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CRISIL IERIndependentEquityResearch

Supreme Infrastructure India Ltd

Detailed Report

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Explanation of CRISIL Fundamental and Valuation (CFV) matrix


The CFV Matrix (CRISIL Fundamental and Valuation Matrix) addresses the two important analysis of an investment making process Analysis of Fundamentals (addressed through Fundamental Grade) and Analysis of Returns (Valuation Grade) The fundamental grade is assigned on a five-point scale from grade 5 (indicating Excellent fundamentals) to grade 1 (Poor fundamentals) The valuation grade is assigned on a fivepoint scale from grade 5 (indicating strong upside from the current market price (CMP)) to grade 1 (strong downside from the CMP).

CRISIL Fundamental Grade


5/5 4/5 3/5 2/5 1/5

Assessment
Excellent fundamentals Superior fundamentals Good fundamentals Moderate fundamentals Poor fundamentals

CRISIL Valuation Grade


5/5 4/5 3/5 2/5 1/5

Assessment
Strong upside (>25% from CMP) Upside (10-25% from CMP) Align (+-10% from CMP) Downside (negative 10-25% from CMP) Strong downside (<-25% from CMP)

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Analyst Disclosure
Each member of the team involved in the preparation of the grading report, hereby affirms that there exists no conflict of interest that can bias the grading recommendation of the company.

Disclaimer:
This Company commissioned CRISIL IER report is based on data publicly available or from sources considered reliable. CRISIL Ltd. (CRISIL) does not represent that it is accurate or complete and hence, it should not be relied upon as such. The data / report is subject to change without any prior notice. Opinions expressed herein are our current opinions as on the date of this report. Nothing in this report constitutes investment, legal, accounting or tax advice or any solicitation, whatsoever. The subscriber / user assume the entire risk of any use made of this data / report. CRISIL especially states that, it has no financial liability whatsoever, to the subscribers / users of this report. This report is for the personal information only of the authorised recipient in India only. This report should not be reproduced or redistributed or communicated directly or indirectly in any form to any other person especially outside India or published or copied in whole or in part, for any purpose.

Supreme Infrastructure India Ltd


Strong order book; gearing is a key monitorable
Fundamental Grade Valuation Grade Industry 3/5 (Good fundamentals) 5/5 (CMP has strong upside) Construction & Engineering

December 12, 2013 Fair Value CMP CFV MATRIX


Excellent Fundamentals 5
Fundamental Grade

300 207

With a strong order book of ~53 bn (provides revenue visibility for the next two-three years), focus on regional and segmental (increasing share of water and power) diversification, and low execution risk in the EPC of in-house BOT projects, Supreme Infrastructure India Ltd (Supreme Infra) is well poised for healthy growth in the next two-three years. The company also has a good portfolio of BOT assets which, once operational, are expected to generate steady cash flows and post average equity IRR of ~15%. We retain our fundamental grade of 3/5. However, the stretched working capital, high gearing and the pending equity of 1.6 bn in BOT projects are monitorables any deterioration could have an impact on our fundamental grade. Further, high dependence on the road and building segments is a risk as slowdown in investments in these segments could hamper growth. Current order book of 53 bn provides revenue visibility for the next 2.7 years The current order book provides revenue visibility for the next 30 months. The execution risk of the order book is low as orders are progressing well and orders from in-house BOT projects (~23% of the order book) have secured the necessary funding, clearances and land. Supreme Infra is also taking steps to move into newer segments such as water and power; we expect these segments to contribute more to the order book. Attractive portfolio of BOT assets; pending equity of 1.6 bn is a monitorable Supreme Infra has a good portfolio of BOT assets - we expect these projects to generate strong steady cash flows once operational and post average equity returns of 15%; moreover there is low risk in timely completion of under-construction BOT projects as land acquisition is nearly complete, financial closure (except for one) has been achieved and all approvals have been attained. However, pending equity of 1.6 bn is a key monitorable. Total funding gap of 2.3bn is manageable; gearing expected to remain high There is a total funding gap of 2.3bn over the next two years (including pending equity of 1.6 bn in the BOT projects, 2.0 bn for working capital, 1.3 bn for capex, supported by internal accruals of 2.7 bn). We see debt on the parent companys balance sheet, securitisation of operational BOT projects and promoter equity as the likely routes for funding. We expect the gearing to remain high but under 2x; it remains a key monitorable. Estimate two-year revenue CAGR of 8%; margin to decline by 50 bps in FY15 We estimate revenues to increase at a two-year CAGR of 8% to 23 bn in FY15, primarily driven by execution of the current order book. EBITDA margin is expected to decline from 15.5% in FY13 to 14.9% in FY15 due to increasing presence in East India with lesser backward infrastructure support. PAT is expected to decline to 1.0 bn in FY15 from 1.1 bn in FY13. Valuations: Current market price has strong upside CRISIL Research has used the sum-of-the-parts (SoTP) method to value Supreme Infra and arrived at a fair value of 300 per share. The contracting business has been valued by the P/E ratio, while BOT projects have been valued by the P/B value method. At the current market price, our valuation grade is 5/5.

4 3 2 1

Poor Fundamentals

Valuation Grade
Strong Downside Strong Upside

KEY STOCK STATISTICS


NIFTY/SENSEX NSE/BSE ticker Face value ( per share) Shares outstanding (mn) Market cap ( mn)/(US$ mn) Enterprise value ( mn)/(US$ mn) 52-week range ()/(H/L) Beta Free float (%) Avg daily volumes (30-days) Avg daily value (30-days) ( mn) 6237/20926 SUPREMEINF 10 16.7 3,472/56 13,259/215 265/146 1.5 42.2% 22,065 4.4

SHAREHOLDING PATTERN
100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 24.3% 6.8% 12.3% 23.4% 6.5% 12.8% 23.0% 6.5% 12.8% 22.8% 6.4% 12.9%

56.6%

57.4%

57.8%

57.9%

KEY FORECAST (STANDALONE)


( mn) Operating income EBITDA Adj net income Adj EPS- EPS growth (%) Dividend yield (%) RoCE (%) RoE (%) PE (x) P/BV (x) EV/EBITDA (x) FY11 9,185 1,565 776 46.4 61.6 0.6 22.1 35.5 4.5 1.2 4.9 FY12 15,059 2,435 918 54.8 18.2 0.6 22.9 29.2 3.8 1.0 4.5 FY13 19,870 3,085 1,121 66.9 22.1 1.0 21.0 28.1 3.1 0.8 4.3 FY14E 20,371 3,059 861 51.4 (23.2) 1.0 17.1 17.5 4.0 0.7 4.7 FY15E 23,057 3,440 986 58.9 14.5 1.0 17.0 17.0 3.5 0.6 4.5

Dec-12 Promoter

Mar-13 FII

Jun-13 DII

Sep-13 Others

PERFORMANCE VIS--VIS MARKET


Returns 1-m Supreme Infra CNX 500 -3% 4% 3-m 28% 8% 6-m 0% 7% 12-m -16% 2%

ANALYTICAL CONTACT
Mohit Modi (Director) Ravi Dodhia Bhaskar Bukrediwala Client servicing desk +91 22 3342 3561 clientservicing@crisil.com mohit.modi@crisil.com ravi.dodhia@crisil.com bhaskar.bukrediwala@crisil.com

NM: Not meaningful; CMP: Current market price Source: Company, CRISIL Research estimates

For detailed initiating coverage report please visit: www.ier.co.in CRISIL Independent Equity Research reports are also available on Bloomberg (CRI <go>) and Thomson Reuters.

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Table 1: Supreme Infra - Business environment


Product / Segment Revenue contribution (FY13) Revenue contribution (FY15E) Product / service offering Engineering, procurement and construction (EPC) 98% ~87% 2% ~13% Build, operate and transfer(BOT)

The company started as a construction material supplier, Develop and manage road projects ventured into road EPC and then gradually diversified Current portfolio: Nine BOT road projects and into other segments such as building, water, power, one bridge project. The bridge project and three bridges among others. Currently Buildings and roads road projects are operational while the remaining comprise ~85% of the order book six road projects are under development. Of the Order book break-up (as of FY13): roads (42%), projects under development, four are expected buildings (46%), water (4%), power (1%) and others (7%) to be operational by the first half of FY15 The company has projects in 13 states (primary being Maharashtra, Rajasthan, Haryana and Punjab). States from North India (including Haryana, NCR, Punjab, UP) comprise 47% of the order book, West India (primarily Maharashtra) 35% and East India (West Bengal, Assam, Bihar, Jharkhand) comprise the rest The company has gradually reduced its dependence on Maharashtra. The share of order book from Maharashtra now comprises <35% of the total order book, down from ~75% in FY11

Geographic presence

Market position

In road construction, the company has emerged as a prominent road developer in the past two to three years in an industry that is not only highly fragmented but also with a large number of organised players In buildings, the company focuses on National Capital Region (NCR) and Mumbai Metropolitan Region (MMR). In this segment, government orders comprise ~55% of the total orders and the company gets good order flow from authorities such as Delhi Urban Shelter Board, Navi Mumbai Municipal, etc. It has also developed goodwill among private developers in these regions such as Ramprastha group, and has been getting repeat orders. The industry is highly fragmented with a large number of organised players The company has superior margins than peers due to its backward integrated model

Industry growth expectation

In the building segment (primarily in NCR and MMR), we expect 8-10% decline in the number of houses sold in FY14; in the commercial category slow growth across sectors has slowed down the pace of new launches. There is deferment of construction schedules of developers in NCR and MMR. This push-back is going to result in a slower order intake for construction players such as Supreme Infra In roads, 75% of the order book is from state roads (primarily Maharashtra). In state roads, CRISIL Research expects a growth CAGR of 11% over FY13-15 to 639 bn in FY15 based on the ongoing thrust on state road development by the state governments. Maharashtra, with high economic growth, greater private sector participation than other states and higher budget expenditure of the state government than most other states, is expected to grow a notch faster. On the other hand, national highway investments are expected to remain flat at 294bn in FY15 primarily because of near-term regulatory and funding challenges for players

Sales growth (FY10-FY13 CAGR) Sales forecast (FY13-FY15E CAGR) Demand drivers Key competitors

55% 8%

NA Revenue from the BOT projects is expected to increase from 453 mn in FY13 to 3,650 mn by FY15 once four more projects are operational

Government spending on roads and infrastructure development Government spending on housing and spending by real estate developers Roads L&T, Ashoka Buildcon, C&C Construction, Gammon India, Gayatri Projects, KNR Construction, MBL Infra, NCC, etc. Buildings - L&T, Gammon India, JMC Projects, Ahluwalia Contracts, NCC, Simplex Infrastructure, Ramky Infrastructure, Pratibha Industries, Man Infraconstruction, etc.

Key risks

Dependence on roads (30% of the order book as of FY13) and buildings (50%) Traffic related risk in BOT assets - lower traffic growth and change in toll rates Presence in real estate contracting could put a strain on the companys balance sheet considering the fund crunch in the real estate industry Slowdown in government spending could affect order intake

Source: Company, CRISIL Research

Supreme Infrastructure India Ltd

Grading Rationale
EPC order book on strong footing; focusing on diversification
Strong order book provides revenue visibility for 2.7 years
Supreme Infras confirmed order book of 52.6 bn (2.7x revenues) provides good revenue visibility for the next 30 months. Besides, the company is also L1 in orders worth 12.5 bn. The order book was backed by strong order inflows of 41 bn in FY13, highest in the past three years.

Healthy order book at 2.7x revenues was driven by strong order inflows

Figure 1: Healthy order book at 2.7x revenues


( bn) 60.0 50.0 40.0 30.0 20.0 10.0 26.2 FY11 FY12 Order book FY13 H1FY14 OB/Sales (RHS) 33.0 49.2 52.6 2.8 2.5 2.2 (x) 2.7 3.0 2.5 2.0 1.5 1.0 0.5

Figure 2: Strong order inflow in FY13


( bn) 45.0 40.0 35.0 30.0 25.0 20.0 15.0 10.0 5.0 FY11 FY12 FY13 H1FY14 y-o-y growth (RHS) 21.4 22.9 40.7 14.0 15% 7% -8% 77% 100% 80% 60% 40% 20% 0% -20% -40%

Order Inflow

Source: Company, CRISIL Research

Source: Company, CRISIL Research

Roads and buildings dominate the order book


Roads and buildings continue to dominate the order book. Roads and building orders comprised ~50% and ~30% of the new orders of 41bn, respectively, in FY13.

Figure 3: Order book concentrated in roads and buildings


Roads 42% Water 4% Railway 2% Power 1%

Figure 4: Order inflow driven by roads and building orders


Roads 50% Water 8% Railway 4% Power 3%

Bridges 5%

Buildings 46%

Bridges 6%

Buildings 29%

Source: Company, CRISIL Research

Source: Company, CRISIL Research

CRISIL IERIndependentEquityResearch

Low execution risk


The execution risk is low as we understand that most of the projects are progressing well. All the in-house BOT projects, which form a significant ~23% of the order book, have received environmental and forest clearances and land acquisition is nearly complete.

Figure 5: In-house BOT projects = one-fourth of total order book


In-house BOT 23%

Total 77%

Source: Company, CRISIL Research

Diversifying to water and power segments


In a bid to reduce the high dependence on roads and buildings (~47% and ~39% of the order book respectively), Supreme Infra aims to increase its presence in the power and water segments. Since FY09, the company has gradually increased its focus on these segments. For example, the ticket size of the orders in the water projects has gradually increased from ~50mn to 1,600mn (the Bhayander water project). Similarly, in the power segment, the company has improved its ticket size and is handling projects valued at 1.1bn (turnkey contract for MSEDCL). As a result, the combined share of power and water segments has improved from 0% in FY09 to ~5% in FY13 and 7% in Q2FY14. Though the managements efforts towards diversification to the water and power segments are steps in the right direction, we opine that it would be challenging to get large orders in these segments given the competition in each of these segments. In both these segments there are established players such as BHEL, Thermax, L&T, Tata Projects, KEC International, Kalpatru, Lanco Infratech, BGR Energy HCC, IVRCL, Gammon, NCC, Soma, Patel Engg and Sadbhav. In the water segment, the company carries out capital works such as construction of reservoirs, drainage systems, etc. In the power segment, the company has primarily worked with MSEDCL, taking turnkey contracts for transmission power lines.

Supreme Infrastructure India Ltd

Table 2: Ongoing projects in water and power segments


Project segment Water Water Water Water Water Power Power Power Project name Bhayander Water Project Reservoir, Chetla, Kolkata Reservoir in Anandapur, Kolkata Drainage system in Digha, West Bengal Reservoir in Mukundapur, Kolkata Power Project, T-95 Power Project, T-79 Power Project, T-74 Turnkey contract for supply, test, transport, construction, testing of subtransmission lines in Tuljapur, Latur Turnkey contract under for supply, test, transport, construction, testing of subtransmission lines in Kalyan Turnkey contract under for supply, test, transport, construction, testing of subtransmission lines in Thane Source: Company, CRISIL Research MSEDCL 1,070 MSEDCL 690 MSEDCL 920 Construction of reservoir in Mukundapur, Kolkata Drainage system in Digha, West Bengal SPMU, ICZM Project KMC 120 410 Project type Work for carrying out capital work and maintenance of water supply scheme at Bhayander, Thane Construction of reservoir, Chetla, Kolkata Design and construction of service reservoir in Anandapur on a turnkey basis KMC KMC 160 60 Client SPML Project Cost 1,600

Geographical diversification to result in pan India presence


Supreme Infra is focussing on reducing dependence on North and West India by improving its share of orders from East India, including the states of Assam, West Bengal, Orissa, Bihar and Jharkhand. The company set up a regional office in Kolkata in 2010 and also created the position of Regional Head for faster, decentralised decision making in the eastern region. The share of orders from these states, as a proportion of total orders, has increased from 3.2% in FY11 to 9% in FY12 and to 18% in FY13. Going forward, with continuing management focus in these regions, we expect the share to further increase.

Likely moderation in EBITDA margin due to regional diversification


We expect slight moderation in the current high EBITDA margin of ~16% going forward as Supreme Infra begins to increase its share from East India. This region today has minimal backward infrastructure support with no quarries, crusher plants and asphalt plants (see Figure 6). In the past, the company has derived superior margins by executing projects in the North and West India where it had better control over resources through its backward infrastructure support. The company does not have the same level of raw material support in East India. Thus, as the share of revenues from East India rises, we expect moderation in EBITDA margin. We estimate EBITDA margin to decline by 50 bps to 15% in FY15.

CRISIL IERIndependentEquityResearch

Figure 6: East India lacks enough backward infra support

Figure 7: EBITDA margin expected to decline


( mn)
4,000 3,500 3,000 2,500 2,000 1,500 1,000 500 0 FY11 FY12 EBITDA FY13 FY14E FY15E 1,565 2,435 3,085 3,059 3,440 16.2% 15.5% 15.0% 14.9% 17.0% 18% 17% 17% 16% 16% 15% 15% 14% 14%

EBITDA margin (RHS)

Source: Company, CRISIL Research

Source: Company, CRISIL Research

Expect steady growth in order book


We expect the order book to grow at a steady 20% CAGR over the next two years, lower than 37% CAGR growth in the past two years. The slow growth in order book is expected to be driven by a decline in order inflows in the roads segment and slower growth in the building segment.

Roads: Expect a decline in order inflow


Going forward, we expect a decline in the order inflow in roads. Until now, the order inflow in roads was largely supported by EPC orders from Supreme Infras own road BOTs (with 61% of new orders in roads from in-house BOTs). However, going forward the company does not want to take BOT projects as they are capital intensive; instead it plans to focus on cash contracts. In cash contracting orders, all orders, except one currently being executed by the company, are of state highways. The company is primarily active in Maharashtra (~40% of the roads orders) which has greater private sector participation and higher budget expenditure for roads. CRISIL Research expects the investments in state highways to post an average CAGR of 11% over FY13-15 based on the ongoing thrust on state road development by state governments. Supreme Infra with its presence in state highways particularly Maharashtra, is well poised to take orders for state highways.

Supreme Infrastructure India Ltd

Buildings: Growth expected to be subdued over the next two years


We expect growth in building orders to be subdued at ~2-3% CAGR over the next two years because of the weak real estate demand in NCR and MMR (the key markets for Supreme Infra comprising 80% of the building order book). Based on our discussion with market participants, residential demand has been weak impacted by high interest rates, rising capital values and weak economic growth. In the commercial segment, the demand has been hit by low economic activity (slow growth across sectors in the past and weak global cues). Based on CRISIL Researchs discussion with leading developers, we believe the pace of new launches has slowed down and developers have pushed back their construction schedules. This push-back is going to result in a slower order intake for construction players such as Supreme Infra. CRISIL Research expects 50-60% of the planned supply in the NCR and MMR markets to be delayed.

Figure 8: Steady growth in order book


( bn)
80 70 60 50 40 30 20 10 0 FY11 FY12 Order book FY13 FY14E FY15E 10% 26.2 33.0 49.2 61.8 75.1 0% 26% 26% 22% 40% 30% 20% 49% 50% 60%

Figure 9: Order inflow to be muted


( bn)
45 40 35 30 25 20 15 10 5 0 FY11 FY12 Order Inflow FY13 FY14E FY15E 21.4 22.9 40.7 33.0 36.4 -19% 15% 7% 10% 77% 100% 80% 60% 40% 20% 0% -20% -40% -60%

y-o-y growth (RHS)

y-o-y growth (RHS)

Source: Company, CRISIL Research

Source: Company, CRISIL Research

Attractive BOT portfolio; equity funding of 1.6 bn a challenge


Expect strong cash flows and equity returns from operational projects
Supreme Infra has four operational BOT projects; Manor-Wada-Bhiwandi is the latest to commence operations in March 2013 and Q1FY14 was the first full quarter of its operations. Based on the daily cash collection data from the three projects, we have analysed the equity IRRs expected out of these projects. We believe that Nagar Kopargaon and Manor-WadaBhiwandi could generate equity IRR of 15-17%.

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Table 3: Equity IRR across projects


Project Kasheli Bridge, Maharashtra Nagar Kopargaon, Maharashtra Patiala, Malerkotla, Punjab Manor-WadaBhiwandi, Maharashtra *COD Commercial operations date
#

COD* Dec 2011 Sep 2011 Jun 2012

Concession period (yrs) 23.5 6.5 13.0

Project cost ( mn) 3,000 2,340 940

Debt ( mn) 2,000 1,755 658

Equity ( mn) 1,000 585 282

Supreme Infras share 10% 100% 100%

Daily cash collection ( mn) NA


#

Expected equity IRR NA


#

1.20 0.35

15% 11%

Mar 2013

22.8

4,300

3,225

1,075

82%

1.60

17%

Supreme Infra has a ~10% stake in the project. The company does not track details of cash collection

Source: Company, CRISIL Research

Under-construction BOTs are on track to commence operations


There is low risk in the timely completion of the six under-construction projects. All the projects except one (Kotakapur-Mukatsar in Punjab) have achieved financial closure. Execution risk is also limited as land acquisition is nearly complete and all the stretches have received forest and environment clearances. Four projects are slated to commence operations in FY15 and the remaining by FY16. According to the management, the operational BOT projects are expected to contribute ~3.7 bn to revenues in FY15; this would translate into ~13% share to the consolidated top-line in FY15.

Table 4: Status of under-construction BOT assets


Supreme Awarded Concession Project Jaipur Ring Road, Rajasthan Panvel-Indapur, Maharashtra AhmednagarKarmala-Tembhurni, Maharashtra Sangli-Shiroli, Maharashtra Haji-Manlang, Maharashtra Kotakapur-Mukatsar, Punjab Punjab PWD 18.0 PWD 22.0 PWD 22.0 Best Value Infratech (10%) Yashita (10%) and Suyog Telematics (10%) SPML Infra Ltd 74% 1,080 810 270 FC not achieved. No land to be acquired as the project involves strengthening of the existing land Source: Company, CRISIL Research 80% 800 504 296 90% 3,300 2,475 825 FC achieved; ~94% land acquired. Construction has started FC achieved; 100% land acquired. Construction has started PWD 22.0 NHAI 22.5 China State (26%) and Mahavir Infrastructure (10%) 100% 5,400 4,050 1,350 FC achieved; ~96% land acquired. Construction has started 64% 12,060 9,045 3,015 by JDA period (yrs) 28.0 Name of JV Partner Sanjose Infras share 40% Project cost ( mn) 10,450 Debt ( mn) 7,838 Equity ( mn) 2,613 Status (update) FC achieved; ~80% land acquisition done. Construction has started FC achieved; ~99% land acquired. Construction has started

Supreme Infrastructure India Ltd

Pending equity funding of 1.6 bn is a monitorable


The six under-construction BOT projects require equity funding of 1.6 bn in the next two years. Out of this, ~1 bn was earlier expected to come from leading international investor 3i (to be infused in the Panvel-Indapur project). However, 3i may not invest the balance owing to change in its views on the prospects of the infrastructure segment in India. This has increased the equity investment burden on Supreme Infra to 1.6 bn. The funding of the BOT projects is a monitorable.

Table 5: Pending equity investment of 1.6bn


Supreme Infra's share bn Operational Manor-Wada-Bhiwandi Ahmednagar-Kopargaon Patiala,Nabha,Malerkotla Kasheli Bridge Total operational Under construction Panvel-Indapur Jaipur Ring Road Ahmednagar-KarnalaTembhurni Sangli-Shiroli Haji-Malang Kotkapura-Muktsar Total (for under-construction) Total Source: Company, CRISIL Research 3.3 0.8 1.1 33.1 43.7 2.5 0.5 0.8 24.7 32.4 0.8 0.3 0.3 8.4 11.3 0.8 0.3 0.3 6.1 8.1 0.8 0.2 4.5 6.5 0.1 0.3 1.6 1.6 12.1 10.5 5.4 9.0 7.9 4.1 3.1 2.6 1.4 2.3 1.0 1.4 1.3 0.8 1.4 1.0 0.3 4.3 2.3 0.9 3.0 10.6 3.2 1.8 0.7 2.0 7.6 1.1 0.6 0.3 1.0 2.9 1.1 0.6 0.3 0.1 2.0 1.1 0.6 0.3 0.1 2.0 Project cost Debt Equity (including 3i) Equity infused (as of Q1FY14) Pending

Total funding gap of ~2.3 bn incremental debt is the most likely option; gearing expected to remain high
Supreme Infra faces a funding gap of ~2.3 bn over the next two years. Total ~4.9 bn funding is required in the next two years. Out of this, ~2.0 bn is for working capital, ~1.3 bn for capex and ~1.6 bn for the remaining equity investment in BOT projects. We have also assumed a dividend payout of 0.1bn (similar to what it paid in FY13). While ~2.7 bn is expected to be generated out of internal accruals and negligible contribution of ~0.1 bn as free cash flow to equity from operational BOTs, the remaining ~2.3 bn needs to be funded by either debt or equity. We believe debt on the parent companys balance sheet, securitisation of certain operational BOTs and promoters equity are likely routes to manage the funding gap. In our estimates, we have taken debt as the possible source of funding. The current gearing of the company is high at 2.3x (as of FY13-end). However, with support from internal accruals, we expect Supreme Infra to manage the gearing at ~2.0x. Gearing is a key monitorable for our fundamental grade.

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Table 6: Total funding gap of 2.3bn


bn Uses of funds Working capital requirement (A) Capex (B) Equity investments in BOTs (C) Dividends (D) Sources of funds Internal accruals standalone (E) Funding gap (A+B+C+D-E) 1.2 (1.0) 1.4 (1.3) (0.8) (0.6) (0.8) (0.0) (1.2) (0.6) (0.8) (0.0) FY14E FY15E

Figure 10: Gearing to remain high


(x) 3.5 3.0 2.5 2.0 1.5 1.0 0.5 0.0 FY11 FY12 Net D/E FY13E FY14E Interest coverage FY15E 1.5 2.3 2.3 2.0 2.2 2.2 1.8 1.8 1.9 3.2

Source: Company, CRISIL Research

Source: Company, CRISIL Research

Securitisation and promoter equity are other likely funding options


Though we have not assumed any equity infusion in our estimates, we feel that the company has certain operational projects which if securitised would help it to manage the funding gap. As per our analysis, Manor-Wada-Bhiwandi and Patiala-Malerkotla projects are expected to generate strong equity cash flows with IRRs of 17% and 15%, respectively. These projects are present in key commercial corridors and have recorded strong cash collection.

Table 7: Assessment of operational BOT projects


Project CRISILs Equity Expected assessment invested equity Basis of opinion of success ( mn) IRR Bhiwandi, known for its textile industry, has the largest number of power looms in the country. Many of the pharmaceuticals, retail chains, logistics companies have taken godowns on lease given the benefits in lease rentals. Bhiwandi is also the highest octroi paying city in India. Given the presence of power looms and godowns and improvement in infrastructure, traffic has been increasing Wada has industries such as pipes, chemicals, etc. Due to availability of huge land parcels at lower costs, many small-scale and medium-scale industries are setting up their units here Bhiwandi to Manor via Wada provides easy access to NH-8 which connects Maharashtra and Gujarat. Manor is a junction on NH-8, the Ahmedabad-Mumbai highway Patiala is known as a tourist destination. It has one of the highest number of vehicles per capita and is well connected by road through NH64 (Zirakpur-Patiala-Bhatinda) and NH1 (Delhi-Patiala-Amritsar) Malerkotla to Patiala provides access to NH 64, a 256-km long highway which connects Chandigarh to Bhatinda Ahmednagar, the largest district of Maharashtra, is home to 19 sugar factories. It also houses automobile, electronics, agricultural industries, etc. It has population of 0.3 mn Kopargaon is part of the Ahmednagar district. It has three sugar factories, an industrial estate with 52 small scale industries and a dairy. It has population of 0.25 mn The famous Sai Baba temple in Shirdi is located between Ahmednagar and Kopargaon This bridge connects Thane to Bhiwandi-Wada Road. It is located on the Mumbai-Agra highway (NH-3), which ensures smooth connectivity between Mumbai, Thane, Nashik and the rest of India

Manor-WadaBhiwandi (Maharashtra)

High

1,075

17%

Patiala, Malerkotla Road (Punjab)

Moderate

280

15%

Nagar Kopargaon (Maharashtra)

Low

590

~11%

Kasheli Bridge (Maharashtra)

NA High 100 (small project)

Source: Company, CRISIL Research

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Supreme Infrastructure India Ltd

Promoter equity likely, if required


We believe that the promoters of the company have the wherewithal to put in their own money, if need be, to partially meet the funding gap. The promoters have a huge built-up space of 1.2 mn sq ft, in Powai, Mumbai generating revenues of ~400 mn as lease rentals. Based on our discussion with the promoters, we believe they are willing contribute equity to the company, if required. Moreover, there have been instances of promoter equity infusion in the past as well which gives us comfort.

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CRISIL IERIndependentEquityResearch

Key risks
Concentration risk
Roads (~30% of the unexecuted order book as of FY13) and buildings (~50%) dominate Supreme Infras order book. Regionally, Delhi NCR in the North and Maharashtra in the West account for the bulk of the order book. Slower-than-assumed order inflow from these regions or untoward incidents such as riots/social unrest in these regions pose a risk to our revenue estimates.

Low traffic and change in toll rates


Supreme Infra has four operational BOT toll projects in its portfolio, one of which has recently started. Lower-than-expected traffic growth could affect our toll revenue estimate and may have an adverse impact on our valuations.

Delay in execution of BOT projects


Supreme Infra has a history of completing projects on time. However, any delay from hereon in the completion of BOT projects would lead to cost overruns and could impact our return expectations.

Presence in real estate contracting


Of the current order book, ~20%-30% is from various real estate players mainly in MMR and NCR. Considering the fund crunch in the real estate industry, there is a risk of delay in receivables which could put a strain on Supreme Infras balance sheet.

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Supreme Infrastructure India Ltd

Financial Outlook
Revenue to grow at 2-year CAGR of 8% to 23.1 bn in FY15
We expect the companys standalone revenues to increase at a two-year CAGR of 8%, slower than the past two years, to 23.1 bn in FY15. Execution of the current orders (77% of revenues in FY14 and 60% in FY15) is expected to drive growth.

Figure 11: Revenue growth to decline


( bn) 25 20 15 32% 10 5 9.2 0 FY11 FY12 Revenue FY13 FY14E FY15E 15.1 19.9 20.4 13% 3% 0% 20% 23.1 40% 72% 64% 60% 80%

Figure 12: Order intake and order intake growth


( bn) 45 40 35 30 25 20 15 10 5 0 FY11 FY12 Order Inflow FY13 FY14E FY15E 21.4 22.9 40.7 33.0 36.4 -19% 15% 7% 10% 77% 100% 80% 60% 40% 20% 0% -20% -40% -60%

y-o-y growth (RHS)

y-o-y growth (RHS)

Source: Company, CRISIL Research

Source: Company, CRISIL Research

EBITDA margin to contract by ~50 bps


In FY13, EBITDA margin declined to 15.5% due to lower margin from certain projects. We expect margin to decline to ~15.0% in FY15. As the company increases its share beyond North and West India - areas that enjoy a good backward infrastructure support - we believe resource mobilisations and overheads costs are likely to increase, leading to a contraction in margins.

EBITDA margin to contract by 50 bps to ~15% in FY15

Figure 13: EBITDA margin to moderate


( mn)

4,000 3,500 3,000 2,500 2,000 1,500 1,000 500 0

17.0%

18% 17% 16.2% 15.5% 15.0% 14.9% 17% 16% 16% 15% 15%

1,565 FY11

2,435 FY12 EBITDA

3,085 FY13

3,059 FY14E

3,440 FY15E

14% 14%

EBITDA m argin (RHS)

Source: Company, CRISIL Research

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CRISIL IERIndependentEquityResearch

PAT expected to be flat


We expect PAT to decline to 1.0 bn in FY15 from 1.1 bn in FY13 due to lower revenue growth and expected decline in margins, also depreciation and interest cost are expected to remain high. EPS is expected to decline to 58.9 in FY15 from 66.9 in FY13.

Figure 14: PAT and PAT margin


( mn) 1,200 1,000 800 600 400 200 776 0 FY11 FY12 PAT FY13 FY14E FY15E 918 1,121 861 986 8.5% 6.1% 5.6% 4.2% 4.3% 9% 8% 7% 6% 5% 4% 3% 2% 1% 0%

Figure 15: EPS and EPS growth


( ) 80 70 60 50 40 30 20 10 0 FY11 FY12 EPS FY13 FY14E FY15E 46.4 54.8 66.9 51.4 58.9 -23.2% 0% -20% -40% -60% 18.2% 22.1% 61.6% 80% 60% 40% 14.5% 20%

PAT m argin (RHS)

y-o-y growth (RHS)

Source: Company, CRISIL Research

Source: Company, CRISIL Research

RoCE and RoE to decline but remain healthy


Due to the expected decline in margin and the investment in BOT projects (which will not fetch returns in the initial years), RoCE is likely to decline from 21.0% in FY13 to 17% in FY15. RoE is expected to decline from 28.1% in FY13 to 17% in FY15.

Figure 16: RoE and RoCE to remain healthy despite decline


(%) 40 35 30 25 20 15 10 5 0 FY11 FY12 RoCE FY13 FY14E RoE FY15E 22.1 22.9 17.5 21.0 17.1 17.0 17.0 35.5 29.2 28.1

Source: Company, CRISIL Research estimates

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Supreme Infrastructure India Ltd

Management Overview
CRISIL's fundamental grading methodology includes a broad assessment of management quality, apart from other key factors such as industry and business prospects, and financial performance.

Capable second generation


Supreme Infra has an experienced management headed by promoter-director Mr Bhawanishankar Sharma. Mr Sharma has an experience of more than three decades in the construction sector. He is supported by his two sons - Mr Vikram Sharma and Mr Vikash Sharma. Mr Vikram Sharma is the managing director of the company. He joined the company in 1998 and has turned it around from a materials supplier to a leading EPC player in the country. He holds a bachelors degree in civil engineering from Mumbai University and has been on the board for the past 15 years. Mr Vikas Sharma is a whole time director with the company. He holds a masters degree in management studies from Mumbai University. He has been with the company for the past 15 years and heads the finance and accounts division.

Promoters are highly experienced and have strong domain expertise

A closely-held company
Supreme Infra is a closely-held company with family members and friends of promoters comprising the senior management. Some regional heads of Supreme Infra are college friends of Mr Vikram Sharma. The day-to-day decision making is decentralized at the regional level and are taken by the regional heads. However, major decisions are taken by the promoters in co-ordination with the senior management.

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CRISIL IERIndependentEquityResearch

Corporate Governance
CRISILs fundamental grading methodology includes a broad assessment of corporate governance and management quality, apart from other key factors such as industry and business prospects, and financial performance. In this context, CRISIL Research analyses the shareholding structure, board composition, typical board processes, disclosure standards and related-party transactions. Any qualifications by regulators or auditors also serve as useful inputs while assessing a companys corporate governance. Overall, corporate governance at Supreme Infra meets the desired levels supported by an experienced board and adequate disclosure levels.

Board composition
The board is chaired by Mr. Bhawanishankar Sharma, promoter director. Prominent name in the board includes Mr. V.P. Singh, currently, a member of the Governing Board of Rashtriya Gramin Vikas Nidhi (RGVN); he holds a masters degree in commerce, a bachelors degree in law, and is a Certified Associate of Indian Institute of Bankers. He is a former CMD of IFCI and a former independent director of ONGC.

Board processes
The boards processes are well structured. All the necessary committees - audit, remuneration and investor grievance are in place. The audit committee is chaired by an independent director, Mr V.P. Singh. It consists of five members including four independent directors. The committee met six times in FY13 and witnessed 100% attendance from three independent directors.

Auditor qualification
The company has two auditors (Walker, Chandiok & Co; Shah & Kathariya). The auditor has made the same qualifications in FY11, FY12 and FY13 regarding delayed payment of statutory dues such as provident fund, sales tax etc. paid.

Public disclosure levels - Average


The companys quality of public disclosure can be considered average judged by the level of information and details furnished in the annual report, websites and other publicly available data. The company does not disclose details of the projects under each segment or details of ongoing execution of key projects. The company however provides information such as order book size and order inflow across categories in its investor presentation on its website.

Disclosure levels are average

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Supreme Infrastructure India Ltd

Valuation

Grade: 5/5

We have valued Supreme Infra by the sum-of-the-parts (SoTP) method. The contracting business has been valued based on the price-to-earnings ratio (P/E) method, while BOT projects have been valued based on the price/book method. We have valued Supreme Infras contracting business at 177 (3.0x to FY15E EPS of 58.9) per share while BOT projects are valued at 123 per share. Based on the current market price, the valuation grade is 5/5, which indicates that the market price has strong upside from the current levels.

Table 8: Valuation SoTP


Supreme Infrastructure India Ltd (Supreme Infra) Contracting business FY15E EPS PE Multiple Value Per Share BOT projects Supreme Infrastructure BOT Holding (P) Ltd - 3 projects Value to Supreme Infra ( mn) Value per share for Supreme Infra Supreme Infrastructure BOT (P) Ltd - 4 Projects Value to Supreme Infra ( mn) Value per share for Supreme Infra () Other projects - 3 projects Value to Supreme Infra ( mn) Value per share for Supreme Infra Total Value of BOT Projects Total Value of BOT Projects Total Value Per Share Current Market Price Per Share Source: CRISIL Research mn per share mn per share 1,145 63 2,143 123 300 207 mn per share 143 9 mn per share 856 51 per share Times per share 59 3 177

Valuation of BOT projects


We have used the P/B method to value the BOT projects, as most of the BOT projects are in the early stage of development and cash flows are a few years away. For the operational projects, we have assigned a multiple of 1.0x to the equity investments, while for projects under development, we have applied a multiple of 0.5x. We continue using 0.7x for the recently started (one quarter old) Manor-Wada-Bhiwandi project. Also, we have not assigned any value to one of the projects Kotakpur-Mukatsar - which has not yet received financial closure. Based on this, the valuation of Supreme Infra comes to 2,143 mn, implying a per share value of 123 per share. Supreme Infras BOT projects are housed under Supreme Infra (3 projects) as well as two separate holding companies, Supreme Infrastructure BOT Holding (P) Ltd (4 projects) and Supreme Infrastructure BOT (P) Ltd (3 projects). Supreme Infra holds 100% stake in Supreme Infrastructure BOT (P) Ltd and 51% stake in Supreme BOT Holding (P) Ltd (remaining 49% was diluted to 3i).

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CRISIL IERIndependentEquityResearch

Table 9: BOT project valuation


Supreme Infras Project Supreme Infrastructure BOT Holding (P) Ltd - 3 projects Ahmednagar-Karnala-Tembhurni Nagar Kopargaon SangliShiroli Total (including 3i) Supreme Infras stake Total excluding 3i (A) Supreme Infrastructure BOT (P) Ltd - 4 Projects Manor-Wada-Bhiwandi Patiala Malerkotla Haji Manlang Kotakapur-Mukatsar Less: Debt raised at BOT level Total (B) (C) Panvel Indapur (D) Kasheli Bridge (E) Jaipur Ring Road Total (A+B+C+D+E-F) Source: CRISIL Research 1,330 100 760 0.5 1.0 0.5 1,075 280 220 NA 0.7 1.0 0.5 NA 753 280 110 NA 1,000 143 665 100 380 2,143 1,350 590 825 0.5 1.0 0.5 675 590 413 1,678 51% 856 equity investment P/BV (x) Total value ( mn)

Figure 17: One-year forward P/E band


( ) 450 400 350 300 250 200 150 100 50 0
Dec-08 Jun-09 Dec-09 Jun-10 Dec-10 Jun-11 Dec-11 Jun-12 Dec-12 Jun-13 Dec-13

Figure 18: One-year forward EV/EBITDA band


( mn) 14,000 12,000 10,000 8,000 6,000 4,000 2,000 0

Dec-08

Dec-09

Dec-10

Dec-11

Dec-12

Suprem e 4x

2x 5x

3x 6x

EV

1x

2x

3x

4x

Source: NSE, CRISIL Research

Source: NSE, CRISIL Research

18

Dec-13

Jun-09

Jun-10

Jun-11

Jun-12

Jun-13

Supreme Infrastructure India Ltd

Figure 19: P/E premium / discount to CNX 500


0% -10% -20% -30% -40% -50% -60% -70% -80% -90% -100%
Jun-09 Jun-10 Jun-11 Jun-12 Dec-08 Dec-09 Dec-10 Dec-11 Dec-12 Jun-13 Dec-13

Figure 20: P/E movement


(Times) 7 6 5 4 3 2 1 0 -1 std dev +1 std dev

Dec-08

Dec-09

Dec-10

Dec-11

Dec-12

Premium/Discount to CNX 500 Median premium/discount to CNX 500

1yr Fwd PE (x)

Median PE

Source: NSE, CRISIL Research

Source: NSE, CRISIL Research

CRISIL IER reports released on Supreme Infrastructure India Ltd


Fundamental Date 04-Sep-12 16-Nov-12 07-Mar-13 12-Jun-13 04-Sep-13 12-Dec-13 Nature of report Initiating coverage Q2FY13 result update Q3FY13 result update Q4FY13 result update Q1FY14 result update Detailed Report grade 3/5 3/5 3/5 3/5 3/5 3/5 Fair value 595 595 595 432 320 300 Valuation grade 5/5 5/5 5/5 5/5 5/5 5/5 CMP (on the date of report) 273 270 204 204 173 207

Dec-13

Jun-09

Jun-10

Jun-11

Jun-12

Jun-13

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CRISIL IERIndependentEquityResearch

Company Overview
Incorporated in 1983, Supreme Infra is a Mumbai-based construction company. Having started as a materials supplier, over time the company has evolved as an EPC player focusing on segments such as roads and buildings. It has a backward integrated model and owns four quarrying mines, six crushing plants, and 13 RMC plants. Its clientele includes PWD Maharashtra, NHAI, Jaipur Development Authority (JDA), Sadbhav Engineering, K Raheja, Hiranandani Constructions and MMRDA (a state government entity).

Table 10: Milestones


1983 2002 2002 2003 2004 2006 2006 2007 2008 2008 2008 2009 2010 2011 2012 2013 Incorporated as Supreme Asphalts Pvt. Ltd Changed name to Supreme Infrastructure Pvt. Ltd Received first contract for roads and bridges in Amravati by MSRDC Set up first RMC plant in Powai, Mumbai Received first order for construction and widening of Western Express Highway from MMRDA Received order from Sadbhav Engineering for four-laning of Bhiwandi-Nasik Highway Established quarrying and crushing plant, RMC plant in Padgha, Nasik (Maharashtra) Received first order from NHAI worth 1 bn for balance work at NH-4, links four major cities of India (Mumbai, Pune, Bengaluru and Chennai) Came out with an IPO, offered ~3.5 mn shares to raise ~380 mn Forayed into railway and received orders worth 289 mn from Central Railway Forayed into housing project and received an order to construct low-cost housing in Thane, Mumbai Received a 2.4 bn order to construct a multi-storied complex in Haryana Awarded first BOT project worth 12.1 bn from NHAI to construct a four-lane road in Panvel-Indapur Received award for Fastest Growing Construction Company (small category-2nd rank) at the 9th Construction World - Annual Awards 2011 Commencement of tolling operations for Patiala Nabha Malerkotla (PNM) road project Manor-Wada-Bhiwandi toll operations commenced from March 2013

20

Supreme Infrastructure India Ltd

Annexure: Financials (Standalone)


Income statement
( mn) Operating income EBITDA EBITDA margin Depreciation EBIT Interest Operating PBT Other income Exceptional inc/(exp) PBT Tax provision Minority interest PAT (Reported) Less: Exceptionals Adjusted PAT FY11 9,185 1,565 17.0% 246 1,319 408 911 49 (17) 944 184 760 (17) 776 FY12 15,059 2,435 16.2% 284 2,151 915 1,236 28 1,264 346 918 918 FY13 19,870 3,085 15.5% 336 2,749 1,192 1,557 41 (24) 1,573 477 1,096 (24) 1,121 FY14E 20,371 3,059 15.0% 376 2,683 1,475 1,208 22 1,230 369 861 861 FY15E 23,057 3,440 14.9% 431 3,009 1,634 1,375 33 1,409 423 986 986

Balance Sheet
( mn) Liabilities Equity share capital Reserves Minorities Net worth Convertible debt Other debt Total debt Deferred tax liability (net) Total liabilities Assets Net fixed assets Capital WIP Total fixed assets Investments Current assets Inventory FY11 FY12 64.0 55.5 18.2 18.2 FY13 31.9 26.7 22.1 22.1 FY14E 2.5 (0.8) (23.2) (23.2) FY15E 13.2 12.5 14.5 14.5 Sundry debtors Loans and advances 72.0 63.9 94.9 61.6 Cash & bank balance Marketable securities Total current assets Total current liabilities Net current assets Intangibles/Misc. expenditure 17.0 8.5 35.5 22.1 25.4 16.2 6.1 29.2 22.9 27.0 15.5 5.6 28.1 21.0 24.7 15.0 4.2 17.5 17.1 20.2 14.9 4.3 17.0 17.0 20.5 Total assets 2,578 74 2,652 1,191 1,170 2,886 1,463 335 39 5,893 2,281 3,612 7,454 2,815 107 2,923 3,163 1,414 4,963 4,052 318 48 10,794 5,363 5,431 11 11,527 3,021 101 3,123 3,195 1,707 6,790 5,386 430 17 14,330 5,805 8,525 15 14,857 3,383 0 3,384 3,992 1,953 7,255 5,685 423 17 15,334 5,969 9,366 15 16,757 3,592 0 3,593 4,790 2,211 8,528 6,123 267 17 17,146 6,762 10,384 15 18,782 167 2,651 2,818 250 4,299 4,549 88 7,454 167 3,294 3,461 7,958 7,958 108 11,527 167 4,351 4,518 10,235 10,235 104 14,857 167 5,173 5,340 11,313 11,313 104 16,757 167 6,119 6,287 12,391 12,391 104 18,782 FY11 FY12 FY13 FY14E FY15E

Ratios
Growth Operating income (%) EBITDA (%) Adj PAT (%) Adj EPS (%) Profitability EBITDA margin (%) Adj PAT Margin (%) RoE (%) RoCE (%) RoIC (%) Valuations Price-earnings (x) Price-book (x) EV/EBITDA (x) EV/Sales (x) Dividend payout ratio (%) Dividend yield (%) B/S ratios Inventory days Creditors days Debtor days Working capital days Gross asset turnover (x) Net asset turnover (x) Sales/operating assets (x) Current ratio (x) Debt-equity (x) Net debt/equity (x) Interest coverage (EBITDA/Interest) Interest coverage (EBIT/Interest) 47 83 115 129 3.2 4.0 3.6 2.6 1.6 1.5 3.8 3.2 34 126 120 123 4.3 5.6 5.4 2.0 2.3 2.2 2.7 2.3 31 104 125 148 4.9 6.8 6.6 2.5 2.3 2.2 2.6 2.3 35 104 130 160 4.3 6.4 6.3 2.6 2.1 2.0 2.1 1.8 35 105 135 160 4.3 6.6 6.6 2.5 2.0 1.9 2.1 1.8 4.5 1.2 4.9 0.8 2.8 0.6 3.8 1.0 4.5 0.7 2.3 0.6 3.1 0.8 4.3 0.7 3.1 1.0 4.0 0.7 4.7 0.7 3.9 1.0 3.5 0.6 4.5 0.7 3.4 1.0

Cash flow
( mn) Pre-tax profit Total tax paid Depreciation Working capital changes Net cash from operations Cash from investments Capital expenditure Investments and others Net cash from investments Cash from financing Equity raised/(repaid) Debt raised/(repaid) Dividend (incl. tax) Others (incl extraordinaries) Net cash from financing Change in cash position Closing cash 315 1,545 (24) 198 2,033 180 335 3,409 (25) (250) 3,135 (17) 318 2,277 (39) (24) 2,213 113 430 1,078 (39) (0) 1,039 (7) 423 1,078 (39) 1,039 (156) 267 (452) (679) (1,132) (565) (1,981) (2,546) (540) (2) (542) (637) (798) (1,435) (640) (798) (1,438) FY11 960 (146) 246 (1,782) (722) FY12 1,264 (326) 284 (1,828) (606) FY13 1,598 (480) 336 (3,011) (1,558) FY14E 1,230 (369) 376 (849) 388 FY15E 1,409 (423) 431 (1,174) 243

Quarterly financials
( mn) Net Sales Change (q-o-q) EBITDA Change (q-o-q) EBITDA margin PAT Adj PAT Change (q-o-q) Adj PAT margin Adj EPS () Q2FY13 3,471 -20% 607 -13% 17.5% 194 194 -25% 5.6% 11.6 Q3FY13 5,503 59% 950 56% 17.3% 359 359 85% 6.5% 21.5 Q4FY13 6,534 19% 827 -13% 12.7% 285 285 -21% 4.4% 17.0 Q1FY14 4,415 -32% 720 -13% 16.3% 221 221 -22% 5.0% 13.2 Q2FY14 3,115 -29% 491 -32% 15.8% 88 88 -60% 2.8% 5.2

Per share
FY11 Adj EPS () CEPS Book value Dividend () Actual o/s shares (mn) 46.4 61.1 168.3 1.3 16.7 FY12 54.8 71.8 206.7 1.3 16.7 FY13 66.9 87.0 269.9 2.0 16.7 FY14E 51.4 73.9 319.0 2.0 16.7 FY15E 58.9 84.6 375.5 2.0 16.7

Source: CRISIL Research

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CRISIL IERIndependentEquityResearch

Focus Charts
Revenue and y-o-y growth
( bn) 25 20 15 32% 10 5 9.2 0 FY11 FY12 Revenue FY13 FY14E FY15E 15.1 19.9 20.4 13% 3% 0% 20% 23.1 40% 72% 64% 60% 80%

Strong order intake in FY13


( bn) 45 40 35 30 25 20 15 10 5 0 FY11 FY12 Order Inflow FY13 FY14E FY15E 21.4 22.9 40.7 33.0 36.4 -19% 15% 7% 10% 77% 100% 80% 60% 40% 20% 0% -20% -40% -60%

y-o-y growth (RHS)

y-o-y growth (RHS)

Source: Company, CRISIL Research

Source: Company, CRISIL Research

EBITDA and EBITDA margin


( mn) 4,000 3,500 3,000 2,500 2,000 1,500 1,000 500 0 FY11 FY12 EBITDA FY13 FY14E FY15E 1,565 2,435 3,085 3,059 3,440 16.2% 15.5% 15.0% 14.9% 17.0% 18% 17% 17% 16% 16% 15% 15% 14% 14%

EPS and EPS growth


( ) 80 70 60 50 40 30 20 10 0 FY11 FY12 EPS FY13 FY14E FY15E 46.4 54.8 66.9 51.4 58.9 -23.2% 18.2% 22.1% 61.6% 80% 60% 40% 14.5% 20% 0% -20% -40% -60%

EBITDA margin (RHS)

y-o-y growth (RHS)

Source: Company, CRISIL Research

Source: Company, CRISIL Research

RoCE and RoE


(%) 40 35 30 25 20 15 10 5 0 FY11 FY12 RoCE FY13 FY14E RoE FY15E 22.1 22.9 17.5 21.0 17.1 17.0 17.0 35.5 29.2 28.1

Share holding pattern


100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 24.3% 6.8% 12.3% 23.4% 6.5% 12.8% 23.0% 6.5% 12.8% 22.8% 6.4% 12.9%

56.6%

57.4%

57.8%

57.9%

Dec-12 Promoter

Mar-13 FII

Jun-13 DII

Sep-13 Others

Source: Company, CRISIL Research

Source: Company, CRISIL Research

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CRISIL IERIndependentEquityResearch

CRISIL Research Team


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Largest and most comprehensive database on Indias debt market, covering more than 15,000 securities Largest provider of fixed income valuations in India Value more than 53 trillion (USD 960 billion) of Indian debt securities, comprising outstanding securities Sole provider of fixed income and hybrid indices to mutual funds and insurance companies; we maintain 12 standard indices and over 100 customised indices Ranking of Indian mutual fund schemes covering 70 per cent of assets under management and 4.7 trillion (USD 85 billion) by value Retained by Indias Employees Provident Fund Organisation, the worlds largest retirement scheme covering over 60 million individuals, for selecting fund managers and monitoring their performance

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Largest independent equity research house in India, focusing on small and mid-cap companies; coverage exceeds 125 companies Released company reports on 1,442 companies listed and traded on the National Stock Exchange; a global first for any stock exchange First research house to release exchange-commissioned equity research reports in India Assigned the first IPO grade in India

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CRISIL Limited CRISIL House, Central Avenue, Hiranandani Business Park, Powai, Mumbai 400076. India Phone: +91 22 3342 3000 | Fax: +91 22 3342 8088 www.crisil.com
CRISIL Ltd is a Standard & Poor's company