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FUNDAMENTALS VALUATION

BALMER LAWRIE & COMPANY

LIMITED

August 10, 2012

ANALYTICAL CONTACT

Mr. Amod Khanorkar +91-22-6754 3520 [email protected]

BUSINESS DEVELOPMENT CONTACTS

MUMBAI

Mr. Saikat Roy +91-22-6754 3547 [email protected]

KOLKATA

Ms. Priti Agarwal +91-33-40181600 [email protected]

CHENNAI

Mr. V Pradeep Kumar +91-44-2849 7812 [email protected]

AHMEDABAD

Mr. Mehul Pandya +91-79-40265656 [email protected]

NEW DELHI

Ms. Swati Agrawal +91- 11- 2331 8701 [email protected]

BANGALORE

Mr. Dinesh Sharma +91-80-2211 7140 [email protected]

HYDERABAD

Mr. Ashwini Kumar Jani +91-40-40102030 [email protected]

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Balmer Lawrie & Company Ltd

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EQUIGRADE

Financial Information Snapshot

(Rs. crore) FY11 FY12 FY13P FY14P

Total Revenues 2,051 2,240 2,500 2,600

EBIDTA 173 197 233 250

PAT 121 138 141 152

Fully Diluted EPS* (Rs.) 74.3 84.8 86.6 93.3

Dividend Per Share (Rs.) 26.0 28.0 29.0 30.0

P/E (times) 7.9 6.9 6.8 6.3

EV/EBIDTA (times) 3.7 3.3 2.8 2.6

* Calculated based on ordinary PAT on Current Face Value of Rs.10/share

EQUIGRADE – Analytical Power for Investment Decision

BALMER LAWRIE & COMPANY LTD Diversified - Public Sector Undertaking

Very Good Fundamentals, Moderate Upside Potential CMP: Rs 588 / CIV: Rs 660 1 Sensex: 17,560

CARE Equity Research assigns 4/5 on fundamental grade to

Balmer Lawrie & Company Ltd. (BLCL)

CARE Equity Research assigns a fundamental grade of 4/5 to BLCL.

This grade indicates ‘Very Good Fundamentals’. BLCL is a Central

Public Sector undertaking with a ‘Mini Ratna–I’ status. It is a

diversified, multi-location and multi-product medium-sized company

manufacturing steel barrels, greases & lubricants & performance

chemicals and carrying out various service-based activities such as

logistics management, tours & travels, project engineering &

consultancy in oil & infrastructure sector, container freight and tea

blending & packaging. It is almost a debt-free company with steady

financial performance during the last three years.

Valuation

CARE Equity Research values equity shares of BLCL at Rs.660 per

share. The value has been arrived using the Sum of Part valuation

methodology. We have valued the BLCL standalone business at

historical average one-year forward multiple of 6.7 times and have

valued BLCL’s stake in Balmer Lawrie - Van Leer Limited (40 per

cent stake) and Balmer Lawrie (UAE) LLC (49 per cent stake) at their

book value. BLCL’s 25 per cent stake in AVI – OIL India Pvt Limited

has been valued at 0.6x book value since the company has relatively

lower RoE of 8.5%. At the Current Market Price (CMP) of Rs.588 per

share as on August 10, 2012, the equity shares of BLCL have been

assigned a valuation grade of 4/5, indicating ‘Moderate Upside

Potential’ from the CMP.

August 10, 2012


www.careratings.com 2

EQUIGRADE

BLCL to benefit from Mini Ratna (Category I) status

BLCL is a ‘Mini Ratna – Category I’, Central PSU under the administrative control of Ministry of Petroleum &

Natural Gas, Government of India (GoI). BLCL was accorded Mini Ratna (Category II) status in 2003 and later

upgraded to Category I in 2006, in view of its improved financial performance. GoI owns 61.8% of BLCL’s equity

through Balmer Lawrie Investments Ltd as on June 30, 2012. Companies with Mini Ratna (category I) status are

empowered to invest up to Rs.500 crore in projects, without approval from the government, thereby enjoying greater

managerial and commercial autonomy in its mergers/amalgamations & acquisitions, formations of joint ventures

(JVs) and capital expenditure initiatives. Further, BLCL’s Central PSU status often helps BLCL to generate revenue

from other PSUs and Government departments, especially in service-strategic business units (SBUs).

Diversified business model; a de-risking strategy

BLCL is a diversified multi-product conglomerate, carrying out operations under seven SBUs, with presence in both

manufacturing and service sectors. Major manufacturing SBUs comprise industrial packaging (IP) and greases &

lubricants (GL) divisions, while key service SBUs include tour & travel (TT) and logistics infrastructure & services

(LIS) divisions. This apart, BLCL is also engaged in manufacturing performance chemicals and service-based

activities like project engineering & consultancy for oil & infrastructure sector. It is also engaged in container freight

and presence in tea blending & packaging business. CARE Equity Research believes such diversified business

model will help the company in mitigating any downswing in any particular sector.

Source: Company Reports and CARE Equity Research

FUNDAMENTAL GRADE Very Good Fundamentals 4/5



EQUIGRADE

Top-line for all the SBUs increased in FY12 over FY11, with TT, LIS and IP being the major contributors to the

turnover in FY12.

SBU-wise revenue (for major SBUs)


Each SBU is spearheaded by professionally qualified and experienced personnel. This SBU approach provides the

required focus and independence in each business unit; thus, aiding BLCL in identifying potential and vulnerable

SBU for taking strategic decisions accordingly.

Revenue to grow at a CAGR of 5.4% over the next two years

BLCL’s turnover grew at a compounded annual growth rate of 18% over the last three years (FY10-12), on account

of increase in turnover in all the major SBUs.

Recently commissioned Chittoor plant and expansion of Container Freight Stations (CFS) at Chennai, proposed

capacity expansion of CFS at Mumbai, Government’s thrust on tourism, development of domestic infrastructure and

higher disposable income in the hands of consumers are expected to provide steady growth momentum to the

revenue of the company over the short to medium term. CARE Equity Research expects the turnover of the

company to grow at a CAGR of around 5.4 per cent during FY12-14E.



EQUIGRADE

BLCL: Revenue and growth


Reputed clientele in TT-SBU, though skewed towards public sector

BLCL mainly caters to PSUs and Government departments. It has a strong clientele comprising reputed central

government organizations (like Indian Railways, SAIL, BHEL etc), oil companies (IOC, ONGC, etc.), ISRO and

defense entities. Hence, any austerity measure by GoI (like restriction imposed in FY10 on travel in the executive

class in the domestic sector and the business class in the international sector for employees working in PSUs and

Government Departments) shall have an immediate adverse impact on the revenue of BLCL’s TT SBU. To reduce

client concentration risk, BLCL is focusing on enhancing marketing strategies to cater to private sector clients as

well.

Volatility in raw material prices; a threat to EBITDA margin

The key raw material for the GL-SBU and IP-SBU are lube based oils (LBO) and steel products respectively. Being

linked to the crude oil prices, the price of LBO is highly volatile in nature. The steel prices are also highly volatile

and absence of any backward integration for steel adds to the woe. CARE Equity Research expects that any upward

movement in raw material price is not likely to trigger a commensurate finished product price adjustment, in view of

intensely competitive current market scenario. This might result in higher cost of sales - as the raw material cost is

the major cost driver for both the manufacturing SBUs – leading to an adverse impact on EBIDTA margin.



EQUIGRADE

Intense competition putting pressure on operating margin

IP industry is characterised by low entry barriers and surplus capacities. LIS and TT industries are dominated by a

large number of unorganised sector players, leading to intense competition. Further, any slowdown in the economic

activity in the country will adversely impact the performance of the LIS. This apart, there is increasing competition

in the CFS business from new players and setting up of own CFS by existing shipping lines. Accordingly, operating

margin of BLCL has consistently been in the range of 8-10% and is expected to hover in the same range during the

projected period.

Alternate packaging products and direct on-line ticket booking; key concerns

In IP-SBU, alternate packaging products like plastic drums are fast gaining market share, posing a challenge to steel

barrels and drums manufacturers. Further, the airline companies are facilitating direct dealings with the customers

by providing incentives and facilities for online bookings, posing a risk, to an extent, to the tour and travel industry.

EBIT of major SBUs EBIDTA level & margin of BLCL


Debt-free status of the company; providing good financial flexibility

The long-term debt-equity and overall gearing ratios of the company have been almost nil during the last three

account closing dates. Interest coverage has been strong, in view of negligible interest cost. The lower leverage

allows better financial flexibility to the company. CARE Research expects the company to capitalise on high growth

opportunities, without significantly leveraging its balance sheet.



EQUIGRADE

For the year ended/as on March 31, 2010 2011 2012 2013E 2014E

Long Term Debt Equity ratio (times) 0.01 0.00 0.00 0.06 0.04

Overall Gearing ratio (times) 0.01 0.00 0.00 0.09 0.09

Interest Coverage (times) 60.83 57.89 57.30 38.83 35.71

Operating ROCE (%) 37.79 37.34 35.88 34.17 31.17

ROE (%) 24.24 23.84 23.50 21.24 20.20


BLCL has major expansion plans in respect of LIS – SBU with estimated investment of over Rs.100 crore to be

financed at a debt-equity ratio of 0.4. In view of the same, CARE Research expects the debt-equity ratio to

deteriorate slightly to 0.06 in FY13E and improve thereafter.

It is also expected that BLCL will continue to report high operating ROCE & ROE, though declining, in future in

view of consistent returns from major SBUs.

BLCL: Return ratios


As on March 31, 2012, BLCL had an aggregate amount of Rs.290 crore (Rs.240 crore as on March 31, 2011) in

bank fixed deposits. The company also has substantial real estate properties in prime localities of India.



EQUIGRADE

Geographically diversified manufacturing & service units; majority have ISO accreditations

BLCL has five GL plants situated in Chennai, Kolkata, Silvassa, Mumbai and Taloja (Maharashtra) having ISO

9001:2008 accreditations. Its five IP plants located across Kolkata, Chennai, Mumbai, Silvassa and Faridabad

(Haryana) are also ISO 9001:2000 accredited. To further strengthen its reach and provide better service to local fruit

industry, BLCL commissioned a new barrel manufacturing plant at Chittoor (Andhra Pradesh) in FY11.

In Service SBUs, 10 out of 13 TT branches, spread across various Tier-I and Tier-II cities, are ISO 9001:2008

accredited. BLCL has widespread marketing and distribution footprints across India. Its pan-India presence provides

it an edge over competition by way of providing better customer services. SBU-wise number of establishments and

the status of ISO accreditation are furnished below:

BLCL’s manufacturing and service units

SBU No. of Units

in India

ISO

9001:2000

ISO

9001:2008

ISO

14001:2004

ISO

18001:2007

GL Manufacturing Units 5 5 - 3 -

Marketing Offices 9 - - - -

IP Manufacturing Units 5 - 5 2 -


Performance

Chemical

Manufacturing Units 1 1 1 1 -


Service Centre 5 - - - -

LIS Offices 18 2 6 3 3

TT Offices 13 - 10 - -

Engineering &

Projects/Refinery

Services

Office 1 - 1 - -

Tea Blending &

Packaging Unit 1 - - - -




EQUIGRADE

Joint ventures further add to the diversification; although most are at germinating stage

BLCL has formed JVs/subsidiaries across various business segments.

Snapshot of BLCL’s Group Companies and their performance in FY12

Company Subsidiary/JV % stake Total Income PAT Operations

Balmer Lawrie

(UK) Ltd. (BL-

UK)

Wholly Owned

Subsidiary 100 - Rs. 0.5 crore

Investment in JV company

PT Balmer Lawrie

Indonesia (50% stake)

Transafe

Services Ltd.

(TSL)

Joint Venture 50 Rs. 75.5 crore (Rs. 10.3

crore)

Container leasing, logistics

services including

warehousing operations and

manufacturing special

purpose containers

AVI - OIL

India Private

Ltd (AVI-OIL)

Joint Venture 25 Rs. 37.6 crore Rs. 2.1 crore

Production of high

performance synthetic oils

and aviation lubricants.

Balmer Lawrie

- Van Leer Ltd

(BLVL)

Joint Venture 40 Rs. 190.8

crore Rs. 9.0 crore

Manufacture of steel drum

closures and plastic drum

containers

Balmer Lawrie

(UAE) LLC

(BL-UAE)

Joint Venture 49 Rs. 531.1

crore *

Rs. 32.5

crore *

Packaging media including

steel drums & kegs, plastic

containers, tin cans etc.

Balmer Lawrie

Hind Terminals

Pvt. Ltd.

(BLHT)

Joint Venture 50% - -

* for the year ended December 31, 2011


BLCL’s aggregate exposure to its group companies as on March 31, 2012 was Rs.58.1 crore (Rs.81.0 crore as on

March 31, 2011), in the form investments and receivables, accounting for 9.4% of BLCL’s net worth. Majority of

the aforementioned exposure (Rs.25.0 crore) was to TSL.

TSL earlier was a joint venture between ICICI Venture, ICICI Trustee Services Ltd. and BLCL. In September 2009,

ICICI Venture & ICICI Trustee Services Ltd. sold their entire stake to BLCL & its subsidiary (BLVLL).

Subsequently, during the audit of TSL’s account in FY10, major accounting irregularities were detected and after

rectification thereof, TSL reported a loss of Rs.38.9 crore in FY10. BLCL had also filed a lawsuit for accounting

fraud against ICICI Venture and ICICI Trustee Services Ltd. As a matter of prudence, BLCL had written off its

entire equity investment in TSL (of Rs.11.66 crore) in FY10 and preference share investment (of Rs.11.82 crore) in

FY12. It has also written off 50% of non-recourse unsecured loan provided to BLVL (Rs.9.08 crore) for investment

in TSL.



EQUIGRADE

A scheme for restructuring the debts of TSL, under the Corporate Debt Restructuring (CDR) mechanism, was

approved by banks in October 2010. As per the agreement, BLCL, in view of being the parent company, infused

Rs.7.8 crore in the form of preference capital (Rs.6.0 crore) & unsecured loan (Rs.1.8 crore) to support operational

cash requirement in TSL. This apart, unsecured loan of Rs.7.3 crore earlier provided by BLCL to TSL, was also

converted into preference shares. As per CDR agreement, parts of loan outstanding extended by banks to TSL, have

also been converted into redeemable preference shares. TSL is operating primarily in the logistic sector and its long-

term business prospect is positive. However, due to high operational cost, the company reported a loss of Rs.10.3

crore in FY12.

BLCL is in compliance with the listing agreement

BLCL’s board comprises of 12 directors, of which eight are independent directors. Two independent directors are

nominees of GoI. Thus, two-third of the board comprises of independent directors. BLCL is in compliance with the

provisions of the listing agreement in respect of corporate governance, especially with respect to broad basing of the

Board of Directors and constituting committees. BLCL has formed five Board level Committees, i.e. Audit

Committee, Shareholders’/Investors’ Grievance Committee, Share Transfer Committee, Remuneration Committee

and Committee for issue of Power of Attorney to functionaries and other miscellaneous matters. Audit Committee,

Shareholders’/Investors’ Grievance Committee and Remuneration Committee are chaired by independent directors

as required under the listing agreement. All directors are qualified professionals with rich industry experience.

BLCL: Board of Directors

Source: Company Reports

Name Qualification Position

Shri V. Sinha B. A., MBA Chairman & Managing Director

Shri V. N. Sharma B. Tech, MBA Director (Manufacturing)

Shri K. Subramanyan B. Com, ACA Director (Finance)

Shri. P. P. Sahoo M.A. (PM & IR) LL.B Director (Human Resource &

Corporate Affairs)

Shri Sri Prakash M.A GoI nominee Director

Shri VLVSS Subba Rao M.A (Economics)., IES GoI nominee Director

Shri K. C. Murarka B.Sc. Independent Director

Shri Arun Seth B.Tech., MBA Independent Director

Shri M. P. Bezbaruah

M.A., Masters in Public

Administration (Harvard

University), IAS (retired).

Independent Director

Shri P. K. Bora M.A. IAS (retired) Independent Director

Shri A. K. Bhattacharyya M.Com, FCA, FICWA, D. Phil Independent Director

Smt. Abha Chaturvedi PhD, Master in Indian & Western

Philosophy Independent Director



EQUIGRADE

Qualified and experienced team

BLCL is a professionally managed company and has employees with high academic qualifications and wide

experience. The organisation structure is well-defined with clear departmental demarcation. The company is

currently operating under the leadership of Shri V. Sinha, who took over as Chairman & Managing Director (CMD)

of BLCL on January 1, 2012,. He succeeded Mr S. K. Mukherjee, who retired from the post of CMD on December

31, 2011 after serving as MD since April 1, 2005 and as a CMD subsequently. Prior to his appointment as CMD, Mr

Sinha was Director (Services) overseeing the TT & LIS SBUs. In his 29 years of career in BLCL, he has

successfully handled diverse leadership roles in sales & marketing, operations and materials management, including

11 years as the head of Balmer Lawrie's operations in UK. The following are the details of some of the other key

executives:-

BLCL: Management Team

Name Designation Qualification Experience (yr)

Shri N. Gupta Executive Director (Logistics) B.Com (H), ACA 31

Shri A. Dayal Executive Director (Industrial Packaging) B.A., Diploma in mktg.

management 34

Shri K. Gopinathan Executive Director (Lubes & Chemicals) B. SC. (Engg.) Mech. 35

Smt. A. Ghosh Chief Vigilance Officer MA in Humanities 25

Shri P. Basu General Manager (Finance) B.Com (H), ACA,

AICWA, ACS 24

Shri A. Ghosh Company Secretary B.Com (H), ACA,

ACS, LLB 30

Source: Company Reports

http://economictimes.indiatimes.com/topics.cms?search=Viren%20Sinha

http://economictimes.indiatimes.com/topics.cms?search=CMD



EQUIGRADE

CARE Equity Research assigns a valuation grade of 4/5 to the equity shares of BLCL

According to CARE Equity Research, the Current Intrinsic Value (CIV) of BLCL stands at Rs.660 per share,

which translates into an Enterprise Value of Rs.760 crore. Thus, BLCL has ‘Moderate Upside Potential from its

Current Market Price (CMP) of Rs.588 per share.

The CIV is calculated based on Sum of Parts Valuation Methodology

CARE Equity Research has arrived at the CIV of the stock on the basis of Sum of Parts Valuation method.

CARE Equity Research has valued BLCL’s standalone businesses using 1-year forward rolling Price-

Earnings (P-E) multiple approach.

The company’s 40 per cent stake in BLVL and 49 per cent stake in BL-UAE have been valued at book

value.

The company’s 25 per cent stake in AVI -OIL has been valued at 0.6x book value since the RoE for AVI-

OIL is on the lower side at 8.5%.

CARE Equity Research has not assigned any value to its TSL given uncertainty the cash-flows from this

company (which is based on receipt of certain orders), however if these orders materialise it would provide

additional upside to the CIV.

BLCL: Valuation Based on SoTP

Valuation Method Multiple

Equity Value

(Rs. Crore)

Per Share

(Rs.)

BLCL (Stand Alone) 1 yr forward PE multiple 6.7 934.7 574

BLVL Price/Book Value 1.0 26.2 16

BL-UAE Price/Book Value 1.0 109.2 67

AVI-OIL Price/Book Value 0.6 5.4 3

CIV 660

Source: Company and CARE Equity Research

VALUATION GRADE Moderate Upside Potential 4/5



EQUIGRADE

BLCL: One-year forward rolling P/E One-year forward rolling EV/EBITDA

Source: BSE and CARE Equity Research

0.0

2.0

4.0

6.0

8.0

10.0

12.0

14.0

Apr-06 Apr-07 Apr-08 Apr-09 Apr-10 Apr-11

Pri

ce/E

arn

ings

(x)

P/E

-

1.0

2.0

3.0

4.0

5.0

6.0

7.0

Apr-06 Apr-07 Apr-08 Apr-09 Apr-10 Apr-11

EV

/EB

ITD

A(x

)

Ev/Ebitda



EQUIGRADE

Background

The history of BLCL dates back to 1867, when a partnership firm was established by two Scotsmen, Mr. Stephen

George Balmer and Mr. Alexander Lawrie. In 1924, the firm was taken over by five Englishmen and was converted

into a private limited company. It was converted into a public limited company in 1936. In 1968, Duncan Brothers

acquired the company and in 1972, divested their stake in favour of Indo-Burma Petroleum Company Ltd. (IBP).

With the nationalisation of oil companies in 1972, including IBP, BLCL became a public sector undertaking under the

administrative control of Ministry of Petroleum & Natural Gas, Government of India (GoI). After the divestment of

GoI’s stake in IBP in favour of Indian Oil Corporation Ltd. in 2001, IBP transferred its entire stake in BLCL to

Balmer Lawrie Investments Limited (BLIL), a PSU, and hence, BLCL continues to be a PSU.

In the initial years of operations, BLCL was only into trading business. In 1937, BLCL entered into manufacturing

arena when it set up its first grease plant at Kolkata. Over the years, BLCL forayed into several other activities like

manufacturing of different types of barrels & containers and offering varied services.

History

Strategic Business Units

Currently, BLCL is engaged in both manufacturing operations as well as rendering services through its seven SBUs.

On the manufacturing front, it is mainly engaged in manufacturing of IP products and GL. On the service front, which

constitutes the major business activity, the company offers services mainly in the LI, LM and TT segments. These

five activities, in aggregate, contributed to more than 95% of the gross turnover during the last three years.

COMPANY BACKGROUND



EQUIGRADE

IP: BLCL is the largest manufacturer of steel barrels in India. It offers 165-210 litre capacity mild steel barrels for

packaging of lubricating oils & greases, additives, transformer oil, chemicals & agro chemicals, food & fruit products

and bitumen.

IP –SBU reported gross sales of Rs.445 crore (constituting 20 per cent of BLCL’s revenue) in FY12 - an increase by

15% over FY11.

GL: BLCL has been in the business of manufacturing GL for over seven decades, under the brand ‘Balmerol’. SBU-

GL reported gross sales of Rs.386 crore (representing 17 per cent of BLCL’s revenue) in FY12 - an increase by 16

per cent over FY11.

To boost its presence in this sector, BLCL proposes to introduce more value-added products for niche markets,

particularly for the automobile segment.

TT: BLCL is the oldest International Air Transport Association (IATA) accredited travel agency in India. BLCL

carries on TT business under three main segments viz., Domestic Travel, International Travel and Tours. Revenue

from TT-SBU constituted 40 per cent of BLCL’s revenue in FY12, increase of 6% over FY11.

LIS: Key revenue generating activities in this SBU are air cargo handling, customs clearance, chartering, operating

CFS, warehousing and distribution. BLCL’s CFSs are located in Navi-Mumbai, Chennai and Kolkata. These three

ports account for more than 75 per cent of the total container traffic in India.

Others: Apart from the above, BLCL is engaged in manufacturing performance chemicals and service-based

activities like project engineering & consultancy for oil & infrastructure sector, refinery & oilfield services and tea

blending & packaging.



EQUIGRADE

Greases & Lubricants:

The Indian GL market is the sixth largest in the world, with current annual consumption and turnover of about 1.5

million tons and Rs.12,000 crore respectively. The GL industry is divided into two major segments – industrial and

automotive accounting for about 35% and 65% of the market respectively. The PSU oil companies are able to

maintain their stronghold in the industry successfully.

CARE Research believes that, in the long run, technology would be a major differentiating factor as the industrial and

automotive sectors are undergoing major technology upgradation programme. Companies with proven source of

premium quality base stocks, sound R&D setup, wide distribution network and wide infrastructure of professionalized

technical services will continue to survive and grow.

Industrial Packaging:

The IP industry is characterised by low entry barriers, large number of manufacturers and surplus capacities. The

major consumer segments for barrels and drums include lubricating oils and greases, transformer oil, agro-chemicals

& other chemicals, paints, food products, bitumen, etc. However, the industry needs to look beyond its existing

market bringing within its fold other non-lube sectors to tide over the feasibility issues. CARE Research believes that

widespread market reach, large volume, competitive pricing and access to alternate markets would be major survival

factors for the players in the long run.

Tours & Travels:

The Indian TT industry is one of the fastest growing industries in India. This industry is also a prominent foreign

exchange earner for the country. It is concentrated with a few multi-locational large agencies and a multitude of small

operators. The main reason for this congestion is the low capital intensity of the business and absence of major entry

barriers.

Global economic meltdown had a significant impact on this industry leading to significant drop in national and

international travel. Lower demand led to stiff competition, which resulted in significant fall in air ticket prices.

However, from FY11, with the revival of demand, average prices of air tickets started to pick up and commission

income for most of the travel agencies increased accordingly.

Government’s thrust on tourism, implementation of bilateral air service agreements and development of domestic

infrastructure are expected to boost the growth of the tourism segment. Travel agents are expected to profit from such

tourism boom, though the threat of commission cut is also contemplated due to the advent of international airlines and

direct on-line bookings.

SNAPSHOT OF THE INDUSTRY



EQUIGRADE

Logistics:

The Indian logistics industry suffers from inadequate infrastructure, lack of technological developments and complex

tax laws. GoI has initiated efforts towards building road infrastructure to bring major benefit for the logistic industry.

As transportation is the key activity for this industry with low operating margin, oil price movement is one of the

major issues. The key success factor is efficient distribution network (extending to rural areas as well) and ability to

provide complete logistic solution to the customers. BLCL is focusing on these areas to improve its revenue per

customer as well as the overall margin.



EQUIGRADE

Income Statement

(Rs. Crore) FY10 FY11 FY12 FY13E FY14E

Total Revenues 1,673 2,051 2,240 2,500 2,600

EBITDA 155 173 197 233 250

Depreciation and amortization 12 12 15 17 18

EBIT 143 161 182 216 232

Interest 3 3 3 6 7

PBT 153 181 194 210 225

Reported PAT 117 121 138 141 152

Fully Diluted Earnings Per Share* (Rs.) 72.0 74.3 84.8 86.6 93.3

Dividend, including tax 44 49 53 55 57

* Calculated based on ordinary PAT on Current Face Value of Rs. 10/- per share

Balance Sheet

(Rs. Crore) FY10 FY11 FY12 FY13E FY14E

Tangible Net worth 462 534 619 705 800

Total Debt 5 1 0 62 68

Deferred Liabilities / (Assets) 11 8 1 (1) (3)

Capital Employed 478 543 620 766 865

Net Fixed Assets, (incl. CWIP, net of revaluation reserve) 197 263 264 262 309

Investments 44 57 45 67 77

Inventory 92 119 123 132 137

Receivables 245 310 354 381 393

Cash and Cash Equivalents 266 266 315 350 400

Loans and Advances 90 48 58 143 150

Less: Current Liabilities and Provisions 457 521 540 568 600

Total Assets 478 543 620 766 865

Ratios based on Financials

FY10 FY11 FY12 FY13E FY14E

Growth in Total Revenues (%) (1.4) 22.6 9.2 11.6 4.0

Growth in EBITDA (%) 12.1 11.7 13.9 18.1 7.3

Growth in PAT (%) 15.3 3.2 14.0 2.1 7.8

Growth in EPS (%) 15.3 3.2 14.0 2.1 7.8

EBITDA Margin (%) 9.4 8.5 8.5 9.3 9.6

PAT Margin (%) 5.8 5.9 5.5 5.6 5.8

RoCE (%) 37.8 37.3 35.9 34.2 31.2

RoE (%) 24.3 23.9 23.6 21.3 20.2

Net Debt-Equity (x) 0.01 - - 0.06 0.04

Interest Coverage (x) 60.8 57.9 57.3 38.8 35.7

Current Ratio (x) 1.5 1.5 1.7 1.8 1.8

Inventory Days 21 21 22 20 21

Receivable Days 50 48 50 53 54

Price / Earnings (P/E) Ratio

6.9 6.8 6.3

Price / Book Value (P/BV) Ratio

1.5 1.4 1.2

Enterprise Value (EV)/EBITDA

3.3 2.8 2.6

Source: Company and CARE Equity Research

FINANCIAL ANALYSIS



EQUIGRADE

CARE EquiGrade Grid (CEG)

Through CEG, CARE Equity Research addresses two critical factors considered by an investor while investing in a

particular company’s equity shares:

1. Fundamentals: Whether the company is fundamentally sound with respect to its business, its financial position, its

management and its prospects.

2. Valuation: What is the Current Intrinsic Value (CIV) of the stock and how it compares vis-a-vis its Current Market

Price (CMP).

These factors are answered assigning quantitative grades to both these parameters. CEG is the snapshot of ‘Fundamental

Grade’ and ‘Valuation Grade’ assigned by CARE Equity Research.

Fundamental Grade

This grade represents how sound the company is fundamentally, vis-à-vis other listed companies in India. This grade

captures:

1. Business Fundamentals and Prospects

2. Financial Soundness

3. Management Quality

4. Corporate Governance Practices

The grade is assigned on a five-point scale as under:

CARE Fundamental Grade Evaluation

5/5 Strong Fundamentals

4/5 Very Good Fundamentals

3/5 Good Fundamentals

2/5 Modest Fundamentals

1/5 Weak Fundamentals

Valuation Grade

This grade represents the potential value in the company’s equity share for the investor over a 1-year period. The Current

Intrinsic Value (CIV) or the price arrived by CARE Equity Research on fundamental basis is compared with the Current

Market Price (CMP) of the stock and the grade is assigned based on the gap between CIV and CMP of the stock.

The grade is assigned on a five-point scale as under:

CARE Valuation Grade Evaluation

5/5 Considerable Upside Potential (>25% upside from CMP)

4/5 Moderate Upside Potential (10-25% upside from CMP)

3/5 Fairly Priced (+/-10% from CMP)

2/5 Moderate Downside Potential (10-25% downside from CMP)

1/5 Considerable Downside Potential (>25% downside from CMP)

Grading determination is a matter of experienced and holistic judgment, based on relevant quantitative and

qualitative factors of the company in relation to other listed companies.

EXPLAINATION OF GRADES



EQUIGRADE

DISCLOSURES

Each member of the team involved in the preparation of this grading report, hereby affirms that there exists no conflict

of interest that can bias the grading recommendation of the company.

This report has been sponsored by the company.

DISLCLAIMER

This report is prepared by CARE Research, a division of Credit Analysis & REsearch Limited [CARE]. CARE Research

has taken utmost care to ensure accuracy and objectivity while developing this report based on information available in

public domain or from sources considered reliable. However, neither the accuracy nor completeness of information

contained in this report is guaranteed. Opinions expressed herein are our current opinions as on the date of this report.

CARE’s valuation of the security is mainly based on company-specific fundamental factors. Equity prices are affected by

both fundamental factors as well as market factors such as – liquidity, sentiment, broad market direction etc. The impact of

market factors can distort the price of the security thereby deviating from the intrinsic value for extended period of time.

CARE EquiGrade on a security should not be construed as recommendation to buy, sell or hold a security; also it is not a

comment on the suitability of the investment to the reader. The subscriber / user assume the entire risk of any use made of

this report or data herein. CARE specifically states that it or any of its divisions or employees do not have any financial

liabilities whatsoever to the subscribers / users of this report. This report is for personal information only of the authorised

recipient in India only. This report or part of it should not be reproduced or redistributed or communicated directly or

indirectly in any form to any other person, especially outside India or published or copied for any purpose.

“Credit Analysis and Research Limited proposes, subject to receipt of requisite approvals, market conditions and other

considerations, to make an initial public offer of its equity shares and has filed a draft red herring prospectus (“DRHP”)

with the Securities and Exchange Board of India (the “SEBI”). The DRHP is available on the website of SEBI at

www.sebi.gov.in as well as on the websites of the Book Running Lead Managers at www.investmentbank.kotak.com,

www.dspml.com, www.edelcap.com, www.icicisecurities.com, www.idbicapital.com, and www.sbicaps.com. Investors

should note that investment in equity shares involves a high degree of risk and for details relating to the same, see the

section titled “Risk Factors” of the DRHP.”

[“This press release is not for publication or distribution to persons in the United States, and is not an offer for sale within

the United States of any equity shares or any other security of Credit Analysis and Research Limited. Securities of Credit

Analysis and Research Limited, including its equity shares, may not be offered or sold in the United States absent

registration under U.S. securities laws or unless exempt from registration under such laws.”]

Published by Credit Analysis & REsearch Ltd., 4th Floor Godrej Coliseum, Off Eastern Express Highway, Somaiya

Hospital Road, Sion East, Mumbai – 400 022.

CARE Research is not responsible for any errors or omissions in analysis/inferences/views or for results obtained from the

use of information contained in this report and especially states that CARE (including all divisions) has no financial liability

whatsoever to the user of this product. This report is for the information of the intended recipients only and no part of this

report may be published or reproduced in any form or manner without prior written permission of CARE Research.

http://www.sebi.gov.in/

http://www.investmentbank.kotak.com/

http://www.dspml.com/

http://www.edelcap.com/

http://www.icicisecurities.com/

http://www.idbicapital.com/

http://www.sbicaps.com/



EQUIGRADE

Credit Analysis & REsearch Ltd. (CARE) is a full-service rating company that offers a wide range of rating and grading services across

sectors. CARE has an unparallel depth of expertise. CARE Ratings methodologies are in line with the best international practices.

CARE Research

CARE Research is an independent research division of CARE Ratings, a full-service rating company. CARE Research is involved in

preparing detailed industry research reports with 5-year demand and 2-year profitability outlook on the industry besides providing

comprehensive trend analysis and the current state of the industry. CARE Research offers reports on various industries which are

updated on a monthly/quarterly basis. Subscribers can access CARE Research reports online. CARE Research also offers research

that is customized to client requirements. Customized Research involves business analysis and position in the market, financial

analysis and market sizing etc.

CREDIT ANALYSIS & RESEARCH LTD

HEAD OFFICE |Mr. Saikat Roy | Cell: +91-9820998779| Tel: +91-22-6754 3547 | E-mail: [email protected]

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