Initiating Coverage

JULY 23, 2018

Stock Details
Market cap (Rs mn) : 105684
ARVIND LTD
52-wk Hi/Lo (Rs) : 479 / 353 PRICE RS. 398 TARGET RS. 500 BUY
Face Value (Rs) : 10
3M Avg. daily vol : 1,737,962 Arvind Ltd promoted by Lalbhai family, is a leading textiles company with
Shares o/s (m) : 259 presence in textiles, branded apparel and engineering business. Its branded
Source: Bloomberg apparel business has a portfolio of 15 international licensed brands (such as US
Polo, Arrow, Tommy Hilfiger, Calvin Klein, etc) and 12 in-house brands (such as
Financial Summary
Flying Machine) which are managed by qualified professionals. We expect all its
Y/E Mar (Rs mn) FY18 FY19E FY20E
brands to be profitable in FY19E, resulting in 230 bps improvement in EBITDA
Revenue 108261 121495 139008
margins of the branded apparel business between FY18-20E. Further, its
Growth (%) 17.2 12.2 14.4
EBITDA 9650 11464 14723
verticalization strategy in its textiles business by focusing on garmenting business
EBITDA margin (%) 8.9 9.4 10.6 would positively impact the RoCE of the business. We believe that Arvind being a
PAT 3158 4211 6506 major player in branded apparel business and having long history in textiles
EPS 12.2 16.3 25.2 business would be benefited by rising disposable income, growth in retail sector
EPS Growth (%) (1) 33 54 and increasing preference towards branded apparels. We believe that the
Book value (Rs/share) 158 172 194 demerger of branded apparel and engineering business would unlock value of
Dividend per share (Rs) 2.4 2.4 2.4
each of the businesses post listing. We initiate coverage on the stock with BUY
ROCE (%) 8.8 10.2 13.3
ROE (%) 8.1 9.9 13.8
recommendation and SOTP based target price of Rs 500.
P/E (x) 32.6 24.4 15.8
EV/EBITDA (x) 13.8 11.6 9.0
Key investment argument
P/BV (x) 2.5 2.3 2.1
 Largest portfolio of brands managed by qualified professionals. Arvind
Source: Kotak Securities - PCG; Company
has a portfolio of 15 international licensed brands and 12 in-house brands
Shareholding Pattern (%) targeting different segments and are managed by qualified and experienced
(%) Jun-18 Mar-18 Dec-17 professionals. The company has delivered robust track record in certain brands
Promoters 42.9 42.9 42.9 in terms of their sales performance in India and built relationship of over 20
FII 21.9 27.1 27.1
years with the brand owners. Based on this, the company registered revenue
DII 18.6 13.8 14.1
and EBIT CAGR (organic + inorganic) of 22.3% and 32.1%, respectively in
Others 16.6 13.8 15.9
branded apparel business in FY13-18. We expect that the trend to continue
Source: Company
with 20.6% CAGR in revenue and 41.2% CAGR in EBITDA in FY18-20E.
Price Performance (%)
 Margins to improve with all brands business turning profitable. Over the
(%) 1M 3M 6M
years, Arvind had built up strong portfolio of licensed international brands and
Arvind Ltd (1.5) (5.2) (11.0)
has been investing in growing them. The rise in scale of operation of these
Nifty 2.2 4.2 1.1
Source: Bloomberg
brands resulted in increased contribution to the bottomline. At the end of
FY18, barring three brands, all others were EBITDA positive. The balance three
Price chart brands are expected to be profitable in FY19E led by increased scale of
500 operation. In addition, its Power brands like Arrow, US Polo and Flying
Machine which command higher margins should maintain their pace in terms
450
of growth. Based on this, we expect 230 bps improvement in EBITDA margins
400 of branded apparel business in FY18-20E.

350  Verticalization of textiles business would positively impact returns ratios.

Jul-17 Nov-17 Mar-18 Jul-18 The company has adopted verticalization strategy in order to move up in value
Source: Bloomberg chain by increasing focus on garmenting business. This strategy is based on
its strong customer relationship and high quality raw material supply through
inhouse manufacturing. Presently, the company is utilizing 10% of its fabric
capacity for garmenting and targets to achieve 30-35% in the next three to
four years. We believe that the verticalization strategy would positively impact
Pankaj Kumar the RoCE of the textiles business in the longer run as garmenting business has
pankajr.kumar@kotak.com higher returns ratios. Further, the company’s focus towards low cost
+91 22 6218 6434 destination would help it in competing against international peers.

Kotak Securities Limited has two independent equity research groups: Institutional Equities and Private Client Group. This report has been prepared by the Private Client Group. The
views and opinions expressed in this document may or may not match or may be contrary with the views, estimates, rating, target price of the Institutional Equities Research Group
of Kotak Securities Limited.
JULY 23, 2018

 Demerger to create focused approach on individual businesses. Arvind

has taken decision to demerge its branded apparel and engineering business
into separate companies and list them separately. The branded apparel
business will be demerged into Arvind Fashions Ltd. (AFL) and engineering
business will be demerged into Anup Engineering Ltd (AEL). The demerger
would create three separately listed companies focusing on three different
business which will lead to increase in focus of individual businesses. We
believe that the demerger would also unlock value of each of the businesses
post listing expected in next 3-6 months.
 Positive outlook for Indian textiles sector. The textile industry in India has
grown at a CAGR of over 10% in 2009-17 (July 2017) and is expected to reach
US$ 250 bn by 2019. The current fashion retail market is ~ US$ 46 bn and is
expected to grow at a CAGR of 9.7% to reach US$ 115 bn by 2026. The growth
is driven by increasing preference towards brands, favorable demographics
led by large young population, increasing urbanization, entry of international
brands, etc.

Outlook & Valuation

We expect company’s revenue and PAT to grow at a CAGR of 13.4% and 43.5%,
respectively in FY18-20E driven by 27% volume CAGR in garments business, 20.6%
CAGR growth in branded retail business, all brands turning profitable and
improved operating leverage across segments. We expect 170 bps improvement
in EBITDA margins in FY18-20E. This will have positive impact on earnings, cash
flows and returns ratios.
The stock is presently trading at FY19E/20E PE of 24.4/15.8 based on EPS of Rs.
16.3/25.2 respectively. We have valued Arvind on sum of the parts basis (SOTP)
where we have assigned FY20E EV/EBITDA multiple of 16x to the branded apparel
business, 8x to the textile business and 13x to the engineering business. We
initiate coverage on the stock with BUY recommendation and SOTP based target
price of Rs 500.

Risks & Concerns

 Major revision in license terms of foreign brands

 Lower export incentive

 Raw material or forex volatility

Kotak Securities – Private Client Research Please see the Disclosure/Disclaimer on the last page For Private Circulation 2
JULY 23, 2018

COMPANY BACKGROUND
Arvind Ltd, founded in 1931 by Lalbhai family, is a leading textiles company with
interest in Textiles, Branded Apparel and Accessories, Engineering, etc. The
company manufactures and sells about 300 million meters (mn mtr) of fabrics and
over 30 mn pieces of garments (FY18). In branded apparels business, the
company’s own brands such as Flying Machine, Colt, Ruggers and Excalibur, etc.
It also has a portfolio of licensed brands which includes US Polo Association,
Arrow, Tommy Hilfiger (TH), Gap, Calvin Klein (CK), Hanes, Gant, Nautica, Izod, Ed
Hardy, Elle, Cherokee, The Children’s Place, Aeropostale, etc. It also owns the value
chain ‘Unlimited’ and is the franchise partner of the world’s largest beauty retailer
‘Sephora’. In engineering business, it designs and manufactures critical process
equipment for petrochemical, fertilizer, power and other process industries.

History
Year Event
1931 The Lalbhai family founded Arvind Mills
1980 Flying Machine was launched
1986 First Denim Plant at Naroda Road, Ahmedabad
1987 Started High Value cotton shirting
1993 Tie-up for Global brands Arrow
1996 Set up modern textile manufacturing units at Santej, Ahmedabad
1998 Set up of shirting facility at Santej, Ahmedabad
2008 Name changed from Arvind Mills to Arvind
2010 Arvind Stores was setup for Selling its brands
2011 Expanded fglobal; brands portfolio by adding Calvin Klein, Tommy Hilfiger, Gap, Ed Hardy,
Hanes, Nautica and Elle
2014 Global patent for Polymeric Film Evaporation Technology by Arvind Envisol
2014 Launched Create brand
2016 Tied up with Sachin Tendulkar to launch True Blue
2017 launches its own Ready-To-Wear brand
2017 Announced demerger and listing of its branded apparel (Arvind Fashions) and Engineering
(Anup Engineering) businesses
Source: Company

Kotak Securities – Private Client Research Please see the Disclosure/Disclaimer on the last page For Private Circulation 3
JULY 23, 2018

Business verticals
Textiles: The textiles business is operated by parent company Arvind limited and
involves manufacturing of wide variety of fabrics including, woven, knitted, denim
etc. The company has positioned itself as a leading fabrics and apparel supplier
to world’s top brands. The company has manufacturing capacity of 100 mn meter
per annum of denim, 132 mn mt p.a. of woven fabrics, 12,000 tonnes p.a. of
knitted fabric and garmenting capacity of ~30mn pieces per annum. The company
is focused on verticalization of textiles business by manufacturing garment with
large focus on exports. Its garmenting facilities are located in India and Ethiopia.
The company intends to expand its garment facilities to 3x in next 3 years by
adding capacities in Jharkhand and Ethiopia. The company is also focusing on
next generation clothing segment such as activewear, sportswear, etc using man
made fibers and blends.
Brand & Retail Business: Arvind has a portfolio of 15 international brands and
12 owned brands which would be part of Arvind Fashions Ltd (AFL) post
demerger. Its brand CK and TH which was earlier controlled by JV company would
now be part of AFL. These two brands contribute Rs 4.8 bn or 12.5% to AFL
revenue. Out of its 12 owned brands, Flying Machine is sold through multiple
channels while balance 11 inhouse brands are sold through its own value retail
store ‘Unlimited’. In terms of distribution of brands, ~25-30% of brand business
comes from wholesale channel, while balance are through EBOs, departmental
stores (large format stores) and online. The company categorizes its large size
high growth brands with higher margins (at 12.2% in FY18) as Power brand which
includes US Polo, Arrow and Flying Machine. Power brands contributed 59% of
FY18 brand revenue and have been growing a CAGR of ~24% in terms of revenue
and 26% in terms of EBITDA.
Engineering business: Anup Engineering would take care of engineering and
fabrication business post demerger. It is the 3rd largest heavy fabrication player
in India. The company manufactures critical process equipment like Heat
Exchangers, Pressure Vessels, Reactors, Columns/Towers, Centrifuges, etc.
Other business: The company is also present in technical textiles through its
Advance Materials division and is part of parent company Arvind Ltd. The division
caters to sectors such as infrastructure, healthcare, energy, aviation, and industrial.
Arvind’s subsidiary, Arvind Envisol Ltd. is specialized on supply of water and waste
water treatment plants for Industrial Process and provides environmental
solutions.
New businesses: The new business which are B2C and retail are part of Arvind
Ltd. But post demerger, these businesses would be merged with AFL. Under this,
the company has two businesses which includes 1) footwear where it has three
own brands along with 2 international brands, and 2) customized premium
clothing under the brand ‘Creyate’. These businesses are expected to be profitable
in FY19E.

Kotak Securities – Private Client Research Please see the Disclosure/Disclaimer on the last page For Private Circulation 4
JULY 23, 2018

Business Segments at a Glance

Particulars Arvind Ltd Arvind Fashions Ltd Anup Engineering Ltd
Presence/capacity 300 mn meters fabrics, 1297 stores: 1160 brands, Current order book Rs 1.5 bn
30 mn pieces garments 101 unlimited, 36 specialty
-----------------------------------------------------------------------------------------------------------------------------------------------------------------
Business Textiles Business: Fabrics and Branded apparels & Retail Engineering Business: Critical process
Apparel supplier to world’s Business equipment manufacturer
top brands
-----------------------------------------------------------------------------------------------------------------------------------------------------------------
Growth Driver Global opportunity India consumption growth Opportunity from new and
opportunity renewal sector
-----------------------------------------------------------------------------------------------------------------------------------------------------------------
Revenue & Growth (FY18) Rs 67.5 bn, 7% yoy Rs 38.52 bn, 31% yoy Rs 2.24 bn, up 25%
-----------------------------------------------------------------------------------------------------------------------------------------------------------------
EBITDA Margin% (FY18) 10% 6.1% 23.9%
-----------------------------------------------------------------------------------------------------------------------------------------------------------------
RoCE % (FY18) 10% 5.3% 24.0%
-----------------------------------------------------------------------------------------------------------------------------------------------------------------
Outlook/Guidance FY19 10% growth, 35% growth in 20-24% growth in revenue with 10-12% growth in revenue, with
Volume with flattish margins 1% margin improvement flattish margins
Source: Company, Kotak Private Client Research

Top management
Name Designation Details
Sanjay S. Lalbhai Chairman and MD Under his leadership, Arvind has become one of the largest manufacturers of woven textiles
in India, and one of the largest denim fabric manufacturers in the world. He was also
responsible for acquiring India’s first denim brand ‘Flying Machine’ in 1981. He also serves on
the board of several premier educational and research institutes.
-----------------------------------------------------------------------------------------------------------------------------------------------------------------
Punit Lalbhai Executive Director He has done MBA from INSEAD and a Masters of Environmental Science from Yale University.
He leads Arvind's Advanced Materials, Engineering, and Agribusinesses. He also spearheads
initiatives in sustainability, CSR, and innovation at Arvind.
-----------------------------------------------------------------------------------------------------------------------------------------------------------------
Kulin Lalbhai Executive Director He holds an MBA from the Harvard Business School, and a BSc in Electrical Engineering from
the Stanford University. Prior to his current role, he has also been a management consultant
at Mckinsey & Co. He is driving new initiatives in the consumer businesses of the group. He
has been instrumental in setting up several new retail concepts and also spearheads the
group’s digital initiatives. He also plays an active role in the overall corporate strategy.
-----------------------------------------------------------------------------------------------------------------------------------------------------------------
Jayesh Shah Whole-time Director and CFO He is an associate member of ICAI and a Commerce Graduate from Gujarat University. He was
working with the group in its various business divisions since 1985 and in the year 2002,
became Director on the Board. Mr. Shah has extensive administrative, financial regulatory and
managerial expertise with his vast experience in the field. He successfully undertook a financial
restructuring of the company during the period 2000-02.

Source: Company & Industry

Kotak Securities – Private Client Research Please see the Disclosure/Disclaimer on the last page For Private Circulation 5
JULY 23, 2018

INVESTMENT RATIONALE
Largest portfolio of brands managed by qualified professionals
Arvind has a portfolio of 15 international licensed brands and 12 in-house brands.
The international brands include 3 retail brands GAP, The Children’s Place and
Sephora which are part of specialty retail segment and balance 12 licensed brands
and one own brand (Flying Machine) are sold through multiple channels. The
channel wise mix for these brands includes 40% from EBOs, 25% from
LFS/departmental, 25% from wholesale and 10% from online. Two third of its EBOs
are based on franchisee and balance are owned stores. Further, its 12 own
branded are sold through own retail Unlimited. The brand business is managed
by qualified and experienced professionals who have vast experience in consumer
and fashion industry.
The company has delivered strong track record in certain brands in terms of their
sales performance in India and built relationship of over 20 years with the brand
owners. This is well evident from the track record of its brand and retail division.
In the last 5 years (FY13-18), the company registered revenue and EBIT CAGR
(organic + inorganic) of 22.4% and 32.1%, respectively in branded apparel
business. Its major brands like US Polo, Arrow and Flying Machine are categorized
as power brands which grew at 24% CAGR with consistent double digit margins
in the last five years (of 12.2% in FY18). Based on this strong portfolio of brands,
the company is prepared to encash on the emerging opportunity in Indian
branded apparel space.

Licensed Brands
Brand Brand Details
Arrow Arrow is the premium menswear brand and known for its classic American styling and is owned by
Phillips-Van Heusen (PVH). Arvind continued to remain sole licensee of the brand in India despite the
brand getting acquired by PVM. The brand's heritage is in dress shirts, and its offerings have expanded
to include sportswear.
-----------------------------------------------------------------------------------------------------------------------------------------------------------------
US Polo The U.S. Polo Assn. brand carries clothing for men, women and children, as well as accessories,
luggage, watches, shoes, home furnishings and more. Since its first store opened in 2011, US Polo
achieved Rs 10 bn plus sales within 5 years.
-----------------------------------------------------------------------------------------------------------------------------------------------------------------
Excalibur It is British Formal Brand and offers wardrobe solutions from work to after hours, with a youthful flavor
and cementing its position as an arbiter of taste and style.
-----------------------------------------------------------------------------------------------------------------------------------------------------------------
Ed Hardy Ed Hardy is an alternative lifestyle fashion brand that celebrates the classic American tattoo as an art
form.
-----------------------------------------------------------------------------------------------------------------------------------------------------------------
Cherokee American family-lifestyle brand, offering classic, casual comfort at affordable prices
-----------------------------------------------------------------------------------------------------------------------------------------------------------------
Izod American brand was founded in 1937 and is a mid-range clothing company that produces dressy
casual clothing, sportswear for men. It is part of PVH, forming part of its Heritage Brands division.
-----------------------------------------------------------------------------------------------------------------------------------------------------------------
ELLE ELLE, the largest selling fashion magazine in the world and is based in France. The group, now in
partnership with Arvind Lifestyle Brands, brings to India the ELLE range of French fashion wear.
-----------------------------------------------------------------------------------------------------------------------------------------------------------------
Grant GANT, is an international clothing brand based in Sweden. It is recognized as skilled shirt makers and
is now also in making jeans, wool sweaters, outerwear and polo shirts
-----------------------------------------------------------------------------------------------------------------------------------------------------------------

Kotak Securities – Private Client Research Please see the Disclosure/Disclaimer on the last page For Private Circulation 6
JULY 23, 2018

Nautica An American brand, founded in 1983, Nautica is a leading water-inspired global lifestyle brand
including men’s, women’s and children’s apparel, accessories and a complete home collection. Nautica
products are classics that are rich in performance, color and authentic style.
-----------------------------------------------------------------------------------------------------------------------------------------------------------------
Hanes Founded in 1991 in US, Hanes caters across men’s, kids’ and women’s intimate apparel and innerwear
categories.
-----------------------------------------------------------------------------------------------------------------------------------------------------------------
GAP Gap is global mega brand which is over 110 years and serves to value-conscious customers with
exclusively-designed collections for Gap Outlet and Gap Factory Stores and includes Gap, Banana
Republic, Old Navy, Athleta and Intermix. Gap is the namesake brand for leading global specialty
retailer, Gap Inc. Gap targets Women's and Men's apparel and accessories
-----------------------------------------------------------------------------------------------------------------------------------------------------------------
Aéropostale It is primarily mall-based, specialty retailer of casual apparel and accessories, principally targeting
young women and men through its Aéropostale stores. It provides customers with a focused selection
of high quality fashion and fashion basic merchandise at compelling values in an exciting store
environment
-----------------------------------------------------------------------------------------------------------------------------------------------------------------
The Childrens Place The Children’s Place is the largest pure-play children’s specialty apparel retailer in North America. The
Company designs, contracts to manufacture, sells and licenses to sell fashionable, high-quality
merchandise at value prices, primarily under the proprietary “The Children’s Place,” “Place” and “Baby
Place” brand names.

Source: Company & Industry

Arvind Fashions – Management details

Name Designation Background
J Suresh MD & CEO Suresh is an MBA from IIM Bangalore and an Engineering graduate. He has over 30 years of experience
in the FMCG, Lifestyle Brands & Retail industries. Prior to joining Arvind in 2005, he has worked in HUL
for 18 years.
-----------------------------------------------------------------------------------------------------------------------------------------------------------------
S Kannan Chief Financial Officer, Kannan is a Chartered Accountant with over 23 years experience of working both in a MNC and Indian
Brands & Retail company environment. He has worked with Hindustan Lever Ltd for 12 years in Financial Accounting,
Commercial and Supply Chain Management functions.
-----------------------------------------------------------------------------------------------------------------------------------------------------------------
Alok Dubey COO – Sportswear & Alok is an MBA with over 26 years of wide experience in Sales & Marketing in Lifestyle Brands & Retail.
Denim / Youth wear He joined Arvind in 2003 after working for 15 years in Titan and Swatch.
-----------------------------------------------------------------------------------------------------------------------------------------------------------------
Sumit Dhingra COO - Heritage Brands He is an MBA from IIM Lucknow and has rich experience in the industry. He managed to turnaround
and scale up the Nautica business. Prior to joining Arvind he was associated with Madura Garments.
-----------------------------------------------------------------------------------------------------------------------------------------------------------------
Parag Dani CEO – Premium and He heads premium brand of the company. Prior to joining Arvind he was associated with Levis and
Bridge to Luxury Brands Reliance Industries
-----------------------------------------------------------------------------------------------------------------------------------------------------------------
Shekhar CS CEO - Unlimited He heads retail arm ‘Unlimited’. Prior to joining the company he was associated with Lifestyle.
Source: Company

Kotak Securities – Private Client Research Please see the Disclosure/Disclaimer on the last page For Private Circulation 7
JULY 23, 2018

Brands have potential to become larger

AFL’s brands have potential to become larger. Brands like VH, LP, etc took 15-20
years to achieve Rs 5 bn revenue, but it took less than five years to achieve Rs 10
bn. Arrow has already crossed Rs 5 bn and has strong potential to grow over Rs
10 bn. The company is also expanding the presence of Arrow in Tier II and Tier III
cities and is considering setting up over 40 new EBOs in these cities. Further, the
company is also focusing on growing this brand through online channels.
Similarly, the company is aggressively looking to grow Flying Machine which has
doubled revenue in last three years to Rs 3-4 bn revenue range and intends to
grow it to over Rs 10 bn in the longer run. In addition, the company is also positive
on GAP and expect it to grow further through opening of new stores and existing
stores turning profitable.

Peer comparison of brands in terms of size

Arvind Major Brands ABFRL Brands Raymond Other International
brand/retailers
Brands Value Brands Value Brands Value Brands Value
US Polo Rs 10 bn + Van Heusen Rs 10 bn + Park Average Rs 6 bn Zara Rs 10 bn+
Arrow Rs 6 bn Louis Philippe Rs 10 bn + Color Plus Rs 2.8 bn H&M Rs 7 bn+
Flying Machine Rs 3-4 bn Peter England Rs 10 bn + Raymond Rs 2.9 bn Benetton Rs 10 bn +
TH Rs 3-3.5 bn Allen Solly Rs 6 bn
CK Rs 1-1.5
Aeropostale Rs 1 bn+
GAP Rs 1 bn+
Source: Company, Industry, Kotak Private Client Research

Margins to improve with all brands business turning profitable

Over the years, Arvind had built up strong portfolio of licensed international
brands and has been investing in growing them. The scale up of operation of
these brands resulted in them achieving break even. The company’s retail
business is also expected to do well in the year with GAP and Unlimited are
expected to be profitable in FY19E. At the end of FY18, barring three brands, all
others are EBITDA positive. The balance three brands are expected to be profitable
in FY19E led by increased scale of operation. In addition, its Power brands like
Arrow, US Polo and Flying Machine which commands higher margins would
maintain its pace in terms of growth. The company is targeting 20-24% growth in
brands and retail business driven by growth across segment. Higher growth in
sales and improvement in operating leverage would result in all of its brands
turning profitable and would positively impact EBITDA margin for AFL. The
company expects 100 bps improvement in EBITDA margins every year in the next
2-3 years.

Power Brands growing at 24% CAGR

Revenue (Rs mn, LHS) EBITDA Margins (%, RHS)

25000 12.5%

20000
12.0%

15000
11.5%
10000

11.0%
5000

0 10.5%
FY13 FY14 FY15 FY16 FY17 FY18

Kotak Securities – Private Client Research Please see the Disclosure/Disclaimer on the last page For Private Circulation 8
JULY 23, 2018

Source: Company

Brand – Revenue breakup Brand – EBITDA Breakup

Base Portfolio TH & CK New Business Base Portfolio TH & CK New Business
100% 100% 0
236 8
294
410 530 663 828 190
80% 140
95%
5313 5844
4430 4830 60%
90%
2280 3186 4381
40% 1450
85%
20%
40455 49355
80% 28980 33160
0% -130
-350
75% -20%
FY17 FY18 FY19E FY20E FY17 FY18 FY19E FY20E

Source: Company, Kotak Securities - Private Client Research Source: Company, Kotak Securities - Private Client Research

Verticalization of textiles business would positively impact returns ratios

Over the years, Arvind has created strong presence in textiles space by offering
quality products through constant innovations which resulted in long
relationships with large global brands. The company is the largest denim player
in India with over 100 mn meter of sales and also established its footprints in
fabrics with over 130 mn meter sales.
The company has adopted its strategy to move up in value chain by increasing
focus on garmenting business. This verticalization strategy is based on its strong
customer relationship and high quality raw material supply through inhouse
manufacturing. This should help it to grow in the segment. Presently, the company
is utilizing 10% of its fabric capacity for garmenting. It targets to achieve 30-35%
of garmenting in the next three to four years. Arvind has capacity of 35 mn pcs
per annum in garments segment which it is expanding to 90 mn pcs per annum
in the next 3-4 years. The company would be investing Rs 7.5 bn in the next three
years to expand its capacity. We believe that the verticalization strategy would
positively impact the RoCE of the textiles business in the longer run as garmenting
business has higher returns ratios.

Garments Volume (mn pcs)

60
50
50
37
40
31 31
30 24
19
20 15
12
10

0
FY13 FY14 FY15 FY16 FY17 FY18 FY19E FY20E

Source: Company, Kotak Securities - Private Client Research

Focus on expanding to low cost destination

The garmenting business in India is facing competition from other exporting
nations like Bangladesh, Pakistan, etc who have advantages such as free trade
agreement with EU, lower labour cost, etc. In order to compete with these peers,
the company has setup garmenting unit in Ethiopia where the labour cost is 50%
lower and enjoys zero duty for exports to the US and Europe. Arvind has setup 10

Kotak Securities – Private Client Research Please see the Disclosure/Disclaimer on the last page For Private Circulation 9
JULY 23, 2018

mn pcs per annum capacity in Ethiopia. Further, the company is also investing in
India in states where government has given sops. It is investing in Jharkhand
where the government is giving labour incentive upto 50% which would make it
competitive against other countries like Bangladesh. We believe that the
company’s focus towards low cost destination would help it in competing against
international peers.

Demerger to create focused approach on individual businesses

Arvind has taken decision to demerge its branded apparel and engineering
business into separate companies to be listed separately. The branded apparel
business will be demerged into Arvind Fashions Ltd (AFL) and engineering
business will be demerged into Anup Engineering Ltd (AEL). The demerger would
create three separately listed companies focusing on three different business
which lead increase the focus on individual businesses run separately. We believe
that the demerger would also unlock value of each of the business post listing. As
per scheme of arrangement, shareholders of Arvind Limited will be entitled for 1
equity shares of Arvind Fashions Limited for every 5 shares held by them. Further,
Arvind shareholder will also get 1 equity shares of Anup Engineering Limited for
27 shares held by them.

Transaction detail

Source: Company

Existing structure: Businesses under divisions and subsidiaries Proposed structure: Independent Listed companies

Source: Company Source: Company

Textile business to grow on its own post demerger

The demerger would help textiles business grow on its own in future as the cash
flows will be utilized towards building capability in the business. The company
intends to invest Rs 15 bn in parent Arvind ltd out of which Rs 7.5 bn will be used
for investing in the garments and balance Rs 7.5 bn will be used for new age
fabrics, technical textiles, automotive fabrics, etc.

Kotak Securities – Private Client Research Please see the Disclosure/Disclaimer on the last page For Private Circulation 10
 JULY 23, 2018

Positive outlook for Indian textiles sector

The textile industry in India grew at a CAGR of over 10% in 2009-17 (July 2017).
The industry is projected to reach US$ 250 bn by 2019 from US$ 150 bn in July
2017 which implies 22.7% CAGR. The Textile and apparel exports from India
reached US$ 37.85 bn in 2018, which included US$ 21.15 billion from textiles and
US$ 16.71 bn was from apparels (forecast to reach US$ 82 bn by FY21). The growth
in Indian textiles sector is driven by increased penetration of organized retail,
favorable trade policies, superior quality, rising per capita income, favorable
demographics, etc. Further, abundant availability of raw materials such as cotton,
wool, silk, jute, etc. give an edge to India in the global trade.

Textile and apparel industry in India (US$ bn) Textiles and apparel exports from India (US$ bn)

300 100
250 82
250
80
200
150 60
137
150
108 36.75 36.66 37.85
40
100

50 20

0 0
2015 2016 2017 2019F FY16 FY17 FY18 2021F

Source: IBEF May 2018 Source: IBEF May 2018

Positive outlook for retail industry

With consumerism & disposable income on the rise, the retail sector has
experienced a rapid growth in the past decade with several international players
entering Indian market. As per industry estimates, the Indian retail market is
expected to reach US$ 1.57 trillion by 2026 from US$ 641 billion in 2016 (CAGR
of 10%). Organized retail was 8% of the total market in 2015 and is expected to
reach 24% by 2020, thus expected to grow at 24.57% CAGR in 2015-2020. This
will be driven by rising income levels, increased urbanization, growing aspiration
levels, etc. Indian apparel industry which is the second largest contributor in the
retail industry after food and grocery is seeing some major shift.

Indian retail industry (US$ bn) Organised retail in nascent stage

1400
Organized Trade Unorganized Trade
1200 100%
1000
80%
800
600 60% 76%
92%
400
40%
200
0 20%
24%
0% 8%
2015 2020

Source: IBEF, BCG , KPMG- indiaretailing.com, Deloitte Report Source: IBEF, BCG , KPMG- indiaretailing.com, Deloitte Report

Kotak Securities – Private Client Research Please see the Disclosure/Disclaimer on the last page For Private Circulation 11
JULY 23, 2018

Indian branded apparel sector to do well

As per industry estimates, the current fashion retail market is ~ US$ 46 bn and is
expected to grow at a CAGR of 9.7% to reach US$ 115 bn by 2026. The growth is
driven by increasing preference towards brands, favorable demographics led by
large young population, increasing urbanization, entry of international brands,
etc. According to World Bank, urban population accounts for 32.7 per cent of the
total population of India and rising incomes has been a key determinant for
increasing brand preference and results in upward push on demand. Increasing
urbanization, growing middle class, and rise in per capita income supported
growth of branded players. Foray of premium international brands into the Indian
market with new designs and styles wooed the consumers and changed their
preference towards branded products.

Rise in urban population (% share of total)

35
30
25
20
15
10
5
0
1971 1981 1991 2001 2011

Source: Census

Trends in per-capita income in India (US$) Changing economic fortunes by income segments
100%
2500 15%
30% 26%
80%
2000 32%
60%
40%
1500 43%
40% 29%
1000 20% 25%
23% 17%
3% 6% 7%
500 0% 1% 3%
2015 2020 2030
0 Globals(>22065.3) Strivers(11032.7-22065.3)
Seekers(4413.1-11032.7) Aspirers(1985.9-4413.1)
Deprived(<1985.9)

Source: IBEF, IMF, Mckinsey Global Institute, TechSci Research Source: IBEF, IMF, Mckinsey Global Institute, TechSci Research

Engineering business: great future ahead

Arvind’s engineering business, (under subsidiary) Anup Engineering has built up
capability to manufacture critical process equipment and caters to marquee
clientele. Its products include critical engineering process equipment like Heat
Exchangers, Pressure Vessels, Reactors, Columns/Towers and Centrifuges and
caters to Oil and Gas, Petrochemicals, Fertilizers and Pharma sectors. The segment
has grown at a CAGR of 25% in FY13-18 with high margins of 30% and RoCE of
~40%. It has net cash balance sheet and has been generating healthy cash flows.
The company is also looking at global opportunity in the business and targets to
achieve Rs 10 bn revenue in next 5-6 years.

Kotak Securities – Private Client Research Please see the Disclosure/Disclaimer on the last page For Private Circulation 12
JULY 23, 2018

RISKS & CONCERNS

Major revision in license terms of foreign brands: Arvind has license arrangement
with 12 international brands. Any revision in license terms or termination of the
same would be negative for the company.
Lower export incentive: The company gets government incentive for its garment
business. Any major revision in incentive by central or state governments may
impact the profitability of the export driven garments business.
Raw material or forex volatility: Any major volatility in the currency or raw material
may impact the profitability of textiles exports business.

Kotak Securities – Private Client Research Please see the Disclosure/Disclaimer on the last page For Private Circulation 13
JULY 23, 2018

FINANCIAL PROJECTIONS
Revenue to grow at 13.4% CAGR in FY18-20E
We expect Arvind’s revenue and PAT to grow at a CAGR of 13.4% and 43.8%
respectively in FY18-20E. The growth in revenue is driven by 9% CAGR in textiles,
21% CAGR in branded apparels and 17.5% CAGR in engineering business. In
textiles business, we expect garment volumes to grow at a CAGR of 27% in FY18-
20E which would result in increased consumption of inhouse fabrics. We expect
17% CAGR in EBITDA for the segment in the period. We have assumed improved
performance in branded apparel segment with 20.6% CAGR in revenue and 41.2%
CAGR in EBITDA during the period driven by 230 bps improvement in EBITDA
margins for the segment in FY18-20E. We have estimated 17.5% CAGR in
engineering business with EBITDA margins of 24-25% in FY18-20E.

Financial Estimates (Entities-wise)

Particulars (Rs mn) FY17 FY18 FY19E FY20E
Revenue 92350 108260 121895 139314
Textiles 61580 67500 72888 80195
Branded Apparel 28980 38520 46431 56028
Engineering 1790 2240 2576 3091
Revenue Growth (%)
Textiles 21.5 9.6 8.0 10.0
Branded Apparel 25.9 32.9 20.5 20.7
Engineering 23.4 25.1 15.0 20.0
EBITDA 10180 9660 11475 14718
Textiles 8190 6770 7435 9263
Branded Apparel 1450 2350 3422 4683
Engineering 540 540 618 773
EBITDA Margin (%) 11.0 8.9 9.4 10.6
Textiles 13.3 10.0 10.2 11.6
Branded Apparel 5.0 6.1 7.4 8.4
Engineering 30.2 24.1 24.0 25.0
EBITDA Growth (%)
Textiles -11.7 -17.3 9.8 24.6
Branded Apparel 39.4 62.1 45.6 36.9
Engineering 34.4 0.0 14.5 25.0
Source: Company, Kotak Securities - Private Client Research

EBITDA and PAT to grow at faster pace on improved margins

We expect the consolidated EBITDA margins to improve by 170 bps in FY18-20E
to 10.6% led by improved profitability in branded apparel business. The
improvement in margins would be driven by all its brands turning profitable led
by operating leverage and higher growth across brands and retail segment. Based
on this, we expect EBITDA and PAT to grow at a CAGR of 23.5% and 43.5%
respectively in FY18-20E. We expect RoE and RoCE of the company to improve
from 8.1% and 8.8% to 13.8% and 13.3%, respectively in FY18-20E on improved
margins and increased asset turnover ratios. We expect strong free cash flows
despite its ongoing capex and expect net debt to equity to be in 0.6-0.7x range.
This should help the company to grow its business without much borrowing.

Kotak Securities – Private Client Research Please see the Disclosure/Disclaimer on the last page For Private Circulation 14
JULY 23, 2018

Net Sales & Growth PAT and Growth

Net Sales (Rs mn, LHS) Growth (%, RHS)

PAT (Rs mn, LHS) Growth (%, RHS)
150,000 20 7,000 60
6,000 50
15
5,000 40
100,000
4,000 30
10
3,000 20
50,000
5 2,000 10
1,000 0
0 0 0 (10)
FY17 FY18 FY19E FY20E FY17 FY18 FY19E FY20E

Source: Company, Kotak Securities - Private Client Research Source: Company, Kotak Securities - Private Client Research

EBITDA Margin & PAT Margin (%) RoCE & RoE (%)

EBITDA margins % PAT Margins 20

12.0 RoE RoCE

10.0 15

8.0
10
6.0

4.0
5
2.0

0.0 0
FY17 FY18 FY19E FY20E FY17 FY18 FY19E FY20E

Source: Company, Kotak Securities - Private Client Research Source: Company, Kotak Securities - Private Client Research

Net D/E (x) OCF & FCF

0.80 Operating Cash Flows (Rs mn, LHS)

10,000 5000
FCF (Rs mn, RHS)
0.70 4000
8,000

0.60 3000
6,000
2000
0.50 4,000
1000
0.40 2,000 0

0.30 0 -1000
FY17 FY18E FY19E FY20E FY17 FY18 FY19E FY20E

Source: Company, Kotak Securities - Private Client Research Source: Company, Kotak Securities - Private Client Research

Kotak Securities – Private Client Research Please see the Disclosure/Disclaimer on the last page For Private Circulation 15
 JULY 23, 2018

OUTLOOK & VALUATION

We expect company’s revenue and PAT to grow at a CAGR of 13.4% and 43.5%
respectively in FY18-20E driven by higher volume growth in garments business,
better growth in branded retail business, improved operating leverage, all brands
turning profitable, etc. We expect 170 bps improvement in EBITDA margins in
FY18-20E. This will have positive impact on earnings, cash flows and returns ratios.
We believe that Arvind being a major player in branded apparel business and
having long history in textiles business has strong potential to grow keeping in
mind increasing penetration of new brands, rising disposable income, increasing
preference towards brands, etc. Robust brand portfolio, strong management and
vast presence across geographies would always give Arvind an edge over other
smaller players in the branded apparel space. We believe that the demerger would
result in value unlocking opportunity for its business segments.
The stock is presently trading at FY19E/20E PE of 24.4/15.8 based on EPS of Rs.
16.3/25.2 respectively. We have valued Arvind on sum of the parts basis where we
have assigned FY20E EV/EBITDA multiple of 16x to branded apparel business, 8x
to textile business and 13x to engineering business. Based on this we arrive at
target price of Rs 500. We initiate coverage on the stock with BUY
recommendation and SOTP based target price of Rs 500.

SOTP valuation
Segment Parameter FY20E Multiple Value Per Share
Textiles EV/EBITDA 9,263 8 74,100 287
Apparels EV/EBITDA 4,683 16 74,930 290
Engineering EV/EBITDA 773 13 10,046 39
Others 1.5x BV 572 1.5 858 3
Net Debt 30,730 119
Value 129,204 500
Source: Kotak Securities - Private Client Research

Peer Comparison
Comparative Mcap FY13-18 FY13-18 FY20E FY20E FY18 FY18 FY18
(Rs bn) Sales PAT P/E (x) EV/EBITDA RoE RoCE Net D/E
CAGR (%) CAGR (%) (x) (%) (%) (x)
Arvind 103 13 44 15.8 11.6 8.1 8.8 0.8
Raymond 49 12 40 20.5 12.6 8.1 6.2 1.3
ABFRL 104 16 5 34.6 15.8 11.5 6.0 1.5
Source: Company, Kotak Securities - Private Client Research, Bloomberg Estimates

P/E Band (x) EV/EBITDA band (x)

600 160000
500 28x 12x
120000
400 21x 9x
(Rs)

300 14x 80000

6x
200
7x 40000
100
3x
0 0
Jun-11

Jun-12

Jun-13

Jun-14

Jun-15

Jun-16

Jun-17

Jun-18
Oct-11
Feb-12

Oct-12
Feb-13

Oct-13
Feb-14

Oct-14
Feb-15

Oct-15
Feb-16

Oct-16
Feb-17

Oct-17
Feb-18

Source: Capitaline, Kotak Securities - Private Client Research Source: Capitaline, Kotak Securities - Private Client Research

Kotak Securities – Private Client Research Please see the Disclosure/Disclaimer on the last page For Private Circulation 16
JULY 23, 2018

Financials: Consolidated
Profit and Loss Statement (Rs mn) Balance sheet (Rs mn)
(Year-end March) FY17 FY18 FY19E FY20E (Year-end March) FY17 FY18 FY19E FY20E
Revenues 92,355 108,261 121,495 139,008 Equity 37,184 40,881 44,366 50,145
% change yoy 15.3 17.2 12.2 14.4 Equity Share Capital 2,584 2,586 2,586 2,586
Raw Materials 42,094 52,738 58,455 66,881 Other Equity 33,086 35,242 38,727 44,506
Employees expenses 10,963 12,647 13,912 15,303 Liabilities 49,496 61,703 59,719 63,529
Other Expenses 29,893 33,227 37,663 42,100 Non-current liabilities 10,207 10,655 10,655 10,655
Total Expenditure 82,950 98,612 110,030 124,285 Financial Liabilities 8,016 8,927 8,927 8,927
Provisions 407 618 618 618
EBITDA 9,406 9,650 11,464 14,723 Other non-current liabilities 355 402 402 402
% change yoy (1.0) 2.6 18.8 28.4 Current liabilities 39,289 51,048 49,064 52,874
Depreciation 2,943 3,593 3,976 4,327 Financial Liabilities 37,892 48,800 46,541 49,987
Provisions 168 258 289 331
EBIT 6,463 6,056 7,488 10,396 Other current liabilities 1,229 1,990 2,233 2,555
Other Income 780 626 726 826 Total Equities & Liabilities 86,680 102,584 104,085 113,674
Interest 2,884 2,579 2,722 2,722 Non-current assets 45,846 47,190 47,845 48,154
Profit Before Tax 4,197 3,904 5,520 8,528 Property, Plant and Equipment 34,801 36,255 36,779 36,952
% change yoy (4.8) (7.0) 41.4 54.5 Capital work-in-progress 497 897 897 897
Tax 997 746 1,308 2,021 Goodwill, intangible & Others 2,381 3,632 3,632 3,632
as % of EBT 23.7 19.1 23.7 23.7 Investmnt & other financl assets 5,183 3,392 3,522 3,659
Deferred Tax Assets (Net) 2,242 2,205 2,205 2,205
PAT 3,201 3,158 4,212 6,507 Other non-current tax assets (Net) 742 808 808 808
% change yoy 1.2 (1.3) 33.4 54.5 Current assets 40,834 55,394 56,240 65,519
Shares outstanding (mn) 258 259 259 259 Inventories 23,828 26,194 29,396 34,276
EPS (Rs) 12.4 12.2 16.3 25.2 Financial Assets 12,622 22,220 25,009 29,143
DPS (Rs) 2.4 2.4 2.4 2.4 Receivable 7,948 17,670 19,830 22,688
CEPS (Rs) 23.8 26.1 31.7 41.9 Cash & Bank Balance 209 395 825 1,837
Others 4,465 4,156 4,356 4,620
BVPS (Rs) 143.8 158.1 171.6 193.9 Other current assets 4,384 6,980 1,836 2,100
Source: Company, Kotak Securities – Private Client Research Total Assets 86,680 102,584 104,085 113,674
Source: Company, Kotak Securities – Private Client Research

Cash Flow Statement (Rs mn) Ratio Analysis

(Year-end March) FY17 FY18 FY19E FY20E (Year-end March) FY17 FY18 FY19E FY20E
Pre-Tax Profit 4,197 3,904 5,520 8,528 Profitability Ratios
Depreciation 2,971 3,593 3,976 4,327 EBITDA margin (%) 10.2 8.9 9.4 10.6
Change in WC (3,137) (4,141) (2,531) (4,595) EBIT margin (%) 7.0 5.6 6.2 7.5
Other operating activities 1,404 1,833 1,414 701 Net profit margin (%) 3.5 2.9 3.5 4.7
Operating Cash Flow 5,435 5,189 8,378 8,960 Adjusted EPS growth (%) 1.2 (1.3) 33.4 54.5
Balance Sheet Ratios
Capex (4,426) (5,509) (4,500) (4,500) Receivables (days) 31 60 60 60
Free Cash Flow 854 (320) 3,878 4,460 Inventory (days) 94 88 88 90
Change in Investments 4,720 0 0 0 Payable (days) 56 72 56 56
Investment cash flow 294 (5,509) (4,500) (4,500) Working capital (days) 97 105 102 103
Asset Turnover 2.0 2.2 2.3 2.4
Equity Raised 6,347 3 0 0 Net Debt/ Equity 0.5 0.5 0.5 0.4
Debt Raised/Repaid (8,536) 2,384 0 0 Return Ratios
Dividend (740) (726) (726) (726) RoCE (%) 12.4 10.0 10.2 13.3
Interest & Others (2,885) (1,156) (2,722) (2,722) RoE (%) 10.0 8.1 9.9 13.8
CF from Financing (5,815) 505 (3,448) (3,448) Valuation Ratios
P/E (x) 32.2 32.6 24.4 15.8
Change in Cash (86) 185 430 1,012 P/BV (x) 2.8 2.5 2.3 2.1
Opening Cash 296 209 395 825 EV/EBITDA (x) 13.8 13.8 11.6 9.0
Closing Cash 209 395 825 1,837 EV/Sales (x) 1.4 1.2 1.0 0.9
Source: Company, Kotak Securities – Private Client Research Source: Company, Kotak Securities – Private Client Research

Kotak Securities – Private Client Research Please see the Disclosure/Disclaimer on the last page For Private Circulation 17
JULY 23, 2018

RATING SCALE
Definitions of ratings
BUY – We expect the stock to deliver more than 12% returns over the next 12 months
ACCUMULATE – We expect the stock to deliver 5% - 12% returns over the next 12 months
REDUCE – We expect the stock to deliver 0% - 5% returns over the next 12 months
SELL – We expect the stock to deliver negative returns over the next 12 months
NR – Not Rated. Kotak Securities is not assigning any rating or price target to the stock. The
report has been prepared for information purposes only.
RS – Rating Suspended. Kotak Securities has suspended the investment rating and price target
for this stock, either because there is not a Sufficient fundamental basis for determining, or
there are legal, regulatory or policy constraints around publishing, an investment rating or
target. The previous investment rating and price target, if any, are no longer in effect for this
stock and should not be relied upon.
NA – Not Available or Not Applicable. The information is not available for display or is not
applicable
NM – Not Meaningful. The information is not meaningful and is therefore excluded.
NOTE – Our target prices are with a 12-month perspective. Returns stated in the rating scale are our
internal benchmark.

FUNDAMENTAL RESEARCH TEAM

Rusmik Oza Arun Agarwal Amit Agarwal Nipun Gupta Krishna Nain
Head of Research Auto & Auto Ancillary Transportation, Paints, FMCG Information Tech, Midcap Special Situations
rusmik.oza@kotak.com arun.agarwal@kotak.com agarwal.amit@kotak.com nipun.gupta@kotak.com krishna.nain@kotak.com
+91 22 6218 6441 +91 22 6218 6443 +91 22 6218 6439 +91 22 6218 6433 +91 22 6218 7907

Sanjeev Zarbade Ruchir Khare Jatin Damania Cyndrella Carvalho K. Kathirvelu

Cap. Goods & Cons. Durables Cap. Goods & Cons. Durables Metals & Mining, Midcap Pharmaceuticals Production
sanjeev.zarbade@kotak.com ruchir.khare@kotak.com jatin.damania@kotak.com cyndrella.carvalho@kotak.com k.kathirvelu@kotak.com
+91 22 6218 6424 +91 22 6218 6431 +91 22 6218 6440 +91 22 6218 6426 +91 22 6218 6427

Teena Virmani Sumit Pokharna Pankaj Kumar Jayesh Kumar

Construction, Cement, Building Mat Oil and Gas, Information Tech Midcap Economy
teena.virmani@kotak.com sumit.pokharna@kotak.com pankajr.kumar@kotak.com kumar.jayesh@kotak.com
+91 22 6218 6432 +91 22 6218 6438 +91 22 6218 6434 +91 22 6218 5373

TECHNICAL RESEARCH TEAM

Shrikant Chouhan Amol Athawale
shrikant.chouhan@kotak.com amol.athawale@kotak.com
+91 22 6218 5408 +91 20 6620 3350

DERIVATIVES RESEARCH TEAM

Sahaj Agrawal Malay Gandhi Prashanth Lalu Prasenjit Biswas, CMT, CFTe
sahaj.agrawal@kotak.com malay.gandhi@kotak.com prashanth.lalu@kotak.com prasenjit.biswas@kotak.com
+91 79 6607 2231 +91 22 6218 6420 +91 22 6218 5497 +91 33 6625 9810

Kotak Securities – Private Client Research Please see the Disclosure/Disclaimer on the last page For Private Circulation 18
JULY 23, 2018

Disclosure/Disclaimer
Kotak Securities Limited established in 1994, is a subsidiary of Kotak Mahindra Bank Limited. Kotak Securities is one of India's largest brokerage and distribution house.
Kotak Securities Limited is a corporate trading and clearing member of Bombay Stock Exchange Limited (BSE), National Stock Exchange of India Limited (NSE), Metropolitan
Stock Exchange of India Limited (MSE). Our businesses include stock broking, services rendered in connection with distribution of primary market issues and financial
products like mutual funds and fixed deposits, depository services and Portfolio Management.
Kotak Securities Limited is also a depository participant with National Securities Depository Limited (NSDL) and Central Depository Services (India) Limited (CDSL). Kotak
Securities Limited is also registered with Insurance Regulatory and Development Authority as Corporate Agent for Kotak Mahindra Old Mutual Life Insurance Limited and
is also a Mutual Fund Advisor registered with Association of Mutual Funds in India (AMFI). We are registered as a Research Analyst under SEBI (Research Analyst)
Regulations, 2014.
We hereby declare that our activities were neither suspended nor we have defaulted with any stock exchange authority with whom we are registered in last five years.
However SEBI, Exchanges and Depositories have conducted the routine inspection and based on their observations have issued advise/warning/deficiency letters/ or levied
minor penalty on KSL for certain operational deviations. We have not been debarred from doing business by any Stock Exchange / SEBI or any other authorities; nor has
our certificate of registration been cancelled by SEBI at any point of time.
We offer our research services to clients as well as our prospects.
This document is not for public distribution and has been furnished to you solely for your information and must not be reproduced or redistributed to any other person.
Persons into whose possession this document may come are required to observe these restrictions.
This material is for the personal information of the authorized recipient, and we are not soliciting any action based upon it. This report is not to be construed as an offer
to sell or the solicitation of an offer to buy any security in any jurisdiction where such an offer or solicitation would be illegal. It is for the general information of clients of
Kotak Securities Ltd. It does not constitute a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual
clients.
We have reviewed the report, and in so far as it includes current or historical information, it is believed to be reliable though its accuracy or completeness cannot be
guaranteed. Neither Kotak Securities Limited, nor any person connected with it, accepts any liability arising from the use of this document. The recipients of this material
should rely on their own investigations and take their own professional advice. Price and value of the investments referred to in this material may go up or down. Past
performance is not a guide for future performance. Certain transactions -including those involving futures, options and other derivatives as well as non-investment grade
securities - involve substantial risk and are not suitable for all investors. Reports based on technical analysis centers on studying charts of a stock's price movement and
trading volume, as opposed to focusing on a company's fundamentals and as such, may not match with a report on a company's fundamentals.
Opinions expressed are our current opinions as of the date appearing on this material only. While we endeavor to update on a reasonable basis the information discussed
in this material, there may be regulatory, compliance or other reasons that prevent us from doing so. Prospective investors and others are cautioned that any forward-
looking statements are not predictions and may be subject to change without notice. Our proprietary trading and investment businesses may make investment decisions
that are inconsistent with the recommendations expressed herein.
Kotak Securities Limited has two independent equity research groups: Institutional Equities and Private Client Group. This report has been prepared by the Private Client
Group. The views and opinions expressed in this document may or may not match or may be contrary with the views, estimates, rating, target price of the Institutional
Equities Research Group of Kotak Securities Limited.
We and our affiliates/associates, officers, directors, and employees, Research Analyst(including relatives) worldwide may: (a) from time to time, have long or short positions
in, and buy or sell the securities thereof, of company (ies) mentioned herein or (b) be engaged in any other transaction involving such securities and earn brokerage or
other compensation or act as a market maker in the financial instruments of the subject company/company (ies) discussed herein or act as advisor or lender / borrower
to such company (ies) or have other potential/material conflict of interest with respect to any recommendation and related information and opinions at the time of
publication of Research Report or at the time of public appearance. Kotak Securities Limited (KSL) may have proprietary long/short position in the above mentioned
scrip(s) and therefore may be considered as interested. The views provided herein are general in nature and does not consider risk appetite or investment objective of
particular investor; readers are requested to take independent professional advice before investing. This should not be construed as invitation or solicitation to do business
with KSL. Kotak Securities Limited is also a Portfolio Manager. Portfolio Management Team (PMS) takes its investment decisions independent of the PCG research and
accordingly PMS may have positions contrary to the PCG research recommendation. Kotak Securities Limited does not provide any promise or assurance of favourable
view for a particular industry or sector or business group in any manner. The investor is requested to take into consideration all the risk factors including their financial
condition, suitability to risk return profile and take professional advice before investing.
The analyst for this report certifies that all of the views expressed in this report accurately reflect his or her personal views about the subject company or companies and
its or their securities, and no part of his or her compensation was, is or will be, directly or indirectly related to specific recommendations or views expressed in this report.
No part of this material may be duplicated in any form and/or redistributed without Kotak Securities' prior written consent.
Details of Associates are available on our website ie www.kotak.com
Research Analyst has served as an officer, director or employee of subject company(ies): No
We or our associates may have received compensation from the subject company(ies) in the past 12 months.
We or our associates have managed or co-managed public offering of securities for the subject company(ies) in the past 12 months: No
We or our associates may have received compensation for investment banking or merchant banking or brokerage services from the subject company(ies) in the past 12
months. We or our associates may have received any compensation for products or services other than investment banking or merchant banking or brokerage services
from the subject company(ies) in the past 12 months. We or our associates may have received compensation or other benefits from the subject company(ies) or third
party in connection with the research report. Our associates may have financial interest in the subject company(ies).
Research Analyst or his/her relative's financial interest in the subject company(ies): No
Kotak Securities Limited has financial interest in the subject company(ies) at the end of the month immediately preceding the date of publication of Research Report: No
Our associates may have actual/beneficial ownership of 1% or more securities of the subject company(ies) at the end of the month immediately preceding the date of
publication of Research Report.
Research Analyst or his/her relatives has actual/beneficial ownership of 1% or more securities of the subject company(ies) at the end of the month immediately preceding
the date of publication of Research Report: No.
Kotak Securities Limited has actual/beneficial ownership of 1% or more securities of the subject company(ies) at the end of the month immediately preceding the date of
publication of Research Report: No
Subject company(ies) may have been client during twelve months preceding the date of distribution of the research report.
"A graph of daily closing prices of securities is available at www.nseindia.com and http://economictimes.indiatimes.com/markets/stocks/stock-quotes. (Choose a company
from the list on the browser and select the "three years" icon in the price chart)."
Kotak Securities Limited. Registered Office: 27 BKC, C 27, G Block, Bandra Kurla Complex, Bandra (E), Mumbai 400051. CIN: U99999MH1994PLC134051, Telephone No.:
+22 43360000, Fax No.: +22 67132430. Website: www.kotak.com/www.kotaksecurities.com. Correspondence Address: Infinity IT Park, Bldg. No 21, Opp. Film City Road, A
K Vaidya Marg, Malad (East), Mumbai 400097. Telephone No: 42856825. SEBI Registration No: NSE INB/INF/INE 230808130, BSE INB 010808153/INF 011133230, MSE INE
260808130/INB 260808135/INF 260808135, AMFI ARN 0164, PMS INP000000258 and Research Analyst INH000000586. NSDL/CDSL: IN-DP-NSDL-23-97. Our research
should not be considered as an advertisement or advice, professional or otherwise. The investor is requested to take into consideration all the risk factors including their
financial condition, suitability to risk return profile and the like and take professional advice before investing. Investments in securities market are subject to market risks,
read all the related documents carefully before investing. Derivatives are a sophisticated investment device. The investor is requested to take into consideration all the risk
factors before actually trading in derivative contracts. Compliance Officer Details: Mr. Manoj Agarwal. Call: 022 - 4285 8484, or Email: ks.compliance@kotak.com.
In case you require any clarification or have any concern, kindly write to us at below email ids:
 Level 1: For Trading related queries, contact our customer service at 'service.securities@kotak.com' and for demat account related queries contact us at
ks.demat@kotak.com or call us on: Toll free numbers 18002099191 / 1800222299, Offline Customers - 18002099292
 Level 2: If you do not receive a satisfactory response at Level 1 within 3 working days, you may write to us at ks.escalation@kotak.com or call us on 022-42858445 and
if you feel you are still unheard, write to our customer service HOD at ks.servicehead@kotak.com or call us on 022-42858208.
 Level 3: If you still have not received a satisfactory response at Level 2 within 3 working days, you may contact our Compliance Officer (Mr. Manoj Agarwal) at
ks.compliance@kotak.com or call on 91- (022) 4285 8484.
 Level 4: If you have not received a satisfactory response at Level 3 within 7 working days, you may also approach CEO (Mr. Kamlesh Rao) at ceo.ks@kotak.com or call
on 91- (022) 4285 8301.

Kotak Securities – Private Client Research Please see the Disclosure/Disclaimer on the last page For Private Circulation 19