Page 1

SPARK INDIA DAILY

25 March 2015

Page 1

DEALER COMMENTARY

Equity market closed in the red for 5th consecutive session. Key

benchmark equity indices fell to the lowest level in nearly six weeks.

Immense volatility was witnessed during latter part of the session as key

indices reversed direction. Market breadth was weak. Auto, banking and

realty were among the major laggards. General sentiment remained

cautious ahead of derivatives expiry. Rollovers are yet to gather

momentum. Pharmaceutical shares edged higher on renewed buying.

Metal and mining stocks declined after the latest data showed Chinese

manufacturing activity dropped to a 11-month low in March. Among BSE

sectoral indices, auto fell the most (1.17%), followed by banking (0.61%),

IT (0.5%) and realty (0.4%). Healthcare index was the star-performer (up

1.84%), followed by consumer durables (0.69%), infrastructure (0.69%)

and oil & gas (0.68%). Market breadth was fairly negative. 106 stocks

registered a fresh 52-week low while mere 12 stocks touched a new 52-

week high. India VIX slipped over 4% to 13.6725.

WHAT’S INSIDE

Oil & Gas – Initiating Coverage on Gas utilities

− Indraprastha Gas Ltd – SELL (TP of Rs. 350)

− Gujarat State Petronet Ltd – BUY (TP of Rs. 148)

− Petronet LNG Ltd – BUY (TP of Rs. 220)

Exchange and Currency Performance

Spark Focus Stocks

Technical Indicators

Spark Model Portfolio

Today’s News & Announcements

Find Spark Research on Bloomberg (SPAK <go>),

Thomson First Call, Reuters Knowledge and Factset

Rs. 2.4/ltr

2.0

2.6

3.2

3.8

4.4

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q

2010 2011 2012 2013 2014 2015

CNG savings over Petrol on running costs (Rs. /km)

New CNG kit demand is highly sensitive to fluctuations in Petrol prices. With a steep decline in prices in the recent months, CNG kit conversions

have declined in the range of 60-80% across most CNG retro-fitters

20.0

30.0

40.0

50.0

60.0

70.0

80.0

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q

2010 2011 2012 2013 2014 2015

Petrol (Rs. /ltr) CNG (Rs./kg)

Delta Rs. 24

Rs. 45

Rs. 32 Rs. 36

Rs. 20 Average Savings Rs. 3.3/km

Source: Industry, Spark Capital Research

Page 2 Page 2

SPARK INDIA DAILY

25 March 2015

Today 1d 5d 1m 3m 6m 12m Today 1d 5d 1m 3m 6m 12m

US (Dow Jones) 18,011 -0.6 0.9 -1.2 -0.1 6.3 10.0 -1.5 13.6 Dollar Index# 97.1 -0.1 -1.5 3.1 7.9 14.0 21.5 -3.3 23.1

UK (FTSE100) 7,020 -0.3 2.7 1.2 6.2 5.7 6.3 -0.6 15.6 Pound 1.5 0.2 -0.7 -4.2 -4.4 -8.8 -10.0 -13.5 1.6

Japan (Nikkiei 225) 19,691 -0.1 0.7 5.9 10.6 20.3 36.5 -0.4 41.8 Yen 119.6 0.1 0.4 -0.6 0.4 -9.1 -14.5 -2.0 18.6

Germany (DAX) 12,006 0.9 0.2 7.1 21.0 26.2 28.6 -1.7 43.7 Euro 1.1 0.1 0.7 -3.8 -10.6 -14.2 -20.9 -21.9 4.5

Brazil (IBOV) 51,506 -0.8 2.4 -0.6 1.2 -8.0 6.9 -17.3 12.3 Real 3.1 -0.2 3.2 -9.9 -14.1 -24.1 -26.0 -5.3 43.8

Russia (Micex) 1,619 1.0 0.4 -7.3 14.9 12.7 22.2 -12.4 28.4 Ruble 57.7 0.1 3.0 6.5 -9.7 -33.3 -38.3 -27.1 72.0

India (Sensex) 28,162 -0.1 -2.0 -2.9 3.5 6.4 27.7 -6.2 28.5 Rupee 62.2 0.0 0.8 -0.1 2.1 -2.0 -2.3 -2.6 6.7

China (SHCOMP) 3,688 -0.1 3.1 14.2 20.0 57.3 78.4 -0.8 85.2 Renminbi 6.2 -0.1 0.3 0.8 -0.1 -1.2 -0.1 -1.1 1.7

South Africa (Jalsh) 52,858 0.6 1.1 -0.7 6.8 6.8 11.5 -1.4 14.7 Rand 11.8 -0.1 2.1 -3.0 -1.7 -5.1 -9.1 -5.7 15.0

HK (H S I) 24,562 0.7 1.8 -0.9 5.2 3.3 13.0 -3.2 13.3 HK Dollar 7.8 0.0 0.1 0.0 0.1 0.0 0.0 -0.3 0.1

Korea (Kospi) 2,041 0.0 0.6 2.5 4.8 0.3 5.1 -2.5 8.8 Won 1,101.8 0.3 2.5 -0.2 0.1 -5.4 -2.0 -3.1 9.3

Singapore (Straits) 3,419 0.2 1.7 -0.6 2.2 3.9 10.1 -1.1 10.4 SG Dollar 1.4 0.0 0.8 -0.9 -3.2 -7.0 -7.2 -2.0 10.5

Malaysia (KLCI) 1,823 0.5 1.4 0.4 4.2 -1.1 -0.8 -3.9 9.0 Ringgit 3.7 -0.2 1.4 -1.4 -4.4 -11.0 -9.6 -2.1 16.3

Indonesia (Jakarta) 5,431 -0.3 0.3 -0.3 5.1 4.4 15.5 -1.5 15.7 Ind Rupiah 12,929.0 -0.1 1.9 -0.6 -3.8 -7.3 -11.9 -2.4 14.8

Commodities Commodities

Brent ($/bbl) 55.2 0.1 -1.3 -10.5 -8.4 -43.1 -48.4 -52.3 22.1 Indonesian Coal ($/MT) 67.8 NA NA 7.7 4.8 -2.8 -12.0 -12.0 7.7

WTI ($/bbl) 47.5 0.0 1.9 -9.9 -16.8 -47.3 -47.1 -51.9 7.9 S Africa Coal ($/MT) 61.0 NA -3.7 -7.6 -6.9 -16.7 -26.4 NA NA

Copper ($/MT) 6,174 0.4 6.4 6.4 -2.9 -8.9 -4.7 -14.1 14.5 Australia Coal ($/MT) 61.8 NA -1.0 -0.6 -4.4 -11.9 -25.4 NA NA

Zinc ($/MT) 2,077 0.0 3.7 0.8 -3.3 -8.6 7.4 -14.2 5.9 Gold Spot $/Oz 1,192 -0.2 3.5 -1.3 1.5 -1.4 -9.3 -11.4 5.3

Aluminium ($/MT) 1,782 -0.3 -0.4 -0.6 -2.8 -8.2 5.6 -15.7 5.9 GOLD INDEX (Rs./10g) 26,231.0 0.7 2.3 -1.0 -1.0 -1.6 -10.6 -12.7 3.5

Iron Ore ($/MT) 59 -1.7 -3.0 -9.3 -12.4 -28.3 -42.4 -48.3 0.0 Silver Spot $/Oz 17.0 -0.5 8.8 2.7 7.8 -3.2 -15.8 -21.4 18.6

Lead ($/MT) 1,853 0.3 8.0 5.4 0.2 -10.8 -9.3 -18.3 10.0 MCX Silver (Rs./KG) 37,698.0 1.7 7.5 3.5 4.7 -3.3 -13.7 -17.9 12.2

Asian Asian

Chg.

from

52WH

Chg.

from

52WL

Developed Developed

BRICS BRICS

Global Indices

Equity Performance (%) Chg.

from

52WH

Chg.

from

52WL

Currency

Currency Performance (%)

Performance (%) Performance (%)

Exchange and Currency Performance

Page 3 Page 3

SPARK INDIA DAILY

25 March 2015

107 86 57

147 105 84

38 43

36

34

33 39

90 59

73

57 87 95

-

50

100

150

200

250

300

1M avg24-Mar23-Mar20-Mar19-Mar18-Mar

Rs. b

n

FII DII Others

NSE / BSE Category wise turnover

Last 5 Day FII Buy FII Sell Net DII Buy DII Sell Net

24-Mar-15 46.5 39.1 7.4 18.6 24.9 -6.3

23-Mar-15 30.7 26.6 4.2 20.0 16.0 4.0

20-Mar-15 75.5 72.0 3.5 15.8 18.0 -2.2

19-Mar-15 59.5 45.3 14.3 16.6 16.0 0.5

18-Mar-15 39.9 44.4 -4.6 15.0 23.9 -8.8

Market Activity FII & DII - Provisional (INR Bn)

Particulars Today 1D 1M 3M 6M 12M

Reverse Repo 127 166 38 27 29 30

Repo 33 126 183 183 58 394

MSF 1 42 3 0 0 176

Net liquidity 93 (2) (148) (156) (29) (540)

Change in BPS

NSE MIBOR 7.52 (29) (45) (67) (53) (148)

1M CP 9.25 (3) 91 63 32 (108)

3M CP 9.03 3 (23) 39 8 (84)

6M CP 9.00 1 (24) 7 (24) (90)

3M CD 8.48 (12) (35) 10 (16) (70)

6M CD 8.50 2 (31) (3) (38) (73)

12M CD 8.46 3 (32) (20) (60) (75)

Change in BPS

India 10 yr 7.75 (0) 4 (21) (74) (104)

US 10 yr 1.88 1 (9) (38) (62) (87)

Spread (India 10Y-US10Y) 587

India 10YR AAA corp 8.40 (1) 2 (15) (86) (128)

Spread (India 10Y-AAA10Y) 65

91D T.Bills 8.31 - (4) (4) (29) (96)

1Y T.Bills 7.97 2 (7) (28) (68) (82)

Call rate 7.36 (1) (38) (68) (59) (142)

Change in BPS

LIBOR 0.17 (9) (19) (46) (68) (147)

MIFOR 8.07 (19) 22 49 157 148

OIS 8.08 (15) 15 40 80 101

12m OIS fw d 7.57 - (9) (32) (84)

Money Market Rates

Liquidity (Rs. Bn)

LIBOR, MIFOR

Bond Market

Bulk Deals (INR Mn)

Date Script Client Type Qty Price

24/03/15 Motilal Oswal Financial HDFC Mutual Fund -HDFC S 1,810,400 289.00

24/03/15 Motilal Oswal Financial Morgan Stanley Investment B 1,362,724 289.00

24/03/15 CARERATING Swiss Finance Corporation S 481,000 1,491.00

24/03/15 CARERATING Clsa Global Markets Pte Ltd B 481,000 1,491.00

Exchange and Currency Performance

Rank Company Delivery % 30D Del. % Price Chg

1 BAJAJ AUTO LTD 91.3 69.1 -0.2%

2 ULTRATECH CEMENT LTD 77.0 63.7 -1.0%

3 HCL TECHNOLOGIES LTD 76.5 68.4 0.2%

4 BHARTI AIRTEL LTD 74.7 61.0 2.8%

5 GAIL INDIA LTD 73.4 59.3 1.6%

6 HERO MOTOCORP LTD 72.5 67.7 -1.2%

7 POWER GRID CORP OF INDIA LTD 72.0 56.1 -0.8%

8 DR. REDDY'S LABORATORIES 71.4 55.2 1.5%

9 TECH MAHINDRA LTD 70.9 66.0 0.4%

10 INFOSYS LTD 70.8 65.2 -1.0%

Nifty Top 10 Deliveries

Page 4 Page 4

SPARK INDIA DAILY

25 March 2015

1D 1M 3M 1Y FY15E FY16E FY15E FY16E

ASHOK LEYLAND LTD 67.4 (1.7) 0.6 35.8 232.0 1698.6 (0.7) 19.4 147.6 31.5 3.7 3.4 Sell

AMARA RAJA BATTERIES LTD 829.8 (2.4) (5.7) 4.4 126.1 164.3 0.5 82.9 32.9 25.9 8.2 6.4 Add

GATEWAY DISTRIPARKS LTD 415.6 (1.0) (2.2) 22.0 165.6 64.6 (0.6) 59.4 24.6 19.0 3.7 3.3 Buy

KAVERI SEED CO LTD 1049.6 (0.1) 11.7 32.9 77.1 35.4 (0.7) 36.0 24.0 19.3 9.3 6.6 Buy

SUNDRAM FASTENERS LTD 168.3 0.6 (9.0) (9.1) 208.4 45.6 (0.5) 67.7 17.5 13.4 3.9 3.2 NA

WABCO INDIA LTD 5496.5 (1.2) 8.9 20.5 177.6 5.9 (0.2) 71.8 81.3 47.8 12.0 9.7 Add

CHOLAMANDALAM INVESTMENT AND 571.0 (1.1) (1.1) 19.0 123.8 8.6 (0.7) 59.8 3.5 2.5 3.5 2.5 Buy

CITY UNION BANK LTD 96.9 2.4 (1.2) 4.0 90.0 409.9 (0.5) 74.4 2.4 2.1 2.4 2.1 Buy

DCB BANK LTD 106.2 (0.5) (2.1) (11.4) 78.4 479.1 (0.2) 58.8 2.1 1.9 2.1 1.9 Buy

FEDERAL BANK LTD 132.5 (2.3) (5.6) (10.3) 44.8 412.8 (0.7) 46.9 1.5 1.4 1.5 1.4 Buy

INDIAN BANK 171.1 0.5 (9.1) (14.4) 61.0 220.1 0.8 81.4 0.9 1.0 0.9 1.0 Sell

KARUR VYSYA BANK LTD 562.1 (2.3) (3.1) 0.9 68.2 37.3 (0.7) 64.0 1.7 1.5 1.7 1.5 Buy

REPCO HOME FINANCE LTD 640.5 0.3 (0.4) 2.5 95.8 28.7 (0.7) 60.9 5.1 4.4 5.1 4.4 Buy

SHRIRAM CITY UNION FINANCE 1887.2 (0.5) (4.8) 5.7 81.4 9.7 (0.7) 74.3 3.1 2.8 3.1 2.8 Buy

SOUTH INDIAN BANK LTD 24.0 (1.4) (12.2) (14.3) 6.9 2365.6 (0.4) 63.6 1.1 0.9 1.1 0.9 Buy

DALMIA BHARAT LTD 431.0 0.2 (10.1) (0.7) 87.7 5.0 (0.7) 72.9 NA 16.2 1.2 1.1 Buy

RAMCO CEMENTS LTD/THE 287.4 (4.7) (13.9) (11.2) 46.8 97.7 (0.4) 79.3 22.6 11.8 2.5 2.1 Add

BLUE STAR LTD 299.4 0.1 (2.8) (4.7) 56.6 13.1 (0.7) 41.7 37.6 23.7 5.3 4.6 Sell

TTK PRESTIGE LTD 3456.6 0.0 11.5 (1.6) 20.4 7.1 (0.8) 49.9 37.5 30.1 6.1 5.4 Sell

VA TECH WABAG LTD 1750.2 (2.2) 2.9 15.6 148.9 22.6 (0.5) 69.3 41.7 32.5 5.0 4.5 Add

V-GUARD INDUSTRIES LTD 920.2 (0.1) (4.5) (15.6) 106.7 2.8 (0.8) 72.3 35.4 26.5 7.3 6.0 Buy

CYIENT LTD 533.3 0.1 (2.3) 3.1 65.7 39.5 (0.5) 78.7 17.0 16.0 3.3 2.9 Add

FIRSTSOURCE SOLUTIONS LTD 29.5 2.1 (6.7) (10.4) 13.5 1180.5 0.1 57.0 8.7 7.0 0.8 0.7 Buy

HEXAWARE TECHNOLOGIES LTD 283.8 6.4 6.4 45.8 93.6 133.9 (0.7) 17.6 19.2 16.8 5.9 5.4 Add

POLARIS CONSULTING & SERVICE 155.7 (0.1) 10.5 (8.7) (18.7) 379.5 0.1 48.1 9.1 8.7 1.6 1.4 Add

REDINGTON INDIA LTD 127.2 (1.7) 8.5 (4.1) 77.0 286.4 (0.6) 44.0 13.6 11.1 2.1 1.8 Buy

BIOCON LTD 434.3 (0.2) 2.1 5.2 (0.0) 156.0 (0.1) 28.8 20.5 17.4 2.5 2.3 Reduce

APOLLO HOSPITALS ENTERPRISE 1355.2 (0.2) 3.2 19.0 51.4 133.8 0.3 57.1 50.5 40.7 5.8 5.2 Reduce

BAJAJ CORP LTD 446.6 (2.8) 1.9 30.9 103.2 37.9 (0.6) 58.9 31.8 26.4 13.5 13.3 Buy

BERGER PAINTS INDIA LTD 213.9 (0.6) (3.9) 5.8 92.1 109.3 (0.6) 35.2 22.9 19.8 11.0 9.2 Add

JYOTHY LABORATORIES LTD 258.1 0.3 (7.2) 4.2 34.3 339.3 1.7 90.7 34.8 28.4 6.0 5.5 Buy

KEWAL KIRAN CLOTHING LTD 2031.8 0.2 13.8 9.0 76.9 0.2 (0.9) 64.7 38.3 24.3 7.8 6.7 Add

LA OPALA RG LTD 380.4 0.1 (1.2) (15.7) 168.1 45.2 0.8 68.7 50.6 37.2 11.4 9.2 Add

RELAXO FOOTWEARS LTD 650.2 1.8 0.0 23.8 123.6 3.8 (0.6) 57.3 48.3 36.2 11.1 8.6 Add

Delivery

Volume

('000)

Rating

PE for all sectors & P/ABV

for banksEV/EBITDA (x)

Capital Goods

% inc/dec to

30D avgDelivery %

Consumption

Returns (%)

Auto, Agri &

logistics

Financials

Cement

Pharma

Top Del. % Company Price

IT Services

Spark Focus Stocks

Page 5 Page 5

SPARK INDIA DAILY

25 March 2015

0

200

400

8000

8100

8200

8300

8400

8500

8600

8700

8800

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9000

9100

9200

9300

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I ('0

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tracts Call Put

0150300450600

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8650

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8750

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8850

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8950

9000

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9100

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9200

9250

9300

9350

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Rs. b

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Total Call Value Total Put Value

Nifty Open Interest (‘000 contracts)

Technical Indicators

0.6

0.8

1.0

1.2

9-F

eb

11-F

eb

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21-M

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23-M

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Nifty PCR Nifty PCR (30D avg)

FII Open Interest 3-17 3-18 3-19 3-20 3-23 Delta 3-24 Delta Delta

Index Futures 214 211 206 207 209 2.8 209 (0.2) 15.3

Stock Futures 604 609 616 602 596 (5.5) 597 1.0 10.5

Stock Options 33 33 33 32 32 0.3 33 0.2 (1.9)

Index Options 466 488 519 548 564 16.1 586 21.8 6.5

Total (Rs. Bn) 1317 1341 1373 1388 1402 13.7 1425 22.8 30.5

Top CompanyPrice

Change

OI

Change

Close

Price

(Rs. / sh)

Colgate-Palmolive India Ltd 3.9% 15.5% 2,057

DLF Ltd 0.5% 11.3% 160

Crompton Greaves Ltd 0.6% 8.1% 165

Indiabulls Real Estate Ltd 1.1% 8.0% 66

Wipro Ltd 1.1% 7.9% 652

GMR Infrastructure Ltd 0.7% 7.6% 15

Coal India Ltd 0.3% 6.4% 370

Sun Pharmaceutical Industries 1.3% 6.3% 1,037

Jaiprakash Associates Ltd 0.2% 6.1% 24

Dr Reddy's Laboratories Ltd 1.5% 6.0% 3,511

Jubilant Foodw orks Ltd -3.6% 26.3% 1,519

NMDC Ltd -0.5% 17.5% 127

NHPC Ltd -1.3% 15.5% 19

Godrej Industries Ltd -0.1% 15.3% 333

Ambuja Cements Ltd -1.1% 15.0% 253

Bajaj Auto Ltd -0.2% 11.7% 2,028

Hindalco Industries Ltd -2.2% 10.2% 133

Jaiprakash Pow er Ventures Ltd -1.4% 8.9% 10

Arvind Ltd -3.9% 8.7% 256

Siemens Ltd -0.7% 6.2% 1,339

Steel Authority of India Ltd 0% -11% 70

Biocon Ltd 0% -6% 434

Havells India Ltd -3% -4% 305

MRF Ltd -2% -4% 37,714

Reliance Communications Ltd 0% -3% 62

Sun TV Netw ork Ltd 0.5% -13.9% 414

Ranbaxy Laboratories Ltd 1.8% -9.3% 819

Bharat Petroleum Corp Ltd 3.6% -6.0% 741

Cairn India Ltd 0.2% -5.9% 219

HCL Technologies Ltd 0.2% -4.9% 970

Lo

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Nifty PCR

Max Pain Theory (based on Index Options) – Indicative Nifty closing for next Expiry

Page 6 Page 6

SPARK INDIA DAILY

25 March 2015

10.60

10.43

25.16

8.21

14.30

4.18

96.96

5.63

9.99

15.99

5.00

6.23

0.68

51.34

4.23

9.30

15.05

3.78

3.81

0.14

41.40

0 20 40 60 80 100 120

V 1.0 (Oct'13 - Jan'14)

V 1.1 (Jan'14 - Apr'14)

V 1.2 (Apr'14 to Aug'14)

V1.3 (Aug'14 to Sep'14)

v1.4 (Sep'14 to date)

v1.5 (Jan'15)

Total

Sensex BSE200 Spark

Spark Model Portfolio

C o mpanyB SE 200

Weights

Spark

Weights

M cap (R s.

B n)C M P

6M A vg (R s.

M n)

A bso lute 1 Yr

R eturn

F inancials - OW 29.6% 33.0% 25.7%

HDFC Bank Ltd 6.0% 2,600 1,038 2,018 39.5%

Kotak M ahindra Bank Ltd 4.0% 1,035 1,341 1,615 73.7%

IndusInd Bank Ltd 5.0% 468 885 755 83.2%

Power Finance Corp 3.0% 368 279 863 54.8%

Yes Bank Ltd 6.0% 344 823 2,411 119.9%

Federal Bank Ltd 3.0% 113 133 527 47.1%

Karur Vysya Bank 3.0% 68 562 85 72.7%

Cholamandalam Inv. 3.0% 82 571 67 125.4%

C o nsumer - OW 13.1% 17.0% 10.6%

Asian Paints Ltd 4.0% 780 813 1,312 56.5%

Dabur India Ltd 3.0% 468 267 337 53.1%

Bajaj Corp Ltd 2.0% 66 447 118 0.0%

Bata Ltd 3.0% 75 1,164 255 3.7%

Redington Ltd 2.0% 51 127 263 0.0%

Whirlpool Ltd 3.0% 93 731 125 221.8%

A uto - OW 10.8% 15.0% 7.5%

Tata M otors Ltd 4.0% 1,585 532 2,714 36.8%

M aruti Suzuki India Ltd 3.0% 1,084 3,587 1,124 0.0%

Hero M otocorp Ltd 3.0% 520 2,605 2,126 23.3%

Exide Industries Ltd 3.0% 156 184 474 60.3%

Wabco India Ltd 2.0% 104 5,497 44 178.0%

H ealthcare - UW 7.1% 6.0% 5.3%

Sun Pharma Ltd 4.0% 2,148 1,037 2,115 79.4%

Torrent Pharma 2.0% 189 1,119 102 107.6%

Info rmatio n T echno lo gy - UW 12.8% 6.0% 2.2%

Wipro Ltd 4.0% 1,610 652 1,191 21.0%

Cyient Ltd 2.0% 60 533 57 68.3%

Oil & Gas - UW 7.6% 6.0% 4.5%

BPCL Ltd 4.0% 536 741 1,170 70.4%

GSPL Ltd 2.0% 68 122 157 82.9%

Infrastructure - UW 10.7% 10.0% 12.5%

Gujartat P ipavav Port Ltd 3.0% 119 247 298 185.8%

Cummins India Ltd 2.0% 238 857 206 58.0%

Sadbhav Engineering Ltd 2.0% 59 346 79 289.0%

Shree Cement Ltd 3.0% 369 10,586 166 101.2%

Others 2.0% 1.6%

Kaveri Seed Ltd 2.0% 72 1,050 178 78.5%

C ash & Others 8.3% 5.0%

T o tal 100.0% 69.9%

Spark Portfolio returns vs. BSE 200 returns

Spark Returns

Spark Portfolio returns outperformance to BSE 200

0

50

100

150

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Spark Portfolio

BSE 200 INDEX

-20

0

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4

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4

Au

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Oc

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%

Page 7 Page 7

SPARK INDIA DAILY

25 March 2015

Today’s News

Sector News

Macro I-T dept collects over Rs. 3,500 cr from non-filers

Special Purpose Vehicles to be created to implement 'Smart City' project:

Venkaiah Naidu

Adani group, 16 others bag projects to develop food parks

Govt allots 38 coal mines to central, state PSUs

Unseasonal rains hit 30% of rabi acreage

India to grow at 7.8% in FY16, to outpace China: ADB

Banking PNB raises Rs 1,800 crore from bonds to fund infra projects

Indian Bank slap notices on Annapurna Studios

Indian Bank to get ₹280-cr capital infusion

SBI sees loan growth picking up from next year

Axis Bank launches financial planning app

G-secs impeding corporate bond market: RBI Dy Governor

Auto VST tillers increases production days to 6 a week from 4

Bajaj Auto - Suman Kirloskar resigned as independent director

JLR to assemble Range Rover Evoque at its Pune Plant

AP allots 592 acres for Hero's new plant

Bldg. Materials Srinivasan’s firm India Cements Limited faces Kadapa heat for limestone

mining operations

Cement to cost Rs 4/bag more on coal price hike: Heidelberg

Today’s News

Today’s News

Sector News

Pharma Suven Life gets patents for molecules in 3 countries

USFDA issues import alert on two plants of Aarti Drugs

Ipca receives import alert for two more facilities

IT Infosys, Wipro under pressure to drop prices to retain clients like Amex,

Home Depot

Samsung to pre-install Microsoft apps on Android tablets

Supreme Court striking down 66A of IT Act victory for net users: Internet

and Mobile Association

Tech Mahindra, HCL eye $350-million stake in engineering solutions firm

Geometric

Samsung to soon go the Xiaomi way in India: Report

Consumption Analysts stay bullish on consumption, domestic cyclical despite unseasonal

rain

The most interesting consumer population is here, says Capital group

chairman

Ferrero profits rise 14% as it grows in emerging markets

Hindustan Coca-Cola to take up two water projects

Asia's milk demand will increase to 320 million tonnes in 6 years'

Dairies under margin pressure as milk prices remain stable

Is Modi magic over as business confidence falls?

Adani group, 16 others bag projects to develop food parks

From Walky WiFi to Antiseptic Spray, Check Out Cool Deals

Here why the procurement guy is called 'The Reaper Man' of the ad world

Page 8 Page 8

SPARK INDIA DAILY

25 March 2015

Today’s Announcements

RBI Money Market Operations as on March 23, 2015

RBI RBI seeks comments on Report on Data Standardisation

MMFS Updates on Scheme of Amalgamation

PNB Raising of Rs.1800 crores long term Bonds

SBIN Outcome of General Meeting (Clause 35A)

CIFC Disclosures under Reg. 10(5) in respect of acquisition under Reg. 10(1)(a) of SEBI (SAST) Regulations, 2011

CBK Appointment / Reappointment of Statutory Central Auditors

TechM Clarifies on news item

Today’s Announcements

Page 9

Indraprastha Gas Ltd CMP

Rs. 414

Target

Rs. 350

Rating

SELL

We initiate coverage on Indraprastha Gas Limited (IGL) with a negative view as we see multiple headwinds to volume

growth and high probability of margin erosion. Based on our channel checks across the CNG value chain we believe 1)

Pace of CNG conversions (100bps increase in penetration in FY14 vs +900bps over FY11-13) indicates penetration in

private cars is nearing saturation 2) Current CNG conversions across most retrofitters have dropped by 50-80% as

savings over Petrol is currently unattractive 3) Payback on new factory fit CNG cars is currently 2.5 yrs – unattractive, 4)

Delhi Metro’s Ph 3 expansion (Dec’16 COD; 70% increase in network size) could structurally alter the commuting

behaviour (cars/bus to metros) impacting CNG sales, 5) Delhi’s public transport fleet (~35% CNG share) to grow by a

meagre ~700 buses (<1% volume growth over next 2 yrs) due to lack of parking space for new buses and very slow

tendering process by DTC. Also industrial volumes would stagnate as IGL’s long term gas prices of $14+/mmbtu would

remain unattractive vs alternate fuels. Overall expect volumes to grow by a muted 3% CAGR over FY15-17E. In the fight

over volumes, we expect IGL to drop margins (Rs. 5.0/scm of EBITDA - lower end of guidance; from Rs. 5.6 in FY14) to

widen savings vs other fuels and expect any cost reductions to be passed on. Stock is pricing in 5% volume CAGR

(FY15-17E) with margins of Rs. 5.5/scm, which is highly unlikely in our view and expect earnings to de-grow by 3%

CAGR over FY15-17E. With market already pricing in a favourable decision in supreme court case with PNGRB, we do

not see any further re-rating on this front. Value at 11x consol FY17E EPS with a TP of Rs. 350

Channel checks with CNG retrofitters and CNG kit importers: CNG conversions across most retro-fitters has dropped by 50-

80% given the narrowing of savings between CNG and Petrol (~Rs. 20). New CNG cars in Delhi (entry variant – Alto K 10) costs

Rs. 71k, more than the petrol variant. Lapse of warranty if retrofitted (cost Rs. 30-35k) has forced customers to buy factory fitted

CNG cars in recent times. However, at ~Rs. 2/km of current savings, new CNG cars is an unattractive proposition

Bus additions remains a distant dream: Our interactions with DTC suggest that they operate 4.8k buses off which 1.1k needs

to be scrapped. A third tender for 1.4k new buses (after two failed attempts) floated in Aug’14 is yet to be finalised. If

unsuccessful DTC would resort to smaller buses and expect some more older buses (off the 4.8k) to be scrapped. Cluster bus

roll outs have stalled (current 1.1k, target 5.5k) as lack of parking depots has hurt expansion. Delhi development authority (nodal

agency for land allotment) is already struggling to resite some of the existing depots due to lack of adequate land availability and

hence we do not see any medium term solution to this issue. Expect ~700 buses (~1% volume growth) over the next 2 years

Delhi Metro impacting commuting habits: Studies indicate that Metro (Ph 1 & 2) currently carries 2mn passengers a day and

has displaced 0.4mn (Bikes, cars, buses) vehicles off Delhi’s roads. Ph 3 expansion (70% increase in network) is expected to

make the network more denser and increase usage to 4mn a day, indirectly impacting CNG volumes

Financial summary (Standalone)

Year Revenues (Rs. mn) EBITDA (Rs. mn) Adj. PAT (Rs. mn) EPS (Rs.) P/E(x) EV/EBITDA (x) ROE (x)

FY14 39,174 7,776 3,603 25.7 16.4x 7.6x 22%

FY15E 36,617 7,730 4,222 30.2 14.0x 7.3x 22%

FY16E 36,669 7,236 3,798 27.1 15.6x 7.6x 17%

FY17E 40,261 7,516 3,980 28.4 14.8x 6.8x 16%

Gassed out !

Stock performance (%)

1m 3m 12m

IGL -5% -2% 46%

Sensex -2% 3% 30%

BSE O&G -1% -6% 4%

Date Mar 24, 2015

Market Data

SENSEX 28261

Nifty 8571

Bloomberg IGL IN

Shares o/s 140mn

Market Cap Rs. 58bn

52-wk High-Low Rs. 489-275

3m Avg. Daily Vol Rs. 188mn

Index member BSE 200

Latest shareholding (%)

Promoters 45.0

Institutions 38.4

Public 16.6

VISHNU KUMAR A S vishnu@sparkcapital.in +91 44 4344 0069

Page 10

Indraprastha Gas Ltd

30-40%

CNG 76%

Industrial 10%

Domestic 6%

Transfer to Adani 8%

Car

Volume Growth to remain muted – expect 3% volume CAGR over FY15E – 17E

Our channel checks with CNG retrofitters suggests car conversions:

− Delhi nearing saturation in CNG cars (CNG penetration from 3% in FY07 to 19% in FY14 –

1% pt increase in FY14)

− CNG car conversions have dropped by 60—90% as reduction in Petrol prices has

reduced the price difference over CNG from >Rs. 30 to < Rs. 22 currently

Payback period on new CNG cars has jumped from 1.8 years to closer to 2.5 years – not

attractive enough !

30-40% Bus

Our interactions with DTC, DIMTS and DMRC suggest that bus additions are moving at

snail’s pace and unlikely to significant additions over the next 24 months

DTC: (Current fleet – 4.8k buses) Tender to add 1.4k buses floated for third time in Aug’14

(failed two times earlier) is yet to be finalized. Even if successful additions would replace

close to 1.2k - 1.3k older buses and net count would be remain the same

DIMTS: (Current fleet: 1.3k buses). Medium term roll out plans are only 400 new buses.

Lack of parking space hurting new roll outs

20-30% Taxis &

Autos

• Delhi government plans to issue 1 lakh new licences (Current fleet of autos – 88k) over a

staggered period of 2-3 years.

• Expect Taxi segment to grow in line with market

Page 11

Indraprastha Gas Ltd

27 25 28 23 26 33 30 28

3%

7%

9% 10%

13%

15%

18% 19%

20.0

24.0

28.0

32.0

36.0

0%

4%

8%

12%

16%

20%

FY07 FY08 FY09 FY10 FY 11 FY 12 FY 13 FY 14

CNG Savings over Petrol (Rs.) RHS CNG Car penetration (%)

Rs. 2.4/ltr

2.0

2.6

3.2

3.8

4.4

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q

2010 2011 2012 2013 2014 2015

CNG savings over Petrol on running costs (Rs. /km)

New CNG kit demand is highly sensitive to fluctuations in Petrol prices. With a steep decline in prices in the recent months, CNG kit conversions

have declined in the range of 60-80% across most CNG retro-fitters

20.0

30.0

40.0

50.0

60.0

70.0

80.0

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q

2010 2011 2012 2013 2014 2015

Petrol (Rs. /ltr) CNG (Rs./kg)

Delta Rs. 24

Rs. 45

Rs. 32 Rs. 36

Rs. 20 Average savings Rs. 3.3/km

CNG penetration in private cars nearing saturation; Car conversions fall >60% as price gap narrows

Is the Delhi CNG car penetration nearing saturation ? Our channel checks suggest so !

Our channel checks with CNG – retrofitters and CNG

kit importers suggests most cost conscious

customers have shifted to CNG when price

differentials of CNG vs Petrol were relatively high

during 2011-14.

Source: Industry, Spark Capital Research

Source: Industry, Spark Capital Research

Page 12

Indraprastha Gas Ltd

CNG Customers moving to factory fit cars on Warranty & EMI Facilities; However current back is almost 2.5 yrs

Particulars Retrofit Factoryfit

Price (Rs.) 35,000 70,000

Availability Available for all models

Available only for specific

models - typically lower end

cars. Eg: Maruti does not

CNG variant for Swift

EMI Facility No Yes

Reliability Medium High

Warranty

Coverage No Yes

Insurance

Cover

Cumbersome procedure to

add Available

Performance

issues

Occasional issues depending

on Brand, fitment etc., Rare

Particulars Based on Jul'14 prices (peak prices) Based on Mar'15 prices Based on Feb'15 prices (recent low)

Vehicle Car Car Car Car Car Car Car Car Car

Fuel Petrol Petrol Deisel Petrol Petrol Deisel Petrol Petrol Deisel

CNG Kit Type Retro fit Factory fit Retro fit Factory fit Retro fit Factory fit

Price (Rs. / Ltr) 73.6 73.6 57.8 60.5 60.5 49.7 56.5 56.5 46.0

Mileage (Km /Ltr) 12.0 12.0 16.5 12.0 12.0 16.5 12.0 12.0 16.5

Running Cost (Rs. /Km) 6.1 6.1 3.5 5.0 5.0 3.0 4.7 4.7 2.8

CNG (Rs. / Kg) 38.2 38.2 38.2 38.2 38.2 38.2 38.2 38.2 38.2

Mileage (Km / Kg) 15.0 15.0 15.0 15.0 15.0 15.0 15.0 15.0 15.0

Running Cost (Rs. /Km) - CNG 2.5 2.5 2.5 2.5 2.5 2.5 2.5 2.5 2.5

Savings (Rs. /km) 3.6 3.6 1.0 2.5 2.5 0.5 2.2 2.2 0.2

% Saving 59% 59% 27% 50% 50% 16% 46% 46% 9%

Daily Average Kms 40 40 40 40 40 40

Kit Cost 35,000 70,000 35,000 70,000 35,000 70,000

Saving /Yr (300 days assumed) 43,120 43,120 29,970 29,970 25,970 25,970

Payback Period (Yrs) 0.8 1.6 1.2 2.3 1.3 2.7

Our interactions with industry players suggest, retro fit conversions

in the last 3-4 years has largely been for 2-3 yr old cars when Petrol

prices increased in 2010-2014. With a typical replacement cycle of 5-

6 years most cars converted to CNG in 2010-2013 are currently being

replaced with newer ones. Customers prefer to buy factory fit CNG

cars due to availability of EMI facilities and clear warranty.

However at current savings/km and almost Rs. 70k CNG kit (2x the

retro fit price), the payback is close to ~2.5 years which could reduce

CNG car sales unless the price variance of CNG vs Petrol widens by

more than Rs. 35

Source: Industry, Spark Capital Research

Page 13

Indraprastha Gas Ltd

Tender for 1.4k buses floated for the third time (after 2 failed attempts); If successful would add 300 buses to the fleet

Bus additions remains a distant dream – Expect <1%CAGR volume growth over FY15-17E

DTC fleet

Target 5500

Current fleet

4893

Includes ~1100

which needs to be

scrapped

Medium term

additions

(tendered)

1380

Net medium

term

additions

280

2,836 2,936 3,114

4,330

6,076

5,602

4,567

2,000

3,500

5,000

6,500

2008 2009 2010 2011 2012 2013 2014

Buses on Road (avg. daily)

After two failed tenders, Delhi Transport Corporation

(DTC) has invited a global tender for the third time for

~1.4k buses in Aug’14 which has still not been

finalised. Our interactions with DTC Officials suggest

that negotiations are still on and if unsuccessful DTC is

likely to resort to small/mini buses to tide over the crisis

– however the roll out is likely to be slow and

measured.

Overall we do not see a case for a dramatic

increase in fleet strength and see chances of

further reduction if the tender fails as more buses

would be gradually scrapped

DTC operated buses has declined by 25% in the last 2 years

due to scrapping of old buses

Lack of parking space a huge deterrent for new roll out; Delhi Development Authority (DDA) says doesn’t have enough land DIMTS fleet

Target 5500

Current fleet 1157

Medium term

additions 300

Delhi Integrated Multi Modal Transport system (DIMTS) had and ambitious plans to roll out 5500 buses in 17 cluster by

2012/13 when it was originally announced in 06/07. However the roll out has been extremely slow with just 1.2k buses

till now largely due to lack of parking depots and has been using many DTC depots.

Our interactions with officials suggest, DDA is already finding it difficult to re-site one of DTC’s existing depot (capacity

– 1000) which the Courts have asked to remove due to environmental issues and says they do not have adequate land

parcels for DIMTS roll out. We do not see any medium term solution to this issue. Hence we believe DIMTS roll out is

likely to be very slow

Demand potential of 1000 new buses – 0.1mmscmd or 2% of FY14 total volumes

Overall we expect 700-800 buses at best to be added over the next 2 years (including 200-300 feeder buses from Delhi metro)

and future roll out is likely to be even slower Best case

1% volume

CAGR over

FY15-17E

Source: DTC, DIMTS, DMRC, News Reports, Spark Capital Research

Page 14

Indraprastha Gas Ltd

2.42

3.03

4.42 4.68

4.35

0.84

1.26

1.66 1.93

2.19

4.00

-

1.00

2.00

3.00

4.00

5.00

2010 2011 2012 2013 2014 2017E

DTC - Passengers carried (mn) daily Delhi Metro - Passengers carried (mn) daily

Crystal Gazing on long term volume: Delhi Metro is changing commuting behavior, could indirectly impact CNG volumes

Description Phase -I Phase -I & II Phase- I & II Phase III All Phases

2007 2011 2014* COD - Dec-16 Dec-16

Distance 65 190 190 136 326

Stations 58 141 141 90 231

No. of vehicles off the road daily 16,895 1,17,249 3,90,971

Annual reduction in fuel consumption (t) 24,691 1,06,493 2,76,000

Annual reduction in pollutants (t) 31,520 1,79,613 5,77,148

Savings in time per trip (minutes) 31 28 32

Source: Urban planning, Central Road Research Institute, DMRC, DTC, Industry, Spark Capital Research

+70% increase

Delhi Metro Rail Corp (DMRC) has helped remove 0.4mn vehicles off the road says - Central Road Research Institute. Phase III of the Metro

project is likely to be commissioned in phases by Dec 2016 – could further reduce the running vehicle population

DMRC expects to double the passengers carried from 2 to 4mn/d once Ph III is completed Phase III will make the network denser by bringing NCR closer

to Delhi

Phase IV of Delhi Metro is currently under planning, if approved will add 100kms

/ 67 new stations connecting the outer bounds of the city. Expected COD - 2021

Page 15

Indraprastha Gas Ltd

19.6 24.2 26.8 24.7 28.5 23.4 26.2 33.3 30.4 28.2 29.3 22.0 25.0 27.5

4.6

4.8

5.2

5.5

4.5

4.9 4.9

5.2

5.6 5.6

5.5

4.2

4.6

5.0

5.4

5.8

15.0

20.0

25.0

30.0

35.0

FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15E Current Scenario 1

Scenario 2

CNG Savings over Petrol

EBITDA (Rs./scm)

Volume

Growth (%) 7% 11% 10% 12% 21% 19% 28% 22% 10% 3% 2%

Avg. price FY05

Petrol (Rs./ltr) 36.5

CNG (Rs. /kg) 16.9

Difference 19.6

Historically IGL has earned <Rs. 5/scm when savings on CNG over Petrol was less than Rs. 25 (except for 2008 due to high crude volatility); With current

savings of Rs. 22, we believe margins IGL would try to boost volumes from decadal lows (2% in FY15E) and drop margins to its lower end of guidance of Rs.

5/scm and see further risks if Petrol prices drops further by Rs. 2-3/ltr

Reduction in domestic gas price by ~$1/mmbtu will increase savings by ~Rs. 3

Increase in petrol prices by additional Rs. 2.5 (considering $8-10/bbl increase in crude prices)

Scenario 1

Scenario 2

Margins /unit @ risk as we see IGL chasing volumes over margins

Source: Company, Spark Capital Research

Page 16

Indraprastha Gas Ltd

Our EPS

estimates are

~20% lower than

consensus

FY16/17E EPS

Stock is factoring 5% CAGR (FY15-17E) in volumes & stable margins – we see downside risks

Particulars # FY14 FY15E FY16E FY17E

Reported Estimate Bear Base Bull Bear Base Bull

PNG mmscmd 2.81 2.94 2.94 3.00 3.09 3.00 3.10 3.24

CNG mmscmd 0.98 0.91 0.91 0.96 1.00 0.93 1.01 1.06

Total mmscmd 3.79 3.85 3.85 3.96 4.09 3.93 4.10 4.30

Growth % 3.4% 1.6% 0.0% 2.7% 6.2% 1.0% 3.2% 5.6%

CNG share % 74% 76% 76% 76% 75% 76% 75% 75%

PNG share % 26% 24% 24% 24% 25% 24% 25% 25%

EBITDA (Rs./scm) Rs. /scm 5.6 5.5 4.5 5.0 5.3 4.5 5.0 5.4

EBITDA Rs. mn 7,776 7,730 6,328 7,236 7,913 6,454 7,516 8,466

PAT Rs. mn 3,603 4,222 3,199 3,798 4,246 3,279 3,980 4,607

EPS Rs. 25.7 30.2 22.9 27.1 30.3 23.4 28.4 32.9

EBITDA growth % 3% -1% -18% -6% 2% -9% -1% 5%

PAT growth % 2% 17% -24% -10% 1% -12% -3% 4%

Standalone EPS Rs. 22.9 27.1 30.3 23.4 28.4 32.9

CUGL/MNGL EPS Rs. 3.1 3.1 3.1 3.4 3.4 3.4

Consolidated EPS Rs. 25.9 30.2 33.4 26.5 31.8 36.3

Target Price (@11x multiple) 311 363 401 318 350 435

Stock is currently

pricing in 5% CAGR

volume growth with

margins ~Rs. 5.5/scm

Page 17

Indraprastha Gas Ltd

Maharashtra Natural Gas

Particulars # FY13 FY14 FY15E FY16E FY17E

Volumes mmscmd 0.20 0.31 0.41 0.50 0.55

Growth 55% 33% 22% 10%

EBITDA Rs. Mn 589 961 1,048 1,095 1,205

PAT Rs. Mn 385 541 586 617 689

PAT to IGL Rs. Mn 192 271 293 309 345

EPS contbn. Rs. 1.37 1.93 2.09 2.20 2.46

Central UP Gas

Particulars # FY13 FY14 FY15E FY16E FY17E

Volumes mmscmd 0.16 0.17 0.19 0.20 0.22

Growth 10% 9% 5% 10%

EBITDA Rs. Mn 391 464 485 475 482

PAT Rs. Mn 210 251 261 250 252

PAT to IGL Rs. Mn 105 125 130 125 126

EPS contbn. Rs. 0.75 0.90 0.93 0.89 0.90

EPS Contribution from Subsidairies

Maharashtra Natural Gas 2.2 2.5

Central UP Gas 0.9 0.9

Total Rs. 3.1 3.4

Valuation

Particulars FY16E FY17E

IGL EPS Rs. /sh 27.1 28.4

MNGL 2.2 2.5

CUGL 0.9 0.9

Consolidated EPS Rs. /sh 30.2 31.8

PE Multiple (x) 11.0 11.0

IGL Standalone Rs. /sh 326 341

MNGL/CUGL Rs. /sh 37 40

Target Price Rs. /sh 333 350

% upside/downside to CMP -16%

Valuation

4x

7x

10x

13x

16x

0

100

200

300

400

500

600

Mar-

08

Sep

-08

Mar-

09

Sep

-09

Mar-

10

Sep

-10

Mar-

11

Sep

-11

Mar-

12

Sep

-12

Mar-

13

Sep

-13

Mar-

14

Sep

-14

12M fwd P/E

CM

P (

Rs.)

IGL has traded at a median range of 11-12x in the last 10 yrs

Source: Bloomberg, Spark Capital Research

Page 18

Indraprastha Gas Ltd

Financial Summary

Abridged Financial Summary Key metrics

Rs. mn FY13 FY14 FY15E FY16E FY17E FY13 FY14 FY15E FY16E FY17E

Profit & Loss Growth ratios (%)

Revenues 33,647 39,174 36,617 36,669 40,261 Sales 33.8% 16.4% -6.5% 0.1% 9.8%

EBITDA 7,558 7,776 7,730 7,236 7,516 EBITDA 19.8% 2.9% -0.6% -6.4% 3.9%

Depreciation 1,867 2,195 1,481 1,589 1,697 Adj. Net Profit 15.6% 1.7% 17.2% -10.0% 4.8%

EBIT 5,692 5,581 6,249 5,646 5,819 Margin ratios (%)

Other Income/Exp 152 259 419 300 300 EBITDA 22.5% 19.9% 21.1% 19.7% 18.7%

Interest 562 441 353 191 89 EBIT 16.9% 14.2% 17.1% 15.4% 14.5%

PBT 5,282 5,398 6,315 5,755 6,030 Adj. Net Profit 10.5% 9.2% 11.5% 10.4% 9.9%

Net Profit 3,541 3,603 4,222 3,798 3,980 Performance ratios

Adjusted Net Profit 3,541 3,603 4,222 3,798 3,980 RoIC (%) 23% 20% 22% 19% 17%

Balance Sheet RoE (%) 26% 22% 22% 17% 16%

Shareholders Equity 14,930 17,632 20,870 23,686 26,683 RoCE (%) 21% 19% 20% 16% 16%

Total debt 4,585 4,012 2,862 862 862 Sales / Total Assets (x) 1.6 1.6 1.4 1.3 1.3

Total Networth & Liabilities 22,908 25,338 27,692 28,508 31,505 Fixed Assets Turnover (x) 1.6 1.8 1.7 1.6 1.7

Net fixed assets 18,473 18,953 19,471 20,382 20,685 Financial stability ratios

CWIP 2,913 2,623 3,123 3,123 2,123 Total Debt to Equity (x) 0.31 0.23 0.14 0.04 0.03

Investments 1,426 1,174 2,592 2,592 2,592 Inventory & Debtor days 23.7 23.9 23.9 23.9 23.9

Current assets 3,410 5,661 5,512 5,420 9,322 Creditor days 26.8 21.1 21.1 21.1 21.1

Current liabilities 3,372 3,182 3,116 3,119 3,327 Valuation metrics

Net current assets 38 2,479 2,396 2,301 5,995 Current Share Price (Rs.) 414

Total Assets 22,909 25,338 27,692 28,508 31,505 Market Cap (Rs.mn) 57,960 57,960 57,960 57,960 57,960

Cash Flows Fully Diluted Shares (mn) 140 140 140 140 140

Cash flows from Operations 6,433 5,357 5,594 5,087 5,314 Adjusted EPS (Rs.) 25.3 25.7 30.2 27.1 28.4

Cash flows from Investing (3,622) (2,818) (3,981) (2,200) (700) P/E (x) 16.4 16.1 13.7 15.3 14.6

Cash flows from Financing (2,180) (1,473) (2,051) (2,983) (983) P/B (x) 3.9 3.3 2.8 2.4 2.2

Cash Generated 631 1,065 (438) (96) 3,631 EV (Rs.mn) 60,609 58,285 55,673 53,769 50,138

Opening Cash 1,299 1,930 2,996 2,557 2,462 EV/ EBITDA (x) 8.0 7.5 7.2 7.4 6.7

Closing Cash 1,930 2,996 2,557 2,462 6,093 Dividend Yield (%) 1.3% 1.3% 1.4% 1.4% 1.4%

Page 19

Gujarat State Petronet Ltd CMP

Rs. 118

Target

Rs. 148

Rating

BUY Set on a growth trajectory

Gujarat State Petronet Ltd. (GSPL) is a natural gas trunk pipeline operator with 2200 kms. of network in the state of

Gujarat. GSPL has seen consistent drop in volumes (36mmscmd in FY11 to ~22 in FY13/14) with fall in domestic gas

supplies. We believe volumes have bottomed out and expect gas supplies to increase over the next 3-4 years driven by

1) Increase in domestic output by 10-15mmscmd (Daman, C-series, Deen Dayal,etc.,) aiding power & fertiliser sectors

and 2)Two new 5MMT LNG terminals with landfall point in Gujarat adding 36 mmscmd of volumes. While we expect 50

mmscmd of additional volumes in the country, we conservatively build in 25/27/30 mmscmd of volumes for FY16/17/18

and see further upside to estimates. In the near term, implementation of gas pooling in the power sector would drive

increase in volumes by 7-8mmscmd. Also transmission tariffs could increase by 5-10% post APTEL’s ruling in favour on

GSPL. Overall we expect standalone earnings to increase by 12% CAGR over FY15E-7E. Our DCF based valuation of Rs.

118, suggests the stock is factoring the positives from the standalone business. However, we see further upsides from

GSPL’s ~26% stake in GSPC gas, which we value at Rs. 30/sh. Initiate coverage with a TP of Rs. 150

Gas pooling – Key near term trigger: News reports suggest that Cabinet is likely to meet soon and discuss regarding the

prospects of gas pooling. Our analysis suggests Gujarat has 8GW of gas power plants of which 5GW has domestic gas

allocation. Assuming the 5GW are operated at 40% PLF, we believe GSPL’s volume could increase by 7-8mmscmd. Adjusting

for lower tariffs (~50%) for these volumes we expect EPS to increase by Rs. 2.4/sh for FY16E (~25% higher than est.)

Incremental gas supplies of 50mmscmd over the next 3-4 years: Expect 10-15mmscmd of domestic supplies from C-Series

(4-6), Daman (7-8) and Deen Dayal fields (5-6) over the next 3-4 years. Additionally 10MMT /36mmscmd of new LNG supplies

(Dahej extn & GSPC Mundra) have landfall points in Gujarat. Overall out of the 50mmscmd, we believe GSPL could attract

atleast 5-10mmscmd over the next 3-4 years. While we are not factoring any incremental volumes form RIL KG-D6, we note that

40% of any incremental volumes >15mmscmd would flow to Gujarat

CGD demand could increase by 3-4 mmscmd over the next 3-4 years: GSPC Gas & Gujarat Gas duo are currently doing

volumes of 7mmsmcd. With 6 new regions being added within Gujarat and potential new regions (Banskantha, amreli,

Patan,etc.,) could overall add 3-4 mmscmd over the next 3-4 years

High Pressure Pipeline tariff set to increase further: APTEL recently (Nov’14) passed an order in favour of GSPL and has

asked PNGRB to rework the tariff. While the quantum of increase is yet to be finalised, we factor in 1.3/scm (5%). We note that

every 10% increase in overall tariff would add 14% to EPS

Financial summary (Standalone)

Year Revenues (Rs. mn) EBITDA (Rs. mn) Adj. PAT (Rs. mn) EPS (Rs.) P/E(x) P/B (x) ROE (%)

FY14 10,507 9,288 4,191 7.4 15.8x 2.0x 13.4%

FY15E 10,840 9,523 4,419 7.9 15.0x 1.8x 12.7%

FY16E 12,227 10,837 5,217 9.3 12.7x 1.6x 13.5%

FY17E 13,162 11,694 5,732 10.2 11.6x 1.5x 13.3%

Stock performance (%)

1m 3m 12m

GUJS 0% 7% 79%

Sensex -2% 3% 30%

BSE O&G -1% -6% 4%

Date Mar 24, 2015

Market Data

SENSEX 28261

Nifty 8571

Bloomberg GUJS IN

Shares o/s 563mn

Market Cap Rs. 66bn

52-wk High-Low Rs. 136-63

3m Avg. Daily Vol Rs. 170mn

Index member BSE 200

Latest shareholding (%)

Promoters 37.7

Institutions 43.1

Public 19.2

Page 20

Gujarat State Petronet Ltd

Medium term volume drivers

Potential of 15-20 mmscmd from domestic sources (excl . RIL)

GSPC – Deen Dayal

Daman Offshore

C- Series

mmscmd Field

5-6

7-8

4-6

Project expected to see first gas by FY17 with peak

production from FY19 onwards. Expect atleast 1-2

mmscmd by FY18

Production expected to start by FY15, currently

delayed – expect start up in the next 2 years

KG – D6 NA

The field currently produces ~13mmscmd of gas. Any

incremental production over 15mmscmd would go to

power plants – off which 40% is allocated to Gujarat.

While production profile from this field is difficult to

predict, a 5mmscmd increase would lead to 1-

1.5mmscmd for GSPL

Gas processing facilities are currently under

development as part of Daman project (Sagar Pragati –

MOPU). Once facilities are online by 2HCY16,

production is expected to increase to >3mmscmd.

LNG sources

GSPC Mundra

Source

18

mmscmd

Dahej - extension 18

15-20

36

50

The land fall point for LNG supplies are in Gujarat and assuming even

20% of these volume flows through GSPL’s network, it would add 6-

7mmscmd.

Expect both these

plants to be

commissioned by

end of FY17

Overall we expect close to 50mmscmd of new supplies in the country driven largely

by LNG volumes. Expect atleast 5-10 mmscmd of additional volumes in GSPL’s

network over the next 3-4 years, driven largely by Industrial, Power and CGD demand

Page 21

Gujarat State Petronet Ltd

GSPC Gas and Gujarat Gas – Existing + New areas

Source: GSPC,GGAS, Industry, PNGRB, Spark Capital Research

1

1 1

1

1

1

1

1

1

1

1

1

2

2

3

3

3

3

3 3

1 GSPC – Existing network

2 Gujarat Gas – Existing network

3 GSPC/GGAS – New areas

Jamnagar

Kutch-West

Botad

Surat

Valsad

Bhavnagar

Metals, Engineering and Petrochemicals

Textiles, Engineering, Power, Steel Pipes,

Chemicals and Ceramics

Metals, Diamond cutting & processing and

Textiles

Textiles, Diamond processing, Engineering, and

Petrochemicals

Textiles and Chemicals

Textiles, Plastic, Minerals, Chemicals, Glass &

Ceramics and Engineering

New Industrial areas covered by GSPC would give

additional 2-3mmscmd of volumes over a 3-4 year horizon

GSPC Gas and Gujarat Gas CGDs to increase volumes to 9-10mmscmd over 3-4 years (Current 7mmscmd)

New CGDs (net yet bid out currently)L GSPC gas had

submitted EOIs to PNGRB in FY11 and estimated the

demand potential of these regions at 2-3mmscmd

2-3

2-3

Total CGD demand in the next 3-4 years

6.5-7

9-10

Current supplies by GSPC and GGAS

Page 22

Gujarat State Petronet Ltd

Plant Capacity

(MW) Type Plant Owner Gas Linkage

Gas

Allocated

Current

PLF

Current Gas

consumption

Gas required @ 40%

PLF (mmscmd)

Dhuvaran CCPP 107 State Gujarat State Electricity Corp APM & Others 0.1 0.23

Utran CCPP 144 State Gujarat State Electricity Corp APM & Others - 0.31

Hazira CCPP 156 State Gujarat State Energy Generation APM & Others 0.1 0.33

Baroda CCPP 160 Private GIPCL APM & Others - 0.34

Peguthan CCPP 655 Private CLP India Pvt APM & Others 0.1 1.40

Sugen CCPP 1,148 Private Torrent Power APM & Others 1.5 2.45

Gandhar CCPP (Jhanore) 657 Central NTPC APM & Others 0.1 1.40

Kawas CCPP 656 Central NTPC APM & Others 0.8 1.40

Dhuvaran CCPP Extension 112 State Gujarat State Electricity Corp KG D6 - 0.24

Utran CCPP Extension 374 State Gujarat State Electricity Corp KG D6 - 0.80

Essar CCPP 515 Private Essar Power KG D6 - 1.10

Vatwa CCPP 100 Private Torrent Power KG D6 - 0.21

Dhuvaran Ext. 376 State Gujarat State Electricity Corp No linkage - 0.80

Pipavav CCPP 702 State GSPC Pipavav Power Co No linkage - 1.50

Hazira CCPP EXT 351 State Gujarat State Energy Generation No linkage - 0.75

DGEN 1,200 Private Torrent Power No linkage - 2.56

Uno Sugen 383 Private Torrent Power No linkage - 0.82

Total 7,796 Total 2.7 16.6

APM & Others 3,683 APM & Others 2.7 7.9

KG D6 1,101 KG D6 - 2.3

No linkage 3,012 No linkage - 6.4

Gas Pooling could boost GSPL’s throughput by 7-8 mmscmd

Gujarat has 8GW of gas plants. If gas pooling is implemented for 5GW (those with domestic gas allocation)

GSPL could see an incremental 7-8mmscmd of volumes.

+7-8

Cost of LNG delivered @ the power plant for Merchant power companies (no

linkage / no PPA) would range around $11/mmbtu ($8/mmbtu ex terminal) and

cost of power would still be > Rs. 6/kwh. We see some demand for power at

these prices during the summer months. At best these plants could add

1mmscmd for a few quarters

Considering Govt. could cut pipeline tariff by ~50%, we expect

every 1mmscmd increase to add 0.15bn in earnings and Rs.

0.3/sh in EPS. Overall 8mmscmd could add Rs. 2.4/sh in

incremental earnings ( 26% higher than our estimates)

Page 23

Gujarat State Petronet Ltd

Tariff computation approved by PNGRB after making adjustments to GSPL’s tariff submission (dated Sep’12) Impact Tariff in

Rs/mmbtu (GCV)

Likely exemptions

based on APTEL

observations

# Tariff submitted by GSPL 39.55

1 Considering rate of inflation as 4.5% 0.43 39.12 0.43

2 Complete disallowance of Unaccounted for Gas 1.6 37.52 1.6

3 Volumes as per the relevant regulations 7.79 29.74

4 Capital expenditure considered only for approved pipelines as per PNGRB authorization 3.96 25.78 3.96

5 Pretax IRR considered to be 18.18% as per regulation (1.34) 27.12

6 Removal of Future Spur Lines 0.54 26.58 0.54

7 Considered an additional employee at every 11 kms + salary escalation @4.5% per annum + removal of training

& ESOPs cost + removal of 50% increase in manpower in the year 2016 and 2026 due to salary revision 1.63 24.95 1.63

8 Days of operations considered to be 355 for compressors 0.04 24.91

9 Future Capital Expenditure for other assets considered as per the supporting documents submitted 0.16 24.75

10 Rate of depreciation considered as 8.33% on pipelines for calculating the net block as on 20.11.2008 0.48 24.27 0.48

11 Considering the Economic Life of the network starting from 11.03.2001 0.02 24.25

12 Considering Tariff on gas used for compressors and heating system as part of operational expenditure as per the

provisions of the regulation (0.04) 24.29

13 Recurring capex (including for replacement compressors) reduced to 70% 0.28 24.02

14 Reworking of residual value considering applicable depreciation rate 0.24 23.78

15 Considered 50% increase in manpower in the year 2016 and 2026 due to salary revision (0.21) 23.99

# Tariff determined by PNGRB 23.99

Total 8.64

Pipeline realisation could inch up post APTEL observations

GSPL’s high pressure pipeline tariff was approved by PNGRB in Sep’12 at Rs. 23.99/mmbtu, sharply lower than the Rs. 39.55/mmbtu tariff submitted by GSPL

GSPL filed an appeal against PNGRB’s order with Appellate Tribunal for Electricity (APTEL). Recently (Nov’14) APTEL passed an order highlighting issues in some of the

assumptions made (favourable to GSPL) and asked PNGRB to rework the tariff based on the observations made.

Page 24

Gujarat State Petronet Ltd

Particulars FY14 FY15E FY16E FY17E FY18E FY19E FY20E FY21E Valuation Mar-16 Mar-17 Mar-18

Total of PV of CF 27 30 32

Gas Volumes (MMSCMD) 21.1 23.2 25.0 27.0 30.0 35.0 35.0 35.0 Terminal Value 52 52 52

Tariff (Rs. /1000scm) 1321.6 1240.2 1300.0 1300.0 1300.0 1100.0 1100.0 1100.0 Total firm Value 80 82 84

Gross Revenue (Rs. bn) 10.5 10.8 12.2 13.2 14.6 14.4 14.4 14.4 Net debt / (cash) 13 9 5

EBITDA (Rs. bn) 9.3 9.5 10.8 11.7 13.0 12.8 12.7 12.6 Equity Value (Rs. Bn) 66 73 79

EBIT (Rs. bn) 7.4 7.7 8.9 9.6 10.9 10.4 10.2 10.1 Target Price (Rs. /sh) 118 130 140

Tax 2.5 2.5 3.0 3.3 3.7 3.5 3.5 3.4 Key Multiples (on CMP) FY17E FY18E FY19E

NOPAT (Rs. bn) 5.0 5.1 5.9 6.4 7.2 6.9 6.7 6.6 EV 80 76 72

Depreciation 1.8 1.8 2.0 2.0 2.1 2.3 2.5 2.5 EV/EBITDA 6.8 5.8 5.6

Capex 2.2 3.5 2.5 2.5 2.5 1.0 1.0 0.0 PE 11.6 10.0 10.1

FCFF (Rs. bn) 4.6 3.5 5.3 5.9 6.8 8.2 8.3 9.2 PB 2.6 2.3 2.1

PV of Cashflows 5.3 5.5 6.0 5.4 5.4 WACC 11.4%

FY 15E-17E 18E-20E

Avg. ROE 13.2% 12.5%

Avg. ROCE 11.2% 11.6% GSPC Gas stake -valuation

Volumes mmscmd 7.5

EBITDA Rs./scm 4.3

EBITDA Rs. Mn 11.8

PAT Rs. Mn 5.4

GSPC Gas - Value @15x Rs. Mn 81.0

Value to GSPL (adj. for consol discount) Rs. Mn 16.7

Value to GSPL Rs. /sh 30

Standalone - DCF Rs. /sh 118

Total Rs. /sh 148

Valuation

Page 25

Gujarat State Petronet Ltd

Financial Summary

Abridged Financial Statements Key metrics

Rs. mn FY 13 FY 14 FY15E FY16E FY17E FY 13 FY 14 FY15E FY16E FY17E

Profit & Loss Growth ratios (%)

Revenues 11,732 10,507 10,840 12,227 13,162 Sales 4.4% -10.4% 3.2% 12.8% 7.6%

EBITDA 10,720 9,288 9,523 10,837 11,694 EBITDA 4.1% -13.4% 2.5% 13.8% 7.9%

Depreciation 2,514 1,839 1,847 1,952 2,047 Adj. Net Profit 3.1% -22.1% 5.4% 18.1% 9.9%

EBIT 8,859 7,450 7,676 8,885 9,648 Margin ratios (%)

Other Income/Exp 660 552 550 550 550 EBITDA 91.4% 88.4% 87.8% 88.6% 88.9%

Interest 1,263 1,418 1,286 1,241 1,196 EBIT 75.5% 70.9% 70.8% 72.7% 73.3%

PBT 8,257 6,583 6,940 8,194 9,002 Adj. Net Profit 45.9% 39.9% 40.8% 42.7% 43.5%

Net Profit 5,381 4,191 4,419 5,217 5,732 Performance ratios

Adjusted Net Profit 5,381 4,191 4,419 5,217 5,732 RoIC (%) 18% 14% 14% 17% 18%

Balance Sheet RoE (%) 20% 13% 13% 13% 13%

Shareholders Equity 29,406 32,948 36,577 40,807 45,551 RoCE (%) 15% 11% 11% 11% 11%

Total debt 16,097 14,288 14,288 13,288 13,288 Sales / Total Assets (x) 0.3 0.2 0.2 0.2 0.2

Total Networth & Liabilities 49,589 51,720 55,349 58,579 63,323 Fixed Assets Turnover (x) 0.3 0.3 0.3 0.3 0.3

Net fixed assets 32,514 31,593 32,746 33,295 33,748 Financial stability ratios

CWIP 5,261 6,561 7,061 7,061 7,061 Total Debt to Equity (x) 0.5 0.4 0.4 0.3 0.3

Investments 1,740 5,850 6,850 16,850 21,850 Inventory & Debtor days 83.8 91.6 30.1 30.1 30.1

Current assets 12,202 8,661 9,916 3,023 2,468 Creditor days 70.8 56.8 60.0 60.0 60.0

Current liabilities 2,835 2,156 2,587 3,012 3,166 Valuation metrics

Net current assets 9,367 6,505 7,330 11 (698) Current Share Price (Rs.) 118

Total Assets 49,589 51,720 55,349 58,579 63,323 Market Cap (Rs.mn) 66,415 66,415 66,415 66,415 66,415

Cash Flows Fully Diluted Shares (mn) 563 563 563 563 563

Cash flows from Operations 6,926 6,451 8,859 8,387 8,959 Adjusted EPS (Rs.) 9.6 7.4 7.9 9.3 10.2

Cash flows from Investing (3,279) (6,459) (3,950) (12,500) (7,500) P/E (x) 12.3 15.8 15.0 12.7 11.6

Cash flows from Financing (9) (4,067) (1,944) (3,031) (2,183) P/B (x) 2.3 2.0 1.8 1.6 1.5

Cash Generated 3,638 (4,076) 2,965 (7,144) (725) EV (Rs.mn) 73,963 75,693 72,728 78,872 79,597

Opening Cash 5,148 8,531 4,992 7,957 813 EV/ EBITDA (x) 6.9 8.1 7.6 7.3 6.8

Closing Cash 8,786 4,992 7,957 813 89 Dividend Yield (%) 0.8% 0.8% 1.0% 1.3% 1.3%

Page 26

Petronet LNG Ltd CMP

Rs. 178

Target

Rs. 220

Rating

BUY

Petronet LNG is India’s largest LNG regas terminal operator a with a 15MMT capacity operating at >100% utilisation

levels at its Dahej facility (10MMT) and <5% utilisation at Kochi (5MMT). The stock has been an underperformer (10% in

3yrs) due to drag on earnings from Kochi and uncertainty on high marketing margins in a utility business (~30% of

PAT) affecting multiples. We believe these concerns are fully priced in and expect a 22% CAGR earnings growth over

FY5E-18E driven by low cost brownfield capacity expansion at Dahej by 5MMT (50% increase), which is scheduled for

commissioning by end of FY17E. The expanded capacity of 15MMT, is >98% contracted under long term agreements

giving stability in earnings. We are negative on Kochi’s utilisation and do not expect more than 20% utilisation by end

of FY18E. Despite this we see, solid FCF generation (16% yield on FY18), superior ROEs (>18% FY18E), low debt (0.3x

DE) and opportunities for further low cost expansion at Dahej as key positives. Though chunk of earnings are back

ended (FY17/18E), incremental demand due to drop in spot gas prices, likely implementation of gas pooling and

successful leasing out of Kochi’s storage tank would provide near term upsides. Initiate coverage on PLNG with a DCF

based TP of Rs. 220

Dahej expansion on track: PLNG is undertaking a low cost brownfield expansion (Rs. 24bn actual capex vs Rs. 50bn for

greenfield) at Dahej which is scheduled for commissioning by Nov’16. The entire capacity is booked under long term contract

with GAIL/IOCL/BPCL and 50% of capex (Rs. 1.2bn) is received in advance to be set off against future revenues. Overall the

entire 15MMT facility in booked with 14.75MMT of long term contracts and likely upward flexibility of 10% (1.5MMT) which

PLNG plans to use for the spot/short term market

Kochi worries to continue: We expect demand from Kochi terminal to remain <20% by FY18E as pipelines on both the Kerala

and Tamil Nadu sections are stuck due to agitation by farmers. While there is some political willingness in Kerala to revive the

GAIL Kochi – M’lore pipeline section (demand potential of 1MMT) there is not much action on ground. Even if project starts by

end of FY16, it could take 18-24 months to see first volumes. The TN section of the pipeline is stuck in a legal battle and the

issue is currently sub judice. PLNG has invited bids to lease out storage tanks, if successful (likely revenues ~Rs. 0.5bn) would

help cover costs partially (not priced in)

Future projects: PLNG plans to increase the capacity by 2.5MMT (capex of <Rs. 10bn), which is currently under study, which if

undertaken on long term contract model would be positive in our view. PLNG plans to build a 5MMT terminal at Gangavaram in

Andhra Pradesh and has necessary approvals in place. PLNG plans to divest 24% stake and expects LT tie ups and pipeline

connectivity before commencing the project. Expect PLNG to go slow on this project, given the Kochi experience

Financial summary

Year Revenues (Rs. bn) EBITDA (Rs. bn) Adj. PAT (Rs. bn) EPS (Rs.) P/E(x) EV/EBITDA (x) EV/EBITDA (x)

FY15E 441 18 9 12.0 16.7 9.2 17%

FY16E 429 20 10 13.2 15.1 7.8 17%

FY17E 409 21 10 13.8 14.5 7.4 15%

FY18E 385 29 16 21.1 9.5 4.6 21%

Stock performance (%)

1m 3m 12m

PLNG 0% -12% 32%

Sensex -2% 3% 30%

BSE O&G -1% -6% 4%

Date Mar 24, 2015

Market Data

SENSEX 28261

Nifty 8571

Bloomberg PLNG IN

Shares o/s 750mn

Market Cap Rs. 133bn

52-wk High-Low Rs. 222-131

3m Avg. Daily Vol Rs. 354mn

Index member BSE OIL & GAS

Latest shareholding (%)

Promoters 50.0

Institutions 26.7

Public 23.3

Structural Story – Slow but steady

Page 27

Petronet LNG Ltd

Country Project Year Capacity

(MMT) Status

Contracted

(MMT)

Un contracted

(MMT)

Total

(MMT)

Indonesia Dong- Sen 2HCY15 2.0 Under Constrn. 2.0 - 2.0

Australia Gladstone 2HCY15 3.9 Under Constrn. 3.5 0.4 3.9

Australia Gorgon 2HCY15 5.2 Under Constrn. 4.1 1.1 5.2

Australia APLNG 2HCY15 4.5 Under Constrn. 4.3 0.2 4.5

Australia Curtis 2HCY15 4.3 Under Constrn. 2.6 1.7 4.3

Australia Gladstone 2HCY15 3.9 Under Constrn. 3.5 0.4 3.9

Australia Prelude 2016 3.6 Under Constrn. 3.6 - 3.6

Australia Wheatstone 2016 8.9 Under Constrn. 7.5 1.4 8.9

Australia Ichtys 2016 8.4 Under Constrn. 8.3 0.1 8.4

US Sabine Pass 2016 9.0 Under Constrn. 9.0 - 9.0

Australia APLNG 2016 4.5 Under Constrn. 4.3 0.2 4.5

Australia Gorgon 2017 5.2 Under Constrn. 4.1 1.1 5.2

US Sabine Pass 2017 9.0 Under Constrn. 7.7 1.3 9.0

US Cove Point 2017 5.8 Under Constrn. 5.4 0.4 5.8

Australia Gorgon 2018 5.2 Under Constrn. 4.1 1.1 5.2

Canada Kitimat 2018 5.0 Planned 2.0 3.0 5.0

US Corpus Christi 2018 13.5 Under Constrn. 8.5 5.0 13.5

US Freeport LNG 2018 6.6 Under Constrn. 6.6 - 6.6

Mozambique Anadarko 2019 5.0 FID by 2015 - 5.0 5.0

Australia Pluto 2019 4.3 Planned 2.7 1.6 4.3

US Sabine Pass 2019 9.0 Under Constrn. 3.8 5.3 9.0

US Cameron LNG 2019 15.0 Under Constrn. 10.6 4.4 15.0

US Freeport LNG 2019 6.6 Under Constrn. 6.6 - 6.6

Total 148.3 114.7 33.5 148.3

Source: GIIGNL, IGU, Bloomberg, Company, News Reports, Industry, Spark Capital Research

Sizeable LNG capacities coming online in the next 3 years – no dearth of supplies

Plants coming live by FY17 70 MMT

Un-contracted 8 MMT

Portfolio buyers 10 MMT

We see LNG market to remain more liquid in the next

few years driven by sizeable capacity additions and

at least 15-20MMT of volumes from portfolio buyers

(GDF Suez, BP, etc.,) which could add to the growing

% of short term/spot volumes. Also partial restart of

a few Japanese nuclear reactors (2HCY15) could

further boost the spot market volumes

0%

5%

10%

15%

20%

25%

30%

35%

0

10

20

30

40

50

60

70

80

90

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

MT

PA

Non Long-term LNG

% of Total LNG Trade (RHS)

LNG Short term/spot market getting more liquid

Page 28

Petronet LNG Ltd

However LNG Delivered price (ex-terminal) likely to be > $10/mmbtu…

USD/MMBTU Ras gas Long Terms (12.67% of JCC) LNG Short term (10-14% linkage) US Henry Hub LNG Pricing

Linkage Crude Crude Crude Crude Crude Crude Crude Gas Gas Gas

% 13% 13% 13% 14% 14% 10% 10% 115% 115% 115%

Price ($/bbl/mmbtu) 100.00 85.00 70.00 100.00 70.00 100.00 70.00 2.80 4.00 5.00

Liquefaction 3.00 3.00 3.00

LNG FOB 12.67 10.77 8.87 14.00 9.80 10.00 7.00 6.22 7.60 8.75

Shipping 0.30 0.30 0.30 0.40 0.40 0.40 0.40 3.00 3.00 3.00

Customs Duty 5% 0.67 0.58 0.48 0.75 0.53 0.54 0.38 0.48 0.55 0.61

Re-gasification Charges 0.67 0.67 0.67 0.67 0.67 0.67 0.67 0.67 0.67 0.67

Service Tax on regas 0.09 0.09 0.09 0.09 0.09 0.09 0.09 0.09 0.09 0.09

Ex-Terminal R-LNG Price 14.40 12.41 10.41 15.91 11.49 11.70 8.54 10.46 11.91 13.12

We see new long term supplies at a delivered gas prices to

range $10-$12 / mmbtu

Fuel Fuel Oil LSHS Naphtha LPG Deisel

Price $/MT

422.6

451.6

629.0

955.0

1,034.4

Kcal / Kg

10,500

10,000

10,500

11,900

9,500

Equiv.Cost per mmbtu

($/mbbtu)

10.1

11.4

15.1

20.2

27.4

Gas price ($/mmbtu)

12.0

12.0

12.0

12.0

12.0

Savings -15% -5% 26% 69% 129%

Exporter Importer (mmtpa) Years Status Start Linkage

Rasgas PLNG 5.0 25 Firm 2004 12.67% of JCC

Rasgas PLNG 2.5 25 Firm 2009 12.67% of JCC

Gorgon PLNG 1.4 20 Firm 2016/2017 14% on crude

BG GSPC 1.3 20 Firm 2015 NA

Gazprom GSPC 2.5 20 MOU 2017+ NA

BG GSPC 1.3 20 MOU 2017+ NA

Cheniere GAIL 3.5 20 Firm 2017/18 115% on Henry

Hub

Dominion GAIL 2.3 NA Firm 2018/19 NA

Gazprom GAIL 3.0 Firm 2018/19 NA

Total 22.7

Firm 18.95

HOA/MOU 8.6

Expect additional 7-8mmt of long term supplies by FY18

At $12/mmbtu LNG to remain competitive across most

alternate fuels

Page 29

Petronet LNG Ltd

Power sector can consumer 5MMT of LNG, if Govt. implements gas pooling and

help run atleast 16GW @ 40% PLF

We do see demand for new 10MMT capacity

LNG terminals in India

Existing Location Current 2016 2017 2018 2019 2020

Petronet Dahej 10.0 10.0 10.0 15.0 15.0 15.0

Petronet Kochi 5.0 5.0 5.0 5.0 5.0 5.0

Shell Hazira 5.0 5.0 5.0 5.0 5.0 5.0

GAIL Dabhol 3.5 3.5 5.0 5.0 5.0 5.0

Under development

GSPC Adani Mundra 5.0 5.0 5.0

H Energy Jaighad - - 8.0

Total (mmt) 23.5 23.5 25.0 35.0 35.0 43.0

Petronet’s Dahej expansion to 15MMT

(10 currently) and GSPC’s Mundra

terminal (5mmt) will increase LNG

regasification capacity from 25MMT to

35MMT by FY18.

Excluding anchor load customers like

Fertiliser & Power sector (cannot buy

LNG without regulatory involvement) we

do see good demand from (Refinery,

Petchem, Industry and CGDs) which

would easily cover the volumes

Refineries & industries can potentially consume 30-32mmscmd / 9-10mmt. 1 2

Source: Industry, Spark Capital Research

Domestic LNG Total Domestic LNG Total 2018 Remarks # Additional Potential

Fertilizer 31 9 40 30 13 43 50 22MMT. Each MMT of urea requires 2.3mmscmd Limited 7

Power (40% PLF) 38 5 43 27 2 29 52 26GW of power plants operating @ 40% PLF Limited 23

LPG 6 1 6 2 1 3 7 Peak demand Limited 4

CNG / PNG 9 0 9 8 0 8 12 Assuming 10% CAGR demand of CGD's - 4

Refineries 2 7 9 3 10 13 30 Yes 17

Petrochemicals 3 2 5 4 1 5 9 Peak demand Yes 4

Steel 1 3 5 2 2 4 8 Peak demand Yes 4

Commercial & Others 5 13 18 5 12 17 22 Assuming 10% CAGR industrial demand Yes 6

Total (mmscmd) 94 40 134 81 41 122 190 68

Ability to buy Costly LNGParticulars

Theoritical Demand2013 2014

1

2

Source: Company, News Reports, Spark Capital Research

Page 30

Petronet LNG Ltd

LNG price @ Terminal $9/mmbtu $10/mmbtu $12/mmbtu

Particulars Unit With taxes W/o taxes With taxes W/o taxes With taxes W/o taxes

Capacity MW 16,000 16,000 16,000 16,000 16,000 16,000

PLF % 40% 40% 40% 40% 40% 40%

Total Gross Gas required mmscmd 32.3 32.3 32.3 32.3 32.3 32.3

Current Domestic gas supply mmscmd 13.7 13.7 13.7 13.7 13.7 13.7

Additional Domestic Gas mmscmd 0.0 0.0 0.0 0.0 0.0 0.0

RLNG Required mmscmd 18.6 18.6 18.6 18.6 18.6 18.6

RLNG Required MMT 5.2 5.2 5.2 5.2 5.2 5.2

Share - Domestic Gas % 42% 42% 42% 42% 42% 42%

Share - RLNG % 58% 58% 58% 58% 58% 58%

Domestic Gas - Cost @ plant $/ mmbtu 5.9 5.2 5.9 5.2 5.9 5.2

Imported Gas - Cost @ plant $/ mmbtu 11.8 10.2 13.0 11.2 15.3 13.2

Domestic Gas- basic price $/ mmbtu 4.6 4.6 4.6 4.6 4.6 4.6

Imported Gas @ terminal $/ mmbtu 9.0 9.0 10.0 10.0 12.0 12.0

Price - Pooled $/ mmbtu 9.3 8.1 10.0 8.7 11.3 9.8

Total Cost per unit Rs./ unit 5.2 4.7 5.6 5.0 6.2 5.5

Variable cost per unit Rs./ unit 4.34 3.79 4.66 4.06 5.29 4.60

Fixed cost per unit Rs./ unit 0.90 0.90 0.90 0.90 0.90 0.90

Peak Tariff Rs./ unit 5.50 5.50 5.50 5.50 5.50 5.50

Revenue gap Rs. mn 0 0 3,352 0 38,785 116

Imported Gas

Base price of RLNG $/ mmbtu 9.0 9.0 10.0 10.0 12.0 12.0

Import Duty $/ mmbtu 0.5 NIL 0.5 NIL 0.6 NIL

Regas Charges $/ mmbtu 0.7 0.7 0.7 0.7 0.7 0.7

Transportation Cost $/ mmbtu 0.3 0.3 0.3 0.3 0.3 0.3

Marketing Margin $/ mmbtu 0.2 0.2 0.2 0.2 0.2 0.2

VAT $/ mmbtu 1.1 NIL 1.2 NIL 1.4 NIL

Price - RLNG $/ mmbtu 11.8 10.2 13.0 11.2 15.3 13.2

Assuming Gas pooling is implemented only for power plants which have domestic gas allocation (16GW out of 26 GW - 21 existing + 5 yet to be commissioned)

Power - Gas pooling: Finally the time is right ! Will the government act?

Gas pooling to mix imported LNG

and domestic gas for power plants

has been in the works for the past 3-

4 years. High LNG prices

(>$18/mmbtu) meant cost of power

to State Electricity boards (SEB)

were >Rs. 7-8/kwh and hence not

been a workable option over the last

many years

With recent crash in LNG prices to

<$8/mmbtu, we believe pooled cost

of power to SEB’s would be at an

affordable Rs. 5.5/kwh at current

LNG prices. Also removal of import

duty and VAT could result in power

costs of ~Rs. 5.5/kwh even if LNG

were to be available at $12/mmbtu.

Our scenario analysis shows a

potential demand of 5MMT is gas

pooling were to be implemented. We

believe PLNG’s Dahej facility could

see an additional 1.5-2MMT of

volumes if gas pooling is

implemented

Government has increased the

Green Energy Cess on Coal by Rs.

200/MT adding Rs. 10bn to the fund.

We believe any shortfall in gas

pooling could be made good from the

fund

Source: CEA, News reports, Industry, Spark Capital Research

Page 31

Petronet LNG Ltd

7.5 7.3

14.8

11.2

14.8

12.6

0.3 1.7

-

6.0

10.0

14.0

18.0

Long Term - Qatar Take or Pay Dec 2017 Capacity FY15E Best Case Volumes Worst case volumes

Committed

Uncommitted

>98% of expanded capacity already booked under Long term contracts, provides stable cash flows

10.0 10.0 10.0

5.0 5.0

2.5

2.5

7.5

12.5

17.5

Current FY18 2019+

MM

T

Current Capacity Expansion underway (COD - Nov'16) Additional planned

>98% of expanded capacity (15MMT) already booked. PLNG can increa

4.50 GAIL 2.50

2.00 IOCL 1.50

1.00 BPCL 1.00

GSPC 2.25

7.50 Total 7.25

1

Contract has provisions to lower offtake by 10% Take or pay clause kicks in for 80% of tariff

Capacity set to increase by 50% over the next 2 years

2 1 Downside

Source:

Source:

2

PLNG can operate the terminal at 110% utilisation levels and

apart from the long term volumes of 14.75 MMT booked by

promoter entities and GSPC, we expect additional 0.5 to 1mmt

of volumes to be taken under ST/spot contracts

Page 32

Petronet LNG Ltd

Kochi to remain a drag – Expect <20% utilisation over FY15-18E

Potential Customers for Kochi's PLNG terminal

Company Industry Current demand

(mmscmd)

Demand in

Kochi – M’lore

(mmscmd)

Demand without PL connectivity

BPCL, Kochi Refinery 0.6-1.5 0.6-1.5

FACT Fertiliser 1.0 1.0

Others Industry 0.3 0.3

Demand without PL 1.9-2.8 2.3

Mangalore Chemicals & Fertilizer Fertiliser 1.0

MRPL, Mangalore Refinery 2.4

Others Industry 0.3

Demand in Kochi - Mangalore PL 3.7

Demand Visibility (mmscmd) 1.9-2.8 6.0

Demand Visibility (MMT) 0.5 1.8

0.09

0.50 0.50

1.00

1.80 2.00

2%

10% 10%

20%

36%

40%

0%

10%

20%

30%

40%

50%

-

0.50

1.00

1.50

2.00

2.50

FY15 FY16E FY17E FY18E FY19E FY20E

Volumes (MMT) Utilisation (%) RHS

Kerala Government support (yet to fructify) is the only beacon of hope; Hostility from Tamil Nadu Government to continue (case against PL subjudice)

Expect Kochi – Mangalore section to come live by FY18/19 helping

Kochi reach ~40% by FY20

Expect Kochi – Mangalore section to come live by FY18/19 helping Kochi reach

~40% by FY20

State Government support

Kerala - Yes

Tamil Nadu - No

Expected PL

Commissioning

FY18

FY19-20

Kerala State Government has lent strong support to GAIL to restart pipeline

construction in the Mangalore section. While protests still continues in various

northern districts in Kerala, we see good prospects of construction starting in

the next 12-18 months

The TN section of the pipeline is currently under legal tussle and the case is

subjudice. Expect any resolution on the issue 24-36 months and volumes

only after FY19/20

Remarks

Kochi – Bangalore PL

Kochi – Mangalore PL

Source: Spark Capital Research Source: Industry, Company, Spark Capital Research

Page 33

Petronet LNG Ltd

Focus Charts # 1

12

18 19

15

18

21 22

30

-

5

10

15

20

25

30

35

FY 11 FY 12 FY 13 FY 14 FY 15E FY 16E FY 17E FY 18E

EB

ITD

A (

Rs.b

n)

96% 84%

74% 84% 88% 83% 85% 88%

1% 1% 7% 6%

9% 4%

16% 26%

15% 11% 10% 9% 3%

0%

20%

40%

60%

80%

100%

FY 11 FY 12 FY 13 FY 14 FY 15E FY 16E FY 17E FY 18E

Dahej - Regas margins Kochi - Regas margins Dahej - Marketing margins

EBITDA trend

Expect 40% jump in volumes in FY18E

7.5 7.3 7.4 7.4 7.5 7.5 7.5 7.5

0.6 1.4 0.9 1.0 2.0 2.0 2.0

7.3

0.6

2.0 2.0 1.2

1.7 2.0 2.0

1.0

-

- - 0.1

0.1 0.5 0.5

1.0

2.0

6.0

10.0

14.0

18.0

FY 11 FY 12 FY 13 FY 14 FY 15E FY 16E FY 17E FY 18E

mm

scm

d

Dahej - LT Dahej - Regas Dahej - Short term.spot Kochi

28.0

32.0

36.0

40.0

44.0

FY 11 FY 12 FY 13 FY 14 FY 15E FY 16E FY 17E FY 18E

Dahej - Regas margins Dahej - Regas margins (adj for Boil off from LT)

We model Dahej regas escalation to stop after 2016

Marketing margins to form <5% by FY18E

Source: Company, Spark Capital Research

Page 34

Petronet LNG Ltd

14%

19%

17%

11%

13% 13% 13%

17%

10%

12%

14%

16%

18%

20%

FY 11 FY 12 FY 13 FY 14 FY 15E FY 16E FY 17E FY 18E

RO

CE

%

22.5%

26.9%

21.5%

12.4%

14.5% 15.2%

14.0%

18.9%

23.1%

25.8%

14.3%

16.0% 16.5% 15.2%

19.4%

10.0%

15.0%

20.0%

25.0%

30.0%

FY11 FY 12 FY 13 FY 14 FY 15E FY 16E FY 17E FY 18E

RoE (excl marketing mgns) Reported ROE

0.7%

2.3%

5.7% 5.6%

16.6%

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

16.0%

18.0%

FY 14 FY 15E FY 16E FY 17E FY 18E

FCF yield

ROCE to spike post Dahej commissioning Marketing margins to form <5% by FY18E

At CMP the FCF yield on FY18E earnings would be > 16%

Source:

Focus Charts # 2

Source: Company, Spark Capital Research

Page 35

Petronet LNG Ltd

Bear Case Utilisation

Dahej 90%

Dahej - Marketing

Volumes (mmt) NIL

TP 177

Kochi 50% Margins (Rs. /mmbtu) NIL

Stock is currently pricing in bear case valuation

Particulars FY14 FY15E FY16E FY17E FY18E FY19E FY20E FY21E Valuation Mar-16 Mar-17 Mar-18

Dahej - Regas (incl. LT) 8.4 9.5 9.5 9.5 13.5 13.5 13.5 13.5 Total of PV of CF 50 63 65

Dahej - Short term /spot 1.2 1.7 2.0 2.0 0.0 0.0 0.0 0.0 Terminal Value 101 101 101

Kochi 0.1 0.1 0.5 0.5 1.0 1.8 2.0 2.5 Total firm Value 151 163 165

Volume (mmt) 9.7 11.3 12.0 12.0 14.5 15.3 15.5 16.0 Net debt / (cash) 6 5 -10

Dahej - utilisation 96% 112% 115% 115% 90% 90% 90% 90% Other liabilities 12 12 12

Kochi - utilisation 2% 2% 10% 10% 20% 36% 40% 50% Equity Value (Rs. Bn) 133 147 163

Dahej - Regas 37.2 39.1 41.0 43.1 43.1 43.1 43.1 43.1 Target Price (Rs. /sh) 177 196 218

Dahej - Mktg margins 46.2 28.4 5.0 5.0 0.0 0.0 0.0 0.0 CMP 175 175 175

Kochi - Regas 62.3 68.1 68.0 65.0 65.0 65.0 65.0 65.0 Key Multiples FY17E FY18E FY19E

Blended (Rs. /mmbtu) 38.3 38.7 39.0 41.1 41.7 43.2 43.6 44.3 EV 149 148 134

Gross Profit (Rs. bn) 19.0 22.3 23.9 25.2 30.9 33.7 34.5 36.1 EV/EBITDA 7.6 6.2 5.1

EBITDA (Rs. bn) 11.9 17.8 18.8 19.7 23.7 26.1 26.5 27.7 PE 13.6 10.9 9.6

EBIT (Rs. bn) 11.9 14.6 15.7 16.3 19.6 22.0 22.3 23.6 PB 1.9 1.7 1.6

NOPAT (Rs. bn) 8.0 8.8 9.3 9.6 11.5 13.1 13.4 14.1 WACC 11.6%

Depreciation 3.1 3.1 3.1 3.4 4.1 4.1 4.1 4.1 FY 15E-17E 18E-20E

Capex 8.8 8.0 8.0 9.0 0.0 0.0 0.0 0.0 Avg. ROE 15.0% 15.3%

FCFF (Rs. bn) 2.3 3.9 4.4 4.0 15.6 17.3 17.5 18.3 Avg. OCF Yield 3.1% 12.8%

Page 36

Petronet LNG Ltd

Valuation: DCF based TP of Rs. 220

DCF based valuation

Particulars FY14 FY15E FY16E FY17E FY18E FY19E FY20E FY21E Valuation Mar-16 Mar-17 Mar-18

Dahej - Regas (incl. LT) 8.4 9.5 9.5 9.5 14.8 14.8 14.8 14.8 Total of PV of CF 61 76 79

Dahej - Short term /spot 1.2 1.7 2.0 2.0 1.0 1.0 1.0 1.0 Terminal Value 121 121 121

Kochi 0.1 0.1 0.5 0.5 1.0 1.7 2.0 2.5 Total firm Value 182 198 200

Volume (mmt) 9.7 11.3 12.0 12.0 16.8 17.5 17.8 18.3 Net debt / (cash) 5 3 -14

Dahej - utilisation 96% 112% 115% 115% 105% 105% 105% 105% Other liabilities 12 12 12

Kochi - utilisation 2% 2% 10% 10% 20% 35% 40% 50% Equity Value (Rs. Bn) 165 182 202

Dahej - Regas 37.2 39.1 41.0 43.1 43.1 43.1 43.1 43.1 Target Price (Rs. /sh) 220 243 269

Dahej - Mktg margins 46.2 28.4 10.0 15.0 15.0 15.0 15.0 15.0 CMP 175 175 175

Kochi - Regas 62.3 68.1 68.0 65.0 65.0 65.0 65.0 65.0 Key Multiples FY17E FY18E FY19E

Blended Tariff (Rs. /mmbtu) 38.3 38.7 39.8 42.8 42.8 44.0 44.4 44.9 EV 149 146 129

Gross Profit (Rs. bn) 19.0 22.3 24.4 26.2 36.6 39.2 40.2 41.8 EV/EBITDA 7.2 5.0 4.1

EBITDA (Rs. bn) 11.9 17.8 19.3 20.7 29.4 31.7 32.2 33.4 PE 12.7 8.3 7.6

EBIT (Rs. bn) 11.9 14.6 16.2 17.4 25.3 27.5 28.1 29.3 PB 1.8 1.6 1.4

NOPAT (Rs. bn) 8.0 8.8 9.6 10.3 15.3 16.8 17.1 17.9 WACC 11.6%

Depreciation 3.1 3.1 3.1 3.4 4.1 4.1 4.1 4.1 FY 15E-17E 18E-20E

Capex 8.8 8.0 8.0 9.0 0.0 0.0 0.0 0.0 Avg. ROE 15.3% 17.5%

FCFF (Rs. bn) 2.3 3.9 4.8 4.7 19.4 20.9 21.2 22.0 Avg. OCF Yield 3.5% 15.6%

PV of Cashflows 4.2 15.6 15.0 13.7 12.7

Page 37

Petronet LNG Ltd

Bull case: Faster Kochi ramp up could boost valuation; Potential TP of Rs. 260 (+50%)

Bull Case Utilisation

Dahej 90%

Dahej - Marketing

Volumes (mmt) 1.0

TP 258

Kochi 80% Margins (Rs. /mmbtu Rs. 25

Particulars FY14 FY15E FY16E FY17E FY18E FY19E FY20E FY21E Valuation Mar-16 Mar-17 Mar-18

Dahej - Regas (incl. LT) 8.4 9.5 9.5 9.5 14.8 14.8 14.8 14.8 Total of PV of CF 69 86 89

Dahej - Short term /spot 1.2 1.7 2.0 2.0 1.0 1.0 1.0 1.0 Terminal Value 141 141 141

Kochi 0.1 0.1 0.5 0.5 2.0 2.5 3.0 4.0 Total firm Value 210 228 231

Volume (mmt) 9.7 11.3 12.0 12.0 17.8 18.3 18.8 19.8 Net debt / (cash) 5 2 -18

Dahej - utilisation 96% 112% 115% 115% 105% 105% 105% 105% Other liabilities 12 12 12

Kochi - utilisation 2% 2% 10% 10% 40% 50% 60% 80% Equity Value (Rs. Bn) 193 214 236

Dahej - Regas 37.2 39.1 41.0 43.1 43.1 43.1 43.1 43.1 Target Price (Rs. /sh) 258 285 315

Dahej - Mktg margins 46.2 28.4 25.0 25.0 25.0 25.0 25.0 25.0 CMP 175 175 175

Kochi - Regas 62.3 68.1 68.0 65.0 65.0 65.0 65.0 65.0 Key Multiples FY17E FY18E FY19E

Blended Tariff (Rs. /mmbtu) 38.3 38.7 42.3 44.4 44.6 45.4 46.0 47.0 EV 148 145 126

Gross Profit (Rs. bn) 19.0 22.3 25.9 27.2 40.4 42.3 44.0 47.3 EV/EBITDA 6.8 4.4 3.6

EBITDA (Rs. bn) 11.9 17.8 20.9 21.7 33.2 34.7 36.0 38.9 PE 11.9 7.2 6.8

EBIT (Rs. bn) 11.9 14.6 17.7 18.4 29.1 30.6 31.9 34.8 PB 1.8 1.5 1.3

NOPAT (Rs. bn) 8.0 8.8 10.6 11.0 17.8 18.8 19.6 21.5 WACC 11.6%

Depreciation 3.1 3.1 3.1 3.4 4.1 4.1 4.1 4.1 FY 15E-17E 18E-20E

Capex 8.8 8.0 8.0 9.0 0.0 0.0 0.0 0.0 Avg. ROE 15.6% 18.7%

FCFF (Rs. bn) 2.3 3.9 5.8 5.4 21.9 22.9 23.8 25.7 Avg. OCF Yield 3.8% 17.4%

PV of Cashflows 4.8 17.6 16.5 15.3 14.8

Page 38

Petronet LNG Ltd

Financials

Abridged Financial Statements Key metrics

Rs. mn FY14 FY15E FY16E FY17E FY18E FY14 FY15E FY16E FY17E FY18E

Profit & Loss Growth ratios (%)

Revenues 3,77,476 4,41,459 4,29,111 4,09,346 3,84,660 Sales 20.0% 17.0% -2.8% -4.6% -6.0%

EBITDA 14,985 17,756 19,839 20,730 29,393 EBITDA -22.7% 18.5% 11.7% 4.5% 41.8%

Depreciation 3,081 3,118 3,118 3,368 4,118 Adj. Net Profit -38.1% 26.1% 10.5% 4.1% 53.2%

EBIT 11,904 14,638 16,721 17,362 25,275 Margin ratios (%)

Other Income/Exp 838 1,272 750 750 750 EBITDA 4.0% 4.0% 4.6% 5.1% 7.6%

Interest 2,196 2,454 2,445 2,472 2,067 EBIT 3.2% 3.3% 3.9% 4.2% 6.6%

PBT 10,545 13,456 15,026 15,640 23,958 Adj. Net Profit 1.9% 2.0% 2.3% 2.5% 4.1%

Net Profit 7,119 8,975 9,917 10,322 15,812 Performance ratios

Adjusted Net Profit 7,119 8,975 9,917 10,322 15,812 RoIC (%) 18% 15% 18% 16% 21%

Balance Sheet RoE (%) 15% 17% 17% 15% 21%

Shareholders Equity 49,861 56,213 63,430 71,052 81,465 RoCE (%) 11% 13% 13% 13% 17%

Total debt 28,965 28,965 31,965 22,965 22,965 Sales / Total Assets (x) 4.5 4.8 4.1 3.6 3.3

Total Networth & Liabilities 87,394 96,745 1,12,963 1,11,585 1,21,997 Fixed Assets Turnover (x) 5.5 6.0 5.4 4.8 4.5

Net fixed assets 62,650 59,533 56,415 78,047 73,929 Financial stability ratios

CWIP 8,799 16,952 25,249 9,249 9,249 Total Debt to Equity (x) 0.6 0.5 0.5 0.3 0.3

Investments 1,399 1,399 1,399 1,399 1,399 Inventory & Debtor days 29 30 30 30 30

Current assets 46,278 55,955 66,119 57,589 72,920 Creditor days 28 28 28 28 28

Current liabilities 31,733 37,093 36,219 34,699 35,499 Valuation metrics

Net current assets 14,545 18,862 29,900 22,890 37,420 Current Share Price (Rs.) 178

Total Assets 87,394 96,746 1,12,963 1,11,585 1,21,997 Market Cap (Rs.mn) 1,33,500 1,33,500 1,33,500 1,33,500 1,33,500

Cash Flows Fully Diluted Shares (mn) 750 750 750 750 750

Cash flows from Operations 9,636 11,044 14,859 15,619 21,505 Adjusted EPS (Rs.) 9.5 12.0 13.2 13.8 21.1

Cash flows from Investing (8,028) (6,728) (7,250) (8,250) 750 P/E (x) 18.8 14.9 13.5 12.9 8.4

Cash flows from Financing (1,966) (1,793) 3,634 (14,172) (4,767) P/B (x) 2.7 2.4 2.1 1.9 1.6

Cash Generated (358) 2,523 11,243 (6,803) 17,488 EV (Rs.mn) 1,49,237 1,46,714 1,38,471 1,36,274 1,18,785

Opening Cash 12,685 12,327 14,851 26,094 19,291 EV/ EBITDA (x) 10.0 8.3 7.0 6.6 4.0

Closing Cash 12,327 14,851 26,094 19,291 36,780 Dividend Yield (%) 1.4% 1.7% 1.7% 1.7% 3.4%

Page 39

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or reliance on this report.

Absolute

Rating

Interpretation

BUY Stock expected to provide positive returns of >15% over a 1-year horizon REDUCE Stock expected to provide returns of <5% – -10% over a 1-year

horizon

ADD Stock expected to provide positive returns of >5% – <15% over a 1-year

horizon SELL Stock expected to fall >10% over a 1-year horizon

Disclaimer

Page 40

Disclaimer (Cont’d)

Spark Capital and/or its affiliates and/or employees may have interests/positions, financial or otherwise in the securities mentioned in this report. To enhance transparency,

Spark Capital has incorporated a disclosure of interest statement in this document. This should however not be treated as endorsement of views expressed in this report:

Disclosure of interest statement Yes/No

Analyst financial interest in the company No

Group/directors ownership of the subject company covered No

Investment banking relationship with the company covered No

Spark Capital’s ownership/any other financial interest in the company covered No

Associates of Spark Capital’s ownership more than 1% in the company covered No

Any other material conflict of interest at the time of publishing the research report No

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Managing/co-managing public offering of securities

Investment banking/merchant banking/brokerage services

products or services other than those above

in connection with research report

No

Whether Research Analyst has served as an officer, director or employee of the subject company covered No

Whether the Research Analyst or Research Entity has been engaged in market making activity of the Subject Company; No

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The views expressed in this research report accurately reflect the analyst’s personal views about any and all of the subject securities or issuers; and no part of the research

analyst’s compensations was, is or will be, directly or indirectly, related to the specific recommendation or views expressed in the report.

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Disclaimer