IEA Report

8th May 2017

"SUBSCRIBE"
Housing and Urban Development Corporation Ltd 8th May 2017
HUDCO is a wholly-owned Government company with more than 46 years of experience in providing loans for housing and urban infrastructure
projects in India. HUDCOs AUM stands at ~Rs 36800Cr out of which 89% is to state government and their agencies. The loan book of the company
has till date been growing at 7.5% CAGR for last 4 years which appears low considering other listed housing finance company. GNPA of the
company stands at 6.80% while NNPA at 1.51% which is again higher than its listed peers. However the company is expected to benefit hugely from
Pradhan Mantri Awas Yojna under Housing for All by 2022. As the CAR is high at 63.9%, risk of any equity dilution in the near term gets eliminated.
The company is attractively priced at 1.4 times BV with Return on Equity at 7.6% . We recommend SUBSCRIBE.
.......................................................... (Page : 2-4)

COSMOFILMS "HOLD" 8th May 2017

In continuation with our previously "BUY" recommendation report dated 30th March 2017 ,we have our "HOLD" rating on the stock, with earlier
target price of 490/-. We believe the recently taken up project of BOPET with a capacity of 36000 MT per annum will boost company's sales growth
and protifability to new heights. This new BOPET line will start adding revenues to the topline from Q3FY19 onwards. Change of estimates in sales
and earnings to this effect, will be updated in Q4FY17 & full FY17 earning review report, soon after announcement of quarterly earning by the
company. We recommend "HOLD" on this stock. ................................. ( Page : 5-8)

MARICO "NEUTRAL" 5th May 2017

Going forward we expect deterioration in margin due to higher input cost especially copra and higher advertisement expenses which may reduce
ROE by 182 bps in FY18E. Secondly there will be some hiccups related to GST which may lead to channel realignment which in turn lead to de-
stocking in next 2 quarters. This could impact domestic volume of Marico in near term. At present company is trading at the peak of its valuation so
we see little upside from here hence recommend `Neutral at this price. ........................... ( Page : 9-13)

IOC "PART BOOK PROFIT" 4th May 2017

With the full commissioning of 15MMTPA Paradip refinery, Indian Oil Corporation is equipped to cater the growing fuel demand in the country.
Management expects 95% capacity utilization of Paradip refinery and volume growth of 3-4 MTPA going forward. Further management plans to
add 300 retail outlets every year to its existing network of 25000+ outlets. This will improve the volume of the company up-to a large extent. IOC
has equipped with BS VI standard HSD and BS VI standard motor spirit and prepared to start supply by Oct17. IOC maintains healthy dividend
payout of 33%. Currently stock is trading at 1.9x FY19 P/BV. Recently IOC rallied smartly and achieved our recommended target price of Rs 445. We
expect that the stock has discounted all the near term positives and at this price point the valuation seems little stretched, so we recommend our
short term investors to book profit at current levels but long term investors may hold this stock. ................................................................... (
Page : 14 -16)

IRB InvIT Fund "SUBSCRIBE" 3th May 2017

IRB InvIT FUND is India's first registered infrastructure investment trust. IRB has bundled six of its operational toll road assets and transferred them
to the Trust.
The Trust generates income in the form of toll collection from these road assets and interest on cash in their books. According to SEBI guidelines,
the Trust needs to distribute at least 90 percent of this distributable cash to the unit holders in the form of dividend, which will be tax free. The
Trust also is exempted from dividend distribution tax.
Based on projected cash flow on the basis of estimated growth in traffic and inflation-linked increase in toll charges, at an upper price band of IPO
(Rs 102), the dividend yield will be close to 10%. Excessive investor interest may also lead to some price appreciation post-listing.
Risk attached to the issue is that the regulatory framework governing infrastructure investment trusts in India is untested and the interpretation
and enforcement thereof involve uncertainties. ..................................................................... ( Page : 17 - 20)

DABUR "NEUTRAL" 3th May 2017

The company is facing headwinds in the international market which contributes approx. 25% of the total revenue. We expect it to continue for at
least next four quarters. Secondly companys management has indicated that going forward they will increase their media spending sharply which
may impact its margin going forward as in this competitive environment it will be slightly tough to increase prices. Considering subdued
International business growth and expectation of contraction in margin going forward on the back of higher Ad expenses we are Neutral on this
stock. .................................................................. ( Page : 21 -24)
Narnolia Securities Ltd IEA Edition No.- 1008
 Housing and Urban Development "SUBSCRIBE"
Corporation Ltd 8th May 2017
IPO Note

ISSUE DETAIL : COMPANY OVERVIEW:

Type 100% Book Building Housing and Urban Development Corporation Ltd (HUDCO) incorporated in 1970,which is a
wholly-owned Government company with more than 46 years experience in providing loans for
Issue Size Rs. 1224 Crore housing and urban infrastructure projects in India. They provides long term finance for
Offer Price *Rs (56-60)/Equity Share construction of houses and to undertake housing and urban infrastructure development
programs. Apart from the financing operations, Hudco offers consultancy services, promotes
Min App Size 200 Shares
research and studies and help propagate use of local building materials, cost-effective and
Issue Open 8-May-17 innovative construction technologies.
Issue Close 11-May-17
Shares Offer 20.40 Cr. HUDCO offers loans for housing projects, such as urban and rural housing, co-operative
Face Value Rs 10 housing, community toilets, slum upgradation, staff housing, repairs and renewals, private
ICICI Securities Ltd,IDBI
sector projects, land acquisition, and housing programs. They also offers take out finance for
Capital Market Services Ltd, housing and infrastructure projects to state government, public agencies, and private
Nomura Financial Advisory corporate sector agencies. Company provide loans for implementing agencies comprising
Lead Mgrs state government bodies, co-operative societies, corporate employers, and community
And Securities (India) Pvt Ltd
, SBI Capital Markets Ltd sectors; and building technology and rent to own schemes. It also provides finance for
infrastructure projects in the sectors of water supply, sewerage, drainage, solid waste
Listing BSE, NSE management, roads and transport, and electricity in the urban areas; and social infrastructure
component, such as play/primary schools, health centers, play grounds, police stations,
Registrar Alankit Assignments Ltd courts, jails, crematorium, etc. In addition, the company offers consultancy services, including
URP services, environmental engineering, and government programs and disaster mitigation
Market Cap (Post Issue) 11210.6 services.

No of shares ( Post & Pre Issue) COMPANY STRATEGIES :

Noof Shares(Pre Issue)
Offer for Sale
Fresh Issue made
Employee Reservation
No of Shares (Post Issue)
2,001,900,000 Company is focusing on housing finance loans and benfit from state govt initiatives to help
204,058,747 build new dwellings for the LIG , EWS & rural population. Housing finance loan offers better
NIM ( 4.26% for Urban infrastructure ) & lower GNPA ( 3.08% for housing Vs 8.26% for urban
0
infrastructure)
3868747 Company focus on sanctioning loans to state govtments to avoid credit risk of the private
2001900000 sector entities . Company sanctions to state Govt and their Agencies reprent 99.93% of total
sanction. Company ceased the sanctioning of new housing finance loan to private sector.

Bid allocation pattern Company continue to participate in the implementation of govt housing and urban
QIB 50% infrastructure programme such as DAY- NULM , JNNURM & PMAY HFA among other.
Non-Institutional 15% Company is increaseing geographical footprint in smaller cities to cater to incresing financing
Retail 35% requirment in these cities.

OBJECTS OF ISSUE:

To carry out the disinvestment of 204,058,747 Equity Shares by the Selling Shareholder
Rubi Burman constituting 10.19% of the companys pre-Offer paid up Equity Share Capital

rubi.burman@narnolia.com To achieve the benefits of listing the Equity Shares on the stock exchanges

RECOMMENDATION :
HUDCO is a wholly-owned Government company with more than 46 years of experience in providing loans for housing and urban infrastructure
projects in India. HUDCOs AUM stands at ~Rs 36800Cr out of which 89% is to state government and their agencies. The loan book of the
company has till date been growing at 7.5% CAGR for last 4 years which appears low considering other listed housing finance company. GNPA
of the company stands at 6.80% while NNPA at 1.51% which is again higher than its listed peers. However the company is expected to benefit
hugely from Pradhan Mantri Awas Yojna under Housing for All by 2022. As the CAR is high at 63.9%, risk of any equity dilution in the near
term gets eliminated.
The company is attractively priced at 1.4 times BV with Return on Equity at 7.6%
We recommend SUBSCRIBE

Please refer to the Disclaimers at the end of this Report.

 Housing and Urban Development
Corporation Ltd
RATINGS

India Ratings (Fitch Group), ICRA and CARE have assigned a rating of AAA to HUDCOs long-term bonds, long-
term bank facilities and fixed deposit programme

HUDDCO BORROWING OVERVIEW :

Average Maturity
Amount (INR
Borrowing Type Period (From date of Residual Maturity Interests Rate Range
bn)
allotment)
Tax Free Bonds 173.88 10-20 years 4.83-17.25 years 7.00%-9.01%

Taxable Bonds 34.4 Upto 10 years 0.75-5.50 years 6.80%-8.14%

Refinance Assistance
21.2 7-10 years 1.83-8.08 years 6.25%-8.00%
from NHB

Other Term Loans 0.61 24 years 5.50 years 0.54%

Public Deposits 9.48 12-84 months 12-24 months 7.00%-9.55%

Fixed: 2.10%
ECB 4.89 25-30 years 6.58-13.75 years Floating USD 6M
LIBOR + (18-40bps)

COMPETITIVE RISKS

If the level of non-performing assets in their outstanding loans, advances and investments in project-linked
bonds were to increase or the NHB-mandated provisioning requirements were to increase.The results of
operations and financial condition would be adversely affected.

If borrowers default on their obligations to company, they may be unable to foreclose on their loans on a timely
basis, or at all, or realise the expected value collaterals and this may have a material adverse effect on results
of operations and financial condition.

Company operations are substantially dependent upon the amount of our NII and NIM. The interest rates
company pay on their borrowings and the interest rates company charge on their loans are sensitive to many
factors, many of which are beyond our control, including the RBIs monetary policies . Volatility in interest rates
could adversely affect our business, net interest income and net interest margin, which in turn would adversely
affect our results of operations and financial condition.

Company business is dependent upon timely access to, and the costs associated with, borrowings. The debt
funding requirements historically have been primarily met from a combination of the issuance of tax-free
bonds,the issuance of unsecured taxable bonds, foreign currency loans, refinance assistance from NHB, public
deposits . Company may be unable to secure funding on commercially acceptable terms and at competitive
rates, which could adversely affect business and results of operations.

Please refer to the Disclaimers at the end of this Report.

 Housing and Urban Development
Corporation Ltd

Financials Snap Shot

Balance Sheet Rs in Crores Detail of Loan Portpolio
Y/E March FY14 FY15 FY16 9MFY17 Y/E March FY14 FY15 FY16 9MFY17
Share Capital Gross Loan Portfolio
Equity Capital 2,002 2,002 2,002 2,002 Social housing 4,721 6,722 8,201 7,755
Reserves & Surplus 5,130 5,779 6,470 6,966 Residential real estate 2,445 2,561 2,876 2,898
Networth 7,132 7,781 8,472 8,968 HUDCO Niw as
Borrowings 21,305 23,468 25,609 24,843 >> Individual Retail Loans 190 166 141 132
Provisions 406 451 467 408 >> Bulk Retail Loans 520 212 479 444
Deferred Tax Liability (Net) 495.1 506.9 485.7 455.9 Housing Loans 7,875 9,661 11,696 11,228
Other Liabilities 886 908 848 1,423 Water supply 3,752 5,638 7,284 8,485
Total Liabilities 30,225 33,114 35,882 36,098 Roads and transport 6,074 6,041 6,041 6,143
Loans and Advances 28,214 31,043 33,805 34,288 Power 7,626 7,138 5,380 5,226
Investments 754 756 369 369 Emerging sectors 1,636 1,932 1,814 2,127
Cash and Bank Balances 272 285 590 387 Commercial inf rastructure and others 1,224 1,135 1,662 1,411
Fixed Assets 95 100 101 104 Social inf rastructure and area development 1,233 943 1,033 1,045
Other Assets 890 931 1,017 951 Sewerage and drainage 591 647 755 722
Total Assets 30,225 33,114 35,882 36,098 Urban Infrastructure 22136.6 23473.4 23969 25157.7
Total Loan Portfolio 30,012 33,135 35,665 36,386

Income Statement Rs in Crores Margin Metrics

Y/E March FY14 FY15 FY16 9MFY17 Yield on Earning Assets (%) 10.81% 11.01% 9.81% 10.07%
Interest on Loans 2,822 3,256 3,157 2,571 Cost of interest bearing liabilities (%) 8.43% 7.91% 7.70% 7.97%
(+) Interest on Bonds 0 0 0 0 Cost to Income Ratio 12.1% 12.9% 13.7% 13.1%
(+) Interest on Loan against Public 48
Deposits 2 55 12 Debt to Equity Ratio ( X) 2.9 2.7 3.0 2.8
(+) Interest on Fixed Deposits 477.0 19.0 554.0 124.0 Net Asset Value per Equity Share 35.3 38.6 42.0 44.5
(-) Interest Expense 1,702 1,775 1,907 1,509
Total Interest Income (1,367) (1,448) (1,531) (1,238) Assets Quality Metrics
Other Income on Loans 21 27 13 12
(+) Consultancy, Trusteeship and Consortium
6 8 4 1 Gross NPA (Rs) 2,030 2,070 2,383 2,475
(+) Other Income 52 81 97 65 Gross NPA (%) 6.76% 6.25% 6.68% 6.80%
Non-interest income (1,288) (1,332) (1,416) (1,160) Net NPA (Rs)
Net of Interest Expense 1,222 1,537 1,328 1,091 Net NPA (%) 2.52% 1.59% 2.06% 1.51%
Non-interest income (2,510) (2,868) (2,744) (2,251) Provision Coverage (%) 64.4% 75.8% 70.6% 79.0%
Employee Benef its Expense 105 161 140 115 NIM (%) 4.59% 5.18% 4.11% 4.26%
Depreciation and Amortisation 4 5 5 3 Valuation Ratio Metrics
Other Expenses 47.4 38.8 43.4 27.4 EPS (Rs) 3.7 3.8 4.0
Corporate Social Responsibilities Expenditure
11 3 5 2 Book Value per share 35.6 38.9 42.3
Operating expenses 166.9 208.8 193 148.2 P/B (X) 1.68 1.54 1.42
Pre-Provision Operating Profit (1,455) (1,541) (1,609) (1,308) P/E (X) (Upper brand ) 16.2 15.8 15.0
Provisions 9 274 129 281 P/E (X) (Lower brand ) 15.1 14.7 14.0
Exceptional Items (20) - 5 0 ROAE (%) 10.8% 10.3% 10.0%
Profit Before Tax (1,484) (1,814) (1,733) (1,588) ROAA (%) 2.6% 2.4% 2.3%
Tax Expense 371 402 315 245 Shareholders Funds as % Assets 24% 23.5% 23.6%
Profit After Tax (1,855) (2,216) (2,048) (1,833) Dividend Payout (%) 15.9% 15.7% 15.5%

Please refer to the Disclaimers at the end of this Report.

 INDUSTRY - PACKAGING
BSE Code - 508814
NSE Code - COSMOFILMS
8-May-17 NIFTY - 9285

Company Data Key Highlights of the Report:

Previous Recommended Price 380 Cosmo Films to set up new production line for Speciality
CMP 450 Polyester (BOPET) Films
Target Price 490
Previous Target Price 490 Cosmo films has announced an expansion at its Aurangabad facility with a
Upside 9% view to expand its footprint in speciality film segment as guided earlier.
52wk Range H/L 468/310 To expand its product categary, company has taken up BOPET project of
Mkt Capital (Rs Cr) 872 36000 MT/annum capacity.
Av. Volume (,000) As per management, current expansion will be in speciality segment and
margin will be in range of 17-18% in BOPET films.
30.0% This BOPET project would commense its commercial operations from
Q3FY19.
20.0%
Project will add revenue in range of 300-300 cr to the topline.
10.0%

0.0% Cosmo Films Launches Low Noice Tape Film

-10.0% FY14 FY15 FY16 FY17E FY18E FY19E Cosmo films announced thr launch of a Low Noice Tape film, used in
making of low noice tapes.
Return on capital employed Return on Equity The BOPP based low noise tape film with a proprietary release surface
treatment enables easy release and generates low noise on unwinding.
Share Holding patterns % low noise tape film take significantly less release force as compared to a
3QFY17 2QFY17 1QFY17 normal tape film. The film can easily take up any adhesive be it water
Promoters 43.5 43.5 43.5 based, solvent based, rubber based or hot melt type.
Public 56.5 56.5 56.5 Value added tape film does not come at a significant incremental cost and
Total 100.0 100.0 100.0 therefore is easier to switch to. In most of the tape applications, printing
Stock Performance % on the filmtakes place on the other side of the release coating. However,
1Mn 3Mn 1Yr the release side could also be made printable.
Absolute 14.6 21.7 21.8
Rel.to Nifty 13.5 14.3 0.7 Financials/Valu FY15 FY16 FY17E FY18E FY19E
130 COSMOFILMS NIFTY
ation
Net Sales 1,647 1,621 1,715 2,276 2,461
125 EBITDA 104 191 183 285 314
120
EBIT 70 156 144 234 263
115
110 PAT 28 96 95 155 169
105 EPS (Rs) 14 50 49 80 87
100 EPS growth (%) - 248% -1% 64% 9%
95
ROE (%) 7% 21% 18% 25% 23%
90
85 ROCE (%) 11% 23% 16% 26% 28%
80 BV 196 235 269 325 381
Jul-16

Feb-17
Sep-16

Jan-17
Dec-16
Jun-16

Aug-16
May-16

Oct-16
Nov-16
Apr-16

Apr-17
Mar-17

P/B (X) 0.4 1.2 1.6 1.7 1.8

P/E (x) 5.4 5.6 8.8 6.1 7.9
ANURAG ARORA
Anurag.arora@narnolia.com
Please refer to the Disclaimers at the end of this Report
Narnolia Securities Ltd
 DETAILS OF THE NEW BOPET PROJECT

Cosmo Films Ltd, a leading global speciality films company, manufacturing multiple types of Bi-axially
Oriented Polypropelene (BOPP) and Cast Polypropelene (CPP) films has announced plans to install a
new product line for Speciality-Polyester BOPET (Bixially Oriented Polyethylene Terephthalate) films by
the third quarter of 2018-19.

The new line will be commisioned at the Waluj plant site in Aurangabad, Maharashtra, India with a
capacity of 36000 MT per annum. The project for the new line will entail an investment of Rs. 250 crores
and shall be funded through a mix of internal accruals and debt. As per management guidance, Debt-
Equity mix for this new project will be in the ratio of 75:25.

This plant already houses BOPP lines, extursion coating lines, chemical coating lines, metallizers and a
CPP line. The new production line will complement the existing BOPP capacity of 200000 MT per
annum and allow Cosmo Films to offer a more comprehensive speciality product basket to flexible
packaging , labeling and industrial applications.

According to Mr. Pankaj Poddar, CEO, Cosmo Films, Speciality BOPET is one of the fastest growing
substrates and we anticipate a strong demand for these films. This will enable Cosmo to do import
substitution as well as take global market share.
BOPET offr high tensile strength, chemical and dimensional stability, tranparency reflectivity, gas and
aroma barrier properties and electical insulation.

Key Competetors
In BOPET segment, Cosmo will have competetion with other packaging players Like Jindal Polyfilms,
Polyplex Corporation, Uflex and others. Jindal Poly is the largest BOPET manufacturer in India with a
total capacity of 127000 mt per annum. A big part of the Indian demand for BOPET films is fulfilled
through imports as of now.
ABOUT BOPET
BOPET- Thin
Thin( 8-36 microns) BOPET films constitute nearly
three fourth of the worlds consumption of BOPET
films and are mainly used in packaging.
BOPET- Thick Industrial
Thick (50-350- microns) PET film is suitable for
various industrial applications.
Opportunities for BOPET
Asia (excluding Japan and Korea) has emerged as
the largest market for BOPET films accounting for
nearly 50% of the world consumption.
Penetration of flexible packaging in developing
countries in Asia still is low and huge opportunity
exist for growth with increase in organized retail,
small serve packs and increasing consumerism all
Image: BOPET film roll requiring better & attractive packaging.

Narnolia Securities Ltd Please refer to the Disclaimers at the end of this Report
 Details of New Product Launch

Cosmo films recently announced the launch of a low noise tape film, used in making of low noise tapes. The
BOPP based low noise tape film with a proprietary release surface treatment enables easy release and generates
low noise on unwinding. This feature becomes extremely significant in industrial settings where multiple packing
lines work in tandem and auto dispensing machines are installed and packing takes place atrelatively higher
speeds. In most developed countries, factory guidelines require manufacturers to adhere to low decibel levels
and therefore low noise tapes become significantly relevant.

The low noise tape film also take significantly less release force as compared to a normal tape film. The film can
easily take up any adhesive be it water based, solvent based, rubber based or hot melt type. The value added
tape film does not come at a significant incremental cost and therefore is easier to switch to. In most of the tape
applications, printing on the film takes place on the other side of the release coating. However, the release side
could also be made printable.

Commenting on the development, Mr. S.

Satish, Global Head- Sales & Marketing said,
We had devised the film for one of our tape
customers. However, we see huge potential for
the film going forward as we see this feature as
a great value add. The product is available in
clear and ultra-clear varieties and could be
made available in different microns.

The low noise tape is ideal for high volume

packing environments and workplaces where
minimum noise is required. These tapes are
known to provide excellent adhesion and
reliable performances especially when it comes
to sealing cartons and parcels mainly for
shipping to long distances.

View & Recommendation

In continuation with our previously "BUY" recommendation report dated 30th March 2017 ,we have our "HOLD"
rating on the stock, with earlier target price of 490/-. We believe the recently taken up project of BOPET with a
capacity of 36000 MT per annum will boost company's sales growth and protifability to new heights. This new
BOPET line will start adding revenues to the topline from Q3FY19 onwards. Change of estimates in sales and
earnings to this effect, will be updated in Q4FY17 & full FY17 earning review report, soon after announcement of
quarterly earning by the company. We recommend "HOLD" on this stock.

Please refer to the Disclaimers at the end of this Report

Narnolia Securities Ltd
 Financials Snap Shot
Income Statement Rs in Crores Key Ratios
Y/E March FY16 FY17E FY18E FY19E Y/E March FY16 FY17E FY18E FY19E
Revenue from Operation 1,729 1,709 2,267 2,451 ROE 21% 18% 25% 23%
Change (%) -2% 6% 33% 8% ROCE 23% 16% 26% 28%
Other Operating Income - 6 9 10 Asset Turnover 1.4 1.2 1.5 1.5
EBITDA 191 183 285 314 Debtor Days 26.45 26.00 27.00 27.00
Change (%) 83% -4% 56% 10% Inventory Days 38.7 40.0 41.0 42.0
Margin (%) 12% 11% 13% 13% Payable Days 36 35 35 35
Dep & Amortization 36 39 51 51 Interest Coverage 5.16 4.80 6.20 8.41
EBIT 156 144 234 263 P/E 6 9 7 8
Interest & other finance cost 30 30 38 31 Price / Book Value 1.2 1.6 1.7 1.8
Other Income 6 5 5 3 EV/EBITDA 4 6 4 5
EBT 124 115 202 235 FCF per Share 147 (43) 181 251
Exceptional Item 7 3 - - Dividend Yield 2.3% 2.7% 3.6% 4.4%
Tax 28 20 46 66
Minority Int & P/L share of Ass. - - - - Assumptions
Reported PAT 96 95 155 169 Y/E March FY16 FY17E FY18E FY19E
Adjusted PAT 96 95 155 169 Volume ('000) 139 142 182 193
Change (%) 248% -1% 64% 9% Volume Growth - 2% 28% 6%
Margin(%) 6% 6% 7% 7% Realization/kg 145 140 141 143
Realization Growth - -3% 1% 1%
Capex(Rs crore) 75 225 50 70

Balance Sheet Rs in Crores Cash Flow Statement Rs in Crores

Y/E March FY16 FY17E FY18E FY19E Y/E March FY16 FY17E FY18E FY19E
Share Capital 151 151 151 151 PBT 124 115 202 235
Reserves 27,598 32,595 38,323 45,573 (inc)/Dec in Working Capital 71 (15) (60) (23)
Networth 27,749 32,746 38,474 45,724 Non Cash Op Exp 39 43 51 51
Debt 237.8 684.0 684.0 684.0 Interest Paid (+) 25 30 38 31
Other Non Current Liab 900 1,213 1,085 1,085 Tax Paid 33 20 46 66
Total Capital Employed 27,987 33,430 39,158 46,408 others (3) 32 51 25
Net Fixed Assets (incl CWIP) 13,989 14,564 13,206 12,244 CF from Op. Activities 222 181 231 251
Non Current Investments 17,512 22,220 27,735 34,938 (inc)/Dec in FA & CWIP (85) (225) (51) (71)
Other Non Current Assets 9 1,862 1,862 1,862 Free Cashflow 138 (44) 180 180
Non Current Assets 32,866 38,683 42,841 49,082 (Pur)/Sale of Investment 5 3 4 2
Inventory 3,200 3,660 3,941 4,399 others 1 6 (9) 2
Debtors 1,387 1,587 1,709 1,907 CF from Inv. Activities (79) (232) (60) (69)
Cash & Bank 77 88 79 83 inc/(dec) in NW 76 66 109 108
Other Current Assets 270 1,583 1,583 1,583 inc/(dec) in Debt (79) 163 (77) (75)
Current Assets 7,404 8,980 11,422 14,058 Interest Paid 27 30 38 31
Creditors 7,127 8,152 8,779 9,798 Dividend Paid (inc tax) 26 24 39 51
Provisions 2,137 2,117 2,279 2,541 others (59) (59) (85) (92)
Other Current Liabilities 2,408 2,754 2,966 3,310 CF from Fin. Activities (138) 104 (161) (167)
Curr Liabilities 11,369 13,005 14,004 15,631 Inc(Dec) in Cash 6 53 10 15
Net Current Assets (3,965) (4,025) (2,583) (1,573) Add: Opening Balance 18 32 86 95
Total Assets 40,270 47,664 54,263 63,139 Closing Balance 25 86 95 110

Please refer to the Disclaimers at the end of this Report

Narnolia Securities Ltd
 INDUSTRY - Con. Staples
BSE Code - 531642
NSE Code - MARICO
6-May-17 NIFTY - 9360

Company Data Key Highlights of the Report:

CMP 310
Maricos result for Q4FY17 is better than expectation. Domestic volume
Target Price 330 grew by 10% led by solid 15% volume growth in Parachute rigid portfolio
Previous Target Price 330 and 10% growth in Value Added Hair Oil (VAHO).
Upside 6% PAT for this quarter grewby 26% YoY backed by lower ad expenses. Ad
52wk Range H/L 330/235 expenses went down by 413 bps YoY.
Mkt Capital (Rs Cr) 39,992 Internationalbusiness acted as dampener, declined by 8%YoY in value
Av. Volume (,000) 1,099 term impacted by 46% decline in MENA business in CC terms.

Maintain ROE of 33%

Going forward we expect deterioration in margin due to higher input cost
especially copra which may reduce ROE by 182 bps in FY18E. At present
company is trading at the peak of its valuation so we see little upside from
ROE
here hence recommend `Neutral at this price.
36% 35%
35% 34%

34% 33% 33%

33%
32% 31%
Financials/Valu FY15 FY16 FY17 FY18E FY19E
31%
30% ation
Net Sales 5,733 6,024 5,936 6,351 7,226
29% EBITDA 870 1,051 1,159 1,205 1,328
FY15 FY16 FY17 FY18E FY19E
EBIT 786 957 1,069 1,115 1,239
Shareholding patterns % PAT 573 723 811 847 941
4QFY17 3QFY17 2QFY17 EPS (Rs) 4 6 6 7 7
Promoters 59.7 59.7 59.7 EPS growth (%) 18% 26% 12% 4% 11%
Public 40.1 40.1 40.0 ROE (%) 31% 34% 35% 33% 33%
Others 0.2 0.2 0.3 ROCE (%) 39% 46% 46% 44% 44%
Total 100 100 100 BV 14 16 18 20 22
Stock Performance % P/B (X) 13.7 16.3 17.2 15.6 14.2
1Mn 3Mn 1Yr P/E (x) 43.5 47.1 49.3 47.2 42.5
Absolute 5.5 (4.6) 13.0
Rel.to Nifty 4.2 (11.7) (6.9) RECENT DEVELOPMENT:

The company has taken price hike in Parachute Rigid portfolio by 8% in

140 MARICO NIFTY March 2017.
130
In Bangladesh, Company has taken price hike in the coconut oil portfolio by
120 10% and initiated price increase of 8% in VAHO portfolio in the later part of
110 Q4FY17.

100 The company has launched a new Demand Sensing model which will
improve response to within month forecasting changes thereby lowering the
90
possibility of stock-outs.
80
The company has entered into super-premium oil segment with the launch
of Saffola Aura whereas Saffola multigrain flakes introduced in selected
markets.

RAJEEV ANAND
rajeev.anand@narnolia.com
Please refer to the Disclaimers at the end of this Report
Narnolia Securities Ltd
 Quarterly Performance
Financials 4QFY16 1QFY17 2QFY17 3QFY17 4QFY17 YoY % QoQ% FY16 FY17 YoY %
Net Sales 1,291 1,754 1,443 1,417 1,322 2% -7% 6,024 5,936 -1%
Other Income 27.77 27.52 24.7 23.28 22.28 -20% -4% 93.33 97.31 4%
COGS 599 842 685 686 637 6% -7% 3,078 2,849 -7%
Ad & P Expenses 161 209 189 151 111 -31% -27%
Employee Cost 95 105 105 96 98 3% 2% 373 404 8%
Other Expenses 220 224 211 212 217 -1% 3% 1,522 1,523 0%
EBITDA 214 374 253 272 259 21% -5% 1,051 1,159 10%
Depreciation 31 21 21 21 27 -12% 28% 95 90 -5%
Interest 7 5 2 4 5 -30% 7% 21 17 -20%
PBT 204 375 255 270 250 22% -8% 1,029 1,150 12%
Tax 68 107 74 78 78 16% 0% 305 338 11%
PAT 136 268 181 192 171 26% -11% 723 811 12%

Reported solid volume growth after demonetization

Domestic MARICOs revenue for this quarter grew by 2%YoY to Rs1322 cr led by robust volume growth in
Parachute rigid portfolio(grew by 15% YoY) and VAHO(grew by 10%) while Suffola maintained its
business
growth of 6% in this quarter.
volume grew
by 10% YoY. Domestic business has clocked double digit volume(10%) growth after four quarters while overall
realization declined by ~4%.
International business declined by 8% YoY and 5% YoY in constant currency(CC) term impacted by
46% decline in MENA business in CC terms.
Gross margin for this quarter declined by 170 bps YoY to 51.9% due to sharp increase in copra
prices(up by 25%QoQ), Rice Bran oil(up by 20% YoY), Liquid Paraffin (LP)(up by 27% YoY) and
HDPE(up by 5% YoY).

EBITDA margin improved by 301 bps YoY to 19.6% backed by 413 bps decline in Advertisement
expenses.
PAT grew by 26% YoY to Rs171 and PAT margin improved by 237 bps YoY in Q4FY17.

Robust volume gr. of 15% YoY in Parachute Rigid Portfolio VAHO grew by 10% YoY

Parachute Rigid Volume growth YoY Value added Hair Oils volume growth YoY

20% 25% 21%

15%
20%
15% 14%
11% 13%
15% 11% 11% 11%
10% 10%
10% 8% 8% 9%
7% 7% 8%
6% 6% 10%
5% 5%
4%
5% 5%

-1% 0%
0%
-5%
-6%
-5% -12%
-10%

-10% -15%

Please refer to the Disclaimers at the end of this Report

Narnolia Securities Ltd
 Margin % 4QFY16 1QFY17 2QFY17 3QFY17 4QFY17 YoY(+/-) QoQ(+/-) FY16 FY17 YoY(+/-)
Gross Margin 53.6% 52.0% 52.5% 51.6% 51.9% -0.02 0.00 49% 52% 0.03
EBITDA Margin 16.6% 21.3% 17.5% 19.2% 19.6% 0.03 0.00 17% 20% 0.02
PAT Margin 10.6% 15.3% 12.5% 13.5% 12.9% 0.02 -0.01 12% 14% 0.02

Gross margin for this quarter declined by 170 bps YoY to 51.9% due to sharp increase input prices. On
yearly basis companys gross margin improved by 309 bps to 52% from 48.9%.
EBITDA margin improved by 301 bps YoY to 19.6% backed by 413 bps decline in Ad. expenses in
Q4FY17. On yearly basis EBITDA margin improved by 208 bps to 19.5% led by lower COGS.
PAT for this quarter grew by 26% YoY to Rs 171 cr whereas PAT for FY17, grew by 12% to Rs 811 cr.
PAT margin improved by 237 bps YoY for Q4FY17 and 166 bps for FY17.

Margin improvement led by lower ad expenses Lower ad expense due to postponement of new launches

EBITDA Margin% PAT Margin% Ad Expenses (% Sales)

25.0% 16.0%
23.0% 21.3% 13.1% 13.1%
14.0% 11.8%11.7% 12.5%
11.9%
21.0% 18.9% 19.2%19.6% 11.2% 11.1%
18.2% 12.0% 10.5% 10.6%
19.0% 16.4% 17.5% 9.8%
16.3% 16.6%
15.7% 15.3% 10.0% 8.4%
17.0%
13.6% 14.0% 13.4% 13.5%12.9%
15.0% 13.1% 12.5% 8.0%
13.0% 11.4% 11.0% 10.5% 10.6% 6.0%
11.0% 8.3%
9.0%
4.0%
9.0%
7.0% 2.0%
5.0% 0.0%

Concall Highlights:
More than half of the product portfolio improved market shares on 12 months MAT basis.
Bangladesh business: Momentum to continue going forward.
Going forward, the volume growth in Parachute rigid is likely to remain in the range of 5-7%.
The company expects copra prices to increase further over the next two quarters due to lower
supplies. Company will take pricing action to make balance between volume growths and
threshold margins.

The Company aims to become the volume market leader in the Amla hair oil category in FY18.
The company plans to add 14000 outlets in FY18.
Company launched Project Marval EDGE in Q1FY17 to improve efficiency and effectiveness of
current trade and marketing spends. Management expects Rs 35 cr gain from this project in
FY18.
Ad&P
expenses The Company will try maintaining international margins at ~16-17%
will remain The estimated capital expenditure in each of the years FY18 and FY19 is likely to be around Rs
in the band 100125 cr .
of 11-12%. Ad&P expenses: The Company expects to operate in a band of 11-12% in the medium term.
The expected effective tax rate during FY18 and FY19 would be around 27-28%.
Ad expenses: will move up marginally in FY18.

Please refer to the Disclaimers at the end of this Report

Narnolia Securities Ltd
 Investment Arguments:
GST led growth:In hair oil market, ~50% of the players are unorganized. Going forward, we
expect due to passage of GST major shift of value will happen from unorganized sector to
organized sector.Secondly some shift will happen from loose coconut oil which is approx.30-
35% of total coconut oil market to packaged form. Marico will be key beneficiary of the
gradual shift as it has strong presence and brand equity.

Innovation led growth: The Company is focusing on innovation and new products
launches going forward. The company has entered into super-premium oil segment with the
launch of Saffola Aura whereas Saffola multigrain flakes introduced in selected markets.
Parachute Advansed Aloe Vera Hair Oil was launched in the markets of Andhra Pradesh,
Telangana & Tamil Nadu in the month of November 2017. Going forward we expect new
launches will drive growth for the company.

Strong Volume growth in Q4FY17: Maricos domestic volume grew by 10% in a situation
where most of the FMCG players are struggling for volume growth. Parachute Rigid volume
grew by 15%YoY best in 18 months. VAHO grew by 10% in Q4FY17 as compared to 12%
decline in Q3FY17. Going forward management expects 8-9% overall volume growth which
is positive considering tough economic environment.

Smart come back by domestic volume Stabilization of Saffola volume

Domestic Business Volume growth

Saffola volume growth YoY
12% 11% 17%
10% 18%
10% 8% 16%
8% 8%
13%
8% 7% 14%
6% 11%
6%
6% 5% 12% 10%
9%
3% 3% 10% 8%
4%
8% 6% 6%
2% 6% 4% 4%
3%
0% 4%
2%
-2% -1%
-4% 0%
-4% -2%
-6%

View & Valuation

Going forward we expect deterioration in margin due to higher input cost especially copra
and higher advertisement expenses which may reduce ROE by 182 bps in FY18E.Secondly
there will be some hiccups related to GST which may lead to channel realignment which in
turn lead to de-stocking in next 2quarters. This could impact domestic volume of Marico in
near term. At present company is trading at the peak of its valuation so we see little upside
from here hence recommend `Neutral at this price.

Please refer to the Disclaimers at the end of this Report

Narnolia Securities Ltd
 Financials Snap Shot
Income Statement Rs in Crores Key Ratios
Y/E March FY16 FY17 FY18E FY19E Y/E March FY16 FY17 FY18E FY19E
Revenue from Operation 6,024 5,936 6,351 7,226 ROE 34% 35% 33% 33%
Change (%) 5% -1% 7% 14% ROCE 46% 46% 44% 44%
Other Operating Income Asset Turnover 1.8 1.6 1.6 1.6
EBITDA 1,051 1,159 1,205 1,328 Debtor Days 15.03 15.03 15.03 15.03
Change (%) 21% 10% 4% 10% Inventory Days 55.1 55.1 55.1 55.1
Margin (%) 17% 20% 19% 18% Payable Days 9 9 9 9
Dep & Amortization 95 90 90 89 Interest Coverage 46.39 64.47 51.85 57.59
EBIT 957 1,069 1,115 1,239 P/E 47 49 47 42
Interest & other finance cost 21 17 22 22 Price / Book Value 16.3 17.2 15.6 14.2
Other Income 93 97 107 117 EV/EBITDA 32 34 33 30
EBT 1,029 1,150 1,201 1,334 FCF per Share 6 6 6 6
Exceptional Item - - - - Dividend Yield 0.01 0.01 0.01 0.01
Tax 305 338 353 392
Minority Int & P/L share of Ass. 1 1 1 1 Assumptions
Reported PAT 723 811 847 941 Y/E March FY16 FY17 FY18E FY19E
Adjusted PAT 723 811 847 941 Domestic Volume growth 8% 4% 8% 10%
Change (%) 26% 12% 4% 11% Domestic Pricing growth -2% -6% 2% 6%
Margin(%) 12% 14% 13% 13% Internationa Business(CC growth) 5% 1% -3% 3%

Balance Sheet Rs in Crores Cash Flow Statement Rs in Crores

Y/E March FY16 FY17 FY18E FY19E Y/E March FY16 FY17 FY18E FY19E
Share Capital 129 129 129 129 PBT 1,034 1,149 1,200 1,333
Reserves 1,968 2,193 2,429 2,692 (inc)/Dec in Working Capital (0) (93) (121) (144)
Networth 2,097 2,322 2,558 2,821 Non Cash Op Exp 102 90 90 89
Debt 334.18 153.2 220.0 220.0 Interest Paid (+) (20) (17) (22) (22)
Other Non Current Liab - - - - Tax Paid (246) (338) (353) (392)
Total Capital Employed 2,097 2,322 2,558 2,821 others (67) - - -
Net Fixed Assets (incl CWIP) 583 550 579 584 CF from Op. Activities 833 825 837 907
Non Current Investments 69 51 51 51 (inc)/Dec in FA & CWIP (101) (102) (125) (94)
Other Non Current Assets 58 33 33 33 Free Cashflow 732 723 712 814
Non Current Assets 1,319 1,275 1,304 1,309 (Pur)/Sale of Investment (101) (102) (125) (94)
Inventory 926 896 959 1,091 others (134) 56 6 (0)
Debtors 252 244 261 297 CF from Inv. Activities (235) (46) (119) (94)
Cash & Bank 310 583 669 783 inc/(dec) in NW 1 - - -
Other Current Assets 31 30 32 36 inc/(dec) in Debt (46) 67 - -
Current Assets 2,115 2,444 2,729 3,149 Interest Paid (20) (17) (22) (22)
Creditors 669 648 693 788 Dividend Paid (inc tax) (502) (585) (611) (679)
Provisions 103 100 107 122 others (11) 3 - -
Other Current Liabilities 375 363 388 442 CF from Fin. Activities (580) (504) (632) (700)
Curr Liabilities 1,147 1,111 1,188 1,352 Inc(Dec) in Cash 17 275 86 113
Net Current Assets 967 1,334 1,541 1,797 Add: Opening Balance 77 310 583 669
Total Assets 3,433 3,719 4,033 4,458 Closing Balance 91 585 669 783

Please refer to the Disclaimers at the end of this Report

Narnolia Securities Ltd
 INDUSTRY - OIL MARKETING
BSE Code - 530965
NSE Code - IOC
6-May-17 NIFTY - 9311

Company Data Key Highlights of the Report:

CMP 443 Management expects higher capacity utilization at 15MT Paradip refinery in
Target Price 1QFY18, will boost volume and will improve GRM of the company.
Previous Target Price IOC has various major expansion plans which will increase the IOCs
Upside refining capacity to 104 MT from existing 80.7MT by 2022.
52wk Range H/L 448/196 Management expects 60km Jharsuguda-Ranchi pipeline to be
Mkt Capital (Rs Cr) 215,140 commissioned in FY18 which will increase offtake from Paradip refinery.
Av. Volume (,000) 526 Considering recent rallies in the stock price, valuation seems little
expensive.
RoE to maintain over 22% in FY17E
Currently, the stock is trading at 1.9x FY19E P/BV. We recommend Book
Profit' for the short term investors and long term investors may HOLD
ROE
25.0% rating in this stock.
22.3%
20.0% 19.9%
18.1% 17.1%
15.0% 14.8%

10.0% 10.4%
7.1% 7.1% Financials/Valu FY15 FY16 FY17E FY18E FY19E
5.0%
ation
Net Sales 449,509 355,927 581,260 605,700 609,900
0.0%
EBITDA 10,550 23,197 38,362 38,949 39,653
EBIT 5,331 17,278 31,289 31,275 31,142
Shareholding patterns % PAT 4,912 11,219 19,778 20,133 19,539
4QFY17 3QFY17 2QFY17 EPS (Rs) 20 46 41 41 40
Promoters 57.3 58.3 58.3 EPS growth (%) -31% 128% -12% 2% -3%
Public 42.7 41.7 41.7 ROE (%) 7% 15% 22% 20% 17%
Total 100.0 100.0 100.0 ROCE (%) 5% 16% 24% 22% 20%
BV 68,832 75,994 88,501 101,413 113,930
Stock Performance % P/B (X) 1.3 1.3 2.4 2.1 1.9
1Mn 3Mn 1Yr P/E (x) 18.2 8.5 10.8 10.6 10.9
Absolute 17.6 107.4 63.3
Rel.to Nifty 16.2 88.8 54.8 RECENT DEVELOPMENT:
200 IOC NIFTY National Green Tribunal (NGT) has confirmed its order dated August 2,
2016, permitting IndianOil to go ahead with its LPG import terminal project
180
at Puthuvypeen, Kerala. This will enable the company to cater growing LNG
160 demand in future.

140 IOC plans to come up with a 15-million-tonne (MT) refinery, with an

investment of about Rs 40,000 crore, at Nagapattinam in Tamil Nadu.
120 Currently, Nagapattinam has a 1-mt plant operated by Chennai Petroleum
Corporation (CPCL), an IOC subsidiary.
100
Oil companies to bear merchant discount rate fees on debit card payments
80
for fuel. The fee is 1% on credit card transactions and 0.25-1% on debit
Jul-16

Sep-16

Feb-17
Jan-17
Dec-16
Jun-16

Aug-16
May-16

Oct-16
Nov-16
Apr-16

Apr-17
Mar-17

card transactions.
IOC keen to buy 26% stake in GSPC's Mundra LNG terminal. With a view
ADITYA GUPTA to expand its gas business, IOC invests Rs. 4500 Cr in Mundra project.
aditya.gupta@narnolia.com
Please refer to the Disclaimers at the end of this Report
Narnolia Securities Ltd
 Quarterly Performance
Financials 3QFY16 4QFY16 1QFY17 2QFY17 3QFY17 YoY % QoQ% FY15 FY16 YoY %
Petroleum products 93,261 93,276 102,802 95,732 111,212 19% 16% 419,264 332,270 -21%
Petrochemicals 4205 5172 4683 4474 4714 12% 5% 20264 16992 -16%
Other business activities 2,758 2,925 2,247 2,836 2,940 7% 4% 17,176 13,651 -21%
Net Sales 82,676 78,401 86,081 80,370 93,117 13% 16% 449,509 355,927 -21%
Other Income 648 722 470 854 793 22% -7% 4,204 2,246 -47%
COGS 69,055 64,134 63,701 66,330 73,872 7% 11% 399,121 289,225 -28%
Employee Cost 1,716 1,288 1,772 1,872 1,813 6% -3% 7,662 8,228 7%
Other Expenses 6,550 8,230 6,925 6,397 9,483 45% 48% 32,175 35,277 10%
EBITDA 5,355 4,750 13,684 5,772 7,949 48% 38% 10,550 23,197 120%
Depreciation 1,191 1,439 1,435 1,505 1,554 30% 3% 5,219 5,919 13%
Interest 641 1,085 680 615 997 56% 62% 4,175 3,630 -13%
PBT 4,172 2,948 12,039 4,507 6,191 48% 37% 5,346 15,894 197%
Tax 1,549 1,255 3,770 1,385 2,196 42% 59% 2,143 5,653 164%
PAT 3,096 1,685 8,269 3,122 3,995 29% 28% 4,912 11,219 128%

Robust PAT growth in 3QFY17:

Profit after tax has increased by 29% to Rs. 3995 Cr in 3QFY17 as compared to Rs. 3096 Cr in the
same quarter in FY16.
Revenue from sale of Petroleum products has increased from Rs. 93261 Cr to Rs. 111212 Cr in
3QFY17.
Revenue from sale of Petrochemicals has increased from Rs. 4205 Cr to Rs. 4714 Cr in 3QFY17.
Revenue from Other business activities has increased from Rs. 2758 Cr to Rs. 2940 Cr in 3QFY17.

EBITDA(Rs. Cr.) EBITDA Margin PAT(Rs. Cr.) PAT Margin

16,000 18% 9,000 12%
16%
14,000 16% 8,000 10%
10%
14% 7,000
12,000
12% 6,000 7% 6% 8%
10,000 10% 10%
5,000
9% 6%

8,269
10%
4% 4%
13,684

8,000 7% 4,000 4%
6,591
6,285

6% 6% 8% 4%
10,287

6,000 3,000 2%
9,284

3,995
6%
7,949

3,122
3,096

2,000 2%
1,685

4,000
5,772

4%
5,355

4,750

1,000 -1%
1% 0%
666

2,000 2% -
(450)

- 0% (1,000) -2%

Concall Highlights:
Management expecting a volume growth of between 3- 4 million tonne(MT) going forward.
IOC's management indicated merger with Chennai Petro,but no timeline yet
All units of Paradip refinery are fully commissioned with capacity utilization of 80% in
3QFY17.Management expects 95% capacity utilization by March 2017.
Management has guided for provisioning of Rs. 20000 Cr for the Entry tax. Out of which provision of Rs.
10000 Cr already made.
Capex guidance for FY18 is Rs. 19600 Cr and FY19 is ~ Rs. 25000 Cr.
Anticipated VAT for Paradip refinery is Rs. 150 Cr per month.

Please refer to the Disclaimers at the end of this Report

Narnolia Securities Ltd
 Investment Arguments:
Stabilization of Paradip refinery- All units of Paradip refinery are fully commissioned with capacity
utilization of 80% in Dec16. Management expects 95% capacity utilization in 1QFY18. It will improve the
refining volume by 13MTPA and will improve GRM in FY18.
Growth in Pipeline volume Evacuation through the Paradip- Jharsuguda-Raipur-Ranchi pipeline has
been started in the month of Jan17. Jharsuguda-Ranchi pipeline of 60Km is yet to be commissioned.
Management is optimistic to commission this pipeline in FY18. This will increase the pipeline throughput
by 3-4% to 21 MMT

Growth in Gasoline volume - Management indicated that volume growth of gasoline is gaining traction
from March17.Liquefied Petroleum Gas (LPG) volume is also growing at double digits. But, diesel
growth has remained flat.
Upcoming Projects- IOCL is investing Rs 34,000 Cr. on the petrochemical complex. The entire
petrochemical complex is expected to be commissioned by 2021. The polypropylene unit would have a
capacity of 7,000 kilo tonne per annum (KTPA) would be integrated with the oil refinery.
High Operational Efficiency- Paradip is expected to achieve GRM of USD 12/BBL post 95% capacity
utilisation. This will improve core GRM to USD 8/BBL.
LPG pipeline- The company is on track to construct 710km Paradip-Haldia-Durgapur LPG pipeline,
which will facilitate LPG transportation from Paradip and Haldia to the LPG bottling plants at Balasore,
Budge-Budge, Kalyani and Durgapur.
Volume Trend GRM Trend

Marketing Volume(MMT) Refinery Throughput(MMT) IOC GRM Singapore GRM

25 12.0
10.8
21 21 20 20 10.0
19 20 19 20 10.0
20 19 8.88.6
16 16 8.0 8.0 7.7 7.7
16 8.0
14 14 14 14 14 6.7
15 14 6.3 6.0
6.0 5.0 5.1
10 4.3
4.0 3.0
5
2.0 0.9
- -

View & Valuation

With the full commissioning of 15MMTPA Paradip refinery, Indian Oil Corporation is equipped to cater the
growing fuel demand in the country. Management expects 95% capacity utilization of Paradip refinery and
volume growth of 3-4 MTPA going forward. Further management plans to add 300 retail outlets every year
to its existing network of 25000+ outlets. This will improve the volume of the company up-to a large
extent. IOC has equipped with BS VI standard HSD and BS VI standard motor spirit and prepared to start
supply by Oct17. IOC maintains healthy dividend payout of 33%. Currently stock is trading at 1.9x FY19
P/BV. Recently IOC rallied smartly and achieved our recommended target price of Rs 445. We expect that
the stock has discounted all the near term positives and at this price point the valuation seems little
stretched, so we recommend our short term investors to book profit at current levels but long term
investors may hold this stock.

Please refer to the Disclaimers at the end of this Report

Narnolia Securities Ltd
 Financials Snap Shot
Income Statement in Rs Crores Cash Flow Statement in Rs Crores
Y/E March FY16 FY17E FY18E FY19E Y/E March FY16 FY17E FY18E FY19E
Revenue from Operation 355,927 581,260 605,700 609,900 PBT 17,259 30,596 30,493 29,621
Change (%) -21% 63% 4% 1% (inc)/Dec in Working Capital 26,295 41,326 42,211 42,176
EBITDA 23,197 38,362 38,949 39,653 Non Cash Op Exp 5,865.2 7,073.2 7,674.1 8,511.2
Change (%) 120% 65% 2% 2% Int Paid (+) 3,629.71 4,043.85 4,043.85 4,043.85
Margin (%) 7% 7% 6% 7% Tax Paid 3,249.9 10,431.3 10,360.0 10,082.4
Depr & Amor. 5,919 7,073 7,674 8,511 others 7,724 (380) 1,251 2,209
EBIT 17,278 31,289 31,275 31,142 CF from Op. Activities 27,020 28,780 32,623 33,778
Int. & other fin. Cost 3,630 4,044 4,044 4,044 (inc)/Dec in FA & CWIP (4,244) (16,460) (20,666) (26,066)
Other Income 2,246 3,350 3,261 2,523 Free Cashflow 22,776.2 12,319.2 11,957.3 7,712.3
EBT 15,894 30,596 30,493 29,621 (Pur)/Sale of Inv 629 - - -
Exp Item 1,364 - - - others (10,190) (6,333) 1,000 4,000
Tax 5,653 10,431 10,360 10,082 CF from Inv. Activities (13,805) (22,794) (19,666) (22,066)
Minority Int & P/L share of Ass. 387 387 - - inc/(dec) in NW
Reported PAT 11,219 19,778 20,133 19,539 inc/(dec) in Debt (4,175.5) 5,861.1 - -
Adjusted PAT 10,340 19,778 20,133 19,539 Div Paid (inc tax) (3,590.0) (7,270.9) (7,220.1) (7,022.6)
Change (%) 128% 76% 2% -3% others (4,661) (4,044) (4,044) (4,044)
Margin(%) 3% 3% 3% 3% CF from Fin. Activities (12,426) (5,454) (11,264) (11,066)
Inc(Dec) in Cash 789 532 1,693 646
Add: Opening Balance 1,225 2,014 2,514 3,654
Balance Sheet in Rs Crores Closing Balance 2,014 2,546 4,207 4,300

Y/E March FY16 FY17E FY18E FY19E

Share Capital 2,428 2,428 2,428 2,428
Reserves 73,566 86,073 98,985 111,502 Key Ratios
Networth 75,994 88,501 101,413 113,930 FY16 FY17E FY18E FY19E
Debt 50,850 56,711 56,711 56,711 ROE 15% 22% 20% 17%
Other Non Cur Liab 18,020 18,020 18,020 18,020 ROCE 16% 24% 22% 20%
Total Capital Employed 126,844 145,212 158,124 170,640 Asset Turnover 1.5 2.1 2.1 2.0
Net Fixed Assets (incl CWIP) 128,434 137,821 150,813 168,368 Debtor Days 8 8 8 8
Non Cur Investments 8,667 15,000 14,000 10,000 Inv Days 40 40 40 40
Other Non Cur Asst 146 146 146 146 Payable Days 23 23 23 23
Non Curr Assets 147,550 163,271 175,262 188,817 Int Coverage 5 8 8 8
Inventory 42,095 50,372 52,654 55,160 P/E 9 11 11 11
Debtors 8,660 10,396 10,874 11,400 Price / Book Value 1.3 2.4 2.1 1.9
Cash & Bank 2,014 2,514 3,654 3,600 EV/EBITDA 5 7 7 6
Other Curr Assets 2,902 3,844 4,104 4,389 FCF per Share 47 25 25 16
Curr Assets 94,474 114,532 119,708 123,250 Div Yield 2% 3% 3% 3%
Creditors 24,921 29,767 31,103 32,570
Provisons 32,109 38,462 40,214 42,137 Key Assumptions
Other Curr Liab 29,060 35,303 37,024 38,914 FY16 FY17E FY18E FY19E
Curr Liabilities 83,614 101,056 105,865 111,145 Refinery Throughput (MT) 56 65 70 70
Net Curr Assets 10,860 13,476 13,843 12,105 Pipeline Throughput (MMT) 80 85 91 99
Total Assets 242,024 277,802 294,971 312,067 Marketing Volume(MT) 80 80 84 88

Please refer to the Disclaimers at the end of this Report

Narnolia Securities Ltd
 IRB InvIT Fund "SUBCRIBE"
2nd May 2017
IPO Note
Issue Detail Company Overview
Type 100% Book Building IRB InvIT Fund is a registered infrastructure investment trust under the InvIT Regulations. They
Issue Size Rs. 4700 Crore primarily intend to own, operate and maintain a portfolio of six toll - road assets in the Indian
Offer Price *Rs (100-102)/Equity Share states of Maharashtra, Gujarat, Rajasthan, Karnataka and Tamil Nadu. These toll roads are
operated and maintained pursuant to concessions granted by the NHAI.
Min App Size 10000 Shares IRB Infrastructure Developers Limited (the Sponsor) is, one of the largest infrastructure
Issue Open 3-May-17 development and construction companies in India in terms of net worth in the roads and
highways sector according to the NHAI's annual prequalification for public private partnerships in
Issue Close 5-May-17
national highway projects report for 2016. Excluding the toll-road assets that will be transferred by
Shares Offer 45.6 Cr. IRB to them, as of December 31, 2016, IRB has 16 road projects, of which eight are operational,
Face Value Rs 10 five are under construction and three are under development. They wish to acquire an initial
Credit Suisse Securities (India) portfolio comprising of the Project SPVs, all of which are currently either wholly or majority owned
Private Ltd , ICICI Securities by IRB and its subsidiaries.
Lead Mgrs
Ltd, IDFC Bank Ltd , IIFL The Trust has been settled by the Sponsor pursuant to the Indenture of Trust in Mumbai, India, as
Holdings Ltd. an irrevocable trust in accordance with the Trusts Act. The Trust was settled with an initial
Listing BSE, NSE settlement amount of Rs. 10,000 by the Sponsor.
Registrar Karvy Computershare Pvt Ltd These toll roads projects are BharuchSurat NH 8, JaipurDeoli NH 12, SuratDahisar NH 8,
TumkurChitradurga NH 4, OmalurSalemNamakkal NH 7 and TalegaonAmravati NH 6. While
Surat-Dahisar and Bharuch-Surat project has concession period tenure till January 2022 and
Omalur-Salem-Namakkal till August 2026, other projects have concession tenures ending in June
2037. Sponsor has 22 BOT road projects on hand as on 31st December 2016 out of which 14 are
No of shares operational, 5 are under construction and 3 are under development. Futures of all these projects
are based on the daily traffic volumes, inflation and regulatory changes. Trust will follow factoring
Offer for Sale 34,761,770
of WPI in the pricing of the projects.
Fresh Issue made 421568627 Company Strength
option to retain oversubscription upto 25% of > Company has diversified road project portfolio and revenue base. The geographic diversity of the
issue size. Initial Road Assets will play a significant role in developing experience and expertise, including
ability to evaluate, acquire, operate and maintain new projects. The geographically and temporally
diverse project portfolio provides with an advantage in capitalizing on new opportunities available
in the roads and highways sector .
> Company has Experienced Sponsor, Investment Manager and Project Manager with consistent
track records in operating and maintaining projects in the roads and highways sector in India . The
Sponsor is one of the largest infrastructure development and construction companies in India in
terms of net worth in the roads and highways sector with a large project portfolio of 8,183 Lane
Kilometres of roads and highways in operation, under construction or under development,
excluding the Initial Road Assets, as of December 31, 2016.

> The Net Proceeds will be used to repay and replace a significant portion of the Project SPVs'
existing indebtedness. The resulting low leverage will provide them with debt capacity to grow
their business, including by financing future acquisitions. They intend on financing future
development and acquisitions through the issuance of additional Units .
Recommendation
IRB InvIT FUND is India's first registered infrastructure investment trust. IRB has bundled six of its operational toll road assets and transferred
them to the Trust.
The Trust generates income in the form of toll collection from these road assets and interest on cash in their books. According to SEBI guidelines,
the Trust needs to distribute at least 90 percent of this distributable cash to the unit holders in the form of dividend, which will be tax free. The
Trust also is exempted from dividend distribution tax.
Based on projected cash flow on the basis of estimated growth in traffic and inflation-linked increase in toll charges, at an upper price band of
IPO (Rs 102), the dividend yield will be close to 10%. Excessive investor interest may also lead to some price appreciation post-listing.
Risk attached to the issue is that the regulatory framework governing infrastructure investment trusts in India is untested and the interpretation
and enforcement thereof involve uncertainties.

Please refer to the Disclaimers at the end of this Report.

 IRB InvIT Fund

Objects of Issue:

The object and purpose of the Trust, as described in the Indenture of Trust, is to carry on the activity of an infrastructure investment trust
under the InvIT Regulations, to raise resources in accordance with the InvIT Regulations, and to make investments in accordance with the
investment strategy of the Trust. The Trustee and the Investment Manager shall ensure that the subscription amounts are kept in a separate
bank account in the name of the Trust and are only utilised for adjustment against Allotment of Units or refund of money to the applicants until
such Units are listed.

Utilization of Net Proceeds

Particulars Estimated Amount

Investment in the Project SPVs by way of an issue of debt
1 4200 Cr.
2 General purposes *+
Particulars Amount Amount
Outstanding as on Proposed to be
December 31,2016 ( Repaid/Prepaid ( Cr.
Cr. ) )
Repayment/prepayment, in part, of certain loans/facilities availed
by the Project SPVs from their respective senior lenders
1
Loans/facilities availed from senior lenders that are not associates
a 2121.4 1060
of GCBRLMs and BRLM
Loans/facilities availed from senior lenders that are associates of
1,391.28 1,368.16
b GCBRLMs and BRLM
Prepayment, in full, of the subordinate debt provided to certain
Project SPVs by the Sponsor and the Project Manager 698.50 698.50
2
Prepayment, in full, of certain unsecured loans and advances
availed by certain Project SPVs from the Sponsor, the Project 741.74 741.74
3 Manager and certain members of the Sponsor group
Repayment/prepayment, in part, of the balance portion of certain
loans/facilities availed by the Project SPVs from their respective 10,14.9
4 senior lenders
Total 4952.921 3868.4028

Trust will have key investment conditions as under:

1 Invest at least 80% of the value of the assets in completed and revenue generating infrastructure assets
2 Balance 20% can be invested in under-construction infrastructure projects and securities of infrastructure
companies in India (cannot invest in units of other InvITs)
3 InvIT should hold (directly or through SPVs) the infrastructure assets for at least 3 years from the date of
purchase of the asset by the InvIT (except investment in securities of infrastructure companies)
4 Investment into SPVs is subject to the InvIT holding a controlling interest (at least 51% of equity share capital)
in the SPVs
On dividend policy, investors are likely to get rewards based on
> At least 90% of distributable cash flow of the SPV shall be distributed to the InvIT in proportion to its
>holding in90%
At least the SPV
of distributable cash flow of the InvIT shall be distributed to the unit holders
> Dividend declared to be paid within 15 days; distributions to the unit holders to be made on a half yearly basis
(however, management has intention to distribute dividends on quarterly basis as informed during road show. Such
dividends will be totally tax free in the hands of the Unit holders.)

Please refer to the Disclaimers at the end of this Report.

 IRB InvIT Fund

InvIT project Details

Residual
Trust's Concessio
equity n
End of interest period as
Commencem concession upon Gross of 31st
ent Commence period with the toll Dec
of ment no listing revenue 2016 with
Project Lane concession of toll reduction of the in no
SPV Project Kms period collection or extention units FY2016 extension
ISDTPL Surat-Dahisar NH8 1434 Feb 20,2019 Feb 20,2009 19-Feb-21 100% 613.476 4.14 yrs
ITCTPL Tumkur-Chitradurga NH4 684 June 4,2011 June 4,2011 3-Jun-27 100% 201.91 20.43 yrs
IDAAIPL Bharuch-surat NH8 390 Jan 2,2007 25-Sep-09 1-Jan-22 100% 193.552 5.01 yrs
IJDTPL Jaipur-Deoli NH12 565 June 14,2010 27-Sep-13 13-Jun-35 100% 120.617 18.45 yrs
MITPL Omalur- Salen-Namakkal NH7 275 14-Aug-06 6-Aug-09 13-Aug-26 74% 74.939 9.62 yrs
ITATPL Talegaon-Amravati NH6 267 3-Sep-10 24-Apr-13 2-Sep-32 100% 47.217 15.67 yrs

Ratings
The Trust has been assigned a rating of CARE AAA(Is) stable by CARE ratings indicating an opinion on the general creditworthiness of the trust
and has not rated the Units of the Trust. India Ratings has assigned IND AAA Outlook Stable to Trusts external senior debt reflecting combined
credit quality of the underlying assets and has not rated the Units.

Competitive Risks
> The debt financing proposed to be provided by the Trust to each of the Project SPVs comprises certain unsecured, interest-free and interest-
bearing loan as well as loans that will be secured by a charge on (i) the cash flows deposited in the escrow account and (ii) the escrow account
of such Project SPV which shall be subordinated to the charge created to secure the debt owed to the senior lenders of the respective Project
SPVs (the Secured Trust Financing). The Project SPVs propose to undertake additional obligations in relation to such deposits, including,
among other things, the creation of a cash reserve of not less than 15% of the amount of the deposits maturing during a financial year and the
immediately succeeding financial year, the appointment of a security trustee for secured deposits and obtaining deposit related insurance

> The escrow arrangements mandated under the concession agreements require all monies that are received by each Project SPV, including
funds constituting the financing package, the fees collected from the operation of the Initial Road Assets and any termination payments
received from the NHAI, to be deposited in an escrow account and utilised only in accordance with the order prescribed under the escrow
agreement. The consent of the NHAI is required to amend the order of outflow of payments from such escrow account.

> The regulatory framework governing infrastructure investment trusts in India is untested and the interpretation and enforcement thereof
involve uncertainties, which may have a material, adverse effect on the ability of certain categories of investors to invest in the Units, our
business, financial condition and results of operations and our ability to make distributions to Unitholders.
> The Sponsor currently holds 74% of the equity share capital of MITPL, and its ability to acquire the residual 26% of the equity share capital
from the other shareholders of MITPL is subject to obtaining NHAI's consent. In case of any delay or failure to obtain such consent, the Sponsor
may be unable to acquire such equity shares in a timely manner or at all and the Trust may be unable to acquire 100% of the shareholding in
MITPL from the Sponsor prior to listing of the Units or at all.

Please refer to the Disclaimers at the end of this Report.

 IRB InvIT Fund

Financials Snap Shot

Profit & Loss Account ( Cr.) 31 Mar 14 31 Mar 15 31 Mar 16 Ratio 31 Mar 14 31 Mar 15 31 Mar 16

Revenue (Net) 745.2 900.3 986.7 Profitability Ratios

Other Income 17.3 16.1 17.1 RoE 12% 12% 17%
Total Revenue 762.5 916.4 1,003.8 RoCE 12% 12% 17%
Road work and site expenses 48.0 142.6 128.4 Liquidity Ratios
Employee benefits expense 16.0 17.4 20.9 Net Debt/Equity 1.981 2.031 1.999
Other expenses 11.7 12.2 11.2 Interest Coverage Ratio 101.5 -95.1 18.7
Total Expenses 75.7 172.3 160.5
EBITDA 686.8 744.1 843.3 Issue Information
Depreciation and amortisation expenses 68.7 74.4 84.3 Type 100% Book Building
EBIT 618.2 669.7 759.0 Issue Size Rs. 4700 Crore
Finance Costs 375.6 444.8 434.8 Offer Price *Rs (100-102)/Equity Share
Profit / (loss) before tax 242.6 224.8 324.2 Min App Size 10000 Shares
Tax expenses 2.4 -2.4 17.3 Issue Open 42858.0
PROFIT AFTER TAX 240.2 227.2 306.9 Issue Close 42860.0
Other comprehensive income 0.1 0.0 -0.1 Shares Offer 45.6 Cr
Profit before Tax 240.3 227.2 306.8 Face Value Rs 10

Balance Sheet ( Cr.) 31 Mar 14 31 Mar 15 31 Mar 16 Cash Flow ( Cr. ) 31 Mar 14 31 Mar 15 31 Mar 16

Share Capital 1111.6 1114.6 1114.6 Profit/(Loss) before tax (45.2) (126.1) (59.1)
Subordinated debt (in nature of equity) 695.6 698.5 698.5 Adjustments
Other equity 215.6 91.6 15.2 Interest expense 347.4 413.9 398.7
Net Worth 2022.7 1904.7 1828.2 Depreciation and amortisation expenses 356.4 425.4 467.6
Borrowings 4006.9 3868.2 3655.2 Dividend income on current investments (0.0) (0.0) (0.4)
Other financial liabilities 6959.2 6867.3 6662.6 Interest income (12.2) (10.1) (9.6)
Provisions 121.5 73.5 109.4 Operating profit before working capital changes646.4 703.0 797.3
Non - current liabilities 11087.6 10809.0 10427.2 Movement in working capital
Borrowings 677.8 677.8 643.6 Increase/(decrease) in trade payables (44.3) 35.4 (29.5)
Trade payables 7.6 43.0 13.4 Increase/(decrease) in other liabilities 9.8 0.6 (10.9)
Other financial liabilities 383.8 421.0 545.4 Increase/(decrease) in other financial liabilities(139.3) (163.9) (152.1)
Other current liabilities 12.9 13.9 3.0 Increase/(decrease) in provisions 0.2 43.8 35.8
Provisions 0.2 0.1 0.1 Decrease/(increase) in trade receivables (0.7) 0.8 0.7
Current tax liabilities 3.8 3.3 1.4 Decrease/(increase) in financials assets-loans (4.0) (129.9) (70.2)
Current liabilities 1086.1 1159.0 1206.9 Decrease/(increase) in others financial assets 18.0 3.0 1.9
Total Liability 14196.5 13872.7 13462.3 Decrease/(increase) in others assets 139.5 8.3 (4.2)
Fixed Asset 13047.0 13466.3 13940.6 Cash generated from / (used in) operations 625.6 501.1 568.7
Deferred tax assets 44.8 49.2 36.7 Direct taxes paid (net of refunds) 0.8 1.3 7.6
Other non-current assets 3.0 1.1 0.5 Net cash flows from operating activities 624.9 499.8 561.1
Total Non-current assets 13094.8 13516.6 13977.9 Net cash flows from investing activities (454.0) (26.6) (37.2)
Trade receivables 20.4 17.8 14.8 Net cash flows from financing activities (271.8) (463.3) (548.3)
Cash and cash equivalents 173.8 180.8 160.6 Net increase/(decrease) in cash (100.9) 9.9 (24.5)
Loans 0.1 125.3 190.4 Cash at the beginning of the year 173.5 72.5 82.4
Current tax assets 3.5 2.2 3.2 Cash at the end of the year 725.4 824.0 579.4
Other current assets 10.7 4.3 9.0
Total asset 13303.2 13846.9 14355.9

Please refer to the Disclaimers at the end of this Report.

 INDUSTRY - Con. Staples
BSE Code - 500096
NSE Code - DABUR
2-May-17 NIFTY - 9314

Company Data Key Highlights of the Report:

CMP 285 DABUR reported result below than our expectation. Sales declined by 5%
Target Price NEUTRAL
YoY to Rs 1915 cr whereas our expectation was Rs 2070 cr.
Previous Target Price DABURs gross margin declined by 163 bps to 49% but maintained
Upside operating margin led by lower employee, A&P and Other Expenses.
52wk Range H/L 320/259 International business declined by 4.5% in constant currency terms led by
Mkt Capital (Rs Cr) 50,045 currency devaluation in Egypt, Turkey and Nigeria and Macro economic
Av. Volume (,000) 1,461 slowdown in MENA region.

RoE
The company reported 2.4% overall volume growth for this quarter.
Considering subdued International business growth which contributes
ROE
approx. 25% of companys total revenue and expectation of contraction in
45%
margin going forward on the back of higher A&P expenses we are Neutral
38%
40% 36%
34% on this stock.
35% 32%
30%
30% 26%

25%
20%
15%
Financials/Valu FY15 FY16 FY17 FY18E FY19E
10%
ation
Net Sales 7,827 7,869 7,701 8,615 9,808
5%
0% EBITDA 1,316 1,518 1,509 1,612 1,845
FY12 FY13 FY14 FY15 FY16 FY17
EBIT 1,201 1,385 1,366 1,833 2,117
Shareholding patterns % PAT 1,066 1,251 1,277 1,411 1,639
4QFY17 3QFY17 2QFY17 EPS (Rs) 6 7 7 8 9
Promoters 68 68 68 EPS growth (%) 16% 17% 2% 11% 16%
Public 32 32 32 ROE (%) 32% 30% 26% 26% 26%
Total 100 100 100 ROCE (%) 34% 31% 26% 23% 24%
BV 19 24 28 32 38
Stock Performance % P/B (X) 10.2 11.6 10.3 8.8 7.5
1Mn 3Mn 1Yr P/E (x) 32.0 38.8 39.3 35.5 30.6
Absolute 2.5 2.9 5.5
Rel.to Nifty 1.0 (4.0) (13.2) RESULT REVIEW:

125 DABUR NIFTY DABURs result for Q4FY17 is below than our expectations. Sales declined
120 by 5% YoY to Rs 1915 cr from Rs 2010 cr.
115
Gross margin declined by 163 bps YoY to 49% due to increase in material
110
105 costs and adverse currency impact.
100 EBITDA margin improved by 115 bps YoY to 21.8% from 20.7% led by

95 lower employee, A&P and Other expenses.
90
85 PAT margin improved by 91 bps YoY 17.4% from 16.5%.
80
DABURs PAT for this quarter remained flat. Reported PAT of Rs 333 cr

(Vs Rs 331 cr in Q4FY16).

RAJEEV ANAND
rajeev.anand@narnolia.com
Please refer to the Disclaimers at the end of this Report
Narnolia Securities Ltd
 Quarterly Performance
Financials 4QFY16 1QFY17 2QFY17 3QFY17 4QFY17 YoY % QoQ% FY16 FY17 YoY %
Net Sales 2,010 1,928 1,981 1,853 1,915 -5% 3% 7,869 7,701 -2%
Other Income 54 61 89 83 65 21% -22% 217 298 37%
COGS 992 938 967 938 976 -2% 4% 3,850 3,843 0%
Ad & P Expenses 157 197 149 177 123 -21% -31%
Employee Cost 202 212 216 189 173 -14% -9% 794 790 -1%
Other Expenses 245 234 240 214 225 -8% 5% 1,707 1,560 -9%
EBITDA 415 349 408 334 418 1% 25% 1,518 1,509 -1%
Depreciation 36 34 36 33 40 11% 19% 133 143 7%
Interest 13 12 17 14 12 -12% -16% 48 54 11%
PBT 420 364 445 370 431 3% 17% 1,554 1,610 4%
Tax 87 70 87 75 98 13% 30% 300 330 10%
PAT 331 293 357 294 333 0% 13% 1,251 1,277 2%

International
business Expect subdued growth due to pressure on International Business going forward.
declined by
4.5% in cc
International business declined by 4.5% in constant currency terms led by currency devaluation in
term. Egypt, Turkey and Nigeria and Macro economic slowdown in MENA region.
Severe currency devaluation of ~55% in Egyptian Pound, ~20% in LIRA and ~36% in Naira led to
translation loss in the international business
Local currency growth for Egypt remained 19% while Nepal and Turkey recorded local currency
growth of 16% in Q4FY17.
Bangladesh recorded local currency growth of 2% in Q4FY17.
The company is facing headwinds in Saudi & UAE market. We expect it to remain for at least one
year. Although company has indicated that market shares in most categories & countries remained
stable to increasing but we remain bearish on overall International business considering slower MENA
region growth going forward.

Contribution from International business in total revenue declined from 34% to 25%.

Sales Contribution(Q1FY17) Sales Contribution(Q4FY17)

Others, 3% Others, 4%

International,
International, 25%
34%
Domestic
FMCG, 63% Domestic
FMCG, 71%

Please refer to the Disclaimers at the end of this Report

Narnolia Securities Ltd
 Margin % 4QFY16 1QFY17 2QFY17 3QFY17 4QFY17 YoY(+/-) QoQ(+/-) FY16 FY17 YoY(+/-)
Gross Margin 50.6% 51.4% 51.2% 49.4% 49.0% -1.6% -0.3% 51.1% 50.1% -1.0%
EBITDA Margin 20.7% 18.1% 20.6% 18.0% 21.8% 1.2% 3.8% 19.3% 19.6% 0.3%
PAT Margin 16.5% 15.2% 18.0% 15.9% 17.4% 0.9% 1.5% 15.9% 16.6% 0.7%

Gross margin declined by 168 bps YoY and 34 bps QoQ led by increase in material costs and adverse
currency impact.
EBITDA margin improved by 115 bps YoY and 379 bps QoQ on the back of lower employee expense
(down by 100bps) ,AD&P expense (down by 136 bps) and Other expense(down by 42 bps).
PAT margin improved by 91 bps YoY and 154 bps QoQ in Q4FY17.

Sales and PAT (in cr.) Domestic FMCG Revenue Break Up

2100 400 Domestic FMCG Revenue Break up(Q4FY17)
Net Sales(in cr) PAT(in cr)
2050 357 350
340 331 333
318
2000 293 294 300
287 283 285
262
1950 250 Health
Foods, 19% Supplements, 1
1900 211 200 Skin & 7% Digestives, 6%
Salon, 5%
1850 150
OTC&
1800 100 Home Care, 6% Ethicals, 9%
Oral Care, 16%
1869

1930

1950

1959

1972

1928

1981

1853

1915
2079

1907

2010

1750 50 Hair Care, 22%

1700 0

Concall Highlights(Q4FY17):
Translation loss Rural market is showing signs of revival.
remained Rs 79 New Launches: Red Gel Toothpaste Launched, Dabur Woman Restorative Tonic.
cr in Q4FY17. Media Spend: Expects sharp increase especially 2nd half of FY18.
International business: Translation loss remained Rs 79 Cr in Q4FY17.
If tax differential will be less in GST than chances of de-stocking will be less.
Secondary sales is much higher than primary sales in this quarter.
The company will curtail its promotions sharply going forward in FY18.
Tax rate: Under MAT for some more time.
Tezpur plant: Tezpur plant commissioned in March17.Excise duty benefit and 80i benefits will
remain for next 10 years.
Market share in toothpaste segment increased by 100 bps yoy.
Dabur gained volume market share by 70bps in Air fresheners and 100 bps in Mosquito
Repellant Creams YOY.
International business: Pressure in MENA region will remain for whole year.
Pricing action: The Company will take price hike only to maintain margin.
OTC remained subdued.
The company has inventory of 6-8 months of low priced raw honey. Company will not
increase prices in Q1FY18.

Please refer to the Disclaimers at the end of this Report

Narnolia Securities Ltd
 Investment Arguments:
Innovation and new product launches:The company has long history of products innovation and new
products launches. It had launched Amla Naturals in last quarter which has very encouraging response.
Recently DABUR has launched: Red Gel Toothpaste and Woman Restorative Tonic.
Strong Ayurvedic portfolio: The Company has strong Ayurvedic product portfolio and we expect
DABUR will be ultimate beneficiary in the long run of Patanjali initiatives of expending awareness about
ayurvedic products and its uses.
Strong financials: DABUR is one of the best companies in our FMCG basket. The companys sales
grew at the CAGR of 15% and PAT of 17% for last five years. It maintained average ROE of 34% for last
five years.
Expect media spending to increase sharply Expect contraction in margin going forward

Employee Expense Other expense Ad Expense

Gross Margin EBITDA margin
18%
60% 53% 52% 54% 52% 51% 51% 51%
16% 51% 50% 51% 49% 49%
14% 50%
12% 40%
10%
30% 22%
8% 18% 17% 18% 17%
21% 19% 21%
18%
21%
18%
6% 20% 14%

4% 10%
2%
0%
0%

Domestic FMCG Volume growth Local Currency Growth Rate

Domestic FMCG Volume Gr %

10.00% 8.70% Local Currency Growth Rate(Q4FY17)

8.10% 8.10%
7.40% 20% 19%
8.00% 7.00%
5.50% 18% 16% 16%
6.00% 4.50% 16%
4.10%
14%
4.00% 2.40% 12%
2.00% 10%
8%
0.00% 6%
-2.50% 4% 2%
-2.00%
2%
-4.00% -5.20% 0%
Egypt Nepal Turkey Bangladesh
-6.00%

View & Valuation

The company is facing headwinds in the international market which contributes approx. 25% of the total
revenue. We expect it to continue for at least next four quarters. Secondly companys management has
indicated that going forward they will increase their media spending sharply which may impact its margin
going forward as in this competitive environment it will be slightly tough to increase prices. Considering
subdued International business growth and expectation of contraction in margin going forward
on the back of higher Ad expenses we are Neutral on this stock.

Please refer to the Disclaimers at the end of this Report

Narnolia Securities Ltd
 Narnolia Securities Ltd
201 | 2nd Floor | Marble Arch Building | 236B-AJC Bose Road |
Kolkata-700 020 , Ph : 033-40501500
email: narnolia@narnolia.com, website
: www.narnolia.com

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