Motilal Oswal Financial Services

7 March 2019

Annual Report Update | Sector: Cement

ACC

Buy

BSE SENSEX

36,725

S&P CNX

11,058

CMP: INR1,552

: INR 1,853 (+19

Profitability improves despite cost pressure

Increase in working capital impacts cash flow…

We have analyzed ACC’s CY18 annual report and the following are the key takeaways:

East, Central and North regions expected to drive demand over FY18-20E



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 (%)

ACC IN

188

291.4 / 4.2

1676 / 1255

10/3/-13

930

45.5



As per the management, India’s total cement capacity stood at 502mt in

CY18 and is expected to reach 550mt by CY20. The cement sector recorded a

growth of ~8.5% during 2018 as compared to ~6% in 2017.

The company expects the East, Central and North regions to drive the

demand, going forward.

As per Indian Brand Equity Foundation (IBEF), in FY 2019, the demand for

cement is likely to grow by 7-8%, led by affordable housing, rural Individual

Home Builders (IHBs) and infrastructure-led activities.

Financials Snapshot (INR b)

Y/E Dec

2018 2019E 2020E

Net Sales

148.0 164.7 178.1

EBITDA

21.2 25.7 29.9

Net Profit

10.8 14.7 17.9

EPS (INR)

57.3 78.4 95.3

EPS Gr. (%)

22.1 36.9 21.6

BV/Sh. (INR)

560.0 621.5 699.9

RoE (%)

10.8 13.3 14.4

RoCE (%)

11.8 13.1 14.2

P/E (x)

27.2 19.8 16.3

P/BV (x)

2.8

2.5

2.2

EV/EBITDA(x)

12.1

9.0

7.1

EV/Ton(USD)

108

Shareholding pattern (%)

As On

Dec-18 Sep-18 Dec-17

Promoter

54.5

DII

23.6

20.7

17.8

FII

7.2

10.2

13.5

Others

14.7

14.6

14.1

FII Includes depository receipts

Stock Performance (1-year)

2,000

1,750

1,500

1,250

1,000

ACC

Sensex - Rebased

Cost pressure arising from higher raw material and fuel prices partly

mitigated by improved efficiency



ACC’s raw material cost was impacted by higher slag prices. Its sustained

efforts to improve flyash absorption enabled the company to reduce the

clinker factor by producing a higher share of blended cement that helped

mitigate the increase in slag prices. The increase in petcoke and coal prices

was mitigated by fuel mix optimization and the use of WHRS. ACC’s freight

cost was impacted by higher FOR sales and a rise in diesel prices, the effects

of which were partly mitigated by route optimization.

During the year, ACC made efforts to reduce the impact of rising electrical

energy cost by partly replacing grid power through the consumption of Open

Access (OA) power from comparatively cheaper sources, resulting in savings

of INR 168m in power cost.

Despite the increase in costs, the company’s EBITDA/t increased by 4% YoY

to INR 745, led by better realization. ACC focused on the sale of premium

products which increased by 36% YoY. Retail constituted 80% of the

company’s sales.

RMC delivers healthy results



ACC’s RMC business has been consistently performing well. Its RMC sales

volume & EBITDA rose by 16% in 2018 as compared to the previous year.

During the year, the RMC business expanded its footprint by adding 18 new

plants in high contribution and high EBITDA margin markets across the

country. With this addition, the company’s nation-wide network of RMC

plants now comprises 75 state-of-the-art units.

Pradnya Ganar – Research Analyst

(Pradnya.Ganar@motilaloswal.com);+91 22 6129 1537

Investors are advised to refer through important disclosures made at the last page of the Research Report.

Motilal Oswal research is available on www.motilaloswal.com/Institutional-Equities, Bloomberg, Thomson Reuters, Factset and S&P Capital.

ACC

Clear capex plans for the future



The company has announced the following expansion plans:



A Greenfield integrated cement plant at Ametha, District Katni, Madhya

Pradesh (clinker capacity of 3mt and cement capacity of 1mt), along with

the expansion of the existing grinding unit in Tikaria, Uttar Pradesh (cement

capacity of 1.6mt) and a third grinding unit also in Uttar Pradesh (cement

capacity of 2.2mt)



1.1mt cement grinding facility at the existing location in Sindri, Jharkhand

The above projects are estimated to cost ~INR30b which is proposed to be

funded through internal accruals.

Increase in working capital and higher taxes impact cash flows



Cash flow from operations before taxes and working capital changes grew by 7%

to INR20.8b due to a strong performance in the current year.

However, an increase of INR3.8b in working capital as compared to an increase

of INR890m in the previous year impacted its cash flow. Also, direct tax paid -

(net of refunds) increased by INR 3.09b, as a result of which, cash flow from

operations after working capital declined by 28% to INR11.2b in CY18.

Total investments remained unchanged during the year, with investments in

subsidiaries, associates and joint ventures at INR 2.26b and other non-current

investments amounting to INR37m.

Capex for the year stood at INR 4.9b as against INR 5.19b in CY17. As a result,

free cash flow declined by 40% YoY to INR 6.2b.

Valuation and view

The company plans to add a capacity of 6mt at a total capex of INR30b (~USD71/t)

that will come on stream over the next three years. The capacity addition will be

funded by internal accruals and will help the company protect its market share in

the central and eastern regions. The profitability gap between ACC and its peers has

narrowed significantly over the last few quarters, led by a higher proportion of (a)

premium sales, and (b) sales from its new cost-efficient units at Jamul and Sindri.

The company has also done well to manage costs through efforts such as increasing

the proportion of linkage coal, reducing the lead distance and route optimization.

Additionally, ACC is making efforts to rationalize its fixed costs. The stock trades at

an attractive valuation of 7x CY 20 EV/EBITDA. We value ACC at 9x CY20E EV/EBITDA

to arrive at a target price of INR1,853.

7 March 2019

ACC

East, Central and North regions expected to drive demand over FY18-20E



As per the management, India’s total cement capacity stood at 502mt in CY18

and is expected to reach 550mt by CY20. The cement sector recorded a growth

of ~8.5% during 2018 as compared to ~6% in 2017.

The company expects the East, Central and North regions to drive the demand,

going forward.

As per Indian Brand Equity Foundation (IBEF), in FY 2019, the demand for

cement is likely to grow by 7-8%, led by affordable housing, rural Individual

Home Builders (IHBs) and infrastructure-led activities

Exhibit 1: India’s cement capacity to grow at CAGR of 5% over next two years

Capacity(mt)

550

502

2018

2020E

Source: MOFSL, Company

Cost pressure arising from higher raw material and fuel prices partly

mitigated by improved efficiency



ACC’s total cost/t increased by 3% YoY, led by a rise of 5%, 2% and 7% in raw

material cost/t, power and fuel cost/t and freight cost/t, respectively.

Raw material cost/t up by 5% YoY due to:



An increase of 55% in slag prices owing to a surge in demand and the resulting

need to procure long lead sources. ACC’s overall slag consumption cost

increased by INR1.38b.

Purchase of clinker increased by INR950m and purchase of limestone decreased

by INR300m.

Increased usage of cheaper activated gypsum and procurement from cheaper

sources helped reduce gypsum cost by 5%.

Landed cost of flyash fell by 4% YoY on account of increased usage of cheaper

wet flyash and source-mix optimization.

ACC’s sustained efforts to improve its flyash absorption enabled the company to

reduce the clinker factor by producing a higher share of blended cements that

helped mitigate the increase in slag prices.

7 March 2019

ACC

Exhibit 2: Total cost/t increases by 3% YoY (INR/t)

Other expenses/t

Power and fuel cost/t

4,352

937

312

1,316

1,035

750

2017

Employee cost/t

Raw mat cost/t

Freight cost/t

Total cost/t

4,467

923

285

1,412

1,056

791

2018

Source: Company

Power and fuel cost/t increases by 2% YoY due to:



Imported petcoke price rose by 22% YoY. The landed cost of imported and

domestic coal also increased in the range of 9% to 12%.

The company continued with its fuel mix optimization during the year. As a

result of higher pet coke prices, the usage of domestic coal increased to 28% in

2018 as compared to 25% in 2017. The usage of pet coke reduced to 64% as

compared to 67% in 2017.

The company’s waste heat recovery plant at Gagal generated 7.5MW of power,

delivering savings of INR220mn.

Exhibit 4: % of petcoke used fell to 64% in CY18 due to rising

prices

Petcoke %

60%

741

67%

64%

Exhibit 3: Electricity consumption improves in CY18

Electricity Kwh/T of Cement

Coal for kiln K.cal/Kg of clinker

748

742

736

733

730

CY14

730

16%

17%

CY15

CY16

CY17

CY18

CY15

CY16

CY17

CY18

CY14

CY12

CY13

Source: MOFSL, Company

Exhibit 5: Key efficiency parameters

Cost of generation at TPP (INR/Kwh)

Average cost of purchased power (INR/Kwh)

Electrical energy efficiency (kwh/t of clinker)

Electrical energy efficiency (kwh/t of cement grinding)

Kiln thermal efficiency (MJ/tonne of clinker)

2017

5.05

6.53

69.9

40.1

3,103

2018 YoY changes

5.39

6.43

-2%

-1%

38.5

-4%

3,099

Source: Company



During the year, ACC made efforts to reduce the impact of rising electrical

energy cost by partly replacing grid power with the consumption of OA power

from comparatively cheaper sources.

7 March 2019

ACC



The enhanced intake of solar power through Power Purchase Agreements (PPA)

at Thondebhavi increased OA consumption to 81.3 % in FY18 from 73% in FY17.

At Kudithini, OA power consumption declined to 83.5 % from 87%, in spite of

enhanced intake of solar power. At Gagal, OA power consumption fell to 6.44%

in FY18 from 32% in FY17. In addition, the consumption of OA power was

started at Wadi and Madukkarai with 10% and 5%, respectively of the grid

power consumed. ACC recorded total saving of INR168m in power cost on a

YOY basis

Freight cost/t increase by 7% YoY on account of:



Increase in FOR sales in the current year

Rise in diesel prices

ACC made the following efforts to contain costs through logistics strategies for

improving efficiency:



Improvement in direct dispatches by 1%



Reduction in rail lead by 4% through route optimization. Road lead increased by

2%.



Improvement in operational efficiencies through mode-mix optimization



Long-term traffic contract with the Indian Railways



Road contract benchmarking & negotiation helped to restrict the increase in

road freight

Other expenses increase by 3% YoY



Consumption of packing material cost increased by 16% YoY to INR5.03b, mainly

due to higher volumes. The average price of packing bags also increased by

10.30% due to a rise in the prices of polypropylene granules. The consumption

of bags for premium products also increased in line with the increase in the sale

of premium products.

However, the consumption of stores and spares parts decreased mainly on

account of lower maintenance cost as compared to the previous year through

optimization of shut-down cost. Advertisement expenses declined due to a

decrease in various promotional activities.

Employee expenses up by 7.6% YoY



During the current year, the company incurred an expense of INR700m for its

Employee Separation Scheme to improve manpower productivity.

The company achieved employee cost optimization by implementing strategic

changes and building its operational capabilities. This helped ACC reduce its

employee cost. Its employee head count also declined from 7,422 in 2017 to

6,731 in 2018.

Despite the increase in costs, the company’s EBITDA/t increased by 4% YoY due

to better realization. The company focused on the sale of premium products

which increased by 36% YoY. Retail constituted 80% of the company’s total

sales.



7 March 2019

ACC

Exhibit 6: Cement realization increases by 3% YoY due to

higher sale of premium products (INR)

Cement Realization

816

572

641

516

497

715

Exhibit 7: Blended EBITDA/t increases by 4% YoY on account

of better realization (INR)

EBITDA/t

745

CY12

CY13

CY14

CY15

CY16

CY17

CY18

CY12

CY13

CY14

CY15

CY16

CY17

CY18

Source: MOFSL, Company

RMC delivers healthy results



ACC’s RMC business has been consistently performing well. Sales volume &

EBITDA of the RMC business rose by 16% in 2018 as compared to the previous

year.

During the year, the RMC business expanded its footprint by adding 18 new

plants in high contribution and high EBITDA margin markets across the country.

With this addition, the company’s nation-wide network of RMC plants now

comprises 75 state-of-the-art units.

A keen focus on day-to-day sales, rigorous business tracking mechanism, well-

defined pricing policy and increase in the sales of “Value Added Solutions” (VAS)

were some of the key drivers of the success witnessed by the RMC business in

FY18.

Exhibit 9: RMC business’ margins remain healthy

volume growth (%)

32%

RMC EBITDA (INR mn)

RMC EBITDA margin (%)

10.1% 10.2%

7.0%

Exhibit 8: RMC volumes up by 16% YoY

RMC volumes (mn cu mtr)

-12%

1.5

CY12

1.6

CY13

10%

13%

16%

4.5%

2.9%

0.4%

196

347

5.6%

1.7

CY14

2.0

CY15

2.1

CY16

2.7

CY17

3.2

CY18

554

745

1,150

1,338

Source: MOFSL, Company

Clear capex plans for the future



During the year, the company capitalized property, plant and equipment worth

INR4.25b, consisting mainly of routine maintenance capex. Depreciation on

property, plant and equipment for the year amounted to INR5.95b.

The company has announced the following expansion plans:



A Greenfield integrated cement plant at Ametha in district Katni, Madhya

Pradesh (clinker capacity of 3mt and cement capacity of 1mt), along with

the expansion of the existing grinding unit at Tikaria, Uttar Pradesh (cement

7 March 2019

ACC



capacity of 1.6mt) and a third grinding unit also in Uttar Pradesh (cement

capacity of 2.2mt)



1.1mt cement grinding facility at the existing location at Sindri, Jharkhand

The above projects are estimated to cost ~INR 30b which is proposed to be

funded through internal accruals.

Increase in working capital impacts operating cash flows



The cash flow from operations before taxes and working capital changes grew

by 7% to INR20.8b due to a strong performance in the current year.

Direct tax paid - (net of refunds) increased by INR3.09b. During the previous

year, the company received an income tax refund of INR1.3b for the earlier

years upon completion of the assessment years.

Also, an increase of INR3.88b in working capital as compared to an increase of

INR890m in the previous year impacted the cash flow. As a result, the cash flow

from operations after working capital declined by 28% to INR11.2b in CY18.

There was an increase in working capital due to an increase in inventory and

receivable days. Inventory days increased from 38.6 days in CY17 to 41.4 days in

CY18, led by an increase in the inventory of cement and coal. The inventory of

linkage coal increased as coal companies cleared the backlog for the earlier

period. The corresponding advance given for the supply of linkage coal also

declined.

Receivable days increased from 18.4 days in CY17 to 21.4 days in CY18 due to an

increase in receivables of both the cement and RMC businesses.

Exhibit 10: OCF declines from INR16b in CY17 to INR11b in CY18 (INR bn)

Operating cash flow

Capex

FCFF

CY12

CY13

CY14

CY15

CY16

CY17

CY18

Source: MOFSL, Company

Borrowings



Short-term borrowings decreased from INR591.7m in CY17 to nil in CY18 as ACC

repaid its borrowings from ACC Mineral Resources Limited, a wholly-owned

subsidiary company. ACC’s long-term borrowings remained at zero.

Investments



Total investments remained unchanged during the year, with investments in

subsidiaries, associates and joint ventures at INR2.26b and other non-current

investments amounting to INR37m.

7 March 2019

ACC

Incentives



Total incentives booked in CY18 amounted to INR1.62b as against INR1.51b in

CY17. Total incentives receivables increased by 29% in CY18 to INR5.3b.

Valuation and View

ACC plans to add 6mt of capacity at a total capex of INR30b (~USD71/t) that will

come on stream over the next three years. The capacity addition will be funded by

internal accruals and will help the company protect its market share in the central

and eastern regions. The profitability gap between ACC and its peers has narrowed

significantly over the last few quarters, led by a higher proportion of (a) premium

sales, and (b) sales from its new cost-efficient units at Jamul and Sindri. The

company has also done well to manage costs through efforts such as increasing the

proportion of linkage coal, reducing the lead distance and route optimization.

Additionally, ACC is making efforts to rationalize its fixed costs. The stock trades at

an attractive valuation of 7x CY 20 EV/EBITDA. We value ACC at 9x CY20E EV/EBITDA

to arrive at a target price of INR1,853.

7 March 2019

ACC

Story in charts

Exhibit 11: Utilization improves by 7pp to 86% in CY18

Capacity (mt)

Despatch (mt)

Cap. Util (%)

Exhibit 12: Cement EBITDA/t increases by 4% YoY (INR)

Source: MOFSL, Company

Exhibit 13: Margins remain flat YoY in CY18

17.9

EBITDA (INR mn)

17.7

12.5 10.9

10.3

Margin (%)

13.4 14.1 14.3

15.6

16.8

Exhibit 14: Return ratios improve

ROCE (%)

ROE (%)

Source: MOFSL, Company

7 March 2019

ACC

Financials and Valuations

Income Statement

Y/E December

Net Sales

Change (%)

Total Expenditure

EBITDA

Change (%)

Margin (%)

Depreciation

Int. and Fin. Charges

Other Income - Rec.

PBT Before EO Item

EO Income/(Expense)

PBT After EO Item

Tax

Tax Rate (%)

Reported PAT

Adjusted PAT

Change (%)

Margin (%)

Balance Sheet

Y/E December

Share Capital

Fully Diluted Capital

Reserves

Net Worth

Loans

Deferred Tax Liability

Capital Employed

Gross Block

Less: Accum. Depn.

Net Fixed Assets

Capital WIP

Investments

Curr. Assets, Loans&Adv.

Inventory

Account Receivables

Cash and Bank Balance

Others

Curr. Liab. and Prov.

Account Payables

Other Liabilities

Provisions

Net Current Assets

Application of Funds

E: MOFSL Estimates

CY14

1,14,811

5.2

1,02,310

12,501

-8.6

10.9

-5,576

-828

4,561

10,658

3,786

14,444

2,761

19.1

11,683

7,897

-7.3

6.9

CY15

1,14,328

-0.4

1,02,597

11,731

-6.2

10.3

-6,521

-673

4,834

9,371

-1,532

7,840

1,924

24.5

5,916

7,447

-5.7

6.5

CY16

1,09,897

-3.9

95,160

14,737

25.6

13.4

-6,052

-826

1,283

9,143

-428

8,715

2,244

25.8

6,471

6,899

-7.4

6.3

CY17

1,32,846

20.9

1,14,097

18,749

27.2

14.1

-6,401

-1,023

1,317

12,642

342

12,984

3,829

29.5

9,155

8,813

27.7

6.6

CY18

1,48,014

11.4

1,26,864

21,150

12.8

14.3

-5,996

-892

1,385

15,647

4,303

19,949

4,883

24.5

15,066

10,764

22.1

7.3

CY19E

1,64,747

11.3

1,39,014

25,733

21.7

15.6

-6,219

-900

1,850

20,464

5,730

28.0

14,734

36.9

8.9

(INR Million)

CY20E

1,78,068

8.1

1,48,139

29,929

16.3

16.8

-6,502

-900

2,350

24,877

6,965

28.0

17,911

21.6

10.1

(INR Million)

CY20E

1,880

1,29,700

1,31,580

6,631

1,38,211

94,274

31,001

63,273

23,922

2,302

1,17,104

20,194

10,446

52,705

33,760

68,390

22,156

43,100

3,133

48,715

1,38,211

CY14

1,880

1,879

80,477

82,356

5,356

87,712

1,09,507

53,523

55,984

19,146

15,730

35,853

12,556

4,107

3,043

16,147

39,002

24,469

4,000

10,532

-3,148

87,712

CY15

1,880

1,879

82,551

84,430

355

4,692

89,477

1,23,603

60,044

63,559

13,000

14,757

37,092

11,886

4,844

916

19,446

38,931

31,339

7,592

-1,839

89,477

CY16

1,880

1,879

86,439

88,319

500

4,474

93,293

81,295

6,045

75,250

2,608

2,585

53,953

12,238

5,361

19,451

16,904

41,103

12,569

26,600

1,934

12,850

93,293

CY17

1,880

1,879

91,775

93,655

592

5,414

99,660

84,799

12,389

72,410

2,617

2,302

71,560

14,040

6,682

26,954

23,884

49,229

18,105

29,192

1,932

22,331

99,660

CY18

1,880

1,03,397

1,05,277

6,631

1,11,908

88,774

18,280

70,494

3,922

2,302

83,533

16,786

8,683

30,003

28,062

48,343

19,227

27,448

1,668

35,190

1,11,908

CY19E

1,880

1,14,961

1,16,841

6,631

1,23,471

91,274

24,499

66,775

11,922

2,302

1,06,198

18,683

9,664

46,616

31,234

63,725

20,950

39,876

2,899

42,473

1,23,471

7 March 2019

ACC

Financials and Valuations

Ratios

Y/E December

Basic (INR)

EPS

Consolidated EPS

Cash EPS

BV/Share

DPS

Payout (%)

Valuation (x)

P/E

Cash P/E

EV/Sales

EV/EBITDA

P/BV

Dividend Yield

EV/ton (USD-Cap)

Return Ratios (%)

RoE

RoCE

RoIC

Working Capital Ratios

Debtor (Days)

Asset Turnover (x)

Leverage Ratio

Debt/Equity (x)

Cash Flow Statement

Y/E December

OP/(Loss) before Tax

Depreciation

Interest & Finance Charges

Direct Taxes Paid

(Inc)/Dec in WC

CF from Operations

Others

CF from Operating incl EO

(Inc)/Dec in FA

Free Cash Flow

(Pur)/Sale of Investments

Others

CF from Investments

Issue of Shares

Inc/(Dec) in Debt

Interest Paid

Dividend Paid

Others

CF from Fin. Activity

Inc/Dec of Cash

Opening Balance

Closing Balance

CY14

42.0

71.7

438.2

34.0

63.6

CY15

39.6

74.3

449.3

17.0

65.1

CY16

36.7

68.9

470.0

0.0

59.4

CY17

46.9

80.9

498.4

0.1

64.2

CY18

57.3

89.2

560.0

0.0

21.0

CY19E

78.4

111.5

621.5

0.0

21.5

CY20E

95.3

129.9

699.9

0.0

17.7

37.0

21.7

2.2

20.3

3.5

2.2

116

39.2

20.9

2.3

22.5

3.5

1.1

120

42.4

22.6

2.4

18.2

3.3

0.0

113

33.2

19.2

2.0

13.9

3.1

0.0

110

27.2

17.4

1.7

12.1

2.8

0.0

108

19.8

13.9

1.4

9.0

2.5

0.0

16.3

12.0

1.2

7.1

2.2

0.0

9.8

10.9

11.4

8.9

8.6

7.1

0.8

8.0

8.1

10.0

0.8

9.7

10.0

12.8

0.8

10.8

11.8

16.0

0.8

13.3

13.1

20.3

0.7

14.4

14.2

27.7

0.8

0.0

(INR Million)

CY20E

24,877

6,502

900

-6,965

-153

25,160

-15,000

10,160

-15,000

-900

-3,172

-4,072

6,089

46,616

52,705

CY14

11,352

5,576

-1,342

-2,354

428

13,660

-343

13,317

-15,244

-1,927

415

7,893

-6,937

-350

-491

-6,445

-1,085

-8,371

-1,991

5,034

3,043

CY15

7,840

8,052

-263

-2,289

579

13,920

693

14,612

-11,643

2,970

222

1,491

-9,930

355

-415

-5,617

-1,134

-6,810

-2,128

3,043

916

CY16

8,715

6,089

171

-2,717

1,764

14,021

-220

13,801

-4,976

8,826

212

13,699

8,935

117

-478

-3,192

-650

-4,201

18,535

916

19,451

CY17

12,984

6,438

104

-2,177

-890

16,459

-912

15,548

-5,194

10,354

625

745

-3,824

-420

-3,192

-650

-4,221

7,503

19,451

26,954

CY18

14,943

6,024

-129

-5,265

-3,881

11,692

-511

11,181

-4,951

6,230

334

896

-3,720

-606

-409

-2,817

-579

-4,411

3,050

26,954

30,003

CY19E

20,464

6,219

900

-5,730

9,330

31,183

-10,500

20,683

-10,500

-900

-3,170

-4,070

16,613

30,003

46,616

7 March 2019

ACC

NOTES

7 March 2019

ACC

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

****************************************************************

7 March 2019

ACC

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.

7 March 2019