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Rewriting the Future INITIATING COVERAGE

Mr. Tarun Jaitly Senior General Manager Moser Baer Limited (O) 91-11-4059444/41406149 Stock metrics Bloomberg code MBI IN

Reuters code MOSR.BO

BSE Group B

BSE Code 5171400

NSE Symbol MOSERBAER

Face Value Rs 10

Market Cap (Rs cr) 1014.80

52WeekHigh/Low 344.80/55.00

Sensex 9040.63

Nifty 2733.20

Average volume 911513

Promoters16%

FCBs37%

FIIs24%

Others 13%

Public 7%

MFs & Insurance

Cos 3%

Research Analyst Denil Savla denil.savla@inventuregrowth.com 022-40751515 Manoj Jethva Manoj.jethva@inventuregrowth.com 022-40751515

Date: 18th Nov, 2008

Current Price Target Price

Rs.60.30 Rs.101.00

Potential Upside Time Duration

67.33% 24 Months

Moser Baer Ltd Moser Baer India Ltd (MBIL) is a global technology company with presence in over 82 countries and services through six marketing offices in India, US and Europe. It is India's largest and the world's 2nd largest Optical Storage Media (OSM) manufacturer and enjoys strong tie-ups with all major global technology brands. It is also India's largest home entertainment company. Its foray into PC peripherals in the form of ODDs (Optical Disk Drives) will further help strengthen its position in the industry. Currently the IT vertical industry (PCs and Notebooks) is pegged at Rs20,000Crs and the PC Peripheral industry is worth Rs 12,000Crs the company has transformed itself from a single business into a multi-technology organisation, diversifying into exciting areas of Solar Energy, Home Entertainment and IT Peripherals and Consumer Electronics. Strong Order Book in PV Currently MBIL has an order book of $500 million which is executable over next four years. The customers include Ralos Vertriebs & Colexon Energy, a Germany based leading company in Photovoltaic business. Acquisitions and Subsidiaries to mark global presence MBIL is making its presence in global sphere through acquisition and JV. MBIL acquisition of 100% stake in its subsidiary Moser Baer Photovoltaic Ltd and an 81% Stake in OM&T BV a highly specialized technology Company based in the Netherlands. This has started bearing fruits in terms of exploiting cutting edge technologies in both the optical and solar photovoltaic (PV) segments, which will act as a strategic operation for the solar energy which in turn would result in increasing its presence in world.

Valuation: We have valued the company by P/E methodology. The stock is trading at P/E of 3.04x for its FY08 earnings. Considering the current market price of Rs.60, we have arrived at the target price of Rs 101 for the time frame of 24 months. At the CMP, the stock is trading at 2.16x and 1.39x its FY09E and FY10E earnings. We rate the stock as a Market Out performer and there is huge potential in the stock to move upwards by 67.33%.

Key Financials

Year Ended March F Y 07 F Y 08 F Y 09E F Y 10ENet Sales (Rs in crore) 1982.5 1964.0 2745.1 3733.4 EBIDTA 602.2 534.0 664.3 956.0 PBT 119.9 -76.9 -68.9 88.2 Cash PAT (Rs in crore) 467.7 352.7 435.4 656.55 EBIDTA Margins (%) 30.4 27.2 24.2 25.6 Cash PAT Margins (%) 23.6 18.0 15.9 17.6 Cash EPS 41.91 19.81 27.97 43.49 ROCE (%) 6.3 1.9 3.0 6.7 ROE (%) 22.9 16.0 20.4 29.5 PE 1.44 3.04 2.16 1.39

Industry IT Hardware

Market Data

Shareholding Pattern :

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Table of Content

Serial No.

Particulars Page No.

1. Company Profile 3

2. Segment wise Business 4

3. Investment Rationale 6

4. Business Overview 8

5. Industry Overview 11

6. Investment Concerns 15

7. Financial Summary 17

8. Income Statement 19

9. Balance Sheet 20

10. Ratios 21

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Collaborating with global firms and has created a leadership In its business over a period of time… Professionally managed team with highly qualified and experienced people..

Company Profile MBIL India was founded in 1983 as a Time Recorder unit in technical collaboration with Maruzen Corporation, Japan and Moser Baer Sumiswald, Switzerland. In 1988, MBIL moved into the data storage industry by commencing manufacturing of 5.25-inch Floppy Diskettes. By 1993, it graduated to manufacturing 3.5-inch Micro Floppy Diskettes (MFD). In 1999, MBIL set up 150-million unit capacity plant to manufacture Recordable Compact Disks (CD-Rs) and Recordable Digital Versatile Disks (DVD-Rs). The strategy for the optical media project was identical to what had successfully been implemented in the diskette business - creating a facility that matched global standards in terms of size, technology, quality, product flexibility and process integration. The company is today the only large Indian manufacturer of magnetic and optical media data storage products, exporting approximately 85 percent of its production. Since inception, Moser Baer has always endeavored to create its space in the international market. Aiding the company in its efforts has been a carefully-planned and sustainable business model - low costs, high margins, high profits, reinvestment and capacity growth. Along the way, deep relationships have been forged with leading OEMs, with the result that today there are hardly any global technology brands in the optical media segment that MBIL is not associated with. In 2006, the company announced its foray into the Photovoltaic and Home Entertainment businesses. In 2007, the IT Peripherals and Consumer Electronics divisions were formed. MBIL is present in over 82 countries, serviced through six marketing offices in India, the US, Europe and Japan, and has strong tie-ups with all major global technology players. MBIL has the distinction of being preferred supplier to all top global OEM brands. The company stands committed to supplying highest quality fully licensed media to its customers. Its products are manufactured at its three state-of-the-art manufacturing facilities. Professional Management The company is professionally managed and day to day management is looked after by Mr. Deepak Puri, CMD.

Source: Company

Name Designation Experience

Deepak Puri Chairman & Managing Director Over the years Ratul Puri Executive Director Over 14 years Rakesh Govil Executive V P- Corporate Strategy &

Business Development More than 27yrs

Yogesh Mathur Group CFO Over years V C Agerwal COO- Blank Optical Media Over 3 decades Ravi Khanna CE-Moser Baer Photovoltaic Ltd. Over 10 yrs Harish Dayani CE- Entertainment Division Over 32 yrs Ram Nomula CE- Moser Baer Entertainment

Services Long experience

Bhaskar Sharma EVP, IT peripherals & Consumer Electronics

Overall 32 yrs

Girish Baluja COO-Corporate Above 20 years

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Strategic Tie Ups and acquisition with huge potential in the business keeping the growth pace… Even though the media storage demand is stagnant, contributing the major part of revenue…

Segment Wise Business MBIL business comprises of two main segments namely Entertainment and Energy segment. In FY08 entertainment segment contributed more than 90% of the company’s revenue and rest from energy segment.

Revenue Model

82%

8%4% 6%

Media Storage Photo voltaic Peripheral & IT EntertainmentSource: Company

Segment Growth Drivers Tie Up

Media Storage Innovative Development in Blu Ray Disc cater huge potential

Maruzen Corporation, Japan and Moser Baer Sumiswald, Switzerland.

Solar Photovoltaic

Shifting of demand to clean renewable energy resources growing demand in this segment

Solaria & Stion corporation (US based Company), Solarvaiue

Home video Entertainment

Robust demand as shifting of consumer preference from cinema halls to home video.

-

IT Peripherals Directly related to computer owners based which is rising day by day

-

Home Electronics

Change in standard of living and consumer preference of entertainment make look this segment attractive

-

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Leveraging its subsidiary through private equity funding driven by significant technological advancements… Acquiring 81% stake in OM&T, a Philips group company, a major milestone… Partnering with the supplier in order to get continuous supply of raw material…

Partnering for growth through Joint Ventures and Subsidiary. (I) Moser Baer Photovoltaic Ltd (Subsidiary) Moser Baer Photo Voltaic Limited (MBPV) is a wholly-owned subsidiary of MBIL. It was set up for spearheading foray into photovoltaic products, systems and projects. MBIL is a global leader in the optical storage media industry. The company intends to utilize the core strengths, technical expertise and high volume manufacturing excellence acquired through the successful growth of their optical media business to its advantage in the PV business. MBIL vision for this sector is to enable reliable solar power as a competitive non-subsidized source of energy through competitively priced products and systems. The wholly-owned solar photovoltaics (PV) subsidiary of MBIL has entered into definitive agreements to raise US $93 million from a consortium of global investors in order to fund growth plans. In all, the wholly owned photovoltaic subsidiary has raised well over Rs. 800 crore ($193.5 million) of Private Equity funding. This investment is intended to fund the expansion of crystalline silicon cell manufacturing to 180 megawatts (MW) and amorphous silicon thin-film to 120 MW. The company currently has an annual capacity of 120 MW, including 40MW of amorphous silicon thin-film modules. Driven by recent significant technological advancements, it is estimated that the solar market will have a 43 per cent CAGR and is poised to achieve grid parity in the short to medium term. Current demand projections translate to a market value of $50-70 billion by 2010. The solar market has grown from $13 billion in 2008 to an estimated $40 billion this year. (II) OM&T BV (Acquisition) MBIL's acquisition of 81% stake in OM&T B.V. which was started as a ‘Optical media and technology’ development group of Philips. The core activity of OM&T is to sell disc DVD and Blu-Ray related technology to big disc replicators, has started bearing fruits in terms of exploiting cutting edge technologies in both the optical and solar photovoltaic (PV) segments. This acquisition is a major milestone for MBIL as it will facilitate strategic implementation and ensure the presence in both the optical and solar photovoltaic (PV) segments. This acquisition will complement the existing research being done at R&D facility based in India and help the company to further consolidate its leadership position. According to the agreement, all innovations by OM&T will be transferred to MBIL. The Joint venture will also focus on development of photovoltaic technologies to support Company's existing PV business.

(III) JV with ‘Solarvaiue AG’ MBIL acquires 40% stake in Solarvaiue AG which will assure supply of high–grade solar wafers. The company will do significant investment as shareholder in this project. This will not only help increase the production capabilities of its silicon production plant in Ruse, Slovenia to a capacity of 4400 tons of solar grade silicon by the end of 2008. As both companies will now have a presence in the entire PV value chain.

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Five fold growth demand potential by FY10 demonstrating 43% CAGR… Separate R&D department to create innovative products in order to maintain its position in the market…

Investment Rationale Strong Demand Potential for Clean Energy Increasing reliance on clean energy and falling PV system costs are set to grow global demand by over 5x (USD 70 billion value) by 2010 which presents MBIL with an exciting growth opportunity. MBIL's core competencies along with its multi technology strategy should allow the company to differentiate itself and significantly grow its market share. Fuelled by the recent technological advancements, it is estimated that solar market would demonstrate a 43 % CAGR and is poised to achieve grid parity in the short to medium term. The current demand projections translate to a market value of $50-70 billion by 2010, according to certain estimates. The solar market has grown from $13 billion in 2005 to an estimated $40 billion this year.

Huge Capex The company would be spending $1Billion by FY10. For PV business USD 650 million, optical business is $20 million and entertainment business $45 million in FY09. Innovative Products to Cater Growth MBIL recently acclaimed fame of being the first non-Japanese Company to innovate its own OSM Blu-ray disc technology. The demand for these blue laser based formats is expected to exceed over 12 Crore discs by 2009 from around 2.5-3 crore units at present. The concept works on blue laser, which used to read and write this type of disc. Because of its shorter wavelength (405 nm), substantially more data can be stored than on the DVD or CD formats (which uses 650 nm and 780 nm wavelength respectively). A dual layer Blu-ray Disc can store up to 50 GB; almost six times the capacity of a double dual layer DVD. The company has an advantage of being "first-to-market" and is well positioned to capture a significant share of this emerging opportunity. The intellectually strong position in the development of this next generation product provides a significant competitive edge.

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100% growth on YOY basis for the demand of DVDs growing faster than industry pace… Moser Baer Photovoltaic Ltd (MBPVL) to emerge as a technology driven by implementing a capacity of 500MW by FY10 which is currently at 40MW… Acquisitions exploiting cutting edge technologies achieving the major milestone…

Huge Market Size Poised to Grow Even Further The size of the blank optical media market in India is over one billion discs per annum. CDR (Compact Disc-Recordable) is the predominant format accounting for about 80% of the OSM market in India. DVDR (Digital Video Disc-Recordable) has grown exponentially over the last year. The overall Indian market for OSM is growing at 15% with DVD growing at a pace faster than the industry (it grew at around 100% YoY in FY 2008 and is expected to continue growing at even higher rates in future).

Embedded Value in Subsidiaries Moser Baer Photovoltaic Limited, a wholly owned subsidiary of MBIL, is in the business of photovoltaic (PV) cells and modules. MBPV is expected to emerge as a technology-driven PV equipment manufacturer in the world by implementing a capacity of 500 MW by FY 2010; through a mix of multiple technologies including crystalline silicon, concentration and thin films. The manufacturing facilities are housed in SEZ dedicated for renewable energy at Greater Noida. MBPV is in the process of setting up India's largest grid connected solar farm in Rajasthan with an investment of around Rs 100 Crore. Driven by recent significant technological advancements, it is estimated that the solar market will have a 43% CAGR over FY 2008 - 2012 and is poised to achieve grid parity in the short to medium term. Current demand projections translate to a value of US$ 50-70 billion by 2010. Another subsidiary, PV Technologies India Limited (PVTIL) has successfully completed deposition trials for Gen 8.5 a-Si (Amorphous Silicon) thin film modules at its new 40 MW facility in Greater Noida in FY 2008 and thus achieved a global landmark. The company is setting up a thin film PV plant near Chennai with a proposed 500MW annualized capacity. The Chennai and the Greater Noida plants will be manufacturing Gen 8.5 thin film panels measuring 5.72 square meters. The utility of using thin films includes savings of material, monolithic device design, use of inexpensive substrates, and manufacturing processes that need low temperature and are possible over large areas. Photo Voltaic Technologies India recently signed a MOU with a global equipment supplier to secure supply of critical equipment for an additional 565 MW phased expansion of its Thin Film photovoltaic modules manufacturing capacity, which together with the current project capacity of 40 MW will take the total manufacturing capacity to over 600 MW by 2010.

Integrating Operations through Acquisitions MBIL's acquisition of an 81% stake in OM&T B.V., a highly specialized technology Company based in The Netherlands, has started bearing fruits in terms of exploiting cutting edge technologies in both the optical and solar photovoltaic (PV) segments. This acquisition is a major milestone for MBIL as it will facilitate strategic implementation and ensure the presence in both the optical and solar photovoltaic (PV) segments. This acquisition will complement the existing research being done at R&D facility based in India and help the company to further consolidate its leadership position. According to the agreement, all innovations by OM&T will be transferred to Moser Baer. The Joint venture will also focus on development of photovoltaic technologies to support Company's existing PV business.

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Optical Media – signs of a definite turn around… Optical Media Trends -- The Future is Blue & poised for the next format leap…

Government Assistance Indian government would provide financial assistance amounting to Rs.12 (30 cents) per kWh in case of solar photovoltaic and Rs.10 per kWh in case of solar thermal power fed to the electricity grid. The scheme will be run by the Indian Renewable Energy Development Agency (IREDA), and solar farm developers will be able to access the subsidy by selling their energy to state-run utilities under the new tariff. The incentives are scheduled to run for 10 years and will be paid in addition to any subsidies offered by state governments. Some of the Indian states have also announced independent programs to support large size solar PV installations. However, the ministry has imposed a limit for the incentives of 50 megawatts in total, a cap of 10 megawatts (MW) within any one state and a maximum of five megawatts per developer.

Business Overview Optical Media Business: MBIL is the second largest manufacturer of optical media in the world after CMC Magnetic Corporation and is leader in the domestic market. The company manufactures the entire spectrum of optical storage media products including Recordable Compact Discs (CD-R), Rewritable Compact Discs (CD-RW), Recordable Digital Versatile Discs (DVD-R), Rewritable Digital Versatile Discs (DVD-RW) and blue laser discs (HD-DVD and Blu-ray). The new range of Gold and Platinum CD-Rs have been developed keeping native conditions in mind in terms of enhanced durability and resistance to both environmental and human-induced hazards. In a market estimated at US$ 350 million in 2005-06, the company exports their products to over 82 countries, servicing these markets through six marketing offices in India, US and Europe. It exports 85% of its output and has a 40% share of the Indian market. CD-R Division: End consumer demand continued to remain flat for CDR with early signs of decline in developed markets. DVDR maintains a positive growth trend during the year with robust demand from developed as well as emerging markets. The industry witnessed a short term overcapacity situation with excess inventory in the supply chain due to patent licensing issues with some of the other players. This resulted in a downward pressure on prices. Strategic Marketing & Decisions (SMD) estimates global demand for blank optical media products to be over 22 billion units in 2008, representing a strong demand growth over 2007.

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First to market and unique IP position in the next generation Blu-Laser based formats… Aiming a 15 fold increase in capacity…

Blu Ray Division: A strong R&D thrust has enabled the company to lead the technology in the optical media industry, making it one of the few Indian companies to have contributed to the establishment of new global technology standards. With Blu-ray disc (BDR) emerging as the front runner in the high definition media format, MBIL enjoys a significant advantage, being the .first non-Japanese Company to have developed its own technology for manufacturing BDR. The company is well poised to benefit from the improved industry dynamics & high growth potential. The Company maintained its status as one of the top rung suppliers of the next generation High Definition formats through its earlier acquisition of OM&T from Philips in FY07. As per Strategic Marketing and Decisions (SMD) the demand for blue laser based formats is set to exceed over 122 million discs by 2009 from a few million units at present and the Company is well positioned to capture a significant share of this emerging opportunity. MBIL's acquisition of an 81 % stake in OM&T B.V, a highly specialized technology Company, has started bearing fruit in terms of exploiting cutting edge technologies. OM&T provided significant contribution to the development of alternate Blu-ray technology and its commercialization to enhance the leadership position of MBIL in this format. Solar Photovoltaic Business: Moser Baer has formed a fully owned subsidiary, having business of solar photovoltaic. In the year 2007 they made foray in to this business and as of today they have already started generating revenues from it. MBPV aims to distinguish itself as a significant player in the global photovoltaic market by leveraging its high-volume manufacturing expertise and planned investments of nearly US$ 3.2 billion in research, development and manufacturing of products dedicated to generating solar power. A 40 MW module manufacturing facility with expansion plans to scale it up to 200 MW. The company has invested in strategic partnerships involving the entire value chain, particularly for strategic sources such as silicon ingots and wafers, glass, etc. through short-term and long-term supply agreements. The company has raised around Rs 411Crs by private equity funding diluting their 6.5% stake. The company has order book of $500 million which is executable within 4 years contract for supply of Silicon Wafers with REC of Norway - world’s largest silicon wafer manufacturer. The USD 880 million (Rs 3500 Crs) – 8year contract is the single largest contract of its kind for wafer supply. With an assured long term supply of silicon wafers through a broad based sourcing strategy, raw material sourcing risks are significantly mitigated placing MBPV with a competitive advantage against peers. Its current capacity is at 40MW and is aiming to reach 600MW by 2010 with a 15 fold increase in its capacity. The Capex for FY09 & FY10 are around $400 mn & $500 mn respectively.

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Largest player in this industry with copyright of above 6000 titles in all major Indian languages…

Home Entertainment Division The company has established national distribution network to offer quality product at the competitive price of Rs 34/- for DVDs and Rs 28/- for VCDs which has changed the current bench mark for price value proposition to the consumers and create a standard which peers find extremely difficult to emulate. It has already acquired copyrights, marketing and distribution rights of around 6000 titles in all major Indian languages constituting over 45% of mainstream cinema in India The company has established distribution network of 450 distributors with across 2 lac outlet in the country. The company plans to invest $100 million in next three years. It has already emerged as a leader in this segment in a short span of 6 months due to its pan India presence (offering home video copyrighted titles in multiple languages) and nationwide-spread distribution reach coupled with aggressive marketing. Although it was launched in March 2007, the business has started to contribute to revenues during the Q2FY09. I.T. Peripherals & Consumer Electronics MBIL one of India's Leading Technology Company has taken a step forward and has entered into IT Peripherals (Solid State) and Consumer Electronics. In consumer Electronics the product portfolio comprises of Ultra Advanced LCD TV's, DVD players and Digital Photo Frames. In IT Peripherals MBIL offer consumers a diverse range of products comprising of USB drives, Memory Cards, External hard drives, DVD writers, keyboards, Mouse, Headphones, speakers and U.P.S and LCD TFT monitors are soon to be launched.

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Second largest player for DVDR/RW formats in the world… Piracy – the main concern in the industry…

INDUSTRY OVERVIEW Media Storage: The global market for magnetic and optical storage material is expected to grow to $39.9 billion in 2010, an AAGR (average annual growth rate) of 15.1%. The primary technologies used to store information, data and images in today’s computer systems are based on magnetism (magnetic recording tapes, hard disk media, hard disk read/write heads), the optical properties of lasers (all types of CDs and DVDs), or a “hybrid” of the two (magneto-optical media). Factors that are expected to contribute to vigorous growth in the data storage market include:

• Increasing demand for hard disk drives, due to a rebounding personal computer market and increasing use of hard disk drives for consumer electronic products

• Continued strong growth in sales of pre-recorded DVD movies;

• Increasing market penetration by high-definition TV, this is expected to spur growth in demand for high-density optical data storage media.

The optical storage media market is expected to grow much faster than the market for magnetic storage over the next five years, i.e., at an AAGR of 19.8% vs. 4.8%. At these growth rates, optical storage media are expected to increase their share of the data storage market to 77% in 2010. Emerging optical storage media such as Blu-ray and HD-DVD, holographic and near-field storage are not significant factors currently, but by 2010, they are expected to account for as much as 4% of the market. Entertainment Industry: The Indian Media and Entertainment (M&E) industry is poised to enter a golden era. One of the largest markets in the world, the industry is seeing strong growth and has the potential to garner US$200 billion by 2015. “The Global Entertainment and Media Outlook 2008-2012 report projects India as the fastest-growing territory in Asia during the next five years with a potential to grow at a CAGR of 18.5 per cent against 6.6 per cent globally. By then it is expected to be worth around US$ 36.331 million in volume.” Concerns: The Indian entertainment industry loses around Rs16000 crore every year due to piracy

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Dependence on clean and renewable source of energy has created demand in PV segment with rising awareness…

Production growth will over take the capacity growth in the near future due to increase in demand as well as awareness…

Photovoltaic Industry

Global energy demand is increasing at a rapid pace. Energy costs are rising globally, in line with oil prices and grid power costs are slated to rise by 8-10% annually. Energy security is a growing concern worldwide, leading to increasing dependence on renewable energy sources. Amongst the renewable space, photovoltaic technology is fast emerging as the most viable technology that has the potential to satisfy the rising demand for distributed peaking power needs of the world. The global PV industry size in 2006 grew to over 2.5 GW representing a 40% yoy growth. Globally, utilities are increasingly entering into long term Power Purchase Agreements (PPA) with the solar energy installations.

World Thin Solar Module Capacity/ Production (MW) &

Growth Rate

0100020003000400050006000700080009000

10000

FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13020406080100120140160180200

Capacity (MW) Production (MW)Capacity Growth % Production Growth %

Source: Electronics.ca Research Network The global PV market, as measured by total PV cell production, increased from 1.2GW, in 2004 to 2.6GW in 2006, which represents a compound annual growth rate, or CAGR, of approximately 36%. During the same period, PV industry revenues grew from approximately $8.0 billion to approximately $20.0 billion. PHOTON International projects that total PV cell production, including thin-film and non-conventional production which our products do not address, will increase from 4.0GW in 2007 to 20.5GW in 2011, representing a CAGR of approximately 50%. During the same period, PV industry revenues are projected to grow from approximately $30 billion to approximately $121 billion.

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Reversing of scenario in the near future in terms of solar energy demand…

India is the lowest in term of per capita consumption of electricity of which PV is the negligible part…

World Solar Photovoltaic Demand

Germany 47%

Spain23%

Rest of Europe

8%

Japan6%

USA8%

Rest of World

8%

Source: Solar Buzz LLC

World solar photovoltaic (PV) market installations reached a record high of 2,826 megawatts (MW) in 2007, Solar energy consumption in India has grown in the last couple of years and has resulted in the birth of a flourishing industry in the large, small and medium sectors. Under the renewable energy plan up to 2012 the Government of India has set target of deployment of solar water heating system in one million homes, 5 million solar lanterns and 2 million solar home lighting systems. India, being a tropical country, is blessed with plenty of sunshine. There are on an average 250 to 300 clear sunny days a year. Thus, it receives about 5000 trillion kWh of solar energy in a year. The total solar module assembly capacity is 50-55 KW in India. It is expected that the time for a major leap forward has come and in the next 10 years it should reach 20MW representing growth of 62% over the previous year.

Per Capita Consumption of Electricity

8365

29801695 1802

646 563 612

2596

0100020003000400050006000700080009000

OECD countrie

s

Middle Eas

t

Latin Ameri

caChina

AsiaAfric

aIndia

World Ave

rage

Kwh

Source: Key world Energy statistics (2007)

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Rs.12000 Crs industry waiting for the next generation super power company…

Source: Eurostat (Historic data), Primes Energy Model (European Commission 2006) for projections. Indian Market & Policies Currently India has an installed power generation capacity of about 123GW per annum. With a robust economic growth, the per capita electricity consumption is expected to rise from 435 KWH at present to 2000 KWH by 2015. However, the capacity currently lags demand with an estimated energy shortage of 8% and a peak load shortage of 11.6% at present. The current demand for PV systems in India is estimated to be 40 MW with major applications being limited to rooftop energy generation and solar thermal applications. Among other incentives, the Indian Government also directs state utilities to buy a specific part of their energy needs from renewable - of which solar is set to rapidly increase its share. Recently announced semi conductor policy provides significant benefits to the PV manufacturing sector through capital subsidies underlining the rising importance of this sector in Government policy initiatives. IT peripherals & Consumer Electronics: Currently the IT vertical industry (PCs and Notebooks) is pegged at Rs 20,000Crs and the PC Peripheral industry is worth Rs 12,000Crs. Consumer electronics products have become indispensable in today’s world. From digital cameras, PDAs, mobile phones, portable media players, camcorders and navigation systems to televisions and projectors, DVRs, home theatres and set top boxes, the consumer electronics market is revolutionizing the way we communicate and share digital media. The fast evolving consumer electronics segment is driving innovation of new technologies, standards, and products. The progress of consumer electronics from standalone, single function appliances into converged, complex, upgradeable, network-connected devices poses a serious challenge for product and application developers. Key to managing this growing complexity is the intelligent use of embedded systems. Creativity and time-to-market are the decisive factors that will aid developers sustain

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Presents in the alternate technologies may create high risk to success…

Silicon film – key raw material having shortage of supply…

their leadership in the highly competitive consumer electronics world. Consumer electronics manufacturers are looking for new, flexible, low cost, fast development solutions that will address the consumers demand for innovative electronic products at lower cost.

Never22%

within 1 Year17%

Within 3 years15%

More Than 3 Years17%

Within 6 months7%

Within 2 Years22%

Source: Consumer Electronic Association

The consumer electronics market is one of the largest segments in the electronics industry in India. With a market size of USD$3.89 billion in 2006, catering to a population of more than 1 billion people, the consumer electronics industry in India is poised for strong growth in the years to come.

Investment Concerns:

a. Alternate technologies: Given MBIL's presence in high technology businesses, managing technology evolution and being at the forefront of the technology curve assumes prime importance. Threat of technology obsolescence and alternate technologies is a constant in the optical and PV space. However, over the years the company has evolved from a technology innovator to a developer and has also entered into strategic technology alliances in PV space to emerge as a technology driven company, thereby mitigating this threat.

b. Prices of key inputs: Polycarbonate for optical media and poly silicon for photo Voltaic are critical key raw material. These commodities are influenced by a variety of factors, including crude prices, respective demand-supply balance, etc. Any sharp increase in prices of these commodities or demand-supply imbalances could adversely impact business. The company is working on strategic

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Tendency to use anti dumping policies by government may be the cause of worry…

sourcing agreements, including investments into production facilities, for critical raw materials. This should ease the impact of any pricing volatility and improve production planning.

c. Anti-dumping and anti-subsidy / government policies: The Company derives a significant part of its revenues from international markets. These have seen a growing protectionist attitude and a tendency by some local governments to use antidumping and trade protection tools to provide protection to local businesses. However, the Company continues to keep a close watch on this front and take necessary steps to minimize any fallout. In the PV front, Government incentive programs and benefits to PV industry are providing strong impetus to demand growth for PV systems. Any adverse change in these policies could have a negative impact on global demand. Moser Baer's multi technology strategy in PV space is not based on the pace of incentive programs as these new technologies could deliver energy at costs comparable to that of conventional energy.

d. Fall in product prices: As products move into the mature phase in their life-cycle, they start to emulate commodity type characteristics. Also, optical media industry has relatively high capital intensity; hence a sharp fall in prices could severely impact overall returns. The company has been consistently improving its asset turnover by installing more efficient lines, improving product mix, etc. The leadership position in high value next generation formats should further improve these returns.

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Slow down in revenue growth due to new business restructuring but expecting robust growth in the future…

Volatility is very high in term of EBITDA margins since past but consistency will be seen in near future due to partnering with the supplier and compensating the raw material expenditure…

Financials Summary

Sales(YOY)

1519.55 1280.31664.12

1982.47 1964.02

2745.13

3733.37

0

1000

2000

3000

4000

FY04FY05

FY06FY07

FY08

FY09E

FY10E

• Steady Growth in Net Sales

We are very optimistic about the company’s sales growth as the company is in the last stage of restructuring the business. The company has diversified its business in which the future outlook is very good. It has formed new subsidiary in its strategic diversification into Photovoltaic (PV) business which is expected to generate revenue for the company for the coming years. As the demand for PV is rising and company is planning to explore Europe and US market where the demand is high where it already has existence and exploring the Asian market as well.

EBITDA MARGIN TREND(%)

43.86

30.1324.89

30.38 27.1924.2 25.61

0

10

20

30

40

50

FY04 FY05 FY06 FY07 FY08 FY09E FY10E

• EBITDA Margins

EBITDA has declined initially as there is sharp rise in raw material expenses of about 1300 bps and other expenses rose by 500bps. But after FY06 the margins are almost constant due to the cost control by introducing cutting edge technology and also increasing the efficiency. But we are optimistic about the future margins as the raw material cost would be decreasing as they has tie ups and JVs with the company supplying raw material at lowest possible price although employees expense may rise marginally.

I N V E N T U R E I N S T I T U T I O N A L R E S E A R C H

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Charging high depreciation on the basis of huge initial investment made in the new business making the PAT negative…

Expecting huge contribution in margins from the new segment of solar photovoltaic business…

342.77 321.43

467.66

352.68

470.46

731.53

60.724.67

109.79

-78.91-27.34

159.19

-200.00-100.00

0.00100.00200.00300.00400.00500.00600.00700.00800.00

FY05 FY06 FY07 FY08 FY09 FY10

Cash PAT PAT

PAT V/S Cash PAT

We can see that PAT is negative for FY08 and FY09 as company is in transformation stage. Even though the company is making profit, PAT is negative as the depreciation charged is very high due to the installation of new machinery for its Photovoltaic business. So the government has allowed subsidy in depreciation for promoting this business. There is huge difference between PAT and Cash PAT due to the charging of high depreciation.

Segment Wise EBIT

-200.00

0.00

200.00

400.00

600.00

800.00

1000.00

FY04 FY05 FY06 FY07 FY08 FY09 FY10

EBIT

Storage Media Products Solar Products Other Operations

The company has already started generating income but however the EBIT are still negative due to the initial expenditure and expected to earn profit from these segments from FY09 onwards. Solar business is expected to contribute around 20% in FY10 whereas its IT peripherals, consumer electronics and home entertainment to contribute around 15% and rest from the media storage.

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Income Statement

Source: IGSL Institutional Research

FY05 FY06 FY07 FY08 FY09E FY10E

Net Sales 1280.4 1664.12 1982.47 1964.02 2745.13 3733.37

% Growth 29.97 19.13 -0.93 39.77 36.00

Other Income 67.49 61.35 78.77 57.68 -130.15 -158.10

Total Income 1347.89 1725.47 2061.24 2021.7 2614.98 3575.27

% Sales 53.33 59.25 51.06 49.31 44.06 41.39

Employee Expenses 72.60 103.59 143.92 189.31 301.96 466.67

% Sales 5.67 6.22 7.26 9.64 11.00 12.50

Other Expenses 206.52 221.67 302.88 329.87 439.28 607.23

% Sales 16.13 13.32 15.28 16.80

TOTAL EXPENDITURE 961.98 1311.21 1459.03 1487.71 1950.64 2619.27

% Sales 75.13 78.79 73.60 75.75 71.06 70.16

PBIDT 385.91 414.26 602.21 533.99 664.34 956.00

% Growth 7.35 45.37 -11.33 24.41 43.90

Interest 73.62 93.55 124.48 179.36 200.50 220.50

% Avg Debt 4.49 5.34 4.95 5.52 5.97 6.49

PBDT 312.29 320.71 477.73 354.63 463.84 735.50

Depreciation 282.05 316.76 357.87 431.59 497.80 572.35

% Gross Block 8.84 9.07 9.05 9.08 9.52 9.75

PBT 30.24 3.95 119.86 -76.96 -33.96 163.15

% PBT -100.79 -18.23 8.40 -2.53 19.49 2.43

Reported Profit After Tax 60.72 4.67 109.79 -78.91 -27.34 159.18

% Growth -92.31 2250.96 -171.87 -65.35 -682.22

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Balance Sheet

Source: IGSL Institutional Research

SOURCES OF FUNDS : FY05 FY06 FY07 FY08 FY09 FY10

Share Capital 111.51 111.51 111.6 561.25 561.25 561.25

TOTAL RESERVES 1878.64 1877.28 1935.49 1639.5 1612.16 1771.34

Total Shareholders Funds 1990.15 1988.79 2047.09 2200.75 2173.41 2332.59

Minority Interest 0 0 1.23 0 0 0

Secured Loans 1603.79 1646.54 1838.93 2066.9 2120 2150

Unsecured Loans 16.83 8.93 11.3 1117.3 1200 1250

Total Debt 1620.62 1655.47 1850.23 3184.2 3320 3400

Total Liabilities 3610.77 3644.26 3898.55 5384.95 5493.41 5732.59

Net Block 2447.17 2431.91 2496.95 2850.93 2831.04 2899.70

Capital Work in Progress 51.02 152.61 389.21 530.38 723.47 832.46

Investments 193.56 39.66 89.93 376.85 390 400

Inventories 343.54 447.43 613.88 724.75 786.11 803.59

Sundry Debtors 331.09 379.89 334.17 376.75 488.86 531.88

Cash and Bank 459.26 290 269.73 821.04 735.02 835

Loans and Advances 79.76 168.4 162.06 298.07 320 325

Total Current Assets 1213.65 1285.72 1379.84 2220.61 2329.99 2495.47

Current Liabilities 269.27 237.92 408.26 509.59 689.45 767.18

Provisions 24.4 27.75 40.25 75.07 91.64 127.86

Total Current Liabilities 293.67 265.67 448.51 584.66 781.09 895.04

Net Current Assets 919.98 1020.05 931.33 1635.95 1548.9 1600.43

Total Assets 3610.32 3644.23 3898.55 5384.95 5493.41 5732.59

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Ratios

Source: IGSL Institutional Research

Turnover Ratios FY06 FY07 FY08 FY09 FY10

Net sales to total assets 0.46 0.51 0.36 0.50 0.65

Net sales to Fixed assets 0.64 0.69 0.58 0.77 1.00

Net sales to net working capital 1.59 2.04 1.15 1.67 2.16

Net Working Capital Days 229.82 178.88 317.98 218.13 168.97

Net sales to inventory 3.72 3.23 2.71 3.49 4.65

Net sales to debtors 4.38 5.93 5.21 5.62 7.02

Liquidity ratios

Current ratio 5.40 3.38 4.36 3.38 3.25

Inventory Days 98.14 113.02 134.69 104.52 78.56

Valuation Ratios (x)

Cash PE 3.16 2.17 3.05 2.16 1.39

P/BV 0.51 0.50 0.46 0.47 0.44

EV/EBIDTA -3.14 -2.16 -2.44 -1.96 -1.36

EV/SALES -0.78 -0.66 -0.66 -0.47 -0.35

Market Cap/Sales 0.61 0.51 0.03 0.37 0.27

Return Ratios (%)

ROCE 2.68 6.27 1.90 3.03 6.69

ROE 0.23 5.36 -3.59 -1.26 6.82

Margins (%)

EBIDTA 24.89 30.38 27.19 24.20 25.61

EBIT 19.27 24.10 18.06 16.90 19.70

PAT 0.28 5.54 -4.02 -1.00 4.26

Growth (%)

Sales 29.97 19.13 -0.93 39.77 36.00

EBIDTA 7.35 45.37 -11.33 24.41 43.90

EBIT -6.12 150.61 -58.09 62.64 130.37

PAT 4.67 109.79 -78.91 -27.34 159.18

EPS 0.42 6.56 -4.68 -3.76 5.00

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Names Designation E-Mail Id. Contact Number Nagji Rita CMD nagji.rita@inventuregrowth.com 40751515*525 SALES Ravinder Kasliwal Head Institutional Sales ravinder.kasliwal@inveturegrowth.com 40751565/66 Dealing Vinit Rita Institutional Dealer vinit.rita@inventuregrowth.com 40751565/66 Rashda Ainapore Institutional Dealer rashda.ainapore@inventuregrowth.com 40751565/66 Amit Rita Institutional Dealer amit.rita@inventuregrowth.com 40751565/66 Research Neha Kakade Senior Research Analyst neha.kakade@inventuregrowth.com 40750515*583 Ashish Pandey Research Analyst ashish.pandey@inventuregrowth.com 40751515*582

Manoj Jethva Research Analyst manoj.jethva@inventuregrowth.com 40751515*579

Mitesh Shah Research Analyst mitesh.shah@inventuregrowth.com 40751515*581

Denil Savla Research Analyst denil.savla@inventuregrowth.com 40751515*580

Sanjeev Haria Research Analyst Sanjeev.haria@inventuregrowth.com 40751515

Sibayan Banerjee Technical Analyst Sibayan.banerjee@inventuregrowth.com 022 22723797

Ashok Patel Technical Analyst Ashok.patel@inventuregrowth.com 022 22723797

Madhu Patel Technical Analyst Madhu.patel@inventuregrowth.com 022 22723797

Disclaimer This Document has been prepared by Inventure Growth & Securities Ltd. The information, analysis and estimates contained herein are based on Inventure’s assessment and have been obtained from sources believed to be reliable. Neither Inventure Growth & Securities Ltd nor any of its employees or associates accepts any liability whatsoever direct or indirect that may arise from the use of information herein and shall not be responsible for its completeness and accuracy. It is not an offer to sell or a solicitation to buy securities. This document is for circulation only

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