Swan Energy Ltd

Detailed Research Report

C.M.P: Target Price: Date:

Stock Data:

Rs. 118.85 Rs. 390.00 April 3rd, 2012

BUY
SYNOPSIS

Sector: Face Value Rs. 52 wk. High/Low (Rs.) Volume (2 wk. Avg.) BSE Code Reuters Code Bloomberg Code Market Cap (Rs.In mn) Share Holding Pattern

Construction & Energy 2.00 119.40/56.00 314000 503310 SWAN.BO SWAN:IN 11290.75

We initiated coverage of Swan Energy Ltd & set a target price of Rs.390.00 for Medium term to Long term Investment. Swan Energy Limited (SEL), a 100 year old company listed on Mumbai Stock Exchange with a market capitalisation of ~Rs 11.29bn. Owned and managed by Dave and Merchant families who took over the company from J.P Goenka Group in 1990. SEL, originally in textile business had discontinued Textile Operations in 2002 as a strategic move to convert all its premises into Lucrative Real Estate projects considering their prime location in the heart of Mumbai City. SEL with large area of land available, ventured into property development in 2005.

1 Year Comparative Graph

BSE SENSEX Swan Energy Ltd

To futher diversify its operations, SEL has ventured into Energy sector and is setting up a 3 MMTPA LNG Floating Storage & Regasification unit (FSRU) and has plans to increase the capacity to 10 MMTPA in a phased manner.

SYNOPSIS
SEL is currently engaged in developing real estate projects in prime locations of Mumbai, with total saleable area of 1.78 mn sq. ft in Kurla (IT park) and Sewri (residential complex) in alliance with Piramal Group (Piramal Holdings), now known as Peninsula Land Ltd. Cash flows from Real Estate Development planned to be used for new business of FSRU projects and Infrastructure. SEL has plans to use gas based power generation owned by it for merchant sale by leveraging gas availability from FSRU. The company has plans to develop more FSRU projects at different locations along coastline. The company wants to leverage FSRU gas availability and strategic relationships with GSPC, BPCL and HPCL to develop gas market for automotive applications. The company has set up a state-of-art-textile Process House at Ahmedabad, Gujarat. The plant has been built on a 4 acre plot with an installed production capacity of 1.25 lakhs meters per day. The company has imported state-of-art machineries for the plant from Germany, Belgium, Italy and Austria. SEL has initiated the process for ISO 9001: 2008, Oekotex 100 and GOTS certification for textile business. During the quarter ended 31st December 2011, the company posted robust growth in Net Operating Revenue and the same is increased by 50.33% to Rs. 275.07 million.


Investment Highlights Sustainable ENERGY for growth: Real estate business Companys Turnaround Factor: Swan Energy (SEL) would see a terrific upmove in growth trajectory of its revenues and earnings on the back of revenue generation from Real estate business, which is at inflection point with the impending completion of its major real estate projects in the near term to generate strong cash flows in FY13. SEL has mills located at Sewri and Kurla, where the company has under taken real estate development. The companys two projects , namely Ashoka Gardens ( residential project) and Peninsula Technopark (commercial property) are nearing completion having total saleable area of 1.78mn sq. ft.The company has appointed reputed developer M/s Peninsula Land as the project manager for both the projects. A commercial IT park Peninsula Technopark at Kurla consisting of 4 buildings with 0.88mn sq. ft. of saleable area. The construction work of 3 buildings have been completed and for remaining 1 building it is at the advanced stage and is expected to be completed by June 12. A residential complex Ashok Gardens at Sewri consisting of 2 towers of 23 floors, each housing 3 wings with 0.90 mn sq. ft. of saleable area, have nearly been completed and is ready for possession. Proposed development of plot in Goa and Mysore SEL had acquired 104 acre plot in 2009 to develop an IT SEZ and had obtained necessary permission from the state of Goa, but due to change in government policies all SEZ projects have been de-notified. Since SEL had acquired the plot from a private seller, the company now plans to develop the same in to a mix of residential and hospitality projects.

The possible developable area under this project is ~ 4.5 million square feet. Though the project is at an nascent stage, we have not factored the same in our estimates, but we believe that the project has strong potential owing to the locational advantage as the plot is situated near to the proposed airport. SEL is also in negotiation to jointly develop a residential project with 187 acre plot of land in Mysore. The company is planning to jointly develop the Mysore plot in to residential bungalows. Completion of scheduled real estate projects to generate strong cash flows SELs is expected to see an accelerated growth in revenues and profitability in FY13 on the back of completion of real estate projects. The improved financial performance would generate strong cash flows in the near term which would enable SEL to fuel the funding of its growth plans in existing real estate business and lucrative new business segment of energy and ports. Deployment of real estate cash flows into energy generation activities: The company has formulated plans to deploy the cash flows that are generated from its real estate activities into energy generation activities. SELs foray into newer lucrative business segment of Floating storage cum regasification unit (FSRU) and development of ports which would provide sustainable revenue and earnings growth for the company going ahead. Entry into FSRU and high margin port business with margin in the range of 65%70% would provide stability of revenues and fuel growth in profitability. Investment in Floating storage cum regasification unit (FSRU) Project SEL is investing in a Floating storage cum regasification unit (FSRU) to leverage opportunity in the LNG business segment. The key objectives of the FSRU project are to provide LNG import facilities in the quickest possible time and provide regasification at competitive rates. The FSRU project would provide a stable new revenue stream for SEL.

The Beautiful Swan: Textile business to leverage on Swan brand name: SEL has set up a State of the Art Fabric Processing Unit in Narol, Ahmedabad with a capacity to process 1.25 lacs meters per day. A continuous processing plant set up with the machines from Germany, Italy, Belgium and Austria. The project has been sanctioned under Technology Upgradation Funds (TUFS), which would keep the cost of debt at a relatively lower level owing to interest subsidy provided by the Government of India. SEL commenced the processing unit in the year 2011-12. The revenue and profitability growth are also expected to be strengthened from the commissioning of its textile processing unit in Narol at Ahmedabad, which would leverage on its strong brand image of Swan, which has been in existence since last 100 years. Swan is a household name as its products catered to the needs of men, women and children, namely Dhotis, Sarees, Dress Materials & Suitings/Shirtings of fine & Superfine qualities from natural & synthetic fibers, cotton, polyester, viscose, nylon etc. With multiple triggers for growth, SEL is on the road to a sustainable growth in revenue and earnings over the next five years. Visibility of revenue from business streams other than real estate is going to be a crucial key growth driver: SEL is generating small amount of revenue from its textile trading business, and real estate business is currently giving excellent cash flows. However, we believe this will fetch cash flows only till the revenues from said real estate projects are accounted for. Companys investment in FSRU will fetch revenues in next 1-2 years once the project is commissioned and fully operational.

Key Financials: Particulars Revenue Rev.Growth (%) EBIDTA EBITDA Margin (%) Profit Before Tax PBT Margin (%) Net Profit PAT Margin (%) No. of Shares(in Millions) EPS (INR) EPS Growth (%) P/E Ratio (x) EV/Sales (x) EV/EBITDA (x) ROE (%) ROCE (%) Book Value (Rs.) P/BV FY10 5372.91 568.01 10.57 546.34 10.17 389.01 7.24 95 4.09 22.97 29.04 2.10 19.89 31.58 7.50 12.97 9.17 FY11 4093.57 -23.81 794.56 19.41 679.94 16.61 438.17 10.70 95 4.61 12.64 25.78 2.76 14.22 26.59 9.67 17.35 6.85 1.74 FY12E 1963.97 -52.02 1012.59 51.56 684.63 34.86 472.19 24.04 95 4.97 7.76 23.92 5.75 11.16 22.27 5.79 22.32 5.33 2.84 FY13E 10948.23 457.45 4415.34 40.33 3462.19 31.62 2312.13 21.12 95 24.34 389.66 4.89 1.03 2.56 52.17 26.85 46.65 2.55 0.94

Debt Equity Ratio (x) 3.21 (Unless stated otherwise all figures are in Rs. mn)

Valuation Conclusion:

Income from real estate projects would lead to cashflow generation and stupendous jump in revenues and earning in FY13. We have not factored earnings from the FSRU and port segment as these businesses are at a nascent stage and post commissioning would provide an upside to our estimates. SELs FY13 earnings are expected to increase five-fold from an EPS of Rs 4.97 in FY12E to Rs 24.34 in FY13E. With such strong earnings growth over the next financial year and investments in sunrise business segments, we expect the stock to get re-rated as the market has yet to factor the strong earnings growth and potential earnings from planned investments. SEL appears to be trading at very cheap valuations of 4.89x its FY13E earnings of Rs 24.34 and 1.03x on FY13 mcap/sales basis. We expect the stock to get re-rated and give a valuation of the stock at 16x FY13E earnings with a target price of Rs 390 providing strong upside to the current market price. In a Nutshell: We expect the EPS to rise five-fold from Rs 4.97 in FY12E to Rs 24.34 in FY13E. Accelerated earnings growth in FY13 would lead to significant re-rating of the stock as it appears to be trading at very attractive valuations of 4.89x FY13E earnings of Rs 24.34. On the basis of EV/Sales, the stock trades at 5.75 x for FY12E and 1.03 x for FY13E. On the basis of EV/EBITDA, the stock trades at 11.16 x for FY12E and 2.56 x for FY13E. Price to Book Value of the stock is expected to be at 5.33 x and 2.55 x respectively for FY12E and FY13E. We expect that the company will keep its growth story in the coming quarters also. We recommend a strong BUY in this particular scrip with a target price of Rs.390 for Medium term to Long term investment.

Financial Update: Nine Months Performance: Nine Months Results Update as at Q3 FY12: Swan Energy Ltd has reported net operating revenue of Rs 772.99 million for the nine months ended on December 31, 2011 as against Rs 428.35 million in the same period last year, a rise of 80.46%. It has reported net profit of Rs. 83.80 million for the nine months ended on December 31, 2011 as against Rs. 66.25 million in the same period last year, an increase of 26.49%. It reported earnings of Rs.0.88 per share. Quarterly Results - (Rs in mn) As At Q3FY12 9 months 772.99 170.29 83.80 83.80 0.88 Q3FY11 9 months 428.35 69.95 66.25 66.25 0.70 YoY % change 80.46 143.45 26.49 26.49 25.71

Net Operating Revenue EBIDTA PBT PAT Basic EPS

Segmental Revenue: During the quarter, On YoY basis the textile revenues increased significantly from Rs.377.56 mn in nine months ended at 31.12.2010 to Rs.420.87mn in the nine months ended as at Q3 FY12, i.e., an increase of 10.29%, whereas the revenues from the construction segment increased significantly by 85.58% to Rs.352.11 mn. During the year, net capital employed in the textile segment and construction segment increased by 22.62% and 36.70% respectively.

(Rs in mn)

Segment wise Revenue

Segmental Revenue (9 months ended as at) Q3 FY12 420.87 352.11 Q3 FY 11 377.56 50.78 % Growth 10.29 85.58

Capital Employed (9 months ended as at) Q3 FY12 372.62 1359.03 Q3 FY 11 303.87 994.14 % Growth 22.62 36.70

Segmental Revenue Textile Construction

Break up of Expenditure(9months)

Quarterly Performance:

Q3 FY12 Results Update Swan Energy Ltd has reported net operating revenue of Rs 275.07 million for the quarter ended on December 31, 2011 as against Rs 182.98 million in the same quarter last year, a rise of 50.33%. It has reported net profit of Rs. 25.17 million for the quarter ended on December 31, 2011 as against Rs. 18.82 million in the same quarter last year, an increase of 33.74%. It reported earnings of Rs.0.26 per share. Quarterly Results - (Rs in mn) As At Q3FY12 3 months 275.07 45.82 25.17 25.17 0.26 Q3FY11 3 months YoY % change

Net Operating Revenue EBIDTA PBT PAT Basic EPS

182.98 20.02 18.82 18.82 0.20

50.33 128.87 33.74 33.74 30.00

Segmental Revenue: During the quarter, On YoY basis the textile revenues increased significantly from Rs.149.20 mn in Q3 FY11 to Rs.168.61 mn in Q3 FY12, i.e., an increase of 11.51%, whereas the revenues from the construction segment increased significantly by 68.28% to Rs.106.45 mn. During the year, net capital employed in the textile segment and construction segment increased by 22.62% and 36.70% respectively.
(Rs in mn)

Segment wise Revenue Segmental Revenue Textile Construction

Segmental Revenue Q3 FY12 168.61 106.45 Q3 FY 11 149.2 33.77 % Growth 11.51 68.28

Capital Employed Q3 FY12 372.62 1359.03 Q3 FY 11 303.87 994.14 % Growth 22.62 36.70

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Break up of Expenditure

Segment Revenue

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Profitability Projections (Rs in mn):

Financials Net Sales / Income from Operations Other Operating Income Revenues Expenses EBIDTA EBIDTA (%) Interest Depreciation PBT Tax PAT Equity F.V EPS (INR) CMP PE

FY10 5348.04 24.87 5372.91 4804.90 568.01 10.57 19.01 2.66 546.34 157.33 389.01 190.00 2.00 4.09

FY11 4031.06 62.51 4093.57 3299.02 794.56 19.41 98.99 15.63 679.94 241.77 438.17 190.00 2.00 4.61

FY12E 1902.26 61.71 1963.97 951.38 1012.59 51.56 285.87 42.09 684.63 212.44 472.19 190.00 2.00 4.97 118.90 23.92

FY13E 10883.44 64.79 10948.23 6532.89 4415.34 40.33 908.95 44.20 3462.19 1150.06 2312.13 190.00 2.00 24.34 118.90 4.89

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Balance Sheet: (Rs in mn)

Particulars (Rs.in.mn) Equity share capital Reserves & Surplus Net worth Secured loans LIC Loan J&K Loan Loan funds Project Advances Net Deferred Tax Liability Total Liabilities Gross block Less: Depreciation Net Block Capital work in Progress Investments Net Current Assets Current Assets, Loans & Advances Less: Current Liabilities & Provisions Net Current assets Total Assets

FY10 190.00 1041.76 1231.76 2381.95

FY11 190.00 1457.85 1647.85 1738.43

FY12E 190.00 1930.04 2120.04 1624.74 1000.00

FY13E 190.00 4242.17 4432.17 1159.68 1500.00 1500.00 2659.68 18.34 8610.19 2901.21 116.25 2784.96 906.50 1003.11 4033.62 118.00 3915.62 8610.19

2381.95 1570.84 2.44 5186.99 338.07 15.27 322.80 397.87 2132.06 4368.19 2033.93 2334.26 5186.99

1738.43 1125.30 18.34 4529.92 1050.41 29.96 1020.45 0.00 1373.11 2775.87 639.51 2136.36 4529.92

2624.74 3387.30 18.34 8150.42 2455.67 72.05 2383.62 2148.10 1820.61 3012.57 1214.48 1798.09 8150.42

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Charts: Net Operating Revenue & PAT

P/E Ratio(x)

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EV/EBITDA(x)

Debt Equity Ratio

15

P/BV

COMPANY BACKGROUND Swan Energy Ltd. originally incorporated in 1909 as Swan Mills Ltd a manufacturer and marketer of cotton and polyester textile products in India was taken over by the Dave & Merchant family from the J.P.Goenka group in 1990 and changed its name to Swan Energy Ltd (SEL) in December, 2008. SEL is a diversified player with interests in Energy, Real Estate & Textile sector. The company's core business includes trading of fabric & development of properties. The textile manufacturing business was completely stopped in 2002 and the company with its large area of land available in the heart of Mumbai had ventured into property development in 2004 with a tie up agreement with Peninsula Land Ltd for various real estate activities including development of its mill land in Mumbai. SEL is currently developing 2 property projects in Mumbai with total saleable area of 1.78 mn sqft in Kurla (IT park) and Sewri (residential complex) in alliance with Piramal Group Piramal Holdings), now known as Peninsula Land Ltd.

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The construction work at Kurla & Sewri for Residential & Commercial projects are about to end in the current fiscal, while it has acquired land in Goa for further development. The company has formulated plans to deploy the cash flows that are generated from its real estate activities into energy based projects. SEL has re-started its textile manufacturing activity, with the vision leveraging on its successful brand image, to cater to the booming demand of Indian textiles from global players by setting up a textile unit at Ahmedabad in Gujarat. Mr. Navinbhai Dave is the non executive chairman of the company. The board comprises of 9 members, of which 5 are the non executive independent directors. Mr. Nikhil Merchant, the Managing Director and Mr. Paresh Merchant, the executive director, have been associated with the company for more than 16 years. The majority of other directors have experience of more than 30 years in varied fields. BOARD OF DIRECTORS & KEY MANAGEMENT PERSONNEL: Name Navinbhai Dave Designation Chairman Nikhil V Merchant Managing Director Profile First Indian to be conferred with Coat of Arms by British Queen Elizabeth II in 94. Conferred with Distinguished Honorary Alumni of the University of South Carolina Aiken in 2000. Widespread experience in several sectors of the Indian economy. BS in Textile Engineering from the Philadelphia College of Textiles and Science; and completed Management Education Programme from IIM Ahmedabad. Associated with SEL for last 16 years and responsible for its operations and the business activities of the group companies Commerce Graduate and certified with Management Education Programme from IIM Ahmedabad Over 30 years of rich experience in financing and structuring. B.A in Economics from the university of Mumbai and MBA in Finance from University of Rochester,

Paresh V Merchant

Executive Director

Shobhan Diwanji Director

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P. S. Teckchandani

Director

P. Suvaganam

Director

R.K.Sukhdevsinhji

Director

NY, USA. Associated as Director, Capital Market Group, Lazard India and as Senior Consultant with Tata Economic Consultancy services. Over 45 years of experience in the Oil & Gas industry. Worked with Indian Oil Corporation (IOC) for 30 years and then with Essar Oil as the CEO of the refinery project at Jamnagar and whole time Director of Essar. Over 36 years of experience in the Oil industry Was associated with IOC for 33 years, involved in international financing, reporting, risk identification and management of JV and subsidiary companies. Over 50 years of rich experience in all functional areas related to the Oil and Gas Sector. Graduate in Economics. Ex- Chairman & MD of BPCL, EX-MD of Essar oil Limited.

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Business Overview: The traditional business of the company includes trading of fabric and has recently forayed into the energy sector. The company is developing LNG regasification unit in Pipavav, Gujarat with a capacity of 4.5 mmtpa and it has also acquired 99.98% interest in Cardinal Energy & Infrastructure Pvt. Ltd. Energy: Swan Energy Ltd (SEL) is an emerging energy company committed to following a sustainable growth path. Led by a powerful vision, the company continues to look beyond traditional power sources for a lower carbon energy future. SEL has in place a strong pipeline of innovative energy projects offering exposure to vast growth opportunities in the Indian energy sector. Earlier known as Swan Mills Ltd, it has changed its name to Swan Energy Ltd in order to focus itself towards Indian energy sector. LNG Floating Storage & Regasification Unit (FSRU):

SEL is investing in a Floating storage cum regasification unit (FSRU) to leverage opportunity in the LNG business segment. The Company is developing LNG regasification unit in Pipavav, Gujarat with a capacity of 3 MMTPA of LNG imports to ensure adequate availability of gas in required time frame. The unit would provide regasification facilities at a cost which is competitive to current cost being charged at existing terminal of Petronet. The detailed project report (DPR) has been submitted for approval and the company is planning to invite EPC bids for planned port facilities.

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Term sheets / MOUs have been signed with off takers/major oil companies. Agreements / Contracts with LNG suppliers are under finalization. Detailed discussions are in process with all potential FSRU suppliers.

Floating Storage & Regasification Unit (FSRU) Project Parameters: Sr. 1 Parameter Capacity Broad Details 3MMTPA of LNG. Expansion 10MMTPA

2 3

Location Gas send out rate

Pipavav Normal-11,5MMSCMD Peak-13.5 MMSCMD

4 5

Gas pressure Regas process

95 bar Closed loop water based integrated with GPPC

6 7 8

Revenue model Project cost Schedule

Tolling terminal INR 2800 Crores Commissioning by end 2014 or early 2015

Ports : The company has also entered into a joint venture agreement with a leading company of India to develop two ports in Gujarat. Generally companies in the port business have operating margins in the range of 65%-70%. Entry into the port segment would lead to improvement of operating margins going ahead.

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1. Real Estate Projects The company is currently developing its mill land situated in Sewri and Kurla in Mumbai into residential and commercial properties respectively. The total saleable area is 1.78 mn sq.ft. The development activities at Sewri & Kurla are under progress, where a Mega Residential complex is under construction at Sewri under the name 'Ashok Garden', comprising of two towers, where as Kurla, Commercial complex are under construction, having four buildings under the name 'Peninsula Techno-park'. Possession of three out of four buildings have been handed over on completion of the construction. It expects completion of this both projects during the current fiscal.

Particulars Name of the Project Plot Area Saleable Area Schedule

Project at Sewri Ashok Gardens 48,927 sq. m. 0.90 mn sq. ft. Completed Except for the upper most floors remodeling work

Project at Kurla Peninsula Technopark 44,781 sq. m. 0.88 mn sq. ft. Completion June 12

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Work Completed as on 28.02.12

Tower I & II

Building A Completed Building B Completed Building C Completed Building D 4.24 lac sq. ft. Under construction. Work complted up to 8 Floor in the 10 stories building. Expected completion by June 2012. Peninsula Land Limited has been appointed as Project Manager for this project.
th

Possession already given for the ready area which is 90 % of the total project. Balance work is scheduled to be completed before March 2012 Peninsula Land Limited has been appointed as Project Manager for this project.

In addition to these, the company owns land in Goa & is considering for the development of the same in short period.

IT Park at Bangalore: SEL has acquired through its subsidiary company, Cardinal Energy & Infrastructure Pvt. Limited, a 3.5 lakh sq ft IT park building in Whitefield, Sadramangala Village, EOIZ Industrial Area, Bangaluru which would generate a monthly lease income of Rs 1.25 crore per month from July 2012 onwards. This is a ready infrastructure building with a long term leasing arrangement with a reputed MNC. Software Tech Project at Hyderabad: SEL has also acquired through its subsidiary company, Cardinal Energy & Infrastructure Pvt Ltd, a 4.8 lacs sq. ft. Software Technology Project building in Guchibowli, Hyderabad.

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This is a ready infrastructure building with a long term leasing arrangement with a reputed company under negotiation. The lease income of Rs. 2.16 Cr per month will commence w.e.f. October 2012.

2. Textile Business SEL has re-started its textile manufacturing activity, with the vision leveraging on its successful brand image, to cater to the booming demand of Indian textiles from global players. The entire textile sector globally was severally affected at the time of slowdown & fierce price competition. With the turnaround in the Global Economy scenario, demand for the textiles products from India has increased recently & is likely to deliver a sustainable growth in the coming time. The company has set up a state of art textile Process House in the heart of Ahmedabad at Narol in Gujarat. The plant has been built on a 4 acre plot with an installed capacity of 1.25 lakhs meters per day. The company has imported state ofart machineries for the plant from Germany, Belgium, Italy and Austria. The company has also initiated the process for ISO 9001: 2008, Oekotex 100 and GOTS certification. This facility comprises of continuous processing machines like: Sinigeing/Desizing Bejimac, Belgium Continuous Scouring and Bleaching range Karl menzel maschinenfabrik, GMBH, Germany Chain cum chainless Mercerising range Goller Textilemaschinen, GMBH, Germany Continuous Dyeing and E control and Cold Pad batch from A. Monforts Textilmaschinen GMBH & Co.KG, Germany 12 Colour Rotary Printing Machine MHM Sebduckmachinen, Austria Peaching / Sueding /Emerizing Xetma Vollenweider GMBH, Germany Calendar Ramisch Gaurneri, Italy

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Subsidiary Company: In January 2010, the Company had acquired 99.98% interest in Cardinal Energy & Infrastructure Pvt. Ltd. Risk Associated Real Estate Segment Availability of credit is the most important factor for the companies engaged in Real Estate sector. The restriction on availability of credit would paralyze the companies ongoing projects or their future growth plans. Textile Segment Textile sector plays an important role in contribution of GDP to the tune of 14%, where a part of the revenues are collected from export earnings too. Hence any slowdown in the Global economy & changes in the regulations by the Government would impact the overall scenario of the sector. High competition from unorganized sector. Duty concessions to importers.

Energy Segment:

Huge capital expenditure Long gestation period for generating revenues

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Industry Overview Energy Sector:

Energy is an essential building block of economic development. Other than power sector, demand for natural gas is likely to be strong considering the advantages of natural gas over other fuels. Gas Market Drivers: Gas demand in India is known to be supply driven Growth in demand dependant on infrastructure in the form of gas pipelines and LNG imports Gas pricing in India converging towards international pricing Indias commitment to reduce GHG emission intensity of its GDP by 25% by year 2020 Demand for natural gas outstripping supply: There continues to exist a yawning demand supply gap in Indias natural gas sector. Compared to approximately 223 mmscmd of demand in FY10, the Supply stood at 163mmscmd, which was catered by a combination of domestic supplies (127 mmscmd) and imports as LNG (36MMSCMD). Power sector accounts for the maximum demand (46%) followed by fertilizers (27%) and industries. As domestic production is unlikely to keep pace with domestic demand, a significant requirement for LNG imports is emerging. India has no option but to go in for large scale LNG imports if it is to guide its power sector toward a fundamental shift in fuel choice. The 2 existing LNG terminals in India, Petronet LNG and Shell Hazira are working at more than 90% capacity utilization. Thus the Indian market offers the maximum potential in terms of growth of natural gas demand across sectors and hence is an attractive destination for LNG import.

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Real Estate: The Indian economy has witnessed robust growth in the last few years and is expected to be one of the fastest growing economies in the coming years. Demand for commercial property is being driven by India's economic growth. Real estate in India contributes about 5 per cent to India's gross domestic product (GDP). The total revenue generated in 2010-11 stood at US$ 66.8 billion. Demand is expected to grow at a compound annual growth rate (CAGR) of 19 per cent between 2010 and 2014Tier 1 metropolitan cities are projected to account for about 40 per cent of this. Growing requirements of space from sectors such as education, healthcare and tourism provide opportunities in the real estate sector. FDI of more than US$ 9 billion was infused in real estate in the last decade.

The foreign direct investment (FDI) up to 100 per cent is allowed with Government's permission for developing townships and settlements New home loan borrowers of up to Rs 1.5 million (US$ 30,477) will get Rs 14,865 (US$ 302) as interest subsidy from the Government, on the condition that the cost of the house should not exceed Rs 2.5 million (US$ 50,798)

Allowing 100 per cent FDI under the automatic route in development of Special Economic Zones (SEZ), subject to the provisions of Special Economic Zones Act 2005 and the SEZ Policy of the Department of Commerce

Investments: Real estate emerged as the popular sector for private equity funds who invested US$1,700 million in this sector during 2011. Private equity in real estate projects will fetch considerable returns by next year-end or early 2013, as per KPMG. Real estate plays an important role in the Indian economy. This sector happens to be the second largest employer after agriculture and is expected to grow at the rate of 30 per cent over the next decade. The size of the Indian real estate market is expected to touch US$ 180 billion by 2020.

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Textile Sector: The Indian textile industry is one of the major sectors of Indian economy largely contributing towards the growth of the country's industrial sector. Textiles sector contributes to 14 per cent of industrial production, 4 per cent of National GDP and 10.63 per cent of country's export earnings. The opening up of the sector through liberalization polices set up by the Indian Government have given the much-needed thrust to the Indian textile industry, which has now successfully become one of the largest in the world. The total foreign exchange earnings from the textile exports during the current financial year (April-July 2011) was registered at US$ 10.32 billion against US$ 7.75 billion during the corresponding period of financial year 2010-11. India has the potential to increase its textile and apparel share in the world trade from the current level of 4.5 per cent to 8 per cent and reach US$ 80 billion by the end of the year 2020. Recent Developments:

Along with the increasing export figures in the Indian Apparel sector in the country, Bangladesh is planning to set up two Special Economic Zones (SEZ) for attracting Indian companies, in view of the duty free trade between the two countries. The two SEZs are intended to come up on 100-acre plots of land in Kishoreganj and Chattak, in Bangladesh.

Italian luxury major Canali has entered into a 51:49 joint venture with Genesis Luxury Fashion, which currently has distribution rights of Canali-branded products in India. The company will now sell Canali branded products in India exclusively.

With the increase in investments in the Indian textile sector, the subsequent increase in the industrial production, and the positivity observed by the Textile sector has resulted in progress and development of the sector.

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The companys reentrance into manufacturing directly by setting up of an art Process House at Gujarat will help company to capture the market potential and would enable SEL to leverage its textile business on the brand image of SWAN.

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Disclaimer: This document prepared by our research analysts does not constitute an offer or solicitation for the purchase or sale of any financial instrument or as an official confirmation of any transaction. The information contained herein is from publicly available data or other sources believed to be reliable but do not represent that it is accurate or complete and it should not be relied on as such. Firstcall India Equity Advisors Pvt. Ltd. or any of its affiliates shall not be in any way responsible for any loss or damage that may arise to any person from any inadvertent error in the information contained in this report. This document is provided for assistance only and is not intended to be and must not alone be taken as the basis for any investment decision.

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Firstcall India Equity Research: Email info@firstcallindia.com C.V.S.L.Kameswari Pharma U. Janaki Rao Capital Goods A. Rajesh Babu FMCG H.Lavanya Oil & Gas Ashish.Kushwaha Diversified A.Nagaraju Infrastructure & Real Estate Firstcall India also provides Firstcall India Equity Advisors Pvt.Ltd focuses on, IPOs, QIPs, F.P.Os,Takeover Offers, Offer for Sale and Buy Back Offerings. Corporate Finance Offerings include Foreign Currency Loan Syndications, Placement of Equity / Debt with multilateral organizations, Short Term Funds Management Debt & Equity, Working Capital Limits, Equity & Debt Syndications and Structured Deals. Corporate Advisory Offerings include Mergers & Acquisitions(domestic and cross-border), divestitures, spin-offs, valuation of business, corporate restructuring-Capital and Debt, Turnkey Corporate Revival Planning & Execution, Project Financing, Venture capital, Private Equity and Financial Joint Ventures Firstcall India also provides Financial Advisory services with respect to raising of capital through FCCBs, GDRs, ADRs and listing of the same on International Stock Exchanges namely AIMs, Luxembourg, Singapore Stock Exchanges and other international stock exchanges. For Further Details Contact: 3rd Floor,Sankalp,The Bureau,Dr.R.C.Marg,Chembur,Mumbai 400 071 Tel. : 022-2527 2510/2527 6077/25276089 Telefax : 022-25276089 E-mail: info@firstcallindiaequity.com www.firstcallindiaequity.com

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