GICS Industry : Automobiles l Sub Industry : Motorcycle Manufacturers l Website : www.kineticindia.

com

Kinetic Motor Company Ltd

Key Stock Indicators

NSE Ticker : KINETICMOT CMP (as on 22 Dec 2010—Rs/share): 30.3 Shares outstanding (mn) : 23.7
Bloomberg Ticker : KNH:IN 52-week range up to 22 Dec 2010 (Rs)(H/L): 47.85/18.40 Free Float (%) : 59.0
Face value / Share: 10.0 Market Cap as on 22 Dec 2010 (Rs mn): 718 Average daily volumes (12 months) : 231,369
Div. Yield (%): 0.0 Enterprise Value as on 22 Dec 2010 (Rs mn): 1,517 Beta (2 year) : 1.1

Kinetic Motor Company Limited (KMCL) was established in the year 1984. Firodias group of Kinetic
Engineering Ltd (KEL), were the pioneers to form KMCL. In 1984 company entered into a joint Key Financial Indicators
venture with Honda Motor of Japan, to produce advanced scooters in India. They manufactured Mar-07 Sep-08 Sep-09
motorcycles, scooters and mopeds. Kinetic has launched popular products like Luna and Kinetic
Honda in two wheelers. In July, 2008 Mahindra & Mahindra Ltd. (M&M) acquired 80% stake in Revenue (Rs mn) 2,219.4 1,470.7 159.5
KMCL. The acquisition was done by forming a new company known as Mahindra Two Wheelers Ltd EBITDA ma rgins (%) -26.2 -54.0 -54.1
(MTWL). KMCL holds 20% equity stake in this strategic venture. PAT (Rs mn) -785.8 -1,151.2 976.1
PAT ma rgins (%) -35.4 -78.3 612.0
KEY HIGHLIGHTS
Gea ring (x) -1.8 -0.9 -1.4
M&M acquires 80% stake in KMCL EPS (Rs /s ha re) -28.2 -36.4 46.3
PE (x) n.m n.m 0.7
In July, 2008 M&M acquired 80% stake in KMCL. The acquisition was done by forming a new
subsidiary company known as Mahindra Two Wheelers Ltd. This deal was done by a cash
P/BV (x) -0.8 -0.2 -1.1
consideration of Rs.1,100 millions and a 20% equity stake in MTWL. RoCE (%) -77.5 -378.9 -
RoE (%) - - -
New models from MTWL help gaining market share
EV/EBITDA (x) -3.1 -2.2 -16.6
n.m. : Not meaningful
KMCL has strategic investment of 20% in the equity of MTWL. Now, MTWL operates in the area of
2 wheelers. MTWL has launched new models and variants of scooters in the last few months, with
a view to expand scooter sales. As on 30th Sept, 2009 MTWL was able to sell 8000 scooters per Shareholding (As on September 30, 2010)
month and achieved a market share of ~8% in the scooter segment post acquisition. Others
59%
KEY RISKS

• Competition from existing and new players in the 2 wheeler industry.

• Increase in interest rates for automobile loans.
• Increase in raw material prices like steel and rubber.

Stock Performances vis-à-vis market

Returns (%)
FII DII
YTD 1-m 3-m 12-m 0% 0% Promoter
41%
KINETICMOT 10 -14 30 51
Indexed price chart
NIFTY 18 0 0 20
(index) ('000)
Note: 250 5000
1) YTD returns are since April 1, 2010 to Dec 22, 2010.
2) 1-m, 3-m and 12-m returns are up to Dec 22, 2010. 200 4000

150 3000

100 2000

50 1000

0 0
Jul-10
Feb-10

Sep-10
Jan-10
Dec-09

Jun-10

Aug-10
May-10

Oct-10
Nov-10
Apr-10
Mar-10

Volumes (RHS) KINETICMOT NIFTY

CRISIL COMPANY REPORT | 1

Kinetic Motor Company Ltd
BACKGROUND

KMCL was established in the year 1984. Firodias group of KEL, were the pioneers to form KMCL. In 1984 company entered into a Joint Venture with Honda Motor of Japan,
to produce advanced scooters in India. The company was renamed Kinetic Honda Motor Limited (KHML). The Japanese collaborator which was holding 50.92% stake in the
company divested its stake in favor of Kinetic Engineering in 1998. They manufactured motorcycles, scooters and mopeds. The manufacturing plants are located at
Pithampur, Indore (for scooters), Ahmednagar (for mopeds) and Pune (for bikes). Kinetic has launched popular products like the Luna and Kinetic Honda in two wheelers. In
July, 2008 M&M acquired 80% stake in KMCL.

COMPETITIVE POSITION

Peer Comparison
Kinetic Motor Company Ltd LML Ltd Bajaj Auto Ltd Hero Honda Ltd TVS Motor Company Ltd
Sep-09 Sep-09 Mar-10 Mar-10 Mar-10
Revenue (Rs mn) 159.5 1,675.5 119,060.4 164,276.0 46,111.7
EBITDA ma rgins (%) -54.1 2.8 21.5 16.9 4.7
PAT (Rs mn) 976.1 -516.2 15,943.2 22,318.3 333.5
PAT Ma rgin (%) 612.0 -30.8 13.4 13.6 0.7
Gea ring (x) -1.4 -0.8 0.6 - 2.0
EPS (Rs /s ha re) 46.3 -6.3 110.2 111.8 1.4
PE(x) 0.7 n.m 13.2 17.7 52.0
P/BV (x) -1.1 -0.3 8.8 11.6 2.9
RoCE (%) - - 69.8 74.9 5.3
RoE (%) - - 87.7 62.5 5.9
EV/EBITDA (x) -16.6 73.9 8.1 13.6 12.9
n.m: Not meaningful

FINANCIAL PROFILE Key Financial Indicators

Revenue declines due to discontinuation of 2 wheeler business; PAT improves due Units Mar-07 Sep-08 Sep-09
to restructuring of business Revenue Rs mil li on 2,219.4 1,470.7 159.5
In FY09, KMCL went through business restructuring. The company sold its 2 wheeler EBITDA ma rgins Per cent -26.2 -54.0 -54.1
business and related assets to MTWL for Rs.1,100 mn and equity stake of 20% in the PAT Rs mil li on -785.8 -1,151.2 976.1
joint venture by M&M. KMCL had not produced any two wheelers post acquisition.
This has led to a decline in revenue between FY07-09 for KMCL from Rs.1470 million PAT ma rgi ns Per cent -35.4 -78.3 612.0
in FY08 to Rs.159.5 million in FY09. During FY09 KMCL sold 996 numbers of two Revenue growth Per cent 5.7 -33.7 -89.2
wheelers from stock as against a sale of 53,378 numbers in the FY08.
EBITDA growth Per cent -58.9 -36.7 89.1
Company reported a PAT of Rs.976.1 million in FY09 vis-à-vis net loss of Rs.1151.2 PAT growth Per cent -70.8 -46.5 184.8
million in FY08. The profit was due to restructuring of business, leading to profit on
sale of 2 wheeler assets to MTWL and settlement of various liabilities. Gea ring Ti mes -1.8 -0.9 -1.4
RoCE Per cent -77.5 -378.9 0.0
RoE Per cent 0.0 0.0 0.0
INDUSTRY PROFILE

Motor-cycles

Majority of India`s middle-class population use motorcycles as a means of private transport. Traditionally, while motorcycles accounted for a large chunk of two-wheelers
demand in the rest of Asia, scooters dominated the Indian two-wheelers market. Demand for motorcycles picked up gradually from 1994-95, following the introduction of
100 cc motorcycles, which are not only highly fuel-efficient, but also safer. The share of motorcycles in the total two-wheelers market zoomed from 26.0% in 1990-91 to
80% in 2009-10. The motorcycles segment grew by 25% in 2009-10, with domestic sales rising by 26% and exports increasing at 14% in 2009-10. Strong rural demand and
lower base of 2008-09 were the major drivers for demand in 2009-10.

CRISIL COMPANY REPORT | 2

Kinetic Motor Company Ltd
ANNUAL RESULTS

Income Statement Balance sheet

(Rs million ) Mar-07 Sep-08 Sep-09 (Rs million ) Mar-07 Sep-08 Sep-09
Net Sales 2,193.8 1,433.6 152.2 Equity share capital 195.5 210.7 210.7
Operating Income 2,219.4 1,470.7 159.5 Reserves and surplus -949.1 -1,851.0 -793.1
Tangible net worth -753.6 -1,640.3 -582.3
EBITDA -580.7 -793.5 -86.3 Deferred tax liablity:|asset| 0.0 0.0 0.0
EBITDA Margin -26.2 -54.0 -54.1 Long-term debt 1,036.3 827.6 519.1
Short-term-debt 294.8 592.3 283.5
Depreciation 119.6 294.8 65.0 Total debt 1,331.1 1,419.9 802.6
Interest 112.8 136.6 4.1 Current liabilities 1,196.3 1,214.1 271.8
Other Income 15.9 76.5 3.6 Total provisions 18.0 20.6 3.1
Total liabilities 1,791.8 1,014.3 495.2
PBT -782.8 -1,151.2 976.2 Gross block 1,595.4 1,590.7 373.4
PAT -785.8 -1,151.2 976.1 Net fixed assets 855.7 626.3 97.5
Investments 0.9 0.9 295.9
PAT Margin -35.4 -78.3 612.0 Current assets 935.2 387.1 101.8
Receivables 316.3 48.3 36.3
No. of shares (Mn No.) 18.6 21.1 21.1 Inventories 353.9 228.3 6.7
Cash 101.7 3.5 4.0
Earnings per share (EPS) -28.2 -36.4 46.3 Total assets 1,791.8 1,014.3 495.2

Cash flow Ratio

(Rs million ) Mar-07 Sep-08 Sep-09 Mar-07 Sep-08 Sep-09
Pre-tax profit -797.2 -1,148.4 -151.9 Revenue growth (%) 5.7 -33.7 -89.2
Total tax paid -3.0 0.0 -0.1 EBITDA growth(%) -58.9 -36.7 89.1
Depreciation 119.6 294.8 65.0 PAT growth(%) -70.8 -46.5 184.8
Change in working capital 400.4 470.2 -674.0
EBITDA margins(%) -26.2 -54.0 -54.1
Cash flow from operating activities -280.2 -383.4 -761.0 Tax rate (%) -0.4 0.0 0.0
Capital Expenditure -636.1 13.3 537.1 PAT margins (%) -35.4 -78.3 612.0
Investments and others 0.0 0.0 -295.0
Dividend payout (%) 0.0 0.0 0.0
Cash flow from investing activities -636.1 13.3 242.1 Return on Equity (%) 0.0 0.0 0.0
Equity raised/(repaid) 236.3 162.5 0.0 Return on capital employed (%) -77.5 -378.9 0.0
Debt raised/(repaid) 784.1 88.8 -617.3
Dividend (incl. tax) 0.0 0.0 0.0 Gearing (x) -1.8 -0.9 -1.4
Others (incl extraordinaries) -4.8 20.5 1,136.7 Interest coverage (x) -5.1 -5.8 -20.8
Debt/EBITDA (x) -2.3 -1.8 -9.3
Cash flow from financing activities 1,015.6 271.8 519.4
Change in cash position 99.3 -98.3 0.5 Asset turnover (x) 1.1 0.6 0.2
Opening cash 2.4 101.7 3.5 Current ratio (x) 0.6 0.2 0.3
Closing cash 101.7 3.5 4.0 Gross current assets (days) 224 139 207
n.m : Not meaningful;

QUARTERLY RESULTS

Profit and loss account

(Rs million) Sep-10 % of Rev Sep-09 % of Rev Jun-10 % of Rev
No of Months 3 3 3
Revenue 44.2 100.0 50.1 100.0 11.1 100.0
EBITDA 35.3 79.9 32.6 65.1 7.1 64.0
Interes t 0.4 0.9 0.4 0.8 1.1 9.9
Depreci a ti on 3.3 7.5 6.8 13.6 3.3 29.7
PBT (1.8) (4.1) 125.5 250.5 3.3 29.7
PAT 1.2 2.7 125.4 250.3 3.1 27.9

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Kinetic Motor Company Ltd
FOCUS CHARTS & TABLES

Rs mn Quarterly sales & y-o-y growth Per cent Rs mn Quarterly PAT & y-o-y growth Per cent
350 40 800 600
300 20 600 400
250 0
400 200
-20
200
-40 200 0
150
-60 0 -200
100 -80
-200 -400
50 -100
0 -120 -400 -600

Sep-08

Sep-09

Sep-10
Dec-07

Dec-08

Dec-09
Jun-08

Jun-09

Jun-10
Mar-08

Mar-09

Mar-10
Dec-07

Dec-08

Dec-09
Jun-08

Jun-09

Jun-10
Sep-08

Sep-09

Sep-10
Mar-08

Mar-09

Mar-10
Sales Sales growth y-o-y (RHS) Net Profit Net profit growth y-o-y (RHS)

Rs/share EPS Per cent Movement in operating and net margins

10 500
250
5 0
-250
0
-500
-5 -750
-1000
-10 -1250
-1500
-15

Sep-08

Sep-09

Sep-10
Dec-07

Dec-08

Dec-09
Jun-08

Jun-09

Jun-10
Mar-08

Mar-09

Mar-10
Sep-08

Sep-09

Sep-10
Dec-07

Jun-08

Jun-09

Dec-09

Jun-10
Mar-08

Mar-09

Mar-10

OPM NPM

Shareholding Pattern (Per cent) Board of Directors

Sep 2009 Dec 2009 Mar 2010 Jun 2010 Director Name Designation
Promoter 53.3 51.7 45.9 41.4 Li u Wu - Hs i ung
FII 5.1 0.9 0.0 0.0 M. Venka ta i a h Non-Executi ve, Independent
DII 0.0 0.0 0.0 0.0 Director
Others 41.7 47.3 54.1 58.6 Sul a jja Fi rodia Motwa ni Ma na gi ng Director
R S Kotecha
A. H. Firodi a Cha i rma n,
Chung Long Chen Executive Di rector
Dines h Munot Non-Executi ve, Independent
R.J.Ka bra Non-Executi ve, Independent
Director

Additional Disclosure
This report has been sponsored by NSE - Investor Protection Fund Trust (NSEIPFT).

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CRISIL COMPANY REPORT | 4