INDSEC

Hero Motocorp

Source: Company, Indsec Research Page 35

 CMP 2,780 Rating BUY
INDSEC Hero MotoCorp
Striking the right chords Target 3,687 (18m) Upside 33%

STOCK DETAILS Hero Motocorp (HMCL) has been the undisputed leader in the sub-125cc motorcycle segment. Its competitive advantage is
Bloomberg code HMCL:IN underpinned by (1) its proficiency to maintain a superior brand equity in rural markets, (2) Deep-rooted distribution network
in remote geographies and (3) ability to maintain a low operating cost matrix across cycles. The scooter segment which was a
Market Cap (Rs. bn) 555
laggard for while has seen stellar recovery from H2FY21 onwards led by healthy demand for premium scooters (Maestro
Market Cap (USD bn) 7.3 125cc +Destini 125cc) from the urban pockets. Interestingly, HMCL has approached the electric mobility through a three
Sector Auto pronged strategy through (a) its acquisition of Ather Energy, (b) launching of an electric scooter towards the end of FY22 and
(c) the recent alliance with Gogoro (Taiwan) which will aid in setting up of charging stations across India. A key growth
Index Nifty 50
enabler in the premium motorcycle segment would be the recent tie-up with H-D which has commenced operations and is
52 wk. High/Low 3,629 / 2,712 ramping up well. Growth is padded up with pristine balance sheet, alluring return ratios and credible track record of strong
Avg Mthly Turnover (Rs.mn) 1,389 execution capabilities. We initiate coverage on the HMCL with a BUY Rating for a TP of Rs 3,687 implying a potential upside of
33%.
Shares in Issue (mn) 400

BSE Sensex 55,792 Efforts to shrug off the ‘mass market’ tag are on...
Having been acclaimed as the ‘Hero’ in the affordable segment, HMCL has successfully endured multiple trough cycles through
NSE Nifty 16,615
superior positioning in the entry and executive motorcycle segment. Its flagship products - Hero Splendor, HF Deluxe, Passion
SHAREHOLDING PATTERN
Pro, Glamour and Super Splendor have entailed a large market share gain over the years for HMCL in <125cc motorcycle
% Dec-20 Mar-21 Jun-21
segment and command premium pricing when compared to peers within segment. The success of the ‘Hero’ can attributed to
Promoter 34.8 34.8 34.8
its best-in-class features like better mileage, engine performance and durability even across rugged terrains.
FII 35.9 37.2 35.0
DII 20.0 18.7 20.2
Notably, its premium motorcycles (Xtreme 160, XPulse 200) have been received well by the customers and the company aspires
Others 9.4 9.4 10.0 to grab a meaningful market share in the >150cc segment. Previously, HMCL struggled to make it big in the premium segment
FINANCIALS with Karizma ZMR and Xtreme. However, this time around the efforts are on to distinguish the brands XPulse 200 and Xtreme
Rs Bn. FY20 FY21 FY22E FY23E
160R from the legacy of ‘Hero’ and create a unique brand proposition in the minds of the customers. Thus, we suppose this
Revenue 288.4 308.0 365.9 402.0
should set the tone for sizable market share gains in the premium segment going ahead. Moreover, visible efforts are seen to-
wards new product development at their Technical Centre in Jaipur and Germany where the focus is to launch a more mascu-
EBITDA 39.6 40.2 47.4 54.9
line and more ubiquitous premium motorcycle and scooter brand.
EBITDA(%) 13.7% 13.0% 13.0% 13.7%
PAT 37.8 29.5 34.7 40.4
We believe, HMCL would attain a reasonable success in the premium segment as its existing large customer base would be
PAT(%) 13.1% 9.6% 9.5% 10.0%
looking to upgrade/replace its existing model and thus aid the overall volume growth for HMCL.
EPS 181.8 148.4 173.7 202.1 Medium term growth drivers for motorcycle segment: (1) Receding of the second wave, (2) Normal and well distributed
P/E(x) 15.3x 18.7x 16.0x 13.8x monsoons, (2) Better kharif sowing to aid agriculture income, (3) Improved cash flows among rural households, (4) Lower
Saral Seth Prathamesh Masdekar penetration in growth states to see faster motorcycle adoption, (5) Pent-up demand leading to an increased adoption of
VP—Institutional Equities Research Associate personal mobility and (6) Cost savings from restrictions/curbs curtailment of discretionary consumption and outdoor travel.
sarals@indsec.co.in prathameshm@indsec.co.in

+91 22 61146139 +91 22 61146140

Page 36
Indsec Research is also available on www.indsec.com and Bloomberg RESP_ISFL <GO>, Thomson Reuters, Factset and Bluematrix
 INDSEC
Hero Motocorp Ltd

‘Nimble footed’ approach towards scooters to regain market share

HMCL’s scooter market share dropped by a substantial 1190bps from 19.2% in FY14 to 7.2% in FY20 as faster growth was seen in the 125cc scooters where
Hero did not have any presence. Meanwhile, the competitors continued to launch a slew of 125cc models to capture the premiumization trend. HMCL made
late entry into the much crowded 125cc scooter segment and managed to successfully launch the Destini 125cc in 2018 and Maestro Edge 125cc in 2019.
With this, it brought back the scooter market share to 9.9% in FY21 (+270bps). The urban markets opened up with the receding of the first wave and thus
resulted in renewed buyer interest from the first time buyers. The company launched a fresh BS6 version of its product lines across segments which led to
customer enticement. The newly launched BS6 version of Pleasure+ which was very well appreciated by customers for its premium finish further aided the
market share expansion for HMCL during 2HFY21. While the near term outlook remains muted due to the sharp progression of Covid pandemic, we expect
demand to make a strong comeback from 2QFY22 onwards as the urban metros would open as the second wave of Covid cases shows signs of decline.
Medium term growth drivers for scooter segment: (1) Opening up of urban markets as the second wave of Covid cases decline, (2) Schools/Colleges and
offices which have remained closed are set to reopen should aid volume growth, (3) Rising youth population including women buyers would be opting for
scooters, (3) Better utility purpose for low distance travel when compared to motorcycles such as storage space.

Exports shaping up well led by customized product based approach across key export clusters
Exports which had been a laggard for a while is slowly gathering pace. The gradual metamorphosis in the export markets is attributed to the adoption of a
more localized and differentiated approach in each of its clusters. Working towards a customer driven model be it through offering of a longer seated motor-
cycle for the Nigeria’s taxi market or forging alliance with the largest dealer in faster growing two-wheeler market in Columbia is showing steady results.
Beyond Nigeria, the Boda Boda or the motorcycle taxis are expected to see faster adoption in countries like Guinea, Kenya, Tanzania and Uganda in Africa.
Whereas the company sees superior gains from key LATAM markets Peru, Ecuador and Dominican Republic. The key growth drivers towards two-wheeler
adoption can be attributed to poor public transport infrastructure, affordable mobility, the regions being having a larger youth inhabitants (median age 20s).

EV adoption to be driven by three pronged strategy

India’s EV adoption is seeing increased adoption over past six months supported by the skewing Govt policies towards electric mobility and superior product
offerings from leading two-wheeler startups (Okinawa, Hero Electric, Ampere). Moreover the recent media announcements from Ola to setup the world’s
largest electric two-wheeler facility in Hosur is pointing towards a speedier EV adoption over next few years. HMCL plans to aggressively enter the electric
mobility through a three pronged strategy through — (a) its acquisition of Ather Energy where it plans to speedily expand distributor network to the larger
cities, (b) launching of an electric scooter (E-Maestro) towards the end of FY22 and (c) the recent alliance with Gogoro (Taiwan) which will aid in setting up of
battery swappable charging stations across India. While India’s EV market could head for a consolidation by FY24, the incumbents such as HMCL would have
an opportunity to make deep roads into India’s EV industry through alliances with startups cushioned with newer products focusing on connected mobility.

Source: Company, Indsec Research Page 37

 INDSEC
Hero Motocorp Ltd

Alliance with Harley Davidson to foster growth in aspirational segment

Harley-Davidson’s announcement with Hero MotoCorp is part of its corporate makeover which involves exits from nearly 40 global markets. As part of the
alliance, Harley stated that it has decided to hand over sales, service and distribution of its products to HMCL which will also take care of sales of parts,
accessories, general merchandise, riding gear and apparels of H-D. WIthin a short span, HMCL has onboarded ~15 dealers of Harley with itself and has start-
ed selling the H-D motorcycles from Jan-21 onwards. HMCL to carry forward the legacy of Harley through its flagship models including iron Rod 883, Forty-
Eight, Softail Standard, Fat Bob, Street Bob etc. to name a few. Championing the 2W distribution network in India, HMCL is expected to successfully ramp up
the ultra luxurious H–D brand and thereby alter the customer’s connect of the ‘Hero’ brand with mass market segment.

Improved two-wheeler financing to cushion volume growth

Two-wheeler financing has emerged as a lucrative business opportunity for a large number of NBFCs due to the low ticket size and faster payback period. 2W
financing penetration for HMCL stands at ~48% out of which 40% is financed by Hero Fincorp (2W financing subsidiary). We expect Hero Fincorp to grow at a
1.5x speed to that of the 2W industry led by increased financing penetration as the EMI options (monthly EMI of Rs ~Rs 9,000-10,000) has accelerated the
volumes of the affordable 2W segment where customers occasionally face cashflow issues. With easing liquidity for NBFCs and affordable financing rates
due to pandemic, we expect to 2W financing to reach 75% penetration in next 4-5 years and thus substantially increase the book size of Hero Fincorp over
the period.

Valuation and Outlook: Initiate BUY Rating with a TP of Rs 3,687

Having been an established player in the entry level two-wheeler space for multi-decades through its flagship products, HMCL has now set the ball rolling in
the premium motorcycle and scooter segment which is still underappreciated by the street. We also expect the company to ride the electric mobility space
over next two years on the back of a robust partnership with Ather Energy and the timely launch of its own electric scooter which could lead to a re-rating of
the stock. We remain enthused by HMCL’s export ambitions where it plans to double its export market share to 10% over next few years through foray into
newer markets and customer focused product approach. Notwithstanding the near-term uncertainty in demand (~70% dealers are shut temporarily) led by
the cascading effect of second wave, we expect HMCL to be aided from the cyclical uptrend which is seen after a 3yr cyclical slowdown (2HFY18-21). We also
expect the entry level motorcycles to fare well over the medium term as it offers superior value proposition to the rural customers. Moreover, improving
farmer cashflows led by MSPs for key crops is a key growth driver. Changing perceptions in the premium segment with the successful launches of XPulse
200T and Xtreme 160R/200R has gathered steam to support the HMCL’s premiumization strategy. As the urban metros open up gradually, scooter volumes
should see faster growth led by pent up demand from college students, working class and women commuters. We build in volume/Revenue/EBITDA/PAT
CAGR of 11%/14%/17%/17% over FY21-23e. We value the stock on SOTP basis and arrive at a TP of Rs 3,687. We value the auto business at 16x FY23e EPS +
financing business at Rs 453/share which leads to a SOTP based TP of Rs 3,687 implying an upside of 33% from current price.
Key Risks:
(1) Weakening of Cashflows within the rural households led by impact of second wave
(2) Unequal distribution pattern of monsoons may have an adverse impact on agriculture and thus impact rural volumes
(3) Rising input costs may lead to near term margin pressures.
Source: Company, Indsec Research Page 38

Corporate background
Facilities
Board of Directors
Leadership Team
Source: Company, Indsec Research
INDSEC
Hero Motocorp Ltd
• Promoted by Mr. Pawan Munjal, Hero Motocorp (HMCL) is the world’s largest two-wheeler manufacturer having ~32% market share in the
overall two-wheeler market. The company enjoys >50% market share in the domestic motorcycles whereas its market share in scooters is at
~10%. The company has gradually increased its export share to 5% led by strong demand from African-LATAM markets. The company has
marked its presence into EVs through its stake in Ather Energy and the recent alliance with Gogoro (Taiwan) for setting up of battery swappa-
ble stations. The tie up with Harley Davidson should help it leverage the premium motorcycle segment.
• HMCL has a total production capacity of 9.1mn units. Its facilities include Dharuhera - 2.1mn units, Gurugram - 2.1mn units, Haridwar - 2.7mn
units, Neemrana - 0.8mn units, Halol - 0.8mn units, Chitoor - 0.4mn units, Colombia - 150,000 units, Bangladesh - 80,000 units
• The company has an R&D Centre in Jaipur (invested amount of Rs 8.5bn) and in Munich, Germany and Mr. Markus Braunsperger is the CTO at
the German Tech Center.
• Dr. Pawan Munjal, Chairman and MD & CEO
• Mr. Pradeep Dinodia, Non-ED
• Mr. Suman Kant Munjal, Non-ED
• Mr. M. Damodaran, Non-ED and Ind. Director
• Mr. Vikram Kasbekar, ED and CTO
• Mr. Jagmohan Singh Raju, Non-ED and Ind. Director
• Ms. Tina Trikha, Non-ED and Ind. Director
• Air Chief Marshall BS Dhanoa (Retd.), Addl and Ind. Director
• Mr. Niranjan Gupta, Chief Financial Officer
• Mr. Vikram Kasbekar, ED and CTO
• Mr. Malo Le Masson, Head—Strategy and Global Product Planning
• Ms. Neerja Sharma, CS and CCO
• Mr. Naveen Chauhan, Head - Sales and After sales
• Mr. Sanjay Bhan, Head - Global Business
• Mr. Mike Clarke, Chief Operating Officer (COO), Chief HR Officer
Page 39
 INDSEC
Hero Motocorp Ltd

The success story of HMCL underlies within its two flagship models - Splendor (35% of sales) and HF Deluxe (29.7% of sales) which contribute 65% of its total
2W volumes. The company has revved up its products after BS6 transition and the newly launched refreshed version of Passion Pro have been received well.

Motorcycle

Model Splendor Plus Splendor ISmart HF Deluxe Passion Pro Glamour Super Splendor

Price (Ex-showroom) 65,995 69,600 62,000 68,150 76,900 75,400

Displacement in cc 97.2 cc 113.2 cc 97.2 cc 113 cc 124.7 cc 124.7 cc

Segment Entry level Entry level Entry level Entry level Executive Executive

110 Kg (Kick) / 109 Kg (Kick) / 117 kg (Drum) / 122 kg (Drum) / 123 kg (Disc) /
Kerb Weight (Kg.) 117 kg
112 Kg (E/S) 112 Kg (E/S) 118 kg (Disc) 123 kg (Disc) 122 kg (Drum)

L / W / H (in mm) 2000 / 720 / 1052 2048 / 726 / 1110 1965 / 720 / 1045 2036 / 715 / 1113 2051 / 720 / 1074 2042 / 740 / 1102

Front - Drum; Front - Disc/Drum; Rear Front - Drum; Front - Disc/Drum; Front - Disc/Drum; Front - Disc/Drum;
Brakes
Rear - Drum - Drum Rear - Drum Rear - Drum Rear - Drum Rear - Drum

FY21 Dom. volumes 1,960,001 1,661,272 487,455 462,912 500,247

% of FY21 Dom. Sales 35.0% 29.7% 8.7% 8.3% 8.9%

Bajaj CT100, Bajaj Platina, TVS Radeon, Sport, Star City Bajaj Pulsar 125, Honda Shine, Honda SP125,
Competition
Honda Dream, Honda Livo KTM 125, KTM Duke 125, KTM RC 125

Source: Company, Indsec Research Page 40

 INDSEC
Hero Motocorp Ltd

HMCL still has a long way to go in the premium motorcycle segment. It is working towards building a robust premium portfolio and the Xtreme and XPulse
have received good response from customers. However, the segment is very much crowded and the competitive intensity remains high.

Motorcycle

Model Xtreme 160R Xtreme 200S XPulse 200S XPulse 200T

Price (Ex-showroom) 107,760 121,983 118,230 115,800

Displacement in cc 163.0 cc 199.6 cc 199.6 cc 199.6 cc

Segment Premium Premium Premium Premium

138.5 kg (Disc);
Kerb Weight (Kg.) 154.5 kg 157 kg 154 kg
139.5 kg (Drum)

L / W / H (in mm) 2029 / 793 / 1052 2062 / 778 / 1106 2222 / 850 / 1258 2118 / 806 / 1089

Front - Disc, ABS Front - Disc, Front - Disc, ABS Front - Disc,
Brakes
Rear - Disc Rear - Disc Rear - Disc Rear - Disc

FY21 Dom. volumes 48,403 14,399

% of FY21 Dom. Sales 0.9% 0.3%

Competition Bajaj Pulsar 150, NS 160, Pulsar 180, 200/220, Avenger 160/220, TVS Apache 160RTR, Honda Hornet, XBlade, Suzuki Gixxer, Yamaha FZ

Source: Company, Indsec Research Page 41

 INDSEC
Hero Motocorp Ltd

HMCL has managed to prevent the declining scooter market share with its newly launched BS6 models. Its 125cc segment has done reasonably well over last
3 quarters which coincided with the recovery in urban markets. Destini 125c and Maestro Edge 125 remain the mainstay in the scooters for HMCL.

Scooter

Model Maestro Edge 110 Maestro Edge 125 Pleasure Plus Destini 125 Ather 450 Plus Ather 450X

Price (Ex-showroom) 65,500 74,500 64,900 73,250 139,990^ 159,000^

Displacement /
110.9 cc 124.6 cc 110.9 cc 124.6 cc 70 kms 85 kms
Battery range

Segment Entry level Premium Entry level Premium Premium Electric Premium Electric

Disc - 112 kg, 104 kg (LX & VX) 113 kg (VX),

Kerb Weight (Kg.) 112 kg 108 kg 108 kg
Drum - 111 kg, 106 kg (ZX) 114 kg (LX)

L / W / H (in mm) 1843 / 715 / 1188 1843 / 718 / 1188 1769 / 704 / 1161 1809 / 729 / 1154 1800 / 700 / 1250 1800 / 700 / 1250

Front - Telescopic, Front - Telescopic, Front - Hydraulic Front - Telescopic,

Suspension Mono shock Mono shock
Rear - Hydraulic Rear - Hydraulic Rear - Hydraulic Rear - Hydraulic

FY21 Dom. volumes 94,307 200,719 142,489 3052**

% of FY21 Dom. Sales 1.7% 3.6% 2.5% ——

Competition Honda Activa, Dio, TVS Ntorq, Jupiter, Suzuki Access 125, Yamaha Fascino, Piaggio Vespa TVS IQube, Bajaj Chetak, Okinawa IPraise+, Ola S1

Source: Company, Indsec Research ; ^After FAME II incentive ; ** 2020 volumes Page 42
 INDSEC
Hero Motocorp Ltd

Financial matrix FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21 FY22e FY23e
Volume (Nos.) 6,245,895 6,631,703 6,632,152 6,664,046 7,587,193 7,820,831 6,409,719 5,786,374 6,673,709 7,189,260
Revenue (Rs in mn) 252,755 275,853 284,427 285,005 322,305 336,505 288,361 308,006 365,896 402,045
Gross profit (Rs in mn) 70,456 78,314 91,329 94,632 103,959 103,328 91,387 90,383 109,687 122,534
EBITDA (Rs in mn) 35,401 35,422 44,550 46,348 52,802 49,301 39,580 40,192 50,541 57,947
PAT (Rs in mn) 20,597 23,365 31,192 33,406 36,725 33,651 36,084 29,642 36,397 41,828

(Rs/unit) FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21 FY22e FY23e
Revenue 40,467 41,596 42,886 42,768 42,480 43,027 44,988 53,230 54,826 55,923
Gross profit 11,280 11,809 13,771 14,200 13,702 13,212 14,258 15,620 16,436 17,044
EBITDA 5,668 5,341 6,717 6,955 6,959 6,304 6,175 6,946 7,573 8,060
PAT 3,298 3,523 4,703 5,013 4,840 4,303 5,630 5,123 5,454 5,818

(% of sales) FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21 FY22e FY23e
Gross margin 27.9% 28.4% 32.1% 33.2% 32.3% 30.7% 31.7% 29.3% 30.0% 30.5%
Staff costs 3.7% 4.3% 4.6% 4.9% 4.8% 5.1% 6.4% 6.2% 6.7% 6.8%
Other expenses 10.2% 11.3% 11.8% 12.0% 11.1% 10.9% 11.6% 10.1% 9.5% 9.3%
R&D expenses 0.5% 2.6% 3.6% 2.2% 1.5% 1.7% 2.4% 2.0% 2.0% 2.0%
Advertising expenses 2.0% 2.4% 2.6% 2.7% 2.6% 2.4% 2.5% 1.9% 2.0% 2.0%
EBITDA margin 14.0% 12.8% 15.7% 16.3% 16.4% 14.7% 13.7% 13.0% 13.8% 14.4%
PAT margin 8.3% 8.6% 11.1% 11.8% 11.5% 10.1% 12.6% 9.6% 9.9% 10.4%
OCF (% of EBITDA) 83.7% 63.5% 87.9% 86.9% 75.4% 19.9% 136.7% 103.8% 56.8% 108.6%
FCF (% of PAT) 96.1% 45.9% 77.4% 85.2% 86.0% 1.7% 111.5% 123.4% 71.4% 136.1%
ROCE (%) 51.4% 53.4% 50.3% 46.1% 44.6% 39.0% 27.7% 25.8% 29.3% 30.5%
FA turnover (x) 7.4 6.9 5.6 4.6 4.5 4.4 3.3 3.2 3.6 3.8

Source: Company, Indsec Research ; ^After FAME II incentive ; ** 2020 volumes Page 43
 INDSEC
Hero Motocorp - Quarterly Trend analysis

Exhibit 1: Quarterly volume trend Exhibit 2: Quarterly Revenue and YoY growth (%) trend

(Rs in bn)
2,500 40% 120 60%
(Vol. in '000)

20% 100 40%

2,000
20%
0% 80
1,500 0%
-20% 60
-20%
1,000
-40% 40
-40%
500 20
-60% -60%

0 -80% 0 -80%

4Q15

2Q16

4Q16

4Q17

2Q18

4Q18

4Q19

2Q20

4Q20
2Q15

2Q17

2Q19

2Q21

4Q21
2Q15

4Q15

2Q16

4Q17

2Q18

4Q18

2Q19

4Q20

2Q21

4Q21
4Q16

2Q17

4Q19

2Q20
Volume (Nos.) Growth YoY (%) (RHS) Revenue (Rs in bn) Growth YoY (%) (RHS)

7,000 80%
Exhibit 3: Quarterly EBITDA and OPM (%) trend Exhibit 4: Quarterly PAT and PATM (%) trend
(Rs in bn)

16 20.0% 6,000

40%
5,000
12 15.0%
4,000
0%
8 10.0% 3,000

2,000
-40%
4 5.0%
1,000

0 0.0% 0 -80%
4Q15

2Q16

4Q16

2Q17

4Q17

2Q18

4Q19

2Q20

4Q20

2Q21

4Q21
2Q15

4Q18

2Q19
2Q15

4Q15

2Q16

4Q16

2Q17

4Q17

2Q18

4Q18

2Q19

4Q19

2Q20

4Q20

2Q21

4Q21

EBITDA EBITDA margin (%) (RHS) PAT (Rs/unit) Growth YoY (%) (RHS)

Source: Company, Indsec Research ; ^After FAME II incentive ; ** 2020 volumes Page 44
 INDSEC
Hero Motocorp - Quarterly Trend analysis (Per unit)

Exhibit 5: Quarterly ASP (Rs/unit) and YoY (%) growth Exhibit 6: Quarterly Gross profit (Rs/unit) and YoY (%) growth
60,000 25% 18,000 25%

20%
55,000 20% 16,000
15%
50,000 15%
10%
14,000

45,000 10% 5%
12,000
0%
40,000 5%
-5%
10,000
35,000 0%
-10%

30,000 -5% 8,000 -15%

2Q15

4Q15

2Q16

4Q16

2Q17

4Q17

4Q19

2Q20

4Q20

2Q21

4Q21
2Q18

4Q18

2Q19
4Q15

4Q16

2Q17

4Q17

2Q18

2Q19

2Q20

4Q20

2Q21

4Q21
2Q15

2Q16

4Q18

4Q19

ASP (Rs/unit) Growth YoY (%) (RHS) Gross profit (Rs/unit) Growth YoY (%) (RHS)

Exhibit 7: Quarterly EBITDA (Rs/unit) and YoY (%) growth Exhibit 8: Quarterly PAT (Rs/unit) and YoY (%) growth
7,000 80%
10,000 80%
6,000
8,000 40%
40% 5,000

6,000 4,000
0% 0%
3,000
4,000
2,000
-40% -40%
2,000
1,000

0 -80% 0 -80%
2Q15

4Q15

2Q16

4Q16

2Q17

4Q17

2Q18

4Q18

4Q19

4Q20

4Q21
2Q19

2Q20

2Q21

2Q15

2Q17

4Q17

2Q18

4Q18

2Q19

4Q19

2Q21

4Q21
4Q15

2Q16

4Q16

2Q20

4Q20
EBITDA (Rs/unit) Growth YoY (%) (RHS) PAT (Rs/unit) Growth YoY (%) (RHS)

Source: Company, Indsec Research ; ^After FAME II incentive ; ** 2020 volumes Page 45
 INDSEC
Hero Motocorp
Exhibit 9: 2W Vol. growth (%) correlation with Farm income growth (%)
Efforts to shrug off the ‘mass market’ tag are on...
10.0 30.0% Having been acclaimed as the ‘Hero’ in the affordable segment, HMCL has successfully
(Vol. in mn)

8.0 20.0% endured multiple trough cycles through superior positioning in the entry and executive
10.0% motorcycle segment. Its flagship products - Hero Splendor, HF Deluxe, Passion Pro, Glam-
6.0
our and Super Splendor have entailed a large market share gain over the years for HMCL
0.0%
4.0 in the <150cc motorcycle segment and command a premium pricing when compared to
-10.0%
peers within segment. The success of the ‘Hero’ can attributed to its rural centric brand
2.0 -20.0% and best-in-class features like better mileage, engine performance and durability even
0.0 -30.0% across rugged terrains.
FY08

FY11

FY12

FY13

FY14

FY17

FY18

FY19

FY20
FY09

FY10

FY15

FY16

FY21
We note that farmers income have a high correlation with HMCL’s volume growth. Thus,
we expect HMCL to benefit from improved farmer’s income led by higher MSP for crops,
2W sales Growth (YoY % RHS)
better mechanization and improved irrigation facilities in farming, increased area under
Exhibit 10: Hero segment wise mix trend (%) acreage, greater crop productivity, stable monsoon outlook and improved reservoir
100% levels should keep the growth momentum intact for farmers and the ancillary rural
11 2
52
42

62

9 3

12 3

12 3

9 3
73

63
11 3

12 3

83
90% households. Thus, increasing farmer’s income should certainly aid the volume growth for
80% HMCL going ahead.
94

93

91

91
91

89
88

70% 88 Notably, its premium motorcycles (Xtreme 160, XPulse 200) have been received well by
87

86

86
85
84

60% the customers and the company aspires to grab a meaningful market share in the >150cc
50% segment. Previously, HMCL struggled to make it big in the premium segment with
FY09

FY10

FY11

FY12

FY13

FY14

FY15

FY16

FY17

FY18

FY19

FY20

FY21
Karizma ZMR and Xtreme. However, this time around the efforts are on to distinguish
the brands XPulse 200 and Xtreme 160R from the legacy of ‘Hero’ and create a unique
Motorcycles Scooters Exports brand proposition in the minds of the customers. Thus, we suppose this should set the
Exhibit 11: Motorcycle market share trend (Domestic & Export) tone for sizable market share gains in the premium segment going ahead. Moreover,
visible efforts are seen towards new product development at their Technical Centre in
11.0%

100.0% 12.5%
8.8%
8.6%
8.6%

8.5%
8.2%

8.1%
8.1%

7.7%

Jaipur and Germany where the focus is to launch a more masculine and more ubiquitous
7.3%

10.0%
6.3%
6.3%

75.0%
5.7%

premium motorcycle and scooter brand.

52.0% 5.1%

7.5%
50.0% We believe, HMCL would attain a reasonable success in the premium segment as its
59.8%

58.5%

5.0%
56.1%
54.6%
54.5%

53.2%

52.9%

52.4%
51.8%

51.5%

51.5%
51.3%

50.7%

25.0% existing large customer base would be looking to upgrade/replace its existing model and
2.5%
thus aid the overall volume growth for HMCL.
0.0% 0.0%
FY08

FY09

FY10

FY11

FY12

FY13

FY14

FY15

FY16

FY17

FY18

FY19

FY20

FY21

Domestic Export (RHS)

Source: Company, Industry, Indsec Research Page 46

 INDSEC
Hero Motocorp

Exhibit 12: HMCL scooter volumes and growth (%) trend ‘Nimble footed’ approach towards scooters to regain market share
1,000 75.0% HMCL’s scooter market share dropped by a substantial 1190bps from 19.2% in FY14 to
(Vol. in '000)

7.2% in FY20 as faster growth was seen in the 125cc scooters where Hero did not have
800 50.0% any presence. Meanwhile, the competitors continued to launch a slew of 125cc models
to capture the premiumization trend. HMCL made late entry into the much crowded
600 25.0% 125cc scooter segment and managed to successfully launch the Destini 125cc in 2018
and Maestro Edge 125cc in 2019. With this, it brought back the scooter market share to
400 0.0% 9.9% in FY21 (+270bps). The urban markets opened up with the receding of the first
wave and thus resulted in renewed buyer interest from the first time buyers. The com-
200 -25.0%
pany launched a fresh BS6 version of its product lines across segments which led to
customer enticement. The newly launched BS6 version of Pleasure+ which was very well
0 -50.0%
appreciated by customers for its premium finish further aided the market share
FY08

FY10

FY11

FY12

FY13

FY14

FY15

FY17

FY19

FY20

FY21
FY09

FY16

FY18
expansion for HMCL during 2HFY21. Aggressive pricing with superior value proposition
Scooter Growth (YoY % RHS) has brought back some of the lost market share for HMCL. While the near term demand
outlook remains muted due to the sharp progression of Covid pandemic, we expect
demand to make a strong comeback from 2QFY22 onwards with the opening up of
Exhibit 13: Scooter market share trend (Domestic & Export)
urban markets as the covid cases moderate.
19.2%

Exhibit 14: HMCL scooter models are priced 10-12% lower than peers
18.8%

20.0% 80,000
16.7%
16.5%

16.4%

16.3%
14.3%

14.1%

70,000
13.3%

13.1%

15.0%
10.7%

60,000
9.9%
9.8%

10.0% 50,000
7.2%

Hero Pleasure

Honda Activa 125

Honda Dio
Honda Activa

TVS Jupiter

Suzuki Access 125

Hero Destini 125

TVS Ntorq 125

Hero Maestro Edge 125
Hero Maestro Edge
5.0%
FY11

FY12

FY13

FY14

FY15

FY16

FY17

FY18

FY19

FY20

FY21
FY08

FY09

FY10

Source: Company, Indsec Research Page 47

 INDSEC
Hero Motocorp

Exhibit 15: Overall Export volumes and growth (%) trend Customized product based approach across key export markets to
250 60.0% drive the export volumes
(Vol. in '000)

Exports which had been a laggard for a while is slowly gathering pace. The improvement
200 40.0% in export markets can be attributed to HMCL’s adoption of a more localized and
differentiated approach in each of its clusters. Working towards a customer driven mod-
el be it through offering of a longer seated motorcycle for the Nigeria’s taxi market or
150 20.0%
forging alliance with the largest dealer in faster growing two-wheeler market in Colum-
bia is showing steady results. Beyond Nigeria, the Boda Boda or the motorcycle taxis are
100 0.0%
expected to see faster adoption in countries like Guinea, Kenya, Tanzania and Uganda in
Africa. Whereas the company sees superior gains from key LATAM markets Peru, Ecua-
50 -20.0% dor and Dominican Republic. The key growth drivers towards two-wheeler adoption can
be attributed to poor public transport infrastructure, affordable mobility, the regions
- -40.0% being having a larger youth inhabitants (median age 20s).
FY08

FY09

FY10

FY11

FY12

FY13

FY14

FY15

FY16

FY17

FY18

FY19

FY20

FY21
In Jan-21, HMCL announced its entry into Mexico through a distribution agreement with
Grupo Salinas. With agreement makes HMCL gets access to one of the largest and fastest
Exports YoY (%)
growing distribution networks in Mexico. The company plans to sell a diversified range of
motorcycles and scooters in Mexico.
Exhibit 16: Overall exports market share (%) trend HMCL is further betting big on Bangladesh which is emerging as one of the fastest grow-
ing economies globally. What is driving the strong growth in 2W market is the faster
urbanizations of smaller towns and increased remittances from expatriates leading to
3.2%
3.2%

3.5%
3.0%

better disposable income. We expect Bangladesh is expected to emerge as the fastest

growing 2W market globally over next few years and HMCL having presence locally is
2.8%
2.8%
2.7%

2.7%

2.7%

3.0%
2.7%
2.7%

bound to benefit from this growth. The company had setup a facility in Jesore in 2017
2.5%

with an installed capacity of 150,000 units. HMCL has also gradually expanded its dealer
2.2%

2.5%
2.1%

network in Bangladesh and thus is likely to benefit from the increased 2W penetration
2.1%

due to urbanization trend going ahead.

2.0% The company also has a facility in Columbia with an installed capacity of 150,000 units.
Through this facility, HMCL plans to export models across LATAM markets and will be a
1.5% key enabler to consolidate its market share in export markets.
FY08

FY09

FY10

FY11

FY12

FY13

FY14

FY15

FY16

FY17

FY18

FY19

FY20

FY21

Source: Company, Indsec Research Page 48


Hero Motocorp
Exhibit 17: Ather’s manufacturing facility in Hosur
Exhibit 18: Gogoro’s Gostation Battery swapping network
Source: Company, Indsec Research
INDSEC
EV adoption to be driven by three pronged strategy
India is seeing increased adoption of EV in two-wheelers over past six months supported
by the skewing Govt policies towards electric mobility and superior product offerings
from leading two-wheeler startups (Okinawa, Hero Electric, Ampere). Moreover the re-
cent media announcements from Ola to setup the world’s largest electric two-wheeler
facility in Hosur is pointing towards a speedier EV adoption over next few years. HMCL
plans to aggressively enter the electric mobility through a three pronged strategy
through — (a) its acquisition of Ather Energy where it plans to speedily expand distrib-
utor network to the larger cities, (b) launching of an electric scooter (E-Maestro) to-
wards the end of FY22 and (c) the recent alliance with Gogoro (Taiwan) which will aid
in setting up of battery swappable charging stations across India. While India’s EV mar-
ket could head for a consolidation by FY24, the incumbents such as HMCL would have an
opportunity to make deep roads into India’s EV industry through alliances with startups
cushioned with newer products focusing on connected mobility.
Ather Energy - The Intelligent electric scooter startup
HMCL holds 34.6% stake in Ather Energy. Based out of Bengaluru, Ather Energy is a an
electric scooter startup that sells scooters under the brand Ather 450X. Started by dual
engineers - Swapnil Jain and Tarun Mehta, Ather is a premium electric scooter brand
that derives uniqueness from 43 IoT sensors fitted into each scooter, enabling it to ob-
tain granular information on every aspect of the driver experience. The company sells
electric scooters under two brands—Ather 450X and 450X Plus which are priced at Rs
140,000-150,000 after deducting FAME II incentive. The company sold 3052 scooters in
CY20. It has started setting up charging grids across leading metros and plans to expand
across pan-India over next few years. The company has an installed capacity of 110,000
units p.a. which is expected to ramp up to 3 lakh units by FY23.
HMCL’s Alliance with Gogoro (Taiwan) which has the battery swapping network under
the brand - Gostation will lead to faster expansion of swappable battery stations and
thus would be one of the key enablers for faster EV adoption across scooters in India.
With the battery swapping infrastructure, the time taken to change the battery would be
as low as 60 secs and thus lead to easy and hassle free driving experience for electric
scooter commuters. With this alliance, HMCL should accelerate its EV footprint over next
couple of years.
Page 49
 INDSEC
Hero Motocorp

Exhibit 19: Harley Davidson model wise pricing Alliance with Harley Davidson to foster growth in premium segment
Harley-Davidson’s announcement with Hero MotoCorp is part of its corporate makeover
Model name Price (Ex-Showroom) Displacement
which involves exits from nearly 40 global markets. As part of the alliance, Harley has
Iron Rod Rs 10.0 Lakh 883 cc decided to hand over sales, service and distribution of its products to HMCL which will
Forty-Eight Rs 11.8 Lakh 1202 cc also take care of sales of parts, accessories, general merchandise, riding gear and
apparels of H-D. Within a short span, HMCL has onboarded ~15 dealers of Harley with
Softail Standard Rs 15.3 Lakh 1746 cc itself and has started supplying H-D motorcycles from Jan-21 onwards. HMCL to carry
Street Bob Rs 16.0 Lakh 1868 cc forward the legacy of Harley through its flagship models including iron Rod 883, Forty-
Eight, Softail Standard, Fat Bob, Street Bob etc. to name a few. Championing the 2W dis-
Pan America 1250 Rs 16.9 Lakh 1250 cc
tribution network in India, HMCL is expected to successfully ramp up the ultra luxurious
Road King Rs 27 Lakh 1746 cc H–D brand and thereby alter the customer’s connect of the ‘Hero’ brand with mass
market segment. The middle-weight segment in India is 4% of total motorcycle volumes
Exhibit 20: Hero Fincorp loan disbursements (Rs in bn) and growth (%) and is largely dominated by Royal Enfield (93% market share). Leveraging Harley’s tech-
nical expertise, HMCL has set its eye on the 350cc/500cc motorcycle. However, right
200 100% pricing of the models should be the key growth driver for the company.
(Rs in bn)

150
100 50%
Improved two-wheeler financing to cushion volume growth
Two-wheeler financing has emerged as a lucrative business opportunity for a large
50
number of NBFCs due to the low ticket size and faster payback period. 2W financing
0 0%
penetration for HMCL stands at ~48% out of which 40% is financed by Hero Fincorp (2W
FY15 FY16 FY17 FY18 FY19 FY20
financing subsidiary). We expect Hero Fincorp to grow at a 1.5x speed to that of the 2W
Disbursement (Rs mn) Growth (%) industry led by increased financing penetration as the EMI options (monthly EMI of Rs
~Rs 9,000-10,000) has accelerated the volumes of the affordable 2W segment where
Exhibit 21: Hero Fincorp Loan asset (Rs in bn) and Gross NPA trend customers occasionally face cashflow issues. With easing liquidity for NBFCs and
250 8% affordable financing rates due to pandemic, we expect to 2W financing to reach 75%
(Rs in bn)

200 penetration in next 4-5 years and thus substantially increase the book size of Hero
6%
150 Fincorp.
4%
100
50 2%

0 0%
FY15 FY16 FY17 FY18 FY19 FY20

Loan Assets (Rs mn) Gross NPA (%)

Source: Company, Indsec Research Page 50

 INDSEC
Hero Motocorp

Valuations Undemanding - Initiate with BUY Rating for a TP of Rs 3,687

Having been an established player in the entry level two-wheeler space for multi-decades through its flagship products, HMCL has now set
the ball rolling in the premium motorcycle and scooter segment which is still underappreciated by the street. We also expect the company
to ride the electric mobility space over next two years on the back of a robust partnership with Ather Energy and the timely launch of its
own electric scooter which could lead to a re-rating of the stock. We remain enthused by HMCL’s export ambitions where it plans to double
its export market share to 10% over next few years through foray into newer markets and customer focused product approach. Notwith-
standing the near-term uncertainty in demand (~70% dealers are shut temporarily) led by the cascading effect of second wave, we expect
HMCL to be aided from the cyclical uptrend which is seen after a 3yr cyclical slowdown (2HFY18-21). We also expect the entry level motor-
cycles to fare well over the medium term as it offers superior value proposition to the rural customers. Moreover, improving farmer cash-
flows led by MSPs for key crops is a key growth driver. Changing perceptions in the premium segment with the successful launches of
XPulse 200T and Xtreme 160R/200R has gathered steam to support the HMCL’s premiumization strategy. As the urban metros open up
gradually, scooter volumes should see faster growth led by pent up demand from college students, working class and women commuters.
We build in volume/Revenue/EBITDA/PAT CAGR of 11%/14%/17%/17% over FY21-23e. We value the stock on SOTP basis and arrive at a TP
of Rs 3,687. We value the auto business at 16x FY23e EPS + financing business at Rs 453/share which leads to a SOTP based TP of Rs 3,687
implying an upside of 33% from current price.

Exhibit 22: HMCL 1yr forward PE band

Key Risks: 25.00

(1) Weakening of the Cash flows within the rural households due to second
wave could adversely impact rural demand
20.00
(2) Inequitable distribution pattern of monsoons may have impact agriculture
and thereby hurting volumes
(3) Rising input costs may lead to near term margin pressures. 15.00

10.00
Jul-11
Jan-12
Jul-12
Jan-13
Jul-13
Jan-14
Jul-14
Jan-15
Jul-15
Jan-16
Jul-16
Jan-17
Jul-17
Jan-18
Jul-18
Jan-19
Jul-19
Jan-20
Jul-20
Jan-21
Jul-21
1 yr fwd P/E Mean +1 SD -1 SD +2SD -2SD

Source: Company, Indsec Research Page 51

 INDSEC
Financials
SUMMARY INCOME STATEMENT SUMMARY BALANCE SHEET
(Rs. in mn) FY19 FY20 FY21 FY22E FY23E (Rs. in mn) FY19 FY20 FY21 FY22E FY23E
Revenue 336,505 288,361 308,006 365,896 402,045 Assets
% YoY growth 4.4% -14.3% 6.8% 18.8% 9.9% Net Block 44,775 59,770 56,982 53,172 50,708
Cost of Goods sold 233,177 196,974 217,623 254,505 277,639 Capital WIP 3,607 1,603 1,779 1,779 1,779
Gross Profit 103,328 91,387 90,383 111,391 124,406 Intangible Assets under dev. 1,812 1,810 2,587 2,587 2,587
Gross margins 30.7% 31.7% 29.3% 30.4% 30.9% Other Non current Assets 45,062 41,425 50,735 50,936 51,062
Employee Cost 17,302 18,417 18,987 21,641 22,774 Current Assets
Other Expenses 36,725 33,390 31,203 42,334 46,683 Current Investment 31,671 46,945 61,915 75,557 83,021
EBITDA 49,301 39,580 40,192 47,416 54,949 Inventories 10,724 10,920 14,696 7,714 16,910
EBITDA margins 14.7% 13.7% 13.0% 13.0% 13.7% Trade receivables 28,216 16,031 24,268 15,586 28,205
Other Income 6,913 7,783 5,799 6,165 6,555 Cash and bank balances 1,365 2,419 2,572 11,267 17,227
Net Interest Exp. 86 220 218 122 118 Short-term loans and advances 250 224 369 439 482
Depreciation 6,020 8,180 6,769 7,116 7,464 Other Current Assets 8,931 6,348 5,709 6,782 7,452
Exceptional Items 0 6,774 0 0 0 Total Current Assets 81,156 82,886 109,528 117,345 153,297
PBT 50,107 45,737 39,004 46,343 53,922 Current Liabilities & Provisions
Tax 16,259 7,968 9,474 11,641 13,545 Trade payables 33,552 30,305 52,046 38,315 53,177
Profit After Tax 33,849 37,769 29,529 34,702 40,377 Other current liabilities 7,161 7,707 7,255 8,619 9,471
PAT margin (%) 10.1% 13.1% 9.6% 9.5% 10.0% Short-term provisions 590 1,466 1,604 1,905 2,093
EPS 169.5 181.9 148.4 173.7 202.1 Total Current Liabilities 41,303 39,478 60,905 48,839 64,741
Net Current Assets 39,853 43,408 48,623 68,506 88,556
Total Assets 135,109 148,016 160,705 176,979 194,692
Liabilities
Share Capital 400 400 400 400 400
Reserves and Surplus 128,172 140,965 151,585 167,260 184,598
Total Shareholders Funds 128,571 141,364 151,984 167,660 184,998
Total Debt - - - - -
Long Term Provisions 1,172 1,224 1,725 2,049 2,251
Other Long Term Liabilities 0 1,500 2,956 3,230 3,401
Net Deferred Tax Liability 5,365 3,928 4,041 4,041 4,041
Total Liabilities 135,109 148,016 160,705 176,979 194,692

Source: Indsec Research, Company RHP Page 52

 INDSEC
Financials

SUMMARY CASH FLOW STATEMENT SUMMARY RATIOS

(Rs. in mn) FY19 FY20 FY21 FY22E FY23E (Rs. in mn) FY19 FY20 FY21 FY22E FY23E
PBT 50,107 45,737 39,004 46,343 53,922 Profitability
Depreciation & Amort. 6,020 8,180 6,769 7,116 7,464 Return on Assets 19.2% 19.4% 13.4% 15.4% 15.6%
Other adjustments -6,634 -6,400 -4,987 -6,044 -6,437 Return on Capital 39.0% 27.7% 25.8% 27.7% 29.2%
Changes in working capital -19,189 12,027 10,700 2,852 -6,378 Return on Equity 26.3% 25.7% 19.5% 20.7% 21.8%
Taxes -20,515 -5,443 -9,759 -11,641 -13,545 Margin Analysis
Cash from Operations 9,790 54,101 41,727 38,627 35,026 Gross Margin 30.7% 31.7% 29.3% 30.4% 30.9%
Capex & Investments 13,212 -28,831 -22,099 -10,783 -5,910 EBITDA Margin 14.7% 13.7% 13.0% 13.0% 13.7%
Cash from Investing 13,212 -28,831 -22,099 -10,783 -5,910 Net Income Margin 10.1% 12.6% 9.6% 9.5% 10.0%
Issuance of share capital 20 1 78 0 0 Short-Term Liquidity
Net Borrowings 0 0 0 0 0 Current Ratio 2.0x 2.1x 1.8x 2.4x 2.4x
Others -86 -874 -515 -122 -118 Quick Ratio 1.7x 1.8x 1.6x 2.2x 2.1x
Issuance of dividend -22,874 -23,325 -18,978 -19,026 -23,038 Avg. Days Sales Outstanding 31 20 29 29 29
Cash from Financing -22,940 -24,198 -19,415 -19,148 -23,156 Avg. Days Inventory Outstanding 12 14 17 17 15
Extraordinary receipts 0 0 0 0 0 Avg. Days Payables 36 38 62 38 48
Net Change in Cash 63 1,072 213 8,696 5,960 Fixed asset turnover 4.4x 3.3x 3.2x 3.6x 3.8x
BF Cash 344 407 1,479 2,572 11,267 Debt-service coverage 45.3x 25.9x 26.4x 33.2x 38.6x
Forex & Others 0 0 0 0 0 Long-Term Solvency
END Cash 407 1,479 1,692 11,267 17,227 Total Debt / Equity – – – – –
EBIT / Interest Expense 583.6x 177.9x 179.6x 382.2x 456.8x
Valuation Ratios
EV/EBITDA 10.6x 12.8x 12.2x 9.9x 8.3x
PER 16.4x 15.3x 18.7x 16.0x 13.8x
P/B 4.3x 3.9x 3.7x 3.3x 3.0x

Source: Indsec Research, Company RHP Page 53

 INDSEC
INDSEC Rating Distribution

BUY : Expected total return of over 20% within the next 12-18 months.
HOLD : Expected total return between 0% to 20% within the next 12-18 months.
SELL : Expected total return is negative within the next 12-18 months.
NEUTRAL: No investment opinion, stock under review.
Note: Considering the current pandemic situation, the duration for the price target may vary depending on how the macro scenario plays out. Therefore, the duration which has been mentioned as a period of 12-18
months for upside/downside target may be higher for certain companies.

DISCLOSURE

DISCLOSURE
BUSINESS ACTIVITIES:
Indsec Securities and Finance Limited (ISFL) is a corporate member of BSE (Equity, WDM segment), of NSEIL (Equity, WDM, Futures & Options and Currency Derivative segments) and has also secured membership of the MSEI Exchange (Currency
Derivative Segment) vide registration No. INZ000236731. ISFL is an AMFI Registered Mutual Fund Advisor (MRMFA) vide Registration Number 9194. ISFL is also a Depository Participant of the National Securities Depository Limited (NSDL) and a
SEBI registered Portfolio Manager. With this setup ISFL is in a position to offer all types of services in the securities industry.
Since inception company’s focus has been on research. In view of its research capabilities ISFL focused mainly on institutional business and is today empaneled with most of the local financial institutions, insurance companies, banks and mutual
funds. ISFL has grown from being a medium size broking outfit to become one of the largest capitalized Indian broking company offering the complete range of broking services.
ISFL was incorporated on 28th July 1993 and doesn’t have any associates/ subsidiaries. ISFL is a registered Portfolio Manager under SEBI (Portfolio Managers) Regulations, 1993 vide registration No. INP000001892.
DISCIPLINARY HISTORY:
• No material penalties / directions have been issued by the SEBI under the securities laws, SEBI Act or Rules or Regulations made there under

• No penalties have been imposed for any economic offence by any authority.
• No material deficiencies in the systems and operations of the Company have been observed by any regulatory agency.

• There are no pending material litigations or legal proceedings, findings of inspections or investigations for which action has been taken or initiated by any regulatory authority against the Company or its Directors, principal officers or em-
ployees or any person directly or indirectly connected with the Company.
DECLARATION:
• ISFL/Research Analysts or their associates or their relatives do not have any financial interest in the subject company (ies);
• ISFL/Research Analysts or their associates or their relatives do not have actual or beneficial ownership of 1 % or more in the subject company (ies);
• Directors may have actual or beneficial ownership of 1 % or more in the subject company (ies);
• ISFL/Research Analysts or their associates or their relatives do not have any material conflict of interest in the subject company(ies) at the time of publication of this document;
• ISFL has not received any compensation from the subject company (ies) in the past twelve months;
• ISFL has not managed or co-managed public offering of securities for the subject company (ies) in the past twelve months;
• ISFL has not received any compensation for investment banking or merchant banking or brokerage services or any other service from the subject company (ies) in the past twelve months;

• ISFL has not received any compensation or other benefits from the subject company (ies) or third party in connection with this document;
• None of the research analysts have served as an officer, director or employee of the subject company (ies);

• ISFL has not been engaged in the market making activity for the subject company (ies);
Page 113
 INDSEC
DISCLOSURE

GENERAL TERMS AND CONDITION/ DISCLAIMERS:

This document has been issued by ISFL and is for informational purposes only and is not intended as an offer or solicitation for the purchase or sale of security.

This document has been prepared and issued on the basis of publicly available information, internally developed data and other sources believed to be reliable. However, we do not guarantee its accuracy and the information may be incomplete
and condensed. Note however that, we have taken meticulous care to ensure that the facts stated are accurate and opinions given are fair and reasonable, neither the analyst nor any other employee of our company is in any way responsible for
its contents. The Company’s research department has received assistance from the subject company (ies) referred to in this document including, but not limited to, discussions with management of the subject company (ies). All opinions, projec-
tions and estimates constitute the judgment of the author as of the date of this document and these, including any other information contained in this document, are subject to change without notice. Prices and availability of financial instru-
ments also are subject to change without notice. While we would endeavor to update the information herein on reasonable basis, we are under no obligation to update or keep the information current. Also, there may be regulatory, compli-
ance, or other reasons that may prevent us from doing so.

Securities recommended in this document are subject to investment risks, including the possible loss of the principal amount invested. Any decision to purchase/sale securities mentioned in this document must take into account existing public
information on such security or any registered prospectus. The appropriateness of a particular investment, decision or strategy will depend on an investor's individual circumstances and objectives. The securities, instruments, or strategies dis-
cussed in this document may not be suitable for all investors, and certain investors may not be eligible to purchase or participate in some or all of them. Each recipient of this document should make such investigations as it deems necessary to
arrive at an independent evaluation of an investment in the securities of companies referred to in this document (including the merits and risks involved).

This document is not directed or intended for distribution to, or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction, where such distribution, publication, availability or use
would be contrary to law, regulation or which would subject the company to any registration or licensing requirement within such jurisdiction. Further, this document is not directed or intended for distribution to the US taxpayers covered under
US Foreign Account Tax Compliance Act (FATCA) provisions. The securities described herein may or may not be eligible for sale in all jurisdictions or to certain category of investors. Persons in whose possession this document may come are
required to inform themselves of and to observe such restriction

This is just a suggestion and the company will not be responsible for any profit or loss arising out of the decision taken by the reader of this document. Any comments or statements made herein are those of the analyst and do not necessarily
reflect those of the company. No matter contained in this document may be reproduced or copied without the consent of the company. Any unauthorized use, duplication, redistribution or disclosure is prohibited by law and will result in prose-
cution. The information contained in this document is intended solely for the recipient and may not be further distributed by the recipient. The Company accepts no liability whatsoever for the actions of third parties.

The research analyst(s) of this document certifies that all of the views expressed in this document accurately reflect their personal views about those issuer(s) or securities. Analyst’s holding in the stocks mentioned in the Report:-NIL

Page 114