SUBSCRIBE to RITES Ltd.page 8 of the report) • Incorporated in 1974, RITES provides consultancy & engineering services to Indian Railways. Services includes conducting techno-economic

“SUBSCRIBE” to

RITES Ltd.

Multi-sector consultant at an attractive valuation

Salient features of the IPO: • RITES Ltd. (RITES) is a wholly owned Government Company, a

Miniratna (Category – I) Schedule ‘A’ Public Sector Enterprise. The company is a leading player in the transport consultancy and engineering sector in India and the only company having diversified services and geographical reach in this field. Based on Public Enterprise Survey FY16, it is ranked No. 1 based on net profit and dividend declared in Industrial Development and Technical Consultancy Services sector (Source: RHP).

• The issue is fully OFS, the company will not receive any proceeds from it.

Key competitive strengths: • Comprehensive range of consultancy services in the transport

infrastructure space • Large order book with strong and diversified clientele base • Technical expertise and business divisions with specialized domain

knowledge • Strong and consistent financial performance • Preferred consultancy organization of the Government of India

including the Indian Railways Risk and concerns: • Lower railway budgets • Change in government policies • Higher employee cost and attrition level • Lower or cancellation of orders • Competition Valuation & recommendation: There are no comparable listed companies in India that engage in the same line of business as of the company. At the higher price band of Rs. 185 per share, its share is valued at a P/E multiple of 10.2x (to its restated FY17 EPS of Rs. 18.1). Below are few key observations of the issue: (For detailed valuation, refer to page 8 of the report) • Incorporated in 1974, RITES provides consultancy & engineering

services to Indian Railways. Services includes conducting techno-economic feasibility studies & preparation of detailed project reports, design engineering activities, procurement assistance, project management consultancy activities, quality assurance, construction supervision, materials system management & commissioning support, training, leasing & export of railway locomotives, rolling stock, spare parts & other equipment as well as turnkey projects on engineering, procurement and construction basis for railway electrification, railway line up gradation works for railway transport systems and modernization of railway workshops.

14th Jun. 2018

1

Recommendation SUBSCRIBE

Price Band (Rs.) Rs. 180 - 185 per Share

Face Value (Rs.) Rs. 10

Shares for Fresh Issue (mn)

Nil

Shares for OFS (mn) 25.2mn Shares

Fresh Issue Size (Rs. mn) N/A

OFS Issue Size (Rs. mn) Rs. 4,536 - 4,662mn

Total Issue Size (Rs. mn) Rs. 4,536 - 4,662mn

Bidding Date 20th Jun. – 22nd Jun. 2018

MCAP at Higher Price Band

Rs. 37,000mn

Enterprise Value at Higher Price Band

Rs. 8,886mn

Book Running Lead Manager

Elara Capital (India) Pvt. Ltd., IDBI Capital Markets & Securities Ltd., IDFC Bank Ltd. and SBI Capital Markets Ltd.

Registrar Link Intime India Pvt. Ltd.

Sector/Industry Railways

Promoters The President of India acting through the Ministry of Railways, Government of India

Pre and post - issue shareholding pattern

Pre – Issue Post - Issue

Promoter and Promoter Group

100.00% 87.40%

Public 0.00% 12.60%

Total 100.00% 100.00%

Retail Application Money at Higher Cut-Off Price per Lot

Number of Shares per Lot 80

Application Money Rs. 14,800 per Lot

Employee and Retail Discount

Rs. 6 per Share on the Offer Price

Analyst

Rajnath Yadav

Research Analyst (022 - 6707 9999; Ext: 912)

Email: [email protected]

• Apart from catering to the railways, the company also provides consultancy services to other transport modes like roads & highways, posts & inland waterways, airport and urban transport like metros. This multi sectoral consultancy de-risks RITES in the event of slowdown in any one sector.

• Over FY16-18, the company’s order book has increased by 35.8% CAGR to Rs. 48,186.8mn in FY18. Around 53% and 3% of the order book are from high margin consultancy and leasing segments. Consultancy and leasing services have an EBITDA margin of around 28% and +30%, respectively. Export segment with margin of 15-17%, contributed 15% to the order book. EPC/Turnkey projects with effective margin of 2-3% formed 29% of the order book.

• The financial health of the company is strong and this can be demonstrated from its asset light & debt free operations and consistency in the financial performance. Over FY13-17, it reported an 11.6% CAGR rise in the earnings on 9.1% rise in the operating revenue. Average PAT margin during the period stood at 26.3%. EBITDA increased by 13.3% CAGR with an average margin of 28.4% during the period. Average RoE and RoIC stood at 17.6% and 16.3%, respectively, during FY13-17.

• The company is consistently paying dividend and has an average dividend payout ratio of over 30%. Since Nov. 2016, it twice went for bonus issue. As of 31st Dec. 2017, it has a capital base of Rs. 2bn with reserves of around Rs. 20bn.

• For the nine month ended Dec. 2017, RITES reported a top-line of Rs. 9,361.5mn with an EBITDA and PAT margin of 32% and 27%, respectively. For FY18E, we are anticipating a top-line of Rs. 14,402.3mn (a growth of 6.4% over FY17) and an EPS of 20.8 per share (a growth of 15.1% over FY17). EBITDA and PAT margin are anticipated at 32.4% and 28.9%, respectively. In FY19, we are expecting a 8.1% rise in the operating revenues to Rs. 15,568.4mn and a 8.7% rise in EPS to 22.6 per share.

• On valuation front, at higher price band, the company is demanding a P/E valuation of 10.2x (to its restated FY17 EPS of Rs. 18.1). The issue seems to be attractively priced considering its strategic importance, limited competition, virtually debt free operations and healthy financial performance.

Thus considering the above observation we assign a “SUBSCRIBE” rating to the issue with long term investment horizon.

© CHOICE INSTITUTIONAL RESEARCH

2

Offer Opens on 20-Jun-2018

Offer Closes on 22-Jun-2018

Finalization of Basis of Allotment 27-Jun-2018

Unblocking of ASBA Account 28-Jun-2018

Credit to Demat Accounts 29-Jun-2018

Listing on Stock Exchanges 02-Jul-2018

About the issue: • RITES is coming up with an initial public offering (IPO) with 25.2mn shares (fresh issue: nil; OFS shares: 25.2mn shares) in

offering. The offer represents around 12.6% of its post issue paid-up equity shares of the company. Total IPO size is Rs. 4,536 - 4,662mn.

• 1.2mn shares are reserved for eligible employees. Thus the net issue comprises of 24mn shares.

• The issue will open on 20th Jun. 2018 and close on 22nd Jun. 2018.

• The issue is book building with a price band of Rs. 180 - 185 per share.

• The employee and retail discount is Rs. 6 per share on the offer price.

• Since the issue is fully OFS, the company will not receive any proceeds from it. • Its promoter holds 100% stake in the company and post IPO this will come down to 87.4%. Public holding will increase

from current nil to 12.6%.

Pre and Post Issue Shareholding Pattern (%)

Pre Issue Post Issue (at higher price band)

Promoter & Promoter Group (%) 100.00% 87.40%

Public (%) 0.00% 12.60%

Source: Company RHP

Indicative IPO Process Time Line:

3

Company Introduction: RITES is a leading player in the transport consultancy and engineering sector in India and the only company having diversified services and geographical reach in this field under one roof. Based on Public Enterprise Survey FY16, it is ranked No. 1 based on net profit and dividend declared in Industrial Development and Technical Consultancy Services sector (Source: RHP). The company has an experience spanning over 44 years and have undertaken projects in over 55 countries including Asia, Africa, Latin America, South America and Middle East region. RITES is the only export arm of Indian Railways for providing rolling stock overseas (other than Thailand, Malaysia and Indonesia). The company is a multidisciplinary engineering and consultancy organization providing diversified and comprehensive array of services from concept to commissioning in all facets of transport infrastructure and related technologies. It has significant presence as a transport infrastructure consultancy organization in the railway sector. However, it also provides consultancy services across other infrastructure and energy market sectors including urban transport, roads and highways, ports, inland waterways, airports, institutional buildings, ropeways, power procurement and renewable energy. Since its inception in 1974, the company has evolved from providing transport infrastructure consultancy and quality assurance services to having developed expertise in: • Design, engineering and consultancy services in transport infrastructure sector with focus on railways, urban transport,

roads and highways, ports, inland waterways, airports and ropeways; • Leasing, export, maintenance and rehabilitation of locomotives and rolling stock; • Undertaking turnkey projects on engineering, procurement and construction basis for railway line, track doubling, third

line, railway electrification, upgradation works for railway transport systems and workshops, railway stations, and construction of institutional/ residential/ commercial buildings, both with or without equity participation; and

• Wagon manufacturing, renewable energy generation and power procurement for Indian Railways through its collaborations by way of joint venture arrangements, subsidiaries or consortium arrangements.

RITES clients include various central and state government ministries, departments, instrumentalities as well as local government bodies and public sector undertakings. These include Indian Railways, NTPC, Dedicated Freight Corridor Corporation of India Ltd., High Speed Rail Corporation of India Ltd., Public Works Department, DMRC, Steel Authority of India Ltd., Rashtriya Ispat Nigam Ltd., Hindustan Petroleum Corporation Ltd., Bharat Coking Coal Ltd., Metro Link Express for Gandhinagar and Ahmedabad Company Ltd., Indian Port Rail Corporation Ltd., Airports Authority of India, among others. The company also engages with various large private sector corporations including L&T Metro Rail (Hyderabad) Limited, Kanti Bijlee Utpadan Nigam Ltd., Cimmco Ltd., Titagrah Wagons Ltd., Snowmex Engineers Ltd., Unity Infraprojects Ltd., Rajdeep Buildcon Pvt. Ltd., Mahalsa Constructions Pvt. Ltd., Marymatha Constructions Ltd., AFCON Infrastructure Ltd., INCAP, ARK Services, MNEC Consultants Pvt. Ltd., Indian Geotechnical Services Ltd., Geokno India Pvt. Ltd. and NATRIP Implementation Society among others.

Source: Company RHP

3

Company Introduction (Contd…): Current order book: RITES order book comprises of anticipated revenues from the unexecuted portions of existing contracts (including signed contracts for which all pre - conditions for entry into force have been met and letters of award issued by various clients prior to execution of the final contract) as of a particular date. As of 31st Mar. 2018, the company has 22 ongoing projects in various international markets. Its standalone order book as of 31st Mar. 2018 for segments is as follows:

Competition: RITES face competition from competitors outside India as well as in the domestic market. Additionally, the competition depends on various factors, such as the type of project, total contract value, potential margins and location of the project. For instance, the Ministry of Railway (MoR) has distributed the jurisdiction of work between RITES and IRCON International Ltd. (a peer group PSU under the MoR) in accordance with their respective core competencies. The company is permitted to participate in EPC or BOT contracts, other than railway contracts, in the event there is no conflict of interest with any other public sector undertaking under the MoR. Further, IRCON is not permitted to make any fresh bids for export of rolling stock and components manufactured by the Indian Railways to countries other than Malaysia, Indonesia and Thailand.

Source: Company RHP

3

Company Introduction (Contd…): Financial performance: With commendable progress in railway infrastructure creation, RITES reported a 9.1% CAGR rise in the total operating revenue over FY13-17 to Rs. 13,533.6mn in FY17. Consulting business, which contributed almost half to the top-line increased by 10.2% CAGR. Export business contributing 28% to the top-line, increased by 5.3% CAGR during the period. For the nine month ended Dec. 2017, top-line stood at Rs. 9,361.5mn. Total operating expenses increased at a lower pace in comparison to the revenue growth; and increased by 7.8% CAGR over FY13-17. Employee expenses, which formed around 30% of the revenue increased by 9.9% CAGR, cost to export sales increased by 7.1% CAGR. As a result, EBITDA increased by 13.3% CAGR to Rs. 3,582.8mn in FY17. Average EBITDA margin during the period stood at 28.4%. For 9M FY18, EBITDA stood at Rs. 2,996.5mn with margin of 32%. Depreciation & amortization charges increased by 25.3% CAGR, which was partly offset by 13.3% CAGR rise in other income. Consequently, reported PAT increased by 11.6% CAGR to Rs. 3,616.6mn in FY17. Average PAT margin during the period stood at 26.3%. 9M FY18, reported PAT stood at Rs. 2,525.4mn with a margin of 27%.

FY13 FY14 FY15 FY16 FY17 9M FY18 CAGR (%) Y-o-Y (%) Total Operating Revenue 9,556.3 10,964.9 10,126.9 10,905.3 13,533.6 9,361.5 9.1% 24.1% EBITDA 2,176.7 2,810.5 3,469.5 3,563.8 3,582.8 2,996.5 13.3% 0.5% Reported PAT 2,330.5 2,605.4 3,122.1 2,825.1 3,616.6 2,525.4 11.6% 28.0%

Restated Adjusted EPS 11.7 13.0 15.6 14.1 18.1 12.6 11.6% 28.0%

Inventories Days 9.8 7.2 4.4 3.3 8.6 12.0 -3.3% 159.0% Debtor Days 112.4 103.2 127.3 153.3 134.8 213.7 4.6% -12.1% Payable Days (54.5) (41.6) (34.9) (29.5) (23.6) (27.5) -18.9% -20.0% Cash Conversion Cycle 67.8 68.8 96.7 127.1 119.8 198.2 15.3% -5.8%

Cash Flow from Operating Activities 2,424.4 711.1 1,095.6 637.2 3,862.0 3,139.4 12.3% 506.0% NOPLAT 1,402.2 1,764.7 2,139.0 2,020.1 2,282.8 1,764.3 13.0% 13.0% FCF 1,199.8 (1,291.2) (2,996.2) 712.0 -123.8%

RoIC (%) 17.6% 20.7% 18.7% 12.1% 12.5% 7.8% (514) bps 40 bps

Revenue Growth Rate (%) 14.7% -7.6% 7.7% 24.1% EBITDA Growth Rate (%) 29.1% 23.4% 2.7% 0.5% EBITDA Margin (%) 22.8% 25.6% 34.3% 32.7% 26.5% 32.0% 370 bps (621) bps Reported PAT Growth Rate (%) 11.8% 19.8% -9.5% 28.0% Reported PAT Margin (%) 24.4% 23.8% 30.8% 25.9% 26.7% 27.0% 234 bps 82 bps

Inventories Turnover Ratio (x) 37.2 50.8 83.8 110.4 42.6 30.4 3.4% -61.4% Trade Receivable Turnover Ratio (x) 3.2 3.5 2.9 2.4 2.7 1.7 -4.4% 13.7% Accounts Payable Turnover Ratio (x) 6.7 8.8 10.4 12.4 15.5 13.3 23.3% 25.1% Fixed Asset Turnover Ratio (x) 5.1 5.1 4.3 2.6 3.3 2.4 -10.2% 29.3% Total Asset Turnover Ratio (x) 0.3 0.3 0.3 0.2 0.3 0.2 -0.8% 13.9%

Current Ratio (x) 1.3 1.3 1.5 1.6 1.6 1.8 4.5% 1.5% Debt to Equity (x) 0.0 0.0 0.0 0.1 0.0 0.0 -37.9% Net Debt to EBITDA (x) (8.7) (7.5) (5.9) (7.0) (8.4) (10.6) -1.0% 19.8%

RoE (%) 18.9% 18.2% 18.5% 15.0% 17.3% 11.4% (151) bps 239 bps RoA (%) 7.1% 7.2% 8.7% 6.4% 7.5% 5.1% 44 bps 112 bps RoCE (%) 13.9% 16.0% 17.0% 14.6% 13.4% 10.0% (49) bps (122) bps

Source: Company RHP

© CHOICE INSTITUTIONAL RESEARCH

Competitive Strengths: • Comprehensive range of consultancy services and a diversified sector

portfolio in the transport infrastructure space • Large order book with strong and diversified clientele base across sectors • Technical expertise and business divisions with specialized domain

knowledge • Strong and consistent financial performance supported by robust internal

control and risk management system • Preferred consultancy organization of the Government of India including

the Indian Railways

6

Business Strategy:

• Leverage its experience and continue to build core competencies in transport infrastructure sector

• Strengthen our EPC/Turnkey business • Expand international operations • Expand operations in the power procurement and renewable energy sector

Risk and Concerns:

• Lower railway budgets • Change in government policies • Higher employee cost and attrition level • Lower or cancellation of orders • Competition

© CHOICE INSTITUTIONAL RESEARCH

Peer Comparison and Valuation: There are no comparable listed companies in India that engage in the same line of business as the company. At the higher price band of Rs. 185 per share, its share is valued at a P/E multiple of 10.2x (to its restated FY17 EPS of Rs. 18.1). Below are few key observations of the issue: • Under-investment in railways has led to overstretched infrastructure with more than 60% routes being more than

100% utilized leading to huge unmet passenger demand and decreasing modal share in freight. Further, due to passenger fares being low, passenger trains utilized two-third of capacity and generated one-third of revenues, whereas high freight rates meant railway freight was getting out-priced in the market. GoI realized that lack of adequate carrying capacity and the resulting congestion has accelerated Indian Railway’s loss of market share to other modal transports. Hence, GoI identified ramping up investments in Indian Railways as the top priority area and proposed a capex plan of Rs. 8.6tn over FY15-19. Of which around Rs. 2.7tn of the investment has already being made between FY15-17. This expansion and upgradation in the rail network, provides a good opportunity for the infrastructure companies catering to the railways sector.

• Incorporated in 1974, RITES provides consultancy & engineering services to Indian Railways. Services includes conducting techno-economic feasibility studies & preparation of detailed project reports, design engineering activities, procurement assistance, project management consultancy activities, quality assurance, construction supervision, materials system management & commissioning support, training, leasing & export of railway locomotives, rolling stock, spare parts & other equipment as well as turnkey projects on engineering, procurement and construction basis for railway electrification, railway line up gradation works for railway transport systems and modernization of railway workshops.

• Apart from catering to the railways, the company also provides consultancy services to other transport modes like roads & highways, posts & inland waterways, airport and urban transport like metros. This multi sectoral consultancy de-risks RITES in the event of slowdown in any one sector.

• Over FY16-18, the company’s order book has increased by 35.8% CAGR to Rs. 48,186.8mn in FY18. Around 53% and 3% of the order book are from high margin consultancy and leasing segments. Consultancy and leasing services have an EBITDA margin of around 28% and +30%, respectively. Export segment with margin of 15-17%, contributed 15% to the order book. EPC/Turnkey projects with effective margin of 2-3% formed 29% of the order book. Going forward, the management has indicated that the consultancy business would continue to the main business, while other business would be like a low hanging fruits and will be executed as it comes.

• The financial health of the company is strong and this can be demonstrated from its asset light & debt free operations and consistency in the financial performance. Over FY13-17, it reported an 11.6% CAGR rise in the earnings on 9.1% CAGR rise in the operating revenue. Average PAT margin during the period stood at 26.3%. EBITDA increased by 13.3% CAGR with an average margin of 28.4% during the period. Average RoE and RoIC stood at 17.6% and 16.3%, respectively, during FY13-17.

• The company is consistently paying dividend and has an average dividend payout ratio of over 30%. Since Nov. 2016, it twice went for bonus issue. As of 31st Dec. 2017, it has a capital base of Rs. 2bn with reserves of around Rs. 20bn.

• For the nine month ended Dec. 2017, RITES reported a top-line of Rs. 9,361.5mn with an EBITDA and PAT margin of 32% and 27%, respectively. For FY18E, we are anticipating a top-line of Rs. 14,402.3mn (a growth of 6.4% over FY17) and an EPS of 20.8 per share (a growth of 15.1% over FY17). EBITDA and PAT margin are anticipated at 32.4% and 28.9%, respectively. In FY19, we are expecting a 8.1% rise in the operating revenues to Rs. 15,568.4mn and a 8.7% rise in EPS to 22.6 per share.

• On valuation front, at higher price band, the company is demanding a P/E valuation of 10.2x (to its restated FY17 EPS of Rs. 18.1). The issue seems to be attractively priced considering its strategic importance, limited competition, virtually debt free operations and healthy financial performance.

Thus considering the above observation we assign a “SUBSCRIBE” rating to the issue with long term investment horizon.

7

© CHOICE INSTITUTIONAL RESEARCH

Financial Statements:

7

Source: Company RHP

Consolidated Profit and Loss Statement (Rs. mn)

FY13 FY14 FY15 FY16 FY17 9M FY18 CAGR over

FY13 - 17 (%) Annual Growth over FY16 (%)

Total Operating Revenue 9,556.3 10,964.9 10,126.9 10,905.3 13,533.6 9,361.5 9.1% 24.1% Employee Benefits Expense (2,859.4) (2,706.7) (3,244.7) (3,409.6) (4,169.5) (3,230.6) 9.9% 22.3% Travel Expenses (309.7) (346.0) (324.7) (355.4) (394.8) (274.9) 6.3% 11.1% Supply and Service Charges (796.8) (746.4) (784.5) (971.3) (1,063.5) (697.1) 7.5% 9.5% Cost of Export Sales (2,252.9) (2,731.9) (805.1) (1,569.4) (2,961.0) (1,140.3) 7.1% 88.7% Cost of Turnkey Construction Projects (546.2) (881.5) (834.8) (352.5) (278.5) (539.4) -15.5% -21.0% Transmission and Wheeling Charges 0.0 0.0 0.0 (21.7) (37.3) (35.7) 72.3% Other Expenses (614.7) (741.9) (663.6) (661.7) (1,046.2) (447.0) 14.2% 58.1% EBITDA 2,176.7 2,810.5 3,469.5 3,563.8 3,582.8 2,996.5 13.3% 0.5% Depreciation and Amortization Expense (155.2) (203.5) (261.5) (346.4) (382.6) (276.8) 25.3% 10.4% EBIT 2,021.4 2,607.1 3,208.0 3,217.3 3,200.2 2,719.7 12.2% -0.5% Finance Costs 0.0 0.0 0.0 (47.1) (113.3) (52.7) 140.3% Share of Profit / (Loss) of Joint Ventures 66.0 (26.8) 10.3 (26.0) (114.7) (23.1) 341.2% Other Income 1,274.2 1,269.8 1,464.2 1,362.0 2,099.2 1,249.1 13.3% 54.1% PBT 3,361.6 3,850.1 4,682.4 4,506.2 5,071.4 3,893.0 10.8% 12.5% Tax Expenses (1,029.7) (1,244.0) (1,560.3) (1,676.9) (1,453.8) (1,367.6) 9.0% -13.3% Reported PAT from Continuing Operations 2,331.9 2,606.1 3,122.1 2,829.3 3,617.6 2,525.4 11.6% 27.9% Profit / Loss from Discontinued Operations (1.4) (0.8) (4.1) (1.0) -7.0% -75.6% Reported PAT 2,330.5 2,605.4 3,122.1 2,825.1 3,616.6 2,525.4 11.6% 28.0%

Consolidated Balance Sheet Statement (Rs. mn)

FY13 FY14 FY15 FY16 FY17 9M FY18 CAGR over

FY13 - 17 (%) Annual Growth over FY16 (%)

Equity Share Capital 1,000.0 1,000.0 1,000.0 1,000.0 2,000.0 2,000.0 18.9% 100.0% Other Equity 11,358.1 13,251.3 15,761.6 17,635.2 18,411.0 19,719.9 12.8% 4.4% Minority Interest 5.1 50.8 146.9 260.3 448.3 522.4 206.5% 72.2% Long Term Borrowings 1,105.4 757.6 696.1 -31.5% Non Current Trade Payables 37.3 31.9 26.8 6.6 -100.0% -100.0% Other Long Term Financial Liabilities 666.9 688.0 822.1 996.2 1,084.6 1,159.8 12.9% 8.9% Long Term Provisions 1,448.3 1,128.0 1,045.5 998.6 1,126.8 1,203.9 -6.1% 12.8% Other Long Term Liabilities 50.9 134.7 64.1 20.7 72.8 1,995.1 9.3% 251.8% Trade Payables 1,426.2 1,075.3 863.1 899.3 849.6 704.4 -12.1% -5.5% Other Current Financial Liabilities 14,720.1 17,005.5 15,044.4 18,960.2 19,262.7 18,313.9 7.0% 1.6% Short Term Provisions 312.6 1,083.7 767.2 1,046.5 1,505.5 997.1 48.1% 43.9% Current Tax Liabilities (Net) 0.2 0.3 0.1 10.1 0.1 0.3 -24.0% -99.2% Other Current Liabilities 1,841.1 913.1 512.6 1,149.9 2,503.3 2,158.5 8.0% 117.7% Total Liabilities 32,866.6 36,362.4 36,054.2 44,089.0 48,022.2 49,471.3 9.9% 8.9%

Property, Plant and Equipment 1,729.4 1,919.7 2,057.2 4,154.4 4,034.7 3,914.7 23.6% -2.9% Capital Work in Progress 113.4 192.4 256.5 69.8 32.8 4.5 -26.7% -53.0% Intangible Assets 35.5 48.0 47.9 31.0 17.4 10.4 -16.3% -43.9% Intangible Assets Under Development 2.3 4.9 7.5 15.8 15.8 15.8 62.4% 0.0% Investment Property 15.9 15.5 13.3 12.9 12.6 12.3 -5.8% -2.8% Investment in Joint Ventures 245.6 278.8 258.1 305.8 148.4 125.3 -11.8% -51.5% Non Current Investment 1,750.4 2,000.4 2,000.4 1,700.5 1,200.5 1,200.5 -9.0% -29.4% Long Term Loans and Advances 1,181.2 1,356.9 1,545.5 103.2 96.5 87.1 -46.5% -6.5% Other Long Term Financial Assets 2,127.6 2,715.4 1,947.9 1,966.9 2,446.8 1,721.8 3.6% 24.4% Deferred Tax Assets (Net) 474.3 598.8 462.4 275.1 468.0 287.4 -0.3% 70.1% Other Non Current Assets 798.8 785.0 1,210.2 905.7 1,204.0 1,233.5 10.8% 32.9% Current Investments 1,224.7 500.0 1,930.4 2,491.9 12.0% 286.1% Inventories 256.6 174.9 66.8 130.7 504.1 307.5 18.4% 285.7% Trade Receivables 2,944.1 3,257.6 3,807.6 5,354.7 4,645.0 5,481.1 12.1% -13.3% Cash & Cash Equivalents - Owned Fund 584.2 363.2 2,569.7 2,619.9 2,647.2 1,454.1 45.9% 1.0% Cash & Cash Equivalents - Clients Fund 2,193.5 2,586.5 1,993.6 1,903.5 3,333.7 4,718.2 11.0% 75.1% Other Bank Balances - Owned Fund 5,673.2 6,050.0 4,643.9 4,653.7 6,299.9 9,855.7 2.7% 35.4% Other Bank Balances - Clients Fund 9,343.4 12,181.0 11,390.9 16,368.1 16,590.9 13,914.3 15.4% 1.4% Current Loans and Advances 33.7 40.9 122.0 71.7 114.2 110.2 35.6% 59.2% Other Current Financial Assets 1,216.6 1,318.2 1,350.9 1,734.6 1,677.1 1,592.8 8.4% -3.3% Current Tax Assets (Net) 63.3 16.2 16.2 386.6 103.5 63.4 13.1% -73.2% Other Current Assets 855.7 458.1 285.8 824.4 498.9 869.1 -12.6% -39.5% Total Assets 32,863.6 36,362.4 36,054.2 44,089.0 48,022.2 49,471.3 9.9% 8.9%

© CHOICE INSTITUTIONAL RESEARCH

Financial Statements (Contd…):

7

Note: Pre-issue data; Source: Company RHP

Source: Company RHP

Consolidated Cash Flow Statement (Rs. mn)

Particulars (Rs. mn) FY13 FY14 FY15 FY16 FY17 9M FY18 CAGR over

FY13 - 17 (%) Annual Growth over FY16 (%)

Cash Flow from Operating Activities 2,424.4 711.1 1,095.6 637.2 3,862.0 3,139.4 12.3% 506.0% Cash Flow from Investing Activities (773.9) (1,592.0) 1,695.5 (1,257.0) (294.1) (2,201.1) -21.5% -76.6% Cash Flow from Financing Activities (441.6) (653.0) (532.6) 340.3 (2,145.6) (1,216.6) 48.5% -730.4%

Net Cash Flow 1,360.9 (1,447.0) 2,391.2 (131.5) 1,440.3 (223.7) 1.4% -1195.2%

Opening Balance of Cash and Bank Balances 449.8 1,810.7 363.7 2,754.9 2,623.4 4,063.7 55.4% -4.8%

Closing Balance of Cash and Bank Balances 1,810.7 363.7 2,754.9 2,623.4 4,063.7 3,840.0 22.4% 54.9%

Consolidated Financial Ratios

Particulars (Rs. mn) FY13 FY14 FY15 FY16 FY17 9M FY18

Revenue Growth Rate (%) 14.7% -7.6% 7.7% 24.1%

EBITDA Growth Rate (%) 29.1% 23.4% 2.7% 0.5%

EBITDA Margin (%) 22.8% 25.6% 34.3% 32.7% 26.5% 32.0%

EBIT Growth Rate (%) 29.0% 23.0% 0.3% -0.5%

EBIT Margin (%) 21.2% 23.8% 31.7% 29.5% 23.6% 29.1%

Reported PAT Growth Rate (%) 11.8% 19.8% -9.5% 28.0%

Reported PAT Margin (%) 24.4% 23.8% 30.8% 25.9% 26.7% 27.0%

Liquidity Ratios

Current Ratio 1.3 1.3 1.5 1.6 1.6 1.8

Debt Equity Ratio 0.0 0.0 0.0 0.1 0.0 0.0

Net Debt to EBITDA (8.7) (7.5) (5.9) (7.0) (8.4) (10.6)

Turnover Ratios

Inventories Days 9.8 7.2 4.4 3.3 8.6 12.0

Trade Receivable Days 112.4 103.2 127.3 153.3 134.8 213.7

Accounts Payable Days (54.5) (41.6) (34.9) (29.5) (23.6) (27.5)

Cash Conversion Cycle Days 67.8 68.8 96.7 127.1 119.8 198.2

Fixed Asset Turnover Ratio (x) 5.1 5.1 4.3 2.6 3.3 2.4

Total Asset Turnover Ratio (x) 0.3 0.3 0.3 0.2 0.3 0.2

Return Ratios

RoE (%) 18.9% 18.2% 18.5% 15.0% 17.3% 11.4%

RoA (%) 7.1% 7.2% 8.7% 6.4% 7.5% 5.1%

RoCE (%) 13.9% 16.0% 17.0% 14.6% 13.4% 10.0%

Per Share Data

Restated Adjusted EPS (Rs.) 11.7 13.0 15.6 14.1 18.1 12.6

Restated DPS (Rs.) 1.9 3.0 2.7 3.9 7.3 3.9

BVPS (Rs.) 61.8 71.5 84.5 94.5 104.3 111.2

Restated Operating Cash Flow Per Share (Rs.) 12.1 3.6 5.5 3.2 19.3 15.7

Restated Free Cash Flow Per Share (Rs.) 6.0 (6.5) (15.0) 3.6

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