21 May 2020

Update | Sector: Metals

Hindalco
BSE SENSEX S&P CNX
30,933 9,106 CMP: INR130 TP: INR175 (+35%) Buy
Well placed to tide over COVID-19 disruption
Hindalco (HNDL) has corrected ~40% in CY20 due to the double whammy of weaker
aluminum demand and margins on account of the COVID-19 pandemic and higher leverage
owing to Aleris’ acquisition. We believe the correction is overdone and reiterate our Buy
rating based on: (1) strength in Novelis’ beverage can business where volumes should not
Stock Info be much impacted from COVID-19, (2) long-dated debt maturity profile and ample liquidity
Bloomberg HNDL IN in hand (~USD2b), which should help HNDL tide over the current crisis comfortably, (3)
Equity Shares (m) 2,229 consistent FCF generation (even in FY21), which should aid deleveraging, and (4) attractive
M.Cap.(INRb)/(USDb) 291 / 3.6 valuation with the stock trading at 0.7x Adj. P/B value and 5.3x FY22E EV/EBITDA.
52-Week Range (INR) 221 / 85
Novelis – Beverage cans resilient, but weak auto sector to impact EBITDA
1, 6, 12 Rel. Per (%) 20/-8/-13
12M Avg Val (INR M) 1634 Beverage cans constitute nearly two-third of volumes for Novelis (ex-Aleris), which
Free float (%) 65.4 has not seen much impact from COVID-19 due to strong at-home consumption trend.
Novelis’ auto finishing lines that constitute ~20% of its volumes, however, have been
Financials Snapshot (INR b) impacted as its auto customers are either shut or operating at low production levels.
Y/E MARCH 2020E 2021E 2022E
With weak outlook for automotive, we have built in sharply lower volumes for
Net Sales 1,184.3 1,177.4 1,347.9
EBITDA (Rs b) 142.6 129.1 158.8 Novelis in FY21 in this segment. This would also impact blended margin as auto is a
NP 44.9 20.9 42.0 high margin business. As a result, we expect Novelis’ volumes to decline by 10% YoY
EPS 20.2 9.4 18.9 and EBITDA per ton to fall by 14% YoY to USD380/t in FY21, leading to a 23% YoY fall
EPS Gr (%) -18.4 -53.5 101.1 in FY21E EBITDA to USD1.1b. We expect both volumes and margins to recover in
BV/Share (Rs) 185.7 169.9 180.0 FY22E as auto sales normalize driving an expected 17% YoY EBITDA growth.
P/E (x) 6.4 13.8 6.9
P/BV (x) 0.7 0.8 0.7 Lower LME to impact profitability of Indian operations
RoE (%) 11.2 5.3 10.8 Due to demand concerns on account of COVID-19, LME Aluminum has declined by
RoCE (%) 8.5 5.8 7.6 ~15% YTDCY20 to USD1,450/t and hit fresh 10-year lows (USD1,422/t). Lower LME
has a direct adverse impact on HNDL’s Indian operations, which is a commodity
Shareholding pattern (%)
As On Mar-20 Dec-19 Mar-19
aluminum supplier. While cost benefits (lower energy cost, higher linkage coal
Promoter 34.7 34.7 34.7 supply, lower caustic soda cost, etc.) should help partly cushion the impact on
DII 26.7 25.3 22.4 margin, we still estimate India EBITDA to decline 26% YoY in FY21 due to lower
FII 18.9 21.0 23.9 volumes and LME price. We also expect LME to improve gradually from current 10-
Others 19.7 19.1 19.1 year lows due to supply curtailments and average USD1,575/t in FY21 and USD1700/t
FII Includes depository receipts in FY22E. At current LME prices, >10% of the global smelters are operating at cash
losses, which we believe is unsustainable and would result in supply curtailments
Stock Performance (1-year)
Hindalco Inds. bringing market balance. Moreover, hedged LME positions (19% volumes for FY21
Sensex - Rebased hedged at a higher level of USD1,836/t) imply hedge premium of USD56/t in FY21E.
260 We estimate India EBITDA per ton at USD308/t in FY21E and USD383/t in FY22E.
210
160
Hit to SOTP from Aleris’ acquisition priced in
110
We estimate an adverse impact of INR33/share on HNDL’s SOTP from the Aleris
60 acquisition, based on 6.0x FY22E EV/EBITDA. Though the Aleris acquisition gives
HNDL a meaningful presence in the lucrative aerospace business, it has happened at
Aug-19
May-19

Nov-19

May-20
Feb-20

an inopportune time as aerospace has been impacted by COVID-19 and Max-737

issues for Aleris’ key customer Boeing. We estimate EBITDA of USD210/USD250m
(ex-Duffel) in FY21/22E, which makes the deal valuation look expensive at 11.7x/ 9.9x
FY21E/FY22E EV/EBITDA. However, given the sharp correction in HNDL’s stock price,
we believe this adverse impact on SOTP is already priced in.
Amit Murarka - Research analyst (Amit.Murarka@motilaloswal.com) +91 22 6129 1538
Basant Joshi - Research analyst (Basant.Joshi@motilaloswal.com)
Investors are advised to refer through important disclosures made at the last page of the Research Report.
Motilal Oswal research is available on www.motilaloswal.com/Institutional-Equities, Bloomberg, Thomson Reuters, Factset and S&P Capital.
 Hindalco

Net debt has peaked, FCF to drive deleveraging

With the acquisition of Aleris for USD2.8b (USD2.5b net of Duffel plant sale), HNDL’s
net debt has increased to ~USD7.8b, implying 4.5x net debt/ EBITDA. We expect net
debt to decline to USD7.6/USD7.2b by Mar’21/Mar’22E aided by FCF generation
even in a weak economic environment. We estimate net debt to EBITDA to decline
to 3.5x in FY22E as the global economy recovers from the impact of COVID-19.
Moreover, HNDL does not have any debt repayments scheduled in FY21, which
coupled with the USD2b cash and cash equivalents at its disposal, should help it
comfortably tide over the current crisis.

Valuation and view

HNDL’s share of commodity business has declined to 25% post the Aleris acquisition
with the higher margin converter business accounting for 75% of EBITDA. We expect
the COVID-19 impact to ease in FY22E. Also, we forecast FY22E EBITDA to rise 23%
YoY to INR159b (nearly same as FY20 ex-Aleris). We value HNDL on SOTP based on
FY22 EV/EBITDA of 5.0x to India operations (commodity business), 6.0x to Novelis
(high margin converter business) and 6.0x to Aleris. We also add HNDL’s investment
in listed market securities at 10% discount to the market price. Accordingly, we
arrive at a target price of INR175/share. The stock trades at an attractive valuation
of 5.3x EV/EBITDA and 6.9x P/E on FY22E. Reiterate Buy.

21 May 2020 2
 Hindalco

LME Aluminum – market surplus to correct in CY21

Aluminum prices below USD1,500/t, near 10-year lows
LME aluminum prices slid below USD1,500/t levels in 1QCY20 from ~USD1,700 at
the start of CY20. This was due to 8% YoY decline in primary aluminum consumption
during 1QCY20, driven by a combination of ~10% decline in China and ~7% world-
wide (excl.-China). Currently, LME Aluminum price is hovering ~USD1,450/t level.

Exhibit 1: Aluminum premium prices at 10-year lows

LME Aluminium (USD/t)

3,400

2,900

2,400

1,900

1,400

900
May/08

Nov/08

May/09

Nov/09

May/10

Nov/10

May/11

Nov/11

May/12

Nov/12

May/13

Nov/13

May/14

Nov/14

May/15

Nov/15

May/16

Nov/16

May/17

Nov/17

May/18

Nov/18

May/19

Nov/19

May/20
Source: MOFSL

Aluminum market in surplus; inventories rise to ~75 days of consumption

During CY19, deficit in the primary aluminum market narrowed to ~1mt against
deficit of 1.7mt in CY18. According to Norsk Hydro, one of the largest aluminum
producers globally, primary aluminum consumption has declined 8% YoY in 1QCY20,
driven by decline of 10% in China and ~7% world-wide (excl. China). This was in
contrast to the 2.0% YoY increase in global production during 1QCY20, resulting in
the primary aluminum market being in surplus of ~2.0mt (supply v/s consumption)
in 1QCY20. We estimate global aluminum was in surplus of 1mt at end-1QCY20.

Exhibit 2: Market balance in surplus in 1QCY20; inventories rise to ~75 days of consumption

Source: Norsk Hydro Presentation

21 May 2020 3
 Hindalco

Global inventories have also increased to ~75 days of consumption from ~60 days at
end-CY19. Total global stocks increased by 1.9mt during 1QCY20 to reach 12.8mt.

Market surplus to reduce in FY22, improving LME price

We expect global aluminum market to remain in surplus of ~2mt in FY21 which
reduce gradually in FY22 as demand normalizes. Moreover, at current LME price,
>10% of the global smelters are operating at cash losses, which we believe is
unsustainable and would result in supply curtailments bringing market balance. We
have factored in average aluminum price of USD1,575/t (down 10% YoY) for FY21E
and USD1,700/t (+8% YoY) for FY22E.

Exhibit 3: Demand growth projection (%) Exhibit 4: Supply growth projection (%) Exhibit 5: Market balance (mt)

Ex-China China Ex-China China Global metal balance projections - mt

3.0 Ex-China China
2.0 3.5
-3.0 2.7 2.5
1.0 2.1
-5.0
-6.0 -6.0
1
0.4
-10.0
-12.0 -1.0 -1.0 -1.0
CRU Harbour Wood
CRU Harbour Wood CRU Harbour Wood Aluminium Mackenzie
Aluminium Mackenzie Aluminium Mackenzie
Source: Industry Source: Industry Source: Industry

21 May 2020 4
 Hindalco

India aluminum – INR depreciation and lower cost to

help offset part of LME decline

Expect volumes to decline 5% YoY in FY21E to 1,227kt

During the ongoing nationwide lockdown, HNDL has been operating its smelters in
India at lower capacity. It has however shut its downstream capacities which we
believe will be partly compensated by higher exports. We expect the share of
exports in standalone volumes to thus rise to ~70% in FY21 as against the usual level
of 50%. Due to the weak domestic demand, we expect 5% decline in its India
aluminum volumes despite higher exports.

Exhibit 6: Aluminum volumes to decline 5% YoY in FY21E

1249 1278 1274 1291 1227 1291

1146

809

FY15 FY16 FY17 FY18 FY19 FY20E FY21E FY22E

Source: MOFSL

LME decline to be partly offset by hedged positions and weaker INR

While LME aluminum has corrected ~15% YTDCY20, the impact on HNDL’s India
realization should be lower due to hedged LME positions and 6% depreciation of INR
against USD. HNDL has hedged 19% of its aluminum volumes at USD1,836/t and 1%
volumes at INR170,640/t for FY21. We estimate this should result in a gain of
USD56/t on our FY21 LME assumption of USD1,575/t. Hedging also resulted in a
estimated gain of ~USD75/t in FY20.

Exhibit 7: Currency depreciation to partly cushion India realization in FY21E

FY18 FY19 FY20E FY21E FY22E
Realisation 2,517 2,652 2,376 2,099 2,225
LME 2,044 2,035 1,750 1,575 1,700
Premium 473 618 626 524 525
INR/USD 64.5 69.9 71.0 75.4 76.0
Realisation - INR/t 1,62,272 1,85,371 1,68,638 1,58,258 1,69,100
Change (%)
Realisation - USD/t 5.4 -10.4 -11.6 6.0
INR/USD 8.4 1.6 6.2 0.8
Realisation - INR/t 14.2 -9.0 -6.2 6.9
Source: MOFSL

21 May 2020 5
 Hindalco

Exhibit 8: Hindalco’s Aluminum realization trend (USD/t) Exhibit 9: Hindalco’s Aluminum realization trend (INR/t)
LME Premium Realisation
'000 Realisation - INR/t
2,652
2,517
2,376
2,099 2,225
473 618
626 525
524
185
2,044 2,035
1,750 1,575 1,700 169 169
162 158

FY18 FY19 FY20E FY21E FY22E FY18 FY19 FY20E FY21E FY22E
Source: MOFSL Source: MOFSL

Cost tailwinds to cushion margins

We expect costs at Indian aluminum operations to decline this year on account of
(1) improved linkage coal availability reducing power cost, (2) lower cost of raw
materials (caustic soda, etc), (3) benefit of lower renewal power obligation, and (4)
efficiency improvement from expansion of low cost Utkal alumina refinery by 500kt
in FY22E.

(1) Improved coal availability

We expect linkage coal availability for industrial use to remain high during FY21 due
to lower demand from power utilities and high inventory build-up (~50mt at end-
Apr’20) with Coal India. HNDL’s coal linkage stands at 75% of its annual requirement
i.e. ~12.2mt but the availability is usually lower at 60-65%. HNDL balance coal
requirement is met through e-auction coal (~20% of mix) and the rest through
captive coal (5%) and imports (~10%) which are all much more expensive. For every
10% increase in linkage coal, we estimate that HNDL’s coal cost declines by ~5% as
linkage coal is cheaper by 30-40% v/s rest of the coal mix. We expect HNDL to meet
~70% of its coal requirement in FY21 through linkage coal, which would reduce its
dependence on higher cost captive mines and imported coal.

Exhibit 10: Linkage coal availability to improve in FY21E

Coal sourcing 1Q20 2Q20 3Q20 4Q20E FY19 FY20E FY21E FY22E
Consumption 4.00 4.00 4.50 4.00 16.5 16.5 15.8 16.5
Linkage 2.5 2.4 3.1 2.76 8.30 10.79 11.7 11.6
E-auction 1.0 1.0 0.7 0.6 3.45 3.24 3.2 3.3
Captive 0.4 0.2 0.2 0.16 2.49 0.90 0.6 0.8
Import 0.1 0.4 0.5 0.44 2.31 1.50 0.3 0.8
(%)
Linkage 63.0 60.0 69 69 50 65 74 70
E-auction 24.0 25.0 15 15 21 20 20 20
Captive 10.0 4.0 4.0 4 15 5 4 5
Import 3.0 11.0 11.0 11 14 9 2 5
Source: MOFSL

In 2HFY21, HNDL should also start coal mining from its Dumri block, which has
reserves of 46mt. Hindalco won the Dumri coal block in 2015 at a premium of
INR2,127/t. Dumri mine getting operational should lower the premium on coal
extraction from captive mines by ~INR275/t at full capacity. The blended cost

21 May 2020 6
 Hindalco

benefit to HNDL from this would however be low due to limited envisaged volumes
from captive coal mines.

Exhibit 11: Captive coal mines; average premium paid for coal to decline by ~INR275 after
Dumri mine starts in 2HFY21
Coal mines Location Reserves (mt) Capacity (mt) Premium (INR/t)
Gare Palma IV/4 Chhattisgarh 65 1.0 3001
Gare Palma IV/5 Chhattisgarh 50 1.0 3502
Kathautia mine Jharkhand 26 0.8 2860
2.8 3,140
Dumri mine Jharkhand 46 1.0 2,100
Total 3.8 2,866
Source: MOFSL

Utkal expansion by 500kt to reduce alumina cost FY22E onwards

HNDL sources ~1.5mt alumina from Utkal and ~1.4mt from its other alumina
refineries. Cost of production (CoP) from Utkal refinery is lower at ~USD150/t
(whereas alumina CoP from other refineries ranges between USD280-300/t) due to
(1) newer technology, (2) proximity to bauxite mines, and (3) higher quality of
bauxite. Expansion of the Utkal alumina refinery (through de-bottlenecking) would
lead to replacement of costlier alumina capacity, leading to savings of ~USD20/t of
alumina at full capacity of 500kt.

Exhibit 12: HNDL’s alumina cost to decline FY22E onwards due to 500ktpa Utkal expansion
Alumina production FY19 FY20E FY21E FY22E
Utkal 1.5 1.5 1.5 1.9
Other refineries 1.4 1.1 1.3 1.0
Import 0.0 0.3 0.0 0.0
Cost/t
Utkal cost (USD/t) 150 150 150 150
Others 300 300 300 300
Import 350
Blended cost/t 222 228 218 202
Incremental Savings (USD/t) 9 17
Source: MOFSL

Lower RPO cost and other input costs

Due to lower renewable power purchase obligation (RPO), HNDL has benefitted by
INR430m in 3QFY20 and INR720m in 1HFY20. We expect HNDL’s production cost to
positively benefit in FY21E due to lower RPO cost coupled with lower input
commodity costs like furnace oil, caustic soda, etc. and availability of the Muri
refinery (for full-year FY21).

HNDL’s aluminum CoP has reduced by 3% YoY in FY20E to INR140,159/t despite

higher alumina cost and break-down of Muri refinery. The reduction was achieved
largely through higher linkage coal in mix and lower RPO. With further improvement
in linkage coal availability, restart of Muri refinery (eliminating alumina purchases)
and decline in input commodity prices, we expect HNDL’s cost of Indian operations
to reduce by 4% YoY to INR135,060/t in FY21E.

21 May 2020 7
 Hindalco

Exhibit 13: India aluminum cost to decline in FY21E

Cost/t - INR

'000
145
140 140
135
126

FY18 FY19 FY20E FY21E FY22E

Source: MOFSL

As a result, despite an expected USD175/t (or 10%) YoY decline in LME aluminum
price in FY21, we expect EBITDA decline to be lower at USD93/t (or 23%) to
USD308/t in FY21. Moreover, we expect EBITDA/t to improve to USD383/t in FY22
supported by higher LME price and ramp-up of expanded Utkal refinery.

Exhibit 14: EBITDA/t to decline in FY21E Exhibit 15: EBITDA to decline 23% YoY in FY21E

EBITDA/t - INR EBITDA/t - USD EBITDA - INR m

570 584

401 383
308
52,020
40,832 46,920
36,714 36,773 37,581
28,479 29,105 28,460
23,198

FY18 FY19 FY20E FY21E FY22E FY18 FY19 FY20E FY21E FY22E
Source: MOFSL Source: MOFSL

21 May 2020 8
 Hindalco

India copper – Lower Tc/rc to drag EBITDA

Volume growth missing, however, share of wire-rods to go up
HNDL shut down its copper smelters during Apr’20, but has restarted one smelter in
May’20. However, we do not expect HNDL to make up for the lost volumes in FY21
due to frequent smelter breakdowns. As a result, we expect copper volumes to
decline by 10% YoY to 295kt in FY21E but improve to 330kt in FY22E. We expect
share of copper wire-rods to increase to 85% of overall volumes.

Exhibit 16: Share of copper wire-rod volumes to increase

Copper volumes - kt Wire-rods as % of total

85 85
77
68
387 407
380 375
41 359 328 330
40 41 40 295

FY15 FY16 FY17 FY18 FY19 FY20 FY21 FY22

Source: MOFSL

EBITDA to decline on lower Tc/Rc and by-product prices

HNDL’s EBITDA from the copper segment consists of (a) Tc/Rc margins, (b) value-
added products and premium, and (c) sale of by-products like sulphuric acid and
DAP with nearly 50% contribution from Tc/Rc and ~25% each from value-added
products and by-products. Tc/Rc margins for CY20 have been settled 23% lower due
to tight supply in the copper concentrate market. Further, due to impact of COVID-
19, we expect by-product prices to decline too. As a result, we expect margins from
the copper segment to decline 18% YoY to USD345/t in FY21E; however, the same
should improve 7% YoY in FY22E.

Exhibit 17: EBITDA/t (USD) to decline in FY21E on lower Tc/Rc

Copper - EBITDA/t

606 584
422
345 369

FY18 FY19 FY20 FY21 FY22

Source: MOFSL

21 May 2020 9
 Hindalco

Novelis (ex-Aleris) – high margin converter business

Novelis, Hindalco’s 100% owned subsidiary, is the world’s largest producer of flat-
rolled aluminum products with operations spread over North America, South
America, Europe and Asia. Novelis’s product mix consists of beverage cans,
automotive sheets and specialty metal. Novelis uses ~60% of recycled input in
production, which requires 95% lower energy than primary aluminum production
thereby saving costs.

Resilient Beverage can demand to support Novelis’ volume in FY21

Novelis’s product mix consists of beverage cans (66%), automotive sheets (19%) and
specialty metal (15%).

Novelis’ automotive sheet facilities have been shut since end-Mar’20 owing to
shutdowns taken by auto OEMs due to the COVID-19 pandemic. The medium term-
outlook for aluminum auto sheets is strong due to an increase in demand for light-
weight vehicles (owing to higher fuel-efficiency, reduced emissions and shift toward
hybrid/electric vehicles). However, demand outlook for autos is uncertain in North
America and Europe due to the high unemployment owing to the COVID-19
pandemic. We expect volumes to decline ~25% for Novelis’s automotive segment in
FY21E. However, with a normalized business environment in FY22E, we expect
Novelis to increase share of auto sheets in its volume mix helped by the
commencement of its 200ktpa Kentucky facility in United States.

Despite the COVID-19 pandemic, beverage can demand remains resilient in North
America and Europe due to strong in-house consumption trends. The same could
get impacted in Asia and South America owing to trade restrictions, lower tourism
and decline in consumer spending. We expect beverage can demand to grow in the
medium term due to shift in the packaging trend from steel to aluminum. Moreover,
increase in aluminum auto sheet demand is likely to tighten supply in the beverage
can market, which bodes well for the growing packaging demand. We have factored
in ~5% decline for Novelis’ beverage can segment volumes in FY21E and have
factored in nil growth for FY22E over FY20.

Due to prevailing uncertainties, we have factored in 15% decline in specialty

volumes for FY21E. As a result, we expect Novelis’ volumes to decline 10% in FY21E
to 2,936kt, with beverage can volume share rising to 70%. However, with Kentucky
auto facility coming on line, we expect share of auto sheets to increase 11% YoY in
FY22E to 21% of total volumes of 3,273kt.

21 May 2020 10
 Hindalco

Exhibit 19: Volumes to normalize in FY22 post 10% decline

Exhibit 18: Share of auto volumes to go up in FY22E in FY21

Beverage and food cans Auto Specialities Total ('000t) Growth (%)

3274 3,273 3,273

3188
20% 17% 15% 14% 13%
19% 16% 21% 11
20% 20%

4 3 2,936
70% (0)
60% 63% 66% 66%

(10)

FY18 FY19 FY20 FY21 FY22 FY18 FY19 FY20 FY21 FY22

Source: MOFSL Source: MOFSL

Lower auto volumes in mix to lower EBITDA margin

In Novelis’s operating segments, auto contributes the highest margin followed by
beverage can and specialty. During FY20, Novelis reported EBITDA/t of USD441 on
favorable scrap-metal spreads and strong demand for automotive sheet in the US.
However, with weak outlook for the auto segment and lower LME, we expect
Novelis’ margins to decline. Novelis is looking to cut its fixed cost by USD250m in
FY21E (~17% of FY20 adj. EBITDA) in order to reduce costs. We have built in lower
EBITDA per ton of USD380/t in FY21E. We expect EBITDA/t to improve to USD400/t
in FY22E as auto volumes gradually normalize.

Exhibit 20: Novelis’ EBITDA to decline 23% in FY21E due to 14% decline in margins

EBITDA - USD m Adj. EBITDA/t - USD

441

418
400
381 380

1,215 1,368 1,443 1,116 1,309

FY18 FY19 FY20 FY21E FY22E

Source: MOFSL

21 May 2020 11
 Hindalco

Aleris – going through a rough patch

Novelis has completed the acquisition of US-based Aleris for an EV of USD2.8b

(including debt of USD2.0b), implying 7.2x CY19 EV/EBITDA (EBITDA – USD388m in
CY19). Novelis has funded the acquisition through debt of USD2.3b (including
USD0.4b raised in Jan’20) and utilized USD0.5b from internal accruals and the bridge
loan facility. The transaction closure however required sale of auto finishing lines:
 At Duffel plant in Belgium to Liberty Group for USD0.34b (at ~7x EV/EBITDA) –
approved by the European Commission and due to be closed soon
 At Lewisport facility in the US – US Department of Justice (DoJ) to define the
timeline (likely 9-12 months) and terms for the divestment.

Even though Aleris’ auto capacities in US and Europe would largely be divested as
part of the regulatory requirement for the acquisition, the acquisition still gives
Novelis an entry into the high margin aerospace segment. It would also position
Novelis as a leader in the Building and Construction segment in the US. Also, Novelis
expects synergy benefits of USD150m p.a. in 3-5 years from the Aleris acquisition.
However, we have not built that in our estimates.

Aleris’ financial performance

Aleris’ CY19 financial performance improved with adj. EBITDA increasing 41% YoY to
USD388m, primarily due to improved metal spreads in North America. However,
during 4QCY19, adj. EBITDA declined 30% QoQ to USD81m due to 14% QoQ decline
in volumes to 187kt and 18% QoQ decline in EBITDA/t to USD431. Decline in
volumes and margins can be attributed to seasonality and lower automotive
volumes in the European business.
Exhibit 21: Aleris’ financial performance
CY18Q1 CY18Q2 CY18Q3 CY18Q4 CY19Q1 CY19Q2 CY19Q3 CY19Q4 Change CY18 CY19 Change
Shipments - '000 tonnes 209 235 225 203 221 232 218 187 (QoQ)
-14.5 873 858 (YoY)
-1.7
North America 120 140 139 119 128 142 134 114 -15.1 518 517 0.0
Europe 85 87 81 77 86 82 77 65 -15.7 330 311 -5.9
Asia Pacific 6 9 7 8 9 8 9 9 3.4 29 35 19.4
Transfers -2 -1 -1 -1 -1 -1 -2 -2 -25.0 -5 -5 12.8
Revenue (US$mn) 802 931 911 802 877 917 857 726 -15.3 3,446 3,376 -2.0
Revenue/t (US$) 3,833 3,960 4,045 3,953 3,961 3,955 3,927 3,888 -1.0 3,949 3,935 -0.4
LME 2,162 2,254 2,056 1,967 1,861 1,792 1,762 1,752 -0.6 2,110 1,792 -15.1
Premium 1,671 1,706 1,989 1,986 2,100 2,163 2,165 2,136 -1.3 1,839 2,143 16.5
Adj. EBITDA (US$mn) 54 85 77 61 85 108 115 81 -30.0 276 388 41.0
North America 34 55 42 32 50 77 78 52 -32.6 162 257 58.5
Europe 27 34 38 31 36 32 36 22 -37.6 129 125 -2.8
Asia Pacific 2 6 6 7 9 9 11 14 33.3 22 43 92.3
Inter-company -10 -10 -8 -9 -10 -9 -9 -9 -7.6 -37 -37 -0.8
EBITDA/t (US$) 256 361 342 299 383 466 527 431 -18.1 316 452 43.0
North America 285 390 300 266 394 539 581 461 -20.6 313 497 58.6
Europe 315 386 464 399 417 383 461 340 -26.1 390 403 3.3
Asia Pacific 328 753 913 974 989 1,073 1,213 1,565 29.0 755 1,217 61.1
Source: MOFSL

21 May 2020 12
 Hindalco

Exhibit 22: Aleris’ revenue mix (before divestment) consists largely of Automotive, Building
and Construction, and Aerospace

N. America
Building and
Distribution, 12 Construction, 22

Other, 7
Heat Exchanger, 6

Truck trailer, 8

Regional plate
and sheet, 7 Automotive, 23
Aerospace, 15

Source: MOFSL

Aleris’ EBITDA to decline due to weak aerospace segment

Aleris’ operating profits are expected to decline in FY21 due to lower aerospace
volumes on account of the COVID-19 impact as well as Boeing 737 Max production
curtailment. Automotive volumes would also be lower on weak auto sales volumes.
We estimate adj. EBITDA of USD210m/USD250m in FY21E/FY22E against adj. EBITDA
of USD338m in CY19 (adj. of USD50m of Duffel facility’s EBITDA).

Aleris’ acquisition to add high-margin Aerospace/Building and Construction

segment to Novelis’ portfolio

Exhibit 23: Novelis: Pre-Aleris Portfolio Exhibit 24: Novelis: Post-Aleris portfolio*

Speciality, Aerospace
17 4%

Speciality B&C, Truck

Can
19% trailer
Automotive, 47%
8%
20

Automotive
Can, 63 22%

Source: Company Source: Company; *pro-forma including Duffel and Lewis Port;

Aleris acquisition is value dilutive by INR33/sh

Though the Aleris acquisition has added Aerospace/Business and Construction
segment to Novelis’ portfolio, timing of the Aleris’ acquisition could not have been
worse as outlook for the Aerospace segment remains uncertain in FY21E due to the
COVID-19 impact and max-737 issues. Novelis expects synergy run-rate of USD150m
p.a. after 3-5 years due to the combination of Aleris’ auto facility in Asia with its own
facilities but we have not factored it in our estimates. We expect EBITDA of
USD210m (ex-Duffel) and USD250m in FY21E and FY22E, respectively, which makes
the deal valuation look expensive at 11.7x/9.9x FY21E/FY22E EV/EBITDA. The Aleris

21 May 2020 13
 Hindalco

acquisition adversely affects HNDL’s fair value by INR41/share on FY21 and

INR33/share on FY22E basis at 6.0x EV/EBITDA multiple.

Exhibit 25: Aleris acquisition affects HNDL valuation negatively

USD m FY21 FY22
EBITDA 210 250
Consideration 2463 2463
EV/EBITDA 11.7 9.9
EV based on 6.0x EBITDA 1,262 1,498
Excess value paid -1,201 -965
Value per share (USD) -0.54 -0.43
Value per share (INR) -41 -33
Source: MOFSL

21 May 2020 14
 Hindalco

Net debt has peaked, FCF to drive deleveraging

Net debt/ EBITDA should decline from 4.5x currently to 3.5x by Mar’22

With the acquisition of Aleris for USD2.8b (USD2.5b net of Duffel plant sale), HNDL’s
net debt has increased to ~USD7.8b, implying 4.5x net debt/ EBITDA. We expect net
debt to decline to USD7.6/USD7.2b by Mar’21/Mar’22E aided by FCF generation
even in a weak economic environment. We estimate net debt to EBITDA to decline
to 3.5x in FY22E as the global economy recovers from the impact of COVID-19.

Exhibit 26: Leverage to decline gradually from peak levels currently (INR b)

Net-Debt Net-Debt/EBITDA
574
550
465 4.4
3.7 401 388 394
3.5
2.9 2.8
2.5

FY17 FY18 FY19 FY20 FY21 FY22

Source: MOFSL

No near-term debt repayments and available liquidity provide comfort

HNDL does not have any debt repayments scheduled in FY21, which coupled with
the USD2b cash and cash equivalents at its disposal, should help it comfortably tide
over the current crisis. The bridge loan of USD1.1b used to finance Aleris’
transaction is due for repayment in Apr’21, which we expect to be funded by (a) sale
proceeds of Duffel and Lewis Port, and (b) refinancing of the balance portion
through long-term debt. HNDL however has few scheduled repayment in FY23 (a)
INR60b bonds in standalone entity due in 1HFY23E, and (b) USD1.75b term loan
facility in Novelis due in Jun’22. Beyond these, there are no significant repayments
to be made till FY26.

Exhibit 27: HNDL’s debt repayment schedule – well spaced out with no near term repayment
Repayment (INR m) FY21 FY22 FY23 FY24 FY25 FY26 FY27 FY28 FY29 FY30
Standalone (a) 120 3,160 61,823 120 9,812 9,812 16,956 16,896 16,836 16,836
Utkal (b) 0 0 0 0 0 3,161 4,635 4,635 4,635 4,635
Novelis (US$mn) 0 1,100 1,750 0 0 2,275 29 0 0 1,600
Novelis (c) 0 83,600 1,33,000 0 0 1,72,900 2,204 0 0 1,21,600
Total 120 86,760 1,94,823 120 9,812 1,85,873 23,795 21,531 21,471 1,43,071
Source: Company

21 May 2020 15
 Hindalco

Exhibit 28: EBITDA to deliver 6% CAGR over FY20-22E to INR159b with incremental EBITDA coming from Aleris business
Consolidated EBITDA break-up (INR m) FY18 FY19 FY20E FY21E FY22E
Standalone + Utkal 62,860 65,986 46,608 36,129 46,839
Novelis 78,325 95,608 1,02,435 83,672 99,447
Aleris 15,772 18,976
Novelis + Aleris (b) 78,325 95,608 1,02,435 99,444 1,18,424
Others and consolidation adjustments (c) -2,981 -6,489 -6,489 -6,489 -6,489
Consolidated (a+b+c) 1,38,204 1,55,105 1,42,554 1,29,084 1,58,773
Source: MOFSL

Exhibit 29: Expect FCF generation even in FY21

(USD m) OCF Capex Interest (net) FCF

1,689 1,714 1,582
1,454 1,435
782
504 433
114 94

(465) (441) (350) (413) (479) (460)

(859) (862) (690)
(927)
FY18 FY19 FY20E FY21E FY22E

Source: MOFSL

21 May 2020 16
 Hindalco

Valuation
HNDL has corrected ~40% in CY20 due to the double whammy of weaker aluminum
demand and margins on account of the COVID-19 pandemic and higher leverage
owing to Aleris’ acquisition. This correction has however resulted in significant de-
rating in the implied valuation multiples despite building in sharply lower earnings
for FY21 and FY22. At CMP of INR117/share, HNDL is trading at 6.7x/ 5.3x FY21E/
FY22E EV/EBITDA which are at a significant discount to 10-year average of 7.3x.
The current valuation is comparable to the trough of 5x EV/EBITDA seen four years
back. However, HNDL’s earning mix has improved substantially since then as ~75%
of EBITDA now comes from relatively stable conversion business (Novelis + Aleris) as
against only 50-55% three years back which should improve the attributable
valuation multiple to the company. Moreover, RoE currently (5.3% in FY21E) is far
better than the trough RoE of 2.2% seen in FY16. We also expect RoE to improve to
10.8% in FY22E on expectation of gradual normalization of COVID-19 impact.
Exhibit 30: HNDL EV/EBITDA – 10% below 10 yr average Exhibit 31: HNDL P/B – currently ~50% below 10 yr average
EV/EBITDA (x) Avg (x) Max (x) P/B (x) Avg (x) Max (x)
Min (x) +1SD -1SD Min (x) +1SD -1SD
12.0 3.0 2.8
10.1
8.7 2.3
9.0 1.7
7.3 1.5 1.3
5.9 0.8
6.0
0.8
5.0 6.5 0.5 0.7
3.0 0.0
May-10

May-11

May-12

May-13

May-14

May-15

May-16

May-17

May-18

May-19

May-20
May-10

Nov-12

May-15

Nov-17

May-20
Aug-11

Feb-14

Aug-16

Feb-19

Exhibit 32: RoE to increase in FY22E after a dip in FY21E

23.5
20.3
18.0
14.5
11.7 12.8
11.6 11.2 10.8
7.1
5.3
2.2

FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20E FY21E FY22E

Source: MOFSL
Exhibit 33: EBITDA from converter business increases to 75% in FY22E from 57% in FY18
EBITDA Break-up FY18 FY19 FY20E FY21E FY22E
Standalone + Utkal 62,860 65,986 46,608 36,129 46,839
Novelis 78,325 95,608 1,02,435 83,672 99,447
Aleris 15,772 18,976
Novelis + Aleris (b) 78,325 95,608 1,02,435 99,444 1,18,424
Others and consolidation adjustments (c) -2,981 -6,489 -6,489 -6,489 -6,489
Consolidated (a+b+c) 1,38,204 1,55,105 1,42,554 1,29,084 1,58,773
Share of Novelis EBITDA (%) 56.7 61.6 71.9 77.0 74.6
Source: MOFSL

21 May 2020 17
 Hindalco

Valuation and view

 With global demand for primary aluminum depleting, LME aluminum trades
near historical lows. Though cost pressure has subsided due to lower
commodity prices, at current LME, several global aluminum smelters would still
be in losses, which we believe is unsustainable. Given its low-cost integrated
production, HNDL is well placed to benefit as LME recovers.
 We remain conservative on profitability and build in lower EBITDA margin of
USD380/t for FY21E and USD400/t for FY22E (v/s USD441/t in FY20) for Novelis.
We have also reduced volumes by 9% for FY21E and expect normalized volumes
in FY22E.
 We have factored in EBITDA of USD210m/USD250m from Aleris’ operations and
have factored in earnings of Lewis Port due to lack of clarity on Lewis Port’s
profitability.
 With ~75% EBITDA contribution from non-LME business i.e. the conversion
business (Novelis + Aleris), we see stability in HNDL’s earnings.
 The stock trades at an attractive valuation of 5.3x EV/EBITDA and 6.9x P/E on
FY22E. We value it at INR175/share based on SOTP. Re-iterate Buy.

Exhibit 34: SoTP valuation

Multiple FY22E INR Per
INR m EV
x EBITDA share
India operations 5.0 40,349 2,01,747 91
Aleris 6.0 18,976 1,13,858 51
Novelis 6.0 99,447 5,96,684 268
Enterprise Value 9,12,288 410
Net-Debt 5,49,926 247
Equity Value (a) 3,62,363 163
Investment in Listed securities @10% discount (b) 25,748 12
Target Price INR/sh. (a+b) 175
Source: MOFSL

Target Price and FY22E EPS sensitivity to LME and INR/USD

A USD50/t movement in Exhibit 35: Target price sensitivity to LME and INR/USD
LME Aluminum assumption Target Price FY22E LME
impacts out target price by 175 1600 1650 1700 1750 1800
INR11/share whereas INR 74 134 145 157 168 180
USD/INR

depreciation against the 75 142 154 166 177 189

USD by INR1 leads to an 76 151 163 175 186 198
77 160 171 183 195 207
increase in our target price
78 168 180 192 205 217
by INR9/share and vice-
Source: MOFSL
versa.

A USD50/t movement in Exhibit 36: FY22E EPS sensitivity to LME and INR/USD
EPS FY22E LME
our LME Aluminum
18.9 1600 1650 1700 1750 1800
assumption impacts FY22E
74 13.2 14.8 16.3 17.9 19.4
EPS by 8%-10% whereas INR
14.4 16.0 17.6 19.2 20.8
USD/INR

75
depreciation against the
76 15.7 17.3 18.9 20.5 22.1
USD by INR1 leads to an
77 16.9 18.5 20.1 21.8 23.4
increase in FY22E EPS by
78 18.1 19.8 21.4 23.1 24.7
6%-7%.
Source: MOFSL

21 May 2020 18
 Hindalco

Financials and Valuations

Income Statement (INR M)
Y/E March 2016 2017 2018 2019 2020E 2021E 2022E
Net sales 9,87,589 10,01,838 11,51,717 13,05,423 11,84,301 11,77,407 13,47,882
Change (%) -4.1 1.4 15.0 13.3 -9.3 -0.6 14.5
Total Expenses 9,01,047 8,77,479 10,13,513 11,50,317 10,41,747 10,48,323 11,89,109
EBITDA 86,542 1,24,359 1,38,204 1,55,105 1,42,554 1,29,084 1,58,773
% of Net Sales 8.8 12.4 12.0 11.9 12.0 11.0 11.8
Depn. & Amortization 43,468 44,572 45,062 47,770 49,144 60,425 61,370
EBIT 43,074 79,786 93,141 1,07,335 93,410 68,659 97,402
Net Interest 51,338 57,424 39,107 37,780 37,258 43,515 43,026
Other income 11,888 11,110 10,046 11,271 7,921 7,586 8,088
PBT before EO 3,624 33,472 64,080 80,826 64,073 32,731 62,465
EO income (exp) -5,765 -76 17,742 -16,957 -12,750 -13,620
PBT after EO -2,141 33,395 81,821 80,826 47,116 19,981 48,845
Current tax 10,095 13,210 15,855 19,104 15,382 9,495 16,396
Deffered tax (net) -5,110 1,116 4,887 6,777 3,846 2,374 4,099
Tax 4,984 14,326 20,742 25,881 19,228 11,869 20,495
Rate (%) -232.8 42.9 25.4 32.0 40.8 59.4 42.0
Reported PAT -7,125 19,069 61,080 54,945 27,888 8,112 28,349
Minority interests -4,508 -174 -1 -7 -7 -7 -7
Share of asso. 1,715 -251 -1,251 5 5 5 5
Adjusted PAT 4,863 19,069 42,088 54,957 44,857 20,873 41,981
Change (%) -82.6 -22.9 120.7 30.6 -18.4 -53.5 101.1

Balance Sheet (INR Million)

Y/E March 2016 2017 2018 2019 2020E 2021E 2022E
Share Capital 2,049 2,227 2,229 2,224 2,224 2,224 2,224
Reserves 4,04,017 4,58,361 5,46,289 5,72,793 5,96,459 6,00,802 6,23,158
Net Worth 4,06,066 4,60,588 5,48,518 5,75,017 5,98,683 6,03,026 6,25,382
Minority Interest 3,813 62 86 95 95 95 95
Total Loans 6,74,754 6,37,515 5,20,155 5,24,150 6,05,145 7,18,754 7,21,987
Deferred Tax Liability 20,970 20,168 31,333 36,505 40,351 42,725 46,824
Capital Employed 11,05,603 11,18,333 11,00,092 11,35,767 12,44,274 13,64,599 13,94,288
Gross Block 10,57,871 10,40,510 10,82,644 11,30,670 11,68,424 14,05,922 14,68,847
Less: Accum. Deprn. 3,78,494 3,64,991 4,10,054 4,57,824 5,06,968 5,67,393 6,28,763
Net Fixed Assets 6,79,377 6,75,518 6,72,590 6,72,846 6,61,457 8,38,529 8,40,083
Goodwill 1,77,353 1,71,350 1,78,294 1,85,746 1,85,746 2,25,121 2,25,121
Capital WIP 42,138 18,139 20,629 40,971 79,018 49,782 42,493
Investments 47,488 62,057 68,778 51,567 51,572 51,577 51,582
Working capital Assets 4,65,104 5,29,543 5,29,846 5,67,157 6,36,437 5,68,413 6,31,855
Inventory 1,67,873 1,82,914 2,16,314 2,21,938 2,20,637 2,19,353 2,43,727
Account Receivables 79,184 82,748 99,598 1,14,598 1,10,318 1,09,676 1,21,863
Cash and Bank Balance 1,20,962 1,72,129 1,19,612 1,36,419 2,11,278 1,45,181 1,72,062
Others (incl. LT) 97,085 91,752 94,322 94,203 94,203 94,203 94,203
Working capital liability 3,05,857 3,38,275 3,70,046 3,82,520 3,69,956 3,68,823 3,96,846
Account Payables 1,50,598 1,78,581 2,04,392 2,07,244 1,94,680 1,93,546 2,21,570
Others (incl. LT) 1,55,259 1,59,694 1,65,655 1,75,276 1,75,276 1,75,276 1,75,276
Net Working Capital 1,59,247 1,91,269 1,59,800 1,84,637 2,66,481 1,99,590 2,35,009
Appl. of Funds 11,05,603 11,18,333 11,00,092 11,35,767 12,44,273 13,64,599 13,94,288

21 May 2020 19
 Hindalco

Financials and Valuations

Ratios
Y/E March 2016 2017 2018 2019 2020E 2021E 2022E
Basic (INR)
EPS 2.4 8.6 18.9 24.7 34.6 30.8 40.3
Cash EPS 17.7 28.6 47.6 46.2 185.7 169.9 180.0
BV/Share (adj.) 111.6 129.9 166.1 175.0 1.6 1.7 2.7
DPS 1.0 1.1 1.4 2.4 9.3 21.2 16.7
Payout (%) 49.3 15.0 8.7 11.4 34.6 30.8 40.3
Valuation (x)
P/E 49.3 13.7 6.2 4.7 6.4 13.8 6.9
Cash P/E 6.6 4.1 2.5 2.5 3.7 4.2 3.2
P/BV 1.0 0.9 0.7 0.7 0.7 0.8 0.7
EV/Sales 0.8 0.7 0.6 0.5 0.6 0.7 0.6
EV/EBITDA 9.2 5.8 4.8 4.2 4.8 6.7 5.3
Dividend Yield (%) 0.9 0.9 1.2 2.1 1.2 1.3 2.1
Return Ratios (%)
EBITDA Margins (%) 8.8 12.4 12.0 11.9 12.0 11.0 11.8
Net Profit Margins (%) 0.5 1.9 3.7 4.2 3.8 1.8 3.1
RoE 2.2 7.1 12.8 14.5 11.2 5.3 10.8
RoCE (pre-tax) 4.9 8.2 9.3 10.6 8.5 5.8 7.6
RoIC (pre-tax) 5.0 9.1 10.8 11.9 10.3 6.8 8.7
Working Capital Ratios 35.6 31.7 35.3 36.2
Fixed Asset Turnover (x) 0.9 1.0 1.1 1.2 1.0 0.8 0.9
Asset Turnover (x) 0.9 0.9 1.0 1.1 1.0 0.9 1.0
Debtor (Days) 29.3 30.1 31.6 32.0 34.0 34.0 33.0
Inventory (Days) 62.0 66.6 68.6 62.1 68.0 68.0 66.0
Payable (Days) 55.7 65.1 64.8 57.9 60.0 60.0 60.0
Leverage Ratio (x)
Current Ratio 1.5 1.6 1.4 1.5 1.7 1.5 1.6
Interest Cover Ratio 0.8 1.4 2.4 2.8 2.5 1.6 2.3
Debt/Equity 2.4 1.6 1.1 1.0 1.0 1.5 1.4

Cash Flow Statement (INR M)

Y/E March 2016 2017 2018 2019 2020E 2021E 2022E
EBITDA 86,542 1,24,359 1,38,204 1,55,105 1,42,554 1,29,084 1,58,773
XO Exp. (income) 1,543 3,622 2,617 439 -16,950 -12,743 -13,613
tax paid -12,291 -7,797 -14,081 -18,883 -15,382 -9,495 -16,396
Change in WC 41,083 6,691 -17,862 -16,865 -6,984 793 -8,538
CF from Op. Activity 1,16,877 1,26,875 1,08,877 1,19,795 1,03,237 1,07,639 1,20,226
(Inc)/Dec in FA + CWIP -42,452 -29,376 -30,008 -60,053 -65,794 -64,652 -52,402
Free Cash Flow to firm 74,426 97,499 78,870 59,742 37,443 42,987 67,824
(Pur)/Sale of Inv. & yield 15,859 5,667 24,685 6,615 7,921 7,586 8,088
Others & M&A 6 3,524 8,052 5,063 -1,84,725
CF from Inv. Activity -26,586 -20,185 2,730 -48,375 -57,873 -2,41,791 -44,314
Equity raised/(repaid) 1 33,141 162 -1,176
Debt raised/(repaid) -36,003 -25,430 -1,22,863 -14,443 70,988 1,15,350
Interest -50,057 -60,754 -38,486 -35,766 -37,258 -43,515 -43,026
Dividend (incl. tax) -2,558 -2,479 -2,938 -3,229 -4,234 -3,781 -6,005
CF from Fin. Activity -88,619 -55,523 -1,64,124 -54,613 29,496 68,055 -49,031
(Inc)/Dec in Cash 1,673 51,167 -52,517 16,807 74,860 -66,097 26,881
Add: Opening Balance 1,19,289 1,20,962 1,72,129 1,19,612 1,36,419 2,11,278 1,45,181
Closing Balance 1,20,962 1,72,129 1,19,612 1,36,419 2,11,279 1,45,181 1,72,062

21 May 2020 20
 Hindalco

Explanation of Investment Rating

Investment Rating Expected return (over 12-month)
BUY >=15%
SELL < - 10%
NEUTRAL < - 10 % to 15%
UNDER REVIEW Rating may undergo a change
NOT RATED We have forward looking estimates for the stock but we refrain from assigning recommendation
*In case the recommendation given by the Research Analyst is inconsistent with the investment rating legend for a continuous period of 30 days, the Research Analyst shall within
following 30 days take appropriate measures to make the recommendation consistent with the investment rating legend.
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Commission ("SEC") in order to conduct business with Institutional Investors based in the U.S., MOFSL has entered into a chaperoning agreement with a U.S. registered broker-
dealer, Motilal Oswal Securities International Private Limited. ("MOSIPL"). Any business interaction pursuant to this report will have to be executed within the provisions of this
chaperoning agreement.
The Research Analysts contributing to the report may not be registered /qualified as research analyst with FINRA. Such research analyst may not be associated persons of the U.S.
registered broker-dealer, MOSIPL, and therefore, may not be subject to NASD rule 2711 and NYSE Rule 472 restrictions on communication with a subject company, public
appearances and trading securities held by a research analyst account.
For Singapore
In Singapore, this report is being distributed by Motilal Oswal Capital Markets Singapore Pte Ltd (“MOCMSPL”) (Co.Reg. NO. 201129401Z) which is a holder of a capital markets
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in respect of any matter arising from, or in connection with this report/publication/communication. This report is distributed solely to persons who qualify as “Institutional Investors”,
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SFA”). Accordingly, if a Singapore person is not or ceases to be such an institutional investor, such Singapore Person must immediately discontinue any use of this Report and
inform MOCMSPL.
Specific Disclosures
1 MOFSL, Research Analyst and/or his relatives does not have financial interest in the subject company, as they do not have equity holdings in the subject company.
2 MOFSL, Research Analyst and/or his relatives do not have actual/beneficial ownership of 1% or more securities in the subject company
3 MOFSL, Research Analyst and/or his relatives have not received compensation/other benefits from the subject company in the past 12 months
4 MOFSL, Research Analyst and/or his relatives do not have material conflict of interest in the subject company at the time of publication of research report
5 Research Analyst has not served as director/officer/employee in the subject company
6 MOFSL has not acted as a manager or co-manager of public offering of securities of the subject company in past 12 months
7 MOFSL has not received compensation for investment banking/ merchant banking/brokerage services from the subject company in the past 12 months
8 MOFSL has not received compensation for other than investment banking/merchant banking/brokerage services from the subject company in the past 12 months
9 MOFSL has not received any compensation or other benefits from third party in connection with the research report
10 MOFSL has not engaged in market making activity for the subject company

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The associates of MOFSL may have:
- financial interest in the subject company
- actual/beneficial ownership of 1% or more securities in the subject company
- received compensation/other benefits from the subject company in the past 12 months
- other potential conflict of interests with respect to any recommendation and other related information and opinions.; however the same shall have no bearing whatsoever on the
specific recommendations made by the analyst(s), as the recommendations made by the analyst(s) are completely independent of the views of the associates of MOFSL even
though there might exist an inherent conflict of interest in some of the stocks mentioned in the research report.
- acted as a manager or co-manager of public offering of securities of the subject company in past 12 months
- be engaged in any other transaction involving such securities and earn brokerage or other compensation or act as a market maker in the financial instruments of the
company(ies) discussed herein or act as an advisor or lender/borrower to such company(ies)
- received compensation from the subject company in the past 12 months for investment banking / merchant banking / brokerage services or from other than said services.

The associates of MOFSL has not received any compensation or other benefits from third party in connection with the research report
Above disclosures include beneficial holdings lying in demat account of MOFSL which are opened for proprietary investments only. While calculating beneficial holdings, It does not
consider demat accounts which are opened in name of MOFSL for other purposes (i.e holding client securities, collaterals, error trades etc.). MOFSL also earns DP income from
clients which are not considered in above disclosures.
Analyst Certification
The views expressed in this research report accurately reflect the personal views of the analyst(s) about the subject securities or issues, and no part of the compensation of the
research analyst(s) was, is, or will be directly or indirectly related to the specific recommendations and views expressed by research analyst(s) in this report.
Terms & Conditions:
This report has been prepared by MOFSL and is meant for sole use by the recipient and not for circulation. The report and information contained herein is strictly confidential and
may not be altered in any way, transmitted to, copied or distributed, in part or in whole, to any other person or to the media or reproduced in any form, without prior written consent
of MOFSL. The report is based on the facts, figures and information that are considered true, correct, reliable and accurate. The intent of this report is not recommendatory in
nature. The information is obtained from publicly available media or other sources believed to be reliable. Such information has not been independently verified and no guaranty,
representation of warranty, express or implied, is made as to its accuracy, completeness or correctness. All such information and opinions are subject to change without notice. The
report is prepared solely for informational purpose and does not constitute an offer document or solicitation of offer to buy or sell or subscribe for securities or other financial
instruments for the clients. Though disseminated to all the customers simultaneously, not all customers may receive this report at the same time. MOFSL will not treat recipients as
customers by virtue of their receiving this report.
Disclaimer:
The report and information contained herein is strictly confidential and meant solely for the selected recipient and may not be altered in any way, transmitted to, copied or
distributed, in part or in whole, to any other person or to the media or reproduced in any form, without prior written consent. This report and information herein is solely for
informational purpose and may not be used or considered as an offer document or solicitation of offer to buy or sell or subscribe for securities or other financial instruments. Nothing
in this report constitutes investment, legal, accounting and tax advice or a representation that any investment or strategy is suitable or appropriate to your specific circumstances.
The securities discussed and opinions expressed in this report may not be suitable for all investors, who must make their own investment decisions, based on their own investment
objectives, financial positions and needs of specific recipient. This may not be taken in substitution for the exercise of independent judgment by any recipient. Each recipient of this
document should make such investigations as it deems necessary to arrive at an independent evaluation of an investment in the securities of companies referred to in this
document (including the merits and risks involved), and should consult its own advisors to determine the merits and risks of such an investment. The investment discussed or views
expressed may not be suitable for all investors. Certain transactions -including those involving futures, options, another derivative products as well as non-investment grade
securities - involve substantial risk and are not suitable for all investors. No representation or warranty, express or implied, is made as to the accuracy, completeness or fairness of
the information and opinions contained in this document. The Disclosures of Interest Statement incorporated in this document is provided solely to enhance the transparency and
should not be treated as endorsement of the views expressed in the report. This information is subject to change without any prior notice. The Company reserves the right to make
modifications and alternations to this statement as may be required from time to time without any prior approval. MOFSL, its associates, their directors and the employees may from
time to time, effect or have effected an own account transaction in, or deal as principal or agent in or for the securities mentioned in this document. They may perform or seek to
perform investment banking or other services for, or solicit investment banking or other business from, any company referred to in this report. Each of these entities functions as a
separate, distinct and independent of each other. The recipient should take this into account before interpreting the document. This report has been prepared on the basis of
information that is already available in publicly accessible media or developed through analysis of MOFSL. The views expressed are those of the analyst, and the Company may or
may not subscribe to all the views expressed therein. This document is being supplied to you solely for your information and may not be reproduced, redistributed or passed on,
directly or indirectly, to any other person or published, copied, in whole or in part, for any purpose. This report is not directed or intended for distribution to, or use by, any person or
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all jurisdictions or to certain category of investors. Persons in whose possession this document may come are required to inform themselves of and to observe such restriction.
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 lost
revenue or lost profits that may arise from or in connection with the use of the information. The person accessing this information specifically agrees to exempt MOFSL or any of its
affiliates or employees from, any and all responsibility/liability arising from such misuse and agrees not to hold MOFSL or any of its affiliates or employees responsible for any such
misuse and further agrees to hold MOFSL or any of its affiliates or employees free and harmless from all losses, costs, damages, expenses that may be suffered by the person
accessing this information due to any errors and delays.
Registered Office Address: Motilal Oswal Tower, Rahimtullah Sayani Road, Opposite Parel ST Depot, Prabhadevi, Mumbai-400025; Tel No.: 022 71934200/ 022-71934263;
Website www.motilaloswal.com.CIN no.: L67190MH2005PLC153397.Correspondence Office Address: Palm Spring Centre, 2nd Floor, Palm Court Complex, New Link Road,
Malad(West), Mumbai- 400 064. Tel No: 022 7188 1000.
Registration Nos.: Motilal Oswal Financial Services Limited (MOFSL)*: INZ000158836(BSE/NSE/MCX/NCDEX); CDSL and NSDL: IN-DP-16-2015; Research Analyst:
INH000000412. AMFI: ARN - 146822; Investment Adviser: INA000007100; Insurance Corporate Agent: CA0579;PMS:INP000006712. Motilal Oswal Asset Management Company
Ltd. (MOAMC): PMS (Registration No.: INP000000670); PMS and Mutual Funds are offered through MOAMC which is group company of MOFSL. Motilal Oswal Wealth
Management Ltd. (MOWML): PMS (Registration No.: INP000004409) is offered through MOWML, which is a group company of MOFSL. Motilal Oswal Financial Services Limited is
a distributor of Mutual Funds, PMS, Fixed Deposit, Bond, NCDs,Insurance Products and IPOs.Real Estate is offered through Motilal Oswal Real Estate Investment Advisors II Pvt.
Ltd. which is a group company of MOFSL. Private Equity is offered through Motilal Oswal Private Equity Investment Advisors Pvt. Ltd which is a group company of MOFSL.
Research & Advisory services is backed by proper research. Please read the Risk Disclosure Document prescribed by the Stock Exchanges carefully before investing. There is no
assurance or guarantee of the returns. Investment in securities market is subject to market risk, read all the related documents carefully before investing. Details of Compliance
Officer: Name: Neeraj Agarwal, Email ID: na@motilaloswal.com, Contact No.:022-71881085.
* MOSL has been amalgamated with Motilal Oswal Financial Services Limited (MOFSL) w.e.f August 21, 2018 pursuant to order dated July 30, 2018 issued by Hon'ble National
Company Law Tribunal, Mumbai Bench.

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