Annual Report Analysis Compendium-FY10-EDEL

Introduction
Edelweiss Securities Limited
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Annual report analysis
Introduction
Annual report analysis provides vital information on companies’ overall performance and helps
developing outlook on them based on historical events. It highlights the true economic profit
against companies’ reported profit as well as the health of the balance sheet.
To analyse annual reports, we have covered the following aspects:
Income statement analysis:
• Economic profits vis-à-vis reported profits
• Direct debit to reserves
• Break up profitability into operating activities, financing activities (ROE analyser)
• Analysing contribution of subsidiaries as well as parent, to the overall profitability of

the consolidated entity.
Balance sheet analysis:
• Non-operational risks
• Capital structure
• Break up into operating and financial assets
• Intangibles and off BS items
• Working capital analysis
• Net worth analysis
Cash flow analysis
Key insights from MD&A
Segmental information analysis.
Accounting policy analysis:
• A framework, wherein accounting policies adopted by a company are analysed and

compared with globally accepted policies. The likely impact on convergence with more
logical accounting practices (IFRS) is highlighted.
• Change in accounting policy/ estimates by the company and its impact on the
profitability.
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Content
List of Companies
Automobiles Metals and Mining
Ashok Leyland Hindalco Industries
Bharat Forge JSW Steel
Escorts Sterlite Industries
Mahindra & Mahindra Tata Steel
Tata Motors
Oil and Gas Petrochemicals
Capital Goods Aban Offshore
Punj Llyod Reliance Industries
Suzlon Energy
Pharmaceuticals
Education Dr. Reddy’s Laboratories
Educomp Solutions Ranbaxy Laboratories
Strides Arcolab
FMCG
United Spirits Pipes
Welspun Corp
Information Technology
HCL Technologies Real Estate
DLF
Infrastructure Unitech
C&C Constructions
Hindustan Construction Company Telecommunications
IL&FS Transportation Bharti Airtel
IRB Infrastructure Developers
IVRCL Infrastructure
Lanco Infratech
Reliance Infrastructure
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Key Highlights
Key Highlights
Automobiles
Ashok Leyland
• Revenues and margins improve; new ventures to propel future revenue growth.
• Sale of revalued assets reduces book profits and MAT outflow.
• Change in deprecation policy; write back of provisions and profit of sale of division
contributed 4.7% to PBT.
Bharat Forge
• Performance of subsidiaries deteriorates further; going concern assumption still doubtful

in overseas subsidiaries.
• Amortisation of FCCB redemption premium through P&L will result in FY10 PBT dipping
by INR 383 mn (395% of PBT before exceptional item).
• Standalone operating performance improves despite dip in sales.
Escorts
• Escorts created a business reconstruction reserve (BRR) of INR 11.1 bn (net) via
transfers, primarily from revaluation and amalgamation reserve.
• BRR has been used to write off losses/diminution in value of various assets aggregating
INR 5.1 bn.
• Doubtful debts/ advances/ deposits aggregate INR 1.6 bn, which is 20% of total debts/
advances/ deposits of INR 7.8 bn.
Mahindra & Mahindra
• Post IFRS, elimination of treasury shares will lead to 10% increase in EPS and 15%
reduction in net worth.
• Provision of certain expenses directly through reserves and routing divesture gains
through P&L increases PBT by 5%.
Tata Motors
• PBT for FY10, adjusted for write back of provisions (INR 4.4 bn), interest cost and
pension loss which has been kept off P&L (INR 7 bn), amounts to INR 8.9 bn vis-à-vis
reported PBT of INR 20.3 bn (excluding investment gains).
• INR 29.4 bn rise in acceptances triggered increase in creditor days (from 86 in FY09 to
108 in FY10); this, together with improved operations, boosted operating cash flow. Also,
discounting charges have increased to INR 6.7 bn in FY10 from INR 4.8 bn in FY09.
Capital Goods
Punj Lloyd
• Revenue includes claim of INR 2.4 bn pending to be approved by ONGC; liquidated

damages of INR 0.7 bn deducted by customer have not been provided for.
• Increased working capital stretches cash flows; QIP and divestment offered respite.
Operating cash flow was at INR (16.2) bn despite PBT of INR 210 mn.
• Auditors have highlighted breach of loan (INR 5 bn) covenant by subsidiary.
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Suzlon Energy
• Cash flows stretched; debt restructuring, Hansen stake sale and fresh issue offered some
respite.
• Suzlon paid INR 2.6 bn towards refinancing arrangement which will be amortised over
loan tenure.
• FCCB interest cost continues to skirt P&L and balance sheet; however, gain on
restructuring of FCCBs has been recognised as exceptional income.
Education
Educomp Solutions
• QIP money of INR 5 bn utilised towards stake hike by 8.8% in EISML (69% subsidiary)
EISML’s net worth (ex-retained earnings) stands at INR 5.43 bn, of which, Educomp has
invested INR 5.4 bn cumulatively for 78% stake; other stakeholders own 22%.
• Reinvestment of QIP money has resulted in further addition to net worth by INR 4.6 bn
with corresponding addition to goodwill.
• IFRS adoption will lead to elimination of inter-group profits and significant increase in
D/E.
• Debtor days increased from 112 in FY09 to 146 in FY10.
FMCG
United Spirits
• Operating cash flow includes addition of INR 5.7 bn towards forex adjustment, of which,
INR 2.9 bn is adjusted for translation losses and INR 1.9 bn realised on repayment of
forex loans. Increase in debtors further stretches cash flow. Operating cash flow also
includes gain on treasury shares of INR 8.9 bn.
• USL has reported derivative loss of INR 1.4 bn (FY09: INR 1.4 bn).
• Pension losses for W&M continue at INR 0.6 bn (FY 09: INR 1.7 bn). Goodwill, at INR
42.4 bn, is 118% of net worth.
Information Technology
HCL Technology
• Reduced derivative exposure may positively impact profitability.
• Creditors at 85 days (FY09: 84 days) in our view are high.
• Goodwill stands at INR 35.2 bn as at FY10 end (FY09: INR 37.3 bn), 56.0% of net worth.
Infrastructure
C&C Construction
• Re-classification of Afghanistan JV as integral contributed 11% to PAT.
• Significant portion of revenues contributed from WIP inventory pending to be billed to

customers.
Hindustan Construction Company
• Leverage moderated but still at 4x.
• Working capital requirement increased with 2.5x increase in debtors to 2.5 bn. Also,
cheques on hand aggregate INR 378.6 mn, ~15.2% of March 31, 2010, debtors.
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Key highlights
IL&FS Transportation Networks
• The company follows IFRS principles for accounting of service concession arrangements
(SCA); consequently, construction income in SCA is recognised upfront on POCM basis.
Margins built on construction income look aggressive.
• Operating cash flow post interest, however, remained subdued despite including
unrealised profit from construction income in SCA.
• Margins booked on in-house contracts increased from 27.0% in FY09 to 32.7% in FY10.
PBT margins on non-captive transactions have dipped from 18.6% in FY09 to 16.9% in
FY10, indicating aggressive assumptions for captive EPC contracts (IFRS accounting).
• Operating cash flow (post interest) was at INR 6.6 bn, however, this includes INR 2.7 bn
towards unrealised profits for EPC work executed for BOT SPV which gets offset by
contra investing cash outflows.
• Cash conversion cycle deteriorated further, primarily on account of increase in debtor

days. Debtors more than six months remained high for FY10, at 27.8% of total debtors.
• Provision for doubtful debts, advances, and deposits and bad debt written off increased
from INR 120.2 mn in FY09 to INR 428.5 mn (11.3% of PBT) in FY10.
Lanco Infratech
• Related party transactions contribute 47% to revenue; IFRS convergence may result in
consolidation of SPVs that will result in elimination of inter-group profits and increase in
D/E ratio from 2.5x to 4.4x.
• Lanco allotted 9.2 mn ESOPs, exercisable at wt. avg. price of INR 0.24 each; ESOP cost
will be amortised over six years; charge for FY10 was INR 570.8 mn (6.1% of PBT).
• Investment book comprises INR 34 bn of investments in promoter group companies.
• Loans and advances, at INR 85.9 bn (FY09: INR 55.9 bn), include inter-corporate deposit
of INR 27.7 bn (FY09: INR 15.9 bn).
• Operating cash flow remains subdued on increased working capital requirement and
revenue recognised under the tariff adjustment account.
Metals and Mining

Hindalco Industries
• Reversal of derivative losses as well as inventory gains contributed a significant

proportion of profitability.
• Operating cash flow (supported by acceptances) and QIP facilitate capex. The company
has huge capex plans (~INR 414 bn) over the next three years.
• High court approval helped keep interest on Novelis acquisition off P&L.
• Goodwill of INR 44.3 bn and customer relationship of INR 17.8 bn constituted 28.8% of
net worth.
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JSW Steel
• Acceptances as at FY10 end stood at INR 54.6 bn (FY09: INR 50.5 bn). During FY09,
JSW had reported that acceptances were short term and issued primarily for project
expenditure and raw material purchase.
• Despite the company raising a loan of INR 6.4 bn (net of repayment), its FY10 loan book
dipped to INR 161.7 bn (FY09: INR 165.5 bn), primarily on account of exchange gain
that stood at INR 10.2 bn. Consequently, adjusted debt/equity for FY10 improved to
2.4x (FY09: 3.0x).
Sterlite Industries
• Exposure to group companies increased ~2x to INR 115.4 bn.
• Guarantee commission and interest income from group companies aggregates INR 3.9
bn, ~ 5.6% of reported PBT.
Tata Steel
• Working capital efficiency and depreciation has facilitated operating cash flows at INR 72
bn despite low PBT of INR 0.3 bn.
• Cost control measures and backward integration on track to enhance savings.
• Actuarial losses on pension liabilities of INR 35.4 bn (FY09 INR 54.9 bn) continue for the
second year; consolidated net worth down.
Oil and Gas Petrochemicals

Aban Offshore
• Forex movement on consolidation imbibed in cash flow statement; hence,

loans/capex/investments do not reflect actual cash flows.
• Derivative losses continued despite the appreciating rupee; also, quantum of derivative
losses is same in consolidated and standalone operations despite varying derivative
positions.
Reliance Industries
• Significant transaction with related party and investments in group companies.
• Significant increase in currency derivative book of INR 1.23 tn (FY09: INR 0.6 tn),
primarily contributed by increase in currency options to INR 449 bn from INR 25 bn in
FY09.
• RIL accounts E&P activities on the basis of full cost method. IFRS implementation
mandates successful effort method, leading to increase in recurring E&P expenses and
one-time impact on net worth.
• Average borrowing cost for FY10 was down at 4.4% (FY09: 8.3%) on account of lower
interest rates and INR appreciation. Lower borrowing cost, coupled with higher treasury
income, results in significant addition to ROE.
Pharmaceuticals
Dr Reddy’s Laboratories
• Subsidiary performance and one timers subdued profitability.
• Operating cash flow, however, continues to remain strong.
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Key highlights
Ranbaxy Laboratories
• Operating concerns loom large; recovery of derivative losses on currency options sold
and MTM gains on forex loans drive profitability.
• Ranbaxy reported negative operating cash, despite PBT of INR 10 bn, on account of
above non-cash items.
• Ranbaxy had derecognised deferred tax assets of INR 2.5 bn on the basis of virtual
certainty test in respect of future profitability, leading to high effective tax rate of 69%.
Strides Acrolab
• Business reconstruction reserve created on amalgamation of subsidiaries used to adjust

losses / expenses aggregating INR 4.2 bn, ~5.1x of adjusted PBT before exceptional items.
• Gains on FCCB option component routed through P&L as per amended AS-30; however,
part of redemption premium is charged to security premium as permitted by the
Companies Act.
Pipes
Welspun Corp
• Advance from customers, at INR 15.5 bn (FY09: 2.2 bn), is 24% of order book. This, in
our view, is not sustainable and thus requires appropriate adjustment while deriving
enterprise value.
Real Estate
DLF
• Net worth includes INR 132 bn on account of unrealised profits on DLF-DAL transactions
(INR 66.4 bn till FY09; now carried at sale price of DLF) and also due to redeemable
preference shares (due on BS date) and capital reserve forming part of net worth.
Reported D/E was 0.7 versus adjusted at ~1.6.
• Promoters were issued 9% fully convertible preference shares in lieu of 40% stake in
DCCDL (instead of equity), which will entitle them additional 9% dividend as well as 40%
share in undistributed profits. This will also result in higher net worth and reported
profits to the extent of minority share in DCCDL.
• Debtors > 6 months have catapulted from INR 9.8 bn in FY09 to INR 13.0 bn in FY10.
Unitech
• Operating cash flow was at INR (13.2) bn vis-à-vis PBT of INR 9.2 bn. Debtors O/S
more than six months doubled to INR 5.7 bn due to drop in property prices.
• Disproportionate drop in interest expense charged to P&L from INR 5.5 bn to INR 2.2 bn.
Details of interest capitalised not disclosed.
• Security premium indicates direct write-off of INR 2.1 bn; goodwill on consolidation has
jumped from INR 11.7 bn to INR 15.3 bn (15% of net worth).
Telecommunications
Bharati Airtel
• Forex-driven margins: PBT margin improved from 21.1% in FY09 to 24.6% in FY10. Excl.
forex impact, the company’s PBT margin dipped from 25.8% in FY09 to 22.8%.
• Funds amounting to INR 6.5 bn raised on short-term basis have been used for long-term
investments.
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ANALYSIS BEYOND CONSENSUS
... the new ABC of research
Ashok Leyland Annual Report Analysis January 17, 2011
Revenues and margins improve; new ventures to propel future revenue growth
Ashok Leyland’s (ALL) revenues jumped 21.1%, from INR 59.8 bn in FY09 to INR 72.4
bn in FY10, due to increased sales volume of commercial vehicles (CV).
EBITDA margin also increased from 7.8% to 10.5%, primarily on the back of improved
realisation and reduction in excise duty rates.
ALL invested INR 1.5 bn in joint ventures (JVs) and associates during FY10. Of these,
investments in Nissan and John Decree JVs amount to INR 0.9 bn; these are likely to
start commercial production FY11 onwards.
In March 2010, the company commissioned a new plant in Pantnagar (Uttarakhand),

which enjoys income tax exemptions and has an installed capacity of 50,000 vehicles
(nearly half of ALL’s existing capacity).
Sale of revalued assets reduces book profits and MAT outflow
ALL’s land and building assets amount to INR 21.4 bn as at FY10 end (FY09: INR 19.1
bn), of which, INR 13.3 bn is on account of revaluation of assets.
Of the revalued assets the company sold few residential flats and recognized a gain of
INR 13.3 bn (in excess of revalued carrying value) while balance in revaluation reserve
pertaining to these assets of INR 13.5 have been transferred to the general reserve.
The company is operating under MAT FY09 onwards. Consequent to the above
transaction the book profit of the company was lower by INR 13.5 mn leading to
reduced MAT outflow.
One timers aid PBT rise

Market Data
52-week range (INR): 81 / 45 Up to FY09, ALL charged depreciation for full year on addition to fixed assets made in
Share in issue (mn): 1,330.3
the first half of the year, for six months on additions during second half and no
depreciation on deletions during the year. During FY10, the company however changed
M cap (INR bn/USD mn): 79 / 1,740
its accounting policy of charging depreciation on pro-rata basis. This resulted in higher
Avg. Daily vol. BSE (’000): 5,426.6 net profit of INR 208.1 mn (~3.8% of PBT).
During FY10, ALL demerged its defiance technology division and integrated it with
Share Holding Pattern (%)
Defiance Technologies, an associate. Total proceeds from this demerger amounted to
Promoters : 38.6
INR 66.8 mn and profit on sale of division was INR 39.5 mn.
MFs, FIs & Banks : 17.8
In FY10, diminution in investments and provision for doubtful debts/advances written
FIIs : 15.1
back was INR 43.2 mn (FY09: provision of INR 46.6 mn), ~0.8% (FY09: 2.1%) of PBT
Others : 28.5 (before exceptional items).
* Promoters pledged shares : 17.8
(% of share in issue)
Analysis beyond Consensus (ABC) is our initiative to provide a differentiated perspective to our clients on various non-routine and intricate issues. This unit of
research works independent of the sector/stock research team and views expressed in this report may vary with that of respective sector/stock analyst.

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Other financial highlights
Unrealised exchange loss on translation of foreign currency loans has reduced from INR 2.6
bn in FY09 to INR 0.7 bn in FY10. Of the total loan book of INR 22.0 bn as at FY10 end
(FY09 end: INR 19.6 bn), INR 13.7 bn (FY09: 15.8 bn) is foreign currency denominated.
Net unhedged foreign outstanding payable is INR 8.2 bn at FY10 end (FY09 end: INR 16.7
bn). With INR appreciating against the USD by 1.1% since FY10 end, the company will
stand further benefitted.
In FY09, ALL availed the option of capitalising/deferring foreign exchange difference on

long-term monetary items provided by the Ministry of Company Affairs. Accordingly, it
capitalised exchange gain of INR 1.5 bn (FY09: exchange loss of INR 2.1 bn), which is
~3.5% (FY09: ~6.3%) of net fixed assets.
During FY10, ALL amortised the final tranche of expenses on voluntary retirement scheme
of INR 32.7 mn (FY09: INR 134.9 mn) as an exceptional item.
ALL has made an impairment provision of INR 112.7 mn (~2.1% of PBT) on plant and
machinery, technical know-how and building.
Research and development expenditure charged to P&L account amounts to INR 1.5 bn
(FY09: 1.3 bn), ~2.1% (FY09: 2.2%) of the turnover.
Export sales (on FOB basis) reduced from INR 8.6 bn in FY09 to INR 6.0 bn in FY10,
despite increase in sales to Sri Lankan associate company from INR 0.8 bn to INR 1.8 bn.
The company amortised debenture issue expenses/expenses on raising loans of INR 14.6
mn during FY10 (FY09: 12.4 mn) over the period of borrowings.
ROE analyser
Particulars FY09 FY10
A. Return on net operating assets (RNOA)
8.5 8.6
(OPATO x NOPAT margin) (%)
OPATO (operating asset turnover) (x) 1.6 1.4
NOPAT margin (%) 5.3 6.3
B. Return from leverage (FLEV x spread) (%) (1.6) 2.8
FLEV (financial leverage) (x) 0.3 0.4
NBC (net borrowing cost) (%) 14.6 1.9
Net financial spread (RNOA -NBC) (%) (6.1) 6.7
ROE Derived (A+B) (%) 6.8 11.4
ROE Tree
12.0
9.6
2.8
7.2
(%)
11.4
4.8
8.6
2.4
0.0
RNOA Return from leverage ROAE
Source: Company’s annual report, Edelweiss research
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Ashok Leyland
ROE has jumped, primarily on the back of:
1) Increase in NOPAT margin, from 5.3% in FY09 to 6.3% in FY10, due to improved
realisations.
2) Decrease in net borrowing costs, from 14.6% in FY09 to 1.9% in FY10, on account of:
• increase in interest capitalised from INR 162.9 mn in FY09 to INR 361.3 mn in FY10;
• increase in investment income from INR 407.9 mn in FY09 to INJR 620.9 mn in FY10
• INR appreciation on forex loans
Sources of funds
100.0
80.0
Increase in 60.0
proportion of current
(
liabilities is primarily %
)
due to higher 40.0

creditors at FY10 end
20.0
0.0
FY06 FY07 FY08 FY09 FY10
Equity shareholders' funds Loan funds Deferred tax liability

Current liabilities Provisions
Application of funds
100.0
80.0
Decline in fixed
assets is owing to
60.0
(
reduction in CWIP on
%
capitalisation of
)
Uttarakhand plant
40.0
20.0
0.0
Fixed assets Investments Inventories
Sundry debtors Cash and bank Loans and advances
3
Profitability ratios
7,000 12.0
10.0
5,600
8.0
Improved
(INR mn)
4,200
realisations, coupled
(%)
with reduction in 6.0
excise duty rates, led 2,800
to increase in EBITDA 4.0
margin from 7.8% in
FY09 to 10.5% in 1,400
FY10
2.0
0 0.0
PBT (before exceptional items) EBITDA margin (%)

PBT margin (%) PAT margin (%)
Fixed assets turnover ratio

50,000 7.0
40,000 5.6
Fixed assets turnover
(INR mn)
ratio slipped in FY10 30,000 4.2
(%)
due to capitalisation
of Uttarakhand plant
in March 2010
20,000 2.8
10,000 1.4
0 0.0
Fixed Assets excl. CWIP (LHS) CWIP (LHS) Fixed Assets Turnover (RHS)
Capacity utilisation
90,000
150,000
75,000
Uttarakhand plant 120,000
increased installed 60,000
capacity by 50,000
(Units)
90,000
(INR mn)
units 45,000
60,000
30,000
30,000 15,000
0 -
Commercial vehicles (in nos.) (LHS)

Installed capacity at year end (Two shifts) (LHS)
Revenue (Gross sales) (RHS)
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Ashok Leyland
Summary financials (INR mn)

Particulars FY06 FY07 FY08 FY09 FY10
Sales 52,477 71,682 77,426 59,811 72,447
Total income 53,048 72,625 78,268 60,723 73,359
EBITDA 5,401 7,027 8,204 4,694 7,628
EBITDA margin (%) 10.3 9.8 10.6 7.8 10.5
Depreciation 1,260 1,506 1,774 1,784 2,041
Financial costs 406 288 763 1,603 1,019
Net profit 3,273 4,413 4,693 1,900 4,237
Equity shareholders' funds 14,051 18,702 21,267 34,681 36,511
Loan funds 6,919 6,404 8,875 19,581 22,039
Net fixed assets 10,847 15,445 20,548 43,974 48,110
Current assets loans and advances 22,324 26,977 28,753 31,656 41,397
Current liabilities and provisions 14,085 17,559 22,719 21,369 29,608
Net current assets 8,239 9,419 6,033 10,287 11,789
Cash flow from operating activities 3,220 5,000 10,657 (5,256) 10,902
Cash flow from investing activities (1,336) (7,222) (8,097) (6,642) (7,832)
Cash flow from financing activities (2,576) (2,908) 3,645 4,592 1,233
Net cash flows (692) (5,131) 6,205 (7,306) 4,303
CAPEX (2,647) (6,813) (6,209) (7,641) (6,947)
Working capital investments (1,291) 372 3,749 (9,131) 4,339
* - Adjusted for interest received on bills receivables and deposits and cash discounts earned as part of ‘
5
Bharat Forge Annual Report Analysis November 25, 2010
Performance of subsidiaries deteriorates further
During FY10, Bharat Forge’s (BF) subsidiaries on an aggregate incurred operating losses
of ~INR 0.8 bn (FY09 operating profits of INR 0.9 bn) on the back of ~45.8% dip in
subsidiaries’ revenue contribution from INR 27.1 bn in FY09 to INR 14.7 bn in FY10.
Going concern assumption still doubtful in overseas subsidiaries
Bharat Forge America (BFA), a wholly owned subsidiary, has registered losses that have
substantially eroded its net worth. Auditors of BFA, have drawn attention to the
appropriateness of going concern assumption used for preparing their respective
financial statements. In CY09, the company had reported net loss of INR 234.5 mn
(CY08: INR 264.3 mn) on a turnover of INR 993.2 mn (CY08: INR 1.7 bn).
The impairment review carried out by the management did not indicate any impairment
loss considering the diminution in value of investment to be temporary in nature. BF has
further invested USD 3.5 mn in equity shares of BFA, taking its total equity investment
in the company to INR 0.9 bn.
Bharat Forge Scottish Stampings, Scotland, a step-down subsidiary, continued to incur

losses; its net worth stood at INR (190.2) mn as at FY10 end. Auditors have opined that
the going concern assumption is not valid for the subsidiary. Its commercial operations
have ceased and assets have been transferred to another subsidiary.
Standalone operating performance improves despite dip in sales
BF’s standalone revenues dipped 9.8% to INR 18.6 bn in FY10 from INR 20.6 bn in FY09
on the back of weak exports (declined to INR 7.1 bn in FY10 from INR 10.0 bn in FY09).
During FY10, standalone EBIDTA rose 15.5% to INR 4.2 bn (FY09 INR 3.6 bn) as
Market Data margins expanded from 17.5% in FY09 to 22.4% in FY10, primarily on account of lower
52-week range (INR): 393 / 232 raw material cost as a percentage of sales and lower forex losses vis-a-vis previous year
(refer page 2 for details).
Share in issue (mn): 232.8
M cap (INR bn/USD mn):86.0 / 1,883.6

Accounting policy highlights
Avg. Daily vol. BSE (’000): 679.4
BFA changed the method for calculating depreciation from years of service to units of
production method, resulting in lower depreciation of INR 70.8 mn (USD 1.6 mn),
~73.2% of reported consolidated FY10 PBT before exceptional items.
Promoters : 42.1
BF had FCCBs of four tranches aggregating USD 183.4 mn o/s on the balance sheet
date (refer page 5 for details). The company had earlier not provided for the redemption
FIIs : 14.8 premium on these FCCBs either through reserves or the P&L account during earlier
Others : 24.2 years. Had the company amortised the redemption premium on YTM basis through P&L,
* Promoters pledged shares : Nil
PBT would have been lower by INR 383 mn (~395.4% of PBT before exceptional item).
Of the above, two tranches amounting to USD 103.5 mn were maturing in April 2010.
Redemption premium on these aggregating INR 1,460.5 mn (including tax amounting to
INR 154.9 mn), since crystalised, has been adjusted to the securities premium account,
net of deferred tax asset amounting to INR 485.1 mn.

1
In FY09, BF availed the option of capitalising/deferring foreign exchange difference on

long-term monetary items provided by Accounting Standard 11. In FY10, as per the
relevant GAAP, exchange gains aggregating INR 1.0 bn were deducted from the carrying
value of fixed assets (FY09 exchange loss INR 1.4 bn). Exchange gains, aggregating INR
321.9 mn, were adjusted against the “foreign currency monetary translation difference
account” (FY09: loss of INR 340.2 mn).
Exceptional items (expenditure/ loss, net) aggregate INR 742.1 mn (FY09: INR 298.9 mn),
~7.7x (FY09: ~21.3%) reported FY10 PBT (before exceptional items). Exceptional items
include:
• Restructuring and redundancy cost related to overseas subsidiaries aggregating

INR 874.1 mn.
• Profit on sale of land by a subsidiary aggregating INR 132.0 mn.
Consolidated cash flow for FY10 reveals unrealised forex gain on INR 0.3 bn included in
PBT (FY09: unrealised forex loss of INR 0.7 bn).
Standalone – Subsidiary operating performance analysis (INR mn)

Particulars Standalone Subsidiary (Derived) Consolidated
FY09 (%) FY10 (%) FY09 (%) FY10 (%) FY09 (%) FY10 (%)
Sales 20,586 100 18,564 100 27,154 100 14,712 100 47,740 100 33,276 100
Raw materials consumed 9,805 47.6 8,224 44.3 14,263 52.5 8,103 55.1 24,068 50.4 16,327 49.1
Operating and mfg. exp. 3,377 16.4 3,161 17.0 4,346 16.0 2,742 18.6 7,723 16.2 5,903 17.7
Personnel cost 1,392 6.8 1,436 7.7 5,700 21.0 3,803 25.8 7,092 14.9 5,239 15.7
Administrative and other exp. 2,415 11.7 1,588 8.6 1,914 7.0 880 6.0 4,328 9.1 2,468 7.4
EBITDA 3,598 17.5 4,156 22.4 931 3.4 (816) (5.5) 4,529 9.5 3,340 10.0
Depreciation 1,494 7.3 1,644 8.9 1,025 3.8 807 5.5 2,519 5.3 2,451 7.4
EBIT 2,104 10.2 2,512 13.5 (94) (0.3) (1,623) (11.0) 2,010 4.2 889 2.7
Financial charges 1,004 4.9 1,028 5.5 288 1.1 275 1.9 1,291 2.7 1,303 3.9
EBT 1,100 5.3 1,484 8.0 (381) (1.4) (1,898) (12.9) 719 1.5 (414) (1.2)
Source: Company annual report, Edelweiss research
Standalone entity
• Despite a dip in sales revenue, on account of sluggish exports, operating metrics have
improved.
• Operating metrics improved, primarily on account of reduced raw material cost (as a
percentage of sales) and lower forex losses (other than on long-term loans), from INR
0.9 bn in FY09 to INR 0.2 bn in FY10.
Subsidiaries
• Subsidiaries were a negative drag on the overall performance; on aggregate basis,

they posted losses at the operating level.
2
Bharat Forge
Subsidiary analysis (INR mn)

% shareholding FY09 FY10
Subsidiary company as on FY10 Networth Turnover PAT Networth Turnover PAT
CDP Bharat Forge, Germany 100.0 4,884 10,176 92 4,196 5,307 (901)
Bharat Forge Holding, Germany 100.0 21 36 (12) 85 84 74
Bharat Forge Aluminiumtechnik & Co. KG, Germany 100.0 417 2,669 145 317 2,062 10
Bharat Forge Aluminiumtechnik Verwaltungs, Germany 100.0 4 0 0 4 0 0
Bharat Forge America. U.S.A. 100.0 36 1,660 (264) 229 993 (235)
Bharat Forge Beteiligungs, Germany 100.0 2,550 38 (26) 2,929 111 68
Bharat Forge Kilsta, Sweden 100.0 1,535 7,046 (336) 963 2,685 (611)
Bharat Forge Scottish Stampings, Scotland 100.0 (192) 2,566 (423) (190) 714 (11)
Bharat Forge Hong Kong, Hong Kong 100.0 1,449 0 (6) 1,281 0 (2)
FAW Bharat Forge (Changchun) Company, China 52.0 2,139 3,377 (347) 1,609 3,398 (315)
Bharat Forge Daun, Germany 100.0 242 1,148 32 217 614 -
BF New Technologies, Germany 100.0 106 - (99) 95 0 -
BF-NTPC Energy Systems. 51.0 1 - - 21 - -
Total 28,718 (1,246) 15,970 (1,923)
PAT margin (%) (4.3) (12.0)
Subsidiary performance dipped further
Geographical revenue breakup
60
48
(lINR bn)
36
Sales outside India

dipped sharply…
24
12
0
Outside India Within India
Fixed asset turnover ratio
30 4.0
24 3.2
18 2.4
(INR bn)
(x)
… impacting fixed
12 1.6
asset turnover ratios
adversely
6 0.8
0 0.0
Fixed assets excl. CWIP Fixed assets turnover ratio (Ex CWIP)
3
Cash conversion cycle

100
86
(Days)
72
58
44
30
Inventory days Receivable days Payable days Cash conversion cycle

Cash conversion cycle increased from 71 days in FY09 to 94 days in FY10, primarily on account
of increase in inventory days and debtor days from 71 in FY09 to 96 in FY10 and 46 in FY09 to
57 in FY10, respectively. This was partially offset by increase in creditor days from 46 in FY09
to 59 in FY10.
Cash flow analysis (INR mn)

Particulars FY10
Profit before tax (645)
Non operating (profit)/Loss 1,065
Non cash adjustments (Incl. tax provision) 2,154
Cash flow from Direct taxes paid (494)
operations remained
Cash profit after tax 2,080
positive, primarily on
account of reduced Decrease in inventories 1,342
working capital Decrease in sundry debtors 289
requirements Increase in other current assets asd loans and advances (4)
Increase in liabilities 1,582
Decrease in working capital 3,210
Net cash from operating activities 5,290
Interest paid (1,310)
Net cash from operating activities post interest 3,980
*Decrease in working capital requirement lead to healthy cashflows from operations
4
Bharat Forge
Movement in shareholders’ fund (INR mn)

Particulars FY10
Opening shareholders' fund 16,435
Add (182)
Profit for the year (634)
Reserve arising on adoption of IFRS by subsidiaries 10
Redemption premium on
FCCBs due in April 2010 Hedging fund arising during the year 172
directly charged to Investment revaluation reserve written off thru P&L 24
reserves Change in FCMITDA 247
Less 1,611
Proposed Dividend and tax thereon 271
Premium on redemption of FCCBs 975
Debenture issue expenses 27
Change in foreign currency transalation reserve 288
Adjustment related to prior year 49
Closing shareholders fund 14,642
Leverage analysis
25 2.0
20 1.6
Despite net loans of INR
1.9 bn availed during
the year, the net 15 1.2
(INR bn)
increase in loan book
(x)
was contained by
exchange gains on forex 10 0.8
loans
5 0.4
0 0.0
Debt Debt /equity
FCCB details
Coupon FCCB O/S Redemption Conversion Maturity

Particulars rate (%) (USD mn ) premium (%) price (INR) date
Tranch 1 0.5 44 26.8 336 Apr' 10
Tranch 2 0.5 60 29.9 384 Apr' 10
Tranch A - 40 42.6 604 Apr' 12
Tranch B - 40 56.5 690 Apr' 13
Total 183
• Post March 2010, BF’s tranch 2 FCCBs of FV USD 1.25 mn were converted into equity
shares and the balance o/s FCCB of tranch 1 and tranch 2 were redeemed.
• The company raised QIP of USD 140 mn in April 2010.
5
Profitability analysis (ROE analyser)
ROE analyser analyses profitability on the scale of operating efficiency and capital allocation
efficiency (detailed concept explained in Annexure A). We have analysed the profitability of BF
for FY08, FY09 and FY10; results and key findings are given below:
Particulars FY08 FY09 FY10

12.7 3.7 1.2
OPATO (operating asset turnover) (x) 1.8 1.5 1.0
NOPAT margin (%) 7.2 2.5 1.3
B. Return from leverage (FLEV x spread) (%) 4.6 (0.3) (3.0)
FLEV (financial leverage) (x) 0.6 0.9 1.1
NBC (net borrowing cost) (%) 4.7 4.0 4.0
Net financial spread (RNOA -NBC) (%) 7.9 (0.3) (2.8)
C. Return from other funding (%) 1.0 1.2 0.9
ROE Derived (A+B+C) (%) 18.3 4.6 (0.9)
Note: *Excluding exceptional items
RoE tree
1.4
0.7 1.2
0.0
(%)
(0.9)
(0.7)
(3.0)
(1.4) 0.9
(2.1)
RNOA Return from Return from other ROAE
leverage funding
• ROE dipped on account of dip in NOPAT margins primarily attributable to subsidiary

operation.
• NBC cost was lower on account of non-charging of interest on FCCB. NBC, excluding FCCB,
stands at 8% (FY09 8.9%).
6
Bharat Forge
Sources of funds
100.0
80.0
(%)
60.0
FCCB redemption
premium, sundry
creditors and 40.0
acceptances
increased current
liabilities 20.0
0.0
Equity shareholders' funds Loan funds Minority interest
Deferred tax liability Current liabilities Provisions
100.0
80.0
60.0
(%)
Mutual fund
investments 40.0
increased
significantly
20.0
0.0
Fixed assets (incl goodwill) Investments Deferred tax asset
Inventories Sundry debtors Loans and advances
Other current assets
7

Sales 30,189 41,783 46,523 47,740 33,276
Total income 30,850 42,752 47,516 48,427 33,787
EBITDA 5,230 6,466 7,047 4,529 3,340
EBITDA margin (%) 17.3 15.5 15.1 9.5 10.0
Depreciation 1,283 1,883 2,273 2,519 2,451
Financial costs 683 1,067 1,269 1,291 1,303
Net profit 2,505 2,906 3,015 583 (634)
Loan funds 11,693 17,996 16,544 21,908 22,527
Net fixed assets 14,814 19,449 23,611 27,902 26,065
Cash flow from operating activities 2,646 3,771 4,284 2,835 5,422
Cash flow from financing activities 9,223 4,159 (3,106) 843 (168)
Net cash flows 5,481 3,457 (6,206) 1,700 1,093
CAPEX (4,180) (5,592) (7,045) (5,393) (1,350)
Working capital investments (4,125) (4,126) (2,361) 574 3,210
8
Escorts Annual Report Analysis April 20, 2010
Revaluation and amalgamation used to clean up the balance sheet
Escorts revalued all its land and buildings by INR 6.7 bn during the year (FY09 opening
balance: INR 4.7 bn).
Also, it amalgamated Escorts Agri Machinery, a wholly-owned subsidiary with investments

in other overseas operational companies. The amalgamation is accounted under pooling
of interest method w.e.f 1st April 2009 on the basis of unaudited financial statements. A
reserve of INR 1.8 bn created thereupon is used to adjust accumulated losses.
Pursuant to the high court approved scheme, Escorts created a business reconstruction
reserve of INR 11.1 bn (net) by transfers, primarily from revaluation and amalgamation
reserve.
This reserve is used to write off losses/ diminution in value of fixed assets, investments,
receivables, loans and advances, accumulated losses, etc aggregating INR 5.1 bn. (Refer
business reconstruction reserve table on page 2).
Consequently, PBT is higher by INR 3.5 bn, ~3.7x of reported PBT before exceptional
items. As on 30th September 2009, the business reconstruction reserve aggregates INR
6.0 bn, ~42.6% of net worth; revaluation reserves aggregates INR 750.0 mn, ~5.3% of
the net worth.
Other accounting policy highlights
~11.2% of the issued share capital (Escorts proportionate share) is held by joint venture
partners, suggesting an element of treasury shares. These shares are excluded in
Market Data
calculating consolidated EPS.
52-week range (INR): 176 / 37
The financial statement of Farmtrac North America, a subsidiary in liquidation, has not
been consolidated. Investments in Farmtrac North America stands at INR nil in the
M cap (INR bn/USD mn): 16.4 / 366.6
standalone financial statements.
Avg. Daily vol. BSE (’000): 2,363.9
Financial highlights
Escorts reported PAT of INR 286.0 mn vis-à-vis net losses of INR 372.4 mn, INR 55.1 mn
Promoters : 30.1
and INR 474.1 mn in FY08, FY07 and FY06, respectively.
Operating cash flows (inflows) increased to INR 2.5 bn vis-à-vis INR 838.5 mn in FY08
FIIs : 15.5
and outflows of INR 2.0 bn in FY07.
Others : 38.6
Borrowings decreased by INR 4.4 bn. However, as per the cash flow statement, net
(% of share in issue) repayments aggregate INR 1.7 bn only, suggesting exchange rate restatements of INR
2.7 bn.
Provisions written back aggregate INR 74.7 mn, ~8.0% of PBT before exceptional items.
Doubtful debts/ advances/ deposits aggregate INR 1.6 bn on total debts/ advances/
deposits of INR 7.8 bn, ~20.5%. Provisions aggregating INR 1.2 bn are adjusted against
business reconstruction reserve and provisions of INR 337.9 mn are treated as
exceptional items.
Escorts follow the period from 01 October to 30 September as its financial year
Analysis beyond Consensus (ABC) is our initiative to provide a differentiated perspective to our clients on various non-routine and intricate issues. This unit
of research works independent of the sector/stock research team and views expressed in this report may vary with that of respective sector/stock analyst.
1
Escorts exercised the put option on bonds received from Idea Cellular in connection with
the sale of telecom business in FY04 and received INR 966.9 mn vis-à-vis the book value
of INR 1.2 bn. It appears that the resulting loss of INR 211.9 mn is adjusted in reserves
(through business reconstruction reserves).
Escorts disposed a subsidiary (Cellnext Solutions) for INR 67.9 mn and recognised a gain
of INR 15.4 mn.
Older issues
The net owned fund of Escorts Automotive, a wholly owned subsidiary (an NBFC), are
below the prescribed limit under NBFC regulation since the past seven years.
Advances include INR 680 mn paid to ICICI Bank in March 2004 for buy back of shares in
Escorts Motors as per a buy back clause in a relevant agreement. The transfer of share is
awaited, pending final settlement.
Loans and advances include INR 320 mn (in the form of 3.4 mn shares @ INR 94 per
share) deposited in connection with an arrangement with fixed deposit holders.
Cash and bank balance include INR 649.9 mn placed in escrow account in connection
with some dispute related to the sale of Escorts stake in Escorts Heart Institute and
Research Center.
Business reconstruction reserve (INR mn)

Sources Amount Application Amount
Capital redemption reserve 8.0 P&L account accumulated losses 1,567.3
Business
Share forfeiture reserve 32.2 Provisions/ write offs 1,982.4
reconstruction
reserve used to Amalgamation reserve 484.6 Dimunition/ impairment of
1,482.5
clean up balance investments/ assets
sheet Revaluation reserve (net) 10,621.4 Depreciation on revalued assets 69.8
Balance 6,044.2
Total 11,146.2 Total 11,146.2
Movement in shareholders’ funds (INR mn)

Particulars Amount
Balance on 1st October 2008 9,353.0
Add:
FY09 PAT 286.0
Revaluation drives Revaluation of fixed assets 6,727.2
shareholders’ fund Consolidation adjustments 1,774.1
increase
Other miscellaneous additions 21.6
Sub total 8,808.9
Less:
Dividend 124.2
Provisions/ write offs 1,982.4
Dimunition/ impairment of investments/ assets 1,482.5
Depreciation on revalued assets 90.2
Utilisation per scheme of arrangement 231.4
Sub total 3,910.7
Balance on 30th September 2009 14,251.2
2
Escorts
efficiency (detailed concept explained in Annexure A). We have analysed the profitability of
Escorts for FY08 and FY09; results and key findings are given below:

A. Return on net operating assets (RNOA)* 4.1 6.4
B. Return from leverage (FLEV x spread) (%) (5.7) (2.2)
Net financial spread (RNOA -NBC) (%) (11.4) (8.1)
C. Return from other funding (%) 0.2 0.2
ROE* Derived (A+B+C) (%) (1.4) 4.4
* Excluding exceptional items
ROE tree
7.5
6.4
5.0
0.2 4.4
2.5
(%)
Better operating
0.0
margin and lesser
leverage make ROAE (0.2)
positive
(2.5)
(5.0)
leverage funding
Sources of funds
100.0
80.0
Debt continues to
recede 60.0
(%)
40.0
20.0
0.0
Deferred tax liabilities Current liabilities Provisions
3
100.0
80.0
60.0
(%)
Revaluation of fixed 40.0
assets, better
working capital
20.0
management and
provisions increase
fixed assets’ share 0.0
Sundry debtors Cash and bank balance Other current assets
Deferred tax assets
Utilisation of income
100.0
Lower material cost 78.0

and direct
adjustment of losses
56.0
in reserves help
post PAT
(%)
34.0
12.0
(10.0) FY05 FY06 FY07 FY08 FY09
Material cost Personnel cost Other operating expenses

Depreciation Interest Other items
Taxes Dividends Retained earnings
Leverage and borrowing cost

2.8 25.0
Revaluation and 2.2 20.0

healthy operating
cash flows help
decrease leverage. 1.7 15.0
(%)
(X)
Borrowing cost
continue to remain
above 10% 1.1 10.0
0.6 5.0
0.0 0.0
Net debt/ equity ratio (x) Debt/ equity ratio (x) Cost of borrowing (%)
4
Escorts

125
100
Better working 75
(Days)
capital management
and provisioning of
doubtful debtors 50
help shorten cash
conversion cycle
25
0
Profitability and return ratios

60.0
45.0
Better EBITDA
margin help better
profitability and 30.0
returns; returns
(%)
partly diminished by 15.0

revaluation
0.0
(15.0)
EBITDA margin
PAT margin (excluding exceptional items)
PAT margin
ROCE (pre tax)
ROE (excluding exceptional items)
ROE
5

Sales 21,431 23,956 27,756 26,820 26,180
Total income 27,242 25,378 28,261 27,667 26,639
EBITDA 121 1,309 1,257 769 1,792
EBITDA margin (%) 0.6 5.5 4.5 2.9 6.8
Depreciation 1,025 489 533 508 480
Financial costs 1,817 1,113 935 721 717
Net profit 1,208 (474) (55) (372) 286
Loan funds 8,868 6,495 8,300 8,402 4,020
Net fixed assets 6,022 9,530 9,375 9,674 15,720
Investments 2,479 2,465 2,453 2,382 1,067
Cash flow from operating activities (714) 2,979 (1,963) 839 2,504
Cash flow from investing activities 3,749 1,000 (662) (955) 504
Cash flow from financing activities (2,642) (3,485) 2,277 (186) (2,462)
6
Mahindra & Mahindra Annual Report Analysis January 17, 2011
Direct debit to reserves and exceptional income boosts profitability
Mahindra & Mahindra (M&M) adjusted provision for diminution in investments of INR 0.7
bn against investment fluctuation reserve; otherwise, PBT would have been lower by INR
0.7 bn (~1.9%). The investment fluctuation reserve stood at INR 6.2 bn as at FY10 end.
The company has FCCBs outstanding of USD 189.5 mn convertible at INR 461.0/share
on or before March 7, 2011. M&M adjusts the redemption premium payable on bonds
against the securities premium account in the year of issue. Had the same been charged
through P&L on YTM basis, FY10 PBT would have been lower by INR 533 mn (1.3%).
ESOPs have been accounted on the intrinsic value basis. Had the company accounted
the same on fair value basis, PAT would have been lower by INR 264.4 mn (~1.1%).
Net exceptional gains for FY10 stood at INR 2.5 bn [FY09: INR (0.8) bn], of which, INR
1.8 bn pertains to the profit realised on sale of investments; and INR 0.8 bn, ~2% of
PBT, is deemed divestiture gain on account of effective dilution of its investments (refer
table on page 2 for details).
The company accounts deemed divesture gain as exceptional income instead of the
conventional practice of adjusting it against reserves.
Accounting Tech Mahindra as JV and consolidation of Satyam to impact financials
Tech Mahindra (TML) ceased to be a subsidiary of M&M w.e.f. March 22, 2010 on
acquisition of stake by AT&T. Post acquisition, M&M’s share (including stake through
subsidiary) has reduced from 48.6% to 44.0%.
Accordingly, TML has been accounted as a joint venture as at BS date and was
proportionately consolidated based on the JV accounting principles, which impacted
M&M’s consolidated financials.
Market Data
52-week range (INR): 826 / 475 Investments have jumped from INR 33.8 bn as at FY09 end to INR 48.1 bn at FY10 end,
primarily due to investments in Satyam Computer Services (SCSL), which was not
consolidated as at FY10 end, since it is in the process of restating its financials.
Post BS date, SCSL financials have been restated and reported a net loss of INR 1.2 bn
in FY10, with M&M’s share of INR 234 mn, ~0.9% of consolidated PAT.
Share Holding Pattern (%) Automotive and farm equipment boost revenue/margins; IT and Systech dampeners
Promoters : 25.8
ROAE has jumped from 21.3% in FY09 to 25.5% in FY10, primarily on the back of
higher NOPAT margin (up from 6.9% to 9.5%). The increase was contributed by the
FIIs : 23.1 following factors:
Others : 26.2
• Rise in automotives and farm equipment revenues from INR 150.4 bn in FY09 to
* Promoters pledged shares : 2.8 INR 202.7 bn in FY10 due to robust sales in domestic and export market. Lower
commodity prices aided increase in EBIT margins from 6.2% to 13.2%.
• Poor sales due to global recession and margin pressure, resulting in IT services’
EBIT proportion dipping to 23.5% from 42.8%.
• Systech revenues slipping to INR 25.5 bn from INR 36.2 bn due to lower sales of
auto-components in European countries due to recessionary conditions.

1
During FY10, outstanding fully convertible debentures (FCD), aggregating INR 7 bn to

Golboot Holdings (owned by Goldman Sachs Group), were converted into 9.4 mn equity
shares of INR 10 at premium of INR 735/share. Consequently, securities premium has
increased by INR 6.9 bn and share capital by INR 94 mn.
The company, through M&M Benefit Trust, holds ~51.8 mn treasury shares (~9.5% of
equity capital) at book value of INR 14.6 bn (14.3% of net worth). Post IFRS from FY12,
the treasury shares will be consolidated, which will increase the reported EPS of INR
42.2/share in FY10 to INR 46.2/share.
The company has received an order for payment of differential excise duty (including
penalty) of INR 3.3 bn. M&M has reflected the above amount along with interest of INR
1.7 bn as contingent liability as at FY10 end (FY09 end: Nil).
Loans and advances jumped from INR 88.6 bn in FY09 to INR 107.7 bn in FY10, of which
loans against assets increased from INR 66.2 bn to INR 79.7 bn.
M&M applies hedge accounting principles as per AS 30 for derivative transactions. Hedge
reserve balance of INR 0.8 bn as at FY10 end (FY09: INR (4.8) bn) (net of tax) is on
account of mark-to-market gains/(losses) on cash flow hedges outstanding at the year
end.
Unhedged foreign currency exposure as at FY10 end is INR 8.2 bn (FY09 end: INR 11.2
bn), primarily on account of USD exposure on zero coupon convertible bonds.
Profit on sale of investments (INR mn)

Profit/(loss) Deemed
on sale of divestiture Total gain /
Company name investment gain/(loss) Others (loss)
Mahindra Holidays & Resorts India 908 1,126 - 2,033
Mahindra Forgings - 129 - 129
Tech Mahindra 950 (452) - 498
Others - - (14) (14)
Total 1,857 802 (14) 2,646
2
Mahindra & Mahindra
Major subsidiary details (INR bn)

% shareholding FY09 FY10
Subsidiary company
as on FY10 Networth Turnover PAT Networth Turnover PAT
Mahindra & Mahindra Financial Services 60.68 14.7 13.8 2.1 17.3 15.5 3.4
Mahindra Life Space Developers 51.08 9.0 1.9 0.5 9.6 3.4 0.8
Mahindra Forgings 50.68 6.7 2.7 (0.4) 7.9 3.3 (0.9)
Mahindra Vehicle Manufacturers 100.00 4.8 - (0.1) 5.6 1.0 (0.2)
Mahindra Forgings International 50.68 4.6 0.2 (0.0) 4.5 0.0 (0.2)
Mahindra Holidays and Resorts India 84.03 2.0 4.1 0.8 4.4 5.0 1.2
Mahindra Navistar Automotives 51.00 3.2 5.0 (0.3) 4.0 6.0 (0.3)
Mahindra Yueda (Yancheng) Tractor 51.00 2.0 1.2 (0.0) 2.7 5.7 (0.1)
Mahindra Gears Global 53.34 2.9 - (0.0) 2.6 - (0.0)
Mahindra Gears Cyprus 53.34 2.9 - (0.0) 2.6 - (0.0)
Mahindra Overseas Investment (Mauritius) 100.00 2.2 0.0 (0.0) 2.6 0.0 (0.0)
Metalcastello S.p.A. 51.00 2.7 6.1 0.3 2.1 2.3 (0.5)
Mahindra Forgings Global 50.68 2.2 0.0 (0.0) 2.0 - 0.0
Mahindra World City (Jaipur) 37.80 1.7 0.8 0.1 1.8 0.5 0.1
Mahindra Ugine Steel Company 50.69 1.7 12.1 (0.2) 1.7 11.8 0.0
Mahindra Intertrade 100.00 1.3 9.0 0.4 1.7 9.5 0.5
Mahindra Navistar Engines Private 51.00 0.3 0.0 (0.1) 1.4 0.0 (0.1)
Mahindra-BT Investment (Mauritius) 57.00 1.8 0.1 0.1 1.4 0.9 0.7
Mahindra Gears International 100.00 1.6 - (0.0) 1.4 - (0.0)
Schöneweiss & Co. GmbH 50.68 1.9 6.1 (0.0) 1.2 2.7 (0.5)
Mahindra Castings 64.94 0.3 0.0 0.0 1.2 3.2 (0.1)
Gesenkschmiede Schneider GmbH 50.68 1.3 8.2 (0.1) 1.1 3.5 (0.5)
Mahindra World City Developers 42.21 1.0 1.0 0.3 1.1 0.3 0.1
Mahindra Engineering Services 100.00 0.6 1.6 0.2 0.8 1.4 0.3
Bristlecone 81.97 0.7 0.0 (0.1) 0.5 0.0 (0.1)
Mahindra Residential Developers 24.85 0.5 - (0.0) 0.5 0.1 (0.0)
Mahindra Renault Private 51.00 2.0 7.4 (4.9) (3.6) 7.4 (4.9)
Total 76.5 81.4 (1.3) 80.0 83.5 (1.3)
PAT 14.1 24.8
ROE analyser
13.4 10.5 15.5
NOPAT margin (%) 8.3 6.9 9.5
B. Return from leverage (FLEV x spread) (%) 17.9 10.9 9.8
NBC (net borrowing cost) (%) (1.0) 0.9 3.8
Net financial spread (RNOA -NBC) (%) 14.4 9.6 11.8
C. Return from other funding (%) 0.2 (0.1) 0.2
ROE Derived (A+B+C) (%) 31.4 21.3 25.5
3
ROAE tree
30.0
ROE improved from
0.2
21.3% to 25.5% on
the back of improved 24.0
margins in
automobiles and farm 9.8
equipment segment, 18.0
(%)
resulting in higher
NOPAT margin
12.0 25.5
15.5
6.0
0.0
leverage funding
Segmental analysis
Segmental revenue
100.0
80.0
Proportion of
automobiles and farm 60.0
(%)
equipment segment
has increased from
56.2% to 64.2% on
40.0
the back of increased
sales volume 20.0
0.0
Automotive Farm equipment IT services

Financial services Steel trading and Processing Infrastructure
Hospitality Systech Others
Automobile segment
120.0 40.0
96.0 32.0
Robust growth in
(INR bn)
domestic utility
72.0 24.0
(%)
vehicle volumes,
augmented by
decrease in 48.0 16.0
commodity prices,
result in margin
growth 24.0 8.0
0.0 0.0
Segmental revenue Segmental result

Segment net assets Segmental EBIT margins
Return on segment net assets
4
Mahindra & Mahindra
Farm equipment segment

100.0 120.0
Rise in domestic and 80.0 96.0

export sales of
tractors result in
60.0 72.0
(INR bn)
higher sales and
(%)
margins
40.0 48.0
20.0 24.0
0.0 0.0

IT services segment
60.0 150.0
48.0 120.0
EBITDA margins
down due to global
(INR bn)
recession and poor 36.0 90.0
(%)
outsourcing demand
24.0 60.0
12.0 30.0
0.0 0.0

Systech segment
40.0 27.0
32.0 20.0
EBIT margins dipped 24.0

(INR bn)
13.0
(%)
due to lower sales of
auto ancillaries to
export markets 16.0 6.0
8.0 (1.0)
0.0 (8.0)
5
Balance sheet analysis
Sources of funds
100.0
Proportion of loan
funds reduced and
shareholders’ funds 80.0
increased, primarily
due to conversion of
60.0
fully convertible
(%)
debentures of INR 7
bn 40.0
20.0
0.0

Deferred income Deferred tax Liability Current liabilities
Provisions
100.0
80.0
Proportion of
investments is up
from 10.8% to 16.7% 60.0
(%)
due to investment in
SCSL of INR 29.7 bn 40.0
20.0
0.0
Inventories Sundry debtors Cash and bank
Movement in shareholders’ funds (INR bn)

Particulars FY10
Opening shareholders' fund 70.3
Add
New issuances and Conversion of FCD to equity shares 7.0
profits boost
shareholders’ fund Profit for the year (including share in JV) 24.8
Change in hedge reserve account 5.6
Adjustment pertaining to prior period in repect of Minority interest 0.5
Others 0.7
38.5
Less
Proposed Dividend and tax thereon (Equity and Preference) 6.4
Investment fluctuation reserve utilised 0.7
7.1
Closing shareholders fund 101.8
Summary financials
6
Mahindra & Mahindra
Summary Financials (INR mn)

Sales 125,087 178,002 241,872 267,564 315,685
Total income 127,134 179,868 245,713 270,275 318,287
EBITDA 16,872 26,077 32,562 31,557 50,109
EBITDA margin (%) 13.5 14.7 13.5 11.8 15.9
Depreciation 2,833 3,799 5,822 7,493 8,735
Financial costs 650 931 2,598 3,470 6,178
Net profit 12,697 14,972 15,711 14,054 24,786
Loan funds 52,713 78,290 98,810 121,903 134,859
Net fixed assets 26,055 47,868 76,255 91,418 105,203
Current assets, loans and advances 97,253 140,397 169,285 185,749 203,162
Cash flow from operating activities (4,589) (1,624) 6,989 34,015 27,988
Cash flow from financing activities 14,682 21,199 16,902 12,066 18,428
Net cash flows 1,275 8,360 (3,806) 11,647 (842)
CAPEX (5,253) (13,746) (19,723) (29,413) (26,999)
Working capital investments (17,412) (17,113) (13,505) 9,261 (11,475)
* - FY10 balance sheet figures have been adjusted, assuming Tech Mahindra to be a subsidiary and not joint venture for the purpose of
comparability.
-Loan funds of M&M Financial Services have been deducted from M&M consolidated loan book for the purpose of D/E ratio and average
borrowing costs.
-Financial expenses of M&M Financial Services have been reduced from the financial cost of M&M consolidated financials and treated as part of
operating expenses.
7
Tata Motors Annual Report Analysis August 18, 2010
Improved operations and one offs drive profitability
Tata Motors’ (TML) revenues jumped 30.6% from INR 708.3 bn in FY09, to INR 925.2 bn
in FY10. PBT* for the year stood at INR 37.8 bn (FY09 loss of INR 17.9 bn).
Other income includes profit on sale of investments of INR 17.5 bn (46.3% of PBT*), of
which, INR 6.9 bn pertains to sale of TATA Steel shares and the balance INR 10.6 bn to
20% stake sale in Telco Construction Equipment Company (former subsidiary).
The company had reversed provision of INR 4.4 bn (11.6% of PBT*) towards residual risk
on vehicles sold, made during earlier years.
Auditors have highlighted that during the year, INR 2.6 bn (FY09: INR 14.6 bn) of
actuarial losses on pension plan of one of the subsidiaries have been charged to
shareholders’ fund in accordance with IFRS (as it is not practical to convert it into
IGAAP). This led to accumulated pension reserve of INR (17.2) bn; had the company
charged the same through P&L, PBT* would have been lower by 6.9%.
During FY10, TML raised INR 45 bn through NCD, of which, INR 42 bn is 2% NCDs with
premium payable on redemption. The company has charged the entire redemption
premium of INR 17.5 bn to shareholders’ fund as permitted by the Companies Act, 1956.
Had the company charged the same on YTM basis through P&L, PBT would have been
lower by INR 2.3 bn (14.5% of PBT excl. one timers; refer page 4 for details).
TML, as per accepted general practice, has written off the entire redemption premium on
FCCBs through reserves in the year of issue. IFRS, however, requires the redemption
premium on FCCBs to be charged through P&L on YTM basis. This would lead to an
additional charge of INR 2.1 bn (13.2% of PBT excl. one timers; refer page 4 for details).
Market Data
52-week range (INR): 1,031 / 422 Acceptances boost operating cash flow
Share in issue (mn): 506.4 Operating cash flow post interest stood at INR 64.7 bn, primarily on account of improved
operations and decrease in working capital requirements (on the back of INR 29.4 bn
jump in acceptances).
TML’s cash conversion cycle improved from (32) days in FY09 to (38) days in FY10,
primarily on account of rise in creditor days from 86 in FY09 to 108 in FY10, partly offset
by increase in debtor days from 18 to 24 and inventory days from 37 to 46.
Promoters* : 37.0
MFs, FIs & Banks : 18.6 Accounting and financial highlights

FIIs : 22.4
TML has revalued certain fixed assets of Jaguar and Land Rover during FY10, resulting in
Others : 22.0 revaluation reserve of INR 1.3 bn (FY09: INR 2.4 bn).
* Promoters pledged shares : 12.2 Fiat India Automobiles, a 50% JV, has incurred a loss of INR 2.7 bn during FY10 (FY09
loss: INR 6.1 bn); accumulated losses post acquisition stood at INR 9.7 bn. TML, during
the year, invested INR 2.8 bn in the JV, resulting in total investment of INR 10 bn.
CWIP includes INR 3.1 bn towards an under construction building for manufacturing
automobiles. Consequent to the decision to relocate the same at another location, TML is
evaluating several options, under all of which, no adjustment to the carrying amount of
the building is considered necessary based on the information available at the BS date.
TML exercised the existing call option to acquire 79% shares in Tata Hispano Motors
Carrocera (to acquire 100% stake) for EUR 2 mn (INR 137.1 mn). The company’s net
worth as at FY10 end stood at INR (1.8) bn.
Based on consolidated financials unless specified otherwise
1
The company, during FY10, issued 4% convertible notes (due in October 2014)
aggregating USD 375 mn, convertible into shares, at INR 621.49 per share. These,
unless converted earlier, will be redeemed at a premium of 8.5%. TML has adjusted the
entire redemption premium through reserves.
INCAT Holdings, INCAT KK, and Lemmerpoort BV (subsidiaries of Tata Technologies) and
Jaguar & Land Rover Asia Pacific Company (subsidiary of Jaguar Land Rover), were
liquidated.
Discounting charges has increased from INR 4.8 bn in FY09 to INR 6.7 bn in FY10.
Improved profitability, equity dilution and exchange gains lower D/E
Despite the company raising net loans of INR 41.3 bn, loan book increased by a meager
INR 2.2 bn, primarily on account of exchange gains and FCCB conversion of USD 345 mn
(~INR 15.5 bn).
TML, during the year, extended an early conversion offer to non-US note holders of
outstanding 0% JPY 11,760 mn (due in 2011) and 1% USD 300 mn (due in 2011)
convertible notes. Note holders, representing 93.62% of JPY notes (i.e. JPY 10,710 mn)
and 76.54% of USD notes (i.e. USD 229.63 mn), opted to convert their notes into
ordinary shares. The offer resulted in allotment of 26.6 mn equity shares to note holders
who exercised the option. This has resulted in issue of additional 8.3 mn equity shares.
The company has issued 29.9 mn global depository shares (GDS) each representing one
share at a price of USD 12.54 per GDS, aggregating USD 375 mn (INR 17.9 bn).
Consequently, gross D/E improved from 6.7x in FY09 to 4.2x in FY10.

Standalone
Other highlights from standalone financials
During the year, TML Holdings (holding company of Jaguar-Land Rover), Singapore, a
wholly-owned subsidiary, redeemed preference shares of face value of USD 195.1 mn at
a discount of USD 189.2 mn. Consequently, TML (standalone) recognised a loss of INR
8.5 bn as an exceptional item. This shall however have no impact on consolidated
financials.
Auditors have highlighted that, short-term funds of INR 66.9 bn have been used during
the year for long-term investments.
TML as at FY10 end had granted loans of INR 2.5 bn to companies, firms or other parties
covered in the register maintained under section 301 of the companies act. Auditors
have highlighted that some of these companies have delayed repaying the interest. This
shall however have no impact on consolidated financials.
2
Tata Motors
Profitability analysis (ROAE analyser)
ROAE analyser analyses profitability on the scale of operating efficiency and capital allocation
efficiency (detailed concept explained in Annexure A). We have analysed Tata Motor’s
profitability for the year ended FY08, FY09, and FY10 (refer table below). Results and key
findings of same are as follows:
The ROAE improved on account of improved operating performance, with RNOA jumping
to 8.6% in FY10 from a negative 4.9% in FY09. The company’s leverage further
propelled the ROAE.
Increase in NOPAT margins primarily attributable to:
(a) Material cost as percentage of net turnover decreased as increase in input price
during the year was offset by cost reduction programme through value engineering
and other measures.
(b) Significant reduction provision towards residual risk on vehicles sold by Jaguar Land
Rover leading to a decrease in operating and other expenses as percentage of net
turnover.
Low NBC, primarily on account of profit on sale of investment of INR 17.2 bn.

17.6 (4.9) 8.6
NOPAT margin (%) 9.3 (2.2) 4.1
B. Return from leverage (FLEV x spread) (%) 6.5 (25.7) 28.7
Net financial spread (RNOA -NBC) (%) 5.9 (8.0) 5.7
C. Return from other funding (0.8) (0.1) (0.1)
ROAE derived (A+B+C) (%) 23.3 (30.7) 37.2
ROAE tree
40.0
(0.1)
32.0
24.0 28.7
(%)
37.2
16.0
8.0
8.6
0.0
RNOA Return from Return from ROAE
leverage other
funding
3
Profitability analysis (INR bn)

Particulars FY10
Reported PBT before exceptional items (A) 37.8
Less:
One time income (B) 21.9
Reversal of Provision 4.4
Profit on sale of investment 17.5
PBT excluding one timers (C=A-B) 15.9
Less :
Expenses kept off P&L (D) 7.0
Acturial Loss 2.6
Debenture premium (YTM charge) 2.3
FCCB redemption premium (YTM charge) 2.1
Adjusted PBT (C-D) 8.9
Debenture issue analysis (INR bn)
Rate Exp kept off P&L

Redemption Total charged to YTM
Particulars Redeemable on Principal premium repayment P&L (%) (%) Full Yr For FY10
2% NCD March 31, 2011 8.0 0.7 8.7 2.0 6.8 0.4 0.3
2% NCD March 31, 2013 3.5 1.0 4.5 2.0 8.4 0.2 0.2
2% NCD March 31, 2014 18.0 6.6 24.6 2.0 8.5 1.2 1.0
2% NCD March 31, 2016 12.5 9.2 21.7 2.0 10.0 1.0 0.8
Total 42.0 17.5 59.5 2.8 2.3
Redemption premium on debentures issued has been directly charged in the shareholders’
fund. The same will lead to a lower interest cost being charged in the P&L.
Cash flow analysis (INR bn)

Particulars FY10
Profit after tax 25.7
Non operating adjustments 7.0
Non cash adjustments (Incl. tax provision) 8.1
Operating cash flow Depreciation 38.8
was healthy on Direct taxes paid (12.3)
account of improved
operations and Cash profit after tax 67.3
decrease in working Increase in trade and other receivables (48.6)
capital requirements
Increase in inventory (12.4)
(on the back of
increase in Increasein current liabilities and provisions 87.1
acceptances) Decrease in working capital 26.0
Net cash from operating activities 93.3
Interst expenses paid 28.6
Net cash from operating activities post interest 64.7
Source Source: Company annual report, Edelweiss research
4
Tata Motors

135
90
45
(Days)
0
(45)
(90)
Debtor days Creditor days Inventory days Cash conversion cycle

Note: Creditor days incl acceptances
Cash conversion cycle improved from (32)days in FY09 to (38) days in FY10 primarily on
account of increase in creditor days from 86 days in FY09 to 108 days in FY10, partly offset
by increase in debtor days from 18 to 24 and inventory days from 37 to 46 during the same
period.
Movement in shareholders’ fund (INR bn)

Particulars FY10
Add
Profit for the year 25.7
Reversal of hedging reserve 0.9
Increase in Revaluation of assets 0.7
shareholders’ fund Issue of shares (net off expenses) 32.0
primarily on account
Adjustment on conversion of FCCB 3.2
of FCCB conversion
and GDS issue Forex gain on long term liabilities 8.3
Others 1.1
71.9
Less
Dividend (incl. tax) 10.0
Exchange loss on non integral foreign operations 5.6
Premium on redemption of NCD (incl expenses) 21.2
Actuarial losses on pension liability 2.7
Others 0.7
40.1
Closing shareholders' fund 84.0
5

Sources of fund
100.0
80.0
Proportion of
loan funds has
reduced primarily on 60.0
(%)
account of exchange
gains and FCCB 40.0
conversion
20.0
0.0
Shareholder's Fund Minority interest Loan Funds
Deferred Tax liability Current liabilities Provisions
Application of fund
100.0
80.0
60.0
(%)
40.0
20.0
0.0
Fixed Assets Investments Inventories Debtors Cash & bank Other current assets
Borrowing cost analysis

12.0 8.0
10.4 6.4
D/E dipped on back
of exchange gains
and equity dilution 8.8 4.8
(%)
(x)
7.2 3.2
5.6 1.6
4.0 0.0
Avg. borrowing cost (RHS) Debt /Equity

6
Tata Motors

Sales 237,613 322,907 355,604 708,302 925,193
Total income 240,766 325,736 360,972 719,196 945,380
EBITDA 29,828 38,930 50,585 17,980 81,160
EBITDA margin (%) 12.6 12.1 14.2 2.5 8.8
Depreciation 6,233 6,881 7,821 25,068 38,871
Adjusted financial costs 3,096 4,651 9,127 21,706 24,653
Net profit 17,281 21,700 21,677 (25,053) 25,711
Loan funds 33,791 73,019 115,849 349,739 351,924
Net fixed assets 58,481 79,572 134,296 394,520 419,292
Cash flow from operating activities 1,105 (8,755) 55,956 7,498 93,269
Cash flow from financing activities (6,237) 30,536 24,869 177,631 25,119
Net cash flows (9,606) (2,284) 26,850 (3,035) 43,058
CAPEX (12,592) (27,588) (52,804) (99,708) (84,754)
Working capital investments (23,440) (41,370) 20,422 (13,441) 26,609
7
Punj Lloyd Annual Report Analysis August 20, 2010
Subdued operating performance; losses contained by adjustments and one offs
Punj Lloyd’s (PL) FY10 revenue dipped 12.0% to INR 104.5 bn from INR 118.8 bn in
FY09. However, EBIDTA margins increased marginally from 3.4% in FY09 to 3.5% in
FY10.
FY10 loss after tax stood at INR 1.1 bn after providing for INR 1.6 bn towards liquidated
damages levied by Ensus (in FY09, it was at INR 2.3 bn after providing for SABIC’s
increase in cost estimates and encashment of bank guarantee /performance bond of INR
5.2 bn).
During the year, PL agreed to divest 19.4% of Pipavav Shipyard’s paid up share capital
for INR 6.6 bn, subject to the satisfaction of certain conditions precedent; the company
booked a gain of INR 3.1 bn as other income for this purpose.
Auditors have highlighted that the company, during the year, sold investments of INR
2.5 bn, recognising profit of INR 1.2 bn. This, it observed, is not in line with AS 9
“revenue recognition” as the sale of investment was subject to fulfillment of certain
conditions, which have been complied with post the closure of the financial year.
During FY09, PL had filed a claim for INR 5.1 bn for increase in cost estimates by INR
3.6 bn with ONGC for Heera project, which we believe were not accounted for in FY09.
In FY10, PL has included in revenue a claim of INR 2.4 bn pending to be approved by

ONGC, while taking a charge of INR 3.0 bn on account of cost overrun on the above
contract.
Liquidated damages amounting to INR 0.7 bn deducted by one of the customers during
the year have not been provided.
Market Data
52-week range (INR): 298 / 112 Increased working capital stretch cash flows; QIP and divestment offered respite
Share in issue (mn): 332.1 Cash from operations for FY10 stood at INR (16.2) bn despite PBT of INR 209.9 mn.
M cap (INR bn/USD mn): 38.7 / 830.2 This is primarily on account of increased working capital requirements (refer pg 4 for
Avg. Daily vol. BSE (’000): 4,969.7 details).
Cash conversion cycle increased from 109 days in FY09 to 174 days in FY10, as
Share Holding Pattern (%) inventory days rose from 125 to 185 during the same period. Inventory carrying value
Promoters* : 37.3 in absolute terms increased from INR 36.7 bn in FY09 to INR 46.5 bn in FY10.
MFs, FIs & Banks : 20.0 Auditors have highlighted that one of the company’s subsidiaries has breached certain
FIIs : 11.9 covenants of bank loans amounting to INR 5.0 bn as at FY10 end. The bank is
Others : 30.8
contractually entitled to request immediate repayment of the outstanding loan amount
in the event of breach of covenant.
FCCBs worth USD 49.7 mn due in 2011 were outstanding as at FY10 end (effective
conversion price INR 343). During the year, PL had provided INR 451.4 mn out of the
securities premium towards outstanding FCCBs. However, adoption of IFRS/AS30
requires it to be charged to P&L on YTM basis, leading to dip in PAT by INR 87.3 mn.
During the year, PL issued 27.9 mn shares @ 240.2/ share via QIP, raising INR 6.7 bn.
Loan book (incl. bank overdraft) rose 19.2% from INR 37.4 bn in FY09 to INR 44.6 bn in
FY10, which has been primarily utilised for the increased working capital requirements.

1
Financial and other highlights
During the year, PL was subject to a search and seizure operation by the IT department.
During the operation, statements of the company’s officials were recorded, in which, they
were made to offer some unaccounted income of the company for FY10.
Despite 12% dip in revenue during the year, consultancy/professional charges jumped
39.3% from INR 2.3 bn in FY09 to INR 3.2 bn in FY10.
PL accounts for long-term construction revenues on POCM basis. Contract revenues earned
in excess of billing reflect under inventory.
Auditors have highlighted deductions made/ amounts withheld by some customers

aggregating INR 587.9 mn (previous year INR 605.1 mn) on various accounts which are
being carried as sundry debtors. The company is also carrying work-in-progress inventory
of INR 31.5 mn (previous year INR 95.5 mn) related to these customers. PL is of the view
that such amounts are recoverable and, hence, no provision is required.
Unexecuted order book as at FY10 end stood at INR 277.7 bn (FY09 INR 206.8 bn),
offering revenue visibility of more than 2.5 years.
efficiency (detailed concept explained in Annexure A). We have analysed PL’s profitability for
years ended FY08, FY09, and FY10; results and key findings of the same are as follows:
ROE analyser
A. Return on net operating assets (RNOA) 14.6 (1.3) (0.3)
NOPAT margin (%) 5.4 (0.5) (0.2)
C. Return from other funding (%) 0.1 0.2 (0.1)
ROE Derived (A+B+C) (%) 17.7 (8.6) (3.9)
2
Punj Lloyd
ROE tree
0.0
(0.3)
(1.0)
(3.5) (3.9)
(2.0)
(%)
(3.0)
(0.1)
(4.0)
(5.0)
leverage funding
ROAE has improved from (8.6)% in FY09 to (3.9)% in FY10, primarily on account of non-
accounting of liquidated damages and revenue booking for claims filed pending acceptance.
Adjusted for the same, ROAE for FY10 stood at ~(15.1)%.
Net borrowing cost dipped to 2.4%, primarily on account of INR 3.1 bn profit on
divestment in Pipavav Shipyard.
Parent / subsidiary operating profitability analysis (INR mn)

Particulars Standalone Subsidiary Consolidated
FY09 % FY10 % FY09 % FY10 % FY09 % FY10 %
Sales 68,520 100.0 71,167 100.0 50,241 100.0 33,311 100.0 118,761 100.0 104,478 100.0
Material 23,818 34.8 32,532 45.7 13,688 27.2 5,169 15.5 37,505 31.6 37,701 36.1
Operating expenses 23,901 34.9 18,955 26.6 32,534 64.8 21,618 64.9 56,436 47.5 40,573 38.8
Personnel cost 5,702 8.3 6,983 9.8 7,220 14.4 6,469 19.4 12,922 10.9 13,452 12.9
Other expenses 8,099 11.8 8,854 12.4 (245) (0.5) 253 0.8 7,853 6.6 9,107 8.7
EBIDTA 7,000 10.2 3,843 5.4 (2,956) (5.9) (197) (0.6) 4,044 3.4 3,645 3.5
Depreciation 1,195 1.7 1,327 1.9 576 1.1 943 2.8 1,771 1.5 2,270 2.2
EBIT 5,805 8.5 2,516 3.5 (3,532) (7.0) (1,141) (3.4) 2,274 1.9 1,375 1.3
SABIC 5,153 5,153
ENSUS 1,630 1,630
EBIT ex-SABIC & ENSUS 5,805 8.5 2,516 3.5 1,621 3.2 489 1.5 7,427 6.3 3,005 2.9
Standalone entity
• On standalone basis, operating profits dipped significantly, which is primarily on

account of increase in material cost.
• On a standalone basis PL during FY10 has taken a charge of INR 3.0 bn on account of
cost overrun in the Heera project during FY09. The company has also recognized a
revenue of INR 2.4 bn towards claims filed, which are pending to be accepted.
• Liquidated damages of INR 0.7 bn deducted by one of the customers has not been
provided.
Subsidiaries
• Subsidiaries continued to be an overhang on the company. After adjusting for one offs
(Ensus during FY10 and SABIC during FY09), the EBIT level profitability has dipped.
The same is primarily on account of dip in revenues.
3

Particulars FY10
Profit before tax 210
Non operating (profit)/Loss (261)
Non cash adjustments 2,490
Direct taxes paid (1,617)
Operating profit before working capital changes 822
Increased working
Increase in inventory (9,775)
capital requirements
Decrease in debtors 4,071
stretched operating
cash flows…. Increase in other current assets 245
Increase in loans and advances (1,309)
Decrease in current liabilities and provision (9,413)
Increase in working capital (16,181)
Net cash from operating activities (15,359)
Interest paid (2,690)
Net cash from operating activities post interest (18,049)
Movement in shareholders fund (INR mn)

Particulars FY10
Add
Forex gain on long term liabilities 274
Issue of shares (Net of issue espenses) 6,556
Ammortisation of forex losses of previous yr 225
7,055
Less
Loss for the year 1,084
Exchange difference in Non Integral operations 391
… QIB issue offered Proposed dividend (incl tax) 58
some respite Premium on redemption of FC C B 81
Others 3
1,617
Closing shareholders fund 30,283
Unexecuted order book versus revenues

300
240
Unexecuted order 180

(INR bn)
book continued to
expand during the
year; though 120
revenues have dipped
60
0
Unexecuted order book Revenue
4
Punj Lloyd
Sources of funds
100.0
80.0
60.0
(%)
40.0
20.0
0.0
Shareholder's fund Minority interest Loan funds
100.0
80.0
Proportion of funds 60.0

(%)
invested in
inventories increased
during the year 40.0
20.0
0.0
Fixed Assets Investments Inventories
Debtors Cash & bank Other current assets

50 15.0
40 12.0
Loan book (incl. bank

overdraft) increased 30 9.0
(INR bn)
from INR 37.4 bn in

(%)
FY09 to INR 44.6 bn

in FY10 20 6.0
10 3.0
0 0.0
Loan funds Borrowing cost
5

250
200
150
(days)
100
50
0
Cash conversion cycle has increased from 109 days in FY09 to 174 days in FY10, primarily on
account of increase in inventory days from 125 days in FY09 to 185 in FY10, and decrease in
payable days from 99 days to 88 days, partly compensated by decrease in receivable days from
82 days in FY09 to 76 in FY10.

Sales 16,846 51,266 77,529 118,761 104,478
Total income 17,166 52,059 78,711 120,019 108,748
EBITDA 1,909 4,103 6,922 4,044 3,645
EBITDA margin (%) 11.3 8.0 8.9 3.4 3.5
Depreciation 604 1,062 1,462 1,771 2,270
Adjusted financial costs 794 1,185 1,806 3,519 5,435
Net profit 555 1,969 3,584 (2,253) (1,084)
Loan funds 5,565 16,992 16,077 37,393 44,567
Net fixed assets 7,176 13,622 16,233 21,727 23,382
Cash flow from operating activities 2 614 (5,183) (7,694) (15,359)
Cash flow from investing activities (2,572) (8,083) (7,348) (7,701) 896
Net cash flows 705 3,159 (3,514) 1,839 (766)
CAPEX (2,556) (5,124) (4,996) (7,946) (3,161)
Working capital investments (1,752) (2,912) (11,612) (10,219) (16,181)
6
Suzlon Energy Annual Report Analysis September 30, 2010
Margins dip on rising material cost and quality management expenses
Suzlon Energy’s (Suzlon) revenues dipped 20.9% to INR 206.2 bn in FY10 from INR
260.8 bn in FY09. EBIDTA margins slipped to 5.1% in FY10 from 10.7% in FY09,
primarily owing to rise in raw material prices and high quality management expenses.
Expenses related to high quality management continue to be an overhang; increased

from INR 9.7 bn (3.8% of revenues) in FY09 to INR 10.1 bn (4.9% of revenues) in FY10
(refer page 2 for details).
On standalone basis, revenues halved to INR 34.9 bn in FY10. The company incurred
cash losses during the year.
Restructuring, Hansen stake sale, fresh issues offer respite to stretched cash flows
During the year, Suzlon (standalone) had delayed repayment of its financial liabilities
amounting to INR 10.8 bn (refer page 3 for details). However, as at FY10 end, all delays
had been rectified.
The company, entered a debt consolidation and refinance arrangement with a consortium
of banks and FIs. Also, loan of INR 38.4 bn raised by foreign subsidiaries for Hansen and
RE Power acquisition has been refinanced by raising fresh loans of USD 465 mn and
partly through Hansen stake sale (refer page 3 for details).
Consultancy charges of INR 2.6 bn (30.6% of PBT) had been incurred on account of the
above refinancing arrangements that have been deferred to be amortised over the tenure
of the respective facilities.
Market Data FCCB due in June 2012 and October 2012 has been restructured, and a net gain of USD
52-week range (INR): 97 / 43 of INR 2.5 bn has been recognised. The company has also incurred an expense of INR 1.3
on restructuring of other loans. Net gains of INR 1.2 bn have been recognised as
exceptional income.
Suzlon disposed 35.2% stake in Hansen Transmission International (Hansen), reducing
Avg. Daily vol. BSE (’000): 28,712
its holding to 26.1%; Hansen is classified as an associate (against a subsidiary earlier).
Residual investment in Hansen is stated at INR 10 bn and profit on sale of part stake
aggregating INR 2.5 bn is disclosed as an exceptional item.
Promoters* : 53.1
In FY10, Suzlon issued ZCCB of USD 90.0 mn (due in 2014). The conversion makes
economic sense at INR 121.3.
FIIs : 10.4
In FY10, the company raised USD 108.0 mn (INR 5.2 bn) through issuance of 14.6 mn
Others : 31.2
GDRs representing 58.4 mn equity shares at a price of INR 89.6 per equity share.
(% of share in issue) Cash conversion cycle has increased to 109 days in FY10 (FY09: 79 days), primarily on
account of increase in inventory days and receivable days, partly offset by rise in payable
days.
Debtor days increased to 75 in FY10 (FY09: 60) primarily on account of extended

deferred credit of INR 10.4 bn given to a US based sticky debtor at FY09 end.
Cash flow statement shows net debt of INR 3.8 bn, however, loan book has dipped to INR
126.7 bn from INR 148.7 bn, primarily owing to exchange gains and exclusion of debt in
the books of Hansen. Average borrowing cost increased to 8.8% in FY10 (FY09: 7.6%).
1
Accounting policy and other highlights
In FY09, Suzlon availed the option of capitalising/deferring foreign exchange difference

on long-term monetary items provided by Accounting Standard 11. In FY10, net
exchange losses of INR 0.9 bn have been deferred and exchange losses aggregating INR
2.3 bn were amortised. Consequently, pre tax losses reported in FY10 are higher by
22.1% (INR 1.4 bn). Unamortised exchange losses as on March 31, 2010, aggregate INR
2.5 bn and will be amortised in FY11.
No provision is made for redemption premium on FCCBs. Consequently, pre tax losses
reported in FY10 (before exceptional items) are lower by INR 1.5 bn, at ~17.9%.
ESOPs are accounted as per the intrinsic value method. Had they been valued as per fair
value method, FY10 reported pre-tax losses (before exceptional items) would have been
higher by INR 181.5 mn at ~2.1%.
Bank charges increased from INR 1.5 bn in FY09 to INR 2.6 bn in FY10 due to rise in
processing fees and expenses in connection with the refinancing of debt.
Unhedged foreign currency exposure stands at INR 41.6 bn (net liabilities).
Standalone subsidiary analysis (INR bn)

FY09 (%) FY10 (%) FY09 (%) FY10 (%) FY09 (%) FY10 (%)
Sales 72.4 100.0 34.9 100.0 188.5 100.0 171.3 100.0 260.8 100.0 206.2 100.0
Raw materials consumed 45.4 62.8 25.2 72.2 123.1 65.3 111.1 64.9 168.6 64.6 136.3 66.1
Operating and mfg. exp. 9.5 13.1 6.7 19.1 10.4 5.5 13.3 7.8 19.9 7.6 20.0 9.7
Personnel cost 2.0 2.8 1.8 5.2 19.7 10.4 19.6 11.5 21.7 8.3 21.5 10.4
Admin. and other exp. 7.5 10.4 3.1 8.9 15.3 8.1 14.9 8.7 22.8 8.7 18.0 8.7
EBITDA 7.9 10.9 (1.8) (5.3) 20.0 10.6 12.3 7.2 27.9 10.7 10.5 5.1
Depreciation 1.0 1.4 1.3 3.6 4.7 2.5 5.4 3.1 5.7 2.2 6.6 3.2
EBIT 6.9 9.5 (3.1) (8.9) 15.3 8.1 6.9 4.1 22.2 8.5 3.8 1.9
Financial charges 4.3 6.0 7.3 21.0 6.2 3.3 7.3 4.2 10.5 4.0 14.6 7.1
EBT 2.6 3.5 (10.4) (29.9) 9.1 4.8 (0.3) (0.2) 11.6 4.5 (10.7) (5.2)
Source: Edelweiss research
Standalone performance dips significantly, incurs cash losses during the year
Quality management expenses (INR mn)

Quality management Provision for operation, maintenance and warranty 689 3,667 5,287
expenses continue to Provision for performance guarantee 1,563 2,809 2,033
increase Liquidated damages 245 2,843 2,151
Quality assurance expenses 76 476 605
Quality management expenses 2,572 9,795 10,076
Sales 136,794 260,817 206,197
% of sales 1.9 3.8 4.9
2
Suzlon Energy
FCCB restructuring (USD mn)

Bond series I Bond series II
Restructuring option
not exercised by Particulars Original Restructured Original Restructured
~ 66.5% of bond New bond issued (3:5) 59.3 35.6 34.7 20.8
holders, though Buy back (54.6%) 29.4 44.0
covenants have been
Option not excercised 211.3 211.3 121.4 121.4
modified with
payment of consent Total 300.0 246.9 200.0 142.2
fee Cash paid on buy back 16.0 24.0
Consent fee paid 11.8 1.9
Gain 25.3 31.9
FCCB outstanding
Maturity Face value Face value Coupon Conversion Redemption Effective conversion
Particulars
date (USD mn) (INR bn) rate (%) price (INR) premium (%) price (INR)
Phase I Jun-12 211.3 9.9 - 97.3 45.2 141.3
Phase II Oct-12 121.4 5.7 - 97.3 44.9 140.9
Phase I (new) Jun-12 16.6 0.8 7.5 74.0 50.2 111.2
Phase II (new) Oct-12 20.8 1.0 7.5 74.0 57.7 116.8
Phase III Jul-14 90.0 4.2 - 90.4 34.2 121.3
Total 460.1 21.5
Note: Conversion price as revised in April 2010
Conversion price has been reduced for original as well as restructured bonds. Fixed exchange
Revision in
conversion price and rate has been revised to 1 USD – INR 44.60 from INR 40.83 for Phase I bonds and INR 39.87
exchange rate will for Phase II bonds.
lead to higher
dilution
Restructured bonds carry higher fixed coupon along with redemption premium.
Delay in repayment of loans

Particulars (INR bn) Period of delays
Letters of credit/Buyers' credit 5.7 Up to 90 days
Term loan 0.1 Up to 36 days
Working capital demand loan 3.0 Up to 125 days
Short-Term loan 1.0 Up to 12 Days
Loan repayment Interest liabilities 1.0 Up to 24 days
delays were rectified Total 10.8
as at FY10 end, with
loans of INR 98.0 bn Source: Edelweiss research
sanctioned under the
restructuring scheme Loan restructuring (INR bn)
Type of facility Amount sanctioned Amount of drawdown
Term loans 32.1 29.4
Term loans (Acquisition loans) 20.9 20.9
Working capital term loan 8.4 4.7
Fund based working capital 17.6 20.6
Non-Fund based facilities 39.9 19.5
Total 98.0 74.2
3
efficiency (detailed concept explained in Annexure A). We have analysed Suzlon’s profitability
for the year ended FY08, FY09 and FY10; results and key findings of same are as follows:

14.9 8.5 (1.0)
NOPAT margin (%) 10.9 5.9 (0.9)
B. Return from leverage (FLEV x spread) (%) 5.3 2.1 (14.1)
Net financial spread (RNOA -NBC) (%) 8.4 2.2 (8.9)
C. Return from other funding (%) 0.6 (0.6) (0.3)
ROE Derived (A+B+C) (%) 20.7 10.0 (15.4)
RoE tree
0.0
(1.0)
(3.2)
(6.4)
(%)
(14.1) (15.4)
(9.6)
(12.8)
(0.3)
(16.0)
RNOA Return from return from other ROAE
leverage funding
ROAE dipped significantly primarily on account of:
Dip in NOPAT margin on the back of higher raw material price and quality management
expenses.
Increase in net borrowing cost from 6.4% in FY09 to 7.9% in FY10.
4
Suzlon Energy
Sources of funds
100.0
80.0
Proportion of loan
funds continues to
rise 60.0
(%)
40.0
20.0
0.0

Deferred Tax Liability Current liabilities Provisions
100.0
Re-classification of 80.0
Hansen as an
associate decreases
the proportion of 60.0
(%)
fixed assets and

increases
investments 40.0
20.0
0.0
Fixed assets Investments Deferred Tax Asset Inventories
Sundry debtors Cash and bank Other current assets
Leverage and borrowing costs

13.5 2.5
10.8 2.0
Leverage and 8.1 1.5

borrowing costs
(%)
(x)
head North
5.4 1.0
2.7 0.5
0.0 0.0
Avg. borrowing cost Debt /equity (RHS)

5

200
160
Inventories and
receivables lengthen 120
cash conversion
(Days)
cycle; partially offset
by higher payables
80
40
0
Debtor days increased from 60 days in FY09 to 75 in FY10 primarily on account of sales
towards FY09 end to a US based customer, on which Suzlon had agreed to extend deferred
credit of INR 10.4 bn, payable on achievement of performance milestone by the WTGs or at
the end of the agreed credit period, whichever is earlier.

Sales 38,410 79,857 136,794 260,817 206,197
Total income 39,155 80,899 139,474 265,305 208,487
EBITDA 8,792 13,123 20,840 27,915 10,465
EBITDA margin (%) 22.9 16.4 15.2 10.7 5.1
Depreciation 716 1,718 2,894 5,731 6,630
Financial costs 648 2,763 5,969 10,539 14,580
Net profit 7,595 8,640 10,301 2,365 (9,826)
Loan funds 4,657 51,620 99,346 148,696 126,679
Net fixed assets 6,409 40,732 56,877 152,654 105,741
Cash flow from operating activities (3,540) 7,372 12,043 (12,238) 22,343
Cash flow from financing activities 11,315 (39,695) 88,141 33,966 (6,546)
Net cash flows 3,970 (69,522) 53,817 (46,717) 7,347
CAPEX (4,060) (10,218) (21,287) (33,308) (10,906)
Working capital investments (13,329) (7,335) (12,196) (41,931) (393)
6
Educomp Solutions Annual Report Analysis October 20, 2010
Stake hike in subsidiary led to increase in goodwill and reserves
Educomp Solutions (Educomp) held 69.4% stake in Educomp Infrastructure and School
Management (EISML) for INR 500 mn. During FY10, it invested additional INR 4.9 bn in
EISML towards incremental 8.8%, hiking its stake to 78.2%. The balance 22.8% is
owned by the promoter and third party.
EISML’s valuation, which hosts K12 business, has been computed by independent
valuers. Its imputed valuation, based on consideration paid by Educomp towards
incremental stake, is INR 16.4 bn (refer page 3 for details).
Cumulatively, Educomp has infused INR 5.40 bn in EISML towards equity till FY10.
EISML’s net worth (ex-retained earnings) stands at INR 5.43 bn (refer page 3 for
details).
Goodwill has jumped from INR 1.2 bn to INR 6.0 bn (36.6% of net worth), out of which
INR 4.6 bn is towards the EISML transaction. Goodwill written off through reserves was
INR 0.8 bn.
Increase in security premium is INR 4.6 bn higher than premium received on equity
issuances by Educomp, which is on account of increase in EISML’s goodwill.
Educomp has given corporate guarantee of INR 6.3 bn against loan extended to EISML.
Loans outstanding as at FY10 end stood at INR 3.6 bn.
BOOT to outright sale advances revenue/cash flow…
During the year, Educomp changed the smart class business model from BOOT to
outright sale and transferred all existing BOOT projects to EduSmart Services. This will
advance revenue booking as well as cash flows through securitisation which is backed
by corporate guarantee from Educomp.
Market Data
Corporate guarantee given to banks for secured loans obtained by third parties
(primarily Edusmart) stood at INR 6.6 bn.
The company’s revenue jumped 63.2% from INR 6.4 bn in FY09 to INR 10.4 bn in
M cap (INR bn/USD mn): 58.2 / 1,310
FY10. However, EBIDTA margins dipped from 48.1% in FY09 to 46.9% in FY10.
…. IFRS may lead to Edusmart’s consolidation

Post migration to IFRS, in our view, considering the nature of transaction between
Promoters : 49.8
Educomp and EduSmart, the latter is likely to be consolidated with the former, leading
MFs, FIs & Banks : 1.7 to elimination of revenues, profitability, and other inter-company transactions.
FIIs : 38.5
This will also lead to consolidation of outstanding loans and receivables in Edusmart’s
Others : 10.0 balance sheet.
(% of share in issue) Increasing debtor stretches cash conversion cycle; debtors > six months surge
Debtors increased ~100% from INR 2.8 bn in FY09 to INR 5.6 bn in FY10, which, as a
percentage of sales, stood at 53.2% (FY09:43.4%). However, debtors exceeding six
months jumped from INR 0.8 bn in FY09 to INR 1.3 bn in FY10.
The increase in debtors is primarily on account of amount to be received from

Edusmart pending securitisation.

1
The company’s cash conversion cycle increased from 62 days in FY09 to 106 days in FY10,
primarily on account of increase in debtor days from 112 in FY09 to 146 in FY10.
FCCB maturing in July 2012; redemption premium not provided for
The company has FCCBs outstanding of USD 78.5 mn convertible at INR 589.9 per share
on or before July 2012 (conversion makes economic sense at INR 832.4). Educomp has
not provided for the redemption premium, but shown it as a contingent liability of INR 1.5
bn on FCCBs. Had the same been charged through P&L on YTM basis, FY10 PAT would
have been lower by 6.3% (INR 173.3 mn).
Increase in net worth on QIP/consolidation leads to reduction in D/E ratio
Net worth has increased due to :
• INR 6.0 bn (net of issue expenses) raised through QIP.
• Additional increase of INR 4.6 bn to security premium on consolidation (refer page 3

for details).
Loan book increased from INR 8.9 bn in FY09 to INR 10.5 bn in FY10. The company’s
average borrowing cost also increased to 9.8% (FY09: 9.3%).
Debt equity reduced to 0.6x (FY09: 2.3x) primarily on account of the above.
Educomp, during the year, acquired the business of Zaptive Internet Services for an
aggregate consideration of INR 60.2 mn. The consideration has been discharged partly
through cash of INR 18.5 mn and balance by issue of 52,616 equity shares.
Other income increased from INR 0.3 bn in FY09 to INR 1.3 bn in FY10 due to profit on
sale of business/ investment of INR 0.9 bn (20.6% of PBT).
Performance of subsidiaries dampened the company’s overall performance. Of the 43

subsidiaries, only 17 are operational and six profit making at the PBT level (refer page 5
for details).
Cash & bank and investments increased from INR 2.6 bn in FY09 to INR 8.2 bn in FY10.
Fixed assets (excluding goodwill) increased 31.1% due to rise in freehold land to INR 3.9
bn (FY09 INR 472.9 mn), which has been partially set off by decrease in computers to INR
377 mn (FY09: INR 2.6 bn) and furniture to INR 131 mn (FY09: INR 518 mn). Decrease in
assets is due to transfer of BOOT projects and vocational business.
Educomp has invested in non convertible redeemable preference shares of INR 200 mn in
EduSmart.
Net assets invested in K12 business increased from INR 2.3 bn in FY09 to INR 11.3 bn in
FY10.
EISML growth track (INR mn)

Year Capital Reserve Networth Turnover PAT Networth ex- Cash infusion for equity by Educomp Educomp's
retained earnings Cummulative Incremental stake (%)
FY07 0.2 251.8 252.1 - 2.0 250.1 250.0 250.0* 69.4
FY08 0.3 508.0 508.3 16.6 6.2 500.1 500.0 250.0 69.4
FY09 10.8 580.7 591.5 316.6 108.9 474.4 500.0 - 69.4
FY10 247.2 5,401.8 5,649.0 564.0 176.1 5,429.9 5,397.5 4,897.5 78.2
Source: Company Annual Report, Edelweiss research
Note : * Partly paid shares issued . Fully paid in FY08
Commulatively, Educomp has invested INR 5.4 bn in EISML towards equity till
FY10. EISML’s net worth stands at INR 5.7 bn.
2
Educomp Solutions
EISML equity share movement analysis

Equity shares (mn) EMISL Educomp Others
Stake holding FY09 (%) 69.4 30.6
Educomp paid INR 4.9
Opening 1.1 0.8 0.3
bn @ 664/ share
Bonus (1:15) 16.2 11.2 5.0 towards incremental
Fresh Issue 7.5 7.4 0.1 8.8% stake
Closing 24.8 19.4 5.4
Stake holding FY10 (%) 78.2 21.8
EISML imputed valuation based on incremental shares purchased

Particulars
Shares acquired by Educomp (mn) 7.4
Consideration Paid by Educomp (INR mn) 4,897.5
Consideration paid per share (INR) 664.4
Total Shares outstanding (mn) 24.7
Imputed valuation of ESIML (INR mn) 16,424.9
Share premium reconciliation statement

Particulars (INR mn)
Share premium addition as per BS schedule 10,814
Difference is on Share premium on issue of equity shares 6,159
account of increase in ESOPs 67
goodwill on EISML QIP 6,051
consolidation
Issued to Zaptive Internet services for business acquisition 42
Difference 4,654
efficiency (detailed concept explained in Annexure A). We have analysed Educomp’s profitability
for FY08, FY09, and FY10; results and key findings are given below:
ROE analyser
24.5 19.4 14.7
NOPAT margin (%) 22.8 23.4 23.2
NBC (net borrowing cost) (%) (10.0) 3.0 (8.1)
ROE Derived (A+B+C) (%) 34.4 39.0 26.7
3
RoE tree
30.0
1.4
24.0
10.6
18.0
(%)
26.7
12.0
14.7
6.0
0.0
leverage funding
RoAE dipped on account of

Decrease in RNOA, primarily attributable to low operating asset turnover for incremental
investment in K12 business segment yet to reap result.
Dip in financial leverage, primarily on account of fresh issue of equity under QIP / ESOP.
NBC was negative due to profit on sale of investment of INR 725.5 mn recognised during
the year and non charging FCCB redemption premium through P&L.
Parent-subsidiary operating performance analysis
(INR mn)
FY09 (%) FY10 (%) FY09 (%) FY10 (%) FY09 (%) FY10 (%)
Sales 5,012 100.0 8,322 100.0 1,359 100.0 2,073 100.0 6,371 100.0 10,395 100.0
Raw materials consumed 1,033 20.6 1,481 17.8 77 5.7 122 5.9 1,110 17.4 1,603 15.4
Operating and
121 2.4 310 3.7 62 4.6 218 10.5 183 2.9 528 5.1
manufacturing
Personnel cost 611 12.2 999 12.0 544 40.0 794 38.3 1,155 18.1 1,793 17.2
Administrative and
496 9.9 904 10.9 362 26.6 689 33.2 858 13.5 1,593 15.3
other expenses
EBITDA 2,749 54.9 4,627 55.6 391 28.8 372 17.9 3,064 48.1 4,877 46.9
Depreciation 752 15.0 907 10.9 62 4.6 235 11.3 814 12.8 1,142 11.0
EBIT 1,997 39.8 3,720 44.7 329 24.2 137 6.6 2,249 35.3 3,735 35.9
Financial Charges 140 2.8 372 4.5 162 11.9 217 10.5 302 4.7 590 5.7
EBT 1,857 37.1 3,348 40.2 167 12.3 (80) (3.9) 1,947 30.6 3,145 30.3
• Despite of change in business model from BOOT to outright sale, EBIDTA margins on a
standalone basis increased marginally from 54.9% in FY09 to 55.6% in FY10.
• Subsidiaries dampened the company’s overall profitability.
4
Educomp Solutions
Subsidiary analysis
(INR mn)
Subsidiary company % FY09 FY10
shareholding
FY10 Networth Turnover PBT Networth Turnover PBT
Educomp Asia Pacific Pte. 100.0 360.1 - (4.4) 1,155.6 - 696.7

Educomp Infrastructure and School 78.2 591.5 316.6 152.8 5,649.0 564.0 267.6
Learning Internet Inc. USA 54.7 919.9 541.5 86.6 862.5 722.4 70.7
EuroKids International 50.0 352.5 103.6 21.2 512.6 292.5 55.4
Educomp Learning 51.0 72.8 61.9 27.7 80.4 61.9 11.6
Singapore Learning.com Pte. 100.0 6.3 9.6 5.8 8.8 10.9 2.8
A Plus Education Solutions - 43.3 1.9 (11.5) 0.0 - 0.0
Educomp Software 100.0 (0.4) 1.6 (0.9) (0.4) 2.6 (0.0)
Wheitstone Productions 51.0 (1.8) - - (1.9) - (0.1)
Evergreen Realtech 77.9 - - - 65.6 - (0.1)
Zeta Buildcon 78.1 - - - 120.7 - (0.1)
Boston Realtech 77.9 - - - 68.6 - (0.1)
Onega Infrastructure 78.0 - - - 85.7 - (0.1)
Grider Infratech 78.0 - - - 106.6 - (0.1)
Euroschool International 50.0 - - - 0.7 - (0.2)
Educomp IntelProp Ventures Pte 100.0 - - - 40.1 - (0.3)
Educomp Infrastructure Services 78.2 0.1 - - (0.2) - (0.3)
Good Luck Structure 77.9 - - - 56.6 - (0.3)
Newzone Infrastructure 77.9 - - - 69.3 - (0.4)
Leading Edge Infratech 78.0 - - - 76.3 - (0.4)
Crosshome Developers 78.0 - - - 75.4 - (0.4)
Rockstrong Infratech 78.0 - - - 87.2 - (0.4)
Reverie Infratech 78.0 - - - 157.2 - (0.5)
Strotech Infrastructure 78.0 - - - 94.7 - (0.5)
Markus Infrastructure 78.0 - - - 104.4 - (0.5)
Growzone Infrastructure 78.0 - - - 107.2 - (0.5)
Orlando Builders 78.0 - - - 109.5 - (0.5)
Herald Infra 78.1 - - - 171.1 - (0.5)
Hidream Constructions 78.1 - - - 263.0 - (0.5)
Falcate Builders 78.0 - - - 187.1 - (0.5)
Educomp Online Supplemental Services 100.0 - - - (0.1) - (0.6)
Educomp School Management 68.0 108.6 72.2 53.8 108.4 5.1 (0.6)
Sikhya Solutions Inc. 72.0 (0.1) 6.1 (5.6) 0.6 11.4 (0.7)
Wiz Learn Pte 100.0 26.7 6.2 (5.8) 23.9 6.1 (1.0)
Pave Education Pte. 100.0 23.6 41.5 5.9 19.4 28.1 (3.1)
EuroKids India 50.0 46.1 24.7 2.4 57.5 52.8 (3.6)
Ask N Learn Pte. 100.0 105.0 189.1 (0.5) 349.2 217.1 (6.2)
Edumatics Corporation Inc. USA 100.0 4.2 48.3 (8.0) 10.7 48.4 (10.9)
Educomp Professional Education 100.0 325.3 1.9 (11.5) 576.0 - (12.3)
Educomp Child Care 100.0 - - - 79.0 29.8 (19.6)
Educomp APAC Services Ltd. BVI 78.2 925.9 - - 897.9 - (27.8)
Educomp Learning Hour 76.3 (5.6) 10.0 (22.1) 41.5 11.6 (32.9)
Authorgen Technologies 72.0 16.4 0.7 (31.8) 39.6 4.5 (36.3)
Savvica Inc., Canada 72.6 8.9 2.4 (27.1) (5.6) 10.2 (52.8)
Of the 43 subsidiaries:
• Only 17 are operational.
• Only six are profit making at the PBT level.
5
Segmental analysis
Revenue (INR mn) EBIT margins(%)

Segment FY09 FY10 FY09 FY10
Higher learning solution 310 265 29.6 (42.0)
School learning solution 4,322 8,068 48.6 55.8
Net assets in K12 K-12 621 997 44.2 32.3
business segment Online & retail 1,118 1,066 18.3 (14.7)
have jumped from 6,371 10,395 41.9 43.8
INR 2.3 bn in FY09 to
INR 11.3 bn in FY10
Net assets (INR mn) Return on net assets (%)
Segment FY09 FY10 FY09 FY10
Higher learning solution 561.4 457.8 16.3 (24.3)
School learning solution 5,777.1 5,486.8 36.4 82.1
K-12 2,252.5 11,314.0 12.2 2.8
Online & retail 1,144.6 1,755.3 17.8 (8.9)
9,735.6 19,013.9 27.4 24.0
Goodwill on consolidation
(INR mn)
Educomp Learning 0.7 0.7
Edumatics Corporation Inc. 26.0 26.0
Wheitstone Productions 3.4 3.4
Increasing stake in Educomp Infrastructure & School Management 152.4 4,754.6
EISML led to goodwill
jumping to INR 4.8 Educomp School Management 10.0 10.0
bn Educomp Learning Hour 5.2 85.0
Authrorgen Technologies 12.0 73.0
Educomp Asia Pacific 727.4 727.4
A Plus Education Solutions 26.6 0.0
Savvica Inc 41.7 75.9
Educomp Higher Initiative 0.0 33.7
Educomp Professional Education 0.0 21.7
Eurokids International 223 223
Total 1,228 6,034
Goodwill on consolidation increased significantly, primarily on account of hiking its stake in

Educomp Infrastructure and School Management to 78.2% (FY09 69.4%) by investing INR 4.9
bn.
6
Educomp Solutions
Movement in shareholders’ fund (INR mn)

Particulars FY10
Add
Issue of shares on QIP, ESOP and business acquisition (as reported net of issue exp.) 10,664
Profit for the year* 2,771
Change in Foreign Currency Monetary Items Translation Diff A/c 350
Others 4.0
13,789
Less
Proposed Dividend (incl tax) 333
Change in Foreign Currency Translation reserve 29
Adj to goodwill on further investment 793
1,154
Closing shareholders' fund 16,479
* excl. amortisation of misc/ prelim.exp.
Goodwill write off directly adjusted through reserves

Particulars FY10
Profit before tax 4,392
Non operating (profit)/Loss (686)
Non cash adjustments (Incl. tax provision) 1,308
Direct taxes paid (909)
Increase in trade and other receivables (1,680)
Increase in Loans and Advances (473)
Increase in trade and other payables 277
Increase in inventories (34)
Interest Paid (411)
Net cash from operating activities post interest 1,784
Net cash flow from operating activity stood at INR 2.2 bn despite a PBT of INR 4.4 bn primarily
on account of increase in debtors by INR 1.7 bn.
7
Sources of funds
100.0
80.0
Debt equity improved

primarily on account 60.0
(%)
of issuance of fresh
equity
40.0
20.0
0.0
Shareholders' funds Loan funds Minority interest
100.0
80.0
Proportion of funds
invested in goodwill 60.0
increased while
(%)
proportion of fixed
assets dipped 40.0
20.0
0.0
Goodwill Fixed assets Investments Inventories

175
140
increased from 62
days in FY09 to 106
105
days in FY10 due to
(Days)
increase in receivable
days from 112 to 146
70
during the same
period
35
0
8
Educomp Solutions
Summary financials

Sales 555 1,101 2,861 6,371 10,395
Total income 570 1,160 3,038 6,598 11,650
EBITDA 270 516 1,281 3,064 4,877
EBITDA margin (%) 48.7 46.9 44.8 48.1 46.9
Depreciation 56 96 331 814 1,142
Financial costs 8 21 65 302 590
Net profit 139 287 706 1,329 2,759
Equity shareholders' funds 894 1,147 2,883 3,844 16,479
Loan funds 110 1,255 3,773 8,895 10,478
Net fixed assets 252 831 2,714 8,126 10,656
Current assets loans and advances 930 1,761 4,639 6,153 15,816
Current liabilities and provisions 182 242 610 2,251 3,963
Net current assets 748 1,519 4,029 3,903 11,853
Cash flow from operating activities 134 165 505 1,914 2,195
Cash flow from investing activities (167) (719) (2,102) (6,751) (3,722)
Cash flow from financing activities 616 1,088 3,393 3,826 7,462
Net cash flows 583 534 1,796 (1,011) 5,936
CAPEX (162) (675) (2,224) (5,786) (6,855)
Working capital investments (99) (225) (730) (1,023) (1,910)
9
United Spirits Annual Report Analysis November 10, 2010
Operating cash flow remains subdued
United Spirits’ (USL) operating cash flow during FY10 remained under pressure due to
increased working capital requirement. Non-cash adjustment in respect of unrealised
forex loss however supported the strained operating cash flows.
Debtors jumped 50.9%, from INR 8.9 bn in FY09 to INR 13.4 bn in FY10, and were at
21.1% of sales (FY09: 16.2%).
Cash flow states that, during FY10, the company incurred unrealized foreign exchange
losses of INR 5.7 bn; however, net forex losses charged to the P&L stood at INR 3.1 bn.
Un-realised forex loss of INR 5.7 bn adjusted in the cash flow comprises of INR 2.9 bn
on account of amortisation of forex losses incurred on debt (of which INR 1.9 bn is for
debt repaid during the year), and INR 2.5 bn and INR 0.3 bn of account of
movement in goodwill and fixed assets, respectively.
Treasury sale/QIP trims debt; borrowing cost may rise on shift to domestic debt
During FY10, USL, through its subsidiary, sold 10.3 mn treasury shares for INR 8.9 bn.
The same has been shown as exceptional and non-recurring items under cash from
operations.
USL also raised INR 16.2 bn by issuing 17.7 mn equity shares via QIP.
During Q4FY10, ~INR 14.5 bn domestic debt was raised in the standalone entity, which
along with funds raised above, were utilised to extend interest free loans of INR 32.1
bn to its wholly owned subsidiary, USL Holdings, UK (USLH), to repay the W&M
acquisition debt.
Market Data
Consequently, the company’s D/E dipped from 4.2x in FY09 to 1.5x in FY10.
52-week range (INR): 1,683 / 1,057
Share in issue (mn): 125.6 Interest free loan extended to USLH are likely to be converted into equity share of the
subsidiary in the near future.

Share Holding Pattern (%) USL’s sales increased 16.4%, from INR 54.7 bn in FY09 to INR 63.6 bn in FY10.
EBIDTA margin rose from 14.1% in FY09 to 16.2%, primarily on account of lower
Promoters : 29.2
actuarial loss on pension fund. Ex-pension, EBIDTA loss was flat at 17.1% (FY09:
17.3%).
FIIs : 48.9
During the year, W&M has provided INR 0.6 bn (FY09: INR 1.7 bn) on account of
Others : 17.4
actuarial loss on pension fund. Present value of the obligation and fair value of plan
* Promoters pledged shares : 25.8 assets as at FY10 end stood at INR 8.2 bn and INR 7.3 bn, respectively. Further details
in respect of assumptions and investment book break up for defined pension fund are
not available.
USL has also reported derivative loss of INR 1.4 bn in FY10 (FY09 INR 1.4 bn), which,
in our view, is primarily on account of interest rate swaps. MTM charge of the same is
included in interest expenses.
Goodwill stands at INR 42.4 bn, at ~118% of net worth. Treasury shares included in
net worth stand at INR 1.2 bn (3.3% of net worth).
1
Miscellaneous expenditure (yet to be amortised) stands at INR 448 mn (FY08: INR 733
mn), which has been incurred for raising loans.
As at FY10 end, the company held 8.4 mn treasury shares (FY09: 13.8 mn), of which,
4.9 mn treasury shares had been issued during the year to its subsidiaries, pursuant to
the scheme of amalgamation with Shaw Wallace & Company.
USL has still reported a loss after tax, primarily on account of higher tax expenses.
Effective tax rate for the year stood at 113.7%.
During the year, the company acquired 100% stake in Tern Distilleries, engaged in the
business of alcoholic beverages, for a sum of INR 139.5 mn.

Particulars FY10
Operating cash flow Profit before tax and exceptional & non recurring items 1,000
remained subdued on Non operating (profit)/Loss 6,033
account
of increase in Unrealised exchange loss (net) 5,743
debtors Other non cash adjustments 1,355
Unrealised exchange Increase in trade payables 1,093
losses included INR
2.5 bn on account of Decrease in inventories 42
movement in Increase in working capital (4,577)
goodwill Net cash from operating activities before exceptional & non
7,002
recurring items
Interst expenses paid 5,801
Net cash from operating activities before exceptioanl & non
1,201
recurring items post interest
Parent-subsidiary financial analysis (INR mn)

FY09 % FY10 % FY09 % FY10 % FY09 % FY10 %
Sales 40,895 100.0 49,289 100.0 13,785 100.0 14,334 100.0 54,681 100.0 63,623 100.0
Raw materials consumed 23,118 56.5 27,469 55.7 3,791 27.5 4,310 30.1 26,909 49.2 31,778 49.9
Operating expenses 1,344 3.3 1,706 3.5 1,377 10.0 1,654 11.5 2,721 5.0 3,360 5.3
Personnel cost 2,592 6.3 2,904 5.9 3,902 28.3 2,405 16.8 6,495 11.9 5,310 8.3
Administrative expenses 7,565 18.5 9,470 19.2 3,287 23.8 3,390 23.6 10,852 19.8 12,860 20.2
EBITDA 6,277 15.3 7,740 15.7 1,427 10.4 2,576 18.0 7,704 14.1 10,315 16.2
Pension liability - - - - 1,746 12.7 577 4.0 1,746 3.2 577 0.9
EBITDA ex- pension liability 6,277 15.3 7,740 15.7 3,173 23.0 3,152 22.0 9,450 17.3 10,892 17.1

EBIDTA margin improved from 14.1% in FY09 to 16.2% in FY10 primarily on account of
reduced charge on account of pension liability . Excluding pension liability charge EBIDTA
margins dipped marginally from 17.3% in FY09 to 17.1% in FY10
2
United Spirits
Subsidiaries financials
(INR mn)
Subsidiary company % shareholding FY09 FY10
Whyte and Mackay Group 100.0 4,691 12,793 258 5,591 11,913 1,185
Bouvet Ladubay S.A.S. 100.0 891 1,087 18 840 1,108 46
Royal Challengers Sports 100.0 (64) 502 (56) (117) 913 (53)
United Spirits Nepal 82.5 68 432 39 55 665 56
Chapin Landais S.A.S. 100.0 12 200 1 12 178 0
Tern Distilleries 100.0 - - - (8) 176 (2)
Four Seasons Wines 51.0 (75) 23 (79) 49 127 (69)
Montrose International S.A 100.0 35 89 13 34 103 3
Liquidity 51.0 (48) 27 (67) (230) 29 (56)
United Spirits (Shanghai) 100.0 5 22 (26) (1) 14 (5)
United Vintners 100.0 (24) 6 (13) (30) 2 (6)
Shaw Wallace Breweries 100.0 5,001 - 227 5,171 - 170
USL Holdings 100.0 1,587 - 478 912 - 458
Palmer Investment Group 100.0 823 - (0) 731 - 3
RG Shaw & Company 100.0 81 - 18 79 - 3
McDowell & Co. (ScotLand) 100.0 46 - (35) 36 - (8)
Shaw Wallace Overseas 100.0 14 - 1 35 - 0
Shaw Scott & Company 100.0 14 - 5 14 - 1
Shaw Darby & Company 100.0 14 - 3 14 - 1
Thames Rice Milling Company 100.0 13 - 2 13 - 1
JIHL Nominees 100.0 9 - 2 9 - 1
Spring Valley Investments Holdings 100.0 2 - (0) 2 - 0
Herbertsons 100.0 1 - (0) 1 - (0)
United Alcobev 100.0 0 - (0) 0 - (0)
McDowell Beverages 100.0 0 - (0) 0 - (1)
McDowell and Company 100.0 0 - (0) 0 - (0)
Jasmine Flavours and Fragrances 100.0 (0) - (0) (0) - (0)
United Spirits (UK) 100.0 (0) - (0) (1) - (0)
Daffodils Flavours & Fragrances 100.0 (1) - 1 (1) - 0
Ramanretti Investments & Trading 100.0 (6) - (0) (6) - (0)
Asian Opportunities & Investments 100.0 155 - (61) (14) - (97)
United Spirits (Great Britain) 100.0 (2,216) - (1,251) (2,768) - (687)
USL Holdings (UK) 100.0 (14,423) - (6,403) (11,019) - (4,572)
Total 15,182 (6,925) 15,228 (3,629)

Repyament of debt will lead to improvement in profitability margin
3

efficiency (detailed concept explained in Annexure A). We have analysed USL’s profitability
for year ended FY08, FY09, and FY10, results and key findings of the same are as follows:
ROE analyser
11.4 3.4 5.6
NOPAT margin (%) 13.8 5.6 8.2
C. Return from other funding (%) (0.4) 0.2 0.0
ROE Derived (A+B+C) (%) 15.3 (21.5) (3.0)
RoE tree
6.0
4.0
5.6
2.0
(%)
Expansion in NOPAT 0.0

margin and lower
leverage led to (8.7) (3.0)

improvement in ROAE (2.0)
for the year

(4.0)
4
United Spirits
Sources of funds
100.0
80.0
QIB issue and

60.0
treasury share sale
(%)
led to increase in 40.0
shareholders’ fund
20.0
0.0

Equity shareholders' funds Loan funds
Minority interest Term laibility towards frachisee rights

Deferred tax liability Current liabilities
Provisions
100.0
80.0
Proportion of debtors 60.0

(%)
increased from 7.9%

in FY09 to 11.9% in 40.0
FY10
20.0
0.0
Other current assets Loans and advances
Debtor analysis
15 25.0
Debtors as % of 12 20.0
revenue has
increased from
(INR bn)
16.2% in FY09 to 9 15.0

(%)
21.1% in FY10
6 10.0
3 5.0
0 0.0
Total Debtors (LHS) Debtors as % of revenue (RHS)
5
Leverage analysis
5.0 15.0
4.0 12.0
D/E dipped as QIB

and treasury share 3.0 9.0
sale proceeds were
(%)
(x)
used for repayment
2.0 6.0
of debt
1.0 3.0

0.0 0.0
Debt /Equity Avg. borrowing cost (RHS)
Derivative Exposure
Category Currency Cross currency Amount (mn)
Derivative losses FY09 FY10
primarily on account Swap USD USD - INR 35 35
of interest rate swaps Interest rate swap GBP 171 171
Forward contract Euro EURO - GBP 1.0 -
MTM loss on derivatives INR 1,350 1,374

Sales 21,485 29,618 46,275 54,681 63,623
Total income 22,328 30,851 47,772 55,921 64,590
EBITDA 2,108 4,358 10,699 7,704 10,315
EBITDA margin (%) 9.8 14.7 23.1 14.1 16.2
Depreciation 426 338 741 926 950
Financial costs 1,772 1,231 5,881 7,377 6,187
Net profit 1,254 5,670 2,721 (4,084) (227)
Loan funds 15,431 14,802 66,041 73,605 55,062
Net fixed assets 15,700 16,515 64,422 61,296 60,638
Cash flow from operating activities 520 5,301 2,673 2,354 15914*
Cash flow from investing activities (9,935) (940) (38,628) 865 (3,719)
Cash flow from financing activities 7,596 (2,195) 35,615 (4,166) (8,999)
Net cash flows (1,819) 2,167 (340) (948) 3,196
CAPEX (371) (403) (2,642) (952) (2,866)
Source: Company, Edelweiss research
*Including trasury share sale of INR 8,912 mn

6
HCL Technologies Annual Report Analysis December 23, 2010
Reduced derivative exposure may positively impact profitability
HCL Technologies (HCL Tech) uses hedge accounting principles for accounting of
derivatives. Opening balance of derivative losses was at INR 7.8 bn, of which, INR 4.8
bn has been recognised in P&L during FY10, which is 32.5% of PBT (FY09: INR 2.4 bn;
15.2% of PBT). INR appreciation has led to MTM gains of INR 2 bn during FY10, while
derivative losses of INR 1.0 bn (FY09: INR 7.8 bn) have been carried forward in
reserves.
HCL Tech has reduced its derivative exposure from INR 38.9 bn as at FY09 end to INR
20.6 bn as at FY10 end.
Net un-hedged foreign currency exposure is INR 24.4 bn as at FY10 end (FY09 end: INR
20.7 bn).
Acquisitions at premium to fair value lead to substantial addition of goodwill
Goodwill stands at INR 35.2 bn as at FY10 end (FY09: INR 37.3 bn), at 56.0% (FY09:
75.5%) of net worth.
Goodwill and intangible assets for various acquisitions is higher than net consideration
paid for acquisition, implying negative net tangible assets of the target companies (refer
table on page 2 for details).
Healthy operating cash flow on the back of reduced working capital requirements
During FY10, HCL Tech reported strong operating cash flows of INR 17.9 bn (FY09: INR
11.2 bn) on account of reduced working capital requirements. This is despite reduction
in PBT from INR 16.0 bn in FY09 to INR 14.7 bn in FY10.
Market Data
Working capital investment has reduced from INR 5.8 bn in FY09 to INR (1.7) bn in
FY10, primarily on account of increase in deferred revenue by INR 3.7 bn. Unbilled
Share in issue (mn): 680.0 revenue stands at INR 5.3 bn as at FY10 end (FY09: INR 5.5 bn).
Creditors stand at INR 17.9 bn as at FY10 end (FY09: INR 20.1 bn). Average payable
Avg. Daily vol. BSE (’000): 1,186.6 days at 85 days (FY09: 84 days), in our view, are high considering major operating
expenses are in the form of employee expenses (51.5% of FY10 revenue).
Promoters : 65.2 Tax implications may affect profitability
MFs, FIs & Banks : 5.7 HCL Tech’s effective tax rate has reduced to 14.8% in FY10 (FY09: 16.4%), primarily on
FIIs : 21.0 account of reversal of income tax provision relating to SEZs of INR 0.3 bn and abolition
Others : 8.1 of fringe benefit tax. This has resulted in increase in PAT by INR 0.6 bn (~4.6% of PAT).
* Promoters pledged shares : Nil The company may incur additional tax burden from 2012 due to expiry of the tax
holiday period.

The company had issued ESOPs to its employees, which have been accounted on the
intrinsic value basis. Had the company accounted the same on fair value, profit for the
year would have been lower by INR 337 mn, ~2.3% of PBT.

1
Upfront non-recurring costs of INR 4.1 bn in FY10 (FY09: INR 3.9 bn), arising on initial
phase of outsourcing contract and contract acquisition, are amortised on straight line basis
over the term of contract.
Sluggish demand in BPO and cost pressure in software services drag margins
HCL Tech’s EBIT margins slipped from 14.2% in FY09 to 12.5% in FY10, primarily on
account of negative margins from the BPO segment and higher employee/outsourcing costs
under the software services segment.
EBIT in the BPO segment has decreased from INR 12.0 bn in FY09 to INR (6.1) bn,
primarily on account of reduced sales volume due to recession. Correspondingly, EBIT
margins have also dipped to -6.4% in FY10 (FY09: 10.7%).
Employee costs have increased from INR 51.9 bn in FY09 to INR 62.5 bn in FY10 due to
increase in head-count of employees during FY10 and increase in proportion of on-site
employees.
Outsourcing costs have almost doubled from INR 4.9 bn in FY09 to INR 8.9 in FY10. EBIT
margins for software services have reduced from 18.8% to 15.3% (refer table).
Other highlights
During FY10, profit on sale of investments is INR 55.9 mn (FY09: INR 1,177.6 mn), which
has resulted in profit realisation of 0.1% (FY09: 5.6%) on investments sold. During FY10,
total proceeds from sale of mutual funds are INR 98.7 bn (FY09: INR 21.2 bn).
HCL borrowed foreign currency bridge loan of INR 24.9 bn in December 2008 to fund the
Axon Group acquisition. During FY10, the company substituted the bridge loan by a long-
term foreign currency loan of INR 12.1 bn and redeemable debentures of INR 10 bn.
Interest expenses on the above loans have increased from INR 0.5 bn in FY09 to INR 1.6
bn in FY10 due to full year impact of borrowings in the current year.
Movement in cash flows (INR bn)

Profit before tax 16.0 14.7
Non operating (profit)/Loss (2.1) 0.2
During FY10, increase
Non cash adjustments (Incl. tax provision) 4.7 4.7
in unearned revenue
contributed to Direct taxes paid (1.6) (3.4)
healthy operating Cash profit after tax 17.0 16.2
cash flows, despite
Increase in trade and other receivables (5.9) (4.5)
increase in
receivables Increase in trade and other payables 1.1 5.1
Decrease in inventories (1.0) 1.0
Decrease in working capital (5.8) 1.7
Net cash from operating activities 11.2 17.9
Net worth of companies/divisions acquired from FY09 to FY10 (INR bn)

Cash Intangible Net tangible
Name of the company Goodwill
consideration assets * assets
HC L Insurance BPO Services 0.2 0.2 0.3 (0.4)
HC L Expense Management Service Inc. 1.1 0.7 0.1 0.3
Axon Group 33.0 28.3 5.9 (1.2)
UC S Solutions Holding (Pty) 0.8 0.7 0.1 (0.0)
RKV Technologies 0.2 0.1 0.1 -
Total 35.3 30.1 6.5 (1.3)
*As per the US GAAP consolidated financials. Included under goodwill in Indian GAAP financials
2
HCL Technologies
Standalone – Subsidiary analysis (INR bn)

FY09 (%) FY10 (%) FY09 (%) FY10 (%) FY09 (%) FY10 (%)
Sales 46.8 100.0 50.8 100.0 55.5 100.0 70.6 100.0 102.3 100.0 121.4 100.0
Raw materials consumed - - 0.9 1.7 2.1 3.7 3.6 5.1 2.1 2.0 4.4 3.7
Operating and manufacturing exp. 8.2 17.6 7.7 15.2 2.4 4.3 7.0 10.0 10.6 10.4 14.8 12.2
Personnel cost 19.3 41.3 21.9 43.1 32.6 58.8 40.7 57.6 51.9 50.8 62.5 51.5
Administrative and other exp. 7.1 15.3 6.7 13.3 12.2 22.0 13.5 19.1 19.4 19.0 20.2 16.7
EBITDA 12.1 25.8 13.6 26.7 6.2 11.2 5.8 8.3 18.3 17.9 19.4 16.0
Depreciation 2.5 5.4 2.7 5.4 1.2 2.2 1.4 2.0 3.8 3.7 4.2 3.4
EBIT 9.6 20.5 10.8 21.3 5.0 9.0 4.4 6.2 14.5 14.2 15.2 12.5
Effective EBIT margins at the subsidiary level have reduced from 9.0% in FY09 to 6.2% in FY10
despite increase in subsidiary sales from INR 55.5 bn to INR 70.6 bn, vis-à-vis marginal
increase in EBIT margins at the standalone level from 20.5% to 21.3%.
efficiency (detailed concept explained in Annexure A). We have analysed HCL Tech’s profitability
ROAE Analyser
35.5 23.9 18.6
NOPAT margin (%) 11.9 11.7 10.9
B. Return from leverage (FLEV x spread) (%) (11.1) 4.2 3.6
FLEV (financial leverage) (x) (0.4) 0.1 0.3
NBC (net borrowing cost) (%) 8.5 (35.6) 4.4
Net financial spread (RNOA -NBC ) (%) 27.0 59.4 14.2
ROE Derived (A+B) (%) 24.4 28.1 22.1
ROAE tree
30.0
24.0
ROAE has reduced
due to lower NOPAT
3.6
margin on the back of 18.0
higher personnel and
(%)
outsourcing costs
22.1
12.0
18.6
6.0
0.0
3

HCL Comnet Systems and Services 99.9 5,418 7,084 2,030 6,960 6,674 1,542
HCL America Inc. 100.0 3,460 37,923 990 4,301 48,497 946
HCL Australia Services Pty. 100.0 441 3,469 328 535 4,447 637
HCL BPO Services (NI) 100.0 635 2,015 (123) 307 1,359 334
HCL Singapore Pte 100.0 913 2,074 271 843 2,479 245
Axon Solutions Inc, 100.0 2,476 15,614 (857) 3,145 8,388 152
Capital Stream Inc. 100.0 1,708 883 (121) 1,791 679 135
HCL Great Britain 100.0 615 9,957 (330) 882 9,666 125
HCL (New Zealand) 100.0 54 610 54 59 563 114
HCL Bermuda 100.0 4,254 355 89 14,795 1,051 85
HCL Technologies Canada Inc. 100.0 9 25 0 85 398 75
HCL Hong Kong SAR 100.0 (55) 201 (45) 38 388 71
HCL Comnet 99.9 1,079 4,475 47 1,145 4,706 66
HCL Axon (Proprietary) 100.0 0 34 0 56 901 54
HCL Japan 100.0 91 1,976 27 165 2,298 30
HCL (Malaysia) Sdn. Bhd 100.0 63 254 24 94 325 27
HCL Sweden AB 100.0 39 747 17 62 1,045 25
Intelicent India 100.0 229 35 25 251 34 22
HCL (Netherlands) BV 100.0 74 1,056 97 65 875 3
HCL Poland Sp.z.o.o. 100.0 (12) 79 (6) 12 244 1
Bywater 100.0 135 5 4 119 - 1
Axon Solutions (Shanghai) Co. 100.0 18 71 2 18 149 0
Axon Solutions Schweiz GmbH 100.0 4 3 0 4 - 0
HCL Hungary 100.0 - - - 2 8 (0)
JSP Consulting Sdn. Bhd. 100.0 136 - (1) 144 - (0)
JSPC i-Solutions Sdn Bhd 100.0 454 3 387 468 - (0)
HCL Latin America Holding LLC 100.0 - - - 211 - (0)
HCL Technologies Romania s.r.l. 100.0 - - - 1 5 (1)
DSI Financial Solutions Pte 100.0 4 - (0) 3 - (1)
HCL Argentina s.a. 100.0 - - - 3 1 (1)
Aspire Solutions Sdn. Bhd. 100.0 2 - (0) 3 - (3)
HCL Technologies (Shanghai) 100.0 21 53 (18) 82 94 (6)
HCL Jones Technologies LLC 51.0 39 - (8) 156 - (8)
HCL Technoparks 100.0 (4) 0 (13) 10 - (8)
HCL EAI Services 100.0 98 111 22 85 56 (13)
HCL Italy SLR 100.0 (37) 4 (17) 3 55 (18)
Axon Group . 100.0 7 - (2) 6,499 - (25)
Axon Solutions Singapore Pte 100.0 3 36 (5) 3 143 (27)
HCL Belgium NV 100.0 (23) 190 (6) 4 187 (30)
HCL GmbH 100.0 (102) 772 (21) 30 770 (39)
HCL (Brazil) Technologia da informacao 100.0 - - - 100 67 (87)
Axon Solution (Canada) Inc. 100.0 (115) 482 (123) - 580 (98)
Axon Solutions Australia Pty 100.0 (81) 287 (86) 26 251 (184)
HCL Holdings GmbH 100.0 5,771 155 103 4,627 - (185)
Axon Solutions 100.0 2 15 1 1,734 8,358 (223)
HCL Insurance BPO Services 100.0 90 2,619 51 231 2,722 (238)
Axon Solutions Sdn. Bhd. 100.0 851 2,244 (325) 629 1,743 (267)
HCL Expense Management Services 100.0 1,050 1,838 (82) 718 883 (300)
HCL EAS 100.0 9,296 23 (987) 6,209 - (1,039)
Total 97,775 1,395 111,089 1,889
PAT margin (%) 1.4 1.7
4
HCL Technologies
Segment analysis
Segment revenue
900
720

540
(INR bn)

360
180
0
Software services Business process outsourcing services Infrastructure services
Segment EBIT
155.0
120.0
85.0
(INR bn)
EBIT margins for BPO

have gone down due
to poor demand 50.0
owing to global
recession and higher
operational costs in 15.0
software services
(20.0)
Software services Business process outsourcing services Infrastructure services
Segment EBIT margin

23.1
15.4
7.7
(%)
0.0
(7.7)
(15.4)
Software services Business process outsourcing services
Infrastructure services
5
Margin analysis
35 25.0
Drop in PBT margin is 28 20.0

more than
proportionate to the
(INR bn)
decrease in EBITDA 21 15.0
(%)
margin on account of
incremental finance
14 10.0
costs
7 5.0
0 0.0
Debt PBT margin (%) EBITDA margin (%)

Sources of funds
100.0
Proportion of loan 80.0

funds dips, primarily
on account of
repayment of bridge 60.0
(%)
loan borrowed for

acquisitions made 40.0
during FY09
20.0
0.0

100.0
Goodwill, as a
proportion to total
funds is 27.9%, 80.0
primarily on
acquisition of Axon
60.0
Group at a significant
(%)
premium
40.0
20.0
0.0
Goodwill Fixed assets (excl goodwill) Investments
Deferred Tax Asset Inventories Sundry debtors
Cash and bank Other current assets
6
HCL Technologies

Sales 45,716 60,687 75,628 102,294 121,363
Total income 46,809 65,246 77,539 104,916 122,904
EBITDA 9,113 12,340 13,083 18,295 19,406
EBITDA margin (%) 19.9 20.3 17.3 17.9 16.0
Depreciation 2,031 2,539 2,988 3,755 4,181
Financial costs 81 80 177 1,124 2,041
Net profit 6,907 13,183 10,514 13,196 12,592
Loan funds 591 769 550 30,162 27,242
Net fixed assets 9,514 11,191 15,587 54,049 54,488
C urrent assets loans and advances 15,737 25,627 35,999 58,617 59,466
C urrent liabilities and provisions 9,226 11,603 25,614 38,015 35,860
C ash flow from operating activities 7,539 10,798 13,492 11,178 17,912
C ash flow from investing activities (447) (3,408) (4,062) (25,316) (10,141)
C ash flow from financing activities (6,307) (3,822) (6,179) 22,632 (7,278)
Net cash flows 786 3,568 3,252 8,494 492
C APEX (4,106) (3,897) (5,543) (6,388) (6,468)
Working capital investments (1,749) (5,880) 1,254 (5,830) 1,706

7
C&C Constructions Annual Report Analysis December 22, 2010
Re-classification of JV as integral; led to higher profitability
During FY10, C&C Constructions (C&C) reclassified its JV operations in Afghanistan from
non-integral to integral. This led to PAT for the year being higher by INR 68.6 mn (11%
of PAT).
WIP forms significant portion of working capital; includes unrealised profits
WIP is valued on net realisable value basis (NRV); hence, the carrying value includes
the unrealised profit. WIP increased sharply by 3.4x, from INR 2.1 bn in FY09 to INR 7.2
bn in FY10.
C&C follows percentage of completion method for recognising the contract revenues.
However, the company does not specify any threshold stage for commencement of
recognition of revenues.
Revenue and EBIDTA growth robust; operating cash flow subdued on increase in WC
C&C’s FY10 revenue jumped 56.6% to INR 11.6 bn (FY09 INR 7.4 bn) and EBIDTA
catapulted 75% to INR 2.1 bn (FY09 INR 1.2 bn).
Despite reported FY10 PBT of INR 1.0 bn (FY09: INR 0.5 bn), cash from operating
activity (post interest) remained subdued at INR (0.6) bn [FY09: INR (13.0) bn], mainly
due to higher working capital requirement.
Cash conversion cycle deteriorated from 181 days in FY09 to 215 days in FY10,
primarily owing to rise in inventory days from 177 in FY09 to 251 in FY10. It was,
however, partially compensated by decrease in receivable days from 109 in FY09 to 69
in FY10.
Capex augmented by mix of debt and equity; D/E improves on new issuances
Market Data
52-week range (INR): 286 / 192 C&C’s net block increased from INR 4.7 bn in FY09 to INR 6.3 bn in FY10. This was
Share in issue (mn): 23.4 primarily on account of pursuing BOT projects represented by CWIP that increased from
INR 1.5 bn in FY09 to INR 2.6 bn in FY10.
Avg. Daily vol. BSE (’000): 35.8 During FY10, C&C raised INR 0.8 bn through QIP and INR 0.5 bn through preferential
allotment of equity shares to promoter group on conversion of warrants.
Share Holding Pattern (%) Loan book increased from INR 6.7 bn in FY09 to INR 8.3 bn in FY10. D/E improved
Promoters : 63.4 marginally, from 1.9x in FY09 to 1.6x in FY10.
MFs, FIs & Banks : 13.9 Average borrowing cost charged to P&L (excl. interest capitalised) was 10.3% in FY10.
FIIs : 6.8 The company capitalises the interest cost to carrying cost of CWIP/inventory. Details on
Others : 15.8 interest capitalised have not been disclosed.
* Promoters pledged shares : Nil Revenue mix to undergo a rejig as company ventures into new businesses
C&C intends to expand its presence across infrastructure segments; besides developing
roads, it is also undertaking projects for buildings, railways and water & sewerage
projects.
The company’s order book, as at FY10 end, stood at INR 26.1 bn (FY09 INR 34.2 bn); of
this, INR 13.8 bn (FY09 22.5 bn) comprises roads and the balance other new ventures.
Note: Based on consolidated financials

1

Particulars FY10
Profit before tax 1,015.6
Depreciation 455.3
Interest/Finance C harges 735.2
Non cash adjustments (Incl. tax provision) (75.3)
Operating cash flow Direct taxes paid (226.1)
subdued, primarily Cash profit after tax 1,904.7
due to rise in Decrease in debtors 1,581.3
inventory Increase in inventories (5,248.9)
Decrease in loans and advances 837.3
Increase in current liabilities 1,029.5
Increase in provisions 48.6
Increase in working capital (1,752.3)
Interest Paid (735.2)
Net cash from operating activities post interest (582.8)

300
240
180
(Days)
120
60
0
FY07 FY08 FY09 FY10

Cash conversion cycle deteriorated from 181 days in FY09 to 215 days in FY10, primarily on
account of rise in inventory days from 177 in FY09 to 251 in FY10; this was, however, partially
compensated by decrease in receivable days from 109 in FY09 to 69 in FY10
2
C&C Constructions
Inventory analysis
10.0 5.0
Increase in inventory
levels primarily led by 8.0 4.0
WIP
(INR bn)
6.0 3.0
(x)
WIP valued at NRV; it 4.0 2.0
includes unrealised
profits
2.0 1.0
0.0 0.0
Raw materials and consumables WIP Inventory Turnover ratio (RHS)
Sources of funds
100.0
Proportion of 80.0
improved, largely on 60.0
(%)
account of fresh
equity issuances 40.0
20.0
0.0
FY07 FY08 FY09 FY10

100.0
80.0
Proportion of funds 60.0

(%)
invested in inventory
has increased 40.0
significantly during
the year 20.0
0.0
FY07 FY08 FY09 FY10
Fixed assets CWIP Investments Deferred Tax Asset
Inventories Sundry debtors Cash and bank Other current assets
3

10.0 15.0
Increase in loan 8.0 12.0

funds primarily to
finance new capex
6.0 9.0
(INR bn)
plans
(%)
4.0 6.0
2.0 3.0
0.0 0.0
FY07 FY08 FY09 FY10
Loan Book Avg. borrowing cost (excl int. capitalised)
Margin analysis
25.0
Margins better on the

back of change in 20.0
accounting policy and
valuation of WIP at
15.0
NRV
(%)
10.0
5.0
0.0
FY07 FY08 FY09 FY10
EBITDA margin PAT margin ROCE (pre tax) ROE
Order book analysis

FY09
Water and
sewerage
Railways 1%
11%
Order book mix Buildings

changes with focus 22%
on new businesses …
Roads
66%
4
C&C Constructions
FY10
Water and
sewerage Transmission
5% 1%
Railways
14%
Roads
53%
Buildings
27%
Revenue analysis
100.0
…leading to a change 80.0

in revenue mix
60.0
(%)
40.0
20.0
0.0
FY07 FY08 FY09 FY10
Roads Buildings Railways Water and sewerage
5
Summary financial (INR mn)

Sales 2,117 3,304 5,333 7,419 11,621
Total income 2,145 3,376 5,449 7,526 11,738
EBITDA 568 667 862 1,218 2,131
EBITDA margin (%) 26.8 20.2 16.2 16.4 18.3
Depreciation 149 160 155 258 455
Financial costs 46 162 300 580 778
Net profit 309 332 408 330 624
Loan funds 982 1,374 2,708 6,743 8,341
Net fixed assets 884 1,555 2,227 4,706 6,347
Current liabilities and provisions 833 1,320 1,816 4,668 5,762
Cash flow from operating activities (38) (381) (378) (819) 152
Cash flow from investing activities (475) (1,742) (311) (2,412) (2,318)
Cash flow from financing activities 567 2,204 952 3,541 2,191
Net cash flows 53 81 263 309 25
CAPEX (520) (932) (875) (2,476) (2,119)
Working capital investments (539) (985) (1,240) (2,017) (1,752)
6
June
Hindustan Construction Company Annual Report Analysis July 07, 2010
Migration to IFRS will advance revenue recognition on BOT contracts

Hindustan Construction Company (HCC), currently, follows the accounting treatment
prescribed by Indian GAAP for BOT contracts, wherein construction costs are capitalised
as intangible assets and amortised over the estimated useful life as per the BOT contract.
Revenue is recognised post completion of construction over the contract period.
Post migration to IFRS, from FY12, the treatment prescribed by IFRS will be applicable,
which will effectively advance revenue recognition. Refer our thematic report, IFRS: The
big switch, dated June 09, 2010, for detailed explanation of IFRS adoption accounting
treatment and consequent impact on profits and returns.
FCCB redemption premium, 3.1x adjusted FY10 PAT, adjusted against reserves
HCC adjusts redemption premium on FCCBs against the securities premium account. In
FY10, redemption premium aggregated INR 152.2 mn (net of tax), ~3.1x of adjusted
PAT.
In FY10, the company bought back FCCBs with face value of USD 3.4 mn and reversed
the redemption premium provided on them (through adjustments to the securities
premium account) aggregating INR 24.1 mn.
Elimination of inter-consolidated entities transactions increased effective tax rate

During the consolidation process, transactions (and resulting gains/ losses) amongst
consolidated entities are eliminated, but tax provisions of all consolidated entities are
aggregated. Consequently, effective tax rate (excluding fringe benefit tax) stands at
98.8% (FY09: 31.4%) of reported PBT. At the standalone level, the effective tax rate
Market Data (excluding fringe benefit tax) stands at 33.2%.

Leverage moderated, but still at 4x
In FY10, HCC’s adjusted debt/ equity ratio* decreased 50bps. However, leverage
M cap (INR bn/USD mn): 35.4 / 752.9 continues to be at 4.0x (FY09: 4.5x). Adjusted net debt-to-equity ratio* stands at 3.5x
Avg. Daily vol. BSE (’000): 811.4 (FY09: 4.1x). Of the consolidated debt, INR 9.0 bn (INR 4.7 bn in FY09) is in the form of
Deep Discount Convertible Debentures (DDCDs) for Lavasa, while another ~INR 7.0 bn is
Share Holding Pattern (%) for BOT projects of the company which typically are long-gestation projects with upfront
investments and back-ended returns.
Promoters : 39.9
MFs, FIs & Banks : 12.7 The company’s adjusted debt* jumped INR 13.2 bn (32.9%) to INR 53.5 bn in FY10
(FY09: INR 40.3 bn).
FIIs : 28.7
Others : 18.7
(% of share in issue) Market value of HCC’s quoted investments was INR 2,999.0 mn vis-à-vis book value of
INR 3,040.1 mn. The unrealised loss on quoted investments was INR 41.1 mn. Currently,
under the Indian GAAP regime, FY10 profits are not impacted, but post adoption of IFRS,
such unrealised losses may impact profits depending upon their classification.
Note 1: All details are consolidated unless stated otherwise.

Note 2: * 6% redeemable preference shares treated as debt and preference dividend (including dividend
distribution tax) payable thereon treated as finance cost.
1
The company’s sundry debtors increased 2.5x to INR 2.5 bn (FY09: INR 1.0 bn).
Receivable days (based on year end balances) also increased 2.1x to 22.9 days sales
(FY09: 10.7 days sales). Also, cheques on hand aggregate INR 378.6 mn, ~15.2% of
March 31, 2010, debtors.
Loss on sale of assets was INR 186.7 mn, ~15.2% of adjusted PBT*.
HCC repriced the exercise price of ESOPs to INR 104.1 per share (earlier: INR 132.5).
The revised exercise price is the market price on the grant date and as per Indian GAAP,
FY10 profits will not be impacted. However, post IFRS adoption, such repricing will
impact profits.
High tax dents operating margin; low operating margin, asset turnover depress RoE
Return on average equity (RoAE) for FY10 dipped 590bps to 0.4% (FY09: 6.3%),
primarily due to lower operating margin, courtesy higher effective tax rate and operating
assets turnover, resulting in lower returns on operating assets (RNOA). Decrease in
RNOA blunted gains from higher leverage and lower borrowing costs:

• RNOA decreased 300bps to 3.3% (FY09: 6.3%) due to lower operating margin that
dipped 280bps (36.7%) to 4.7% (FY09: 7.5%) and lower operating assets turnover
that decreased 10bps (17.3%) to 0.7x (FY09: 0.8x).
• Return from leverage decreased 730bps (3.7%) (FY09: positive, 3.6%), despite
higher leverage and lower borrowing costs, due to lower RNOA (lower than
borrowing costs).
• Had the effective tax rate been constant at FY09 level, FY10 adjusted RoE* would
have been 7.9% vis-à-vis the current 0.4%.
ROE analyser analyses profitability on the scale of operating efficiency and capital
allocation efficiency (detailed concept explained in Annexure A). We have analysed HCC’s
profitability for FY09 and FY10; results and key findings are given below:
ROE analyser
6.3 3.3
B. Return from leverage (FLEV x spread) (%) 3.6 (3.7)
Net financial spread (RNOA -NBC) (%) 1.1 (0.9)
C. Return from other funding (%) (3.7) 0.8
ROE Derived (A+B+C) (%) 6.3 0.4
2
RoE tree
9.0 FY09
FY10
4.0
6.0
2.0
3.3 6.3
3.0 6.3
Higher tax rate dents 0.0 0.8 0.4 3.6
(%)
RoE
0.0
(2.0) (3.7)
(3.7)
(3.0)
(4.0)
(6.0) (6.0)
RNOA Return Return ROAE RNOA Return Return ROAE
from from
from from
leverage other leverage other
funding funding

Sources of funds
100.0
80.0
60.0
(%)
Borrowings dominate 40.0

sources of funds
20.0
0.0
Adjusted equity shareholders' funds* Adjusted loan funds*
Minority interest Deferred tax liability (net)
100.0
80.0
Inventories continue 60.0

to decline for third
(%)
successive year
40.0
20.0
0.0
3
100.0
80.0
60.0
Higher other
(%)
operating expenses
and taxes offset 40.0
savings in
construction 20.0
expenses
0.0
Construction expenses Personnel cost
Operating and other expenses Depreciation
Adjusted finance charges* Other items
Taxes Dividend
Retained earning

5.0 8.0
4.0 6.4
Leverage and 3.0 4.8

(x)
borrowing cost
decreased
2.0 3.2
1.0 1.6
0.0 0.0
Adjusted debt/ equity ratio* (x) Adjusted net debt/ equity ratio* (x)
Adjusted cost of borrowing* (%)

440
352
Higher inventory and

(Days)
264
payable days offset
better payables
management; 176
marginally lengthen
cash conversion cycle
88
0
Inventory days Receivable days

Payable days Cash conversion cycle
4

16.0 10.0
Higher tax expense
triggers adjusted 12.8 8.0
PAT* and RoE*
decline
9.6 6.0
(%)
(x)

6.4 4.0

3.2 2.0
0.0 0.0
EBITDA margin (%) ROCE (pre tax) (%)
Adjusted PAT margin* (%) Adjusted ROE* (%)

Sales 19,581 23,007 29,947 35,603 39,752
Total income 19,715 23,434 30,407 35,823 39,950
EBITDA 1,853 2,255 3,459 5,143 5,257
EBITDA margin (%) 9.5 9.8 11.5 14.4 13.2
Depreciation 542 804 974 1,259 1,405
Adjusted financial costs* 487 847 1,594 2,480 2,815
Adjusted net profit* 794 320 880 584 50
Adjusted equity shareholders' funds* 8,417 8,762 9,345 9,044 13,402
Adjusted loan funds* 12,144 19,502 27,029 40,286 53,534
Net fixed assets 6,247 10,232 13,652 28,753 38,599
Investments 720 172 441 953 3,056
Cash flow from operating activities (1,128) (10,767) (679) 5,698 (753)
Net cash flows 9,148 (7,460) 738 (1,199) 915
CAPEX (2,315) (4,695) (5,096) (15,670) (13,097)
Working capital investments (2,532) (12,771) (3,874) 831 (5,432)
5
IL&FS Transportation Networks Annual Report Analysis December 27, 2010
IFRS accounting for concession arrangement boosts construction revenue/profit …
IL&FS Transportation Networks’ (ITNL) FY10 revenue jumped 96.1% to INR 24.0 bn
(FY09 INR 12.3 bn) and PBT catapulted 5.5x to INR 5.2 bn (FY09 INR 0.8 bn). PBT
margins soared from 6.6% in FY09 to 21.8% in FY10.
The company follows IFRS principles for accounting of service concession arrangements
(SCA); consequently, construction income in SCA is recognised on POCM basis upfront
during construction phase.
Construction income, the primary revenue driver, jumped ~ 7x from INR 1.7 bn in FY09
to INR 11.6 bn during the year.
Rights under SCA have increased from INR 6.9 bn in FY09 to INR 14.8 bn in FY10 and
receivables under SCA catapulted from INR 7.3 bn in FY09 to INR 12.0 bn in FY10. (with
corresponding impact on investing cash flows)
IFRS adoption, however, is limited to accounting of SCA while other transactions are
accounted as per IGAAPs.
… operating cash flow, however, subdued
ITNL’s FY10 cash from operating activities post interest stood at INR 0.2 bn [FY09
INR (1.6 bn)] despite a PBT of INR 5.2 bn (FY09 INR 0.8 bn).
Operating cash flow also includes unrealised profit from construction income in SCA
which gets offset by contra investing cash outflows.
Segmental analysis
Market Data During FY10, geographical revenue mix shifted from outside India to within India, with
52-week range (INR): 368 / 256 increase in the latter’s revenue share from ~34% in FY09 to ~ 59% in FY10.
Share in issue (mn): 194.3 Business segment revenues increased sharply for surface transport business from
M cap (INR bn/USD mn):57.7 / 1,299.7 INR 9.1 bn in FY09 to INR 22.2 bn in FY10, with margins in the segment soaring from
Avg. Daily vol. BSE (’000): 589.0 13.7% in FY09 to 32.8% in FY10.
Loan book rise to facilitate new projects; D/E maintained

Promoters : 75.1 ITNL’s loan book increased from INR 19.0 bn in FY09 to INR 33.7 bn in FY10 primarily to
MFs, FIs & Banks : 5.2 finance new road projects.
FIIs : 4.9 D/E was, however, maintained at 2.0x (FY09 2.1x) on the back of INR 5.9 bn raised by
Others : 14.8 the company by issuing 22.8 mn fresh equity shares of INR 10 each at a premium of
INR 248 /share.
The company considers infrastructure construction/ upgrading services cost incurred to

be exchanged against toll collection rights. Thus, gains/ losses on intra group
transactions are treated as realised and not eliminated on consolidation.

1

Subsidiary company % shareholding FY10
as on FY10 Networth Turnover PAT
Elsamex SA 100.0 3,013.0 7,144.4 120.6
North Karnataka Expressway 74.5 795.5 1,129.3 146.2
Gujarat Road and Infrastructure C ompany 83.6 2,397.0 756.6 181.8
Grusamar Ingenieria y C onsulting SL 100.0 217.8 736.5 4.0
Intevial-Gestao Integral Rodoviaria, S.A. 100.0 (16.6) 681.9 0.1
West Gujarat Expressway 49.0 375.8 387.1 (166.1)
Atenea Seguridad y Medio Ambiente S.A 95.0 40.4 376.9 5.1
Elsamex Internacional SRL 100.0 686.5 364.7 3.2
Vansh Nimay Infraprojects 80.0 (7.3) 283.5 (36.1)
C entro De Investigacion Elpidio Sanchez Marcos S.A. 100.0 10.7 239.9 0.7
Mantenimiento Y C onservacion De Vialidades SA DE C .V 64.0 27.7 201.2 0.2
C ontrol 7, S.A 100.0 35.4 167.7 0.3
Elsamex Portugal SA 70.0 56.6 157.9 8.6
Elsamex India 70.0 (4.1) 128.2 11.3
Yala C onstruction C ompany 70.0 24.1 104.8 0.5
Instituto Tecnico de la Vialidad y del Transporte, S.A. 100.0 2.7 102.1 0.5
ITNL Enso Rail Systems 70.0 131.2 77.8 (5.1)
Senalizacion Viales E Imagen SA 100.0 (62.6) 60.4 (15.2)
ITNL International Pte. 100.0 1,051.7 51.5 (247.3)
ESM Mantenimiento Integral SA DE C .V 100.0 18.4 23.9 (0.4)
Geotecnia 7 100.0 1.1 17.3 (3.6)
Proyectos de Gestion, Sistemas, C alculo y Analisis, S.A 100.0 (47.8) 14.6 (2.7)
Grusamar Albania SHPK 51.0 (1.2) 2.8 (1.3)
Sanchez Marcos Senalizacion e Imagen, S.A 100.0 3.6 0.0 (3.9)
Rapid Metrorail Gurgaon 100.0 (4.1) 0.0 (4.6)
ITNL Road Infrastructure Development C ompany 100.0 399.2 - (0.7)
East Hyderabad Expressway 74.0 289.5 - (3.6)
Inversiones Tyndrum S. A. 100.0 10.2 - (0.5)
Hazaribagh Ranchi Expressway 73.9 - - (0.5)
Pune Sholapur Road Development C ompany 99.9 (1.0) - (1.5)
Ecoasfalt C onstruction C ompany 70.0 (4.7) - (0.4)
Proyectos Y Promociones Inmobilarias Sanchez Marcos SL 100.0 (34.9) - (1.8)
Total 9,403.69 13,210.77 (12.31)
Note : The figures mentioned above are based on financials prepared under IGAAP
The figures used for consolidated financials may differ due to different accounting policy used.
2

Despite reporting
Profit before tax 0.8 5.2
high PBT, cash from
Interest and finance expense 1.7 2.9
operating activities
Depreciation 0.4 0.6
post interest
other non operating adjustments (0.7) (0.6)
remained subdued
other non cash adjustments (0.1) (0.1)
Direct taxes paid (0.6) (1.9)
Cash profit after tax 1.5 6.2
Operating cash flow Decrease in receivables 0.2 1.2
also includes Increase in loans and advances (0.4) (3.7)
unrealised profit Decrease in trade and other payables (1.1) (0.5)
element from Increase in working capital (1.3) (3.0)
construction income Net cash from operating activities 0.2 3.2
in SCA
Interest expenses (1.8) (2.9)
Net cash from operating activity post interest (1.6) 0.2
Cash flow analysis

24.6
16.4
8.2
(INR bn)
0.0
(8.2)
(16.4)
Cash flow from operating activities Cash flow from investing activities
Cash flow from financing activities
Operating revenue analysis

30.0
24.0
Construction revenue
primary growth 18.0
(INR bn)
driver
12.0
6.0
0.0
Fee income Operation & maintainance income
Toll revenues Construction income
Traded product
3
Business Segment analysis

25.0 57.6 60.0
56.4
Margins in surface 20.0 48.0
transport segment
(INR bn)
jumped sharply from 15.0 36.0
(%)
32.8
13.7% in FY09 to
32.8% in FY10 10.0 24.0
13.7
5.0 12.0
10.9 9.9
0.0 - - 0.0
FY07 FY08 FY09 FY10
Revenue - surface transportation business
Revenue - Building maintenance
Segmental margin - surface transport (RHS)
Segmental margin - building maintenance (RHS)
Geographical segment—Revenue analysis

100.0
80.0
Revenue mix has
shifted to India in
60.0
FY10 with recognition
(%)
of surface transport
revenues… 40.0
20.0
0.0
FY07 FY08 FY09 FY10
In India Outside India
Sources of funds
100.0
80.0
60.0
(%)
40.0
20.0
0.0
Equity shareholders' funds Loan funds
Minority interest Deferred Tax Liability
Current liabilities & provisions
4
Applications of funds
100.0
80.0
Proportion of funds
60.0
invested in loans &
(%)
advances catapulated
in FY10 40.0
20.0
0.0
Fixed assets (incl goodwill) Investments Inventories
Summary Financial (INR mn)

Sales 420 1,887 3,617 12,254 24,029
Total income 432 1,981 4,376 13,320 24,873
EBITDA 127 969 1,831 1,933 7,942
EBITDA margin (%) 30.2 51.3 50.6 15.8 33.1
Depreciation 5 33 76 353 603
Financial costs 49 215 1,070 1,743 2,941
Net profit 50 514 933 263 3,444
Loan funds* 1,148 10,846 16,636 18,996 33,665
Net fixed assets 14 8,048 11,675 11,469 18,947
C urrent assets loans and advances 1,570 11,189 22,179 23,399 36,976
C urrent liabilities and provisions 229 1,069 8,451 7,250 7,868
C ash flow from operating activities 12 331 2,065 175 3,189
C ash flow from investing activities (662) (3,895) (2,563) (184) (14,586)
C ash flow from financing activities 583 3,755 1,726 (300) 15,226
Net cash flows (67) 191 1,228 (308) 3,829
C APEX (9) (556) (631) (214) (5,423)
Working capital investments (82) (361) 622 (1,321) (3,008)
*Includes advance towards capital received by subsidiary and intended to convert into subordinated debt.
5
IRB Infrastructure Developers Annual Report Analysis December 8, 2010
IFRS accounting w.r.t. BOT projects gives additional surge to revenue/profit
IRB Infrastructure Developers’ (IRB) FY10 revenue jumped 71.9% to INR 17.0 bn (FY09
INR 9.9 bn), and PBT catapulted 93.8% to INR 4.2 bn (FY09 INR 2.2 bn). PBT margins
increased from 21.7% in FY09 to 24.4% in FY10.
Complying with IFRS principles, IRB’s consolidated FY10 revenue and PBT include INR
8.1 bn (47.6 % of revenue) and INR 2.7 bn (64.3 % of PBT), respectively (FY09: INR
3.7 bn and INR 1.0 bn), on account of work executed by EPC arm for BOT SPVs.
This implies that margins booked on in-house contracts increased from 27.0% in
FY09 to 32.7% in FY10.
Excluding the captive work executed, FY10 revenue jumped 42.8% to INR 8.9 bn (FY09
INR 6.3 bn), while PBT increased 30.1% to INR 1.5 bn (FY09 INR 1.2 bn). PBT margins,
on the other hand, dipped from 18.6% in FY09 to 16.9% in FY10.
IFRS adoption, however, is limited to accounting of BOT projects, while other

transactions are accounted as per IGAAPs.
Operating cash flow healthy, but includes unrealised profit element for BOT SPVs
Cash from operating activities post interest remained healthy at INR 6.6 bn, despite
reported PBT of INR 4.2 bn. Operating cash flow, however, includes profit element of
INR 2.7 bn for EPC work executed for BOT SPV which gets offset by contra investing
cash outflows.
Income from BOT projects jumped 61%, from INR 4.5 bn in FY09 to INR 7.2 bn,
primarily on account of 8.4% hike in toll rates, full year operation of Surat-Dahisar
project and commencement of toll collection in Bharuch-Surat BOT project.
Market Data
52-week range (INR): 313 / 187 IRB’s cash conversion cycle improved from 50 days in FY09 to 47 days in FY10 on
account of dip in inventory days, from 91 in FY09 to 79 in FY10, partially compensated
by decrease in payable days from 45 in FY09 to 37 in FY10.
M cap (INR bn/USD mn):63.3 / 1,411.3
Avg. Daily vol. BSE (’000): 1,338.0 Investment gain adds to profitability
IRB sold investments of INR 976.1 mn (FY09 INR 111,2.9 mn) in FY10, realising a gain
Share Holding Pattern (%) of INR 140.3 mn (FY09 loss of INR 14.5 mn). Also, the company has written back
Promoters : 74.9 provision for diminution on value of investment of INR 5.2 mn (FY09 provided INR 24.7
MFs, FIs & Banks : 4.3 mn). Together, these form 3.5% of PBT (FY09: 1.8%).
FIIs : 12.7
Loan book rises to facilitate new projects; execution picked up on Surat-Dahisar
Others : 8.1
During FY10, IRB was granted new BOT road projects worth ~INR 55.0 bn in addition to
(% of share in issue) the Sindhudurg greenfield airport project. Also, execution on Surat–Dahisar project
gathered steam during the year.
Consequently, the company’s loan book increased from INR 24.9 bn in FY09 to INR 29.2
bn in FY10, primarily to facilitate the construction of new BOT projects. However, D/E
was maintained at 1.4x.

1
Interest cost jumps on low capitalisation
Interest cost jumped 69.5%, from INR 1.5 bn in FY09 to INR 2.5 bn in FY10, primarily due
to low capitalisation as Surat–Bharuch BOT project became operational during the year.
IRB considers that the construction cost incurred by BOT operator is in exchanged for toll
collection rights. Thus, for BOT projects awarded to group companies, where EPC is
subcontracted to fellow subsidiaries, the profit on intra group transaction is not eliminated
and is included in toll collection rights.
Toll collection rights have increased from INR 17.2 bn in FY09 to INR 31.6 bn in FY10.

as on FY10 Networth Turnover PBT Networth Turnover PBT
Ideal Road Builders 100.0 1,545.41 5,342.3 484.6 2,050.7 3,501.0 539.8
Modern Road Makers 100.0 1,730.31 5,802.9 548.7 2,465.7 10,208.9 1,098.7
Thane Ghodbunder Toll Road 100.0 379.03 269.6 78.0 465.4 278.2 76.1
IDDA Infrastructure 100.0 1,779.00 - - 1,594.6 850.5 (384.9)
Mhaiskar Infrastructure 100.0 1,426.94 2,934.4 564.1 1,496.0 3,122.5 664.6
IRB Infrastructure 100.0 297.39 70.5 25.2 347.4 68.1 15.2
MMK Toll Road 100.0 141.04 65.8 39.9 186.2 63.1 40.5
NKT Road & Toll 100.0 287.46 114.4 8.0 359.7 134.6 67.1
ATR Infrastructure 100.0 692.24 164.0 114.6 847.9 180.8 134.9
Aryan Toll Road 100.0 609.80 129.4 62.3 706.0 133.0 92.1
Aryan Infrastructure Investment 66.0 888.17 - - 888.2 - -
IRB Surat Dahisar Tollway 90.0 2,971.76 208.4 149.1 4,766.6 2,068.4 1,777.8
IRB Kolhapur Integrated Road Dev. Co 100.0 443.81 - - 772.3 - -
Aryan Hospitality 100.0 0.10 - - 0.1 - -
IRB Pathankot Amritsar Toll Road 100.0 - - - 394.0 - -
IRB Sindhudurg Airport 100.0 - - - 147.9 - -
IRB Talegaon Amravati Tollway 100.0 - - - 197.0 - -
IRB Jaipur Deoli Tollway 100.0 - - - 526.8 - (0.2)
IRB Goa Tollway 100.0 - - - 346.0 - -
Total 15,102 2,075 20,609 4,122
2

Particulars FY10
Profit before tax 4.2
Interest 2.4
Other Non operating (profit)/Loss (0.4)
Depreciation / Amortisation 1.8
Operating cash flow Direct taxes paid (0.8)
includes INR 2.7 bn Cash profit after tax 7.2
towards captive EPC Decrease in trade and other receivables 0.1
profit Increase in trade and other payables 1.4
Decrease in inventories 0.4
Increase in working capital 1.8
Interest paid (2.5)
Net cash from operation post interest 6.6
Operating cash flow includes INR 2.7 bn of captive EPC profit, which is offset by higher
investing cash outflow towards toll collection rights capitalised

180
Cash conversion cycle 120

improved from 50 days
in FY09 to 47 days in
FY10 on account of dip 60
(Days)
in inventory days,
partially compensated
by decrease in payable 0
days
(60)
(120)
FY07 FY08 FY09 FY10

Operating revenue analysis

20.0
16.0
Income from BOT
projects increased,
12.0
(INR bn)
leading to healthy
operating cash flow
8.0
4.0
0.0
FY07 FY08 FY09 FY10
Contract revenue Income from BOT Projects Others

3
Sources of funds
100.0
80.0
60.0
(%)
40.0
20.0
0.0
FY07 FY08 FY09 FY10
100.0
Proportion of toll 80.0

collection right
increased, primarily 60.0
(%)
due to capitalisation
of Surat-Bharuch BOT
40.0
project
20.0
0.0
FY07 FY08 FY09 FY10
Fixed assets CWIP Investments Inventories
4
Summary Financials
Particulars FY07 FY08 FY09 FY10
Sales 3,057 7,327 9,919 17,049
Total income 3,287 7,896 10,307 17,558
EBITDA 1,654 4,119 4,388 7,990
EBITDA margin (%) 54.1 56.2 44.2 46.9
Depreciation 526 1,016 1,144 1,819
Financial costs 913 2,006 1,483 2,514
Net profit 225 1,139 1,758 3,854
Equity shareholders' funds 3,595 16,191 17,291 20,390
Loan funds 25,180 20,212 24,859 29,152
Net fixed assets 24,420 27,737 34,707 43,477
Current assets loans and advances 7,366 9,589 10,180 11,477
Current liabilities and provisions 2,313 2,600 3,065 4,816
Net current assets 5,053 6,989 7,116 6,661
Cash flow from operating activities 2,472 2,119 2,615 9,033
Cash flow from investing activities (11,680) (5,288) (6,047) (10,223)
Cash flow from financing activities 8,790 4,077 3,308 1,431
Net cash flows (418) 908 (123) 241
CAPEX (6,664) (4,288) (8,114) (10,657)
Working capital investments 1,035 (1,586) (1,401) 1,849
5
IVRCL Infrastructures Annual Report Analysis November 30, 2010
Increase in working capital stretches cash flow
During the year, IVRCL Infrastructures (IVRCL) reported net cash flow from operation of
INR (539.9) mn [FY09: INR (934.2)] mn, despite PBT of INR 3780.9 mn (FY09: INR
3107.9 mn), primarily on account of higher working capital requirement.
Cash conversion cycle deteriorated from 159 days in FY09 to 173 days in FY10,
primarily on account of increase in debtor days (including unbilled revenue and
retention money) from 169 in FY09 to 205 in FY10. This was, however, partially offset
by increase in creditor days and advances from contractee.
Debtors more than six months remain high for FY10, at INR 5.5 bn, which is 27.8% of
the total debtors (excluding unbilled revenues and retention money; FY09: 27.3%).
Low subcontracting drives EBIDTA; however, provision/interest cost dampens profit
IVRCL’s sales increased 15.1%, from INR 50.6 bn in FY09 to INR 58.3 bn in FY10,
primarily on account of income from transmission business, sale to sub-contractors and
sale of systems, equipment, services and spares.
Blended EBIDTA margin improved from 9.5% in FY09 to 11.3% in FY10, primarily due
to reduction in sub-contracting activities, which, in turn, lowered the construction and
manufacturing costs from 83.6% of sales in FY09 to 81.4% of sales in FY10.
PBT margin, however, increased meagerly from 6.1% in FY09 to 6.5% in FY10 as net
interest cost increased from INR 1.7 bn in FY09 to INR 2.4 bn in FY10.
Provision for doubtful debts, advances and deposits and bad debt written off increased
from INR 120.2 mn in FY09 to INR 428.5 mn (11.3% of PBT) in FY10.
Market Data Auditors have highlighted that during the year provision of INR 1.4 bn on account of
withdrawal of the tax relief u/s 80IA availed in earlier years, has directly been adjusted
52-week range (INR): 197 /110
from special reserve, which constitutes 65.5% of PAT.
Average borrowing cost (excluding interest capitalised) for the year stood at 8.1%
(FY09: 8.0%), details on interest capitalised have not been disclosed.
Share Holding Pattern (%) Subsidiary analysis
Promoters : 9.5 During the year, IVRCL A&H, a subsidiary, has capitalised interest amounting to 1.1 bn
MFs, FIs & Banks : 8.6 under expenditure incurred during construction period pending allocation (EDCPA); year
end balance of EDPCA account is INR 2.4 bn. IVRCL A&H has done capital expenditure of
FIIs : 57.7
7.0 bn during the year.
Others : 24.2
During the year, IVR Strategic Resources & Services (ISRSL) and IVRCL Water
(% of share in issue) Infrastructure (IWIL), two wholly-owned subsidiaries, amalgamated with IVRCL A&H.
Accordingly, IVRCL A&H has issued 59.5 mn shares to IVRCL, raising IVRCL’s
shareholding in it from 62.4% to 80.5%.

1
Analysis of major operating entities (INR mn)

IVRCL Assets & Hindustan Dorr-
IVRCL (Standalone) Holdings * Oliver *
FY09 FY10 FY09 FY10# FY09 FY10
Gross work bills / other operational income 49,492 53,659 - - - -
Share of (loss) / profit from joint ventures 101 (160) - - - -
Sale of products to sub-contractors 211 1,423 - - - -
Sale of land and development rights - - - 579 - -
Sale of flats, villas and plots (net of cancellations) - - 457 (376) - -
Construction revenue - - 0 1,188 - -
Sewage treatement revenue - - - 17 - -
Income from toll collection - - - 184 - -
Sale of system, equipments, spares and services - - - - 5,155 8,775
Total sales 49,804 54,923 457 1,590 5,155 8,775
EBITDA margin (%) 8.5 9.7 7.1 12.1 10.3 12.0
Note: *consolidated entities
#amount not comparable with FY09 as ISRSL and IWIL is amalgamated

Particulars FY10
Depreciation 803
Increase in working Bad debts written off 429
capital requirement Other non cash adjustments (68)
stretches cash flows Interst expenses 2,137
Other non operating (profit)/Loss (134)
Increase in debtors (4,705)
Increase in other current assets (4,449)
Increase in Loans and advances (1,056)
Increase in inventory (1,178)
Increase in current liabilities and provisions 5,508
Net cash from operating activities (540)
Interst expenses paid (2,121)
Net cash from operating activities post interest (2,661)
2
19
13
(INR bn)
7
Operating and
investing cash flows
continue to be
1
supported by cash
from financing (5)
activities
(11)
Sources of funds
100.0
D/E increases from 80.0

1.0x in FY09 to 1.2x
in FY10 60.0
(%)
40.0
20.0
0.0
100.0
Proportion of fixed 80.0

assets increased,
60.0
of completion of road
(%)
project during the

year 40.0
20.0
0.0
FY05 FY06 FY07 FY08 FY09 FY10
3
Cash conversion analysis

220
176
132
Increase in debtor
(Days)
days stretched cash
conversion cycle 88
44
0
Debtor days Creditor days

Inventory days Advances from contractee days
Debtor analysis
25 40.0
20 32.0
(INR bn)
Debtors exceeding six 15 24.0
(%)
months have
increased 29.7%, 10 16.0
from INR 4.3 bn in
FY09 to INR 5.5 bn in
5 8.0
FY10
0 0.0
Debtors exceeding six month Other debtors
Debtors as % of revenue (RHS)
4

Sales 16,871 24,962 38,496 50,645 58,312
Total income 17,082 25,227 38,937 51,196 58,675
EBITDA 1,532 2,887 5,541 4,792 6,583
EBITDA margin (%) 9.1 11.6 14.4 9.5 11.3
Depreciation 123 247 371 537 803
Adjusted financial costs 378 541 762 1,698 2,353
Net profit (Report) 1,078 1,631 2,834 2,250 2,156
Loan funds 7,804 7,905 17,249 24,996 33,064
Net fixed assets 4,201 6,604 15,451 21,660 28,133
Cash flow from operating activities (1,738) 2,127 (6,704) (934) (540)
Net cash flows (349) (1,205) 3,616 (878) 446
CAPEX (1,299) (10,528) (9,282) (9,635) (7,006)
Working capital investments (3,012) (14) (10,002) (4,406) (5,882)
5
Lanco Infratech Annual Report Analysis September 15, 2010
Related party transactions boost revenue; IFRS convergence may impact financials
Lanco Infrastructure’s (Lanco) sales jumped 33.7% from INR 60.0 bn in FY09 to INR
80.3 bn in FY10. The rise was on account of increase in construction segment’s
contribution from 52% in FY09 to 55.6% in FY10.
The company’s EPC and construction order book as at FY10 end catapulted ~ 147.4% to
INR 257.1 bn (FY09: INR 103.9 bn), imparting it ~ 3 years’ revenue visibility. However,
most of the orders are from related parties.
Lanco generates ~ 47% of its revenue from related parties, of which two associates-
Udupi Power (UPCL) and Lanco Anpara Power (LAnPL), contribute ~43.9%. The
company also holds cumulative compulsorily convertible preference shares in these
companies, which when exercised will lead to them becoming subsidiaries. Lanco’s
current holding in UPCL and LAnPL is 26.2% and 26.1%, respectively.
During the year, the company earned INR 35.3 bn as contract service revenue from these
companies, which is 43.9% of total sales. While consolidating, Lanco has eliminated INR
755.3 mn as unrealised profit to the extent of its holding in these companies.
The outstanding term loans and net assets of these entities as at FY10 end are INR 63.6
bn and INR 84.7 bn, respectively. Corporate guarantee given for UPCL is at INR 33.8
bn, which is 100.9% of the company’s net worth.
IFRS will lead to consolidation of SPVs which will lead to elimination of intergroup
revenues and profitability and also will increase debt by 76.1% to INR 147.2 bn;
correspondingly, D/E will jump from 2.5x to 4.4x.
The management has, however, guided that post IFRS, select power projects will qualify
Market Data under build-operate-transfer (BOT). Hence, revenue and profit related to EPC activity of
52-week range (INR): 74 / 40 such projects will continue to be recognised on POCM basis and will not be eliminated.
Share in issue (mn): 2,407.8 Lanco has also invested INR 6.0 bn in share application money in a few other associates
M cap (INR bn/USD mn): 167 / 3,596 and companies where it or key management personnel have significant influence. If, in
the future, shares of these companies are allotted to Lanco its relationship with them
Avg. Daily vol. BSE (’000): 11,672
may change.

Margins improved despite higher ESOP cost; debtors ageing a concern
Promoters* : 67.9
PBT margin increased from 8.2% in FY09 to 9.1% in FY10 despite a rise in employee
cost on account of ESOPs and higher depreciation charge.
FIIs : 19.6
Others : 7.9
During the year, Lanco allotted 9.2 mn ESOPs exercisable at weighted avg. price of INR
0.24 each pursuant to which the company has taken an additional charge of INR 570.8 mn
(% of share in issue) during the year (6.1% of PBT). Total outstanding ESOPs as at FY10 end are 53.3 mn.
Since ESOP cost is amortized over vesting period (6 years for Lanco); the higher ESOP
charge will continue over next 5 years.
LAPL, one of the subsidiary, has, during FY10, changed the method of providing
depreciation from the straight line method (SLM) to the written down value method
(WDV), which led to INR 1.2 bn dip in PBT (12.9% of PBT). We believe the change in
depreciation will result in lower tax outgo under MAT.

1
Income from the property development segment, dipped significantly from INR 1,574.5 mn
in FY09 to INR (256.7) mn in FY10, primarily on account of reversal of revenue of INR 1.1
bn towards cancellation and the price discounts offered to existing as well as prospective
customers.
Other income increased from INR 0.5 bn in FY09 to INR 1.8 bn (19.7% of PBT) in FY10
primarily on account of interest received on deposits, gain on forex fluctuation, and profit
on sale of long-term investments.
Debtors outstanding increased two folds to INR 22.3 bn (FY09: INR 11.9 bn) as debtors
exceeding six months doubled from INR 4.3 bn in FY09 to INR 8.1 bn in FY10.
Financial and other highlights
Despite rise in the company’s debt from INR 55.9 bn in FY09 to INR 83.6 bn, the D/E has
reduced from 2.7x in FY09 to 2.5x in FY10, primarily on account of Lanco’s QIP issue.
During the year, the company raised INR 7.3 bn through QIP of 18 mn shares of INR 10
each at INR 394.9, which is primarily invested in mutual funds and preference shares of
associates, leading to increase in investment by 106% from INR 9.8 bn in FY09 to INR 20.2
bn in FY10.
Total borrowing cost capitalised during FY10 is at INR 5.1 bn. Average borrowing cost incl.
interest capitalised is at 12.0% (FY09: 13.9%).
Related party analysis (INR mn)

Contract service
Particulars Relation rendered
Substantial portion of
Lanco Anpara Power Associate 19,041
revenue comes from
Udupi Power Corporation Associate 16,269
related parties
Others ESI 3,009
Total 38,319
47.3% of sales
(INR mn)
Closing balance recievable Closing balance payable
Particulars Relation Guarantee share appl. ICD Loans Others ICD others
given money
Lanco Anpara Power Associate 2,103 2,941
Udupi Power Corporation Associate 33,773 8,788 2,000 474
Lanco Hoskote Highway Associate 246
Lanco Devihalli Highway Associate 133 361
Belinda Properties Associate 543
Ananke Properties Associate 548
Tethys Properties Associate 538
Bianca Properties Associate 548
Lanco Babandh Power Associate 2,500 1,830 1,210 311 2,452
Portia Properties Associate 328
Lanco Group KMPSI 1,540
Others ESI 87 843
Others KMPSI 61 12
Total 36,405 6,022 1,210 311 11,747 2,000 6,485
108.8% of
networth
Allotment of shares by related parties for share application money pending allotment may
change the relationship to subsidiaries
2
Lanco Infratech

Particulars FY10
Non operating (profit)/Loss 4,413
Significant increase Non cash adjustments (Incl. tax provision) 3,512
in working capital Direct taxes paid (3,145)
requirements led by Cash profit after tax 14,101
increase in debtors Increase in trade and other receivables (12,920)
Increase in trade and other payables 3,420
Increase in inventories (3,044)
40,000
25,000
10,000
(5,000)
(20,000)
(35,000)
Lanco has been generating positive cash from operations which together with funds from
financing activities have been deployed in capex plans.
The group has a power projects portfolio of 9,311 MW, of which about 1,349 MW is in operation
and the balance under construction.
Lanco’s power generation capacity is expected to jump to 3,957 MW over the next 12 months
with the additional capacity of 133 MW from Kondapalli II, 1,200 MW from Udupi and Anpara
each, 70 MW from Lanco Green and 5 MW from Vamshi Industrial.
3
Sources of funds
100.0
80.0
Proportion of loan
funds increased from
60.0
48.5% in FY09 to
(%)
52.2% in FY10
40.0
20.0
0.0
Equity shareholders' funds Loan funds Minority interest Current liabilities Provisions
Applications of funds
100.0
80.0
60.0
Rise in fixed assets is
(%)
of capitalisation of 40.0
plant and machinery
on commencement of 20.0
power plants which
were lying as CWIP 0.0
Fixed assets CWIP
Investments Expenditure during construction
Inventories Debtors
Cash and bank Other current assets

15.5 3.0
Average borrowing 14.0 2.4

cost dipped from
13.9% in FY09 to
12.0% in FY10 12.5 1.8
(%)
(x)
11.0 1.2
9.5 0.6
8.0 0.0
FY07 FY08 FY09 FY10
Avg. borrowing cost Debt /equity (RHS)
4
Lanco Infratech

110 120
88 96
66 72
(Days)
(Days)
44 48
22 24
0 0
Cash conversion cycle deteriorated from 44.2 days in FY09 to 50 days in FY10, primarily on
account of increase in debtor days from 58.3 to 77.7 and inventory days from 77.7 to 83.0,
which is partly compensated by increase in creditor days from 91.8 to 110.8 during the same
period.

Sales 1,421 15,944 32,334 60,062 80,320
Total income 1,484 16,473 33,287 60,614 82,160
EBITDA 117 4,084 6,916 8,236 14,515
EBITDA margin (%) 8.3 25.6 21.4 13.7 18.1
Depreciation 19 656 776 1,073 3,479
Financial costs 36 829 921 2,185 3,554
Net profit 171 1,880 3,542 2,804 4,585
Loan funds 1,398 17,099 31,650 55,970 83,614
Net fixed assets 268 22,875 33,488 45,345 64,058
Expenditure during construction 141 1,515 3,560 8,793 5,956
Cash flow from operating activities (125) 3,805 5,450 2,383 1,557
Cash flow from investing activities (525) (32,033) (15,260) (17,447) (28,410)
Cash flow from financing activities 705 29,936 13,188 17,119 26,959
Net cash flows 54 1,707 3,379 2,054 106
CAPEX (211) (24,636) (13,692) (13,207) (15,383)
Working capital investments (223) (82) (718) (5,849) (12,544)
5
Reliance Infrastructure Annual Report Analysis January 17, 2011
Significant investment book, primarily in promoter group companies
Reliance Infrastructure’s (Rinfra) investments continue to be high, at INR 136.6 bn as at

FY10 end, (FY09: INR 159.4 bn). Of this, INR 99.5 bn is invested in promoter group
companies and INR 34.9 bn in liquid funds. Together, they form 66% (FY09: 94.3%) of
the company’s net worth.
Investment in promoter group companies includes:
• INR 65.1 bn in Reliance Power (RePL), an associate, [cost of equity (INR 17.2 bn) +
capital reserve on dilution (INR 43.2 bn) and balance as profits for the year).
• Investment of INR 34.3 bn in preference shares of non-associate promoter group

companies (INR 11.0 bn in Sonata Investments and INR 23.3 bn Reliance Infra
Projects International).
Further, current assets include INR 5.1 bn towards premium receivable on redemption
of the aforementioned preference shares.
Loans and advances surge (including inter-corporate deposits)
Loans and advances jumped from INR 55.5 bn as at FY09 end to INR 85.9 bn as at FY10
end, of which, inter-corporate deposits increased from INR 15.8 bn to INR 27.7 bn.
Of the total inter-corporate deposits, INR 1.4 bn (FY09: INR 1.4 bn) constitutes deposits
given to Reliance Infrastructure and Consultants, an associate. Details of other parties
to whom inter-corporate deposits have been given are not available.
During FY10, interest income on inter-corporate deposits was INR 2.2 bn yielding an
average return of 9.9%.
Market Data Revenue gap and adjustments add to revenue growth

52-week range (INR): 1,225 / 751
Rinfra revenues stood at INR 146.3 bn in FY10 (FY09: INR 126.3 bn). Of this, INR 11.0
bn recognised as asset under tariff adjustment account is on account of:
• Revenue gaps of INR 9.7 bn, i.e., shortfall in actual returns over assured returns;
which are to be recovered from customers, and carried forward as unbilled revenue.
Share Holding Pattern (%) • Income towards payment of wage revision arrears of INR 1.3 bn.
Promoters : 42.7 The outstanding balance of tariff adjustment account as at FY10 end is INR 16.0 bn
MFs, FIs & Banks : 25.7 (FY09: INR 10.3 bn), indicating that the company received INR 5.3 bn in FY10.
FIIs : 15.5
Operating cash flow remains subdued on increased working capital requirement
Others : 16.0
* Promoters pledged shares : Nil Cash flows from operations stood at INR 1.7 bn in FY10 (FY09: INR 9.2 bn), despite PBT
(% of share in issue) of INR 13.5 bn (FY09: INR 13.4) on the back of increased working capital requirement.

Working capital requirement increased on the back of:
• Tariff adjustment, arising due to revenue gaps, jumped by INR 5.7 bn during FY10.
• Increase in debtors from INR 19.3 bn in FY09 to INR 22.5 bn in FY10.
• Rise in advances recoverable in cash or kind by INR 7.6 bn.

1
IFRS compliance to boost construction revenues on BOT projects
Rinfra recognised toll collection rights of INR 7.7 bn as at FY10 end (FY09: Nil), at actual
cost incurred on BOT projects and amortised it over the concession period.
Migration to IFRS (FY12 onwards) is likely to effectively advance revenue recognition.

Refer our report, ‘IFRS: The big switch’, dated June 09, 2010, for detailed explanation of
IFRS adoption accounting treatment.

Erstwhile warrants forfeited; fresh warrants/shares to promoters boost net worth

Rinfra had issued 4.3 crore warrants of INR 7.8 bn in FY08 to AAA Project Ventures
(AAAPVL), promoter, convertible into equivalent number of equity shares @ INR 1,812/
share.
During FY10, these warrants were forfeited and the amount of INR 7.8 bn was credited
to capital reserve as promoters did not opt to exercise the warrants.
Rinfra’s net worth jumped from INR 169.0 bn in FY09 to INR 207.0 bn in FY10, primarily
due to fresh issue of 4.3 crore warrants @ INR 929/warrant to AAAPVL, of which, 2.0
crore warrants were converted to equivalent equity shares.
On January 7, 2011, AAAPVL has exercised the balance 2.3 crore warrants which have
been converted into equivalent equity shares.

Increased average borrowing cost, despite lower D/E
Average borrowing cost (including capitalised) jumped from 6.5% in FY09 to 8.1% in
FY10, primarily due to repayment of low-cost foreign currency borrowing.
Rinfra’s D/E ratio dipped from 0.6 to 0.4, primarily due to repayment of loan funds out of
the amount received from issue of share warrants.
Related party transactions
Of the current liabilities of INR 70.4 bn as at FY10 end (FY09: INR 59.1 bn), amount
payable to related parties for rendering services stood at INR 20.5 bn (FY09: INR 17.3
bn), ~29.1% (FY09: 29.3%) of current liabilities.
During FY10, advances received towards contracts from joint ventures/associates

aggregate INR 8.0 bn (FY09: INR 18.0 bn), 9.3% (FY09: 32.4%) of total loans and
advances.
Corporate guarantees and collaterals for related parties stood at INR 3.2 bn as at FY10
end (FY09: INR 6.2 bn), ~1.5% (FY09: 3.7%) of net worth.
Other highlights
ROAE reduced from 8.1% in FY09 to 8.0% in FY10, primarily due to lower return on net
financial income.
Other current assets include retentions on contracts which have increased from INR 5.8
bn in FY09 to INR 7.6 bn in FY10, 24.4% (FY09: 45.3%) of net current assets.
Provision for disputed matters/contingencies for electricity business and other corporate
matters stood at INR 6.3 bn as at FY10 end (FY09 end: INR 5.6 bn), ~3.0% (FY09:
3.3%) of net worth.
Post BS date, the company sold investments in two wholly-owned subsidiaries (BSES
Kerela Power and Reliance Energy Generation) to RePL. The turnover of these
subsidiaries as at FY10 end was INR 4.5 bn with a net worth of INR 1.9 bn.
2
During FY10, unrealised gain on fair valuation of foreign exchange derivative transactions
was INR 0.8 bn (FY09: unrealised loss, INR 1.7 bn) ~ 5.9% (FY09: - 12.7%) of PBT.
Net unhedged foreign currency exposure stood at INR 16.4 bn as at FY10 end (FY09 end:
7.9 bn).
During FY10, Rinfra bought back and extinguished 0.7 mn equity shares aggregating INR
431.5 mn through open market transactions at average price of INR 616/share.

Cash flow from operations (INR bn)
Particulars FY10
Depreciation 4.7
Interest and finance charges 5.3
Non operating (profit)/Loss (7.6)
Cash flow subdued due
to increase in unbilled Non cash adjustments (Incl. tax provision) (0.5)
revenue and debtors. Direct taxes paid (0.4)
Higher interest expense Cash profit after tax 14.9
resulted in negative
Increase in trade and other receivables (25.7)
cash from operations,
post interest Decrease in inventories 1.7
Increase in trade payables 10.7
Increase in working capital (13.3)
Interest expenses paid (6.6)
Net cash from operations post interest (4.9)
Shareholders’ fund movement (INR bn)

Particulars FY10
Add
Issue of share warrants to AAA Project Ventures Private 23.6
Grants received 1.4
Increase in capital reserve on forfeiture of share warrants 7.8
Warrants/ equity shares
Increase in share in reserves of JV's 1.3
issued to promoters
result in increase in Profit for the year 15.2
shareholders’ funds Others (1.0)
48.4
Less
Proposed Dividend and tax thereon (Equity and Preference) 2.0
Forfeiture of equity share warrants 7.8
Buyback of equity shares 0.4
10.3

3
ROE analyser
10.2 6.8 7.2
NOPAT margin (%) 9.1 7.0 8.2
B. Return from leverage (FLEV x spread) (%) (1.2) 1.2 0.8
FLEV (financial leverage) (x) (0.4) (0.2) (0.1)
ROE Derived (A+B+C) (%) 9.0 8.1 8.0
ROAE Tree
9.0
0.8
7.2
Return from leverage 5.4

slipped due to lower net
(%)
financing income. Better

operating margins 8.0
3.6 7.2
resulted in increased
NOPAT margin
1.8
0.0
Return on net operating Return from leverage ROAE
assets
Profitability analysis
20.0 15,000
16.0 12,000
(INR mn)
PBT margin decreased 12.0 9,000
(%)
(from 10.6% in FY09 to

9.2% in FY10) despite
increase in EBIT margin 8.0 6,000
(from 3.9% to 5.3%),
due to lower net 4.0 3,000
financial income
0.0 0
PBT (before exceptional items) EBITDA margin (%)
PBT margin (%) EBIT margin (%)

4
Average borrowing cost

9.0 125
7.2 100
Average borrowing
costs increased from 5.4 75
(INR bn)
6.5% to 8.1%, primarily
(%)
due to replacement of
low-cost foreign 3.6 50
currency borrowing
1.8 25
0.0 0
Debt (RHS) Debt /Equity (LHS) Avg. borrowing cost (incl capitalised) (LHS)
Note: Borrowing cost capitalised details are not available for FY06 and FY07
Sources of funds
100.0
80.0
Proportion of loan funds 60.0

(%)
reduced from 29.3% to

22.5%, primarily due to
funds received from 40.0
issue of share warrants
20.0
0.0

100.0
80.0

60.0
(%)
40.0
Proportion of loans and
advances increased due
to jump in inter- 20.0
corporate deposits from
INR 15.8 bn in FY09 to
0.0
INR 27.7 bn in FY10
Loans and advances

5

Sales 40,335 68,489 83,429 126,320 146,286
Total income 45,790 77,584 97,005 139,180 157,240
EBITDA 7,765 5,664 5,880 8,213 12,498
EBITDA margin (%) 19.3 8.3 7.0 6.5 8.5
Depreciation 3,486 3,032 3,074 3,304 4,724
Financial costs 1,919 3,130 4,021 4,394 5,251
Net profit 6,503 8,345 11,782 13,532 15,194
Loan funds 42,669 66,256 59,036 101,054 85,839
Net fixed assets 28,737 43,878 50,186 90,277 112,185
Net cash flows (3,925) (34,810) (21,175) 3,286 (103)
CAPEX (3,828) (6,146) (9,775) (24,453) (22,108)
Working capital investments (2,768) 5,218 (5,736) (2,530) (13,265)

6
Hindalco Industries Annual Report Analysis September 20, 2010
Subsidiaries led by Novelis steered turnaround
Hindalco Industries’ (Hindalco) consolidated revenues dipped 7.9% from INR 659.6 bn in
FY09 to INR 607.2 bn in FY10 on the back of lower aluminium prices, 2% reduction in
shipment of Novelis and change in the status of Idea Cellular to associate from joint
venture w.e.f. from January 01, 2009.
The company reported EBIDTA of INR 97.5 bn (FY09 29.7 bn), of which, subsidiaries
contributed INR 68.0 bn [FY09 INR (0.7) bn].
Unrealised derivative gains supported improved operations
Unrealised derivative gains for FY10 stood at INR 27.0 bn (43.7% of PBT), primarily on
account of reversal of derivative losses incurred by Novelis (INR 23.8 bn) during FY09.
Hindalco, on a standalone basis, was not providing for MTM losses on derivative contracts
till FY09. During FY10, Hindalco’s standalone entity early adopted AS 30 and adjusted the
net loss of INR 2.3 bn (net of deferred tax of INR 1.2 bn) arising from fair valuation of
outstanding derivatives as at FY09 end against general reserve. INR 1.8 bn of derivative
gains for FY10 have been routed through the P&L.
Derivative driven profit variability likely to reduce
Derivatives in Novelis, which caused huge losses in FY09, were primarily taken to hedge
the customer fixed price contracts. Last of such contracts expired on CY09 end. The new
agreement does not contain such metal price ceiling. Going forward, variability in
profitability on account of derivative will not be substantial.
Market Data Inadequate provisioning for copper purchase in FY09 hits profitability
Raw material consumed for copper business during FY10 includes INR 2.6 bn (4.2% PBT)
Share in issue (mn): 1,913.7 of additional liability for copper concentrate purchased during FY09 for which price and
M cap (INR bn/USD mn): 371 / 8,120 quantity was not finalised in earlier years. The company has made a fresh provision of
Avg. Daily vol. BSE (’000): 11,785 INR 1.1 bn for FY10 for similar contracts.
High court approvals keep interest expenses off P&L

Promoters* : 32.1 Interest and finance charges of INR 3.0 bn incurred on loans taken by AV Minerals
MFs, FIs & Banks : 15.9 (Netherlands) B.V, a subsidiary for Novelis, have been charged to the business
reconstruction reserve (BRR), which has resulted in profit for FY10 being higher by INR
FIIs : 27.0
3.0 bn (7.6% of PAT). BRR had been formed in FY09 by seeking a court approval for
Others : 25.0
transferring the balance in share premium account to BRR.
Operating cash flows supported by acceptances and QIP facilitate capex
Cash from operation post interest paid stood at INR 32.5 bn, supported by increase in
acceptances by ~INR 17 bn.
The company is pursuing aggressive capex plans. Net cash outflow for capex during FY10
stood at INR 41.7 bn (FY09 INR 25.9 bn)
Interest capitalised for FY10 stood at INR 3.4 bn (FY09 INR 3.3 bn)

1
Improved operations, coupled with exchange fluctuation and dilution reduced D/E
During FY10, Hindalco’s loan book reduced by 43.1 bn, to INR 240 bn (FY90 INR 283.1 bn),
primarily on account of exchange fluctuation. Net loan repaid as per cash flow stands at
INR 3.2 bn.
Hindalco raised INR 27.9 bn by issuing 213.2 mn equity shares of INR 1 each at a premium
of INR 129.9/share through QIP.
Consequently, the D/E of the company reduced from 1.8x in FY09 to 1.1x in FY10.
Other highlights
The company had issued ESOPs to its employees, which have been accounted on the
intrinsic value basis. Had the company accounted the same on fair value basis, profit for
the year would have been lower by INR 18.4 mn.
Cash conversion cycle increased from 44 days in FY09 to 45 in FY10, primarily due to
increase in inventory days from 57 in FY09 to 71 in FY10; impact partly offset by rise in
creditor days from 50 in FY09 to 66 in FY10
Inventory has increased 32.4% from INR 85.2 bn in FY09 to INR 112.8 bn in FY10
primarily on account of increase in base metal prices.
Hindalco has an investment of INR 344.5 mn in trident trust which holds 16.3 mn treasury
shares in the company.
Goodwill of INR 44.3 bn and customer relationship of INR 17.8 bn constituted 28.8% of the
net worth.
Book value per share of the company on a consolidated basis stood at INR 112.5 Vis a vis
INR 145.8 on a standalone basis primarily on account of losses incurred in Novelis charged
to BRR.
Movement in shareholder's funds (INR bn)

Particulars FY10
Opening shareholder's fund 157.6
Add:
Issue of share capital (net of expenses) 27.5
Exchange translation losses 1.9
Un-reconciled 68.7
decrease in securities Less:
premium of INR 1.7 Proposed dividend including tax 3.0
bn Net Loss on fair valuation of derivatives 2.3
Others 0.8
Interest on loan taken for Novelis (BRR) 3.0
Unreconciled decrease in securities premium 1.7
10.9
Closing shareholder's fund 215.4
2
Hindalco Industries
Base metal movement
Reversing of commodity cycle led to

recouping unrealised MTM commodity
15,000 4,000
derivative losses
12,000 3,200
(USD/tonne)
(USD/tonne)
9,000 2,400
6,000 1,600
3,000 800
0 0
Dec-04
Dec-05
Dec-06
Dec-07
Dec-08
Dec-09
Sep-04
Sep-05
Sep-06
Sep-07
Sep-08
Sep-09
Mar-05
Mar-06
Mar-07
Mar-08
Mar-09
Mar-10
Jun-04
Jun-05
Jun-06
Jun-07
Jun-08
Jun-09
Jun-10
Copper Aluminium (RHS)
Source: Bloomberg, Edelweiss research
Summarised asset liability position of derivatives
(INR bn)
FY10 FY09
Particulars Liability Asset Net fair value Liability Asset Net fair value
Commodity contracts (6.8) 7.1 0.3 (29.4) 7.5 (21.9)
Foreign currency contracts (2.8) 3.4 0.6 (5.2) 2.8 (2.5)
Interest rate contracts (0.7) 0.0 (0.7) (0.9) - (0.9)
Total (10.3) 10.5 0.2 (35.5) 10.3 (25.2)
Significant derivative gains on the commodity contracts.
Cash flow analysis
(INR bn)
Particulars FY10
Non operating (profit)/Loss 8.0
Depreciation 27.8
Gains on derivative transaction net (27.0)
Operating cash flows
Non cash adjustments (9.0)
improves on the back
Direct taxes paid (6.4)
of increase in current
Cash profit after tax 55.3
liabilities primarily
comprising of Increase in trade and other receivables (6.5)
acceptances Increase in inventory (31.1)
Increase in current liabilities and provisions 31.6
Interest paid 16.8
Net cash from operating activities post interest 32.5
3
Balance sheet and income statement analysis
Parent / subsidiary operating profitability analysis (INR bn)

Standalone Subsidiary Consolidated
Particulars FY09 % FY10 % FY09 % FY10 % FY09 % FY10 %
Sales 182.2 100.0 195.4 100.0 477.4 100.0 411.9 100.0 659.6 100.0 607.2 100.0
Material cost 109.6 60.2 125.4 64.2 322.9 67.6 239.3 58.1 432.5 65.6 364.7 60.1
Manufacturing expenses 19.0 10.4 19.4 9.9 17.4 3.6 14.1 3.4 36.4 5.5 33.5 5.5
Personnel cost 8.2 4.5 8.8 4.5 45.2 9.5 41.9 10.2 53.4 8.1 50.7 8.3
Other expenses 15.0 8.2 12.3 6.3 92.6 19.4 48.6 11.8 107.6 16.3 60.9 10.0
EBIDTA 30.4 16.7 29.5 15.1 (0.7) (0.1) 68.0 16.5 29.7 4.5 97.5 16.0
Depreciation 6.7 3.7 6.5 3.3 23.7 5.0 21.4 5.2 30.4 4.6 27.8 4.6
EBIT 23.7 13.0 23.0 11.8 (24.4) (5.1) 46.6 11.3 (0.7) (0.1) 69.6 11.5
Unrealised derivative gain/ (losses) - 1.8 (23.8) 25.2 (23.8) 27.0
EBIDTA excluding derivative gains 30.4 16.7 27.7 14.2 23.2 4.9 42.7 10.4 53.5 8.1 70.5 11.6
Standalone performance
Y-o-Y revenues increased 7.2%.
EBIDTA margins dipped from 16.7% in FY09 to 15.1% in FY10, despite an unrealised
derivative gain of INR 1.8 bn, as:
• In aluminum business, lower Rupee-LME eroded profit by ~INR 7.5 bn.
• Higher coal cost led to an extra cost of INR 1.0 bn at Renusagar Power.
• Copper business, which benefitted from higher contracted TcRc (Treatment charges
and Refining charges), lost INR 7.5 bn on lower by-product credit, in terms of
sulphuric acid realisation and lower fertiliser subsidy.
Subsidiary performance
Novelis
• Despite declined sales owing to decrease in the average LME prices and 2% lower
shipments, adjusted EBITDA increased 55% Y-o-Y, to USD 754 mn, primarily due to price
increases negotiated in specific contracts across regions and cost reduction and
restructuring initiatives.
Aditya Birla Minerals
• Aditya Birla Minerals reported profit after tax of AUD 61.4 mn against a loss of AUD 76.0
mn in the previous year, on the back of sustained cost management.
• Lower production was mainly due to loss of production of copper in concentrate at Mt.
Gordon and cathode production at Nifty oxide operations, which were put under
maintenance. Drop in overall production was partly offset by 13.8% increase in Nifty’s
production of copper in concentrate.
4
Hindalco Industries
efficiency (detailed concept explained in Annexure A). We have analysed Hindalco’s profitability
Table 1: ROE analyser

11.6 1.3 11.6
NOPAT margin (%) 5.3 0.8 7.8
C. Return from other funding (0.5) 1.1 (1.3)
ROAE derived (A+B+C) (%) 14.5 2.9 20.7
ROE tree
28.0
21.0 (1.3 )
10.4
(%)
14.0
20.7
7.0
11.6
0.0
leverage other
funding
ROAE improved significantly on the back of Increase in NOPAT margins from 0.8% in FY09 to
7.8% in FY09
5
Segmental revenues
600
480
(INR bn)
Aluminum revenue 360
dipped on the back of
lower avg.LME prices
240
120
0
Alluminium Copper Others
Segmental EBIT share

73
57
Significant
41
(INR bn)
improvement in EBIT
contribution from
aluminum 25
(7)
Alluminium Copper Others
Segmental EBIT margins

48.0
36.0
Margins improved for

24.0
both segments
(%)
12.0
0.0
(12.0)
FY04 FY05 FY06 FY07 FY08 FY09 FY10
Alluminium Copper
6
Hindalco Industries
Sources of funds
100.0
Proportion of loan 80.0

funds have reduced
of exchange
(%)
fluctuation
40.0
20.0
0.0
Provisions Current liabilities Deferred tax liability
Loan funds Minority interest Shareholder's fund
100.0
Proportion of 80.0
investments in
inventories increased
60.0
during the year
(%)
40.0
20.0
0.0
Fixed assets Investments Inventories Debtors Cash & bank Other current assets
Efficiency ratio analysis

350 3.0
280 2.4
210 1.8
(INR bn)
(x)
140 1.2
70 0.6
0 0.0
Fixed assets excl. CWIP (LHS) Fixed assets turnover ratio excl. CWIP (RHS)
7

170

increased from 44 136
days in FY09 to 45 in
FY10, primarily due
102
(Days)
to increase in
inventory days from
57 in FY09 to 71 in 68
FY10; impact partly
offset by rise in
34
creditor days from 50
in FY09 to 66 in FY10
0
Debt analysis
2.0 10.0
D/E improved on the 1.6 8.0

back of improved
operations, exchange
1.2 6.0
fluctuation and equity
(x)
(x)
dilution
0.8 4.0
0.4 2.0
0.0 0.0
Debt /Equity Interest coverage (RHS)
8
Hindalco Industries

Sales 121,197 193,161 600,128 659,630 607,221
Total income 124,002 197,252 606,689 666,543 610,448
EBITDA 28,449 44,306 66,351 29,695 97,458
EBITDA margin (%) 23.5 22.9 11.1 4.5 16.0
Depreciation 7,959 8,646 24,883 30,378 27,836
Financial costs 3,014 3,135 18,491 12,280 11,041
Loan funds 62,790 84,429 323,524 283,098 239,987
Net fixed assets 98,834 111,533 371,638 347,651 348,013
Investments 31,632 78,741 140,077 103,893 112,455
Cash flow from investing activities (19,435) (63,940) (180,724) 32,188 (54,368)
Cash flow from financing activities 12,953 29,031 129,145 (67,313) 4,284
Net cash flows 5,645 (650) 2,421 7,778 (764)
CAPEX (27,287) (28,809) (27,858) (26,747) (42,756)
Working capital investments (12,156) (5,347) 7,583 2,591 (5,984)
9
JSW Steel Annual Report Analysis July 20, 2010
Improved standalone operations; subsidiaries a drag
Revenue for standalone entity rose 30%, from INR 140 bn in FY09 to INR 182 bn in FY10.
Also, EBIT margin improved from 14.3% to 17.3%, primarily owing to low material cost
and operational efficiencies.
Operating losses from JSW Steel’s (JSW) subsidiaries aggregated INR 2 bn in FY10 (FY09:
operating profit INR 1.5 bn) which dragged down EBIT margins from 17.3% (standalone)
to 14.6% (consolidated). Also, their revenues dipped 60.9% from INR 19.3 bn in FY09 to
INR 7.5 bn in FY10.
On consolidated basis, JSW’s revenue increased from INR 159.3 bn in FY09 to INR 189.6
bn in FY10 as volumes jumped 67% together with a 21% dip in blended sales realisation
(due to drop in steel prices).
Exchange fluctuation led to higher profits, lower debts
JSW posted forex gain of INR 4.1 bn as other income (~18.5% of PBT) in FY10; however,
in FY09, it had reported forex loss of INR 7.9 bn as an exceptional item.
Despite the company raising a loan of INR 6.4 bn (net of repayment), its FY10 loan book
dipped to INR 161.7 bn (FY09: INR 165.5 bn), primarily on account of exchange gain,
which stood at INR 10.2 bn.
Consequently, adjusted*debt/equity for FY10 improved to 2.4x (FY09 3.0x).
Net unhedged payable position as at FY10 end stood at INR 83.5 bn (FY09 INR 96.9 bn).
The company has restated borrowing cost capitalised for FY09 from INR 0.6 bn to INR 2.5
Market Data
bn. The average borrowing cost for FY09 thus increased from 8.6% (as per last annual
52-week range (INR): 1,350 / 588
report) to 9.9%; in FY10 it stood at 8.4%.
M cap (INR bn/USD mn): 206 / 4,378 Accounting and other highlights
During FY10, drilling of second mining concession did not yield any positives. Since JSW
follows the successful effort method for E&P activities, there could be a one-time hit for
Share Holding Pattern (%) cost of unsuccessful concession.
Promoters : 45.0
As at FY10 end, the company has FCCB outstanding of USD 274.4 mn, convertible at
MFs, FIs & Banks : 6.8 INR 953.4 per share on or before June 2012 (conversion makes economic sense at INR
FIIs : 28.8 1361.5). Currently, redemption premium on FCCB is charged through security premium.
Others : 19.5 If the same is charged to P&L, PAT would have been lower INR 704.2 mn (4.4% of PAT).

(% of share in issue) Acceptances as at FY10 end stood at INR 54.6 bn (FY09: INR 50.5 bn). During FY09, JSW
had reported that the acceptances were short term and issued primarily for project
expenditure and raw material purchase.
During Q1FY11, the company issued 17.5 mn warrants at INR 1,210 to Sapphire
Technologies, a promoter group company. Post conversion of these warrants, the
promoter holding will increase from 45.0% to 49.7%.
The number of JSW Shoppe outlets rose to 174 (FY09: 50). Retail sales for the current
fiscal, through JSW Shoppe, accounted for 16% of domestic sales (excluding semis).
*Adjusted for preference shares, FCCB redemption premium and acceptances
1
efficiency (detailed concept explained in Annexure A). We have analysed JSW’s profitability
for the year ended FY08, FY09, and FY10; results and key findings of same are as follows:

11.3 6.1 6.7
NOPAT margin (%) 14.9 9.9 10.6
C. Return from other funding 0.1 0.4 0.6
ROAE derived (A+B+C) (%) 23.0 11.9 19.1

ROAE tree
20.0
0.6
16.0
12.0 11.8
(%)
19.1
8.0

4.0
6.7

0.0
leverage other
funding
ROAE improved during the year on account of exchange gains:
1. RNOA improved on the back of better operating margins.
2. Return from leverage was high primarily due to foreign exchange gain, which may not be
sustainable. Ex-forex gain, return from leverage stood at 7.4% in FY10.
2
JSW Steel

Particulars FY10
Profit before tax and exceptional item 22,000
Healthy operating Non operating (profit)/Loss 8,367
cash flows helped Non cash adjustments 12,549
finance the expansion Direct tax paid (4,594)
plans Cash profit after tax 38,323
Decrease in inventory 578
Decrease in current liabilities and provisions (1,038)
Decrease in working capital (4,710)
Parent - Subsidiary operating profit analysis (INR mn)

FY09 % FY10 % FY09 % FY10 % FY09 % FY10 %
Sales 140,013 100.0 182,025 100.0 19,336 100.0 7,547 100.0 159,348 100.0 189,572 100.0
Material 84,501 60.4 104,607 57.5 11,692 60.5 7,706 102.1 96,193 60.4 112,312 59.2
Operating exp. 24,293 17.4 31,037 17.1 3,858 20.0 720 9.5 28,151 17.7 31,757 16.8
Personnel cost 2,888 2.1 3,652 2.0 2,298 11.9 1,143 15.2 5,186 3.3 4,795 2.5
EBIDTA 28,331 20.2 42,729 23.5 1,487 7.7 (2,022) (26.8) 29,818 18.7 40,707 21.5
Depreciation 8,277 5.9 11,234 6.2 1,601 8.3 1,753 23.2 9,878 6.2 12,987 6.9
EBIT 20,055 14.3 31,495 17.3 (114) (0.6) (3,775) (50.0) 19,941 12.5 27,720 14.6
Subsidiaries dragged down overall operations
1. Revenue from subsidiaries dipped 60.9%, from INR 19.3 bn in FY09 to INR 7.5 bn in
FY10.
2. On EBIDTA basis, subsidiaries reported losses. They have not been able to recoup even
raw material costs, which in our opinion is primarily on account of inventory write downs.
Sources of funds
100.0
80.0
Proportion of loan
funds has reduced
of exchange gains
Debt equity improved
(%)
of exchange 40.0
fluctuation
20.0
0.0
3
100.0
80.0
Commissioning of
crude steel capacity 60.0
expansion and hot
(%)
strip mill during
40.0
FY10, increased the
proportion of fixed
assets 20.0
0.0

Fixed assets CWIP Goodwill Investments
Inventories Sundry debtors Current assets

Sales 62,155 85,544 124,567 159,348 189,572
Total income 66,032 87,069 126,629 162,190 195,001
EBITDA 17,505 27,774 34,780 29,818 40,707
EBITDA margin (%) 28.2 32.5 27.9 18.7 21.5
Depreciation 4,058 4,983 7,419 9,878 12,987
Financial costs 3,687 4,069 6,256 11,681 11,149
Net profit (reported) 8,565 13,039 16,400 2,749 15,976
Loan funds 40,961 41,730 121,362 165,502 161,730
Net fixed assets 83,799 102,059 215,848 286,775 293,082
Investments 851 2,450 4,696 3,966 6,282
Net current assets 4,253 1,985 (5,857) (31,699) (26,027)
Cash flow from financing activities (2,650) (3,844) 66,956 11,169 (5,762)
Net cash flows 59 1,941 1,719 (122) (1,471)
CAPEX (15,971) (23,564) (52,439) (59,735) (27,537)
Working capital investments 2,636 3,145 1,570 26,781 (4,710)
4
Sterlite Industries Annual Report Analysis June 23, 2010
Group companies: Exposure increases ~ 2.0x to INR 115.4 bn
Sterlite Industries’ (Sterlite) exposure (investments and loans & advances) to group
companies (associates, fellow subsidiaries and companies under same management)
increased 2.0x to INR 115.4 bn (FY09: INR 38.5 bn), ~ 18.9% of total assets (FY09:
8.6%), in FY10.
• Loans and advances to associates (Vedanta Aluminium) jumped ~9.1x to INR 85.5
bn (FY09: INR 8.5 bn; includes overdue interest of INR 595.7 mn). Also, Sterlite
guaranteed Vedanta Aluminium’s liabilities aggregating INR 48.4 bn (FY09: INR 35.8
bn).
• Loans and advances to fellow subsidiaries (Konkola Copper Mines) increased ~

21.1% to INR 6.8 bn during the year (FY09: INR 5.6 bn).
• Investments (long term and current) in associates dipped 5.5% to INR 22.9 bn in
FY10 (FY09: INR 24.2 bn).
Income (guarantee commission and interest) received from group companies was at INR
3.9 bn (FY09: INR 683.8 mn), ~ 5.6% of reported PBT before exceptional items (FY09:
1.2%), and share in associates’ profits stood at INR 587.7 mn (FY09: loss, INR 1.5 bn).
Cash conversion cycle shortens ~ 71.5%

Sterlite’s cash conversion cycle dipped by 31.8 days (71.5%) to 12.7 days (FY09: 44.5
days) in FY10. All the three components, viz., inventory, receivables, and payables,
contributed ~10 days each in shortening the cash conversion cycle.
Market Data
52-week range (INR): 232 / 134 Accounting policy highlights
Share in issue (mn): 840.4 The company opted for early adoption of AS 30–financial instruments, recognition and
measurement FY08. Consequently:
Avg. Daily vol. BSE (’000): 13,406.8 • Financial assets and liabilities are valued at fair values, resulting in lower FY10 PBT
by INR 32.6 mn (FY09: Lower, INR 2.7 bn; FY08: Higher, INR 2.7 bn).
Share Holding Pattern (%) • The option component embedded in convertible senior notes is valued at fair value
Promoters : 52.1 through income statement, resulting in higher PAT of INR 345.5 mn.
Financial highlights
FIIs : 14.3
Exceptional items aggregate loss, INR 3.0 bn (FY09: Gain, INR 553.1 mn), ~ 4.3% of
Others : 25.7
reported PBT before exceptional items (FY09: 1.0%) comprising:
(% of share in issue) • INR 2.7 bn provision in respect of payments to ASARCO and legal expenses.

• Voluntary retirement scheme expenses of INR 234.3 mn.
In FY10, the company posted exchange loss (including forward premium) of INR 1.4 bn
(FY09: Gain, INR 2.0 bn), 2.1% of reported PBT before exceptional items (FY09: Gain,
3.5%).
As per the companies law, share issue expenses of INR 817.2 mn have been adjusted
against the securities premium account, 1.2% of reported PBT before exceptional items.
1
Derivatives exposure
Unhedged foreign currency exposure in respect of liabilities stood at INR 86.3 bn (net) in
FY10.
Sterlite has entered into forex forward contracts aggregating INR 25.5 bn to hedge
currency risk. It has also entered into commodity derivative contracts to buy (net) 425
MT of copper and sell (net) 95,892 oz of gold, 890,229 oz of silver, and 2,200 MT of zinc.
efficiency (detailed concept explained in Annexure A). We have analysed Sterlite’s
profitability for FY09 and FY10; results and key findings are given below:

21.1 17.7
Lower operating OPATO (operating asset turnover) (x) 1.2 0.9
assets turnover ratio
offset better operating
margin, higher B. Return from leverage (FLEV x spread) (%) (6.9) (3.9)
financial yield, and FLEV (financial leverage) (x) (0.5) (0.4)
lower financial
leverage
Net financial spread (RNOA -NBC ) (%) 13.3 9.6
C. Return from other funding (%) 0.2 (1.2)
ROE Derived (A+B+C) (%) 14.4 12.6
RoE tree
24.0 FY09 24.0 FY10
18.2 18.2
(6.9)
12.4 (0.2) 12.4 (3.9 )
( 1.2 )
(%)
21.1
(%)
17.7
6.6 14.4 6.6 12.6
0.8 0.8
(5.0) (5.0)
RNOA Return Return ROAE RNOA Return Return ROAE
from from other from from other
leverage funding leverage funding
2
Sterlite Industries
Sources of funds

100.0
80.0
Shareholders’ funds
continue to dominate
60.0
(%)
sources of funds;
leverage comfortable
40.0
20.0
0.0


Deferred tax liability (net) Current liabilities Provisions
100.0
Current assets soar on

back of loans and 80.0
advances to group
companies
(%)
60.0
40.0
20.0
0.0
100.0
Lower material costs

75.0
marginally offset
lower other income
50.0
(%)
25.0
0.0
(25.0)
Material cost Personnel cost Other operating expenses

Depreciation Finance charges Exceptional items
Other items Taxes Dividends
Retained earning
3

90
72
54
(Days)
Better inventory,
receivables, and
payables management 36
contribute to shorten
cash conversion cycle
18

0
Profitability, returns, and efficiency ratios

80.0 3.5
Lower material cost 64.0 2.8

boost EBITDA margin;
lower asset turnover
48.0 2.1
(x)
(%)
depresses ROCE (pre

tax). Lower other
income and higher 32.0 1.4
taxes dent PAT margin
and RoE
16.0 0.7
0.0 0.0
EBITDA margin (%) PAT margin (%)

ROCE (pre tax) (%) ROE (%)
Asset turnover ratio (x) Equity turnover ratio (x)
4
Sterlite Industries
Summary financials (INR bn)

Sales 131.3 243.9 247.1 211.4 244.1
Total income 134.6 250.7 262.7 233.0 263.7
EBITDA 34.4 94.1 78.6 47.0 60.7
EBITDA margin (%) 26.2 38.6 31.8 22.2 24.9
Depreciation 5.3 8.0 5.9 7.0 7.5
Adjusted financial costs 2.4 3.8 3.1 4.0 3.4
Exceptional items gains/ (losses) (0.1) (1.6) (0.5) 0.6 (3.0)
Net profit 16.8 44.8 44.0 35.4 37.4
Equity shareholders' funds 61.5 100.0 226.5 259.3 374.1
Loan funds 51.9 46.2 51.2 70.9 93.5
Net fixed assets 85.5 97.2 124.4 172.1 233.5
Current assets loans and advances 60.4 90.6 88.2 116.4 175.1
Current liabilities and provisions 33.0 48.4 28.0 38.1 44.4
Net current assets 27.4 42.2 60.2 78.2 130.7
Cash flow from operating activities 22.1 56.9 63.8 58.4 41.8
Cash flow from investing activities (16.2) (43.1) (136.4) (77.2) (132.7)
Cash flow from financing activities (3.1) (13.9) 81.0 3.7 88.2
Net cash flows 2.8 (0.0) 8.4 (15.1) (2.6)
CAPEX (11.9) (10.9) (30.2) (40.2) (62.1)
Working capital investments (8.3) (18.6) 2.0 13.6 (8.5)
5
Tata Steel Annual Report Analysis July 27, 2010
Lower capacity utilisation, higher costs in subsidiaries drag profitability
Tata Steel’s (TSL) FY10 consolidated revenue dipped 30.5% to INR 1.0 tn from INR 1.5 tn
in FY09, along with a dip in EBIDTA margin from 12.3% in FY09 to 7.9% in FY10.
Standalone operations were muted as revenues grew marginally by 2.9% from INR 243.2
bn in FY09 to INR 250.2 bn in FY10, along with a dip in EBITA margin from 37.3% in
FY09 to 36.0% in FY10.
Subsidiaries, primarily led by Corus, displayed dismal performance as their average

capacity utilisation remained low ~66% (~ 53% in H1FY10 and 80% in H2FY10).
At the EBIDTA level, subsidiaries reported loss. The company ascribed the losses
primarily to sudden and unilateral termination of a 10-year offtake agreement by four
international customers of the slab produced in Teesside. Further, being a non integrated
manufacturer, EBIDTA margin at Corus remains low vis-a-vis Indian operations.
Healthy cash flows augment debt repayment; facilitates domestic capex
Despite low PBT of INR 0.3 bn in FY09, TSL reported cash from operations post interest of
INR 72.0 bn primarily owing to dip in working capital due to reduced level of operation
and depreciation. This has been utilised for repayment of debt and part finance capex.
Loan book reduced from INR 599 bn in FY09 to INR 531 bn in FY10, mainly due to debt
repayment of INR 26.9 bn and exchange gains; this implies enhanced future profitability.
Jamshedpur capacity expansion 2.9 mtpa, along with new blast furnace “I”, to commence
operation from Q3FY12. This will further improve the productivity of Indian operations,
Market Data which are already one of the cheapest in terms of cost of production.
52-week range (INR): 737 / 408 TSL, during FY10, under an exchange offer swapped 1% CARs of USD 493 nm (YTM
Share in issue (mn): 887.2 5.15%) with 4.5% FCCB of USD 546.9 mn. Though the YTM charge to the company’s
M cap (INR bn/USD mn): 472 / 10,076 balance sheet will reduce, the charge to P&L will increase as earlier redemption premium
on CARs was directly routed through reserves (refer page 7 for details).
Avg. Daily vol. BSE (’000): 10,349.8
Cost control measures on track to enhance savings

‘Weathering the storm’ program helped cost savings of GBP 866 mn.
Promoters : 31.3
MFs, FIs & Banks : 26.5 The Teesside facility has partially mothballed in February 2010 to contain losses.
FIIs : 15.5
However, disposal of assets may lead to onetime losses.
Others : 26.7 Efforts on securing captive raw material for Corus:
* Promoters pledged shares : 11.0 A) DSO project, Canada, is expected to commence 4 MTPA sinter fines from Q3CY11,
for which Tata Steel has 100% offtake rights.

B) Benga coal project, Mozambique, feasibility study has revealed production of 10.6
mtpa ROM, of which, 5.3 mtpa ROM is expected to commence by Q2CY11, for which
Tata Steel has 40% offtake right.
The company, during the year, had charged actuarial losses on pension liabilities of Corus
of INR 35.4 bn (FY09 INR 54.9 bn) directly to reserves. IGAAPs, however, requires the
actuarial gains/ losses to be routed through the P&L.
1
TSL had opted to account the exchange fluctuation on long-term monetary items as per
amendment in AS 11; consequently, at the end of FY10, TSL had a credit balance of INR
2.1 bn in the FCTDA (FY09: debit balance of INR 4.7 bn) pending to be amortised.
Unhedged loans payable for the standalone entity as at the end of FY10 stood at USD
1135.9 mn (FY09 USD 1160.7 mn)
efficiency (detailed concept explained in Annexure A). We have analysed Tata Steel’s
profitability for the year ended FY08, FY09, and FY10; results and key findings of same are as
follows:

A. Return on net operating assets (RNOA) 21.4 12.1 0.7
NOPAT margin (%) 8.2 7.0 0.5
B. Return from leverage (FLEV x spread) (%) 8.5 12.3 (4.1)
Net financial spread (RNOA -NBC) (%) 8.6 7.5 (2.1)
C. Return from other funding (%) 0.1 0.5 (0.0)
ROE Derived (A+B+C) (%) 29.9 24.8 (3.4)
ROAE tree
1.0
0.7
0.0
ROE dipped
significantly due to
low margins and (1.0)
capacity utilisation,
(%)
partially (4.1) (3.4)

compensated by (2.0)
increase in profit on
sale of investment
(3.0)
(4.0)
RNOA dipped significantly on the back of weak product demand, resulting in:
1. dip in capacity utilisation
2. shrink in operating margins
Net borrowing cost dipped on account of profit on sale of investment of INR 12.9 bn
(FY09 INR 2.5 bn).Ex profit on sale of investment NBC stood at ~5.2%
2
Tata Steel
Parent - Subsidiary operating profitability analysis (INR bn)

FY09 % FY10 % FY09 % FY10 % FY09 % FY10 %
Sales and operating income 243 100.0 250 100.0 1,230 100.0 774 100.0 1,473 100.0 1,024 100.0
Material expenses 57 23.6 59 23.5 691 56.2 390 50.4 749 50.8 448 43.8
Personnel expenses 24 9.7 23 9.2 156 12.7 142 18.3 180 12.2 165 16.1
Operating expenses 59 24.1 65 26.2 288 23.4 212 27.4 347 23.6 277 27.1
other expenses 13 5.2 13 5.1 4 0.3 41 5.2 16 1.1 53 5.2
EBIDTA 91 37.3 90 36.0 91 7.4 (10) (1.2) 181 12.3 80 7.9
Depreciation 10 4.0 11 4.3 33 2.7 34 4.4 43 2.9 45 4.4
EBIT 81 33.3 79 31.7 58 4.7 (44) (5.7) 139 9.4 36 3.5
Note : Expense capitalised have been adjusted against the operating expenses
Analysis of performance
Standalone Consolidated
Key Highlights Key Highlights
Remained profitable Revenue from subsidiaries dipped 37.1% on the back of
low demand
Operating profitability resonably maintained Sudden termination of 10-year Offtake Agreement by 4
international slabs customers of Teeside facility
Modest operating revenue growth of 2.9% Proportion of material cost continued to be high on account
of non captive RM sourcing
Capaicity utilisation remained high Underutilisation of capacity dents profitability on account of
fixed costs
Subsidiaries report EBIDTA losses
Positive triggers for future Positive triggers for future

Capacity expansion at Jamshedpur of 2.9 MTPA in Q3FY12 Demand on a Uptick in H2FY10 led to better capacity
utilisation
Blast furnace "I" to commence in Q3FY12 Teeside facility partially mothballed in Feb' 10 to contain
cost
Decrease in RM cost as it replaces blast furnaces A , B, D, E Weathering the storm program helped bringing in cost
saving of £ 866 mn
Dharma port commencement in Q2FY11 to integrate Management hopeful of making corus partially capive with
logistic cost & consolidate supply chain RM in future
DSO Project in Canada where Tata Steel will have 100%
offtake rights of sinter fines expected to commence
production of 4 mtpa in Q3CY11
Benga coal project, Mozambique, to commence production
of of 5.3 mtpa ROM in Q2CY11 (1st phase); in this, TSL has
has 40% offtake right
3
Capacity utilisation analysis

700 3.0
Significant drop in 560 2.4

overall capacity
utilisation during 420 1.8
(INR bn)
(x)
FY10
280 1.2
CWIP is primarily 140 0.6

attributable to

ongoing expansion in
India 0 0.0

Fixed assets CWIP Fixed assets turnover ex CWIP
Q-o-Q cost and realistation analysis
Tata Steel India

2.0 1,500
Capacity utilisation 1.6 1,200

remains robust
(mn tonne)
1.2 900
(USD)
Margins improving
0.8 600
Q2FY10 onwards
0.4 300
0.0 0
Q1FY09 Q2FY09 Q3FY09 Q4FY09 Q1FY10 Q2FY10 Q3FY10 Q4FY10
Production Delivery Revenue /Tonne Operating Cost/ Tonne
Corus
7.0 1,350
Volumes picked up 6.0 1,200

since Q2FY10…
(mn tonne)
5.0 1,050
(USD)
…however EBIDTA
turns positive only in
4.0 900
Q3FY10 on the back
of improved
realisations
3.0 750
2.0 600
Q1FY09 Q2FY09 Q3FY09 Q4FY09 Q1FY10 Q2FY10 Q3FY10 Q4FY10
Production Delivery Revenue /Tonne Operating Cost/ Tonne
4
Tata Steel

100
80
(Days)
increased marginally
40
20

0


Particulars FY10
Healthy cash flows Non operating (profit)/Loss 34.3
utilised for financing Non cash adjustments 48.3
capex and repayment
of loans
Decrease in trade and other receivables 20.9
Decrease in inventory 18.8
Increase in current liabilities and provisions 6.7
Decrease in working capital 46.5
Interest paid 32.7
Net cash from operations post interest 72.0
Movement in shareholder fund (INR bn)

Particulars FY10
Opening balance 271.4
Add:
Profit for the year (20.1)
Issue of share capital 24.2
Forex gain on long term monetary liabilities 6.8
Actuarial losses has
Gains on effective cash flow hedges 0.6
directly debited to
shareholder’s fund Premium on CARs written back 1.7
capital expenditure contributuion 0.2
Others 1.2
Less:
Proposed dividend (equity & preference) incl. tax 9.1
Acturial loss 35.4
Exchange translation losses on non integral foreign operations 11.3
Closing balance 230.2
On a standalone basis, shareholders’ fund as at the end of FY10 stood at INR 371.7 bn. The
difference with the consolidated net worth is primarily on account of actuarial losses of INR
31.3 bn, foreign currency translation difference on non integral operations of INR 59.9 bn and
losses in subsidiary post acquisition.
5
Sources of fund
100.0
80.0
60.0
(%)
40.0
20.0

0.0

Other Liabilities
Application of fund
100.0
80.0
Proportion of other
current assets has
decreased primarily 60.0
(%)
on account of
reduction in advances
40.0
20.0
0.0

750.0 15.0
Loan book reduced
during FY10,
primarily on account 600.0 12.0
of repayment and
exchange gains
450.0 9.0
(INR bn)
(%)
Average borrowing 300.0 6.0

cost dipped during
the year
150.0 3.0
0.0 0.0
Loan funds Avg borrowing cost
6
Tata Steel
CAR restructuring analysis

Issue date Aug ' 07 Nov ' 09

Type of instrument CARS FCCB

Amount 493.0 549.9
YTM (%) 5.2 4.5

Coupon rate 1.0 4.5

Conversion price / share 733.1 605.5
Maturity period Sept ' 12 Nov ' 14
Benefits Adverse Impacts

Lower YTM implies lower charge to Higher charge on P&L
net worth
Lower conversion price and higher Under IFRS accounting the reduction in conversion
tenure to facilitate easy conversion price/increase in maturity period leads to higher
option valuation resulting in higher interest (YTM)
charge to P&L

Sales 203,221 252,124 1,315,336 1,473,293 1,023,931
Total income 206,148 258,733 1,324,635 1,480,954 1,040,512
EBITDA 63,455 74,513 177,842 181,294 80,443
EBITDA margin (%) 31.2 29.6 13.5 12.3 7.9
Depreciation 8,604 10,110 41,370 42,654 44,917
EBIT 54,851 64,403 136,472 138,640 35,525
Adjusted financial costs 2,076 6,341 45,394 37,907 34,943
Net profit 37,346 41,773 123,500 49,509 (20,092)
Loan funds 33,774 249,255 536,247 599,005 531,004
Net fixed assets 109,021 144,402 600,163 606,708 603,377
Cash flow from financing activities (9,451) 204,803 205,426 (27,548) (51,350)
Net cash flows 2,902 96,951 (122,622) 21,192 6,396
CAPEX (19,328) (29,751) (84,197) (84,337) (71,495)
Working capital investments (5,742) 2,541 (22,227) 2,848 46,465
7
Aban Offshore Annual Report Analysis October 4, 2010
Forex movements on consolidation imbibed in cash flow
Aban Offshore’s (Aban) net loan repaid as per cash flow stood at INR 24.3 bn in FY10.
However, the reported loan book dipped by a mere INR 24.8 bn. Considering that INR
88.4 bn (~62.4%) of the loan book as at FY10 end (FY09: INR 100 bn ~ 60.1% of loan
book) is foreign currency denominated and the INR appreciated 11.4% against USD
during the year, it can be implied that forex gains on revaluation of loans have
been included in repayment of loans in the cash flow.
FY10 cash flow statement states a net sale of investment of INR 8.1 bn on which the
company has recognised a profit of INR 0.2 mn. Despite the sale, Aban reported
increase in gross investment book by INR 0.4 bn (refer page 3 for details).
Derivative losses continued despite appreciating rupee
Surprisingly, the company has incurred derivative loss of INR 555.5 mn in FY10 (FY09:
loss of INR 396.2 mn) despite appreciation of the INR against a depreciation in FY09.
Also, the quantum of losses in standalone and consolidated financials is same despite
varying derivative positions (refer table for derivative analysis on page 3).
INR appreciation impacts translation reserve on consolidation
During FY10, balance in foreign currency translation reserve (FCTR) dipped by INR 5.2
bn on 11.4% appreciation of the INR. However, during FY09 the balance in the FCTR
had increased by INR 4.2 bn on 27.5% depreciation of INR (refer page 3 for details).
Operating metrics improved, but overall margins dipped
Market Data Aban’s consolidated sales increased 10.1% from INR 30.5 bn in FY09 to INR 33.6 bn in
FY10.
52-week range (INR): 1,679 / 637
EBIDTA margin improved from 56.8% in FY09 to 59.0% in FY10. However, PBT margins
dipped from 22.3% in FY09 to 13.2% in FY10 primarily owing to INR 1.2 bn provision
M cap (INR bn/USD mn): 37 / 830
towards diminution in value of long-term investment towards equity investment by a
Avg. Daily vol. BSE (’000): 2,262.8 foreign subsidiary and increase in finance charges.
Interest cost continued to be an overhang on the company and jumped 14.2% (from INR
Share Holding Pattern (%) 8.6 bn in FY09 to INR 9.8 bn in FY10) primarily on account of low interest capitalisation.
Promoters* : 53.1
CWIP dipped from INR 47.0 bn in FY09 to INR 0.1 bn in FY10, primarily due to
MFs, FIs & Banks : 6.0 commencement of new rigs.
FIIs : 5.0
The company’s loan book* dipped from INR 169.7 bn in FY09 to INR 144.9 bn in FY10.
Others : 35.9 Consequently, its D/E* improved 12.0x in FY09 to 7.8x of FY10.
(% of share in issue) Other financial and accounting highlights
FCCB of JPY 5.4 bn are outstanding as at FY10 end (effective conversion price of INR
3,397.4), and will mature in April 2011. Currently, the company is neither providing for
redemption premium nor showing it as contingent liability. Had the company provided
for redemption premium from P&L, PBT for the year would have been lower by INR
138.4 mn (3.1% of PBT). Since FY10 end, the JPY has appreciated ~10.7% against INR
which may lead to further increase in liability.
*including preference shares

1
During the year, INR 25.8 bn loan extended to Aban Holding, Singapore, the company’s
wholly-owned subsidiary, has been converted into equity shares. Accordingly, the
subsidiary has issued 526.4 mn equity shares to Aban.
Goodwill as at FY10 end stood at INR 49.6 bn (227.3% of net worth).
During the year, the company de-capitalised INR 21.8 bn from fixed assets towards the
exchange difference of non-integral operations (FY09: INR 35.7 bn capitalised) and
deducted INR 489.1 mn from depreciation (FY09: INR 700.8 mn added).
efficiency (detailed concept explained in Annexure A). We have analysed Aban’s profitability for
years ended FY08, FY09, and FY10; results and key findings of same are as follows:
RoE analyser
5.7 5.6 6.7
NOPAT margin (%) 30.6 27.6 32.8
ROE Derived (A+B) (%) 59.6 30.3 29.0
Note:* excluding the impact of diminution in value of investment, forex items and derivative contracts cancellation expenses
RoE tree
30.0
24.0
The company has
high financial
18.0 22.3
leverage and hence
(%)
financing will have 29.0

high propelling 12.0
impact
6.0
6.7
0.0
RNOA Return from ROAE
leverage
• NBC increased from 3.9% in FY09 to 4.3% in FY10, primarily on account of lower
interest capitalisation during the year.
• Including forex items, derivatives and diminution in value of investments, ROAE dipped
from 55.4% in FY09 to 18.8% in FY10.
2
Aban Offshore
Investment book analysis (INR mn)

Particulars FY10
Opening gross investments reported (A) 5,756
Increase 629
Mutual funds 95
Joint venture (Venture drilling ASA) 534
Decrease 224
Trade investment (Petrojack ASA) 224
Closing gross investments reported (B) 6,161
Net sale of investment as per cash flow statement (C) 8,097
Profit recognised on sale of investment (D) 0.2
Calculated closing gross investments (E= (A-C+D)) (2,341)
Difference between reported and calculated
8,502
gross investment (B-E)
Cost analysis (INR mn)

FY09 % of sales FY10 % of sales
Personnel cost 3,442 11.3 2,884 8.6
Consumption - stores and spares 1,735 5.7 1,033 3.1
Rental charges for machinery 1,111 3.6 463 1.4
Other expenses
Drilling services and management fees 1,002 3.3 472 1.4
increased
Travelling and transportation expenses 1,659 5.4 1,582 4.7
substantially on
Provision for dimunition value of
account of - - 1,205 3.6
long term investment
deployment of rigs
Foreign exchange loss - - 1,203 3.6
during the year
Other expenses 743 2.4 1,754 5.2
Administration and misc expenses 3,482 11.4 4,395 13.1
13,174 43.2 14,991 44.6
Foreign exchange translation reserve analysis (INR mn)

FY08 FY09 FY10
Dip in translation Exchange gain/ (loss) adjusted in fixed assets (7,044) 34,980 (21,278)
reserve was higher Exchange gain/ (loss) adjusted in net liabilities 6,675 (30,791) 16,061
despite lower Movement in translation reserve (369) 4,189 (5,217)
currency appreciation INR appreciation/(depreciation) (%) 8.3 (27.5) 11.4
Aban classifies all its subsidiaries as non integral, consequently all assets and liabilities have
been restated at the closing exchange rates while P&L items are translated at the exchange
rates on the date of transaction. The difference on account of the above are held in foreign
currency translation difference account till the disposal of investment in the subsidiary.
Derivative analysis (INR mn)

Derivative losses Standalone Consolidated
have remained same
Particulars FY09 FY10 FY09 FY10
on standalone and
Currency Forward contracts/options 10,376 6,722 22,932 9,910
consolidated levels
Interest swaps 1,139 611 2,407 611
despite varying
exposures Loss on forex contracts 396 556 396 556
3

Profit before tax 6,802 4,430
Non operating (profit)/Loss 8,353 9,717
Cash from operations
Non cash adjustments (Incl. tax provision) 6,015 6,607
remains positive and
Direct taxes paid (2,406) (2,584)
was used for
Cash profit after tax 18,764 18,170
repayment of debts
Increase in trade and other receivables (2,841) (1,970)
Increase in trade and other payables 5,782 4,304
Increase in inventories (628) (203)
Decrease in working capital 2,313 2,131
Net cash from operating activities 21,077 20,301
Movement in shareholders fund (INR mn)

Opening shareholders' fund 8,119 17,440
Add
Issue of Preference shares 200 -
Issue of ESOP's 3 7
Issue of shares on QIP - 6,975
Profit for the year 5,407 3,110
5,610 10,092
Less
Proposed Dividend and tax 478 510
Change in Translation reserve (4,189) 5,217
Others - (0)
(3,711) 5,726
Closing shareholders fund 17,440 21,806
Sources of funds
100.0
80.0
Funds raised through

QIP led to increase in 60.0
(%)
proportion of
shareholders’ fund 40.0
20.0
0.0
Equity shareholders' funds Loan funds Deferred tax liability
4
Aban Offshore
100.0
80.0
Rise in proportion of
fixed assets is
(%)
of capitalisation of
rigs which were lying 40.0
as CWIP
20.0
0.0
Fixed assets Goodwill CWIP Investments
Inventories Debtors Cash and bank Other current assets
Leverage analysis
200 25
160 20
Repayment of loans
and favourable forex
movement led to fall 120 15
(INR mn)
in D/E
(x)
80 10
40 5
0 0
Preference shares Debt Debt /Equity
5

DDI Holding AS Norway 100 17,097 28 (756) 10,235 48 (3,102)
Aban Holdings,Singapore 100 14,319 6 (1,737) 34,535 0 (1,765)
Aban International, Norway 100 (171) 0 (1,576) (1,582) 0 (1,511)
Aban Singapore, Singapore 100 2,508 663 (1,366) 16,571 6,536 (1,049)
Deep Drilling 6, Singapore 100 2,204 1 (318) 1,226 21 (670)
Aban 7, Singapore 100 1,958 1 (508) 1,106 0 (583)
Sinvest AS,Norway 100 15,115 948 3,325 25,233 261 (386)
Deep Drilling 1,Singapore 100 11,543 3,337 2,164 10,023 580 (60)
Venture Drilling, Singapore 100 (2) - (0) (2) 0 (0)
Sinvest Cyprus,Cyprus 100 (2) - - (2) 0 -
Aban Energies, India 100 (9) 14 1 (7) 15 4
Beta Drilling, Singapore 100 (3,283) 872 (3,510) 0 15 16
Deep Drilling Invest, Singapore 100 32,522 206 197 28,268 83 56
Deep Drilling 4, Singapore 100 3,994 3,569 1,699 3,575 1,620 327
Deep Drilling 7, Singapore 100 3,148 1,088 500 3,213 1,239 374
Aban Abraham, Singapore 100 2,602 105 78 2,836 2,526 758
Deep Drilling 8, Singapore 100 1,382 2 (26) 2,343 2,116 1,287
Aban 8, Singapore 100 2,352 2,838 1,431 3,561 2,963 1,753
Deep Drilling 3, Singapore 100 11,232 3,467 2,045 11,530 3,001 2,006
Aban Pearl,Singapore 100 2,945 29 4 4,637 2,798 2,154
Total 23,192 4,783 27,703 1,366
PBT margin (%) 20.6 4.9
Profitability of subsidiaries declined further.
During Q1FY11, a rig owned by Aban Peal, Singapore, sunk, which will further dampen
performance of subsidiaries.
6
Aban Offshore

Sales 4,902 7,187 20,470 30,501 33,587
Total income 5,041 8,068 21,350 34,544 33,805
EBITDA 2,812 3,474 10,725 17,327 18,596
EBITDA margin (%) 57.4 48.3 52.4 56.8 55.4
Depreciation 1,014 1,266 3,140 6,015 4,616
Financial costs 436 2,686 6,658 8,553 9,768
Net profit 823 (140) 1,230 5,407 3,110
Equity shareholders' funds* 2,804 2,248 5,059 14,180 18,547
Loan funds* 12,598 111,585 133,494 169,713 144,901
Net fixed assets 7,158 75,203 83,529 128,601 153,514
Net current assets 400 12,241 6,573 3,063 5,288
Cash flow from investing activities (8,254) (87,734) (32,566) (48,183) 4,211
Cash flow from financing activities 4,914 97,676 17,413 26,599 (28,080)
Net cash flows (842) 13,131 (6,812) (507) (3,569)
CAPEX (8,405) (35,745) (32,647) (50,799) (3,935)
Working capital investments 211 (200) (1,654) 2,313 2,131
*adjusted for non-convertible redeemable preference shares considered as debt
7
Reliance Industries Annual Report Analysis June 8, 2010
Loan book and interest cost dip on exchange gains
Reliance Industries’ (RIL) loan book in FY10 dipped by INR 116.5 bn (15.3%), to INR
646.1 bn. Of this decrease, INR 58.2 bn was on account of debt repayment (net) and INR
58.3 bn owing to exchange rate fluctuation (~83% of the company’s loan book is foreign
currency denominated).
Exchange gains adjusted to fixed assets were INR 53.1 bn vis-à-vis exchange loss of INR
121.2 bn during FY09.
The company’s FY10 gross interest expense decreased from INR 52.1 bn in FY09 to INR
30.4 bn. Average gross borrowing cost was significantly lower at 4.4% vis-à-vis 8.3%
during FY09, on account of lower interest rates and INR-USD appreciation by 11.4%
during FY10. Since the balance sheet date, the INR has depreciated 3.4%, which will lead
to reversal of exchange gains as well as higher interest cost during FY11.
Interest charged to P&L jumped 13.4% from INR 18.2 bn in FY09, to INR 20.6 bn in
FY10, on account of lower capitalisation during the year.
Operating cash flow includes exchange rate adjustment of INR 18 bn, which may be on
account of non cash exchange gain included in the P&L.
The company’s ROAE and RNOA have dipped consistently over past two years despite
lower net borrowing cost, primarily due to decline in GRMs (refer ROE analyser).
RIL has a drilling success ratio of 54% and it follows the full cost method for accounting
Market Data
of oil & gas E&P activities. Shift to IFRS will require adoption of the successful effort
52-week range (INR): 1,186 / 840
method, which entails charging of expenses pertaining to unsuccessful wells. This will
Share in issue (mn): 3,270.4 lead to lower profitability and net worth.
M cap (INR bn/USD mn): 3,301/69,817
The company’s cash conversion cycle increased from 18 days in FY09 to 22 days in FY10
Avg. Daily vol. BSE (’000): 7,844.5 on the back of decrease in creditor days from 51 to 47 during the same period.
Expenses paid to related parties increased significantly from INR 38.2 bn in FY09 to INR
51.4 bn in FY10 (refer table 4), which we believe is due to doubling of refining capacity
Promoters : 44.8 post commissioning of the SEZ refinery.
Derivative exposure, both in currency and commodity, has increased substantially over
FIIs : 17.6
the past two years.
Others : 27.0
Unhedged foreign currency exposure at FY10 end stood at INR 504.9 bn.
(% of share in issue) Investments include investment of INR 20 bn in 9% preference shares of Reliance Gas
Transportation Infrastructure (classified as an associate) and INR 7 bn invested during
the year through one of the subsidiaries in 10% preference shares of Shinano Retail (not
an associate).
1
Operating performance and other highlights
RIL’s revenue increased 34.7% from INR 1,512.2 bn in FY09 to INR 2,037.4 bn in FY10
with 50% increase in volume and 13% decrease in prices.
The company, during FY10, had an average utilisation of 98.3%, significantly higher than
that of refineries globally.
The company’s EBIT margins dipped from 11.8% in FY09 to 9.8% in FY10, primarily on
account of lower GRMs in the refining segment and higher depreciation cost.
Petrochemicals emerged as the largest EBIT contributing segment with an increase in

segmental EBIT margin from 13.3% in FY09 to 15.4% in FY10.
Gross block of assets jumped 42.6% from INR 1,571.8 bn in FY09 to INR 2,241.3 bn in
FY10, primarily on account of commissioning of the SEZ refinery and KG-D6 block. This
increase is despite the write down in gross block of INR 53.1 bn due to exchange gains
on forex loans.

With commencement of the SEZ refinery, the inventory of finished goods and crude
increased 101.8% to INR 95.3 bn. However, inventory for stock in process rose only
21.6% to INR 68.3 bn (refer table 2).
During FY10, RIL through the Petroleum Trust sold 88.8 mn shares (adjusted for bonus)
for INR 93.3 bn and realised an exceptional gain of INR 86.1 bn. The company, through
its subsidiaries / trust, further holds 292.3 mn equity shares which have been eliminated
on consolidation.
ROE analyser
RIL for FY08, FY09 and FY10; results and key findings of which are given below:
Table 1: ROE analyser

FY08 FY09 FY10
14.3 9.8 9.4
OPATO (Operating asset turnover) (x) 1.2 1.0 1.1
NOPAT margin (%) 11.5 9.8 8.4
NBC (Net borrowing cost) (%) 1.0 (0.1) 0.1
ROAE derived (A+B+C) (%) 19.9 14.2 12.9
Source: Company’s Annual Report, Edelweiss research

2
Reliance Industries
Chart 1: ROE tree

15.0
0.1
12.0
3.4
9.0
(%)
6.0 12.9
9.4
3.0

0.0

leverage funding

ROAE dips significantly despite commissioning of significant CWIP projects
The company’s RNOA, during FY08 and FY09, was muted on account of high CWIP. RNOA
for FY08, FY09 and FY10 (excluding CWIP) stood at 22.2%, 16.5% and 12.5%,
respectively.
Higher yield on cash and investment @ 7.5%, lower gross interest cost @ 4.4% (due to
exchange rate gains and lower borrowing cost), and capitalisation of interest cost have
caused almost NIL effective borrowing cost charged to the P&L.
Poor GRMs during FY10 further dragged NOPAT margins, resulting in lower ROAE.
Table 2: Loan book reconciliation statement (INR bn)

Difference may be
Opening balance 762.6
exchange gains on
Net debt repaid (58.2)
loans recognised in
Exchange gain capitalised (53.1)
P&L
Closing calculated 651.2
Closing reported 646.1
Difference 5.2
Operating cash flow includes exchange rate adjustment of ~INR 18 bn, which may be on
account of non cash exchange gain included in the P&L.
Table 3: Inventory analysis (INR bn)

Inventory for raw Inventory FY09 FY10 increase (%)
material and finished Raw material 61.7 150.9 144.5
goods increased by FG/traded goods 47.3 95.5 101.8
more then 100% Stock in progress 56.1 68.3 21.6
during FY10. Source: Company’s Annual Report, Edelweiss research
However, stock in
progress increased by
only ~22%.
3
Table 4: Related party expense transaction (Standalone) (INR mn)

Related party FY08 FY09 FY10
Reliance Ports and Terminals 12,050 12,553 27,737
Reliance Utilities 0 3,959 6,745
Gujarat chemical Port Terminal 621 500 574
Reliance Europe 103 216 202
Reliance Utilities and Power 3,188 2,899 2,858
Reliance Industrial Infrastructure 315 383 528
Reliance Gas Transportation Infrastructure 0 71 3,490
Others 9,898 17,647 9,290
Total 26,174 38,227 51,424

Table 5: Investment book details (INR bn)

FY08 FY09 FY10
In Associates 2.5 26.0 24.0
In Others
Long Term
. Unquoted 30.2 7.3 22.0
. Quoted 2.1 2.3 0.4
Current 60.5 28.7 84.7
Total 95.2 64.4 131.1
Current investments have increased, primarily on account of additional investment of

INR 30.6 bn in mutual funds.
Unquoted long-term investments have increased, primarily owing to investment in

preference shares of Shinano Retail and non-convertible redeemable debentures of Citi
Financial Consumer Finance of INR 7 bn each.
Table 6: Parent/subsidiary operating profitability analysis (INR bn)

Particulars Standalone Subsidiary (derived) Consolidated
FY09 % FY10 % FY09 % FY10 % FY09 % FY10 %
Sales 1,418 100.0 1,925 100.0 94 100.0 113 100.0 1,512 100.0 2,037 100.0
Material 1,032 72.8 1,457 75.7 64 68.0 78 69.3 1,096 72.5 1,536 75.4
Operating expenses 72 5.1 74 3.8 15 15.6 14 12.7 87 5.8 88 4.3
Personnel cost 24 1.7 24 1.2 6 6.6 4 3.9 30 2.0 28 1.4
Other expenses 57 4.0 64 3.3 8 8.6 13 11.4 65 4.3 77 3.8
EBIDTA (adj.) 233 16.4 306 15.9 1 1.2 3 2.8 234 15.5 309 15.2
Depreciation 52 3.7 105 5.5 5 4.9 4 4.0 57 3.7 109 5.4
EBIT (adj.) 181 12.8 201 10.4 (3) (3.7) (1) (1.2) 178 11.8 199 9.8

Subsidiary operations continue to be margin dampeners; however, margins have improved

over the years.

4
Reliance Industries
Chart 2: Sources of funds

100.0
80.0
60.0
(%)
40.0
Balance sheet
strength improves
20.0
further on reduction
of loan book; D/E
0.0
stands at 0.6x

Chart 3: Application of funds

100.0
Commissioning of SEZ
80.0
refinery and KG-D6
projects has increased
fixed assets 60.0
(%)
40.0
20.0
0.0
Chart 4: Debt analysis

850 10.0
Repayment of debt, 680 8.0

coupled with
exchange gains on
(INR bn)
510 6.0
forex loans, reduced
(%)
the loan book

340 4.0
Interest cost dipped

170 2.0
on account of INR
appreciation and
lower cost of short- 0 0.0
term borrowings FY06 FY07 FY08 FY09 FY10
through CP Loan book Avg. borrowing cost
5
Chart 5: Cash conversion cycle

80
RIL’s cash conversion 60

cycle increased from
18 days in FY09 to 22
40
days in FY10 on the
(Days)
back of decrease in
creditor days from 51 20
to 47

(20)
Table 7: Currency derivative exposure (INR bn)

Hedging positions
have increased
Interest Rate Swaps 146.1 232.2 483.6
significantly in the
past two years, led by Currency Swaps 20.9 44.4 42.0
options Options (net) 21.8 24.9 448.5
Forward Contracts 190.8 303.8 262.3
Total 379.6 605.2 1,236.5
Table 8: Commodity derivative exposure

FY08 FY09 FY10
Particulars Petroleum Crude Oil Petroleum Crude Oil Petroleum Crude Oil
products sales purchases products sales purchases products sales purchases
(in Kbbl) (in Kbbl) (in Kbbl) (in Kbbl) (in Kbbl) (in Kbbl)
Forward swaps (net) 236 3,457 2,985 6,157 1,900 8,185
Futures - 1,470 256 2,689 5,772 4,967
Spreads 475 6,345 1,908 13,424 10,306 32,141
Options (net) 18,725 1,575 9,387 10,800 1,800 12,175
Margin hedginig 15,820 - 30,650 72,700
Total 35,256 12,847 45,186 33,070 92,478 57,468
Chart 6: Margin hedging

30.0 110.0
Margin hedging as 24.0 88.0

a % of production was
(USD/bbl)
lowest in FY08, when 18.0 66.0

(%)
avg. crude price was

~USD 97/bbl; since 12.0 44.0
then, hedge position
has increased
6.0 22.0
0.0 0.0

Hedgining as % of production EBIDTA margin Average crude prices (RHS)

Note: Avg crude price is wrt last 15 days of respective FY
6
Reliance Industries
Segmental analysis
Chart 7: Segmental revenue

100.0
80.0
60.0
(%) 40.0

20.0

0.0

FY08 FY09 FY10
Refining Petrochemicals Oil & Gas Others
Chart 8: Segmental EBIT

100.0
Petrochemicals
contributed to 80.0
significant proportion
of EBIT 60.0
(%)
40.0
20.0
0.0
FY08 FY09 FY10
Chart 9: Segmental EBIT margin

80.0
Petrochemical 60.0
margins grew from
13.3% in FY09 to 40.0
(%)
15.5% in FY10,
offering respite to
20.0
overall EBIT margin
0.0
(20.0)
FY08 FY09 FY10
7
Dr. Reddy’s Laboratories Annual Report Analysis August 3, 2010
Subsidiaries and one offs drag margin…
Dr. Reddy’s Laboratories’ (DRL) consolidated FY10 revenues rose marginally by 1% to

INR 70.3 bn (INR 69.0 bn in FY09) despite 7.5% increase in standalone revenues to
INR 45.1 bn (INR 41.9 bn in FY09). The difference is primarily on account of continued
dismal performance of Betapharm and other subsidiaries. Also, the higher revenue base
from Sumatriptan drug during FY09 was a drag.
On standalone basis, DRL reported operating profit margin of 25.2% in FY10 (FY09;
20.3%). However, on consolidated basis, operating margins reduced to 20.2% in FY10
(FY09: 18.9%).
Cash flow statement shows that inventory write-down for FY10 is at INR 1.0 bn (FY09:
INR 0.8 bn), (9.4% of PBT) primarily on account of Betapharm and Sumatriptan.
During the year, DRL recorded one-time charge of INR 912 mn i.e. 8.5% of PBT,
related to termination benefits payable to employees.
The company has impaired its goodwill and intangibles by INR 4.6 bn i.e. 42.6% of PBT
(FY09: INR 14.6 bn) towards the acquisition of Betapharm. However under IFRS,
company has recognised impairment loss of INR 8.5 bn, the higher write off under IFRS
is primarily on account of higher intangible recognised at the time of acquisition.
… operating cash flow continues to remain strong
Cash from operating activities has increased from INR 6.0 bn in FY09 to INR 18.5 bn in
FY10 (working capital change in FY09 had dragged cash from operations by INR 8.2
bn). Cash generated from operations is partly used to pay off long-term debts and the
Market Data remaining amount is parked in short-term investments.
52-week range (INR): 1,515 / 696

M cap (INR bn/USD mn): 232 / 5,010 DRL’s return on average equity for FY10 is at 21.3% (FY09; 13.3%), while return on
net operating assets (RNOA) stood at 16.2% (ROE analyser analyses the difference).
Cash conversion cycle has improved slightly from 52 days in FY09 to 51 days in FY10.
Share Holding Pattern (%) Increase in creditor days from 81 in FY09 to 102 in FY10 is offset by increase in debtor
days from 55 to 67 and inventory days from 78 to 86 during the period.
Promoters* : 25.7
MFs, FIs & Banks : 16.2 Revenue share of North America and Europe in DRL’s total revenues has dipped from
60.9% in FY09 to 54.4% in FY10; it has increased in case of Russia and other CIS
FIIs : 28.5
countries, from 10.9% in FY09 to 13.2% in FY10.
Others : 29.6
During the year, the company acquired a unit of the Dow Chemical for INR 1.3 bn and
(% of share in issue) manufacturing facilities of BASF Corporation in Shreveport, Louisiana, USA and related
pharmaceutical contract manufacturing business for INR 1.6 bn; consequently, it
recognised goodwill of INR 478 mn and INR 153, respectively.
Foreign currency translation reserve for FY10 is at INR 2.5 bn (FY09: INR 2.2 bn).
Note: All numbers are as per Indian GAAP and on consolidated basis, unless stated otherwise

1
efficiency (detailed concept explained in Annexure A). We have analysed DRL’s profitability for
the year ended FY08, FY09 and FY10; results and key findings of same are as follows:

8.7 10.7 16.2
NOPAT margin (%) 8.7 8.3 11.4
Net financial spread (RNOA -NBC ) (%) 7.8 8.2 16.1
ROAE derived (A+B) (%) 10.2 13.3 21.3
ROAE Tree
25.0
20.0
5.1
15.0
(%)
10.0 21.3
16.2
5.0

0.0
Improved operating margins and low borrowing cost drive ROAE
1. NOPAT margin has improved from 10.7% in FY09 to 16.2% in FY10.
2. Lower net borrowing cost is primarily on account of significant proportion of foreign

currency denominated loans supported by favourable currency movement whereas
investment book is mainly represented by domestic assets yielding higher returns.
2
Dr. Reddy’s Laboratories

FY09 FY10
% shareholding
Subsidiry name FY10 Networth Turnover PBT Networth Turnover PBT
Betapharm Arzneimittel GmbH 100.0 3,207 9,770 70 1,856 7,288 (1,635)
Reddy Holding GmbH 100.0 580 32 (3,404) 4,425 40 (892)
Promius Pharma 100.0 415 289 (494) (955) 521 (852)
Dr. Reddy’s Laboratories Louisiana 100.0 1,806 1,842 (206) 1,112 1,475 (513)
OOO Dr. Reddy’s Laboratories 100.0 489 5,243 53 161 7,110 (405)
Dr. Reddy’s Farmaceutica do Brasil 100.0 (681) 79 (357) (838) 157 (200)
Reddy Pharma Iberia SA 100.0 (216) 60 (184) (340) 56 (164)
Dr. Reddy’s SRL 100.0 (202) 92 (207) (328) 123 (161)
Dr. Reddy’s Laboratories (Australia) 100.0 (50) - (42) (200) 15 (152)
Reddy Pharmaceuticals Hong Kong 100.0 95 - 23 8 - (88)
Reddy US Therapeutics 100.0 85 - 1 (8) - (63)
Chirotech Technology 100.0 (64) 755 21 (102) 729 (43)
Reddy Pharma Italia SPA 100.0 10 15 1 13 - (14)
Aurigene Discovery Technologies (Malaysia) 100.0 (7) - (8) (19) - (12)
Reddy Netherlands B.V. 100.0 (11) - (4) (22) - (11)
OOO DRS 100.0 153 - 4 143 - (10)
Beta Healthcare Solutions GmbH 100.0 (31) - (9) (27) - (9)
Reddy Antilles N.V. 100.0 196 - (3) 192 - (5)
DRL Investments 100.0 1 - - (2) - (3)
Aurigene Discovery Technologies Inc. 100.0 431 - 3 (11) - (1)
Eurobridge Consulting B.V. 100.0 152 - - 150 - (1)
Trigenesis Therapeutics 100.0 21 - (1) 20 - (1)
Beta Institute 100.0 6 - - 6 - -
Cheminor Investments 100.0 1 - - 1 - -
Dr. Reddy’s Bio–Sciences 100.0 208 - - 208 - -
Dr. Reddy’s Laboratories ILAC TICARET 100.0 - - - - - -
Dr. Reddy’s Laboratories International SA 100.0 - - 4 - -
Dr. Reddy’s Pharma SEZ 100.0 - - 1 - -
Macred India Private 100.0 1 - - 1 - -
Reddy Cheminor S.A. 100.0 (10) - (1) - - 10
Dr. Reddy’s Laboratories (Proprietary) 60.0 (70) 286 (33) (40) 444 22
Dr. Reddy’s New Zealand 100.0 60 141 (1) 84 351 28
OOO JV Reddy Biomed 100.0 (10) - (9) 27 - 37
Dr. Reddy’s Laboratories (U.K.) 100.0 173 1,999 (24) 212 1,965 57
Aurigene Discovery Technologies Ltd. 100.0 496 599 92 719 754 77
Kunshan Rotam Reddy Pharmaceutical 51.3 164 612 45 312 788 115
Dr. Reddy’s Laboratories (EU) 100.0 934 701 102 1,078 771 235
Industrias Quimicas Falcon de Mexico SA de CV 100.0 437 1,926 (75) 613 2,513 241
Lacock Holdings* 100.0 15,058 - 588 16,753 - 399
Dr. Reddy’s Laboratories Inc. 100.0 3,916 22,561 2,953 5,315 18,655 1,492
Dr. Reddy’s Laboratories SA 100.0 4,674 3,023 2,131 7,439 8,649 3,393
Total 32,417 50,025 1,025 37,961 52,404 871
PBT margin (%) 2.0 1.7
PBT margin ex- German generic subsidiaries(%) 10.8 7.5
*holding company of Reddy Holding GmbH, Reddy Pharma Italia SPA
1. Of the total 41 subsidiaries, only 12 were profitable during the year.

2. Aggregated PBT margin, ex – Betapharm and Reddy’s Holding, dipped from 10.8% in FY09 to 7.5% in FY10.
3. Total amount of intangibles including goodwill, at FY10-end, is INR 6.1 bn (FY09: INR 12.9 bn).
3
Inventories write-down analysis (INR mn)

Parent 14 155 345 486 1077*
Subsidiaries 1 209 213 347 (66)
Inventory write-down Consolidated 16 364 558 833 1,011
remains high
% of PBT before exceptional item 0.8 2.9 10.2 10.3 9.4
* as per cash flow

Profit before tax (6,563) 6,183

Non operating (profit)/Loss 471 40
Non cash adjustments 5,702 6,301
Impairment of Goodwill and Intangibles 14,628 4,583
Healthy cash flow
from operations Direct taxes paid (2,791) (2,831)
during the year Cash profit after tax 11,447 14,276
(Increase)/ decrease in trade and other
(7,935) 1,391
receivables
Increase in inventory (2,556) (1,154)
Increase in current liabilities and provisions 5,035 3,997
Increase in working capital (5,456) 4,234
Net cash from operating activities 5,991 18,510
Sources of fund
100.0
Repayment of long- 80.0

term debts led to dip
in proportion of loan
funds from 27.4% in 60.0
FY09 to 20.3% in
(%)
FY10
40.0
20.0
0.0
4
Dr. Reddy’s Laboratories
100.0
80.0
Excess cash
generated from
operation partly
60.0
parked under current
(%)
investments
40.0
20.0

0.0
Fixed assets Investments Inventories Debtors Cash & bank Loans and advances


70 120
improved slightly
60 106
(Days)
50 92
(Days)
40 78
30 64
20 50
Debtor days Cash conversion cycle Creditor days Inventory days

5

Sales 23,627 65,256 49,918 69,006 70,310
Total income 24,814 66,418 51,955 70,000 71,324
EBITDA 3,135 16,641 8,407 13,020 14,195
EBITDA margin (%) 13.3 25.5 16.8 18.9 20.2
Depreciation 1,617 3,791 4,019 4,977 4,131
EBIT 1,518 12,850 4,388 8,043 10,064
Adjusted financial costs 644 1,526 958 972 312
Net profit 1,467 9,659 4,381 (9,172) 3,515
Loan funds 31,169 24,907 19,684 19,976 14,840
Net fixed assets 35,315 38,252 41,809 33,566 31,144
Cash flow from financing activities 26,884 233 (7,754) (2,651) (5,317)
Net cash flows 375 8,673 (10,730) (1,710) 731
CAPEX (1,894) (4,621) (5,092) (6,419) (9,665)
Working capital investments 2,314 2,975 4,024 5,456 (4,234)
6
Ranbaxy Laboratories Annual Report Analysis June 7, 2010
Operating concerns loom large; MTM gains drive profitability
In CY09, Ranbaxy Laboratories (Ranbaxy) reported profit before tax of INR 10.1 bn, post
net forex gains of INR 3.4 bn. However, in our view, adjusted loss before tax will be at
INR 0.7 bn considering unrealised foreign exchange gain of INR 10.8 bn (as per cash flow
statement), representing dismal operating performance.
The exchange gain on derivatives during CY09 represents recovery of MTM loss on
currency option sold (MTM loss during CY08 was INR 26.8 bn). During the year,
outstanding derivative option has been reduced from USD 1.4 bn to USD 1.0 bn,
indicating realisation of partial exchange loss.
During CY09, Ranbaxy has recognised MTM exchange gain of INR 1.5 bn on forex loan.
Unhedged foreign currency loans for CY09 end stood at INR 31.5 bn (CY08; INR 33.3 bn).
USFDA issue continues to hover for the second consecutive year. During the year, the
company has received warning letter for its manufacturing facility in Gloversville and
Paonta Sahib and import alert issued by USFDA.
Other income includes write back of provision made earlier of INR 937.8 mn (9.3% of
PBT).
Dismal cash flow; warrant cancellation; FCCB redemption to keep liquidity stretched
During the year, cash from operating activities stood at INR (1.6) bn (CY08; INR (1.5)
bn) vis-à-vis profit before tax of INR 10.1 bn.
Market Data Cash & bank balance dipped from INR 23.9 bn in CY08 to INR 12.4 bn in CY09 primarily
on account of acquisition of fixed assets of INR 5.2 bn and repayment of loans of INR 4.5
bn.
During Q1CY10, Daiichi Sankyo, holding company has not opted for conversion of entire
23.8 bn warrants to equity shares convertible at INR 737/share.
FCCBs are due for redemption in March 2011, total amount payable is USD 557.8 mn.
Refinancing the same will lead to additional interest cost in the P&L, currently charged to
reserves.
Promoters : 63.9
MFs, FIs & Banks : 7.6 Accounting policy highlights

FIIs : 11.6
Write off/ reversal of deferred tax asset led to higher effective tax rate of 69.2%, despite
Others : 16.9
the company paying MAT.
(% of share in issue) Currently, the company charges redemption premium on FCCB through security premium
account. However, adoption of IFRS/AS30 requires it to charge the same to P&L, which
will lead to dip in PAT by INR 801.3 mn (27% of PAT).
The company has valued ESOP by using the intrinsic value method; had it followed the
fair value method, which is more logical, profit for the year would have been down INR
105.9 mn (1.1% of PAT).
1
New product launch offers some respite…

Ranbaxy’s sales in CY09 grew ~2.5% to INR 75.6 bn (CY08 INR 74.1 bn), primarily on
account of launch of first to file (FTF) products in the US in H2CY09. Operating margins
for the year dipped slightly from 35.1% in CY08 to 34.8% in CY09.
The cash conversion cycle improved from 128 days in CY08 to 120 days in CY09,
primarily on account of increase in creditor days from 70 in CY08 to 89 in CY09, partly
compensated by increase in debtor days from 70 to 76 during the same period.
Other highlights
During the year, Ranbaxy disposed its joint venture company, Nihon Pharmaceutical and
subsidiary company, Ranbaxy (Guangzhou China), for INR 847 mn and INR 646.3 mn,

respectively. Pursuant to this, it has recognised a gain of INR 413.7 mn.

During the year, Ranbaxy has exercised available call option and acquired the remaining
25% stake in Be-Tabs Pharmaceuticals and Be-Tabs Investments for INR 739.5 mn and
recognised goodwill of INR 541.3 mn.
Goodwill as at CY09 end stood at INR 20.9 bn, comprising ~48.2% of the net worth.
efficiency (detailed concept explained in Annexure A). We have analysed Ranbaxy’s
profitability for the year ended CY07, CY08 and CY09; results and key findings of same are as
follows:
ROE analyser CY07 CY08 CY09

(OPATO x NOPAT margin) (%) 9.2 (5.1) 2.6
OPATO (Operating asset turnover) (x) 1.0 0.9 1.1
NOPAT margin (%) 9.0 (5.5) 2.3
B. Return from leverage (FLEV x spread) (%) 17.6 (20.5) 4.5
NBC (Net borrowing cost) (%) (3.8) 18.7 (4.9)
Net financial spread (RNOA -NBC) (%) 13.0 (23.8) 7.5
C. Return from other funding (%) (0.3) (0.3) (0.2)
ROAE derived (A+B+C) (%) 26.5 (25.9) 6.9

Negative borrowing cost, which has contributed significantly to ROAE, is due to:
1. Exchange gains of forex loans and FCCBs credited to profit and loss.
2. Redemption premium on FCCBs, representing ~56.4% of the loan book, has not been
charged to profit and loss account.
2
ROAE tree
10.0
Main drivers of
profitability are MTM 7.5 (0.2 )
gains on derivatives
and forex loans which 2.7
5.0
we believe are not
(%)
sustainable 1.8 6.9
2.5
4.6
0.0
(2.0)
(2.5)
RNOA excl. Forex Return from Forex gain Return from ROAE
forex derivative leverage on leverage other
derivative gain funding
gain
Cash flow analysis
(INR mn)
Particulars CY09
Negative operating Profit before tax and exceptional item 10,098
cash flow due to MTM
forex gain of INR 10.8 Non operating (profit)/Loss (1,076)
bn Non cash adjustments 2,299
Fair valuation loss/(gain) on derivatives (8,932)
Unrealised foreign exchange loss/ (gain) (2,014)
Foreign exchange loss/(gain) on integral operations 161
Cash profit after tax (1,892)
Decrease in inventory 865
Increase in current liabilities and provisions 3,924
Decrease in working capital 271
Net cash from operating activities (1,621)
Capital structure and leverage analysis (INR bn)

Average borrowing CY05 CY06 CY07 CY08 CY09
cost remains low on Shareholder's fund 24.5 25.9 28.0 43.0 43.4
account of FCCBs and Loan Funds* 20.0 39.6 41.4 69.6 53.0
repayment of high
cost short-term debts D/E* (x) 0.82 1.53 1.48 1.62 1.22
Avg Borrowing cost (%) 4.7 3.5 3.5 4.9 1.8
Note: * Adjusted to liability on fair valuation of derivatives
3
100.0
Goodwill forms a 80.0

substantial portion of
assets
60.0
(%)
40.0
20.0

0.0
CY05 CY06 CY07 CY08 CY09

Goodwill Fixed Assets Investments Inventories
Debtors Cash and bank Other current assets

180 100
continues to improve
164 92
148 84
(Days)
(Days)
132 76
116 68
100 60
Inventory days Cash conversion cycle
Debtor days (RHS) Creditors days (RHS)
Deferred tax assets (INR mn)

Particulars CY08 CY09
Deferred tax assets on:
Effective tax rate is at
Tax loss carried forward 12,749 7,222
69.2%, despite the
FCCB redemption premium 1,227 0
company paying MAT
Others 1,514 694
Total deferred tax assets 15,490 7,917
Deferred tax liabilities 3,261 3,171
Net deferred tax assets 12,229 4,746
Deferred tax assets (DTA) dipped by INR 7.5 bn, primarily on account of write-off of tax
losses carried forward, DTA on FCCB redemption premium and reversal of derivative
losses. This has led to high effective tax rate of 69.2%, despite the company paying MAT.
Ranbaxy had de-recognised DTA amounting INR 2.5 bn on the basis of virtual certainty
test in respect of future profitability, of which, INR 1.3 bn is towards carried forward
losses and INR 1.2 bn towards redemption premium payable on FCCB.
4
Revenue growth analysis (INR bn)

India and Asia Pacific
Geography Revenue (INR bn) Growth (%)
helped maintain
volumes; growth CY08 CY09 CY08 CY09
maintained in North North America 19.7 19.6 12.8 (0.9)
America, despite Europe 18.2 15.9 7.9 (12.6)
import alerts by
USFDA, on account of India 15.8 19.4 (5.0) 22.6
launch of FTF product Asia pacific 5.7 6.9 19.9 21.4
Others 14.7 14.2 22.0 (3.4)
Total 74.1 76.0 9.3 2.5

Derivative exposure
Category Currency Cross Amount Buy/
Reduction in currency Currency CY08 CY09 Sell

options indicate Forward contract USD mn USD INR 218.4 20.0 Sell
realisation of partial Forward contract USD mn EUR USD 35.3 1.4 Sell
exchange loss Forward contract USD mn GBP USD 0.2 - Sell
incurred earlier Forward contract USD mn USD BRL 5.3 - Buy
Currency options USD mn USD INR 1,403.0 1,038.5 Sell
Currency swap JPY bn JPY USD 10.4 10.4 Buy
Interest rate swap JPY bn JPY 11.8 11.8
(JPY LIBOR)
5
Strides Arcolab Annual Report Analysis June 11, 2010
Key takeaways
Amalgamation of subsidiaries used to create business reconstruction reserve. Losses/

expenses aggregating INR 4.2 bn, ~5.1x of adjusted PBT* before exceptional items
adjusted against the reserve.
Early adoption of AS-30 in CY08. Up to CY09, INR 838.2 mn income, net (CY09: expense,
INR 41.1 mn) recognised under exceptional items on the option component embedded in
FCCBs.
Taking shelter of companies law, redemption premium aggregating INR 348.7 mn

adjusted against securities premium account.
Business reconstruction reserve helps moderate leverage; would have increased 4.2x to
19.3x (CY08: 3.7x) otherwise.
Related party transactions aggregate 11.2% of sales, 10.6% of receivables.
ESOPs repriced; repricing expenses aggregating INR 10.0 mn adjusted against business
reconstruction reserve.
Exceptional items aggregate INR 575.3 mn (gains, net), ~ 70.2% of adjusted PBT*
before such items.
Sundry debtors outstanding for more than six months and considered good increased
5.2x.
Market Data Business reconstruction reserve created on amalgation of subsidiaries used to

adjust losses against reserves
Share in issue (mn): 43.2 Strides Arcolab (Strides) amalgamated three subsidiaries (Global Remedies, Grandix
M cap (INR bn/USD mn): 16.5 / 351.4 Pharmaceuticals, and Grandix Laboratories) with effective from January 1, 2009.
Avg. Daily vol. BSE (’000): 106.7 As per the scheme of amalgamation approved by high courts of respective judicature,
Strides created a business reconstruction reserve of INR 7.0 bn by revaluing investment
Share Holding Pattern (%) in a 100% subsidiary (Strides Specialties), land, machinery, and transferring the capital
reserve created on amalgamation.
Promoters : 30.8
MFs, FIs & Banks : 29.1 This reserve has been used to write off losses/ diminution in value of fixed assets,
investments, intangible assets, current assets, employee compensation, restructuring,
FIIs : 8.5
and other expenses aggregating INR 4.2 bn (refer business reconstruction reserve table
Others : 31.6
on page 4).
(% of share in issue) Consequently, CY09 PBT is higher by INR 4.2 bn, ~ 5.1x of adjusted PBT* before
exceptional items and ~ 3.9x of adjusted PAT*. As on December 31, 2009, the reserve
aggregates INR 2.9 bn, ~ 36.5% of adjusted net worth*.
Note 1: Strides Arcolab follows January 1-December 31 as its financial year
Note 2: * 6% redeemable preference shares are treated as debt, and preference dividend (including
dividend distribution tax) payable thereon is treated as finance cost.
1

Strides opted for early adoption of AS 30–Financial instruments, recognition and

measurement in CY08. As per AS 30:

• FCCBs are segregated in two components:
a) Option component representing the value of conversion option to FCCB holder.

The option component is valued using the Black Scholes and Merton valuation
model, and the annual change in the fair value of option is recognised in the
income statement. In CY09, INR 41.1 mn (CY08: Gain, INR 452.2 mn; CY07:
Gain, INR 427.1 mn) representing annual change in the fair value of the
embedded option, has been charged to the income statement as an exceptional
item. Up to CY09, Strides has recognised net gains of INR 838.2 mn due to
change in the fair value of option component embedded in FCCBs; the value of
FCCBs on December 31, 2009, is stated at INR 6.3 bn.
b) Debt component representing the debt redeemable, if the conversion option is

not exercised. The debt component is valued at amortised cost and the interest
charge is determined based on effective yield. However, as per the provisions of
companies law, Strides adjusted a significant portion of effective yield,
attributable to redemption premium, against the securities premium reserve. In
CY09, INR 348.7 mn (CY08 INR 443.2 mn; CY07: INR 546.1 mn), 42.5% of
adjusted PBT* before exceptional items and 67.5% of FCCB interest charge, has
been adjusted against securities premium reserves and INR 168.1 mn has been
charged to the income statement.
• Investments in foreign operations of a subsidiary company with USD as the

functional currency have been designated as hedged items and certain FCCBs and
ECBs denominated in USD have been designated as hedging instruments, to hedge
the foreign exchange risk arising out of the INR–USD foreign exchange rate
fluctuation and the resulting exchange difference has been recognised in the hedging
reserve. In CY09, INR 154.0 mn has been credited to the hedging reserve. As on
December 31, 2009, the hedging reserve aggregates negative INR 1.0 bn (CY08:
Negative INR 1.2 bn).
Business reconstruction reserve helps moderate leverage
Strides adjusted debt* increased by INR 1.6 bn (11.5%) to INR 15.1 bn in CY09 (CY08:
INR 13.5 bn) comprising incremental debt (net) of INR 1.4 bn, AS-30 adjustments of INR
41.1 mn, gain of INR 292.2 mn on FCCBs repurchased, and exchange loss restatements
of INR 377.4 mn.
The company’s adjusted debt equity ratio* moderated 180bps to 1.9x (CY08: 3.7x) due
to creation of business reconstruction reserve (discussed earlier). Had the business
reconstruction reserve not been created and had the losses adjusted against the said
reserve been charged to the income statement, the debt equity ratio would have
increased 4.2x to 19.3x.
Related party transactions: 11.0% of sales, 10.6% of receivables
Net sales to related parties aggregated INR 1.4 bn in CY09 (CY08: INR 1.1 bn), ~ 11.2%
(CY08: 10.5%) of total revenues.
As on December 31, 2009, receivables from related parties stood at INR 440.3 mn
(December 31, 2008: INR 303.9 mn), 10.6% of receivables on that date (December 31,
2008: 9.0%).
2
Strides Arcolab
ESOPs valued at intrinsic value and costs adjusted against reserves; re-priced

ESOPs have been valued at intrinsic value and the ESOP cost adjusted against the
business reconstruction reserve as per high court approved amalgamation scheme. Had

the ESOPs been valued at fair value and expenses charged to the income statement,
CY09 PBT would have been lower by INR 10.1 mn.
In CY09, Strides revised the pricing date of options. Additional expense of INR 10.0 mn
due to repricing has been adjusted against the business reconstruction reserve.
ESOPs granted and outstanding on December 31, 2009, aggregate 1.7 mn, ~4.4% of
equity shares outstanding.
Agreement with the Aspen Group
In CY08, Strides entered into a put and call option agreement with the Aspen Group to
dispose of its 49% holding in Pharmalatina Holdings, operating in Latin America, and
recognised an impairment loss of USD 38.1 mn (INR 1.7 bn). As per the agreement,
Strides will exit at a consideration based on a specified EBITDA multiple for the period
ended June 30, 2009.
Strides is currently negotiating terms of exit and as per the agreement, the company is
not entitled to dividends or profits attributable to its 49% interest and consequently
Pharmalatina Holdings have not been consolidated.
The company has also provided a guarantee of USD 75 mn to the Aspen Group, which
will, subject to approval of the appropriate authority, be further increased to USD 152.5
mn.
A subsidiary entered into a share purchase agreement with the Aspen Group for
acquisition of Co Pharma, UK. The agreement provides for a put and call option, wherein
the Aspen Group has a put option to sell its 49% holding to the subsidiary at 7x EBITDA
adjusted for net debt during July 2009 to December 2011. The minimum consideration
payable as per the agreement is GBP 8.0 mn (INR 566.1 mn).
Exceptional items aggregate INR 575.3 mn (gains, net), ~ 70.2% of adjusted PBT*
before such items.
• Profit on buyback of FCCBs of INR 291.2 mn.
• Redemption premium for CY09 provided on FCCBs bought back reversed
aggregating INR 80.0 mn.
• Profit of INR 113.7 mn on sale of a plant owned by a US-based subsidiary.
• Exchange gain of INR 131.6 mn (excluding exchange losses of INR 90.4 mn, treated
as routine item).
• Change in fair value of option component of FCCBs of INR (41.1) mn.
Sundry debtors outstanding for more than six months and considered good increased
5.2x to INR 862.8 mn in CY09 (CY08: 138.5 mn). Provision for doubtful debts charged to
income statement was nil (CY08: INR 96.9 mn).
Other income in CY09 stood at INR 235.7 mn (CY08: INR 3.1 bn), ~ 28.8% (CY08:
123.2%) of adjusted PBT* before exceptional items. The 92.4% decrease is primarily
due to profit on sale of investments/ assets of INR 2.5 bn and exchange gains of INR
407.5 mn recognised in CY08. In CY09, Strides recognised exchange loss of INR 90.4 mn
and profit on sale of investments/ assets of INR 0.1 mn.
Goodwill on consolidation stood at INR 10.1 bn, ~ 1.3x of adjusted net worth*.
3
Strides recognised licensing income of INR 290.0 mn, ~ 2.2% of total revenues, for the

first time in CY09.
Net gains on derivative contracts recognised in income statement stood at INR 117.9 mn
(CY08: Loss INR 454.3 mn, net).

Loans and advances include INR 24.4 mn representing excess managerial remuneration
for earlier years due to the managing director and whole time director pending central
government’s approval. In CY09, the company received central government’s approval
for excess managerial remuneration pertaining to CY07 aggregating INR 27.1 mn.
Financial statements of some subsidiaries and joint ventures, with total net assets of INR
1.8 bn, ~ 7% of consolidated net assets and total revenues of INR 1.3 bn, ~ 10.3% of
consolidated revenues have not been audited but certified by the management.
Net unhedged foreign currency exposure for liabilities as on December 31, 2009, stood
at INR 148.5 mn (December 31, 2008: INR 124.4 mn, liabilities, net), representing 1.9%
of adjusted net worth*. Strides also has short positions aggregating AUD 2.1 mn in
currency forward contracts and USD 10.0 mn (put, net) in currency option contracts.
Post balance sheet date developments
Strides entered in to a licensing and supply agreement with Pfizer to address new market
and product segments. Currently, the company has collaboration with Pfizer for 45
products.
Business reconstrcution reserve (INR mn)

Sources Amount Application Amount
Revaluation of: Impairment of:
Investment in Strides specialities 5,856 Fixed assets 73
Land 754 Goodwill 1,935
Machineries 281 Current Assets 903
Capital reserve on Amalgamation 147 Amortisation of brands 115
Compensation related to product returns and early 365
termination of procurement contract
Long term employee compensation 678
Restructuring and other expenses 117
Balance 2,854
Total 7,039 Total 7,039


Strides for CY08 and CY09; results and key findings are given below:
4
Strides Arcolab
ROE analyser
Particulars CY08 CY09
3.2 6.0
B. Return from leverage (FLEV x spread) (%) (11.2) 3.6
FLEV (financial leverage) (x) @ 4.3 2.5
Net financial spread (RNOA -NBC) (%) (2.6) 1.5
C. Return from other funding (%) 2.4 0.3
ROE Derived (A+B+C) (%) (5.7) 10.0
Note 3: @ gains on sale of investments aggregating INR nil (CY08: INR 2.5 bn) excluded.
ROE tree
6.0 CY08 12.0 CY09
3.0 9.6
3.2 0.3
2.4
0.0 3.6
Better operating 7.2
margin and lower net (3.0) (5.7)
(%)
(%)
borrowing cost drove 4.8 10.0

RoE growth; turns (6.0) (11.2)
positive 6.0
2.4
(9.0)
(12.0) 0.0
RNOA Return Return ROAE
RNOA Return Return ROAE
from from from from
leverage other leverage other
funding funding

Sources of funds
100.0
80.0
60.0
(%)
Business 40.0
reconstruction reserve
boosts equity
shareholders’ fund 20.0
0.0
Adjusted equity shareholders' funds* Adjusted loan funds*
Minority interest Deferred tax liability (net)
5
100.0
80.0
Goodwill on
consolidation 60.0
constitutes one third
(%)
of total assets, 1.3x of
adjusted 40.0
20.0
0.0
Fixed assets Goodwill Investments
Inventories Sundry debtors Cash and bank balance
100.0
75.0
50.0
(%)
Exceptional items
propel CY09 PAT, 25.0
unlike in CY08 when
they had depressed 0.0
PAT
(25.0)
Materials consumed Personnel cost
Operating and other expenses Depreciation
Adjusted finance charges* Exceptional items
Other items Taxes
Dividend Retained earning

25.0 10.0
20.0 8.0
15.0 6.0
(%)
(x)
Business
reconstruction reserve 10.0 4.0
helps decrease
leverage. Borrowing 5.0 2.0
costs dip marginally
0.0 0.0
Adjusted debt/ equity ratio (x)*
Adjusted debt/ equity ratio (excluding credits to BRR) (x)*
Adjusted net debt/ equity ratio (x)*
Adjusted cost of borrowing (%)*
6
Strides Arcolab

140
112
Higher receivable
Higher receivable
days partially offset
days partially offset
(Days)
the gains from better 84
the gains from better
inventory
inventory
management; 56
management;
lengthens cash
lengthens cash
conversion cycle
conversion cycle 28
marginally
marginally

0

112.0
84.0
56.0
(%)
EBITA margin and

ROCE (pre tax) 28.0
increased for second
consecutive year. 0.0
Non-operating and
(28.0)
exceptional items CY05 CY06 CY07 CY08 CY09
make PAT margin and
EBITDA margin
RoE extremely volatile
Adjusted PAT margin*
Adjusted PAT margin* (excluding exceptional items)
ROCE (pre tax)
Adjusted ROE*
Adjusted ROE*(excluding exceptional items)
7

Particulars CY05 CY06 CY07 CY08 CY09
Sales 5,237 7,430 7,443 10,203 13,048
Total income 5,312 7,640 8,696 13,312 13,283
EBITDA 1,113 1,237 (202) 710 1,961
EBITDA margin (%) 21 17 (3) 7 15
Depreciation 211 309 364 399 492
Adjusted financial costs* 384 481 733 881 794
Exceptional items gains/ (losses) - - (299) (1,409) 575
Adjusted net profit* 451 368 (536) 1,045 1,062
Adjusted equity shareholders' funds* 2,588 3,280 2,268 3,662 7,819
Adjusted loan funds* 4,861 6,010 13,266 13,512 15,060
Net fixed assets 3,837 5,816 7,428 6,385 9,319
Investments 0 15 19 3,464 3,414
Cash flow from operating activities 790 1,079 893 1,177 639
Cash flow from financing activities 2,050 879 6,646 134 916
Net cash flows 766 (625) 1,625 (877) 79
CAPEX (1,465) (1,584) (2,513) (3,028) (1,311)
Working capital investments (428) (205) 368 (68) (1,130)
8
Welspun Corp Annual Report Analysis November 22, 2010
Cash conversion cycle improves, but may not be sustainable
Welspun Corporation’s (Welspun) cash conversion cycle decreased from (22) days in
FY09 to (32) days in FY10. It, however, looks unsustainable as was the case in FY09
when cash conversion was low primarily due to steep increase in acceptances. With
acceptances paid off in FY10, advances from customers have increased substantially
from INR 2.2 bn in FY09 to INR 15.5 bn in FY10.
Order book reduced from INR 77.4 bn in FY09 to INR 64.0 bn in FY10. However, the
company has guided that the order book, in quantitative terms, has increased to
791,000 MT FY10 (FY09: 781,000 MT) and the reduction in value is due to lower metal
prices.
Net finance cost increases on lower interest income and capitalisation
Net finance cost increased from INR 1.8 bn in FY09 to INR 2.1 bn, as interest income
dipped from INR 1.0 bn in FY09 to INR 0.2 bn in FY10. This is despite the increase in
cash and investment from INR 10.6 bn in FY09 to INR 18.6 bn in FY10, which, we
believe, is on account of cash received at FY10 end.
Interest capitalised dipped from INR 571 mn in FY09 to INR 81 mn in FY10 on account
of commissioning of US spiral mill and coil mill at Anjarin FY09 end.
Borrowing cost dips as FCCBs replace high-cost debt
High cost debt was replaced by FCCBs, which reduced average borrowing cost from
14.2% in FY09 to 9.3% in FY10.
Operating margins rise, supported by reversal of forex provisioning

Market Data
During FY10, the company’s revenues increased 28.1%, from INR 57.4 bn in FY09 to
INR 73.5 bn in FY10.
EBIDTA margins grew from 11.1% in FY09 to 17.9% in FY10. This was primarily on
M cap (INR bn/USD mn): 49 /1,090
account of lower raw material (RM) costs and reversal of forex provisioning of INR
Avg. Daily vol. BSE (’000): 1,276.5 1,256 mn on asset liability mismatch booked during FY09. Excluding forex provisioning,
EBIDTA margins improved from 13.3% in FY09 to 16.2% in FY10.
FCCB redemption premium/ESOP discounts charged through reserves
Promoters : 40.8

During FY10, Welspun raised USD 150 mn (INR 6.9 bn) through issue of 4.5% FCCBs,
convertible at INR 300/share, maturing on October 2014. Unless previously converted/
FIIs : 19.5
redeemed, the bonds will be redeemed at a premium of 2.8%.
Others : 21.6
Premium payable on redemption of FCCB, aggregating INR 16 mn, has been adjusted
(% of share in issue) against securities premium account.
During the year, 1.1 mn equity shares were issued at a price of INR 80 each, on
exercise of ESOPs. Discount allowed, aggregating INR 30 mn in respect of shares
allotted, is adjusted in the securities premium account.
Welspun accounts ESOPs on intrinsic value basis. Had the company used the fair value
model, PAT for FY10 would have been lower by INR 10.1 mn.
1
Accounting and financial highlights
During FY09, Welspun adopted amended AS11. Accordingly, during FY10, it adjusted
forex gain of INR 348 mn (FY09 loss of INR 616 mn) to the cost of fixed assets. Also, it
transferred exchange gains of INR 94 mn (FY09 loss of INR 533 mn) to "foreign currency
monetary item translation difference account", to be amortised over the balance period
of such long term assets / liabilities, but not beyond FY11.
Of the above, gain of INR 18 mn (FY09 loss of INR 178 mn) has been adjusted in the
current year and gain of INR 75 mn (loss of INR 355 mn) has been carried over.
Welspun also raised INR 4.7 bn via QIP issue during the year.
It has early adopted AS-30 and, accordingly, loss of INR 32 mn (INR 2.0 bn) related to
foreign exchange difference on cash flow hedges for certain firm commitments and
forecasted transactions is recognised in shareholders' funds and shown as hedging
reserve account.
During FY10, the company acquired 99.97% in Welspun Trading for a consideration of
INR 50.2 mn, recognising a capital reserve on acquisition of INR 152.9 mn.
Welspun Infratech, a wholly owned subsidiary of the company has entered into share
purchase agreement with the existing promoters and other shareholders of MSK Projects
to transfer 5.3 mn equity shares (23.13% stake) at a price of INR 130.50 per share.
Further, it also entered into a share subscription agreement to subscribe to 17.1 mn
equity shares of the said company at INR 123/share (to increase the stake to 56.15%.
Moreover, it made an open offer to acquire 20% of post preferential issue equity share
capital of MSK Projects at INR 130.5/share.
efficiency (detailed concept explained in Annexure A). We have analysed Welpun’s
profitability for the year ended FY08, FY09 and FY10; results and key findings of same are as
follows:

15.2 9.8 20.5
NOPAT margin (%) 9.7 5.6 10.1
ROE Derived (A+B) (%) 30.0 13.5 27.1
2
Welspun Corp
ROAE tree
30.0
24.0
6.5
18.0
(%)
27.1
12.0
20.5
6.0
0.0
• ROE improved primarily on account of increase in NOPAT margins on the back of efficient
raw material utilisation and reversal of forex provisioning of INR 1,256 mn on asset
liability mismatch booked during FY09.
• NBC increased, primarily on account of low interest income.
Movement in shareholder fund (INR bn)

Particulars FY10
Add
Issue of shares 4.7
Change in Hedging reserve 2.0
Shareholders’ fund has
Capital reserve on consolidation 0.2
increased on the back
of fresh equity Increase in FCMTA 0.4
issuance, profits and Increase in Translation reserve 1.0
exchange fluctuations 14.4
Less
Proposed Dividend and tax thereon 0.5
0.5
3

240
180
(Days)
decreased from (22)
days in FY09 to (32)
60
days in FY10
(60)
Inventory days Receivable days

Advances from customers Payable days
Order book analysis
90 30.0
Trade advances have 72 24.1 24.0

increased significantly
from INR 2.2 bn in
54 18.0
(INR bn)
FY09 to INR 15.5 bn in
(%)
FY10
36 12.0
18 2.8 6.0
2.6
0 0.2 0.0
FY07 FY08 FY09 FY10
Revenue Order book Trade advances/ order book (RHS)

Particulars FY10
Non operating (profit)/Loss 1.6
Depreciation 2.1
Foreign exchange adjustments (1.3)
Healthy cash flows
utilised for financing Other non cash adjustments (Incl. tax provision) 0.1
capex and repayment Direct taxes paid (1.8)
of loans Cash profit after tax 9.94
Increase in trade and other receivables (2.0)
Decrease in acceptances (24.7)
Increase in trade and other payables 11.2
Decrease in inventories 9.4
Interest paid (2.0)
Net cash from operating activity post interest 1.8
4
Welspun Corp
Sources of fund
100
Proportion of current 80
liabilities has decreased
on account of
repayment of 60
(%)
acceptances
40
20
0
Application of fund
100
80
Proportion of
inventories have
reduced, largely on 60
(%)
account of lower steel

prices and better
40
inventory management
20
0
Fixed assets (incl goodwill) Investments Deferred Tax Asset
30.0 2.5
Loan book reduced in
FY10, primarily on
account of repayment 24.0 2.0
and exchange gains
(INR bn)
18.0 1.5
(x)
12.0 1.0
Average borrowing cost
dipped during the year
as high-cost borrowing 6.0 0.5
were replaced by FCCBs
0.0 0.0
Debt (INR bn) Avg. borrowing cost (%) Debt /equity (RHS)

5

Sales 18,298 26,834 39,945 57,395 73,503
Total income 18,428 26,895 40,466 58,603 73,947
EBITDA 1,655 3,384 6,555 6,348 13,186
EBITDA margin (%) 9.0 12.6 16.4 11.1 17.9
Depreciation 352 476 609 1,433 2,061
Financial costs 530 779 1,232 2,787 2,329
Net profit 614 1,425 3,408 2,135 6,104
Loan funds 8,027 15,146 20,677 26,538 25,476
Net fixed assets 10,113 16,493 26,807 36,804 38,333
Cash flow from operating activities 132 (265) 2,855 13,195 3,821
Net cash flows 606 507 (870) 6,767 2,725
CAPEX (5,325) (6,298) (12,229) (10,708) (3,783)
Working capital investments (1,076) (2,601) (2,794) 5,058 (6,117)
6
DLF Annual Report Analysis October 12, 2010
CARAF/DAL consolidation impact
DLF promoters were issued 9% compulsory convertible preference shares (CCPS) of INR
16.0 bn in DLF Cyber City Developers (DCCDL), convertible into equity shares of DCCDL
at any time within five years from the date of issue at holder(s) option. Conversion will
lead to promoters’ equity stake in DCCDL to 40%.
DCCDL will be under obligation to pay dividends @ INR 1.4 bn/annum on preference
shares till the date of conversion. In FY10, the company posted PAT of INR 3.0 bn and
paid no dividend on equity shares.
Till the date of conversion, there will not be any charge in P&L for minority stake and,
hence, consolidated profits will be higher to that extent. Post conversion, 40% of
accumulated undistributed profits will get subsumed in minority interest.
The increase in shareholders’ funds includes INR 29.3 bn on account of consolidation of

preference shares in DLF Assets (DAL) held by DSIPL. Post balance sheet date, Caraf
(DAL’s holdco/DLF subsidiary) has acquired 90% of the preference shares for INR 30.9
bn, which will have corresponding adjustment to equity and net debt.
DLF’s capital reserve jumped from INR 16.8 bn in FY09 to INR 28.3 bn in FY10 (up
INR 11.5 bn) on account of consolidation of DAL. (refer table 1 for details).
DAL earns rental income from leasing of properties purchased from DLF at a value
arrived at by assuming a rental and capitalising the same at a rate of 9%. Post
consolidation, the aforesaid properties are stated at sales price of DLF which includes
profit of INR 66.4 bn on transactions till FY09.
Redemption of preference shares may impact future cash flows/debt
DLF has redeemable non-convertible preference shares (NCPS) of INR 19.7 bn, which
were due for redemption as on balance sheet date including redemption premium of INR
5.9 bn. The said NCPS will be redeemed in the next FY at a reduced premium of INR 3.8
Market Data bn (refer table 2 for details).
52-week range (INR): 490 / 251 If one were to consider redeemable preference shares and preference shares in DAL
held by DSIPL as debt instead of equity, as prudence would suggest, the revised D/E
would be 1.07x vis-à-vis the reported 0.71x.
Avg. Daily vol. BSE (’000): 9.680.4

The redemption premium on preference shares has not been amortised through the P&L
(INR 2.1 bn YTM; 12.3% of FY10 PAT) as would have been a prudent accounting policy,
in our view. The Companies Act, 1956, allows the same to be charged as a one-time
charge against the securities premium account.
Promoters* : 78.6
MFs, FIs & Banks : 0.5 DAL consolidation leads to reduction in debtors; debtors > 6 months has gone up
FIIs : 15.1
Debtors exceeding six months increased from INR 9.8 bn in FY09 to INR 13.0 bn in FY10,
Others : 5.8 though overall debtors declined due to consolidation of DAL (refer chart 5).
During FY10, DLF forfeited INR 320.3 mn (FY09 INR 73.8 mn) on account of non-
payment of dues from customers included in revenues.
Interest charged to customers increased from INR 0.9 bn in FY09 to INR 1.1 bn in FY10.
Interest accrued from customers increased to INR 1.4 bn (FY09: INR 0.7 bn).

1
Operating metrics dip
DLF’s revenues dipped 24.7% from INR 104.3 bn in FY09 to INR 78.5 bn in FY10 on
account of reduced sales to DAL.
PBT margins declined from 51.8% in FY09 to 32.5% in FY10 as EBIT margins dipped from
55.7% to 46% and finance charges increased from INR 5.5 bn to INR 11.1 bn.
Divestment of non-core assets
The company’s loans and advances slipped 21.8% from INR 97.1 bn in FY09 to INR 75.9
bn in FY10, primarily on account of divestment of non-core assets comprising advances to
be received from the government for integrated township projects and convention centres,
advance licence fee refunds, and disposal of select land parcels held for hotel development
under the hotel business.
DLF Brands (DBL), the retail arm, ceased to be a subsidiary of DLF by preferential
allotment of a majority stake to a promoter entity. DBL had accumulated losses of INR
424.1 mn; however, pending approval no effect has been given in financial statements.
Other highlights
DLF follows PoCM DLF’s revenue recognition policy is based on the percentage completion method (PoCM)
which includes cost of and is determined as a proportion of actual project costs incurred to date (including cost of
land land) to the total estimated project cost (including cost of land). The project becomes
eligible for revenue recognition when the percentage of completion exceeds 30%.
There are certain claims of existing and previous shareholders of Silverlink (Silverlink
Holdings), a subsidiary, with regard to repurchase of shares held by shareholders in
exchange of secured convertible notes to be issued by Silverlink. These claims originated in
the years prior to the acquisition of Silverlink by DLF. The Court in Singapore has passed
an interim order that Silverlink was in breach of its contract. However, the court has not
quantified any amount. Management has assessed the liability as contingent in nature and
no provision has been made.
The book value of long-term quoted investments is INR 2.5 bn at FY10 end and the market
value is INR 1.7 bn. However, no provision for diminution on investments was made during
FY10. As on the date of this report, the market value is INR 1.8 bn.
DLF has capital commitments of INR 58.4 bn at FY10 end (3x compared to FY09) which will
result in incremental cash outflow.
The company has reduced retained earnings on account of an amalgamation adjustment of

INR 7.4 bn. This had no impact on profits for the year.
Note: All numbers are on consolidated basis, unless stated otherwise
2
DLF
Table 1: Balance sheet showing impact of DAL consolidation (INR bn)

Movement Impact of
Particulars Balance Reason for change
during FY10 DAL
CCPS of INR 29.3 bn held by DSIPL in DAL and INR 16 bn
Share capital 45.2 45.2 -
issued by DCCDL to promoters
Reserves and surplus 17.5 11.5 6.0 Increase in capital reserve
Minority interest (0.1) - (0.1)
Loan funds 53.6 21.2 32.4
Deferred tax liability 2.5 - 2.5
Goodwill (10.0) - (10.0)

Fixed assets 86.5 76.0* 10.5
At sale price of DLF. Includes profit of INR 66.4 bn till FY09
CWIP 54.4 53.0 1.4
Deferred tax asset (0.4) - (0.4)
Investments 41.0 0.0 41.0
Inventory 15.5 - 15.5
Elimination on consolidation of DAL and balance is primarily
Current assets (58.7) (35.5) (23.2)
on account of divestment of non-core assets
Current liabilties (5.0) (6.1) 1.2
Provisions (4.6) 0.0 (4.6)
* - Stated at gross block
Table 2: Redeemable preference shares (INR bn)

Due for Revised Reduction in YTM
Name of subsidiary Redemption
redemption on Amount (A) redemption redemption premium Charge
company amount (B)
BS date amount (C) (D = B-C) FY10
Shivaji Marg Properties Yes 4.8 6.9 5.9 1.0 0.6
DLF Southern Homes Yes 4.6 6.7 5.6 1.1 0.6
DLF New Gurgaon
Yes 4.5 6.1 6.1 -* 0.9
Home Developers
Total 13.8 19.7 17.6 2.1 2.1
* - Subsequent to balance sheet date, the Company has issued redeemable preference shares of INR 6.6 bn, the proceeds of which will be used to
redeem the preference shares
Table 3: Major subsidiary details (INR mn)

% FY09 FY10
Subsidiary company shareholding PBT as PBT as
as on FY 10 Networth Turnover PBT Networth Turnover PBT
% of TO % of TO
Caraf Builders & Constructions * 100.0 NA NA NA NA 43,999 4 (17) (475)
DLF Assets (DAL) * 100.0 NA NA NA NA 58,331 172 17 10
DLF Commercial Complexes 100.0 4,041 7,353 3,710 50 3,773 6,917 (399) (6)
DLF Commercial Developers 100.0 19,058 7,052 2,464 35 20,967 3,902 1,705 44
DLF Cyber City Developers * 100.0 28,323 14,426 11,945 83 47,209 6,400 3,715 58
DLF Home Developers 100.0 13,194 19,757 7,614 39 24,734 24,698 12,133 49
DLF Info City Developers (Chennai) 100.0 27,621 14,038 10,206 73 30,262 4,683 2,983 64
DLF Retail Developers 100.0 1,910 4,409 (906) (21) 1,942 15,019 107 1
DLF New Gurgaon Homes Developers 82.7 5,146 3,071 360 12 5,257 1,574 196 12
DLF Southern Homes 51.0 7,895 1,795 295 16 7,742 988 (230) (23)
DLF Hotel Holdings 100.0 11,654 276 (70) (25) 12,362 143 (124) (87)
DLF Global Hospitality 100.0 3,850 12 (740) (6,324) 5,245 24 (486) (1,990)
Silverlink Holdings 89.9 1,568 164 (634) (386) 87 63 (1,279) (2,041)
Shivajimarg Properties 100.0 4,871 4 2 46 4,960 924 142 15
Overseas Hotels 100.0 11,837 310 210 68 11,964 359 314 88
* - Effective holding @ 60% considering CCPS held by promoters
3
Chart 1: Sources of fund

100.0
80.0
The mix has remained
the same other than a
slight increase in loan 60.0
funds
(%)
40.0
20.0
0.0

Chart 2: Application of fund

100.0
80.0
60.0
(%)
The mix has changed

significantly due to
acquisition of DAL.
40.0
20.0
0.0
Fixed assets (incl goodwill) Investments Deferred Tax Asset
Chart 3: Profitability analysis

150 80.0
120 64.0
Integration of DAL
led to significant dip
in revenues. NP 90 48.0
(INR bn)
margins dipped more

(%)
than proportionate to
EBIDTA on account of 60 32.0
incremental finance
charges
30 16.0
0 0.0
Revenue (LHS) NP margins (RHS) EBIDTA margins
4
DLF
Chart 4: Analysis of WIP, advance extended, and realisations from agreement to sell
150
120
Area under
constructed
properties has 90
(INR bn)
increased; however,
realization under
agreement to sell has 60
declined
30
0
Work in progress Advance recoverable Realisation under agreement to sell
Chart 5: Debtors analysis

110 100.0
88 80.0
Consolidation of DAL
leads to elimination 66 60.0
(INR bn)
of debtors. However,
(%)
debtors exceeding six
months as a 44 40.0
percentage of
revenue have
increased 22 20.0
0 0.0
Debtors (incl. unbilled revenue) (LHS)
Table 4: Movement in shareholders’ funds (INR bn)

Particulars FY10
Add/(Less)
Impact of DAL acquisition and amalgamation
Shareholders’ funds Compulsory convertible preference shares 45.2
increased on account Increase in capital reserve 11.6
of consolidation of Amalgamation adjustment (7.4)
DAL and profits
49.4
P&L impact
Change in translation reserve (0.1)
Proposed dividend and tax thereon (Equity and preference) (4.2)
Employee stock option scheme 0.3
Others 0.2
13.4
5
Table 5: Summary financials (INR mn)

Sales 18,357 26,374 140,414 100,354 74,229
Total income 19,602 40,533 146,839 104,314 78,509
EBITDA 7,508 14,908 93,177 55,914 34,174
EBITDA margin (%) 40.9 56.5 66.4 55.7 46.0
Depreciation 358 578 901 2,390 3,249
Financial costs 1,685 3,076 3,100 5,548 11,100
Net profit 4,110 19,336 78,120 44,696 17,198
Loan funds 41,320 108,825 131,583 177,161 230,726
Net fixed assets 33,298 50,786 120,962 158,657 289,548
Cash flow from operating activities (8,730) (65,635) (17,809) 1,743 86,278
Cash flow from investing activities (20,844) 2,364 (60,142) (35,901) (163,060)
Net cash flows 908 1,323 18,258 (9,724) (2,607)
CAPEX (6,467) (20,307) (47,831) (33,783) (139,076)
Working capital investments (15,785) (74,808) (97,656) (45,213) 57,432
Equity shareholders’ fund excludes redeemable preference shares issued by the Company which
are treated as part of loan funds.
6
Unitech Annual Report Analysis October 27, 2010
Operating cash flows strained further on increased working capital requirement …
Unitech’s debtors increased from INR 9.3 bn in FY09 to INR 12.7 bn in FY10. However,
debtors outstanding for more than six months increased to INR 5.7 bn in FY10 (FY09:
INR 2.6 bn). Management has attributed reasons for increase in debtors to drop in
property prices during 2009.
Project-in-progress rose to INR 171.7 bn in FY10 (FY09: INR 157.4 bn), more than
proportionate to the increase in advances from customers from INR 74.5 bn in FY09 to
INR 80.2 bn in FY10.
During FY10, cash flow from operations was INR (13.2) bn, though, profits before tax
were INR 9.2 bn, primarily on account of increase in receivables and projects in progress
(refer table 2 for details).
… QIP and warrant issue offered some respite
Unitech has raised INR 44.1 bn through two rounds of Qualified Institutional Placements
(QIP) issues and additional INR 2.9 bn through issue of share warrants to the promoter
group company (refer table 3 for details).
Loan book has reduced from INR 90.6 bn in FY09 to INR 60.1 bn in FY10, which led to
reduction in debt/equity from 1.8x to 0.6x.
Finance expenses have reduced significantly from INR 5.5 bn in FY09 to INR 2.0 bn in
FY10. The average borrowing cost charged through P&L (excl. interest capitalised) dipped
from 6.3% in FY09 to 2.7% in FY10. Details of interest capitalised on projects are not
available.
Market Data
Operational highlights and adjustments to reserves
Share in issue (mn): 2,517.9 Revenue has marginally increased from INR 28.9 bn in FY09 to INR 29.3 bn in FY10.
M cap (INR bn/USD mn):11,261 / 5,018
However, EBIT decreased from INR 15.7 bn in FY09 to INR 10.3 bn in FY10 primarily on
account of increase in input costs for real estate projects.
Avg. Daily vol. BSE (’000): 39,401.4
Revenue includes income on sale of investments in real estate projects, which decreased
Share Holding Pattern (%) significantly from INR 14.5 bn (50% of FY09 sales) in FY09 to INR 8.7 bn (30% of FY10
sales) in FY10.
Promoters : 46.6
MFs, FIs & Banks : 2.9 Movement in shareholders’ funds includes write-off of securities premium of INR 3.1 bn
(46% of FY10 PAT) (refer table 5 for details) and increase in capital reserve of INR 2.2
FIIs : 34.6
bn. Further details in respect of these adjustments are not available.
Others : 15.9
Unitech adjusted INR 166 mn (2.5% of FY10 PAT) during FY10 from opening reserves.
(% of share in issue) The company has prior period expenses (including taxes paid for earlier years) of INR 13
mn during FY09, which has increased to INR 160 mn (2.4% of FY10 PAT) during FY10.
Goodwill on consolidation increased from INR 11.7 bn (23% of net worth) in FY09 to INR
15.3 bn (15% of net worth) in FY10.
Fixed assets include office vehicles of INR 1.2 bn towards aircraft purchased. As informed
to us, post BS date, the Company has exited the transaction.
1
Segment highlights
EBIT margins for real estate segment dipped from 66.8% in FY09 to 41% in FY10 on
account of increase in input costs. Consequently, Unitech’s EBIT margins declined from
54% in FY09 to 35% in FY10.
Dip in real estate
revenues and margins Return on net assets of real estate segment decreased from 37.7% in FY09 to 12.5% in
FY10.
Revenue from overseas operations declined to INR 3.0 bn (FY09: 5.3 bn). Overseas
assets have also reduced from INR 31.9 bn in FY09 to INR 18.8 bn in FY10.
Other highlights
Unitech has delayed repayment of dues of INR 0.3 bn to certain debenture holders,
banks and financial institutions. Approval for rescheduling/restructuring of the same has
been received from lenders.
The minority interest share was INR (31.4) mn during FY10 against INR 21.5 mn during
FY09 on account of losses in subsidiaries.
Unitech has accounted revenue for liquidated damages of INR 0.5 bn during FY10.
Consolidated financial statements include revenue of INR 1.0 bn (3.4% of revenue) and
total assets of INR 23.3 bn (8.2% of assets) from unaudited financial statements of
subsidiaries/joint ventures.
Distinctive accounting policies
Revenue recognised on Unitech recognises revenue from real estate projects undertaken on or after April 1,
PoCM including 2004, on the ‘percentage of completion method’ (PoCM) and is determined as a
proportionate land cost percentage of actual project costs incurred (including proportionate cost of land) to the
with threshold of 20% total estimated project cost under execution. Revenue is recognised when the
percentage of completion exceeds 20%. (refer table 1 for details)
‘Project in progress’ (PIP) (~ 61% of total assets) includes the profit element on real
estate projects of INR 11.5 bn in FY10 (FY09: INR 10.8 bn). However, as per the
accounting policy PIP is valued at cost.
Amount received from PIP results in boosting the balance sheet size since the amount received from customers
customers not netted off is shown separately as part of current liability. Amount received from customers
against PIP, inflating increased from INR 74.5 bn in FY09 to INR 80.2 bn in FY10.
balance sheet size
Unitech accounts for revenue from sale of land/land rights and sale proceeds of
investments held in subsidiaries, joint ventures and associates as ‘sales and other
receipts’, net of cost. Revenue on sale of land/land rights decreased to INR 52.5 mn in
FY10 (FY09: INR 646.1 mn).
Advance from customers
Debtors for real estate business are accounted with corresponding credit to advance
include non cash
adjustment from customers. Thus, advance from customers includes amount in respect of which no
money is received from the customers. Debtors also include amount outstanding on
direct sale of land/land rights and other non project business.
Note: All numbers are on consolidated basis, unless stated otherwise
2
Unitech
Table 1: Accounting treatment as per Unitech versus industry
Transactions Unitech Industry

On receipt of advances
C ash and bank Increase 20 Increase 20
Advance from customers Increase 20 Increase 20
Expenses incurred for construction
Work in progress/ Project in progress Increase 40 Increase 40
C ash and bank Decrease 40 Decrease 40
On revenue booking
Sales Increase 50 Increase 50
Debtors / unbilled revenue - Increase 30
Advance from customers - Decrease 20
Project in progress Increase 50
On cost booking
Profit and loss Decrease 40 Decrease 40
Work in progress/ project in progress Decrease 40 Decrease 40
On debtors due
Debtors Increase 30
Advance from customers Increase 30
Summary of accounts
Unitech Industry practice

Project in progress WIP
Particulars Amount Particulars Amount Particulars Amount Particulars Amount
Expenses incurred Expnses booked Expenses incurred Expenses booked
40.0 40.0 40.0 40.0
(C ash and bank) (P&L) (C ash and bank) (P&L)
Sales (P&L) 50.0 C losing balance 50.0
Total 90.0 90.0 Total 40.0 40.0
Profit accumulated in project in progress
Debtors Debtors
Advance from customers 30.0 C losing balance 30.0 Sales (P&L) 30.0 C losing balance 30.0
Total 30.0 30.0 Total 30.0 30.0
For real estate projects business, debtors are not recognized on sales recognition
Advance from customers Advance from customers

C losing balance 50.0 C ash and bank 20.0 Sales (P&L) 20.0 C ash and bank 20.0
Debtors 30.0
Total 50.0 50.0 Total 20.0 20.0
Advance from customers is not adjusted against sales/debtors
Assumptions: Total cost of contract INR 80
Margin 25%
Project completion 50%
Debtors due as per the terms of agreement 50%
3
Chart 1: Cash flow analysis: Funds deployed in project in progress financed by

debtors
200 80.0
No major change in
160 72.0
advances from
customers
120 64.0
(INR bn)
(%)
80 56.0
40 48.0
0 40.0
Project in progress
Advance from customers
Profit element
Chart 2: Cash flow analysis
65.0
45.0
Positive cash flows from
financing activities from
(INR bn)
QIP/warrants issued. 25.0

Operating cash flows
negative
5.0
(15.0)
(35.0)
Operating activities Investing activities Financing activities
Table 2: Cash flow from operating activities (INR bn)

Particulars FY10
Profit before tax and minority interest 9.2
Non operating and non-cash adjustments 1.5
Cash profit before tax 9.5
Substantial increase in
receivables and project- Increase in trade receivables (3.4)
in-progress. Also, Increase in project-in-progress (14.4)
creditors have
decreased resulting in Decrease in loans and advances and other assets 2.8
negative cash from Decrease in trade and other payables (6.3)
operating activities
Net cash from operating activities (11.6)
Interest expenses paid (1.6)
Net cash from operating activities post interest (13.2)
4
Unitech
Table 3: Proceeds from issue of shares/warrants

No. of
Issue
shares Amount
Particulars price Remarks
/warrants (INR bn)
(INR)
(mn)
Includes securities premium
QIP Issue I 421.1 38.5 16.2
of INR 36.5/share
QIP Issue II 344.4 81.0 27.9
of INR 79.0/share
Warrants converted to
50.0 50.8 2.5 of INR 48.75. Issued to
shares
promoter holding company
Issued to promoter holding
Warrants o/s on BS date 177.5 12.7 2.3
company
Proceeds from issue of
48.9
shares/warrants
Table 4: Movement of shareholders’ funds (INR bn)

Particulars FY10
Add/(Less):
Issue of shares/warrants
Issue of shares via QIP (incl securities premium) 44.1
Issue of shares via conversion of share warrants (including
2.5
securities premium)
Issue of share warrants pending conversion 2.3
48.9
Increase in
shareholders’ funds Movement in reserves
primarily on account of Profit for the year 6.8
QIP/share warrants Increase in capital reserve 2.2
issue
Securities premium account written off (3.1)
Movement in foreign currency translation reserve (1.6)
Opening adjustment in reserves (0.2)
4.2
Other adjustments
Dividend (incl tax) (0.9)
Others 0.2
(0.7)
Shareholders’ funds increased on account of issue of QIP/share warrants, securities premium

netted off and increase in capital reserve on consolidation.
Table 5: Movement of securities premium balance (INR bn)

Particulars FY10
Difference in securities Opening securities premium balance 7.2
premium statement
indicate direct write-off Add: Premium on issue of shares/warrants 45.0
of INR 2.2 bn Total 52.2
Closing securities premium balance 49.2
Difference 3.1
Of the above difference, INR 0.9 bn is likely on account of share issue expenses written off
and balance INR 2.2 bn indicates direct write-off
5
Chart 3: Balance sheet analysis

Sources of funds
100.0
80.0
Proceeds from increase
in shareholders’ funds 60.0
(%)
used to repay loan funds
resulting in change in 40.0
mix
20.0
0.0
Shareholder's Fund Minority interest

Loan Funds Deferred liability against land
Deferred Tax liability Current liabilities
Provisions
Chart 4: Application of funds

100.0
80.0
No major change in the
mix 60.0
(%)
Project in progress
forms almost 61% of 40.0
the balance sheet
20.0
0.0
Fixed Assets Investments Inventories Project in progress
Debtors Cash & bank Loans and advances
Chart 5: Debtors analysis

15,000 50.0
12,000 40.0
Debtors as a percentage
of revenue increased
(INR mn)
from 32% to 43%. 9,000 30.0

(%)
However, debtors more

than six month jumped 6,000 20.0
more than proportionate
from 9.1% to 19.4%
3,000 10.0
0 0.0
Total Debtors (LHS)
Debtors as % of revenue (RHS)
Debtors exceeding six months as % of revenue (RHS)
6
Unitech
Chart 6: Segment revenue

45,000
36,000
(INR mn)
27,000
18,000
9,000
0
Construction Real Estate Consultancy Hospitality Transmission towers Others
Chart 7: Segment EBIT

100.0
Real estate segment 80.0

EBIT share reduced
during FY10 on account
of increase in 60.0
consultancy share.
(%)
40.0
20.0
0.0
Construction Real Estate Consultancy Hospitality Transmission towers Others
Chart 8: Segment EBIT margin

120.0
90.0
60.0
(%)
Segment EBIT margin 30.0

for real estate dipped
substantially
0.0
(30.0)
Construction Real Estate Consultancy
Hospitality Transmission towers Others
7
Table 6: Major subsidiary details (INR mn)

Extent of FY09 FY10
Name of the subsidiary company Holding
(%) Networth Turnover PAT Networth Turnover PAT
Unitech Realty 100 3 33 (15) 119 2,891 122
Bengal Unitech Universal Infrastructure 90 327 1,968 55 556 2,297 229
Unitech Power Transmission 100 200 1,018 (46) 300 1,044 (1)
Unitech Property Management (Formerly
100 180 794 71 298 778 118
Unising Projects)
Unitech Developers & Hotels 100 257 1 1 622 530 366
Unitech Global 100 3,032 443 (405) 1,975 378 (681)
Unitech Holdings 100 4,375 12 7 4,383 10 8
Aditya Properties 100 2,235 0 (0) 2,235 0 (0)
Coleus Developers 100 0 0 0 205 0 (0)
Technosolid 100 NA NA NA 647 - 976
Vectex 100 13 - (0) 7 - 716
Zimuret 100 3,515 3,116 3,131 3,061 - 28
Unitech Overseas 100 3,332 - (5) 2,875 - (1)
Unitech Hotels 100 3,341 867 869 2,883 - (1)
Firisa Holdings 100 2,286 - (0) 1,970 - (3)
Unitech C omm. & Res. Projects 100 1,649 0 (16) 1,637 - (6)
Unitech Hi-Tech Builders 100 1,711 0 (17) 1,698 - (7)
Unitech Realty Builders 100 1,734 0 (17) 1,721 - (7)
Empecom 100 (230) - (205) 130 - (162)
Unitech Residential Resorts 100 100 - (404) 100 - (170)
The dip in the net worth of few subsidiaries (highlighted in bold) is higher than the reported losses in the consolidated financial
statements.
Table 7: Summary financials (INR mn)

Sales 9,267 32,898 41,152 28,897 29,313
Total income 9,545 33,881 42,801 33,156 30,153
EBITDA 1,689 18,296 22,038 15,888 10,690
EBITDA margin (%) 18.2 55.6 53.6 55.0 36.5
Depreciation 112 73 205 209 341
Adjusted financial costs 465 1,287 2,804 5,546 2,000
Net profit 841 13,061 16,613 11,964 6,751
Loan funds 10,449 40,397 85,524 90,558 60,078
Net fixed assets 5,711 9,274 32,567 44,930 48,844
Cash flow from operating activities (2,247) (20,745) (10,342) (54) (13,170)
Net cash flows 1,182 6,328 3,855 (7,634) (353)
CAPEX (4,000) (5,212) (24,810) (20,141) (5,346)
8
Bharti Airtel Annual Report Analysis October 5, 2010
Increased customer base and forex gains drive profitability
Bharti Airtel’s (Bharti) subscriber base increased substantially from 97 mn in FY09 to 131
mn in FY10. This rise catapulted the company’s revenues 11.9% to INR 418.3 bn in FY10
(FY09: INR 373.5 bn) despite 20.8% dip in ARPU on back of stiff tariff war in the sector.
PBT margin improved from 21.1% in FY09 to 24.6% in FY10, primarily on account of
foreign exchange gain of INR 7.9 bn (FY09: loss INR 17.9 bn). Excluding forex impact,
the company’s PBT margin dipped from 25.8% in FY09 to 22.8% in FY10 primarily on
account of increase in network operating expenditure and new business ventures,
currently under gestation period, making losses.
Bharti’s network operation expenditure increased significantly from INR 62.5 bn in FY09
to INR 89.1 bn in FY10 (from 16.7% of sales to 21.3%) which was partially offset by
decrease in access charges from INR 52.9 bn in FY09 to INR 44.8 bn in FY10 (from
14.2% in FY09 to 10.7% in FY10).
During the year, provision for doubtful debts increased to INR 12.5 bn (28.1% of
debtors) from INR 9.8 bn in FY09 (25.3% of debtors).
Bharti provided INR 277.9 mn (FY09: INR 60.6 mn) in FY10 towards dimunition in the
value of inventory which is 36.5% of inventory (FY09: 5.9%).
Auditors have highlighted that funds amounting to INR 6.5 bn raised on short-term
basis (primarily represented by capital creditors) have been used for long-term
investments (primarily represented by fixed assets).
During FY10, the company had revised estimates for assets retirement obligations
(ARO) and consequently, reversed provision of INR 5.8 bn with corresponding reversal
from fixed assets. The change in estimate led to INR 269.6 mn increase in PBT.
Segmental analysis
Mobile services segment continued to be the highest revenue and segmental EBIT
contributor. However, EBIT margins were the highest and continued to grow in the
enterprise services segment.
Market Data
52-week range (INR): 439 / 229 Revenue share from passive infrastructure segment increased from 3.4% in FY09 to
8.4% in FY10.
Other highlights
M cap (INR bn/USD mn):1,365 / 30,760
Avg. Daily vol. BSE (’000): 9,401.9 In FY10, Bharti Infratel converted interest free unsecured convertible debentures of INR
32.0 bn into 40.3 mn equity shares at an average price of INR 793.9. Consequently,
Bharti’s stake in Bharti Infratel dipped from 92.5% to 86.1%. The imputed valuation for
Bharti Infratel on this basis stands at INR 461.2 bn.
Promoters* : 67.9
The company acquired 55% stake in Bharti Telemedia for INR 73.8 mn from Bharti
Enterprises. This led to its stake in Bharti Telemedia increasing to 95%. Also, the
FIIs : 16.7
company extended an INR 14.9 bn (FY09: INR 6.4 bn) interest free loan to Bharti
Others : 6.6 Telemedia.
* Promoters pledged shares : Nil As at FY10 end, accumulated losses of a few subsidiaries including Bharti Telemedia,
Bharti Airtel Lanka, etc., exceed the networth of respective companies.
During the year, the company remitted USD 311.5 mn (INR 14.1 bn) to its subsidiary
Bharti Airtel Holdings (Singapore) for acquisition of 70% stake in Warid Telecom,
Bangladesh.

1
efficiency (detailed concept explained in Annexure A). We have analysed Bharti’s profitability
for years ended FY08, FY09, and FY10; results and key findings of same are as follows:

31.5 28.7 20.3
NOPAT margin (%) 25.5 26.1 21.3
B. Return from leverage (FLEV x spread)
6.5 1.4 5.3
(%)
NBC (net borrowing cost) (%) 9.6 23.9 (6.3)
ROE Derived (A+B+C) (%) 38.5 30.6 26.2
ROAE tree
30.0
0.6
Healthy operating 24.0
cash flow 5.3
Net borrowing cost
(NBC) negative on 18.0
(%)
account of forex
gains 26.2
12.0
20.3
6.0
0.0
leverage funding
ROAE dipped primarily on account of:
• Dip in NOPAT margin from 26.0% in FY09 to 21.4% in FY10 primarily on account of
increase in network operating expenses.
• Bharti generated net financing income on the back of foreign exchange gain earned during
the year which pushed return from leverage North. Excluding foreign exchange gains, NBC
stood at 3.6% (FY09: 0.8%).
2
Bharti Airtel

Name of Subsidiary company % of Shareholding FY09 FY10
Bharti Telemedia 95.0 (2,374) 74 (2,230) (7,046) 2,870 (4,672)
Bharti Airtel Lanka 100.0 538 95 (1,585) (2,456) 955 (3,056)
Bharti Airtel (Holding) Singapore Pte 100.0 1,156 - 56 14,729 - (531)
Bharti International Singapore Pte 100.0 - - - (502) - (511)
Warid Telecom International 70.0 - - - 10,929 407 (231)
Bharti Airtel (Canada) 100.0 (25) 4 (22) (35) 12 (13)
Bharti Airtel (Hongkong) 100.0 (3) 0 (14) (13) 12 (10)
Bharti Infratel Ventures 100.0 (0) - (0) (0) - (0)
Bharti Airtel Intl. (Netherlands) B.V 100.0 - - - 1 - (0)
Bharti Infratel Lanka 100.0 - - - - - -
Bharti Airtel (USA) 100.0 (266) 906 (228) (258) 799 8
Bharti Airtel (UK) 100.0 66 46 (17) 157 145 64
Bharti Airtel (Singapore) 100.0 6 312 12 102 979 125
Bharti Airtel Services 100.0 (147) 4,926 (19) 5 4,215 251
Network i2i 100.0 717 1,095 585 1,041 1,474 295
Bharti Infratel 86.1 104,506 26,154 4,374 136,708 24,530 3,208
Bharti Hexacom 70.0 15,136 22,876 5,616 21,379 26,415 7,361
New business ventures currently under gestation period are making losses

Particulars FY10
Healthy operating Non operating (profit)/Loss 3.3
cash flow Non cash adjustments (Incl. tax provision) 63.0
Increase in debtors (5.7)
Decrease in other receivables 13.4
Decrease in inventory 0.3
Decrease in trade and other payables (5.5)
Decrease in working capital 2.6
Movement in shareholders’ fund (INR bn)

Particulars FY10
Add 114.4
Increase in
primarily on account Issue of shares 0.4
of profit earned and Increase in Employees stock options outstanding 1.3
conversion of interest Reserve arising on dilution of Equity in Subsidiary 21.1
free convertible
debentures of Bharti Less 6.9
Infratel during the Decrease in Foreign currency translation reserve 0.1
year Proposed dividend (incl tax) 4.5
Net depeciation on Fair value assets 2.0
Minority share 0.3
3
Efficiency analysis
1.3 0.0
Increased 1.0 (1.8)

competition and new
business ventures
dragged down 0.8 (3.6)
operating efficiency
(x)
(x)
0.5 (5.4)
0.3 (7.2)
0.0 (9.0)
Fixed asset turnover ratio (excl. CWIP) Working capital turnover ratio (RHS)
Debtor analysis
35.0 4.5
31.0 4.0
27.0 3.5
(%)
(%)
Substantial increase
in provision for 23.0 3.0
doubtful debts
19.0 2.5
15.0 2.0
Provision for doubtful debts as a % of total debtors
Provision for doubtful debts as a % of sales (RHS)
4
Bharti Airtel
Segmental analysis
Segmental revenue
350
Mobiles services
continued to 280
dominate. However,
its revenue share 210
(INR bn)
dipped from 78.9% in
FY09 to 75.9% in
140
FY10, which was
offset by increase in
revenue share from 70
passive infrastructure
segment (from 3.4%
0
in FY09 to 8.4% in
FY10)
Mobile services Telemedia services Enterprise services Passive infrastructure Others
Segmental EBIT share

90.0
EBIT share from

60.0
passive infrastructure
increased from 3.7%
in FY09 to 5.8% in 30.0
FY10. However, EBIT
(%)
margins of all
0.0
segments, expect
enterprise services
segment, dipped (30.0)
(60.0)
Mobile services Telemedia services Enterprise services Passive infrastructure Others
32.5 125.0
Segmental EBIT 29.0 110.0

margins of the
enterprises group 25.5 95.0
increased, while they
(%)
(%)
dipped for other

22.0 80.0
segments
18.5 65.0
15.0 50.0
FY08 FY09 FY10
Mobile services Telemedia services
Passive infrastructure Enterprise services -RHS
5
Sources of fund
100.0
80.0
Proportion of
60.0
inches up primarily
(%)
on account of
conversion of 40.0
debentures of Bharti
Infratel and 20.0
profitability
0.0

Application of fund
100.0
80.0
60.0
(%)
40.0
20.0
0.0
6
Bharti Airtel

Sales 116,641 184,202 270,122 373,521 418,295
Total income 117,541 185,917 273,723 379,496 423,066
EBITDA 41,528 74,359 113,700 152,638 168,292
EBITDA margin (%) 35.6 40.4 42.1 40.9 40.2
Depreciation 16,419 26,190 38,102 49,639 65,544
Financial costs 2,555 3,100 6,083 23,064 (1,483)
Net profit 20,279 40,621 63,954 78,590 91,631
Loan funds 47,728 52,859 96,017 135,171 102,881
Net fixed assets 162,551 229,753 361,194 480,923 532,850
Net current assets (40,718) (59,172) (83,160) (65,958) (50,198)
Cash flow from financing activities 3,698 3,771 59,987 20,648 (13,749)
Net cash flows (631) 5,010 (1,096) 6,010 (6,216)
CAPEX (55,343) (86,169) (136,376) (168,590) (125,077)
Working capital investments 4,755 10,387 14,391 (7,524) 2,558
7
ANNEXURES
8
Annexure
Annexure A: ROE analyser
ROE analyser analyses the profitability on the scale of operating efficiency and capital allocation
efficiency. While operating efficiency is a measure of how efficiently the company is making use
of operating assets, capital efficiency is the measure of balance sheet efficiency.
The above analysis involves:

1. Dissection of profitability along two major drivers:
a. Return from operating activities (RNOA: return on net operating assets).
b. Return from financing activities (leveraging effect on ROE).
ROE = Return from operating activities (RNOA) + Return from leverage
Or
ROE = Operating margin x Operating assets turnover + Leverage spread x Leverage

multiplier
Whereas:
RNOA = NOPAT/Average operating assets
Operating margin = NOPAT/Operating revenue
Operating assets turnover = Operating revenue/Average operating assets
Leverage spread = RNOA – Net borrowing cost
Leverage multiplier = Average net financial obligation/Average common shareholders’

equity
2. Reformulation of balance sheet, wherein, we have regrouped assets and liabilities into
operating and financing categories (against traditional current and non-current
categorisation).
3. Reformulation of income statement, wherein, we have regrouped income and expenses into
operating and financing activities.
9
Notes
NOTES:
xx xxxxx

200
AnnualEdelweiss
report analysis
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Introduction

Edelweiss Securities Limited

To analyse annual reports, we have covered the following aspects:

 Income statement analysis:

• Economic profits vis-à-vis reported profits

• Direct debit to reserves

• Break up profitability into operating activities, financing activities (ROE analyser)

• Analysing contribution of subsidiaries as well as parent, to the overall profitability of

 Balance sheet analysis:

• Break up into operating and financial assets

• Intangibles and off BS items

• Working capital analysis

• Net worth analysis

 Cash flow analysis

 Key insights from MD&A

 Segmental information analysis.

 Accounting policy analysis:

• A framework, wherein accounting policies adopted by a company are analysed and

Edelweiss Securities Limited

Automobiles Metals and Mining

Ashok Leyland Hindalco Industries

Bharat Forge JSW Steel

Escorts Sterlite Industries

Mahindra & Mahindra Tata Steel

Oil and Gas Petrochemicals

Capital Goods Aban Offshore

Punj Llyod Reliance Industries

Education Dr. Reddy’s Laboratories

Educomp Solutions Ranbaxy Laboratories

United Spirits Pipes

HCL Technologies Real Estate

Hindustan Construction Company Telecommunications

IL&FS Transportation Bharti Airtel

IRB Infrastructure Developers

Edelweiss Securities Limited

• Sale of revalued assets reduces book profits and MAT outflow.

• Performance of subsidiaries deteriorates further; going concern assumption still doubtful

• Standalone operating performance improves despite dip in sales.

Mahindra & Mahindra

• Revenue includes claim of INR 2.4 bn pending to be approved by ONGC; liquidated

• Auditors have highlighted breach of loan (INR 5 bn) covenant by subsidiary.

Edelweiss Securities Limited

• Debtor days increased from 112 in FY09 to 146 in FY10.

• Reduced derivative exposure may positively impact profitability.

• Creditors at 85 days (FY09: 84 days) in our view are high.

• Re-classification of Afghanistan JV as integral contributed 11% to PAT.

• Significant portion of revenues contributed from WIP inventory pending to be billed to

Hindustan Construction Company

• Leverage moderated but still at 4x.

Edelweiss Securities Limited

IL&FS Transportation Networks

IRB Infrastructure Developers

• Cash conversion cycle deteriorated further, primarily on account of increase in debtor

• Investment book comprises INR 34 bn of investments in promoter group companies.

Metals and Mining

• Reversal of derivative losses as well as inventory gains contributed a significant

Edelweiss Securities Limited

• Exposure to group companies increased ~2x to INR 115.4 bn.

• Cost control measures and backward integration on track to enhance savings.

Oil and Gas Petrochemicals

• Forex movement on consolidation imbibed in cash flow statement; hence,

• Significant transaction with related party and investments in group companies.

• Subsidiary performance and one timers subdued profitability.

Income statement analysis:

Balance sheet analysis:

Cash flow analysis

Key insights from MD&A

Segmental information analysis.

Accounting policy analysis:

In March 2010, the company commissioned a new plant in Pantnagar (Uttarakhand),

In FY09, ALL availed the option of capitalising/deferring foreign exchange difference on

Bharat Forge Scottish Stampings, Scotland, a step-down subsidiary, continued to incur

In FY09, BF availed the option of capitalising/deferring foreign exchange difference on

Also, it amalgamated Escorts Agri Machinery, a wholly-owned subsidiary with investments