Sector Update | 10 March 2019
Utilities
NTPC: Financials Snapshot (INR b)
Y/E MAR
2019E 2020E 2021E
Sales
EBITDA
NP
EPS (INR)
EPS Gr. (%)
BV/Sh. (INR
) (%)
RoE
RoCE (%)
P/E (x)
P/BV (x)
931.7 1,028.6 1,125.1
273.7 331.7 382.9
110.1 136.7 157.0
13.3
16.6
19.0
25.1
24.2
14.8
133.0 142.4 153.6
10.3
12.0
12.9
6.7
7.8
8.6
11.4
9.2
8.0
1.1
1.1
1.0
CERC tariff regulation 2019-24 is constructive
Raise earnings by 3-4% for NTPC and by 5-6% for PWGR; Re-iterate Buy
The Central Electricity Regulatory Commission (CERC) has notified the tariff regulations for
FY20-24. The regulations are applicable to thermal and hydro generation projects, and also
to transmission projects that are regulated by CERC (including all majority-owned central
PSUs and a few regulated private power projects). The tariff regulations are a benchmark
for state regulators to frame their respective state tariff policies.
Ensures continuing and reasonable returns on regulated assets…
PWGR:
Financials Snapshot (INR b)
Y/E MAR
2019E 2020E 2021E
Sales
335.2 380.0 409.4
EBITDA
299.4 341.1 367.9
95.5 108.7 118.4
NP
18.3 20.8 22.6
EPS (INR)
EPS Gr. (%)
10.4 13.9
8.8
BV/Sh. (INR )
115.2 127.9 141.9
16.7 17.1 16.8
RoE (%)
8.1
8.4
8.6
RoCE (%)
P/E (x)
10.2
9.0
8.3
P/BV (x)
1.6
1.5
1.3
NHPC: Financials Snapshot (INR b)
Y/E MAR
2019E 2020E 2021E
Net Sales
87.9 101.8 108.9
EBITDA
46.5 59.7 65.3
PAT
22.1 26.6 31.0
EPS (INR)
2.2
2.6
3.1
Gr. (%)
-9.9 20.4 16.6
BV/Sh (INR)
29.9 30.8 32.1
RoE (%)
7.4
8.7
9.8
RoCE (%)
5.6
7.3
7.9
P/E (x)
11.4
9.5
8.1
P/BV (x)
0.8
0.8
0.8
The regulations have kept regulated RoE unchanged at 15.5% (and 16.5% for
hydro assets) — the third-consecutive five-year tariff regulation period when
the regulators have not tinkered with regulated RoE. Thus, providing a strong
direction for long-term assured returns for developers and investors.
The two-part tariff structure has been retained (fixed charge for capital returns
based on plant availability and variable charge for covering the fuel cost).
The allowance of 85 kcal recognizes the loss in GCV of coal between ‘as
received’ and ‘as fired’ point. It is a welcome relief for coal-based plants.
O&M allowance for coal-based plants was hiked by more than ~8% over FY19
for the base period FY20, which recognizes impact of the recent wage increase
in public sector companies. Annual inflation in O&M allowance was, however,
cut from the ~6.3% earlier to 3.5% (but better than 3.2% proposed in the draft).
The O&M allowances have become more accommodative over the years. Water
charges and capital spares was already based on actuals (since the FY14
regulations). The new regulations will reimburse security expenses as well on
actuals. It will improve recovery and management of overhead cost for
regulated generation and transmission projects.
There is marginal increase in normative auxiliary and station heat rate allowance
for certain unit sizes of coal-based plants.
…with some tightening in operating norms
Availability of plants will be monitored separately for high (3-month) and low
demand (9-month) seasons. Availability will also be monitored for peak hours
(4-hour) and non-peak hours (20-hour) of each day. Any gap in availability
during high demand and peak periods will not be allowed to be recouped by
higher availability during low demand and non-peak season. The recovery of
fixed charge, which is based on availability of plants, has thus become stringent.
Plants will have to ensure ramp rates of 1% per minute else they will lose RoE of
0.25%. A higher than 1% ramp rate will earn 0.25% additional RoE, subject to a
cap of additional 1%.
Normative receivable days and coal inventory days for pit-head stations is cut by
15 days and 10 days, respectively.
Sanjay Jain – Research Analyst
(SanjayJain@motilaloswal.com@MotilalOswal.com); +91 22 6129 1523
Research Analyst: Dhruv Muchhal
(Dhruv.Muchhal@MotilalOswal.com); +91 22 6129 1549;
Aniket Mittal
(Aniket.Mittal@MotilalOswal.com)
Motilal Oswal research is available on www.motilaloswal.com/Institutional-Equities, Bloomberg, Thomson Reuters, Factset and S&P Capital.
Investors are advised to refer through important disclosures made at the last page of the Research Report.
8 August 2016
1

Utilities
Normative working capital interest rate is linked to MCLR (plus 350bp) v/s base
rate (plus 350bp). It will now be reset annually, unlike every five years in the
earlier regulations.
In case of plants that have completed their useful life and where regulated
equity was more than 30% of project cost, will be reset to 30%. This impacts
NTPC for some of its old plants. However, the provision is significantly relaxed
v/s the draft tariff regulations, which had called for a write-off of regulated
equity of old plants to ~5%.
Good balance between developers and DISCOMs
We believe the regulations have achieved a good balance between interest of
developers/investors and DISCOMs. Particularly, in the backdrop of the high losses
faced by DISCOMs and proclivity to assist them in some manner, and after the FY14
tariff regulations, which sharply cut earnings of generating companies (particularly
coal-based).
The regulations have maintained continuity in regulated RoE and the tariff structure,
addressing some of the genuine losses faced by developers (GCV, O&M). Rather
than succumbing to the pressure of cutting regulated RoE, which would have
provided only a marginally relief to DISCOMs (but significantly impacted IRRs for
developers), the tightening of operating norms for availability and ramp rates will
improve DISCOMs ability to better manage their power purchase cost as volatility in
the grid is rising due to renewables.
Removes uncertainty; positive for NTPC and Power Grid
The final tariff regulations remove a key overhang for regulated entities. Earnings
estimate for NTPC and Power Grid see an upgrade as there was no change in
regulated RoE (v/s expectations of a cut to 14%) and for factoring in changes
announced in the new tariff regulations; but, this was partly offset by building-in
higher working capital requirement due to delay in payment by DISCOMs. For
FY20/21E, NTPC’s consolidated PAT has been upgraded by 3-4% and Power Grid’s
has been upgraded by ~5-6%. NHPC’s estimates remain broadly unchanged.
NTPC — concerns receding, RoE improving, strong growth; Re-iterate Buy
With the uncertainty of regulations now behind, focus should now shift to core
performance, which we believe is turning around well. The fixed charge under-
recovery has started to decline as domestic coal availability has improved.
Recognizing the tightness in domestic coal availability, NTPC has planned for
increasing coal imports, which will avoid coal availability shocks seen in FY17/18.
Capitalization should also start to pick up pace now, which was partly hampered due
to coal availability issues. We expect regulated equity to grow at CAGR of ~14% over
FY18-21. Consolidated PAT is expected to increase at CAGR of ~14% to INR157b by
FY21E. RoE will improve from ~9% in FY18 to ~13% by FY21E as capitalization
outpaces capex and under-recoveries decline. The stock trades attractively at ~1.1x
FY20E P/BV for strong double-digit earnings growth and improving RoE profile. Our
revised DCF-based TP is INR197/share. Re-iterate Buy.
10 March 2019
2

Utilities
Power Grid — best RoE in the sector; valuations attractive; Re-iterate Buy
PWGR owns more than 90% of India’s inter-state transmission network. It has many
competitive advantages v/s private players due to its balance sheet strength,
negotiation with vendors, scale and reach. While new transmission orders have
slowed in recent years, we believe there is huge scope for long-term growth driven
by demand, renewables, increasing flexibility requirement and efficiency in the
market. PWGR is well positioned to benefit from future investment requirement.
PWGR’s RoEs are amongst the best in regulated entities. At CMP, the stock is trading
attractively at 1.5x FY20E P/BV for a RoE of ~16-17% and CoE of ~10-11%. If we were
to assume no growth after FY20, which means that PAT is available for dividend
distribution, the stock is trading at an attractive dividend yield of ~11-12% for an
assured return model and revenues backed by state-guarantees (G-Sec yield is ~7-
8%). PWGR has ~INR770b (incl. CWIP) of projects pending capitalization that
provides visibility of EPS growth of 11% CAGR over FY18-21E. Our revised DCF-based
TP is INR232/share. Re-iterate Buy.
NHPC — under-recoveries to decline; Maintain Buy
The tariff regulations do not address the wage hike impact for NHPC. This could be
allowed separately for NHPC, as was mentioned in the explanatory memorandum to
the Draft Tariff Regulations. NHPC is facing under-recoveries on revenue, due to
delay in approval of capital cost for five projects, and on cost, as the normative
O&M allowance is lower than actual. The capital cost approvals are in final stages
and management is hopeful the O&M under-recoveries will be bridged under the
new regulations. We expect consolidated PAT to grow at CAGR of ~7% over FY18-
21E on lower under-recoveries and building in the resumption of work at Lower
Subhanshari. Dividend yield is attractive at 5-6%. We value NHPC on DCF basis at TP
of INR31/share. Maintain Buy
Exhibit 1: Relative valuations
Rating
Powergrid
NTPC
JSW Energy
Tata Power
NHPC
Coal India
Buy
Buy
Neutral
Neutral
Buy
Buy
CMP
(INR)
187
150
70
70
25
235
TP
(INR)
232
197
73
69
31
281
Up/(dw) MCAP
(USD M)
%
24
13,709
31
17,349
4
1,617
0
2,636
24
3,902
20
20,792
FY18
16.5
10.7
3.0
5.3
2.4
19.2
EPS
FY19E
18.3
13.3
3.8
2.5
2.2
27.4
FY20E
20.8
16.6
4.6
6.6
2.6
29.0
P/E (x)
FY19E FY20E
10.2
9.0
11.2
9.1
18.7
15.3
27.6
10.5
11.4
9.5
8.6
8.1
P/B(x)
FY19E FY20E
1.6
1.5
1.1
1.1
1.0
1.0
1.1
1.0
0.8
0.8
7.1
6.5
RoE (%)
FY19E FY20E
16.7
17.1
10.3
12.0
5.5
6.5
4.3
10.3
7.4
8.7
84.1
83.7
Source: MOFSL, Company
10 March 2019
3

Utilities
Key changes in tariff regulations
Exhibit 2: Key changes in the final tariff regulations
FY 20-24
FY 14-19
RoE (%)
15.5%; 16.5% for storage based hydro
15.5%; 16.5% for storage based hydro
Additional RoE for early completion
Removed
0.5%
RoEs to increase/decrease based on benchmark
Ramp rate
-
ramp rate of 1% per minute
Useful life of hydro
40 years
35 years
Energy charge
Cost of limestone/other reagents included
-
> 25 years old plants: Capacity Charge
May get determined on actual generation
-
>25 years plants: Regulated equity
Capped at 30% of project cost
-
Special allowance
INR 0.95m/MW
INR 0.75m/MW escalated @6.35% p.a.
in lieu of R&M capex
Salvage value unchanged
10% of capital cost
10% of capital cost
Thermal
Thermal
Inventory: 10 days pit head; 20 days non-pit
Inventory: 15 days pit head; 30 days non-pit
head
head
Advances: 1 month
Advances: 1 month
SFO: 2 months
SFO: 2 months
Maintenance spares: 20% of O&M
Maintenance spares: 20% of O&M
Working capital
Receivables: 1.5 months
Receivables: 2 months
O&M expense: 1 month
O&M expense: 1 month
Hydro
Maintenance spares: 15% of O&M
Receivables: 1.5 months
O&M expense: 1 month
MCLR + 350bps
8-10% increase for coal and 6% decline for gas
plants in the base year i.e. FY20
3.5%
To be recovered separately
(not part of O&M norms)
85kcal/kg
INR 0.65/kWh: peak hours & 0.5/kWh: non-peak
for PLF>85%
200/250MW sets: 2,430 kCal/kWh
COD after FY09: 1.05* Design Heat Rate
5.75% (for >300MW, steam driven)
85%
AC system: >98.5%
HVDC bi-pole and back-to-back: >97.5%
1.5% per month after 45 days
50%
50%
50%
Hydro
Maintenance spares: 15% of O&M
Receivables: 2 months
O&M expense: 1 month
Base rate + 350 bps
Bank rate
O&M expense
a) Base year O&M expense
b) Escalation rate
c) Security expenses
Compensation for loss of GCV in
storage in Plant
PLF Incentive
Station Heat Rate
Auxiliary consumption
Normative PAF
PAF for transmission incentives
Late payment surcharge
Sharing of benefits
a) Other Income
b) SHR, Aux. and SFO
c) Finance cost
6.3%
-
-
INR 0.5/kWh for PLF >85%
200/250MW sets: 2,450 kCal/kWh
COD after FY09: 1.045* Design Heat Rate
5.25% (for >300MW, steam driven)
85%
AC system: >98.5%
HVDC bi-pole and back-to-back: >96%
1.5% per month after 60 days
40%
40%
Source: CERC
Others
Additional RoE for early completion:
Additional RoE of 0.5% for early
completion of projects can no longer be availed.
Ramp rate:
RoEs would increase/decrease based on a benchmark ramp rate of
1% per minute. Additional RoE of 0.25% would be earned for every incremental
10 March 2019
4

Utilities
1% ramp rate per minute above the benchmark. On the other hand, RoEs would
decrease 0.25% in case of failure to achieve the 1% benchmark rate.
Tariff for plants >25 years:
For projects completing 25 years of operation,
recovery of capacity charges may be based on scheduled generation agreed by
the generator and the DISCOM. In case of any non-agreement, the generator
would be free to sell the electricity in a manner it deems fit.
Special allowance for R&M capex:
Special allowance for R&M capex has been
fixed at INR 0.95m/MW for FY20-24. This is at similar levels to the implied R&M
allowance of INR 0.96m/MW for FY19 as per the previous tariff period.
Working capital:
Coal inventory norms for both pit head and non-pit head
stations are reduced. Receivables cut to 45 days v/s 60 days earlier.
Bank rate:
The bank rate is now defined as MCLR +350bp v/s the earlier Base
rate-based +350bp. Given lower bank rates and with MCLR of ~50bp lower than
the bank rate, working capital rates may be reset ~100-150bp lower.
O&M allowance:
O&M allowance has increased given the recent wage hike at
PSUs, in our view. Besides, it now excludes security charges, which will be paid
on actuals. However, annual inflation is only 3.5% p.a. (v/s 6.3% in previous
tariff) for coal-based plants.
PLF incentives:
PLF incentives have been categorized for peak and non-peak
generation. Plants would receive higher incentives of INR0.65/kWh for
generation during peak hours.
Sharing of other income:
Non-tariff income generated from rent of
land/buildings, sale of scrap and advertisements shall now be shared with
beneficiaries.
10 March 2019
5

10 March 2019
Utilities
Update | Sector: Utilities
NTPC
Buy
BSE SENSEX
36,671
S&P CNX
11,035
CMP: INR152
TP: INR197 (+29%)
Concerns receding
Capitalization to pick up pace; Re-iterate Buy
NTPC’s consolidated PAT estimates are upgraded by ~3-4% to INR137b/INR157b for
FY20E/21, factoring in the New Tariff Regulations.
Stock Info
Bloomberg
Equity Shares (m)
M.Cap.(INRb)/(USDb)
52-Week Range (INR)
1, 6, 12 Rel. Per (%)
12M Avg Val (INR M)
Free float (%)
NTPC IN
8,245
1256.2 / 17.9
180 / 128
10/-6/-18
1080
41.1
Positives in the regulation v/s the previous regulation
GCV allowance of ~85kCal will give a relief of INR11-12b. After adjusting for the
50% sharing of efficiency gains, net benefit to NTPC is estimated at ~INR5-6b.
O&M allowance hike and allowance of security expenses on actual basis should
help reduce O&M under-recoveries, boosting earnings.
The cut in regulated equity to 30% of the project cost for plants that have
completed their useful life and where regulated equity as % of project cost was
>30% will impact earnings by ~INR3-5b over FY20-21E.
The cut in working capital days on receivables and inventory for non-pit head
plants is estimated to reduce normative working capital by ~INR50b. While the
interest rate on working capital is also reset lower (from ~13% to ~12%), we
were already building in this in our estimates.
We are also conservatively building in under-recoveries of ~INR3b for the
tightening in availability norms and ramp rate requirements.
Negatives in the regulation v/s the previous regulation
Financials Snapshot (INR b)
Y/E MAR
2019E 2020E 2021E
931.7 1,028.6 1,125.1
Sales
273.7 331.7 382.9
EBITDA
110.1 136.7 157.0
NP
13.3
16.6
19.0
EPS (INR)
25.1
24.2
14.8
EPS Gr. (%)
133.0 142.4 153.6
BV/Sh. (INR )
RoE (%)
10.3
12.0
12.9
RoCE (%)
6.7
7.8
8.6
P/E (x)
11.4
9.2
8.0
P/BV (x)
1.1
1.1
1.0
Shareholding pattern (%)
As On
Dec-18 Sep-18 Dec-17
Promoter
58.9
61.8
62.3
DII
26.1
23.5
22.5
FII
11.7
11.6
11.8
Others
3.3
3.1
3.5
FII Includes depository receipts
Stock Performance (1-year)
NTPC
195
170
145
120
Sensex - Rebased
Our earnings estimates are also boosted by unchanged regulated RoE of 15.5% v/s
our expectation of cut to 14%. We have increased the working capital requirement
due to recent delays in payment by DISCOMs, partly offsetting the benefit of
regulations. Consolidated PAT/EPS is upgraded by ~3-4% to INR137b/INR157b and
INR16.6/INR19 per share for FY20E/21, factoring in the New Tariff Regulations.
We have increased the risk-free rate from 7% to 7.3% in our DCF-based valuation
model. The target price has increased marginally from INR195/share to
INR197/share.
Valuation and view
The uncertainty of regulations is now behind and focus should now shift to core
performance, which we believe is turning around well. The fixed charge under-
recovery has started to decline as domestic coal availability has improved.
Recognizing the tightness in domestic coal availability, NTPC has planned for
increasing coal imports, which will avoid coal availability shocks seen in FY17/18.
Capitalization should also start to pick up pace now, which was partly hampered
due to coal availability issues. We expect regulated equity to grow by CAGR of
~14% over FY18-21. Consolidated PAT is expected to increase by CAGR of ~14% to
INR157b by FY21E. RoE will improve from ~9% in FY18 to ~13% by FY21E as
capitalization outpaces capex and under-recoveries decline. The stock trades
attractively at ~1.1x FY20E P/BV for strong double-digit earnings growth and
improving RoE profile. Our revised DCF-based TP is INR197/share.
Re-iterate Buy.
10 March 2019
6

Utilities
Exhibit 3: NTPC’s DCF valuation
Case 1
Rf. Nominal risk free rate
B. Beta
Km. Equity Risk premium
Cost of equity (Rf+Km x B)
DCFE
A. FY19-22
RoE
(%)
14.00
12.00
Re-Invst
(%)
50
25
Growth
(%)
7.0
3.0
(%)
(%)
(%)
INR m
1,28,800
6.50
0.79
5.00
10.45
INR/sh.
16
(%)
(%)
(%)
INR m
1,27,370
Base
7.30
0.79
5.00
11.25
INR/sh.
15
(%)
(%)
(%)
INR m
1,27,017
Case 2
7.50
0.79
5.00
11.45
INR/sh.
15
B. FY25-32
C. Terminal Value
Target price (A+B+C)
CMP
Upside (%)
BV
P/BV
6,78,044
10,37,009
82
126
224
152
46.8
126
1.8
6,40,741
8,52,588
78
103
197
152
29.0
126
1.6
6,31,834
8,13,197
77
99
191
152
25.1
126
1.5
Source: MOFSL, Company
10 March 2019
7

Utilities
Financials and Valuations
Income Statement
Y/E March
Net Sales
Change (%)
Expenditure
EBITDA
Margin (%)
Depreciation
EBIT
Interest
Other Income
XO reported
Profit before Tax
Tax
Tax Rate (%)
Share of JVs
Minority int
PAT
Prior period
Adj. PAT
Change (%)
2016
727,055
-9.8
547,486
179,569
24.7
52,240
127,329
33,137
10,576
0
104,768
-1,628
-1.6
1,412
-204
108,012
-11,055
96,957
14.9
2017
817,171
12.4
598,870
218,300
26.7
60,099
158,201
36,511
9,668
0
131,358
30,467
23.2
6,247
-57
107,196
-8,479
98,717
1.8
2018
877,622
7.4
647,813
229,808
26.2
74,599
155,209
44,346
15,583
0
126,446
25,881
20.5
4,451
-425
105,440
-17,448
87,992
-10.9
2019E
931,663
6.2
657,936
273,727
29.4
82,950
190,776
58,989
6,958
0
138,745
33,802
24.4
5,468
-57
110,468
-409
110,060
25.1
2020E
1,028,632
10.4
696,941
331,691
32.2
95,976
235,715
71,301
8,308
0
172,722
43,343
25.1
7,312
-57
136,748
0
136,748
24.2
(INR Million)
2021E
1,125,142
9.4
742,275
382,868
34.0
110,927
271,941
84,045
9,080
0
196,976
49,774
25.3
9,700
-57
156,959
0
156,959
14.8
Balance Sheet
Y/E March
Share Capital
Reserves
Net Worth
Minority Interest
Loans
Deferred Tax Liability
Capital Employed
Gross Block
Less: Accum. Deprn.
Net Fixed Assets
Capital WIP
Investments
Current Assets
Inventory
Account Receivables
Cash and Bank Balance
Loans and Advances
Others
Current Liabilities
Payables
Other current liabilities
Net Working Capital
Application of Funds
E: MOFSL Estimates
2016
82,455
809,511
891,965
8,928
1,120,194
14,094
2,035,181
1,632,140
587,180
1,044,959
815,497
148
543,886
79,592
101,740
57,370
202,075
103,110
369,310
68,266
301,044
174,577
2,035,181
2017
82,455
895,926
978,380
8,033
1,137,551
14,849
2,138,812
1,170,879
125,562
1,045,317
868,957
78,023
492,677
65,861
89,995
33,015
6,133
297,674
346,162
55,859
290,303
146,515
2,138,812
2018
82,455
953,180
1,035,635
9,478
1,300,143
24,081
2,369,337
1,501,531
206,147
1,295,385
820,931
92,515
534,851
61,403
88,122
43,876
6,931
334,519
374,344
67,309
307,035
160,507
2,369,337
2019E
82,455
1,014,176
1,096,630
9,478
1,389,250
24,081
2,519,439
1,781,547
289,097
1,492,450
772,425
97,765
524,024
68,480
90,777
23,317
6,931
334,519
367,225
60,189
307,035
156,800
2,519,439
2020E
82,455
1,091,557
1,174,011
9,478
1,447,474
24,081
2,655,044
2,200,325
385,074
1,815,251
559,648
102,736
549,874
74,238
98,645
35,541
6,931
334,519
372,465
65,430
307,035
177,409
2,655,044
(INR Million)
2021E
82,455
1,184,202
1,266,656
9,478
1,432,952
24,081
2,733,167
2,583,059
496,001
2,087,058
343,208
102,736
578,677
82,035
107,923
47,269
6,931
334,519
378,511
71,476
307,035
200,166
2,733,167
10 March 2019
8

Utilities
Financials and Valuations
Ratios
Y/E March
Basic (INR)
EPS
Cash EPS
BV/Share
DPS
Payout (%)
Valuation (x)
P/E
Cash P/E
P/BV
EV/EBITDA
Dividend Yield (%)
Return Ratios (%)
EBITDA Margins (%)
Net Profit Margins (%)
RoE
RoIC (Post-tax)
RoCE (Post-tax)
Working Capital Ratios
Debtor (Days)
Inventory (Days)
Payable (Days)
Leverage Ratio (x)
Current Ratio
Interest Cover Ratio
Net Debt/EBITDA
Net Debt/Equity
2016
11.8
19.4
108.2
3.4
28.5
11.1
6.7
1.2
11.9
2.6
24.7
14.9
11.3
11.8
7.2
51
40
34
1.5
4.2
5.9
1.2
2017
12.0
20.3
118.7
4.8
39.9
12.7
7.5
1.3
10.8
3.1
26.7
13.1
10.6
10.5
6.6
40
29
25
1.4
4.6
5.1
1.1
2018
10.7
21.8
125.6
4.5
42.2
14.3
7.0
1.2
10.9
3.0
26.2
12.0
8.7
9.6
6.4
37
26
28
1.4
3.9
5.5
1.2
2019E
13.3
23.5
133.0
5.0
37.5
11.4
6.5
1.1
9.6
3.3
29.4
11.9
10.3
9.5
6.7
36
27
24
1.4
3.4
5.0
1.2
2020E
16.6
28.2
142.4
6.0
36.2
9.2
5.4
1.1
8.0
3.9
32.2
13.3
12.0
9.9
7.8
35
26
23
1.5
3.4
4.3
1.2
2021E
19.0
32.5
153.6
6.5
34.1
8.0
4.7
1.0
6.9
4.3
34.0
14.0
12.9
9.7
8.6
35
27
23
1.5
3.3
3.6
1.1
Cash Flow Statement
Y/E March
Profit/(Loss) before Tax
Interest
Depreciation
(Inc)/Dec in WC
Tax paid
others
CF from Operations
Capex
(Pur)/sale of Invest.
Acquisition in subs.
Int. & Div. Income
Others
CF from Investments
Issue of Shares
Inc/(Dec) in Debt
finance cost
Dividend (incl. tax)
Others
CF from Fin. Activity
Inc/Dec of Cash
Add: Beginning Balance
Closing Balance
E: MOFSL Estimates
2016
101,035
41,090
61,534
-36,422
-14,584
1,452
154,106
-232,470
16,536
0
9,528
-16,514
-222,920
80,528
-33,513
1,252
-35,206
-104,021
161,390
57,369
-83,473
(INR Million)
2017
137,606
35,691
60,099
-2,073
-26,263
-3,395
201,666
-243,451
3,436
-12,002
2,707
-8,262
-257,573
150,466
-43,269
0
31,552
-24,355
57,369
33,015
-75,645
2018
132,417
44,160
74,599
-58,298
19,257
-15,508
196,627
-187,559
0
-11,531
3,033
-42
-196,099
145,059
-48,669
0
10,333
10,861
33,015
43,876
-86,058
2019E
138,745
58,989
82,950
-16,851
-33,802
-6,958
223,074
-231,511
-5,250
6,958
5,525
-224,277
89,107
-58,989
-49,473
-19,355
-20,559
43,876
23,317
2020E
172,722
71,301
95,976
-8,386
-43,343
-8,308
279,962
-206,000
-4,971
8,308
7,369
-195,294
58,224
-71,301
-59,367
-72,444
12,224
23,317
35,541
2021E
196,976
84,045
110,927
-11,029
-49,774
-9,080
322,064
-166,293
0
9,080
9,757
-147,456
-14,522
-84,045
-64,315
-162,881
11,727
35,541
47,269
10 March 2019
9

Power Grid
BSE SENSEX
36,671
S&P CNX
11,035
10 March 2019
Utilities
Update | Sector: Utilities
CMP: INR187
TP: INR232(+24%)
Buy
Best RoE in the sector
Valuations attractive; Re-iterate Buy
PWGR’s consolidated PAT estimates are upgraded by ~5-6% to INR109b/INR118b for
FY20E/21, factoring in the new tariff regulations.
PWGR IN
5,232
978.8 / 14
217 / 173
1/0/-14
1286
43.7
Stock Info
Bloomberg
Equity Shares (m)
M.Cap.(INRb)/(USDb)
52-Week Range (INR)
1, 6, 12 Rel. Per (%)
12M Avg Val (INR M)
Free float (%)
Positives in the regulation v/s the previous regulation
The increase in O&M allowance will offset the drag of recent wage hikes.
Negatives in the regulation v/s the previous regulation
Financials Snapshot (INR b)
Y/E MAR
2019E 2020E 2021E
Sales
335.2 380.0 409.4
EBITDA
299.4 341.1 367.9
95.5 108.7 118.4
NP
18.3
20.8
22.6
EPS (INR)
EPS Gr. (%)
10.4
13.9
8.8
BV/Sh. (INR )
115.2 127.9 141.9
16.7
17.1
16.8
RoE (%)
8.1
8.4
8.6
RoCE (%)
P/E (x)
10.2
9.0
8.3
P/BV (x)
1.6
1.5
1.3
Shareholding pattern (%)
As On
Promoter
DII
FII
Others
Dec-18 Sep-18 Dec-17
56.3
15.3
24.0
4.4
56.3
15.4
23.6
4.7
56.9
12.0
24.4
6.7
The cut in working capital days on receivables and normative interest rate on
working capital has a marginal impact on estimates.
While the availability factor for HVDC lines was increased, it has now shifted
from monthly to annual availability. Hence, we expect no impact.
Our earnings estimates are also boosted by unchanged regulated RoE of 15.5% v/s
our expectation of a cut to 14%. We have increased the working capital
requirement due to recent delays in payment by DISCOMs, partly offsetting the
benefit of regulations. Consolidated PAT/EPS is upgraded by ~5-6% to
INR109b/INR118b and INR20.8/INR22.6 per share for FY20E/21, factoring in the
new tariff regulations.
We have increased the risk-free rate from 7% to 7.3% in DCF-based valuation
model. The target price has increased marginally from INR231/share to
INR232/share.
Valuation and view
PWGR owns more than 90% of India’s inter-state transmission network. It has
many competitive advantages v/s private players due to its balance sheet
strength, negotiation with vendors, scale and reach. While new transmission
orders have slowed in recent years, we believe there is huge scope for long-term
growth driven by demand, renewables, increasing flexibility requirement and
efficiency in the market. PWGR is well positioned to benefit from future
investment requirement. At CMP, the stock is trading attractively at 1.5x FY20E
P/BV for a RoE of ~16-17%, while cost of equity (CoE) is ~11%. This implies that
valuations are ignoring growth. If we were to assume no growth after FY20, which
means that PAT is available for dividend distribution, the stock is trading at an
attractive dividend yield of ~11-12% for an assured return model and revenues
backed by state-guarantees (G-Sec yield is ~7 to 8%). PWGR has ~INR770b (incl.
CWIP) of projects pending capitalization that provide visibility of EPS growth of
11% CAGR over FY18-21E. Our revised DCF-based TP is INR232/share.
Re-iterate
Buy.
FII Includes depository receipts
Stock Performance (1-year)
Power Grid Corpn
Sensex - Rebased
240
210
180
150
10 March 2019
10

Utilities
Exhibit 4: Power Grid’s DCF valuation
Case 1
Rf. Nominal risk free rate
B. Beta
Km. Equity Risk premium
Cost of equity (Rf+Km x B)
DCFE
A. FY19-22
RoE
(%)
14.00
12.00
Re-Invst
(%)
35
20
Growth
(%)
4.9
2.4
(%)
(%)
(%)
INR m
90,838
6.50
0.75
5.00
10.25
INR/sh.
17
(%)
(%)
(%)
INR m
89,858
Base
7.30
0.75
5.00
11.05
INR/sh.
17
(%)
(%)
(%)
INR m
89,016
Case 2
8.00
0.75
5.00
11.75
INR/sh.
17
B. FY25-32
C. Terminal Value
Target price (A+B+C)
CMP
Upside (%)
BV
P/BV
6,05,287
6,65,920
116
127
260
187
39.2
128
2.0
5,73,110
5,50,119
110
105
232
187
24.0
128
1.8
5,46,772
4,69,012
105
90
211
187
12.9
128
1.7
Source: MOFSL, Company
10 March 2019
11

Utilities
Financials and Valuations
Income Statement
Y/E March
Net Sales
Change (%)
EBITDA
% of Net Sales
Depreciation
Interest
Other Income
PBT before EO
EO income (expense)
PBT after EO
Tax
Rate (%)
Reported PAT
Share of JVs and asso.
Adjusted PAT
Change (%)
2016
206,521
17.0
182,581
88.4
61,818
50,862
4,663
74,563
0
74,563
16,129
21.6
58,434
58,434
14.8
2017
257,039
24.5
226,572
88.1
77,223
62,036
5,838
93,153
0
93,153
20,063
21.5
73,090
1,418
74,507
27.5
2018
299,415
16.5
263,119
87.9
92,310
73,241
4,891
102,459
0
102,459
21,955
21.4
80,504
1,479
86,513
16.1
2019E
335,191
11.9
299,420
89.3
103,437
86,599
10,082
119,466
0
119,466
25,421
21.3
94,045
1,448
95,493
10.4
2020E
380,045
13.4
341,079
89.7
115,976
93,518
4,321
135,905
0
135,905
28,635
21.1
107,270
1,464
108,734
13.9
(INR Million)
2021E
409,398
7.7
367,857
89.9
126,265
98,192
4,700
148,100
0
148,100
31,206
21.1
116,895
1,456
118,351
8.8
Balance Sheet
Y/E March
Share Capital
Reserves
Net Worth
Loans
Deferred Rev. & tax
Capital Employed
Gross Fixed Assets
Less: Depreciation
Net Fixed Assets
Capital WIP
Investments
Other Assets
Inventory
Debtors
Cash & Bank Balance
Other Current Assets
Loans & Advances
Other Liabilities
Net Current Assets
Application of Funds
E: MOFSL Estimates
2016
52,316
387,383
439,699
1,085,449
82,169
1,607,318
1,214,908
63,965
1,150,942
354,021
9,185
278,769
109,163
27,395
22,434
82,260
37,518
185,600
93,170
1,607,318
2017
52,316
446,339
498,655
1,189,879
74,184
1,762,718
1,519,616
142,837
1,376,779
296,750
11,650
271,272
94,963
31,319
33,536
71,952
39,501
193,732
77,539
1,762,718
2018
52,316
491,944
544,260
1,315,030
74,509
1,933,798
1,798,900
236,914
1,561,986
289,496
12,240
279,548
97,683
36,400
21,890
85,246
38,329
209,468
70,080
1,933,801
2019E
52,316
550,141
602,457
1,415,907
74,509
2,092,873
2,056,304
340,351
1,715,952
277,589
12,240
295,300
94,174
48,919
18,516
94,947
38,743
208,205
87,094
2,092,876
2020E
52,316
617,056
669,372
1,453,135
74,509
2,197,015
2,303,619
456,327
1,847,292
226,682
12,240
297,832
82,046
46,958
24,598
110,418
33,812
187,027
110,805
2,197,018
(INR Million)
2021E
52,316
689,925
742,240
1,483,302
74,509
2,300,051
2,536,261
582,592
1,953,669
196,939
12,240
323,860
83,271
55,715
32,440
118,623
33,812
186,654
137,206
2,300,054
10 March 2019
12

Utilities
Financials and Valuations
Ratios
Y/E March
Basic (INR)
EPS
Growth (%)
Cash EPS
Book Value
DPS
Div.Payout (incl. Tax.)
Valuation (x)
P/E
Cash P/E
EV/EBITDA
Price/Book Value
Dividend Yield (%)
Profitability Ratios (%)
RoE
RoCE
RoIC
Turnover Ratios
Debtors (Days)
Inventory (Days)
Current Liabilities (Days)
Asset Turnover (x)
Leverage Ratio
Net Debt/EBITDA
Debt/Equity (x)
2016
11.17
14.8
23.0
84.0
2.1
0.0
16.7
8.1
11.2
2.2
1.1
14.2
6.5
8.6
48
94
160
0.2
5.8
2.5
2017E
14.24
27.5
29.0
95.3
2.5
21.0
13.1
6.4
9.4
2.0
1.3
15.9
7.2
8.9
44
70
142
0.2
5.1
2.4
2018E
16.54
16.1
34.2
104.0
5.8
44.2
11.3
5.5
8.6
1.8
3.1
16.6
7.5
8.9
44
64
136
0.2
4.9
2.4
2019E
18.3
10.4
38.0
115.2
5.9
40.0
10.2
4.9
7.9
1.6
3.2
16.7
8.1
9.1
53
59
131
0.2
4.7
2.4
2020E
20.8
13.9
43.0
127.9
6.7
40.0
9.0
4.4
7.1
1.5
3.6
17.1
8.4
9.6
45
52
118
0.2
4.2
2.2
2021E
22.6
8.8
46.8
141.9
7.3
40.0
8.3
4.0
6.6
1.3
3.9
16.8
8.6
9.6
50
50
111
0.2
3.9
2.0
Cash Flow Statement
Y/E March
PBT before EO Items
Depreciation
Interest
Others
(Inc)/Dec in WC
Direct Taxes Paid
CF from Operations
(Inc)/Dec in FA
(Pur)/Sale of Investments
CF from Investments
(Inc)/Dec in Debt
Interest Paid
Dividend Paid
CF from Fin. Activity
Inc/Dec of Cash
Add: Beginning Balance
Closing Balance
E: MOFSL Estimates
2016
75,597
61,818
50,862
-4,730
-19,310
-14,156
150,082
-216,795
1,030
-215,765
117,171
-47,584
-13,379
56,208
-9,475
31,909
22,434
2017E
94,369
77,223
62,036
-3,264
4,495
-18,714
216,144
-239,244
495
-238,749
112,506
-57,000
-15,921
39,586
16,980
16,556
33,536
2018
103,938
92,310
73,241
-3,616
-16,181
-22,591
227,101
-261,799
4,784
-257,015
119,924
-70,480
-36,598
12,847
-17,067
38,957
21,890
2019E
119,466
103,437
86,599
-10,082
-20,388
-25,421
253,610
-245,497
11,530
-233,967
100,878
-86,599
-37,296
-23,017
-3,374
21,890
18,516
2020E
135,905
115,976
93,518
-4,321
-17,628
-28,635
294,816
-196,408
5,784
-190,623
37,227
-93,518
-41,819
-98,110
6,082
18,516
24,598
(INR Million)
2021E
148,100
126,265
98,192
-4,700
-18,560
-31,206
318,092
-202,900
6,156
-196,743
30,167
-98,192
-45,482
-113,507
7,842
24,598
32,440
10 March 2019
13

10 March 2019
Utilities
Update | Sector: Utilities
NHPC
Buy
BSE SENSEX
36,671
S&P CNX
11,035
CMP: INR25
TP: INR31 (+24%)
Under-recoveries to decline; Maintain Buy
NHPC’s earnings estimates are broadly unchanged. The benefit of increase in secondary
energy incentive rate is partly offset by impact of tightening in working capital norms.
NHPC IN
10,045
252.1 / 3.6
30 / 22
6/1/-16
136
26.2
Stock Info
Bloomberg
Equity Shares (m)
M.Cap.(INRb)/(USDb)
52-Week Range (INR)
1, 6, 12 Rel. Per (%)
12M Avg Val (INR M)
Free float (%)
Positives in the regulation v/s the previous regulation
Increase in secondary energy incentive from INR0.9/kWh to INR1.2/kWh.
Relaxed norms for recovery of shortfall in actual generation v/s the design
energy.
Negatives in the regulation v/s the previous regulation
Financials Snapshot (INR b)
Y/E MAR
2019E 2020E 2021E
Net Sales
87.9 101.8 108.9
EBITDA
46.5
59.7
65.3
PAT
22.1
26.6
31.0
EPS (INR)
2.2
2.6
3.1
Gr. (%)
-9.9
20.4
16.6
BV/Sh (INR)
29.9
30.8
32.1
RoE (%)
7.4
8.7
9.8
RoCE (%)
5.6
7.3
7.9
P/E (x)
11.4
9.5
8.1
P/BV (x)
0.8
0.8
0.8
Shareholding pattern (%)
Dec-18 Sep-18 Dec-17
As On
Promoter
DII
FII
Others
73.7
11.3
4.6
10.5
73.7
11.2
4.5
10.6
74.0
10.7
4.5
10.8
The cut in working capital days on receivables and normative interest rate on
working capital has a marginal impact on estimates.
We have increased the risk-free rate from 7% to 7.3% in our DCF-based
valuation model. The target price has decreased marginally from INR32/share
to INR31/share.
Valuation and view
The tariff regulations do not address the wage hike impact for NHPC. This could be
allowed separately for NHPC, as was mentioned in the explanatory memorandum
to the Draft Tariff Regulations. NHPC is facing under-recoveries on revenue, due to
delay in approval of capital cost for five projects, and on cost, as the normative
O&M allowance is lower than the actual. The capital cost approvals are in final
stages and management is hopeful the O&M under-recoveries will be bridged
under the new regulations. We expect consolidated PAT to grow at CAGR of ~7%
over FY18-21E on lower under-recoveries and building in the resumption of work
at Lower Subhanshari. Dividend yield is attractive at 5-6%. We value NHPC on DCF
basis at TP of INR31/share. Maintain Buy.
FII Includes depository receipts
Stock Performance (1-year)
NHPC Ltd
Sensex - Rebased
32
28
24
20
10 March 2019
14

Utilities
Exhibit 5: NHPC’s DCF valuation
Case 1
Rf. Nominal risk free rate
B. Beta
Km. Equity Risk premium
Cost of equity (Rf+Km x B)
DCFE
A. FY19-22
Reg. RoE
(%)
15.50
12.00
Re-Invst
(%)
30
20
Growth
(%)
4.7
2.4
(%)
(%)
(%)
INR m
30,760
6.50
1.00
5.00
11.50
INR/sh.
3
(%)
(%)
(%)
INR m
30,438
Base
7.30
1.00
5.00
12.30
INR/sh.
3
(%)
(%)
(%)
INR m
30,358
Case 2
7.50
1.00
5.00
12.50
INR/sh.
3
B. FY23-30
C. Terminal Value
DCF value per share
Dividend for FY19/20E
Target price per share
CMP
Upside (%)
BV
P/BV
1,48,115
1,42,292
15
14
32
3
35
25
38.3
31
1.0
1,41,284
1,20,040
14
12
29
2
31
25
15.7
31
0.9
1,39,641
1,15,177
14
11
28
25
13.1
31
0.9
Source: MOFSL, Company
10 March 2019
15

Utilities
Financials and Valuations
Income Statement
Y/E March
Net Sales
Change (%)
Total Expenses
EBITDA
% of Net Sales
Depn. & Amortization
EBIT
Net Interest
Other income
Rate regulated
PBT before EO
EO expense
PBT after EO
Tax
Rate (%)
Reported PAT
Minority, JV & Asso.
Adjusted PAT
Change (%)
2016
83,540
1.3
35,323
48,218
57.7
14,320
33,898
11,182
10,924
5,509
39,149
0
39,149
10,003
25.5
29,147
-3,130
26,017
6.8
2017
86,231
3.2
37,798
48,433
56.2
14,618
33,816
10,734
15,038
7,188
45,307
0
45,307
10,531
23.2
34,776
-4,482
30,294
16.4
2018
77,512
-10.1
35,494
42,018
54.2
14,791
27,227
9,226
11,014
7,362
36,376
0
36,376
8,629
23.7
27,748
-2,709
25,039
-17.3
2019E
87,879
13.4
41,408
46,471
52.9
16,588
29,883
9,109
8,082
5,032
33,888
0
33,888
8,325
24.6
25,563
-3,485
22,078
-11.8
2020E
101,845
15.9
42,176
59,669
58.6
17,189
42,480
11,282
6,393
2,140
39,729
0
39,729
9,720
24.5
30,009
-3,434
26,576
20.4
(INR Million)
2021E
108,875
6.9
43,543
65,332
60.0
17,189
48,143
11,115
6,029
2,140
45,196
0
45,196
10,896
24.1
34,300
-3,322
30,978
16.6
Balance Sheet
Y/E March
Share Capital
Reserves
Net Worth
Minority Interest
Total Loans
Deferred Tax Liability
Capital Employed
Gross Block
Less: Accum. Deprn.
Net Fixed Assets
Capital WIP
Goodwill
Investments
Curr. Assets
Inventories
Account Receivables
Cash and Bank Balance
Others
Curr. Liability & Prov.
Account Payables
Provisions & Others
Net Curr. Assets
Appl. of Funds
E: MOFSL Estimates
2016
110,707
205,720
316,427
31,681
199,382
15,136
562,627
342,331
116,191
226,140
167,416
0
5,999
228,446
928
19,045
72,847
135,626
65,375
1,304
64,070
163,071
562,627
2017
102,593
187,555
290,148
33,822
192,267
16,653
532,891
353,055
130,784
222,271
175,876
0
10,200
193,424
1,008
18,540
34,725
139,152
68,881
1,576
67,305
124,544
532,891
2018
102,593
197,586
300,179
29,349
186,021
17,109
532,658
255,977
44,204
211,772
190,871
0
11,248
189,985
1,047
13,460
33,191
142,287
71,219
1,838
69,381
118,767
532,658
2019E
100,450
199,534
299,984
29,440
186,973
17,109
533,506
315,448
60,792
254,656
155,578
0
11,247
183,244
1,047
14,682
20,359
147,156
71,219
1,838
69,381
112,026
533,506
2020E
100,450
209,234
309,684
28,349
184,323
17,109
539,465
315,448
77,981
237,467
178,578
0
11,246
183,393
1,047
16,973
16,242
149,132
71,219
1,838
69,381
112,175
539,465
2021E
100,450
222,131
322,581
27,147
184,072
17,109
550,909
315,448
95,171
220,277
205,578
0
11,245
185,027
1,047
18,121
14,752
151,108
71,219
1,838
69,381
113,809
550,909
10 March 2019
16

Utilities
Financials and Valuations
Ratios
2016
Basic (INR)
EPS
Growth
Cash EPS
BV/Share
DPS
Payout (%)
Valuation (x)
P/E
Cash P/E
P/BV
EV/EBITDA
Dividend Yield (%)
Return Ratios (%)
EBITDA Margins (%)
Net Profit Margins (%)
RoE
RoCE (post-tax)
RoIC (post-tax)
Working Capital Ratios
Fixed Asset Turnover (x)
Asset Turnover (x)
Inventory (Days)
Debtor (Days)
Payables (Days)
Leverage Ratio (x)
Current Ratio
Net Debt/EBITDA
Debt/Equity
2.4
6.8
3.6
28.6
1.3
67.6
10.7
6.9
0.88
9.1
5.2
57.7
31.1
8.2
6.2
8.0
0.4
0.1
4
83
6
2017
3.0
25.6
4.4
28.3
2.5
98.9
9.9
6.7
1.04
10.2
8.4
56.2
35.1
10.0
7.0
8.3
0.4
0.2
4
78
7
2018
2.4
-17.3
3.9
29.3
1.2
55.1
10.3
6.5
0.86
10.5
4.9
54.2
32.3
8.5
5.6
6.8
0.4
0.1
5
63
9
2019E
2.2
-9.9
3.8
29.9
1.4
73.7
11.4
6.5
0.84
9.6
5.4
52.9
25.1
7.4
5.6
7.0
0.3
0.2
4
61
8
2020E
2.6
20.4
4.4
30.8
1.4
63.5
9.5
5.8
0.81
7.5
5.6
58.6
26.1
8.7
7.3
9.4
0.4
0.2
4
61
7
2021E
3.1
16.6
4.8
32.1
1.5
58.4
8.1
5.2
0.78
6.9
6.0
60.0
28.5
9.8
7.9
11.2
0.5
0.2
4
61
6
2.6
0.4
2016
48,218
11,134
-30,491
-8,718
20,143
-21,470
7,667
6,341
-7,462
0
-6,184
-15,020
-18,952
28,347
-11,809
872
71,975
72,847
3.3
0.5
2017
48,433
35,873
-11,834
-10,808
61,664
-15,870
7,024
-9,799
-18,645
-26,259
-8,364
-13,912
-32,737
131
-81,141
-38,122
72,847
34,725
3.6
0.5
2018
42,018
6,409
10,852
-8,301
50,978
-15,673
4,167
-2,377
-13,883
0
43,550
-11,440
-22,310
-48,429
-38,629
-1,534
34,725
33,191
3.6
0.5
2019E
46,471
-1,222
5,032
-8,325
41,956
-24,178
8,082
-4,868
-20,964
-6,000
952
-9,109
-19,666
0
-33,823
-12,831
33,191
20,359
2.8
0.5
2020E
59,669
-2,290
2,140
-9,720
49,798
-23,000
6,393
-1,976
-18,583
0
-2,650
-11,282
-21,399
0
-35,332
-4,117
20,359
16,242
2.6
0.5
(INR Million)
2021E
65,332
-1,148
2,140
-10,896
55,428
-27,000
6,029
-1,976
-22,947
0
-250
-11,115
-22,605
0
-33,971
-1,490
16,242
14,752
Cash flow statement
Y/E March
EBITDA
WC
Others
Direct taxes (net)
CF from Op. Activity
Capex
Interest income
Investments
Others
CF from Inv. Activity
Share capital
Borrowings
Finance cost
Dividend
Others
CF from Fin. Activity
(Inc)/Dec in Cash
Opening balance
Closing balance
E: MOFSL Estimates
10 March 2019
17

Utilities
NOTES
10 March 2019
18

Utilities
Explanation of Investment Rating
Investment Rating
Expected return (over 12-month)
BUY
>=15%
SELL
< - 10%
NEUTRAL
< - 10 % to 15%
UNDER REVIEW
Rating may undergo a change
NOT RATED
We have forward looking estimates for the stock but we refrain from assigning recommendation
*In case the recommendation given by the Research Analyst is inconsistent with the investment rating legend for a continuous period of 30 days, the Research Analyst shall within
following 30 days take appropriate measures to make the recommendation consistent with the investment rating legend.
Disclosures
The following Disclosures are being made in compliance with the SEBI Research Analyst Regulations 2014 (herein after referred to as the Regulations).
Motilal Oswal Securities Ltd. (MOSL)* is a SEBI Registered Research Analyst having registration no. INH000000412. MOSL, the Research Entity (RE) as defined in the Regulations,
is engaged in the business of providing Stock broking services, Investment Advisory Services, Depository participant services & distribution of various financial products. MOSL is a
subsidiary company of Motilal Oswal Financial Service Ltd. (MOFSL). MOFSL is a listed public company, the details in respect of which are available on
www.motilaloswal.com.
MOSL is registered with the Securities & Exchange Board of India (SEBI) and is a registered Trading Member with National Stock Exchange of India Ltd. (NSE) and Bombay Stock
Exchange Limited (BSE), Multi Commodity Exchange of India (MCX) & National Commodity & Derivatives Exchange Ltd. (NCDEX) for its stock broking activities & is Depository
participant with Central Depository Services Limited (CDSL) & National Securities Depository Limited (NSDL) and is member of Association of Mutual Funds of India (AMFI) for
distribution of financial products. Details of associate entities of Motilal Oswal Securities Limited are available on the website at
http://onlinereports.motilaloswal.com/Dormant/documents/List%20of%20Associate%20companies.pdf
MOSL and its associate company(ies), their directors and Research Analyst and their relatives may; (a) from time to time, have a long or short position in, act as principal in, and buy
or sell the securities or derivatives thereof of companies mentioned herein. (b) be engaged in any other transaction involving such securities and earn brokerage or other
compensation or act as a market maker in the financial instruments of the company(ies) discussed herein or act as an advisor or lender/borrower to such company(ies) or may have
any other potential conflict of interests with respect to any recommendation and other related information and opinions.; however the same shall have no bearing whatsoever on the
specific recommendations made by the analyst(s), as the recommendations made by the analyst(s) are completely independent of the views of the associates of MOSL even though
there might exist an inherent conflict of interest in some of the stocks mentioned in the research report
MOSL and / or its affiliates do and seek to do business including investment banking with companies covered in its research reports. As a result, the recipients of this report should
be aware that MOSL may have a potential conflict of interest that may affect the objectivity of this report. Compensation of Research Analysts is not based on any specific merchant
banking, investment banking or brokerage service transactions. Details of pending Enquiry Proceedings of Motilal Oswal Securities Limited are available on the website at
https://galaxy.motilaloswal.com/ResearchAnalyst/PublishViewLitigation.aspx
A graph of daily closing prices of securities is available at
www.nseindia.com, www.bseindia.com.
Research Analyst views on Subject Company may vary based on Fundamental
research and Technical Research. Proprietary trading desk of MOSL or its associates maintains arm’s length distance with Research Team as all the activities are segregated from
MOSL research activity and therefore it can have an independent view with regards to Subject Company for which Research Team have expressed their views.
Regional Disclosures (outside India)
This report is not directed or intended for distribution to or use by any person or entity resident in a state, country or any jurisdiction, where such distribution, publication, availability or
use would be contrary to law, regulation or which would subject MOSL & its group companies to registration or licensing requirements within such jurisdictions.
For Hong Kong:
This report is distributed in Hong Kong by Motilal Oswal capital Markets (Hong Kong) Private Limited, a licensed corporation (CE AYY-301) licensed and regulated by the Hong Kong
Securities and Futures Commission (SFC) pursuant to the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong) “SFO”. As per SEBI (Research Analyst
Regulations) 2014 Motilal Oswal Securities (SEBI Reg No. INH000000412) has an agreement with Motilal Oswal capital Markets (Hong Kong) Private Limited for distribution of
research report in Hong Kong. This report is intended for distribution only to “Professional Investors” as defined in Part I of Schedule 1 to SFO. Any investment or investment activity
to which this document relates is only available to professional investor and will be engaged only with professional investors.” Nothing here is an offer or solicitation of these
securities, products and services in any jurisdiction where their offer or sale is not qualified or exempt from registration. The Indian Analyst(s) who compile this report is/are not
located in Hong Kong & are not conducting Research Analysis in Hong Kong.
For U.S.
Motilal Oswal Securities Limited (MOSL) is not a registered broker - dealer under the U.S. Securities Exchange Act of 1934, as amended (the"1934 act") and under applicable state
laws in the United States. In addition MOSL is not a registered investment adviser under the U.S. Investment Advisers Act of 1940, as amended (the "Advisers Act" and together with
the 1934 Act, the "Acts), and under applicable state laws in the United States. Accordingly, in the absence of specific exemption under the Acts, any brokerage and investment
services provided by MOSL , including the products and services described herein are not available to or intended for U.S. persons. This report is intended for distribution only to
"Major Institutional Investors" as defined by Rule 15a-6(b)(4) of the Exchange Act and interpretations thereof by SEC (henceforth referred to as "major institutional investors"). This
document must not be acted on or relied on by persons who are not major institutional investors. Any investment or investment activity to which this document relates is only
available to major institutional investors and will be engaged in only with major institutional investors. In reliance on the exemption from registration provided by Rule 15a-6 of the
U.S. Securities Exchange Act of 1934, as amended (the "Exchange Act") and interpretations thereof by the U.S. Securities and Exchange Commission ("SEC") in order to conduct
business with Institutional Investors based in the U.S., MOSL has entered into a chaperoning agreement with a U.S. registered broker-dealer, Motilal Oswal Securities International
Private Limited. ("MOSIPL"). Any business interaction pursuant to this report will have to be executed within the provisions of this chaperoning agreement.
The Research Analysts contributing to the report may not be registered /qualified as research analyst with FINRA. Such research analyst may not be associated persons of the U.S.
registered broker-dealer, MOSIPL, and therefore, may not be subject to NASD rule 2711 and NYSE Rule 472 restrictions on communication with a subject company, public
appearances and trading securities held by a research analyst account.
For Singapore
In Singapore, this report is being distributed by Motilal Oswal Capital Markets Singapore Pte Ltd (“MOCMSPL”) (Co.Reg. NO. 201129401Z) which is a holder of a capital markets
services license and an exempt financial adviser in Singapore.As per the approved agreement under Paragraph 9 of Third Schedule of Securities and Futures Act (CAP 289) and
Paragraph 11 of First Schedule of Financial Advisors Act (CAP 110) provided to MOCMSPL by Monetary Authority of Singapore. Persons in Singapore should contact MOCMSPL in
respect of any matter arising from, or in connection with this report/publication/communication. This report is distributed solely to persons who qualify as “Institutional Investors”, of
which some of whom may consist of "accredited" institutional investors as defined in section 4A(1) of the Securities and Futures Act, Chapter 289 of Singapore (“the
SFA”). Accordingly, if a Singapore person is not or ceases to be such an institutional investor, such Singapore Person must immediately discontinue any use of this Report and
inform MOCMSPL.
Specific Disclosures
1 MOSL, Research Analyst and/or his relatives does not have financial interest in the subject company, as they do not have equity holdings in the subject company.
2 MOSL, Research Analyst and/or his relatives do not have actual/beneficial ownership of 1% or more securities in the subject company
3 MOSL, Research Analyst and/or his relatives have not received compensation/other benefits from the subject company in the past 12 months
4 MOSL, Research Analyst and/or his relatives do not have material conflict of interest in the subject company at the time of publication of research report
5 Research Analyst has not served as director/officer/employee in the subject company
6 MOSL has not acted as a manager or co-manager of public offering of securities of the subject company in past 12 months
7 MOSL has not received compensation for investment banking/ merchant banking/brokerage services from the subject company in the past 12 months
8 MOSL has not received compensation for other than investment banking/merchant banking/brokerage services from the subject company in the past 12 months
9 MOSL has not received any compensation or other benefits from third party in connection with the research report
10 MOSL has not engaged in market making activity for the subject company
****************************************************************
****************************************************************
10 March 2019
19

Utilities
The associates of MOSL may have:
- financial interest in the subject company
- actual/beneficial ownership of 1% or more securities in the subject company
- received compensation/other benefits from the subject company in the past 12 months
- other potential conflict of interests with respect to any recommendation and other related information and opinions.; however the same shall have no bearing whatsoever on the
specific recommendations made by the analyst(s), as the recommendations made by the analyst(s) are completely independent of the views of the associates of MOSL even
though there might exist an inherent conflict of interest in some of the stocks mentioned in the research report.
- acted as a manager or co-manager of public offering of securities of the subject company in past 12 months
- be engaged in any other transaction involving such securities and earn brokerage or other compensation or act as a market maker in the financial instruments of the company(ies)
discussed herein or act as an advisor or lender/borrower to such company(ies)
- received compensation from the subject company in the past 12 months for investment banking / merchant banking / brokerage services or from other than said services.
The associates of MOSL has not received any compensation or other benefits from third party in connection with the research report
Above disclosures include beneficial holdings lying in demat account of MOSL which are opened for proprietary investments only. While calculating beneficial holdings, It does not
consider demat accounts which are opened in name of MOSL for other purposes (i.e holding client securities, collaterals, error trades etc.). MOSL also earns DP income from clients
which are not considered in above disclosures.
Analyst Certification
The views expressed in this research report accurately reflect the personal views of the analyst(s) about the subject securities or issues, and no part of the compensation of the
research analyst(s) was, is, or will be directly or indirectly related to the specific recommendations and views expressed by research analyst(s) in this report.
Terms & Conditions:
This report has been prepared by MOSL and is meant for sole use by the recipient and not for circulation. The report and information contained herein is strictly confidential and may
not be altered in any way, transmitted to, copied or distributed, in part or in whole, to any other person or to the media or reproduced in any form, without prior written consent of
MOSL. The report is based on the facts, figures and information that are considered true, correct, reliable and accurate. The intent of this report is not recommendatory in nature. The
information is obtained from publicly available media or other sources believed to be reliable. Such information has not been independently verified and no guaranty, representation
of warranty, express or implied, is made as to its accuracy, completeness or correctness. All such information and opinions are subject to change without notice. The report is
prepared solely for informational purpose and does not constitute an offer document or solicitation of offer to buy or sell or subscribe for securities or other financial instruments for
the clients. Though disseminated to all the customers simultaneously, not all customers may receive this report at the same time. MOSL will not treat recipients as customers by
virtue of their receiving this report.
Disclaimer:
The report and information contained herein is strictly confidential and meant solely for the selected recipient and may not be altered in any way, transmitted to, copied or distributed,
in part or in whole, to any other person or to the media or reproduced in any form, without prior written consent. This report and information herein is solely for informational purpose
and may not be used or considered as an offer document or solicitation of offer to buy or sell or subscribe for securities or other financial instruments. Nothing in this report
constitutes investment, legal, accounting and tax advice or a representation that any investment or strategy is suitable or appropriate to your specific circumstances. The securities
discussed and opinions expressed in this report may not be suitable for all investors, who must make their own investment decisions, based on their own investment objectives,
financial positions and needs of specific recipient. This may not be taken in substitution for the exercise of independent judgment by any recipient. Each recipient of this document
should make such investigations as it deems necessary to arrive at an independent evaluation of an investment in the securities of companies referred to in this document (including
the merits and risks involved), and should consult its own advisors to determine the merits and risks of such an investment. The investment discussed or views expressed may not be
suitable for all investors. Certain transactions -including those involving futures, options, another derivative products as well as non-investment grade securities - involve substantial
risk and are not suitable for all investors. No representation or warranty, express or implied, is made as to the accuracy, completeness or fairness of the information and opinions
contained in this document. The Disclosures of Interest Statement incorporated in this document is provided solely to enhance the transparency and should not be treated as
endorsement of the views expressed in the report. This information is subject to change without any prior notice. The Company reserves the right to make modifications and
alternations to this statement as may be required from time to time without any prior approval. MOSL, its associates, their directors and the employees may from time to time, effect
or have effected an own account transaction in, or deal as principal or agent in or for the securities mentioned in this document. They may perform or seek to perform investment
banking or other services for, or solicit investment banking or other business from, any company referred to in this report. Each of these entities functions as a separate, distinct and
independent of each other. The recipient should take this into account before interpreting the document. This report has been prepared on the basis of information that is already
available in publicly accessible media or developed through analysis of MOSL. The views expressed are those of the analyst, and the Company may or may not subscribe to all the
views expressed therein. This document is being supplied to you solely for your information and may not be reproduced, redistributed or passed on, directly or indirectly, to any other
person or published, copied, in whole or in part, for any purpose. This report is not directed or intended for distribution to, or use by, any person or entity who is a citizen or resident of
or located in any locality, state, country or other jurisdiction, where such distribution, publication, availability or use would be contrary to law, regulation or which would subject MOSL
to any registration or licensing requirement within such jurisdiction. The securities described herein may or may not be eligible for sale in all jurisdictions or to certain category of
investors. Persons in whose possession this document may come are required to inform themselves of and to observe such restriction. Neither the Firm, not its directors, employees,
agents or representatives shall be liable for any damages whether direct or indirect, incidental, special or consequential including lost revenue or lost profits that may arise from or in
connection with the use of the information.
The person accessing this information specifically agrees to exempt MOSL or any of its affiliates or employees from, any and all
responsibility/liability arising from such misuse and agrees not to hold MOSL or any of its affiliates or employees responsible for any such misuse and further agrees to hold MOSL or
any of its affiliates or employees free and harmless from all losses, costs, damages, expenses that may be suffered by the person accessing this information due to any errors and
delays.
Registered Office Address: Motilal Oswal Tower, Rahimtullah Sayani Road, Opposite Parel ST Depot, Prabhadevi, Mumbai-400025; Tel No.: 022-3980 4263; www.motilaloswal.com.
Correspondence Address: Palm Spring Centre, 2nd Floor, Palm Court Complex, New Link Road, Malad (West), Mumbai- 400 064. Tel No: 022 3080 1000. Compliance Officer:
Neeraj Agarwal, Email Id:
na@motilaloswal.com,
Contact No.:022-38281085.
Registration details: MOSL: SEBI Registration: INZ000158836 (BSE/NSE/MCX/NCDEX); CDSL: IN-DP-16-2015; NSDL: IN-DP-NSDL-152-2000; Research Analyst: INH000000412.
AMFI: ARN 17397. Investment Adviser: INA000007100. Motilal Oswal Asset Management Company Ltd. (MOAMC): PMS (Registration No.: INP000000670) offers PMS and Mutual
Funds products. Motilal Oswal Wealth Management Ltd. (MOWML): PMS (Registration No.: INP000004409) offers wealth management solutions. *Motilal Oswal Securities Ltd. is
a distributor of Mutual Funds, PMS, Fixed Deposit, Bond, NCDs, Insurance and IPO products. *Motilal Oswal Real Estate Investment Advisors II Pvt. Ltd. offers Real Estate
products. * Motilal Oswal Private Equity Investment Advisors Pvt. Ltd. offers Private Equity products.
* MOSL has been amalgamated with Motilal Oswal Financial Services Limited (MOFSL) w.e.f August 21, 2018 pursuant to order dated July 30, 2018 issued by Hon'ble National
Company Law Tribunal, Mumbai Bench. The existing registration no(s) of MOSL would be used until receipt of new MOFSL registration numbers.
10 March 2019
20