Technologies -...

March 16, 2018

IPO Review

ICICI Securities Ltd | Retail Equity Research

Diversified ancillary company…

Sandhar Technologies (STL) is a diversified (21 categories of products)

component supplier primarily catering to automotive OEMs. The company

largely focuses on safety & security systems of vehicles with a pan-India

presence. STL is a leader in 1) 2-W locking systems market & 2) CV rear view

market in India. In terms of product wise revenue mix as of FY17, locks

account for 23% of its revenue, mirror assembly 13%, wheel assembly 11%,

sheet metal 13%, aluminium comps 17% & others 24% of its revenue. In

terms of segment mix, 2-W accounts for ~55% of its revenue, off-highway for

~9% and 4-W (PV + CV) while other segments account for remaining ~36%

of its revenue. Geography wise, India accounts for ~85% of its revenue while

the remaining 15% is from European market. In FY13-17, revenue, EBITDA,

PAT registered CAGR of 9%, 12%, 20%, respectively. In the past, the

company has maintained stable operating margin at ~9%. Its net debt to

equity has been ~1.3x while return ratios, RoE & RoCE are both >13%.

Key investment rationale

Vast product portfolio + long-standing & growing OEM relationships

STL manufactures 21 categories of products & caters to different automotive

segments like 2-W, PV, CV, off-highway vehicles and tractors, as well as non-

automotive segments including medical & electrical equipment. Through its

six joint ventures, STL also manufactures products like high precision press

parts, insert moulded contact plates, AVN panels and switches. It

manufactures products from 29 manufacturing facilities across eight states in

India, two manufacturing facilities in Spain and one manufacturing facility in

Mexico. The company has a long-standing relationship with some of its major

OEMs and is one of the most significant factors contributing to its growth. Its

customer portfolio consists of 79 Indian and global OEMs (HMCL, TVS, Royal

Enfield, Suzuki, UML, Honda, Tata Motors, Ashok Leyland, SML Isuzu, JCB,

Caterpillar, Bosch, Autoliv, CTS and others) across various segments.

Key business strategy

STL is committed to increasing its market share across their product verticals

& customers spend per vehicle. It is diversifying product offerings, customer

base & geographical footprint. Some of its key business strategies are:

1) increasing wallet share from existing customer (higher content per

vehicle); 2) expansion of its product portfolio & customer base; 3) inorganic

growth through strategic acquisition; 4) ensure efficiency & cost optimisation.

Key Risk & Concerns

Some of the major risks for STL are 1) slowdown in the overall automotive

space, 2) failure to identify & understand evolving industry trends &

preference, 3) customer concentration risk and 4) unfavourable input price &

currency movement that may impact its prospects.

Priced at PE of 51x FY17 diluted EPS (at upper price band of | 332/share)

STL has a diversified portfolio vis-à-vis some of its peers. Further, comparing

with some of the listed entities, STL (at upper price band of | 332/share) is

available at PE of 51x on FY17 diluted EPS of | 6.5 (vs. some of its peers that

are trading in the range of 25x-50x) & P/BV of ~5.6x book value of

| 58.9/share (compared to other peers available in the range of ~3x to ~12x).

Sandhar Technologies

Price band | 327-332

Rating matrix

Rating : Unrated

Issue Details

Issue Details

Issue Opens 19-Mar-18

Issue Closes 21-Mar-18

Price Band (|) 327-332

Bid Multiples (no of shares) 45.0

No. of Shares on Offer (crore) 1.5

Issue Size* (| crore) 512.5

QIB (%) 50.0

Non-Institutional (%) 15.0

Retail (%) 35.0

*Assuming issue price of |332

Objects of issue

The object of the issue 1) proceeds of fresh issue would be used

towards repayment or prepayment of debt; 2) offer for sale - GTI

capital will sell its stake and; 3) General corporate expense

Shareholding Pattern

Pre-Offer Post-Offer

Promoters & Promoter Group 82.5 70.1

Public 17.5 29.9

*Assuming issue price of |332

Financial Summary

| crore FY13 FY14 FY15 FY16 FY17

Total Revenues 1159.9 1265 1482 1513 1627

EBITDA 93.1 116 139 141 146

EBITDA Margins 8.0 9.2 9.4 9.3 9.0

PAT 19.0 33 38 33 39

EPS (Diluted) 3.2 5.5 6.4 5.6 6.5

Valuation Summary (at |332; upper price band)

FY13 FY14 FY15 FY16 FY17

P/E 104.9 60.4 52.2 59.7 51.0

EV/EBITDA 23.8 19.5 16.5 16.4 16.4

P/BV 11.1 9.6 7.7 7.3 6.6

Research Analyst

Nishit Zota

[email protected]

Vidrum Mehta

[email protected]


Exhibit 1: Consolidated Key Financials

| crore FY13 FY14 FY15 FY16 FY17

Total Revenues 1159.9 1265.0 1482.1 1513.2 1626.8

EBITDA 93.1 116.3 139.1 141.3 145.8

EBITDA Margins (%) 8.0 9.2 9.4 9.3 9.0

PAT 19.0 33.1 38.3 33.4 39.2

PAT Margins (%) 1.6 2.6 2.6 2.2 2.4

Diluted EPS 3.2 5.5 6.4 5.6 6.5

RoE 10.6 16.0 14.8 12.2 13.0

RoCE 15.2 16.9 16.3 15.4 13.4

Source: RHP, ICICIdirect.com Research

About the Company

Sandhar Technologies (STL) commenced operations as a supplier to Hero

(formerly Hero Honda Motors) for sheet metal components on October 1987.

The company is promoted by first-generation entrepreneur, Jayant Davar, Co-

Chairman & Managing Director, who has 30 years of experience in the OEM

component manufacturing industry. As of October 31, 2017, STL had a total

work force of 7,744 individuals comprising 2,363 employees & 5,381

individuals engaged on a contractual basis. The company has various

subsidiaries – in Barcelona, Poland, Mexico while it also has joint ventures -

Indo tooling (JV with JBM Auto for stamping tools), Sandhar Han Sung (JV

with Han Sung for high precision press parts), Jinyoung Sandhar (JV with

Jinyoung Electro-Mechanics for AVN & switches assemblies), Sandhar

Daewha (JV with Daewha Fuel Pump for fuel pumps & oil/air filters), Sandhar

Amkin (JV with Amkin group for manufacture of Helmets) and others.

Exhibit 2: Sandhar Technologies – Various business division, subsidiaries and Joint Ventures

Source: RHP, Presentation, ICICIdirect.com Research


Exhibit 3: Sandhar Technologies share (stake in various subsidiaries & JVs)


STL is a customer centric component supplier primarily catering to

automotive OEMs. The company focuses on safety and security systems of

vehicles with a pan-India presence and growing international footprint. STL is

a leader in 1) the 2-W locking systems market & 2) the commercial vehicle

rear view market in India. The company is one of the two largest companies

catering to the commercial vehicle locking systems market and the two-

wheeler rear view market in India. STL is one of the two largest

manufacturers of operator cabins in India, along with being the largest player

in the excavator cabins market.

The company manufactures 21 categories of products and caters to different

industry segments. STL’s portfolio comprises various categories of products

including safety and security systems such as lock assemblies, mirror

assemblies, operator cabins for off-highway vehicles, aluminium spools,

spindles and hubs. The other product categories include wheel assemblies,

handle bar assemblies, brake panel assemblies, sheet metal components

such as fuel filler caps, fuel cock assembly, step pillions, tools, dies, moulds,

other aluminium components, crane and tractor parts, plastic and painted

parts such as door handles (inner and outer), panels for televisions, and

cabinets for air conditioners. In terms of revenue mix as of FY17, locks

account for 23% of its revenue, mirror assembly 13%, wheel assembly 11%,

sheet metal 13%, aluminium comps 17% and others 24% of its revenue.

Geography wise, India accounts for ~85% of its revenue while the remaining

15% is from the European market. In terms of segment mix, 2-W accounts for

~55% of its revenue, off-highway accounts for ~9% of revenue and the

remaining of ~36% is from PV, CV and other segments. As of FY17, OEM

sales accounted for 75.1% of its revenue while revenue from its top five

customers constituted 67.2%. STL manufactures products from 29

manufacturing facilities across eight states in India, two manufacturing

facilities in Spain and one manufacturing facility in Mexico. The company has

a long-standing relationship with some of its major customers and is one of

the most significant factors contributing to its growth. STL’s customer

portfolio consists of 79 Indian and global OEMs (HMCL, TVS, Royal Enfield,

Suzuki, UML, Honda, Tata Motors, Ashok Leyland, SML Isuzu, JCB,

Caterpillar, Bosch, Autoliv, CTS and others) across various segments.


Exhibit 4: Sandhar’s business evolution


STL’s various division, products, customers and manufacturing facilities are:

Automotive Division

Under the automotive division, STL manufacture products based on its own

technology, or technology absorbed over a period of time pursuant to

technical collaborations with international technical collaborators including

Honda Lock and JEM Techno.

Product line – STL’s line of products under the automotive division

includes locking systems, rear view mirrors systems, auto relays,

switches, hinges and latches for two-wheeler and four-wheeler OEMs,

and door handles for four-wheeler OEM

Manufacturing facilities - Products under the automotive division are

manufactured at six manufacturing facilities of which three are in

Gurugram and one each in Bengaluru, Haridwar and Pune

Key customers – Automotive division caters to clients like Ashok

Leyland, Hero, Royal Enfield, SML Isuzu and others

Component division

The components division is a part of its vertically integrated operations and

forms part of its overall strategy of being self-reliant with respect to key

materials and processes required for products manufactured by its

automotive division.

Product line – Its line of products under this division includes sheet

metal stampings and tubular components, zinc and aluminium high

pressure die cast components such as wheel hubs, spools, spindles,

sprockets and plastic injection moulding components

Manufacturing facilities - Products under this division are

manufactured at six manufacturing facilities. Of these facilities, two

each are in Bawal and Gurugram with one each in Bengaluru and

Pune

Key customers – The division caters to clients like CTS, Hero, Royal

Enfield and TVS

Automatch division

Under the automach division, STL has modern production processes and

manufacturing technologies for wheel forming, tri-nickel chrome plating and

assembly machines. The company is among the top three players in the 2-W

steel wheels’ market in India


Product line – STL’s line of products under this division includes

wheel rims and wheel assemblies, handle bars, clutch and brake

panels and fender assemblies


manufactured at six manufacturing facilities in Bengaluru, Chennai,

Hosur, Mysuru, Oragadam (Chennai) and Nalagarh

Key customers – The division caters to clients like include Hero, Royal

Enfield, Suzuki and TVS

Cabins and fabrication division

Under the cabins and fabrication division, STL caters to the off-highway

vehicles segment. This has been achieved by acquiring Mag Engineering in

FY13 and the cabin business of Arkay Fabsteel in FY15

Product line – STL’s line of products under this division includes

operator cabins, canopies, housings, panels, switchboards, control

cabinets and other high precision sheet metal components for back

hoe loaders, excavators, wheel loaders, cranes and tractors


manufactured in four facilities of which two are in Bengaluru and one

each in Pune and Jaipur

Key customers – The division caters to clients like Atlas Copco,

Caterpillar, Doosan Bobcat, JCB, Kobelco, Komatsu, LeeBoy India,

Potain India, TAFE, and Tata Hitachi

HSCI division

Under the HSCI division, STL predominantly cater to Honda Cars. The

company has a 30-year-old relationship with Honda Cars. In 1987, the

company entered into a technical assistance arrangement for supply of 2-W

locks to Honda Lock, which progressed further into a technical collaboration

for 4-W lock assemblies, mirror assemblies and door handles in 1996.

Product line – STL’s line of products under this division includes lock

assemblies, door handles, mirror assemblies and painted products for

passenger vehicles as well as painted products for two-wheelers


manufactured at Gurugram and Pathredi, Alwar

Key customers – The division caters to Honda

Some key subsidiaries & joint ventures -

Sandhar Technologies Barcelona, SL

In FY08, STL acquired the business of TECFISA, Spain, which was primarily

engaged in the business of aluminium die of small parts and mould design,

and is named Sandhar Technologies Barcelona, SL (STBSL). It has further

three wholly-owned subsidiaries, ST Mexico, ST Poland and Breniar Projects.

The company caters to some of its key customers including Bosch, Autoliv

and other global auto component manufacturers.

Sandhar Tooling

Sandhar Tooling was incorporated in 2002 as a joint venture between STL

and Steady Stream. The JV largely caters to OEMs while the manufacturing

facility is in Manesar.

Sandhar Strategic Systems

Sandhar Strategic Systems was incorporated on September 9, 2016 as an

MSME for carrying out manufacturing activities in, inter alia, the defence and

aerospace sector. The company is yet to commence its operations.


Indo Toolings

Indo Tooling is a joint venture between STL & JBM Auto. Indo Toolings

primarily undertakes commercial tooling activities. STL holds 50% of the

equity share capital of Indo Toolings. The remainder is held by JBM Auto.

Indo Toolings operates under an operation, maintenance and management

agreement entered into with Pithampur Auto Cluster. The company’s key

customers include commercial vehicle OEMs. Its manufacturing facility is in

Indore and Bhopal.

Sandhar Han Sung

Sandhar Han Sung is a joint venture between STL and Han Sung. Sandhar

Han Sung primarily undertakes the manufacture of high precision press parts,

insert moulded contact plates and switches. STL holds 50% of the equity

capital of Sandhar Han Sung. The remainder is held by Han Sung. The key

customers of Sandhar Han Sung include a major electrical equipment

manufacturer and a South Korean automotive component supplier. The

manufacturing facility is in Gurugram and Oragadam.

Jinyoung Sandhar Mechatronics (JSM)

Jinyoung Sandhar Mechatronics is a joint venture between STL and Jinyoung

Electro-Mechanics. JSM primarily undertakes the assembly of AVN panels,

and switches. STL holds 50% of JSM’s equity share capital. The remainder is

held by Jinyoung Electro-Mechanics. A key customer of JSM includes a

South Korean automotive components manufacturer, which supplies to the

only South Korean OEM in the Indian auto industry. The manufacturing

facility operated by JSM is located at Oragadam, Chennai.

Sandhar Daewha

Sandhar Daewha is a joint venture between STL and Daewha Fuel Pump.

Sandhar Daewha had been set up to undertake the manufacture and

assembly of oil fuel modules, fuel filters, starter motors, and wiper blades.

STL holds 50% of Sandhar Daewha’s equity share capital. The remainder is

held by Daewha Fuel Pump.

Sandhar Amkin

Sandhar Amkin is a joint venture between STL and the Amkin Group. Sandhar

Amkin has been set up to undertake the manufacture of safety helmets and

other headgears for 2-W. STL holds 50% of Sandhar Amkin’s equity share

capital. The remainder is held by the Amkin Group.

Sandhar Ecco-Green Energy

Sandhar Ecco-Green Energy is a joint venture between STL, ECCO Green

Energy, DMRG, and Tarun Agrawal. Sandhar Ecco-Green Energy primarily

undertakes solar power installation engineering project contracts for captive

use by the company. STL holds 50% of Sandhar Ecco-Green Energy’s equity

share capital. The remainder is held by ECCO Green Energy, DMRG, and

Tarun Agrawal.


Exhibit 5: STL – segment wise number & list of OEMs.


Exhibit 6: STLs – Segment and customer wise product offerings



Exhibit 7: STL’s– Product category wise peers


Investment Rationale

Long-standing, growing relationships with major OEMs

STL has long-standing relationships with 79 Indian & global OEM customers,

which include some leading companies such as Ashok Leyland, Doosan

Bobcat, Hero, Honda Cars, Komatsu, Scania, TAFE, Tata Motors, TVS, UM

Lohia and Volvo. It has grown its client base over the last few years to include

OEMs such as Caterpillar, CTS, Hyundai Construction, International Tractors,

JCB, Kobelco, SML Isuzu and others. STL’s consistent delivery of quality and

cost competitive products over the years, irrespective of the size and scale of

demand, has helped it in receiving orders from multiple OEMs and locations

globally. Its relationship with its customers provides it with the opportunity to

cross sell multiple products to them.

Diversified product portfolio

STL commenced its business by manufacturing sheet metal components

which accounted for 100% of its revenue. However, the revenue contribution

from the same is at 13.8% as of FY17. This is mainly after STL diversified into

various products and across segments. At present, STL manufactures 21

categories of products with varieties, which cater to different automotive

segments such as 2-W, PV, CV, off-highway vehicles and tractors, as well as

non-automotive segments including medical and electrical equipment. Its

current portfolio comprises various categories of products including safety &

security systems such as lock assemblies, mirror assemblies, operator cabins

for off-highway vehicles, aluminium spools, spindles, and hubs. The company

also manufactures other product categories including wheel assemblies,

handle bar assemblies, brake panel assemblies, sheet metal components

such as fuel filler caps, fuel cock assembly, step pillions, tools, dies, moulds,

other aluminium components, crane and tractor parts, plastic and painted

parts such as door handles (inner and outer), panels for televisions, and

cabinets for air conditioners. Through its six joint ventures, Sandhar also

manufactures products like high precision press parts, insert moulded contact

plates, AVN panels and switches.

Production facilities close to customers based on philosophy ‘Be Glocal’

STL’s strategy has been to invest in locations close to its OEM customers’

plants, which has been a key factor in aiding a strong relationship with OEM

customers. Its manufacturing facilities at Gurugram, Chennai & Bengaluru are

close to plants of Hero, Royal Enfield & TVS, respectively. Further, the

company also has manufacturing facilities in Mexico & Spain, and an

assembly and packaging centre in Poland, to cater to customers in Western

Europe, Eastern Europe and Nafta markets. It has expanded its operations

from four manufacturing facilities in India as on FY05 to 31 facilities in India,

two manufacturing facilities in Spain and one in Mexico.


Vertical, horizontal integration of its operations from product designing to

supply solutions

STL is present across levels of the automotive component critical value chain.

It provides products & services that range from product design and

prototyping to tool manufacturing, assembly, as well as production of

integrated components. As part of its vertical integration strategy, the

company has established multiple processes like zinc die casting, aluminium

die-casting, plastic injection moulding and an in-house robotic paint shop that

are used in manufacturing and assembly of locking systems. Its integration

strategies reduce the dependence on third party suppliers for a number of

products & services. The company has various in-house R&D activities that

primarily work on development of new products, designing, prototyping, and

product upgrades. STL also has six JVs that manufacture products like high

precision press parts, insert moulded contact plates, AVN panels and

switches. The company also has a technical collaboration with Honda Lock

and JEM Technologies.

Financial performance

Over FY13-17, revenue, EBITDA and PAT have registered a CAGR of 9%,

12%, 20%, respectively. In the past, the company has maintained operating

margin at ~9%. On the balance sheet front, its net debt to equity has been

around 1.3x while its return ratios, RoE & RoCE both were >13%.

Exhibit 8: Revenue trend

1159.9

1265.0

1482.1 1513.2

1626.8

0

200

400

600

800

1000

1200

1400

1600

1800


| crore

Total Revenues


Exhibit 9: Profitability trend

19.0

33.1

38.3

33.4

39.2

0

5

10

15

20

25

30

35

40

45


| crore

PAT


Exhibit 10: EBITDA & PAT margins (%)

8.0

9.2 9.4 9.39.0

1.6

2.6 2.62.2 2.4

0

2

4

6

8

10

12

14


%

EBITDA Margins (%) PAT Margins (%)


Exhibit 11: Return ratios (RoE & RoCE)

10.6

16.014.8

12.213.0

15.2

16.916.3 15.4

13.4

-2

2

6

10

14

18

22


%

RoE RoCE



Exhibit 12: Net debt-equity

1.21.3

1.2 1.1

1.3

0.0

0.5

1.0

1.5

2.0


| crore

Net Debt/Equity


Exhibit 13: Free cash flow

-24.4

-15.2-11.0

37.0

-13.7

-30

-20

-10

0

10

20

30

40

50


| crore

FCF


Exhibit 14: Product wise revenue mix (%) – FY17

23

13

11

13

17

27

Locks Mirror Assembly Wheel Assembly

Sheet Metal Aluminium Comp Others


Exhibit 15: Segment wise revenue mix (%) – FY17

895

146

586

2-W OHT 4-W (PV + CV)


Exhibit 16: Geography wise revenue mix

13141401

875

204

233

116

0

200

400

600

800

1000

1200

1400

1600

1800

FY16 FY17 6MFY18

| crore

India Europe



Key business strategy

STL is committed to increasing its market share across its product verticals &

customers spend per vehicle. The company is diversifying product offerings,

customer base and geographical footprint. The following are some of its key

business strategies:

Expansion of product portfolio through investment in new products, business

with high growth potential

The company plans to leverage current trends in the automotive sector such

as increasing focus on safety, fuel efficiency, comfort, customisation,

entertainment and communication, as well as auto electronics to develop

products that meet its OEM customers’ requirements in these areas. The

company is exploring & testing the feasibility of various technology driven

and high margin products such as smart keys, auto relays, switches, USB

chargers, parking assistant systems, fuel filters, fuel modules, fuel senders,

starter motors and shark-finned antennas, among others in partnership with

its OEM customers. STL aims to capture dominant market share in each of its

new products and at the same time, also intends to continuously upgrade its

existing products and customise them according to the needs of its OEM

customers.

Expand customer base

The company continues to focus on increasing its customer base by

marketing existing products to new customers, together with developing new

products. It has increased its customer base in the past through new products

and segments as well as through acquisitions. The number of OEMs

customer base has grown from 58 in FY13 to 79 in FY17.

Increase wallet share from existing OEM customers

STL focuses on increasing its contribution per vehicle (i.e. the number and

value of components supplied by STL in vehicles produced by its OEM

customers) and also works closely with its OEM customers to develop a

broader portfolio of products, which meet their requirements. Over the years,

STL has been able to increase its customers’ contribution to its revenue. For

instance – its revenue from Royal Enfield was | 18.74 crore in FY13, which

increased to | 69.74 crore in FY17. Further, its revenue from Honda Cars was

at | 46.82 crore in FY13, which increased to | 130.5 crore in FY17. STL

intends to continue focus on increasing its contribution per vehicle and work

closely with OEM customers to develop a broader portfolio of products,

which meet their requirements.

Inorganic growth through strategic acquisitions

The company has a successful track record of acquiring assets and ensuring

two-way transfer of best practices. STL evaluate potential acquisitions on

several criteria including access to technology, new customer access,

new/adjacent product portfolio, new market access, size of the acquisition

and profitability. The company endeavours to target segments where it can

leverage its existing expertise and competencies to build new capabilities.

Ensure efficiency, cost optimisation & enhance innovation/design capabilities

The company constantly endeavours to reduce the costs of its operations

while ensuring the quality of products. STL already has central planning,

marketing and raw material procurement teams that helps company to

reduce cost and achieve operational efficiencies and economies of scale.

Further ensuring cost rationalisation in its manufacturing processes continues

to be one of its key strategies. The company intends to focus on adopting

strategies to establish a standardised platform across its business units for

the processes, hardware and software infrastructure and workforce.


Exhibit 17: Sandhar Technologies – Key Business strategies


Exhibit 18: Demand Drives vs. Sandhar preparedness



Key Risk & Concerns

Slowdown in overall demand environment (automotive space)

STL’s performance is largely dependent on the automotive space and any

slowdown in the space could directly impact its performance. Though the

company has a presence across segments, it has a higher dependence on the

2-W segment, which accounts for ~54.6% of its revenue as of FY17. In the

event of a decline in 2-W demand, or any other developments that make the

sale of components in the 2-W market less economically beneficial, the same

can adversely affect its business, results of operations and prospects.

Failure to identify, understand evolving industry trends & preference

The changes in regulatory/industry requirement or in competitive

technologies may render few of its product obsolete or less attractive. The

ability to anticipate changes in technology and regulatory standards and

successfully develop and introduce new and enhanced products on a timely

basis is a significant factor.

High customer concentration risk

STL has higher customer concentration risk, which could impact its financial

performance. As of FY17, OEM sales accounted for 75.1% of its revenue

while revenue from its top five customers constituted 67.2%. The company

does not have any firm commitment for supplying component to its

customers. Thus, it has to rely on purchase orders that may be amended or

cancelled prior to finalisation. Also, loss of any of its key customers or a

significant reduction in demand from its customers may have an adverse

effect on their business.

Unable to manage its raw material requirement

STL is highly depended on zinc, sheet metal parts and aluminium that

account for 41.5% of its revenue. It sources its glass requirement from one of

its major suppliers, which accounts for 90% of its glass requirement. If STL is

unable to manage its raw material procurement (price, availability & quality) it

may impact its production and business. Also, the purchase of goods

(bought-out parts) constituted ~28.3% of its overall raw material cost.

Adverse currency movement may impact its performance

STL’s consolidated results of operations are in rupee while its subsidiaries

report their financial results in their respective local currencies of France,

Spain, Mexico and others. Hence, there could be an impact on consolidation

of its financials primarily due to currency movement. As of FY17, revenue

from Europe and other location (outside India) were at | 232.8 crore (~14.3%

of its total revenue). Thus, exchange rate fluctuations may have an adverse

effect on its reported revenues and financial results.


Objects of issue

The object of the issue 1) proceeds of fresh issue (| 300 crore) would be used

towards repayment or prepayment of debt (around | 225 crore); 2) offer for

sale (64 lakh equity share at upper price band of | 332/share will result into

overall value of | 212.50 crore) by GTI Capital Beta (currently holds 89.34 lakh

share or 17.47% stake in the company with average cost of acquisition at |

84/share) and; 3) general corporate expense. Thus, the overall offer size (at

upper price band of | 332/share) will be around | 512.5 crore.

Valuations

STL has a diversified product portfolio vis-à-vis its peers. Comparing with

some of the listed entity, which are into similar kind of business, STL (at

upper price band of | 332/share) is available at 51x on FY17 diluted EPS of

| 6.5 compared to some of its other ancillary players that trade in the range of

25-50x their FY17 EPS. On the book value front, STL will be available (at

upper price band of | 332/share) at ~5.6x on FY17 book value of | 58.9/share

compared to some of its other peers available in the range of ~3-12x.


Exhibit 19: Profit & Loss statement

Income statement (| crore) FY13 FY14 FY15 FY16 FY17 6MFY18

Gross Revenue 1,259.9 1,369.8 1,606.2 1,643.7 1,764.9 1,029.0

Less Excise duty 100.0 104.8 124.1 130.5 138.1 39.6

Total Income 1,159.9 1,265.0 1,482.1 1,513.2 1,626.8 989.4

Raw Material expenses 719.5 773.2 907.7 901.3 951.1 591.9

Employee benefits 156.2 160.2 184.3 201.8 235.4 130.1

Other expenses 191.3 215.3 251.0 268.8 294.5 165.1

Total Expenditure 1,066.9 1,148.7 1,342.9 1,371.9 1,481.0 887.0

EBITDA 93.1 116.3 139.1 141.3 145.8 102.4

Other Income 3.9 4.2 5.7 5.2 7.2 1.5

Financial charges 35.6 39.4 41.0 42.4 42.7 20.1

Depreciation 35.9 39.4 52.4 55.2 60.3 33.7

PBT 25.4 41.8 51.4 49.0 49.9 50.1

Extraordinary items - - - (3.7) (0.5) -

Taxation 6.2 8.5 13.0 11.5 9.9 15.5

Reported PAT 19.2 33.2 38.4 33.7 39.5 34.6

Share of Minority Interest 0.1 0.1 0.1 0.3 0.4 0.3

PAT 19.0 33.1 38.3 33.4 39.2 34.2


Exhibit 20: Balance Sheet

Balance Sheet (| crore) FY13 FY14 FY15 FY16 FY17 6MFY18

Equity Share Capital 9.4 9.4 10.2 51.2 51.2 51.2

Reserves & Surplus 169.9 197.7 249.0 222.5 250.2 279.6

Total Shareholders Funds 179.3 207.1 259.2 273.6 301.3 330.7

Share application money - 1.5

Minority Interest 1.3 1.4 1.6 1.8 2.2 2.6

Long term borrowings 132.8 126.2 166.8 194.5 209.2 191.8

Deferred tax liability (net) 14.0 14.5 10.6 8.0 8.3 8.2

Other long term liability - - - 5.7 5.1 10.4

Long term provisions 0.1 0.2 - 0.6 0.8 1.0

Total Non-current liabilities 147.0 140.9 177.4 208.8 223.5 211.4

Short term borrowings 89.5 148.3 142.3 124.7 183.3 210.4

Trade Payables 162.3 183.7 224.9 225.0 236.2 315.3

Other current liabilities 86.4 99.1 97.9 121.9 113.8 141.4

Short term provisions 4.6 8.1 12.9 9.5 13.8 23.6

Total current liabilities 342.8 439.2 478.0 481.1 547.1 690.7

Total Liabilities 670.4 790.2 916.1 965.4 1,074.1 1,235.4

Fixed Assets

Tangible assets 377.0 411.5 460.7 514.3 583.9 612.5

Intangible assets 4.6 6.9 15.5 13.5 12.0 10.9

Capital work-in-progress 20.5 26.3 40.5 55.2 29.2 69.7

Total 402.1 444.7 516.7 583.0 625.1 693.1

Goodwill 1.2 0.7 0.0 0.7 0.5 0.5

Deferred tax assets 0.4 0.0 0.3 0.6 1.0 1.3

Long term loans & advances 17.8 29.3 16.2 16.3 15.7 23.1

Non-current Investments 3.0 3.0 3.0 3.1 3.1 3.0

Other non-current assets 2.1 0.0 0.2 - 0.7 0.3

Total non-current assets 426.6 477.8 536.4 603.7 646.2 721.3

Current Investment 3.7 0.0 - 1.0 1.0 2.5

Inventories 116.6 129.9 157.2 159.8 167.1 193.5

Trade receivables 98.0 151.4 187.6 166.7 209.3 264.3

Cash and bank balances 6.3 2.7 7.3 6.0 7.3 6.1

Short-term loans and advances 18.4 28.2 25.2 27.5 30.3 45.4

Other current assets 0.7 0.2 2.4 0.7 12.9 2.3

Total Current assets 243.7 312.4 379.7 361.7 428.0 514.1

Total Assets 670.4 790.2 916.1 965.4 1,074.1 1,235.4



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