Karvy's Diwali Picks - 2016
Karvy's Diwali Picks
J K Jain | Jagannadham T
jambu@karvy.com | jagannadham.t@karvy.com
040 - 3321 6300 / 6296
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Karvy's Diwali Picks - 2016
NSE Symbol Sector
Market Cap
(Rs. Mn.)
Price (Rs.)
Upside (%)
AMBIKCO Textiles 6027 1026 1190 16
BERGEPAINT Paints 251309 259 307 19
CAPF BFSI 69581 762 882 16
FEDERALBNK BFSI 128864 75 89 19
GABRIEL Auto-Ancillary 17280 120 151 26
GSFC Chemicals 39230 98 115 17
M&MFIN BFSI 203106 357 428 20
RADICO FMCG - Beverages 18539 139 166 19
*As on Oct 24, 2016, Time frame 9-12 Months, **Based on Techno-Funda analysis
Karvy's Diwali Picks - 2016
India Research - Stock Broking
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Valuation Summary
YE Mar (Rs. Mn)
FY15 FY16 FY17E FY18E FY19E
Net Sales 4955 4923 5324 5940 6670
EBITDA 991 923 1006 1168 1331
EBITDA Margin (%) 20.0 18.8 18.9 19.7 20.0
Adj. Net Prot 512 445 513 604 716
EPS (Rs.) 87.1 75.7 87.4 102.9 121.8
RoE (%) 18.2 14.0 14.4 15.1 15.7
P/E (x)* 9.0 10.6 11.7 10.0 8.4
Source: Company, Karvy Research,
Represents standalone nancial numbers
* Represents multiples for FY15 & FY16 based on historic market price
Recommendation (Rs.)
CMP (as on Oct 24, 2016) 1026
Target Price 1190
Upside (%) 16
Stock Information
Mkt Cap (Rs.Mn/US$ Mn) 6027 / 90
52-wk High/Low (Rs.) 1046 / 735
3M Avg.daily volume
Beta (x) 1.0
Sensex/Nifty 28179 / 8709
O/S Shares(mn) 5.9
Face Value (Rs.) 10.0
Shareholding Pattern (%)
Promoters 48.6
FIIs 0.0
DIIs 4.0
Others 47.4
Relative Performance*
Source: Bloomberg; *Index 100
Stock Performance (%)
1M 3M 6M 12M
Absolute 26 24 16 13
Relative to Sensex 28 22 6 10
Source: Bloomberg
Company Background
Ambika Cotton Mills Ltd (ACML) was
incorporated in 1988 and is engaged in the
manufacture of premium quality Compact and
Elitwist cotton yarn for hosiery and weaving.
Its 4 manufacturing units are situated in
Dindigul, Tamil Nadu and it operates with
total installed spindle capacity of 1,08,228 of
compact facility. The company has installed
27.4 MW wind power for captive consumption
of spinning segment. Ambika Cotton Mills has
unique distinction in making of speciality cotton
yarn and has strong demand for its products.
The company’s products always command
premium over those of competitors. ACML
also prides itself on its zero complaints with
clients, shippers and raw material suppliers.
Ambika Cotton Mills Ltd
Bloomberg Code: ACML IN
Aug -16
Ambika Cotton
Strong Player in Yarn Manufacturing
Specialised Yarn manufacturer in the market:
The company operates with a
total spindle capacity of 1,08,228, manufacturing speciality cotton yarn and has good
demand for its product. During FY16, the company recorded cotton yarn production
of 17.6 mn kg, as against 16.11 mn kg in FY15. The core strengths are making
specialty yarn from superior cotton, oering products to the specic needs of the
reputed customers, coupled with product innovation. This has largely contributed to
the sustained nancial performance of the company. The company is implementing
the Knitting facility at an estimated cost of Rs.83.49 mn, fully funded out of internal
accruals; this is part of the scheme earlier envisaged along with the spinning unit.
This facility is expected to be operational from Oct 2016 onwards.
Healthy Balance sheet with Zero debt:
With the peers facing labour problems,
high debt, diluting equity, currency crisis and higher cotton price, ACML executed
unique distinction with them. ACMLs debt has reduced from Rs.2662 mn in FY08 to
Rs. 197 mn as of FY16. Looking at the healthy balance sheet, the company appears
likely to become debt free by FY17E. Ambika Cotton has recorded outperforming
return ratios of RoE, RoCE & RoA at 14.0%, 18.2% & 10.1% in the industry in FY16.
ACMLs EBITDA margin will be in the range of 18-20% in FY17E-19E.
Capex plan is in line:
The company had a plan to set up a spinning phase with
a capacity of 30,000 spindles with a capex of Rs.1300 mn. The implementation of
spinning phase is still pending due to lack of appropriate land clearance from the
Government. Once clearance is obtained, the project will be initiated.
Valuation and Outlook
At CMP of Rs.1026, Ambika Cotton is trading at a P/Ex of 10.0x and 8.4x on FY18E
and FY19E earnings, respectively, on the back of stable raw material prices,
favourable product mix, improving cost eciency and economies of scale. We
continue to maintain our positive outlook on Ambika Cotton with a “BUY” rating
with a target price of Rs.1190, based on 9.8x P/E FY19E, representing an upside
potential of 16%.
Key Risks
Increase in cotton prices may have bearing impact on the company’s protability.
Forex Risk.
Karvy's Diwali Picks - 2016
India Research - Stock Broking
Demand in Decorative Paint Segment is Expected to Grow
Berger Paints India Ltd (BPIL) is the 2nd largest paint company in Indian decorative
paint segment with a market share of ~18%. The company has registered healthy
volume growth in Q1FY17 on the back of pick-up in decorative and industrial coating
segments. Urban demand has picked up nicely; rural demand is still sluggish and
expected to grow in coming years. Good monsoons and implementation of the
7th pay commission may have a positive impact on the paint industry. Protective
coatings segment has continued to show modest growth. The company’s protective
coating business has already seen uptick and expected to grow more. Momentum
on smart cities and urban housing projects can boost the paint industry.
Capex plans to capture more demand: Capacity expansion at various
locations and expansion in distribution network will help the company capture
more demand. The company is planning to expand its plants in Andhra Pradesh
& Maharashtra and also setting up two new plants in Assam which are expected
to be operational by January 2017. The company is planning to spend nearly
Rs. 4,000 mn over the next 4-5 years.
Margins expansion likely to continue: The margins of the company are
expected to enhance further, backed by softer input costs. Crude-linked raw
material forms around 40% of the total raw material costs (including packaging).
Titanium Dioxide (TiO2), another key raw material in paints, forms about 25-30%
of the total raw material. But the pace of the fall in raw material prices may become
slow as the prices are already bottomed out. The company is focusing more on high
value water-based paints to improve its product mix for better margins. EBITDA
Margins were expanded by 196 basis points from 13.7% during Q4FY16 to 15.7%
during Q1FY17.
Valuation and Outlook
Berger Paints, with its strong operational performance and robust growth in
volumes, is performing in line with industrial peers. Berger Paints is earning more
than 80% of its revenue from decorative coating segment. At CMP of Rs.259 per
share, the stock is trading at 35.4x FY19E EPS. We value the company at 42.0x and
arrive at target price of Rs.307 with a potential upside of 19% with “BUY” rating.
Key Risks
Increase in the prices of key raw materials.
Competition from other players.
Any slowdown in decorative paints segment.
India Research - Stock Broking
Valuation Summary
YE Mar (Rs. Mn)
FY15 FY16 FY17E FY18E FY19E
Net Sales 43221 46341 51628 59372 70059
EBITDA 5107 6554 8042 9421 11333
EBITDA Margin (%) 11.8 14.1 15.6 15.9 16.2
Adj. Net Prot 2647 3698 4852 5794 7095
EPS (Rs.) 3.8 3.8 5.0 6.0 7.3
RoE (%) 22.2 27.0 29.7 24.4 19.9
P/E (x)* 54.6 45.9 51.8 43.4 35.4
Source: Company, Karvy Research,
Represents consolidated nancial numbers
*Represents multiples for FY15 & FY16 based on historic market price
Recommendation (Rs.)
CMP (as on Oct 24, 2016) 259
Target Price 307
Upside (%) 19
Stock Information
Mkt Cap (Rs.Mn/US$ Mn) 251309 / 3759
52-wk High/Low (Rs.) 277 / 153
3M Avg.daily volume (Mn)
Beta (x) 0.9
Sensex/Nifty 28179 / 8709
O/S Shares(mn) 970.9
Face Value (Rs.) 1.0
Shareholding Pattern (%)
Promoters 75.0
FIIs 5.2
DIIs 9.3
Others 10.5
Relative Performance*
Source: Bloomberg; *Index 100
Stock Performance (%)
1M 3M 6M 12M
Absolute (1) 10 43 64
Relative to Sensex 1 8 31 60
Source: Bloomberg
Company Background
Berger Paints India Ltd (BPIL) is a pioneer
in tailored customer-centric services and
exclusive retail partnership programs with a
vibrant portfolio of paints and decor services
in various paints segments. BPIL is one of
the leaders in decorative paints segment that
includes predominantly household paints.
Decorative paints include high-end acrylic
exterior and interior emulsions, medium range
exterior and interior emulsions and enamels,
low-end distempers, wall putty, wood coatings,
cement paints, primers, thinners and putties.
The company has 10 strategically located
manufacturing units, about 170 sales oces
and a countrywide distribution network of
18,000+ dealers.
Berger Paints India Ltd
Bloomberg Code: BRGR IN
Aug -16
Berg er Paints
Karvy's Diwali Picks - 2016
India Research - Stock Broking
Increasing Focus on the Retail Lending Aiding Sustainable
Transformation into a strong Retail Lending player with consistent
AUM growth:
CFL witnessed its AUM grow at 34.2% CAGR from Rs.27.5 bn
in FY11 to Rs.160.4 bn in FY16, currently standing at Rs.172.1 bn in Q1FY17.
Post-acquisition, the company shifted its focus towards retail lending, resulting
in a growth of 61.7% CAGR over FY11-16 on the back of focused strategy,
well-driven processes, superior underwriting skills, strong promoter and its ability
to raise funds. This resulted in the share of the retail loan book from 10% in
FY10 to 85% in FY16. CFL is likely to witness AUM growth at CAGR of 24% over
FY16-FY19E to Rs.304.9 bn.
Improving and Healthy NIMs:
NIM (net interest margin) witnessed improvement
from 5.6% in FY15 to 7.9% in FY16. Given the robust borrowing mix, quality credit
rating and focus on higher yielding retail products like consumer durables and two-
wheelers, NIM is expected to improve in the years to come.
Superior asset quality, with impressive Capital Adequacy Ratio (CAR):
CFL has a superior asset quality with GNPA and NNPA currently standing at 1.18%
and 0.6%, respectively, which is best among the Indian Financial Services industry.
It also has a long-term credit rating at AA+ given only for a select few nance
companies & banks in India. CFL has maintained CAR signicantly higher than
regulatory requirements over the years, which currently stands at 18.68%.
Improving return ratios:
RoA improved from 1.1% in FY15 to 1.1% in FY16.
Similarly, RoE improved from 7.3% in FY15 to 9.9% in FY16. RoA and RoE are
expected to improve on the back of diversied loan mix, superior margins and
declining costs and enhanced asset quality.
Valuation and Outlook
Due to CFLs ability to transform itself post acquisition with strengthening retail
franchise, along with strong promoter backing, the company's performance is
expected to be maintained going forward with improving nancial metrics like NIM,
RoE & RoA. At CMP, CFL trades at 2.7x FY19E BVPS. We value the stock at 3.1x
FY19E BVPS and recommend “BUY” rating for a price target of Rs. 882, presenting
a potential upside of 16%.
India Research - Stock Broking
Valuation Summary
YE Mar (Rs. Mn)
FY15 FY16 FY17E FY18E FY19E
NII 5363 8181 11810 15471 20000
Net Prot 1143 1662 2428 3455 4527
EPS (Rs.) 13.8 18.2 26.7 37.9 49.5
BVPS (Rs.) 173 187 210 243 284
P/BVPS (x)* 2.3 2.3 3.6 3.1 2.7
RoE (%) 72.6 97.6 13.4 16.8 18.9
RoA (%) 1.1 1.1 1.5 1.7 1.8
Source: Company, Bloomberg, Karvy Research,
Represents consolidated nancial numbers
*Represents multiples for FY15 & FY16 based on historic market price
Recommendation (Rs.)
CMP (as on Oct 24, 2016) 762
Target Price 882
Upside (%) 16
Stock Information
Mkt Cap (Rs.Mn/US$ Mn) 69581 / 1041
52-wk High/Low (Rs.) 797 / 346
3M Avg.daily volume (Mn)
Beta (x) 1.3
Sensex/Nifty 28179 / 8709
O/S Shares(mn) 91.4
Face Value (Rs.) 10.0
Shareholding Pattern (%)
Promoters 64.4
FIIs 7.3
DIIs 6.5
Others 21.8
Relative Performance*
Source: Bloomberg; *Index 100
Stock Performance (%)
1M 3M 6M 12M
Absolute 8 13 71 99
Relative to Sensex 10 11 57 94
Source: Bloomberg
Company Background
Capital First Ltd (CFL) is a leading Financial
Institution in the business of loan against
property, NBFC & MFI and Construction
Loans, business loans, two-wheeler loans,
consumer durable loans, personal loan & auto
loans and home loans. It was earlier known as
Future Capital promoted by Biyani group. In
2012, Warburg Pincus acquired majority stake
and infused additional capital in the company.
It is managed by Mr. V. Vaidyanathan (ex. ICICI)
and also has 14% stake (including options)
in the company. It has nanced over 2.3 mn
customers and has large network of nancing
in 222 locations. CFL has three wholly owned
domestic subsidiaries namely, Capital First
Commodities Ltd, Capital First Home Finance
Ltd and Capital First Securities Ltd.
Capital First Ltd
Bloomberg Code: CAFL IN
Aug -16
Capital First
Karvy's Diwali Picks - 2016
India Research - Stock Broking
Digitally Enabled Mid-market Admired Bank
Dominant home state market, gaining share outside Kerala coupled with
ever-growing NR business: With an enormous ~13% market share in its home
state Kerala, FBL is the preferred partner to bank with. Also, to boost the revenue,
FBL has expanded at a rapid pace during FY12-FY16 across India & the focus now
is on reaping the optimum out of it. FBL leads the Non-Resident (NR) business
with ~18-20% of market share and the recent hardening of oil prices from the
historical lows (due to supply glut) is expected to aid the NR business growth in
future cementing its leadership in NR franchise.
Assets to grow while focusing on healthy NIM: FBL's loan book is expected to
clock a CAGR of 16.9% during FY16-FY19E translating into a loan book of Rs.940
bn driven mainly by a healthy mix of retail & wholesale loans well complimented by
reinforced relationship management structure. With a push towards high yielding
SME loans negated by increasing proportion of credit substitutes & MCLR impact,
we expect a stable NIM of 3.2% for FY19E.
Stable asset quality with minimal slippages: The credit book is diversied
with Wholesale customer exposures of Rs.206.9 Bn, SME - Rs.153.3 Bn and Retail
& Agri - Rs.238.3 Bn and GNPA & NNPA levels of 2.92% & 1.68% as on Q1FY17
respectively with no 5:25 restructuring, no SDR & no conversion to o-balance
sheet with a PCR ratio of 72% and Capital adequacy ratio of 13.9%. We expect the
asset quality to hold in future as well.
Robust capital structure with state-of-the-art digital capabilities: As on
Q1FY17, FBL has a Capital adequacy of 12.99% against the minimum requirement
of 6.125%, which shows the strength of the bank to meet any unforeseen events
and support the business growth. The Bank has sucient headroom to raise
various forms of Basel III compliant capital instruments.
Valuation and Outlook
FBL, at CMP of Rs.75, is trading at 1.2x FY19E BVPS. In view of its dominance
in home state Kerala and focus on increasing the Rest of India’s market share,
superior NR franchise, healthy balance sheet growth, strengthening liability
portfolio, improving cost to income ratio, adequate CAR and superior return ratios
coupled with good governance and the bank's digital capabilities, we value the
stock at 1.4x FY19E BVPS and recommend a “BUY” for a price target of Rs. 89.
Key Risks
Economic down turn, Policy risk
India Research - Stock Broking
Valuation Summary
YE Mar (Rs. Mn)
FY15 FY16 FY17E FY18E FY19E
NII 23800 25042 28709 33672 40068
Net Prot 10121 4864 7564 10152 13408
EPS (Rs.) 5.9 2.8 4.4 5.9 7.7
BVPS (Rs.) 45.2 47.3 50.3 54.9 61.8
P/BVPS (x)* 1.0 1.5 1.5 1.3 1.2
RoE (%) 13.8 6.0 8.9 11.2 13.3
RoA (%) 1.3 0.5 0.8 0.9 1.0
Source: Company, Bloomberg, Karvy Research,
Represents consolidated nancial numbers
*Represents multiples for FY15 & FY16 based on historic market price
Recommendation (Rs.)
CMP (as on Oct 24, 2016) 75
Target Price 89
Upside (%) 19
Stock Information
Mkt Cap (Rs.Mn/US$ Mn) 128864 / 1928
52-wk High/Low (Rs.) 77 / 41
3M Avg.daily volume (Mn)
Beta (x) 1.1
Sensex/Nifty 28179 / 8709
O/S Shares(mn) 1718.2
Face Value (Rs.) 2.0
Shareholding Pattern (%)
Promoters 0.0
FIIs 20.7
DIIs 30.6
Others 48.6
Relative Performance*
Source: Bloomberg; *Index 100
Stock Performance (%)
1M 3M 6M 12M
Absolute 3 17 58 31
Relative to Sensex 5 16 45 28
Source: Bloomberg
Company Background
Federal Bank Ltd is a Kerala-based scheduled
commercial bank oering retail, wholesale
banking and treasury services. It operates
through a network of 1,252 branches and
1,551 ATMs spread across 25 states & 5
union territories. Its various products and
services include auto loans, personal loans,
credit cards, home loans, commercial vehicle/
construction equipment nance, gold loans,
savings account, current account, FDs and
working capital term loans, bill collection, forex
& derivatives, cash management services for
corporate clients on the wholesale front.
Federal Bank Ltd
Bloomberg Code: FB IN
Aug -16
Feder al Bank
Karvy's Diwali Picks - 2016
Gabriel India Ltd
India Research - Stock Broking
Bloomberg Code: GABR IN
Well-Positioned to Benefit from the Up-cycle in Auto Sector
Strong presence across various Auto segments: Gabriel is a proven leader
in shock absorbers and front forks space in the country with presence in almost all
segments of automobile industry, viz. Commercial vehicles, passenger vehicles,
2/3 wheeler and also the aftermarket. The company has seen its operating
revenue growing at a CAGR of 6.1% during FY13-FY16. On the back of expected
improvement in the economy and expected reforms at the macro-economic
level leading to increased customer demand, we expect the company to register
operating revenue CAGR of over 11.0% during FY16-FY19E to reach Rs.19,666
mn in FY19E.
Improved processes leading to increase in profit margin profile: With
the company’s focus on improving the processes, it has seen its gross margins
increase to 28.5% in FY16 from 28.3% in FY13 and EBITDA margins increase to
8.9% from 6.9% during the same period. We expect the company to register further
increase in its gross margins, while registering an EBITDA CAGR of ~16.2% during
FY16-FY19E to reach Rs.2,003 mn in FY19E, and increase its EBITDA margins
to 9.7% in FY17E, 10.1% in FY18E and 10.2% in FY19E resulting on account
of the company’s focus on improvement in processes through technological
developments and increased capacity utilization levels.
Strong balance sheet with decreasing debt/equity ratio and higher free
cash flows: The company has consistently seen strong balance sheet in the last
few years along with consistent free cash ows. It has continuously seen its debt
reduction in the last few years. Its debt/equity has decreased to 0.02x in FY16 from
0.26x in FY13. We further expect the debt/equity ratio to reach around 0.01x in
FY19E, while continuing to register higher free cash ows during FY17E-FY19E.
Valuation and Outlook
The company’s likely focus on increasing its product lines coupled with the fact
of improvement in the domestic market demand is likely to lead to higher growth
in its revenues. Its focus on improved processes driven by dierent product mix
and measures in improving and sustaining the margin levels is expected to witness
increase in its margins and earnings prole in the coming years. We recommend
“BUY” on Gabriel India valuing it at 17.9x of its FY19E EPS of Rs. 8.4 to arrive at a
target price of Rs.151, representing an upside potential of 26%.
Key Risk
Inability of the company in passing on the costs in case of any steep increase in
its raw material prices such as steel will put pressure on its margins and earnings.
India Research - Stock Broking
Valuation Summary
YE Mar (Rs. Mn)
FY15 FY16 FY17E FY18E FY19E
Net Sales 14298 14264 15796 17385 19666
EBITDA 1168 1276 1545 1765 2003
EBITDA Margin (%) 8.1 8.9 9.7 10.1 10.2
Adj. Net Prot 600 752 876 1025 1210
EPS (Rs.) 4.2 5.2 6.1 7.1 8.4
RoE (%) 19.7 21.3 21.4 21.6 18.5
P/E (x)* 21.7 17.1 19.7 16.9 14.2
Source: Company, Karvy Research,
Represents standalone nancial numbers
* Represents multiples for FY15 & FY16 based on historic market price
Recommendation (Rs.)
CMP (as on Oct 24, 2016) 120
Target Price 151
Upside (%) 26
Stock Information
Mkt Cap (Rs.Mn/US$ Mn) 17280 / 258
52-wk High/Low (Rs.) 126 / 75
3M Avg.daily volume (Mn)
Beta (x) 1.0
Sensex/Nifty 28179 / 8709
O/S Shares(mn) 143.6
Face Value (Rs.) 1.0
Shareholding Pattern (%)
Promoters 54.6
FIIs 11.2
DIIs 7.1
Others 27.1
Relative Performance*
Source: Bloomberg; *Index 100
Stock Performance (%)
1M 3M 6M 12M
Absolute 1 16 32 26
Relative to Sensex 3 14 21 23
Source: Bloomberg
Company Background
Gabriel India Ltd, the agship company of
Anand Group, started in 1961 as a leading
name in the Indian auto component industry. It
supplies products such as front forks, hydraulic
and gas shock absorbers for 2/3 wheelers,
Mcpherson struts, gas shock absorbers for
passenger cars and shock absorbers, cabin
& seat dampers for commercial vehicles
and railways. It has a well diversied OEM
customer base in every automotive segment,
2/3 wheelers, passenger cars and commercial
vehicles. It has 9 manufacturing facilities with
a combined capacity of over 24 mn shock
absorbers & struts and 2.7 mn front forks
along with strong R&D.
Aug -16
Gabr iel India
Karvy's Diwali Picks - 2016
India Research - Stock Broking
New Capacities and Lower Raw Material Costs to Drive Growth
New capacities commissioned: The Nylon 6 Plants commissioned in July '15
and the Water Soluble Fertilizer plant that’s likely to be commissioned in FY17E
are expected to boost the capacitates of the plant signicantly. The 3rd Melamine
plant that’s to be commissioned by end of FY18E is expected to support the growth
in the long term. This new capacity along with the base capacity in major Industrial
products - Melamine & Caprolactum and Fertilizers - DAP, APS and NPS, are likely
to augment well for the growth of the company. The expansion in Onshore location
is to be watched keenly as the nature of earnings would get aected by this project.
Decrease in raw material costs: All the major commodity raw materials have
decreased by more than teens in the last few months and the major international
prices aligned their prices. In spite of decrease in prices, like in DAP and a few
other fertilizers, reduction in costs and low price competition, Sulphate fertilizers
are expected to maintain the current EBITDA margins.
Strong Market share: GSFC has market share in a few industrial products
such as Caprolactam, Melamine and MEK Oxime and 5% and 9% market share
in Fertilizers DAP & AS. It is one of the few manufacturers of Caprolacatum and
Melanine in the domestic market. In fertilizer business, it's into manufacturing of
Healthy Balance sheet: With a low Debt Equity ratio of 0.05x, GSFC has a strong
balance sheet, higher receivables because of subsidy and higher credit period.
This aected the cash ow in FY16 and is expected to normalize in the coming
years. This, along with growth and the new capex plans of Rs.10,000 mn in the next
18 months, are expected to maintain the current healthiness of the balance sheet.
Valuation and Outlook
With fully integrated production facilities, GSFC with strong market share in a
few industrial products and with key low price competitive products in Fertilizers,
is well placed in specialty chemical manufacturing. Fall in commodity prices and
new capacities are expected to augur well for the company's growth. With these
triggers, we assign PE multiple of 9x to FY19E earnings and give a target of Rs.115
per share with an upside of 17% from current price of Rs.98 per share.
Key Risks
Volatility in Crude derivatives.
Currency Risk and Cheap imports form China.
India Research - Stock Broking
Valuation Summary
YE Mar (Rs. Mn)
FY15 FY16 FY17E FY18E FY19E
Net Sales 53246 61633 67036 73203 80157
EBITDA 3530 3549 5842 7046 8016
EBITDA Margin (%) 6.6 5.8 8.7 9.6 10.0
Adj. Net Prot 4095 3793 3486 4662 5105
EPS (Rs.) 10.3 9.5 8.8 11.7 12.8
RoE (%) 8.0 8.2 7.7 9.0 9.9
P/E (x)* 8.1 10.3 11.2 8.4 7.7
Source: Company, Bloomberg, Karvy Research,
Represents consolidated nancial numbers
*Represents multiples for FY15 & FY16 based on historic market price
Recommendation (Rs.)
CMP (as on Oct 24, 2016) 98
Target Price 115
Upside (%) 17
Stock Information
Mkt Cap (Rs.Mn/US$ Mn) 39230 / 587
52-wk High/Low (Rs.) 102 / 57
3M Avg.daily volume (Mn)
Beta (x) 0.9
Sensex/Nifty 28179 / 8709
O/S Shares(mn) 398.5
Face Value (Rs.) 2.0
Shareholding Pattern (%)
Promoters 37.8
FIIs 13.5
DIIs 19.0
Others 29.7
Relative Performance*
Source: Bloomberg; *Index 100
Stock Performance (%)
1M 3M 6M 12M
Absolute 28 33 34 42
Relative to Sensex 30 31 23 38
Source: Bloomberg
Company Background
Owned by Gujarat State Investment Ltd,
GSFC is India’s premier fertilizer & chemical
manufacturing company incorporated on
February 15, 1962. It is into manufacturing
of Industrial chemical and Fertilizer products.
It has manufacturing plants at Sikka Coastal
Phosphate fertilizer unit; Nandesari, it’s
a Polymer unit; Vadodara, an integrated
Fertilizer and chemical unit; surat , Nylon chips
& Yarn production unit. It also has wind farms
at Rajkot, Kutch. A few of the main industrial
chemicals manufactured by the company are
Caprolactam, Melamine, MEK Oxime, Nylon -
6 Chips; and Fertilizers are DAP, APS, AS and
Gujarat State Fertilizers & Chemicals Ltd
Bloomberg Code: GSFC IN
Aug -16
Gujar at State F&C Ltd
Karvy's Diwali Picks - 2016
India Research - Stock Broking
Stabilization of Rural Economy to Bring Long-Term Prospects
Growth in loan book led by increase in car financing: Automobile nancing
comprises more than 80% of their total lending, where utility vehicles, personal
mobility and tractors segment account for 31.0%, 24.0% and 17.0% of their Assets
Under Management (AUM), respectively, as in FY16. Standalone loan book grew at a
CAGR of 15.0% during FY13-16 and 10.8% YoY during Q1FY17, driven by personal
mobility and tractor space supported by favorable rain fall. Standalone Net interest
income grew at 6.0% between FY15-16 while PAT took a hit due to increase in NPAs.
Personal Mobility and Commercial Vehicle Growth to Spur Revenues:
There is signicant potential in passenger vehicle growth driven by increase in
household incomes and also commercial vehicle nancing is expected to be driven
by growth in economic activities like freight trac, construction activity, improvement
in rural infrastructure and prominence of hub-and-spoke model in logistics.
Rural Infrastructure development to boost housing finance segment:
Mahindra Rural Housing Finance Ltd, positioned in the rural and semi-urban areas,
disbursed loans aggregating Rs.15,525 mn during FY16, 57.0% higher than that
of FY15. PAT grew by 42.0% at Rs.627 mn in FY16 as compared to Rs.442 mn
in FY15. During FY16, the number of customer contracts increased by 53.0% to
1,25,074 families compared to 81,960 families in FY15. The growth in this segment
can be attributed to the rural push in the Union Budget 2016-17 where Rs.877 bn
was allocated to the rural sector. These allocations are expected to drive the rural
economy and lead to higher job creation among the farm laborers leading to higher
disposable income and consumption.
Mahindra Insurance Brokers steadily marching ahead: Net premium
grew by 7.2% YoY during Q1FY17 as against 21.6% YoY during FY16 at
Rs.10,870 mn driven by increase in number of policies by 19.8% YoY during Q1FY17
and 16.9% YoY in FY16 at 13,30,929 policies. Going ahead, rural development
schemes are likely to trigger housing nance growth.
Valuation and Outlook
Mahindra & Mahindra Financial Services Limited (MMFSL) is expected to maintain
a 20.3% CAGR growth during FY16-19E driven by automobile growth and rural
infrastructure development. We recommend a “BUY” and value MMFSL at Rs. 428
at 2.55x FY19E BVPS representing an upside of 20%.
Key Risks
Economic down turn, Policy risk
India Research - Stock Broking
Valuation Summary
YE Mar (Rs. Mn)* FY15 FY16 FY17E FY18E FY19E
NII 27514 30707 39319 46729 56983
Net Prot 9129 7723 10034 13595 17368
EPS (Rs.) 14.8 11.9 18.0 24.3 30.6
BVPS (Rs.) 99.7 107 125 143 168
P/BVPS (x) 3.6 3.3 2.9 2.5 2.1
RoE (%) 15.5 11.4 14.9 17.7 18.5
RoA (%) 2.5 1.9 2.2 2.6 2.6
Source: Company, Bloomberg, Karvy Research, *Represents consolidated nancial numbers
Recommendation (Rs.)
CMP (as on Oct 24, 2016) 357
Target Price 428
Upside (%) 20
Stock Information
Mkt Cap (Rs.Mn/US$ Mn) 203106 / 3038
52-wk High/Low (Rs.) 405 / 173
3M Avg.daily volume (Mn)
Beta (x) 1.0
Sensex/Nifty 28179 / 8709
O/S Shares(mn) 568.8
Face Value (Rs.) 2.0
Shareholding Pattern (%)
Promoters 51.9
FIIs 33.6
DIIs 9.7
Others 4.8
Relative Performance*
Source: Bloomberg; *Index 100
Stock Performance (%)
1M 3M 6M 12M
Absolute 1 13 30 51
Relative to Sensex 3 11 19 47
Source: Bloomberg
Company Background
Mahindra Finance is a subsidiary of the Indian
conglomerate Mahindra & Mahindra group,
which serves nancing needs in rural and semi-
urban areas of India. Their portfolio includes:
Vehicle and pre-owned vehicle nancing,
SME loans, Personal Loans, Housing nance
serviced through their subsidiary Mahindra
Rural Housing nance Ltd and Insurance
Broking serviced through their subsidiary
Mahindra Insurance brokers Ltd. In addition
to this, they provide investment and advisory
services. They operate through 1,172 oces
having more than 15,800 employees covering
about 2,86,000 villages across India.
Mahindra & Mahindra Financial Services Ltd
Bloomberg Code: MMFS IN
Aug -16
M&M Financial Services
Karvy's Diwali Picks - 2016
India Research - Stock Broking
Premium Brands Spirited High-volume Growth
Despite the challenges from overall IMFL (Indian-Made Foreign Liquor) volumes
Radico gross sales grew by 8.8% CAGR during FY14-FY16, while excise
duty increased by 13.7% CAGR and underlying sales volumes were down by 5.5%
CAGR during FY14-FY16 to 18.2 mn cases. Premium brands, which comprised
24.2% (during FY16) of total volumes, spirited the high-volume growth (CAGR of
8.8%) during FY14-FY16 to 4.4 mn cases, respectively.
Profitability to improve on the back of strong demand and better pricing:
A reduction of 20%-25% excise duty from April 2016 in Uttar Pradesh resulted in
positive impact on Regular & others category brand volumes and 6%-7% price hike
in Karnataka (contributes around 15% of sales) starting July 2016 and new product
Electra (Ready-to-drink product segment) started showing good response with
sales of 55,000 cases during Q1YF17, and increasing focus on premium brands
and encouraging macro factors such as disposable income, growth in middle class
households would drive the healthy volumes further.
Favorable shift in product mix and cost optimization backed the healthy
operating margins: EBITDA margin increased by 116 bps during FY16 supported
by high-margin product mix and stabilizing input costs; FY17 started with higher
margins (grew by 208 bps QoQ) on the back of lower other expenses (impacted
-200 bps YoY). PAT grew by a CAGR 3.9% during FY14-16. FY16 PAT margin grew
by 56 bps YoY despite raise in eective tax rate (increased by 624 bps during FY16).
Return ratios to improve going forward:
Prestige and above brands volume
growth has supported the operating margins and generated Rs.5.8 per share (EPS
grew by CAGR of 7.8% during FY14-FY16) and 8.5% of return on equity during FY16.
Radico had cash and cash equivalents of Rs.113.9 mn during FY16, maintaining
the annual dividend payout ratio of 14.0%-15.0%.
Valuation and Outlook
Despite raise in ENA (Extra Neutral Alchol) raw material prices, the factors such
as higher proportion of premium products in volume mix, strong macro demand
in tier 2 and tier 3 cities and anticipation of better price hikes which would drive
protability. At CMP of Rs.139, stock is trading at P/E of 16.2x and 14.7x of FY18E
and FY19E EPS. We value the stock at 17.6x FY19E EPS and recommend a target
price of Rs.166, representing an upside potential of 19% from current levels.
Key Risks
Government regulations.
Increasing ENA (Extra Neutral Alcohol) Prices which would impact protability.
India Research - Stock Broking
Valuation Summary
YE Mar (Rs. Mn)
FY15 FY16 FY17E FY18E FY19E
Net Sales 14884 15431 16434 18077 19885
EBITDA 1704 1946 2240 2493 2764
EBITDA Margin (%) 11.4 12.6 13.6 13.8 13.9
Adj. Net Prot 676 769 942 1143 1257
EPS (Rs.) 5.1 5.8 7.1 8.6 9.5
RoE (%) 8.2 8.5 9.6 10.5 10.5
P/E (x)* 18.2 15.9 19.7 16.2 14.7
Source: Company, Bloomberg, Karvy Research,
Represents consolidated nancial numbers
*Represents multiples for FY15 & FY16 based on historic market price
Recommendation (Rs.)
CMP (as on Oct 24, 2016) 139
Target Price 166
Upside (%) 19
Stock Information
Mkt Cap (Rs.Mn/US$ Mn) 18539 / 277
52-wk High/Low (Rs.) 150 / 84
3M Avg.daily volume (Mn)
Beta (x) 0.8
Sensex/Nifty 28179 / 8709
O/S Shares(mn) 133.0
Face Value (Rs.) 2.0
Shareholding Pattern (%)
Promoters 40.5
FIIs 25.9
DIIs 14.4
Others 19.3
Relative Performance*
Source: Bloomberg; *Index 100
Stock Performance (%)
1M 3M 6M 12M
Absolute 25 55 51 40
Relative to Sensex 27 53 38 36
Source: Bloomberg
Company Background
Radico Khaitan, which was formerly known as
Rampur Distillery established in 1943. During
1999, it launched and started marketing its own
brands in Indian markets. It has four millionaire
brands, 8 PM Whisky, Magic Moments Vodka,
Contessa Rum and Old Admiral Brandy, in its
portfolio. It operates three distilleries in the
largest sugar producing state of Uttar Pradesh
and one joint venture with total capacity levels
of 157 mn liters. It has 33 bottling units spread
across India, out of which ve bottling units
belong to the company and remaining 28 are
contract bottling units. Currently, Radico sells
its products through over 55,000 retail outlets
and 5,000 on-premise outlets.
Radico Khaitan Ltd
Bloomberg Code: RDCK IN
Aug -16
Karvy's Diwali Picks - 2016
Technical Outlook
Karvy's Diwali Picks - 2016
AMBIKCO: Technical View
BERGEPAINT: Technical View
prot booking; prices corrected a bit, made a swing low of 706 and eventually entered into a consolidation mode. Technically
speaking, after a stupendous rally from the lows of 140 to a high of 1,149, prices retraced nearly 38.2% of the said move and,
subsequently, in last one-year time frame managed to hold and sustain without violating swing low of 706; prices entered into a
consolidation mode.
In the recent price consolidation, prices found rm support near the 50-weekly EMA and are holding well above the 200-weekly
EMA, which is currently placed near 615 levels and notably the said average has not been violated once since the inception of
the rally. On the weekly technical setup, 14-period RSI managed to hold above 40-levels the phase of price correction which
happens to be bulls controlled territory, which perhaps clearly indicates that long-term bulls were in total control of the counter
and, in recent past, with recovery in price oscillator moving towards overbought territory rearming the fact. Technically, the
stock is well poised to reclaim its all-time high in the months to come. On the downside, 700-710 should work as an immediate
support for the counter, followed by 600-615, where prices are likely to nd support from the major weekly moving average.
per the recent price action, the stock consolidated in the range of 140-165 levels for almost 11 months before it gave a break
out in the month of December 2015. Thereafter, the stock has witnessed a stellar rally towards the all-time highs of 276 levels.
Historically, the stock has been moving northwards after witnessing a small consolidation on the daily charts, indicating any
consolidation may be used as a buying opportunity in the counter. At the current juncture, the stock is trading in the sideways
consolidation zone in the range of 250-270 levels, which may be utilized as the best opportunity to enter in the counter. Any
decisive breakout above 270 levels may take the stock to surpass the psychological mark of 300-305 levels in the medium-
term perspective. On the other hand, it is also trading well above its major long-term moving averages rolling on the upper
band of the Bollinger (20,2) on the monthly charts, pointing in the northward direction and arming further move up. Hence, we
recommend long-term investors to buy the counter around the given levels for the next upside targets of 300-310 levels in the
coming months. For the longer time frame, any close and sustenance above the said levels may further fuel the rally in the stock
towards 350-370 levels.
AMBIKCO made its dream run from the
low of 140 to an all-time high of 1149,
gains of more than seven times in
less than four years time frame. At the
start of year 2012, stock price gained
momentum from the lows of 140, since
then price remained in secular bull trend
without any intermittent price correction
or consolidation up till Aug ’15, when
stock clocked an all-time high of 1,149;
following which the uninterrupted
rally took minor pause, on account of
BERGEPAINT is our preferred pick from
the Paint Sector. The stock has been an
outperformer among both its peers and the
overall market, with returns of around 75% in
the past one year. The counter has been in
the secular uptrend from a two digit number
towards the all-time high levels of 276.80
with increasing number of trading volumes.
The strong momentum may be dened from
the weekly charts where the stock has never
retraced sharply in the past seven years. As
Karvy's Diwali Picks - 2016
CAPF: Technical View
FEDERALBANK: Technical View
chart near 472 levels and closed above the said pattern and made its 52 week high of 791 levels with more than average volume
conrmed the pattern signicance. The stock has seen strong buying interest for past consecutive six to eight months and
outperformed some of it peers signicantly, suggesting inherent strength in the counter. The stock has also taken support from
its 61.8% Fibonacci retracement support levels of 631 level on closing basis drawn from a low of 528.50 level to a high of 797.40
levels which indicates long-term players are still bullish in the stock and likely to move higher in coming months. The advance
variable moving averages like Variable index dynamic average (VIDYA) are also showing strength and price is still trading above
the said average with no sign of any reversal in the counter indicating strength in the uptrend. The stock is also trading well
above its 21/50/100/200 day EMA levels.
On weekly chart, both the indicator Stochastic (Fast averages has crossed slow average on daily chart and which suggest that
the stock still has potential to go further higher) and William %R (-15.48) is also trading in a bullish zone and there is still no sign
of any reversal. Considering all the above data, we recommend accumulating the stock at current levels and adding further on
declines for targets of 882 levels in coming 9-12 months.
at 52 levels and gathers the attraction of market participants. The bounce in the stock is supportive with increasing volumes
indicating strong hands accumulating the counter. Currently, the stock is on the verge of giving a breakout of V shape pattern at
80 levels on monthly charts. Hence, the breakout of the said V shape recovery in the stock will provide fresh trigger for the stock.
On the longer-term time frame, the stock after sharp correction will resume its upward journey to generate 4-5 time of return
from the lows. The stock is likely to surge 160-200 levels after it started its fresh rally from lows of 40 levels which is likely to be
achieved in next 2-3 years.
On the technical setup, The 14 period RSI is pointing northward and has given positive cross over with signal line on monthly
charts, which is reecting strength in the up move. The parabolic SAR is trading below the price which reects that the recent
move in the stock which stared from the low of 41.35 levels will remain intact in near term. Hence, above discussed development
in the stock suggest that technically the stock is well-placed to take it up for the targets of 90 levels in the next 9-12 months.
Capital First Ltd. is one of our preferred
counters in nancial services. The
counter has been an outperformer on
the monthly basis and generated more
than 10% returns in comparison to its
peer group. On the volumes front, the
stock's delivery volumes have picked
up signicantly over the last few
months, indicating participants' interest
in the stock has increased signicantly.
The stock has given breakout from
The stock has resumed its up move and is
making higher highs and higher lows on weekly
charts after making a low of 41.35 levels in the
mid of February 2016. Prior to that, the stock
has seen sharp fall from all time high of 79.80
levels, which has dragged the stock to the low
of 41 levels. Thereafter, the stock bounced
from the said lower levels but was unable to
sustain the gain and retested the low around
42.30 levels. However, the price action in the
stock has given the double bottom breakout
Karvy's Diwali Picks - 2016
GABRIEL: Technical View
GSFC: Technical View
On monthly chart, the stock has seen a “Pole & Pennant” pattern breakout around the levels of 96 which was well-backed
with robust volumes arming the strength in the breakout and the upward movement to continue from medium to long-term
perspective. As per the pattern made on monthly chart, the potential upside in the stock is expected somewhere near 145-150
levels which can be seen over a period of 1 year. On the other hand, the stock is placed above the upper band of the Bollinger
(20,2) on monthly basis, arming inherent strength in the counter from medium to long term . On the price extension scale drawn
from the lows of 19.35 to the highs of 106.75 levels, currently the stock is placed near its 50%, above which next resistance can
be seen around 135 levels which is the 66.67% of the extension, breaching which the stock is expected to surge higher. On the
other hand, if the counter crosses the above-mentioned targets, then it may test 123.80% price extension targets of 184 levels
which may be achieved in next 1-2 years period. On the contrary, the support for the counter is pegged around the levels from
where it witnessed breakout, i.e., 96 levels, breaching which it might test the levels of 70 below which strong uptrend could get
negated. Thus, we recommend investors accumulate the stock for targets of 150 levels in the coming 9-12 months.
Thereafter, the counter entered the consolidation zone and traded in the broad range of 65-85 levels for a few months. However,
recently, the stock broke out from the said consolidation with a huge spurt in the volumes on the monthly charts and currently is
trading well above the same. On the volumes front, highest monthly volumes were recorded in the month of breakout (October
2016) in the past two years indicating the stock being in strong hands. The stock is also trading well above its major long-term
moving averages rolling on the upper band of the Bollinger (20,2) with direction pointing northward arming further up move.
Technically, the stock is in bullish momentum and has a minor hurdle placed at 115-120 levels, which is around its all-time high
levels, breaching which the counter may test 145-150 levels in medium to long-term perspective. On the ip side, medium-
term supports are placed at 75 levels followed by 60 levels, breaking which the trend may change for the broader time frame.
As per the overall chart structure, the counter looks extremely poised to move into uncharted territory entering the triple digit
mark towards 115 to 145 levels in the medium to long-term period. After considering the above-mentioned data points, we
recommend long-term investors to buy the counter on every dip with a target of 115 in the next 12 months.
GABRIEL is one of our preferred picks
from Auto ancillary sector from long-
term perspective. The stock has seen a
stellar run from the lows of 20 odd levels
and has given a return of more than 5x
in the last 2 years. The stock is in cycle
of higher highs and higher lows and
is currently placed above all its major
moving averages (21, 50, 100 and
200 DEMA) on daily chart suggesting
inherent strength in the rally.
The stock has been one of the outperformer
in the overall Agricultural space generating
whooping returns of over 100% in a two-and-
half-year time frame. The counter has been
in the secular uptrend on the monthly charts
making repeated cycles of higher tops and
higher bottoms. After clocking all-time high of
124.55 levels in the month of November 2014,
the stock witnessed a round of prot booking
and retraced 78.6% of the up move from the
top and took support around 60-62 levels.
Karvy's Diwali Picks - 2016
M&M Fin: Technical View
RADICO: Technical View
making higher highs and higher lows on all major times frames. The stock witnessed a strong up move and generated approx.
133% return in the last six months with notable volumes conrming bullishness of the stock and still there is no sign of any reversal
in the counter and also the stock has outperformed its sector and also some of its peer group in last 6 months. Technically, on
monthly chart, the stock has given breakout from broad range (342-203 levels ) from 342 levels and also the stock has retested
its said pattern and started moving higher. On the Oscillator front, parabolic SAR (Stop & Reverse) on monthly chart is trading
below the price, suggesting buying will remain intact with the counter in the near term. Moving averages convergence and
divergence (MACD) is also trading above its centre line which increases the pattern signicance of the stock. As per the overall
chart structure, the counter looks extremely bullish from current levels and there is no major resistance till 440 levels and we may
expect 430-440 levels in the long term.
After considering the above-mentioned data points, we recommend long-term investors to buy the counter around 360 levels
with a time frame of one year for the targets of 430-440 levels.
consolidating the broad range of 50-200 levels in the last 8 years, making lower highs and high lows forming a long triangle
pattern. A trend line drawn from its lift high of 219 levels made in year 2007 connecting the subsequent high is pegged around
165-170 levels currently. Any break above the same can push the momentum in the stock to make fresh life time highs. However,
we expect with recent strong move there is high probability the stock likely to break the above levels in the next 6-12 months.
Any correction in the stock for near term around 120 levels would be ideal levels to accumulate the stock. On the lower side, 100
would be a crucial level to watch, which could negate our strong bullish view.
On the monthly chart, the stock is trading above its 50 DEMA, 100 DEMA and 200 DEMA. Moreover, 100 DEMA on the monthly
chart is on the verge of crossing 50 daily exponential moving averages. Further, MACD on the monthly chart is trading above the
signal line adding strength to the counter. On the monthly chart, RSI is placed above the 9 day exponential moving average and
has crossed the resistance level of 62.60 indicating continuation of the positive momentum. The stock looks good from one-year
perspective and investors are recommended to go long for one year targets of 165-170 levels.
Mahindra & Mahindra Financial
Services Limited (MMFSL) is one of
India’s leading Rural NBFC services.
The stock has seen more than 100%
return from the February lows, out-
performing its peers. The stock has
tested a fresh life-time high of 405 levels
in the current month and witnessed a
sharp prot taking which dragged the
counter to a low of 340 levels.
The stock is in secular uptrend and
RADICO has been an outperformer in
its sector, generating a return of 20.79%
compared to FMCG that has generated return
of around 7%. The stock, after forming strong
base around 80 levels where it spent 18-20
months, have resumed its uptrend in the last
couple of months. The stock surged from 80
to 150 levels in the last three months with life-
time high monthly volumes indicating the stock
is poised for a big move in the coming months.
On the longer time frame, the stock has been
Karvy's Diwali Picks - 2016
Stock Ratings
Absolute Returns
Buy : > 15%
Hold : 5-15%
Sell : <5%
Connect & Discuss More at
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name(s) is/are mentioned therein, certify (ies) that the views expressed herein accurately reect his (their) personal view(s) about the subject security (ies)
and issuer(s) and that no part of his (their) compensation was, is or will be directly or indirectly related to the specic recommendation (s) or views contained
in this research report.
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are not predictions and may be subject to change without notice. Actual results may dier materially from those set forth in projections.
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