolis Healthcare Ltd. 20.4 79.1 10.5 0.0 3.1 25.8% 37.7% 43.2 11.1 6.7 24.9 6.9 2.3% Dr. Lal Pathlabs Ltd. 20.5 95.4 1.5 0.0 4.8 21.5% 28.8% 51.5 11.1 7.9 31.6 8.3 1.9% Thyrocare Technologies Ltd. 17.7 84.0 5.1 0.0 1.2 21.1% 27.2% 30.0 6.3 7.6 18.6 7.9 3.3% Average 3.3 0.0 3.0 21.3% 28.0% 40.7 8.7 7.7 25.1 8.1 2.6%

Company Name Number of

Clinical Laboratories

Number of Test Offered

Number of Patient Service Centers

Number of Pick-up Points

Sales Mix (%)

Geographical Revenue Break-up (%)

3Y Revenue

CAGR (%)

3Y Average EBITDA Margin

(%)

3Y Average

PAT Margin

(%) B2B B2C North East West South Others

Metropolis Healthcare Ltd. 106 3,487 1,130 8,500 43% 57% 7% 3% 54% 28% 8% 12.3% 27.1% 16.2% Dr. Lal Pathlabs Ltd. 193 2,028 2,153 5,624 72% 13% 7% 7% 1% 17.0% 25.8% 16.6% Thyrocare Technologies Ltd. 246 3,779 30,000 77% 23% 24% 17% 31% 26% 2% 24.9% 39.2% 20.6% Average 20.9% 32.5% 18.6%

Offer Opens on 03-Apr-2019

Offer Closes on 05-Apr-2019

Finalization of Basis of Allotment 10-Apr-2019

Unblocking of ASBA Account 11-Apr-2019

Credit to Demat Accounts 12-Apr-2019

About the issue: • MHL is coming up with an initial public offering (IPO) with 13.69mn shares (fresh issue: nil; OFS shares: 13.69mn shares)

in offering. The offer represents around 27.27% of its post issue paid-up equity shares of the company. Total IPO size is Rs. 12,001.8 - 12,042.9mn.

• The issue will open on 03rd Apr. 2019 and close on 05th Apr. 2019.

• The issue is through book building process with a price band of Rs. 877 - 880 per share.

• 0.30mn shares are reserved for MHL’s employees, thus the net issue size is 13.39mn shares (Rs. 11,738.7 - 11,778.9mn).

• Since the issue is fully OFS, the company will not receive any proceeds from it.

• 75% of the net issue shall be allocated on a proportionate basis to qualified institutional buyers, while rest 15% and 10% is reserved for non-institutional bidders and retail investors, respectively.

• Promoter holds 67.80% stake in the company and post-IPO this will come down to 55.30%. Public holding will increase

from current 32.20% to 44.70%.

Pre and post issue shareholding pattern (%)

Pre Issue Post Issue (at higher price band)

Promoter & Promoter Group (%) 67.80% 55.30%

Public (%) 32.20% 44.70%

Source: Choice Equity Broking

Indicative IPO process time line:

Commencement of Trading 15-Apr-2019

Company introduction: As of 31st Mar. 2018, in term of revenue - MHL is one of the leading diagnostics companies in India. It has widespread presence across 19 states in India, with leadership position in west and south India. Through its widespread operational network, the company offers a comprehensive range of clinical laboratory tests and profiles, which are used for prediction, early detection, diagnostic screening, confirmation and/or monitoring of the disease. MHL also offers analytical and support services to clinical research organizations for their clinical research projects. During 9M FY19, the company conducted approximately 12.3mn tests from approximately 6.6mn patient visits as compared to approximately 16mn tests from approximately 7.7mn patient visits during FY18. According to Frost & Sullivan, the Indian diagnostics market was valued at approximately Rs. 596bn in FY18, and is projected to grow to approximately Rs. 802bn by FY20, driven by favorable changes in demographics, improvements in health awareness, increased spend on preventive care and wellness, increase in medical tourists, increase in lifestyle-related ailments and rising penetration of insurance in India. While the diagnostics industry is largely unorganized, increased brand awareness among patients and customers, increased penetration of specialized tests, and a diverse and large test menu at organized providers provides opportunity for faster consolidation in the diagnostics industry. As of 31st Dec. 2018, MHL offered a broad range of approximately 3,487 clinical laboratory tests and 530 profiles. The profile comprises of a variety of test combinations which are specific to a disease or disorder as well as wellness profiles that are used for health and fitness screening. The company classifies its tests into (i) ‘routine’ tests such as blood chemistry analyses, blood cell counts and urine examination; (ii) ‘semi-specialized’ tests such as thyroid function tests, viral and bacterial cultures, histology, cytology and infectious disease tests; and (iii) ‘specialized’ tests such as tests for coagulation studies, autoimmunity tests, cytogenetics and molecular diagnostics. MHL focuses on providing reliable test results as well as value-added services such as home collection of specimens and online access to test reports. The company also offer customized wellness packages to its institutional customers as per their requirement. Its patient centric approach is a critical differentiator, which results in several individuals and healthcare providers choosing us as their diagnostic healthcare service provider. MHP conducts operations through its laboratory and service network. The company has implemented a ‘hub and spoke’ model for quick and efficient delivery of services through its widespread laboratory and service network, which covers 197 cities in India, as of 31st Dec. 2018. Its laboratory network consists of 115 clinical laboratories, comprising (i) a global reference laboratory located in Mumbai, which is the main ‘hub’ and equipped to conduct majority of the tests offered by the company; (ii) 14 regional reference laboratories (out of which four are located outside India), which are equipped to conduct routine, semi-specialized and few specialized tests; (iii) 56 satellite laboratories (out of which one is located outside India), which are equipped to conduct routine and semi-specialized tests; and (iv) 44 express laboratories (out of which five are located outside India), which are equipped to conduct routine tests. The company’s service network caters to individual patients as well as institutional customers. It services individual patients through 1,631 patient touch points (out of which 26 are located outside India), as of 31st Dec. 2018, including 256 patient service centers owned by it and 1,375 third party patient service centers. MHL services its institutional customers through approximately 9,552 institutional touch points, including (i) approximately 9,000 pick-up points; and (ii) 552 assisted referral centers (out of which seven are located outside India), which are the company’s exclusive third party referral centers. MHL brand is recognized for delivering quality diagnostic and related healthcare tests and services. For instance, the company received “excellence in customer service and delivery” award from Biotrains in 2018, and also received special jury mention for “service excellence (diagnostic center)” by FICCI at the Healthcare Excellence Awards 2018. In addition, its health campaign was recognized as “best in health and fitness” in the Digital Campaign Awards 2018 by LH Insights.

Company introduction (Contd…): Key operating metrics:

Source: Company RHP

Geographical segmentation of revenue:

Source: Company RHP

Geographical operational network:

Competition: MHL’s business is highly competitive and it face competition from organized as well as unorganized providers. The company also competes with many regional reference laboratories and local private laboratories. Advancement in technology has allowed mid-level sized laboratories to insource semi-specialized tests, and has, therefore, increased competition. Further advancement in technology may lead to the development of more cost-effective tests that can be performed outside of a clinical laboratory such as point-of-care tests that can be performed by physicians in their offices and home testing that can be carried out without requiring the services of clinical laboratories.

Company introduction (Contd…): Financial performance: With the increase in number of clinical laboratories, number of patients and test conducted, MHL reported a 16.3% CAGR rise in consolidated operating revenue over FY16-18 to Rs. 6,435.7mn in FY18. Clinical laboratories count increased from 89 units in FY16 to 106 units in FY18. Patient count and tests conducted increased by 5.6% and 9.3% CAGR over the same period to stood at 7.7mn and 16mn, respectively. For the nine month ended Dec. 2018, i.e. 9M FY19, the company reported a top-line of Rs. 5,593.1mn. Patient visit and diagnostic tests stood at 6.6mn and 12.3mn, respectively, during 9M FY19. Cost of raw materials, which formed an average of 24.6% of the top-line increased by 8.2% CAGR during FY16-18. Higher outsourcing to third party laboratories, led to a 34.3% CAGR rise in laboratory testing charges. Employee benefit expenses, which formed an average of 23% of the top-line increased by 16.7% CAGR, while other expenses (which formed 24.6% of the top-line) increased by 23.4% CAGR. As a result, total operating expenditure increased in-line to top-line, thereby leading to a 16.8% CAGR rise in consolidated EBITDA over FY16-18 to Rs. 1,725.4mn in FY18. Average EBITDA margin stood at 27.1% during the period. 9M FY19, EBITDA stood at 1,432.2mn with a margin of 25.6%. With an expansion in operations and service network, depreciation & amortization charges increased by 6.9% CAGR over FY16-18, while finance charge increased by 23% CAGR. Other income declined by 27.4% CAGR. Consequently, the company reported a 15.4% CAGR rise in reported PAT over FY16-18 to Rs. 1,022.7mn in FY18. Average PAT margin during the period stood at 16.9%. 9M FY19, reported PAT stood at Rs. 856.6mn with a margin of 15.3%. Cash flow from operations was positive over FY16-18 and increased by 6.6% CAGR. Average annual operating cash flow during the period stood at around Rs. 1bn. Average return on invested capital over FY16-18 stood at 25.5%. Average RoE was at around 26.5%, while average RoCE was around 36% during the period.

Source: Choice Equity Broking

(Rs. mn) FY16 FY17 FY18 9M FY19 CAGR (%) Y-o-Y (%) Revenue from Operations 4,754.7 5,447.2 6,435.7 5,593.1 16.3% 18.1% EBITDA 1,264.9 1,519.5 1,725.4 1,432.2 16.8% 13.6%

Reported PAT 768.0 1,016.6 1,022.7 856.6 15.4% 0.6%

Restated Adjusted EPS 15.3 20.3 20.4 17.1 15.4% 0.6%

Cash Flow from Operating Activities 914.2 1,017.5 1,039.3 525.9 6.6% 2.1% NOPLAT 705.9 903.6 1,051.1 848.0 22.0% 16.3% FCF 921.2 317.8 -65.5%

RoIC (%) 25.0% 26.4% 25.2% 18.7% 14 bps (119) bps

Revenue Growth Rate (%) 14.6% 18.1% EBITDA Growth Rate (%) 20.1% 13.6% EBITDA Margin (%) 26.6% 27.9% 26.8% 25.6% 21 bps (108) bps Adjusted PAT Growth Rate (%) 32.4% 0.6% Adjusted PAT Margin (%) 16.2% 18.7% 15.9% 15.3% (26) bps (277) bps

Inventories Turnover Ratio (x) 30.5 36.7 36.4 20.3 9.2% -0.6% Trade Receivable Turnover Ratio (x) 6.8 7.2 7.1 4.0 2.5% -1.8% Accounts Payable Turnover Ratio (x) 14.5 15.9 18.1 12.7 11.6% 13.9% Fixed Asset Turnover Ratio (x) 3.2 2.6 3.1 2.6 -1.9% 19.2% Total Asset Turnover Ratio (x) 1.2 1.1 1.2 1.0 0.5% 14.8%

Current Ratio (x) 2.5 1.9 3.3 3.3 15.7% 76.7% Debt to Equity (x) 0.0 0.0 0.0 0.0 -34.1% -40.1% Net Debt to EBITDA (x) (1.0) (1.1) (0.9) (1.0) -3.9% -18.9%

RoE (%) 26.1% 29.5% 23.8% 18.2% (230) bps (571) bps RoA (%) 19.4% 19.7% 19.3% 14.7% (11) bps (45) bps RoCE (%) 36.0% 37.1% 34.9% 26.8% (111) bps (217) bps

© CHOICE INSTITUTIONAL RESEARCH

Competitive strengths: • One of the leading diagnostics companies in India which is well positioned

to leverage the expected growth in the Indian diagnostics industry • Widespread operational network, young patient touch point network and

asset light growth of service network • Comprehensive test menu with wide range of clinical laboratory tests and

profiles • Strong and established brand with a focus on quality and customer service • Robust information technology infrastructure with focus on improving

efficiency • Established track record of successful acquisition and integration in India

and overseas • Experienced senior management team and qualified operational personnel

Business strategy:

• Continue to focus on organic growth initiatives to expand the reach • Continued focus on providing quality tests and services • Focus on the expansion of service network • Focus on increasing business from individual patients • Pursue new avenues of growth • Focus on consolidation opportunities in a largely unorganized diagnostic

sector

Risk and concerns:

• Decline in quality and efficiency of clinical laboratory tests • Adverse government regulations and policies • Unfavorable revenue mix • Inability to maintain margins • Competition

© CHOICE INSTITUTIONAL RESEARCH

Financial statements:

Source: Company RHP

Consolidated profit and loss statement (Rs. mn)

FY16 FY17 FY18 9M FY19 CAGR over

FY16 - 18 (%) Annual Growth over

FY17 (%)

Revenue from Operations 4,754.7 5,447.2 6,435.7 5,593.1 16.3% 18.1% Cost of Material Consumed (1,245.9) (1,351.0) (1,459.0) (1,296.7) 8.2% 8.0% Laboratory Testing Charges (31.5) (24.7) (56.8) (38.5) 34.3% 129.8% Employee Benefits Expense (1,081.8) (1,277.0) (1,473.7) (1,337.2) 16.7% 15.4% Other Expenses (1,130.7) (1,275.1) (1,720.9) (1,488.5) 23.4% 35.0% EBITDA 1,264.9 1,519.5 1,725.4 1,432.2 16.8% 13.6% Depreciation and Amortization Expense (166.4) (172.3) (190.2) (146.1) 6.9% 10.4% EBIT 1,098.5 1,347.2 1,535.2 1,286.1 18.2% 14.0% Finance Costs (8.0) (3.9) (12.1) (4.6) 23.0% 212.1% Other Income 151.7 229.4 79.9 75.1 -27.4% -65.2% Share of Profit/(Loss) for Equity Accounted Investees (Net of Tax)

33.1 26.5 (10.4) -100.0% -100.0%

PBT 1,275.2 1,599.2 1,603.0 1,346.3 12.1% 0.2% Tax Expenses (455.7) (526.6) (505.5) (458.5) 5.3% -4.0% PAT Before Minority Interest 819.5 1,072.6 1,097.5 887.7 15.7% 2.3% Minority Interest (51.6) (56.0) (74.8) (31.1) 20.4% 33.6% Reported PAT 768.0 1,016.6 1,022.7 856.6 15.4% 0.6%

Consolidated balance sheet statement (Rs. mn)

FY16 FY17 FY18 9M FY19 CAGR over

FY16 - 18 (%) Annual Growth over

FY17 (%) Equity Share Capital 95.4 95.4 95.4 100.4 0.0% 0.0% Other Equity 2,691.8 3,136.3 4,052.2 4,580.0 22.7% 29.2% Minority Interest 151.6 209.8 143.6 22.8 -2.7% -31.5% Long Term Borrowings 4.6 3.6 2.0 0.8 -33.8% -44.8% Other Non Current Financial Liabilities 2.9 86.6 24.3 25.1 189.0% -71.9% Long Term Provisions 24.4 31.5 35.2 32.4 20.0% 11.6% Deferred Tax Liabilities (Net) 78.9 69.7 44.4 29.4 -24.9% -36.3% Short Term Borrowings 4.4 4.0 3.7 2.5 -8.4% -7.7% Trade Payables 328.1 359.1 353.4 441.3 3.8% -1.6% Other Current Financial Liabilities 229.2 883.5 347.1 389.0 23.1% -60.7% Other Current Liabilities 210.9 141.0 77.2 62.9 -39.5% -45.2% Short Term Provisions 36.7 36.8 43.7 64.4 9.2% 18.8% Current Tax Liability (Net) 100.3 94.3 81.1 87.8 -10.1% -14.0% Total Liabilities 3,959.2 5,151.6 5,303.4 5,838.8 15.7% 2.9%

Property, Plant and Equipment 1,056.0 1,051.6 1,123.0 1,141.1 3.1% 6.8% Other Intangible Assets 9.6 147.4 167.7 180.3 318.7% 13.8% Capital Work in Progress 5.6 9.5 -100.0% -100.0% Intangible Assets Under Development 34.4 Equity Accounted Investees 53.9 60.3 0.1 9.1 -96.4% -99.9% Goodwill 351.0 824.6 783.7 785.7 49.4% -5.0% Long Term Investments 17.6 17.6 17.6 17.5 0.0% 0.0% Long Term Loans and Advances 83.0 37.2 33.2 31.7 -36.8% -10.8% Other Non Current Financial Assets 0.4 22.4 83.3 92.1 1308.6% 272.7% Deferred Tax Assets (Net) 52.5 34.3 53.0 35.7 0.5% 54.4% Other Non Current Assets 58.4 85.8 19.6 25.3 -42.1% -77.1% Non Current Tax Assets (Net) 18.1 9.8 16.7 59.2 -3.9% 70.0% Current Investments 942.4 1,340.5 1,004.2 762.3 3.2% -25.1% Inventories 155.7 141.3 211.9 274.9 16.6% 49.9% Trade Receivables 702.0 802.9 1,006.8 1,385.9 19.8% 25.4% Cash and Bank Balances 336.0 405.1 601.4 730.2 33.8% 48.4% Short Term Loans and Advances 72.5 96.1 108.2 132.4 22.1% 12.6% Other Current Financial Assets 5.5 5.5 13.5 57.2 56.9% 147.6% Current Tax Asset (Net) 2.6 1.0 2.5 4.8 -2.5% 156.1% Other Current Assets 36.4 58.9 57.1 79.0 25.2% -3.1% Total Assets 3,959.2 5,151.6 5,303.4 5,838.8 15.7% 2.9%

© CHOICE INSTITUTIONAL RESEARCH

Financial statements:

Note: Ratios calculated on pre-issue data; Source: Company RHP

Consolidated cash flow statement (Rs. mn)

Particulars (Rs. mn) FY16 FY17 FY18 9M FY19 CAGR over

FY16 - 18 (%) Annual Growth over

FY17 (%)

Cash Flow Before Working Capital Changes 1,321.1 1,569.2 1,846.5 1,474.7 18.2% 17.7% Change in Working Capital 4.2 39.0 231.4 452.4 645.0% 493.4% Cash Flow from Operating Activities 914.2 1,017.5 1,039.3 525.9 6.6% 2.1% Purchase of Property , Plant & Equipment (164.3) (165.6) (156.6) (148.9) -2.3% -5.4% Cash Flow from Investing Activities 963.6 (857.9) 18.8 40.9 -86.0% -102.2%

Cash Flow from Financing Activities (1,737.6) (173.0) (873.0) (475.0) -29.1% 404.6%

Net Cash Flow 140.1 (13.3) 185.1 91.8 14.9% -1489.6%

Opening Balance of Cash and Bank Balances 128.9 268.3 255.1 434.7 40.7% -4.9%

Closing Balance of Cash and Bank Balances 268.3 255.1 434.7 533.8 27.3% 70.4%

Consolidated financial ratios

Particulars (Rs. mn) FY16 FY17 FY18 9M FY19

Revenue Growth Rate (%) 14.6% 18.1%

EBITDA Growth Rate (%) 20.1% 13.6%

EBITDA Margin (%) 26.6% 27.9% 26.8% 25.6%

EBIT Growth Rate (%) 22.6% 14.0%

EBIT Margin (%) 23.1% 24.7% 23.9% 23.0%

Adjusted PAT Growth Rate (%) 32.4% 0.6%

Adjusted PAT Margin (%) 16.2% 18.7% 15.9% 15.3%

Liquidity ratios

Current Ratio 2.5 1.9 3.3 3.3

Debt Equity Ratio 0.0 0.0 0.0 0.0

Net Debt to EBITDA (1.0) (1.1) (0.9) (1.0)

Turnover ratios

Inventories Days 12.0 10.0 10.0 17.9

Debtor Days 53.9 50.4 51.3 90.4

Payable Days (25.2) (23.0) (20.2) (28.8)

Cash Conversion Cycle 40.7 37.3 41.1 79.6

Fixed Asset Turnover Ratio (x) 3.2 2.6 3.1 2.6

Total Asset Turnover Ratio (x) 1.2 1.1 1.2 1.0

Return ratios

RoE (%) 26.1% 29.5% 23.8% 18.2%

RoA (%) 19.4% 19.7% 19.3% 14.7%

RoCE (%) 36.0% 37.1% 34.9% 26.8%

Per share data

Restated Reported EPS (Rs.) 15.3 20.3 20.4 17.1

Restated DPS (Rs.) 16.5 0.1 10.5 0.0

Restated BVPS (Rs.) 58.6 68.6 85.5 93.7

Restated Operating Cash Flow Per Share (Rs.) 18.2 20.3 20.7 10.5

Restated Free Cash Flow Per Share (Rs.) 18.4 6.3

Dividend Payout Ratio 107.9% 0.3% 51.6% 0.0%

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