Ahluwalia Contracts (India) LTD

FUNDAMENTALS
VALUATION

AHLUWALIA CONTRACTS (INDIA) LIMITED

31
st
January 2011

ANALYTICAL CONTACT
Ms. Revati Kasture +91-22-6754 3465 revati.kasture@careratings.com

BUSINESS DEVELOPMENT CONTACTS

MUMBAI
Mr. P. N. Satheeskumar +91-22-6754 3555 sathees.kumar@careratings.com

KOLKATA
Mr. Sukanta Nag +91-33- 2283 1800 sukanta.nag@careratings.com

CHENNAI
Mr. V Pradeep Kumar +91-44-2849 7812 pradeep.kumar@careratings.com

AHMEDABAD
Mr. Mehul Pandya +91-79-40265656 mehul.pandya@careratings.com

NEW DELHI
Ms. Swati Agrawal +91- 11- 2331 8701 swati.agrawal@careratings.com

BANGALORE
Mr. G. Sundara Vathanan +91-80-2211 7140 sundara.vathanan@careratings.com

HYDERABAD
Mr. Ashwini Kumar Jani +91-40-40102030 ashwini.jani@careratings.com

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EQUIGRADE

EQUIGRADE Analytical Power for Investment Decisions
Construction
Very Good Fundamentals; Considerable Upside Potential CMP : Rs. 137 / CIV : Rs. 202.00
1
31
st
January 2011

CARE Equity Research assigns 4/5 on fundamental grade to
Ahluwalia Contracts (India) Limited (ACIL)
CARE Equity Research assigns fundamental grade of 4/5 to ACIL.
This indicates Very Good Fundamentals. ACIL is largely present
in civil construction with more than four decades of execution track
record and healthy diversification across sectors, clients and
geographies across India. ACILs significant and increasing order-
book of close to Rs. 6,000 crore, with around Rs. 3,500 crore worth
pending to be executed, provides revenue visibility of around two
years. The order pipeline is also expected to remain buoyant in the
short to medium term.
Being primarily into civil construction exposes the company to the
risk of slow-down in the economy, as the order-book is primarily
biased towards the private sector. Any slow-down in the real estate
sector and/or the corporate capital expenditure would hurt the
company in terms of sluggish order flows. However, the companys
recent foray into the BOT projects and power sector and its
increasing focus in these areas will help it mitigate the said risks and
improve its revenue visibility over the long term. High working
capital cycle, which is the characteristic of this industry, is also a
challenge for the company, as working capital cycle is on a rising
trend.
Valuation
CARE Equity Research assigns valuation grade of 5/5 to ACIL
based on the current Intrinsic Value (CIV) of Rs. 202 as against
Current Market Price (CMP) of 137, indicating Considerable
Upside Potential from CMP.

Financial Information Snapshot
(Rs Crore) FY09 FY10 FY11 P FY12 P
Operating Income 1,164 1,568 1,800 2,400
EBITDA 152 179 239 325
PAT (After minority interest) 58 82 95 146
Fully Diluted EPS* (Rs.) 9.1 13.0 15.1 23.3
Dividend Per Share (Rs.) 0.7 0.8 1.0 1.5
P/E (times)

10.5 9.1 5.9
EV/EBITDA (times) 4.5 3.4 2.5
* Calculated on Current Face Value of Rs. 2/- per share

Lakhs 0.41
www.careratings.com 2
EQUIGRADE

Construction: need for built-up space increasing
India is the second fastest growing economy in the world and construction is Indias second largest economic
activity after agriculture. The share of construction sector in Indias GDP inched up to 7.9 per cent in FY10 from
6.8 per cent of GDP in FY01 and construction activity is intrinsic to the growing economy like India.

Construction sector: increasing contribution to GDP

Source: Central Statistical Organization (CSO)

Increasing urbanisation and rising disposable income is translating into a huge potential demand for housing.
Similarly, favourable demographic mix is driving the demand for retail malls, theatres, hospitals, hotels, etc.
Significant corporate capex is driving demand for office spaces, while Governments spending on infrastructure
also offers opportunity for construction industry. CARE Equity Research believes that the construction sector is
likely to witness real growth of 7 8 per cent in the next 4 5 years.

ACIL to benefit out of the humungous opportunity in construction industry
CARE Equity Research believes ACILs proven track record of more than four decades with diverse experience
across various sectors and various geographies across India would auger well for the company in tapping the
humongous growth opportunity in the construction sector. ACIL has executed spectrum of projects across India in
segments like residential real estate, office spaces, hotels, IT parks, SEZ, hospitals, etc. and this varied experience
would help the company to maintain a buoyant order-book pipe-line. ACIL has been successful in increasing its
order book size largely on account of timely and quality execution of its projects. The company enjoys repeat
orders from many of its clients, which signifies its commendable project execution capabilities. However,
increasing inflationary pressure and increasing interest rates is a cause of concern for ACIL amongst other players
in the industry. Furthermore, execution risks are also inherent in construction business.
FUNDAMENTAL GRADE Very Good Fundamentals 4/5

EQUIGRADE

Completed projects by ACIL

Source: CARE Equity Research

Comfortable order backlog provides revenue visibility for at least next two years
ACILs current order back log stands at close to Rs. 6,000 crore, of which close to Rs. 3,500 crore worth orders
are yet to be billed. The quantum of unbilled orders is 2 times its top-line of Rs. 1,800 crore expected to be
achieved in FY11. During H1 FY11, ACIL has won new contracts of Rs. 981 Crore which reflects a Y-o-Y growth
of 66% over the same period previous year. From Rs. 780 crore in FY05, the companys order book size has
increased at a CAGR of about 47 per cent to Rs. 5,300 crore in FY10 and further to around Rs. 6,000 crore till
date. CARE Equity Research expects the company to add orders worth at least Rs. 2,000 crore in FY11.

ACIL: Trend in order-book


Residential

Commercial

Hotel

Retail

South City, Kolkata

ITC Corporate Office,
Gurgaon
Four Seasons, Mumbai

Inorbit Mall, Mumbai

Gurgaon One,
Gurgaon
Technopolis, Kolkata

Rennaisance, Mumbai

India Exposition Mart,
G. Noida

DLF Richmond Park,
Gurgaon
SEBI Office, Mumbai

Shangri-La, Delhi &
Mumbai
Brigade Orion Mall,
Ludhiana

Brigade Metropolis,
Bangalore
Maruti Corporate
Office, New Delhi
ITC Grand Central,
Mumbai
MBD Mall, Ludhiana

La Citadel, Mumbai

Apollo Tyres Corp.
Office, Gurgaon
Hotel Gardenia,
Bangalore
Destination Point, G.
Noida

Common Wealth Games (CWG) Village and up-gradation and renovation of S P M Swimming Pool for CWG

EQUIGRADE
Well diversified order-book with least concentration risk
ACILs current order book consists of more than 110 projects, which are at the execution stage at different
locations. The Northern region of India accounts for about 49 per cent of the order-book position, while the East
and Western region accounts for about 20 per cent of the projects respectively. The orders are bagged from
diverse sectors of the economy and no single order forms more than 7 per cent of its total order book. Though the
residential and commercial real estate continue to remain the major contributors to its order-book, the projects
from sectors such as infrastructure, hotels, institutions and hospitals are witnessing increasing trend.

Project diversification


Restriction to civil construction and skew of order-book towards private sector a concern
ACIL is primarily into civil construction, which exposes the company to the risk of slow-down in the economy, as
the order-book is primarily biased towards the private sector. Currently, close to 70 per cent of the orders are
bagged from the private sector, which significantly slow-down in case of compression in the economy. Any slow-
down in the real estate sector and / or the corporate capital expenditure would hurt the company in terms of
sluggish order flows. On the other hand, order-flows form Government, which account for 30 per cent of its order
back-log, are relatively more stable and can provide sizeable opportunities even in the sluggish phase of the
economy.

Focus on diversification affirms de-risking strategy
On the back of its strength and expertise in the civil construction business, ACIL has forayed / planning to foray
into new business ventures such as urban infrastructure, construction of power projects and Built Operate Transfer
(BOT) projects. CARE Equity Research believes such persistent diversification strategies will help the company in
mitigating any slowdown in particular sector(s) and persistently improve its revenue visibility.

BOT 1
Commercial 40
Hospitals 5
Hotels 11
Infrastructure 8
Institutional 10
Power 2
Residential 30
Retail 6
Total 113

EQUIGRADE
ACIL has received a BOT project worth Rs. 72 crore from the Rajasthan State Road Transport Corporation
(RSRTC) to build a bus terminal along with a commercial complex at Kota, Rajasthan with rent sharing agreement,
which increases the visibility of the companys income flow. With the focus on urban infrastructural projects like
water and waste management, metro railways, airports etc, ACIL is making itself available and capable for backing
new upcoming projects arising out of the increased allocation of funds to the Jawaharlal Nehru National Urban
Renewal Mission (JNNURM) scheme.

During Q3 FY11, ACIL has secured new orders from diverse sectors aggregating to Rs. 580 Crores. Of these,
orders power segment contributed to around Rs. 35 Crores, services segment (electromechanical, plumbing and
fire fighting) worth Rs. 42 Crores and Rs 103 crore order for construction of industrial building.

Backward integration to help in cost mitigation and timely execution
ACIL has six plants to produce ready mix concrete (RMC) with the production capacity of 1,800 cubic meters of
concrete per day with self owned transit of mixers, stationery and book pumps. The company has over seventy five
tower cranes, thirty five batching Plants, boom & concrete Pumps, load excavators, DG sets, passenger cum
material lift, etc and over forty five transit mixers, one of the largest fleet in Northern India. However, the rising
cost of production for the steel and cement manufacturers poses a direct threat to the company.

Comfortable leverage and superior returns
When compared with its peers, ACIL is well placed with a debt-equity ratio of about 0.6 times and an interest
coverage ratio of about 6 times. The lower leverage allows better financial flexibility to the company as the
company does not have to go for any equity dilution and has also resulted into better ROE and ROCE margins. It
also helps the company to capitalize on high growth opportunities without significantly hampering its balance sheet.

Comparison of FY 10 financials

Source: Capitaline, CARE Equity Research

ACIL CCCL BL Kashyap
Debt/Equity (Times) 0.6 0.5 0.8
Interest Coverage (Times) 6.3 4.5 4.1
ROCE (%) 48.5 22.4 8.3
RONW (%) 37.9 16.5 8.2

EQUIGRADE
Working capital cycle to add pressure on margins
Historically, ACIL has been very effective in managing its working capital requirements. The net working capital to
net sales was as low as 10 per cent until FY09, substantially lower when compared to peers in the construction
industry. However, the working capital cycle which averaged around 30 days during FY07 to FY09, has reached to
55 days in FY10. Increased focus on infrastructural and BOT projects has lead to a substantial increase in ACILs
working capital requirements. Going ahead, CARE Equity Research believes the companys working capital
requirement to increase further on account of the companys diversification plans.

Working Capital Cycle (in days) Projected ROCE and ROE

Reasonable corporate Governance practices
ACILs board comprises of 10 directors, of which 5 are non-executive independent directors, 3 are executive
director and 2 are executive promoter directors. This suggests well diversified composition of board with adequate
separation of ownership and management. ACIL is in compliance with the provisions of the Listing Agreement in
respect of corporate governance, especially with respect to broad basing of the Board of Directors and constituting
committees. There are four Board level committees in ACIL- (i) Audit Committee, (ii) Shareholders/Investors
Grievances Committee (iii) Remuneration Committee and (iii) Share Transfer Committee. All four committees
are chaired by non-executive independent directors. The board is supported by well experienced senior level
managerial personnel.

Management succession may be challenging
ACILs board comprises of four members from the promoter family - Shri Bikramjit Ahluwalia (Promoter),
chairman and managing director (CMD), aged 71 years, Smt. Sudershan Walia (Promoter), Whole Time
Director, aged 63 years, Shri Shobhit Uppal (Family member), Dy. Managing Director and Shri. Vikaas Ahluwalia
(Family member), Whole Time Director. Though the management succession seems to be a challenge for the
company, it has developed a team of well qualified professionals having vast experience in the industry to lead the
company forward.

EQUIGRADE

CARE Equity Research values ACIL at Rs. 202 per share
According to CARE Equity Research, the Current Intrinsic Value (CIV) of ACIL stands at Rs. 202 per share. This
translates into Enterprise Value (EV) of Rs. 1,220 crore valuing the entity at 5 times the EBITDA for FY11E.
Thus, ACIL has Considerable Upside Potential from the current market price of Rs 149 per share.

The CIV is calculated based on Discounted Cash Flow model
CARE Equity Research has arrived at CIV of the stock on the basis of Discounted Cash Flow (DCF) model. The
overall firm Weighted Average Cost of Capital (WACC) is calculated based on our long term assumptions of cost
of financing summarized in below table.

CARE Equity Research has used Free Cash Flow (FCF) methodology to arrive at the firm value, as ACILs
business is (working) capital intensive in nature.
The forecasted FCF is as per CARE Equity Research estimates.
Terminal value is arrived at by using Gordon Growth Model.
Terminal value forms 89 per cent of the firms total equity value, which appears to be reasonable.

ACIL: Valuation Based on Discounted Cash Flows

VALUATION GRADE Considerable Upside Potential 5/5
Item Value Basis
Risk Free Rate 8.25% 10 year G-sec yield expected at year end FY11
Equity Risk Premium 6.00%

Beta 0.7

Cost of Equity 12.66%
Cost of Debt 12.00% Long term cost of debt
Tax Rate 33.00% Long term tax rate

D/E Ratio 1.00 Long term target D/E ratio

WACC 10.35%
Terminal growth rate 3.00%

EQUIGRADE


ACIL: Sensitivity Analysis Share price


Weighted Average Cost of Capital (%)
9.0% 9.5% 10.3% 11.0% 11.5%
T
e
r
m
i
n
a
l

Y
e
a
r

G
r
o
w
t
h

R
a
t
e

2.0% 220 203 180 165 155
2.5% 235 216 190 174 163
3.0% 253 232 202 183 171
3.5% 275 250 216 195 181
4.0% 301 271 231 207 192

(Rs crore except per share data)
2010-11 2011-12 2012-13 2013-14 2014-15
Terminal
Value
PAT 95 146 205 280 384 384
DTL 27 33 50 71 100 100
Depreciation 54 67 81 98 117 117
Interest (1-T) 24 31 39 47 58 58
Capex -171 -151 -137 -153 -195 -195
Increase in WC -46 -136 -203 -268 -347 -347
Free Cash Flow -18 -10 34 76 118 118
Discount Rate 0.97 0.88 0.80 0.73 0.66 0.66
PV of FCF -18 -9 27 55 78
PV of Terminal
Value
1,087

Total Discounted Value of Firm 1,220

Less: Net Debt (FY10) -47

Present Value of Equity 1,268

No of Equity Shares (crore) 6

CIV 202

EQUIGRADE

The CIV of Rs. 202 per share is 5.1 times the FY11E EBITDA of Rs. 239 crore
The CIV of ACIL at Rs. 202 per share as arrived by CARE Equity Research is 5.1x FY11E EBITDA of 239
crore. This seems reasonable if compared with its peers, given the higher RoCE earned by the company.

ACIL: Peer comparison


ACIL CCCL BL Kashyap
Operating Income 1,568 1,976 1,060
EBITDA 179 194 94
EBITDA Margin 11.4% 9.8% 8.9%
Net Profit 82 92 39
RoCE 48% 23% 12%
Enterprise Value 813 1,174 996
EV/EBITDA (FY10) 4.5 6.0 10.6
Total Order Book 5,300 4,500* 4,000*
* approximate as at Sep - 10

EQUIGRADE

Company Background
Incorporated in 1979 and subsequently converted into a public limited company in 1990, Ahluwalia Contracts
India Limited (ACIL) is engaged in the construction business for over four decades. ACIL has executed diverse
projects across sectors like residential spaces, office spaces, retail malls, hotels, hospitals, IT parks, SEZ, industrial
buildings, etc. across geographies in India. Mainly involved into the construction business, ACIL also offers total
integrated engineering and design turnkey solutions to its clients in the public and private sector. ACIL through its
100% subsidiary Ahlcon Ready Mix Concrete Private Limited (ARMC) operates into the business of Ready Mix
Concrete (RMC), which as well makes the company backward integrate itself in its core business of construction
activities. The company has successfully completed various projects in the residential, commercial, educational
institutes, retail, hotels, industrial plants and hospitality sectors.
Some of the major projects completed/under execution by ACIL include the following:
Birsa Munda Airport, Ranchi, Jharkhand: Construction of new integrated passenger terminal building.
Bangalore Metro Rail Project: Construction of three elevated metro stations in Phase I.
Mumbai Metro One: Civil work for VAG corridor MRTS project.
IDBI and PNB Bank: Construction of office building at the Bandra-Kurla complex in Mumbai
Vedanta Aluminium Ltd: Civil and allied works of aluminium smelter projects at Jharsuguda Orissa.
Leela Palace Hotel: Five star hotel Leela Palace Hotel at Chanakyapuri in New Delhi.
Common Wealth Village: One of the largest residential projects awarded to any construction company in the
country.
Tata Housing Project: Bangalore etc.
Development of a bus terminal in Kota, Rajasthan, forays ACILs new venture into the Built Operate Transfer
(BOT) space. ACIL is also looking into fresher areas of growth like sewage water treatment, civil work for power
plants and other infrastructure related activities which will enable the company to take advantage of the increase in
investments in the sector.
Business Segments

COMPANY BACKGROUND
Construction
Undertake all
kinds of
construction
work from pilling
to pre-cast-pre
stressing work
Plumbing
Provides
services for
water supply,
sanitary & fire
fighting works
RMC
Produces over
1800 cubic
meters of
concrete a day
with self owned
transit mixers
Design
Examplary in-
house design
cell comprising
of design
experts
Aluminium (AL)
Undertakes
design supply &
installation of AL
doors, windows,
glass facades
etc.
Electromechanical
Provide supply,
installation, testing
& commisioning
services for
electrical wor

EQUIGRADE
Source: Company presentations

ACILs order book size as on 30
th
September 2010 stands at Rs. 5005.47 Crores, which constitutes around 30% of
the orders backed from the government and the rest from the private sector. As on same date, the estimated
balance work in hand is around Rs. 3,217 crore.

ACILs growth in Order book position:

Source: Company Annual Reports, CARE Equity Research

Sector-wise order book mix:
The residential and commercial segment contributes to about 35% and 21% share of the balanced order book
respectively. ACILs foray into new business ventures such as BOT and power sector are adding to new orders
contributing around 2% and 4% of the balanced order book respectively. With respect to the geographical
locations, the order book is well diversified and consists of about 113 projects from across the segments.
Order book position as on 30
th
Sept10: Sector-wise and geographical location wise:


EQUIGRADE

Promoters & Management

Source: Company Annual Report

Name Designation Education Experience
Shri Bikramjit Ahluwalia Chairman & M.D Civil Engineer Over 4 decades of Experience
Shri Shobhit Uppal Dy. M.D Electrical Engineer Over 17 years of Experience
Smt. Sudershan Walia Director N.A Over 3 decades of Experience
Shri Vikas Ahluwalia Director Civil Engineer Over 15 years of Experience
Shri Vinay Pal Director Civil Engineer Over 25 years of Experience
Directors Non-Executive and Independent
Shri Arun Kumar Gupta Director C.A., I.C.W.A Over 3 decades of Experience
Shri S.K. Chawla Director Engineer Over 3 decades of Experience
Shri Balbir Singh Director Civil Engineer Over 4 decades of Experience
Dr. Sushil Chandra Director M.A - PhD Over 4 decades of Experience
Shri S.S. Kohli Director N.A Over 4 decades of Experience

EQUIGRADE

Industry Overview
Construction is an essential part of countrys infrastructure and industrial development. Broadly, construction can
be classified into 3 segments Infrastructure, Industrial and Real Estate. Infrastructure segment involves
construction projects in different sectors like roads, rails, ports, irrigation, power, telecom etc. Construction
industry, with its backward and forward linkages supports various other industries such as cement, steel, paint, pipe,
electric appliance, tiles & fittings and construction equipment.
Construction industry is working capital intensive and highly fragmented large number of unorganised players
work on a sub-contracting basis. Construction component in a particular project varies from sector to sector because
of varied level of civil construction activities involved in different projects. Revenue of a construction company is a
function of order book size and order book tenure (execution period). Strong order book position (in multiples of
sales) provides long term revenue visibility to the firm. A company having higher proportion of low gestation period
projects in its order book enjoys higher conversion rate of order backlog and in turn faster growth in revenues.
Profitability of the construction company depends upon the order mix of the company and construction costs.
Complex projects which are technology savvy like construction of nuclear power plant fetch higher profit margins as
compared to low-technology projects like road construction

Industry Outlook
Healthy economic growth, significant corporate capex, favourable demographics and easily available housing
finance has lead to the robust growth of the Indian construction industry. Increasing urbanization and rising
disposable income is translating into a huge potential demand for residential real estate, while significant corporate
capex is driving the commercial as well as industrial construction space. The favourable demographic pattern is
driving the construction of hotels and restaurants, cinemas, malls and retail outlets.

With the recovery in the economic growth, buoyant outlook and increased impetus of the government on
infrastructure development and housing for the low-income group, CARE Research foresees huge opportunity for
the construction industry going forward. Persistently rising household income levels and significant capital
expenditure plan of the Indian corporate sector would continue to drive the industrys growth going forward.

SNAPSHOT OF THE INDUSTRY
EQUIGRADE

Income Statement

(Rs Crore) FY08 FY09 FY10 FY11 P FY12 P
Operating Income 880 1,164 1,568 1,800 2,400
EBITDA 113 152 179 239 325
Depreciation and amortisation 23 46 33 54 67
EBIT 90 106 146 185 258
Interest 12 18 21 35 46
PBT 78 88 125 150 212
Ordinary PAT (After minority interest) 52 58 82 95 146
PAT (After minority interest) 52 58 82 95 146
Fully Diluted Earnings Per Share* (Rs.) 8.2 9.1 13.0 15.1 23.3
Dividend 5 5 6 7 10
* Calculated based on ordinary PAT on Current Face Value of Rs. 2/- per share

Balance Sheet

(Rs Crore) FY08 FY09 FY10 FY11 P FY12 P
Net worth (incl. Minority Interest) 125 178 253 341 496
Debt 57 76 124 200 265
Deferred Tax Liability / (Asset) -4 -13 -15 -15 -15
Capital Employed 178 241 362 526 746
Net Fixed Assets 121 121 128 139 143
Investments & Others 4 1 8 115 195
Loans and Advances 33 46 54 80 93
Inventory 54 95 92 125 145
Receivables 226 309 334 395 505
Cash and Cash Equivalents 116 90 171 182 194
Current Assets, Loans and Advances 451 579 712 848 1,023
Less: Current Liabilities and Provisions 398 461 486 575 615
Total Assets 178 241 362 526 746
Ratios

FY08 FY09 FY10 FY11 P FY12 P
Growth in Operating Income 31.5% 32.3% 34.7% 14.8% 33.3%
Growth in EBITDA 50.4% 35.2% 17.6% 33.0% 36.3%
Growth in PAT 65.6% 11.8% 41.7% 16.2% 53.7%
Growth in EPS 65.6% 11.0% 42.7% 16.2% 53.7%
EBITDA Margin 12.8% 13.1% 11.4% 13.3% 13.5%
PAT Margin 5.9% 5.0% 5.2% 5.3% 6.1%
RoCE 57.0% 50.6% 48.5% 40.8% 39.8%
RoE 50.5% 38.2% 37.9% 31.1% 33.9%
Net Debt-Equity (times) -0.5 -0.1 -0.2 0.1 0.1
Interest Coverage (times) 9.5 8.4 8.5 6.8 7.1
Current Ratio (times) 1.1 1.3 1.5 1.5 1.7
Inventory Days 22 30 21 25 22
Receivable Days 94 97 78 80 77
Price / Earnings (P/E) Ratio 10.5 9.1 5.9
Price / Book Value(P/BV) Ratio

3.4 2.5 1.7
Enterprise Value (EV)/EBITDA 4.5 3.4 2.5
Source: Company, CARE Equity Research

FINANCIAL STATISTICS
EQUIGRADE

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LEFT BLANK
EQUIGRADE

CARE Equigrade Grid (CEG)
Through CEG, CARE Equity Research addresses two critical factors considered by an investor while investing in a
particular companys equity shares:
1. Fundamentals: Whether the company is fundamentally sound with respect to its business, its financial position, its
management and its prospects.
2. Valuation: What is the Current Intrinsic Value (CIV) of the stock and how it compares vis-a-vis its Current
Market Price (CMP)

These factors are answered assigning quantitative grades to both these parameters. CEG is the snapshot of
Fundamental Grade and Valuation Grade assigned by CARE Equity Research.

Fundamental Grade
This grade represents how sound the company is fundamentally, vis--vis other listed companies in India. This grade
captures:
1. Business Fundamentals and Prospects
2. Financial Soundness
3. Management Quality
4. Corporate Governance Practices

The grade is assigned on a five-point scale as under:
CARE Fundamental Grade Evaluation
5/5 Strong Fundamentals
4/5 Very Good Fundamentals
3/5 Good Fundamentals
2/5 Modest Fundamentals
1/5 Weak Fundamentals

Valuation Grade
EXPLANATION OF GRADES
EQUIGRADE
This grade represents the potential value in the companys equity share for the investor over a 1 year period. The
Current Intrinsic Value (CIV) or the price arrived by CARE Equity Research on fundamental basis is compared with
the current market price (CMP) of the stock and the grade is assigned based on the gap between CIV and CMP of the
stock.
The grade is assigned on a five-point scale as under:
CARE Valuation Grade Evaluation
5/5
Considerable Upside Potential
(>25% from CMP)
4/5
Moderate Upside Potential
(10-25% from CMP)
3/5
Fairly Priced
(+/- 10% from CMP)
2/5
Moderate Downside Potential
(Negative 10-25 from CMP)
1/5
Considerable Downside Potential
(<25% from CMP)
Grading determination is a matter of experienced and holistic judgment, based on relevant quantitative and qualitative factors of
the company in relation to other listed companies.

DISCLOSURES
Each member of the team involved in the preparation of this grading report, hereby affirms that there exists no conflict of
interest that can bias the grading recommendation of the company.
This report has been sponsored by the company.
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EQUIGRADE

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