15 October 2010
India | Industrials | Initiating Coverage
BUY
| BGRL IN
Target: `930 (Sept’11)
Abhishek Puri
abhishek.puri@jmfinancial.in
Tel: (91 22) 6630 3073
Transforming to play in a big league
„
Risks to our call: a) Concentration risk with few SEB’s as customers, as other
states (GUVNL, APGenco) disqualified BGR in the past, b) LD/PG risks for
using Chinese equipment, and c) Inconsistent order inflow.
Exhibit 1. Financial Summary
FY09A
FY10A
FY11E
FY12E
FY13E
Net sales
19,221
30,692
46,811
61,576
71,832
59.7
52.5
31.5
16.7
2,079
3,435
5,253
6,713
7,761
EBITDA
EBITDA (%)
Adjusted net profit
EPS (`)
10.8
11.2
11.2
10.9
10.8
1,149
2,010
3,084
3,916
4,461
16.0
27.9
42.8
54.4
62.0
74.9
53.4
27.0
13.9
EPS growth (%)
ROCE (%)
23.3
37.2
40.5
28.7
22.7
ROE (%)
20.5
31.8
37.5
35.9
31.6
PE (x)
46.7
26.7
17.4
13.7
12.0
9.6
7.6
5.7
4.3
3.4
26.2
15.3
10.2
8.1
6.9
Price/Book value (x)
EV/EBITDA (x)
Shares in issue (mn)
72.0
Diluted share (mn)
72.0
`187.6 / US$ 4.2
3-mon avg daily val (mn)
52-week range
950 / 410
Sensex/Nifty
20,125/6,063
44.1
`/US$
Daily Performance
BGR Energy
900
800
700
600
500
400
300
200
100
0
250%
200%
150%
100%
50%
0%
BGR Energy
%
Jul-10
Sep-10
May-10
Jan-10
Mar-10
-50%
Relative to Sensex (RHS)
1M
3M
12M
-9.9
0.3
48.3
-13.1
Relative*
* To the BSE Sensex
-12.1
31.3
Absolute
Shareholding Pattern
Promoters
FII
DII
Public / others
(%)
1Q FY11
1Q FY10
81.3
2.9
6.6
9.2
81.3
1.5
6.0
11.2
(` mn)
Y/E March
Sales growth (%)
`53.7 / US$ 1.2
Market cap (bn)
Jul-09
Initiate with BUY and TP of `930: Large opportunity is likely to result in
order inflow CAGR of 52% over FY10-13E (Exhibit 14) with sales CAGR of 31%
and earnings CAGR of 30%. We value BGR with an exit multiple of 16x to
Sept’12E EPS of `58.2 to arrive at Sept’11 TP of `930. PE multiple of 16x is at
c.15% discount to BHEL based on a) BGR’s impressive earnings growth profile,
b) re-rating potential on large business opportunity from BTG manufacturing
JV with Hitachi, c) possibility of earnings upgrade as street expects 1,320MW
order from RRVUNL (worth `65bn) while tender flow/management guidance is
higher at `150-200bn; and d) marginalisation of Chinese vendors due to visa
and performance issues which will benefit domestic companies like BGR. BUY.
Key Data
Sep-09
„
Strong execution record and better return ratios: BGR is an established
player in the turnkey engineering and equipments supply for power and oil &
gas industry. The team (>1,450 engineers) has executed 150 projects in >45
countries. With strong in-house design and engineering capabilities (and
lesser outsourcing), BGR has given better return on capital vs peers. Over
FY08-10, BGR has consistently generated RoEs of >30%.
Abhishek Anand
abhishek.anand@jmfinancial.in
Tel: (91 22) 6630 3067
May-09
„
Clear preference for EPC players over BoP: EPC opportunity is likely to be
2x BoP as states prefer single point responsibility. Additionally, plant
performance guarantees can be strictly implemented. Hence, we have a clear
preference for EPC players as BoP space becomes more crowded with
emerging competition from sub-vendors like Sunil Hitech and McNally Bharat
(Exhibit 4). BGR’s integrated offerings help control costs better and present
bigger opportunities as it can take up BTG, BoP, EPC projects as well as
package-wise individual projects.
Kashish Tandon
kashish.tandon@jmfinancial.in
Tel: (91 22) 6630 3085
Jan-09
„
US$40bn opportunity up for grabs in 12th FYP: With c.100GW capacity
addition planned and >60% to be ordered out, we estimate US$40bn (`1.8trn)
opportunity for a company like BGR Energy (see Exhibit 2) which is present
across all verticals in BTG, BoP and EPC. CEA’s advisory placing 100% 12th Plan
orders before FY12 will lead to significant order accretion. This will be
corroborated with SEB tender flow (Exhibit 3) currently up for bidding. We
expect BGR’s order inflow for FY11 and FY12 at `80-95bn.
Mar-09
„
Nov-09
BGR Energy
Price: `745
Source: Company data, JM Financial. Note: Valuations as of 15/10/2010
JM Financial Institutional Securities Private Limited
JM Financial Research is also available on:
Bloomberg - JMFR <GO>, Thomson Publisher & Reuters.
Please see important disclosure at the end of the report
BGR Energy
18 October 2010
US$40bn opportunity in 12th FYP
Ministry of Power envisages c.100GW capacity addition in the 12th FYP which
includes >90GW of thermal power capacity. But with 30-35GW of slippages
expected in the 11th FYP capacity addition target, we believe 12th Plan will target
>100GW of capacity addition. We estimate US$40bn (`1.8trn) opportunity for a
company like BGR Energy (Exhibit 2) which is present across all verticals in BTG,
BoP and EPC. The estimates are based on industry interactions and our
understanding of preference for each power developer in terms of ordering BTG,
EPC or BoP turnkey. Out of 100GW of planned thermal capacity addition, c.38GW,
including UMPPs, is ordered out, while NTPC JV BTG orders are expected to be
retained by BHEL.
Planned capacity for 12th Plan could be
much higher on un-identified projects from
IPPs
Exhibit 2. Opportunity in EPC, BoP and BTG space
Opportunity (` bn)
Turnkey Opportunity (MW)
Planned
Capacity in
12 FYP (MW)
Ordered
Capacity
(MW)
Unordered
Capacity
(MW)
30,420
13,560
16,860
-
-
16,860
-
-
464
4,140
1,500
2,640
-
-
-
-
-
-
21,895
12,740
9,155
5,460
3,695
3,695
246
63
102
3,850
1,000
2,850
2,850
-
-
128
-
-
UMPPs ordered
15,960
15,960
-
-
-
-
-
-
-
IPPs with in house EPC
(RPower, Lanco)
10,170
-
10,170
-
-
10,170
-
-
280
Other IPPs (JSPL,
Navbharat, KVK, etc.)
9,850
2,550
7,300
-
7,300
7,300
-
124
201
New UMPPs
8,000
-
8,000
-
-
8,000
-
-
220
104,285
47,310
56,975
8,310
10,995
46,025
374
187
1,266
Utility
NTPC
NTPC JV
Total SEBs
NLC
Total Thermal
EPC
BoP
BTG
EPC
BoP
BTG
Source: Ministry of Power, CEA, JM Financial estimates
Near-term tenders spell part of the opportunity
In the near future, few SEB orders are in the pipeline where NIT has been issued
and BGR has participated. States like Rajasthan and Gujarat will be tendering out
projects worth >`200bn primarily being developed in the super critical space.
GUVNL has 3 projects with 4GW capacity to
be
tendered
in
FY11,
but
BGR
was
disqualified in Gujarat on lack of experience
Exhibit 3. Tenders to be bid/opened in near future
Project
Capacity
Location
Client
Order type
Value (` bn)
Remarks
2x660 MW Suratgarh
1,320
Rajasthan
RRVUNL
EPC
65.0
2X660MW Chhabra
1,320
Rajasthan
RRVUNL
EPC
65.0
Awaiting coal linkage
660
Maharashtra
Mahagenco
MPP/BoP
10.0
BoP opportunity available
3x660MW Dondaicha
1,980
Maharashtra
Mahagenco
MPP/BoP
29.7
BoP opportunity available
1x600MW Ennore TPS
600
Tamil Nadu
TNEB
EPC
28.8
EPC Opportunity
1x600MW Muddanur
600
Andhra
AP Genco
EPC
32.0
BGR filed court case on unfair PQ
1x600MW Chelpur
600
Andhra
AP Genco
EPC
32.0
BGR filed court case on unfair PQ
1x660MW Bhusawal
Source: SEBs, JM Financial
Awaiting coal linkage
AP
Genco’s
participation
decision
for
to
companies
limit
EPC
with
<1yr
experience has been challenged by BGR
JM Financial Institutional Securities Private Limited
Page 2
BGR Energy
18 October 2010
Annual ordering in EPC/BoP has been in `130-150bn range
Based on announced orders and industry checks in the last three years,
combined annual ordering of BoP/EPC projects has been upwards of `130bn. We
expect more EPC/BoP ordering p.a. as many state utilities want to crunch
timelines by giving turnkey orders to one party. Unless there is a mandate to use
domestic manufactured equipments, which eventually is likely, few private
companies would continue placing orders with Chinese. Visa restriction on
Chinese workers is a definite positive for domestic BoP players.
Exhibit 4. Annual ordering (BoP and EPC combined)
Project
Type
Executing
Company
(` mn)
Capacity
(MW)
Order value (`
mn)
Realization
(` mn/MW)
FY08
IOC Captive Power
EPC
BHEL
170
4,310
25.4
DVC Durgapur
EPC
BHEL
1,000
32,200
32.2
Okari-Gujarat
EPC
BHEL
490
19,500
39.8
Anpara-D
EPC
BHEL
1,000
33,900
33.9
North Chennai
EPC
BHEL
600
24,750
41.3
Kaperkheda
BoP
BGR Energy
500
9,980
20.0
Konaseema EPS
BoP
BGR Energy
820
6,830
8.3
Kothagudem, AP
BoP
BGR Energy
500
7,930
15.9
Total
FY09
Hindustan Zinc Captive
Power
Mettur
Kalisindh
Companies like Tata Power, RPower and
Lanco Infra do BoP and EPC through inhouse or group capabilities
139,400
EPC
Tata
Projects
BGR Energy
600
31,000
51.7
EPC
BGR Energy
1,200
49,000
40.8
North Chennai Ext II
EPC
BHEL
600
21,750
36.3
Bokaro A, DVC
Pallatana - ONGC,
Tripura & IL&FS
Total
EPC
BHEL
500
18,400
36.8
EPC
BHEL
740
22,050
29.8
BoP
160
2,760
17.3
144,960
FY10
APPDCL
BoP
Sterlite CPP Project
BoP
Ideal Energy Nagpur
BoP
NTPC Bongaigaon
BoP
Mahagenco Parli Hydro
Power
Mahagenco Koradi
Tata
Projects
Tata
Projects
McNally
Bharat
McNally
Bharat
BoP
Sunil Hitech
EPC
L&T
1,600
27,750
17.3
160
3,000
18.8
270
4,140
15.3
250
4,360
17.4
250
4,878
19.5
68,970
34.8
1,980
Total
113,098
Source: Company, Media reports, JM Financial
JM Financial Institutional Securities Private Limited
Page 3
BGR Energy
18 October 2010
Clear preference for EPC over BoP
EPC opportunity to be 2x BoP as states prefer single point responsibility for
design, engineering, supply, erection and commissioning (Exhibit 5).
Additionally, enforceable plant performance guarantees can be strictly
implemented. Hence, we have a clear preference for EPC players as BoP space
becomes more crowded with emerging competition from sub-vendors like Sunil
Hitech and McNally Bharat (Exhibit 4).
Exhibit 5. BoP packages and associated costs (`mn/MW)
Electrical Packages (5.5)
C&I packages
Ash Handling (2.3)
Coal Handling (4.5)
DM Plant (0.4)
HIGH
Business Potential
Fire Detection & Protection (0.6)
WTP Package (0.6)
LOW
Cooling Tower (2.0)
Chimney (1.3)
AC System (0.4)
Civil Packages (1.7)
LP Piping (0.4)
LOW
HIGH
Constraint of
sourcing
Source: CEA, Company, JM Financial
JM Financial Institutional Securities Private Limited
Page 4
BGR Energy
18 October 2010
BGR Energy – Jostling higher
BGR Energy, a BoP and EPC company, was incorporated in 1985 as JV between
GEA Energietechnik GmbH and Mr. B G Raghupathy (promoter) to produce and
sell specific boiler auxiliary and components such as condenser tube cleaning
system, debris filter and rubber cleaning balls for thermal and nuclear power
plants. From a turnover of `7.75bn in FY07, the company has catapulted itself
into a prime player in the EPC and BoP space winning large ticket orders
(>`50bn).
Holistic Business Model
Integration across BoP components: BGR has a unique business model. Major
competitors in the equipment space generally sub-contract various packages
while BGR does designing, engineering, erection and commissioning in-house for
all major packages.
Presence across entire power project value
chain from civil works to help garner larger
pie of the opportunity vis-à-vis competition
Exhibit 6. Power generation project value chain
Source: Company, JM Financial
Strong technical know how, pre-qualifications and product expertise
While operating in the BoP and EPC segments, BGR also manufactures certain
products related to these businesses. This rich portfolio of products (air cooled
condensers, de-aerators etc.) caters to both power and industrial segment and is
one of BGR’s strengths. These manufactured products not just give BGR an edge
over competition in giving integrated solutions but also helps manage costs. All
these products are designed by either collaborating with international players or
their technology has been transferred to BGR under an agreement (Exhibit 7). BGR
has pre-qualification for upto 800MW units, combined cycle power plants (except
Main Plant area) upto 400kV substation and GIS, Oil & gas pipeline and sea water
desalination plant.
JM Financial Institutional Securities Private Limited
Water being scarce, its products like Air
cooled condensers and heat exchangers are
gaining popularity especially in states like
Rajasthan and Tamil Nadu
Page 5
BGR Energy
18 October 2010
Exhibit 7. Systems/Products offering and technology tie up
Systems / Equipment Manufactured
Cooling Towers
Air Cooled Condensers
Coal Handling Plant
De-aerators
Water Treatment Plant
Effluent Treatment Plant
Condensate Polishing Unit
Condenser Tube Cleaning System and Debris Filter
Air Cooled Heat Exchanger
Gas Compressor Skid
Gas Metering & Conditioning Skid
Fin Tubes for HRSG
Waste Heat Recovery Module
HP Heater
Super Heater Coil
Pressure Vessels
Technology Partner
GEA, Germany
Crane, USA *
Termo Mechanicca, Italy **
AES, Saudi Arabia **
Termo Mechanicca, Italy
GEA, Germany *
GEA Btt, France *
GEA Spirogills, UK *
-
BGR manufactures equipments totalling
upto `1-1.5mn/MW out of the total BoP
value
Source: Company, JM Financial, *- The technology transfer is completed, **- Case by case Co-operation
Graduation from BoP to EPC in 2008
BGR was primarily a BoP player while equipment manufacturing formed a small
portion of its revenues. BGR executed number of turnkey contracts, supplying
the BOP equipment, services and civil works for power generation projects. But in
FY08, BGR won two large contracts in engineering, procurement and construction
(EPC) space, and thereon it concentrated its core skills from design, engineering
and supply of BoP to entire EPC including procurement of BTG equipments. Due
to its strong track record and ability to integrate solutions, it bagged two major
orders from Mettur TPP and Kalisindh TPP worth `80bn (combined). As of FY10end, EPC contracts formed a major part (58%) of its total OB (`102.3bn).
Exhibit 8. Evolution of order backlog over the years
80,000
BoP
EPC
Natural progression from BoP to EPC to
offer better and more complete solutions
(` mn)
Equipments
70,000
FY08
6,352
32,550
0
0
10,000
52,690
20,000
0
7,628
30,000
74,040
40,000
7,310
50,000
26,870
60,000
FY09
FY10
Source: Company, JM Financial
BTG indigenisation to happen over a period
of time; will set up facility in 3 years post
Completing offering by entering BTG space; JV with Hitachi
BGR has announced JVs with Hitachi Germany and Hitachi Japan for setting up the
BTG facility with an investment of `44bn. The boiler JV will have 70% BGR holding
while the turbine JV will have 74% BGR holding. All this while, BGR had been
sourcing BTG from third parties for its contracts. Initial sourcing came from
Europe (players like Rolls Royce), but in recent times, Chinese manufacturers (like
Dongfang) have been providing BGR with the BTG equipment.
This JV will initially source components from Hitachi but slowly BGR will look at
indigenising the equipment, resulting in better margins once initial phase is over.
JM Financial Institutional Securities Private Limited
agreement signing
JV to offer 5 units per annum of 660-800MW
capacity each, once fully commissioned
Page 6
BGR Energy
18 October 2010
BTG space is becoming competitive for newer players…
BTG facility will enable BGR to edge out competition in the BoP space and also
enhance acceptability of its tender in the wake of growing opposition to Chinese
power equipments. Many established Indian power equipment companies have
announced their JVs or technological collaborations for entering the BTG space
(see Exhibit below).
Exhibit 9. BTG competitive landscape
Domestic Player
Foreign Partner
Boiler
BGR
Alstom
Mitsubishi
Electric
Corporation
Hitachi
Turbine
Siemens
Mitsubishi
Heavy
Industries
Hitachi
JSW
-
Bharat Forge
JV
Holding
(%)
Capital
Outlay
(` mn)
Capacity (MW)
Expected
Roll out
Facility
Remarks
100
8,000
Current
15,600
51:49
36,000
-
4,000
FY11
Hazira
JV
74:26
44,000
-
4,000
FY12
JV signed in August'10
Toshiba
24:76
12,000
-
3,000
FY12
Chennai
Tamil
Nadu
-
Alstom
49:51
24,000
-
5,000
FY12
GB Engineering
Ansaldo
Caldie
NA
15:85
10,000
-
2,000
NA
Thermax
Babcock &
Wilcox
NA
51:49
7,000
1,500
3,000
FY12
Cethar Vessels
Riley Power,
Siemens
Power
Machines
BHEL
L&T
100%
Boiler;
49% TG
15,500
-
Expansion
5,000
FY12
NA
Technical Collaboration
3,000
NA
Mundra
Trichy
JV
JV started construction in
Dec'09
JV in initial stages of
setting up facility
In process
JV signed in March'10
Trichy
Technical collaboration
with Riley Power and JV
with Power Machines (
Russia)
Source: Company, Media Reports JM Financial
…and is essential for success in EPC contracts:
We believe BoP offering with BTG supplies help a company gain edge over
competition. It not only helps bag orders but execution is also better when the
entire package is being given to a single contractor.
Pursuant to the aggressive domestic power generation capacity addition, most
domestic equipment biggies have announced plans to ramp up capacities to
cater to the burgeoning market. Companies like L&T and Thermax and utilities
like JSW have already got their agreements in place and are setting up their
capacities.
BGR to leverage its EPC understanding with
BTG technology acquisition
In our view, the long standing experience in turnkey engineering and EPC
business, offering of complete BTG and EPC would give BGR an edge over
competition. Only BHEL and L&T, apart from BGR, have integrated offering of
BTG/EPC.
Long standing project management track record
In its long history of 25 years, BGR has successfully executed complex projects in
the power and oil & gas sectors. It has executed more than 150 contracts in 45
countries. It was one of the early entrants in the BoP space in India and did milk
the early mover advantage to fuel growth in its initial history. The company has
transformed itself from a component manufacturer to a multi product specialist
providing complete BoP and EPC solutions.
JM Financial Institutional Securities Private Limited
Testimony to effective and timely
completion is faith of many SEBs in BGR
(repeat ordering)
Page 7
BGR Energy
18 October 2010
Exhibit 10. Key completed projects
Project
Customer/Location
Value
Commissioned In
EPC
120 MW CCPP
Aban Power, Karuppur, Tamil Nadu
3,293
July’05
92.2 MW CCPP
TNEB, Valuthur (Phase-II), Tamil Nadu
4,339
May’08
25 MW IPP
MALCO, Mettur, Tamil Nadu
914
March’09
95 MW CCPP
T N E B, Valuthur (Phase-I), Tamil Nadu
725
December’02
23 MW TPP
Grasim Industries, Chittorgarh, Rajasthan
542
330 MW CCPP
RRVUNL, Dholpur, Rajasthan
2,558
December’07
500 MW TPP
APGENCO, Vijayawada, Andhra Pradesh
7,066
April’ 09
Strong execution aiding to bag large ticket
orders
BoP
February’03
Source: Company, Media reports, JM Financial
Developed a strong team of >1,700 to take up 10-12 projects simultaneously
Over the years, as it increased its scale of projects, BGR developed a strong team
of professionals handling the EPC and BoP business. As at end-May’10, it had
1,735 employees, with c.84% being engineers. The management is highly
experienced with over 25 years of average experience in the industry.
Exhibit 11. Experienced management
Key Professionals
Designation
Mr. B.G. Raghupathy
Mr. T. Sankaralingam
Mr. S. Rathinam
Chairman & Managing Director
Managing Director
Director (Finance)
Director (Technologies, HR &
Infrastructure)
Chief Financial Officer
Mr. V.R. Mahadevan
Mr. P.R. Easwar Kumar
27
16
rich in BoP and EPC experience
Experience
with BGR
Energy
25
Industry
Experience (Years)
36
34
30
Management and engineering professionals
17
22
15
Source: Company, JM Financial
100% of domestic OB from SEB
BGR’s order inflow witnessed 21% CAGR during FY07-FY10, first three years of the
11th FYP when much cap addition plans were announced and most of them
materialised. There was subdued ordering from IPPs in FY05-08, and incremental
ordering came primarily from CPSUs and SEBs. BGR managed its inflows well as it
picked up quite a chunk of public sector orders (100% of domestic OB is from the
public sector). Though this means more transparency and assured terms w.r.t the
project but also entails stretched working capital as SEBs have stretched payment
terms.
Significant SEB exposure led to
transparency in ordering and execution but
affected WC levels
Has to increase focus towards IPPs for incremental orders
The public sector focussed strategy worked well for the Chennai based
manufacturer, but to maintain future growth and market share BGR has to look
beyond public sector orders and bag private sector orders. The private sector
space becomes even more quintessential for growth when we consider the fact
that the 12th plan envisages 100-120GW of capacity addition, both IPPs and
CPSUs combined. The 12th plan will differ from 11th plan as the IPPs will have a
larger share (c.43%, see Exhibit 12) of ordering for capacity vis-à-vis the 10th and
11th FYP. So, the company will have to eye the private IPP pie for incremental
orders in the coming years.
JM Financial Institutional Securities Private Limited
Smaller IPPs (ex-Tata Power, RPower, Lanco)
to be targeted for incremental ordering
Page 8
BGR Energy
18 October 2010
Exhibit 12. Sectoral break up of capacity addition
Central Sec tor
100%
13
S tate Sec tor
Priv ate Sec tor
19
80%
43
33
60%
34
24
40%
20%
(%)
54
47
33
0%
10th Plan
11th Plan
12th Plan
Source: CEA, Ministry of Power, JM Financial
Competition catching up in BoP
The company would have to work hard to secure a place for itself in the 12th plan
ordering as big IPPs like Tata Power (BUY, `1,440), Reliance Power, Lanco
Infratech have in-house EPC capabilities and hence don’t tender out full BoP
orders. Smaller and regional players order out EPC contracts and not the complete
BoP orders, and competition is increasing from other sub-contractors/BoP
manufacturers like McNally Bharat and Sunil Hi-tech. But, as a natural extension,
BGR has signed a MoU with Hitachi, Japan to manufacture BTG equipments under
a separate JV to offer integrated solutions as per changing market conditions.
JM Financial Institutional Securities Private Limited
Recent order wins by Sunil Hitech and
McNally heighten competition
Page 9
BGR Energy
18 October 2010
Valuation
Initiating coverage with a BUY rating and target price of `930
We are initiating coverage on BGR Energy with a BUY rating and Sept’11 target
price of `930. With sales CAGR of 32%, net profit CAGR of 31% over FY10-13
(leading to 31% BV growth) and 32-38% RoEs, we arrive at our target price using
an exit multiple of 16x to Sept’12E EPS of `58.2. At CMP, the stock trades at
13.7x FY12E earnings and 9.1x FY12 EV/EBITDA. In the past, the stock has traded
in the range of 10-16x 1yr fwd EPS, but we assign an exit multiple of 16x, near to
BTG manufacturing peers. We think the company will enjoy premium valuations
on high growth, superior return ratios than peers and its progression from
competitive BoP to high-end BTG manufacturing. PE multiple of 16x is at c.15%
discount to BHEL based on- a) BGR’s impressive earnings growth profile, b) rerating potential with BTG manufacturing JV, and c) possibility of earnings upgrade
as street expects just one 1,320MW order from RRVUNL (worth `65bn) while
tender flow/management guidance is higher at `150-200bn. Large ticket orders
will be triggers for an earnings upgrade. Based on impressive project
management track record and huge power generation equipment opportunity, we
recommend a BUY.
We believe most 12th FYP plan projects will be ordered in FY12; we have built in
c.`80bn order inflows in FY11E, primarily due to expectation of two orders in the
EPC space. We expect near-term order book accretion mainly from SEB (Exhibit 3)
and in the longer run from IPPs as they will drive incremental power generation
capacity addition (Exhibit 2 and 12). Our order inflow and growth projections are
presented in Exhibit 13.
Exhibit 13. Growth assumptions
Order Inflow
% YoY growth
Order Book
% YoY growth
Gross Sales
% YoY growth
At our TP, BGR trades at 11.0x EV/EBITDA
and 5.4x P/BV (FY12)
US$40bn opportunity in the 12th FYP
coupled with > `200bn ordering from SEB
(` mn)
FY07
FY08
FY09
FY10
FY11E
FY12E
FY13E
20,541
25,510
82,780
36,840
79,826
94,163
131,079
0%
24%
225%
-55%
117%
18%
39%
21,660
32,120
95,230
102,300
125,520
158,223
113,788
0%
48%
196%
7%
23%
26%
-28%
7,751
15,048
19,221
30,738
46,811
61,576
71,832
0%
94%
28%
60%
52%
32%
17%
Though management has guided for order
inflow of `150-200bn in FY11, we assume
c.`80bn order inflow in FY11E and c.`94bn
in FY12E
Source: Company, JM Financial
Our forecasts are 11-9% higher than consensus for FY11E and FY12E as we are
positive on the business opportunity in FY11-12, and hence, company would like
to showcase better execution to gain EPC pre-qualification in other states.
Exhibit 14. Consensus EPS upgrades for FY11E and FY12E and stock price performance
900
Stoc k Pric e (RHS)
JMFe FY11E
Mean EPS FY11E
JMFe 42. 8
45.0
S toc k Pric e (RHS )
JMFe FY12E
Mean EPS FY12E
JMFe 54. 4
800
800
40.0
700
600
35.0
30.0
400
60.0
50.0
700
40.0
600
500
500
30.0
400
20.0
300
300
25.0
200
100
Jan-09
900
20.0
Apr-09
Jul-09
Oc t-09
Jan-10
Apr-10
Jul-10
10.0
200
100
Jan-09
Apr-09
Jul-09
Oc t-09
Jan-10
Apr-10
Jul-10
Source: Bloomberg, JM Financial
JM Financial Institutional Securities Private Limited
Page 10
BGR Energy
18 October 2010
Exhibit 15. Valuation multiple charts
1 year fwd P/E band chart
1 year fwd PBV band chart
900
900
800
700
600
12x
500
300
4x
500
10x
8x
400
5x
700
14x
600
6x
800
16x
400
2.5x
300
6x
200
200
100
100
2x
1.5x
0
0
Apr-08
Jan-09
Oct-09
Apr-08
Jul-10
1 year fwd EV/OB band chart
Jan-09
Oct-09
Jul-10
1 year fwd EV/EBITDA band chart
60000
10x
55000
0.4x
50000
50000
8x
45000
40000
40000
0.3x
6x
35000
30000
0.25x
30000
0.20x
25000
20000
4x
20000
3x
0.15x
15000
2x
10000
0.08x
10000
5000
0
Apr-08
Jan-09
Oct-09
Jul-10
Apr-08
Jan-09
Oct-09
Jul-10
Source: Bloomberg, JM Financial
Peer valuation comparisons
Exhibit 16. Valuation Comparisons
BGR
Energy*
M Cap
(US$ bn)
P/E (x)
EV/EBITDA
(x)
P/BV (x)
RoE (%)
BHEL
L&T
Rel Infra
Alstom
Shriram
EPC
Punj
Lloyd
Patel
Engg
McNally
Bharat
Sunil
Hitech
1.2
28.0
27.3
5.9
1.3
0.3
1.0
0.6
0.2
0.05
FY10
26.7
28.6x
22.2x
15.8x
33.0x
24.4x
-
12.3x
17.2x
9.4x
FY11E
17.4
22.7x
28.0x
21.4x
28.9x
18.2x
20.2x
16.7x
10.8x
6.1x
FY12E
13.7
18.9x
22.4x
19.0x
23.1x
12.1x
12.9x
15.4x
8.2x
4.5x
FY10
15.4
19.5x
16.2x
10.9x
14.1x
8.8x
24.4x
9.2x
6.9x
2.1x
FY11E
10.6
14.5x
17.6x
24.9x
17.9x
-
8.4x
10.5x
2.8x
-
FY12E
9.1
11.7x
13.2x
20.6x
13.4x
-
7.0x
8.7x
2.3x
-
FY10
7.6
7.8x
5.7x
1.4x
11.1x
2.6x
1.4x
1.9x
3.2x
1.2x
FY11E
5.7
6.2x
5.1x
1.7x
9.2x
2.4x
1.3x
1.9x
2.3x
0.8x
FY12E
4.3
4.9x
4.3x
1.6x
7.2x
2.1x
1.2x
1.7x
1.8x
0.7x
FY10
31.8
29.9
31.2
8.1
37.1
11.3
-3.9
16.6
21.0
6.0
FY11E
37.5
30.0
20.0
8.1
33.6
12.8
6.6
10.9
23.0
14.3
FY12E
35.9
29.1
20.8
8.1
34.7
16.2
10.2
11.3
22.8
16.6
Source: Bloomberg, JM Financial, *-JMFe, Valuation as on 15/10/2010
JM Financial Institutional Securities Private Limited
Page 11
BGR Energy
18 October 2010
Risks
„
Unforeseen execution delays: Power utilities in India have been facing an
average 4-6 months delay for most projects under construction. Timely
execution is important for any EPC/BoP player and BGR is also susceptible to
execution delays due to unavailability of coal, evacuation of water, as the
balance 10% amount is based on performance guarantee. Since, it has fewer
but large ticket orders, timely execution is even more important and
unforeseen delays would adversely impact our estimates and may bear
downside risk to our valuation. The delays may also result in penalty being
doled out by BGR to clients.
„
Vulnerability to raw material and currency fluctuations: Though BGR
safeguards its margins as it does BoP associated works in-house, it is also
vulnerable to fluctuating raw material and commodity prices. With c.30% of
the current OB having a price variation clause (PVC), BGR’s operating margins
could be dented in the event of sharp raw material price hikes.
„
High working capital intensity: EPC and BoP space is a working capital
intensive industry and more so if one is dealing with SEBs. Hence, any adverse
movement in interest rates and borrowing terms would stretch BGR’s
borrowing ability and hence earnings estimates.
„
Concentration risk with only SEB clients: BGR faces huge concentration risk
as the current order wins have been from few SEBs. While it is pre-qualified in
Rajasthan and Tamil Nadu for EPC and BoP qualification is also available in
states like Maharashtra and Andhra, cases like Gujarat and Andhra Pradesh
disqualifying BGR for EPC jobs due to lack of experience pose risk in future
contracts. BGR needs to prove its mettle in IPP projects as future capacity
addition will be dominated by IPP/Case-2 route.
„
LD/PG risks for using Chinese equipment: While many IPPs have installed
Chinese equipments earlier and few are working as good as Indian
equipments, we are still not sure of their performance with high-ash Indian
coal. In that context, BGR may have to bear performance guarantee (PG) on
their account.
„
Order booking is crucial: Being an order book driven industry, dry years like
FY09 could stifle growth for BGR until it attains a larger size and has 8-10
projects in its order book. Our projections are based on `80bn and `95bn
inflow assumptions in FY11 and FY12 each, and could be at risk, if the
company doesn’t achieve the desired inflows.
JM Financial Institutional Securities Private Limited
Page 12
BGR Energy
18 October 2010
Financials
EPC orders to drive growth; sales and earnings CAGR of 30-32%
BGR has been one of the early beneficiaries of the BoP opportunity in India and
post its transformation from a component manufacturer to a complete BoP
solutions provider it clocked 67% CAGR in OB and 72% CAGR in earnings during
FY07-10 (see Exhibit 17).
Going forward, the financial performance is expected to be driven by incremental
EPC orders as we witness the shift in focus from BoP to EPC orders. In FY09, BGR
picked up two large ticket EPC orders for Mettur and Kalisindh worth `31bn and
`49bn respectively.
EPC orders likely to be the main stay of
order accretion as well as earnings growth
(contributing c. 57% of FY10 OB)
Exhibit 17. Order backlog segment wise
BoP
140
(` bn)
EPC
Equipments
120
100
Other large EPC players would be occupied
80
124
with in house projects
26
78
26
9
10
FY11E
FY12E
FY13E
0
0
6
8
7
20
8
53
24
33
74
27
40
94
60
0
FY08
FY09
FY10
Source: Company, JM Financial
Order inflow expected to remain robust over FY11-13
We expect BGR’s order inflow to witness CAGR of 52% in FY10-FY13E and OB to
reach `158bn in FY12E. In the coming years we expect strong OB accretion as
12th FYP ordering picks up, and has to be completed before FY12 (Exhibit 18).
Exhibit 18. Order inflow and order book till FY12E
140
Order Inflow
Given the current opportunity in Rajasthan,
Order Booking
where
131
160
(` mn)
established
strong
94
126
114
37
32
26
95
60
102
80
158
80
83
100
20
has
each in FY11E and FY12E
120
40
BGR
credentials, we expect one 2x660MW project
0
FY08
FY09
FY10
FY11E
FY12E
FY13E
Source: Company, JM Financial
JM Financial Institutional Securities Private Limited
Page 13
BGR Energy
18 October 2010
Earnings growth of 30% expected over FY10-13
Owing to more in-house capabilities to execute BoP and EPC projects rather than
depending on sub-vendors and sub-contractors, BGR has better cost control and
hence better margin. We expect EBITDA margins to remain in the 10-11% range
till FY12 (Exhibit 19). We estimate net earnings CAGR of 30% over FY10-13E.
Exhibit 19. Net income and operating margins
5,000
PAT
Significant EPC in initial years to impact
11.6
Operating Margins
margins due to BTG outsourcing to Chinese
4,000
11.2
11.2
3,000
11.2
10.9
10.9
10.8
10.8
10.4
2,000
10.0
10.0
1,149
2,010
3,084
3,916
4,508
0
845
1,000
FY08
FY09
FY10
FY11E
FY12E
FY13E
9.6
9.2
Source: Company, JM Financial
EBIT margins amongst the highest
Its EBIT margins are amongst the highest, second only to E&C behemoth L&T,
when compared with related peers.
Exhibit 20. EBIT margins (vis-à-vis peers)
BGR Energy
L&T*
Reliance Infra*
Sunil Hi-tech
Mc Nally Bharat
FY08
FY09
FY10
End to end integrated package offering
9.8%
11.1%
10.9%
translates into better margins vis-à-vis
12.2%
12.1%
12.6%
peers
9.1%
8.2%
8.1%
13.3%
7.0%
10.0%
8.0%
8.7%
5.1%
Source: Company, JM Financial, * note-only EPC segment numbers have been considered
High working capital cycle; to get better…
Owing to the nature of its business, BGR has always had high working capital
levels and resorts to WC loans to manage operations. In FY08, it had WC levels of
as much as 159 days which have now reduced to 87 days (FY10, see Exhibit 21),
owing to speedier receivables recovery and increase in creditors (advances from
customers). We expect WC cycle to remain in a similar range going forward as
EPC orders will contribute most to the revenues and require high WC. WC
intensity (WC/sales) is expected to remain in early 20s in the future from 30%
odd levels in FY09.
JM Financial Institutional Securities Private Limited
Page 14
BGR Energy
18 October 2010
Exhibit 21. WC cycle and WC/sales
180
WC Cy c le
160
33%
140
Exhibit 22.Working capital cycle
WC/S ales (%)
34%
120
20%
100
80
20%
21%
20%
35%
300
30%
250
25%
200
20%
150
FY10
FY11E
65
FY09
72
FY08
87
-
66
5%
150
20
159
40
10%
FY12E
(days)
Creditors
Debtors
20
270
16
15%
60
Inv entory (RHS)
350
40%
244
309
222
134
6
100
123
91
50
163
10
159
3
FY08
136
132 6
5
4
2
FY07
190
185
-
0%
15
203
FY09
FY10
3
FY11E
FY12E
FY13E
FY13E
Source: Company, JM Financial
WC intensity (WC/sales) likely to remain in
…resulting in positive free cash flow
20-21% range on outsourcing of BTG
Over the last two years, BGR’s working capital cycle has improved considerably,
owing to better receivables management and reasonable payment terms from the
SEBs. This improvement has led to positive free cash flow (`1.7bn) for BGR in
FY10 vis-à-vis negative `2.3bn in FY08.
High RoE; to remain >30%
Over FY08-10, BGR consistently generated strong return ratios - RoEs of above
30% (see Exhibit below). Going forward, as earnings grow at higher rate and
despite debt equity ratio expected to come down, we estimate RoEs to settle in
the c.32-38% range for the next two years.
Exhibit 23. RoEs vs D:E ratio
1.4
D:E ratio
40
RoE
37.5
1.2
31.8
30.4
1.0
35.9
31.9
20
22.3
10
0.8
1.1
1.3
1.3
1.2
0.9
0.8
0.6
30
FY08
FY09
FY10
FY11E
FY12E
FY13E
-
Source: Company, JM Financial
Better capital efficiency amongst peer group
In-house capabilities help it manage costs better, leading to better return on
capital employed than its peers.
Exhibit 24. RoCEs
BGR Energy
L&T*
Reliance Infra*
Sunil Hi-tech
Mc Nally Bharat
FY08
174%
70%
22%
46%
20%
FY09
115%
59%
132%
25%
24%
Despite high WC, BGR has healthy RoCE
(%)
FY10
67%
61%
68%
36%
NA
Source: Company, JM Financial, * note-only E&C segment has been considered
JM Financial Institutional Securities Private Limited
Page 15
BGR Energy
18 October 2010
Company background
BGR was incorporated in 1985, as a joint venture between GEA Energietechnik
GmbH, Germany and Mr. B.G. Raghupathy to produce and sell on-line condenser
tube cleaning systems, debris filters and rubber cleaning balls used in thermal
and nuclear power plants. The company carries out businesses in two segments,
the supply of systems and equipment and turnkey engineering project
contracting. BGR Energy employed more than 1,700 people as at end-May’10,
with c.84% being engineers and remaining administration staff.
Exhibit 25. Board of directors
Name
Post
Background
Mr. B.G. Raghupathy
Chairman
Managing Director
Mr. T. Sankaralingam
Managing Director
Mr. S. Rathinam
Director-Finance
Mr. V. R. Mahadevan
Director – Technologies,
HR & Infrastructure
Mr. A. Swaminathan
Director (Sales &
Marketing)
He holds a Bachelor’s degree in Chemistry from the University of Madras. Prior to founding BGR,
Mr. Raghupathy worked as a marketing executive specializing in the sale of industrial equipment,
instruments and control systems. He has also served as the Chief Executive Officer of Introls, a
company engaged in trading. He has over 33 years of experience in the fields of marketing, sales
and management.
Electrical Engineer from REC, Trichy, Mr. Sankaralingam previously worked with NTPC Limited, and
lastly served as Chairman and Managing Director. He has over 34 years of experience in planning,
design, construction, commissioning, operation and maintenance of power plants. He has been
conferred the “Distinguished Fellowship Award” by Institution of Directors and Eminent Engineer
Award (2005) by Institution of Engineers, Delhi.
A chemistry graduate from the University of Madras and qualified chartered accountant, Mr.
Rathinam is responsible for the overall management and supervision of the finance and audit
functions. Prior to joining BGR in 1992, he was associated with Tamil Nadu Industrial Explosives
Limited as Joint General Manager and Tamil Nadu Industrial Development Corporation as Accounts
Officer. He has over 30 years of experience in the fields of finance, management and accounting.
Electrical Engineer from Annamalai University, Tamil Nadu, he is responsible for the overall
management and supervision of the operations of the technology, human resources and
infrastructure divisions. Prior to joining the company in 1987, he worked as a project manager with
Best and Crompton Limited. He has over 27 years of experience in the fields of project and
business management.
Mechanical Engineer from the Indian Institute of Technology, Bombay, Mr. Swaminathan holds a
leadership position and is responsible for Sales and Marketing functions of the company. Prior to
BGR Energy, Mr. Swaminathan was with TATA Power Limited as General Manager-Projects. He has
more than 30 years of rich and varied experience in design, engineering, construction, erection,
commissioning, operation & maintenance of Power Projects.
Source: Company, JM Financial
Most of BGR’s manufacturing comes under JV or is through associate route.
Promoter is involved in other businesses as well, presented in Exhibit 26.
Exhibit 26. Subsidiaries and their offering
Company
BGR Power Ltd. (`0.5mn equity)
Shareholding
100% Promoters
Business Interest
Power generation from gas
Cuddalore Power Company
Ltd. (`2.4mn equity)
59% promoters;
41% BGR Energy
Germanischer Lloyd Industrial
Services India
Schmitz India Pvt. Ltd.
GEA Cooling Tower
Technologies (India) Pvt. Ltd.
50% Promoters; 50% Germanischer
Lloyd Offshore & Industrial Services
100% Promoters
51% GEA Energietechnik GmbH
1% BGR Energy
48% Promoters
100% promoters
2 X 660 MW coal based combined cycle thermal power project; power purchase
agreement has been signed by the company with the TNEB on September 28,
2006
and the company is awaiting tariff approvals from the Tamil Nadu electricity
regulatory commission
Industrial services, including industrial certification and inspection services
GEA BGR Energy System India
Ltd.
Progen Systems and
Technologies Ltd.
BGR Aquaatech India Ltd.
ANI Constructions Pvt. Ltd.
Sasikala Estate Pvt. Ltd.
100% promoters
100% promoters
100% promoters
Mega Funds India Ltd.
100% Promoters
70% BGR Energy, 30% promoters
Manufacturing sponge rubber cleaning balls
Design and Engineering of Air cooled condensers and cooling towers
On load condenser tube cleaning system, debris filter and sponge rubber cleaning
balls
Heat exchangers and condensers, pressure vessels and boiler components, heat
recovery steam generator
Aquaculture
real estate residential and non- residential buildings
real
estate development
property development and trade related business
Source: Company, JM Financial
JM Financial Institutional Securities Private Limited
Page 16
BGR Energy
18 October 2010
Financial Tables (Consolidated)
Profit & Loss
(` mn)
Balance Sheet
Y/E March
FY09A
FY10A
FY11E
FY12E
FY13E
Net sales (Net of excise)
19,221
30,692
46,811
61,576
71,832
59.7
52.5
31.5
16.7
0
0
0
0
0
15,193
24,207
38,010
50,184
58,615
731
1,248
1,722
2,277
2,655
Other expenses (or SG&A)
1,218
1,803
1,826
2,401
2,801
Minority interest
EBITDA
2,079
3,435
5,253
6,713
7,761
Sources of funds
10.8
11.2
11.2
10.9
10.8
Intangible assets
65.2
52.9
27.8
15.6
Fixed assets
315
247
308
203
153
70
98
155
168
200
2,324
3,584
5,406
6,748
7,714
-579
-538
-734
-815
-955
1,745
3,047
4,672
5,933
6,759
Def tax assets/- liability
596
1,037
1,588
2,017
2,298
Current assets
Add: Extraordinary items
0
0
0
0
0
Inventories
Less: Minority interest
0
0
0
0
0
Sundry debtors
Reported net profit
1,149
2,010
3,084
3,916
4,461
Cash & bank balances
Adjusted net profit
1,149
2,010
3,084
3,916
4,461
Other current assets
6.0
6.5
6.6
6.4
6.2
Growth (%)
Other operational income
Raw material (or COGS)
Personnel cost
EBITDA (%)
Growth (%)
Other non-op. income
Depreciation and amort.
EBIT
Add: Net interest income
Pre tax profit
Taxes
Margin (%)
Diluted share cap. (mn)
Diluted EPS (`)
Growth (%)
Total Dividend + Tax
Y/E March
(` mn)
FY09A
FY10A
FY11E
FY12E
FY13E
Share capital
720
720
720
720
720
Other capital
0
0
0
0
0
Reserves and surplus
4,891
6,312
8,674
11,674
15,091
Networth
5,611
7,032
9,394
12,394
15,811
Total loans
7,078
9,326
11,293
10,868
11,938
0
0
0
0
0
12,689
16,358
20,687
23,261
27,748
0
0
0
0
0
1,132
1,704
2,164
2,624
3,084
Less: Depn. and amort.
221
313
461
623
817
Net block
910
1,391
1,703
2,001
2,267
Capital WIP
54
104
55
60
142
Investments
48
48
1,896
6,516
9,288
Loans & advances
-785
-1,589
-1,589
-1,589
-1,589
25,653
37,635
43,710
44,994
50,723
125
154
385
844
1,181
12,780
19,787
25,650
31,210
37,392
6,108
10,234
9,202
3,710
2,420
186
189
204
210
210
6,454
7,270
8,270
9,020
9,520
72
72
72
72
72
Current liabilities & prov.
13,191
21,230
25,088
28,720
33,082
16.0
27.9
42.8
54.4
62.0
Current liabilities
12,290
18,898
21,812
24,102
27,695
NA
74.9
53.4
27.0
13.9
Provisions and others
902
2,332
3,277
4,618
5,387
253
590
722
916
1,044
12,462
16,405
18,622
16,274
17,641
Source: Company, JM Financial
Net current assets
0
0
0
0
0
12,689
16,358
20,687
23,261
27,748
FY09A
FY10A
FY11E
FY12E
FY13E
BV/Share (`)
77.9
97.7
130.5
172.1
219.6
ROCE (%)
23.3
37.2
40.5
28.7
22.7
ROE (%)
20.5
31.8
37.5
35.9
31.6
0.2
-0.1
0.0
0.1
0.0
12.0
Others (net)
Application of funds
Source: Company, JM Financial
Cash flow statement
Y/E March
(` mn)
Key Ratios
FY09A
FY10A
FY11E
FY12E
FY13E
1,149
2,010
3,084
3,916
4,461
Depreciation and amort.
61
92
148
162
194
-Inc/dec in working cap.
2,012
-429
-3,179
-3,728
-2,927
0
0
0
0
0
Cash from operations (a)
3,222
1,674
52
350
1,728
-Inc/dec in investments
Reported net profit
Others
Y/E March
Net Debt/equity ratio (x)
Valuation ratios (x)
1,509
0
-1,848
-4,620
-2,772
PER
46.7
26.7
17.4
13.7
Capex
-563
-622
-411
-465
-542
PBV
9.6
7.6
5.7
4.3
3.4
Others
-3,320
612
-71
585
269
26.2
15.3
10.2
8.1
6.9
Cash flow from inv. (b)
-2,374
-10
-2,330
-4,500
-3,045
2.8
1.7
1.1
0.9
0.7
1
0
0
0
0
243
235
200
185
190
2
2
3
5
6
295
285
209
175
172
Inc/-dec in capital
Dividend+Tax thereon
Inc/-dec in loans
Others
-253
-590
-722
-916
-1,044
2,065
2,248
1,967
-425
1,070
392
804
0
0
0
Financial cash flow ( c )
2,204
2,463
1,245
-1,341
26
Inc/-dec in cash (a+b+c)
3,052
4,126
-1,032
-5,492
-1,291
Opening cash balance
3,057
6,108
10,234
9,202
3,710
Closing cash balance
6,108
10,234
9,202
3,710
2,420
EV/EBITDA
EV/Sales
Turnover ratios (no.)
Debtor days
Inventory days
Creditor days
Source: Company, JM Financial
Source: Company, JM Financial
JM Financial Institutional Securities Private Limited
Page 17
BGR Energy
18 October 2010
JM Financial Institutional Securities Private Limited
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B oard: +9122 6630 3030 | Fa x: +91 22 6747 1825 | E mail : jmfin an cial.re sear ch @jmfin ancial .in | www.jmfi n an cial .in
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The research analysts, with respect to each issuer and its securities covered by them in this research report, certify that:
All of the views expressed in this research report accurately reflect his or her or their personal views about all of the issuers and their securities; and
No part of his or her or their compensation was, is, or will be directly or indirectly related to the specific recommendations or views expressed in this research
report.
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This research report has been prepared by JM Financial Institutional Securities Private Limited (JM Financial Institutional Securities) to provide information about the
company(ies) and sector(s), if any, covered in the report and may be distributed by it and/or its affiliated companies solely for the purpose of information of the select recipient
of this report. This report and/or any part thereof, may not be duplicated in any form and/or reproduced or redistributed without the prior written consent of JM Financial
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multi-service, integrated investment banking, investment management and brokerage group. JM Financial Institutional Securities and/or its affiliated company(ies) might have
lead managed or co-managed a public offering for the company(ies) covered herein in the preceding twelve months and might have received compensation for the same during
this period for the services in respect of public offerings, corporate finance, investment banking, mergers & acquisitions or other advisory services in a specific transaction. JM
Financial Institutional Securities and/or its affiliated company(ies) may receive compensation from the company(ies) mentioned in this report within a period of three to six
months' time following the date of publication of this research report for rendering any of the above services. Research analysts and Sales Persons of JM Financial Institutional
Securities may provide important inputs into the investment banking activities of its affiliated company(ies) or any other firm or company associated with it.
While reasonable care has been taken in the preparation of this report, it does not purport to be a complete description of the securities, markets or developments referred to
herein, and JM Financial Institutional Securities does not warrant its accuracy or completeness. JM Financial Institutional Securities may not be in any way responsible for any
loss or damage that may arise to any person from any inadvertent error in the information contained in this report. This report is provided for information only and is not
intended to be and must not alone be taken as the basis for an investment decision. The investment discussed or views expressed herein may not be suitable for all investors.
The user assumes the entire risk of any use made of this information. The information contained herein may be changed without notice and JM Financial Institutional Securities
reserves the right to make modifications and alterations to this statement as they may deem fit from time to time.
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securities of the company(ies) mentioned herein or (b) be engaged in any other transaction involving such securities and earn brokerage or other compensation or act as a
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company(ies) 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 a
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JM Financial Institutional Securities Private Limited
Page 18