Container Corporation of India -...

Container Corporation of India ‘Concors’ with future growth

Vikram Suryavanshi

Please refer to Disclosures and Disclaimers at the end of the Research Report.

Container Corporation of India ‘Concors’ with future growth in DFCs and shift to containers

Logistics: Initiating Coverage 14 July 2014

PhillipCapital (India) Pvt. Ltd.

Container remains attractive cargo, where Concor enjoys near monopoly The CAGR of container traffic handled by Concor since 1992 is 15%. India’s container traffic has a potential CAGR of 10‐14% over the next five years, considering expected GDP growth recovery to 6.0‐7.5%. Substantial incremental demand should come from a shift of general cargo in break bulk to containerized form (as is the case globally). We believe CONCOR is uniquely placed to capitalize on upcoming growth opportunities in container and warehousing. DFCs, DMICDC : Potential game changers Dedicated freight corridors (DFCs) will enhance the market share of railway to carry containers with faster, reliable and competitive service. Container trains will carry almost 4x cargo with speed of ~ 100kpl, thus yielding significant reduction in capital intensity, in turn resulting in better return ratios for operators. Delhi Mumbai Industrial Corridor (DMICDC) along with DFC would create an economic base with globally competitive environment. Concor is setting up around 15 logistic parks ahead of competitors to capture growing trade. Concor ‐ Business model difficult to replicate With its scheduled services between major port traffic centers and its nationwide terminal network, Concor enjoys a significant competitive advantage and economies of scale. It has 63 terminals, 10,413 wagons and is adding 2‐3 terminals and 1,000 wagons every year. The second largest competitor is ~1/10th of size. It’s countrywide network, strong relationships with various intermediaries act as strong entry barriers for other players. The company is spending Rs60bn over FY12‐17 for capacity addition and land acquision to be ready to capture growth opportunities post DFCC. It has also started Concor Air, its air‐cargo division, which will tie up with major airports for cargo handling. No significant threat from private players The government allowed 15 private players to enter containerized transportation in 2007. However, most of them could not develop their business and are finding it difficult to penetrate and acquire significant market share. On the other hand, with its vast network, Concor has been able to reduce empty haulage from 18% to 8% which is significantly lower than ~40% for private players. In fact, Concor has increased its market share from ~74% to ~80% in the last one year and we believe its partial monopoly will continue without affecting its growth rate. Attractive valuation We expect the company’s net profit to increase from Rs 9.8bn in FY14 to Rs 13.6bn in FY16 — at a CAGR of 17.8%. The stock is currently trading at 20.8x FY15 and 17.6x FY16 and at an FY16 EV/EBIDTA of 13.2x. It is debt free and its cash balance stands at Rs 25bn; its ROCE should remain healthy at 19.2% in FY16. We have valued the stock on a DCF basis (to account for aggressive capex to capitalize on container growth after the freight corridors are operational) at Rs 1,587, providing an upside of 28%. We recommend a Buy.

BUY CCRI IN | CMP RS 1,236 TARGET RS 1,587 (+28%) Company Data O/S SHARES (MN) : 195MARKET CAP (RSBN) : 250MARKET CAP (USDBN) : 4.252 ‐ WK HI/LO (RS) : 1310 / 637LIQUIDITY 3M (USDMN) : 3.3FACE VALUE (RS) : 10

Share Holding Pattern, % PROMOTERS : 61.8FII / NRI : 28.8FI / MF : 5.6NON PROMOTER CORP. HOLDINGS : 2.9PUBLIC & OTHERS : 0.9

Price Performance, % 1mth 3mth 1yr

ABS 9.5 36.4 76.9REL TO BSE ‐0.7 19.5 52.0

Price Vs. Sensex (Rebased values)

Source: Bloomberg, Phillip Capital Research

Other Key Ratios Rs mn FY14 FY15E FY16ENet Sales 49,846 58,489 69,057Ebidta 11,019 13,416 16,036Net Profit 9,848 11,569 13,670EPS, Rs 50.5 59.3 70.1 PER, X 24.5 20.8 17.6 EV/EBIDTA, x 19.6 16.0 13.2 EV/Net Sales, x 3.4 3.1 2.7 ROE, % 14.1 14.7 15.4 Debt/Equity (%) 0.2 0.2 0.2 Source: PhillipCapital India Research Est. Vikram Suryavanshi (+ 9122 66679951) [email protected]

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14 July 2014 / INDIA EQUITY RESEARCH / CONTAINER CORPORATION INITIATING

Container trade remains an attractive investment Container Corporation of India (Concor) provides multi‐modal logistic support services and enjoys a near monopoly in handling the nation’s trade in containers through the rail route. Container traffic has remained one of the highest growing cargoes in India historically, with a GDP multiplier of around 1.5‐2x. Concor is uniquely placed to benefit from growing international trade and a shift to containerized cargo from bulk form. The company’s focus in setting up 15 logistics parks and increasing its terminal segment’s revenue should be a major positive development.

Cargo growth at Indian Ports, non major ports major driver Container Volume (m TEU) at Indian Ports grew at CAGR 9.5%

Source: Company, PhillipCapital India Research

India has been seeing a higher growth its container volumes compared to other cargo or commodities. Container traffic mostly belongs to major ports. Only select non‐major/intermediate ports such as Pipavav Port and Adani Port cater to containerized traffic. Most of India’s container cargo moves through gateway ports in north‐west India, accounting for around 65% of the container trade. The share of container cargo as a percentage of total cargo at major ports has increased from 14% in 2004 to 21% in 2014. Apart from normal economic growth, an incremental demand is expected to come from a shift of general cargo from break bulk to containerized form. Again, gradual recovery in global growth (led by high‐income countries) projected by the World Bank is also positive for domestic container trade. Container traffic growth and GDP multiplier


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DFCs and DMICDC – changing paradigm The cargo movement by train is more cost competitive than movement by road, particularly for a distance of more than 500kms. However, in India, containers are moved by road even for distance of more than 1,000kms due to poor rail infrastructure. With the development of the Dedicated Freight Corridor Corporation (DFCC) and Delhi Mumbai Industrial Corridor Corporation (DMICC), the growth rate in the container trade could see a structural shift in the coming years. Dedicated Freight Corridors (DFCs) will strengthen India’s rail transport infrastructure to meet expected high future demand for freight movement. The development of DFCs would result in enhancing the market share of rail in freight by providing an efficient, safe, economical, and environment‐friendly option. The main earnings of the railways come from its freight operations, which cross subsidizes its losses on running passenger trains. However, currently, passenger trains are given preference and cargo trains are made to wait due to shortage of tracks. As a result, the average speed of a goods train is ~25kms per hour, which makes trucks a better option for many customers. Railways’ market share in the goods movement of the country has come down to around 30% from 65% in 1987 while the road sector's share has gone up to 60% from 34% in the same period. DFCC will reduce the unit cost of transportation by creating rail infrastructure to carry higher throughput per train. DFCC will provide non‐discriminatory access to freight trains belonging to Indian railways and other qualified operators. Construction of DFCs across the country is the most ambitious project ever conceived by the Indian Railways. Out of six DFCs planned in a phased manner, two corridors (eastern and western) are scheduled to be fully commissioned by FY17‐18. The eastern corridor will run from Ludhiana in Punjab to Dankuni near Kolkata with a length of 1,839kms and the Western corridor will stretch is JNPT near Mumbai to Dadri, Delhi with a length of 1,534kms. The phasing of corridors is synchronized with the existing most‐saturated sections on the Mumbai‐Delhi and Delhi‐ Kolkata rail links. The growth in demand is expected due to an increase in rail share in port‐based container traffic by 35‐40% due to the DFC, and a market share increase in container traffic by Concor through setting up of multi‐modal logistics parks, and a modal shift from road to rail. DMICDC to create global manufacturing and trading hub The Ministry of Commerce and Industries, GOI, is developing an industrial corridor along the western DFC to create an economic base with a globally‐competitive environment and modern infrastructure. Delhi‐Mumbai Industrial Corridor Development Corporation (DMICDC) is an SPV that is based on public‐private partnership (with 49% equity held by GOI and remaining 51% by financial institutions, including 26% by Japanese institutions and 25% combined by HUDCO, IFCL, and LIC. DMICDC, India's most ambitious Infrastructure programme, is developing new industrial cities as "Smart Cities" implementing next‐generation technologies across infrastructure sectors. DMICDC envisages development of infrastructure linkages like power plants, assured water supply, high capacity transportation and logistics facilities as well as softer interventions like skill development programs for employing local people. The programme has been conceptualized in partnership and collaboration with the Government of Japan. In the first phase, seven new industrial cities are being developed.

Container trains will carry almost 4x cargo with speed of ~ 100kpl, thus yielding significant reduction in capital intensity, in turn resulting in better return ratios for operators

India's most ambitious Infrastructure programme, is developing new industrial cities as "Smart Cities" implementing next‐generation technologies across infrastructure sectors

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Business model difficult to replicate Concor’s business is characterized by three distinct activities: inland container depot operator (ICD), container train carrier, and container freight station (CFS) operator. The company also manages ports, air‐cargo complexes, road services, and cold chain. Additionally, it provides hub‐and‐spoke services that involve the linking of road or short‐lead rail‐shuttle services within defined catchment areas to long‐lead point‐to‐point train services. The major revenue contribution is from running container trains earning rail freight income. The cargo mix is predominantly export /import containers accounting ~78% of total container volume.

Rail freight accounts for 77% of its revenue (FY14) Container volume mix (FY14)


Network and Infrastructure With its scheduled services between major port traffic centers and its nationwide terminal network, Concor enjoys a significant competitive advantage and economies of scale. Infrastructure base consists of 62 terminals across the country of which 13 are pure exim terminals, 35 are combined container terminals, and 14 are pure domestic terminals. It has a fleet of 11,770 wagons, including 10,413 high‐speed wagons, 18,680 containers, 53 reach stackers, and 14 gantry cranes. Availability of large fleet of rolling stock (especially high‐speed BLC/BLL wagons), specialized container handling equipment, customized owned/leased containers, and fully computerized commercial operations with internet‐based customer and customs interface provide Concor a strong competitive advantage. No significant threat from private players The government allowed 15 private players to enter containerized transportation in 2007. However, most of them could not develop their business and are finding it difficult to penetrate and acquire significant market share. On the other hand, with its vast network, Concor has been able to reduce empty haulage from 18% to 8% and is working on further reducing this to 4%, which is significantly lower than ~40% for private players. In FY14, Concor handled 2.9mn containers (2.4mm exim, 0.5mn domestic) controlling ~80% market. Other market players have only garnered around 20% share despite the opening up of container trains to private players from 2007.

Rail Freight77%

Road Freight 3%

Handling11%

Storage & Warehousing

7%

Others 2%

Exim78%

Domesic22%

In FY14, Concor handled 2.9mn container) controlling ~80% market

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Network of Concor terminals

Source: Company The company is well poised to tap new business opportunities arising from potential growth in EXIM container volumes and the likely increases in container traffic due to development of dedicated freight corridors. It has already taken the lead in developing logistics parks along the upcoming DFCs through strategic tie‐ups with central agencies, state governments, road/rail operators, etc. It has already acquired land at around eight places for logistic parks which has been done keeping in mid future requirements. The re‐opening of “hub‐and‐spoke” policy of Indian Railways in FY13 will facilitate development of rail transshipment hubs and help club traffic from various origin points or move it to various destinations from one point. This is expected to generate higher incomes from value‐added activities such as specialized warehousing, packaging, invoicing, etc. Concor is actively working on increasing use of technology for minimizing transaction costs by way of e‐transactions. The company is increasing revenue by diversification and product differentiation. It has started operating air cargo centers at airports. The company has done investment in joint ventures for development of port infrastructure in country which support captive cargo generation. It has also started Concor Air, its air‐cargo division, which will tie up with major airports for cargo handling.

It has already taken the lead in developing logistics parks along the upcoming DFCs through strategic tie‐ups

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Financials: Strong market outlook We forecast revenues to increase at a CAGR of 18% to Rs 69.1bn over FY14‐16 driven by a 12% CAGR in volume growth. After a change in strategy to attract return cargo, Concor has become more aggressive on domestic volume and reported growth of 17% in FY14. The development of multi‐modal logistic parks is expected to contribute to its domestic business volume growth. The company had 61% container volumes from ports on west coast of India mainly from JNPT (32%). Non major ports, Adani Ports & SEZ and APM terminals, Pipavav contributed to 16% and 14% of container volume respectively in FY14. We have assumed an overall container CAGR of 9.4% to 12.8m TEU over FY14‐16 for country with volumes from major ports showing a CAGR of 4.2%, contributing to 8.1m TEU in FY16. Volumes at non‐major ports driven by high growth at Adani Ports and AMP Terminals, Pipavav are estimated to grow at a CAGR of 20% to 4.7m TEU. We estimate Concor’s domestic business volumes to grow at a CAGR of 13.5% to 0.65m TEU over FY14‐16 with a recovery in the economy and an increase in double stacking of containers resulting in shift to rail from road. Its exim business volumes should see a CAGR of 11.5% to 2.9m TEU over FY14‐16.

Exim volumes (TEU) CAGR 11.5% FY14‐16 Domestic volumes (TEU) to grow at CAGR 13.5% FY14‐16

\ Source: Company, PhillipCapital India Research

Revenue CAGR at 17.7% to Rs 69.1bn FY14‐16 Export/Import revenue mix (Rs mn)


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The average realization per TEU for the company is mainly a function of market demand and cost‐push by Indian railways. In FY14, the average realization in its domestic business grew by 10% to Rs 22,057 per TEU while it remained flat in its exim business at Rs 16,370 per TEU. We have assumed its domestic and exim realizations increasing at a CAGR of 7% and 3.5% to Rs 25,251 and Rs 17,536 per TEU respectively over FY14‐16. With increased competition and slowdown in the economy, Concor has faced margin pressure — margins fell 510bps to 22.1% in FY14 from 27.2% in FY09. In the same period, in its EXIM business, EBIT margins fell by 540bps to 23.3% from 28.7% and domestic by 400bps to 8.5% from 12.5%. We expect an overall margin recovery of 110bps to 23.2% in FY16 backed by volume growth, higher contribution from handling, and warehousing. Lower volumes had a significant impact on the cost of empty running — this should come down in the future.

Average realization (Rs per TEU) trend EBITDA to grow at a CAGR of 20.6% FY14‐16


Segmental EBIT margins (%) trend

Source: Company, PhillipCapital India Research The company has an aggressive capacity expansion target of Rs 60bn in the 12th five‐year plan (FY12‐17) (to increase capacity and set up logistic parks). In FY14 its capex was ~Rs 10bn with Rs 2.5bn on wagons, Rs 2.5bn on civil construction, and Rs 5bn on logistic parks. Its FY15 and FY16 targets are similar (Rs 10‐11bn) of which ~60% will be spent on

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developing logistic parks. The company is setting up 15 logistic parks of which three are partially operational, and three more should be operational in FY15. Most of these investments are back‐ended due to purchase of land and high gestation periods. For example, its terminal at Khatuwas, Rajasthan, is spread over 280 acres of which 40 acres will be developed for Inland Container depot (ICD) and 80 acres for a domestic terminal; the rest will be available for warehousing and future developemnt. Annual capex has shot up; plans Rs 60bn capex over FY12‐17 (Rs mn)


Profit to grow at a CAGR of 17.8% over FY14‐16 Return ratios to bottom out with volume recovery


Concor balance sheet should remain strong with no debt and cash balance of ~Rs 25bn. We estimate cash generation of ~Rs 31bn over the next two years, which should be sufficient to fulfill its capex needs. We estimate core EPS growth of 18% between FY14 and FY16. Dividend payout should be in line with its historical payouts (at 24%). We have not assumed major gains in investments in subsidiaries or any non‐recurring income.

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Quarterly result table (Rs mn) Jun‐12 Sep‐12 Dec‐12 Mar‐13 Jun‐13 Sep‐13 Dec‐13 Mar‐14Net Sales 10,369 10,549 10,828 12,316 11,945 12,540 12,393 12,968YoY growth (%) 9.3 6.1 3.5 15.0 15.2 18.9 14.5 5.3Rail Freight Expenses 5,920 6,124 6,255 7,501 7,146 7,459 7,282 7,637 % of Net Sales 57.1 58.1 57.8 60.9 59.8 59.5 58.8 58.9Staff Expenditure 275 279 299 220 281 283 341 330Other Expenditure 1,503 1,570 1,642 1,999 1,805 2,013 1,912 2,336EBITDA 2,671 2,576 2,632 2,596 2,714 2,784 2,856 2,664 Ebitda margins (%) 25.8 24.4 24.3 21.1 22.7 22.2 23.0 20.5Interest 0 0 0 0 0 0 0 0PBDT 2,671 2,576 2,632 2,596 2,714 2,784 2,856 2,664Depreciation 407 423 442 456 460 466 468 500Other Income 823 810 840 899 900 785 888 1,145PBT 3,088 2,962 3,031 3,040 3,154 3,103 3,276 3,310Tax 636 638 665 781 689 676 780 849 Tax rate (%) 20.6 21.5 21.9 25.7 21.9 21.8 23.8 25.7Profit after Tax 2,451 2,325 2,366 2,258 2,465 2,427 2,496 2,461Net Profit 2,451 2,325 2,366 2,258 2,465 2,427 2,496 2,461 Net Margin 23.6 22.0 21.8 18.3 20.6 19.4 20.1 19.0YoY growth (%) 4.7 32.5 ‐1.9 ‐0.5 0.5 4.4 5.5 9.0EPS (Adj) 19 18 18 17 19 12 13 13EPS (Reported) 19 18 18 17 19 12 13 13

Source:Company Segmental Results (Rs mn) 1QFY13 2QFY13 3QFY13 4QFY13 1QFY14 2QFY14 3QFY14 4QFY14Handling Volumes (TEU) Exim 5,32,539 5,28,148 5,22,926 5,68,421 5,47,619 6,03,475 5,94,642 6,15,693Domestic 96,346 1,06,175 1,13,894 1,17,237 1,14,006 1,19,646 1,27,262 1,46,269Total 6,28,885 6,34,323 6,36,820 6,85,658 6,61,625 7,23,121 7,21,904 7,61,962Segmental Revenues Exim 8,583 8,531 8,611 9,673 9,416 9,970 9,626 9,646Domestic 1,786 2,018 2,217 2,641 2,530 2,570 2,766 3,321Total 10,369 10,549 10,828 12,314 11,945 12,540 12,393 12,966Realisation/TEU Exim 16,118 16,152 16,467 17,017 17,194 16,520 16,188 15,667Domestic 18,540 19,004 19,463 22,529 22,190 21,484 21,736 22,701Total 16,489 16,630 17,003 17,959 18,055 17,341 17,166 17,017EBIT Results Exim 2,201 2,129 2,166 2,012 2,267 2,394 2,344 1,985 Margin (%) 25.6 25.0 25.1 20.8 24.1 24.0 24.4 20.6Domestic 214 140 186 304 187 136 246 383 Margin (%) 12.0 6.9 8.4 11.5 7.4 5.3 8.9 11.5Unallocable 670 693 680 737 700 573 573 905Total 3,084 2,962 3,031 3,053 3,154 3,103 3,163 3,273Margin (%) 29.7 28.1 28.0 24.8 26.4 24.7 25.5 25.2

Source: Company

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Valuations: Growth with stability Concor’s rapid expansion (with increase in container‐handling capacity and setting up of multi‐modal logistic parks) makes it an exciting play on container growth. We believe the company is set for a re‐rating with a change in its business mix and demonstration of leadership position in a challenging environment. It has been able to gain market share consistently in spite of the entry of private players, thereby appeasing investors’ concerns. Its strong presence in one of the highest growth cargo segments guarantees volume growth going ahead. It remains financially robust with no debt and an annual cash flow of ~Rs 14bn per annum, which provides the company with a strong competitive edge. Our DCF‐based fair valuation for the company is at Rs 1,587 per share (EV of Rs 283bn). We believe DCF is a better valuation method vs. historical PE and EV/EBITDA, considering the expected change in revenue mix with development of logistic parks and aggressive capacity expansion. The major benefit of ~Rs 36bn expenditure in logistic parks and development of DFCC should start materializing from FY17. The company is expecting more than 15% IRR from investment in Logistic Parks. We believe the logistic parks (assumed 15 operational) once fully developed has revenue potential of ~Rs30bn and profit of ~Rs5.4bn. The valuation is based on the following assumptions: WACC derived from cost of equity of 11.5%. Equity risk premium of 2.5% and

effective tax rate of 23%. Perpetual growth rate of 4% in EBITDA from FY20 onwards considering strong

outlook for container trade in India along with the company’s increasing competitive market position.

DCF valuation at Rs 1,587 Present Value of Cash flow (Rs mn) 1,18,990 Key Assumptions Present Value of Terminal Value (Rs mn) 1,64,865 Cost of Equity 11.5%Total Present Value (Rs mn) 2,83,854 Cost of Debt naLess: Net Debt (Rs mn) ‐25,475 WACC 11.5%Equity value (Rs mn) 3,09,329 Tax rate 23.0%Value Per Share (Rs) 1,587 Terminal Growth rate 4.0%

Source: Indian Port Association, PhillipCapital India Research

1‐year forward P/E: New assets to provide boost to top line and earnings


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We believe the company is set for a re‐rating with a change in its business mix and demonstration of leadership position in a challenging environment.

The major benefit of ~Rs 36bn expenditure in logistic parks and development of DFCC should start materializing from FY17.

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1‐year forward EV/EBITDA: on way to structural re‐rating

Source: Company, PhillipCapital India Research 1‐year forward P/BV: a different PSU


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Business Risks Haulage charges: The container train operators have very limited control over the largest cost component (~75%) — namely rail haulage. The increase in rates on an ad‐hoc basis by Indian Railways is a point of concern. Cost breakup: Railway freight is a major cost

Source: Company, PhillipCapital India Research Competition from road: Shift of cargo from road to rail may take some time. This may cause disruptions in the company’s profitability and viability of overall rail operations. Improved road infrastructure in the country is facilitating direct road transfers with competitive transit times and costs, despite all environmental and energy advantages associated with rail transport. Restricted commodities: Indian Railways has the right to specify certain commodities as restricted/notified commodities, which are not allowed to be transported by container operators. Presently, ores, minerals, coal, and coke have been specified as notified commodities. Valuation upside from investment in port operations We have not assumed any upside from investment in following subsidiaries/joint ventures. • Fresh and Healthy Enterprises Limited (FHEL): It is wholly owned subsidiary

incorporated in FY06 to create world‐class cold‐storage infrastructure in India and to provide complete cold‐chain logistics solutions.

• CONCOR Air Limited: It is a wholly owned subsidiary incorporated in FY13 to undertake the design, development, and operations of the air‐cargo terminal at Santa Cruz airport in Mumbai.

• Gateway Terminals India Pvt (: It is joint venture of APM terminals and Concor (74:26), which operates a container terminal at Nhava Sheva’s Jawaharlal Nehru Port Trust since FY07. It is India’s largest container‐terminal‐handling facility. In FY13, JNPT recorded a combined throughput of 4.26m TEUs with Gateway terminals India handling nearly 47% of its total throughput at 2m TEUs, representing 20% of India's total containerized cargo.

• India Gateway terminals (IGT): It is an Special Purpose Vehicle formed with an equity holding of 81.63% by DP World, 14.56% by Container Corporation of India

Rail freight Expenses77%

Road Freight Expenses

3%

Handling Expenses5%

Employee 3%

Other Expenditure12%

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Other Expenditure

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(CONCOR), 2.75% by Chakiat and 1.07% by Transworld Group to set up International Container Transshipment Terminal (ICTT). It is first transshipment terminal in , India developed on BOT basis with an estimated cost of Rs.24bn. ICTT is located 11 nautical miles off the Middle East trade route and 76 nautical miles off the Suez route making it attractive as a hub to the vessels operating in this route).

• SIDCUL‐Concor: The government‐owned State Infrastructure and Industrial

Development Corporation of Uttarakhand Limited (SIDCUL) and CONCOR have formed a joint venture to establish two logistics hubs at Pantnagar and Haridwar. These two logistics hubs will be linked with the eastern and western DFCs and will get a direct rail link with New Delhi. These logistics‐cum‐transport hubs will have warehouses, truck parking facilities, dormitories, 24‐hour canteens and restaurants, fuel stations, service centers, and office complexes for service providers.

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Company Background Container Corporation of India Ltd (CONCOR) established in Mar 1988, is a Mini‐Ratna Category‐1 GoI undertaking under the aegis of the Ministry of Railways. The company commenced operations in 1989 by taking over 7 makeshift inland container depots (ICDs) from the Indian Railways. The company operates 62 facilities and acts as a carrier, terminal operator, and warehouse operator, providing multi‐modal logistics for India’s export‐import and domestic trade and commerce. The company has a pan‐India presence. It is a leader in multi‐modal transport in India, with the largest available network of intermodal terminals across the country providing wide reach and penetration, combined with a strong presence at almost all container‐handling ports. Its infrastructure base consists of 62 terminals across the country of which 13 are pure exim terminals, 35 are combined container terminals, and 14 are pure domestic terminals. It has a fleet of 11,770 wagons, including 10,413 high‐speed wagons, 18,680 containers, 53 reach stackers, and 14 gantry cranes. Container Carrier: Most of companies terminals are rail linked and container movement through rail is major business operation for the company. Most of its inland transport is carried through the Indian Railway network where railway provide engine, track service and signaling systems. Though rail is its mainstay transportation, some of its terminals are exclusively road‐fed. However, road services are mostly in the form of a supplement — to offer the door‐to‐door linkages. Terminal operator: Its ICDs are dry ports and bring all port facilities (including customs clearance) to its customers’ doorstep. Its terminals provide a spectrum of facilities in terms of warehousing, container parking, repair facilities, and even office complexes. Warehouse operator: As a container freight station (CFS) operator, Concor offers value‐added services such as transit warehousing for import and export cargo, bonded warehousing that enables importers to store cargo and take partial deliveries thereby deferring duty payment, less‐than‐container‐load consolidation services and reworking of this LCL cargo at nominated hubs, and air‐cargo clearance using bonded trucking.

Concor business model

Source: Company

Rail Transportation & handling Freight forwarding and logistics

Rail Freight Intermodal Land Transport Air/Ocean Freight Contract Logistics / SCM

Rail freight operations across neighbouringcountries and on TAR, train running, sales and

asset mgt.

Terminals for distribution of cross‐modal container

transport services across countries

Terminals for distribution of cross‐modal container transport services across countries

Air and Ocean Freight Forwarding services worldwide as AITA agents/ NVOCC

Contract Logistics and Supply Chain Management Worldwide

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Port volume in India India’s port infrastructure constitutes 13 major ports and 187 non‐major ports (~48 are meaningfully operational). The total volume of traffic handled by all Indian ports during FY14 was 969.3mt, of which 555mt (57%) was handled by major ports and the remaining 414mt by non‐major ports. Volumes at major ports have increased at a CAGR of 5% while at non‐major ports by 13.1% over FY04‐14, higher than the growth in GDP, which was in the range of 6‐9%. Cargo at major ports (mn tones) Port 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 GAGRGujarat‐ Kandla 41.5 41.6 45.9 53.0 64.9 72.2 79.5 81.9 82.5 93.6 87.0 7.7%JNPT 31.2 32.8 37.8 44.8 55.8 57.3 60.7 64.3 65.7 64.5 62.4 7.2%Mumbai 30.0 35.2 44.2 52.4 57.0 51.9 54.5 54.6 56.2 58.0 59.2 7.0%Mormugao 27.9 30.7 31.7 34.2 35.1 41.7 48.8 50.0 39.0 17.7 11.7 ‐8.3%New Manglore 26.7 33.9 34.5 32.0 36.0 36.7 35.5 31.6 32.9 37.0 39.4 4.0%Cochin 13.6 14.1 13.9 15.3 15.8 15.2 17.4 17.9 20.1 19.8 20.9 4.4%West Cost 170.8 188.2 208.0 231.7 264.7 275.0 296.6 300.2 296.4 290.7 280.6 5.1%VO Chidambaranar 13.7 15.8 17.1 18.0 21.5 22.0 23.8 25.7 28.1 28.3 28.6 7.7%Chennai 36.7 43.8 47.2 53.4 57.2 57.5 61.1 61.5 55.7 53.4 51.1 3.4%Kamarajar (Ennor) 9.3 9.5 9.2 10.7 11.6 11.5 10.7 11.0 15.0 17.9 27.3 11.4%Visakhapatnam 47.7 50.1 55.8 56.4 64.6 63.9 65.5 68.0 67.4 59.0 58.5 2.1%Paradip 25.3 30.1 33.1 38.5 42.4 46.4 57.0 56.0 54.3 56.6 68.0 10.4%Haldia 32.6 36.3 42.3 42.5 43.6 41.6 33.3 34.9 31.0 28.1 28.5 ‐1.3%Kolkata 8.7 9.9 10.8 12.6 13.7 12.4 13.0 12.5 12.2 11.8 12.9 4.0%East Cost 174.0 195.6 215.6 232.1 254.5 255.4 264.4 269.7 263.7 254.9 275.0 4.7%Total Major Ports 344.8 383.7 423.6 463.8 519.3 530.4 561.0 569.9 560.1 545.6 555.5 4.9%Non‐major Port 121 138 145.5 186.2 203.6 213.2 288.8 314 353 387.8 413.8 13.1%Non major Port Share (%) 26.0 26.4 25.6 28.6 28.2 28.7 34.0 35.5 38.7 41.5 42.7 5.1%Total Port Volume 465.8 521.7 569.1 650.0 722.9 743.6 849.8 883.9 913.1 933.4 969.3 7.6%

Source: Indian Ports Association, PhillipCapital India Research

Cargo breakup at major ports


POL35%

Iron Ore5%

Coal16%

Container23%

Others21%

POL

Iron Ore

Coal

Container

Others

Volumes at non‐major ports is growing almost twice as fast as volumes at major ports. In terms of share of traffic handled, non‐major ports now account for about 43% ….

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Containers: Unique cargo with high growth rate India has been seeing a high growth in its container volumes. Most of India’s container cargo of India moves through gateway ports in north‐west India, accounting for around 65% of the container trade. Container traffic mostly belongs to major ports. Only select non‐major/intermediate ports such as Pipavav Port and Mundra Port cater to containerized traffic. The share of container cargo as a percentage of total cargo at major ports has increased from 14% in 2004 to 21% in 2014. Top‐4 ports control 80% container volume in India

Source: Company, PhillipCapital India Research Historically, container cargo has grown at 1.5‐2x GDP (growth is very high in economic recovery). With increased container penetration and development of industrial corridors, the growth should increase going ahead. Container traffic (mn TEU) growth and GDP multiplier

Source: Company, PhillipCapital India Research The gradual recovery in global growth (led by high‐income countries) projected by the World Bank is also positive for container trade — global growth is expected to pick up speed as the year progresses and world GDP is projected to expand from 2.8% in 2014 to 3.4% in 2015 and 3.5% in 2016. The bulk of this acceleration will come from high‐income countries (notably the U.S. and the Euro area) with improving labor market conditions and a steady release of pent‐up demand (Source: GLOBAL ECONOMIC PROSPECTS | June 2014, WB).

‐

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500 FY14 FY13

0

5

10

15

20

25

‐

0.5

1.0

1.5

2.0

2.5

3.0


GDP multiplier (X) Container traffic growth (%)‐ RHS

Container trade remains concentrated to selected ports with strong logistic network

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Dedicated Freight Corridors (DFC) DFCs will strengthen India’s rail transport infrastructure to meet expected high future demand for freight movement. The development of DFCs would result in enhancing the market share of rail in freight by providing an efficient, safe, economical, and environment‐friendly option. The main earnings of the railways come from its freight operations, which cross subsidizes its losses on running passenger trains. However, currently, passenger trains are given preference and cargo trains are made to wait due to shortage of tracks. As a result, the average speed of a goods train is ~25kms per hour, which makes trucks a better option for many customers. Railways’ market share in the goods movement of the country has come down to around 30% from 65% in 1987 while the road sector's share has gone up to 60% from 34% in the same period. DFCC will reduce the unit cost of transportation by creating rail infrastructure to carry higher throughput per train. DFC will provide non‐discriminatory access to freight trains belonging to Indian railways and other qualified operators. The DFC has adopted international best practices, technology, systems, and business processes. It is using higher axle load and higher capacity rolling stock with efficient locomotives and traction system. Alignment of Western and Eastern DFC Corridor

Source: Dedicated Freight Corridor Corporation of India (DFCCIL) Construction of DFCs across the country is the most ambitious project ever conceived by the Indian Railways. Out of six DFCs planned in a phased manner, two corridors (eastern and western) are scheduled to be fully commissioned by FY17‐18. The eastern corridor will run from Ludhiana in Punjab to Dankuni near Kolkata with a length of 1,839kms and the Western corridor will stretch is JNPT near Mumbai to Dadri Delhi with a length of 1,534kms. The phasing of corridors is synchronized with the existing most‐saturated sections on the Mumbai‐Delhi and Delhi‐ Kolkata rail links.

Railways’ market share in the goods movement of the country has come down to around 30% from 65% in 1987

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DFCC infrastructure Feature Existing Western DFC

Height

4.26m

7.1m

Width

3200mm

3660mm

Container Stack

Single Stack

Double Stack

Train Length 700m

1500m

Train Load 4000 ton

15000 ton

Axle Load 22.9t /25t

32.5t / 25t

Track loading Density 8.67 t/m

12 t/m

Maximum speed 75 km per hour 100 km per hour

Traction Electrical (25KV) Electrical (2x25 KV)

Station Spacing 7‐10 Km 40Km

Signaling Absolute /Automatic with 1 km spacing Automatic with 2km spacing

Communication Emergency Sockets /Mobile Train Radio Mobile Train Radio

Source: Dedicated Freight Corridor Corporation of India (DFCCIL) The western corridor is specifically dedicated to the container traffic requirements for the existing as well as emerging ports of Gujarat, Maharashtra, and the northern hinterland. Its route comprises of the following main destinations: JNPT‐Surat‐Vadodara‐Ahmedabad‐Palanpur‐Ajmer‐Rewari. It has been divided into two phases — phase‐1 from Rewari to Varodara (~950kms) and the phase‐2 from JNPT to Vadodara and Rewari to Dadri (~584kms). Japan International Cooperation Agency (JICA) will be funding the development of both sections to the extent of 80%. The growth in demand is expected on the back of: 1. Increase in rail share in port‐based container traffic by 35‐40% due to the DFC 2. Market share increase in container traffic by CONCOR through setting up of Multi‐

modal Logistics Parks (MMLPs) 3. Modal shift from road to rail 4. Creation of specific container movement for automobile and roll and roll off (Ro‐Ro)

traffic. 5. Anticipated changes in profile of traded goods — from intermediate to finished

goods — is bound to increase the opportunities for containerization in the domestic market.

DFCC would earn revenue as per user charges (termed Track Access Charges (TAC)), which are estimated at ~Rs 0.19 per NTKM in FY18 — significantly lower than the current railway charge of ~Rs 1 per NTKM.

Western DFC should lead to an exponential growth in container traffic

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DMICDC to create global manufacturing and trading hubs The Ministry of Commerce and Industries, GOI, is developing an industrial corridor along the western DFC to create an economic base with a globally‐competitive environment and modern infrastructure. Delhi‐Mumbai Industrial Corridor Development Corporation (DMICDC) is an SPV that is based on public‐private partnership (with 49% equity held by GOI and remaining 51% by financial institutions, including 26% by Japanese institutions and 25% combined by HUDCO, IFCL, and LIC. DMICDC, India's most ambitious Infrastructure programme, is developing new industrial cities as "Smart Cities" implementing next‐generation technologies across infrastructure sectors. It will expand India's manufacturing and services base and develop DMIC as a global manufacturing and trading hub. DMICDC envisages development of infrastructure linkages like power plants, assured water supply, high capacity transportation and logistics facilities as well as softer interventions like skill development programmes for employing local people. The programme has been conceptualized in partnership and collaboration with the Government of Japan. In the first phase, seven new industrial cities are being developed. DMICDC along western DFC corridor

Source: DMICDC presentation

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DMICDC acts as a pass‐through entity for specific projects and raises various financing instruments such as ‘Project Development Fund (PDF)’ that could be used as a Revolving Fund and would specifically be used for undertaking project development activities on a Public‐Private‐Partnership basis. It will develop industrial cities around a multi‐modal high‐axle‐load dedicated freight corridor between Delhi and Mumbai, covering an overall length of 1,534km. It will develop an area of around 150‐200kms on both sides of its alignment. Its project influence area (PIA) comprises 430,000 square kilometers, which constitutes around 14% of India’s total geographical area. Six DMICDC states contribute ~50% of India’s principal crops; constitute 45% of the country’s GDP, and 58% of value of output. The development of industrial regions in these states will result in a 70% contribution to GDP by 2030. The developmental planning for DMICDC aims to double employment potential in five years (15% CAGR), triple industrial output in five years (25% CAGR), and quadruple exports from the region in five years (32% CAGR). DMICDC will have 24 investment regions developed in three phases out of which 7 will be developed in the first phase over the next five years. Each state has one investment region, except Maharashtra, which has two. The master plan for all seven industrial regions is ready. DMICDC is planning to use information technology to the fullest in addition to having a physical master plan for all these cities. Cisco and IBM are to create a digital layer on top of the physical plan for these cities. The entire city control and governance will be managed from one place with an integrated approach on a massive scale. To monitor real‐time container movement, DMICDC is working on logistics data software for connectivity with all logistic players. Apart from DMICDC, four more corridors will be developed by the Ministry of commerce, where DMC will provide support. Bangalore – Mumbai, Chennai – Bangalore, Amritsar ‐ Kolkata on eastern DFC, and Chennai ‐ Kolkata, where the first phase would be Chennai to Vizag.

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Financials

Income Statement Y/E Mar, Rs mn FY13 FY14 FY15E FY16ENet sales 44,062 49,846 58,489 69,057Growth, % 9 13 17 18Total income 44,062 49,846 58,489 69,057Terminal and Service Charges ‐30,570 ‐35,128 ‐40,942 ‐48,340Employee expenses ‐1,072 ‐1,235 ‐1,371 ‐1,535Other Operating expenses ‐1,944 ‐2,464 ‐2,760 ‐3,146EBITDA (Core) 10,476 11,019 13,416 16,036Growth, % 2.3 5.2 21.8 19.5 Margin, % 23.8 22.1 22.9 23.2 Depreciation ‐1,727 ‐1,893 ‐2,134 ‐2,459EBIT 8,749 9,125 11,282 13,576Growth, % 1.1 4.3 23.6 20.3 Margin, % 19.9 18.3 19.3 19.7 Other Non‐Operating Income 3,371 3,717 3,940 4,177Pre‐tax profit 12,119 12,843 15,222 17,753Tax provided ‐2,721 ‐2,995 ‐3,653 ‐4,083Profit after tax 9,399 9,848 11,569 13,670Net Profit 9,399 9,848 11,569 13,670Growth, % 7.1 4.8 17.5 18.2 Net Profit (adjusted) 9,399 9,848 11,569 13,670 Unadj. shares (m) 130 195 195 195 Wtd avg shares (m) 195 195 195 195 Balance Sheet Y/E Mar, Rs mn FY13 FY14 FY15E FY16ECash & bank 29,162 25,641 26,794 29,264Debtors 257 330 363 399Inventory 121 149 164 180Loans & advances 7,803 11,942 12,181 12,424Other current assets 1,258 1,578 1,673 1,773Total current assets 38,601 39,640 41,174 44,041Investments 4,822 8,640 9,140 9,640Gross fixed assets 39,590 45,190 55,190 65,190Less: Depreciation ‐12,389 ‐14,283 ‐16,416 ‐18,876Add: Capital WIP 1,883 1,500 1,515 1,530Net fixed assets 29,084 32,408 40,289 47,845Total assets 72,507 80,688 90,603 101,526 Current liabilities 4,843 6,014 6,495 7,089Provisions 1,985 1,605 1,733 1,872Total current liabilities 6,827 7,618 8,228 8,961Non‐current liabilities 2,868 3,216 3,524 3,883Total liabilities 9,695 10,835 11,752 12,844Paid‐up capital 1,300 1,950 1,950 1,950Reserves & surplus 61,511 67,904 76,901 86,733Shareholders’ equity 62,811 69,854 78,851 88,682Total equity & liabilities 72,507 80,688 90,603 101,526

Source: Company, PhillipCapital India Research Estimates

Cash Flow Y/E Mar, Rs mn FY13 FY14 FY15E FY16EPre‐tax profit 12,119 12,843 15,222 17,753Depreciation 1,727 1,893 2,134 2,459Chg in working capital 622 ‐3,768 228 337Total tax paid ‐2,416 ‐2,687 ‐3,349 ‐3,728Cash flow from operating activities 12,053 8,280 14,235 16,821Capital expenditure ‐5,833 ‐5,217 ‐10,015 ‐10,015Chg in investments ‐1,891 ‐3,819 ‐500 ‐500Other investing activities 1 ‐29 677 0Cash flow from investing activities ‐7,722 ‐9,065 ‐9,838 ‐10,515Free cash flow 4,331 ‐785 4,397 6,306Debt raised/(repaid) ‐91 41 3 3Dividend (incl. tax) ‐2,653 ‐2,777 ‐3,249 ‐3,838Cash flow from financing activities ‐2,744 ‐2,736 ‐3,245 ‐3,835Net chg in cash 1,587 ‐3,521 1,152 2,471 Valuation Ratios & Per Share Data FY13 FY14 FY15E FY16EPer Share data EPS (INR) 48.2 50.5 59.3 70.1 Growth, % 7.1 4.8 17.5 18.2 Book NAV/share (INR) 322.2 358.3 404.4 454.9 FDEPS (INR) 48.2 50.5 59.3 70.1 CEPS (INR) 57.1 60.2 70.3 82.7 CFPS (INR) 44.5 23.4 52.8 64.9 DPS (INR) 11.7 12.3 14.2 16.8 Return ratios Return on assets (%) 13.7 12.9 13.5 14.2 Return on equity (%) 15.0 14.1 14.7 15.4 Return on capital employed (%) 14.7 13.8 14.6 15.3 Turnover ratios Asset turnover (x) 1.4 1.3 1.3 1.3 Sales/Total assets (x) 0.6 0.7 0.7 0.7 Sales/Net FA (x) 1.6 1.6 1.6 1.6 Working capital/Sales (x) 0.1 0.2 0.1 0.1 Receivable days 2.1 2.4 2.3 2.1 Inventory days 1.0 1.1 1.0 1.0 Payable days 18.0 15.9 14.8 13.4 Working capital days 38.1 58.5 49.2 40.6 Liquidity ratios Current ratio (x) 8.0 6.6 6.3 6.2 Quick ratio (x) 7.9 6.6 6.3 6.2 Dividend cover (x) 4.1 4.1 4.2 4.2 Total debt/Equity (%) 0.2 0.2 0.2 0.2 Net debt/Equity (%) (46.2) (36.5) (33.8) (32.8)Valuation PER (x) 25.6 24.5 20.8 17.6 PEG (x) ‐ y‐o‐y growth 3.6 5.1 1.2 1.0 Price/Book (x) 3.8 3.4 3.1 2.7 Yield (%) 0.9 1.0 1.2 1.4 EV/Net sales (x) 3.0 4.3 3.7 3.1 EV/EBITDA (x) 12.6 19.6 16.0 13.2 EV/EBIT (x) 15.0 23.6 19.0 15.6

– 23 of 24 –


Management

(91 22) 2300 2999(91 22) 6667 9735

Research Engineering, Capital Goods Pharma

Deepak Jain (9122) 6667 9758 Ankur Sharma (9122) 6667 9759 Surya Patra (9122) 6667 9768Priya Ranjan (9122) 6667 9965 Aditya Bahety (9122) 6667 9986

Retail, Real EstateInfrastructure & IT Services Abhishek Ranganathan, CFA (9122) 6667 9952

Manish Agarwalla (9122) 6667 9962 Vibhor Singhal (9122) 6667 9949 Neha Garg (9122) 6667 9996Sachit Motwani, CFA, FRM (9122) 6667 9953 Varun Vijayan (9122) 6667 9992Paresh Jain (9122) 6667 9948 Technicals

Midcap Subodh Gupta, CMT (9122) 6667 9762Vikram Suryavanshi (9122) 6667 9951

Naveen Kulkarni, CFA, FRM (9122) 6667 9947 Production ManagerVivekanand Subbaraman (9122) 6667 9766 Metals Ganesh Deorukhkar (9122) 6667 9966Manish Pushkar, CFA (9122) 6667 9764 Dhawal Doshi (9122) 6667 9769

Dharmesh Shah (9122) 6667 9974 Database ManagerCement Vishal Randive (9122) 6667 9944Vaibhav Agarwal (9122) 6667 9967 Oil&Gas, Agri Inputs

Gauri Anand (9122) 6667 9943 Sr. Manager – Equities SupportDeepak Pareek (9122) 6667 9950 Rosie Ferns (9122) 6667 9971

Anjali Verma (9122) 6667 9969

Sales & Distribution Kinshuk Bharti Tiwari (9122) 6667 9946 Sales Trader ExecutionAshvin Patil (9122) 6667 9991 Dilesh Doshi (9122) 6667 9747 Mayur Shah (9122) 6667 9945Shubhangi Agrawal (9122) 6667 9964 Suniil Pandit (9122) 6667 9745Kishor Binwal (9122) 6667 9989Sidharth Agrawal (9122) 6667 9934Dipesh Sohani (9122) 6667 9756

Economics

Consumer, Media, Telecom

Vineet Bhatnagar (Managing Director)Jignesh Shah (Head – Equity Derivatives)

Automobiles

Banking, NBFCs

Contact Information (Regional Member Companies)

SINGAPORE

Phillip Securities Pte Ltd 250 North Bridge Road, #06‐00 Raffles City Tower,

Singapore 179101 Tel : (65) 6533 6001 Fax: (65) 6535 3834

www.phillip.com.sg

MALAYSIA Phillip Capital Management Sdn Bhd B‐3‐6 Block B Level 3, Megan Avenue II,

No. 12, Jalan Yap Kwan Seng, 50450 Kuala Lumpur Tel (60) 3 2162 8841 Fax (60) 3 2166 5099

www.poems.com.my

HONG KONG Phillip Securities (HK) Ltd

11/F United Centre 95 Queensway Hong Kong Tel (852) 2277 6600 Fax: (852) 2868 5307

www.phillip.com.hk

JAPAN Phillip Securities Japan, Ltd

4‐2 Nihonbashi Kabutocho, Chuo‐ku Tokyo 103‐0026

Tel: (81) 3 3666 2101 Fax: (81) 3 3664 0141 www.phillip.co.jp

INDONESIA PT Phillip Securities Indonesia

ANZ Tower Level 23B, Jl Jend Sudirman Kav 33A, Jakarta 10220, Indonesia

Tel (62) 21 5790 0800 Fax: (62) 21 5790 0809 www.phillip.co.id

CHINA Phillip Financial Advisory (Shanghai) Co. Ltd.

No 550 Yan An East Road, Ocean Tower Unit 2318 Shanghai 200 001

Tel (86) 21 5169 9200 Fax: (86) 21 6351 2940 www.phillip.com.cn

THAILAND Phillip Securities (Thailand) Public Co. Ltd.

15th Floor, Vorawat Building, 849 Silom Road, Silom, Bangrak, Bangkok 10500 Thailand

Tel (66) 2 2268 0999 Fax: (66) 2 2268 0921 www.phillip.co.th

FRANCE King & Shaxson Capital Ltd.

3rd Floor, 35 Rue de la Bienfaisance 75008 Paris France

Tel (33) 1 4563 3100 Fax : (33) 1 4563 6017 www.kingandshaxson.com

UNITED KINGDOM King & Shaxson Ltd.

6th Floor, Candlewick House, 120 Cannon Street London, EC4N 6AS

Tel (44) 20 7929 5300 Fax: (44) 20 7283 6835 www.kingandshaxson.com

UNITED STATES Phillip Futures Inc.

141 W Jackson Blvd Ste 3050 The Chicago Board of Trade Building

Chicago, IL 60604 USA Tel (1) 312 356 9000 Fax: (1) 312 356 9005

AUSTRALIA PhillipCapital Australia

Level 37, 530 Collins Street Melbourne, Victoria 3000, Australia

Tel: (61) 3 9629 8380 Fax: (61) 3 9614 8309 www.phillipcapital.com.au

SRI LANKA Asha Phillip Securities Limited

Level 4, Millennium House, 46/58 Navam Mawatha, Colombo 2, Sri Lanka

Tel: (94) 11 2429 100 Fax: (94) 11 2429 199 www.ashaphillip.net/home.htm

INDIA PhillipCapital (India) Private Limited

No. 1, C‐Block, 2nd Floor, Modern Center , Jacob Circle, K. K. Marg, Mahalaxmi Mumbai 400011 Tel: (9122) 2300 2999 Fax: (9122) 6667 9955 www.phillipcapital.in

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Disclosures and Disclaimers PhillipCapital (India) Pvt. Ltd. has three independent equity research groups: Institutional Equities, Institutional Equity Derivatives and Private Client Group. This report has been prepared by Institutional Equities Group. The views and opinions expressed in this document may or may not match or may be contrary at times with the views, estimates, rating, target price of the other equity research groups of PhillipCapital (India) Pvt. Ltd. This report is issued by PhillipCapital (India) Pvt. Ltd. which is regulated by SEBI. PhillipCapital (India) Pvt. Ltd. is a subsidiary of Phillip (Mauritius) Pvt. Ltd. References to "PCIPL" in this report shall mean PhillipCapital (India) Pvt. Ltd unless otherwise stated. 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Certifications: The research analyst(s) who prepared this research report hereby certifies that the views expressed in this research report accurately reflect the research analyst’s personal views about all of the subject issuers and/or securities, that the analyst have no known conflict of interest and no part of the research analyst’s compensation was, is or will be, directly or indirectly, related to the specific views or recommendations contained in this research report. The Research Analyst certifies that he /she or his / her family members does not own the stock(s) covered in this research report. Independence: PhillipCapital (India) Pvt. Ltd. has not had an investment banking relationship with, and has not received any compensation for investment banking services from, the subject issuers in the past twelve (12) months, and PhillipCapital (India) Pvt. Ltd does not anticipate receiving or intend to seek compensation for investment banking services from the subject issuers in the next three (3) months. PhillipCapital (India) Pvt. Ltd is not a market maker in the securities mentioned in this research report, although it or its affiliates may hold either long or short positions in such securities. PhillipCapital (India) Pvt. Ltd does not hold more than 1% of the shares of the company(ies) covered in this report. Suitability and Risks: This research report is for informational purposes only and is not tailored to the specific investment objectives, financial situation or particular requirements of any individual recipient hereof. Certain securities may give rise to substantial risks and may not be suitable for certain investors. Each investor must make its own determination as to the appropriateness of any securities referred to in this research report based upon the legal, tax and accounting considerations applicable to such investor and its own investment objectives or strategy, its financial situation and its investing experience. The value of any security may be positively or adversely affected by changes in foreign exchange or interest rates, as well as by other financial, economic or political factors. Past performance is not necessarily indicative of future performance or results. Sources, Completeness and Accuracy: The material herein is based upon information obtained from sources that PCIPL and the research analyst believe to be reliable, but neither PCIPL nor the research analyst represents or guarantees that the information contained herein is accurate or complete and it should not be relied upon as such. Opinions expressed herein are current opinions as of the date appearing on this material and are subject to change without notice. Furthermore, PCIPL is under no obligation to update or keep the information current. Copyright: The copyright in this research report belongs exclusively to PCIPL. All rights are reserved. Any unauthorized use or disclosure is prohibited. No reprinting or reproduction, in whole or in part, is permitted without the PCIPL’s prior consent, except that a recipient may reprint it for internal circulation only and only if it is reprinted in its entirety. Caution: Risk of loss in trading in can be substantial. You should carefully consider whether trading is appropriate for you in light of your experience, objectives, financial resources and other relevant circumstances. For U.S. persons only: This research report is a product of PhillipCapital (India) Pvt Ltd. which is the employer of the research analyst(s) who has prepared the research report. The research analyst(s) preparing the research report is/are resident outside the United States (U.S.) and are not associated persons of any U.S. regulated broker‐dealer and therefore the analyst(s) is/are not subject to supervision by a U.S. broker‐dealer, and is/are not required to satisfy the regulatory licensing requirements of FINRA or required to otherwise comply with U.S. rules or regulations regarding, among other things, communications with a subject company, public appearances and trading securities held by a research analyst account. This report is intended for distribution by PhillipCapital (India) Pvt Ltd. only to "Major Institutional Investors" as defined by Rule 15a‐6(b)(4) of the U.S. Securities and Exchange Act, 1934 (the Exchange Act) and interpretations thereof by U.S. Securities and Exchange Commission (SEC) in reliance on Rule 15a 6(a)(2). If the recipient of this report is not a Major Institutional Investor as specified above, then it should not act upon this report and return the same to the sender. Further, this report may not be copied, duplicated and/or transmitted onward to any U.S. person, which is not the Major Institutional Investor. In reliance on the exemption from registration provided by Rule 15a‐6 of the Exchange Act and interpretations thereof by the SEC in order to conduct certain business with Major Institutional Investors, PhillipCapital (India) Pvt Ltd. has entered into an agreement with a U.S. registered broker‐dealer, Marco Polo Securities Inc. ("Marco Polo").Transactions in securities discussed in this research report should be effected through Marco Polo or another U.S. registered broker dealer PhillipCapital (India) Pvt. Ltd. Registered office: 2nd Floor, C‐Block, Modern Centre, Mahalaxmi, Mumbai – 400011

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