Star Ferro & Cement Ltd. - SKP Moneywise...Star Ferro and Cement Ltd. SKP Securities Ltd Page 3of 22...

February 24, 2016

Star Ferro & Cement Ltd.

Cement Star of North East

CMP INR 105 Target INR 151 Initiating Coverage – BUY

SKP Securities Ltd www.skpmoneywise.com of 22

Ke y Sha re Da ta

Face Value (INR) 1.0

Equity Capital (INR Mn) 222.2

Market Cap (INR Mn) 23,328.2

52 Week High/Low (INR) 189/96

6 months Avg. Daily Volume (BSE) 16,254

BSE Code 536666

NSE Code SFCL

Bloomberg Code SFCL IN

Shareholding Pattern (as on 31st Dec 2015)

Promoter,66.43%

Institution 0.12%

Others, 33.45%

Source: Company

P a rtic ula rs FY 14 FY 15 FY 16E FY 17E

Net Sales 11,733.7 14,304.3 16,817.2 20,369.8

Growth (%) 77.9% 21.9% 17.6% 21.1%

EBITDA 2,549.5 4,350.7 4,136.3 5,152.8

PAT 61.5 834.1 1,006.6 1,630.7

Growth (%) - 75.3% 1256.2% 20.6% 62.0%

EPS (INR) 0.3 3.8 4.5 7.3

BVPS (INR) 42.3 45.1 50.0 58.5

Ke y Financ ia ls ( INR Million)

Pa rtic ula rs FY14 FY15 FY16E FY17 E

P/E (x) 380.9 28.0 23.2 14.3

P/BVPS (x) 2.5 2.3 2.1 1.8

Mcap/Sales (x) 2.0 1.6 1.4 1.2

EV/EBITDA (x) 12.5 6.9 7.0 5.5

ROCE (%) 4.4% 9.6% 10.2% 13.1%

ROE (%) 0.5% 7.0% 8.4% 12.6%

EBITDA Mar (%) 21.7% 30.4% 24.6% 25.3%

PAT Mar (%) 0.5% 5.8% 6.0% 8.0%

Debt - Equity (x) 0.9 0.7 0.5 0.4

Ke y Fina nc ia ls Ra tios

Source: Company, SKP Research

1 Yr price performance SFCL vis-à-vis BSE Mid Cap

-10%

40%

90%

140%

190%

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12-M

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12-A

pr

12-M

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12-J

un

12-J

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12-A

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12-S

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12-O

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12-N

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12-D

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12-J

an

12-F

eb

SFCL BSE Mid Cap

Company Background

Star Ferro & Cement Ltd (SFCL), promoted by first generation entrepreneurs Mr. Sajjan Bhajanka and Mr. Sanjay Agarwal is the largest cement player in the North East Region (NER) with 23% market share selling under ‘Star Cement’ brand. It has fully integrated cement plants with an installed cement capacity of 3.7 MTPA (own capacity 2.9 MTPA & leased capacity 0.84 MTPA); 2.6 MTPA of clinker capacity, 51 MW of power plant located in Meghalaya and Assam and adding 1.0 MTPA grinding unit in West Bengal. Investment Rationale Leadership in NER with strong brand pull, robust distribution network and close proximity to raw materials SFCL has emerged as NER’s largest cement manufacturer with ~23% market

share, having its own captive limestone mines (reserves of ~300 million tonnes), captive power plant (51 MW) and close availability of coal resulting in operational efficiencies and low logistic costs. Regional players enjoy strong entry barriers on account of political instability, geographical complexity and regulatory hurdles making it a supply deficit market with no additions to the existing capacities is in the pipeline.

SFCL has invested heavily in dealer’s network expansion and currently has presence in 11 states with a network of 2,300+ dealers and 8,700+ retailers. It distributes directly via dealers (77% sales contributed by trade segment), which has resulted in strong brand equity, deeper penetration, greater reach and higher market share. About 3-4% of revenue is spent on advertising.

En-route to eastern market- Positive step for future growth

NER contributes ~70% of SFCL cement output whereas eastern region market accounts for the rest ~30%. SFCL is leveraging its strong brand and distribution network to penetrate into markets of West Bengal, Bihar & Jharkhand which has a total cement market of about 53 MTPA (volumes from the eastern market have grown from 3% of the total volumes in FY13 to ~30% in FY15). Over the next two years, we expect a sharp uptick in volumes from eastern market backed by capacity addition of 1 MTPA grinding unit at Siliguri and aggressive advertisement.

SFCL would get a freight subsidy of ~90% by expanding towards the Eastern Region, as opposed to ~50% freight subsidy within NER under NEIPP 2007.

Margins to scale up with better operating efficiencies & capacity utilization EBITDA margins have improved significantly from ~17.9% in FY13 to ~23.3%

in 9MFY16 on account of better operating efficiencies, higher capacity utilization, fiscal incentives (Rs 600-650/tonne) and uninterrupted supply of raw materials enabling, SFCL to enjoy higher EBIDTA/tonne of Rs 1,800+ (higher by Rs 40-50/bag compared to other regional players) which is ~2x-3x the industry average.

SFCL is set to increase its cement capacity utilization to ~74% by FY17E from ~65.4% in FY15, on its effective capacity of ~4.7 MTPA. SFCL is likely to maintain its margin supremacy over its peers, backed by improvement in cement realizations, moderation in operating cost & fiscal incentives benefit, and we expect SFCL's EBITDA margins to improve to ~25.3% by FY17E.

Valuation

With government’s thrust on infrastructure development, leadership in NER with entry barriers, strong brand pull and pricing power coupled with robust distribution network, retail-centric business model, raw material security, en-route to eastern market, fiscal incentives benefit and enhancing return ratios, augurs well for SFCL.

We have valued the stock on the basis of EV/EBIDTA ‐ of 6.5x of FY17E EBIDTA – method of relative valuation. In view of the sharp correction in the share price to Rs 105 now, after a stupendous rally to a life time high of Rs 185 recently, we recommend a BUY on the stock with a target price of Rs 151/- (44% upside) in 15 months.

Analysts: Nikhil Saboo

Tel No: +91-33-40077019; Mobile: +91-9330186643

e-mail: [email protected]

Anik Das

Tel No: +91-33-40077020; Mobile: +91-8017914822

e-mail: [email protected]

Star Ferro and Cement Ltd.


Industry Snapshot – Indian Cement Sector (North Eastern & Eastern Market) India is the second largest cement manufacturer in the world with a cumulative installed

capacity of nearly ~366 MTPA. Country’s cement consumption from current ~263 MTPA is

expected to grow at a CAGR of ~7.4% over FY14-17E vs a ~5.5% CAGR witnessed in

FY11-14 backed by expected pick-up in the demand of housing and infrastructure

segments, which accounts for ~60% and ~20% of total cement consumption. Per capita

consumption of cement in India stands at ~210 kg vis-à-vis global average of ~365 kg,

indicating a good potential for secular growth over medium to long term. The cement sector

is all set to enter a cyclical upturn backed by (1) imminent project led demand recovery (2)

subsiding of cost pressures and (3) improved demand-supply dynamics would further

accelerate the sector's cyclical recovery.

Presently, North East & Eastern market accounts for ~13% of installed capacity of cement

in India i.e. ~48 MTPA. Regional per capita cement consumption is lowest in the country,

highlighting good potential for growth coupled with pricing premium of over ~50 kg bag in

the Region and renewed focus of GoI to kick start infrastructure projects in North East,

augurs well for SFCL.

Exhibit: Per capita cement consumption region-wise / state-wise

Bihar

Jharkhand

Orissa

West Bengal

Chhattisgarh

NER

Pan India

Source: SKP Research; NER - North Eastern Region

260 - 210

9.5

14.2

6.9

7.5

4%

6%

3%

Expected Consumption

In FY16 (MTPA)

% of total cement

consumption

211

148

258

2% 142

Per capita cement

consumption (in kg)States

10.4

5.4

100

160

4%

2%

North East Region: Size and Growth Trends: In the last 5 years cement capacity in the North East Region

(NER) has nearly doubled and is currently estimated at ~11 MTPA and cement

consumption is expected to grow at a CAGR of ~10% over next five years vs. 7% CAGR

witnessed in last 5 years. Pick-up in demand and better utilization is on account of GoI’s

thrust on infrastructure development, no major additional capacities in the pipeline

(consolidation on cards as small players expected to be edged out eventually) and

sustained reduction of cement arrivals from mainland players, gives additional advantage to

existing players.

Exhibit: North East Region - (Total Capacity and Demand)


7 79

1011 11 11

5.4 5.8 6.0 6.3 6.6 7.5 8.2

77% 83%

67% 63% 60%68%

75%

0%

50%

100%

0

5

10

15

FY11 FY12 FY13 FY14 FY15 FY16E FY17E

NER Cement Capacity (MTPA) NER Cement Demand (MTPA)

Capacity Utilisation (%)



Major Players and Market Share: Currently, in NER, there are only three major cement

manufacturers: SFCL, Dalmia Bharat & Meghalaya cement. SFCL has been one of the

earliest players with ~0.4 MTPA capacity in Meghalaya. Over the years, it has increased its

capacity manifold to ~2.9 MTPA in cement and 2.6 MTPA in clinker. Dalmia Bharat acquired

Calcom and Adhunik cement and expanded Calcom’s clinker capacity to become regional

players with ~18% market share. Meghalaya cement is the third largest cement producer in

NER with ~15% market share.

Exhibit: Major Players - Installed Capacity

Player Capacity (MMT) *CPP Brand Name

Dalmia Bharat (Only NER Capacity) 3.6 25 MW Dalmia Cement

Star Cement 3.0 51 MW Star Cement

Meghalaya Cement 1.3 10 MW Topcem

Others 3.1 - Amrit,Max Cement

Total Capacity - North East 11.0 86 MW -

Exhibit: Market Share - North Eastern Market

Source: Company, SKP Research; *CPP - Captive pow er plant

Star Cement, 23%

Dalmia Bharat, 18%

Meghalaya Cement, 15%

Others, 25%

Supplies from West Bengal, 10%

Imports from Bangladesh, 9%

NER - High entry barrier & supply deficit region: In FY15, cement demand in the NER

was at ~6.6 MTPA and top 3 producers accounted for ~55-60% of total demand with

capacity utilization levels at ~60%. Notwithstanding the region’s superior limestone reserves

coupled with coal availability, only few mainland cement companies have been able to set

up local manufacturing units due to tangible entry barriers such as political instability, tough

terrain and difficulty in land acquisition and mining approvals. Thus NER remains a supply

deficit market due to lower regional capacity addition and gap is filled by imports from

Bangladesh and supply from West Bengal. Going forward, we believe the supply from

Bangladesh and West Bengal would reduce (import of cement from other states declined

from 30% in FY12 to 10% in FY15) as players like SFCL and Dalmia Bharat ramp up their

production.

Opportunities & Demand Drivers GoI’s thrust on infrastructure development in NER: Despite NER being extremely rich in

terms of natural resources, rail & road connectivity has been one of the concerns for the

government which has remained far behind as compared to other regions of India, leaving a

significant socio-economic development gap with rest of India on parameters like per capita

GDP and electricity consumption. To fill the gap, GoI has launched various infrastructure

development projects in NER.



Multitude of tax incentives for cement producers in the NER: To boost investments in

NER region, the government had introduced fiscal incentives under the North East Industrial

policy (NEIP) in 1997 for 10 years. In 2007, Sikkim was also included under the new policy

‘North East Industrial and Investment Promotion Policy’ (NEIIPP) to attract industrial

investments in the region. Key benefits under NEIIPP 2007 are as follows:

All new and existing units that go in for substantial expansion, unless otherwise

specified, and which commence commercial production within the 10 years from the

date of notification of NEIIPP, 2007 eligible for incentives for ten years from the date

of commencement of commercial production.

Incentives to all industrial units, new as well as existing units on their substantial

expansion, located anywhere in NER. Consequently, the distinction between ‘thrust’

and ‘non-thrust’ industries made in NEIP,1997 discontinued from April1, 2007.

100% Excise Duty exemption on finished products made in the NER continued, as

was available under NEIP, 1997.

Capital Investment Subsidy enhanced from 15% of investment in plant and machinery

to 30% and the limit for automatic approval of subsidy at this rate at Rs.1.5 crores per

unit, as against Rs.30 lakhs available under NEIP,1997.

Interest Subsidy available @ 3% on working capital loan under NEIIPP, 2007 as was

available under NEIP, 1997.

Source: DIPP

Exhibit: Central government’s infrastructure development thrust in north eastern region

Airports 50

Railways 450


~20 ongoing new line (Rs 330 bn for ~1,157 kms of rail network), gauge conversion (Rs

99 bn – ~1,439kms of rail network) & double line (Rs21 Bn – 1,400kms) projects in NER.

Sector

Roads

Largest Hydro power potential in India is in NER with ~98% still untapped, ~63,000 MW of

Hydro Power capacity identified; ~14,000 MW already allotted to Pvt. Every ~1,000 MW of

hydro‐power has the potential to generate cement demand of ~1‐1.2 MT. Hence this itself

will mean incremental cement demand of ~70‐75 MT in the longer term.

Hydro Power -

Five airports sanctioned and eight more are in pipelines. Rs 50 bn investment is expected

in next ~10 years.

Budgeted

expenditure

(Rs bn)

Govt Initiative

Special Accelerated Road Development for North East (SARDP-NE) and National Highway

Development Programmes (NHDP) in NER for 10,141 kms, will result in over ~18-22 MT

of cement demand in NER region over next few years. Furthermore, Minister of Road

Transport and Highways of India will spend additional Rs150 bn on road projects in

North‐East.

335



Eastern Region: Size and Growth Trends: Total capacity of eastern market in FY15 was estimated at ~53

MTPA, with a capacity utilization of 77%. The region is expected to post a CAGR of ~12%

over next ~2-3 years backed by capacity addition from the exiting players and significantly

higher infrastructure spending especially in West Bengal where assembly elections are due.

Further, the eastern region continues to be underpenetrated coupled with regional

contribution of 15% to the total housing shortage in urban India, thereby implying potential

for strong cement demand.

Major Players and Market Share: Currently in the Eastern region’s top six cement

manufacturers enjoys a market share of ~67% and top cement group (Lafarge Holcim)

enjoy a market share of ~38%. Recently, Heidelberg Cement has announced the acquisition

of Italcementi at a global level, which may result in consolidation of the group in India.

Exhibit: Eastern Market- (Total Capacity, Production & Capacity Utlilisation)


34 37 43 45 49 53 62 6629 31 33 36 37 41 46 51

8584

77

80

7677

73

78

65

70

75

80

85

90

0

10

20

30

40

50

60

70

FY10 FY11 FY12 FY13 FY14 FY15 FY16E FY17E

Total Capacity (MTPA) Total Production (MTPA)


Exhibit: Market Share & Installed Capacity - Eastern Market

Source: SKP Research

Lafarge, 15%

Dalmia Bharat,

13%

Ambuja, 12%ACC,

11%

Others, 33%

Market Share (%) - Eastern India

UltraTech,11.4

Lafarge, 5.2

Dalmia Bharat,

8.8

Ambuja, 4.9

ACC, 6.2

Shree Cement,

2.0

Birla Corp,

7.5

Capacity- Eastern Market (MTPA)



Capacity addition in the East: Cement players are planning to add ~22 MMT of capacity

over the next 3 years, despite that utilization levels are likely to remain healthy. Shree

Cement and JK Lakshmi, the new entrants over last six months in the region, are operating

at utilisation levels of around 45-50%, planning to add 5.2 MMT & 2.7 MMT capacities

respectively while Emami Cement, another new entrant is expected to commission its plant

by next year. There has been increased supply from Ultratech and Star Cement in the

market and Shree and JK Lakshmi Cement have been ramping up their market share with

aggressive pricing. In H1FY16, prices in the region have moderated by INR5-20/bag.

Opportunities & Demand Drivers:

There is an uptick in government-related infrastructure spending in Odisha and Bihar and a

significant pick-up in the private sector capex after a long halt. Over the next 2-3 years,

government-led Housing for All projects coupled with upcoming state election in West Bengal

will spur cement demand. Key opportunities in the eastern market are as follows.

Exhibit:Capacity addition in Eastern region (In MTPA) & Utilisation rate - (%)


1

0.8

1.5

1.7

2

1

1

2.6

3.2

2.5

2.5

2.6

0 1 2 3 4

ACC

Ambuja -…

Dalmia-…

Emami …

JK Lakshmi-…

JK Lakshmi-…

Star Cement

Shree-Bihar

Shree-…

Ultratech-…

Capacity addition in Eastern region (In MTPA)

FY18E FY17E FY16E

81 85 82 78 56

82 79 80 7955

78 79 82 80

55

80 79 81 80

57

81 83 80 81

59

0

100

200

300

400

500

North Central East West South

Utilisation Rate (%)

FY13 FY14 FY15 FY16E FY17E

Expected

DemandStates Opportunities

Odisha 10 MMT

The state has received higher budgetary allocation for Irrigation and Rural

development and the state government is focused on low-cost housing

under Housing for All scheme.

States per capita cement consumption stands at 148kg Vs all India

average of 207kg, huge potential for growth. Post monsoon, demand is

expected to pick-up as government will increase its focus on from rural and

urban housing, owing to huge under-investment in the past.

15 MMTWest Bengal

Bihar 12 MMT

Post elections, Bihar could see heightened activities in roads & highways

construction sector. The Central government had already announced

schemes worth US$16bn and special package of US$19bn for the state.



Company Profile Star Ferro & Cement Company (SFCL) was incorporated as a separate company in 2011

and is the de-merged entity of Century Plywood, with demerger coming in effect from 1st

April 2012. SFCL is promoted by first generation entrepreneurs Mr. Sajjan Bhajanka

(Chairman & MD), Mr. Sanjay Agarwal (Managing Director), Mr. Rajendra Chamaria (VC &

MD) and ably supported by Mr. Sanjay Kumar Gupta (CEO) and Mr. Dilip Kumar Agarwal

(CFO).

The demerged entity had two major business verticals a) Cement and b) Ferro Alloys,

contributing 88% and 12%, respectively to revenues in FY14. The Ferro Alloy vertical was

demerged into Shyam Century Ferrous Ltd at a demerger ratio of 1:1 w.e.f 1.4.2014.

SFCL has ~3.03 MTPA cement capacity in Meghalaya, Assam and West Bengal under its

~70.48% owned subsidiary Cement Manufacturing Company Ltd (CMCL). CMCL has a

clinker capacity of 0.8 MTPA at Lumshnong (Meghalaya) with grinding capacity of ~3.03

MTPA (~0.6 MTPA at Lumshnong, ~1.6 MTPA at Guwahati, Assam and leased capacity of

~0.84 MTPA in West Bengal) and is adding ~1.0 MTPA of grinding unit in West Bengal.

CMCL through its 100% subsidiary Megha Technical & Engineers Pvt. Ltd (MTEPL), has

~0.67 MTPA grinding capacity at Lumshnong (Meghalaya) and power generation capacity

of 9 MW (DG Set). CMCL holds ~87.5% in Star Cement Meghalaya Ltd (SCML), which has

~1.75 MTPA clinker capacity at Lumshnong (Meghalaya) and rest ~12.5% stake in SCML is

held by MTEPL. CMCL also holds 51% stake in Meghalaya Power Limited (MPL) which

operates 51 MW power plant.

Exhibit: Key Milestones

Cement capacity increased to 3.7 MTPA

Power generation capacity increased to 51 MW

The ferro alloy division has been demerged into Shyam Century Ferrous Ltd


2013 Cement capacity increased to 2.9 MTPA and clinker capacity to 2.6 MTPA

2014

2015

Star Ferro & Cement Company (SFCL) was incorporated as a separate company

Cement capacity increased to 1.27 MTPA, and clinker capacity increased to 0.8 MTPA

Cement Manufacturing Company Ltd (CMCL) was incorporated in 2001

The plant commenced operations in 2005 with capacity of 0.4 MTPA

SFCL entered into on-lease agreement with local cement grinding units in Siliguri and Durgapur (Total

0.84 MTPA capacity)

Cement and clinker capacity increased to 1.06 MTPA and 0.6 MTPA respectively2008

2001

2005

Commenced 8 MW of power capacity2010

2011



Business Segment and Revenue Mix: SFCL has three business segments viz. cement,

clinker and others. Cement vertical contributes ~90%+ of total sales and ~88% of total EBIT

whereas clinker and others vertical contributes ~8-10% of total sales.

Exhibit: Revenue Mix (%)


90%

83%

92%

0%

4%

8%10%12%

0%

75%

80%

85%

90%

95%

100%

FY13 FY14 FY15

Cement Clinker Others

Exhibit: Company Structure (Key Subsidiaries/Associates)



Cement Manufacturing Comapny Ltd.('CMCL')

Star Cement Meghalaya Ltd.('SCML')

Megha Technical & Engineers Pvt. Ltd. ('MTEPL')Promoters 28.5

0%70.48

%

100%

87.49%

12.51%

*Grinding unit with capacity of 0.67 MTPA at Lumshnong

* Power generation capacity of 9MW (DG Set)

Meghalaya Power Ltd. ('MPL)

*Clinker manufacturing capacity of 0.80 MTPA at Lumshnong

*Grinding Unit with capacity of 0.59 MTPA at Lumshnong

*Grinding unit with capacity of 1.60 MTPA at Sonapur, Guwahati, Assam

*Hired 0.70 mn ton grinding units in WB

*Clinker manufacturing capacity of 1.75 MTPA at Lumshnong

*51 MW power plan

*Rest of 49% Shareholding with Shyam Century Ferrous Ltd

51%



Cement - Installed Capacity & Capacity Utilisation:

SFCL, is the largest cement player in NER, with ~23% market share and a cumulative

cement manufacturing capacity of ~3.7 MTPA. It has three manufacturing units in

Meghalaya and one unit in Assam along with two hired units in West Bengal and sells

cement under the brand name ‘Star Cement’. NER remains the supply deficit market due to

lower regional capacity addition, political instability, regulatory hurdles and geographical

complexity.

To grasp the demand opportunity and lessen the region’s dependence on import from other

states, SFCL has increased its total cement capacity (Assam & Meghalaya) from ~1.27

MTPA in FY12 to ~2.9 MTPA in FY15, through setting up ~1.6 MTPA grinding unit in Assam

and adding ~0.6 MTPA at Meghalaya. Both these units were commissioned in Q4FY13,

post which cement capacity in Meghalaya now stands at 1.26 MTPA.

SFCL entered into on-lease agreement with local cement grinding units in Siliguri and

Durgapur (total 0.84 MTPA), further increasing total capacity to ~3.7 MTPA. SFCL is also

planning to add 1 MTPA grinding unit in West Bengal, which is expected to be operational

by October 2016.

SFCL currently manufactures high grade ordinary portland cement (OPC), pozzolana

portland cement (PPC) and other specialty grades required in infrastructure projects using

state-of-the-art dry process rotary kiln technology.

Exhibit: Cement - (Installed Capacity & Capacity Utilisation)

Source: Company, SKP Research, *Effective capacity utilization

1270000

1270000

2860000

2860000

3320000

3700000 4

700000

950000

1100000

1070000

1631047

2171666

2518600

2982333

75%

87%

37%

57%

65%

72%* 74%*

0%

20%

40%

60%

80%

100%

-600000

200000

1000000

1800000

2600000

3400000

4200000

5000000

FY11 FY12 FY13 FY14 FY15 FY16E FY17E

Cement Installed Capacity (TPA) Production (TPA)


Clinker- Installed Capacity & Capacity Utilisation:

SFCL has increased its clinker capacity to 2.6 MTPA (~1.7 MTPA commissioned in

Q4FY13) from 0.8 mt in FY12.

The recent lease arrangement for grinding clinker in West Bengal will further increase

CMCL’s market expansion. Clinker’s production grew at a CAGR of ~6% during FY13-15

and we expect this segment to maintain a share of ~7-10% in total sales over the next two

years, on back of higher capacity utilization (current capacity utilization – 61%).

Currently, Bangladesh imports 10-15 MT of clinker annually as the country does not have its

own supply of limestone. SFCL is exploring opportunities to export clinker from its north

east plants.



Exhibit: Clinker - (Installed Capacity & Capacity Utilisation)


2550000

2550000

2550000

2550000

2550000

1378616

1100000

1550000

1734000

1912500

54%

43%

61%

68%

75%

0%

10%

20%

30%

40%

50%

60%

70%

80%

-600000

200000

1000000

1800000

2600000

3400000

4200000

5000000


Cement Installed Capacity (TPA) Production (TPA) Capacity Utilisation (%)

Market Mix – North Eastern Region Vs Eastern Market:

Currently, NER contributes ~70% of its cement output whereas eastern region accounts for

the rest ~30%. Within NER, Assam is the major market where it dispatches ~35%-40% of

its cement volumes followed by Arunachal Pradesh, Meghalaya, Manipur, Mizoram, Tripura,

Sikkim etc. In East region, West Bengal is the major market (accounts for ~24% of the

volumes and 4% market share) followed by Jharkhand and Bihar. SFCL has started

expanding its presence in eastern market (total market of ~53 MTPA) and over the next two

years we expect a sharp uptick in volumes backed by capacity addition of 1 mn MT grinding

unit at Siliguri (volumes from the eastern market have grown from 3% of the total volumes in

FY13 to ~30% in FY15).

Exhibit: Market Mix (%)


Market Mix (FY15)Market mix (FY14)Market mix (FY13)

North-East,97% North-East,79% North-East,70%

East,21% East,30%East,3%



Fiscal Incentives leads to higher profitability: SFCL enjoys various fiscal benefits under NE industrial policy (NEIIPP 2007) which includes

100% excise exemption, 100% income tax exemption, interest subsidy at 3% of working

capital loan, transport subsidy, capital investment subsidy up to 30% of investment in plant

& machinery. As a result, SFCL generates robust EBITDA/tonne which is almost ~2.0x of

pan-India level cement players.

SCML CMCL-GGU CMCL-LMS MTEPL

Excise Duty on

Clinker 75% 8 years - 2 years -

Cement 75%/36%^ - ^8 years 2 years ^2 years

Central Sales Tax 99% 5 years - - -

VAT 99%^^ 5 years Rs 275 Crs / 5 years - -

Freight Subsidy Inward

Within NER* 90% - - - -

Outside NER 90% - - - -

Freight Subsidy Outward 3 years 3 years

Within NER* 50% - - - -

Outside NER 90% - - - -


Exemption

100% under Section 80

IE, subject to MATIncome Tax 8 years 8 years - 2 years

-

Exhibit: Fiscal Incentives leads to higher profitability

^^At GGU unit, VAT exemption is 99% upto 200% of FCI ̂75% for integrated units and 36% for standalone grinding

units. *Freight subsidies are not available for intra-state movements; ** As on 31.03.2015

Capital Investment Subsidy

30% of Investment in

Plant & MachineryOne time One time -

Balance Exemption period**



Investment Rationale

Leadership in North East region with strong brand pull, close proximity to raw materials

and robust distribution network

Leadership in North East region with pricing power

Over the years, SFCL has emerged as the largest cement manufacturer in NER with ~23%

market share and a total NER installed capacity of 2.9 mn MT (one integrated cement plant,

one clinkerisation unit and two split grinding unit). The regional players enjoy strong entry

barriers on account of political instability, geographical complexity and regulatory hurdles

making it a supply deficit market with no new capacities in the pipeline.

Presently, mainland companies bring cement in NER which results in high logistic cost

coupled with demand supply mismatch which creates a high price-end market (cement

arrivals in NER from mainland players has come down to 10% from 30%), allowing SFCL to

enjoy its leadership position with better pricing power.

Exhibit: Higher realisations Vs Peers backed by leadership position in NER


58185982

62066399

6591

5400

5600

5800

6000

6200

6400

6600

6800


Sales Realization (Rs/Tonne)

23

23

23

23

18

Growing Market Share In NER (%)

Closer proximity to raw materials

Cement is a localised industry due to low value and bulky end product. Proximity to source

of raw material is imperative to keep the cost of cement at bay. SFCL enjoys the advantage

of having its own captive limestone mines in Meghalaya (mines are located within 2-3 kms

of the clinker units, providing uninterrupted supply of raw material) having reserves of 300

million tonnes, which is enough to meet all its raw material requirements (based on

expanded capacity) for the next 70-80 years.

Also, coal is readily available in close proximity (Assam and Meghalaya have large coal

deposits), ensuring cost and operational efficiencies which provides strong back-up for

Company’s 51 MW power plants. Captive power ensures non-dependency on grid power

and fly ash generated from power plant is used in cement plants at almost nil cost.

Proximity to rich limestone source, availability of quality fuel at the doorstep and a presence

in the market place has resulted in an edge in logistic costs.



Exhibit: SFCL locational advantage


Strong brand pull led by aggressive advertising campaigns

The Company’s greatest asset is the recall value of its brands among customers. This is

largely driven by its aggressive but strategic brand spends over the last 3-4 years with

consistent focus on quality. Currently, advertisement expense accounts for ~3-4% of total

revenues. As a result, over the years SFCL has positioned ‘Star Cement’ as a Tier 1 brand

in NER.

Star Cement followed by Dalmia Cements, commands premium pricing. Second grade

cement brands sells at Rs 5-7 per bag discount, and C grade brands sell at Rs 20-30 per

bag discount to Star Cement.

Exhibit: Advertisement Expense (Rs Million)


161

434 462

555

672

2.4%

3.7%

3.2% 3.3% 3.3%

0.0%

1.0%

2.0%

3.0%

4.0%

0

150

300

450

600

750

FY2013 FY2014 FY2015 FY2016E FY2017E

Advertisement Expense - As a (%) of Sales

A&P Expense (Rs Millions) As a (%) of Net Sales



Robust distribution network and retail-centric business model

SFCL has heavily invested in dealer’s network expansion to retain its premium position in

NER and currently has its presence in 11 states with 2,300+ strong dealers and 8,700+

strong retail network. It distributes directly via dealers rather than through C&F agents which

has resulted in deeper penetration, greater reach and higher market share.

SFCL would achieve a freight subsidy of ~90% by expanding towards the Eastern Region,

as opposed to ~50% freight subsidy within NER under NEIPP 2007. Therefore, SFCL has

steadily increased its sales presence outside NER (West Bengal, Bihar, and Jharkhand) to

capitalize the freight subsidy. SFCL's business model is primarily retail driven, nearly 77%

of its total product marketed to retail customers while only 23% is marketed through the

discount-driven institutional network.

Exhibit: Robust Dealer network growth & Sales Mix (%)


603 693 796 877 95090

110

572

11491358

0

500

1000

1500

2000

2500

FY12 FY13 FY14 FY15 FY16 (Oct)NE WB, BH & JHK

Trade, 77%

Non Trade, 23%

SFCL- A retail focus brand with 77% sales in the trade segment

En-route to eastern market - Positive step for future growth

NER contributes ~70% of SFCL cement output whereas eastern region market accounts for

the rest ~30%. SFCL is leveraging its strong brand and distribution network to penetrate into

markets of West Bengal, Bihar & Jharkhand which has a total cement market of about 53

MTPA (volumes from the eastern market have grown from 3% of the total volumes in FY13

to ~30% in FY15). Over the next two years, we expect a sharp uptick in volumes from

eastern market backed by capacity addition of 1 MTPA grinding unit at Siliguri and

aggressive advertisement.

Exhibit: Capacity addition details

Grinding Clinker

CMCL Meghalaya - Lumshnong 590000 800000

MTEPL Meghalaya - Lumshnong 670000 - Q4FY13

SCMIL Meghalaya - Lumshnong - 175000 Q4FY13

CMCL Guwhati (Assam) 1600000 - Q4FY13

CMCL West Bengal 460000 - On lease from Q3FY14-15

CMCL West Bengal - Durgapur 380000 - On lease from Q3FY16

CMCL West Bengal 1000000 - Expected by October 2016


Capacity (MTPA) Remarks Subsidiaries Location



Strong Financial performance:

Cement volumes expected to grow at ~17.1% CAGR over FY15-17E

Key drivers for revenue growth for SFCL going forward will be (1) GoI’s thrust on

infrastructure development in NER (2) en-route to eastern market with robust distribution

network and retail-centric business model (3) superior brand mix and innovative marketing

strategies and (4) strong entry barriers for new player in NER with no new capacities in

pipeline. To grasp the demand opportunity and lessen the region’s dependence on import

from other states, SFCL has increased its total cement capacity from ~1.27 MTPA in FY12

to ~3.7 MTPA currently and is also planning to add 1 MTPA grinding unit in West Bengal,

which is expected to be operational by October 2016.

Going forward, on the back of above demand drivers, we expect SFCL sales to grow at a

CAGR of 19.3% during FY15-17E resulting into better capacity utilization and higher sales

volume. Capacity utilization is expected to improve from 65% in FY15 to effective sub ~74%

by FY17E and cement volumes to grow at ~17.1% CAGR over FY15-17E.

Pricing premium, regional advantage and fiscal incentives drive EBITDA/Tonne of Rs

1900+, 2x of industry’s average

Cement prices in the NER are among the highest in the country. Strong realisations led by

tier 1 brand positioning and focus towards trade sales, tax benefits (excise duty & VAT

benefits amounting to Rs 250-350/tonne), freight subsidy (subsidy of Rs 250-300/tonne)

and proximity to raw materials (uninterrupted supply of limestone, coal & power) have

helped SFCL to enjoy higher EBIDTA/tonne of Rs 1,800+ (higher by Rs 40-50/bag

compared to other regional players) which is ~2x-3x the industry average. These benefits

will continue for the next 3-8 years.

During FY15, SFCL reported cement realizations of Rs 6,213/tonne and EBITDA/tonne of

Rs 1,847/tonne. Going forward, on back of above factors we expect SFCL cement

realisation to improve moderately by ~3% y-o-y during FY15-17E led by gradual

improvement in utilisation rates

Exhibit: Expect revenue CAGR of 19.3% during FY15-17E led by pick-up in sales volume


10

65

09

7

16

31

04

7

21

69

25

1

25

11

04

4

29

73

38

6

83

55

76

13

78

61

6

15

50

00

0

17

34

00

0

19

12

50

0

0

500000

1000000

1500000

2000000

2500000

3000000

3500000


( T

on

ne

s P

er

An

nu

m)

Capacity ramp-up drive sales volume CAGR of ~17.1% during FY15-17E

Cement Sales Volume Clinker Sales Volume

65

96

11

73

4

14

30

4

16

81

7

20

37

0

78

2218

21

0

10

20

30

40

50

60

70

80

90

0

5000

10000

15000

20000

25000


Expect revenue CAGR of 19.3% during FY15-17E

Revenue (Rs Mn) Growth (%)



Consolidated EBITDA/PAT to grow at a CAGR of 8.8%/39.8% during FY15-17E

We expect SFCL to post an EBITDA growth at ~8.8% CAGR over FY15-FY17E, backed by

improvement in cement realizations, moderation in operating cost and fiscal incentives

benefit. Net profit during the same period is expected to improve by ~1.95x on account of

higher utilization rates amid stable capital charges and decline in interest cost. PAT growth

will also be supported by increase in cash flow generation which will yield a higher treasury

income over FY16-17E.

De-leveraging balance sheet with low capex commitment:

Over the last few years, SFCL has reduced its net debt from Rs 829 crores in FY13 to Rs

672 crores in FY15, bringing down D/E ratio significantly to ~0.7x in FY15 from ~0.9x in

FY14 on account of better operational performance and working capital management.

Exhibit: Cement EBITDA/tonne comparison


1111

1485

1847

694 730 725

0

400

800

1200

1600

2000

FY13 FY14 FY15

Star Ferro & Cement All India average

2.0x 2.5x1.6x

58

45

59

82

62

13

63

99

65

91

11

11

14

85

18

47

15

21

16

09

17.9 21.7

30.4

24.6% 25.3%

0.0

10.0

20.0

30.0

40.0

0

2000

4000

6000

8000


EBITDA/tonne to improve to Rs 1920/t by FY17E

Cement Realisation (Rs/Tonne) EBITDA/Tonne (Rs)

EBITDA Margin (%)

EBITDA - 2x of industry’s average

Exhibit: EBITDA And PAT


11

84 25

50 4

35

1

41

36

51

53

18%

22%

30%

24.6% 25.3%

0%

5%

10%

15%

20%

25%

30%

35%

-500

1000

2500

4000

5500

7000


EBITDA And EBITDA Margin (%)

EBITDA (Rs Mn) EBITDA Margin (%)

24

9

61 83

4

10

07 1

63

1

6%

1%

6% 6%

8%

0%

1%

2%

3%

4%

5%

6%

7%

8%

9%

0

400

800

1200

1600

2000


PAT and PAT Margin (%)

PAT (Rs Mn) PAT Margin (%)



On account of better capacity utilization over the next two years, it is estimated to generate

an operating cash flow of Rs 250 crore, which would be used to fund its major capex

programme. Currently, SFCL is adding ~1 MTPA of grinding unit in West Bengal at a capex

of Rs 190 crore and has leased ~0.84 MTPA grinding unit in Siliguri and Durgapur.

Furthermore, SFCL is also expected to receive Rs. 600 crore of subsidies over next two

years. Thus, on back of limited capex commitment, we expect D/E ratio to come down to~

0.4x in FY17E.

.

Peer Comparison:

Exhibit: Debt/Equity And Interest Coverage Ratio


0.9x 0.9x 0.7x 0.5x 0.4x

2.4x

1.1x

2.4x2.7x

4.3x

0.0x

1.0x

2.0x

3.0x

4.0x

5.0x

6.0x

7.0x


Debt/Equity And Interest Coverage Ratio (x)

Debt/ Equity (x) Interest Coverage Ratio (x)

Exhibit: Peer Valuation

FY13 FY14 FY15 FY13 FY14 FY15 FY13 FY14 FY15

Dalmia Bharat Ltd 23.9 52608 27906 30158 35141 12.2% 20.0% 13.6% 15.0% 1971 -84 31 -87.6%

JK Lakshmi Cement Ltd 8.3 31418 20550 20566 23155 6.2% 18.6% 13% 13.7% 1750 939 1029 -23.3%

Ramco Cement Ltd 7.7 87612 38308 36835 36554 -2.3% 22.9% 13.3% 17.1% 4037 1146 2461 -21.9%

Birla Corp 5.2 26948 26030 30164 32099 11.0% 13.1% 7.4% 8.1% 2703 1298 1752 -19.5%

Mangalam Cem 3.3 4303 7060 6973 9218 14.3% 15.9% 6.9% 8.6% 774 296 179 -51.9%

Sanghi Industries 4.0 11241 9901 10483 9323 -3.0% 17.2% 17.2% 15.2% 459 496 306 -18.3%

Star Ferro Cement Ltd 3.3 23328 6596 11734 14304 47.3% 17.9% 21.7% 30.4% 249 61 834 83.1%

Source: Company, SKP Research ,*Capacity in MTPA, Mcap as on Feb 24, 2016

Revenue

CAGR

(%) FY13-

15

PAT

CAGR

(%) FY13-

15

Company

Mcap

(Rs

Mn)

Revenue (Rs Mn) EBITDA Margin (%) PAT (Rs Mn)

Capacity*



Valuations

With government’s infrastructure development thrust & strong entry barriers in NER, coupled

with leadership in NER with strong brand pull and pricing power, robust distribution network,

retail-centric business model, raw material security, en-route to eastern market, fiscal

incentives benefit and enhancing return ratios, augurs well for SFCL.

We have valued the stock on the basis of EV/EBIDTA ‐ of 6.5x of FY17E EBIDTA – method of

relative valuation. In view of the sharp correction in the share price to Rs 105 now, after a

stupendous rally to a life time high of Rs 185 recently, we recommend a BUY on the stock

with a target price of Rs 151/- (44% upside) in 15 month.

Risks & Concerns

Sharp recovery in diesel prices can inflate cost pressures-

Currently road freight accounts for ~80% of total freight cost, any sharp recovery in diesel

prices could inflate costs pressures may hurt margins.

Delay in project execution may lead to lower capacity utilizations-

Any material delay in infrastructure project execution will lead to lower utilization of its

existing capacity resulting to lower sales volumes and pricing power.

Rollback of subsidy benefits under ‘NEIIPP 2007’-

Currently, the company enjoys various fiscal benefits under NE industrial policy (NEIIPP

2007). This includes 100% excise exemption, 100% income tax exemption, interest subsidy

at 3% of working capital loan, transport subsidy, capital investment subsidy up to 30% of the

investment in plant & machinery. Rollback of any such benefits could lead to a negative

impact on margins.


Exhibit: Valuation Charts

0

4

8

12

16

20

De

c-1

3

Fe

b-1

4

Ap

r-1

4

Ju

n-1

4

Au

g-1

4

Oc

t-1

4

De

c-1

4

Fe

b-1

5

Ap

r-1

5

Ju

n-1

5

Au

g-1

5

Oc

t-1

5

De

c-1

5

Rolling forward EV/EBITDA (x) chart

Daily EV/EBITDA Mean EV/EBITDA

Mean+1sd Mean-1sd

0

50

100

150

200

250

De

c-1

3

Feb

-14

Ap

r-1

4

Jun

-14

Au

g-1

4

Oct

-14

De

c-1

4

Feb

-15

Ap

r-1

5

Jun

-15

Au

g-1

5

Oct

-15

De

c-1

5

Rolling forward EV/MT ($) chart

Daily EV/MT($) Mean EV/MT($)

Mean+1sd Mean-1sd



Q2 FY16 Result Update

Particulars Q3FY16 Q3FY15 YoY (%) Q2FY16 QoQ (%) FY16-9M FY15-9M YoY (%)

Net Sales 4,282.4 3,371.0 27.0% 3,111.5 37.6% 11,478.3 9,216.7 24.5%

Other Operating Income 5.1 10.6 - 3.2 57.7% 10.8 18.1 -

Total Income 4,287.5 3,381.6 26.8% 3,114.7 37.7% 11,489.1 9,234.8 24.4%

Expenditure 3,370.3 2,201.6 53.1% 2,562.6 31.5% 8,806.6 6,431.7 36.9%

Material Consumed 465.6 475.9 -2.2% 359.9 29.4% 1,293.3 1,299.1 -0.4%

(as a % of Total Income) 10.9% 14.1% 11.6% 11.3% 14.1%

Purchase of Traded goods 412.7 77.0 436.1% 266.8 54.7% 1,008.8 112.8 794.2%


Changes in Inventories & WIP 80.0 (325.4) -124.6% (163.9) -148.8% (332.3) (190.7) 74.3%

(as a % of Total Income) 1.9% -9.6% -5.3% -2.9% -2.1%

Employees Cost 277.7 246.2 12.8% 304.8 -8.9% 813.8 686.3 18.6%


Other Expenses 2,134.3 1,727.8 23.5% 1,795.0 18.9% 6,023.0 4,524.2 33.1%


EBITDA 917.2 1,180.0 -22.3% 552.1 66.1% 2,682.5 2,803.1 -4.3%

EBITDA M argin (%) 21.4% 34.9% (1,350)Bps 17.7% 367 Bps 23.3% 30.4% (701)Bps

Depreciation 430.1 551.5 -22.0% 428.0 0.5% 1,275.4 1,637.7 -22.1%

EBIT 487.1 628.5 -22.5% 124.1 292.4% 1,407.1 1,165.4 20.7%

Other Income 12.7 8.2 54.6% 11.5 10.1% 41.1 17.1 139.7%

Interest Expense 198.9 233.9 -15.0% 216.5 -8.1% 617.6 673.3 -8.3%

Income from Forw ard Contracts - - -

Exceptional Items, net (4.8) 7.9 1.7 (3.1) (2.5)

Profit Before Tax 296.1 410.7 -27.9% (79.1) -474.3% 827.5 506.8 63.3%

Income Tax 8.2 29.3 -72.1% 15.7 -48.1% 29.2 66.9 -56.3%

Effective Tax Rate (%) 2.8% 7.1% - -19.9% - 3.5% 13.2% -

Profit After Tax (PAT) 288.0 381.4 -24.5% (94.8) -403.6% 798.3 439.9 81.5%

Minority interests 102.4 128.9 (16.2) 276.0 155.4

Profit After Tax (PAT) 185.6 252.5 -26.5% (78.6) -336.0% 522.2 284.5

PAT M argins (%) 6.7% 7.5% (75)Bps -3.04% 976 Bps 6.95% 4.76% 218 Bps

Diluted EPS 0.8 1.1 -26.5% (0.4) -336.0% 2.35 1.28 83.6%

Exhibit: Q3FY16 Result Review Figs. in INR M illion

Source: Company Data, SKP Research



Exhibit: Balance Sheet

Particulars FY14 FY15 FY16E FY17E Particulars FY14 FY15 FY16E FY17E

Total Income 11,733.7 14,304.3 16,817.2 20,369.8 Share Capital 222.2 222.2 222.2 222.2

Growth (%) 77.9% 21.9% 17.6% 21.1% Reserve & Surplus 6,641.1 6,578.0 7,324.5 8,695.1

Expenditure 9,184.2 9,953.6 12,680.9 15,217.0 Shareholders Funds 6,863.3 6,800.2 7,546.6 8,917.2

Material Cost 2,095.7 1,679.1 1,597.6 1,874.0 Total Debt 8,443.0 6,917.6 6,015.6 5,145.6

Traded Goods -77.6 616.4 1,345.4 1,629.6 Minority Interest 2,528.5 3,230.9 3,566.4 4,081.4

Employee Cost 785.8 912.8 1,177.2 1,425.9 Liabilities & Provisions 4,192.5 4,869.4 5,394.3 5,315.5

Admin & Other Exp. 6,380.4 6,745.3 8,559.9 10,286.7 Deferred Tax Liabilities 44.8 86.6 86.6 86.6

EBITDA 2,549.5 4,350.7 4,136.3 5,152.8 Total Liabilities 22,072.0 21,904.7 22,609.6 23,546.3

Depreciation 1,616.4 2,237.4 1,876.3 2,116.7 Net Block inc. Capital WIP 12,717.4 10,689.4 9,819.7 8,682.2

EBIT 933.2 2,113.2 2,260.0 3,036.1 Deferred Tax (Net) - - - -

Other Income 25.0 7.8 53.3 58.7 Non-Current Assets - - - -

Interest Expense 872.1 873.8 822.0 711.1 Inventories 1,754.9 1,091.4 1,491.8 1,679.2

Profit Before Tax (PBT) 76.0 1,247.4 1,491.3 2,384.1 Sundry Debtors 1,415.7 3,098.0 3,260.2 4,441.2

Income Tax 27.1 48.0 -149.1 -238.4 Cash & Bank Balance 125.8 203.7 388.4 577.5

Profit After Tax (PAT) 48.9 1,199.4 1,342.1 2,145.7 Other Current Assets - -

Minority Interest 12.4 -365.0 -335.5 -515.0 Loans and Advances 6,037.4 6,802.3 7,633.5 8,149.9

Adj PAT (Post Minority) 61.5 834.1 1,006.6 1,630.7 Non Current Investment 15.3 15.3 15.7 15.4

Growth (%) -75.3% 1256.2% 20.6% 62.0% Other Non Current Assets 5.4 4.5 0.4 0.9

Diluted EPS 0.3 3.8 4.5 7.3 Total Assets 22,072.0 21,904.7 22,609.6 23,546.3

Exhibit: Ratio Analysis

Particulars FY14 FY15 FY16E FY17E Particulars FY14 FY15 FY16E FY17E

Profit Before Tax (PBT) 76.0 1,247.2 1,491.3 2,384.1 Earning Ratios (%)

Depreciation 1,616.4 2,237.4 1,876.3 2,116.7 EBITDA Margin (%) 21.7% 30.4% 24.6% 25.3%

Finance Costs 872.1 873.8 822.0 711.1 PAT Margins (%) 0.5% 5.8% 6.0% 8.0%

Chg. in Working Capital 1,599.4 2,809.2 2,160.7 2,206.5 ROCE (%) 4.4% 9.6% 10.2% 13.1%

Direct Taxes Paid - (207.5) (149.1) (238.4) ROE (%) 0.5% 7.0% 8.4% 12.6%

Other Charges - - Per Share Data (INR)

Operating Cash Flows 1,599.4 2,601.7 1,189.6 1,257.0 Diluted EPS 0.3 3.8 4.5 7.3

Capital Expenditure (1,173.2) (433.6) (874.8) (916.7) Cash EPS (CEPS) 7.5 15.5 14.5 19.2

Investments - 4.6 BVPS 42.3 45.1 50.0 58.5

Others - - 3,000.0 3,000.0 Valuation Ratios (x)

Investing Cash Flows (1,174.7) (402.3) 2,084.9 1,993.3 P/E 380.9 28.0 23.2 14.3

Changes in Equity - - Price/BVPS 2.5 2.3 2.1 1.8

Inc / (Dec) in Debt 409.1 (1,231.1) (2,002.0) (2,090.0) EV/Sales 2.7 2.1 1.7 1.4

Dividend Paid (inc tax) (122.1) - (184.2) (184.2) EV/EBITDA 12.5 6.9 7.0 5.5

Financing Cash Flows (585.2) (2,103.1) (3,084.2) (3,061.2) Dividend Yield (%) 0.4% 1.0% 1.0% 1.0%

Chg. in Cash & Cash Eqv (160.4) 96.3 190.3 189.1 Balance Sheet Ratios

Opening Cash Balance 262.5 102.1 198.0 388.4 Debt - Equity 0.9 0.7 0.5 0.4

Balances with Banks - - Current Ratio 1.6 1.8 1.8 2.1

Closing Cash Balance 102.1 198.0 388.4 577.5 Fixed Asset Turn. Ratios 0.4 0.6 0.8 1.1


Exhibit: Income Statement Figures in INR Million

Exhibit: Cash Flow Statement

Figures in INR Million

Figures in INR Million



Notes:

The above analysis and data are based on last available prices and not official closing rates. SKP Research is also available on Bloomberg,

Thomson First Call & Investext Myiris, Moneycontrol, Tickerplant and ISI Securities.

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The following Disclosure of Interest Statement, clarifies it further: SKP or its Research Analyst(s) engaged in preparation of this Report or his/her relative (i) do not have any financial interests in the subject company mentioned in this report (ii) one of the whole-time Director of the company owns less than 1% equity securities of the subject company mentioned in the report as of the last day of the month preceding the publication of the research report (iii) do not have any other material conflict of interest at the time of publication of the research report. The distribution of this document in other jurisdictions may be strictly restricted and/ or prohibited by law, and persons into whose possession this document comes should inform themselves about such restriction and/ or prohibition, and observe any such restrictions and/ or prohibition.



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The views expressed in this research report accurately reflect the personal views of the analyst about the subject securities or issues, which are subject to change without prior notice and does not represent to be an authority on the subject. No part of the compensation of the research analyst was, is, or will be directly or indirectly related to the specific recommendations and views expressed by research analyst in this report. The research analysts, strategists, or research associates principally responsible for preparation of SKP research receive compensation based upon various factors, including quality of research, investor client feedback, stock picking, competitive factors and firm revenues.

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*Group Entities INB/INF: 230707532, BSE INB: 010707538, CDSL IN-DP-CDSL-132-2000, DPID: 021800, NSDL IN-DP-NSDL: 222-2001, DP ID: IN302646, ARN: 0006, NCDEX: 00715, MCX: 31705, MCX-SX: INE 260707532

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