March 29, 2008| Logistics

Initiating coverage

Allcargo Global Logistics (ALLGLO)
Emerging global cargo consolidator …
Allcargo Global Logistics is a leading logistics service provider involved in MTO (multimodal transport operations), CFS (container freight stations) and handling of project cargo. The company plans to capitalise on India’s fast-growing international trade by expanding its freight services through multiple modes of transport. We expect a 13.67% CAGR in consolidated revenues and 29.39% CAGR in net profit over CY07-09E.

Current price Rs 840 Potential upside 11%

Target price Rs 934 Time Frame 12 months

PERFORMER
Analyst’s Name

Siddhartha Khemka

siddhartha.khemka@icicidirect.com

World’s second largest MTO
Allcargo is India’s largest MTO. It also became the world’s second largest NVOCC (Non Vessel Operating Common Carrier) by acquiring Belgiumbased ECU Line in June 2006. The acquisition complements Allcargo’s MTO business and enables it to leverage ECU Line’s network to service clients across the world.

Sales & EPS trend
2500 2000 Rs cr 1500 1000 500 60 50 30 20 10 0 FY06 9MCY06 CY07 CY08E CY09E Net Sales (Rs cr) (LHS) EPS (Rs) (RHS) Rs . 40

Expanding CFS/ICD operations to create a pan-India network
The company has an established CFS at JNPT, besides two new CFS at Chennai and Mundra. It has entered into a JV with Concor to set up an ICD (inland container depot) at Dadri, Greater Noida, to be operational by Jan 2009. It is also planning to set up ICDs at Indore, Nagpur, Hyderabad, Ahmedabad and Bangalore at a capex of Rs 250-Rs 300 crore.

0

Deal with Blackstone to fund capex
In order to fund its expansion, it has entered into a stake sale deal with Blackstone Group LP, a global private equity fund. Allcargo will dilute 10.39% of its equity in a mix of warrants and fully & compulsorily convertible debentures.

Stock metrics Bloomberg code Reuters code Face Value Promoters holding Market Cap 52 Week H/L Sensex Average volume Comparative return metrics Stock return 3M Allcargo Global -6% TCI -45% Gateway Distriparks -34% Aegis Logistics -40%

AGLL.IN ALGL.BO Rs 10 79.60% Rs 1,791 crore 1095 / 610 16,015 60,742

Valuations
At the current price of Rs 840, the stock is trading at 20.83x it CY08E consolidated earnings (EPS) of Rs 40.33 and 17.50x its CY09E EPS of Rs 47.99. On an EV/EBIDTA basis, the stock is available at 10.80x CY08E earnings and 8.36x CY09E earnings. Though we are upbeat on the future prospects of the company, we believe current valuations have already factored in near-term growth opportunities. We estimate the company’s CY08 EBIDTA at Rs 153.72 crore. We arrive at a target price of Rs 934, valuing the stock at 12x its CY08E earnings on an EV/EBIDTA basis. We rate the stock a PERFORMER. Exhibit 1: Key Financials Year to Dec 31 9MCY06 Net Sales (Rs cr) 895.41 Adj Net Profit (Rs cr) 60.35 EPS (Rs) 29.75 P/E (x) 28.23 Price/Book (x) 4.32 EV/EBIDTA (x) 21.75 NPM (%) 6.70 RoNW (%) 15.29 RoCE (%) 16.29 CY07 1643.05 71.61 31.98 26.26 3.87 16.12 4.34 14.72 18.00 CY08E 1901.05 90.30 40.33 20.83 3.07 10.80 4.75 14.76 16.93 CY09E 2122.93 119.89 47.99 17.50 2.32 8.36 5.65 13.28 16.18

6M -7% -32% -30% 18%

12M -23% 42% -27% 66%

Price trend
1400 1300 1200 Share Price (Rs) 1100 1000 900 800 700 600 500 400 Apr-07 Feb-07 Jun-07 Aug-06 Aug-07 Jun-06 Dec-06 Dec-07 Feb-08 Oct-06 Oct-07

Absolute Sell

Target Price

Absolute Buy

Source: Company, ICICIdirect Research ICICIdirect | Equity Research

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Company Background
Allcargo Global Logistics (AGL) is a leading logistics service provider involved in MTO (multimodal transport operations) and handling of project cargo. It started operations in 1993 as a shipping and freight-forwarding agency. It transitioned to a MTO in 1998 by offering logistics services such as consolidation of LCL (less-than-container load) and FCL (full container load) cargoes for exporters and importers. In 2003, it integrated forward into CFS operations in order to offer value added services to clients. It owns CFS (container freight station) near the Jawaharlal Nehru Port Trust, Mumbai, and also in Chennai and Mundra. To strengthen its MTO business globally, Allcargo acquired Belgium-based ECU Line NV in 2006. In January 2007, the company acquired Hindustan Cargo from Thomas Cook to enter the growing airfreight business. Share holding pattern Share holder Promoters Institutional investors Other investors General public Promoter & Institutional holding trend
90 80 70 60 50 40 30 20 10 0 79.6 79.6 79.6 79.6

% holding 79.60 12.37 3.98 4.05

(%)

12.6

12.7

12.8

12.4

Q1CY07

Q2CY07 Q3CY07 Promoters Institutional investors

Q4CY07

Exhibit 2: Business Model

Allcargo Global Logistics

CFS / ICD

MTO

Infrastructure Support

NVOCC

Project Cargo

Air Freight

Exports LCL FCL
Source: Company, ICICIdirect Research

Imports LCL FCL

CFS: Container Freight Station ICD: Inland Container Depot MTO: Multimodal Transport Operations NVOCC: Non vessel owning container carrier LCL: Less than container load FCL: Full container load

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INVESTMENT RATIONALE
India’s largest multimodal transport operator
Allcargo is India’s largest MTO offering consolidation and freight services for export and import cargo, utilising multiple modes of transport like sea, road and rail under a single multimodal transport document. Currently, MTO revenues are dominated by LCL cargo, but the company plans to increase its focus on high-margin FCL cargo as there is no labour cost involved in stuffing and de-stuffing containers at the CFS. (TEU: Twenty-foot equivalent unit, standard size of a container). Exhibit 3: Growth in MTO throughput (standalone volumes handled in TEUs)
50000 45000 40000 35000 (TEUs) 30000 25000 20000 15000 10000 5000 0 FY03 FY04 FY05 FY06 FCL
Source: Company, ICICIdirect Research
9431 7486 11412 12481 13509 12077 9662 10388 15430 19828 13410 24442 16223 18818

Allcargo is India’s largest MTO offering consolidation and freight services for export and import cargo

Volumes handled by the domestic MTO business to grow from 13,410 TEUs in CY07 to 18,818 TEUs in CY09E

9388

11798

9MCY06 LCL

CY07

CY08E

CY09E

World’s second largest NVOCC player
Allcargo acquired ECU Line, the world’s second largest NVOCC based in Antwerp, Belgium in a phased manner between 2005 and 2006. (NVOCC: Non Vessel Operating Common Carrier, a freight forwarder that dose not owns a shipping vessel, but books space on ships and sell it in smaller quantities, consolidating freight for transport in standard containers). The ECU acquisition, an all-cash deal for €22.8 million in June 2006, propelled Allcargo into the world’s second largest NVOCC player. The acquisition is expected to complement Allcargo’s MTO business as it can leverage ECU Line’s network to service clients across the world. ECU Lines has more than 120 offices in 60 countries and a franchisee and agent network across 203 locations in 120 countries.

The world’s second largest NVOCC player after acquiring ECU Line

Initiatives to improve ECU Line’s performance
Post the acquisition, Allcargo has retained the management and employees of ECU Line and has been taking several steps to boost the latter’s margins. ECU Line has an EBITDA margin of around 4% – 5 % and net margin of around 2% – 2.5%, which are lower than that of Allcargo’s MTO business, which has EBIDTA margins of around 7% and net margins of 6%. However, the MTO business, both domestic and international, is not capital intensive. This business is working-capital neutral and very little capital equipment is required. As a result, the return on equity and return on capital employed are very high. 3|Page

Tie-up with Econocaribe, US-based NVOCC
Earlier, ECU Line had a tie-up with OTS Logistics for the US-EU corridor. Allcargo had no presence in the US. In order to increase its presence, it tied up with Econocaribe to provide services in the US, Latin America and other parts of the world. Econocaribe is the third largest MTO player in the US. We believe, this cooperation will create synergies for both companies in terms of wider reach both into and out of US to regions like Europe, Asia and Middle East. This tie-up is likely to increase the volumes handled by ECU and Allcargo.

Allcargo has taken several initiatives to increase ECU Line’s operational efficiency and improve margins

Outsourcing of business processes to India
Allcargo has tied-up with WNS in India to outsource back end business processes and support functions like accounts, budgetary review, documentation, etc. This process will not only reduce manpower at ECU Line, but also help reduce the cost of operations. We believe lower cost of support operations in India would result in huge cost savings for ECU Line over the next few years.

Set-up global freight buying office in Hong Kong
The company has set up a global freight buying office in Hong Kong to centralise the process and gain preferential rates from shipping lines on the back of higher committed volumes. Allcargo expects to negotiate for better rates with shipping lines as it will be able to buy at bulk for ECU Line as well as itself as a group. We expect this to lead to savings of 1% to 1.5% in freight costs by 2010. Exhibit 4: Un-audited financials of ECU Line (CY07) Particulars Income from Operations Operating Expenses Staff Cost Other Expenditure EBIDTA Other Income Interest Depreciation Exceptional Items - Depreciation write back Provision for Taxation Profit after Tax Minority Interest Adj. Net Profit EBIDTA margins (%) NPM (%)
Source: Company, ICICIdirect Research

Rs crore 1276.81 863.07 231.87 127.34 54.54 2.19 5.02 9.28 2.96 12.53 26.95 8.37 18.58 4.27 1.45

ECU Line’s revenues are 6.8x Allcargo’s standalone revenues of Rs 321.80 crore for CY07

ECU Line has an EBITDA margin of around 4% – 5 % and net margin at around 2% – 2.5%, lower than Allcargo’s MTO business which has EBIDTA margins of around 7% and net margins of 6%

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CFS at India’s largest container handling port
Allcargo offers integrated logistics and port related support services through its CFSs. The CFS' main role is to facilitate temporary storage, stuffing and destuffing of containers, Customs clearance of cargo and maintenance of container units. The two primary revenue streams under this business are ground rent and handling & storage charges. CFS revenues are driven primarily by imports; hence shipping lines are the main customers in this business. Allcargo has an established CFS at JNPT, India’s largest container port, which handles almost 60% of the total container traffic. It began operations in April 2003 and currently has a capacity to handle 120,000 TEUs per annum. Besides JNPT, the company entered new locations in May 2007. It has a CFS at Chennai and Mundra, each having an annual capacity of handling 50,000 TEUs. Exhibit 5: Current CFS capacity Operation Region commenced Mumbai CFS April 2003 Chennai CFS (Phase I) May 2007 Mundra CFS May 2007 Total
Source: Company, ICICIdirect Research

Allcargo has established CFSs at JNPT, Chennai and Mundra with a total capacity to handle 220,000 TEUs per annum

Total Area (acres) 19 25 16 60

Developed area (acres) 19 9 9 37

Capacity pa (TEUs) 120,000 50,000 50,000 220,000

Container traffic in India increased at a 14.5% CAGR over FY02-07. Overall EXIM trade witnessed a 10% CAGR during the same period. Going ahead, the Indian Port Association (IPA) estimates an 18% CAGR in container cargo from 5.4 million TEUs in FY07 to 12.5 million TEUs in FY12 due to increasing EXIM volumes, time and cost efficiency of handling containers and increasing domestic trade. We believe that this growth augurs well for Allcargo, which is present in the entire logistics value chain for containers. Exhibit 6: Growth in containerised cargo in India
14 12 TEUs in million 10 8 6 4 2 0 FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY12E

16% CAGR

Growth in movement of containerised cargo in India to benefit Allcargo

Source: IPA, ICICIdirect Research

5|Page

Expanding the CFS/ICDs to create a pan-India network
Allcargo plans to create a pan-India network of CFSs and ICDs to tap high volumes as well as provide better logistic services. The company has already acquired land at Pithampur (near Indore) and Bangalore. It has also taken land in Nagpur and Hyderabad on a lease basis, while it is still looking for a suitable land at Ahmedabad. The Indore ICD would be the first to be developed and is expected to be operational by July 2008. The company has also entered into a joint venture with Container Corporation of India (Concor) to share its ICD at Dadri, Greater Noida. It is also expanding its CFS at Chennai, by developing the surplus land to increase the capacity from 50,000 TEUs to 85,000 TEUs. Exhibit 7: Proposed expansion of the CFS/ ICD network Total Area Location Expected (acres) Pithampur, Indore July 2008 14 Chennai Phase II Dec 2008 14 Dadri, Greater Noida Jan 2009 10 Nagpur Dec 2009 45 Hyderabad Dec 2009 30 Ahmedabad Dec 2009 NA Bangalore Dec 2009 12
Source: Company, ICICIdirect Research

Capacity (TEUs) 30,000 34,000 84,000 NA NA NA NA

Aggressive expansion plan to create a pan-India network of CFSs and ICDs

The diversification will help Allcargo to cater to the increasing trade from other ports locations, while reducing its dependence on JNPT. We expect revenues from CFS / ICD business to show 18.29% CAGR over CY07-09E from Rs 94.28 crore to Rs 131.93 crore. This is on back of the growth is volumes handled from 142,025 TEUs to 220,600 TEUs in CY09E. Exhibit 8: Volumes handled by CFS / ICD to see manifold increase
250000 200000 150000 100000
142,025 151,500 220,600

(TEUs)

50000 0
26,466 57,736

83,214

CFS / ICD revenue to witness a 18.29% CAGR over CY07-09E on back of increase in volumes handled

77,035

FY04

FY05

FY06

9MCY06

CY07

CY08E

CY09E

Source: Company, ICICIdirect Research

6|Page

JV with Concor to set up ICD at NCR
As part of its expansion plan, Allcargo has entered into a joint venture with Concor for setting up an inland container depot (ICD) at Dadri, Greater Noida in Uttar Pradesh. Allcargo will own 51% of the joint venture, while the rest would be owned by Concor. The facility to be set up on a 10 acre land belonging to Concor is likely to be operational by Jan 2009 and would have a capacity to handle 84,000 TEUs pa. The ICD will have a rail sliding connecting it to the western ports.

ICD at Dadri, Greater Noida to be operational by Jan 2009 in joint venture with Concor

Deal with Blackstone to fund capex
The company has laid out an aggressive growth strategy, entailing an investment of around Rs 350 – 400 crore over the next few years. In order to fund its various expansion initiatives, it entered into a stake sale deal with Blackstone Group LP in March 2008. Allcargo issued 1,081,081 6% fully & compulsorily convertible debentures (FCCD), 1,513,514 warrants and 1,000 equity shares. Post conversion, the deal which is linked to the company’s performance, is likely to fetch Rs 242.43 crore to Rs 295.40 crore. The conversion into the same number of shares will be done on completion of 18 months from the date of issue. Apart from the capex (Rs 250 – 300 crore) for expanding its CFS and ICD business, Allcargo plans to invest up to Rs 100 crore for the purchase of cranes under TansIndia, its newly acquired infrastructure equipment handling business. Exhibit 9: Blackstone deal structure Number of Instrument shares FCCD Equity Shares Warrants* 1,081,081 1,000 1,513,514 Conversion Price (Rs) 934 1,109 1,209 1,284 Conversion Price (Rs) 934 934 934 - 1284 Total Amount (Rs cr) 100.97 0.09 141.36 – 194.34 Total Amount including FCCD & Equity shares (Rs cr) 242.43 268.92 284.05 295.40

* Conversion Price is linked to consolidated EBIDTA of CY08

EBDITA CY08 (Rs cr) Up to 190 190 - 200 200 - 210 > 210

Amount payable (Rs cr) 141.36 167.85 182.98 194.34

Deal with global fund Blackstone to raise Rs 242.43 – 295.40 crore by diluting 10.39% equity

Source: Company, ICICIdirect Research

While this stake sale will result in a dilution of up to 10.39% of the equity post conversion, we believe that this equity infusion will help Allcargo fund its growth plans. The company is also likely to benefit from the vast management experience the global fund will bring on board.

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Merger of TransIndia to enhance infrastructure support services
To expand its business under the infrastructure support services, Allcargo acquired the projects and equipment division of promoter-owned company, TransIndia Freight Services Private Ltd, in October 2007. The project and equipment division, which accounted for 95% of TransIndia’s business, was merged with Allcargo Global with retrospective effect from January 1, 2007. TransIndia owns and operates a diverse mix of assets providing support services to the logistics and infrastructure space. The division is primarily engaged in the business of contracting transportation of containers and project related cargo; hiring out cranes, trailers & other infrastructure equipments as well as port handling (general cargo & containerised cargo). Exhibit 10: Equipment owned by TransIndia (as on Dec 2007) Equipment Number Cranes 18 Forklifts 40 Reach stackers 6 Trailers 233
Source: Company, ICICIdirect Research

Merger of TransIndia is likely to enhance Allcargo’s infrastructure services and project cargo business

The company has a fleet of 18 cranes with capacities ranging from 25 – 750 tonnes. These cranes are used in industrial manufacturing and infrastructure sectors such as power, oil and gas refineries, wind energy, steel and cement. The fleet is fairly diversified and includes multiple crane types like all terrain cranes, crawler cranes, telescopic cranes and lattice boom cranes from well known manufacturers.

Foray into air cargo operations
Allcargo diversified its product offering by entering into air freight forwarding business. It bought Hindustan Cargo, a subsidiary of Thomas Cook for Rs 8.91 crore in January 2007 in an all cash deal. Hindustan Cargo specialises in air freight transport business and has 9 offices in India and 120 agents worldwide. We believe that this acquisition supplements Allcargo’s existing strength in ocean freight logistics. Allcargo plans to synergize the operations of both the companies achieving economies of scale by expanding in airfreight and sea freight. Air Freight Transport is usually used for high value items and perishable goods for increased safety and faster delivery. Around 10% of India's EXIM trade is through air. Going ahead, this segment will not only diversify but also add to overall revenues. Acquisition of Hindustan Cargo to diversify into air freight transport business

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RISK & CONCERNS
Margins hit by ECU Line acquisition
Allcargo’s standalone margins are higher compared to that of subsidiary, ECU Line. This is mainly due to ECU Lines’ MTO /NVOCC model, which is a highvolume, low-margin business. As a result, Allcargo’s high margins (before the acquisition) dropped sharply during CY06. Going forward, we expect consolidated operating margins to improve from 7.35% in CY07 to 12.14% in CY09E. Margin expansion will be driven by various restructuring exercises undertaken by the company to improve ECU Line’s margins. Post restructuring, we believe increasing contribution from the new CFS/ICDs (likely to be operational in CY10) would drive margin expansion. Exhibit 11: Profitability margins to remain flat

25 20 15 (%) 10 5 0

21.48

17.64 8.92 7.35

9.81

12.14
Acquisition of ECU Line could depress Allcargo’s margins

6.70 FY06 9MCY06

4.34 CY07

4.75 CY08E
NPM %

5.65 CY09E

EBIDTA margin (%)
Source:Company, ICICIdirect Research

Margin pressure at JNPT, new CFS/ICDs to take time to mature operations
The huge margins (40-50% EBIDTA) earned by CFS operators is attracting a large number of players at the JNPT port, resulting stiff competition. This is likely to impact Allcargo’s CFS business, which is mainly dependent on JNPT. The CFSs at Chennai and Mundra are smaller in scale of operations and realisations per TEU. While the Chennai CFS has around 65% utilisation, the Mundra CFS is witnessing only 25-30% capacity utilisation in terms of TEUs handled. The new ICDs at Nagpur, Hyderabad, Ahmedabad and Bangalore are expected to be operational only by Q3CY09. These ICDs will take some time to stabilise operations and attain critical mass.

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FINANCIALS
Stable growth in revenues
Consolidated revenue is expected to grow at a 13.67% CAGR over CY07-09E on back of increasing MTO business, ECU Line and expansion of CFS network to various new locations. Exhibit 12: Steady growth in consolidated revenues
127.73

2000 1500 (Rs cr) 1000 500 0
226.20 94.28 45.76

98.26 103.12

50.34

131.93

57.38

1276.81

1378.96

1503.06

Consolidated revenue to grow at 12.59% CAGR over CY07-09E on back of the MTO business and expansion of CFS network

270.38

302.82

CY07 MTO

ECU Line

CY08E CFS / ICD Hindustan Cargo

CY09E TransIndia

Source:Company, ICICIdirect Research

ECU business is expected to see a stable CAGR of 8.5% over the same period as it operates in the mature European markets. However, standalone MTO operation is likely to witness a 15.7% CAGR on back of robust domestic trade and economic growth. Revenues from CFS/ICD operations are likely to witness a 18.29% CAGR on the back of increasing volumes handled from the new CFSs, apart from and expanded capacities at Chennai.

Net profit to show a healthy growth of 29.39% over CY07-09E
We expect consolidated net profit to increase at a 29.39% CAGR over CY0709E. Allcargo is currently in an expansion phase in India, while its international business is likely to stabilise in a couple of years. It has undertaken various initiatives to improve operating performance of ECU Line. It also plans to expand its CFS/ ICD business, which enjoy higher margins, while diversifying into infrastructure support services and air freight transport. Exhibit 13: Consolidated net profit and EPS trend
140 120 (Rs crore) 100 80 60 40 20 FY06 9MCY06 CY07 CY08E CY09E Adj Net Profit (Rs cr)
Source; Company, ICICIdirect Research

50 45 40 35 30 25 EPS (Rs) (RHS) (Rs)

Net profit to show a 29.39% CAGR over CY07-09E

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VALUATIONS
Allcargo is India’s largest MTO and the world’s second largest NVOCC. It has aggressive growth plans to expand its CFS/ICD network. It has already acquired land at five locations including Pithampur, which will be operational by July 2008. The other facilities are expected to be fully operational only by CY10. We believe that over the long term, restructuring at ECU will bring in operational efficiency and result in margin expansion, while commencement of new CFS/ICDs will drive volume growth. The infrastructure support services and air cargo business are still in the nascent stages, and would take time to contribute significantly to the revenues. At the current price of Rs 840, the stock is trading at 20.83x it CY08E consolidated earnings (EPS) of Rs 40.33 and 17.50x its CY09E EPS of Rs 47.99. On an EV/EBIDTA basis, the stock is available at 10.80x CY08E earnings and 8.36x CY09E earnings. Though we are upbeat on the future prospects of the company, we believe current valuations have already factored in near-term growth opportunities. Blackstone has valued the company at Rs 934 at the lower side and Rs 1284 on the higher side on the basis of the company’s CY08E EBIDTA earnings (see Exhibit 8). We estimate the company’s CY08E EBIDTA at Rs 186.51 crore. On the basis of Blackstone’s valuation table, we arrive at a target price of Rs 934, valuing the company at 12x its CY08E earnings on an EV/EBIDTA basis. We rate the stock a PERFORMER. Exhibit 14: One-year forward rolling EV/EBIDTA band
3500 3000 2500 EV (Rs cr) 2000 1500 1000 500 0 Jun-06 Aug-06 Jun-07 Aug-07 Oct-06 Dec-06 Apr-07 Feb-07 Oct-07 Dec-07 Feb-08
22x 18x 14x 10x

Current valuations factor in the near term growth opportunities

We value the stock at 12x its CY08E earnings on an EV/EBIDTA basis, arriving at a target price of Rs 934

Source: ICICIdirect Research

Exhibit 15: Peer comparison (Estimates for FY09E) PAT Price Market Cap Revenue (Rs) (Rs cr) (Rs cr) (Rs cr) Company Allcargo Global * 840 1881 1901 90 TCI 106 822 1391 28 Gateway Distriparks 110 1271 354 93 Aegis Logistics 205 409 519 59
Source: ICICIdirect Research Estimates (* Estimates for CY08E)

EPS (Rs) 40.3 3.6 8.1 29.8

P/E EV / (x) EBITDA 20.8 10.8 29.1 10.0 13.6 8.9 6.9 5.0

ROE ROCE (%) (%) 14.8 16.9 8.2 9.5 12.9 13.7 30.3 29.0

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FINANCIAL SUMMARY (Consolidated)
Profit and Loss Account Year to Dec 31 Net Sales % Growth Employee cost Operating Expenses Others Total expenditure EBIDTA Other income Depreciation Interest PBT Taxation PAT Extra ordinary items Minority interest Adjusted Net Profit EBIDTA margin (%) NPM % Shares O/S (crore) EPS (Rs) Balance Sheet Year to Dec 31 Sources of funds Equity Share Capital ESOPS Outstanding Advance against Warrants Reserves & Surplus Secured Loans Unsecured Loans Deferred Tax Liability Current Liabilities & Provisions Minority interest Total Liability Application of Funds Net Block Capital WIP Investments Cash Trade Receivables Loans & Advances Miscellaneous Expenditure Total Asset 9MCY06 20.29 0.77 0.00 373.71 68.48 9.11 -1.29 201.80 5.26 678.12 273.77 34.00 57.79 45.03 186.10 80.84 0.60 678.12 CY07E 22.39 0.77 0.00 463.28 115.00 9.11 2.79 242.24 5.26 860.84 381.89 42.00 63.04 58.91 303.97 10.42 0.60 860.84 CY08E 22.39 0.77 50.34 538.23 215.00 4.98 5.79 281.55 5.26 1124.30 551.15 29.00 56.98 87.05 371.01 28.52 0.60 1124.30 9MCY06* 895.41 230.2% 107.87 612.48 95.23 815.58 79.83 4.98 7.88 5.26 71.68 17.50 54.18 7.82 1.65 60.35 8.92 6.70 2.03 29.75 CY07* 1643.05 83.5% 252.16 1119.60 150.54 1522.31 120.74 8.04 18.88 5.64 104.27 24.66 79.61 0.38 8.38 71.61 7.35 4.34 2.24 31.98 CY08E 1901.05 15.7% 284.95 1258.49 171.09 1714.53 186.51 0.00 45.75 18.70 122.07 29.30 92.77 0.00 2.47 90.30 9.81 4.75 2.24 40.33 (Rs Crore) CY09E 2122.93 11.7% 313.44 1367.17 184.69 1865.30 257.63 0.00 65.29 24.29 168.04 43.69 124.35 0.00 4.46 119.89 12.14 5.65 2.50 47.99 (Rs Crore) CY09E 24.98 0.77 0.00 877.36 283.00 2.78 8.79 317.67 5.26 1520.60 735.85 45.00 68.22 231.95 407.14 31.84 0.60 1520.60 Increase in net block due to capacity expansion of CFS / ICD business and capex of TransIndia Equity dilution on conversion of warrants and FCCD by Blackstone 13.67% CAGR in revenue over CY07-09E

29.39% CAGR in net profit over CY07-09E

* Financials for CY06 is for nine months, as the company changed its accounting period to calendar year to match that of ECU Line. CY07 financials are unaudited, and the Balance sheet is our estimates

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Cash Flow Statement Year to March 31 Opening Cash Balance Adj Profit after Tax Misc Expenditure w/off Dividend Paid Depreciation Provision for deferred tax Cash Flow before WC Changes Net Increase in Current Liabilities Net Increase in Current Assets Cash Flow after WC Changes Purchase of Fixed Assets (Increase) / Decrease in Investments Increase / (Decrease) in Loan Funds Increase / (Decrease) in Equity Capital Net Change in Cash Closing Cash Balance 9MCY06 41.24 60.35 1.05 0.00 7.88 6.74 76.02 176.26 226.07 26.21 (568.95) 375.90 55.05 115.58 3.79 45.03 CY07E 45.03 71.61 0.00 (12.25) 18.88 4.08 82.32 40.44 47.46 75.29 (135.00) (5.25) 46.52 32.31 13.88 58.91 CY08E 58.91 90.30 0.00 (15.44) 45.75 3.00 123.60 39.31 85.13 77.78 (202.00) 6.06 95.87 50.43 28.14 87.05

(Rs Crore) CY09E 87.05 119.89 0.00 (20.51) 65.29 3.00 167.68 36.12 39.45 164.34 (266.00) (11.24) 65.80 192.00 144.90 231.95

Capex on expanding CFS/ICD network and purchase of cranes under TransIndia business

Ratio Analysis Year to March 31 EPS (Rs) Book Value (Rs) Enterprise Value (Rs Crore) Market Cap (Rs crore) EV/Sales (x) EV/EBIDTA (x) Market Cap to sales (x) Price to Book Value (x) Operating Margin (%) Net Profit Margin (%) RoE (%) RoCE (%) Debt/ Equity (x) Current Ratio Debtors Turnover Ratio Fixed Assets Turnover Ratio Du Pont Analysis PAT / PBT PBT / EBIDTA EBIDTA / Sales Sales / Assets Assets / Equity RoE (%) 0.84 0.90 0.09 1.32 1.72 15.29 0.69 0.86 0.07 1.91 1.77 14.72 0.74 0.65 0.10 1.69 1.84 14.76 0.71 0.65 0.12 1.40 1.68 13.28 13 | P a g e 9MCY06 29.75 194.61 1736.56 1704.01 1.94 21.75 1.90 4.32 8.92 6.70 15.29 16.29 0.20 1.55 4.81 2.91 CY07 31.98 217.27 1945.86 1880.67 1.18 16.12 1.14 3.87 7.35 4.34 14.72 18.00 0.26 1.54 5.41 3.88 CY08E 40.33 273.22 2013.68 1880.75 1.06 10.80 0.99 3.07 9.81 4.75 14.76 16.93 0.36 1.73 5.12 3.28 CY09E 47.99 361.47 2152.52 2098.70 1.01 8.36 0.99 2.32 12.14 5.65 13.28 16.18 0.32 2.11 5.21 2.72

Margin to recover on account of initiatives under ECU Line, expansion of high margin CFS and infrastructure support service

RATING RATIONALE ICICIdirect endeavours to provide objective opinions and recommendations. ICICIdirect assigns ratings to its stocks according to their notional target price vs. current market price and then categorises them as Outperformer, Performer, Hold, and Underperformer. The performance horizon is 2 years unless specified and the notional target price is defined as the analysts' valuation for a stock. Outperformer: 20% or more; Performer: Between 10% and 20%; Hold: +10% return; Underperformer: -10% or more.

Harendra Kumar

Head - Research & Advisory ICICIdirect Research Desk, ICICI Securities Limited, Ground floor, Mafatlal House, 163, H.T. Parekh Marg, Backbay Reclamation, Churchgate, Mumbai – 400 020 research@icicidirect.com

harendra.kumar@icicidirect.com

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