Liberty Shoes June 14

8/12/2019 Liberty Shoes June 14

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Private & Confidential

Liberty Shoes – Getting off on the right foot

1

Corporate Factsheet

Promoter Background Liberty Shoes Ltd. (LSL)’s business operations are run by three promoter

families (2 Gupta Families & 1 Bansal Family). The promoters have been in the

footwear/leather business for almost 60 years.

Presence Operates out of 6 facilities – 3 in Karnal (Haryana), 1 in Poanta Sahib (Himachal

Pradesh), 1 in Dehradun and 1 in Roorkee (Uttarakhand)

Management depth Number of Promoter directors – 5. Mr. Adesh Kumar Gupta - CEO &

Executive Director; Mr. Adarsh Gupta - Executive Director; Mr. Shammi Bansal -

Executive Director; Mr. Sunil Bansal - Executive Director; Mr. Adeesh Kumar

Gupta - Executive Director

Business LSL was incorporated in September 1986 and is engaged in the business of

manufacturing, branding and selling leather and non‐leather footwear.

Corporate Structure Group Companies: Liberty Enterprise (LE), Liberty Group Marketing Division

(LGMD), and Liberty Footwear Company (LFC), all 100% held by promoters of

LSL. Subsidiary company: Liberty Foot Fashion Middle East FZE, Dubai

(Recently Liberty Retail Revolution a subsidiary was merged with LSL)

Revenue Model (FY14) Domestic (~89% sales), Exports (~11% of sales)

Capacity 6 plants together posses a capacity of ~11mn pairs of footwear per annum on

single shift basis.

Key Clientele Value for money branded premium/semi-premium footwear offerings.

Key Vendors Current distribution structure comprises of ~150 distributors, ~550 exclusive

showrooms and over ~8000 multi‐brand outlets in India. LSL products are also

sold in more than 25 countries like France, Italy, and Germany.

Key Brands Coolers, Fortune, Warrior, Gliders, Force10, Senorita, Windsor, Prefect, Tiptoppand Footfun

Credit Rating Long Term Bank Facilities – ICRA BBB+ ( Triple B Plus)

Short Term Bank Facilities - ICRA A2+ ( A two Plus)

Corporate Bankers HDFC Bank, Corporation Bank, Allahabad Bank, Indusind Bank, HSBC, Royal

Bank of Scotland.

Auditors M/S Pardeep Tayal & Co.

Market Data

Market Cap (Rs. mn) 2.8bn

Shareholding 65% Promoters, 35% Public

52-week High-Low (Rs.)188 (21st April 2014) -

70 (7 th August 2013)

All time High-Low (Rs.)321 (21st September 2005) -

19 (18 th September 2001)

3M Average Volume 301937

Stock Return (%)

Correction from 52WH 12%

Rise from 52WL 137%

F&O NA

FII limit 24%

Stock exchange list BSE-NSE

3M 6M 1Y YTD

37% 96% 88% 10%

Fundamental View

Current Market Price Rs. 166

Recommended entry

priceNA

Target Price NA





2

Key takeaways from the management interaction

Industry Scenario: The Indian footwear market continues to present lucrative opportunities fuelled by increasing income, higher propensity to

spend, urbanisation and penetration of organised retail. Industry sources predict that the organised footwear market is expected to grow at ~15%

CAGR over the next three years driven by increasing reach, conversion from unorganised market, rising premiumization and increasing per

capita usage. Liberty Shoes Limited (LSL) management too shared this growth optimism and believes their current initiatives - distribution

expansion, product extensions and increasing brand promotions would enable them to take advantage of this opportunity.Increasing Reach: Currently North and South regions contribute to ~3/4th of LSL sales, with majority coming from metro and tier1 cities as Delhi,

Chennai, Gurgaon, Noida, Mumbai, etc. Though management indicated that concentration on North and South would remain high, they also

indicated spreading into tier2/tier 3 cities in West and East India to increase the contribution from these regions. The expansion is set to be a mix

of company owned stores and franchise stores. Increasing reach coupled with expanding into new regions to be a significant growth lever.

Distribution Expansion: LSL’s current revenues are derived from Retail (~47%), Distribution (~26%) and Institutional (~28%) channels. LSL

sells through its 150 distributors, 100 company owned stores, ~450 franchisees and over 8000 multi brand outlets. Management has outlined

aggressive plans of adding ~100 exclusive outlets per year for the next three years taking the total exclusive store count to ~800 in 3 years.

Management has laid out that per store CAPEX is expected to be around Rs.~2.5mn-~4mn and that the expansion is to be funded through

internal accruals and borrowings. Management further noted that majority of expansion would be in high street rather than in shopping malls,

which we believe could assist in saving on rental yields in near term.

Margins improvement to be the key: Higher exposure to crude based commodities, operation inefficiencies and high royalty pay-out to group

companies have resulted in LSL margins being well below its peers. TOC approach and restructuring to be key to margin expansion in near term.

Financial arrangements with group companies remain an overhang: Current financial arrangements with the group companies continue to

hinder investment opportunities considering that they appear to be minority share-holder unfriendly. Though merger of Liberty Retail Revolution

(Subsidiary) seems a step in the right direction, we understand that restructuring of financial arrangements with group companies could lead to

immense value unlocking. Any restructuring which leads to LSL taking ownership of the facilities and brands/sub-brands could lead to significant

margin expansion as franchisee and licence fees become redundant. Though positive rearrangement could lead to better credit ratings and

valuation re-rating, financial considerations paid out for any such restructuring would be a key determinant on the valuations of LSL.

Our View: We believe LSL’s potential value could be unlocked only on achieving critical revenue mass and a minority shareholder friendlybusiness structure. Identifying the humungous growth potential, management has laid out a well-structured distribution expansion plan to

increase revenues, which in turn is expected to lead to operational efficiency based margin expansion. With current arrangements with the group

companies affecting the credit rating and value creation/discovery in the stock, any positive development on this aspect can lead to significant re-

rating of the business. Though there seems to be a long opportunity pathway in the offing, LSL fortunes to be determinant on whether they end

up wearing the right shoe for the right track.





3

1986• Incorporated as Public Limited Company

1988

•Obtained certificate of commencement of business

1990• 'Force 10', Liberty's first sub-brand, was launched

1991

•Sets up a joint venture in Russia to manufacture shoes in 1991 under thename of M/S Liberty &Go, with M/S Gorky Production & shoes Unit.

1994

•First direct injection soiling machine was installed with a capacity of 50000pairs per annum on single shift basis

1995•Second direct injection soiling machine was installed

2004•Liberty split its manufacturing and retail business

2004•Ventured into high fashion, by tying up with fashion designers

2005

•Liberty unveils new range of footwear, -Liberty Shoes announces a Bonus

in the Ratio of 1:1

2006•-Liberty Shoes joins hand with Pantaloons

2013• Announces merger of retail unit (LRL) with Liberty shoes

Liberty Shoes corporate timeline

Source: Company, Spark Capital

Liberty Shoes Brand Profile

Brand Price Range Type For

CoolersRs.349-

Rs.2999

Slipper, Sandal,

shoesMen

Force10Rs.399-

Rs.2499

Sandals,

ShoesMen and Women

FortuneRs.674-

Rs.3999Shoes Men and kids

GlidersRs.175-

Rs.2999

Sandal, Shoes,

Slippers

Men, Women,

Kids

TIPTOPP Rs.399-Rs.1699

Slippers,Sandals

Women

FootfunRs.175-

Rs.1999

Flipflops,

Sandals, Shoes,Kids and Men

SenoritaRs.699-

Rs.2199

Sandals Ballerina

and SlippersWomen

Warrior Rs.1350-

Rs.1799Shoes Men

PrefectRs.549-

Rs.699Shoes Kids

Windsor Rs.1649-

Rs.2999Shoes Men






4

Poanta Sahib (Himachal

Pradesh )

Dehradun (Uttarakhand)

Karnal (Haryana), 3

plants – 1 owned, 2

lease

Liberty Shoes manufacturing locations


Plant & Production details

6 plants together posses a capacity of 11mn pairs of footwear per annum

on a single shift basis.

Tax benefits available in Dehradun, Ponta Sahib and Roorkee plants until

December 2016

Liberty Shoes had implemented Theory Of Constraints(TOC) initiative to

streamline supply chain and ensure efficient retail inventory system , the

implementation led to

Establishing a central warehouse

Implementation of production priority system

Making retail availability paramount

Production and raw material lead times separated.

Recognising brand success and failure at short notice

Better inventory pipeline

Number of pairs produced in millions


Roorkee (Uttarakhand)

6.6 6.26.8 6.4 6.4

5.66.7

7.7 7.7 8.3

9.5

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0

9.0

10.0

FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14

N o o f p a

i r s p r o d u c e d ( m n )





5

Volumes have led the growth in FY14.


Revenue drivers remain intact

Contributions from Domestic market remain robust


Men’s variants remain the dominant offering…


…with higher spread in North and South


8%

-13%

9%

-8%

9%

19%

2% 9%

33%

4%

8%

12%

-3%

8%

14%

12%9%

34%

-20%

-10%

0%

10%

20%

30%

40%

FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14

Volume Sales growth Value Sales growth

89.8% 90.9%

10.2% 9.1%

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%

80.0%

90.0%

100.0%

FY13 FY14

Domest ic Exports

Men, 50%

Women, 30%

Kids, 20%

North & South,75%

West, 20%

East, 5%





6

Growth levers in place to tap industry opportunity

Drivers of Future Growth


Enhanced ProductPortfolio

BrandInvestments

RetailExpansion

Realising that retail

venture has to be

matched with brand

awareness, LSL has

invested heavily

behind its brands,

mass appeal media

advertisements and

celebrity

endorsements areexpected to lead to

better traction in

semi-urban areas.

With an enhanced

product portfolio,

volumes to be driven

by popular brands

while premiumization

should lead to better

growth profile andmix.

LSL has outlined that

they would continue to

expand retail networks

to achieve revenue

growth. Given that

majority of their

revenues currently

come in from North and

South India only,

immense opportunity in

terms of expansion into

West and East regions

and distribution into tier

2/tier 3 cities could

further facilitate growth.

Given that LSL portfolio

is largely in mass and

popular ranges, growth

in tier 2/tier 3 cities to

be rapid.





7

ASSOCHAM study predicts the Indian footwear market to grow by at-

least ~15% CAGR over the next 3 years.

Source: Industry, Spark Capital

Footwear is one of the segment where acceptability for branded

products continues to be on the rise.


Indian demographic profile coupled with increasing per capita spend to

be key determinants to growth.


Volumes are expected to be a function of increasing expansion while

margins are to be a function of premiumization in urban areas.


0

50

100

150

200

250

300

350

400

2008 2009 2010 2011 2012 2013E 2014E 2015E

Domestic Market Size (In bn INR)

40

0%

10%

20%

30%

40%

50%

60%

70%80%

90%

100%

Clothing & Apparel

Footwear Jewellery Eyewear Timewear Food &Grocery

Leisure Consumer Electronics

Organized Unorganized

6162626261

5853

5046

4236

2923

1712

75

0 20 40 60 80

5554

555554

5149

4644

4035

2923

1813

97

020406080

0-4

10-14

20-24

30-34

40-44

50-54

60-64

70-74

80+

Urban cities

45%

Tier 2 & Tier 3towns

55%

Potential for organized players in the Indian footwear market remains lucrative as ever…


http://slidepdf.com/reader/full/liberty-shoes-june-14 8/18Private & Confidential


8

Retail formats continue to contribute to~50% of sales…


Though revenue growth levers are emerging, efforts to improve cost efficiency to be the key variable to success.

…with larger contribution from franchise based stores


…which should assist in expansion over the next two years


Wholesale,25.8%

Exclusivebrand outlets,

29.4%

Company OwnedShowroom,

17.2%

Institutional,27.5%

405455

88

100

-

100

200

300

400

500

600

FY13 FY14

Franchise Stores Company Owned Stores

555

855

100

100

0

100

200

300

400

500

600

700

800

900

FY14E FY15E FY16E FY17E

Number of Stores




9

Agreement to use footwear manufacturing

facilities at Karnal and export sales network for a

period of 2 years until March 31, 2015.(Licence fee paid in FY14: Rs.~11.5mn)

Agreement for use of services of fixed assets at

Karnal facility, registered exclusive trademarks

and domestic sales network for a period of 2years until March 31, 2015.

(Licenc e fee paid in FY14: Rs.~84mn)

Agreement for trademark usage “LIBERTY” and

other trademarks on exclusive basis for 15 years

until March31, 2028.(Licence fee paid in FY14: Rs.~80mn)

LIBERTY ENTERPRISES (LE)

LIBERTY GROUP MARKETING

DIVISION (LGMD)

LIBERTY FOOTWEAR

COMPANY (LFC)

LIBERTY SHOES LIMITED (LSL)

LIBERTY RETAIL

REVOLUTIONS (LRR)LIBERTY FOOT FASHION

(LFF)

LIBERTY GROUP

Into retail, having a chain of ~98 high end

showrooms.(Sales :Rs~800mn, PAT: Rs~4mn)

Dormant middle east marketing

subsidiary (PAT: -1.0mn)

Liberty group intercompany license fee/franchisee fee agreements


Subsidiary

Group

Companies




10

Key Related party disclosure snapshot

Type of transaction Type Of Relationship Entity/Person Nature2012-13

(Rs.mn)

2011-12

(Rs.mn)

Receiving of service

Subsidiary Liberty Retail Revolutions Limited Shoe upper production charges 2.8 3.0

Entities where key managementpersonnel has significant influence

Geofin investments private limited Rent for office Premises 10.1 9.9

Liberty Footwear Co Rent for office Premises 0.6 0.7

Sanjeev Bansal Charitable Trust Rent for office Premises 0.5 0.5

Medical Facilities for employees 0.9 0.9

Key Management personnelSh.Adesh Kumar Gupta Rent 0.0 0.0

Sh.Adesh Kumar Gupta Rent 0.1 0.1

Sale of Goods

Subsidiary Liberty Retail Revolutions Limited Sale of goods manufactured and deal in by the Company 352.8 346.6

Entities where key management

personnel has significant influenceLiberty Innovative Outfits Limited Sale of goods manufactured and deal in by the Company 23.7 6.4

License AgreementsEntities where key managementpersonnel has significant influence

Liberty enterprises Franchise fee(including Service Tax) 67.4 6.6

Liberty Group Marketing Division Franchise fee(including Service Tax) 78.7 77.2

Liberty Footwear Co License Fee(including Service Tax) 53.1 52.1

Payment of Salary Wages and

other benefits to Employees

Entities where key management

personnel has significant influenceLiberty Group Marketing Division Salary, Wages and other benefits 30.8 56.1

Key Management personnel

Sh. Adesh Kumar Gupta Salary, Wages and other benefits 1.2 1.2

Sh. Sunil Bansal Salary, Wages and other benefits 1.2 1.2

Sh. Shammi Bansal Salary, Wages and other benefits 1.2 1.2

Sh.Adeesh Kumar Gupta Salary, Wages and other benefits 1.2 0.6

Sh.Satish Kumar Goel Salary, Wages and other benefits 1.4 0.9

Relatives of key Management

Personnel

Sh.Raman Bansal Salary, Wages and other benefits 1.1 1.1

Sh.Vivek Bansal Salary, Wages and other benefits 1.1 1.1

Sh.Ayush Bansal Salary, Wages and other benefits 0.2 0.2

Sh.Manan Bansal Salary, Wages and other benefits 0.2 0.2

Sh.Pranav Gupta Salary, Wages and other benefits 0.2 0.1

Sh.Anmol Gupta Salary, Wages and other benefits 0.1 0.0

Source: FY13 Annual Report, Spark Capital





66.1 66.1 66.1 66.1 66.1 66.1 65.4 65.4 65.4 65.4 65.0 64.9

0.1 0.1 0.1 0.1 0.1 0.0 0.0 0.0 0.0 0.0 0.0 0.1

33.8 33.8 33.8 33.8 33.8 33.9 34.6 34.6 34.6 34.5 34.9 35.0

0

10

20

30

40

50

60

70

80

90

100

Jun-11 Sep-11Dec-11Mar-12Jun-12Sep-12Dec-12Mar-13 Jun-13 Sep-13Dec-13Mar-14

Promoters DII Others

Board composition


11

Promoter holdings have been between ~65-66%

Source: BSE, Spark Capital

Though revenue growth levers are emerging, efforts to improve cost efficiency to be the key variable to success.

…however institutional participation is negligible

Source: BSE, Spark Capital

Liberty shoes Vs Sensex returns

Source: Bloomberg, Spark Capital

Promoters64.9%

DII0.1%

Others35.0%

Category Number of directors

Executive Directors representing Promoters 5

Non-Executive Director 1

Non-Executive Independent Director 6

Total 12

0

100

200

300

400

500

600

Liberty Shoes Sensex





12

LSL has managed to outgrow its peers convincingly in FY14…


… margins though continue to be the lowest


Return ratios under significant pressure due to lower PAT…


…leading to subdued valuations

Source: Bloomberg, Spark Capital

Peer Group Analysis

53.1% 52.9% 54.1%

46.9%

53.5% 54.5%

40.5%

52.6%47.7%

14.9% 14.9% 15.6%10.9% 10.9% 12.1%

8.6% 8.3% 8.5%

10% 9% 10%4.6% 4.4% 5.4%

2.3% 1.5% 2.7%

-20.0%

-10.0%

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%


Bata Relaxo Liberty

Gross Margin EBITDA Margin PAT Margin

15.5 18.4 20.7 8.6 10.1 12.1 3.3 3.6 4.8

21.4%18.9%

12.1%

25.0%

16.8%20.0%

11.7%8.6%

34.2%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

35.0%

40.0%

0.0

5.0

10.0

15.0

20.0

25.0


Bata Relaxo Liberty

Y o Y g r o w t h ( % )

R s . b n

Revenue % growth

27%

25%24% 23.2%

20.9%23.7%

7.6%

4.1%

9.6%

27%

25%24%

15.7%

12.5%

17.1%

9.6%8.1%

10.9%

0%

5%

10%

15%

20%

25%

30%


Bata Relaxo Liberty

ROE ROCE

Bata Relaxo Liberty

CMP 1158 370 166

Market Cap (Rs.mn) 74,392 22,192 2,829

EV (Rs.mn) 71,861 23,763 3,584

12M Trailing PE 39.0 33.8 21.4

12M Fwd PE 32.2 26.8 17.7

FY16 EV/EBITDA 15.7 12.1 7.0





Revenues have increased at~15% CAGR in the past 6 years…


…EBIDTA margins though way below its historical high


13

Licence fees and Franchisee fees continue to be a burden…


…with higher interest cost further declining PAT


Financials

1.96 2.052.22

2.48 2.412.60

2.973.32

3.62

4.85

0.00

1.00

2.00

3.00

4.00

5.00

6.00

2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14

46.2% 45.0%42.0%

39.4% 39.5% 39.8% 40.5%

52.6%47.7%

15.4% 14.1% 12.4%10.4% 9.4% 8.1% 8.6% 8.3% 8.5%

9.0% 7.7% 6.5%3.1% 3.7% 3.4% 3.3% 1.6% 2.8%

-10%

0%

10%

20%

30%

40%

50%

60%


Gross Margin EBITDA Margin PAT Margin

163.8 164.2162.3 163.8

169.0

177.3 177.3175.5

7.4%

6.6% 6.7%6.3%

5.7%5.3%

4.9%

3.6%

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

8.0%

150

155

160

165

170

175

180

FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14

R s . m n

Royalty & Franchisee fees % of sales

184.9 170.2 160.5 75.5 96.7 101.5 110.4 58.0 133.7

9.0%

7.7%

6.5%

3.1%3.7%

3.4% 3.3% 1.6%2.8%

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

8.0%

9.0%

10.0%

0

20

40

60

80

100

120

140

160

180

200

2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14

PAT PAT Margin





Debt/equity ratio currently trending at 0.84


Higher inventory & debtor days leading to inflated working capital cycle


14

Cash flow from operations have improved in FY14…


…so has been the return ratios


Balance sheet ratios

155145

129

113 114 121 118112

10298 100

91

112

85106 107

9695

97 80

88

63 64 64

82

74 71

5640

60

80

100

120

140

160

FY08 FY09 FY10 FY11 FY12 FY13 FY14

Chart Title

Working Capital Days Inventory Days Debtor Days Creditor Days

228

271

154

76

108

269

151

228

97

-35

39

181

-100

-50

0

50

100

150

200

250

300

FY08 FY09 FY10 FY11 FY12 FY13

R s . m n

OCF FCF

13.8%

10.6%12.1% 8.7% 8.3% 7.9%

9.6%8.1%

10.9%

22.6%

17.2%

14.0%

6.4%7.6% 7.4% 7.6%

4.1%

9.6%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%


ROCE ROE

1208.2

1016.9

878.3 924.6 958.1

1149.1 1179.3

1.05

0.83

0.67 0.65 0.64

0.84 0.84

0.00

0.20

0.40

0.60

0.80

1.00

1.20

0

200

400

600

800

1,000

1,200

1,400

FY08 FY09 FY10 FY11 FY12 FY13 FY14

R s . m n

Gross Debt Debt/Equity





Risks

&

Concerns

Dividend Pay-outPolicy (Declared

dividend of

Rs.~1.5/share inFY13-14 post 7

years of no payout)

Group companieshangover (Current

financialarrangements withgroup companies)

Tax benefits toexpire in Dec

2016. (Tax benefitsavailable atDehradun,

Roorkee, PoantaSahib)

Industry Risk(Any adverse

regulatory changeand increasing

competitiveintensity)

Crude Oil Pricesand Rupee Impact(Higher exposureto crude basedraw materials)

Higher WorkingCapital days andlower return ratioswhen compared to

Bata India andRelaxo Footwear

15

Risks & Concerns






Abridged Financial Statements

Rs. mn FY11 FY12 FY13 FY14P FY11 FY12 FY13 FY14P

Profit & Loss Growth Ratios (%)

Revenue 2969 3317 3620 4850 Revenues 14% 12% 9% 34%

EBIDTA 239 285 301 410 EBIDTA -2% 19% 5% 36%

Other Income 13 10 2 3 Normalised PAT 5% 9% -47% 131%

Depreciation 68 74 104 111 Margins (%)

EBIT 184 222 199 302 Gross 39.8% 40.5% 52.6% 47.7%

Interest 82 117 143 160 EBIDTA 8.1% 8.6% 8.3% 8.5%

PBT 101 72 53 140 Normalised PAT 3.4% 3.3% 1.6% 2.8%

Normalised PAT 101 110 58 134 Leverage Ratios (x)

Balance Sheet Debt to Equity 0.7 0.6 0.8 0.8

Net Worth 1416 1493 1367 1408 Current Ratio 2.4 2.3 2.4 2.4

Loan Funds 925 958 1149 1179 Return Ratios (%)

Deffered Tax Liabilities 55 51 51 48 RoCE 7.9% 9.6% 8.1% 10.9%

Sources of Funds 2396 2501 2569 2637 RoE 7.4% 7.6% 4.1% 9.6%

Net Block 863 862 1014 991 Total Asset Turnover (x) 1.3 1.4 1.4 1.9

Capital WIP 11 1 0 0 Per Share

Goodwill 0 0 0 0 EPS (Rs.) 6.0 6.5 3.2 7.8

Investments 396 510 270 212 Dividend (Rs.) - - - 1.5

Total Current Assets 1926 1953 2231 2485 Valuation Metrics

Total Current Liabilities 802 831 946 1050 Current Market Price 166

Net Current Assets 1124 1122 1285 1435 Shares Outstanding (mn) 17 17 17 17

Application of Funds 2396 2501 2569 2637 Market Cap. (Rs. mn) 2,829

Cash Flow Enterprise Value (Rs. mn) 3,181 3,182 3,584 3,773Cash Flow from Operation 76 108 269 14 EV /Sales (x) 1.1 1.0 1.0 0.8

Cash Flow from Investments -97 -69 -184 72 Price/Earnings (x) 27.9 25.6 52.5 21.4

Free Cash Flow -35 39 181 25 Price/Book (x) 2.0 1.9 2.1 2.0

Cash Flow from Financing -3 -120 -60 -187 EV/EBIDTA (x) 13.3 11.1 11.9 9.2

Closing Cash Balance 175 96 124 23 FCF Yield -1.3% 1.4% 6.4% 0.9%

16





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Spark Capital Advisors (India) Private Limited (Spark Capital) and its affiliates are engaged in investment banking, investment advisory and institutional equities. Spark Capital is registeredwith SEBI as a Stock Broker and Category 1 Merchant Banker.

This document does not constitute or form part of any offer or solicitation for the purchase or sale of any financial instrument or as an official confirmation of any transaction. This document is

provided for assistance only and is not intended to be and must not alone be taken as the basis for an investment decision. Nothing in this document should be construed as investment orfinancial advice, and nothing in this document should be construed as an advice to buy or sell or solicitation to buy or sell the securities of companies referred to i n this document.

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 thisdocument (including the merits and risks involved), and should consult its own advisors to determine the merits and risks of such an investment. This document is being supplied to you solelyfor your information and may not be reproduced, redistributed or passed on, directly or indirectly, to any other person or published, copied, in whole or in part, for any purpose. This report isnot 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 Spark Capital and/or its affiliates to any registration or licensing requirement within such

jurisdiction. The securities described herein may or m ay not be eligible for sale in all jurisdictions or t o a certain category of investors. Persons in whose possession this document may come arerequired to inform themselves of and to observe such applicable restrictions. This material should not be construed as an offer to sell or the solicitation of an offer to buy any security in any

jurisdiction where such an offer or solicitation would be illegal.

Spark Capital makes no representation or warranty, express or implied, as to the accuracy, completeness or fairness of the information and opinions contained in this document. Spark Capital ,its affiliates, and the employees of Spark Capital and its affiliates may, from time to time, effect or have effected an own account transaction in, or deal as principal or agent in or for the securitiesmentioned in this document. They may perform or seek to perform investment banking or other services for, or solicit investment banking or other business from, any company referred to in thisreport.

This report has been prepared on the basis of information, which is already available in publicly accessible media or developed through an independent analysis by Spark Capital. While wewould endeavour to update the information herein on a reasonable basis, Spark Capital and its affiliates are under no obligation to update the information. Also, there may be regulatory,compliance or other reasons that prevent Spark Capital and its affiliates from doing so. Neither Spark Capital nor its affiliates or their respective directors, employees, agents or representativesshall be responsible or liable in any manner, directly or indirectly, for views or opinions expressed in this report or the contents or any errors or discrepancies herein or for any decisions oractions taken in reliance on the report or the inability to use or access our service in this report or for any loss or damages whether direct or indirect, incidental, special or consequential includingwithout limitation l oss of revenue or profits that may arise f rom or in connection with the use of or reliance on this report.

Spark Capital and/or its affil iates and/or employees may have interests/positions, financial or otherwise in the securities mentioned in this report. To enhance transparency, Spark Capital hasincorporated a disclosure of interest statement in this document. This should however not be treated as endorsement of views expressed in this report:

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-yearhorizon

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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Analyst Certification of Independence

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.

Additional Disclaimer for US Institutional Investors

This research report prepared by Spark Capital Advisors (India) Private Limited is distributed in the United States to US Institutional Investors (as defined in Rule 15a-6 under the SecuritiesExchange Act of 1934, as amended) only by Decker & Co, LLC, a broker-dealer registered in the US (registered under Section 15 of Securities Exchange Act of 1934, as amended). Decker & Coaccepts responsibility on the research reports and US Institutional Investors wishing to effect transaction in the securities discussed in the research material may do so through Decker & Co. Allresponsibility for the distribution of this report by Decker & Co, LLC in the US shall be borne by Decker & Co, LLC. All resulting transactions by a US person or entity should be effected througha registered broker-dealer in the US. This report is not directed at you if Spark Capital Advisors (India) Private Limited or Decker & Co, LLC is prohibited or restricted by any legislation orregulation in any jurisdiction from making it available to you. You should satisfy yourself before reading it that Decker & Co, LLC and Spark Capital Advisors (India) Private Limited arepermitted to provide research material concerning investment to you under relevant legislation and regulations;

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 relat ionship with the company covered No

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