Axis Smallcap

18 NOV 2019
Rising Stars
Conference
Thursday & Friday, 7/8th Nov 2019
Key Takeaways
Kashyap Pujara Prakash Agarwal

Managing Director – Head of Research Dy Head – Research | Executive Director – Pharma
kashyap.pujara@axiscap.in prakash.agarwal@axiscap.in
+91 22 4325 1107 +91 22 4325 1145
18 NOV 2019 Key Takeaways
Axis Capital Rising Stars Conference: Gist of the meetings…
Rising Stars Conference 2019
Our 2019 Rising Star Conference had a packed setting with 34 corporates meeting 92 funds over 2 days
(7/8 November’19). While the expanse of the event has widened, the essence remains the same. Our endeavor is to
present only those companies to our investors where we see a clear vision for the future backed by good business and a
great management besides huge potential to grow over the next five years.
The companies this year included an eclectic mix of fresh ideas and ye’old favorites. Discovering and re-discovering these
stories made for an exciting set of meetings. Key takeaways:
Astral Polytechnik
The company manufactures CPVC and PVC pipes, plumbing and drainage system products. Through acquisition of Resinova and Seal
IT in 2015, Astral has become a strong No.2 player in adhesive space. Management is targeting +15% volume growth in pipes &
adhesives over the next few years and expects margin to sustain at +15% led by (1) bottoming out of raw material prices,
(2) improving margin in the adhesives business with change in distribution strategy (three tier to two tier), (3) increasing growth
without compromising balance sheet quality (continuing the cash and carry model), (4) leveraging the strength and reach of its brand
and distribution network (2nd highest in the industry) to sell its existing and new products.
AU Small Finance Bank

Within vehicle finance, AU is largely into personal mobility and last mile connectivity segments like tour operators (focus on SCV)
where there are no early warning signals. It has guided for 35-40% AUM CAGR with total assets base of USD 10 bn by FY22.
Blue Dart Express

Blue Dart has rationalized its distribution network to 14,400 branches (from 18,000 branches at its peak) given limited viability – this
will aid cost savings. No plans to add new aircraft on lease (88% utilization currently) as it is optimizing on surplus belly space
available with other airlines; plans to capitalize on commissioning of DFC phase I. Ground cargo vol growth has been much higher
than air cargo growth due to volume shift from air to ground, however lower realization (road realization is 1/3rd of air) has led to
slower revenue growth. Operating leverage benefits to play out with macro recovery as most of its costs are fixed in nature (~65%
costs are fixed).
2
…Axis Capital Rising Stars Conference: Gist of the meetings…
Bookmyshow
Aims to increase share of live entertainment shows (presence in only 7 cities currently). The company has already started
experimenting with sports/ other categories in other cities. It is also playing role of promoter/producer (for shows like Disney's
Aladdin, Cirque du Soleil) to boost audience reach. Unlike competition, BMS is not following heavy discounting model as it is not
sustainable in longer run, given low customer stickiness.
CDSL
Muted capital market activities impacting transaction charges and IPO/Corporate actions business. Annual issuer charges business
intact as more unlisted companies opt for dematerialization of share. New business streams through CDSL ventures scaling up well
however are sill in nascent stage.
Crompton Greaves Consumer Electricals

Electrical Consumer Durables continue to be the growth engine as lighting witnesses price erosion. Investment in distribution playing
out well for the company with strong inroads into newer markets. Focus remains to drive premiumization trend through innovative
launches and to be a top 3 player across categories.
DCB Bank
DCB Bank continues to deliver a steady performance in a tough environment. It intends to keep its growth rate 5-15% above the
industry average driven by growth in mortgage book (~40% of loans) while curtailing its corporate exposure. It expects to improve
its return profile gradually driven by fee income, cost reduction and lower tax benefits.
EaseMyTrip
Founded in 2008, EaseMyTrip (EMT) is the only profitable online travel company in India. It has a high ‘Look-to-Book’ ratio of ~5%
(vs. 0.5% for the industry) and ~83% of its total gross bookings are from repeat customers. Gross revenue and volumes increased at
CAGR of ~18% and ~29% from 2017 and were at ~Rs 24 bn and 3.24 mn in FY19 respectively. It is now extending focus on
Hotels and adding new partners.
3
Eris Lifesciences
Eris is uniquely positioned given 100% sales from India domestic formulations, focus on high growth high margin chronic segment
(84% of FY19 revenue), and ability to generate steady FCF from its domestic business model (vs. volatile US generics business).
While H1FY20 growth was at 9% YoY, it expects growth to pick up from H2FY20 with new launches in Cardio Metabolic division
(Ticagrelor – Nov’19, Vildagliptin & Vildagliptin-Metformin – Dec’19), in-licensing opportunities (Sideral, TPIAO) and planned
expansion in Derma unit with ~300 MRs@.
Godrej Agrovet
Animal feed growth to remain healthy on steady volume growth (led by layer/cattle and fish feed) and realization (pass through of
RM hikes) – this coupled with R&D initiatives to substitute expensive raw materials will aid medium term margin. Crop protection to
recover in H2 on strong Rabi season + benefits from new product launches in domestic and export recovery in Astec. Sharp drop in
global palm oil prices + lower extraction rate (excessive heat) to limit FY20 growth, though expect FY21 to be a normal year.
Godrej Properties
GPL is the only developer in India which has been successful in expanding its operations Pan-India. Over the last 2-3 years, while
the industry (including large developers) has been grappling with disruptions, GPL has not only reported strong volumes
(FY18/FY19 pre-sales of Rs 51 bn/52 bn), but also aggressively added projects to its portfolio (added 24 msf/ 31 msf in
FY18/FY19). Thus, GPL is emerging as the biggest beneficiary of the consolidation in the industry. Further, improved liquidity (cash
of ~Rs 30 bn from equity raise of Rs 21 bn in Q1FY20) will aid business development. Management is targeting 20% CAGR in
sales over next 3 years driven by a resilient business model built over the past few years with growth dependent on business
development (project acquisitions) and not market environment.
Intellect Design Arena

Intellect continues to face challenges in Europe due to Brexit, trade war and consolidation of banks, leading to delay in deal
signing. License part is impacted due to volatility in Europe, though AMC and implementation remain unaffected. Intellect aims to
increase its revenue and profitability by increasing share of high margin revenue from AMC and license.
4
Mahindra Holidays & Resorts India

MHRL has built a unique business model with resort opex and construction costs being funded by the member. Over the last 3 years,
there have been changes in the accounting standards (IND AS 115 and 116) because of which revenue recognition is now very
conservative. During this period, member additions continued (17-18 k members being added every year). Cumulative member
base now stands at 250k members. Efforts to further enhance member experiences and increase room inventory are ongoing.
Ability to leverage on a captive audience of 250k will generate granular and more profitable revenue streams going forward.
Mahindra Logistics
New CEO Rampraveen emphasized on key focus areas: (a) diversify customer base across sectors, reducing dependence on auto,
(b) asset light model enabling customized logistics solutions and (c) warehousing and distribution logistics (sticky business). Keeping
near-term auto-led weakness at bay, expects strong momentum in non-auto SCM revenue. Favorable changes in business mix –
(a) higher growth in non-M&M business and (b) higher share from warehousing/ distribution logistics to aid margin expansion.
Mastek
UK business (72%of revenue) was impacted by uncertainties around Brexit. Mastek has actively managed cost and workforce in
slowing environment and continues making business investments despite weakness in revenues. Its US business needs more sales
capabilities to drive sustainable growth. Its strong order bookings indicates revenue has just been deferred and not lost.
Minda Corp
Minda Corp is a diversified auto component manufacturer and supplies products such as wiring harness, locksets/keys, plastic
systems, instrument panels, aluminium die casting products etc. to 2W, 3W, PV and CV OEMs. Despite 14% decline in auto
production in H1FY20 on muted demand, Minda has outperformed industry with revenue down only ~7% YoY. This was driven by
robust growth in aftermarket and exports. Company has initiated several cost cutting actions to combat the slowdown which has
helped protect margin as well (~9.4% in H1). It has also strengthened its balance sheet and reduced gross debt by Rs 1 bn in H1.
Minda continues to remain well-positioned to benefit from BS-VI emission norms especially on the wiring harness side where content
is expected to increase by 2-2.3x/25-30% in 2Ws (Minda has 33-34% market share) and CVs (30% market share). It is also
primed to benefit from premiumization trend with products such as keyless start/stop systems for 2Ws (albeit adoption might get
pushed ahead due to regulation driven cost increases). Order wins continue to be robust. Company is also supplying products
developed at SMIT, Pune to Bajaj’s electric scooter Chetak (CPV of ~Rs 5k).
5
NIIT Technologies
NIIT Tech’s ability to win large deals has improved significantly as it has built a strong sales team backed by sturdy execution along
with deep domain capabilities with select few offerings (cognitive, data, automation, and cloud). Its deal pipeline remains healthy
across verticals, which should support growth momentum over FY19-21.
Oberoi Realty
Oberoi’s key USP is acquiring quality land at significantly low cost (e.g. Thane and Borivali). Management believes the property
cycle is bottoming out but revival will be linked to overall economic growth. However, its current pre-sales run-rate of Rs 3-4 bn/
quarter is low and does not do justice to its balance sheet size (asset turns of 0.2x vs. 0.5-1x for peers), scale of operations and
brand name. Management is confident of pick-up in volumes in H2FY20/21 driven by its new launches at Thane project (greenfield
location; launch in Q4FY20) and Goregaon Phase 3 (Q4FY20) and revival at Worli (upon completion – expected in Q4FY20). We
like Oberoi due to its strong balance sheet (net D/E at 0.2x), low cost land, brand and execution. It is well-placed to capitalize on
industry consolidation.
Phoenix Mills
All the company’s malls are the best performing in their respective cities. We estimate its annuity EBITDA to become 2.4x over next
5 years driven by: (1) Its operational mall portfolio, which will continue to grow in double-digit (CAGR of ~12% over last 3 years),
mainly driven by strong consumption growth at its malls (CAGR of ~9% over last 3 years) and rental renewals of ~57% of total area
over next 3 years at a significant premium (mark-to-market rentals are ~30-40% higher than in-place rents) and (2) Under-
construction portfolio of ~6 msf of retail (5 projects) and office (2 projects) will add Rs 6-7 bn to its annuity income by FY24. It has a
sizeable development portfolio of 7.2 msf, which can generate strong cash flows of ~Rs 12 bn over next 4-5 years. While
consumption growth at its malls in H1 was muted (up 3% YoY), management believes it to be transient (impacted by upgradation/
churn) and expects consumption growth going ahead should revert to 10-12% YoY.
Polycab India
Slowdown in real estate and construction has limited growth of cables & wires in India. However, export orders largely made up for
it. Polycab targets to increase share of wires (higher margin business) in cables & wires business. FMEG scaling up well and
Polycab continues to gain market share across key categories.
6
PVR
To maintain its leadership position led by ability to better monetize footfalls (has always been above par), superior operating matrix
(ATP, SPH, ad/screen, occupancy rates) and healthy geographic reach (30% North, 34% West/ South each). Growth driven by
(a) 80+ screen additions in FY20-21 each across Tier I/II locations (+42 screens in H1), (b) healthy growth in net ATP (+3-5%) and
SPH (+8-10%), and (c) gradual recovery in ad revenue (yield-driven; aided by SPI re-pricing) with favorable macro. No significant
impact for rise in OTT platforms given industry’s strict adherence of 8-week window for release on digital/ OTT platforms.
Quess Corp
Concerns over Trimax resolved, rationalization of loans to subsidiaries underway and Thomas Cook India spinoff likely to be
completed by Dec-19. Quess targets to grow 20%+ organically over next 3-5 years. Increasing share of higher margin businesses
should help maintain margin at 6-7%; long term target remains 8%.
RBL Bank
RBL has been marred by stress in its corporate book due to oversized exposure to few accounts. This will sharply push provisions up
in FY20 hurting RoE/ RoA story and a potential capital raise may not be very accretive. However, core trend in core deposits,
retail, and cards remains strong and once the bank passes the hump of these NPL recognition and provisioning, we expect RoE/
RoA to start improving again from FY21.
Reliance Nippon Life Asset Management

Nippon brand to help geographic expansion. The company plans to launch products in other markets where Nippon has strong
presence like Thailand, Australia etc. The company is likely to benefit from global best practices on both debt and equity side and
roll-out is already in progress.
Security & Intelligence Services India

With leadership position in India security achieved, the next milestone is to become #1 player in India FM space. Recent
acquisitions have strengthened SIS’ position across geographies and verticals. Initiatives like Man-tech solutions. ONE SIS, etc. in
play as it targets to transform from a service-based offering to a solution-based offering. Long term vision of 20%+ organic growth,
25%+ ROCE and 50%+ OCF:EBITDA remains intact.
7
Spandana Sphoorty Financial

Management expects 40% AUM CAGR over 3-4 years with resilient margin, improving cost to income and pristine asset quality.
Capacity addition on track with about 42 new branches in last 7 months and 2,400 employee additions over last 6 months.
Supreme Industries
Supreme is one of the best plays on India’s building material industry given its wide product range (over 8,500 SKUs) with
continuous new product additions (high margin value-added products), expansive distribution network (~3,700 channel partners),
pan-India manufacturing (saves on logistics cost). Management expects volume growth of 10-12% p.a. (12-15% in terms of value) in
the long-term. Also, it expects margin to normalize at 14-15% in the long term driven by (1) increasing share of value added
products in the sales mix, (2) bottoming out of raw material prices, (3) benefits of discounts/incentives given on packaging products
playing out, (4) pick-up in sales of industrial products(used in consumer appliances) led by consumption growth, (5) ploughing back
savings from tax cuts into building capacity to create barriers to scale for new entrants and capturing market share from
unorganized players.
Syngene International
Syngene is a leading India-based CRO which provides research services on contract basis). Given its unique positioning of
providing quality CRO services at low costs (cost arbitrage), it has strong sales growth and margin visibility. Despite H1FY20
growth at 7% YoY (12% on adjusted basis), it expects mid-teen growth in FY20 implying strong growth in H2. It expects margin to
be ~30% (similar to FY19) given continued investments in quality, safety, compliance & marketing initiatives. Capex plan of
USD 550 mn by FY21; USD 400 mn already undertaken as of Q2FY20. It expects to achieve asset turnover of 1-1.5x from new
capex 1-2 years post commercialization.
8
Torrent Power
The company is on a steady improvement in distribution businesses as well as turning around stressed gas power projects. With low
gas prices globally, it is selling power in the spot market earning Rs 1/kWh contribution, which can rise in a better demand
environment. Gas pooling scheme from the government and alternate PPA (for replacement of AMGen) could be the key triggers.
We expect steady ~15% return, with optional potential of a 30-40% rise over any of the next 1-3 years.
Tube Investments of India

Slowdown in economy and sluggish demand from auto sector weigh on topline performance, but bottomline improvement
continues. Target is to sustain PBT margin at 10% levels with continued efforts on cost savings. Export is the core growth focus area
and newer products are developed specifically for these markets. Long term vision of 15%+ revenue growth, 10% PBT margin, 30%
RoCE and cash conversion remains intact.
V-Mart Retail
V-Mart currently operates 254 stores spread across 189 cities,19 states and UTs. As per the management, it aims to continue its
aggressive expansion strategy with opening of total 60 new stores in FY20 and will look forward to expand its total retail space by
25% in FY21. Management highlighted sustained shift in customer demand towards less quantity but better products. The company
has recently launched its omnipresence platform and will continue to gradually ramp it up. While targeting an average store size of
8,000 sq feet, company has implemented zonal structures and operating stores in clusters for better supply chain management.
Company has planned capex of ~Rs1 bn (towards stores, inventory, warehouse and technology) and guided for EBITDA margin of
8-8.5% for FY20.
Voltamp Transformers
Business scenario in transformers is weak due to liquidity tightness as order pick-up and finalization both see slowdown. Enquiries
have been at similar levels as last year. Competitive intensity remains high despite reduction/ exit of few important players such as
Crompton, Kirloskar, Emco etc. VAMP has a revenue visibility of ~Rs 8.5 bn for FY20. 10 sectors contribute 70% to the revenues;
hence well diversified. Company is a bit cautious on the overall environment. VAMP’s key differentiator is its low-cost, price
competitive model, works on a lean cost structure, with experienced old hands (25-40 years for the top management and functional
team heads).
9
…Axis Capital Rising Stars Conference: Gist of the meetings
Welspun Corp
WLCO witnessed recovery in Indian operations (from election-related uncertainties) coupled with a turnaround in Saudi operations
and steady performance in USA, translating into strong operational performance in Q2. Management targets zero net debt by
FY20 (Rs 2 bn in Q2FY20). WLCO is facing tailwinds across its geographies. In India, gas grid development (GAIL), oil pipeline
network (IOCL), City Gas Distribution projects, Govt’s drinking water project ‘Nal se Jal’ and also its irrigation thrust driving
demand. Its US volumes to increase led by pipeline infra bottlenecks and import restrictions (anti-dumping and CVD duties). Saudi
order book mainly driven by SWCC orders (18-24 months order backlog); seeing traction from Oil & Gas orders (higher margin).
Westlife Development
McDonald’s offers combinations of initiatives like in-store celebration opportunities, McDelivery, Drive-thru, McBreakfast, McCafe
and Experience of the Future (EOTF) stores have helped improve sales per store. Westlife currently operates 304 McDonald’s
restaurants (of which 205 have McCafe outlets). Management guided for capex of ~Rs 1.2 bn this year; ~80% of this would be
attributed to setting up new restaurants (~25 this year) while the remaining will be reinvested in McCafe or EOTF. Going forward,
WLDL will open 20-25 stores per year (committed to ~400 store openings by Dec-2022). Management aims to steadily expand
gross margin by 50-60 bps per year. ~70% of new stores will be added in metros. Management remains confident of delivering
7-9% SSSG and is on track to deliver on Vision 2022. It aspires to open McCafes in 100% of its McDonalds stores by 2022. In
addition, it expects Delivery business + McCafe to generate ~Rs 8.5-10 bn of revenue in 2022 (close to half of total sales).
10
Valuation summary of Rising Stars under coverage
M ca p CM P TP Up sid e FDEP S (INR) P E (x) P B (x) EV/ E (x) ROE (% )

Com p a ny (USDm ) (Rs) (Rs) (% ) FY20e FY21e FY20e FY21e FY20e FY21e FY20e FY21e FY20e FY21e
Godrej Properties 3,180 918 1,068 16 18 23 50 40 4.7 4.3 52 43 13 11
Oberoi Realty 2,584 513 603 17 32 32 16 16 2.1 1.9 20 14 14 12
Astral Poly Technik 2,283 1,086 1,250 15 25 31 43 35 8.9 7.7 32 27 22 24
CG Consumer Electricals 2,273 261 270 4 8 9 34 30 11.8 9.5 25 22 38 36
Supreme Ind 2,015 1,132 1,080 (5) 38 47 30 24 6.1 5.5 17 14 21 24
Torrent Power 1,960 294 366 25 24 27 12 11 1.4 1.3 6 6 12 13
RBL Bank 1,906 318 350 10 170 196 18 10 1.9 1.6 - - 10 15
Polycab India 1,858 896 900 0 47 53 19 17 3.4 2.9 12 10 21 19
Syngene Intl 1,779 323 330 2 9 12 36 27 5.9 4.9 21 17 17 20
Phoenix Mills 1,526 709 822 16 29 33 25 21 3.2 2.9 14 14 14 14
NIIT Technologies 1,295 1,505 1,580 5 81 99 19 15 3.3 2.8 11 9 19 20
Godrej Agrovet 1,256 474 525 11 14 18 34 26 5.0 4.4 21 15 15 18
PVR 1,242 1,750 1,970 13 54 65 33 27 4.9 4.1 15 12 17 17
Tube Invst 1,174 444 530 19 18 22 25 20 4.9 4.2 15 12 21 23
Spandana Sphoorty 1,171 1,291 1,400 8 421 521 20 13 3.1 2.5 - - 18 21
Quess Corp 1,133 568 670 18 19 28 29 20 2.9 2.7 12 10 10 14
SIS 943 908 1,080 19 42 51 21 18 4.3 3.4 14 12 22 21
Eris Lifesciences 786 411 600 46 25 29 16 14 3.8 3.0 12 11 27 24
Westlife Devlp 760 349 440 24 3 6 115 64 8.7 7.7 36 27 8 13
Mahindra Logistcs 394 398 450 13 10 15 39 27 5.1 4.4 16 12 14 17
CDSL 323 223 270 21 11 13 20 18 3.2 2.8 22 19 17 17
Note: Price as on 14 November 2019
For BFSI - EPS =ABV
Source: Bloomberg, Axis Capital estimates
11
Contents
Page Page
 Astral Poly Technik 14  Phoenix Mills 46
 AU Small Finance Bank 16  Polycab India 48
 Blue Dart Express 18  PVR 50
 CDSL 20  Quess Corp 52
 Crompton Greaves Consumer Electricals 22  RBL Bank 54
 DCB Bank 24  Reliance Nippon Life Asset Management 56
 Eris Lifesciences 26  Security & Intelligence Services India 58
 Godrej Agrovet 28  Spandana Sphoorty Financial 60
 Godrej Properties 30  Supreme Industries 62
 Intellect Design Arena 32  Syngene International 64
 Mahindra Holidays & Resorts India 34  Torrent Power 66
 Mahindra Logistics 36  Tube Investments of India 69
 Mastek 38  V-Mart Retail 71
 Minda Corp 40  Voltamp Transformers 73
 NIIT Technologies 42  Welspun Corp 74
 Oberoi Realty 44  Westlife Development 76
12
Company meetings
Note: CMP as on Nov 14, 2019

Astral Polytechnik…
14% revenue CAGR over FY16-20E

Company background
40 Revenue YoY (RHS) 30
Astral Polytechnik makes CPVC and PVC pipes, plumbing and (Rs bn) (%)
25
drainage system products. Through acquisition of Resinova and Seal 30
IT in 2015, it intends to be strong 2nd player in the adhesive space. 20
20 15
It has 10 manufacturing plants (5 pipe manufacturing and 4 10

adhesives plants) with footprint across 4 countries. It has extensive 10
5
distribution network comprising 750+/1,800 distributors and
28K/400K dealers for piping/adhesive divisions respectively. 0 0
FY16 FY17 FY18 FY19 FY20E
Source: Company, Axis Capital
EBITDA and EBITDA margin PAT and ROCE
6 EBITDA EBITDA margin (RHS) 18 4 PAT ROCE (RHS) 30

(Rs bn) (%) (Rs bn) (%)
5 26
16 3
4
22
3 14 2
18
2
12 1
1 14
0 10 0 10
FY16 FY17 FY18 FY19 FY20E FY16 FY17 FY18 FY19 FY20E
Source: Company, Axis Capital Source: Company, Axis Capital
kunal.lakhan@axiscap.in kashyap.pujara@axiscap.in utkarsh.punkhia@axiscap.in 14

91 22 4325 1147 91 22 4325 1107 91 22 4325 1127
…Astral Polytechnik
Key takeaways
 Strong volume growth in pipes: Management is confident of over 15% volume growth in pipes over next couple of years given
(1) faster-than-anticipated shift to organized sector due to confluence of GST, RERA, and demonization; (2) government initiatives –
affordable housing, increased spending on irrigation and water supply; (3) product suite expansion -- low noise drainage system, column
pipes, pressure pipes and valves; (4) improving brand recognition and wider distribution reach.
 Current margin of ~18% is not sustainable; expect it to normalize to 15%, but can improve slightly due to anti-dumping duty.
 Geographic expansion helps in saving logistics cost and enables to compete with local players (putting up a plant in east India).
 Adhesive division to achieve revenue of Rs 13 bn (Rs 6.3 bn in FY19): Astral is focusing on volume growth and increasing its market share
by adding large distributors. Adhesive segment is growing at 15-20% annually and needs senior management as the company doubles its
scale – hired a reputed person for marketing to head the Adhesive division. Has identified 2-3 tie-ups in south India, especially in
construction chemicals (as is it localised). Moreover, synergies from distribution and cross-selling should help improve the margin.
 Change in distribution strategy (Adhesives) – a well thought out one: The company admitted that when it entered the adhesives business, it
incentivized distributor commissions (~7-8%) to the extent that it squeezed its margin. Change in strategy from a three tier system to two tier
system will help to restore margin and working capital efficiency and help it compete effectively.
 Outlook: ASTRA has a strong brand name, distribution network, wide product suite in pipes business and is headed to become #2 adhesives
player. Hence, it remains a scalable business model in a segment which has weak entry barriers but huge barriers to scale. We expect
revenue growth to sustain (~23% CAGR over FY19-21) as piping capacities come on stream and adhesives gets fully integrated into the
ASTRA ethos. We see ~35% earnings growth on slight improvement in the margin and financial deleveraging. With lower capex
requirements/ working capital improvement, we see strong cash generation which could be utilized for growth or higher payouts.
Financial sum m ary (C MP: R s 1086)

Y/E S al es Adj. PAT C o nsensus EPS C hg PE RoE RoCE EV/E DPS
Marc h (R s mn) (R s mn) EPS * (R s) (R s) Yo Y (% ) (x) (% ) (% ) (x) (R s)
FY18 20,729 1,757 - 14.7 14.8 74.1 18.8 24.4 41.3 1.0
FY19 25,073 1,973 - 16.5 12.3 65.9 17.2 23.4 34.1 1.0
FY20E 31,871 3,057 19.6 25.4 54.1 42.8 22.2 27.4 25.6 8.0
FY21E 37,945 3,778 24.6 31.4 23.6 34.6 23.8 30.5 21.4 10.0
Source: Company, Axis Capital; *Consensus broker estimates
15
AU Small Finance Bank…
Retail assets dominated by vehicle

Company background
GL + CD + PL
OD against FD
AU Small Finance Bank (AUBANK) operates as a commercial bank. 0.6%
2.9%
It offers financial products and services such as savings and current Home Loan
accounts, term deposits, debit cards, insurance, government 1.5%
banking, retail loans, and microfinance lending.
It is a diversified retail-focused lender with presence across vehicle
finance and MSME segments. It largely serves under-contested Wheels
segments, which coupled with lower credit penetration in its primary SBL - MSME
43.2% 51.8%
markets (such as Rajasthan) offers a massive growth canvas along
with sustainable pricing power. At 4.6x P/BV FY21E (consensus
estimate), valuations offer decent risk reward on 30%+ AUM CAGR.
Assets – geography mix Increasing share of retail in savings account
Others Retail SA Bulk SA

Punjab 6% 3,000 2, 638 2, 611
2, 4 02 2, 441 2, 508
5%
Rajasthan 2,500 475 392
276
41% 1, 911 391
2,000 601
Delhi
8% 497
1,500
1,000 2,050 2,232 2,163 2,219

Gujarat 1,802
1,414
11% 500
Madhya
Maharashtra 0
Pradesh
15% 30-Jun-18 30-Sep-18 31-Dec-18 31-Mar-19 30-Jun-19 30-Sep-19
14%
manish.karwa@axiscap.in praveen.agarwal@axiscap.in vikash.mundhra@axiscap.in ojasvi.khicha@axiscap.in amit1.jain@axiscap.in 16

91 22 4325 1103 91 22 4325 1102 91 22 4325 1126 91 22 4325 1133 91 22 4325 5181
…AU Small Finance Bank
Key takeaways
 No stress in vehicle finance book: Within vehicle finance, the bank is largely into personal mobility and last mile connectivity
segments like tour operators (focus on SCV), where there are no early warning signals. Only 4% of vehicle finance book has
exposure to M&HCV segment which is facing some issues on industry level. It does not foresee any major concerns on asset
quality. Focus remains on small ticket-sized secured and retail loans.
 As a policy, the bank finances vehicles for same manufacturer/model both new and used. There is clear no for Tata Motors
(except for Ace) and General Motors. The bank keeps a tab on subvention announcements and assesses/reconsiders
financing vehicles from such manufacturers.
 Long growth runway: Total customer base at ~1.5 mn and branch count at ~550 (vs. 300 two years ago). Focus is also on
increasing the use of business correspondents. It has guided for AUM CAGR of 35-40% with total asset base of USD 10 bn
by FY22.
 It achieved FY21 opex to average assets/RoA target of 3.75%/1.7% in H1FY20 itself helped by reduction in tax rate also.
 Stake sale not on agenda: Adequately capitalized with CAR at 17.9% and Tier 1 at 14.9%; no hurry to sell its remaining stake
in Aavas Financiers (equity stake of ~Rs 8.4 bn).
 It also holds 9.9% stake in M Power Micro Finance Company (worth ~Rs 45 bn).
Financial summary (C MP: R s 836)

PAT F DEPS EPS c hg P/E BV Adj. BV P/BV P/Adj. RoE R o A Net NPA
Y/E Mar
(R s mn) (R s) (% ) (x) (R s) (R s) (x) BV (x) (% ) (% ) (% )
2016 2,116 48 49.0 17.4 229 184 3.7 4.5 23.3 4.1 1.1
2017 8,220 50 4.3 16.7 70 68 12.0 12.3 22.3 4.1 1.2
2018 2,920 10 (79.5) 82.0 79 76 10.6 11.0 13.8 2.0 1.3
2019 3,818 13 28.9 63.3 101 101 8.3 8.3 14.7 1.5 1.3
17
Blue Dart…
Revenue and operating margin

Company background
Net revenues EBITDA margin (RHS)
Blue Dart (BDE) is one of the largest organized express distribution 35 13.0% 15%
players in India with dominant presence in air cargo and healthy 11.2%
9.9%
presence in ground cargo. International parentage (DHL) and strong 30 9.3%
10%
in-house tech team have helped create technological customized
innovative solutions for India, giving it a significant lead over 25 5.5%
the competition. 5%
20
It has extensive domestic network covering over 14,400 22.7 25.5 26.8 27.9 31.7
15 0%
locations. Given its global parentage (DHL), it services more than
FY15 FY16 FY17 FY18 FY19
220 countries and territories and offers extensive express distribution
services worldwide.
Tonnage volume and realization Shipment realization
Shipments Realisation per Shipment (RHS) Tonnage carried Realisation per kg (RHS)
800 43 44
250 170 ('000 tons) 42 40 42
(mn) (Rs)
162 159 41 42
225 600
160 40
200
175 145 150 400 38
142
150 36
136 140 200
125 34
100 130 0 32
FY15 FY16 FY17 FY18 FY19 FY15 FY16 FY17 FY18 FY19
ankur.periwal@axiscap.in nitesh.dhoot@axiscap.in jeet.shah@axiscap.in 18

91 22 4325 1149 91 22 4325 1138 91 22 4325 1118
…Blue Dart
Key takeaways
 Rationalizing distribution network: Blue Dart (BDE) has rationalized its distribution network to 14,400 branches now vs.
~18,000 earlier (had increased from ~6,500 office/ branches in FY18), as select branches in remote areas were witnessing
low traction (higher cost due to large service area, but lower shipments).
 Many such branches were on variable cost model for which all costs have been booked (impacted margin historically). Management to
keep evaluating other branches (based on profitability/traction); typically, breakeven achieved in 2 years.
 Revenue growth relatively subdued on (a) shift in select cargo from air to road (1/3rd realization) on cost rationalization across
sectors like auto spare parts, readymade apparels, pharma etc. and (b) macro slowdown across most segments.
 While B2B segment is consolidating its operations in the current slowdown, the management highlighted B2C is witnessing much faster
shift form Air to Road (cost rationalization measures). Diversified presence across sectors restricted such adverse impact.
 No more aircraft expansion on the cards (operating at ~88% currently) as management would prefer to use Dedicated Freight
Corridor (DFC) as an opportunity assuring time-bound delivery; may enter into operational arrangement to offer first mile and
last mile delivery services and capitalize on its network by providing additional combined offerings.
 Awaiting macro recovery: As most of its costs are fixed in nature (~70%) coupled with asset light business model, management
expects to drive healthy operating leverage benefits with volume uptick going ahead. However, revenue growth may remain
relatively subdued given shift from air to road (realization impact) and high competitive intensity.

Y/E S al es EBIT DA EBIT DA Adj. PAT PAT EPS C hg RoE RoCE
Marc h (R s mn) (R s mn) margin (% ) (R s mn) margin (% ) (R s) Yo Y (% ) (% ) (% )
FY16 25,519 3,307 13.0 1,885 7.4 79.2 36.3 54.0 46.1
FY17 26,809 2,644 9.9 1,368 5.1 57.6 (27.3) 29.6 30.5
FY18 27,909 2,598 9.3 1,421 5.1 59.8 3.9 24.9 28.5
FY19 31,655 1,735 5.5 876 2.8 36.9 (38.4) 13.7 18.9
19
CDSL…
Revenue and margin profile

Company background
Revenue EBITDA margin
Incorporated in 1999, CDSL is one of the two depositories in India 3,000 80%
and the only one to be listed. The company is leading securities (Rs mn)
depository in India in terms of incremental Beneficial Owner (BO) 60%
2,000
accounts. It earns revenue by charging annual issuer fee to 40%
corporates and account maintenance charges, user facility charges 1,000
and transaction fees to Depository Participants (DPs). It also facilitates 20%
a range of non-cash corporate actions, digitization of academic 0 0%
records, insurance policies, e-warehouse receipts etc. In addition to FY15 FY16 FY17 FY18 FY19
securities depository services, CDSL Ventures (CVL) is registered with
the SEBI and UIDAI. It undertakes common KYC services for investors
in the capital markets, including the mutual fund industry.
Revenue mix Improving cash flows and stable return ratios

Annual issuer charges Transaction charges IPO/corporate action charges (Rs mn) OCF RoCE
Online data charges Others
1,000 30%
100%
800
80% 20%
600
60%
400
40% 10%
200
20%
0 0%
0%
aditya.bagul@axiscap.in kashyap.pujara@axiscap.in anshuman.singh@axiscap.in 20

9122 4325 1130 91 22 4325 1107 91 22 4325 1128
…CDSL
Key takeaways
 Annual issuer charges – increasing opportunity: With more unlisted companies applying for dematerialization of shares, the
growth avenue is huge – opportunity size of 65-70K unlisted companies. Currently, it has dematerialization services for 2,500+
unlisted companies.
 Transaction & BO revenue: H1 was impacted by muted capital market activities. CDSL’s market share in incremental BO
accounts stood at 74%. It is catching up with the market leader (NSDL).
 KYC business – pole position: CDSL retains #1 spot with ~60% market share in India KYC business.
 CDSL Ventures
 Dematerializing academic records by CDSL by acting as national academic repository. CDSL has tie-ups with 540+ universities and has
dematerialized over 23 mn+ academic records. However, MHRD is yet to finalize pricing for this initiative.
 Digitalization of insurance records is scaling up well with 270K+ insurance policies processed till date.
 Commodity repository business and GST services have kicked off well, however, still in nascent stages.
 Tax rate: FY20 to be levied tax at 22%.

Y/E S al es EBIT DA Adj. PAT C o nsensus EPS C hg PE PB RoE RoCE EV/E DPS
Marc h (R s mn) (R s mn) (R s mn) EPS * (R s) (R s) Yo Y (% ) (x) (x) (% ) (% ) (x) (R s)
FY18 1,877 1,104 1,036 - 10 20 22 3.9 18.3 24.3 28.6 4
FY19 1,947 1,089 1,148 - 11 11 20 3.5 18.1 22.4 20.5 4
FY20E 2,163 1,073 1,194 11.2 11 4 20 3.2 17.0 21.1 19.9 5
FY21E 2,418 1,221 1,309 11.6 13 10 18 2.8 16.8 21.3 19.7 5
21
Crompton Greaves Consumer Electricals…
Strong growth trajectory

Company background
Crompton is a leading consumer appliance maker with product suite Net sales YoY change (RHS)
spanning across fans, lighting & luminaire, geysers, mixer grinders, 50,000 15%
toasters, small domestic appliances and pumps. It is the market (Rs mn)
40,000
leader in fans and among top 3 players across other product
10%
offerings. The company has 4 manufacturing facilities in Goa, Badi, 30,000
Baroda and Ahmednagar. 20,000
5%
Active focus on distribution through rollout of its GTM strategy has 10,000
helped it make in-roads into uncharted turfs and improve position in
exiting playgrounds. It has extensive distribution network of 150K+ 0 0%
touch points across India. FY16 FY17 FY18 FY19
Stable margin profile Healthy return ratios
PAT Gross margin EBITDA margin (RHS) RoE RoCE
4,500 40% 60%

(Rs mn)
30%
3,000 40%
20%
1,500 20%
10%
0 0% 0%
FY16 FY17 FY18 FY19 FY17 FY18 FY19

9122 4325 1130 91 22 4325 1107 91 22 4325 1128
…Crompton Greaves Consumer Electricals
Key takeaways
ECDs
 Fans: (1) Registered double digit growth in H1, (2) Retains #1 spot with 24-25% market share and (3) mass premium segment to
be growth focus area going forward.
 Pumps: (1) Growth momentum driven by innovative launches like ‘Crest Mini’ and (2) Agri pumps witnessed good volume traction
in H1.
 Geysers: Refreshed product suite and changing portfolio mix key growth drivers. Crompton holds 6-7% market share in Indian
geyser market. New launch ‘Solarium’ drew good customer response.
 Mixer grinder is the next focus area. Management targets to be among top 2 players in this category over next
4-5 years.
Lighting
 B2B segment remains core growth area for Crompton with focus on new product innovations and GTM-backed distribution
expansion.
 B2C segment remains challenging due to continued price erosion.
 Margin: Low double-digit margin over the next 2-3 years.
Near term growth triggers: (i) Continued innovation-led new product launches (‘Crest Mini’, Anti-dust fans, ‘Anti-bac’ bulbs
dominated their respective categories in FY19) and (ii) Cost-control initiatives and improving product mix are driving margin both in
lighting and ECD segments.
FY18 41,051 3,238 - 5.2 13 - 50 43 - 1.8
FY19 44,789 4,025 - 6.4 24 41 43 39 29 2.0
FY20E 49,035 4,765 7.8 7.6 18 34 38 38 25 3.0
FY21E 55,669 5,508 9.2 8.8 16 30 36 40 22 3.5
So urce: Co mpany, A xis Capital; *Co nsensus bro ker estimates
23
DCB Bank…
Asset quality stable

Company background
GNPA NNPA
DCB Bank is a new-age private sector bank promoted by Aga Khan 2.5%
Foundation (15% holding). It offers a wide array of products across 2.09%
2.0% 1.76% 1.79% 1.84%
individual, small and medium businesses, rural banking and mid 1.51% 1.59%
corporates through its network of 333 branches. It is concentrated in 1.5%
tier 2 to tier 6 locations given its lower base. 1.01% 0.96%
1.0% 0.75% 0.79% 0.72% 0.65%
Loan book is predominantly mortgage (~40% of loans) mainly to
0.5%
self employed professionals. CASA ratio at 23% is lower than peers;
however, it is well capitalized with a tier I ratio at 12.6%. 0.0%
FY15 FY16 FY17 FY18 FY19 Sept-19
The stock trades at 1.5x FY21E (Bloomberg consensus).
Profitability improving gradually Loan book is predominantly mortgage
RoA ROE (RHS) Gold loan, 2% Others, 3%

Const Fin., 3%
1.6% 15.0%
CV, 7%
1.4% 13.0%
1.2% Mortgage, 41%
11.0%
1.0% AIB, 20%
9.0%
0.8%
0.6% 7.0%
0.4% 5.0%
FY15 FY16 FY17 FY18 FY19 Sept-19
Corporate, 12% SME + MSME,
12%

91 22 4325 1103 91 22 4325 1102 91 22 4325 1126 91 22 4325 1133 91 22 4325 5181
…DCB Bank
Key takeaways
 Loan book predominantly mortgage (40% of loans): DCB offers both mortgage loans and Loan Against Property (LAP) which
together constitute 40% of loans. Of the total mortgage book, 75% is LAP primarily to self employed professionals with an
average ticket size of Rs 4 mn. Management indicated that this is a high-RoE business and expects it to drive overall loan growth.
It intends to grow overall loan book at 5-15% above that of the industry.
 Corporate exposure contained at 12%: Most of the exposure is to A rated corporates given its smaller size and, it is cognizant of
stress in corporate. Consequently, it does not expect to grow the corporate book aggressively and is targeting ~10% growth over
the next few quarters. Its corporate exposure is fairly granular with no big ticket exposures – only 2-3 accounts are >Rs 1 bn; rest
are small. Around 30% of advances are in wholesale and retail trade and, it does not indulge in project lending.
 Asset quality is largely stable with GNPA at ~2% and reported coverage at 73%. Management highlighted some stress in
self employed segment post demonetization and GST, which has led to some uptick in NPAs. However, it does not expect sharp
deterioration in asset quality from the current levels.
 Expect RoA/RoE of 1.5%/~15% in medium term: The bank expects to improve its return profile gradually driven by 3 factors –
(i) fee income to emerge a big driver led by third party distribution/PSLC/distribution fees; (ii) with investment phase now behind,
expects cost to assets to decline to 2.1-2,2% vs. 2.5% currently; and (iii) a lower tax to support earnings.
 Management highlighted that its prudent measures of capital allocation are now yielding results. In Q2FY20, risk-weighted assets
grew 5% vs. loan growth of 12%. Tier I at ~12.5% is fairly comfortable and it does not intend to raise capital over the next
12 months vs. its earlier expectation of FY20.
Financials summary (C MP: R s 183)

Y/E PAT EPS EPS c hg BV P/E P/BV RoE RoA Net NPA
Marc h (R s mn) (R s) (% ) (R s) (x) (x) (% ) (% ) (R s)
FY16 1,945 6.9 (4.9) 63 26.6 2.9 11.6 1.1 0.8
FY17 1,997 7.0 2.2 77 26.0 2.4 10.3 0.9 0.8
FY18 2,453 8.0 14.4 91 22.8 2.0 10.3 0.9 0.7
FY19 3,254 10.5 31.3 101 17.3 1.8 12.1 1.0 0.7
Source: Company, Bloomberg
25
Eris Lifesciences…
Company background Eris’ top 4 therapies belong to chronic/lifestyle related diseases

T herap y Eris % of F Y19 Yo Y (% ) Q1'20 Yo Y (% ) H 1'20 Yo Y (% )
Eris has a unique positioning in the India Pharma market. It is 100% (R s mn) (Q1'20) rev enues Eris IPM Eris IPM Eris IPM
into domestic formulations and is ranked 23rd despite being a Cardiovascular 853 27% 16% 13% 12% 10% 12% 11%
relatively new entrant (established in 2007). Its key focus is on high Anti-diabetics 919 29% 19% 15% 19% 11% 19% 13%
growth high margin chronic segment (84% of FY19 revenue vs. 52% Vitamins 539 17% 5% 9% 8% 8% 6% 9%
in FY13). CNS 245 8% 12% 10% 19% 9% 10% 9%
Gastro-intestinal 209 7% 0% 9% 0% 6% 0% 9%
Gynaecology 147 5% 3% 9% 20% 7% 12% 7%
Eris’ strategy to create strong prescription-led brands coupled with Others 250 8% -12% 8% 6% 7% 6% 10%
focus on metro cities ensures higher MR productivity and continues to T o tal 3, 162 100% 9% 10% 13% 8% 11% 10%
drive operating leverage.
Source: AIOCD
Expect FCF generation to improve over FY19-22 on improved

Key focus remains on top 10 brands CFO and capex moderation
T o p 10 b rands/ F Y19 sal es
T herap y F Y19 Q1'20 H 1'20
Yo Y gro wth (R s mn)
6 (Rs bn)
Glimisave M Anti Diabetic 924 22% 21% 21%
3.8
Glimisave MV Anti Diabetic 597 28% 36% 36%
4 3.3 3.3
Remylin D Vitamins/ Minerals/ Nutrients 515 16% 9% 8%
1.7
Renerve Plus Vitamins/ Minerals/ Nutrients 482 7% 5% 7% 2 0.8
Triglimisave Anti Diabetic 406 3% -25% -31%
Eritel CH Cardiac 338 21% 18% 17% 0
Tendia M Anti Diabetic 315 42% 40% 41%
(2) -3.2
Tendia Anti Diabetic 283 30% 18% 19%
LnBloc Cardiac 281 17% 30% 27%
(4)
Rabonik D Gastro Intestinal 241 10% -6% -4%
FY17 FY18 FY19 FY20E FY21E FY22E
T o p 10 b rands 4 , 382 19% 15% 18%
Eris T o tal 11, 998 9% 13% 11%
IPM T o tal 13, 05, 064 10% 8% 10%
Source: AIOCD
prakash.agarwal@axiscap.in dhagash.vora@axiscap.in mehul.sheth@axiscap.in 26

91 22 4325 1145 91 22 4325 1132 91 22 4325 1131
…Eris Lifesciences
Key takeaways
 Unique positioning
 Eris is uniquely positioned given 100% sales from India domestic formulations, focus on high growth high margin chronic
segment (84% of FY19 revenue vs. 52% in FY13) and metro cities, and ability to generate steady FCF from its domestic
business model (vs. volatile US generics business).
 Strategies going forward – multiple levers ahead
 Expects to grow 25-30% higher than industry led by focus on chronic/ lifestyle therapies (~85% exposure to Diabetes/
Cardio/ Vitamins/ CNS) coupled with growth recovery in Strides portfolio and improved MR productivity via building brands.
 While new product growth was lower vs. IPM in FY19, it expects this to pick up with new launches in Cardio Metabolic
division (Ticagrelor – Nov’19, Vildagliptin & Vildagliptin-Metformin – Dec’19), in-licensing opportunities (Sideral, TPIAO) and
planned expansion in Derma unit with ~300 MRs.
 Furthermore, there would be new launch opportunities in anti-diabetic segment from SGLT2 & Sitagliptin (FY22).
 While growth will improve form H2FY20 (on low base), impact of new launches would be seen largely from FY21.
 Continue to evaluate organic and inorganic opportunity to deploy the cashflow from operations.
 Changed its credit policy in Q2FY20 by increasing credit terms from 7/14 days to 21 days to support stockists facing pressure
due to channel disruption, thereby leading to pressure on receivable days. Expects this to be the new norm for Eris.
 Outlook positive given strong focus on building brands and visibility of new launches. Incremental growth recovery on better
execution can lead to PE rerating.
Financial sum m ary (C MP: R s 4 11)
FY19 9,822 2,908 - 21.1 (1.1) 19.4 28.9 24.6 16.0 -
FY20E 11,217 3,496 26.0 25.4 20.2 16.2 26.6 25.8 12.3 1.3
FY21E 12,785 3,972 29.6 28.9 13.6 14.2 23.8 24.6 10.7 1.4
FY22E 14,539 4,720 36.0 34.3 18.8 12.0 22.6 24.4 8.5 1.7
27
Godrej Agrovet…
Animal feed – revenue and EBIT margin trend

Company background
Revenue EBIT (RHS)
GAVL is a diversified R&D focused agri-business company dedicated 50 (Rs/ kg) 1.6
(Rs bn)
to improving the productivity of Indian farmers by innovating
40
products and services which sustainably increase crop and livestock
1.3
yields. Company holds leading market share in different businesses – 30
animal feed, crop protection, oil palm, dairy and poultry and
processed foods. 20
1.1
It is the leading compound animal feed company with significant 10
volumes (>1 mn tons in FY19) and presence in Bangladesh
0 0.8
(JV – ACI Godrej Agrovet). GAVL has control over 1/3rd (69,000+ FY18 FY19 FY20E FY21E FY22E
hectares) of oil palm plantations across India.
Palm oil – revenue and EBIT margin trend Crop protection – revenue and EBIT margin trend
Revenue EBIT (RHS) (Rs bn) Standalone CPB Astec EBIT (RHS)
8 (Rs bn) (%) 20% 16 24%
18%
6 22%
12
16%
4 20%
14% 8
18%
2
12%
4
16%
0 10%
FY18 FY19 FY20E FY21E FY22E 0 14%
FY18 FY19 FY20E FY21E FY22E
Source: Company, Axis Capital Source: Company, Axis Capital Note- Including Astec

91 22 4325 1149 91 22 4325 1138 91 22 4325 1118
…Godrej Agrovet
Key takeaways
 Animal feed: Revenue growth in H1 was led by healthy volumes (layer/cattle and fish feed) and higher realization (pass-through
of raw material hike earlier), which aided EBIT margin expansion as well. Management working on R&D initiatives to substitute
select high-cost raw materials, which will aid further margin expansion in the medium term.
 Crop protection: H2FY20 is expected to be healthy on (a) strong Rabi season (given water reservoirs) and (b) benefit from new
product launches – Rohelus (fungicide) and Hanabi (insecticide in-licensed from Nissan Chemicals) in Q2.
 Expect recovery in Astec’s EBIT margin in H2 as (a) execution of export orders to pick up (have been seeing demand
postponement in H1) aiding capacity utilization and (b) limited incremental impact from input pricing pressure and inventory
clearance of Propiconazole (at low margin) due to ban in Europe.
 Palm oil: Recovery in global palm oil prices to aid growth in H2 (though lower palm kernel oil prices may restrict such benefit);
FY20 to see limited growth given lower oil extraction ratio on higher-than-expected heat wave; expect FY21 to be a normal year.
 Creamline Diary: Expect H2 to be better on seasonal decline in raw material prices and steady contribution from value-added
products (higher-margin) – 29% currently vs. 27% in FY19.
 Capex: Rs 7 bn over FY20-22 for NPD*/expansion – includes Astec’s new R&D facility (Rs 0.6 bn), upcoming Rs 1 bn expansion.
 Outlook positive, as we expect 28% earnings CAGR on benefits from (a) strong volume growth in animal feed segment (10%
CAGR over FY20-22E; led by cattle and rebound in poultry feed), (b) Crop protection (15% CAGR over FY20-22E) backed by
revival in Astec’s revenue (CRAMS) and steady demand in standalone business (product expansion on in-licensing opportunities) –
stronghold across key segments like cotton (Hitweed, Hitweed+), paddy (Oryzostar) and Plant Growth Regulators (PGR).
F inanc ial summary (C MP: R s 4 74 )
Marc h (R s mO) (R s mn) (R s mn) EPS * (R s) (R s) Yo Y (% ) (x) (x) (% ) (% ) (x) (R s)
FY19 58,707 4,558 2,407 - 12.5 11 38 5.5 16 16.5 20.8 4.5
FY20E 71,826 4,731 2,673 14.3 13.9 11 34 5.0 15 13.9 20.0 4.5
FY21E 78,703 6,353 3,535 18.1 18.4 32 26 4.4 18 18.3 14.7 4.9
FY22E 86,025 7,529 4,375 20.6 22.8 24 21 3.8 19 20.7 12.2 6.4
Note: *New Product development 29

Godrej Properties…
Sales on a strong footing

Company background
Sales Value Area Sold (RHS)
Godrej Properties Ltd (GPL) is the real estate development arm of the
Godrej group. In a short span, GPL has become India’s largest 60 10
(Rs bn) (msf)
publicly listed developer by booking value. It has successfully 50 8
delivered over 20 msf of real estate projects in the past five years. 40
6
Its portfolio comprises ~175 msf of developable area across India. 30
Leveraging on brand Godrej, it is the only developer in India which 20
4
has successfully expanded its operations across India. 2
10
Company’s strategy is to maintain an asset-light business with focus 0 0
on 4 key markets -- Mumbai, NCR, Bangalore and Pune. Godrej FY15 FY16 FY17 FY18 FY19
group’s land bank in Vikhroli (~800 acres) adds to its strong value.
Low D/E ratio offers room to leverage New launches consistently high
Net debt(Rs in bn) D/E Ratio (RHS) New Launches Completions

15
40 2.0 (msf)
(Rs bn) (x)
30 1.5
10
20 1.0
5
10 0.5
0 0.0 0
kunal.lakhan@axiscap.in utkarsh.punkhia@axiscap.in 30
91 22 4325 1147 91 22 4325 1127
…Godrej Properties
Key takeaways
 20% CAGR sales target over next 3 years: Management highlighted over the years the company has built a more resilient
business model with growth dependent on business development (project acquisitions) and not market environment.
The company looks not only to survive but also dominate any market that it enters -- it entered the NCR market and is now selling
faster than peers. It does not believe in setting the prices, but rather allows market forces to set prices with focus on volumes.
 Affordability at all-time high, as per the company, given the reduced interest rates, incomes growing over the past decade and
stagnant real estate prices. Weak sentiment is the only factor holding the customers back from purchasing real estate which is at
the cusp of a sustained recovery.
 Execution capability no bar: Company has bandwidth to take on more projects and feels that the supply of land at the right price
is the only limiting factor. It is also looking to bring down its construction timeline in line with global peers to 18-24 months from
India’s average of 36 months, and is evaluating technologies for it.
 Focus remains on business development: Company will continue to exploit the JV/DM method of development. It has recently
started looking at buying land parcels in marquee locations and executing it if it believes the turnaround time will be lesser.
 Outlook: Over past 2-3 years, when the industry (including large developers) has been grappling with disruptions, GPL has not
only reported strong volumes (FY18/FY19 pre-sales at Rs 51 bn/52 bn) but has also aggressively added projects to its portfolio
(added 24 msf/ 31 msf in FY18/FY19). Thus, GPL is emerging as the biggest beneficiary of consolidation in the industry.
Further, improved liquidity (cash of ~Rs 30 bn from equity raise of Rs 21 bn in Q1FY20) will aid business development.

Y/E S al es Adj. PAT EPS C hg Net Deb t Netwo rth RoE RoCE PE PB
Marc h (R s mn) (R s mn) (R s) Yo Y (% ) (R s mn) (R s mn) (% ) (% ) (x) (x)
FY18 15,883 868 4.0 (58.0) 24,600 12,104 5.4 (3.6) 229.0 16.4
FY19 28,174 2,532 11.0 175.3 31,732 24,690 13.8 3.0 83.2 8.5
FY20E 37,340 4,621 18.3 66.1 11,354 49,230 12.5 6.5 50.1 4.7
FY21E 32,179 5,738 22.8 24.2 12,605 53,625 11.2 7.1 40.3 4.3
31
Intellect Design Arena…
AMC and implementation revenue growing steadily

Company background
5 (Rs bn)
License AMC Implementation
Intellect is engaged in software development and providing software 4
product license and related services. It is a global leader in Financial
technology for banking, insurance and other financial services. 3
2.14 2.31 2.43
2.18 2.12
It has a portfolio of products across global consumer banking, central 2 1.84 1.98
1.58 1.64
1.63 0.54
banking, risk and treasury management, global transaction banking 1 0.59 0.6
0.47 0.5 0.52 0.55 0.6 0.63
and insurance. It had revenue of USD 208 mn in FY19 with focus on 0.28 1.16 0.88 0.95
0.45 0.59 0.53 0.67 0.47 0.66 0.53
advanced markets (65% of revenue from Americas, Japan, Australia, 0
Singapore and Europe).
Q1FY18
Q2FY18
Q1FY19
Q2FY19
Q3FY19
Q4FY19
Q1FY20
Q3FY18
Q4FY18
Q2FY20
It had 240+ customers in 91 countries at the end of FY19.
Currency-wise revenue mix Revenue CAGR of 25% over FY15-19
AUD 16 14.6
2% (Rs bn)
EUR 14
Others USD
3% 12 10.7
11% 37%
10 9.1
CAD 8.1
9% 8 6.1
6
4
INR
GBP 2
13%
26%
0
shashi.bhusan@axiscap.in santosh.sinha@axiscap.in akshay.ramnani@axiscap.in 32

91 22 4325 1104 91 22 4325 1121 91 22 4325 1119
…Intellect Design Arena
Key takeaways
 High entry cost: Cost of entry in a jurisdiction is high. Once the entry is made, all others become low hanging fruit for the
company. Also, once it gets one of the top 2 banks in a region, other banks also approach the company.
 AMC to increase at fast pace: Licenses are important in the initial phase. 20% of the license value is AMC and comes after a
lag of 1-2 years after license booking. There is tremendous focus now on AMC and it expects some critical mass in 2 to 3 years.
AMC to increase YoY once there is critical mass. Margin for AMC and license is higher vs. implementation. It expects share of
AMC and licenses to increase.
 Volatility in Europe affecting performance: Europe particularly UK business has been affected by Brexit. It is also facing the
impact of trade war specifically in Germany. Consolidation of banks in Europe and management change is affecting the budget
cycle. Deal signings have been delayed and revenue has been volatile. Volatility in Europe has affected the license part, but not
AMC and implementation.
 Cash burn to reduce: Management expects growth momentum to return in H2FY20 led by healthy pipeline and then focus on
profitability vs. growth. It incurred Rs 9 bn in cash burn from FY15 and plans to focus on reducing any further cash burn. As per
management, cash burn can be reduced by: (i) developing products that can be used anywhere, (ii) developing framework to
reduce integration method, (iii) making sure that 1st customer is referenceable, and (iv) charging customers for special products.

Y/E S al es EBIT DA Adj. PAT EPS C hg PE PB RoE RoCE EV/E DPS
(R s mn) (R s mn) (R s mn) (R s mn) (R s) Yo Y (% ) (x) (x) (% ) (% ) (x) (R s)
FY16 8,107 (373) (234) (2.2) NA NM 3.7 (3.8) (3.6) NM 0.0
FY17 9,136 (232) (224) (2.1) (5) NM 2.0 (3.7) (2.0) NM 0.0
FY18 10,873 925 467 4.0 (292) 41.6 2.4 6.5 7.6 22.2 0.0
FY19 14,496 1,275 1,313 10.2 156 20.0 2.6 14.1 13.4 21.1 0.0
Source: Bloomberg, Axis Capital
33
Mahindra Holidays & Resorts Ltd (MHRL)…
Revenue and margin profile

Company background
Total income EBITDA margin PBT margin
MHRL is the leisure hospitality arm of Mahindra Group operating 150 30%
(Rs bn)
under brand Club Mahindra. It is the market leader in the Vacation
Ownership (VO) business in India with over 20 years of track record 100 20%
through its 50+ resorts pan-India and a member base of 250K+.
50 10%
In FY15, it acquired Finnish VO player ‘Holiday Club Resorts”, a
leading vacation ownership company in Europe. With this
0 0%
acquisition, MHRL has become the largest VO company outside US FY15 FY16 FY17 FY18 FY19
with a bouquet of 81 resorts across Thailand, Malaysia, Dubai,
Finland, Sweden and Spain. Further, its members can choose to
access a range of resorts globally through its RCI affiliation.
Revenue mix Room growth with stable occupancy
VO income Resort income ASF income Interest & others (# units) Room Occupancy
4,000 100%
100%
80% 80%
3,000
60% 60%
2,000
40% 40%
20% 1,000
20%
0%
0 0%

9122 4325 1130 91 22 4325 1107 91 22 4325 1128
…Mahindra Holidays & Resorts Ltd. (MHRL)
Key takeaways
 Member addition – huge target audience: In past 3 years, MHRL has been adding 17-18K new members each year with total
member count at 250K+. Management’s conscious focus remains on improving the quality of member-adds by increasing the
proportion of down payment and discouraging EMI program. This will help customer persistency, reduce cancellations and
improve realizations over longer term. With target audience of 10-15 mn, growth avenues for MHRL is huge.
 Innovative products -- Club Mahindra’s product “Bliss” targeting potential customers above the age of 55 years is gaining
momentum. This is a shorter duration product (8-10 years) and provides greater flexibility to prospects.
 Online growing at fast clip -- MHRL’s online/ digital investments are paying off, with more than 85% of the members confirming
the holidays through online channel or mobile app.
 Capital allocation plan – to add half as much rooms in 5 years: With strong cash on books (~Rs 6.5 bn), MHRL targets to
add 1,400 new rooms with a total capital outlay of ~Rs 10 bn over next 4-5 years. Currently, it has 31 hotel properties with
3,500+ rooms.
Financial summary CMP (Rs 221)

Y/E S al es EBIT DA Adj. PAT EPS C hg PE RoE RoCE EV/E
Marc h (R s mn) (R s mn) (R s mn) (R s) Yo Y (% ) (x) (% ) (% ) (x)
FY16 9,515 2,367 1,135 13 44 17 17 27 14
FY17 10,732 2,443 1,304 15 45 15 21 32 15
FY18 10,642 2,320 1,344 10 (32) 22 19 29 11
FY19 9,183 1,065 639 5 (52) 46 12 19 18
35
Mahindra Logistics…
SCM – revenue and gross margin trend

Company background
Mahindra Logistics Limited (MLL) is one of the largest third party SCM Gross margin (RHS)
55 12.0%
logistics (3PL) solution providers in India. It operates on an asset light (Rs bn) 9.4% 9.7%
9.2%
model wherein all the necessary assets like vehicles, warehouses, 8.1% 10.0%
45 7.9%
etc. are provided by a large network of business partners. This 8.0%
flexibility enables MLL to offer cost effective, integrated and
35 6.0%
customized supply chain management solutions to diverse set of
industry verticals. 4.0%
25
31 2.0%
It also provides technology-enabled people transportation solutions to 35 33 38 45
its clients across IT, ITeS, business process outsourcing, financial 15 0.0%
services and manufacturing industries.
PTS – revenue and gross margin trend SCM – non-M&M contribution on a rise
M&M Non - M&M
PTS Gross margin (RHS) 50
(Rs bn)
6 11.0%
(Rs bn)
10.6% 40
5 10.1% 10.5%
9.9% 23.4
30 18.4
13.7 14.6
9.5% 12.6
4 10.0% 20
9.4%
3 9.5% 10 18.2 21.0 18.9 19.8 21.2
3.4 3.9 4.0 4.3 4.9 0

2 9.0%

91 22 4325 1149 91 22 4325 1138 91 22 4325 1118
Mahindra Logistics
Key takeaways
 Growth focus intact: New CEO Rampraveen emphasized (a) focus to diversify customer base across sectors like FMCG,
E-com, Pharma and bulk, reducing dependence on auto sector, (b) asset light model to help in customized logistics solutions and
(c) focus on warehousing (driven by capacity addition; 1.1 mn sq ft in H1) and distribution logistics (sticky business) augurs well
for gradual margin expansion (click here).
 Focus remains on scaling up non-M&M SCM revenue led by consumer, FMCG, e-com and pharma, given the huge scope for
organized players; Auto SCM growth to be in sync with industry revival – greater focus on ancillaries.
 M&M auto revenue (52% in H1) to see some recovery in H2 as (a) BS-VI volume movement to pick up from Q4FY20 and (b) non-farm
segment to see volume addition (healthy Rabi season).
 Operating margin to improve gradually on (a) favorable business mix – higher growth in non-auto vs. auto and warehousing/
distribution logistics vs. transportation and (b) operating leverage benefits, as revenue contribution from new clients picks up.
 People Transport Solutions’ (PTS) performance has been subdued given (a) delays in client ramp-up and (b) initial costs for new
client additions. Management expects client ramp-up in next few months, aiding recovery in revenue and margin (back-ended).
 Capex to remain at Rs 0.4-0.5 bn in FY20 (H1 capex stood at Rs 0.3 bn – largely for handling equipment/ interiors for
warehousing space additions) to increase on warehouse capacity addition.
 Outlook: Maintain our positive bias given Mahindra Logistics’ ability to offer customized third-party logistics solution across key
sectors. We expect 20% CAGR in non-M&M SCM revenue (9% overall) over FY19-22 and gradual margin expansion on better
business mix and warehousing/ distribution logistics focus. This will aid 21% earnings CAGR over FY19-22E and healthy FCF
generation, as working capital remains largely stable.
Y/E S al es EBIT DA EBIT DA Adj. PAT R ep . PAT EPS RoE RoCE EV/E P/E
Marc h (R s mn) (R s mn) margin (% ) (R s mn) (R s mn) (R s) (% ) (% ) (x) (x)
FY19 38,513 1,537 4.0 933 916 13.1 20.3 27.0 17.8 30.5
FY20E 37,414 1,678 4.5 725 725 10.1 13.7 19.8 15.9 39.2
FY21E 42,553 2,076 4.9 1,037 1,037 14.5 17.4 23.1 12.3 27.4
FY22E 49,478 2,765 5.6 1,542 1,542 21.6 22.0 28.8 8.9 18.4
37
Mastek…
Total revenue (CAGR: 36%; CC: 29% over FY17-19)

Company background
12 (Rs bn) 10.6
Mastek (founded in 1982) is an IT services company providing
services to government, retail and financial services organizations 10
8.4
worldwide. Principal offshore delivery facility is based in Mumbai 8
(India), it predominantly focuses on UK geography (~72% of 5.7
6
revenue) and also operates in US and Asia-Pacific.
4 2.5 2.5
It has annual revenue of USD 148 mn in FY19 (~16.8% YoY growth 2
on fully organic basis) and headcount of 1,900+ employees as of 0
Q2FY20. It has 144 clients and 25 >USD 1 mn clients. FY17 FY18 FY19 Q1FY20 Q2FY20
EBITDA (CAGR: 60% over FY17-19) Order backlog (next 12 months) CAGR: 28% over FY17-19
EBITDA EBITDA Margin (RHS) 7 6.3

2.0 20% (Rs bn) 6.0
(Rs bn) 6 5.3 5.5
14.4% 14.8% 15.0% 14.9%
1.5 15% 5
10.7% 4 3.3
1.0 10% 3
2
0.5 5%
1
0.61 1.21 1.56 0.38 0.38
0.0 0% 0
FY17 FY18 FY19 Q1FY20 Q2FY20 FY17 FY18 FY19 Q1FY20 Q2FY20

91 22 4325 1104 91 22 4325 1121 91 22 4325 1119
…Mastek
Key takeaways
 UK business (72% of revenue) was impacted by uncertainties around Brexit both in UK public and private sectors. In UK public
sector (~40% of revenue), hunting and mining strategy continues. Recent move to hire Laura Cameron-Peck as chief growth
officer and Dennis Badman as chief business officer is towards driving growth in UK public sector.
 In UK private sector (~32% of revenue), new logo conversion is slow due to Brexit. Now talk is around increasing efficiencies
(onsite offshore mix, automation) vs. discretionary spending earlier.
 Mastek has actively managed cost and workforce in a slowing environment. Also, it did not shy away from making business
investments despite weakness in the revenue.
 Monetization plan of non-core assets is ongoing. Funds will be used for inorganic initiatives: first for adding capacity and
then capabilities.
 US business needs more sales capabilities to drive sustainable growth and is looking to add senior level sales capabilities in US.
 Strong order bookings (+4.4% QoQ) indicates revenue is not lost. There is just deferment of revenue and when macro clarity
emerges, this order book should start contributing to revenue growth.

FY16 5,253 208 137 6.0 - 23.8 1.0 3.0 2.9 10.1 2.5
FY17 5,586 505 324 14.0 132 13.0 0.9 8.2 7.7 6.6 3.5
FY18 8,156 997 700 29.7 113 17.8 2.3 13.7 12.6 11.1 6.0
FY19 10,310 1,315 1,015 42.6 43 10.4 1.5 16.0 14.9 7.0 8.5
39
Minda Corp…
Revenue by business verticals

Company background
Minda Corp is a diversified auto component maker catering to

2W/3W, PV and CV OEMs. Key products include wiring harness, 21%
locksets/keys, plastic systems and instruments clusters & sensors. Mechatronics + Aftermarket
It also manufactures aluminium die-cast products.
47%
Information & Connected systems
Minda also has strong presence in the aftermarket segment and
derives ~10% of revenue from exports. Its products are sold in
Europe, the US, CIS and ASEAN countries. It operates through 34 32% Plastics & interiors
manufacturing plants and also has an advanced engineering centre
of Electronics and Mechatronics (SMIT) in Pune.
Revenue and EBITDA margin Return ratios

Revenues EBITDA margin (RHS) (%)
ROE ROCE
35 (%) 11 25
(Rs bn) 20
30 19 19 19
20 17 17
25 10 16
15 15 15
14
20 15
9 9
15 10
10 8
5
5
0 7 0
FY14 FY15 FY16 FY17 FY18 FY19 FY14 FY15 FY16 FY17 FY18 FY19
nikhil.kale@axiscap.in nishit.jalan@axiscap.in 40
91 22 4325 1137 91 22 4325 1148
…Minda Corp
Key takeaways
 H1FY20 performance was hit by steep decline in production of vehicles (especially CV: -27% YoY). Auto production was down
13% YoY in H1; however, Minda outperformed the industry with revenue down by only 7% YoY helped by healthy growth in
exports and aftermarket. EBITDA margin at 9.4% (vs. 10% last year) has also held up well.
 Balance sheet strengthened further: As of Q2 end, the net worth has increased by Rs 380 mn, while gross debt has reduced by
~Rs 1 bn. It has also increased its cash by Rs 480 mn helped by reduction in working capital requirements.
 Exports grew 20% YoY in H1 driven by jump in die casting exports to Europe (~Rs 1.3 bn in H1). Company targets to double
the exports over the next 3 years.
 Wiring harness content for 2Ws expected to go up by 2-2.3x post BS-VI and for CVs by 25-30%.
 KTSN’s performance continues to be weak. Management is working on stabilizing and improving the operations. Focus is on
(1) reducing dependence on VW by aggressively pursuing new business and (2) reduce fixed costs and break-even points.
Performance is expected to improve in 2-4 quarters; however, if it continues to be weak, the management is not averse to taking
a strategic call.
 Supplying products for e2Ws: Company is supplying keyless system consisting of electronics steering column lock, key FOB,
smart ECU and glove box actuation mechanism and few die casting components for Bajaj’s e-scooter Chetak. All these products
have been developed at SMIT, Pune. Management noted Minda’s content is ~Rs 5k per vehicle. It will also start supplies of
locking system and wiring harness to Netherland-based start-up Bolt Mobility in January 2020.

FY16 24,158 2,281 1,073 5.1 - 20.3 3.9 21.6 23.2 11.9 0.5
FY17 20,598 1,887 1,021 4.9 (5) 19.2 3.1 17.4 20.6 13.1 0.5
FY18 25,617 2,729 1,427 7.0 43 25.4 5.0 20.9 26.4 15.6 0.6
FY19 30,567 2,924 1,692 7.7 10 17.7 2.6 17.5 23.5 11.1 0.7
41
NIIT Technologies…
Revenue growth to remain strong

Company background
Revenue Growth - YoY (RHS)
NIIT Technologies (established 2004) is a leading global IT solutions 800 (USD mn) (% YoY) 20%
organization with over 10,000 employees. 14%
600 14% 13% 15%
The company focuses on 3 key industries: (i) Banking and Financial
12%
Services; (ii) Insurance; and (iii) Travel, Transportation and 400 10%
Hospitality. 414
200 5%
It provides services to clients across Americas, Europe, Asia, and 1% 464 528 604 683
Australia in Data & Analytics, Automation, Cloud, and Digital. 0 0%
FY17 FY18 FY19 FY20E FY21E
Margin to improve Orders executable over next 12 months

EBITDA EBITDA Margin (RHS) 500 (USD mn)
10 19%
(USD mn) 18.5%
400
8 17.9%
405
395
390
18%
375
363
17.6% 300
347
339
329
320
320
320
311
309
307
6
16.8% 200
16.5% 17%
4
100
16%
2 0
4.6 5.0 6.5 7.8 9.3 Q1FY17
Q2FY17
Q3FY17
Q4FY17
Q2FY18
Q3FY18
Q4FY18
Q1FY19
Q3FY19
Q4FY19
Q1FY20
Q2FY20
Q1FY18
Q2FY19
0 15%
FY17 FY18 FY19 FY20E FY21E

91 22 4325 1104 91 22 4325 1121 91 22 4325 1119
…NIIT Technologies
Key takeaways
 Low client concentration: NIIT Tech follows the strategy of being specialist around select verticals (Travel) and sub-verticals
(Insurance). The strategy helps to mitigate client concentration. It has one of the lowest client concentration among mid cap IT
(Top 10 clients at 39% of revenue).
 Low banking exposure: NIIT Tech's BFSI is insurance heavy (~31% of revenue). Insurance is seeing traction. NIIT’s BFSI being
less exposed to banking is relatively insulated to challenges that larger IT companies are facing.
 Digital delivered from offshore: NIIT Tech's Digital (~38% of revenue) derives less proportion from front-end activities (CX/UX)
and more from back-end activities. This enables NIIT Tech to deliver Digital from offshore as well. NIIT Tech has a good practice
of Pega and Appian and are also expanding its Mulesoft practice. Good amount of Digital revenue is from such practices.
 Attrition low: Supply-side constraints are relatively less pronounced for NIIT Tech (attrition at 12.3% is one of the lowest among IT
mid caps). Large deal velocity has increased after the management overhaul (in 2017).
 Barings’ involvement primarily at board level (strategic, capital allocation and corporate governance). 4 out of 7 board
members at NIIT Tech are from Barings. There is less interference from Barings at operational level. Synergies from portfolio
companies is limited.

FY18 29,914 5,012 2,801 - 46 7 33 4.5 15 19 17 12
FY19 36,762 6,453 4,089 - 66 46 23 3.9 18 24 13 12
FY20E 43,456 7,759 4,981 74 81 22 19 3.3 19 25 11 12
FY21E 50,086 9,270 6,063 88 99 22 15 2.8 20 26 9 12
43
Oberoi Realty…
Increasing sales in a tough market

Company background
Sales Value(Rs in bn) Area Sold(msf)
Oberoi Realty Ltd (ORL) is one of the most reputed developers in
Mumbai. Focused on developing premium residential projects, it has 60 1.5
(Rs bn) (msf)
completed over 42 projects at strategic locations across Mumbai 50
aggregating to ~12 msf (group entity including promoter group). 40 1
With another ~27 msf in the making, it has aggressive plans for 30
upcoming projects in various parts of Mumbai and other regions. 20 0.5
Its key strategy includes acquiring large land parcels directly from 10
corporates (clear title) and developing large-scale mixed-use 0 0
developments. Being conservative on leverage has helped the FY15 FY16 FY17 FY18 FY19
company sail through tough times.
Low gearing vs. peers Ability to charge a premium translating into higher margin
Net debt D/E Ratio (RHS) EBITDA EBITDA margin (RHS)
100 (x) 0.4 20 (Rs bn) 60

(Rs bn) (msf)
80 15 50
0.3
60
0.2 10 40
40
0.1 5 30
20
0 0.0 0 20
91 22 4325 1147 91 22 4325 1127
…Oberoi Realty
Key takeaways
 Volumes to improve in H2: Volumes in H1 were low due to economic slowdown. However, its new launch (Maxima) has received strong
response in Q3 and it has also booked strong sales in Worli project (were only able to book 4 units in Q2, rest will spill over to Q3). The
company believes that the property cycle is bottoming out, but revival will be linked to the overall economic growth. It expects sales traction
to improve in H2 driven by (1) Worli nearing completion (occupation certificate by Q4), (2) improved conversion at Borivali and Goregaon
projects led by festive season and (3) new launches in Thane (early Q4) and Goregaon phase III (Q4).
 Ramping up rental portfolio: It is developing 2 malls (Worli and Borivali) and 2 office projects (Goregaon and Worli) which will take the
rental income from Rs 3 bn to Rs 14 bn. Company will incrementally spend Rs 40-45 bn as capex.
 Low land acquisition cost is key: Oberoi places high importance on buying large land parcels at right price, which holds the key to the
success of any project. Developers which have paid exorbitantly for land parcels have seen limited success for these projects or
lower profitability.
 Thane land parcel: Completed acquisition at an all-in price of Rs 150 mn/ acre vs. the recent sale by Raymonds at Rs 350 mn/ acre, which
implies significant discount to market value. Total outlay for the land purchase was ~Rs 9 bn. Plans to launch phase 1 (2.5 msf) in early Q4
and believes it can sell 1 msf annually in Thane. To monetize the project in 8-9 years.
 Outlook: We believe pre-sales run-rate of Rs 3-4 bn/ quarter is low and does not do justice to its balance sheet size (asset turns of 0.2x vs.
0.5-1x for peers), scale of operations and brand. Pick-up in volumes in FY20/21 hinges upon new launches at Thane project (greenfield
location) and Goregaon Phase 3. We like Oberoi Realty due to its strong balance sheet (net D/E at 0.2x), brand and execution  well-
placed to capitalize on industry consolidation.

FY18 12,654 4,588 13.5 21.2 8,278 60,353 7.8 9.6 37.9 2.9
FY19 25,825 8,169 22.5 66.3 4,108 79,721 11.7 14.9 22.8 2.3
FY20E 23,539 11,490 31.6 40.7 14,260 90,135 13.5 10.2 16.2 2.1
FY21E 34,386 11,555 31.8 0.6 33,862 100,609 12.1 12.4 16.1 1.9
45
Phoenix Mills…
Strong growth in consumption, rental income at its malls

Company background
Rental Consumption (RHS)
Phoenix Mills Ltd (PML) began operations as a textile manufacturing 12 (Rs bn) 80
(Rs bn)
company in 1905. Gradually, it entered the growing real estate 10
market in Mumbai with High Street Phoenix emerging as the most 60
frequented destination in the city. Having set a benchmark, it 8
replicated the success story in 6 other cities across India. 6 40
4
20
It owns 8 retail malls operational across 7 cities in India and is 2
developing 5 additional large malls. Besides retail malls, the
0 0
company also owns office projects (5), hotels (2) and is also
FY13 FY14 FY15 FY16 FY17 FY18 FY19
developing a residential project (Bangalore).
Annuity income to grow1.6x by FY23 on new acquisitions Average monthly rentals at all of PML’s malls rising
Annuity EBITDA Debt (RHS) Pune Bangalore Mumbai Chennai HSP (RHS)
30 (Rs bn) 60
(Rs bn) 160 400
25 50 (Rs psf p.m.)
140
20 40 350
15 30 120
300
10 20 100
5 10 250
80
0 0
FY19 FY20E FY21E FY22E FY23E FY24E FY25E 60 200
FY14 FY15 FY16 FY17 FY18 FY19
91 22 4325 1147 91 22 4325 1127
…Phoenix Mills
Key takeaways
 Slowdown in consumption transient; pick-up seen: Consumption growth in H1 (up 3% YoY) was impacted by upgradation/ churn at its malls
resulting in lower trading area. Management highlighted Q3 is seeing signs of revival with consumption in October and November (so far)
up 30% and 20% YoY respectively. It has guided for 7-8% consumption growth in FY20.
 Capex requirements: The company plans to incur capex of Rs 8.15 bn in FY20 and another Rs 20 bn over next 2-3 years to complete its
under-construction portfolio. This will be funded by Rs 5-6 bn of annual FCF from operational annuity assets, cash flow from development
business and residual through debt.
 Financial prudence while focusing on growth: Gross debt at Rs 45 bn, of which >90% is backed by income generating assets (annual
EBITDA of Rs ~10 bn; interest cover of >2x). Residual capex can lead to peak debt of Rs 55-60 bn by FY23 which will be backed by
annuity EBITDA of Rs 20 bn (interest cover of >3x).
 Impact of new tax rates: The company has chosen to stick to the old regime since it sees significant MAT credits building up in the near
future which will help it reduce its effective tax rate.
 Outlook: We estimate its annuity EBITDA to become 2.4x over next 5 years driven by (1) Its operational mall portfolio, which will continue to
grow in in double digits (CAGR of ~12% over last 3 years) driven by strong consumption growth at its malls (CAGR of ~9% over last 3
years) and rental renewals of ~57% of total area over next 3 years at a significant premium (mark-to-market rentals are ~30-40% higher than
in-place rents) and (2) Under-construction portfolio of ~6 msf of retail (5 projects) and office (2 projects) will add Rs 6-7 bn to its annuity
income by FY24. It has a sizeable development portfolio of 7.2 msf, which can generate strong cash flows of ~Rs 12 bn over next 4-5 years.

FY18 15,424 2,422 15.8 44.1 34,060 24,806 11.2 10.5 44.8 4.4
FY19 19,816 3,729 24.3 53.8 37,891 31,030 13.4 11.7 29.1 3.5
FY20E 22,163 4,594 28.8 18.3 45,752 34,885 13.9 11.4 24.6 3.2
FY21E 24,396 5,287 33.1 15.1 54,513 39,115 14.3 11.1 21.4 2.9
47
Polycab India…
Trajectory and margin profile

Company background
Sales EBITDA margin (RHS)
Polycab is India’s #1 cable & wires player (18% market share). 100,000 15%
(Rs bn)
Leveraging upon strong ties with distributors and gaining scale
80,000
benefits over the years, it has come a long way from being a
10%
distributor (4 decades ago) to an electrical leader. In FY14, it 60,000
ventured into FMEG space with offering across fans, switchgears,
40,000
lighting & luminaries and other domestic appliances -- in less than 5%
5 years it has clocked sales of ~Rs 5 bn. Renewed focus is to 20,000
transform from a B2B major to a B2C behemoth. It has strong
manufacturing capabilities through 24 manufacturing units and JVs. 0 0%
Regular investment in brand building coupled with initiatives like
‘Bandhan’ and ‘Josh’ have helped it in setting extensive reach.
Earnings and return ratios improving Strong cash conversion
PAT RoE (RHS) RoCE (RHS) OCF OCF:EBITDA (RHS)

15,000 150%
(Rs bn)
6,000 (Rs bn) 30%
5,000
10,000 100%
4,000 20%
3,000
5,000 50%
2,000 10%
1,000
0 0% 0 0%

9122 4325 1130 91 22 4325 1107 91 22 4325 1128
…Polycab India
Key takeaways
 Cable & wires

 Demand from real estate and construction sectors continued to be sluggish.
 Polycab maintains #1 position in India cables & wires market with 12% (18% in organized market) share.
 On steady state, margin should be 11-13%.
 Large export order (~Rs 9.5 bn) for Africa commenced in Q2, with majority of order execution to be done in FY20.
 FMEG
 Fans and lighting & luminaires have been key growth focus areas; have grown strong in H1. Next targeted product category
is water heaters.
 Polycab continues to gain market share across geographies by leveraging on its strong brand name and is benefitting from
shift from unorganized to organized.
 EPC: Strategic play where Polycab leverages its strengths of cables & wires franchise. Not a key focus area for the
company and on annualized basis should be mid-single digit as % of overall revenue.
 Capex: Targets to spend ~Rs 2.5 bn over the next 3 years.

Marc h (R s mn) (R s mn) (R s mn) (R s) Yo Y (% ) (x) (x) (% ) (% ) (x) (R s)
FY18 67,703 7,289 3,585 25 54 35 5.4 17 22 18 1
FY19 79,560 9,232 5,003 35 40 25 4.4 19 28 13 3
FY20E 91,988 10,774 6,978 47 32 19 3.4 21 28 12 4
FY21E 103,907 12,218 7,908 53 13 17 2.9 19 25 10 4
49
PVR…
PVR’s operating matrix

Company background
Footfalls Occupancy rate (RHS)
PVR Ltd is the largest and a premium film exhibition company in 150 (mn) (%) 38
India. It acquired Cinemax in 2012 and had taken over DT Cinemas
in 2016 serving 100 mn+ patrons annually. It also acquired SPI 120 36 36
Cinemas in 2018, increasing its penetration in southern states. 35
35 35
90 34
Currently PVR operates a cinema circuit of 800+ screens at 170
properties in 69 cities (21 states and UTs). 60 32
31
PVR Ltd has PVR Cinemas as its major subsidiary. Its other two
30 30
subsidiaries are PVR Leisure and PVR Pictures. PVR Pictures has been
76 99 108 118 127
a prolific distributor of non-studio/ independent international films in 0 28
India since 2000. FY18 FY19 FY20E FY21E FY22E
SPI Cinema’s operating matrix ATP/SPH trend (PVR+ SPI Cinemas)
(mn) (%) (Rs) Blended ATP SPH (RHS) (Rs)

Footfalls Occupancy rate (RHS)
30 60 180 120
25 110
58 58 58 58 58 175
20 100
15 56 170 90
10 80
54 54 165
5 70
12 10 18 21 25
0 52 160 60
FY18 FY19* FY20E FY21E FY22E FY18 FY19 FY20E FY21E FY22E
Source: Company, Axis Capital *Actual from date of merger Source: Company, Axis Capital

91 22 4325 1149 91 22 4325 1138 91 22 4325 1118
…PVR
Key takeaways
 Expansion plans intact – expects to add 80+ screens each in FY20-21 (+42 screens in H1) across tier I/II/III locations; no
significant impact of ongoing real estate slowdown expected on mall development in the medium term.
 PVR Utsav to operate 10-12 screens in FY20 (~25 screens in FY21E; focus to expand reach in tier III and beyond) – operating
in 2 locations (Satna, Madhya Pradesh, and Jalgaon, Maharashtra) currently. Management expects its RoCE profile to be
largely in sync with PVR as lower ATP/SPH will get negated with lower per screen capex.
 No significant threat from Digital / OTT penetration given (a) exhibitors following a strict 8-week movie release window between
theatrical and digital release – this is still lower than global benchmark of 90 days and (b) movie watching being the cheapest
outdoor media/entertainment options for Indian consumers.
 Management highlighted no impact on footfalls due to OTT till date, as audience still enjoys cinema viewing experience.
 Management remains confident of (a) healthy growth in net ATP (+3-5%) and F&B spends (+8-10%), and (b) gradual recovery in
ad revenue (yield-driven; aided by SPI repricing) with favorable macro. Expect limited impact of ad growth slowdown given its
longer term contracts with select ad agencies.
 Capex guidance of Rs ~5 bn in FY20 maintained for (a) screen additions (2/3rd of capex; Rs 30 mn/screen) and (b) upgrade/
renewal of older screens (1/3rd capex). Debt expected to peak at current levels (Rs 13-14 bn).
 Outlook positive, as attractive screen locations across key geographies (first mover advantage) and strong management enable it
to monetize footfalls (have always been above peers’), visible in superior operating matrix (ATP, SPH, ad/screen, occupancy).

FY19 30,856 1,938 - 41.5 54.6 42.2 16.7 19.0 15.6 2.0
FY20E 35,687 2,600 39.0 53.8 29.7 34.2 17.5 16.0 14.1 2.0
FY21E 40,427 3,145 50.9 65.1 21.0 28.3 16.6 16.2 12.0 2.0
FY22E 45,325 3,843 68.1 79.5 22.2 23.1 17.3 17.2 10.2 2.0
51
Quess Corp…
Focus on organic growth

Company background
Quess is a kaleidoscope comprising of core competencies in staffing

and tech services with acquisitions in adjacencies. Quess falls in the
category of unique set of companies like Motherson Sumi which have
grown through roll-up acquisitions providing sub-scale niche
operators a larger playing field.
The company operate across 3 verticals – (1) Work force
management: Staffing business, (2) Operating asset management:
Industrial asset management and facility management and (3) Tech
services business: Technology services and internet business
through Monster.
Continuous improvement in cash flows Segment RoCE

80
(%) OCF:EBITDA
59
60
47
44 44
40 35
29 31 31
20
0
FY17 FY18 Q1FY19 Q2FY19 Q3FY19 Q4FY19 Q1FY20 Q2FY20

9122 4325 1130 91 22 4325 1107 91 22 4325 1128
…Quess Corp
Key takeaways
 Outlook: Quess targets to grow 20%+ organically over the next 3-5 years. Increasing share of higher-margin businesses should
help maintain the margin at 6-7%; long-term target remains at 8%. Focus on cash conversion (50% by end of FY20) and efficient
capital management to help achieve 20% RoCE target.
 Concerns over Trimax resolved: Quess has outstanding dues of ~Rs 1.8 bn for Ahmedabad smart city project. With JV partner
Trimax filing for insolvency, receivables from this project became a key investor concern. However, with Quess acquiring the
remaining 49% stake in the JV, all current dues and future receivables to exclusively flow to the company. Management targets to
recover ~Rs 810 mn by FY20 (~Rs 207 mn recovered in H1).
 Rationalization of intercompany loans: Quess has disbursed intercompany loans worth ~Rs 5.6 bn (as of Jun-19) for growth of its
subsidiaries. However, it has undertaken a rationalization drive and targets to bring it down to ~Rs 950 mn by Dec-19.
 Thomas Cook India Ltd’s (TCIL) demerger to conclude by Dec-19. Post the demerger, Quess will be directly held by Fairfax
Holdings (~33%), with public shareholding going up to ~44% (from ~28% currently).
 Amazon investment: Quess issued 0.75 mn share to Amazon at ~Rs 676/share amounting to an investment of ~Rs 510 mn by
way of preferential allotment. These investments will be utilized for expansion of DigiCare business.
F inanc ial summary (C MP: R s 568)

FY18 61,673 3,544 3,110 - 21 122 27 3.4 17 11 23 0
FY19 85,270 4,646 2,567 - 18 (17) 32 3.0 10 11 18 0
FY20E 105,657 6,385 2,786 21 19 9 29 2.9 10 12 13 0
FY21E 122,375 7,838 4,018 28 28 44 20 2.7 14 15 10 0
53
RBL Bank…
Asset quality likely to trend better from FY21

Company background
GNPA NNPA
RBL is a young ‘old-generation’ private bank with a differentiated 4%
distribution strategy. Though in existence for 7+ decades, RBL’s
turnaround started in FY10 with professional management (strong 3%
corporate governance) being brought in and shareholder and capital
base widened (focus on quality of capital). 2%
RBL is transitioning from being a wholesale-focused regional player 1%

to an agile technology-leader with a diversified portfolio, focus on
strategic niche customer segments and pan-India aspirations. 0%
The stock trades at 1.6x FY21E P/B for ~15% RoE (in FY21) is FY17 FY18 FY19 FY20E FY21E FY22E
reasonable given its strong retail and cards franchise.
Expect RoA/RoE of 1.5%/16% by FY22 Margin to remain healthy despite near-term challenges
RoA ROE (RHS) 5%

4.2% 4.3% 4.4%
3.8%
1.4% 17.0% 4% 3.4%
15.0% 3.0%
1.2%
3%
13.0%
1.0%
11.0% 2%
0.8%
9.0%
0.6% 1%
7.0%
0.4% 5.0% 0%
FY17 FY18 FY19 FY20E FY21E FY22E FY17 FY18 FY19 FY20E FY21E FY22E

91 22 4325 1103 91 22 4325 1102 91 22 4325 1126 91 22 4325 1133 91 22 4325 5181
…RBL Bank
Key takeaways
 Stress in corporate book is getting recognized: Stress book of Rs 18 bn (3% of loans) in Q2 (vs. Rs 10 bn in Q1) comprising 4
accounts in media, tea, coffee, and plastics segments and it expects ~50% provision. Of this, Rs 3.5 bn is already made.
 Management was fully aware that the resolution process has been delayed beyond control, which led to uptick in stress book.
It acknowledged that exposure to certain groups was in excess of the comfort level; hence, it is rejigging its wholesale portfolio by
defining limits based on networth. Consequently, it expects growth to remain muted in this segment (~15% in the near term).
 Retail growing at healthy pace: Retail business continues to do well and the management does not see any sign of stress in the
segment. It highlighted that a downcycle in retail particularly personal loan is not visible as of now; cards and MFI are largely
resilient in the downcycle and likely to benefit RBL.
 Cards business is doing well. It has ~2.5 mn cards and is doing 1 mn cards a year and expects to maintain this run-rate. Analytics
is helping to keep delinquencies under check for this segment.
 All Bajaj schemes are now available on RBL credit cards at same cost. A new Bajaj partner is unlikely to impact RBL given its size.
Festive season turned out to be good for RBL with spends up 30% MoM, similar to that in the last year.
 MFI book: Risks are more geographic and political which are beyond control. Consequently, it has specified geographical and
district-wise limit on its MFI portfolio. It has 2.7 mn active accounts (all women) and this book is expected to grow at ~30%.
 Outlook: Trend in core deposits, retail, and cards remains strong; once the bank passes the hump of NPL recognition and
provisioning, we expect RoE/ RoA to start improving again from FY21.

Y/E PAT EPS EPS c hg BV Adj. BV P/E P/ABV RoE RoA Net NPA
Marc h (R s mn) (R s) (% ) (R s) (R s) (x) (x) (% ) (% ) (R s)
FY18 6,351 15.1 27.3 159 154 21.0 2.1 11.5 1.1 0.8
FY19 8,670 20.3 34.3 177 171 15.6 1.9 12.2 1.2 0.7
FY20E 7,462 17.5 (13.9) 191 170 18.2 1.9 9.5 0.9 2.0
FY21E 13,405 31.4 79.6 218 196 10.1 1.6 15.3 1.3 1.8
55
Reliance Nippon Life Asset Management (RNAM)… (Not Rated)
AUM mix dominated by MFs and pension funds

Company background
MF Pension Managed Offshore
RNAM is one of largest asset managers in the country with 5,000
24 years of track record. It offers portfolio management, financial 35 34 35
4,000 34 34
planning, mutual fund investment, and advisory services to
individuals, institutions, trusts, private funds, charitable 3,000 1,750 1,806 1,875 2,217 2,549
organizations, and investment companies.
2,000
As of September 2019, RNAM has AUM of Rs 4.53 trn – Rs 1.9 trn
in mutual funds, Rs 2.6 trn in managed accounts and Rs 65 bn in 1,000 2,238 2,272 2,278 2,025 1,886
international segment. It has presence in ~290 locations with
0
~1,100 employees and ~75,400 distributors. In Sept’19, Nippon Sept'18 Dec'18 Mar'19 Jun'19 Sep'19
Life Insurance completed acquisition of 75% stake in RNAM. As a
result, RNAM became subsidiary of Nippon Life.
Equity contributes 43% to MF AUM Increasing share of stickier AUM
SIP book (Rs bn) SIP count (mn)

Equity Debt Liquid ETFs
10 4
100 3.2 (mn)
5 7 9 12 14 (Rs mn) 2.9
8
80 19 19 19 15 3
14
2.1
6
60 38 31 29 1.6 2
35 33
4 8.5 8.5
40
5.9 1
20 39 42 43 2 4.0
37 38
0 0 0
Sept'18 Dec'18 Mar'19 Jun'19 Sep'19 Sept'16 Sept'17 Sept'18 Sept'19
praveen.agarwal@axiscap.in vikash.mundhra@axiscap.in manish.karwa@axiscap.in ojasvi.khicha@axiscap.in amit1.jain@axiscap.in 56

91 22 4325 1102 91 22 4325 1126 91 22 4325 1103 91 22 4325 1133 91 22 4325 5181
…Reliance Nippon Life Asset Management (RNAM)
Key takeaways
 Nippon brand to help geographic expansion: The company plans to launch products in other markets where Nippon has strong
presence such as Thailand, Australia etc. The company is likely to benefit from global best practices on both debt and equity
side and the rollout is already in progress.
 Additionally, Nippon certainly looks to add value on risk and compliance functions; additional filing with FSA (Japanese regulator) will
improve compliance. The company earns 40-50 bps on offshore funds depending on fund type (debt/equity).
 First mover advantage on digital distribution channels: The company led distribution on digital channels much before its peers
with platforms like Paytm, ETMoney and Paisa Bazaar. These partnerships started at inception stage itself which is helping
volumes. Moreover, apps like Business Easy, Simply Save have lot of APIs which drive volumes higher. 54% transactions are now
on digital. Next leg of growth will come through through relationship deepening by leveraging on analytics.
 Employee cost to remain stable: Employee cost will remain at this level except for ESOPs (as per Ind-AS). ESOP cost will taper off
going ahead. 6% out of 7.5% has been allocated with tenure of 7 years and it covers 150 employees.
 No ADAG exposure on balance sheet: AMC balance sheet has zero exposure to ADAG group. While exposure is
Rs 2.50 bn across schemes. These exposures, with face value of Rs 11.20 bn, were largely towards Reliance Home Finance
and Reliance Commercial Finance (~80% of the exposure).
Financial sum m ary (C M P: R s 358)
Y/E AUM PAT EPS EPS C hg RoE M . C ap / P/E

M ar (R s b n) (R s mn) (R s) (% ) (% ) AUM (% ) (x)
FY16 1,528 3,964 6.4 - 24.3 14.0 55.9

FY17 2,081 4,020 6.9 6.9 22.3 10.3 52.3
FY18 2,321 4,557 7.6 11.4 21.7 9.2 46.9
FY19 2,344 4,861 7.9 4.1 19.7 9.1 45.1
Source: Company, Axis Capital Note: AUM excludes pension funds
57
Security & Intelligence Services India…
Leadership across verticals

Company background
SIS is a leading security service and FM solutions provider with #2 in India cash
Market position #1 in India security #2 in India FM
operations across India and APAC (Australia and SEA). Over the logistics
years, it has posted strong organic growth coupled with inorganic
acquisitions. It is #1 player both in India security and Australia
security market and #2 player in India FM market. SIS (India security) > SIS (India) > ISS SIS (cash) > Brinks
G4S (India security) (India) Cash (India)
While growth trajectory is in place, it has taken several initiatives
(Man Tech solutions, Alarm monitoring, Integrated FM) to move from
a product/service offering to a solution-based offering. Through a But, market
successful track record of integrating acquisitions into SIS ethos, it share
4% 3% 14%
has gained access to newer markets and service verticals.
Strong organic growth trajectory Continuous improvement on cash flows
Overall 77%
80% Organic (Rs bn) OCF Cash conversion (RHS) RoCE (RHS)
growth growth
4 80%
60%
60%
40% 27% 2 40%
20% 10%
41% 20%
26%
8% 0 0%
0% FY14
FY15
FY16
FY18
FY19
India security International security India FM

9122 4325 1130 91 22 4325 1107 91 22 4325 1128
…Security & Intelligence Services India
Key takeaways
 Still headroom to grow: SIS became the #1 player in the Indian security industry in FY19 and is the #2 player in FM services
and cash logistics. Even so, the market share both in the India security business/ FM businesses remains very low at 4%/ 3%.
Hence, the headroom to grow in India business – security and FM (continue to grow at 20% organically) – remains.
 Transitioning from product to service to a solution-based offering: SIS is taking large strides towards moving from a service-based
offering to a solution-based offering. Man-tech solutions/ integrated facility management are focus areas for solution-based
selling. Initiatives like ONE SIS, OYC (own your customer) will enable better and more granular client mining.
 M&A strategy: SIS acquired 5 key companies during FY19. Going forward, acquisition targets would have following attributes --
(1) geographic niche, (2) in core categories of FM, security services and cash logistics (3) optimal size (no marginal deals or
large deals impacting Debt/ equity).
 Guidance: ~20% organic revenue growth (India security + FM); 25%+ RoCE and 50%+ CFO/EBITDA. On steady state, India
businesses should clock 6-6.5% margin, while international business margin to be 5-5%.

Y/E S al es EBIT DA Adj. PAT C o nsensus EPS C hg PE RoE RoCE EV/E DPS
Marc h (R s mn) (R s mn) (R s mn) EPS * (R s) (R s) Yo Y (% ) (x) (% ) (% ) (x) (R s)
FY18 58,334 3,120 1,630 - 22 49 41 20 19 21 0
FY19 70,933 3,652 2,147 - 29 32 31 19 13 19 0
FY20E 89,535 5,170 3,106 38 42 45 21 22 15 13 0
FY21E 103,024 6,006 3,745 44 51 21 18 21 17 12 0
59
Spandana Sphoorty Financial…
Strong growth in AUM

Company background
200,000 AUM AUM growth (RHS) (%) 200
Spandana is a leading rural-focused NBFC-MFI with a (Rs mn)
geographically diversified presence in India. It offers income 150
150,000
generation loans under the joint liability group model predominantly
to women from low-income households in rural areas. 100
100,000
It is one of the most profitable and the only MFI to get a rating 50
upgrade after the recent liquidity crisis (A- from ICRA). It is the third
50,000
largest NBFC-MFI (in AUM terms) and has impressive metrics – 0
superior asset quality (GNPA% at 0.8%), low expense (cost to
0 -50
income at 20.3%), positive ALM, pan-India presence
FY17 FY18 FY19 FY20E FY21E FY22E FY23E
(941 branches), experienced management and robust risk-based
framework. Source: Company, Axis Capital
Note: AUM figures exclude old AP portfolio (FY19: Rs 3,585 mn)
Diversified funding mix Return ratios likely to propel
22 (%) RoE RoA (RHS) 10

(%)
21
NBFC 9
18.4% 20
Debt securities 19 8
46.2%
18
7
Banks 17
34.7% 16 6
Others
0.7% FY19 FY20E FY21E FY22E FY23E
Source: Company, Axis Capital Note: Details as on FY19 Source: Company, Axis Capital
praveen.agarwal@axiscap.in vikash.mundhra@axiscap.in manish.karwa@axiscap.in ojasvi.khicha@axiscap.in amit1.jain@axiscap.in 60

91 22 4325 1102 91 22 4325 1126 91 22 4325 1103 91 22 4325 1133 91 22 4325 5181
…Spandana Sphoorty Financial
Key takeaways
 Strong growth trajectory: Management expects 40% AUM CAGR over 3-4 years with resilient margin, improving cost to income,
and pristine asset quality. Capacity addition is on track with ~42 new branches in last 7 months and 2,400 employee addition
over the past 6 months.
 Growth is now more granular with top 3 states growing <20%. Incremental growth was led by states like Rajasthan (88% growth),
Bihar (65%) etc. The company targets 1,000 branches and Rs 67 bn AUM by FY20. PBT guided to be Rs 7.5 bn for FY20.
 Huge demand for PSL portfolio: Management indicated huge demand for PSL-compliant portfolios. Consolidation in MFI space
and requirements like high CAR and high net worth result in very few MFIs who can sell sizable portfolios to banks.
 Margin expected to remain stable: Cost of borrowings (including off-balance sheet) declined 20 bps QoQ to 11.5% as it
pre-closed high cost borrowings during the quarter. The company pre-closed Rs 2 bn worth of borrowings in Sept’19 and
~Rs 1.5 bn in Oct’19.
 Yields were down 150 bps YoY, as Rs 480 mn upfront income on securitization transaction was not included in calculation.
 Operating efficiency expected to improve: Even with branches and employee additions, the management expects improvement
in efficiency ratio driven by enhanced branch productivity. AUM per branch is expected to reach
Rs 67mn by Mar’20 (Q2FY20: Rs 57 mn).

Y/E PAT EPS EPS c hg Adj. BV P/E P/ABV RoE RoA Net NPA
Marc h (R s mn) (R s) (% ) (R s) (x) (x) (% ) (% ) (% )
FY18 1,879 63.2 (59.5) 466 20.4 2.8 16.2 6.6 0.2
FY19 3,119 52.3 (17.2) 317 24.7 4.1 19.0 7.2 0.0
FY20E 4,212 65.5 25.2 421 19.7 3.1 18.3 7.5 0.0
FY21E 6,437 100.1 52.8 521 12.9 2.5 21.2 9.0 0.0
61
Supreme Industries…
16% revenue CAGR over FY16-20E

Company background
Revenue CAGR % Linear (Revenue)
Founded in 1942, Supreme Industries Ltd is India's leading plastic 80
(Rs bn)
processing company with seven business divisions. The company has 62.7
56.1
forayed into different types of plastic processing in injection 60 49.7
moulding, rotational moulding (ROTO), extrusion, compression 44.6
moulding, blow moulding etc. Handling over 3,20,000 tonne of 40 29.6
polymers annually effectively makes it the country's largest
plastics processor. 20
It has 25 advanced plants across India and a wide distribution 0

network of ~3,700 channel partners. 2016 2017 2018 2019 2020E
EBITDA and EBITDA margin PAT and ROCE
EBITDA EBITDA margin (RHS) PAT ROCE (RHS)

10 40
10 20 (Rs bn) (%)
(Rs bn) (%)
8
8 30
15
6
6 20
10
4
4
5 10
2 2
0 0 0 0
2016 2017 2018 2019 2020E 2016 2017 2018 2019 2020E
kunal.lakhan@axiscap.in kashyap.pujara@axiscap.in utkarsh.punkhia@axiscap.in 62

91 22 4325 1147 91 22 4325 1107 91 22 4325 1127
…Supreme Industries
Key takeaways
 Strong volume growth in pipes: Management is confident of over 10-12%/ 12-15% volume/ value growth in pipes in the long term
(12-13% volume growth in FY20). Demand for pipes remains strong (both new construction and replacement demand). CPVC pipes will
continue to dominate, as PVC pipes are substituted by CPVC pipes.
 Industrial division -- lacklustre performance not a secular trend: The company’s products i.e. material handling and household appliances are
used in products such as washing machines and other white labor goods etc. The companies to which it supplies have seen subdued sales
during the quarter; hence, the lacklustre performance. Sales are expected to pick up.
 Consumer segment -- remains a commodity play: The company sees a 8-10% growth in the consumer segment as its products i.e. plastic
chairs is largely a commodity. The company has also entered into blow moulded furniture.
 Composite cylinders: HPCL has recently placed an order for its plastic composite cylinders. The company commented that such orders can
only continue if customers are given a choice between metal cylinders and plastic cylinders.
 Margin outlook steady in long term: While margin outlook remains soft in the near term as raw material prices remain subdued, in the long
term the margin should return to 14-15%.
 Outlook: Supreme is one of the best plays on India’s building material industry with an excellent track record -- stable gross margin at ~35%
over last decade, 25% earnings CAGR over FY08-18, RoCE at 25-30%, dividend payout of 40-50%, organic growth focus and funded only
from internal accruals, no equity raise since last two decades. We continue to like Supreme in the long run because of consistent growth
(15% pa), sustainable margin trajectory, RoCE focus, strong FCF generation with zero debt, and ~50% dividend payout. We have a
REDUCE rating, as the growth trajectory over the last 2-3 years has been relatively flat and valuations at 29x/24x FY20/21 seem fair.
June (R s mn) (R s mn) EPS * (R s) (R s) Yo Y (% ) (x) (% ) (% ) (x) (R s)
FY18 49,701 4,318 - 34.0 0.8 33.3 24.0 29.1 18.5 12.0
FY19 56,120 3,814 - 30.0 (11.7) 37.7 18.8 26.0 18.5 24.7
FY20E 62,668 4,764 38.5 37.5 24.9 30.2 21.1 24.5 17.3 18.8
FY21E 71,412 5,939 45.5 46.8 24.7 24.2 24.0 27.6 14.1 23.4
63
Syngene International…
Revenue growth momentum expected to continue given visibility

Company background
(Rs bn) Revenues Revenue Growth (RHS)
Incorporated in 1993, Syngene is a leading India-based CRO. 28.3%
It provides research services on a contract basis to pharmaceuticals, 35 20.9% 30%
biotechnology, agrochemicals, consumer & animal health, cosmetic 30 20.9% 25%
and nutrition companies. Business comes from molecules under 25 18.5%
15.7% 20%
discovery and under development stages. It intends to forward 20
integrate into commercial-scale manufacturing of New Molecule 15%
15
Entities (NEMs). 10
10%
It largely operates under 3 verticals: discovery services (dedicated 5 5%

scientists, contract renewed annually), development and 0 0%
manufacturing services (fee for service) and dedicated centres FY18 FY19 FY20E FY21E FY22E
(5-6 year long term contracts). Source: Company, Axis Capital
Margin to gradually expand on faster sales growth over

Business model: Segmenting billing types continued investments
F ee F o r S erv ic e (F F S ) F ul l T ime Equiv al ent (F T E) Dedic ated
Duration Short-term Medium-term; >=1year Long-term; >5 years Rs bn EBITDA Adj. Net profit EBITDA Margin (RHS)
Exclusive/ semi-exclusive Exclusive/ semi-exclusive team/ Customized, dedicated to
Infrastructure
team/ infra infra client's need 12 38%
32.6% 31.8%
Predictability Low Medium High
30.2% 31.2%
Integrated collaboration with
10 29.3% 33%
Complexity Generally low Medium
multiple services
8 28%
Material,
Largely borne by the
employee cost
company
Likely passed on to the client Borne by client 6 23%
over run
Client's focus Cost arbitrage; productivity Productivity; innovation Innovation 4 18%
Source: Company, Axis Capital 2 13%

4.6 3.1 5.4 3.3 6.4 4.3 8.0 4.7 9.8 5.8
0 8%
prakash.agarwal@axiscap.in dhagash.vora@axiscap.in mehul.sheth@axiscap.in 64

91 22 4325 1145 91 22 4325 1132 91 22 4325 1131
…Syngene International
Key takeaways
 Unique positioning
 Strong growth visibility on extension and expansion of older contracts (BMS, Amgen, Baxter, etc.) and new contracts (GSK)
totalling to 331 global clients (vs. 103 in FY12). GSK and Amgen would be amongst the top 5 dedicated clients in FY19.
 Syngene’s advantages stem from lower operating costs on its lower loaded cost of scientists than in China, EU, and the US
(which has per scientist cost at 1.5x/2x-3x/4x-5x that of Syngene’s billing rate).
 Additionally, recent developments between US and China (trade war) coupled with IP related issues could create an
opportunity for Asian companies due to the shift in outscoring from China to other countries.
 Expects strong growth in H2 with steady margin: Company maintains mid-teen growth guidance in FY20, implying strong growth
in H2 (H1 was 7% YoY, 12% on adj basis). Syngene expects the margin to be ~30% (similar to FY19) given continued
investments in quality, safety, compliance and marketing initiatives.
 High capex to continue given growth visibility:

 Capex plan of USD 550 mn by FY21; USD 400 mn already undertaken as of Q2FY20 (USD 350 mn already commissioned
while USD 50 mn as CWIP).
 Capex is being spent towards (1) Mangalore API facility (expects completion by FY20 end, validation in FY21 and sales from
FY22), (2) discovery services and (3) dedicated centres & development services. Expects to achieve an asset turnover of
1-1.5x from the new capex 1-2 years after commercialization.

Y/E S al es Adj. PAT EPS C hg PE RoE RoCE EV/E DPS
Marc h (R s mn) (R s mn) (R s) Yo Y (% ) (x) (% ) (% ) (x) (R s)
FY19 18,256 3,307 8 8 - 18 13 - 0.8
FY20E 21,116 3,591 9 9 36 17 14 - 1.0
FY21E 25,523 4,743 12 32 27 20 16 17 1.2
FY22E 30,850 5,833 15 23 22 20 18 14 1.5
65
Torrent Power…
Regulated equity in distribution license to post12% CAGR

Company background
A'bad Surat
Torrent Power (TPW) is an integrated power utility present across the 40
(Rs bn)
value chain from generation to T&D. Generation capacity at ~3 GW
(88% gas, 12% coal); ~44% of gas capacity has PPA; 362MW coal 30 8
plant to be retired by Dec’22 on new emission norms. On 7
7
distribution, front, TPW has distribution licenses for Ahmedabad, 20 6 6
6
Surat, Dahej (~425 sq.km) and operates as a franchisee for 5 6
22 25
Bhiwandi/ Agra (~942 sq.km) till FY27/ 30 respectively. In FY19, 10 17 20
14 16
TPW further won license for Dholera (~920 sq.km) and franchise for 12 13
Shil-Mumbra-Kalwa circle (65sq.km). Under renewables, TPW has 0
611MW of operational capacity and 841 MW under construction FY15 FY16 FY17 FY18 FY19 FY20E FY21E FY22E
(of which 500 MW likely to be terminated on delays)
AT&C losses at Bhiwandi, Agra – expect 1.5% reduction p.a. RoE to expand with turnaround in gas plants and fall in DF losses
(units) Bhiwandi Agra 16%

13.9%
60 12.9% 12.4% 12.6% 13.0%
50 12% 10.8%
40
30 8% 6.0% 6.4%
20
4%
10
0
0%
FY20E
FY21E
FY22E
FY11
FY12
FY13
FY14
FY15
FY16
FY17
FY18
FY19
FY15 FY16 FY17 FY18 FY19 FY20E FY21E FY22E
abhishek.puri@axiscap.in vaibhav.saboo@axiscap.in 66
91 22 4325 1141 91 22 4325 1123
…Torrent Power…
Key takeaways
 Spot power sale viable at current lower gas prices, higher spot prices in peak
 Imported gas prices down 21% YTD (73% from peak) – USD 4.25 gas contracts, make variable cost cheap at Rs 2.6-2.7. Margin of
0.97/kWh in the worst period has scope to expand meaningfully. Management expects gas prices to remain benign till atleast 2022.
 Scope for stranded gas to tie up PPA: (1) PPA opportunity with in-house distribution upon retirement of 362 MW Amgen coal plant by
Dec’2022, (2) Gas pooling mechanism – to provide steady volumes; (3) RE penetration -- mainly in evening peaks when solar penetration
dips and thermal is incapable of quick ramp up.
 Option value of Rs 62/share if TPW’s merchant gas plants are operated at 20% PLF.
 Distribution franchisee – long runway for growth

 Tariff increase in UP helped Agra contribution efficiency and compound profits.
 Long runway for improvement; T&D loss reduction hasn’t topped out.
 Lean balance sheet supports growth; FCF generation to be utilized for repayments, inorganic expansion with 15% RoE threshold
 TPW repaid Rs 10 bn debt till Oct’19. Dgen losses can reduce on quicker debt payment (Rs 5.8 bn PBT loss in FY19).
 TPW to remain opportunistic in transmission (15% RoE cut-off), distribution (1-2 circles p.a.) and renewables (selectively).
F inanc ial summary (C MP: R s 294 )

FY18 115,121 31,171 9,423 - 20 120 15 1.8 13 11 7 2
FY19 131,510 31,995 8,989 - 19 (5) 16 1.6 11 10 7 5
FY20E 139,769 35,279 11,716 24 24 30 12 1.4 12 10 6 5
FY21E 147,763 38,047 13,017 27 27 11 11 1.3 13 11 6 7
67
…Torrent Power
Key takeaways
 Renewables addition delays on land acquisition, inability of EPC contractor – to cut down 65% of target additions
 SECI – III (500 MW) likely to be terminated on delays (SCOD: Nov’19). Though Torrent Power has requested timeline extension (Feb’21),
it will take call after SECI’s response considering land status and increase in cost of equipment's – provision of Rs 1.65 bn.
 SECI – V (115 MW) – though facing land challenges – likely to be completed by SCOD (Jan’20); penalty of Rs 230 mn if delayed.
 Sugen medium term contracts till Dec’20 offers visibility; lower gas prices a support
 Sugen is operating at 65% PLF. It has medium term contracts till Dec’20.
 Management expects gas prices to remain low till FY22 with lowest at USD 4.25. Torrent Power made 0.97/u EBITDA margin on gas
power spot sale with variable cost at Rs 2.6-2.7/unit; could yield a margin over Rs 1/u in peak season Q3 onwards.
 Operating gains to be lower with tightening of norms (SHR, O&M).
 Downsizes capex guidance on RE delays

 Given RE delays, management downsized FY20 capex guidance to Rs 25-28 bn (from Rs 50-52 bn) to factor in the delays particularly on
SECI- III project.
 To incur Rs 15 bn each year on the DF circles and ~Rs 13 bn towards project additions (RE, etc.).
 Outlook
 Torrent Power to benefit from (1) Distribution reforms as it is one of the largest private distribution operators – DF to remain biggest value
contributor given low capex-high RoE model, (2) Regulated generation to remain steady state, (3) Gas pooling for renewable integration
to pave way for recovery of stranded gas plants, and (4) Lean balance sheet (net D/E of 1x) to support growth – expect earnings to post
18% CAGR over FY19-22.
68
Tube Investments of India…
Revenue growth remains strong

Company background
Revenue EBITDA margin (RHS)
TIINDIA is a flagship company of Murugappa group with offering 60,000 10%
across adjacencies like engineering products (mainly tubes; 53% of (Rs bn)
50,000 8%
FY19 revenue) and metal formed products (chains, car doorframes,
fine blanking products; 25% of FY19 revenue). It acquired Shanti 40,000
6%
Gears in FY14 (Rs 5 bn for buying 70%; current MCap of ~Rs 8 bn). 30,000
It also used internal accruals along with moderate debt to incubate 4%
20,000
financial services business (Rs 10 bn), listed Cholamandlam 2%
10,000
Investment Finance Corp (owned 46.3% stake) and unlisted general
insurance, Chola MS general insurance (owned 60%; 40% with 0 0%
Mitsui Sumitomo). It unlocked value for shareholders by demerging FY15 FY16 FY17 FY18 FY19
financial services business into a separate listed entity, TI Financial
Holdings, whose market cap is ~Rs 90 bn (9x investment value). Source: Company, Axis Capital
Margin trend Improving cash conversion

30%
RoCE RoE OCF OCF:EBITDA (RHS)
5,000 150%
22% (Rs bn)
4,000
20% 100%
14% 14% 3,000
19%
10% 2,000
9% 14% 14% 50%
10%
1,000
7% 0 0%
6%
0%

9122 4325 1130 91 22 4325 1107 91 22 4325 1128
…Tube Investments of India
Key takeaways
 Under leadership of MD S.Vellayan, key focus areas are (1) sustain revenue growth at 15%+, (2) maintain PBT margin at 10%
and eventually improve it to 12% over next 2-3 years, (3) achieve RoCE of ~30% (14%/21% in FY18/19) and (4) FCF:PAT
conversion of 80% which would imply that TIINDIA becomes virtually a debt-free company (0.3x debt: equity in FY19).
 Efficiency drive: The path to ~10% PBT margin would include (1) growth driving operating leverage benefits, (2) fixed cost
reduction, (3) efficiency gains by reducing the internal rejection rates, higher realizations from scrap sales and reduction in
logistics costs etc. and (4) lower finance costs on deleveraging.
 Engineering: (1) H1 decline on sluggish auto demand; scenario unlikely to improve significantly in H2, (2) Prices maintained in
H1; however, pricing power is with auto OEMs and may come under pressure due to weak economic scenario, (3) Exports is
core focus area and trial production of multiple new products for European OEM makers are underway and (4) Large diameter
tubes market is still evolving and on steady state would derive higher margin than other products in the segment.
 Metal formed: (1) Strongest performing divisions are railways, fine blanking and industrial chains, (2) Railway business scaling
up well and has ample growth opportunities, (3) Innovative products like adaptive chains witnessing good traction in export
markets and (4) Auto chain business sluggish due to weak auto demand.
 Cycles: (1) Topline weak due to dip in trade market and rationalization of institutional sales; however, bottomline improvement
continued to be strong, (2) Focus is to maintain topline and continuously focus on improving bottomline through cost control
measures and (3) Margin expected to bounce back to historic levels of 4.5-5%.
F inanc ial summary (C MP: R s 4 4 4 )
FY18 46,548 3,481 1,617 - 9 2 52 6.9 14 14 26 2
FY19 52,857 4,964 2,525 - 13 56 33 5.8 19 22 18 3
FY20E 50,292 5,822 3,309 18 18 31 25 4.9 21 23 15 5
FY21E 55,742 6,983 4,165 22 22 26 20 4.2 23 26 12 6
70
V-Mart Retail…
Store network
Company background
No. of stores Total area
Incorporated in 2002, V-Mart is one of the pioneers to set up fashion 250 17.9 20
retail sores across tier II and III towns and cities. It caters to the
14.4
‘aspiring class’ and ‘middle class’ by operating on its principles of 200
15
12
low price fashion. Operating a chain of departmental stores offering
150 10.1
apparel, general merchandise and ‘kirana’, it caters to the 8.8
10
entire family. 100
5
50
As of 1st November 2019, V-Mart runs 254 stores spread out across
106 123 141 171 214
189 cities, 19 states and UT, with total retail area of >2.1 mn sq ft. 0 0
Presence – tier wise SSSG (company level)

20%
Tier 1 Tier 2 Tier 3 Tier 4
150 132 15.4%
(no. of stores) 16%
116
120 105 12%
92 8.8%
90 78 8% 6.5%
3.7%
60 4%
36
2217 21 25
30 1612 1712 1914 16 0%
0 2 3
-4% -1.3%
0
anand.shah@axiscap.in gaurav.jogani@axiscap.in raghav.malik@axiscap.in 71

91 22 4325 1142 91 22 4325 1124 91 22 4325 1139
…V-Mart Retail
Key takeaways
 Demand trends: Company is witnessing a shift in consumer trend towards purchasing less but better product. Customers are
becoming more choosy in their purchases; not only has festive season seen a much higher demand for better fashion, the
management believes this shift in trend is long term in nature. Festival season was decent but did not live up to the
management’s expectation; winter and wedding season are expected to see balanced growth.
 Store addition: As of Q2FY20, V-Mart has 239 stores with total retail space of 2 mn sq. ft. It added 12 stores in Q2 and
27 stores in H1FY20. Management aims to continue its aggressive expansion strategy by opening 60 new stores in FY20 and
will look forward to expand the total retail space by 25% in FY21. Focus continuous to remain debt free and expand from
internal accruals.
 Recently launched its omnipresence platform and will continue to gradually ramp it up. The plan is to tap its existing customer
base through the online platform. Management did highlight that value retailers have seen some pressure from online channels
and competition.
 Other takeaways – (1) Focus on vendor consolidation continues with aggressive expansion in private label (now at 70%),
(2) The company has planned capex of ~Rs1 bn in FY20 toward stores, inventory, warehouse and technology, (3) EBITDA
margin guided at 8-8.5% for FY20, and (4) Management has implemented zonal structures and operating stores in clusters for
better supply chain management.
F inanc ial summary (C MP: R s 1716)

Marc h (R s mn) (R s mn) (R s mn) (R s) Yo Y (% ) (x) (x) (% ) (% ) (x) (R s)
FY16 8,093 618 267 15 31 3.7 13 18 13.5 1.3
FY17 10,017 848 433 24 59 34 5.5 18 24 17.1 1.3
FY18 12,224 1,328 770 43 77 44 9.9 25 34 24.9 2.0
FY19 14,337 1,231 664 34 (21) 79 11.9 16 26 37.7 1.7
Source: Capitaline, Axis Capital
72
Voltamp Transformers (VAMP IN)
Key takeaways
 Business scenario in transformers: Enquiries similar as last year’s; however, enquiry to order conversion rate has fallen after
Sept’19 due to liquidity issues with vendors as well as bank credit for projects. Sectors with visible demand are cement, data
centers, mining & steel, food & agriculture, commercial real estate (South India) etc. Automobile and industrials have
experienced a steep slowdown this year.
 Liquidity crisis: Acute liquidity position since the last 3 months – delay in payment by almost all corporates (MNCs, domestic
private, PSUs) by ~30-40 days in addition to existing credit period. VAMP is adding that to its bid cost.
 Competition intensity: Remains high despite reduction/ exit of few important players such as Crompton, Kirloskar, Emco etc.
Pricing remains a key determinant and a differentiating factor (11-12% margin), but with time customers have realized the
importance of a credible vendor.
 Voltamp key features

 Largest share in dry type transformers, which is growing well in cities now for building/ under-ground installations.
 Revenue visibility of ~Rs 8.5 bn for FY20. 10 sectors contribute 70% to the revenue; hence, well diversified. Company is a bit
cautious on the overall environment.
 Price competitive, works on a lean cost structure with experienced old hands.
 Policies that have kept Voltamp afloat and strong in this difficult business: Not entering contracts which have (1) retention
money clause and (2) long-duration performance guarantee and (3) avoid bidding for contracts from state utilities except in
rare cases where a particular utility is financially sound.
 Capex is not on the cards due to weak sentiment. Voltamp plans a capex of ~Rs 100-120 mn in FY20. The current capacity
utilization is >85%.
 Company has an export division, but contracts are taken on an extremely selective basis. Export markets contain high
contractual liabilities which the company avoids.
abhishek.puri@axiscap.in vaibhav.saboo@axiscap.in 73
91 22 4325 1141 91 22 4325 1123
Welspun Corp
WLCO Consolidated
Company background
Incorporated in 1995, WLCO makes Longitudinal (LSAW), Spiral India business Saudi business US business
(Standalone) (Joint Venture) (Subsidiary)
(HSAW) and ERW/ HFIW pipes at its plants in India, US, and Saudi
Arabia and has a healthy share in large diameter pipes.
The company is known to supply pipes for some of the world’s Pipes Welspun Mauritius
Welspun Pipes Inc
notable pipeline projects: (1) Highest -- Peru LNG, (2) Deepest -- (HSAW, Holdings Ltd
LSAW, ERW) (100% subs of WLCO)
Independence Trail, Gulf of Mexico, (3) Longest -- Canada to US, (90% subs of WLCO)^
and (4) Heaviest -- Persian Gulf.
Plates & Coils
It has long standing relationships with Oil & Gas majors like Exxon 50% Welspun ME pipes 100% Welspun Tubular
Mobil, TransCanada, Saudi Aramco among others and Indian LLC # (HSAW) LLC (HSAW,HFIW)
JV
entities like IOCL, GAIL, RIL.
# ME – Middle East; ^ Balance 50% Welspun ME Pipe 100% Welspun Global
10% owned by Mohawarean Coating Co LLC # Trade LLC
Holding Investment
(Coating of pipes) (Marketing)
Presence across products and geographies Capacity utilization across key geographies
(‘000 mtpa) HFIW/ERW L-SAW H-SAW Bends Coating USA India (ex-plate mill) Plate mill Saudi JV
100%
78%
74%
70%
India 200 700 755 Yes Yes
65%
80%
46%
60%
43%
41%
38%
33%
33%
33%
USA 175 - 350 - Yes
30%
40%
23%
16%
16%
- 20%
Saudi Arabia - 375 - Yes
0%
FY16 FY17 FY18 FY19

91 22 4325 1149 91 22 4325 1138 91 22 4325 1118
…Weslpun Corp
Key takeaways
 All round performance improvement
 Recovery in Indian operations in Q2FY20 (from election-related uncertainties) and steady volumes in USA (~85% capacity utilization)
translated into blended EBITDA margin of Rs 14,300/ton (USA at Rs 25,000/ ton) vs. Rs 9,600/ ton YoY.
 Net debt stood at Rs 2 bn (down Rs. 0.9 bn in H1FY20). Management targets zero net debt by FY20 end even if PCMD sale gets
delayed (currently awaiting CCI approval).
 Negligible capex plans

 WLCO’s Bhopal plant has been commissioned at a capex of Rs 1.6 bn. No major capex plans currently.
 To evaluate inorganic opportunities depending on the asset. Maintenance capex to be Rs ~0.5 bn each for India and US.
 Outlook
 In India, gas grid development (GAIL) and oil pipeline network (IOCL) to drive large-diameter pipe demand while city gas distribution
projects to drive demand for small-diameter. Industry/WLCO to benefit from govt’s ‘Nal se Jal’ (drinking water) and thrust on irrigation.
 Also, strong export demand (Middle East, Africa and Australasia) to aid sales growth from India (capacity utilisation ~45%).
 US volumes growth to be driven by eliminating pipeline infra bottlenecks and import restrictions (anti-dumping and CVD duties). It is
witnessing high demand from Bakken basin and exports.
 Saudi ops turned around after 2 years; order book mainly driven by SWCC orders (18-24 months order backlog); seeing traction from oil
& gas orders (higher-margin).
FY16 72,355 7,777 1,223 4.6 30.1 1.26 4.0 6.9 6.5 0.5
FY17 58,987 5,124 296 1.1 (76) 124.5 1.26 1.0 5.5 9.4 0.5
FY18 63,470 4,954 1,749 6.6 491 21.1 1.27 6.0 6.6 8.3 0.5
FY19 89,535 4,846 3,069 11.6 75 12.0 1.32 10.8 7.3 8.2 0.5
75
Westlife Development…
Store network
Company background
Westlife Development is the holding company for Hardcastle 500
425
(nos)
375
Restaurants (100% subsidiary), which is the master franchisee for
335
400
305
McDonald’s with rights to own and operate restaurants in west and
277
258
south India. It operates 304 McDonald’s restaurants and
236
300
209
184
205 McCafe’s.
161
200
130
107
87
Over past 23 years, the company has built a strong consumer
74
100
55
franchise for McDonald’s brand in India. It has also developed an
integrated and scalable supply chain and localized the menu with 0
value offerings, making it one of the most compelling plays in the
FY20E
FY21E
FY22E
FY08
FY09
FY10
FY11
FY12
FY13
FY14
FY15
FY16
FY17
FY18
FY19
Indian QSR space.
Revenue and growth EBITDA margin

(Rs bn) Revenue Growth (RHS) (%)
16
13.0
30 50 (%)
12.1
24.0
11.6
11.0
25
19.8
40 12
9.8
9.5
16.6
8.5
20
14.0
30
11.3
6.8
15 8
5.8
5.1
5.0
9.3
20
8.3
7.6
7.4
6.8
10
3.2
5.5
2.3
3.8
2.0
2.7
10
2.1
5
1.6
0.0
0 0 0
FY20E
FY21E
FY22E
FY08
FY09
FY10
FY11
FY12
FY13
FY14
FY15
FY16
FY17
FY18
FY19
FY20E
FY21E
FY22E
FY08
FY09
FY10
FY11
FY12
FY13
FY14
FY15
FY16
FY17
FY18
FY19
anand.shah@axiscap.in gaurav.jogani@axiscap.in raghav.malik@axiscap.in 76

91 22 4325 1142 91 22 4325 1124 91 22 4325 1139
…Westlife Development
Key takeaways
 Near-term demand trends: Management remains confident of achieving 7-9% SSSG for FY20. It highlighted (1) Western fast
food continues to grow at robust 14-15% in value terms (including store expansion-led growth), while Indian fast food and
particularly hawkers have been hit by slowdown, (2) for Westlife, growth in near term has been more footfalls-led, average ticket
size has been largely flat YoY and (3) near-term growth has been partially aided by successful launch of value platform in April
2019 (more variety and attractive prices/combos).
 Store expansion: Management maintained guidance of opening ~25 stores this financial year; going forward, WLDL will open
20-25 stores per year and is committed to ~400 store openings by Dec-2022. ~70% of new stores will be added in metros.
Store expansion will be balanced across malls, retail stores etc.
 Management believes gross margin is at healthy levels; buying efficiencies, operating efficiencies and McCafe continue to
contribute to the margin expansion. Management aims to steadily expand the margin by 50-60 bps per year.
 Management guided for capex of ~Rs 1.2 bn this year; ~80% of this would be to set up new restaurants (~25 this year), while
the remaining will be reinvested in McCafe or EOTF.
 Vision 2022: Management aspires to open McCafes in 100% of its McDonalds stores by 2022. In addition, it expects Delivery
business + McCafe to generate ~Rs 8.5-10 bn revenue in 2022 (close to half of total sales).
 Few challenges: Management highlighted the main challenges -- (1) additional costs due to various duties/expenses imposed in
restaurant business, (2) hiring quality employees and retaining them and (3) expanding restaurants in real estate/areas that are
suitable to their restaurant size and scale.

Y/E S al es EBIT DA Adj. PAT C o nsensus EPS C hg PE RoE RoCE EV/E DPS
Marc h (R s mn) (R s mn) (R s mn) EPS * (R s) (R s) Yo Y (% ) (x) (% ) (% ) (x) (R s)
FY19 13,887 1,206 399 - 3 210 136 7 7 46 0
FY20E 15,806 1,539 479 - 3 20 113 8 10 36 0
FY21E 18,368 2,067 858 4 6 79 63 13 15 26 0
FY22E 21,274 2,548 1,197 5 8 40 45 15 18 21 0
77
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Canada, Japan and the People’s Republic of China (China) or distributed or redistributed, directly or indirectly, in the United States of America (except to MII), Canada, Japan and China or
to any resident thereof.
xiii. Where the report is distributed within the United States ("U.S.") it is being distributed pursuant to a chaperoning agreement with Axis Capital USA, LLC pursuant to Rule 15a-6. The distribution
of this document in other jurisdictions may be restricted by law, and persons into whose possession this document may come shall inform themselves about, and observe, any such restrictions.
xiv. Neither the Firm, not its directors, employees, agents or representatives shall be liable for any damages whether direct or indirect, incidental, special or consequential including but not limited
to loss of capital, revenue or profits that may arise from or in connection with the use of the information.
xv. Copyright of this document vests exclusively with Axis Capital Limited.
Axis Capital Limited
Axis House, C2, Wadia International Centre, P.B Marg, Worli, Mumbai 400 025, India.
Tel:- Board +91-22 4325 2525; Dealing +91-22 2438 8861 - 69; Fax:- Research +91-22 4325 1100; Dealing +91-22 4325 3500
DEFINITION OF RATINGS
Ratings Expected absolute returns over 12 months
BUY More than 15%
ADD Between 5% to 15%
REDUCE Between 5% to -10 %
SELL More than -10%
Research Disclosure - NOTICE TO US INVESTORS:

This report was prepared, approved, published and distributed by Axis Capital Limited, a company located outside of the United States (a “non-US Company”). This report is
distributed in the U.S. by Axis Capital USA LLC, a U.S. registered broker dealer, which assumes responsibility for the research report’s content, and is meant only for major U.S.
institutional investors (as defined in Rule 15a-6 under the U.S. Securities Exchange Act of 1934 (the “Exchange Act”)) pursuant to the exemption in Rule 15a-6 and any
transaction effected by a U.S. customer in the securities described in this report must be effected through Axis Capital USA LLC rather than with or through the non-US Company.
Neither the report nor any analyst who prepared or approved the report is subject to U.S. legal requirements or the Financial Industry Regulatory Authority, Inc. (“FINRA”) or
other regulatory requirements pertaining to research reports or research analysts. The non-US Company is not registered as a broker-dealer under the Exchange Act or is a
member of the Financial Industry Regulatory Authority, Inc. or any other U.S. self-regulatory organization. The non-US Company is the employer of the research analyst(s)
responsible for this research report. The research analysts preparing this report are resident outside the United States and are not associated persons of any US regulated broker-
dealer and therefore the analyst(s) is/are not subject to supervision by a US broker-dealer, and are not required to satisfy the regulatory licensing requirements of FINRA or
required to otherwise comply with US rules or regulations regarding, among other things, communications with a subject company, public appearances and trading securities
held by a research analyst account.
The non-US Company will refrain from initiating follow-up contacts with any recipient of this research report that does not qualify as a Major Institutional Investor, or seek to
otherwise induce or attempt to induce the purchase or sale of any security addressed in this research report by such recipient.
ANALYST DISCLOSURES
1. The analyst(s) declares that neither he/ his relatives have a Beneficial or Actual ownership of > 1% of equity of subject company/ companies;
2. The analyst(s) declares that he has no material conflict of interest with the subject company/ companies of this report;
3. The research analyst (or analysts) certifies that the views expressed in the research report accurately reflect such research analyst's personal views about the subject securities
and issuers; and
4. The research analyst (or analysts) certifies that no part of his or her compensation was, is, or will be directly or indirectly related to the specific recommendations or views
contained in the research report.

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18 NOV 2019

Kashyap Pujara Prakash Agarwal

AU Small Finance Bank

Blue Dart Express

Crompton Greaves Consumer Electricals

Intellect Design Arena

Mahindra Holidays & Resorts India

Reliance Nippon Life Asset Management

Security & Intelligence Services India

Spandana Sphoorty Financial

Tube Investments of India

M ca p CM P TP Up sid e FDEP S (INR) P E (x) P B (x) EV/ E (x) ROE (% )

Note: CMP as on Nov 14, 2019

14% revenue CAGR over FY16-20E

It has 10 manufacturing plants (5 pipe manufacturing and 4 10

Source: Company, Axis Capital

EBITDA and EBITDA margin PAT and ROCE

6 EBITDA EBITDA margin (RHS) 18 4 PAT ROCE (RHS) 30

Source: Company, Axis Capital Source: Company, Axis Capital

kunal.lakhan@axiscap.in kashyap.pujara@axiscap.in utkarsh.punkhia@axiscap.in 14

Financial sum m ary (C MP: R s 1086)

Retail assets dominated by vehicle

Source: Company, Axis Capital

Assets – geography mix Increasing share of retail in savings account

Others Retail SA Bulk SA

1,000 2,050 2,232 2,163 2,219

manish.karwa@axiscap.in praveen.agarwal@axiscap.in vikash.mundhra@axiscap.in ojasvi.khicha@axiscap.in amit1.jain@axiscap.in 16

Financial summary (C MP: R s 836)

Revenue and operating margin

Tonnage volume and realization Shipment realization

Source: Company, Axis Capital Source: Company, Axis Capital

ankur.periwal@axiscap.in nitesh.dhoot@axiscap.in jeet.shah@axiscap.in 18

Financial sum m ary (C MP: R s 2177)

Revenue and margin profile

Revenue mix Improving cash flows and stable return ratios

Source: Company, Axis Capital Source: Company, Axis Capital

aditya.bagul@axiscap.in kashyap.pujara@axiscap.in anshuman.singh@axiscap.in 20

 Tax rate: FY20 to be levied tax at 22%.

Financial sum m ary (C MP: R s 223)

Strong growth trajectory

Source: Company, Axis Capital

Stable margin profile Healthy return ratios

PAT Gross margin EBITDA margin (RHS) RoE RoCE

4,500 40% 60%

Source: Company, Axis Capital Source: Company, Axis Capital

aditya.bagul@axiscap.in kashyap.pujara@axiscap.in anshuman.singh@axiscap.in 22

Asset quality stable

Source: Company, Axis Capital

Profitability improving gradually Loan book is predominantly mortgage

RoA ROE (RHS) Gold loan, 2% Others, 3%

manish.karwa@axiscap.in praveen.agarwal@axiscap.in vikash.mundhra@axiscap.in ojasvi.khicha@axiscap.in amit1.jain@axiscap.in 24

Financials summary (C MP: R s 183)

Source: Company, Bloomberg

Company background Eris’ top 4 therapies belong to chronic/lifestyle related diseases

Expect FCF generation to improve over FY19-22 on improved

prakash.agarwal@axiscap.in dhagash.vora@axiscap.in mehul.sheth@axiscap.in 26

Animal feed – revenue and EBIT margin trend

Source: Company, Axis Capital

ankur.periwal@axiscap.in nitesh.dhoot@axiscap.in jeet.shah@axiscap.in 28

Note: *New Product development 29

Sales on a strong footing

Source: Company, Axis Capital

Net debt(Rs in bn) D/E Ratio (RHS) New Launches Completions

Source: Company, Axis Capital Source: Company, Axis Capital