30 March 2021

ASIAMONEY Brokers Poll 2020 (India) Today’s top research idea

Varun Beverages: Sharp recovery paving way for growth

 During the latter part of CY20 and in 1QCY21, VBL witnessed a strong demand
recovery driven by: a) pick-up in volumes in the newly acquired territory, b)
strong demand for newly launched products, and c) re-working of the
formulation of the PepsiCo brand concentrate.
 VBL's market share (in handling PepsiCo’s India volumes) increased to ~85% in
Market snapshot CY20 due to increasing penetration in the new territories as well as existing
ones. In the NCB segment, the management aims to ramp-up operations at the
Equities - India Close Chg .% CYTD.%
Sensex 49,009 1.2 2.6 new Pathankot facility and aggressively distribute its product; in line with its
Nifty-50 14,507 1.3 3.8 long-term strategy.
Nifty-M 100 23,214 1.6 11.4  VBL plans to rationalize operations and aims to dispatch products from large
Equities-Global Close Chg .% CYTD.%
S&P 500 3,971 -0.1 5.7
plants where the cost of production is lower.
Nasdaq 13,060 -0.6 1.3  The shift from smaller plants is expected to boost margin, with economics of
FTSE 100 6,736 -0.1 4.3 scale kicking-in.
DAX 14,818 0.5 8.0
 We expect revenue/EBITDA/PAT CAGR of 28%/36%/64% over CY20-22E. We
Hang Seng 10,943 -0.2 1.9
Nikkei 225 29,385 0.7 7.1 value the stock at 31x CY22E EPS. Our TP of INR1,145 per share implies 15%
Commodities Close Chg .% CYTD.% upside. Maintain Buy.
Brent (US$/Bbl) 64 4.4 24.5
Gold ($/OZ)
Cu (US$/MT)
1,733
8,967
0.3
2.1
-8.7
15.7 Research covered
Almn (US$/MT) 2,276 2.5 15.3
Currency Close Chg .% CYTD.% Cos/Sector Key Highlights
USD/INR 72.5 -0.2 -0.8 Varun Beverages Sharp recovery paving way for growth
USD/EUR 1.2 0.3 -3.5 th
USD/JPY 109.6 0.4 6.2 4 Ideation
Key insights from the virtual conference.
YIELD (%) Close 1MChg CYTD chg Conference (Day 2)
10 Yrs G-Sec 6.1 -0.01 0.3 Automobiles Supply-side issues impacting most segments
10 Yrs AAA Corp 7.2 0.00 0.6
Flows (USD b)
FIIs
26-Mar
-0.01
MTD
2.57
CY21
7.57
Piping hot news
DIIs 0.23 0.13 -3.99
Small SUVs see highest price hikes in 3 years
Volumes (INRb) 26-Mar MTD* YTD*
Cash 626 722 796 The strong demand for small sports utility vehicles (SUVs) has led to the sharpest
F&O 21,449 45,721 41,492 price increases in the last three years in this segment. Data compiled by JATO, a
Note: *Average global supplier of automotive business intelligence since March 2018, showed…

Chart of the Day: Varun Beverages | Sharp recovery paving way for growth
Increase in market share (handling PepsiCo domestic
Volume composition of VBL business) over the years

Source: Company, MOFSL Source: Company, MOFSL

Research Team (Gautam.Duggad@MotilalOswal.com)
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.
 In the news today
Kindly click on textbox for the detailed news link

1 2
HPCL to buy out Shapoorji Small SUVs see highest price hikes in 3 years
Pallonji Group’s share in The strong demand for small sports utility vehicles (SUVs) has led to
Gujarat LNG terminal JV the sharpest price increases in the last three years in this segment.
State-owned Hindustan Petroleum Data compiled by JATO, a global supplier of automotive business
Corporation Ltd ( HPCL) will buy intelligence since March 2018, showed compact SUVs, the hottest
out the share of its joint venture segment at present, have seen the highest price increase of nearly
partner SP Ports Pvt. Ltd (SPPPL) in 11%. Hatchbacks are up just over 4%, MPVs over 9%, premium
the 5 million metric tonnes per hatchbacks 3.5%, premium sedans over 8% and the larger (more than
annum LNG re-gasification four metre) SUVs have seen over 9% price.
terminal, that is being set up at
Chhara in Gujarat.

3 4
Manappuram looks to take
Third Covid vaccine in India
MFI arm Asirwad public
likely to be approved soon:
Manappuram Finance, the second
largest gold loan company in the Dr Reddy's official
Pharmaceutical firm Dr Reddy's
5
country, is toying with the idea of
hiving off and taking its Laboratories expects the Russian- Jio, Airtel and Vi Pay Rs 5,000
microfinance arm Asirwad made Covid-19 vaccine, Sputnik V, crore AGR dues for March
Microfinance public within a year, to get approval from the Indian quarter
a top company official said. With a regulator in the next few weeks. The telecom department has
loan portfolio of over Rs 5,360 "We expect to get the approval in received about Rs 5,000 crore
crore and close to 25 lakh the next few weeks. It is a two-dose from Reliance Jio , Bharti Airtel
customers across 23 states, the vaccine. You take the first dose on and Vodafone Idea (Vi) in license
Chennai-headquartered Asirvad is day zero and the second one on fee and spectrum usage charges
the fourth largest microfinance … day 21. The peak immunity … for the January-March quarter.
“The three telcos have made
their payments and there has
6 7 been no delay, which is a good
sign. The January-March quarter
Beer sales get boost from state Government gets multiple dues need to come in by March
25.…
excise policies EoIs for privatisation of NINL
State excise policies aimed at The government has received
recovering loss of revenue multiple expressions of interest
caused by Covid-19 are having a from bidders for privatisation of
positive effect on India's beer Neelachal Ispat Nigam Ltd
industry that had gone flat last (NINL), DIPAM Secretary Tuhin
year. Helped by summer Kanta Pandey said on Monday.
tailwinds, domestic breweries The Department of Investment
have not only been able to stem and Public Asset Management
sliding sales but have started (DIPAM) had in January invited
clawing back to pre-Covid … preliminary bids for strategic…

30 March 2021 2
 29 March 2021
Company Update | Sector: Others

Varun Beverages
BSE SENSEX S&P CNX
49,009 14,507
CMP: INR994 TP: INR1,145 (+15%) Buy
Sharp recovery paving way for growth
VBL has multiple levers in place to drive its long-term growth strategy. We expect
volumes to bounce back and support its overall growth led by: a) faster recovery of
Stock Info the business in the backdrop of the COVID-19 pandemic, b) strong demand traction
Bloomberg VBL IN across geographies and product segments, c) a gradual gain in market share, with
Equity Shares (m) 289 increased penetration, and d) ramp-up of operations in new regions (South and West
M.Cap.(INRb)/(USDb) 287.1 / 4 India). Key insights are highlighted below:
52-Week Range (INR) 1096 / 502
1, 6, 12 Rel. Per (%) -4/12/3
Demand drivers in place to drive near term growth
12M Avg Val (INR M) 280  During the latter part of CY20 and in 1QCY21, VBL witnessed a strong
Free float (%) 33.6 demand recovery. In the initial phase of COVID-19, demand was impacted.
Financials Snapshot (INR b) This recovery was primarily driven by: a) pick-up in volumes in the newly
Y/E DEC 2020 2021E 2022E acquired territory of South and West India, b) strong demand for newly
Sales 64.5 91.5 105.7 launched products (Mountain Dew – Ice), and c) re-working of the
EBITDA 12.0 19.3 22.4
formulation of the PepsiCo brand concentrate, which resulted in higher
Adj. PAT 4.0 8.0 10.7
EBITDA margin (%) 18.6 21.1 21.2 retention of CO2. Higher retention of carbon dioxide led to a reduction in
Adj. EPS (INR)* 13.7 27.5 37.0 sweetness. The product has seen higher acceptance and demand post that.
EPS Gr. (%) -15.7 101.0 34.4  HORECA segment (current revenue share at 6-7%) is another channel
BV/Sh. (INR) 122.1 147.0 181.2 whose performance is expected to improve. Lower occupancy in theaters
Ratios and travel restrictions due to COVID-19 are affecting HORECA volumes.
Net D:E 0.9 0.4 0.2
Going forward, the management expects a strong recovery in this segment,
RoE (%) 11.5 20.5 22.6
RoCE (%) 10.4 15.6 18.4 with a gradual lifting of lockdown restrictions across India.
Payout (%) 21.9 9.4 7.6  New product launches (Mountain Dew – Ice), ambient temperature dairy
Valuations beverages, etc., are some of the products gaining traction. With the lifting
P/E (x) 72.6 36.1 26.8 of lockdown restrictions, VBL aims to aggressive distribute and market
EV/EBITDA (x) 26.4 15.9 13.3 these products.
Div. Yield (%) 0.3 0.3 0.3
 VBL's market share (in handling PepsiCo’s India volumes) increased to ~85%
FCF Yield (%) 2.5 5.4 4.3
* Cons. in CY20 from 80% in CY19, which is primarily due to increasing penetration
in the newly territories as well as existing ones. We expect a similar
Shareholding pattern (%) trajectory to lead to 28% volume CAGR over CY20-22E.
As On Dec-20 Sep-20 Dec-19 
Promoter 66.4 66.4 68.4 Initiatives across segments and regions to provide all round sustainable
DII 5.9 6.0 6.3 growth
FII 20.5 20.8 19.4  PepsiCo acquired 'Rockstar', who is the leader in the Energy Drink segment.
Others 7.3 6.9 5.9
VBL aims to launch this product in the domestic market in the next few
FII Includes depository receipts
years.
 In the NCB segment, the management aims to ramp-up operations at the
Stock Performance (1-year)
Varun Beverages new Pathankot facility and aggressively distribute its product. This is in line
1,100
Sensex - Rebased with its long-term strategy as the management was not able to ramp up
950 the plant due to imposition of the COVID-led lockdown.
800  At the time of acquisition (in CY19), the south and west region recorded
650 volumes of 135m units. Two years prior to that, these regions did 205m units
500 (when PepsiCo undertook bottling and distribution). VBL plans to achieve
similar volume numbers in the next 1-2 years. Post that, its focus will be to
Nov-20
Jul-20
Mar-20

Mar-21

increase penetration levels, which in-turn will support volume growth.

30 March 2021 3
  VBL's market share increased to 13% from 6% in Morocco. On the back of
increased demand, it plans to add a glass line in CY21, which is expected to
further drive volume growth. It also plans to double water capacity in Morocco
over the next 2-3 years.
 Zimbabwe volumes have doubled in the last couple of years on the back of
market share gains, which is difficult from here on as the company has 50%
market share in the region. Growth from here will be driven by expanding the
market and launching new products. The management plans to backward
integrate (setting-up preform/caps machinery) in Zimbabwe in CY21, which is
expected to benefit margin in the near-to-medium term.

Major capex behind, focus is on cash generation; expect VBL to generate
FCF of INR27.9b over the next two years
 Due to COVID-19 and subsequent lockdowns, the company reduced capex
outflow with respect to expansion in new territories and spending on plant and
machinery. In CY22, VBL plans to spend cash, which will be more or less equal to
its depreciation outflow in CY21 and CY22. Organic capex in the last seven years
was 0.9x consolidated depreciation (excluding inorganic capex).
 It sees inorganic acquisition opportunities in Asia and Africa. The management’s
current focus is to grow its market share in the newly acquired territories and
drive efficiencies. It expects cash generation in CY21 to be used for debt
repayment and intends to reduce debt by INR8b. Lower capex outflow is
expected to increase free cash flow generation, which in turn would aid in debt
reduction.
 VBL plans to rationalize operations and aims to dispatch products from large
plants where the cost of production is lower. The shift from smaller plants is
expected to boost margin, with economics of scale kicking-in.

Valuation and view
 We expect VBL to maintain its earnings momentum, led by: a) increased
penetration in newly acquired territories of South and West India, b) higher
acceptance of newly launched products, and c) ramping-up of operation in
domestic as well as international territories on the back of growing demand.
 With a ramp-up in operations due to increased demand and impact of COVID-19
gradually subsiding, we expect operating leverage to kick-in and complement
margin expansion. Lower capex intensity in coming years and higher profitability
is expected to improve cash flows and reduce debt.
 We expect revenue/EBITDA/PAT CAGR of 28%/36%/64% over CY20-22E. We
value the stock at 31x CY22E EPS. Our TP of INR1,145 per share implies 15%
upside. Maintain Buy.

30 March 2021 4
 23-25 March 2021

The Indian economy has successfully navigated the “Survive to Revive” phase over the past few quarters.
Robust corporate earnings, after the pandemic-led disruption, and improving macroeconomic data indicate
positive near-term prospects and have led the broader indices to new heights. Furthermore, with
economic growth being the focal point, the government has rightly focused on infrastructure
development.

Thus, inspired by the success of our traditional conferences, we rolled out the ‘Motilal Oswal 4th Ideation
Conference’ – Our Emerging Companies Platform from 23rd–25th March, 2021.

The full-day virtual conference, with matching schedules across time zones, from Asia to the US, consists of
interactive sessions with 60+ corporates – as they dwell on future challenges and opportunities in store in
this disruptive world.

Our guests shed light on how their respective industries are coping with the dual challenge of the
pandemic and slowdown, and the way forward hereafter.

We bring you key insights from the virtual conference.

Capital Goods
Amber Enterprises India | (AMBER IN, Mkt Cap USD1.5b, CMP INR3177)
A. PLI scheme: Some draft guidelines are expected to be out by Apr’21. Currently, imports are more skewed
towards the component side (86% compressors, 76% motors, 66% PCBA, and 100% of aluminum and copper in
raw form). The PLI scheme is expected to have a compounding effect on the component ecosystem more than
on finished products.
B. Commodity price inflation: Product pricing has gone up by 5-7%. Based on earlier trends, such a steep price hike
could be a deterrent to offtake. However, a very strong summer could negate this phenomenon.
C. Inventory: Current inventory in the channel is close to normal. So, strong secondary offtake should bode well for
primary sales of brands.
D. China+1 strategy: Other countries are ready to outsource from AMBER even at a 2-3% price arbitrage. It just has
to scale up its product offerings in terms of quality. Around 20% of finished goods (ACs) globally is catered by
Thailand. The latter’s own consumption is 2.5m units, whereas it exports almost 12m units annually. This has
been the fulcrum around India’s PLI scheme.

KEC International | (KECI IN, Mkt Cap USD1.5b, CMP INR427)

A. Order inflows and book: KECI is L1 in INR60b worth of orders, with ~50% being from the Railways segment.
Domestic T&D is still weak. The management is unsure about orders from state discoms. It expects large
overseas T&D orders and sees T&D forming 50% of the order book in FY22.
B. Railways and Civil business: Strong focus on the Civil business could lead to ~INR10b revenue by FY21-end, with
the same likely to double in FY22. The Railways segment saw order inflows of INR35b in FY21, which could lead
to strong growth in FY22.
C. SAE business: FY21 will be a loss-making year. The business is expected to break even by FY22. KECI has already
executed a loss-making order, while another order will be executed by Jul’21.

KEI Industries | (KEII IN, Mkt Cap USD0.7b, CMP INR527)

A. Execution: While the retail segment had fully ramped up by 3QFY21, institutional sales and exports were lower.
As of now, institutional sales have bounced back to pre-COVID levels, while exports are at 70-75% of pre-COVID

30 March 2021 5
 levels owing to travel constraints.
B. B2C wires: INR80b is the size of B2C wires, with 30% of the market being unorganized. The management expects
unorganized players to lose 3-4% market share owing to difficulty in scaling up the supply chain. KEII has 5%
market share and aims to grow by over 70% in FY22.
C. Working capital: Current working capital cycle is 2.9 months due to an elongated cycle in the EPC segment (6.5
months). As current tenders have lower margins, the management has decided to scale down this business to
INR5b (from INR10b). This will unlock INR1.4-1.5b in working capital. Scale up of the retail segment and gradual
reduction of EPC sales will reduce the working capital cycle to 2.4 months.

Cement
Prism Johnson | (PRSMJ IN, Mkt Cap USD0.8b, CMP INR122)
A. Cement business
a) Cement demand remains strong in 4QFY21 and has supported a price hike of INR10-15/bag in Mar’21. The
management expects cement demand to remain strong in the near term.
b) Planned commissioning of the remaining 12.5MW Solar Power capacity (of 25MW) and 12.5MW of WHRS
capacity (10MW commissioned in Nov’20) in Mar’21 would generate potential savings of INR150/t, thereby
offsetting increase in fuel cost on account of petcoke inflation.
c) The management plans to expand clinker capacity by 1mtpa to 5.2mtpa at Satna, via debottlenecking, at a
capex of INR1.4b in FY22. Debottlenecking of the grinding unit (by 1mtpa) would be carried out in FY24.
B. H&R Johnson: Tiles and Bathroom products
a) During 3QFY21, the segment saw a volume growth of 23.4%, led by higher exports of Tiles and improved
demand from Tier II and III cities. However, demand may be dampened by spike in a COVID-19 cases.
b) The management has guided at a sustainable EBITDA margin (11%-12% range) compared to 14.1% (+910bp
YoY) achieved in 3QFY21 as some cost normalization would take place from 4Q onwards.
C. Balance Sheet
a) During 9MFY21, the company reduced its debt by INR3.8b to INR14.9b. It aims to become debt free over the
next three years. Schedule debt repayment for FY22 is ~INR1.8b.
b) The management has guided at a capex of INR4b for FY22, which would be funded through internal accruals.
D. Others
a) Sale of the Insurance business is expected to be concluded in 1QFY22 and would lead to cash flows of
INR3.6b, of which INR0.8b is on account of reimbursement towards capital infusion by the company over
last year.
b) De-merger of Cement and HRJ business can take place once the Tiles business starts generating sustainable
cash flows.

Consumer
Mrs Bectors Food Specialities | (BECTORS IN, Mkt Cap USD0.3b, CMP INR348)
A. Demand outlook to remain strong given the management’s focus on premiumization of its existing product
portfolio. 9MFY21 product mix | Biscuits: domestic 42%, exports 24%; Bakery: 21%; and Institutional Bakery: 8%.
Total contribution for Biscuits increased to 64% in 9MFY21 from 50% in FY20.
B. Distribution network covers 23 states and includes 185 super-stockists, 737 distributors, and 557k retail outlets.
Its direct reach in Biscuits/Bakery stood at 190k/17k outlets. The management is targeting to expand its direct
reach in Biscuits to 260k outlets by FY22-end.
C. Commodity cost: Steep rise in RM cost like palm oil to be countered by necessary price hikes going forward.
D. Working capital is currently at 50-55 days due to higher receivable cycle for exports and CSD. The same is
expected to remain high in the near term due to stocking of key inputs like milk, sugar, and packaging material.
E. Return profile: The management is targeting sustainable RoE and RoCE of over 20% in the next three years.

30 March 2021 6
 Financials – Diversified
Home First Finance Company India | (HOMEFIRS IN, Mkt Cap USD0.5b, CMP INR456)
A. The management said bounce rates have been faring well. Currently, ~88% of customers pay on time, while 2%
slip into the dpd bucket. On an average, a 10% bounce in the run-rate is considered to be due course in the
business
B. Credit cost should take a couple of quarters to return to normal levels. 1+dpd has increased to 7.5% from 3.5%.
C. Disbursements have picked up and crossed pre-COVID levels. The management is looking to grow the book by
~30% going forward.
D. It is targeting to halve liquidity on its books to improve NIMs. Opex-to-AUM stands at 3% and is targeted to be
brought down by 200bp. It is hopeful of improving RoE by 2-3% annually over the next 2-3 years.
E. As per the management, branch optimization would result in operating leverage. It targets C/I ratio of 30-35%
over the next 2-3 years. Margin is likely to be in the 4.50-4.75% range in the medium to long term. It targets to
increase branch count to 100-120 from 70 over the next two years. Usually a branch takes 6-12m to break even.

IDFC | (IDFC IN, Mkt Cap USD1.1b, CMP INR50)

A. Internal working group recommendations are supportive of unlocking value for shareholders. The management
said the recommendations suggest that the structure can be dismantled completely. The company would have
to exit IDFC MF and then reverse merger with the bank. There is no borrowing at the parent level.
B. The indexed cost of the MF business and capital losses of other subsidiaries are close to INR25-26b. From the MF
business, it expects sale proceeds of ~INR30b. Sale of MF proceeds can be transferred as: a) dividend or b)
transfer to the bank, who in turn will issue more shares in the bank to IDFC’s shareholders. Tax on capital gains
of INR5b (post indexation) would be 20%.
C. The minimum shareholding requirement of 40% in the bank for a period of five years ended in Oct’20. Hence,
the company will not participate in the current capital raise of IDFC First Bank.

MAS Financial Services | (MASFIN IN, Mkt Cap USD0.6b, CMP INR861)
A. The management expects RoA to be in the range of 2.75-3.15% (steady state RoA at 3%). Once the business
stabilizes, it feels RoE could range between 17% and 20%.
B. It plans to double branch count (currently at 100) over the next two years. It targets direct business ratio
between 50% and 60% going forward (currently at 40%).
C. The NBFC does not expect any negative surprises in the asset quality ahead. Overall, about 50bp of the book
would need restructuring.
D. The end use of the Housing loan is closely monitored. As a policy there is only stage-based funding and
deployment is done only in incremental Housing. The management sees potential to scale the book to INR10b
(INR3b currently).
E. It does not see major elevations in customer leverage. Only 10-15% of customers would be without any credit
history.
F. EMI-to-monthly income ratio stood between 25% and 35% even during the tough macro environment. MASFIN
has restricted FOIR (Fixed Obligations-to-Income Ratio) to sub-35% levels.
G. The management will like to add Used Vehicle lending and Personal loans to its portfolio going forward. It will
start the same on a small scale

Healthcare
Sun Pharma Advanced Research Company | (SPADV IN, Mkt Cap USD0.5b, CMP INR151)
A. Focus on select high-potential therapeutic areas: SPARC is focusing on Neurodegenerative diseases, and Onco,
and certain opportunities in the Autoimmune space – with gaps in terms of needs, standard operating
procedure, and/or efficacy. Neurodegenerative diseases (Parkinson’s, Lewy Body, Alzheimer’s) have no standard
of care currently – this holds huge potential for the company if efforts prove successful. Interestingly,
development work on Oncology sees good support from regulators and payors.

30 March 2021 7
 B. Vodobatinib: This is the lead candidate, with trials ongoing for three indications [Parkinson’s Disease (PD), Lewy
Body Dementia (LBD), and Chronic Myelogenous Leukemia (CML)]. SPARC has undertaken the largest phase 2b
trial globally for PD indication and expects the completion of enrolment for phase 2b by 1QCY22 and the readout
by 1QCY23. Peak sales for the PD indication are expected to be ~USD5b; sales would come in at ~USD10b if the
company manages to get the ‘disease modifying treatment label’. The readout for the LBD indication phase 2
trials are also expected by 1Q2023. The registration study is underway for the CML indication, and the US NDA
filing is expected in 1QCY23.
C. Elepsia: This has been outlicensed to Tripoint for commercialization in the US and to CMS for commercialization
in China. The US launch is expected in May’21. SPARC’s contract with Tripoint would lead to the realization of
royalties on sale. Phenobarbital has orphan drug designation, with 7.5 years’ exclusivity, and is in the phase 3
trials currently.
D. SCD-044: SCD–044 is highly selective for S1P Receptor 1 (S1PR1); hence, it has a better safety profile v/s other
S1PR1 drugs. The product has been outlicensed to Sun Pharma. It is currently in the phase 2 trials for three
indications (Psoriasis, Atopic Dermatitis, and Alopecia Areata); trials for additional indications are expected later
on. There are gaps in therapies such as Dermatology, and the company would explore more opportunities in this
area. There are many S1PR1 inhibitors in trials for the Multiple Sclerosis indication; hence, SPARC is attempting
to avoid the pack. Sun Pharma would be responsible for further clinical trials and SPARC would work closely with
the company. The phase 2b trial readout is expected in late 2021 / early 2022.
E. SC0-120: This is a promising candidate for the treatment of Metastatic Breast Cancer as there is a high focus on
safety in this category, and SPARC’s candidate has done well on the safety front. US IND was filed in Jan 2020;
phase 1a was commenced in 1QCY20 and is expected to end in 1QCY23.
PDP-716 and SDN-037: SDN-037 phase 3 trials are complete and SPARC awaits the completion of the PDP-716
trials. Both the molecules would be filed together.
Phenobarbetal: The phase 3 trials are ongoing currently. The molecule has an orphan drug designation, with 7.5
years’ exclusivity.
F. The net cash requirement would be USD35–40m, which may be funded through an equity raise. Early
monetization is an option to raise more money, but the company is not in favor of this given the promising data
on its pipeline molecules.
G. Taclantis (Paclitaxel): The USFDA has asked for an additional clinical program; thus, this program is still under
consideration for the US market. Given the limited commercial opportunity, with the generics settlement with
Celgene, SPARC is re-thinking this product. SPARC has invested millions of dollars (in the single digits) on this to
date. It has been approved and is marketed in India and has been outlicensed in China.

Infrastructure
KNR Constructions | (KNRC IN, Mkt Cap USD0.8b, CMP INR206)
A. Execution: Across projects, work is on in full swing, with efficiency almost at 100% now. On the outstanding two
Irrigation projects, KNRC has appointed a supplier and started work on one project. On the other project, land
clearance is pending, with work expected to start in FY22 only. Both these projects will take 24 months for
execution.
B. Order inflows: KNRC bagged one EPC project (INR11b) in 4QFY21 and is L1 in two HAM projects in Kerala
(INR45b in total, not yet received a letter of intent). It bagged almost INR70b worth of orders in FY21, while the
target for FY22 stands at INR30-40b.
C. Diversification: Though KNRC is looking positively at Jal Jeevan Mission projects, the recent L1 order from Kerala
would be a priority. It is looking at projects in the Urban and Water Infrastructure space.

NCC Limited| (NJCC IN, Mkt Cap USD0.6b, CMP INR77)

A. Monetization: The monetization process of NCC Vizag will conclude in the next six months. Proceeds of over
INR3.5b will be utilized for debt reduction.
B. Receivables: Payments by PSUs and other Central government authorities has improved significantly, while for
state government it continues to be delayed (especially in the case of Uttar Pradesh).
C. Commodity inflation: Rising steel prices has not impacted much as NCC has passed on the increase with the help

30 March 2021 8
 of a pass-through clause in contracts. It doesn’t foresee any sharp increase in steel prices in the medium term.

Metals
Jindal Stainless | (BSOFT IN, Mkt Cap USD1b, CMP INR252)
A. Demand outlook for stainless steel remains strong, supported by ~10% CAGR in demand from segments like
Automobile, Railways, and Building Construction.
B. Margin outlook: While the company achieved EBITDA/t of INR17,745 in 3QFY21, it has guided at a sustainable
EBITDA/t between INR14,000 and INR16,000 as quarterly margin is impacted by fluctuations in raw material
prices. The latter is pass-through with a lag effect. The company doesn’t see a material impact on its margin due
to revocation of duties on Indonesian imports as imports compete with only 20% of its product mix.
C. Capacity expansion: The company plans to expand capacity to 1.6mtpa from 1.1mtpa. The same would entail a
capex of just INR25b (v/s INR70b for greenfield capacity) and is likely to be announced in FY22. The expansion
would take 24 months for completion.
D. Deleveraging: The company has reduced net debt by INR9b in 9MFY21 to INR28.2b and has prepaid part debt
for FY22 and FY23. Scheduled repayments for FY22/FY23 is INR0.4b/INR1.5b. Of this, INR9b is on account of an
inter-corporate loan, which it owes to Jindal Stainless HIsar.
E. Merger with JSHL: Merger of JSL into JSHL remains on track. The company has received approvals from SEBI and
the exchanges and is awaiting approval from NCLT. The merger is expected to be completed by 2HFY22. The
merged entity would have a combined net worth of INR58b (as on 31st Mar’21), net debt of INR45b, and EBITDA
of over INR20b. With a combined capacity of 1.9mtpa, the merged entity would be among the top 10 stainless
steel players in the world. The swap ratio for the merger is 1:1.95. The merged entity would have ~8.2b shares.

Technology
Firstsource Solutions | (FSOL IN, Mkt Cap USD1.1b, CMP INR114)
A. Industry outlook: Total outsourced volumes are only 20-25% of IT budgets currently. With a lot of clients just
starting to increase their outsourcing volumes, the management expects the industry to continue to grow. The
consolidation of vendors taking place in the industry is expected to benefit a few large players like FirstSource.
B. Trends in BFSI: The company did not face any material impact from rising yields in the BFSI space. However, if
they keep rising, there may be some impact and re-finance volumes would reduce. This, however, will largely be
absorbed by purchase volumes and hence there would not be a steep decline.
C. Company strategy and target: After the change of guard in CY19, it now has a largely stable management,
whose focus is entirely on the core of the business and how to it can carry it forward. The target has been to
achieve double-digit growth compared to mid-single digit growth in the past 5-10 years.
D. Capital allocation policy: There is no immediate thought on dividend payout. However, the company will invest
significantly in organic capabilities. In the case of acquisitions, FirstSource is not looking to buy growth by
acquiring large companies, but would look for tuck in acquisitions which would make it structurally stronger.

Happiest Minds Technologies | (HAPPSTMN IN, Mkt Cap USD1.1b, CMP INR540)
A. DEMAND Outlook: The management said it is seeing a scale up in Digital transformation in the industry. With no
legacy backlog, Happiest Minds will see a lot of traction from a positive demand environment. It expects 20%
revenue CAGR in the near to medium term.
B. Wage hike: The company has advanced salary increase because of increasing attrition in the industry. The scale
of the wage hikes is 1-2% more than what it was initially expecting.
C. Pricing: With increasing demand for Digital skills, the management expects some increase in billing rates (in
some cases).
D. Geographical expansion: It will focus on further expansion into Europe to de-risk from the US. It expects to
invest in Europe to gain traction as contribution has fallen below 10%.

30 March 2021 9
 Intellect Design Arena | (INDA IN, Mkt Cap USD1.2b, CMP INR656)
A. Market opportunity: The US market provides an USD1b opportunity in the Corporate Banking space, with the
company winning deals with Tier I banks. It also has a strong pipeline in the Data and Underwriting business. In
the Europe geography, it sees opportunities in Digital Lending and Underwriting.
B. Competitive edge: Intellect Design has a competitive edge over peers in terms of its products and servicing. It
services over 90 countries with the best practices available. It has consistently provided agility to customer
systems and its products are differentiated on length and breadth.
C. Levers for revenue growth: The management intends to have more products per customer by leveraging its
existing customer assets. It is also looking at expanding into newer countries and thereby win more customers
per product. These levers position the company for double-digit growth ahead.
D. Provisioning for bad debts: In light of the current situation, the management has had to provide more for bad
debts in the case of Indian and Asian markets, where delays have been more than 12 months. However, there
have been no write-offs in advanced markets.

KPIT Technologies | (KPITTECH IN, Mkt Cap USD0.6b, CMP INR172)

A. Industry outlook: The Auto industry has been going through a disruptive phase with a clear separation between
hardware and software. The management is confident that Automotive software and Electric will grow over the
next 7-10 years, with KPIT well-positioned for aligned growth. The deal pipeline is already at 80-85% of pre-
COVID levels and has a good mix of large deals. The rate of growth in the next 10 years will definitely surpass
that of the previous decade.
B. Increase in addressable market: Software-led features have been the key differentiator for OEMs and would be
the main driver of the addressable market, increasing it phenomenally. Software component, which was earlier
15-20%, is now expected to comprise 35-40% per car. An increase in spending from the company’s T25 clients
has also been a lead indicator.
C. On track to achieve target margin: The management has been targeting 16-18% EBITDA margin over a period of
time. It is confident of reaching the lower end of the band in FY21. The increased margin would be on the back of
robust revenue growth and higher offshoring and utilization levels.
D. Outlook on practices: While Powertrain and Autonomous will continue to be the key growth drivers of the
company over coming quarters, the management sees a healthy deal pipeline in its Connected business as well.
This would result in robust growth in this segment going forward.
E. Capital Allocation policy: Over time, KPIT wants to increase its dividend payout ratio to 30%. In case of
acquisitions, it is looking at tuck in opportunities.

Route Mobile | (ROUTE IN, Mkt Cap USD1.2b, CMP INR1489)

A. Demand outlook: Route operates in CPaaS industries, which has been growing at 33% CAGR. Regional players
are becoming stronger. The company is now considered among the established leaders in the industry. Most
companies in this space have capabilities around SMS or voice, while it provides a comprehensive platform for
all messaging/call-related requests, which is helping it gain traction.
B. Wide presence: The company has connections with over 250 mobile operators and has eight out of the top 20
global giants as its clients. Route has become the go to player for companies expanding their presence in
emerging markets.
C. Revenue breakup: Majority of the revenue (95%) comes from A2P messaging and through telecom providers,
while only 5% comes from next generation messaging. Margin in next generation messaging is much higher than
A2P messaging.
D. Competition: Recently Twillio (global leader in CPaaS industry) has made an entry into India by acquiring India-
based ValueFirst. Further expansion by Twillio can increase competition in the industry.

30 March 2021 10
 Others
Delta Corp | (DELTA IN, Mkt Cap USD0.6b, CMP INR165)
A. Replacement of the Deltin Caravela ship: The management intends to replace Deltin Caravela with a new ship,
which will increase existing capacity by 2.5x. The new ship, whose manufacturing cost is INR1,500-2,000m,
should be ready in 12-18 months. The payback period of the said investment is 12 months.
B. Approval for the Daman casino: The court heard the writ petition on 22nd Mar’21. A second hearing is
scheduled on 30th Mar’21. The management feels there are higher chances of receiving an approval for the
casino. It is planning a 70,000sq ft Casino, with gaming positions of 1,500-2,000.
C. Land-based casino project in Goa: The company has close to 100 acres of land near the upcoming airport, where
it plans to develop a casino, hotel, theme/water park (exact plans are not yet finalized) by incurring a capex of
INR10-15b spread over five years. It is planning an electronic casino spread over 100k sq ft.
D. Business recovery: The company is currently operating at 50% capacity utilization as per the government’s
guidelines. Despite that, it expects revenue in 4QFY21 to cross 4QFY20 levels.

Himatsingka Seide | (HSS IN, Mkt Cap USD0.2b, CMP INR150)

A. Surge in cotton prices: The ban imposed by the US on products made from cotton from China’s Xinjiang region
has led to an increase in global prices. The resumption in business activity across the globe, especially in
countries like Vietnam, Bangladesh, etc. (large consumers of cotton), has led to an increase in the demand for
cotton, further complementing the surge in cotton prices.
B. Capacity utilization: HSS witnessed increased demand in the Bath and Bed Linen segment due to the higher time
spent by people at home and the growing relevance of personal hygiene. Sheeting capacity stands at 61m
meters and is operating at 71% utilization levels. Terry Towel capacity stands at 25,000MTPA, with utilization
levels rising to 45%. With room for further expansion of capacity, the management’s primary focus is on higher
sweating of assets.
C. Increasing RM cost: HSS' captive spinning units account for 30-40% of overall yarn requirement. In-house
spinning units account for 50-60% of Sheeting requirements. The Terry Towel segment is majorly exposed to
sharp changes in yarn prices. However, in-house spinners slightly mitigate the exposure to severe price
fluctuations.
D. Freight cost: Majority of India’s exporters are facing container shortages. HSS too is facing a shortage of
containers at ports. Increase in freight cost is majorly passed-on by the company to its customers. However, it
did not face any order cancellation or delay due to the shortage of containers.
E. Duty rates are yet to be announced by the government. An announcement is expected shortly.

Mold-Tek Packaging | (MTEP IN, Mkt Cap USD0.1b, CMP INR392)

A. Strong relations with big brands: The management has good working relations with Mondelez, HUL, etc. When
brands identify fillers in different geographies, MTEP is the preferred supplier to execute packaging operations.
The company has set up plants in Visakhapatnam and other regions where Asian Paints and other customers
have shifted to.
B. Addition of new capacity: Majority of MTEP’s capacity is fungible. Current cumulative capacity stands at
41,500MT. The management plans to add another 3,000-4,000MT in the next two months. Current utilization
levels stand at 70-75% and peak optimum utilization achievable is 77-80%.
C. Capex: The management plans to spend INR350-400m on both plants (Kanpur and Sultanpur unit) and expects
to complete the set-up by FY22.
D. New initiatives: The company is working on a new IML (in-mold labeling) technique in the Lubricant segment,
where unique codes are to be installed on every pack. This initiative will help track products and trace back the
unit they have been manufactured along with other details. This new initiative is expected to drive sales.
E. Revenue concentration: Revenue from top five/10 clients is 50%/80%. In the last three years, the major clients
lost by MTEP are IOCL, BPCL, and an edible oil company (based in Ahmedabad).

30 March 2021 11
 Neogen Chemicals | (NEOGEN IN, Mkt Cap USD0.3b, CMP INR798)
A. Focus area: The promoters are focusing on R&D, and operational activities are being handled by a professional
team. This would release promoter bandwidth for scaling up R&D. To sustain or grow margins, the company has
to focus on: i) innovative products or processes, and ii) environment friendly processes.
B. Working capital management: The management is working towards matching debtor and creditor days. Thus,
investments would only be in terms of inventory days. It is targeting a reduction in WC days to 120 from 160
days.
C. Product pipeline: The company currently has 30-35 molecules under trails. Another 30-35 molecules are in the
pre-development R&D stage. The size of the molecules once commercialized is INR100m/molecule.

Stove Kraft | (STOVEKRA IN, Mkt Cap USD0.2b, CMP INR457)

A. Guidance: The management is targeting a revenue of INR11,500-12,000m in FY22 v/s INR6,235m/INR6,699m in
9MFY21/FY20. In FY22, it intends to be working capital neutral v/s 47 days of net working capital as of Dec’20.
B. Outsourcing: Over the years, the company has consciously reduced the share of traded products in revenue (as
a percentage of sales) to 16% at present from 30% a few years ago. In the initial phase of a product launch, it
typically outsources manufacturing of the product. Once it has achieved scale, it manufactures the same at its
own factory.
C. The management has hiked prices by 5% to account for an increase in input cost (aluminum, plastic, and other
key RMs).
D. Since it prices its products on an FOB basis, the recent increase in container cost does not impact it.

Welspun India | (WLSI IN, Mkt Cap USD1.1b, CMP INR79)

A. Strategy: The Brands business, which comprises domestic, licensed, and international brands, is expected to
grow at a steady pace. The management aims to achieve INR10b revenue from the domestic brand segment by
CY25 (current revenue from this segment stands at INR2b).
B. Demand outlook: Demand from global retailers remains robust and is expected to be strong going forward as
well. The management has maintained margin in the 18-20% range in the last four years and expects a similar
run-rate ahead. It has hiked prices and may undertake more price hikes in the future as well.
C. e-commerce: Current revenue contribution from the e-commerce channel stands at 5%. The same is expected to
increase to 7-8% by FY22E. International and license brands account for a sizable chunk of e-commerce sales.
The management aims to achieve over USD100m in revenue from this channel by FY23. It is looking to record
70% of online sales in the US market, followed by 15-20% in the UK, and 7-8% in India.
D. Raw materials: Around 40-50%/70% of yarn/fabric segment demand is met through backward integration.
About 90% of premium cotton used by the company is imported.

30 March 2021 12
 Sector Update | 27 March 2021

Automobiles
Supply-side issues impacting most segments
Price hikes to worsen situation of 2Ws
 The demand momentum largely sustained across segments (excluding 2W) in Mar’21.
However, the recent price hike announced by OEMs to cover rising commodity prices
“If there is a second wave may have had some impact on demand. Inventory is much lower than normal for PVs
or if sentiment comes down and Tractors due to strong demand, leaving headroom to fill inventory in the coming
a little for discretionary months. PVs and Tractor wholesales are expected to grow for replenishing abnormally
purchases like Cars, it will low inventory.
have a disproportionate  Our interaction with leading industry channel partners reflects optimism (excluding
effect on sales, both on the 2Ws). Weak 2W demand continued in Mar’21, with OEMs maintaining inventory of 30-
positive and negative side.” 45 days at the dealers end. Demand momentum for PVs has sustained, resulting in
– Shashank Srivastava, ED- below normal inventory (less than 10 days), with a waiting period of 4-6 weeks in fast
Marketing and Sales, MSIL. selling models. M&HCV demand has grown sequentially, but not to the extent that it
was expected to reach at the end of FY21, due to supply-side constraints. Demand
from the Infrastructure/Construction segment remains strong, while the Cargo
segment is catching up with an increase in capacity utilization. Demand for Tractors
remains strong, with inventory at 10-30 days.
 Considering the impact of COVID-19 from Mar’20, a YoY comparison doesn’t make
sense. In Mar’21, wholesale volumes are estimated to grow by ~3.6% MoM for 2Ws.
PV and CV wholesales were restricted by supply-side constraints. PVs/CVs are
expected to grow by ~6.3%/~8.8% MoM (LCV/M&HCV growth of ~10.5%/~7% MoM).
Wholesale volumes for Tractors are expected to grow by ~14.3% MoM on robust
demand.
 2Ws: Slowness in demand was further impacted by fuel price inflation. We expect
some recovery in demand in Apr’21 due to expected cash flow from the sale of rabi
crop and beginning of the marriage season. OEMs – BJAUT (CT100, CT110, and Platina
– INR2.5k) and HMCL (INR1k) – are offering discounts to push sales. Dealers are
holding 1-1.5 months of inventory. The waiting period for RE’s Meteor is 12-16 weeks,
while Classic/Bullet is readily available. We expect sequentially flat wholesales for
BJAUT 2Ws (8.4% MoM growth in domestic 2Ws), ~5.8% MoM growth for TVSL, ~4.5%
for HMCL, and ~2% for RE.
 PVs: Strong demand for PVs sustained in Mar’21. The waiting period is still high across
OEMs. TTMT is benefiting from its existing range of vehicles (Nexon and Altroz).
Customers prefer CNG models over petrol given its lower running cost, with MSIL
benefitting from the same. Volumes are expected to grow by ~4.3%/~22.8%/8% MoM
for MSIL/MM/TTMT.
 CVs: Demand for M&HCVs from the Infrastructure segment remains strong, even as
the Cargo segment is catching up. Discounts have fallen by 4-5% to 10-13% from
Dec’20 levels due to improving demand and supply-side issues. M&HCVs now have a
waiting period of 30 days due to supply-side constraints (for most parts including
semiconductors), which was not there two months back. LTV is stable (85-90%),
leading to an increase in inquiries and conversions. Post lifting of the moratorium on
term loan EMIs, there has been exit of some transporters, but this has led to the entry
of new ones, indicating demand. Higher tonnage segments continue to dominate due
to higher demand from the Infrastructure segment. Demand for LCVs/SCVs continue
to remain strong. We expect AL’s wholesales to grow by ~6.8% MoM (~8% MoM for
M&HCVs) and that for TTMT to grow by ~6% MoM for both M&HCVs and LCVs.

30 March 2021 13
  Tractors: Demand for Tractors has sustained due to good rabi sowing and preference
for farm mechanization. Both MM and ESC are operating at full capacity. Sales remain
skewed towards greater HP Tractors due to higher demand from the Agriculture
segment and low base. Commercial use of Tractors is also picking up. Dealers are also
holding lower inventory (10-30 days). We expect Tractor volumes to grow by ~16%/9%
MoM for MM/ESC due to higher demand.
 Valuation and view: Mar’21 saw sustained demand across segments (excluding 2Ws).
Current valuations largely factor in sustained recovery (our Base case), leaving a
limited margin of safety for any negative surprises. We prefer companies with: a)
higher visibility in terms of a demand recovery, b) a strong competitive positioning, c)
margin drivers, and d) balance sheet strength. MSIL and MM are our top OEM picks.
Among Auto Component stocks, we prefer ENDU. We prefer TTMT as a play on global
PVs.

Snapshot of volumes for Mar’21

YoY MoM
Change Growth
Company sales Mar’21 Mar’20 Change (%) Feb’21 Change (%) FY21 YTD FY20 YTD (%) FY21E (%)
Maruti Suzuki 1,71,512 83,120 106.3 1,64,469 4.3 14,62,359 15,62,625 -6.4 14,62,359 -6.4
Domestic 1,61,666 78,414 106.2 1,52,983 5.7 13,67,971 14,60,460 -6.3 13,67,971 -6.3
Export 9,846 4,706 109.2 11,486 -14.3 94,389 1,02,165 -7.6 94,389 -7.6
Mahindra & Mahindra 67,991 21,014 223.6 56,923 19.4 7,03,397 7,77,958 -9.6 7,03,397 -9.6
UV (incl. pick-ups) 31,741 6,889 360.7 25,839 22.8 3,24,077 4,02,580 -19.5 3,24,077 -19.5
LCV and M&HCV 615 91 576.1 581 5.9 4,093 11,276 -63.7 4,093 -63.7
Three-Wheelers 2,903 421 589.6 2,357 23.2 18,967 62,187 -69.5 18,967 -69.5
Tractors 32,732 13,613 140.4 28,146 16.3 3,56,260 3,01,915 18.0 3,56,260 18.0
Tata Motors 65,596 12,924 407.6 61,365 6.9 4,80,554 4,73,307 1.5 4,80,554 1.5
HCVs 14,718 3,710 296.7 13,890 6.0 86,857 1,24,476 -30.2 86,857 -30.2
LCVs 21,296 3,413 524.0 20,076 6.1 1,71,318 2,16,154 -20.7 1,71,318 -20.8
CVs 36,014 7,123 405.6 33,966 6.0 2,58,175 3,40,630 -24.2 2,58,175 -24.2
Cars 16,649 2,422 587.4 15,733 5.8 1,36,880 72,222 89.5 1,36,880 89.5
UVs 12,933 3,379 282.7 11,666 10.9 85,499 60,455 41.4 85,499 41.4
Hero MotoCorp 5,28,291 3,34,647 57.9 5,05,647 4.5 57,43,210 64,09,719 -10.4 57,43,210 -10.4
Bajaj Auto 3,76,916 2,42,575 55.4 3,75,017 0.5 39,80,382 46,15,212 -13.8 39,80,382 -13.8
Two-Wheelers 3,36,187 2,10,976 59.3 3,32,563 1.1 36,11,947 39,47,568 -8.5 36,11,947 -8.5
Three-Wheelers 40,728 31,599 28.9 42,454 -4.1 3,68,434 6,67,644 -44.8 3,68,434 -44.8
Ashok Leyland 14,640 2,179 571.9 13,703 6.8 98,137 1,25,255 -21.7 98,137 -21.6
CV (excluding LCV) 8,435 1,831 360.7 7,802 8.1 49,154 78,609 -37.5 49,154 -37.5
LCV 6,205 348 1683.2 5,901 5.2 48,983 46,646 5 48,983 5.0
TVS Motor 3,14,911 1,44,763 117.5 2,97,747 5.8 30,44,091 32,63,492 -6.7 30,44,091 -6.7
Eicher Motors
Royal Enfield 71,147 35,814 98.7 69,659 2.1 6,17,149 6,95,839 -11.3 6,17,149 -11.3
VECV 5,898 1,499 293.4 5,457 8.1 40,126 48,721 -17.6 40,126 -17.6
Escorts 12,258 5,444 125.2 11,230 9.2 1,06,662 86,018 24.0 1,06,662 24.0
Domestic 11,758 5,228 124.9 10,690 10.0 1,01,876 82,252 23.9 1,01,876 23.9
Exports 500 216 131.5 540 -7.4 4,786 3,766 27 4,786 27

30 March 2021 14
 In conversation
\

HDFC Life: Seeing resurgence in COVID-19 claims; Vibha

Padalkar, MD & CEO
 Seeing a resurgence in COVID-19 claims MoM; we are watching this space very
closely, not out of the woods yet
 Reinsurance rate increase in March was not related to COVID-19
 Being more cautious on underwriting
 Tax change is not having a major impact on businessx
 Rate increase will likely depend on mortality rates in coming quarters
 Protection will slowly grow as a share, but over the next 5 years
 VNB is seen at about 20% now
 Looking at health as possible game changer for VNB uplift
 LIC has been selling annuities, despite which we have made market share inroads

Cadila: Cuts Remdesivir prices by 65%; want to make it an

affordable COVID drug; Shravil Patel, MD
 Moved to Phase-III after completing Phase-II for the COVID-19 vaccine
 On Track to file the vaccine in Q1FY22; COVID-19 vaccine ZyCOV-D is a 3-dose
vaccine
 No efficacy data that can be shared; no issues related to safety
 Finished the first dose enrolment of 30000 volunteers for Phase-III
 We are not manufacturing COVID vaccine Sputnik V
 Built a brand new facility to manufacture the COVID-19 vaccine
 Company is the largest seller of Remdesivir in India, have large institutional orders
 Wanted to make Remdesivir affordable; offtake of remdesivir has been excellent

Shriram City Union: Demand for SME loans to drive AUM growth
YS Chakravarti, MD & CEO
 We are not part of companies that complained to court w.r.t RBI’s withdrawal limits
 2-wheeler demand was slow in Q4; February was very slow
 Will end Q4 with similar or slightly better numbers YoY
 Good demand for working capital loans seen in small enterprise finance
 Demand is coming back for SME loans which will drive AUM growth ahead
 Collections are at comfortable levels for SMEs
 Don’t intend to make additional COVID-19 related provisions
 Cost of funds has come down by 20-30 bps

SKF: Intent of scrappage policy excellent; wrinkles need to be

ironed out; Manish Bhatnagar, MD
 See a lot of Government capex funding with infra leading the pack
 Have not seen too much on capex plans from the private sector yet
 There are number of wrinkles in the scrappage policy that need to be ironed out
 We do not have scrapyards or testing sites to determine the fitness of vehicles
 Seeing a pick-up in the passenger vehicles segment

30 March 2021 15
  Cement and steel are doing well; seeing investments being announced
 Our diversification has helped us and we will see a good FY22; expecting a
significant double-digit growth in FY22

Dixon Tech: Maintaining FY22 guidance of topline of over Rs.

10000 crore; Atul Lall, MD
 Have still not heard from Government on PLI
 Extension of PLI timeline is difficult
 Have met eligibility criteria on investment and revenue threshold
 Hadn’t factored in increase in profitability in FY21 due to PLI
 Demand is normal; order book forecast remains very strong
 Still sticking to the guidance for this year
 Will end FY21 with revenue of around Rs. 6200-6300 crore
 Commodity price rise is impacting consumer durable companies
 Order book under mobile phones is very strong in domestic and international
markets
 Margin to remain in the range of 4.4-4.5% on back of product mix
 Sticking to guidance for FY22 of topline of over Rs. 10000 crore
 Expect 25-30% CAGR run-rate post FY22

RailTel Corp: Expects FY22 to be better than FY21; Puneet

Chawla, CMD
 Order book at Rs. 4400 crore vs Rs. 4000 crore at the time of filing DRHP
 Our pace of execution has improved
 Expect FY22 to be better than FY21
 In talks with Centre & State Governments for important projects
 We offer WiFi at around 5900 railway stations
 Expect broadband to see strong growth
 Railways has given a hospital management order

30 March 2021 16
 NOTES

30 March 2021 17
Disclosures:
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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
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Disclosure of Interest Statement Companies where there is interest
Analyst ownership of the stock No
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
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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 Financial Services Limited(SEBI Reg No. INH000000412) has an agreement with Motilal Oswal capital Markets (Hong Kong) Private
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who compile this report is/are not located in Hong Kong & are not conducting Research Analysis in Hong Kong.
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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
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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
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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,
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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
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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
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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,
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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.
* 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.

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