Motilal Oswal Financial Services

30 March 2020

Update

| Sector:

Capital Goods

Larsen & Toubro

BSE SENSEX

28,440

S&P CNX

8,281

CMP: INR800

TP: INR1,320(+65%)

Buy

Near-term execution impact imminent

Working capital stabilization to determine extent of growth revival in FY22



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 (%)



LT IN

1,402

1122.4 / 15.6

1607 / 661

-7/-19/-16

4706

100.0

In this report, we highlight some of the risks that have emerged for L&T’s (Larsen &

Toubro) business in the near term and its impact on earnings/cash flow.

We expect L&T to tide over these challenging times, thanks to multiple levers in its

business, scale of operations and the re-emergence as a pure EPC company.

However, on account of worsening working capital, growth post the lockdown in

India may be spaced over the next few months, impacting our near-term earnings

estimates and TP. We cut FY21/22E earnings by 20%/14% and TP to INR1,320.



Financials Snapshot (INR b)

Y/E Mar

2020E 2021E

Sales

1,471 1,620

EBITDA

175

198

PAT

EBITDA (%)

11.9 12.2

EPS (INR)

65.4 69.6

EPS Gr. (%)

14.1

6.4

BV/Sh. (INR)

494

544

Ratios

Net D/E

2.0

RoE (%)

13.9 13.4

RoCE (%)

6.1

6.0

Payout (%)

30.0 30.0

Valuations

P/E (x)

12.2 11.5

P/BV (x)

1.6

1.5

EV/EBITDA (x)

18.4 16.8

Div Yield (%)

1.6

1.8

FCF Yield (%)

-6.0

-4.7

2022E

1,871

238

126

12.7

89.8

29.0

614

1.8

15.5

6.6

30.0

8.9

1.3

14.3

2.2

-2.1



Shareholding pattern (%)

As On

Dec-19 Sep-19 Dec-18

Promoter

0.0

DII

37.2

38.7

FII

19.9

20.7

20.2

Others

42.9

42.1

41.1

FII Includes depository receipts

Stock Performance (1-year)



Execution halt in peak season to impact revenue growth:

The Covid-19

lockdown in India has brought construction activities to a halt in the peak

season. We note that March is a peak month for construction activities in

India. Even post the lockdown, there might be some more delays in resuming

construction activities in full swing as labor, machinery and materials would

need to be re-mobilized. Thus, we see a clear risk to our revenue growth

assumptions for 4QFY20 as well as FY21E estimates.

Working capital likely to spike, recovery post lockdown may take time:

Historically, the month of March is marked by superior execution and higher

payments from government authorities, which brings down the year-ending

closing working capital. However, 4QFY20 will see absence of both execution

as well as payment push. Moreover, L&T would have to continue supporting

its vendor base, including sub-contractors, in these tough times as it has been

doing over the past many months. This is likely to increase its working capital

further. Working capital as % of sales stood at 23.5% at end-3QFY20 v/s 18%

at end-FY19. We fear that working capital can spike to 25% of sales in the near

term, implying no FCF for FY20/FY21, despite revenue and EBITDA growth.

Higher working capital is likely to weigh on the execution rate even after the

lockdown is removed, thus implying that recovery may not be as swift as

expected. Thus, we expect the focus to shift toward working capital

management in the near term. Moreover, we believe that L&T will start

showing improvement in FCF from FY22, thereby returning to the growth

trajectory given its scale of operations and multiple operating levers.

Oil price crash weakens prospects of hydrocarbon segment in near term:

The

hydrocarbon segment has been a key driver of execution and earnings since

the last 4 years (from the lows witnessed in FY15 when oil prices saw a

correction). Currently, the hydrocarbon segment enjoys the highest-ever order

book of INR450b+ and margins in double-digit. Over FY14-20E, the

hydrocarbon segment has witnessed an order inflow CAGR of 18%, driving

EBITDA CAGR of 33% subsequently v/s overall E&C order inflow/EBITDA CAGR

of 4% each. As international orders form ~50% of the order book for the

hydrocarbon segment, there is risk of order inflow growth tapering in sync

with the current level of oil prices.

Nilesh Bhaiya – Research Analyst

(Nilesh.Bhaiya@MotilalOswal.com); +91 22 6129 1556

Pratik Singh – Research Analyst

(Pratik.Singh@MotilalOswal.com) +91 22 6129 1543

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.

Larsen & Toubro



Re-emergence as a pure EPC company to help tide over challenging times:

draw comfort from the fact that since FY16, the company has taken multiple

steps to emerge as a pure-play engineering, procurement and construction

(EPC) company. We recall that post the Global Financial Crisis of FY08, capex

growth was driven by the private sector and even L&T forayed into the

development business. Thus, over FY10-16, while revenue/EBITDA growth stood

at 15%/8%, adj. PAT declined at 4% CAGR as depreciation and interest expense

surged. With no major capex planned except for maintenance, we believe that

L&T would be able to tide over the current challenging times and would emerge

stronger. However, we do see risk for some mid-cap contractors with high

leverage; these companies may face the uphill task of mending their balance

sheets post the current economic slowdown.

Positive over L&T’s long-term prospects, but push growth further by a year:

L&T remains the best play on India’s capex story. We note that without the

capex cycle, it may be difficult for economic growth to achieve/sustain higher

levels. However, with delays in the capex cycle, the vendor base including sub-

contractors are facing serious challenges to survive and L&T may have to

support them in the near term. Once the situation improves, we believe L&T

would be able to improve its working capital cycle as it has done in the past. For

instance, L&T’s working capital improved from 25% in FY15 to 18% in FY19.

Valuation and view:

We cut our core FY21/FY22E E&C earnings by 10.6%/8.3%

factoring in lower execution, order inflow delays and worsening working capital

over the next 12 months or so. While FY21E looks challenging from growth

perspective, we do expect a bounce-back in FY22E, helped by a lower base and

stabilization of working capital. Our consolidated earnings cut look higher at

20%/14% for FY21/FY22E on account of higher losses from Hyderabad Metro

(fully operational now but real-estate monetization may be slower than

expected) and lower growth expected in Financial Services and IT business.

From valuation perspective, we reduce our TP to INR1,320 on account of (a) cut

in core earnings as well as reduction of core business P/E multiple to 18x from

20x earlier, and (b) lower contribution from listed subsidiaries due to market cap

erosion (we continue to value L&T’s stake in 4 listed subsidiaries after applying

30% holding company discount). Maintain

Buy.

30 March 2020

Larsen & Toubro

Risk #1: Lockdown in peak construction season to impact revenue growth in near term

Exhibit 1: 4Q a seasonally strong quarter to be impacted by

lockdown

34.0

25.0

22.2

18.8

FY16

35.5

23.7

22.2

18.6

FY17

35.8

23.6

21.4

19.3

FY18

34.2

25.3

22.0

18.6

FY19

33.0

11.3

23.9

23.1

20.0

FY20

Source: MOFSL, Company

719

729

1.4

8.2

7.3

2.9

811

877

941

1,031

1,061

1,149 1,323

9.6

8.3

Exhibit 2: Core E&C revenue CAGR of 11.7% over FY20-22E

Core E&C revenue (INR b)

YoY (%)

15.1

Source: MOFSL, Company, Note: 4QFY20 is estimate

Risk #2: Oil price crash doesn’t auger well for prospects of hydrocarbon business

Exhibit 3: Hydrocarbon segment order book at record high

and has witnessed strong growth over past 4 years

Order book (INR b)

(3)

137

150

261

266

397

498

575

645

104

(3)

107

186

(15)

279

(7)

158

YoY (%)

Exhibit 4: Hydrocarbon segment order inflow tends to

fluctuate sharply on account of oil price movements

Order inflow (INR b)

259

285

259

YoY (%)

Source: MOFSL, Company

Exhibit 5: Hydrocarbon segment revenue estimated at

16.7% CAGR over FY20-22E, thanks to strong order book

Revenue (INR b)

100

(27)

117

151

158

182

215

YoY (%)

Exhibit 6: Hydrocarbon segment EBITDA margin at multi-

year high; may not sustain if oil prices remain so low

EBITDA (INR b)

6.9

3.0

0.6

0.5

-11.3

-15.4

6.6

9.0

13.3

16.5

16.3

19.3

7.7

EBITDA (%)

10.5 9.0

8.8

9.0

Source: MOFSL, Company

30 March 2020

Larsen & Toubro

Risk #3: Working capital escalation can put pressure on execution

Exhibit 7: Working capital as % of sales stood at 23.5% at 3QFY20 end

24.0% 24.0% 24.0%

23.0% 23.0%

22.0%

21.0%

18.0%

22.0%

20.0% 20.0%

20.0% 20.0% 20.0% 19.6%

18.0%

23.5%

Source: MOFSL, Company

Impact #1: Core E&C growth to see near-term moderation before bouncing back in FY22 – still strong at 11.7%

CAGR over FY20-22E

Exhibit 8: Core E&C order inflow estimated at 9% CAGR over

FY20-22E

Core E&C order inflow (INR b)

19.8

4.8

1,152

1,362

-15.4

5.5

8.9

-0.0

729

1,207 1,274 1,387 1,387 1,458 1,647

1.4

5.1

YoY (%)

13.0

Exhibit 9: Core E&C revenue expected 11.7% CAGR over

FY20-22E

Core E&C revenue (INR b)

YoY (%)

15.1

11.3

8.2

7.3

2.9

719

811

877

941

1,031 1,061 1,149 1,323

9.6

8.3

1,137

Source: MOFSL, Company

Exhibit 10: Core E&C EBITDA estimated at 15.1% CAGR over

FY20-22E

Core E&C EBITDA (INR b)

11.0

9.3

9.0

9.5

10.5

8.1

8.7

9.0

EBITDA (%)

9.3

Exhibit 11: Core E&C PAT expected at 14.8% CAGR over

FY20-22E

Core E&C PAT (INR b)

46.1

25.3

34.0

19.0

6.9

-30.9

-9.3

23.2

YoY (%)

103

123

Source: MOFSL, Company

30 March 2020

Larsen & Toubro

Impact #2: Consolidated earnings to see moderation in FY21 as full-year impact of Hyderabad Metro’s operations

offsets MindTree’s contribution

Exhibit 12: Consolidated order inflow expected at 11% CAGR

over FY20-22E

Order inflow (INR b)

22%

16%

8.1

7.9

14%

10.8

8.8

13.0

8.8

10.1

YoY (%)

Exhibit 13: Consolidated revenue expected at 12.8% CAGR

over FY20-22E

Consolidated revenue (INR b)

YoY (%)

15.5

-12%

1,270 1,554 1,369 1,430 1,529 1,768 1,799 1,930 2,198

851 920 1,020 1,100 1,197 1,352 1,471 1,620 1,871

Source: MOFSL, Company

Exhibit 14: Consolidated EBITDA estimated at 16.7% CAGR

with margin expansion of 80bp over FY20-22E

Consolidated EBITDA (INR b)

12.6

12.3

10.3

10.1

11.3

EBITDA margin (%)

12.2 12.7

11.3 11.9

Exhibit 15: Consolidated PAT estimated at 17.1% CAGR over

FY20-22E

Consolidated PAT (INR b)

43.0

22.4

13.1

11.0

14.1

6.4

126

YoY (%)

29.0

108

113

105

111

136

153

175

198

238

-6.3

Source: MOFSL, Company

Impact #3: Cut FY21/22E earnings by 20%/14% and TP to INR1,320

Exhibit 16: We cut our FY21/FY22E EPS by 20%/14%

Earnings Change

(INR b)

Revenue

EBITDA

EBITDA margin (%)

Adj. PAT

FY20E

1,531

186

12.1

102

Old

FY21E

1,750

220

12.6

122

FY22E

1,964

255

13.0

147

FY20E

1,471

175

11.9

New

FY21E

1,620

198

12.2

FY22E

1,871

238

12.7

126

Change

FY20E

FY21E

FY22E

-3.9%

-7.5%

-4.7%

-5.9%

-10.3%

-6.9%

-25bp

-39bp

-30bp

-9.6%

-19.7%

-14.4%

Source: MOFSL, Company

Valuation and view



Cut TP to INR1,320; maintain Buy:

We cut our core FY21/FY22E E&C earnings by

10.6%/8.3% factoring in lower execution, order inflow delays and worsening

working capital over the next 12 months or so. While FY21E looks challenging

from growth perspective, we do expect a bounce-back in FY22E, helped by a

lower base and stabilization of working capital. Our consolidated earnings cut

look higher at 20%/14% for FY21/FY22E on account of higher losses from

Hyderabad Metro (fully operational now but real-estate monetization may be

30 March 2020

Larsen & Toubro

slower than expected) and lower growth expected in Financial Services and IT

business. From valuation perspective, we reduce our TP to INR1,320 on account

of (a) cut in core earnings as well as reduction of core business P/E multiple to

18x from 20x earlier, and (b) lower contribution from listed subsidiaries due to

market cap erosion (we continue to value L&T’s stake in 4 listed subsidiaries

after applying 30% holding company discount). Maintain

Buy.

Exhibit 17: Our SOTP-based TP stands at INR1,320

Business segment

Core E&C

E&A sale

IT & TS + MindTree

Finance Holdings

IDPL

Total

Sep’21E

992

180

1,320

Remarks



18x core E&C EPS



E&A sale proceeds of INR112b



30% discount to current mkt cap



30% discount to current mkt cap



P/Inv based approach

Source: MOFSL, Company

30 March 2020

Larsen & Toubro

Financials and valuations

Income Statement

Y/E March

Net Sales

Change (%)

EBITDA

Change (%)

Margin (%)

Depreciation

EBIT

Net Interest

Other Income

PBT

Tax

Rate (%)

Reported Profit (Before MI & AI)

Less: Minority Interest

Add: Profits of Associates

EO Adjustments

Adjusted PAT

Change (%)

Cons. Profit (Reported)

Balance Sheet

Y/E March

Share Capital

Reserves

Net Worth

Loans

Deferred Tax Liability

Minority Interest

Capital Employed

Gross Fixed Assets

Less: Depreciation

Add: Capital WIP

Net Fixed Assets

Investments

Inventory

Debtors

Cash & Bank Balance

Loans & Advances

Other Current Assets

Current Assets

Current Liab. & Prov.

Net Current Assets

Capital Deployed

2017

10,93,118

7.2

1,11,305

6.4

10.2

23,699

87,606

13,387

13,441

87,659

20,066

22.9

68,808

4,443

-3,953

1,214

59,198

43.0

60,412

2018

11,96,832

9.5

1,35,714

21.9

11.3

19,287

1,16,427

15,385

14,120

1,15,162

31,989

27.8

84,403

6,346

-4,359

1,230

72,469

22.4

73,699

2019

13,52,203

13.0

1,53,296

13.0

11.3

19,230

1,34,066

18,026

18,365

1,34,406

40,671

30.3

1,02,376

13,115

-210

8,641

80,411

11.0

89,051

2020E

14,71,258

8.8

1,74,521

13.8

11.9

24,118

1,50,403

26,629

17,538

1,41,312

36,000

25.5

1,12,347

14,237

700

7,035

91,775

14.1

98,810

2021E

16,19,788

10.1

1,97,718

13.3

12.2

24,648

1,73,070

33,434

18,420

1,58,056

43,828

27.7

1,23,394

17,978

1,400

9,166

97,650

6.4

1,06,816

(INR Million)

2022E

18,71,491

15.5

2,37,637

20.2

12.7

26,448

2,11,188

33,434

21,198

1,98,952

52,286

26.3

1,57,207

22,125

1,400

10,541

1,25,940

29.0

1,36,481

2017

1,866

5,00,299

5,02,165

9,39,761

-11,252

35,636

14,66,310

1,71,779

38,375

1,67,374

3,00,778

1,97,530

41,397

2,79,696

55,725

19,547

4,88,977

16,05,954

6,37,950

9,68,004

14,66,312

2018

2,803

5,46,232

5,49,035

10,75,241

-21,170

52,014

16,55,120

2,19,694

57,939

1,58,481

3,20,236

1,53,113

48,478

3,31,170

80,327

23,536

5,74,595

19,23,256

7,41,486

11,81,771

16,55,120

2019

2,806

6,20,943

6,23,748

12,55,552

-31,078

68,261

19,16,483

2,62,141

74,024

1,63,017

3,51,134

2,11,203

64,139

3,70,382

1,17,262

24,890

6,14,870

21,94,782

8,40,637

13,54,146

19,16,483

2020E

2,806

6,89,453

6,92,258

14,35,552

-31,078

82,498

21,79,230

2,82,141

98,142

1,63,017

3,47,016

3,11,203

69,786

4,02,992

57,251

27,082

6,69,006

23,69,314

8,48,303

15,21,011

21,79,230

2021E

2,806

7,60,697

7,63,503

16,00,552

-31,078

1,00,476

24,33,452

3,02,141

1,22,790

1,63,017

3,42,368

3,11,203

76,832

4,53,541

1,00,947

29,816

7,36,545

26,97,628

9,17,746

17,79,882

24,33,452

(INR Million)

2022E

2,806

8,58,725

8,61,531

17,82,052

-31,078

1,22,601

27,35,106

3,22,141

1,49,239

1,63,017

3,35,919

3,11,203

88,771

4,95,945

2,05,805

34,449

8,50,999

31,48,340

10,60,356

20,87,983

27,35,106

30 March 2020

Larsen & Toubro

Financials and valuations

Ratios

Y/E March

Basic (INR)

Adjusted EPS

Growth (%)

Cons. EPS (Fully Diluted)

Growth (%)

Cash EPS

Book Value

DPS

Payout (incl. Div. Tax.)

Valuation (x)

P/E

Cash P/E

EV/EBITDA

EV/Sales

Price/Book Value

Dividend Yield (%)

Return Ratios (%)

RoE

RoCE

Turnover Ratios

Debtors (Days)

Inventory (Days)

Asset Turnover (x)

Leverage Ratio

Current Ratio (x)

Debt/Equity (x)

2017

42.2

43.0

42.2

43.0

59.1

358.3

8.9

21.0

18.9

13.5

18.0

1.9

2.5

1.1

12.5

5.5

93.4

13.8

0.8

2.5

1.8

2018

51.7

22.4

51.7

22.4

65.5

391.7

15.9

30.8

15.5

12.2

15.6

1.8

2.2

2.0

13.8

6.0

101.0

14.8

0.7

2.6

1.8

2019

57.3

10.9

63.5

22.8

77.2

444.7

18.0

28.4

14.0

16.9

19.3

2.2

1.8

1.4

13.7

6.0

100.0

17.3

0.7

2.6

1.8

2020E

65.4

14.1

70.4

11.0

87.6

493.5

21.1

30.0

12.2

14.9

18.4

2.2

1.6

13.9

6.1

100.0

17.3

0.7

2.8

2.0

2021E

69.6

6.4

76.1

8.1

93.7

544.3

22.8

30.0

11.5

13.9

16.8

2.1

1.5

1.8

13.4

6.0

102.2

17.3

0.7

2.9

2.0

2022E

89.8

29.0

97.3

27.8

116.2

614.2

29.2

30.0

8.9

11.2

14.3

1.8

1.3

2.2

15.5

6.6

96.7

17.3

0.7

3.0

1.8

Cash Flow Statement

Y/E March

PBT before EO Items

Add : Depreciation

Others

Less : Direct Taxes Paid

(Inc)/Dec in WC

CF from Operations

(Inc)/Dec in FA

Free Cash Flow

(Pur)/Sale of Investments

CF from Investments

(Inc)/Dec in Net Worth

(Inc)/Dec in Debt

Others

Dividend Paid

CF from Fin. Activity

Inc/Dec of Cash

Add: Beginning Balance

Closing Balance

2017

92,429

23,699

-3,888

-32,017

-28,086

52,138

-28,638

23,499

-86,740

-1,15,378

14,378

58,408

6,708

-14,429

65,065

1,825

53,900

55,725

2018

1,07,733

19,287

-9,918

-34,034

-1,88,660

-1,05,592

-38,745

-1,44,337

44,417

5,168

-926

1,35,478

16,378

-25,902

1,25,028

24,603

55,725

80,327

2019

1,42,862

20,840

-11,636

-45,816

-23,921

82,329

-1,73,298

-90,969

-35,366

113

1,78,653

10,978

-26,471

1,63,273

36,937

80,325

1,17,262

2020E

1,41,312

24,118

7,735

-36,000

-86,876

50,288

-1,60,000

-1,09,712

-1,00,000

1,80,000

-30,299

1,49,701

-60,011

1,17,262

57,251

2021E

1,58,056

24,648

10,566

-43,828

-58,425

91,017

-1,76,750

-85,733

1,65,000

-35,572

1,29,428

43,696

57,251

1,00,947

(INR Million)

2022E

1,98,952

26,448

11,941

-52,286

-30,819

1,54,236

-1,92,425

-38,189

1,81,500

-38,454

1,43,046

1,04,857

1,00,947

2,05,805

30 March 2020

Larsen & Toubro

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 Financial Services Ltd. (MOFSL) is a SEBI Registered Research Analyst having registration no. INH000000412. MOFSL, 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. MOFSL is a subsidiary company of Passionate Investment Management Pvt. Ltd.. (PIMPL). MOFSL is a listed public company, the details in respect of which are

available on www.motilaloswal.com. MOFSL (erstwhile Motilal Oswal Securities Limited - MOFSL) 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 Limited (MCX) and

National Commodity & Derivatives Exchange Limited (NCDEX) for its stock broking activities & is Depository participant with Central Depository Services Limited (CDSL) National

Securities Depository Limited (NSDL),NERL, COMRIS and CCRL and is member of Association of Mutual Funds of India (AMFI) for distribution of financial products and Insurance

Regulatory & Development Authority of India (IRDA) as Corporate Agent for insurance products.

Details of associate entities of Motilal Oswal Financial Services Limited are

available on the website at

http://onlinereports.motilaloswal.com/Dormant/documents/List%20of%20Associate%20companies.pdf

MOFSL 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 MOFSL even

though there might exist an inherent conflict of interest in some of the stocks mentioned in the research report

MOFSL 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 MOFSL 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 Financial Services 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 MOFSL or its associates maintains arm’s length distance with Research Team as all the activities are segregated

from MOFSL 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 MOFSL & 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 Financial Services Limited (MOFSL) 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 MOFSL 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 MOFSL , 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., MOFSL 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 MOFSL, 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 MOFSL, Research Analyst and/or his relatives do not have actual/beneficial ownership of 1% or more securities in the subject company

3 MOFSL, Research Analyst and/or his relatives have not received compensation/other benefits from the subject company in the past 12 months

4 MOFSL, 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 MOFSL has not acted as a manager or co-manager of public offering of securities of the subject company in past 12 months

7 MOFSL has not received compensation for investment banking/ merchant banking/brokerage services from the subject company in the past 12 months

8 MOFSL has not received compensation for other than investment banking/merchant banking/brokerage services from the subject company in the past 12 months

9 MOFSL has not received any compensation or other benefits from third party in connection with the research report

10 MOFSL has not engaged in market making activity for the subject company

30 March 2020

Larsen & Toubro

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The associates of MOFSL 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 MOFSL 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 MOFSL 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 MOFSL which are opened for proprietary investments only. While calculating beneficial holdings, It does not

consider demat accounts which are opened in name of MOFSL for other purposes (i.e holding client securities, collaterals, error trades etc.). MOFSL 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 MOFSL 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 MOFSL. 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. MOFSL 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. MOFSL, 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 MOFSL. 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 MOFSL 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 MOFSL or any of its

affiliates or employees from, any and all responsibility/liability arising from such misuse and agrees not to hold MOFSL or any of its affiliates or employees responsible for any such

misuse and further agrees to hold MOFSL 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 71934200/ 022-71934263;

Website

www.motilaloswal.com.CIN

no.: L67190MH2005PLC153397.Correspondence Office Address: Palm Spring Centre, 2nd Floor, Palm Court Complex, New Link Road,

Malad(West), Mumbai- 400 064. Tel No: 022 7188 1000.

Registration Nos.: Motilal Oswal Financial Services Limited (MOFSL)*: INZ000158836(BSE/NSE/MCX/NCDEX); CDSL and NSDL: IN-DP-16-2015; Research Analyst:

INH000000412. AMFI: ARN - 146822; Investment Adviser: INA000007100; Insurance Corporate Agent: CA0579;PMS:INP000006712. Motilal Oswal Asset Management Company

Ltd. (MOAMC): PMS (Registration No.: INP000000670); PMS and Mutual Funds are offered through MOAMC which is group company of MOFSL. Motilal Oswal Wealth

Management Ltd. (MOWML): PMS (Registration No.: INP000004409) is offered through MOWML, which is a group company of MOFSL. Motilal Oswal Financial Services Limited is

a distributor of Mutual Funds, PMS, Fixed Deposit, Bond, NCDs,Insurance Products and IPOs.Real Estate is offered through Motilal Oswal Real Estate Investment Advisors II Pvt.

Ltd. which is a group company of MOFSL. Private Equity is offered through Motilal Oswal Private Equity Investment Advisors Pvt. Ltd which is a group company of MOFSL.

Research & Advisory services is backed by proper research. Please read the Risk Disclosure Document prescribed by the Stock Exchanges carefully before investing. There is no

assurance or guarantee of the returns. Investment in securities market is subject to market risk, read all the related documents carefully before investing. Details of Compliance

Officer: Name: Neeraj Agarwal, Email ID: na@motilaloswal.com, Contact No.:022-71881085.

* MOFSL 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.

30 March 2020