La Opala RG –In ‘HOT’ pursuitmailers.sparkcapital.in/uploads/Consumer/3QFY14/La Opala RG - Mid@s... · La Opala RG –In ‘HOT’ pursuit 1 Corporate Factsheet Promoter Background

Private & ConfidentialTejash Shah – Direct: +9122 4228 8155 Mobile: +9193238 89447 , [email protected]

La Opala RG – In ‘HOT’ pursuit

1

Corporate Factsheet

Promoter Background Established in 1987, La Opala RG (LOG) under the leadership of Mr. Sushil

Jhunjhunwala and Mr. Ajit Jhunjhunwala has transformed itself as one of the

leading brands in the Indian crockery market through its three brands, La

Opala, Diva and Solitaire.

Presence Headquartered in Kolkatta, India. Operates out of dual facility at Madhupur

(Jharkhand) and Sitarganj (Uttarakhand)

Management depth Mr . A C Chakrabortti - Chairman

Mr . Sushil Jhunjhunwala - Vice Chairman & Managing Director

Mr . Ajit Jhunjhunwala - Joint Managing Director

Ms . Nidhi Jhunjhunwala - Executive Director

Business LOG is engaged in the manufacturing and marketing of Opalware and

Crystalware products.

Corporate Structure Associates: Genesis Exports Ltd, Ishita Housing (P) Ltd, SKJ Estate (P) Ltd,

Anuradha Designers (P) Ltd

Revenue Model (FY13) Three Brands – La Opala (~40%), Diva (~48%) and Solitaire (~12%)

Capacity Madhupur (Jharkhand) (5000 tpa) and Sitarganj (Uttarakhand) (8000 tpa)

Key Clientele Aspiring middle class retail population

Key Vendors LOG currently has ~125 distributors with a reach of ~10,000 retail outlets. 75

employees are involved in selling to distributors as also Modern Retail. Modern

Retail contributes ~15%.

Key Success Factors Brand strength and expanding distribution network

Capital History Rs.34mn in February 1995

Credit Rating Long Term Bank Facilities - CARE A + ( Single A Plus)

Short Term Bank Facilities - CARE A 1 + ( A One Plus)

Corporate Bankers State Bank of India

Auditors Doshi, Chatterjee, Bagri & Co

Market Data

Market Cap (Rs. mn) 6,390

Shareholding 68% Promoters, 13%

institutions, 19% Public

Key Shareholders Kotak Mahindra (1.9%), UTI

asset mgmt. (1.9%)

52-week High-Low (Rs.) 230-631

All time High-Low (Rs.) 33-631

3M Average Volume 18984

Stock Return (%)

Correction from 52WH 4.4%

Rise from 52WL 162%

F&O NA

Index BSESMCAP

Stock exchange list BSE-NSE

3M 6M 1Y YTD

24% 57% 122% 0.5%

Fundamental View

Current Market Price Rs. 600

Recommended entry

priceNA

Target Price NA



2

Key takeaways from the management interaction

Industry Scenario: Growth potential in the segment continues to be attractive despite growth momentum being slightly subdued off-late. The

management believes that high teen revenue growth is achievable in FY14 and growth potential is enough to sustain high teens growth number

in the medium to long term. With majority of the MNCs competitors still struggling to establish a scalable and profitable distribution model in India,

competitive intensity in the segment has dwindled. We learn that RAK and Luminarc are re-jigging their distribution network while Corelle is

looking out for direct tie-ups with importers post severing ties with World Of Kitchen. Further, volumes of Chinese imports too have significantly

declined post the antidumping duty imposition in 2010. The management did express their cognizance of Hopewell’s 8000mtpa plant in Jaipur

(only other player to have a plant set up in India) and their potential threat, however believes LOGs stronger terms of trade provides them with

the necessary edge to Hopewell’s offerings.

Capacity Expansion: The management indicated that all capacities are running at high utilization and that LOG has incurred a cost of Rs.130mn

for the Madhupur facility modernisation, carried out in August 13. The management outlined that further capacity addition to keep abreast with the

increasing demand would be in Sitargunj plant and that Rs.~200mn has been allocated to increase capacity to 12000mtpa from its current

8000mtpa capacity by FY15E.

3 ‘P’ growth strategy: Premiumization, Penetration and Portfolio extension are to be the key growth drivers. The management confirmed that all

the three brands continue to do well, with Diva leading the growth. Revenue contribution from premium range Diva has increased to 55%, and the

premium positioning of the brand continues to gain traction. Crystalware value growth should also significantly improve as the brand gains reach

and popularity. We learn that LOG has done considerable distribution realignment in recent times which should assist in increasing penetration

and drive growth. Western India to be a key market and LOG believes the market has the potential to become their largest selling region,

currently ranks 3rd. LOG also underlined the plans to launch complimentary opalware products viz. Tumbler, Bake & Serve offerings, etc. to

expand their product portfolio. With these additional product lines requiring no extra capex, capital efficiency is expected to improve.

Management indicated that macro drivers as increasing aspirational purchases, growth of nuclear families, rising microwave and dishwasher

penetration continue to drive opalware sales in India.

Margin to expand: Management remains confident that operating margins would sustain in near term and expand from FY15. Modernization of

the Madhupur facility, favourable product mix leading to premiumization and calibrated price increases are expected to lead to gross margins

expansion. Significant operating leverage is expected to arise from non-linearity of employee cost and A&P spends as revenue grows.

Capital Efficiency to improve: LOG’s efforts of transform into a asset light model through portfolio expansion and increasing premiumization is

expected to improve capital efficiency in medium to long term.

Our View: We believe LOG revenues and earnings would grow by ~20% and ~23% respectively in FY15E led by strong set of macro drivers and

favourable industry economics. With the industry still being at a nascent stage, macro factors as rising urbanisation, increasing propensity to

spend towards aesthetically appealing products and rising number of women in workforce to lead to massive industry expansion in near term. We

see that LOG with its superior terms of trade, high brand equity and increasing reach, stands at a definitive advantage to grab this opportunity.

The portfolio of strong brands (La Opala, Diva and Solitaire ) should enable LOG to garner significant market and wallet share in long term.



3

1987•La Opala Glass Private Limited commences operation

1988•First opalware glass plant set up at Madhupur, Bihar

1991•Commences export of Opal tableware

1995•Public Listing in the market (Rs.34mn in February 1995).

1996

•Pioneered 24% Lead Crystal glassware technology in India and sets up first Crystal Glass plant at Madhupur, Bihar.

1996

•Launches India's first 24% Lead Crystal glassware, under the brand name 'Solitaire'.

1999

•Merges La Opala Glass Ltd, with Radha Glass & Industries Ltd, forming La Opala RG Ltd.

2007

•Fully automatic state-of-the-art plant set up at Sitargung, Uttarakhand, to produce opal glass tableware.

2008

•Launches 'Diva', the hi-tech, world class opal brand in the premium segment.

2012•Completes major expansion plan at Sitargunj, Uttarakhand plant.

2013

•Awarded Economic Times Bengal Corporate Awards for Best Entity in Innovation.

La Opala RG corporate timeline Key product categories

Opalware Crystalware

Since 1987 1996

% of sales ~88% ~12%

Brands La Opala , Diva Solitaire

Price RangeLa Opala (Mass),

Diva (Popular)Premium

Growth drivers• Shift towards opalware

from metals

• Strong brand equity

• Increasing Social strata

symbol

• Rising need for appealing

home wares

CompetitorsCorelle, Vanres, Luminarc,

etc

Waterford, Zrike, Lauren

Ralph, etc

~Operating MarginsLa Opala (~20%)

Diva (~30%)(~30%)

Products OfferedPlates, Glasses, Mugs and

Bowls

Bar ware, vases, Ash Trays,

drink ware and beer mugs

Source: Company, Spark Capital Research




4

Kolkata (Head Office)

Madhupur (Plant) (La

Opala opalware &

Solitaire crystalware

Sitarganj (Plant)

(Diva opalware)

La Opala RG’s presence in India


Sales and PAT margin performance (15 years)

Source: Company, Spark Capital

301359 357

276328 343

415 431488 502

609

740

964

1150

1539

8.8%

11.1%

7.9%

4.2%

6.2%5.5%

6.7%

10.0%9.4%

2.1%

1.3%

3.7%

9.7%

11.0%

14.9%

-1.0%

1.0%

3.0%

5.0%

7.0%

9.0%

11.0%

13.0%

15.0%

0

200

400

600

800

1000

1200

1400

1600

1800

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Sales (Rs mn) PAT margin (%)

La Opala RG brands

Value For Money opalware offering

Premium

opalware offering

Crystal glassware offering




5

• Vast Unorganized market:

India’s crockery/opalware market is serviced predominantly by the unorganised sector with most of the products sold being imported by small-time

traders from China, Dubai and France and sold through local stores. The US brand, Corelle, is the largest known player in the super-premium

category with sales of approximately about Rs.500mn last year. We believe La Opala RG’s portfolio of well-established brands in the Indian

tableware market (La Opala, Diva and Solitaire) command high recall and enjoys premium positioning which should enable them to gain share

from unorganized players. The 100%+ anti-dumping duty on opalware implemented few years back on imports from China and UAE should further

assist in taking away the pricing pressure off the industry.

• Domestic expansion led growth:

~85% of LOG’s turnover is from domestic market, balance from exports. Management has indicated that overseas market is currently not the

focus area for the company and focus would be more on the Indian markets where it can leverage brand equity of its brands – La Opala, Diva and

Solitaire. LOG currently has ~125 distributors reaching out to ~10,000 retail outlets. At present, 75 employees are involved in selling to distributors

as also modern retail. Modern retail contribution has increased to ~15% from ZERO in the last 3 years. We believe growth of modern retail would

be a key growth driver, we learn that terms of trade are similar to that of with distributors. Interesting to note – LOG has Rs. ~130mn sales in its

largest single market – Kolkata. Reach in Mumbai, Bangalore and Delhi is growing stealthily. We believe attractive channel margins should enable

rapid expansion as LOG bills distributors and Modern Retail ~60% of MRP, leaving the rest for the sales channel. This is in line with major brands

in the branded apparels business (Page Industries earns 60%, Kewal Kiran Clothing earns 58%). In general, payments are collected in less than

45 days.

Robust historical financial performance:

(1) Healthy revenues & expanding margins: Revenues have grown at a CAGR of ~23% in FY08-13 enabling the company attain the critical size of

Rs.1.5bn turnover. EBIDTA margins expanded from 12.7% in FY08 to 26.8% in FY13.

(2) Strong Balance sheet: Balance sheet indicated management’s aversion to debt funded growth. Despite maintaining stupendous growth rate in

last decade, average Debt/Equity has hovered at ~0.8x most of the time with the highest point being ~1.2x in FY09. In FY13 Debt/Equity stood at

0.3x. Controlled working capital cycle – FY13 Debtor days: 44 days, Inventory days: 73 days (because of the nature of the business), Creditor

days: ~9 days. Healthy capital efficiency (Current RoE ~35%, Current RoCE ~27%), sharp improvement from the lows of 2-3% in FY08-09.

Investment Thesis



6

Gas Stove (Rs. ~25bn, ~40%, ~20%)

Refrigerator (Rs. ~140bn, ~90%, ~22%)

Metal Ware (Rs. ~70bn, ~40%, ~60%) OpalWare (Rs. ~3bn, ~30%, ~1%)Grinders (Rs. ~2bn, ~70%, ~10%)

Microwave Oven (Rs.~13bn, ~90%, ~2%) Toaster (Rs.~1.4bn, ~60%, ~1%) Mixie (Rs.~16bn, ~60%, ~31%)

Pressure Cooker

(Rs. ~17bn, ~60%, ~40%))

Non-Stick Cookware

(Rs. ~7bn, ~50%, ~10%))Induction Stove

(Rs. ~12bn, ~60%, ~2%))Water Purifiers

(Rs. ~38bn, ~80%, ~6%))

(Market Size, Organised share, Penetration)

Opalware has

the lowest

organised

share and one

of the lowest

penetration in

the Indian

Kitchen.



7

Distribution

terms of

trade

A&P outlayReach PricingTechnologic

al superiority

Economic Moat Index

Brand

Strength

Supplier

credit terms

Production

facility



8

STRENGTHS1. Strong brand equity

2. Established retail network

3. Brands straddled across price points

4. Robust historical financial performance

5. Credible management with proven track record

6. Strong domestic demand.

WEAKNESS1. Seasonal sales and production pattern leading to optically bloated working capital because of high inventory days.

2. Absence of a super-premium product.

3.Limited reliance on outsourcing model, makes model slightly more capital intensive vs. other players in the kitchenware categories.

OPPORTUNITIES1. Vast Unorganised market

2. Anti-dumping duty period to strengthen entry barriers.

3. Shift from metalware to glassware

4. Increasing urbanisation and nuclear families

5. Glass ware/Opalware gaining aesthetic appeal

4.

THREATS1. Cheap competitive imports in case Rupee appreciates significantly.

2. Threat from substitutes (Stainless steel offerings)

3.Slow-down in discretionary spend

4. Volatile oil prices

5. Unhealthy competition from unorganised sector

6. Anti-dumping duty removal in near future

SWOT



9

Company

specific

drivers

f

Growth – function of (f) Importance Outlook

f

Wide expansion

opportunity

Glass ware to

metal ware

consumption rising

f

f

f

f

L

a

O

p

a

l

a

R

G

G

r

o

w

t

h

d

r

i

v

e

r

sMacro

drivers

Increasing disposable

income

Urbanisation drive gaining

momentum

Rising working women

population

Increasing propensity to

spend

Shift towards fashionable

crockery

f

fBranding led

pricing premium

Indian crockery sector

remains predominantly

unorganised

Increasing usage

of glass ware

• A rough channel check with households makes us

believe that there is almost no other brand that the

typical householder recalls other than La Opala RG

and Corelle.

• Improving product mix is expected to drive margin

expansion and also provide cushion for higher A&P

spend.

Vast Unorganized

market

Anti Dumping duty

imposed

f

f

Currently caters to just ~125

distributors and ~10000 retail

outlets

Amount spent on A&P

should enable them to

charge a brand premium

f

Source: Spark Capital Research- Negative- Strong - Weak - Positive - Neutral

Industry

drivers

f

Improving product

mix

Increasing contribution from

premium opalware and

crystalware to assist in

margin expansion

ff

Imposed in 2011 on import of

opal/glassware from China

and UAE.

f

f

• Most of the products sold being imported by small-

time traders from China, Dubai and France and sold

through local stores.

• India imposed anti dumping duty on the import of opal/

glassware from China and UAE for a period of five

years from December 2011. Since the imposition of the

duty, % of imported crockery has significantly reduced

assisting domestic players as La Opala RG

• Increasing disposable income coupled with rising

propensity to spend has enabled the growth of

Opalware and crystalware market in India.

• Increasing number of nuclear families and working

women has led to an increased need for ‘convenience’

based products as opalwares in India.

• Aesthetic appeal and social strata associated with

opalware’s is also beginning to significantly contribute

to their superior growth in recent times.



10

Business Overview

Well positioned brands straddling across price points to assist in growth and expansion of margins.

Time Tested

Positioning

Contribution

Since 1996

Aesthetic

Waterford, Zrike, Lauren Ralph

~12% - FY13 Sales

~1000 tpa

Since 1988

Value For Money

~40% - FY13 Sales

~4000 tpaCapacity Location

Since 2008

Premium Affordable

~48% - FY13 Sales

~8000 tpa

Madhupur, JharkhandMadhupur, JharkhandPlant Sitarganj, Uttarakhand

CompetitorsHopewell, Unorganised players,

Cheap Chinese imports Luminarc, Corelle, Vanras



11

• Sustain growth momentum

LOG has grown at 23% CAGR in the last 5 years. Management is confident of maintaining growth at these levels over the next 2-3 years. We

believe the business should easily grow 23-24% annually merely if LOG can manage to dovetail capacity additions with distribution network

expansion as we see that there is actually no great effort from any of the unorganized players to resort to branding to generate demand. Moreover,

marked preference amongst consumers to avoid “Made in China” labels when it comes to products that are too close to the “person” – eatables,

medicine, toys, tableware, etc to act as a growth driver.

• Branding to lead to pricing premium:

With LOG using branding to drive consumers to stores to buy their products, we believe the premium they would be commanding in comparison to

the unorganized players should assist in sustaining margins. LOG currently spends 10% of sales on A&P with a preference for using celebrities

(within its budget) to improve brand standing and recall. The management intends to continue with this level of spend and a growing revenue base

will help them stay miles ahead of competition. In fact a rough check with households by us makes us believe that there is almost no other brand

that the typical householder recalls other than La Opala RG and Corelle. We believe this is crucial as Modern Retail is “forced” to deal with such

brands in a product category in a more benign manner (Jockey, Levis, Bajaj Almond Drops).

• Focus on Mix Improvement:

Margins to further improve as contribution from Diva opalware range increases. Diva, premium opalware offering is positioned under Whiter,

Brighter and Stronger proposition to La Opala opalware offerings. This along with the branding effort on Diva (Manish Malhotra collection, etc.)

should help it to premiumise its brand position in the medium to long term. Further, low power & fuel cost from Madhupur facility, that has

undergone modernisation (conversion of fuel furnace to electric furnace) to assist in margin expansion in near term.

• Better placed capacity to meet up to robust demand:

Major capacity expansion was undertaken at Sitargunj (Uttarakand) was carried out in 2007-08. Initial teething problems in this facility had resulted

in higher depreciation costs despite low output however the plant currently is working fine, with power assured from the hydel projects in the state.

The company also has carried out modernization of its Madhupur plant in 2013 (automating manual processes and conversion to electric furnace),

resulting in higher through put capacity. Moreover, the modernisation has shifted the capacity from the legacy crystalware product line to opalware

which is the key growth area for the company. Power is a key input cost for this product and fortunately the current plants are in locations where

power is regularly available at a cheap cost.

Strategy Going Forward



Cookware, 44%

Dinnerware, 36%

Kitchenware14% Beverageware,

2%

Cutlery, 4%

Metalware, 75%

Glassware, 7%

Ceramicware3%

Woodenware, 1%

Plasticware, 14%

12

Investment Concerns

Cheap competitive imports in case Rupee appreciates. Ability to defend and expand market share post anti-dumpy duty expiry.

Threat from substitute tableware categories (Stainless steel, melamine, bone china, plastic, etc.)

Slow-down in discretionary spend

Growth drivers

Concerns & Challenges

Shift from Steel/metal crockery to glass

crockery

Increasing usage of

glass crockery

La Opala RG volume offtakes

Growth drivers

1. Increasing disposable

income

2. Urbanisation drive gaining

momentum

3. Rising working women

population

4. Increasing propensity to

spend

5. Shift towards fashionable

crockery

Usage drivers

1. Rising acceptance of

Microwave ovens

2. Increasing shift towards

western foods

3. Rising spend towards

convenience needs

4. Prominence of health and

lifestyle increasing

5. Increasingly becoming social

strata symbol.Source: Bloomberg, Spark Capital Research

Source: Bloomberg, Spark Capital Research

Crockery by type (%)

Crockery by category (%)



13

Competitive Landscape

Low Pricing Scale High

Lazzaro

Stainless

steelCorelleSuper ware TupperwareRAK

La OpalaLa Opala

DivaServe well

Bormioli

Rocco

Valerio

opalwareVanras

Luminarc

Plastic

Economy Offerings Premium offerings Domestic

MNCs

Reason for a huge unorganised market

• Utensils and cutlery continued to be perceived as commodities by Indian consumers

• Unbranded products are available at a huge discount compared to branded products

• Among the few brands which do exist, economy brands doing better due to a huge base of middle-class

consumers.

• Premium brands have found it easier to sell to institutional clients than retail consumers.



14

Revenue growth more consistent despite slowdown


Off late it has been operating margin led PAT margin expansion

`


Power & Fuel cost to come down as Madhupur modernisation gets

completed


Healthy A&P outlay to assist in brand equity


Consistent growth history…

509 620 750964

1150

15391791

2150

3%

22% 21%

29%

19%

34%

16%

20%

0%

5%

10%

15%

20%

25%

30%

35%

40%

0

500

1000

1500

2000

2500

FY08 FY09 FY10 FY11 FY12 FY13 FY14E FY15E

% Y

oY

gro

wth

Revenue (

Rs m

n)

Revenue % YoY growth

48%

59% 59% 58%61% 63% 63% 64%

13%16% 17%

22% 23%27% 28% 28%

2% 1%4%

10% 11%15% 16% 17%

0%

10%

20%

30%

40%

50%

60%

70%


Gross Margin EBITDA Margin PAT Margin

122

180

130

160

196

243263

309

24.0%

29.0%

17.3%

16.6%17.0% 15.8%

14.7% 14.4%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

35.0%

0

50

100

150

200

250

300

350


Power & Fuel Costs % of sales

12

41

59

77

95

148

193

224

2.4%

6.5%

7.9% 8.0% 8.3%

9.6%

10.8%

10.4%

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

0

50

100

150

200

250


A&P % of sales



15

D/E ratio improving stealthily


Working capital seem stretched due to business seasonality


Returns on the uptrend


FCF/OCF


… with improving capital efficiency

333.5

446.2

390.2

290.7

202.0

238.7

189.0

149.0

0.9

1.2

1.0

0.6

0.40.3

0.20.1

0.0

0.2

0.4

0.6

0.8

1.0

1.2

1.4

0

50

100

150

200

250

300

350

400

450

500


Debt/

Equity

Debt (R

s m

n)

Debt Debt/Equity

65

5244 44 44

86 8373 72 71

12 11 9 9 9

139

124

108 107 106

0

20

40

60

80

100

120

140

160

FY11 FY12 FY13 FY14E FY15E

Debtor Days Inventory Days Creditor Days Working Capital Days

3% 4%

7%

16%

20%

27% 27% 27%

3% 2%

8%

22%

25%

35%34%

32%

0%

5%

10%

15%

20%

25%

30%

35%

40%


ROCE% ROE%

52

-37

141158 143

320 306

359

-109

-53

106137

96 96

156129

-200

-100

0

100

200

300

400


OCF FCF



16

Remuneration details of key management personal

NameCategory of

Directorship

Remuneration

(Rs.mn) ^

Mr Sushil Jhunjhunwala, Vice Chairman and Managing Director 14.17

Mr Ajit Jhunjhunwala, Joint Managing Director 13.03

Ms Nidhi Jhunjhunwala, Executive Director 5.57

Mr. A C Chakrabortti Non-executive Directors 0.275

Mr. G Narayana Non-executive Directors 0.275

Mr. Shakir Ali Non-executive Directors 0.275

Mr. Arun Churiwal Non-executive Directors 0.275

Mr. Rajiv Gujral Non-executive Directors 0.275

Note: ^ - (Salary & perquisites + Commission). Source: FY13 La Opala Annual Report, Spark Capital

Consistent dividend pay Out


Holding structure – Promoter holding has slightly

increased in the recent past


Promoter 68%

FII4%

DII2%

Bodies Corporate

7%Public19%

Corporate Governance

Board of Directors: There are 5 Independent directors out of total 8

directors on the board. Most of the directors have long experience in

relevant area of operation. The promoter is the vice-chairman of the board

and the managing director.

Audit Committee: The audit committee comprises of three members, all of

whom are non-executive independent directors.

Remuneration committee: The remuneration committee comprises of

three members, all of whom are non-executive independent directors.

Director compensation: Primary compensation to the non-executive

directors is in the form of sitting fees plus commission. The Executive

director’s compensation is basic salary plus perquisites and commission.

1.50

2.00

3.50

4.00

4.5020% 19% 19%

17%15%

0%

5%

10%

15%

20%

25%

0

1

1

2

2

3

3

4

4

5

5

FY11 FY12 FY13 FY14 FY15

Dividend Per Share Dividend Payout

Management Tenets



17

Trading at 18x FY15E – Sharp re-rating in last 12 months


5 years one year forward multiple


5 years one year forward multiple

P/E Multiple range No. of days traded % of of no. of daysCumulative traded

no. of days

%of Cumulative

no. of days

3 - 4x 29 2% 29 2%

4 - 5x 427 23% 456 25%

5 - 6x 629 34% 1085 59%

6 - 7x 268 15% 1353 74%

7 - 8x 74 4% 1427 78%

8 - 9x 17 1% 1444 79%

9 - 10x 38 2% 1482 81%

10 - 11x 70 4% 1552 85%

11 - 12x 80 4% 1632 89%

12 - 13x 67 4% 1699 93%

13 - 14x 43 2% 1742 95%

14 - 15x 16 1% 1758 96%

15 - 16x 66 4% 1824 100%

Source: Bloomberg, Spark Capital

2x

5x

8x

11x

14x

17x

0

100

200

300

400

500

600

700

Jan

-09

Ap

r-09

Jul-0

9

Oct-

09

Jan

-10

Ap

r-10

Jul-1

0

Oct-

10

Jan

-11

Ap

r-11

Jul-1

1

Oct-

11

Jan

-12

Ap

r-12

Jul-1

2

Oct-

12

Jan

-13

Ap

r-13

Jul-1

3

Oct-

13

Jan

-14

CM

P(R

s.)

Average

+1SD

+2SD

-1SD

-2SD

0.0

2.0

4.0

6.0

8.0

10.0

12.0

14.0

16.0

18.0

Jan-09 Jul-09 Jan-10 Jul-10 Jan-11 Jul-11 Jan-12 Jul-12 Jan-13 Jul-13 Jan-14

Reaching a considerable size led to sharp re-rating in last ~12 months



18

Abridged Financial Statements

Rs. mn FY12 FY13 FY14E FY15E FY12 FY13 FY14E FY15E

Profit & Loss Growth Ratios (%)

Revenue 1,150 1,539 1,791 2,150 Revenues 19% 34% 16% 20%

EBIDTA 269 412 493 605 EBIDTA 26% 53% 20% 23%

Other Income 2 10 8 8 PAT 36% 80% 26% 24%

Depreciation 46 56 55 74 Margins (%)

EBIT 224 367 446 539 Gross 61.2% 63.0% 63.0% 63.5%

Interest 41 42 36 30 EBIDTA 23.3% 26.8% 27.5% 28.1%

PBT 184 325 410 508 PAT 11.0% 14.9% 16.1% 16.7%

Tax 57 96 121 150 Leverage Ratios (x)

Normalised PAT 127 229 289 358 Debt to Equity 0.4 0.3 0.2 0.1

Balance Sheet Current Ratio 2.5 2.2 2.4 2.7

Net Worth 557 741 981 1,284 Return Ratios (%)

Loan Funds 202 239 189 149 RoCE 19.6% 27.1% 27.0% 27.3%

Sources of Funds 842 1,067 1,258 1,521 RoE 25.1% 35.3% 33.6% 31.6%

Gross Block 820 989 1,148 1,378 Total Asset Turnover (x) 1.5 1.6 1.5 1.5

Capital WIP 20 9 - - Per Share

Net Block (incl. Capital WIP) 506 647 742 898 EPS (Rs.) 12.0 21.6 27.3 33.8

Investments 64 132 152 162 Dividend (Rs.) 2.0 3.5 4.0 4.5

Total Current Assets 454 538 623 735 Valuation Metrics

Total Current Liabilities 182 249 259 274 Current Market Price 600

Net Current Assets 272 288 364 461 Shares Outstanding (mn) 11 11 11 11

Application of Funds 842 1,067 1,258 1,521 Market Cap. (Rs. mn) 6,359

Cash Flow Enterprise Value (Rs. mn) 6,492 6,457 6,378 6,326

Cash Flow from Operation 143 320 306 359 EV /Sales (x) 5.6 4.2 3.6 2.9

Cash Flow from Investments (47) (297) (162) (232) Price/Earnings (x) 50.1 27.8 22.0 17.8

Free Cash Flow 96 96 156 129 Price/Book (x) 11.4 8.6 6.5 5.0

Cash Flow from Financing (98) (19) (135) (125) EV/EBIDTA (x) 24.2 15.7 12.9 10.5

Closing Cash Balance 4 8 18 20 Dividend Yield 0.3% 0.6% 0.7% 0.8%



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Absolute Rating Interpretation

Buy Stock expected to provide positive returns of >15% over a 1-year horizon

AddStock expected to provide positive returns of >5% – <15% over a 1-year

horizon

Reduce Stock expected to provide returns of <5% – -10% over a 1-year horizon

Sell Stock expected to fall >10% over a 1-year horizon

Recommendation History

Date CMP Target price Rating

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The views expressed in this research report accurately reflect the analyst’s personal views about any and all of the subject securities or issuers; and no part of the researchanalyst’s compensations was, is or will be, directly or indirectly, related to the specific recommendation or views expressed in the report.

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Disclosure of interest statement Yes/No

Analyst ownership of the stock No

Group/directors ownership of the stock No

Broking relationship with the company covered No

Investment banking relationship with the company covered No

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