5 CAIRN INDIA LIMITED

RESEARCH
EQUITY RESEARCH August 18, 2009

RESULTS REVIEW Cairn India Limited Hold

Q1’10 performance hit by one-time exceptional loss of Rs 1.6 bn
Share Data
Market Cap Rs. 453.21 bn For Q1’10, Cairn India Limited’s (CIL’s) net revenues declined 49.2% yoy to
Price Rs. 238.95 Rs. 2,049.5 mn. This decline was largely due to a 15.2% yoy fall in the net
BSE Sensex 15,035.26
production per day and a 46.2% yoy decline in average price realisations
Reuters CAIL.BO
Bloomberg CAIR IN (USD 51.2 per boe), partly offset by the depreciation of the rupee. Overall
Avg. Volume (52 Week) 1.03 mn results have benefited from higher other income, which included income
52-Week High/Low Rs. 273.7 / 88.2
from investments of Rs 571 mn and forex gains of Rs 718 mn. In addition,
Shares Outstanding 1,897 mn
there was a write-back of deferred taxes to the extent of Rs. 418.6 mn.
Valuation Ratios (Consolidated)
However, the Company’s reported net profit fell 67.2% yoy to Rs. 454.7 mn
Year to 31 December 2010E 2011E
EPS (Rs.) 5.2 21.3
on account of an exceptional provision of Rs.1,637.1 mn for a past-profit
+/- (%) 43.3% 309.4% petroleum payment pertaining to Ravva that was due to the GoI. The matter
PER (x) 45.7x 11.2x is currently under appeal in the higher court.
EV/ Sales (x) 23.7x 7.0x
Revised Mangala field development plan approved: GoI has approved
EV/ EBITDA (x) 34.8x 9.6x
the revised Mangala field development plan, which included an increased
Shareholding Pattern (%)
Promoters 65 offtake of 125,000 bopd for Mangala, a higher processing capacity of
FIIs 11 205,000 bopd for the Mangala processing terminal, and a pipeline to
Institutions 6 Gujarat.
Public & Others 18
Initial crude offtake volumes and pricing formula finalised: Commercial

Relative Performance
terms and pricing negotiations for the initial offtake of Rajasthan crude have
been concluded with IOC and MRPL. As per the production-sharing
375
325
contract, pricing will be based on the comparable low sulphur crude,
275 frequently traded in the region - bonny light, with an appropriate discount to
225
175 Cairn’s waxy nature of crude. The implied price realisation would be at a
125
10-15% discount to Brent, on the basis of prices prevailing for the six
75
May-09
Nov-08

Mar-09
Aug-08

Sep-08

Oct-08

Dec-08

Jan-09

Feb-09

Apr-09

Jun-09

Jul-09

Aug-09

months ended June 2009, driven by the light-heavy spread. The pricing
formula and offtake volumes will be subjected to revision post March 2011.
CAIR IN Rebased BSE Index
Key Figures (FY ended March) Q1'09 Q4'09 Q1'10 YoY% QoQ%
(Figures in Rs. mn, except per share data)
Net Sales 4,036 1,818 2,050 (49.2%) 12.8%
EBITDAX 2,721 867 1,321 (51.4%) 52.3%
Net Profit 1,386 187 455 (67.2%) 143.4%

Margins(%)
EBITDAX 67.4% 47.7% 64.5%
NPM 34.3% 10.3% 22.2%
Per Share Data (Rs.)
Adj. EPS 0.73 0.10 0.24 (67.2%) 143.4%
Please see the end of the report for disclaimer and disclosures. -1-
 5 CAIRN INDIA LIMITED
RESEARCH
EQUITY RESEARCH August 18, 2009

Initially, till the completion of the pipeline to Gujarat, oil will be trucked to the
Gujarat coast and will be shipped to MRPL and HPCL. The sale of oil to
IOC will be through the Company’s existing pipeline network in Gujarat.
Production schedules on track: All facilities and logistics for trucking at
Train 1 with capacity of 30,000 bpd are complete at both the Mangala
processing terminal in Rajasthan and the receiving port at Kandla in
Gujarat. The first production is set to start in August 2009. Train 2 of
50,000 bpd capacity is targeted for completion by the end of December
2009; Train 3 is progressing according to schedule to attain production of
50,000 bpd by H1’10. 28 wells have been drilled on the Mangala oil-field in
the Rajasthan blocks so far, out of which 16 have been completed and are
ready to start production.
Exploration activities progressing aggressively: CIL continues to
aggressively undertake exploration activities to increase the production of
its gross reserve base from the current level of ~1 bn boe. The Company is
planning further appraisal/exploratory drilling of up to three wells in 2009.
One significant oil discovery was made in Raageshwari East resulting in a
more than doubling of the size of the prospective resources in the
Raageshwari area. The field development plan for the 822 sq km
Kaameshwari West has been submitted to the Management Committee for
approval. Preliminary work on 3D seismic surveys has commenced in
Mannar (Sri Lanka) and Palar basins.

Valuation
We maintain a Hold rating for the stock based on our DCF-based net asset
value at Rs. 250. Key Assumptions for arriving at the value include (i)
company’s potential to grow its production volumes significantly in FY09-
FY14. The company currently reports net 695 mmboe of 2P reserves
yielding an attractive RP ratio of 75 years based on the estimated
production for FY’10 (ii) increase in price realisations to reflect the impact of
the recent recovery in crude oil prices; we expect crude prices to hover at
USD 70 -80/bbl in the near term. However, this is partly offset by a 15%
discount on pricing (vs.10% assumed earlier) as per the revised pricing
formula.

Please see the end of the report for disclaimer and disclosures. -2-
 5 CAIRN INDIA LIMITED
EQUITY RESEARCH
Improved qoq price realisations;
expected to increase further
Exceptional loss Rs 1.6 bn impacts
profitability
Please see the end of the report for disclaimer and disclosures.
RESEARCH
August 18, 2009
Major risk factors that may hamper the achievement of the price target
include i) unfavourable movement in oil and gas prices and ii) any adverse
event like weather, regulatory factors, etc., which could impact oil
production in Rajasthan.
Result Highlights
For the first quarter of the fiscal, CIL reported a decline in net sales, down
49.2% yoy to Rs. 2,049.5 mn, due to lower average price realisations and
lower gross production volumes from its existing producing fields.
Average Price Realisations by Quarter
95.2 87.4
73.3
58.4 68.1
51.2
50.5 47.1
42.4
42.3
Q4 07 Q1 08 Q2 08 Q3 08 Q4 08 Q1 09 Q2 09 Q3 09 Q4 09 Q1 10
Average price realisation plummeted by ~46.2% yoy to ~USD 51.2 per boe.
However, on a qoq basis price realisation witnessed an improvement of
~20.8%, resulting in a 12.8% increase in sales. We expect the average
price realisations to improve further in the coming quarters on the back of
the recent recovery in the prices of crude oil.
EBITDAX dropped to Rs. 1,321 mn as against Rs. 2,721 mn in Q1’09 on
account of an increase in operating expenses, employee costs, and
administrative expenses. However, EBITDAX improved 52.3% qoq and the
EBITDAX margin climbed by 16.8 pts qoq to 64.5% on account of relatively
lower administrative expenses and raw material cost of the Company, partly
offset by a slight increase in the operating and employee costs.
Reported net profit for the quarter stood at Rs. 454.7 mn, as against
Rs. 1,385.8 mn in Q1’09, mainly on account of a one-time exceptional item
of Rs. 1,637.1 mn for a past-profit petroleum payment pertaining to Ravva
that was due to the GoI. Adjusted net profit, however, increased 50.9% yoy
to Rs. 2,091.8 mn, mainly due to an increase in other income (up 123% yoy
to Rs. 1,289.7 mn) and a deferred tax reversal. Cash (net of borrowing)
available as at the end of June 2009 was Rs. 9,976 mn.
-3-
 5 CAIRN INDIA LIMITED
RESEARCH
EQUITY RESEARCH August 18, 2009

Production schedules on track to
produce 175,000 bpd by H1’10
Outlook
The growth prospects due to the increased production of CIL look attractive
for a long-term investor. The Company is ready to start production of
30,000 bpd and raise it to 80,000 by the end of the year. By H1’10, the
Mangala Processing Terminal (MPT) is expected to operate at its peak
plateau capacity of 125,000 bpd. In addition, the Company expects to start
production from Bhagyam and Aishwarya by 2011. After these projects
become operational, the 175,000 boepd MBA fields will significantly boost
CIL’s top-line. The smaller fields in Rajasthan Rageshwari and Saraswati
could add another 10,000-15,000 bpd. In addition, the company plans to
drill nearly 300 more wells in these blocks and use enhanced oil recovery
(EOR) measures from the early phase to improve the production levels in
the future. The company’s exploration efforts elsewhere in the country are
also on schedule and could possibly result in more discoveries.

Key Figures
1 2 3
Year ending March* FY08 FY09 FY09 FY10E FY11E FY12E CAGR (%)
3
(Figures in Rs. mn, except per share data) (FY09 -12E)
Net Sales 10,917 14,327 11,168 23,309 78,445 116,837 118.7%
EBITDAX 7,479 9,097 6,817 15,868 57,646 86,837 133.5%
Net Profit 388 8,034 6,870 9,848 40,322 61,116 107.2%
Margins(%)
EBITDAX 68.5% 63.5% 61.0% 68.1% 73.5% 74.3%
NPM 3.6% 56.1% 61.5% 42.3% 51.4% 52.3%

Per Share Data (Rs.)

EPS 0.0 4.2 3.6 5.2 21.3 32.2 107.2%
PER (x) NM 56.0x 65.4x 45.7x 11.2x 7.4x
* year ending changed from December to March
1. Pro-forma figures for April 2007 – March 2008
2. Pro-forma figures for January 2008 – March 2009
3. Pro-forma figures for April 2008 – March 2009

Please see the end of the report for disclaimer and disclosures. -4-
 5 CAIRN INDIA LIMITED
RESEARCH
EQUITY RESEARCH August 18, 2009

Disclaimer
This report is not for public distribution and is only for private circulation and use. The Report should not be reproduced
or redistributed to any other person or person(s) in any form. No action is solicited on the basis of the contents of this
report.

This material is for the general information of the authorized recipient, and we are not soliciting any action based upon it.
This report is not to be considered as an offer to sell or the solicitation of an offer to buy any stock or derivative in any
jurisdiction where such an offer or solicitation would be illegal. It is for the general information of clients of Indiabulls
Securities Limited. It does not constitute a personal recommendation or take into account the particular investment
objectives, financial situations, or needs of individual clients. You are advised to independently evaluate the investments
and strategies discussed herein and also seek the advice of your financial adviser.

Past performance is not a guide for future performance. The value of, and income from investments may vary because
of changes in the macro and micro economic conditions. Past performance is not necessarily a guide to future
performance.

This report is based upon information that we consider reliable, but we do not represent that it is accurate or complete,
and it should not be relied upon as such. Any opinions expressed here in reflect judgments at this date and are subject
to change without notice. Indiabulls Securities Limited (ISL) and any/all of its group companies or directors or
employees reserves its right to suspend the publication of this Report and are not under any obligation to tell you when
opinions or information in this report change. In addition, ISL has no obligation to continue to publish reports on all the
stocks currently under its coverage or to notify you in the event it terminates its coverage. Neither Indiabulls Securities
Limited nor any of its affiliates, associates, directors or employees shall in any way be responsible for any loss or
damage that may arise to any person from any error in the information contained in this report.

The analyst for this report certifies that all of the views expressed in this report accurately reflect his or her personal
views about the subject stock and no part of his or her compensation was, is or will be, directly or indirectly related to
specific recommendations or views expressed in this report. No part of this material may be duplicated in any form
and/or redistributed without Indiabulls Securities Limited prior written consent.

The information given herein should be treated as only factor, while making investment decision. The report does not
provide individually tailor-made investment advice. Indiabulls Securities Limited recommends that investors
independently evaluate particular investments and strategies, and encourages investors to seek the advice of a financial
adviser. Indiabulls Securities Limited shall not be responsible for any transaction conducted based on the information
given in this report, which is in violation of rules and regulations of National Stock Exchange or Bombay Stock
Exchange.

Indiabulls (H.O.), Plot No- 448-451, Udyog Vihar, Phase - V, Gurgaon - 122 001, Haryana. Ph: (0124) 3989555, 3989666 -5-