IEA Report

23th Mar 2017

MARICO "BUY" 23th Mar 2017
The companys recent acquisition is small but a right step in right direction. This acquisition will expand companys product portfolio in male
grooming market and will enhance companys digital marketing capability going forward. Management is optimistic of clocking double digit
volume growth for Saffola in medium term which gives us confidence of high single to double digit overall volume growth for Marico going
forward. On margin front, management reiterated its previous guidance of 20% plus margin for domestic business and 18% for overall business.
Presently company trades at 16 times of FY17E book value with 35% of RoE. Considering improving business conditions after demonetization,
better medium term volume guidance for domestic business and expected recovery from international business going forward, we reiterate to
BUY this stock with the target price for Rs 330. ............................................................ ( Page : 2-4)

KALPATPOWER "BUY" 22th Mar 2017

Kalapatrus Standalone order book remains strong and advanced stage of an overseas project in transmission will help to register strong revenue
growth of 20% in FY17. Increasing opportunity in Railway segment can be a potential growth driver going forward for the Company. Based on
SOTP valuation method we have valued the standalone business at Rs. 260 per share and subsidiaries (JMC, SSL, Transmission BOT projects and
Development projects) at Rs. 60 per share. Hence, we recommend BUY on the stock with target price of Rs. 320.
................................................................. ( Page : 5)

EXIDEIND Part Book Profit 21th Mar 2017

We expect that managements strategy of cost control and technology up-gradation may improve the margin up to 100bps by 2017-18.
Technological innovation, segment branding and increased distribution reach along with GST implementation will help the company to gain
market share going forward. We recommended this stock at Rs.175 for a target price of Rs.220 and the stock has achieved our recommended
target. So we advise our investors to Book Part Profit at current levels and considering the future growth potential of the stock we revise our
target and recommend fresh BUY for a target price of Rs.240 and we value insurance business at Rs.19 per share.
............................................................ ( Page : 6-8)

IRB "BUY" 20th Mar 2017

IRB had filed draft red herring prospectus (DRHP) with SEBI and was waiting for SEBIs approval. Now, SEBI has given the nod and IRB is ready to
launch InvIT IPO of 4300 Cr in month of April. InvIT is near to become reality in Indian capital market as the SEBI gives a nod to IRB to launch its
Infrastructure Trust. IRB will launch it in April 2017. IRB is planning to raise Rs. 4300 Cr through InvIT IPO. The proceeds will be used for the debt
repayment and as a growth capital for the on-going and upcoming projects. Encouraging traffic growth and strong recovery in economic activity
nullified the demonetization impact in Q3FY17. Based on the strong order book, we expect EPC revenue to grow @ 12% in FYT17E and 30% in
FY18E. According to us, the launch of InvIT , robust EPC revenue growth and strong toll collection will be a growth driver for the company going
forward and hence, we maintain BUY on the stock with revised target price of Rs.285 from 265. ................................................ ( Page : 9-13)

NBFC-Gold Loan "Neutral" 17th Mar 2017

Recently RBI capped the cash transaction of gold loan to Rs 20,000 for the NBFCs involved in gold loan business. NBFCs cannot issue more than Rs
20,000 in cash against gold loan. The earlier provision for NBFC was that high value loans against gold of Rs 1 lakh and above must only be
disbursed by cheque. RBI reduced the amount to Rs 20,000 from the earlier Rs 1 lakh in line with the provisions of the Income Tax Act.
We believe this change in norm will have significant impact in near terms on the portfolio of gold loan NBFCs. We expect huge disruption in
disbursement and collection in gold loan NBFCs. The key impacted company will be Manappuram Finance and Muthoot Finance as these are two
major players in gold loan business. We are NEUTRAL in both the companies till further updates. .................................................... ( Page : 14)

CANBK "ACCUMULATE" 16th Mar 2017

We expect the trend to continue as management is hopeful of significant recoveries and up-gradation in coming 1 or 2 quarters. However given
the bulky nature of book, improvement in economic environment remains the key. We expect the credit cost to moderate marginally to 1.4% in
FY18 as ageing related provisions will remain high given the spike in NPA in last 5 quarters. We expect the loan growth to remain muted at 8% in
FY18 due to sluggish corporate loan demand. However recognition of reversal of interest income in 3Q on account of S4A and SDR will largely
prevent further significant fall in yield and any further fall will be subject to MCLR. So we expect NIM to improve from current levels on the back
of decline in cost of fund and expect NII to grow at a CAGR of 30% over next 2 years due to lower base. We also believe the trading gains will be
muted in current quarter given the sharp spike in Bond Yield. We are initiating coverage on this stock and recommend 'ACCUMULATE' with
target price of Rs 325. ......................................... ( Page : 15-16)
Narnolia Securities Ltd IEA Edition No.- 980
 BUY
MARICO 23rd March 2017

Company Update
Acquires 45% stake in Zed Life Style
CMP 285
Marico has recently agreed to acquire 45% stake in Zed Life Style for an
Target Price 330 undisclosed amount. Marico will gradually increase its stake in next two
Previous Target Price 330 years. Zed Life Style sells men grooming products in the brand name
Upside 16% `Beardo. `Beardo has strong presence in the online channel and salons
Change from Previous NA and 75% of its revenue comes from online channel orders. This acquisition
will give Marico a much needed diversification of products portfolio. Marico
is present in Rs3,200 cr mens grooming market with its mens hair gel and
Market Data mens deodorant under the brand name 'Set Wet'. This acquisition will help
BSE Code 531642 Marico to access the emerging niches at premium end and will enhance
NSE Symbol MARICO companys digital marketing and social media engagement capability going
forward.
52wk Range H/L 307/235
Mkt Capital (Rs Cr) 36,795 Managements short and medium term focus areas
Av. Volume(,000) 1260 Management is targeting 14-15% revenue growth from Indian business in
Nifty 9,030 next 5 years. The company is concentrating on 5 point agenda to improve
its business performance going forward which are innovation, go to the
Stock Performance market, cost management, talent & culture and IT. Immediate target for
1M 3M 12M Maricos management is to get back to 10% volume growth for Indian
business. However medium term expectation for organizations blended
Absolute 3.8 14.3 15.4
margin is 18% and Indian business margin is 20%plus.Food business is
Rel.to Nifty 2.4 2.3 -3.4 also expected to become Rs 300-500 cr in next 5 years. As far as
international business is concern, Management sees minimum15%
Share Holding Pattern-% constant currency (CC) organic growth upcoming 4-5 years.
3QFY17 2QFY17 1QFY17 Outlook and Valuation
Promoters 59.7 59.7 59.7 The companys recent acquisition is small but a right step in right direction.
Public 40.1 40.0 40.0 This acquisition will expand companys product portfolio in male grooming
market and will enhance companys digital marketing capability going
Others 0.2 0.3 0.3 forward. Management is optimistic of clocking double digit volume growth for
Total 100 100 100 Saffola in medium term which gives us confidence of high single to double
digit overall volume growth for Marico going forward. On margin front,
management reiterated its previous guidance of 20% plus margin for
Company Vs NIFTY
domestic business and 18% for overall business. Presently company trades
125 MARICO NIFTY at 16 times of FY17E book value with 35% of RoE. Considering improving
120
business conditions after demonetization, better medium term volume
115
guidance for domestic business and expected recovery from international
110
business going forward, we reiterate to BUY this stock with the target price
105
for Rs 330.
100
Rs,Cr
95
Financials 3QFY17 2QFY17 (QoQ)-% 3QFY16 (YoY)-%
90
85 Sales 1417 1443 -2% 1530 -7%
80 EBITDA 272 253 8% 290 -6%
Net Profit 192 181 6% 206 -7%
EBITDA% 19% 18% 169 Bps 19% 28 Bps
Rajeev Anand PAT% 14% 13% 100 Bps 13% 9 Bps
rajeev.anand@narnolia.com
Narnolia Securities Ltd 2
Please refer to the Disclaimers at the end of this Report
 Concall Highlights(Q3FY17)
The company sees inflation led value growth going ahead.
South and West impacted less due to demonetization.
Company sees much better traction from Bangladesh going forward.
Management expects recovery from MENA region in 2HFY18.
The company expects 18% overall margin in the medium term.
Management guided for 6-8% near term volume growth for overall business.
The company is diversifying its products portfolio.
GST will lead to improvement in market share for Marico going forward.
A&P Expenses will be in the range of 10% going forward.
In the month Jan, company witnessed 90% of its demand recovery.
The company may initiate pricing growth for Egypt.
In medium term, the company would be comfortable at 20%+ EBITDA margin.
Parachute and Nihar: Despite headwinds of demonetization and steep increase in inputs costs, near term volume growth
prospects remain promising.
Copra prices went up by 17%on sequential basis and YoY decline of 5%. The company expects the copra prices to go up further
in Q4FY17.
Company will take prices up in near term considering the inflation in commodity prices.
Net Sales and PAT(in cr.)
2000 300
Sales(in cr) PAT(in cr)
1800 268
250
1600
229
1400 206 200
185 192
1200 181
160 153
1000 150
138
800 118 110
100
600
400
50
1623

1431

1452

1226

1750

1454

1530

1307

1754

1443

1417

200
0 0
1QFY15 2QFY15 3QFY15 4QFY15 1QFY16 2QFY16 3QFY16 4QFY16 1QFY17 2QFY17 3QFY17

EBITDA and PAT Margin

25.0%
EBITDA Margin% PAT Margin%
21.3%
18.9% 19.2%
20.0% 18.2% 17.5%
16.4% 16.3% 16.6%
15.7% 15.3%
13.6% 14.0% 13.4% 13.5%
15.0% 13.1% 12.5%
11.4% 11.0% 10.5% 10.6%
9.0%
10.0% 8.3%

5.0%

0.0%
1QFY15 2QFY15 3QFY15 4QFY15 1QFY16 2QFY16 3QFY16 4QFY16 1QFY17 2QFY17 3QFY17

Narnolia Securities Ltd 3

Please refer to the Disclaimers at the end of this Report

 Financials Snap Shot
INCOME STATEMENT RATIOS
FY14 FY15 FY16 FY17E FY14 FY15 FY16 FY17E
Revenue 4687 5733 6132 5929 EPS(adjusted) 8 9 6 6
Other Income 58 59 93 101 Book Value(adjusted) 21 28 16 18
Total Revenue 4744 5792 6225 6029 DPS 2 5 4 4
COGS 2399 3119 3061 2849 Payout (incl. Div. Tax.) 29% 52% 72% 60%
GPM 48.8% 45.6% 50.1% 51.9% Valuation(x)
Other Expenses 1255 1419 1644 1537 P/E 15.7 23.1 46.5 45.1
EBITDA 748 870 1062 1148 Price / Book Value 5.6 7.2 16.1 15.7
EBITDA Margin (%) 16.0% 15.2% 17.3% 19.4% Dividend Yield (%) 1.9% 2.3% 1.6% 1.3%
Depreciation 77 84 102 96 Profitability Ratios
EBIT 671 786 961 1052 RoE 35.7% 31.4% 34.6% 34.7%
Interest 34 23 20 15 RoCE 41.6% 39.4% 45.8% 45.3%
PBT 695 822 1034 1138 Turnover Ratios
Tax 190 237 297 328 Asset Turnover (x) 1.6 1.8 1.8 1.6
Tax Rate (%) 27.4% 28.8% 28.7% 28.8% Debtors (No. of Days) 17 11 15 20
Reported PAT 485 573 725 807 Inventory (No. of Days) 121 116 110 105
Dividend Paid 142 300 522 484 Creditors (No. of Days) 39 36 40 42
No. of Shares 64 64 129 129 Net Debt/Equity (x) 0.2 0.1 0.0 0.0

BALANCE SHEET CASH FLOW STATEMENT

FY14 FY15 FY16 FY17E FY14 FY15 FY16 FY17E
Share Capital 64 65 129 129 OP/(Loss) before Tax 695 822 1,034 1,135
Reserves 1296 1760 1968 2194 Depreciation 77 84 102 96
Net Worth 1361 1825 2097 2323 Direct Taxes Paid (181) (210) (246) (328)
Long term Debt 252 169 0 0 Op. profit bef. WC changes 754 891 1,079 1,246
Short term Debt 274 165 153 140 CF from Op. Activity 660 665 833 901
Deferred Tax 10 8 10 10 Non Current investments (155) (121) (33) -
Capital Employed 1612 1994 2097 2323 Capital expenditure (785) (48) (7) (18)
Net Fixed Assets 638 590 583 565 CF from Inv. Activity (204) (179) (235) (220)
Capital WIP 4 0 0 0 Repaym of L T Borrowings (181) (83) (168) -
Debtors 223 177 252 325 Interest Paid (35) (23) (20) (15)
Cash & Bank Balances 406 205 310 382 Divd Paid (incl Tax) (142) (300) (502) (581)
Trade payables 503 564 669 682 CF from Fin. Activity (339) (625) (580) (609)
Total Provisions 86 104 115 115 Inc/(Dec) in Cash 144 (147) 17 72
Net Current Assets 777 893 967 1149 Add: Opening Balance 105 224 77 310
Total Assets 2965 3125 3433 3668 Closing Balance 224 77 91 382

Narnolia Securities Ltd 4

Please refer to the Disclaimers at the end of this Report

 BUY
Kalpatru Power Transmission Ltd. 22-Mar-17

Result Update Kalapatru Powers standalone order book stands at Rs8300 Cr at the end of
CMP 286 Q3FY17 with Rs3000 Cr plus orders in L1. Management expects to convert
Target Price 320 Rs1500-2000 Cr of L1 orders into firm order in Q4FY17. Out of the total
Previous Target Price order book, 55% comes from overseas orders and rests are from the
domestic market. Kalapatru has received its 90% of the overseas order in
Upside 12%
last six months and a company is fully ready to execute it going forward
Change from Previous
which will drive revenue growth in Q4FY17 and FY18.Management has
guided for 15-20% revenue growth in FY17, which implies more than 20%
Market Data growth in Q4FY17. The company has witnessed delay in orders from PGCIL
BSE Code 522287 but healthy traction from SEBs, Africa, and CIS countries. Management
NSE Symbol KALPATPOWER expects to win at least 2500-3000 Cr of a new order in Q4FY17. Continuous
52wk Range H/L 186/299 focus on improvement in working capital resulted in lower interest, 2.3% of
Mkt Capital (Rs Cr) 4,388 sales in 9MFY17 against 3.4% of sales in 9MFY16 and it will be around
Av. Volume 4520 2.5% of sales in Q4FY17
Nifty 9121
Strong Opportunity in Infra Segment:-
Stock Performance Currently, Infra segment (Pipeline and Railway) contributes only 10% of the
1Month 3 Month 1Year Order book but we see huge opportunity going forward especially in Railway
Absolute 1.6 21.4 48.8 segment. KALAPTPOWER has strong order pipeline of 3000 Cr and 1500
Rel.to Nifty -0.8 8.2 28.9 Cr in Railway and Pipeline business respectively. Railway Ministry has set a
target to award 2000 Km, 4000 Km and 6000 km of overhead electrification
orders in FY17, FY18 and FY19 respectively which provides huge
Share Holding Pattern-%
opportunity going forward. Shri Shubham logistics business remained
3QFY17 2QFY17 1QFY17
muted in Q3FY17 due to demonization and we do not expect significant
Promoters 59% 59% 59% improvement in it inFY17
Public 41% 41% 41%
Others 0% 0% 0%
Outlook & Valuation:-
Total 100% 100% 100%
Kalapatrus Standalone order book remains strong and advanced stage of
Company Vs NIFTY an overseas project in transmission will help to register strong revenue
160 growth of 20% in FY17. Increasing opportunity in Railway segment can be a
KALPATPOWR NIFTY
potential growth driver going forward for the Company. Based on SOTP
140
valuation method we have valued the standalone business at Rs. 260 per
120 share and subsidiaries (JMC, SSL, Transmission BOT projects and
100
Development projects) at Rs. 60 per share. Hence, we recommend BUY
on the stock with target price of Rs. 320.
80

60
Financials Q3FY17 Q2FY17 Q3FY16 YoY % QoQ %
Sales 1158 1143 899 29% 1%
40
EBITDA 119 122 90 32% -2%
Net Profit 47 58 28 68% -19%
EBIDTA% 10.3% 10.7% 10.0% 30 bps (40 bps)
Sandip Jabuani PAT 4.1% 5.1% 3.1% 100 bps (100 bps)
sandip.jabuani@narnolia.com
Narnolia Securities Ltd 5
Please refer to the Disclaimers at the end of this Report
 Part Book Profit
EXIDE INDUSTRIES LTD 21-Mar-17

Result Update Exide Industries Limited is well placed to take advantage of growing mobility
CMP 218 demand in the country. The company has plans to invest Rs 1,400 crore
Target Price 240 over the next two years to introduce more durable automotive batteries in
Previous Target Price 220 India. Batteries with the new technology will be initially rolled out from our
Haldia plant and gradually, other facilities will also start producing the same.
Upside 10%
Unorganized players constitute over 35% market share in the Indian battery
Change from Previous - industry and introduction of Goods and Services Tax in FY18 will play a
major role in the growth of Exide. We expect that the industrial battery
Market Data segments demand will pick up gradually in line with the economic
improvement going ahead. To promote eco-friendly vehicles, the
BSE Code 500086
government has been offering incentives on electric and hybrid vehicles
NSE Symbol EXIDEIND under the National Electric Mobility Mission Plan which will also boost
52wk Range H/L 225/130 demand for Exide. The nation-wide rollout of this scheme is scheduled from
Mkt Capital (Rs Cr) 1 April, 2017.
18,607
Av. Volume 2,00,169
Nifty 9,127 Result Update

Stock Performance Revenue grew by 12.6%YoY to Rs. 1729 crore in 3QFY17. The growth in
1Month 3Month 1Year top-line was supported by higher sales of Passenger vehicles and 2
wheelers segment.
Absolute 1.7 25.9 60.9
Rel.to Nifty -1.0 13.0 40.9 EBITDA Margin decreased by 230 bps YoY. Other expenses remain higher
due to sales and promotion expenses.
Share Holding Pattern-% PAT Margin decreased by 20 bps YoY. Company reported Rs.2.63 crore of
3QFY17 2QFY17 1QFY17 other comprehensive income under the new IndAS.
Promoter 45.99 45.99 45.99
Outlook and Valuation
Public 54.01 54.01 54.01
Others -- -- -- We expect that managements strategy of cost control and technology up-
Total 100.00 100.00 100.00 gradation may improve the margin up to 100bps by 2017-18. Technological
innovation, segment branding and increased distribution reach along with
GST implementation will help the company to gain market share going
Company Vs NIFTY forward. We recommended this stock at Rs.175 for a target price of Rs.220
160 EXIDEIND NIFTY and the stock has achieved our recommended target. So we advise our
150 investors to Book Part Profit at current levels and considering the future
growth potential of the stock we revise our target and recommend fresh
140
BUY for a target price of Rs.240 and we value insurance business at Rs.19
130
per share.
120
110 Rs. In crore
100 Financials 3QFY17 2QFY17 3QFY16 QoQ YoY
90 Sales 1729 1929 1536 -10% 13%
80 EBITDA 230 293 239 -22% -4%
Jul-16

Sep-16

Feb-17
Jan-17
Dec-16
Jun-16

Aug-16
May-16

Oct-16
Nov-16
Apr-16

Mar-17
Mar-16

Net Profit 154 182 140 -15% 10%

EBIDTA% 13.3% 15.2% 15.6%
Naveen Kumar Dubey PAT % 8.9% 9.4% 9.1%
naveen.dubey@narnolia.com
Narnolia Securities Ltd 6
Please refer to the Disclaimers at the end of this Report
 EXIDEIND
Investment Arguments
Capex in new technology - Exide has planned to invest Rs.1400 crore over the next two years to introduce more durable
automotive batteries in India. Out of total Rs.1400 crores, Rs 700 crore has been invested in its plant at Haldia in West Bengal from
where batteries with punch-grid technology have started rolling out this year. The remaining Rs 700 crore of the planned capex will
be invested across the rest of the four automotive battery manufacturing plants over 2017-18. The plant will roll-out 1 mn batteries
and these batteries would be targeting primarily aftermarket.
Technological Innovation- Exide has tie ups with technological partners like East Penn Inc. USA, Hitachi chemicals Japan,
Furukawa Battery Co.Ltd Japan which provides requisites technology to develop better products. These companies have technical
expertise in 2Ws, 4Ws and Industrial segments batteries and they provide technological edge to the Exide over its peers and
unorganized players.
Market share shift towards organized from unorganized - Unorganized players constitutes over 35% market share in the
Indian battery industry.major unorganized players operate in Tractor, 3Ws and CV space. We believe that the introduction of GST
will bring down the price differential between organized and unorganized players, so there could be a prompt shift of market share
towards the organized players from unorganized players.
Telecom a big opportunity- Exide has 10% market share in the telecom segment, and it is very small portion of total revenue.
The teleocom industry has started data escalation and tower companies offer immense potential for industrial batteries. So it can be
a good opportunity for Exide to capture more market share. According to the management, industrial segment should grow over
15% in next two years.
Life Insurance business remains profitable for last consecutive 3 years. The company has started investing on branding and
promotion of its insurance arm to make it one of the big insurance companies of India.

Plant Location and Capacity

Capacity
Auto MC Industrial HUPS Systems
Plant Location mn units mn units Mah mn units
Shamnagar (1946) 1.6 636
Chinchwad (1969) 2.9
Haldia (1981) 2.1 1102 adding 1 mn capacity in auto space in FY17
Hosur (1997) 2.8 1086
Taloja (1998) 2.8 0.6
Bawal (2003) 8.4
Ahmednagar (2010) 8.9
Roorkee (2011) 0.5
Haridwar (2012) 0.5
Total 12.2 17.9 2824.0 1.0

Key Risk
Increase in Lead prices can affect the margins because of competitive replacement market.
Power defict in the country has reduced from 3.6% to 2.1% in FY16, so improving power condition in the country can hamper fast
growing inverter segment growth.
Economic slowdown in the country can negatively impact both the industrial and automotive segments.

Narnolia Securities Ltd 7

Please refer to the Disclaimers at the end of this Report

 EXIDEIND

Financials Snap Shot

INCOME STATEMENT RATIOS
FY14 FY15 FY16 FY17E FY14 FY15 FY16 FY17E
Revenue (Net of Excise Duty)
8309 9535 9479 10155 EPS 6.4 7.2 8.4 9.3
Other Income 73 95 135 186 Book Value 40.7 45.2 50.9 57.1
Total Revenue 8382 9630 9615 10341 DPS 2.1 2.6 2.8 3.1
COGS 4014 4652 4429 4753 Payout (incl. Div. Tax.) 33% 36% 33% 33%
GPM 48% 49% 47% 47% Valuation(x)
Other Expenses 2466 2959 2550 2742 P/E 18.9 24.6 16.6 18.9
EBITDA 862 937 1055 1152 Price / Book Value 3.0 3.9 2.7 3.1
EBITDA Margin (%) 10% 10% 11% 11% Dividend Yield (%) 1.74% 1.45% 2.02% 1.77%
Depreciation 140 155 180 211 Profitability Ratios
EBIT 721 782 875 941 RoE 16% 16% 16% 16%
Interest 8 3 2 3 RoCE 21% 20% 20% 19%
PBT 787 874 1009 1123 Turnover Ratios
Tax 241 257 292 337 Asset Turnover (x) 0.7 0.7 0.6 0.6
Tax Rate (%) 31% 29% 29% 30% Debtors (No. of Days) 29 26 28 28
Reported PAT 545 615 714 786 Inventory (No. of Days) 118 129 103 103
Dividend Paid 179 219 239 263 Creditors (No. of Days) 48 40 44 44
No. of Shares 85 85 85 85 Net Debt/Equity (x) 0 0 0 0

BALANCE SHEET CASH FLOW STATEMENT

FY14 FY15 FY16 FY17E FY14 FY15 FY16 FY17E
Share Capital 85 85 85 85 OP/(Loss) before Tax 787 874 1009 1123
Reserves 3375 3756 4245 4769 Depreciation 140 155 180 211
Net Worth 3460 3841 4330 4854 Direct Taxes Paid (235) (253) (278) (337)
Long term Debt 4 3 2 2 Operating profit before working
950capital changes
831 1298 1338
Short term Debt 30 51 109 117 CF from Op. Activity 872 180 1616 983
Deferred Tax 112 131 131 131
Total Capital Employed 3464 3844 4332 4856 Capex (158) (332) (423) (263)
Net Fixed Assets 1167 1314 1602 1654 CF from Inv. Activity (602) (56) (1351) (824)
Capital WIP 63 115 192 192 Repayment of Long Term Borrowings
(38) (2) (1) 0
Debtors 658 690 722 774 Interest Paid (8) (3) (1) (3)
Cash & Bank Balances 287 207 294 194 Divd Paid (incl Tax) (171) (223) (238) (263)
Trade payables 1101 1046 1132 1213 CF from Fin. Activity (215) (199) (182) (259)
Total Provisions 245 292 327 350 Inc/(Dec) in Cash 55 (74) 83 (100)
Net Current Assets 1365 1537 1896 1817 Add: Opening Balance 221 287 207 294
Total Assets 12494 13887 15326 16824 Closing Balance 287 207 294 194

Narnolia Securities Ltd 8

Please refer to the Disclaimers at the end of this Report

 Maintain BUY
IRB Infrastructure Developers Ltd. 20-Mar-17

Result Update IRB will Launch InvIT in April:-

CMP 244 IRB had filed draft red herring prospectus (DRHP) with SEBI and was waiting
Target Price 285 for SEBIs approval. Now, SEBI has given the nod and IRB is ready to launch
Previous Target Price 265 InvIT IPO of 4300 Cr in month of April. InvIT are the trust that manages the
income generating assets of 6 SPVs. IRB will transfer 6 project namely Surat
Upside 17%
Dahisar, Bharuch Surat, Jaipur- Deoli, Tumkar Chaitradurg, Omalur Salem
Change from Previous 8% and Talegaone Amravati to trust at mutually agreed valuation. IRB values its
transferring assets at 8000 Cr Enterprise Value (EV) and 3000 Cr of equity
Market Data valuation. Trust will acquire 100% equity stake from IRB and issue units of
BSE Code 532947 trust as consideration. Then the Trust will offer fresh units worth of Rs. 4300
NSE Symbol IRB Cr to investors through Offer for Sale and the proceed from it will infuse as
52wk Range H/L debt into six SPVs. IRB and other sponsors can also sell its units through
266/177
Offer for sale. Post this transaction IRBs debt to equity will improve
Mkt Capital (Rs Cr) 8,577 significantly from 2.8x to 2.2X, which will result in lower interest outgo and
Av. Volume 203192 improvement in the bottom line.
Nifty 9160
Robust construction revenue visibility:-
Stock Performance Currently, 5 projects are under construction and in next 8-10 months time
1Month 3 Month 1Year period another 3 projects in Rajasthan namely Gujarat/Rajasthan, Kishangarh
Absolute 6.9 26.7 5.9 - Udaipur and Kishangarh - Gulabpura will come under execution. Recently,
company has executed concession agreement with NHAI for the Kishangarh
Rel.to Nifty 3.1 14.2 -16.3
to Gulabpura road project. We expect work will start on Gujarat Rajsthan and
Kishangarh Udaipur projects from April and June 2017 respectively. Order
Share Holding Pattern-% book stands at Rs. 12011 Cr i.e. 3.45x of TTM EPC revenue. All the projects
3QFY17 2QFY17 1QFY17 are well on track and management confident to complete projects on time.
Promoters 57% 57% 57% Current on-going projects will drive the revenue growth and we expect
Public 43% 43% 43% revenue growth of 40-45% in FY18E.
Other 0% 0% 0%
Total 100% 100% 100% Strong Recovery in Toll Collection :-
IRB has witnessed encouraging traffic growth post the demonization. Average
Company Vs NIFTY daily toll collection in month of December has grown by 3% to Rs. 7.79 Cr
130
compared to Rs. 7.53 Cr in month of October. IRB's most of the operation
IRB NIFTY
120 road projects are in western part of the country which is seeing good recovery
110 in traffic movement. Management expects 10-12% growth in BOT revenue
100 including 5-6% traffic growth.
90
80
70 In Rs. Cr
60
Financials Q3FY17 Q2FY17 Q3FY16 YoY (+/-) QoQ (+/-)
50
40
Sales 1411 1291 1333 6% 9%
EBITDA 743 709 688 8% 5%
PAT 184 142 170 8% 30%
EBIDTA% 52.7% 54.9% 51.6% 110 bps (220) bps
Sandip Jabuani PAT 13.1% 11.0% 12.7% 40 bps 210 bps
sandip.jabuani@narnolia.com
9
Narnolia Securities Ltd
Please refer to the Disclaimers at the end of this Report
 Structure of theTrust :- Socure :- InvIT DRHP

Projects transfer to Trust :-

IRB Length Annual Toll Debt as on Concession Remaing Concession

Projects State
Holding (Kms) Collection 31st Dec Period(In Years) Period (In Years)
Surat-Dahisar 100% Maharstra 239 613 2016
742 12 5
Tumkar Chitradurga 100% Karnataka 114 202 926 26 21
Baruch - Surat 100% Gujarat 65 194 503 15 6
Jaipur - Deoli 100% Rajsthan 146 121 869 25 20
Omalur Salem Namakkal74% Tamil Nadu 69 75 206 20 10
Talegaon Amravati 100% Maharstra 67 47 479 22 16

Trust will receive interest on debt infuse inform of equity into SPVs and the interest income will be a tax exempted for the trust.
Trusts will also received dividend from SPVs. Trust has to distribute dividend to its unit holder based on net distributable cash
flow available and not on the basis of accounting profit.
IRB Infrastructure Developers is the Sponsor of the Trust
IRB Infrastructure (Standalone Company) is act as project Manager
IDBI Trusteeship Services will act as Trustee of the Trust (InvIT)

Outlook and Valuation :-

InvIT is near to become reality in Indian capital market as the SEBI gives a nod to IRB to launch its Infrastructure Trust. IRB will
launch it in April 2017. IRB is planning to raise Rs. 4300 Cr through InvIT IPO. The proceeds will be used for the debt repayment
and as a growth capital for the on-going and upcoming projects. Encouraging traffic growth and strong recovery in economic
activity nullified the demonetization impact in Q3FY17. Based on the strong order book, we expect EPC revenue to grow @ 12% in
FYT17E and 30% in FY18E. According to us, the launch of InvIT , robust EPC revenue growth and strong toll collection will be a
growth driver for the company going forward and hence, we maintain BUY on the stock with revised target price of Rs.285
from 265

Narnolia Securities Ltd 10

Please refer to the Disclaimers at the end of this Report
Quartely Performance 2QFY15 3QFY15 4QFY15 1QFY16 2QFY16 3QFY16 4QFY16 1QFY17 2QFY17 3QFY17 YoY% QoQ%
Net Sales 883 964 990 1,109 1,149 1,333 1,537 1,517 1,291 1,411 6% 9%
Other Operating Income - - - - - - - - - -
Net Sales 883 964 990 1,109 1,149 1,333 1,537 1,517 1,291 1,411 6% 9%
Contarct Site Exp 193 240 239 273 314 488 597 553 379 447 -8% 18%
RM Cost 75 75 103 126 138 64 51 76 82 85 31% 3%
COGS 268 314 341 399 452 552 648 629 461 532 -4% 15%
Employee Expenses 50 45 53 48 60 57 81 64 60 67 17% 11%
Other Expenses 42 49 25 33 32 36 68 50 60 69 89% 14%
Total Expenditure 360 408 420 480 544 646 797 743 582 667 3% 15%
EBITDA 523 555 571 629 605 688 740 774 709 743 8% 5%
Depreciation 180 179 172 202 203 226 222 221 227 180 -20% -21%
EBIT 343 377 399 427 402 461 517 553 482 563 22% 17%
Intreset 227 237 251 235 240 264 327 328 340 339 28% 0%
PBT 145 169 176 220 192 229 225 256 176 254 11% 45%
Tax 23 35 40 55 43 61 73 74 33 70 15% 109%
PAT 122 133 138 165 150 170 151 182 142 184 9% 30%

Margin Profile YoY (+/-) QoQ (+/-)

Gross Margin 69.60% 67.38% 65.53% 63.99% 60.65% 58.57% 57.86% 58.54% 64.28% 62.31% 374 (197)
EBIDTA 59.2% 57.6% 57.6% 56.7% 52.7% 51.6% 48.1% 51.0% 54.9% 52.7% 110 (220)
EBIT 38.9% 39.1% 40.2% 38.5% 35.0% 34.6% 33.7% 36.5% 37.3% 39.9% 530 260
PAT 13.8% 13.8% 14.0% 14.9% 13.0% 12.7% 9.8% 12.0% 11.0% 13.1% 40 210

Opearting Matrix YoY% QoQ%

Construction Order 2QFY15 3QFY15 4QFY15 1QFY16 2QFY16 3QFY16 4QFY16 1QFY17 2QFY17 3QFY17
Ongoing BOT Projects 4,254 3,776 3,219 8,136 7,503 6,675 5,810 4,818 5,634 4,826 -28% -14%
Construction yet to comm. 5,402 5,403 7,551 2,133 2,133 8,828 2,133 2,133 3,987 5,436 -38% 36%
9,656 9,178 10,770 10,269 9,636 15,503 7,943 6,951 9,621 10,262 -34% 7%
BOT Projects in O&M 1,932 3,776 1,861 1,847 1,832 1,818 1,803 1,788 1,773 1,750 -4% -1%
Total 11,587 12,954 12,631 12,116 11,468 17,321 9,746 8,739 11,394 12,011 -31% 5%

Toll Collection at Major Projects YoY% QoQ%

Munbai- Pune 136 147 149 160 146 162 165 188 173 137 -15% -21%
Surat - Dahisar 131 145 147 151 145 156 162 161 148 111 -29% -25%
Tumkar Chitradurga 45 47 48 50 49 51 51 53 50 40 -22% -20%
Baruch - Surat 45 49 48 49 45 49 50 49 47 37 -25% -21%
Ahem.-Vadodra (NE-1) 35 42 43 44 37 53 86 88 83 69 31% -16%
Jaipur - Deoli 24 27 29 33 26 29 32 32 27 22 -24% -16%
Pathankot - Amritsar - 8 21 23 22 27 27 29 28 24 -12% -15%
Thane- Bhiwandi Bypass 17 19 19 20 19 20 21 20 19 15 -24% -19%
Omalur Salem Namakkal 19 21 19 19 18 17 21 20 19 15 -11% -22%
Talegaon Amravati 10 11 12 12 10 12 13 13 12 10 -15% -13%

Narnolia Securities Ltd

Please refer to the Disclaimers at the end of this Report 11
Order Book
Order book Book to bill

20,000 17,321 20

15,000 12,954 12,631 15

11,587 12,116 11,468 11,394 12,011
9,746
10,000 8,739 10

5,000 5

- -
2QFY15 3QFY15 4QFY15 1QFY16 2QFY16 3QFY16 4QFY16 1QFY17 2QFY17 3QFY17

Order Book break up project wise

Yedeshi Aurangabad
6% 4%
9%
2% Kaithal Rajasthan Border
12% 2%
Solapur Yedeshi
Sindhudurg Airport
Agra Etawah
15% 17%
Gulabpura -Chittorgarh
Udaipur -Gj Border
O & M Contracts
17% 16% Kishangarh Gulabpura
Goa Kundapur

Revenue Mix

Narnolia Securities Ltd 12

Please refer to the Disclaimers at the end of this Report
 Financials Snap Shot
INCOME STATEMENT RATIOS
FY14 FY15 FY16 FY17E FY14 FY15 FY16 FY17E
Net Revenue 3732 3847 5130 5694 EPS 14 15 18 18
Other Income 121 113 124 119 Book Value 107 124 137 151
Total Revenue 3853 3960 5254 5812 DPS 6 5 5 5
EBITDA 1754 2212 2661 3041 Payout (incl. Div. Tax.) 42% 30% 26% 26%
EBITDA Margin (%) 47% 57% 52% 53% Valuation(x)
Depreciation 477 707 853 935 P/E 7 15 13 15
EBIT 1277 1505 1807 2106 Price / Book Value 1 2 2 2
Interest 756 931 1063 1346 Dividend Yield (%) 6% 2% 2% 2%
PBT 642 686 868 878 Profitability Ratios
Tax 182 144 232 246 RoE 13% 12% 13% 12%
Tax Rate (%) 28% 21% 27% 28% RoCE 9% 10% 10% 10%
Reported PAT 459 543 636 633 Turnover Ratios
Dividend Paid 194 164 164 164 Asset Turnover (x) 0.2 0.1 0.1 0.1
No. of Shares 33 35 35 35 Debtors (No. of Days) 1 0 7 7
Inventory (No. of Days) 59 73 55 55
Creditors (No. of Days) 40 22 22 22
Net Debt/Equity (x) 2.64 2.48 2.62 2.68

BALANCE SHEET CASH FLOW

FY14 FY15 FY16 FY17E FY14 FY15 FY16 FY17E
Share Capital 332 351 351 351 OP/(Loss) before Tax 642 686 868 878
Reserves 3228 4009 4476 4942 Depreciation 477 707 853 935
Net Worth 3561 4361 4827 5293 Direct Taxes Paid 232 216 312 246
Long term Debt 9398 10804 12652 14192 Op. before WC change 1749 2216 2719 3159
Short term Debt 897 631 1189 1189 CF from Op. Activity 1656 1823 2342 2104
Deferred Tax 22 19 16 16 Non Current Investment 0 1 0 0
Total CE 12959 15165 17479 19485 Capex 3002 2311 3161 2261
Net Fixed Assets 13041 36599 39169 40494 CF from Inv. Activity (2743) (2295) (3175) (2261)
Capital WIP 48 80 78 78 Repayment of LTB 888 794 1140 0
Debtors 6 5 104 115 Interest Paid 740 1317 1435 1346
Cash Balances 1501 1580 1559 0 Divd Paid (incl Tax) 194 78 254 164
Trade payables 408 234 305 339 CF from Fin. Activity 1274 474 667 30
Total Provisions 289 219 169 324 Inc/(Dec) in Cash 186 2 (165) (127)
Net Current Assets 879 477 510 1349 Add: Opening Balance 257 443 445 1559
Total Assets 15712 39393 42181 42046 Closing Balance 443 445 279 1432

Narnolia Securities Ltd 13

Please refer to the Disclaimers at the end of this Report

 NEUTRAL
NBFC- Manappuram, Muthoot 17-Mar-17

MANAPPURAM FINANCE After Demonetization RBI Imposes Cash Transaction

CMP 94 Recently RBI capped the cash transaction of gold loan to Rs 20,000 for the
Target Price Neutral NBFCs involved in gold loan business. NBFCs cannot issue more than Rs 20,000
in cash against gold loan. The earlier provision for NBFC was that high value
BSE Code 531213
loans against gold of Rs 1 lakh and above must only be disbursed by cheque. RBI
NSE Symbol MANAPPURAM reduced the amount to Rs 20,000 from the earlier Rs 1 lakh in line with the
52wk Range H/L 107/34 provisions of the Income Tax Act.
Mkt Capital (Rs Cr) 7909
We believe this change in norm will have significant impact in near terms on
Company Vs NIFTY
the portfolio of gold loan NBFCs. We expect huge disruption in
240 MANAPPURAM NIFTY disbursement and collection in gold loan NBFCs. The key impacted company
220 will be Manappuram Finance and Muthoot Finance as these are two major
200
players in gold loan business. We are NEUTRAL in both the companies till
180
further updates.
160
140
Restriction in cash transaction imposes Short term challenge.
120
100
The average ticket size in gold loan business ranges between Rs 30k to 40k.
80
Loans above Rs 1 Lakh are done by cheque as per the RBI rule. Portfolio above
Rs 1Lakh in Manappuram finance is 50% and that in Muthoot Finance is only
30%. Online transaction accounts for about 7 to 8% in both the company. Rest of
the portfolio is cash dominated. We believe in near term disbursement and
MUTHOOT FINANCE collections will fall as 30 to 40 percent of the portfolio deals in cash above Rs
CMP 349 20000 and below Rs 1Lakh. This may also lead to increase in delinquencies in
Target Neutral near term. We believe the impact on the portfolio will be same as we experienced
Price
BSE Code 533398 during demonetization period. As both of the company is focus towards online and
electronic format of transaction, we believe this shift from cash mode to electronic
NSE MUTHOOTFIN
mode will take few months. Also there are chances of temporary switch of some
Symbol
52wk 405/172 customers to unorganized sector that are in urgent need of cash with no bank
Mkt Capital (Rs Cr) 13937 accounts.
Company Vs NIFTY
200 MUTHOOTFIN NIFTY Financial Performance
180
AUM (Gold) 3QFY16 2QFY17 3QFY17 YoY % QoQ%
160
Manappuram 9,639 12,383 12,267 27.3% -0.9%
140
Muthoot 24,991 27,456 27,000 8.0% -1.7%
120 NII
100 Manappuram 379 543 580 53.1% 6.8%
80 Muthoot 580 792 749 29.2% -5.4%
PAT
Manappuram 100 192 203 101.9% 5.3%
Muthoot 187 297 291 55.9% -1.9%
DEEPAK KUMAR
Deepak.kumar@narnolia.com
Narnolia Securities Ltd 14
Please refer to the Disclaimers at the end of this Report
 ACCUMULATE
CANARA BANK 16-Mar-17

Result Update Stake sale in Can Fin Homes Ltd and Right Issue will boost the CRAR
CMP 290 Canara Bank sold its 13.45% stake in Can Fin Homes Ltd at Rs 753.77 Cr.
Target Price 325 It sold 35.8 Lakh shares at Rs 2105 per share to Singapore-government
backed Caladium Investment. Post the sale, Canara Bank would own 30%
Previous Target Price
in Can Fin Homes Ltd. The decision to sell the stake in its home loan arm is
Upside 12% as per the plan of management to monetize the non-core assets to boost
Change from Previous the Capital Adequacy ratio. Apart from this Canara Bank is also opened for
right issue till 16th March 2016 for an amount of Rs 1124 Cr at Rs 207 per
Market Data share. Out of this Rs 745 Cr would come from Government and balance
from other shareholder. Post this right issue and stake sale we estimate Tier-
BSE Code 532483 1 Capital to improve by about 50 bps from current 9.01%.
NSE Symbol
CANBK
52wk Range H/L 330/171 Result Update
Mkt Capital (Rs Cr) 16181
Av. Volume (,000) 149 PAT increased nearly by 4x to Rs 322 due to lower base and primarily on
Nifty 9085 account of higher trading gains of Rs 750 Cr. NII continues to be muted with
8% growth due to flattish advances growth and reversal of interest income
on account of S4A and SDR accounts. NIMs were stable QoQ at 2.19%.
Stock Performance
Demonetization helped CASA deposits growth at 30% YoY which led the
1Month 3 Month 1Year
CASA ratio improved to 32% vs 29% a quarter ago. Slippages decline to Rs
Absolute (1.7) 65.7 13.6 2225 Cr from Rs 2449 Cr QoQ while GNPA and NNPA stood at 9.97% and
Rel.to Nifty (5.1) 44.4 2.5 6.72% from 9.81% and 6.69% QoQ respectively. Management expects 1-2
large corporate accounts resolution to take place by end of FY17 which will
lead to upgrade of Rs 1000-1500 Cr. Also management expects slippages
Share Holding Pattern-%
of less than Rs 1500 during 4QFY17 and guided for loan growth of 7 to 8
3QFY17 2QFY17 1QFY17 percent in FY17.
Promoters 66.3 66.3 66.3
Public 33.7 33.7 33.7 View and Valuation
Others - - -
Total 100.0 100.0 100.0 Over the last 3 quarters delinquencies have been declining and net stress
addition remained stable. We expect the trend to continue as management
is hopeful of significant recoveries and up-gradation in coming 1 or 2
Company Vs NIFTY
quarters. However given the bulky nature of book, improvement in economic
180 CANBK NIFTY environment remains the key. We expect the credit cost to moderate
170
160
marginally to 1.4% in FY18 as ageing related provisions will remain high
150 given the spike in NPA in last 5 quarters. We expect the loan growth to
140 remain muted at 8% in FY18 due to sluggish corporate loan demand.
130
However recognition of reversal of interest income in 3Q on account of S4A
120
110 and SDR will largely prevent further significant fall in yield and any further
100 fall will be subject to MCLR. So we expect NIM to improve from current
90
levels on the back of decline in cost of fund and expect NII to grow at a
80
CAGR of 30% over next 2 years due to lower base. We also believe the
trading gains will be muted in current quarter given the sharp spike in Bond
Yield. We are initiating coverage on this stock and recommend
DEEPAK KUMAR 'ACCUMULATE' with target price of Rs 325.
Deepak.kumar@narnolia.com
Narnolia Securities Ltd 15
Please refer to the Disclaimers at the end of this Report
 CANBK

Quarterly Performance (Rs in Crore)

Financials 3QFY15 4QFY15 1QFY16 2QFY16 3QFY16 4QFY16 1QFY17 2QFY17 3QFY17 YoY % QoQ%
Interest Inc. 11052 11103 11140 11268 10882 10733 10202 10405 10288 -5% -1%
Interest Exp. 8671 8617 8623 8621 8655 8359 7894 7963 7874 -9% -1%
NII 2380 2486 2517 2647 2227 2374 2307 2442 2414 8% -1%
Other Income 1176 1326 1113 1210 1168 1383 1585 1782 1792 53% 1%
Total Income 3557 3812 3629 3857 3395 3757 3892 4224 4206 24% 0%
Ope Exp. 1759 2079 1626 1913 1843 2110 2073 2083 2224 21% 7%
PPP 1797 1732 2004 1944 1552 1647 1819 2141 1981 28% -7%
Provisions 841 1010 1360 1212 1429 6332 1493 1586 1485 4% -6%
PBT 956 723 644 732 123 -4685 326 555 497 304% -10%
Tax 300 110 165 203 39 -780 97 198 175 353% -12%
Net Profit 656 613 479 529 84 -3905 229 357 322 281% -10%

Profitability Metrix
Ratios 3QFY15 4QFY15 1QFY16 2QFY16 3QFY16 4QFY16 1QFY17 2QFY17 3QFY17 YoY(bps) QoQ(bps
Yield On Assets 8.8 8.8 8.3 8.3 8.1 8.1 7.6 7.5 7.4 -0.7 )
-0.1
Cost of Fund 6.8 6.8 6.4 6.4 6.9 6.3 5.9 5.8 5.7 -1.2 -0.1
NIM 2.2 2.3 2.2 2.2 2.2 2.2 2.2 2.2 2.2 0.0 0.0
NII Growth % 6.9 (1.9) 3.6 11.8 (6.5) (4.5) (8.3) (7.7) 8.4
C/I Ratio 49.5 54.6 44.8 49.6 54.3 56.2 53.3 49.3 52.9 -1.4 3.6
Other Inc./Net Inc. % 33.1 34.8 30.7 31.4 34.4 36.8 40.7 42.2 42.6 8.2 0.4
Tax % 31.4 15 26 27.7 31.4 16.6 29.8 35.7 35.2 3.8 -0.5
PAT Growth % 60.2 0.3 (40.7) (15.6) (87.1) (737.5) (52.2) (32.5) 281.3
RoE 11.3 11.1 7.0 7.1 5.2 (10.7) 3.5 4.4 4.6 -0.6 0.1
RoA 0.5 0.5 0.4 0.4 0.1 (0.5) 0.2 0.2 0.2 0.2 0.0

Business Metrix (Rs in Crore)

3QFY15 4QFY15 1QFY16 2QFY16 3QFY16 4QFY16 1QFY17 2QFY17 3QFY17 YoY % QoQ%
Net Advances 312269 330036 324063 323077 331915 324715 321283 327129 331636 -0.1% 1.4%
Deposits 462450 473840 471877 485206 490599 479792 465314 484321 510327 4.0% 5.4%
CASA Deposits 105018 113532 109683 116002 118125 123542 128270 131738 153705 30.1% 16.7%
CASA % 22.7 24.0 23.2 23.9 24.1 25.7 27.6 27.2 30.1 6.0 2.9

Assets Quality 3QFY15 4QFY15 1QFY16 2QFY16 3QFY16 4QFY16 1QFY17 2QFY17 3QFY17 YoY % QoQ%
GNPA (Rs) 10574 13040 13081 14021 19813 31638 32334 33315 34339 73% 3%
GNPA % 2.9 3.4 4.0 4.3 5.8 9.4 9.7 9.8 10.0 4.1 0.2
NNPA (Rs) 7556 8740 8888 9383 12940 20833 21494 21887 22296 72% 2%
NNPA % 2.4 2.7 2.7 2.9 3.9 6.4 6.7 6.7 6.7 2.8 0.0
PCR % 56.0 60.0 59.0 59.8 54.0 50.1 50.8 51.8 52.5 -1.4 0.8

Narnolia Securities Ltd 16

Please refer to the Disclaimers at the end of this Report

 N arnolia Securities Ltd
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Road | Kolkata-700 020 , Ph : 033-40501500
email: narnolia@narnolia.com,
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