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Adani Ports and SEZ Limited ADSEZ IN; APSE.BO October 30, 2014Marine Ports & Services | India

SBICAP Securities Ltd (SSL)Mafatlal Chambers, A-Wing 2nd Floor, N.M. Joshi Marg Lower Parel, Mumbai - 400013 + 91-22-4227 3300/01 [email protected]

Viral Shah +91 22 4227 3388 [email protected] Pranjal Sanghvi +91 22 4227 3428 [email protected]

Copper–bottomed Assets

Adani Ports & SEZ Ltd SBICAP Securities Ltd

[email protected] I [email protected] October 30, 2014 | 2

Copper-bottomed Assets; Re-initiate a BUY

Adani Ports and SEZ Ltd (APSEZ) is the largest multi-cargo port developer and operator in India, having ~11% of total EXIM cargo market share. Over time, APSEZ has expanded its presence across the country starting from Mundra on the west coast to Dhamra on the east coast, having a total operating capacity of 306MMT, which would further expand to 351MMT by F17e. We believe APSEZ is by far the best infrastructure asset having strong competitive advantage due to a) strategic locations with deep drafts, b) well established connectivity, c) low turnaround time, d) improving return ratios and e) rising cash flows. We expect it to report consolidated top-line/bottom-line 25.8%/29.8% CAGR over F14–F17e, respectively. We re-initiate our coverage with a BUY rating on APSEZ with a target price of Rs327 based on sum-of-the-parts (SOTP).

Mundra–a marquee asset: APSEZ’s flagship asset, Mundra Port (with operating capacity of 208MMT), is one of its best infrastructure assets, having the first mover advantage, with a) strategic location, b) well established connectivity, c) lower turnaround time and d) pricing freedom. Despite being the only commercial port to handle ~101MMT cargo in F14, Mundra port is still operating at 48.5% blended capacity utilization; hence, we believe it is well poised to benefit from any uptick in cargo volumes and high industrial activities (DMIC, DFC and smart cities) in the area.

Well diversified cargo mix: APSEZ handles a diverse mix of cargo such as coal (32%), crude oil (31%), containers (18%) and dry bulk and others (19%), thereby mitigating the concentration risk. While Mundra, Dahej and Hazira Ports are fully operational, supplemental commissioning of Vizag and Goa Ports (which handles coal and dry bulk cargo) and Ennore Port (which handles container cargo) would offer good diversity of overall cargo mix at APSEZ.

Dhamra Port–strong gateway on the east coast: APSEZ acquired 100% stake in Dhamra Port from L&T–Tata Steel JV for an EV of Rs55bn. We believe it is an attractive asset providing meaningful presence across the eastern coast of India, given its strategic location, strong connectivity in terms of road, rail and well-mechanised berths along with deep drafts. As on F14, the port handled 14.3MMT (29% YoY) of dry bulk cargo and is expected to grow 10% CAGR over F14–F17e.

Valuation: We have used SOTP valuation method for APSEZ. We have valued Ports and SEZ business on DCF basis at 13% and 15% CoE and logistic business at a P/E multiple of 15x, which is at a discount of 30% to CONCOR. We re-initiate our coverage on the stock with a BUY rating and target price of Rs327, indicating an upside of 20%. We have not given any value for non-operational ports in our SOTP valuations.

Key risks: a) lower than expected recovery in global trade and b) sluggish economic growth.

Financial SummaryY/E Mar (Rs mn) F13 F14 F15e F16e F17eNet sales 35,766 48,240 68,784 80,996 95,976growth (%) 32.6 34.9 42.6 17.8 18.5 EBITDA margin (%) 66.4 60.5 62.2 62.8 63.3Adjusted net profit 15,379 17,624 23,848 28,974 38,287EPS (Rs) 7.7 8.5 11.5 14.0 18.5growth (%) 0.0 10.9 35.3 21.5 32.1P/E (x) 35.4 31.9 23.6 19.4 14.7EV/EBITDA (x) 27.5 23.5 17.1 14.2 11.6Dividend yield (%) 0.4 0.4 0.6 0.7 1.0RoE (%) 24.0 23.2 24.4 24.0 25.6RoCE (%) 9.7 11.5 12.0 12.3 14.0Source: Company, SSLe

Re-Initiating Coverage BUY

Current price (29 Oct) RsTarget price RsUpside/(downside) % 20 Earning estimate Revised

Market dataMkt capitalisation Rs bn 563.0Average daily vol '000 1323.052-week H/L Rs 302.7 / 140.6Shares O/S mn 2070.1Free float mn 517.5Promotor holding % 75.0Foreign holding % 17.9Face value Rs 2.0

Price performance (%)1m 3m 6m 1yr

Nifty (abs) 1.7 4.4 20.5 30.1Stock (abs) (3.4) 2.2 42.0 87.4Relative to Index (5.0) (2.2) 21.5 57.4

Performance

272 327

(20)

10

40

70

100

100

160

220

280

340

Oct-13 Jan-14 Apr-14 Jul-14 Oct-14

Adani Ports (LHS) Rel. to Nifty (RHS)

(%)(Rs)

Source: Bloomberg, SSLe



Industry snapshot

Well placed for economic recovery India has a vast coast-line measuring 7,515km, with 13 major ports and 207 non-major ports handling ~95% of India’s international trade by volume and ~77% by value. Over the years, India has emerged as a preferred investment destination and outsourcing/manufacturing hub, which has helped India, achieve strong growth in trade volumes (19.1% CAGR over C00–12). This has led to strong port volume growth in India from 650MMT in F07 to 976MMT in F14, registering 6% CAGR over F07–F14. We expect continued traffic volume growth at all ports, led by improving economic global scenario and revival of the Indian economy. In addition, India is emerging as a global export hub for grains, import of goods for heavy civil infrastructure and capital goods industries.

Exhibit 1: Past trend of Indian seaborne trade growth Exhibit 2: EXIM volume has grown ~7.9% CAGR over F04–F14

(16.0)

(8.0)

0.0

8.0

16.0

F08 F09 F10 F11 F12 F13 F14

(%)

World Trade Volume World Seaborne CargoIndian Seaborne Cargo

345

384

424

464

519

531

561

570

560

546

555

(5.0)

0.0

5.0

10.0

15.0

0

150

300

450

600

F04

F05

F06

F07

F08

F09

F10

F11

F12

F13

F14

(%)

(MM

T)

Total EXIM Volume (LHS) % Growth YoY (RHS)

Source: Ministry of Shipping, Maritime Agenda 2020, SSLe

Growth in GDP is positively correlated to growth in EXIM Ports play a vital role in an economy. Over F04–F14, India’s GDP has grown 7.5% CAGR, while cargo volumes at ports registered 7.7% CAGR. This shows that there has been a positive correlation between growth in EXIM and GDP. We expect improvement in GDP to lead to proportionate improvement in EXIM trade volumes, thereby increasing volumes at ports.

Exhibit 3: Growth in GDP augurs well for EXIM volume growth Exhibit 4: Revival in economy to boost GDP and EXIM volume

-5

0

5

10

15

F01

F02

F03

F04

F05

F06

F07

F08

F09

F10

F11

F12

F13

F14

(%)

EXIM Trade Volume (% chg) GDP at Contant prices (% chg)

0

10

20

30

40

F01

F02

F03

F04

F05

F06

F07

F08

F09

F10

F11

F12

F13

F14

(%)

EXIM trade in value (% chg) GDP at Contant prices (% chg)

Source: Ministry of Commerce, SSLe



Strong volume growth at non-major ports: Due to a) higher utilization levels (>90%), b) poor infrastructure and c) longer turnaround time at major ports, volume growth at non-major ports is 43% of cargo handled in F14 (faster compared to major ports). Non-major ports registered 13.3% volume CAGR over F04–F14; compared with 4.9% volume CAGR handled by major ports. We expect non-major ports to continue their growth momentum driven by a) better infrastructure, b) shorter turnaround time, c) assured captive cargo and d) better port operating efficiency.

Exhibit 5: Volumes at non-major ports growing at faster rate Exhibit 6: Non-major volumes grew 13.3% CAGR over F04–F14

26 26 26 29 28 29 34 36 39 42 43

74 74 74 71 72 71 66 64 61 58 57

0

25

50

75

100

F04

F05

F06

F07

F08

F09

F10

F11

F12

F13

F14

% s

hare

Major ports Non-major ports

121

138

146

186

204

213

289

315

353

388

420

0

10

20

30

40

0

120

240

360

480

F04

F05

F06

F07

F08

F09

F10

F11

F12

F13

F14

(%)

(MM

T)

Non-major ports volume (LHS) Growth (RHS)

Source: Ministry of Shipping, IPA, SSLe

Mundra well geared up for pick up revival in economy: Of the total volumes handled at non-major ports, Mundra accounts for 24.1% of total cargo volumes handled in F14. Mundra has capacity of 208MMT, which is currently operating at blended capacity utilization of 48.5%; hence, with huge capacity and excellent infrastructure, it is well poised to benefit from any uptick in cargo volumes and high industrial activities (DMIC, DFC and smart cities) in the area.

Exhibit 7: Mundra Port gaining market share in non-major ports Exhibit 8: Largest private port handling ~101MMT in F14

4 7 8 11 14 17 14 16 18 21 24

96 93 92 89 86 83 86 84 82 79 76

0%

25%

50%

75%

100%

F04

F05

F06

F07

F08

F09

F10

F11

F12

F13

F14

% share of non-major ports % share of Mundra

40 5264

82

101113

126141

0%

10%

20%

30%

40%

0

40

80

120

160

F10 F11 F12 F13 F14 F15e F16e F17e

(MM

T)

Mundra volume (LHS) Volume growth YoY% (RHS)

Source: Ministry of Shipping, Company, SSLe

Cargo volumes were handled at non-major ports due to capacity constraints faced at various major ports



Investment rationale

Integrated player with flagship asset Mundra Port APSEZ is the largest multi-cargo port developer and operator in India, having ~11% market share in the total EXIM cargo. Over time, the company has expanded its presence across the country starting from Mundra to Dhamra. As of F14, APSEZ has 306MMT total capacity, with a) six operational ports having 15 terminals, 34 berths and two single-point mooring facilities and b) two inland container depots at Patli and Kishangarh (providing integrated port services ranging from anchorage of vessels to evacuation of cargo and regional infrastructure). We expect the capacity to increase to 351MMT by F17e, driven by commissioning of new port projects, inorganic growth and capacity addition at existing operational ports.

Exhibit 9: APSEZ Port details

Ports Status Type of Cargo Berths Berth

Length (m)Draft (m)

Concession period till

Capacity (MMT)

Capacity (TEU)

F13 (MMT)

F14(MMT)

Mundra Operational Multi-cargo 23 6,789 17-20 30 years 208 4mn 82.1 101.1

Dahej Operational Dry bulk 2 560 17 30 years 20 7.6 7.9

Hazira Operational Multi-cargo 5 1,580 17 30years 37 1.5mn 1.0 3.7

Kandla Operational by F16 Dry bulk 4 1,178 16 30 years 14 - -

Vizag Operational Coal 1 280 16 30 years 6 - -

Goa Operational Coal 1 300 16 30 years 10 - -

Ennore Operational by F17 Containers 2 780 18 30 years 12 0.8mn (Ph-I) - -

Dhamra Operational Dry bulk 2 700 18 34 years 25 - - Source: Company, SSLe Exhibit 10: Increasing share of non-major ports in India Exhibit 11: APSEZ accounts ~27% of cargo at non-major ports

89 96 105

121

138

146

186

204

213 28

9

315

353

388

420

281 28

8 314 34

5 384 423 46

4 519

531 56

1

570 56

0 546 55

5

0

250

500

750

1000

F01

F02

F03

F04

F05

F06

F07

F08

F09

F10

F11

F12

F13

F14

(MM

T)

Major ports Non-major ports

0 3 4 5 9 12 20 29 36 40 52 78 91 112

89

93 101 116 129

134 16

6

175

177 24

9

263 27

6 297 30

8

89 96 105 121 138 146186 204 213

289315

353388

420

0

125

250

375

500

F01

F02

F03

F04

F05

F06

F07

F08

F09

F10

F11

F12

F13

F14

(MM

T)

APSEZ Non-major ports Source: Ministry of Shipping, IPA, Company, SSLe

Exhibit 12: APSEZ capacity to increase to ~350MMT by F17e Exhibit 13: Utilization at ~37% posing expansion opportunities

75 75 75 76 76 76 76

30 30 65 80 97 97 12450 5050 50 50 50

50

30 30

65100 100 100

100

0

100

200

300

400

F11 F12 F13 F14 F15e F16e F17e

(MM

T)

Bulk & others Crude Container Coal

14 19 27 36 41 51 60 18 20 26 35 41

47 57

7 9 17

20 23 25

28

12 19 21

21 44

52 60

0%

15%

30%

45%

60%

0

60

120

180

240

F11 F12 F13 F14 F15e F16e F17e

(MM

T)

Bulk & others CrudeContainer Coalutilisation rate (RHS)

Source: Company, SSLe

APSEZ currently operates at capacity of 306MMT and is all set to scale up to ~351MMT by F17e on back of

commissioning of new projects



Largest commercial port by overtaking Kandla in cargo handing Mundra port has registered a healthy cargo volume growth of 23.1% CAGR over F09–F14, making it the only commercial port to handle 100MMT plus cargo. It has overtaken Kandla port, which handled highest cargo of 93.6MMT in F13. We expect APSEZ to continue its strong volume growth, led by a ramp up in cargo by anchor customers, PSA, commencement of Goa and Vizag Ports, synergies arising recent acquisition of Dhamra Port and high utilization rate at Mundra Port.

Exhibit 14: Only commercial port to handle ~101MMT cargo (F14) Exhibit 15: Mundra represents 18% of cargo at major ports

1329

6859

2751

2921

3912

5962

87101

0 30 60 90 120

KolkataHaldia

ParadipVisakhapattam

EnnoreChennaiTuticorin

CochinNew Mangalore

MormugaoMumbaiJ.N.P.TKandlaMundra

(MMT)

0

175

350

525

700

F01

F02

F03

F04

F05

F06

F07

F08

F09

F10

F11

F12

F13

F14

(MM

T)Mundra Kandla J.N.P.T MumbaiMormugao New Mangalore Cochin TuticorinChennai Ennore Visakhapattam ParadipHaldia Kolkata

Source: IPA, Company, SSLe

Diversified product mix mitigates concentration risk In terms of cargo, the APSEZ Port handles the diverse nature of cargo such as coal, crude oil, containers and dry bulk cargo, thereby mitigating concentration risk and helping in sustaining growth of overall business cycle. As of F14, income from port operation rose 33% CAGR YoY over F10–F14, led by robust cargo volume growth (CAGR of 29% over F10–F14). While Mundra, Dahej and Hazira Ports are fully operational, supplemental commissioning of Vizag and Goa Ports (which handles coal and dry bulk cargo) and Ennore Port (which handles container cargo) would offer good diversity of overall cargo mix at APSEZ.

Exhibit 16: APSEZ cargo volume rose 29.3% CAGR over F10–F14 Exhibit 17: Well-blended cargo mix

4052

6691

113

149

175205

0%

10%

20%

30%

40%

0

60

120

180

240

F10

F11

F12

F13

F14

F15e

F16e

F17e

(MM

T)

APSEZ Volume (LHS) Growth YoY (RHS)

21% 27% 28% 30% 32% 27% 29% 29%

28%

36% 30% 28%31%

27% 27% 28%

19%

13%14% 18%

18%

15% 14% 13%

33%24% 28% 23% 19%

30% 30% 29%

0%

25%

50%

75%

100%

F10

F11

F12

F13

F14

F15e

F16e

F17e

Bulk & Others Crude Conatiner Coal


Mundra port handled 101.1MMT of cargo as of F14, becoming the largest commercial port in India,

overtaking the major ports



Mundra–a marquee asset In our view, the flagship asset of Adani–Mundra Port is one of the best infrastructure assets having a) the first mover advantage, b) strategic location (deep natural draft, waterfront and proximity to the northern hinterland), c) well-established connectivity, d) lower turnaround time and e) pricing freedom. It serves the hinterlands of northern and western regions of India, accounting for ~64% of trade and 60% of industrial activities of the country. Despite being the only commercial port to handle ~101MMT plus cargo in F14, the Mundra Port is still operating at blended capacity utilization of 48.5%; hence, we believe it is well poised to benefit from any uptick in cargo volumes and high industrial activities (DMIC, DFC and smart cities) in the area.

Exhibit 18: Mundra Port details

Terminal Status Cargo type Berths Berth Length (m) Draft (m) Capacity

(MMT)Capacity

(TEU)F13

(MMT)F14

(MMT)

Multi Purpose I Operational Dry/Liquid 4 815 17.5 12.5

Multi Purpose II Operational Dry bulk 4 575 17.5 12.5 25.4 21.9

Multi Purpose III Operational Dry bulk 4 1,096 17.5 15.0

Container Terminal I Operational Containers 2 632 17.5 18.3 1.25 mn 12.2 14.0

Container Terminal II Operational Containers/Cars 2 631 14.5 18.3 1.25 mn 9.8 11.0

Container Terminal III Operational Containers 2 810 16.0 21.9 1.50 mn 3.4 9.9

Container Terminal IV 1QF17e Containers 1 650 16.5 19.0 1.30 mn 0.0 0.0

Coal Bulk I Operational Coal/ Dry 3 60

Coal Bulk II Trial runs Coal 1 1580 20.0 40 18.3 27.0

Single Point Mooring I Operational Crude 0 32.0 25.0

Single Point Mooring II Operational Crude 0 32.0 25.0 13.0 17.3Source: Company, SSLe

Increase in import of coal to drive Mundra’s volumes According to the Ministry of Commerce, the demand for coal has been growing at 5.9% CAGR over F10–F14 to ~740.5MMT, driven by growing demand in Steel, Cement and Power sectors, with inability to increase domestic production. Going forward, we expect the coal demand to increase 9.8% CAGR to 980.5MMT by F17e (currently 740.5MMT). On the back of a) slow ramp up of production in Coal India (CAGR of 5.7% over F14–F17e), b) recent mining ban imposed and c) delay in start of private and captive mine, we expect coal import to increase 16.9% CAGR over F14–F17e. Minor ports have better port infrastructure and lesser turnaround time, so we expect minor port volumes to grow ~7% CAGR over F14–F17e.

Exhibit 19: Coal imports to grow at 16.9% CAGR over F14–F17e Exhibit 20: Demand–supply analysis of coal

Coal Demand & Supply F12 F13 F14 F15e F16e F17e

CIL 435.8 452.2 471.1 507.0 530.3 556.4

SCCL 52.2 53.2 50.5 55.5 56.0 57.0

Others 51.9 52.3 52.6 68.3 86.7 101.6

Total Supply 540.0 557.7 574.2 630.8 673.0 715.0

Total Demand 638.7 713.4 740.5 805.2 852.2 980.5

Imports 98.8 155.7 166.3 174.5 179.2 265.5

Supply Growth 1% 3% 3% 10% 7% 6%

Demand Growth 8% 12% 4% 9% 6% 15%

Coal import Growth 64% 58% 7% 5% 3% 48%

1%3% 3%

10%

7% 6%

8%

12%

4%

9%

6%

15%

0%

4%

8%

12%

16%

F12 F13 F14 F15e F16e F17eSupply Growth Demand Growth

Source: Planning Commission, Ministry of Coal, SSLe

Mundra Port has the best state-of-the-art infrastructure with deepest drafts, with highly

mechanized berths

Coal imports in India is expected to rise significantly due to slower-than-expected domestic production and the

recent ban imposed on coal blocks



Mundra overtook Paradip Port in terms of coal cargo handling In F14, Mundra handled 36MMT of coal cargo as compared to Paradip Port (India’s largest coal handling port), which handled 32MMT. The company has entered into long term agreements with Tata Power (~12MMT coal requirement for 4000MW) and Adani Power (~13MMT coal requirement for 4,620MW), which assures revenue visibility. Going forward, we expect coal volumes to grow 8.5% CAGR over F14–F17e due to a) higher coal imports, b) commissioning of Vizag and Goa port terminals and c) ramp up in coals volumes for Tata Power and Adani Power projects.

Exhibit 21: Coal handled to increase to ~46MMT by F17e Exhibit 22: Mundra coal volume rose 43.3% CAGR over F10–F14

72 7379

87

105

41

58

79

109

126

9 14 1927

36

0

35

70

105

140

F10 F11 F12 F13 F14

(MM

T)

Major ports Non-major ports Mundra port

7 8 8 8 7 6 718 20 20 19 22 26 3210 11 12 11 10 10

109 10 9 9 13 152220 22 23 24 26

29

34

47 9 14

1927

36

0

40

80

120

160

F08 F09 F10 F11 F12 F13 F14

(MM

T)

Mundra Others Ennore Visakhapattam Paradip Haldia

Source: Ministry of Shipping, IPA Company, SSLe

Containers traffic growth to increase with revival in economy The container cargo traffic is largely dependent on economic activity and has been rising 8.4% CAGR (over F04–F14) compared with ~5–7% CAGR volume growth witnessed by commodities such as POL, coal, cement, iron ore and fertilizers. Even though container transport in India is on the rise, it still formed just 20.6% of total EXIM volumes as of F14, which is substantially low compared to the global average of 70–75%. We believe a) increase in the containerization level for the break-bulk commodities, b) enhancing the industries promoting the containerized cargo and c) building more container handling terminals both on the east and west coast, would help in driving the container cargo, thereby driving overall EXIM volumes. In terms of market share, minor ports have been gaining share due to capacity constraints at JNPT (largest in terms of container cargo handle) and better operational efficiencies at non-major ports.

Exhibit 23: Mundra Port accounted ~30% of container traffic across major ports

101114

120 120 115

3848

59 6472

1118 20

2635

0

35

70

105

140

F10 F11 F12 F13 F14

(MM

T)

Major ports Non-major ports Mundra

Source: Ministry of shipping, Company,IPA, SSLe

Mundra Port ranks second in terms of containerthroughput after JNPT as of F14 amongst all ports

Mundra Port handled highest coal cargo (~36MMT as of F14), overtaking Paradip Port



Mundra’s fourth container terminal CT–4 to drive strong volume growth On the back of delay in capacity addition, high utilization and congestion at JNPT and excellent infrastructure, we expect the container volumes to grow 17.4% CAGR over F14–F17e. The company has also entered into JV agreement on 4th July 2014, with France’s CMA CGM Group (which is the world’s third largest shipping company) to develop a new container terminal (CT-4) at the Mundra Port with capacity to handle 1.3 million TEUs. The terminal is expected to be operational by F17e.

Exhibit 24: Mundra ranks second in container cargo traffic Exhibit 25: CT-4 to be operational by F17e

18 21 23 29 30 30 286 5 7

8 9 9 10

52 51 5356 58 58 55

17 1618

20 23 23 218 10

11

1820 26 35

0

40

80

120

160

F08 F09 F10 F11 F12 F13 F14

(MM

T)

Mundra Others J.N.P.T Tuticorin Chennai

2026

3541

47

56

0%

10%

20%

30%

40%

0

15

30

45

60

F12

F13

F14

F15e

F16e

F17e

(MM

T)

Container volume (LHS) Volume growth YoY% (RHS) Source: Ministry of Shipping, IPA, Company, SSLe

Update on LNG terminal APSEZ is in talks with Gujarat State Petroleum Corporation (GSPC) to set up a 5MMT LNG terminal, which could be expandable to 10MMT at Mundra Port. On finalization of the deal, the company could receive at upfront payment of Rs7–8bn and annuity payment of ~Rs1.2bn over the concession period. However, due to lack of clarity on signing the agreement, we have not incorporated in our SOTP valuation.

APSEZ’s JV with CMA CGM Group to develop CT-4 at Mundra Port would drive robust container volume

growth by F17e



Synergies at Mundra Port The Mundra Port has over 6km of total berth length, with the deepest water draft depths ranging between 16m and 20m berth-side and 32m single mooring point facility, making it the largest port in India. It can also handle more than 10,000 TEUs, VLCCs and ULCCs up to 360,000DWT. In June 2013, Mundra Port had handled MSC Valeria vessel, which is the largest vessel that entered Indian port and has the capacity of 14,000 TEUs.

Exhibit 26: Lowest turnaround time ensuring overall port efficiency

21 1

7

12

12

21

6 6

3

0

3

6

9

12

Dry Liquid Containers

(Day

s)

Mundra Kandla Mumbai JNPT

Source: Ministry of Shipping, Company, SSLe Exhibit 27: Lower rail lead distance from Mundra to major ICD’s Exhibit 28: Road distance from ports to industrial cities

Railway line Mundra (km)

Mumbai/ JNPT (km)

Pipavav (km)

ICD Tughlakabad (New Delhi) 1,276 1,513 1,234

ICD Sabarmati (Ahmedabad) 367 491 316

ICD Ludhiana (Ludhiana) 1,551 1,895 1,499

ICD Kanakpura (Jaipur) 920 1,150 979

ICD Dadri 1,223 1,460 1,278

Kms JNPT Mundra Pipavav

New Delhi 1,468 1,121 1,249

Kanpur 1307 1380 1400

Jaipur 1,210 861 989

Jamshedpur 1844 2230 2258

Source: Company, SSLe Strategic location with pan India presence APSEZ has six operational ports spread along India’s western and eastern coastlines. With the commissioning of Ennore and recent acquisition of Dhamra Port, APSEZ has made its presence even stronger along India’s eastern coast. With all its ports becoming operational by F17e, the company is in a further better position to handle a well diversified mix of cargo such as coal, container, dry bulk and crude oil.

Mundra Port achieved a milestone by handling MSC Valeria- largest ever vessel entering any Indian port



Exhibit 29: Pan India presence with excellent rail, road and pipe connectivity


Exhibit 30: Mundra Port–Rail and Pipe connectivity Exhibit 31: Industrial cluster around Twin Ports and Mundra

Exhibit 32: DMIC to benefit in long run Exhibit 33: DFC- a game changer for the sector

Source: DMIC, DFC, Company, SSLe

APSEZ is the only private sector port operator withpresence across eight ports in India



PSA and long term agreements provide strong cargo visibility APSEZ has entered into port service agreements (PSA) or long term agreements with customers for the off-take of cargo, providing strong long term cargo volume visibility. Mundra Port has signed 46MMT of cargo (20MMT of crude and 25MMT of coal) off-take agreements with IOCL, HMEL, Tata Power and Adani Power. In addition, the company has also entered into agreements with CMA CGM, Suzuki Motors and various other clients for handling cargo at Mundra port. As of F14, ~47% of total cargo was handled through PSA or long term agreements and we expect it to further grow with the ramp of production at these power plants and commissioning of new oil refineries at Bhatinda and Panipat.

Exhibit 34: Table: PSA or long term contracts Exhibit 35: PSA volumes provides healthy cargo visibility

Long term/ PSA F11 F12 F13 F14 F15e F16e F17e

IOCL 6.7 8.2 8.2 7.7 9.1 10.4 12.0

HMEL 0.0 1.1 4.9 9.6 10.6 11.6 12.1

Tata Power 0.0 1.0 5.6 11.8 13.0 14.3 15.0

Adani Power 3.0 7.5 12.7 15.0 16.2 17.5 18.7

HPCL (POL) 0.0 0.0 3.8 3.0 3.2 3.3 3.5

Total 9.7 17.8 35.2 47.1 52.0 57.1 61.3

28 42 46 47 54 61 69 8012 10 18

35 47

52 57

61

0

40

80

120

160

F10 F11 F12 F13 F14 F15e F16e F17e

(MM

T)

Cargo under PSA Spot Cargo

Source Company, SSLe

Special Economic Zone (SEZ) APSEZ received approval for developing a multi-product SEZ at Mundra on 1st April 2006. The company currently has 25,000 acres of land under possession and has paid ~Rs4.2bn for land acquisition. Till date, APSEZ has leased ~4000 acres of land and is in the process of signing MOU agreements with the client. The company recently has received MOEF clearance for SEZ along with regulation clearance for settling a desalination plant. The SEZ receives cash flow through upfront payment from tenants and annual lease rent payments. Exhibit 36: Export from Adani SEZ units’ grew ~20% YoY

Units in Mundra SEZ (Rs in mn) F14 F13

Dorf Ketal Speciality Chem Pvt Ltd 1,762 1,764

Oriental Carbon and Chem Ltd 1,200 761

SKAPS Industries (Unit-1) 488 531

Thermax Ltd 574 0

SKAPS Industries (Unit-2) 2,179 0

Terram Geo-Synthetics 532 192

Ahlstom Fibre Composites Pvt Ltd 748 893

Adi Oil Pvt Ltd 0 3

Ashapura Garments 0 0

Chemoil Adani Pvt Ltd 12,224 12,405

Empezar Logistics Ltd 156 140

Oil Field and Warehousing Services 38 39

Adani Warehousing Services Ltd 12 0

Plant F&B Park 7 6

Total 19,920 16,733 Source: Development Commissioner, Mundra, Business Standard, SSLe

Long term contracts with Tata Steel and Adani Power- key growth drivers of Mundra’s cargo

volumes going forward

APSEZ received MOEF clearance for its SEZ and also clearance for settling a desalination plant at Mundra



Dhamra port–strong gateway on the eastern coast of India In June 2014, APSEZ acquired 100% stake in Dhamra Port (DPCL) from L&T–Tata Steel JV for EV of Rs55bn, enabling the company to build a strong gateway on the eastern coast of India. The port is multi-cargo handling port with 25MTPA capacity, which is expandable to 100 MTPA plus. The port commenced operation on 6th May 2011 and currently has two dry bulk terminals such as a) 12 MTPA capable of handling imported dry bulk cargo and b) 13 MTPA capable of handling export/costal cargo– having a deep draft of 17.5m.

Given its strategic location, strong connectivity in terms of road and rail and well mechanised along with deep-draft, we believe it is an attractive asset providing meaningful presence across the eastern coast of India. According to the management, the port capacity is expected to increase to 30MTPA by F17e, with additional capex of ~Rs6bn spend over the next two years. The port also has long term take-or-pay agreements with Tata Steel and various other keys clients, which assures revenue visibility. As of F14, the company has handled 14.3MMT of dry bulk cargo and is expected to rise 10% CAGR over F14–F17e.

Exhibit 38: Strategically located in proximity to coal and iron belt Exhibit 39: Additional capex to aid strong volume growth

1416

1719

0

5

10

15

20

F14 F15e F16e F17e

(MM

T)

Volume Source: Company, DPCL, SSLe

Exhibit 40: Revenue to grow at a CAGR of 13.4% over F14–F17e Exhibit 41: EBITDA to improve going forward

7,730 8,782

9,950 11,274

0

3,000

6,000

9,000

12,000

F14 F15 F16 F17

(Rs

mn)

Revenue

4,290

5,492 6,270

7,155

55

63 6363

40

50

60

70

80

0

2,000

4,000

6,000

8,000

F14 F15e F16e F17e

(%)

(Rs

mn)

EBITDA (LHS) EBITDA margins (RHS)


Exhibit 37: Dharma total project costParticulars (Rs bn)Enterprise value 55.0

Total Debt 38.5

Promoters debt including loan 9.5

Third part debt 29.0

Total Equity 16.5

Source: DPCL, SSLe



Financial Analysis

Consolidated revenue to grow at a CAGR of 25.8% over F14-F17e We expect APSEZ’s consolidated revenues to be Rs68.7bn, Rs80.9bn and Rs96bn in F15e, F16e and F17e, respectively, registering 25.8% CAGR over F14–F17e. This is mainly driven by strong cargo volume growth at Mundra Port and existing operational ports, aided by a) long term agreements, b) growth in spot cargo volumes, c) ramp up in volumes at Dahej, Dhamra and Hazira and d) commissioning of new ports. Moreover, we project standalone revenues to rise 12.3% CAGR over F14–F17e.

Exhibit 42: Consolidate revenues to grow at a CAGR of 25.6% over F14–F17e

26,973

35,766

48,240

68,784

80,996

95,976

0

25,000

50,000

75,000

100,000

F12 F13 F14 F15e F16e F17e

(Rs

mn)

Consolidated Revenues

24,819

33,611

43,458 49,117

54,548 61,469

0

18,000

36,000

54,000

72,000

F12 F13 F14 F15e F16e F17e

(Rs

mn)

Standalone Revenues Source: Company, SSLe

Consolidated EBITDA margins to improve led by change in cargo mix We expect consolidated EBITDA margins to improve by 280bps to 63.3% in F17 from 60.5% in F14 due to increase in portion of container cargo handle and other cargo to 59.3% of total cargo volume in F17e from 49.9% of total cargo volume in F14. Generally, container and other cargo volumes report a higher EBITDA margin of 80– 85% as compared to 60–65% margins reported by dry bulk cargo volumes.

Exhibit 43: EBITDA margins to expand due to change in cargo mix

17,4

66

23,7

60

29,2

04

42,7

82

50,8

34

60,7

90

65% 66%61% 62% 63% 63%

0%

25%

50%

75%

100%

0

16,000

32,000

48,000

64,000

F12 F13 F14 F15e F16e F17e

(Rs

mn)

Consolidated EBITDA (LHS) EBITDA margins (RHS)

17,1

16

24,7

02

27,4

01

31,6

24

35,3

54

40,0

65

69% 73%63% 64% 65% 65%

0%

20%

40%

60%

80%

0

10,500

21,000

31,500

42,000

F12 F13 F14 F15e F16e F17e

(Rs

mn)

Standalone EBITDA (LHS) EBITDA margins (RHS)




ROE to improve going forward With the acquisition of Dhamra Port completed and commissioning of Vizag and Goa Ports, the company’s major capex cycle is almost completed. In addition, there is no major capex planned at Mundra Port for the next two–three years. So, as per our estimate, there would be a regular maintenance capex in the range of Rs6–8bn per year. We expect the consolidated D/E to reduce to 0.9x by F17e, as most of the under development ports would a) be operational and b) improve cash flow. Based on this, we expect consolidated ROE to improve to ~26% in F17e from 24% in F14.

Exhibit 44: Return ratios to improve going forward

9% 10%13% 13% 13%

15%

25%

27%

23%

24%24%

26%

20%

22%

24%

26%

28%

0%

10%

20%

30%

40%

F12 F13 F14 F15e F16e F17e

Consolidated ROCE (LHS) Consolidated ROE (RHS)

14%

16% 16%

13%

14%

15%

25%

29%

25% 20%

20% 20%

0%

10%

20%

30%

40%

12%

13%

14%

15%

16%

F12 F13 F14 F15e F16e F17e

Standalone ROCE (LHS) Standalone ROE (RHS)




Valuations

We believe APSEZ is by far the best infrastructure asset having strong competitive advantage due to a) strategic locations with deep drafts, b) well established connectivity, c) low turnaround time and d) pricing freedom. We estimate APSEZ to report consolidated top-line/bottom-line CAGR of 25.6%/29.9% over F14–F17e, respectively. We believe the premium pricing would continue, given its unmatched infrastructure and delay in capacity expansion at major ports.

We have used SOTP valuation method for APSEZ. We have valued Port and SEZ business on DCF basis at a CoE of 13% and 15% and logistic business at a P/E multiple of 15x, which is at a discount of 30% to CONCOR. We re-initiate our coverage on the stock with a BUY rating and target price of Rs327, indicating an upside of 20%. We have not given any value to non-opeartional ports such as Kandla Port, CT-4 Terminal and Ennore Port in our SOTP valuations.

Exhibit 45: APSEZ SOTP

Project Value Rs mn

Holding % COE/Multiple Adj value

(Rs mn) Value/Share

% of Total TP

Mundra Port 368,040 100% 13.0% 368,040 177.8 54%

CT- 3 62,806 50% 13.0% 31,403 15.2 5%

SEZ 65,088 100% 15.0% 65,088 31.4 10%

Dahej 66,930 74% 13.0% 49,528 23.9 7%

Hazira 93,999 100% 13.0% 93,999 45.4 14%

Mormugao 13,764 100% 13.0% 13,764 6.6 2%

Vizag 11,916 74% 13.0% 8,818 4.3 1%

Dhamra 38,799 100% 13.0% 38,799 18.7 6%

Adani Logistics 6,870 100% 15.0x 6,870 3.3 1%

Total 676,310 327 100%

Source: SSLe

Exhibit 46: P/BV band Exhibit 47: EV/EBITDA band

0

80

160

240

320

Feb-

08Ju

n-08

Oct

-08

Feb-

09Ju

n-09

Oct

-09

Feb-

10Ju

n-10

Oct

-10

Feb-

11Ju

n-11

Oct

-11

Feb-

12Ju

n-12

Oct

-12

Feb-

13Ju

n-13

Oct

-13

Feb-

14Ju

n-14

(Rs)

Share price 1.5x 2x 3.5x 5x 5.5x

0

300,000

600,000

900,000

1,200,000

Feb-

08Ju

n-08

Oct

-08

Feb-

09Ju

n-09

Oct

-09

Feb-

10Ju

n-10

Oct

-10

Feb-

11Ju

n-11

Oct

-11

Feb-

12Ju

n-12

Oct

-12

Feb-

13Ju

n-13

Oct

-13

Feb-

14Ju

n-14

(Rs

mn)

EV 12.0x 15.0x 18.0x 20.0x 22.5x Source: Bloomberg, SSLe



Relative valuation

In India, private ports have projects with asset profiles spread across handling different mix of cargo such as coal, containers, dry bulk and crude oil. Moreover, most companies have risks varying considerably depending on their project portfolio. Thus, the companies are strictly not comparable. As Gujarat Pipavav, Essar and Adani Ports cater primarily to the Port sector, we believe some comparisons may be in order though not entirely. We believe Adani Ports is trading slightly on premium on P/E and P/BV basis compared with listed Indian ports and global ports. Given its unmatched infrastructure, strategic locations with deep drafts, well established connectivity, low turnaround time and improving return ratios, we believe the premium is justified.

Exhibit 48: Peer comparison

F15e F16e F17e F15e F16e F17e F15e F16e F17e F15e F16e F17e F15e F16e F17e

Domestic Port Co's 641 103 121 133 31.0 36.0 42.0 16.7 14.3 12.4 3.2 2.6 2.3 20.7 19.8 19.1

Adani Ports 518 78 90 101 14.3 16.8 20.1 17.5 14.9 12.4 4.6 3.6 2.9 29.5 27.1 25.8

GPPV 80 8 9 10 7.6 9.0 10.3 21.3 18.0 15.7 3.8 3.1 3.1 20.3 19.6 19.7

Essar Ports 44 17 22 22 9.1 10.3 11.6 11.5 10.1 9.0 1.3 1.1 1.0 12.5 12.8 11.9

International Co's 5,745 4,213 4,487 4,763 11,979 14,430 16,003 13.9 22.3 16.4 1.4 1.3 1.3 5.1 7.3 8.6

AP Moeller Maersk 2,852 2,922 3,086 3,253 11,929 14,371 15,933 11.7 9.7 8.8 1.2 1.1 1.0 12.1 11.5 12.0

DP World 962 206 225 245 47.9 53.5 63.5 24.1 21.6 18.2 1.7 1.6 1.5 7.2 7.6 8.4

Cosco 361 693 761 831 (2.0) 0.7 2.0 (12.6) 36.6 12.9 1.1 1.1 1.0 -8.7 2.6 8.3

Shanghai Int. Port 1,207 291 310 323 2.7 3.0 3.0 19.0 17.4 17.4 2.3 2.1 2.0 12.1 12.2 11.4

Hutchinson Port Hold. 363 102 105 110 1.5 1.6 1.7 27.0 26.3 24.7 0.7 0.8 0.8 2.7 2.7 2.9

Source: Bloomberg, SSLe

Valuation Mkt Cap (Rs bn)

Revenue (Rs bn) EPS (Rs) PE (x) P/B ROE (%)

Exhibit 49: Key Assumptions (Mundra Port)Particulars F13 F14 F15e F16e F17eContainer volumes (TEU's)CT-1 840,000 900,000 990,000 1,089,000 1,197,900

Growth YoY 13% 7% 10% 10% 10%

CT-2 700,000 800,000 896,000 985,600 1,133,440

Growth YoY -9% 14% 12% 10% 15%

CT-3 675,000 911,250 1,139,063 1,309,922 1,440,914

Growth YoY 193% 35% 25% 15% 10%

CT-4 200,000

Growth YoY -

Bulk & Others volumes (MMT) 39.9 45.9 49.6 53.8 57.4

Growth YoY 14% 15% 8% 8% 7%

Liquid volume (MMT) 16.9 20.3 22.8 25.4 27.6

Growth YoY 81% 20% 12% 11% 9%




Exhibit 50: Key Assumptions (Other Port)F13 F14 F15e F16e F17e

Dahej Port Volume (MMT) 7.6 7.9 11.0 13.8 15.9

Growth YoY - 4% 40% 25% 15%

Hazira Port Volume (MMT) 1.0 3.7 7.1 9.9 14.1

Growth YoY - 267% 91% 39% 42%

Mormugao Port Volume (MMT) 0.0 0.0 0.5 1.3 2.2

Growth YoY - - - 150% 75%

Vizag Port Volume (MMT) 0.0 0.0 1.0 3.0 5.3

Growth YoY - - - 200% 75%

Kandla Port Volume (MMT) 0.0 0.0 0.0 4.0 6.7

Growth YoY - - - - 68%

Ennore Port Container Volume (TEU's) 0 0 0 0 50000

Growth YoY - - - - -

Dhamra Port Volume (MMT) 11.1 14.3 15.7 17.3 19.0

Growth YoY 118% 29% 10% 10% 10%


Exhibit 51: Key Assumptions (Operating expense)Particulars F13 F14 F15e F16e F17e

Cargo Handling Expense 7.5% 5.6% 5.6% 5.6% 5.6%

Railway Operating 4.1% 4.6% 4.5% 4.5% 4.5%

Power & Fuel 2.4% 2.3% 2.2% 2.2% 2.2%

Water Front charges 3.9% 4.0% 4.0% 4.0% 4.0%

Construction Contract Charges 0.3% 2.8% 2.8% 2.8% 2.8%

Container Terminal Infra Development 0.0% 4.3% 4.0% 4.0% 4.0%

Employee Bebefit Expense 3.7% 3.4% 2.7% 2.6% 2.6%

Other Expenses 11.7% 12.5% 12.0% 11.5% 11.0%

Total Manufacturing Expense 33.6% 39.5% 37.8% 37.2% 36.7%

Source: Company, SSLe Key concerns Agreements/license based business: APSEZ operates its ports service business under various concession, sub-concession and license agreements. Thus, any cancellation, early termination or non-renewal of such agreements would cease the company’s operations and adversely impact volume growth and cash flows. Contingent on international trade: APSEZ’s port business is highly reliant on international trade between India and other internationally countries in Middle-east, Europe and North America, which further depends on global economic scenario and continued flow of trade across counties. Any significant economic downturns like recession, global crisis and change in government policies relating to EXIM trade could have adverse impact on its port business effecting their overall volume growth. Small client base contributing major portion of revenues: A major share of the company’s revenues relies on small but imperative number of customers like Adani Power, other power plants, petroleum refineries, government owned POL distribution companies, automobiles and container service providers. Any decline in contracts from these customers could impact APSEZ’s top-line significantly.



Company profile

APSEZ is one of India’s largest private integrated port and logistic service provider, with port operations at eight ports with total capacity of 306 MMTPA as of F14. Incorporated as Gujarat Adani Port Limited (GAPL) in 1988, on west coast of India, the Government of Gujarat (GoG) and Gujarat Maritime Board (GMB) granted GAPL concession to develop deep water port in Mundra in February 2001 and the company commenced commercial operations in October 2001. Over the years, APSEZ has developed and operates 15 terminals, 34 berths and two single-point mooring facilities handling dry and liquid bulk, container, crude oil, automobiles and other cargo. APSEZ’s total cargo volume increased from 40.3MMT in F10 to 112.7MMT in F14, registering a CAGR of 29%. APSEZ is a subsidiary of Adani Enterprise Limited, flagship of the Adani Group, one of India’s largest business houses, with operations across coal mining, logistics, energy and other ancillary industries, and it has presence in India, Indonesia, Singapore, Australia, China and Middle East countries. The Adani Group has three listed entities in India viz. Adani Enterprise Limited, Adani Power Limited and APSEZ.

Exhibit 52: APSEZ Structure




Exhibit 53: APSEZ Milestone




Key management

Gautam Adani- Chairman and Managing Director Mr. Gautam Adani, the founder of the Adani Group has over 33 years of experience and has been the managing director at Adani Ports and Special Economic Zone Limited since 1999. He has been significantly responsible for APSEZ’s overall business growth. Under his leadership and guidance, Adani Group has emerged as a diversified integrated infrastructure player with verticals spread across power generation and distribution, development of special economic zone, gas distribution and logistics and generated robust business model. Mr Adani has studied commerce from the Gujarat University. Rajesh Adani- Non-independent and Non-executive director Mr. Rajesh Adani has been associated with the Adani Group since inception. He handles the marketing and finance aspects of Adani Enterprise Limited and is responsible for developing business relationships of Adani Enterprise Limited. He serves as the executive director of Adani Enterprise Limited and as a non-independent & non-executive director of APSEZ. Mr. Rajesh graduated from Gujarat University and his proactive and personalized approach to the business empowered overall growth of the Adani group. Malay Mahadevia- Whole time director Dr. Malay Mahadevia was conferred with a doctorate of philosophy in coastal ecology around Mundra area and Kutch district in Gujarat by the Gujarat University in 2008. He joined Adani Group in 1992 and since then worked on developing Mundra port from conceptualization to commissioning. Currently he handles the marine and ports, special economic zones, health care, water supply, education, railways logistics and social infrastructure of the company. He also holds a master’s degree in dental surgery. He has been awarded the outstanding manager of the year award of Gujarat by the Ahemdabad Management Association for the year 2002. He is also the member of the Gujarat Chamber of Commerce and Industry. Sudipta Bhattacharya- Whole time director Mr. Sudipta served as the Chief Executive Officer of Ports & Special Economic Zone at Adani Enterprises Limited along with being Chief Technology Officer of the Adani Group. He is recognized as a top industry leader in supply chain and manufacturing with 17 years of experience in managing and building global teams across Europe, U.S and India. Mr. Sudipta currently serves as the Whole Time Director of APSEZ since May’14. He holds Master’s degree with specialization in marketing, finance, operations from Indian Institute of Technology, Kharagpur. He also has MBA in Operations and Management and finance from University of Cincinnati. Rajeeva Ranjan Sinha- Whole time director Mr. Rajeeva Sinha, a former Indian Administrative Service officer has over 35 years of work experience in the public and the private sector. He holds in-depth knowledge of shipping and port sector having worked earlier as the Deputy Chairman and Chairman of Mumbai and Marmugao Port Trust and CEO of Maharashtra Maritime Board. His expertise spans across ports and shipping management, commercial and labour laws, project and financial management and maritime laws. Mr. Sinha holds a master’s degree in science in shipping management from the World Maritime University along with being a fellow member of the Institute of Chartered Shipbrokers, U.K.



Financials (Consolidated) Income Statement Balance SheetY/E Mar (Rs mn) F13 F14 F15e F16e F17e Y/E Mar (Rs mn) F13 F14 F15e F16e F17eNet sales 35,766 48,240 68,784 80,996 95,976 Cash & Bank balances 8,306 5,139 2,582 3,530 11,214growth (%) 32.6 34.9 42.6 17.8 18.5 Other Current assets 37,978 79,297 88,762 106,617 121,039Operating expenses 12,007 19,036 26,002 30,162 35,186 Investments 2,216 634 634 634 634EBITDA 23,760 29,204 42,782 50,834 60,790growth (%) 36.0 22.9 46.5 18.8 19.6 Net fixed assets 112,179 130,035 186,444 186,165 190,324Depreciation &amortisation 4,220 6,495 8,591 10,279 10,841 Goodwill & intangible assets 31,158 21,843 21,843 21,843 21,843EBIT 19,540 22,709 34,191 40,555 49,949 Other non-current assets 18,516 9,822 10,857 12,730 14,455Other income 2,644 6,836 7,566 8,910 10,557 Total assets 210,352 246,771 311,122 331,519 359,509Interest paid 5,418 9,768 11,947 13,247 12,647Extraordinary/Exceptional items 853 - - - - Current liabilities 23,822 21,569 25,421 28,412 30,990PBT 17,619 19,777 29,810 36,217 47,859 Borrowings 115,858 129,340 169,340 161,840 154,340Tax 1,231 2,140 5,962 7,243 9,572 Other non-current liabilities 5,286 6,744 6,744 6,744 6,744Effective tax rate (%) 7.0 10.8 20.0 20.0 20.0 Total liabilities 144,966 157,653 201,505 196,996 192,074Net profit 16,388 17,638 23,848 28,974 38,287Minority interest 156 14 - - - Share capital 4,035 4,168 4,168 4,168 4,168Reported Net profit 16,232 17,624 23,848 28,974 38,287 Reserves & surplus 59,928 83,513 104,012 128,918 161,830Non-recurring items (853) - - - - Shareholders' funds 63,963 87,681 108,181 133,087 165,998Adjusted Net profit 15,379 17,624 23,848 28,974 38,287 Minority interest 1,423 1,437 1,437 1,437 1,437 growth (%) 37.6 14.6 35.3 21.5 32.1 Total equity & liabilities 210,352 246,771 311,122 331,519 359,509

Key Financials ratios Cash Flow StatementY/E Mar F13 F14 F15e F16e F17e Y/E Mar (Rs mn) F13 F14 F15e F16e F17eProfitability and return ratios (%) Pre-tax profit 17,619 19,777 29,810 36,217 47,859 EBITDAM 66.4 60.5 62.2 62.8 63.3 Depreciation 4,220 6,495 8,591 10,279 10,841 EBITM 54.6 47.1 49.7 50.1 52.0 Chg in working capital (34,879) (34,878) (6,648) (16,737) (13,569) NPM 43.0 36.5 34.7 35.8 39.9 Total tax paid (1,387) (2,153) (5,962) (7,243) (9,572) RoE 24.0 23.2 24.4 24.0 25.6 Other operating activities (10,746) 1,458 - - - RoCE 9.7 11.5 12.0 12.3 14.0 Operating CF (25,174) (9,301) 25,791 22,516 35,559 RoIC 6.5 5.2 6.5 6.9 8.8

Capital expenditure 62,378 (15,036) (65,000) (10,000) (15,000) Per share data (Rs) Chg in investments (1,519) 1,582 - - - O/s shares (mn) 2003 2070 2070 2070 2070 Other investing activitiesEPS 7.7 8.5 11.5 14.0 18.5 Investing CF 60,860 (13,454) (65,000) (10,000) (15,000) FDEPS 7.7 8.5 11.5 14.0 18.5 FCF 37,205 (24,338) (39,209) 12,516 20,559 CEPS 9.8 11.7 15.7 19.0 23.7BV 31.9 42.4 52.3 64.3 80.2 Equity raised/(repaid) - 133 - - - DPS 1.2 1.2 1.6 2.0 2.6 Debt raised/(repaid) (49,792) 13,482 40,000 (7,500) (7,500)

Dividend (incl. tax) (2,344) (2,500) (3,348) (4,068) (5,376) Valuation ratios (x) Other financing activities 13,571 8,474 0 (0) (0) PE 35.4 31.9 23.6 19.4 14.7 Financing CF (38,565) 19,590 36,652 (11,568) (12,876) P/BV 8.5 6.4 5.2 4.2 3.4EV/EBITDA 27.5 23.5 17.1 14.2 11.6 Net chg in cash & bank bal. (2,879) (3,166) (2,557) 948 7,684 EV/Sales 18.2 14.2 10.6 8.9 7.4 Closing cash & bank bal 8,306 5,139 2,582 3,530 11,214

Other key ratiosD/E (x) 1.8 1.5 1.6 1.2 0.9DSO (days) 61 84 78 77 79

Du Pont Analysis - RoENPM (%) 43.0 36.5 34.7 35.8 39.9Asset turnover (x) 0.2 0.2 0.2 0.3 0.3Equity multiplier (x) 3.3 3.0 2.8 2.7 2.3RoE (%) 24.0 23.2 24.4 24.0 25.6Source: Company, SSLe



SBICAP Securities Limited

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KEY TO INVESTMENT RATINGS (w.e.f. February 2013) Guide to the expected return over the next 12 months. 1=BUY (expected to give absolute returns of 15 or more percentage points); 2=HOLD (expected to give absolute returns between -10 to 15 percentage points); 3=SELL (expected to give absolute returns less then -10 percentage points)

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