12 4 2007 (first Glob) First Global Initiates Pa_xqw05429

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Sector: Textiles Page Industries Limited (PAG.IN/PAGE.BO) Initiating Coverage Market Perform with Outperform bias (CMP: Rs.411.9 Mkt. Cap: Rs.4.6 bn, $115.4 mn, Dec 4, ’07) Relevant Index: S & P CNX Nifty: 5858.35 Dec 4, ’07

Strong product portfolio, wide distribution network & expansion into high margin leisurewear & female innerwear segment to help capitalise on the retail boom… Economies of scale, lower CST, & favourable change in product mix to aid margin improvement…but intensifying competition and higher advertisement & promotional expenses to restrict expansion...

December 4, 2007 Research Contact: Associate Director, Research: Hitesh Kuvelkar Sales Offices:

India Sales:

Tel. No: +91-22-400 12 440

US Sales: Tel. No: 1-212-2276611

Mob. +91 9833 732633 Email: [email protected] Email: [email protected] [email protected]

Email: [email protected]

Asia & Europe Sales: Tel.: 44-207-959 5300

Email: [email protected]

Research Note issued by First Global Securities Ltd., India FG Markets, Inc. is a member of NASD/SIPC and is regulated by the Securities & Exchange Commission (SEC), US First Global (UK) Ltd. is a member of London Stock Exchange and is regulated by Financial Services Authority (FSA), UK First Global Stockbroking is a member of Bombay Stock Exchange & National Stock Exchange, India

IMPORTANT DISCLOSURES CAN BE FOUND AT THE END OF THIS REPORT.

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Table of Contents Price and Rating History Chart

2

Financial Snapshot

3-4

Key Ratios

5

Page Industries’ Business in Pictures…(FY07)

6

The Story…

7-9

Industry Scenario

10-11

Business Model

12-13

Financial Performance

14-18

Wide distribution network & retail boom aids top line growth

14-15

Economies of scale & change in product mix aids margin expansion…

15-16

Superior return ratios

16-17

Working Capital Cycle…

17

Free Cash Flow Analysis

18

Financials

19-25

Earnings Model

19

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Price and Ratings History Chart Ratings Key

Positive Ratings Neutral Ratings Negative Ratings

B = Buy

BD = Buy at Declines

OP = Outperform

S-OP = Sector Outperform H = Hold S = Sell

M-OP = Market Outperform MP = Market Perform SS = Sell into Strength

MO-OP = Moderate Outperform SP = Sector Perform UP = Underperform

A = Avoid

MO-UP = Moderate Underperform

S-UP = Sector Underperform

ST: Short Term

MT: Medium Term

LT: Long Term

Page Industries Limited (PAG.IN/PAGE.BO) 16-Mar-07 = 100 (LHS)

500

160 450 145 4-Dec-07 MO-OP

130

400

(INR)

350 115

300

100 85

250

70

200

16- 3- 19- 8- 24- 11- 26- 11- 26- 10- 28- 12- 27- 15- 30- 14- 29Mar- Apr- Apr- May- May- Jun- Jun- Jul- Jul- Aug- Aug- Sep- Sep- Oct- Oct- Nov- Nov07 07 07 07 07 07 07 07 07 07 07 07 07 07 07 07 07 Relative to NIFTY (LHS)

FG Reco

Page Industries (RHS)

Represents an Upgrade Represents a Downgrade Represents Reiteration of Existing Rating

Details of First Global’s Rating System given at the end of the report

2

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Financial Snapshot Key Financials (YE Mar 31st) (Rs. mn)

FY 04

FY 05

FY 06

FY 07

FY 08E

FY 09E

625

747

1,013

1,362

1,848

2,480

25.9%

19.5%

35.8%

34.4%

35.7%

34.2%

87

76

189

273

377

533

44.1%

38.1%

41.6%

170

243

334

49.5%

42.6%

37.7%

166

243

334

45.9%

46.1%

37.7%

Operating Revenue Revenue Growth (Y-o-Y) EBIDTA EBIDTA Growth (Y-o-Y)

34.3%

Net Profit Net Profit Growth (Y-o-Y)

53 68.9%

Proforma Net Profit (Excl.Extra-ordinaries) Proforma Net Profit Growth (Y-o-Y)

-12.1% 147.8% 42

-19.5% 168.6%

53 68.9%

114

42

114

-19.5% 168.6%

Shareholders Equity

52

67

125

677

844

1,102

Number of Diluted shares (mn)

9.8

9.8

9.8

11.2

11.2

11.2

Key Operating Ratios (YE Mar 31st)

FY 04

FY 05

FY 06

FY 07

FY 08E

FY 09E

5.4

4.3

11.7

14.9

21.8

30.0

27.7%

46.1%

37.7%

Proforma Diluted EPS (INR) EPS Growth (Y-o-Y)

68.9%

CEPS (Rs.) (Excl. Extra-Ordinaries)

-19.5% 168.6%

6.2

5.1

12.5

16.3

24.2

33.3

EBIDTA (%)

13.9%

10.2%

18.7%

20.0%

20.4%

21.5%

NPM (%)

8.4%

5.7%

11.2%

12.2%

13.1%

13.5%

Tax/PBT (%)

26.0%

30.0%

34.3%

34.2%

32.2%

33.0%

RoE (%)

65.5%

58.0%

92.0%

38.7%

30.4%

33.1%

RoCE (%)

33.1%

25.3%

46.5%

28.8%

24.3%

26.4%

Book Value per share (INR)

5.3

6.8

12.8

60.7

75.6

98.8

Debt/Equity (x)

2.1

2.0

1.1

0.4

0.4

0.3

104.2%

65.1%

48.6%

32.6%

31.5%

22.8%

FY 05

FY 06

FY 07

FY 08E

FY 09E

P/E (x)

18.9

13.7

P/BV (x)

5.4

4.2

P/CEPS (x)

17.0

12.4

EV/EBIDTA (x)

12.4

8.5

Market Cap. / Sales (x)

2.5

1.9

1.5%

1.5%

Dividend Payout Ratio (%)

Valuation Ratios (YE Mar 31st)

FY 04

Div.Yield (%)

DuPont Model (YE Mar 31st) EBIDTA/Sales (%) Sales/Operating Assets (x) EBIDTA/Operating Assets (%) Operating Assets/ Net Assets (x) Net Earnings/ EBIDTA (%) Net Assets/ Equity (x)

FY 04 13.9% 3.8 52.3% 1.1 60.6% 1.9

FY 05 10.2% 3.7 38.2% 1.1 55.5% 2.6

FY 06 18.7% 4.0 75.1% 1.1 60.2% 1.9

FY 07 20.0% 3.4 67.6% 0.7 61.0% 1.4

FY 08E 20.4% 2.7 54.1% 0.7 64.5% 1.3

FY 09E 21.5% 2.6 55.6% 0.7 62.7% 1.3

Return on Equity (%)

65.5%

58.0%

92.0%

38.7%

30.4%

33.1%

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Common Sized Profit & Loss Account (YE Mar 31st)

FY 04

FY 05

FY 06

FY 07

FY 08E

FY 09E

Total Revenues

100%

100%

100%

100%

100%

100%

Less: Raw Material

56.4%

58.5%

51.9%

51.0%

48.5%

47.5%

Less: Personnel

11.8%

12.2%

11.6%

14.3%

14.5%

14.7%

Less: Advertisement and sales promotion Exp.

17.9%

19.0%

17.8%

14.7%

16.7%

16.3%

EBITDA

13.9% 10.2% 18.7% 20.0%

20.4%

21.5%

Less: Depreciation and Amortization

1.2%

1.0%

0.8%

1.1%

1.5%

1.5%

Less: Interest

1.8%

1.7%

1.6%

1.7%

1.7%

1.5%

Add: Non-Operating Income

0.5%

0.6%

0.8%

1.4%

2.1%

1.6%

Add: Extraordinary Income

0.0%

0.0%

0.0%

0.5%

0.0%

0.0%

PBT

11.4%

8.1%

17.1%

19.0%

19.4%

20.1%

Less: Tax

3.0%

2.4%

5.9%

6.5%

6.2%

6.6%

PAT

8.4%

5.7%

11.2%

12.5%

13.1%

13.5%

PAT (Excl.Extra-ordinaries)

8.4%

5.7%

11.2% 12.2%

13.1%

13.5%

Top Management Team Designation Managing Director Director Alternate Director Chairman Alternate Director Director Director Director Company Secretary

Capital Issue History

Name Sunder Genomal Ramesh Genomal V Sivadas Nari Genomal P V Menon Timothy Ralph Wheeler Ravi Uppal G P Albal R Vijayakumar

Date

Equity Capital (INR mn)

27/02/1995 26/07/1995 20/02/1998 30/03/1998 18/03/2000 20/03/2002 29/09/2006 10/3/2007

4.2 7 10 12.5 19.6 24.4 97.4 111.5

Equity shares Issued Equity shares issued Further Issue

Further Issue Further Issue Further Issue Further Issue Bonus Issue Public Issue

Key Statistics Share Holding Pattern - Sept'07

Industry: 52 Week Hi: Lo:

Public & Others 6%

CMP:

Foreign 7%

Institutions 13%

Textile Rs.488.9/240 Rs. 411.9

Avg Daily Vol (20 days):

3,000

Avg Daily Val (20 days):

Rs.1.1 mn

Performance over 52 weeks: T otal Promoters 72%

Non Promoter Corporate Holding 2%

* Page Industries’ performance since listing (March 16,’07)

4

PAGEIND:

Up 51.1 % *

Nifty:

Up 46.7 %

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Key Ratios (Year ended Mar. 31)

FY 04

FY 05

FY 06

FY 07

FY 08E

FY 09E

Raw Material / Sales (%)

56.4%

58.5%

51.9%

51.0%

48.5%

47.5%

Other Income/EBT (%)

4.1%

7.3%

4.8%

7.4%

11.1%

8.0%

EBITDA Margin (%)

13.9%

10.2%

18.7%

20.0%

20.4%

21.5%

Tax / PBT (%)

26.0%

30.0%

34.3%

34.2%

32.2%

33.0%

Net Profit Margin (%)

8.4%

5.7%

11.2%

12.5%

13.1%

13.5%

RoE (%)

65.5%

58.0%

92.0%

38.7%

30.4%

33.1%

RoCE (%)

33.1%

25.3%

46.5%

28.8%

24.3%

26.4%

Sales/Operating Assets (x)

3.76

3.74

4.02

3.38

2.66

2.59

Operating Assets/Total Assets (x)

0.61

0.62

0.62

0.48

0.51

0.56

Return on Operating Assets (%)

35.4%

24.2%

47.1%

42.0%

34.1%

34.7%

Total Loans / Equity (%)

205.2%

197.2%

105.3%

37.4%

36.1%

34.6%

7.76

5.88

11.98

11.46

12.17

14.39

Interest / Debt (%)

11.7%

10.9%

12.0%

12.4%

11.1%

10.8%

Growth in Gross Block (%)

22.0%

20.9%

22.8%

55.3%

77.3%

13.8%

Sales Growth (%)

25.9%

19.5%

35.6%

34.3%

36.0%

34.2%

EBITDA Growth (%)

34.3%

-12.1%

147.8%

44.1%

38.1%

41.6%

Proforma Net Profit Growth (%)

68.9%

-19.5%

168.6%

45.9%

46.1%

37.7%

Proforma EPS Growth (%)

68.9%

-19.5%

168.6%

27.7%

46.1%

37.7%

Debtor Turnover period (days)

29

23

20

15

16

16

Creditor Turnover period (days)

0

0

11

26

27

27

Inventory Turnover period (days)

86

88

94

100

107

113

Interest Coverage (x)

Current Ratio (x)

1.8

1.7

1.8

3.0

2.9

3.2

51.9%

52.0%

51.7%

58.9%

54.3%

67.0%

Diluted Shares Outstanding (in mn)

9.8

9.8

9.8

11.2

11.2

11.2

Fully diluted Reported EPS (INR)

5.4

4.3

11.7

15.3

21.8

30.0

Fully diluted Proforma EPS (INR)

5.4

4.3

11.7

14.9

21.8

30.0

104.2%

65.1%

48.6%

32.6%

31.5%

22.8%

Fully diluted Cash EPS (INR)

6.16

5.08

12.53

16.27

24.20

33.27

Book Value per share (INR)

5.32

6.84

12.84

60.71

75.63

98.77

Net Current Assets/Capital Employed (%)

Dividend Payout (%)

5

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Page Industries’ Business in Pictures…(FY07) (All figures are in Rs. mn except where stated otherwise) All percentages are percent of revenues, unless otherwise stated)

Operations/ Value added

Segmental break-up: Jockey Men – 72 % Women – 15% Leisurewear – 13%

Total Revenues: Rs.1362 mn (100%) Raw Material – Rs 476 mn (34.9%) Manf. Exp. – Rs 219 mn (16.1%)

Raw Material – Rs 695mn (51.0%) Selling and Distribution Exp– Rs. 198 mn (14.5%)

Raw Material: Indigenous – 98% Import – 2% Raw Material, primarily yarn sourced by the company’s dedicated suppliers, with which the company stands longterm relations

Personnel exp – Rs. 195 mn (14.3%) Miscellaneous exp – Rs. 2 mn (0.2%)

EBIDTA – Rs 273 mn (20.0%)

Interest – Rs. 24 mn (1.8%) Depreciation – Rs 15 mn (1.1%)

Below Operating Line

Revenue distribution (Format –wise): Hosiery stores – 45 % Multi-brand stores– 22% Departmental stores – 15% Chain stores – 10% Exclusive stores – 8%

Non-Operating Income – Rs 19 mn (1.4%)

Pricing Basics – Up to Rs. 80 Premium – Rs. 80-150 Super Premium – More than Rs. 150

Extraordinary Income – Rs 6 mn (0.4%)

Profit Before Tax- Rs 259 mn (19.0%)

Taxes- Rs 89 mn (6.5%)

Competition Neva, Hanes Cromozome, Playtex, Maxwell (VIP, Frenchie-X, Feeling, Lovable), Body Care, Triumph, Rupa, Lux, Rivolta, Tommy Hilfiger, Van Huesean, Calvin Klein & other international brands

Profit After Tax - Rs. 170 mn (12.5%)

Assets

Balance Sheet

Liabilities

Rs 1211 mn (100%) Fixed Assets – Rs. 188 mn (15.3%)

Equity – Rs. 112 mn (9.2%)

Investments – Rs.137 mn (11.3%)

Debt – Rs. 253 mn (20.9%)

Capital WIP – Rs. 61 mn (5.0%)

Reserves – Rs. 566 mn (46.7%)

Current Assets – Rs 721 mn (59.5%)

Deferred Tax – Rs 8 mn (0.1%)

Loans & Advances – Rs 103 mn (8.5%)

Current Liabilities– Rs. 272 mn (22.5%)

Current AssetsInventory - Rs 364 mn (50.5%) Receivables - Rs 56 mn (7.8%) Cash & Bank – Rs 302 mn (41.9%)

Loans & Advances:

Current Liabilities: Creditors – Rs 106 mn (39.0%) Provisions –Rs 28 mn (10.3%) Others – Rs 138 mn (50.7%)

Operating Loans & Advn – Rs 101 mn (98.1%) Non-Operating. Advn – Rs 2 mn (1.9%)

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The Story… Page Industries Limited (PAG.IN/PAGE.BO) is yet another bet on the upwardly mobile Indian consumer. With the rise in the disposable income of consumers, coupled with an increase in the proportion of the young population, the demand for premium end (in terms of quality as well as brand perception) products is on the rise. Through its flagship brand, ‘Jockey’, Page has clearly Through its flagship brand, ‘Jockey’, Page emerged as the industry leader among the few has clearly emerged as the industry leader organized players in the Indian Innerwear market, among the few organized players in the and has given other players, such as Maxwell Indian Innerwear market, and has given (VIP) a run for their money. Page recorded a top other players, such as Maxwell (VIP) a run line growth of 36% Y-o-Y and 34% Y-o-Y in for their money… FY06 and FY07 respectively. On the other hand, … we believe that Page’s strong product Maxwell recorded an increase of 16% Y-o-Y and portfolio, coupled with its wide distribution a decline of 6% Y-o-Y in its top line in FY06 and network, will help the company capitalise on FY07 respectively (top line of Rs 1.96 bn for the consumer boom… Maxwell in FY07). We believe that Page’s strong product portfolio, coupled with its wide distribution network, will help the company capitalise on the consumer boom. The Indian Innerwear market is estimated at around Rs.88 bn (Images-KSA Technopak India Apparel Report-2006), out of which only one-third is organized, with players such as Page, Maxwell Industries, Rupa, Lux, etc. Currently, male segment, which contributes almost 72% to its The company plans to increase the top line, is dominant for Page, however the contribution from its female innerwear company plans to increase the contribution from segment in the coming years, which presently its female innerwear segment in the coming contributes around 15% to its top line. It years, which presently contributes around 15% plans to increase its women innerwear to its top line. It plans to increase its women operations and launch new products across innerwear operations and launch new products different price segments, catering to the across different price segments, catering to the requirements of various customer classes and requirements of various customer classes and competing with the likes of Lovable, Body Care, Hanes, Triumph, etc. competing with the likes of Lovable, Body Care, Hanes, Triumph, etc. Also, its leisurewear segment, which primarily includes T-shirts, gym wear, sportswear, socks, etc., has received an encouraging response from consumers. In FY07, the female innerwear segment grew by 60% Y-o-Y, the leisurewear segment was up 50% Y-o-Y, while the male segment increased by 32% Y-o-Y. In the Innerwear segment, Page has products across three price segments, namely basic (top line contribution of 30%), premium (top line contribution of 68%), and super premium (top line contribution of 2%), and also caters to the requirements of premium and high-premium customers. The company is expanding its products portfolio and has recently launched two new products, ‘3D’ and ‘IC’ in the super-premium segment.

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Page has a strong distribution network, with around 140 distributors catering to the requirements of over 14,000 retail outlets. The company has also entered into an agreement with Reliance Mart supermarkets and the Aditya Birla Group (along with the existing tie-up with Shopper’s Stop) and Page has a strong distribution network, with is also expanding its presence through exclusive around 140 distributors catering to the retail stores, which presently contribute around requirements of over 14,000 retail outlets. 8% to its overall top line. The company has also entered into an agreement with Reliance Mart supermarkets and the Aditya Birla Group (along with the existing tie-up with Shopper’s Stop) and is also expanding its presence through exclusive retail stores, which presently contribute around 8% to its overall top line

Page has established strong quality control process, which has helped it reduce shrinkage. At an average, almost 97.5% of the company’s products are higher than the minimum quality standard (‘A’ class), while 2.5% of the products have slight defects (‘B’ class), which are sold through separate sales channel at lower prices. Page incurs shrinkage of around 1% of its aggregate production due to cutting wastage. In order to cater to the rising demand, Page has expanded its manufacturing capacity from 33 mn units in FY07 to the current 47 mn units, which it plans to increase further to around 80 mn units by the end of FY08. The expansion will aid the company to develop a strong presence in the female innerwear segment as well as the leisurewear segment, which command comparatively higher margins. On account of its premium product positioning, Page commands better margins in comparison to other innerwear players, such as Maxwell, etc. Page recorded an EBIDTA margin of 20% in FY07, as compared to around 10.5% for Maxwell.

On account of its premium product positioning, Page commands better margins in comparison to other innerwear players, such as Maxwell, etc. Page recorded an EBIDTA margin of 20% in FY07, as compared to around 10.5% for Maxwell

Moreover, a decline in the Central Sales Tax (CST) from 4% to 3% in the recent budget in FY08 and 2% (as declared) in FY09 will aid the company’s growth on the margins front in the coming years. We believe that although economies of scale, a decline in CST, and favourable change in product mix will We believe that although economies of boost margins, an increase in competition due to scale, a decline in CST, and favourable the entry of new players, such as Benetton, etc., change in product mix will boost coupled with a rise in advertisement & margins, an increase in competition due promotional expenses, could put a leash on the to the entry of new players, such as EBIDTA margin expansion. Benetton, etc., coupled with a rise in advertisement & promotional expenses, could put a leash on the EBIDTA margin expansion

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On the valuations front, the stock currently trades at a P/E of 19x our FY08 proforma diluted EPS estimate of Rs.21.8. Page command a much higher EBIDTA margin in comparison to its peers, such as Maxwell (10.5% in FY07), due to its premium product positioning, and also enjoys much superior returns. Plus, its growth rates are much more attractive. We believe that Page’s wide distribution We believe that Page’s wide distribution network, coupled with its expansion into the high network, coupled with its expansion into margin female innerwear segment and leisurewear the high margin female innerwear segment segment, will help the company to ride on the back and leisurewear segment, will help the of the retail boom in the coming years. We expect company to ride on the back of the retail Page to record a top line growth of 34% and the boom in the coming years… PAT to grow by 38% in FY09. We estimate the … we expect Page to record a RoE of EBIDTA margin to expand to 20.4% in FY08 and 30.4% and a RoCE of 24.3% for FY08 – further to 21.5% in FY09 and expect PAT to grow again, several times the ratios for Maxwell at a CAGR of 37% over the next three years. We expect Page to record a RoE of 30.4% and a RoCE of 24.3% for FY08 – again, several times the ratios for Maxwell. We initiate coverage on Page Industries with a rating of Marketperform with outperform bias.

Comparative Valuations – Indian Innerwear segment Company

Year End

Page Industries Mar Maxwell * Mar

P/E (x)

P/S (x)

P/BV (x)

EV/Sales (x)

EV/EBITDA (x)

EBITDA Margin (%)

RoE (%)

RoCE (%)

Annual Annual EPS Sales Growth Growth (%) (%)

FY08E FY09E FY08E FY09E FY08E FY09E FY08E FY09E FY08E FY09E FY08E FY08E FY08E (09/08) (09/08) 18.9 13.7 2.5 1.9 5.4 4.2 2.5 1.8 12.4 8.5 20.4% 30.4% 24.3% 37.7% 34.2% 16.7 14.8 0.7 0.6 1.8 1.6 0.7 0.7 6.4 6.3 11.0% 10.7% 7.9% 13.0% 13.0%

Source: FG Estimates * Quick Estimates for Maxwell Industries (VIP Innerwear)

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Industry Scenario The Indian Innerwear market is estimated to be around Rs.88 bn (Images-KSA Technopak India Apparel Report-2006). In volume terms, the innerwear market accounts for almost 20.5% of the total apparel revenues, while in value terms, it forms 10% of the apparel industry’s revenues. The female segment contributes around 59%, while the male segment contributes 41% to the aggregate revenues of the Indian innerwear market. However, the organised innerwear market contributes only around 10% to revenues of the female segment, as compared to a contribution of 65% from the organised market to the revenues of the male segment. Although the Indian innerwear market is still unorganised to a large extent (67%), there are a few existing organised players, such as Maxwell Industries (VIP), Page Industries (Jockey), Rupa Garments (Rupa), Madura Garments (Van Heusen), etc. However, some other companies, such as Benetton, While the entry of new players will Triumph, Sara Lee, etc., are also expanding their presence certainly intensify the competition in India. While the entry of new players will certainly in the Indian innerwear market, we intensify the competition in the Indian innerwear market, believe that greater conversion we believe that greater conversion (from the unorganised (from the unorganised innerwear innerwear segment) to the organized segment will aid the segment) to the organized segment will aid the industry to grow and industry to grow and develop as a whole. develop as a whole

Innerwear Market Scenario Tommy Hilfiger Premium Van Huesean Calvin Klein

PRICE (Expensive)

Jockey Super-premium Chromozome Super-Premium Jockey Rivlota Premium Rupa Chromozome Premium Premium Jockey Basic Hanes Tommy Hilfiger Basic Rupa Chromozome Basic Basic Lux Frenchie ‘X’

VALUE (High)

VALUE Signifying Brand, (Low) quality, durability etc.

Source: FG Research

PRICE (Inexpensive)

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On the basis of the disposable income of consumers, the organised innerwear industry has been segmented into various price segments, such as basic, middle, premium, super-premium, etc. Page is present mainly in the premium and super premium market segment, which has historically recorded a comparatively higher top line growth, due to the low base and the upward mobility of the Indian consumer. The basics/lower premium segment (priced up to Rs.80) contributes 30%, the premium segment (priced from Rs.80-150) contributes 68%, while the super premium (priced > Rs.150) contributes the rest to the company’s top line.

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Business Model Page, a leading player in the Indian innerwear market, was established in 1995, primarily to introduce the No. 1 US innerwear brand, ‘Jockey’ in India. Apart from India, the company also caters to the requirements of Bangladesh, Nepal and Sri Lanka. The Genomal Group, who are the company’s promoters, have a long-standing relationship (around 46 years) with the parent company Jockey Page operates on a franchisee International (US), as the former was the sole licensee of model and has a license until 2020 the latter’s products in Philippines. Page operates on a as of now (renewable after every franchisee model and has a license until 2020 as of now five years) and is liable to pay 5% (renewable after every five years) and is liable to pay 5% of of the revenues generated as royalty to the parent company the revenues generated as royalty to the parent company. On account of its steady out-performance (as compared to the target set) and long-standing relation with the parent company, we believe that the Genomal group stand low non-renewal risks for its license in the Indian market.

Page’s Business Model Yarn Yarn sourcing from dedicated vendors, with whom the company share long-term relations Fabric Knitting & Processing

Woven Fabric Trims & Accessories

Stringent quality check measures undertaken at various levels

Material Inspection

Accessories sourced from Singapore etc, primarily for women products

Fabric Cutting & Garmenting

Garment Packaging

Distribution

Page has a manufacturing facility in Bangalore with an existing capacity of 47 mn units (80% capacity utilisation), which it plans to increase by another 33 mn units in FY08. An increase in its manufacturing capacity may provide Page an opportunity to supply products to its parent company (as done by the China subsidiary). However, according to management, the company may not be much inclined to do so due to the inherently lower margins in the export business. 12

Distribution network of 140 distributors, catering to the requirements of >14,000 retailers

An increase in its manufacturing capacity may provide Page an opportunity to supply products to its parent company (as done by the China subsidiary). However, according to management, the company may not be much inclined to do so due to the inherently lower margins in the export business

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Apart from the garment manufacturing facility, Page manufactures socks, for which it currently has a capacity of 0.5 mn and plans to increase it to 1.2 mn units in the coming years. The company has also begun manufacturing elastics, for which it presently has a capacity of 0.24 mn mt per annum and plans to In order to complement its products increase it to 0.5 mn mt per annum in FY08. The with better stitching, finishing and company’s elastic production presently caters to almost designs, Page has installed imported 80% of its requirements, while the remaining 20% is machines at its manufacturing outsourced to local vendors. In order to complement its facility. Apart from innerwear, the products with better stitching, finishing and designs, company is also present in the Page has installed imported machines at its leisurewear segment, which manufacturing facility. Apart from innerwear, the primarily includes shorts, t-shirts, company is also present in the leisurewear segment, sportswear, gym wear, etc which primarily includes shorts, t-shirts, sportswear, gym wear, etc. Page has a wide distribution network of 140 distributors, which cater to the requirements of over 14,000 retail outlets. The company distributes its products through various store formats, such as hosiery stores, chain stores (like Shopper’s Stop), multi-brand outlets, departmental stores, exclusive The company distributes its products stores, etc. In order to complement its distribution through various store formats, such as network and ride on the back of the retail boom, hosiery stores, chain stores (like Page has also tied-up with the Aditya Birla Group Shopper’s Stop), multi-brand outlets, and Reliance Retail for its hypermarket storedepartmental stores, exclusive stores, etc. format. In order to complement its distribution network and ride on the back of the retail boom, Page has also tied-up with the Aditya Birla Group and Reliance Retail for its hypermarket store-format

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Financial Performance Wide distribution network & retail boom aids top line growth Page is one of the leading players in the Indian innerwear market and targets the low premium, midpremium, and super-premium customer segments. In FY05, Page faced some stiff competition from its peers, such as Maxwell, Rupa and others, which had led to a much slower top line growth In FY05, Page faced some stiff competition for the company in the period. However, over a from its peers, such as Maxwell, Rupa and period of time, Page has been able to create a others, which had led to a much slower top niche for itself in the premium innerwear line growth for the company in the period. product segment. The company recorded an However, over a period of time, Page has impressive top line growth of 36% Y-o-Y and been able to create a niche for itself in the 34% Y-o-Y in FY06 and FY07 respectively, premium innerwear product segment. The which was driven primarily by its wide company recorded an impressive top line growth of 36% Y-o-Y and 34% Y-o-Y in FY06 distribution network across various storeand FY07 respectively, which was driven formats. primarily by its wide distribution network across various store-formats

Top line Performance 40%

3,000 35.8%

34.4%

34.2%

2,500

35%

35.7% 30%

2,000 1,500

25.9%

1,000

25% 20%

19.5%

15%

500

10%

0 FY04

FY05

FY06

Sales INR mn (LHS)

FY07

FY08E

FY09E

Y-o-Y sales Grow th (RHS)

Source: Company Reports, FG Estimates

Within the innerwear market, the male segment contributes around 72% to its top line in FY07, while the female segment contributed 15%, and the leisurewear segment contributed 13%. The company recorded a growth of 32% in the male segment, 60% in the female segment, and 50% in the leisurewear segment. Apart from innerwear, Page has Apart from innerwear, Page has also expanded its product also expanded its product range to range to include shorts, sports wear, gym wear, and has include shorts, sports wear, gym plans to further expand into sleepwear and loungewear in wear, and has plans to further the coming years. expand into sleepwear and loungewear in the coming years

14

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Segmental revenue break-up

Format-wise revenue distribution Format-wise Revenue distribution

Segmental revenue break-up

Chain Stores 10%

Women 15%

Exclusive 8%

Hosiery stores 45%

Men 72%

Department stores 15%

Leisurew ear 13%

Multi-brand 22%

Source: Company reports

In FY07, sales in hosiery stores contributed around 45% to the company’s top line, while multibrand stores, departmental stores, and chain stores contributed 22%, 15% and 10% respectively. Page also opened 22 exclusive ‘Jockey’ retail stores in FY07 and plans to open around 15 more stores in FY08. Exclusive retail stores (150-400 sq ft area) contributed around 8% to the company’s top line in FY07.

Economies of scale & change in product mix aids margin expansion… Since FY05, Page has been recording a steady improvement in its EBIDTA margin, which rose to 20% in FY07. The company’s EBIDTA margin had declined in FY05 due to a rise in yarn prices, which it did not pass on to its customers and increasing competition, which led to an increase in its marketing & distribution expenses, as well as greater markdowns to attract customers.

Margin performance 25% 20.0% 20% 15%

20.4% 21.5%

18.7% 13.5%

13.9% 13.2% 10.2%

10%

12.2%

11.2%

8.4% 5.7%

5%

0% FY04

FY05

FY06

PAT Margin (RHS)

FY07

FY08E

EBIDTA Margin (RHS)

Source: Company Reports, FG Estimates

15

FY09E

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Page’s manufacturing capacity increased from 33 mn units in FY06 to 47 mn units, which it plans to increase further to 33 mn units in FY08. We believe that the expansion in the company’s manufacturing capacity will help it achieve economies of scale, which will not only Page’s manufacturing capacity increased from increase its bargaining power, but also lead to 33 mn units in FY06 to 47 mn units, which it a decline in manufacturing expenses. plans to increase further to 33 mn units in Moreover, as per the recent Budget, the FY08. We believe that the expansion in the Central Sales Tax (CST) has been reduced company’s manufacturing capacity will help it from 4% to 3% in FY08, which can decline achieve economies of scale, which will not only further to 2% in FY09 and 1% in FY10. This increase its bargaining power, but also lead to a reduction in the CST will be reflected directly decline in manufacturing expenses… at the operational level and aid the growth in … as per the recent Budget, the Central Sales margins for Page. Tax (CST) has been reduced from 4% to 3% in FY08, which can decline further to 2% in FY09 and 1% in FY10. This reduction in the CST will be reflected directly at the operational level and aid the growth in margins for Page

improve further on account of scaling-up of operations in the leisurewear segment in the coming years. Moreover, Page has already introduced two new products in the superpremium segment, which command comparatively higher margins and going forward, it expects the contribution from the super-premium segment to increase, although at a slower pace.

Apart from innerwear, Page also produces leisurewear, which commands better margins in comparison to innerwear products. Although the leisurewear segment presently contributes only 13% to the company’s top line (FY07), we believe that the margins may Although the leisurewear segment presently contributes only 13% to the company’s top line (FY07), we believe that the margins may improve further on account of scaling-up of operations in the leisurewear segment in the coming years… … Page has already introduced two new products in the super-premium segment, which command comparatively higher margins and going forward, it expects the contribution from the super-premium segment to increase, although at a slower pace

We believe that although Page may face pressure due to increasing competition and higher marketing & distribution costs, the economies of scale and a favourable change in product mix will provide support to the company’s margins. We expect Page to record an EBIDTA margin of 20.4% in FY08 and 21.5% in FY09 and a PAT margin of 13.2% in FY08 and 13.5% in FY09.

Superior return ratios Page commands much higher return ratios, primarily on account of the steady improvement in its EBIDTA margin and high asset turnover multiple. The company’s asset turnover multiple is much The company’s asset turnover multiple is much higher, primarily due to its wide distribution higher, primarily due to its wide distribution network that generates greater sales through multinetwork that generates greater sales through multi-brand outlets, hosiery stores, brand outlets, hosiery stores, departmental stores, departmental stores, etc., (no investment in etc., (no investment in fixed assets, but only fixed assets, but only inventory). The company inventory). The company commands better margins commands better margins in comparison to its in comparison to its peers, such as Maxwell, due to peers, such as Maxwell, due to its premium its premium product positioning. There was a product positioning 16

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decline in the company’s operating assets (as a percentage of net assets) due to the IPO proceeds in FY07. Page recorded a decline in leverage from 2.1x debt-equity in FY04 to 0.4x debt-equity in FY07. The company recorded a RoE and RoCE of 39% and 29% respectively in FY07.

DuPont Analysis (YE Mar 31) EBIDTA/Sales (%) Sales/Operating Assets (x) EBIDTA/Operating Assets (%) Operating Assets/ Net Assets (x) Net Earnings/ EBIDTA (%) Net Assets/ Equity (x) Return on Equity (%)

FY04 14% 3.8 52% 1.1 61% 1.9 65%

FY05 10% 3.7 38% 1.1 55% 2.6 58%

FY06 19% 4.0 75% 1.1 60% 1.9 92%

FY07 20% 3.4 68% 0.7 61% 1.4 39%

FY08E 20% 2.7 54% 0.7 64% 1.3 30%

FY09E 22% 2.6 56% 0.7 63% 1.3 33%

Source: Company reports, FG estimates

We expect Page to record a decline in the asset turnover ratio in FY08 and FY09, due to an increase in its manufacturing capacity. However, we believe that such a decline in the asset turnover is shortterm in nature and will aid the company’s growth in the long term. We expect Page to record a RoE of 31% in FY08 and 33% in FY09.

Working Capital Cycle… The inventory turnover period has been rising from 86 days in FY04 to 100 days in FY07, on account of its large distribution network and a large number of SKUs (stock keeping units) (approximately The inventory turnover period has 2200). Another contributor has been the 22 exclusive been rising from 86 days in FY04 to ‘Jockey’ stores Page opened in FY07 - it plans to open 100 days in FY07, on account of its another 15 stores in FY08. An increase in the company’s large distribution network and a large bargaining power due to an increase in its scale of number of SKUs (stock keeping units) operations, led to a higher creditor turnover period of 26 (approximately 2200). Another days in FY07. Correspondingly, the net working capital contributor has been the 22 exclusive cycle declined from 114 days in FY04 to 89 days in ‘Jockey’ stores Page opened in FY07 FY07.

Working Capital Cycle (in days) (YE Mar 31) Inventory Turnover Period (days) Debtors Turnover Period (days) Creditors Turnover Period (days) Net Working Capital Cycle (Days)

FY04 86 29 0 114

FY05 88 23 0 112

FY06 94 20 11 103

FY07 100 15 26 89

FY08E 107 16 27 95

FY09E 113 16 27 103

Source: Company reports, FG estimates

We believe that the company’s inventory turnover period will increase to 107 days in FY08 and further to 113 days in FY09, primarily due to the company’s increased retail presence and greater SKUs. Moreover, following Page’s agreement with retail chains, such as Shopper’s Stop,

Reliance Mart, the Aditya Birla Group, etc., we believe that such retail chains may demand a longer credit period due to their greater bargaining power, which could lead to a slight increase in the company’s creditor turnover period. We expect Page to record a net working capital cycle of 95 days in FY08 and 103 days in FY09. 17

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Free Cash Flow Analysis Free Cash Flow Analysis (YE Mar 31) INR mn EBITA Less: Adjusted Taxes NOPLAT Plus: Depreciation Gross Cash flow Less: Increase in Working Capital Operating Cash flow Less: Net Capex Less: Increase in Net Other Assets FCF From Operations Less: Inc./(Dec.) in Investment FCF after Investment Plus: Gain/(loss) on Extraordinary Items Plus: Foreign currency Translation Effect Total FCF

FY04 80 21 59 7 66 8 58 22 -4 40 3 37 0 0 37

FY05 69 21 48 7 56 25 31 27 -2 6 0 6 0 0 6

FY06 181 62 119 8 127 66 62 33 -30 59 4 55 0 0 55

FY07 257 88 169 15 185 114 70 141 9 -79 130 -209 4 0 -205

FY08E 350 113 237 27 264 191 73 190 -12 -105 -20 -85 0 0 -85

FY09E 496 164 333 37 369 176 193 60 -15 149 -60 209 0 0 209

Source: Company reports, FG estimates

Historically, Page has been recording positive free cash flows. However, the company’s free cash flows turned negative in FY07 due to a higher capex. The company is in the process of increasing its production capacity from the current 47 mn units (33 mn units in FY07) to around 80 mn units by the end of FY08. Although most of the capex is expected only in FY08, management expects some of the capex to spill We expect Page to record over in FY09 as well. Moreover, an increase in the negative free cash flows in FY08 company’s working capital requirement, primarily as well due to a rise in the capex inventory, could eat into its free cash flow from operations and working capital in FY08. We expect Page to record negative free cash requirement. However, we flows in FY08 as well due to a rise in the capex and expect the company to turn cash working capital requirement. However, we expect the flow positive in FY09 company to turn cash flow positive in FY09.

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Financials Earnings Model* (YE Mar 31) (Rs. mn) Net Sales

Q1FY08 474

Q2FY08 481

Q3FY08E 524

Q4FY08E 370

FY 08E 1,848

Less: Net Raw Materials (incld Manf cost) Less: Personnel Less: Selling, general & admin expenses Total Cost EBIDTA Less: Depreciation EBIT Add: Other Income Less: Interest PBT Less: Total Tax Profit After Tax

235 66 71 373 101 7 94 11 8 96 30 66

230 72 89 391 90 7 84 13 7 90 27 63

253 76 88 417 106 7 100 10 8 102 35 67

178 53 60 291 79 6 72 6 8 71 24 46

896 268 308 1,472 377 27 350 40 31 358 115 243

Diluted Earnings Per Share (In Rs.) Weighted average Shares Outstanding (mn)

6.0 11.2

5.7 11.2

6.0 11.2

4.2 11.2

21.8 11.2

21.4% 19.8% 20.3% 14.0% 31.1%

18.8% 17.4% 18.6% 13.1% 29.6%

20.3% 19.0% 19.4% 12.8% 34.2%

21.3% 19.6% 19.1% 12.6% 34.2%

20.4% 18.9% 19.4% 13.1% 32.2%

EBIDTA Margin (%) EBIT (%) PBT Margin (%) NPM (%) Effective Tax Rate (%)

* The company was listed in March 2007, thus historical quarterly financials are not available.

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Profit & Loss Account (Year ended Mar.31) (Rs. Mn)

FY 04

FY 05

FY 06

FY 07

FY 08E

FY 09E

625

747

1013

1362

1848

2480

Raw material cost (including manufacturing cost)

352

437

526

695

894

1,178

Personnel

74

91

118

195

268

365

Administrative, Selling & Distr. expenses

112

142

179

198

310

404

0

0

1

2

0

0

Total Operating Expenditure

538

670

824

1089

1472

1947

EBIDTA

87

76

189

273

377

533

Less: Depreciation

7

7

8

15

27

37

EBIT

80

69

181

257

350

496

Less: Interest

11

13

16

24

31

37

Add: Non-Operating Income

3

4

8

19

40

40

Add: Extraordinary Income

0

0

0

6.2

0

0

Profit before tax

71

61

173

259

358

499

Less: Tax

19

18

60

89

115

165

Profit after Tax

53

42

114

170

243

334

Profit After Tax (Excl.Extra-ordinaries)

53

42

114

166

243

334

Total Operating Revenue Less:

Miscellaneous Exp

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Balance Sheet (Year ended Mar.31) (Rs. Mn)

FY 04

FY 05

FY 06

FY 07

FY 08E

FY 09E

Equity Capital

24

24

24

112

112

112

Reserves & Surplus

28

42

101

566

732

990

Net Worth

52

67

125

677

844

1102

Net Deferred tax liability/(Asset)

10

12

12

8

8

8

Loans

107

132

132

253

305

382

Capital Employed

169

211

269

939

1156

1492

Gross Block

107

129

158

246

436

496

Less: Depreciation

31

35

44

58

85

122

Net Block

75

94

115

188

351

374

Capital WIP

3

5

8

61

61

61

Investments in subsidiaries

0

0

0

0

0

0

Investments- Others

3

3

7

137

0

0

Total Investment

3

3

7

137

117

57

Sundry Debtors

46

50

59

56

101

125

Inventories

131

193

234

364

499

706

Cash and Bank Balance

1

0

0

302

216

443

Loans and Advances

0

0

30

103

148

186

Sundry Creditors

0

0

52

106

113

171

Provisions

0

0

31

28

39

55

Others

113

155

103

138

185

236

Total current liabilities & provisions

113

155

185

272

337

461

0

0

0

0

0

0

169

211

269

939

1156

1492

LIABILITIES

ASSETS

Current Assets

Less: Current Liabilities and Provisions

Miscellaneous Assets Capital Employed

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Common sized Profit & Loss Account (Year ended Mar 31)

FY 04

FY 05

FY 06

FY 07

FY 08E

FY 09E

100.0%

100.0%

100.0%

100.0%

100.0%

100.0%

Raw material cost (incld. manufacturing cost)

56.4%

58.5%

51.9%

51.0%

48.4%

47.5%

Personnel

11.8%

12.2%

11.6%

14.3%

14.5%

14.7%

Administrative, Selling & Distr. expenses

17.9%

19.0%

17.7%

14.5%

16.8%

16.3%

Miscellaneous Exp

0.0%

0.0%

0.1%

0.2%

0.0%

0.0%

Total Operating Expenditure

86.1%

89.8%

81.3%

80.0%

79.6%

78.5%

EBIDTA

13.9%

10.2%

18.7%

20.0%

20.4%

21.5%

Less: Depreciation

1.2%

1.0%

0.8%

1.1%

1.5%

1.5%

EBIT

12.7%

9.3%

17.9%

18.9%

18.9%

20.0%

Less: Interest

1.8%

1.7%

1.6%

1.7%

1.7%

1.5%

Add: Non-Operating Income

0.5%

0.6%

0.8%

1.4%

2.1%

1.6%

Add: Extraordinary Income

0.0%

0.0%

0.0%

0.5%

0.0%

0.0%

11.4%

8.1%

17.1%

19.0%

19.4%

20.1%

Less: Tax

3.0%

2.4%

5.9%

6.5%

6.2%

6.6%

Profit after Tax

8.4%

5.7%

11.2%

12.5%

13.1%

13.5%

Profit After Tax (Excl.Extra-ordinaries)

8.4%

5.7%

11.2%

12.2%

13.1%

13.5%

Total Revenue Less:

Profit before tax

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Common sized Balance Sheet (Year ended Mar 31)

FY 04

FY 05

FY 06

FY 07

FY 08E

FY 09E

Equity Capital

14.5%

11.6%

9.1%

11.9%

9.6%

7.5%

Reserves & Surplus

16.3%

20.1%

37.5%

60.3%

63.3%

66.4%

Net Worth

30.8%

31.7%

46.6%

72.1%

72.9%

73.9%

Net Deferred tax liability/(Asset)

6.0%

5.8%

4.4%

0.9%

0.7%

0.6%

Loans

63.2%

62.5%

49.1%

27.0%

26.3%

25.6%

100.0%

100.0%

100.0%

100.0%

100.0%

100.0%

Gross Block

63.2%

61.1%

58.8%

26.2%

37.7%

33.2%

Less: Depreciation

18.6%

16.8%

16.2%

6.2%

7.4%

8.2%

Net Block

44.5%

44.4%

42.7%

20.0%

30.3%

25.1%

Capital WIP

1.8%

2.2%

3.0%

6.5%

5.3%

4.1%

Investments in subsidiaries

0.0%

0.0%

0.0%

0.0%

0.0%

0.0%

Investments- Others

1.8%

1.4%

2.6%

14.6%

0.0%

0.0%

Total Investment

1.8%

1.4%

2.6%

14.6%

10.1%

3.8%

Sundry Debtors

27.3%

23.7%

21.9%

5.9%

8.8%

8.4%

Inventories

77.9%

91.4%

87.0%

38.7%

43.2%

47.3%

Cash and Bank Balance

0.4%

0.2%

0.1%

32.2%

18.7%

29.7%

Loans and Advances

0.0%

0.0%

11.3%

11.0%

12.8%

12.5%

LIABILITIES

Capital Employed ASSETS

Current Assets

Less: Current Liabilities and Provisions Sundry Creditors

0.0%

0.0%

19.2%

11.3%

9.8%

11.4%

Provisions

0.0%

0.0%

11.4%

3.0%

3.4%

3.7%

Others

67.0%

73.4%

38.2%

14.7%

16.0%

15.8%

Total current liabilities & provisions

67.0%

73.4%

68.8%

28.9%

29.2%

30.9%

Miscellaneous Assets

0.0%

0.0%

0.0%

0.0%

0.0%

0.0%

100.0%

100.0%

100.0%

100.0%

100.0%

100.0%

Capital Employed

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Cash Flow Statement (Year ended Mar.31) (In Rs. Mn)

FY 04

FY 05

FY 06

FY 07

FY 08E

FY 09E

Profit Before Tax

71

61

173

259

358

499

Depreciation

7

7

8

15

27

37

Dividend Payout

55

28

55

56

76

76

Tax Paid

19

18

60

89

115

165

Operating cash flow

5

22

67

130

193

295

Increase in Equity Share capital

0

0

0

87

0

0

Increase in Share premium

0

0

0

423

0

0

Increase in other reserves

0

0

0

-73

0

0

Increase in Pref Capital

0

0

0

0

0

0

Increase in Others

4

2

-1

-3

0

0

Inc/(Dec) in Loans

22

25

0

121

51

77

Inc/(Dec) in Minority Interest

0

0

0

0

0

0

Inc/(Dec) in Equity/Loans/MI

26

27

0

555

51

77

Difference in Dep.

0

-3

0

-1

0

0

Total Inflows

31

46

66

684

245

372

Inc/(Dec) in Provisions

0

0

31

-3

12

15

Inc/(Dec) in Current Liabilities

-4

42

0

90

54

109

Inc/(Dec) in Inventory

9

61

41

130

136

207

Inc in Debtors

-6

4

9

-3

45

24

Inc/(Dec) in Loans & Adv.

0

0

30

73

45

38

Inc/(Dec) in other Current Assets

-2

-1

-21

0

0

0

Inc/(Dec) in Working Capital

5

22

30

113

161

145

Inc/(Dec) in Investments

3

0

4

130

-20

-60

Addition to Gross Block

19

22

29

88

190

60

Inc/(Dec) in Capital WIP

3

2

3

53

0

0

Inc/(Dec) in other assets

0

0

0

0

0

0

Inc. in Misc. Assets

0

0

0

0

0

0

Inc/(Dec) in Fixed assets/ Investments

25

24

37

270

170

0

Inc/(Dec) in Cash/Bank Balance

0

0

0

302

-86

227

Total Outflows

31

46

66

684

245

372

Less:

Changes in Capital Structure

Adjustments

CASH OUTFLOWS Working Capital Changes

Less:

Capex/Investments

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FIRST GLOBAL

www.firstglobal.in

India Research

Common sized Cash Flow Statement (Year ended Mar.31)

FY 04

FY 05

FY 06

FY 07

FY 08E

FY 09E

Profit Before Tax

231%

132%

261%

38%

146%

134%

Depreciation

24%

16%

13%

2%

11%

10%

Dividend Payout

178%

60%

83%

8%

31%

21%

Tax Paid

60%

40%

90%

13%

47%

44%

Operating cash flow

17%

48%

101%

19%

79%

79%

Increase in Equity Share capital

0%

0%

0%

13%

0%

0%

Increase in Share premium

0%

0%

0%

62%

0%

0%

Increase in other reserves

0%

0%

0%

-11%

0%

0%

Increase in Pref Capital

0%

0%

0%

0%

0%

0%

Increase in Others

13%

4%

-1%

0%

0%

0%

Inc/(Dec) in Loans

71%

55%

0%

18%

21%

21%

Inc/(Dec) in Minority Interest

0%

0%

0%

0%

0%

0%

Inc/(Dec) in Equity/Loans/MI

83%

59%

0%

81%

21%

21%

0%

-7%

0%

0%

0%

0%

100%

100%

100%

100%

100%

100%

0%

0%

46%

0%

5%

4%

-12%

91%

0%

13%

22%

29%

Inc/(Dec) in Inventory

31%

133%

62%

19%

55%

56%

Inc in Debtors

-19%

8%

14%

0%

19%

6%

Inc/(Dec) in Loans & Adv.

0%

0%

46%

11%

18%

10%

Inc/(Dec) in other Current Assets

-7%

-2%

-31%

0%

0%

0%

Inc/(Dec) in Working Capital

17%

48%

45%

16%

66%

39%

Inc/(Dec) in Investments

10%

0%

6%

19%

-8%

-16%

Addition to Gross Block

62%

48%

44%

13%

78%

16%

Inc/(Dec) in Capital WIP

10%

4%

5%

8%

0%

0%

Inc/(Dec) in other assets

0%

0%

0%

0%

0%

0%

Inc. in Misc. Assets

0%

0%

0%

0%

0%

0%

82%

52%

55%

39%

69%

0%

1%

0%

0%

44%

-35%

61%

100%

100%

100%

100%

100%

100%

Less:

Changes in Capital Structure

Adjustments Difference in Dep. Total Inflows CASH OUTFLOWS Working Capital Changes Inc/(Dec) in Provisions Inc/(Dec) in Current Liabilities Less:

Capex/Investments

Inc/(Dec) in Fixed assets/ Investments Inc/(Dec) in Cash/Bank Balance Total Outflows

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FIRST GLOBAL

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India Research

IMPORTANT DISCLOSURES Price Target Price targets (if any) are derived from a subjective and/or quantitative analysis of financial and nonfinancial data of the concerned company using a combination of P/E, P/Sales, earnings growth, discounted cash flow (DCF) and its stock price history.

The risks that may impede achievement of the price target/investment thesis are Change in regulatory environment affecting the policies of the government towards textiles industry. Higher than expected increase in raw material prices, primarily cotton may impact the demand of the consumers and thus impact the profitability of the company. Shift of demand due to unanticipated price cuts/discounts/special offers made by competitors. Entry of new & aggressive competitors – particularly overseas brands not available in India currently

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FIRST GLOBAL

www.firstglobal.in

India Research

First Global’s Rating System Our rating system consists of three categories of ratings: Positive, Neutral and Negative. Within each of these categories, the rating may be absolute or relative. When assigning an absolute rating, the price target, if any, and the time period for the achievement of this price target, are given in the report. Similarly when assigning a relative rating, it will be with respect to certain market/sector index and for a certain period of time, both of which are specified in the report.

Rating in this report is relative to: S&P CNX Nifty Index

Positive Ratings (i) Buy (B) – This rating means that we expect the stock price to move up and achieve our specified price target, if any, over the specified time period. (ii) Buy at Declines (BD) – This rating means that we expect the stock to provide a better (lower) entry price and then move up and achieve our specified price target, if any, over the specified time period. (ii) Outperform (OP) – This is a relative rating, which means that we expect the stock price to outperform the specified market/sector index over the specified time period.

Neutral Ratings (i) Hold (H) – This rating means that we expect no substantial move in the stock price over the specified time period. (ii) Marketperform (MP) – This is a relative rating, which means that we expect the stock price to perform in line with the performance of the specified market/sector index over the specified time period.

Negative Ratings (i) Sell (S) – This rating means that we expect the stock price to go down and achieve our specified price target, if any, over the specified time period. (ii) Sell into Strength (SS) – This rating means that we expect the stock to provide a better (higher) exit price in the short term, by going up. Thereafter, we expect it to move down and achieve our specified price target, if any, over the specified time period. (iii) Underperform (UP) – This is a relative rating, which means that we expect the stock price to underperform the specified market/sector index over the specified time period. (iv) Avoid (A) – This rating means that the valuation concerns and/or the risks and uncertainties related to the stock are such that we do not recommend considering the stock for investment purposes.

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FIRST GLOBAL

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Dealing Desk (US):

Dealing Desk (UK & Europe):

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The information and opinions in this report were prepared by First Global Securities Ltd. Information contained herein is based on data obtained from recognized statistical services, issuer reports or communications, or other sources, believed to be reliable. However, such information has not been verified by us, and we do not make any representations as to its accuracy or completeness. Any statements nonfactual in nature constitute only current opinions, which are subject to change. First Global does not undertake to advise you of changes in its opinion or information. First Global and others associated with it may make markets or specialize in, have positions in and effect transactions in securities of companies mentioned and may also perform or seek to perform investment banking services for those companies. Whilst all reasonable care has been taken to ensure the facts stated and the opinions given are fair, neither First Global (UK) Limited nor FG Markets, Inc. nor any of their affiliates shall be in any way responsible for its contents, nor do they accept any liability for any loss or damage (including without limitation loss of profit) which may arise directly or indirectly from use of or reliance on such information. First Global (or one of its affiliates or subsidiaries) or their officers, directors, analysts, employees, agents, independent contractors, or consultants may have positions in securities or commodities referred to herein and may, as principal or agent, buy and sell such securities or commodities. An employee, analyst, officer, agent, independent contractor, a director, or a consultant of First Global, its affiliates, or its subsidiaries may serve as a director for companies mentioned in this report. First Global and its affiliates may, to the extent permitted under applicable law, have acted upon or used the information prior to or immediately following its publication, provided that we could not reasonably expect any such action to have a material effect on the price. This memorandum is based on information available to the public. No representation is made that it is accurate or complete. This memorandum is not an offer to buy or sell or a solicitation of an offer to buy or sell the securities mentioned. The investments discussed or recommended in this report may not be suitable for all investors. Investors must make their own investment decisions based on their specific investment objectives and financial position and using such independent advisors as they believe necessary. Where an investment is denominated in a currency other than the investor's currency, changes in rates of exchange may have an adverse effect on the value, price of, or income derived from the investment. 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Some investments are not readily realizable and investors may have difficulty in selling or realizing the investment or obtaining reliable information on the value or risks associated with the investment. Where a security is denominated in a currency other than sterling (for UK investors) or dollar (for US investors), changes in exchange rates may have an adverse effect on the value of the security and the income thereon. The tax treatment of some of the investments mentioned above may change with future legislation. The investment or investment service may not be suitable for all recipients of this publication and any doubts regarding this should be addressed to your broker. While First Global has prepared this report, First Global (UK) Ltd. and FG Markets, Inc. is distributing the report in the UK & US and accept responsibility for its contents. 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