In Tell Visions Software Ltd

EQUITY RESEARCH - ELECTRONIC SOFTWARE EQUIPMENT

22nd December 2005

BUY:- RS.106

INTELLVISIONS SOFTWARE LTD.

Target:- Rs 195

A PEL@INAPLE .BO

Purvesh Shelatkar/Subhadip Mitra [email protected]/[email protected] (91 22) 5551 5912/ 5551 5938

Innovative Automation Initiative... INTELLVISIONS SOFTWARE Ltd. was incorporated in 1995 and has since inception been involved in creating dynamic and innovative products to service the automation & network requirements of Telecom & Banking industries with a wide range of products. The company specializes in developing and manufacturing Self-Service Terminals, Bill Payment machines, ATM Surveillance Solutions and a comprehensive suite of Network Appliances.

Market Cap (mn) Rs 620/$13.5 Issued Shares (mn) 5.8 Avg. Daily Volume (nos) 21925 BSE Sensex 9394

• Telecom segment to drive future growth

Year end Mar Net Revenues Net Profit EPS (Rs) Cash EPS (Rs) P/E (x) ROCE (%) ROE (%) P/BV (x) EV EV/EBIDTA (x) EV/Sales (x) EBITDA

2004 41.3 2.2 0.4 0.7 265 0.0 0.0 8.8 481.0 145.0 11.7 3.3

12mth 850.0 44.9

2006P 102.6 28.0 4.8 4.9 22 0.3 0.3 3.5 471.8 11.0 4.6 42.9

2007P 255.8 76.3 10.8 10.9 9.8 0.4 0.4 2.1 514.1 4.4 2.0 116.5

2008P 447.6 138.1 19.5 19.6 5.4 0.5 0.5 1.5 567.3 2.7 1.3 210.1

Shareholding Pattern

Source : Company reports

• Valuation

BSE share relative

FY 05

FY06 (Projected)

Promoter s 42%

NRI/OCB 0%

Pvt. Corp. Bodies 12%

FII 24% Indian Public 26%

NRI/OCB 0%

Pvt. Corp. Bodies 10%

Intellvision

1200 1000 800 600 400 200 0

Dec-05

Nov-05

Sep-05

Aug-05

Jun-05

Sensex Feb-05

(Rs)

Promoters 40%

FII 15%

Jan-05

Indian Public 31%

Dec-04

target of Rs 195, based on P/E valuation.

3mth 10.5 12.0

Source : Company reports / UTISEC estimates

Intellvisions has developed Cheque deposit machines,Q manager, Versa Banker & ATM Surveillance, which we expect would be highly useful in the fast growing automated world. Subsequent to the successful testing of its ATM Surveillance Systems,Cheque Deposit Machine & Digital Video Recording, the company is negotiating with leading private sector & psu banks for supply of ATM Surveillance Sytems.The potential is huge with more than 19000 ATMs to be covered under ATM Surveillance.

The stock is trading at a multiple of 9.8x and 5.4x FY07P and FY08P earnings respectively. With continuous innovations and development of new products, we expect the demands for its products to rise thereby augmenting its revenues. We initiate coverage on the stock with a BUY rating and a medium term

2005 53.3 0.7 0.1 0.3 106 0.0 0.0 8.7 480.3 243.1 9.0 2.0

May-05

• Revenue from Banking products set to jump

1mth 13.1 9.2

107.4 8.9 531777

(Rs mn)

Apr-05

The company has a 4 month order book of Rs. 40 mn from various banks and telecom companies for supplying the Bill Payment Terminal & ATM Surveillance System. Teledensity in the country is increasing fast with nearly 2mn subscribers getting added every month. This is expected to increase the telecom base to over 250 mn by 2008. Besides almost 4700 cheques are handled by telecom collection centres every day, which in due course will make manual handling virtually impossible.

Price Performance (%) Intellvisions Software Ltd. BSE Sensex

52 week High 52 week Low BSE/NSE Code

Jul-05

I NITIATING C OVERAGE

Source : BSE website Please see back cover for disclaimer

Intellvisions Software Ltd.- 22nd December 2005

Investment Rationale

Bill Payment Terminal, ATM Surveillance & Cheque Deposit Machines to drive future Growth

Intellvisions shifting from low margins to high margin business

Intellvisions is expected to show double digit growth in revenues as well as net profits for the next 2-3 years on account of its shift from traditional products to technologically high end products with higher margins. Strengthening market presence: The company is already executing orders for ATM Surveillance Systems & Bill Payment Terminals and is servicing the top banking & telecom companies in the country. Its customers in the banking segment include marquee names like ICICI Bank, CITI Bank, HSBC, SBI, PNB, UTI Bank & those in the telecom segment include Hutch, Airtel and Idea. Rapid growth in telecom: The month of November 2005 saw an addition of 23 mn new connections in the Telecom sector. As per the telecom policy, it is expected to touch 250 mn customers by 2008 from present base of 50 mn customers. Further this will also increase the daily work load faced by the bill collection centres. On an average, total telecom collection centres receive payments for over 4700 bills in cheques/cash per day, which is likely to go up massively in the near future as per projected growth in the number of connections. This makes the automation in bill payment /collection a necessity. We expect this to propel the demand for companies products. Intellvision’s price for the basic product in this category(bill payment)is around Rs1.85 lakhs per machine, however the cost of fully integrated machines(those accepting cheque,cash & credit cards)could go upto Rs.3.5 lakhs. ATM Surveillance tobe mandatory: As per International regulations as well as RBI guidelines all ATM centres need to have electronic surveillance,but in India very few banks are curently following this guideline. Moreover tightening of the norms augurs well for the company as it is one of the leading surveillance solution providers. The cost is around Rs.65000 per machine. One of the leading private sector banks has woken up to this fact and Intellvision got its first ever large order for 1810 ATM Surveillance Systems. These systems, where the company enjoys a near monopoly, is expected to be one of it’s major revenue drivers. Market acceptance: Its other banking products like Q- Manager, Cheque/Cash Deposit Machine, Digital Video Surveillance Systems have just begun to gain acceptability in banks after almost 2 years of testing, which is reflected in the order book. Also, the company stands to gain from the annual maintenance contracts, where margins are expected to be higher. T+ 0 Settlement: The Cheque Deposit Machines could be a revolutionary product as the RBI goes ahead with the T+0 settlement cycle for cheque clearance. Asthe RTGS(Real Time Gross Settlement) system has already spread across more than 7000 branches the T+0 settlement seems like a reality by April 2006. Thus in order to handle the daily cheque collection of over 2.7 crore cheques, this machine will become a must for the entire banking system. Further, the flexibility of depositing the cheque anywhere and anytime will be a major benefit for banks & it’s customers,which will be a revenue driving force for the company. EVA (Rs mn)

120 100

EVA growth to continue in the future

80 60 40 20 0 -20

2004

2005

2006P

2007P

2008P

Source : UTISEC Research

2

UTISEC - Equity Research

Intellvisions Software Ltd.- 22nd December 2005

Company does not have any major debt on its balance sheet

EVA: The company had a negative EVA of Rs. 7.2 mn for FY05, which it is expected to turn positive for FY 06. The lower EVA can also be attributed to the fact that the company’s spendings in the past have been majorly towards R&D. Low debt burden: The company presently does not have any major debt and hence has a very low interest cost. Further, it has recently raised Rs81.3 mn by way of shares & warrants issued to investors as well as promoters which will enable it to take care of its working capital requirement for the next few years.

SWOT Analysis Strengths Company has 3 IPR’s registered for its products

Weaknesses

• Strong innovative Technology Driven • The company lacks visibility in the market. • It is struggling to get a foothold in this products with 3 IPR’s. • Bills Payment Terminals/ Cheque Deposit segment for the last 3 years. As it deals with Machine to contribute substantially to the revenues. • Strong entry barriers ensure lead time of around 2 years for any new players.

security systems, any adverse development can jeopardise all its future growth plans.

Opportunities

Threats

Machines/ Bill Payment Terminal. • Huge growth in telecom will provide opportunities for a techno base products company like Intellivisions.

threat in the banking automation sector. The telecom opportunity although very huge can attract bigger players to enter this segment. • Innovative technologies such as quick touch / biometrics transaction processing pose a threat.

• Potential demand for ATMs/ Cheque Deposit • Larger players like NCR may pose a serious

Lead time of 2 years for any new player to get established in this segment is the major entry barrier

Cost Advantage due to Automation :- The savings on account of the deployment of machine can be seen from the table below. Here the per shift cost of human labour is equated with the machine cost, amounting to substantial savings. COST OF MACHINE Details (Amt in Rs.) Bills payment terminal 185000 Bills payment terminal(cash+cheque+card) 350000 The machine has a low maintainnance contract rate of just 5-10% this effectively means the cost of machine is far cheaper than manual labour with no time limit involving as barrier.

SAVINGS Due to automation their is a tremedous cost advantage to the company

If we presume a machine life of 4-5 years Cost per machine Maintenance cost per year (assumed to be 10%) Maintenance cost for 5 years Total cost of machine (A) Total cost on manual for 5 years for 1 Shift Cost of Employee per month per year (B) For 5 years Savings : per machine (A-B) per shift Savings : If 100 machines installed (Considering 2 shifts)

350,000 35,000 175,000 525,000 9000 108000 540000 15,000 55,500,000

We have considered both 1 & 2 shifts because, as per industry standards private sector banks normally have 2 shifts while public sector banks have 1 shift. 3

UTISEC - Equity Research

Intellvisions Software Ltd.- 22nd December 2005 Potential growth in sales Following table indicates the price per machine and the potential sales volume growth. Price per machine

Huge growth potential in telecom, utility and banking segment

ATM Surveillance Cheque Deposit Machine Bill Payment Terminal Q-Manager Digital Video Survillance I-Serve Terminal Self Banking Terminal bill payment terminal bill payment terminal (cash+cheque+cc) RENTED Utility Bills Payment Terminal Total

56,000 125,000 185,000 75,000 56,000 300,000 350,000 350,000

2006 Orders in Hand 1,200 100 100 55 -

420,000 350,000

Amt. (in Rs. mn) 67.2 12.5 18.5 4.1 -

POTENTIAL Potential Amt. Order (in Rs. mn) 4110 230.2 -

-

3000 4000 102.3

1,260.0 1,400.0 2,890.2

Source : UTISEC Research

We have presumed only 1200 ATM Surveillance Systems for FY06 in our projections. The Optimistic Scenario is projected on the basis of 3 potential major orders from, a leading Bank, Telecom operator & Utility company which are being negotiated as of date.

ATMs - Bank Group wise Share

Percent

On-site

Off-site

Total ATMs

45 40 35 30 25 20 15 10 5 0 Nationalised Banks

State Bank Group

Old Pvt. Sector Banks

New Pvt. Sector Banks

Foreign Banks

Source: RBI Report on Trend and Progress of Banking in India, 2004-2005

As per the RBI report on trend and progress of Banking in India, there were 17,642 ATMs in the country as on March 2005. Presently the same number has risen to around 19,000 ATMs. Further the branch network as of March 2005 stood at 53,726. This leaves tremendous scope for products like ATM & Branch Surveillance Systems, Cheque /Cash Deposit Terminals in the banking sector (especially in the urban branches and ATMs).

Percent

Rural

Semi-Urban

Urban

Metro Politan

90.0 80.0 70.0 60.0 50.0 40.0 30.0 20.0 10.0 0.0 Nationalised Banks

State Bank Group

Old Pvt. Sector Banks

New Pvt. Sector Banks

Foreign Banks

Source: RBI Report on Trend and Progress of Banking in India, 2004-2005

The above table shows the segmentwise details about the branch networking. Here the point to be noted is the number of Urban branches are a little over 11000, which will be covered under Branch Surveillance in due course. 4

UTISEC - Equity Research

Intellvisions Software Ltd.- 22nd December 2005

COMPANY BACKGROUND Intellvision Software Ltd being incorporated in 1995,has been serving the market with a wide range of electronic software based products since inception. The company specializes in developing and manufacturing Self-Service Terminals, Bill Payment Terminals,ATM Surveillance Solutions and a comprehensive suite of Network Appliances for Banking as well as Telecom Sector. The company has recently started getting recognition for the quality of its products. It entered the field of Professional Services starting with the Banking and the Telecom Industry, focusing on developing embedded system software. Almost 40% of its employees are involved in software development and rest are in support functions.The current employee strength of the company is around 62 ,majority of whom are engineers. Management

Company mangement specialises in technology related to banking & software

Mr. S. Nair : Managing Director of the company is a former Banker.He has worked extensively in the Financial Sector, Advertising, Manufacturing and Retail Sector before establishing Intellvisions Software Limited. Mr. Nair is a gold medalist in Economics with a Masters Degree in Marketing. He also serves as a director in various Manufacturing and International businesses. Mr. Raj Menon : Co-founder/Chief Software Product Designer had started his career in the ERP business before he co-founded the company. He spearheads all the technological initiatives of the company. He holds a Masters Degree in Computer Applications. Mr. Paresh Patel: Executive Director had commenced his career in one of India’s leading Engineering Design Consultancies. He holds a degree in Engineering and a Masters in Management.

Products

Company specialises in Embedded software and technology driven banking and telecom instruments

Company has a monopoly in ATM Surveillance machines.

Banking Automation/ Telecom Automation The Banking Automation Division of company is operational since 2000 and has introduced several user friendly machines having multiple applications in the banking industry. The R&D group constantly scans the rapidly changing technology requirements and develop suitable end-to-end solutions. It has developed Self Service terminals, MICR Cheque Processing solutions. The latest offering by the company is a digital Image enabled Cheque Processing solution. Various banking products supplied by it are: ATM Surveillance Self Service Terminals Q-Managers Bill Payment Terminals Digital Video Surveillance MICR Readers Quick Pay Versa Banker ATM Surveillance- This machine is also called I-watch. Built on embedded digital architecture, it provides full motion, real time, broadcast of quality images. It can be activated on motion or event based recording. It can be connected from anywhere in the world through remote control via internet and has multiple levels of password protection & biometrics access control. It also has an alarm notification through E-mail, page, phone or fax. The company enjoys near monopoly in this product. It is normally sold in a set of 7 connected cameras at a cost of Rs 65000 per machine. The same machine can also be converted into a branch surveillance system (whose cost ranges between Rs 1.5 - Rs 5.0 lakhs). Cheque/Cash Deposit Machines - The company has also developed digital cheque/cash deposit machines, which would substantially reduce the clearance time for domestic as well as outstation cheques. The time taken by conventional cheque clearing systems is

5

UTISEC - Equity Research

Intellvisions Software Ltd.- 22nd 14 December 2005

Bills Payment Terminal is useful for Telecom & Utility companies in urban as well as rural areas

Q-Manager is CMM Level V category machine

around 3 working days, whereas this machine will reduce the entire manual process of cheque clearing /collection to a few minutes. The moment a cheque is deposited in the machine it’s digital image is created and transmitted to RBI, through which it is routed to the issuing bank which in turn will clear the same. The next instant, funds transfer would take place in the reverse order and the customer’s account would get credited in a matter of minutes. In the process the only time taken will be for the signature verification which may involve manual intervention. This is one of the major innovations and key drivers for the future growth of the company. Q-Manager - This machine is very useful in the retail banking segment. It tracks the time taken by the bank (i.e. by it’s employees) in servicing it’s customers highlighting any scope for improving efficiency. This helps in reducing the time taken by a bank for processing any transaction substantially. A leading private sector bank has very successfully implemented this machine and reaped benefits from its use. Judging the pace of growth in the retail banking industry, this machine will become a must for every branch of the bank. India has over 50,000 bank branches, which creates a huge potential demand for this product. Versa Banker/ Bill Payment Terminal - This machine is primarily for collecting payments through Cash, Card and Cheques. It is thus useful for utility &telecom bill collections. The telecom segment is growing at an accelerated rate and is expected to double its subscriber base in the next 12 months. This will exert pressure on the manual system, which will automatically make these cost & time efficient machines a necessity for all the players. Product Patents The company has patented 3 of its products. These are basically product patents and the cost incurred on each patent is almost Rs. 5 lakh.

Company will have revenue shift from large orders

Business is highly brand driven hence no competition from unorganised sector

6

Revenue Model During the year 2004-05, a major chunk of Intellivision’s revenues comprised of sales of various embedded software based products. However, the quantum of sale was very low as many bankers/telecom operators purchased the products mostly on trial basis. Now as the company’s products have gained acceptance in the market, we expect, it to do well in these high margin products : Cheque Deposit Machines, Bills Payment Terminal and Low Cost ATMs. These products are now expected to contribute to the revenues & profitability to a large extent and eventually become key growth drivers for the company. Competitors The company faces competition from organised players (like NCR, HCL Peripherals, Diebold & Aplab), while competition from the unorganized sector is non existant. Intellivisions products are of such a nature that they get recognition in the market only after careful scrutiny and successful implementation over the years. This is exactly the reason, why unorganised players stay away from these businesses due to high gestation period. Even an organised player like NCR, is able to maintain it’s majority market share (currently 95%) due to high market recognition and customer confidence.However Intellvisions enjoys an advantage over NCR in terms of cost effectiveness. We feel company will be able to bag a reasonable share of this fast growing market on account of its superiority in quality of service delivered and market acceptability of it’s products, which it has earned in the recent past ,as is evident from the order book.

UTISEC - Equity Research

Intellvisions Software Ltd.- 22nd December 2005 Research & Development Intellivision’s core strength lies in developing innovative products at a low cost. It has successfully delivered various made to order machines to various banks in the past.

Future Growth Drivers New Business Area Airlines & Government will drive future growth

Company is planning to tap export markets which has a huge potential

Renting Machines on pay per user basis will improve revenue substantially.

The company is planning to tap the Aviation Industry, Utility & Government companies in a big way. It has developed and supplied one machine to Jet Airways for Ticket Booking and is hopeful of supplying more in the near future. It is also in advanced stages of negotiation with organisations like MSEB for supplying made to order machines for the purpose of bill collection. On an average 6000 bills are handled by any collection centre of MSEB per day. This volume is likely to go up in future, therefore the automatic bill payment terminal is a must for such an organisation. We feel company would do well in procuring large orders from such big players. Exports Company presently is making an attempt to sell its products in the export market. In this regard,it is participating in various trade fairs organised by various countries. It has recently formed a consortium with National Bank of Kuwait, Baharin Telecom & Al-Ghanian group of Kuwait for marketing its product abroad. It is expecting to export atleast 50-100 machines to Kuwait in FY06. It is also attempting to export its products to countries like South Africa, Lebnon & Mauritius. Normally 45 days is the time taken by the company for fulfilling any order in the Domestic as well as Export market. Pay Per Use (PPU) Company is also evaluating the option of Pay per User model (PPU) vis a vis conventional outright sale. The PPU model is suitable for the company as it normally recovers its cost within 15-18 months of operation. The normal terms are Rs 30,000 p.m. + 2% of the collections. In this model, from the third year onwards the company has an opportunity of making supernatural profits(even if we consider fixed rentals of Rs30,000 only). Customers prefer this model where the machine may be required for a short period of time.This option also gives them some time in trying out the products . In case of SBI, which is a leading PSU bank more than 75% (In FY05 60%) of the transactions in the current financial year would be routed through automatic machines. This will allow company to rake in higher revenue in the times to come. Potential Revenue under Pay Per Use System Amt collected at PPU rentals

300

No of bills collected per day per machine

470

Total amount collected Charges @2% per day collection Charges in a month Collection in a year If 100 machines are rented on PPU Fixed cost per machine per month Fixed cost per machine per year

7

(Amt in Rs.)

Average Bill amount collected per person

Amt in Rs Crores

141000 2820 84600 1015200

0.1

101520000

10.2

35000 420000

UTISEC - Equity Research

Intellvisions Software Ltd.- 22nd December 2005 Potential Growth in Telecom Sector

Large number of biIl Payment Terminal/ Cheque Deposit Machine/ ATMs to be set up in the next 2-3 years

Company hopes to cash-in on the rapidly growing telecom demand. Telecom sector is likely to grow at an accelerated rate as per projections made by the TRAI & Telecom Ministry. From monthly new-subscribers additions of around 2 mn, it is expected to reach a level of around 4 mn per month. If the growth is sustained at projected levels ,it will result in extreme load on the existing manual system of bill collections.Globally around 46% of subscriber base is presently made up of post-paid connections. In India over 20 mn of the subscribers are having post-paid connections, where company’s products are a requirement. This will immediately boost demand for company’s products. no. of subscriber( in Mn)

30 20 10

2007

2006

2005

2004

2003

2002

2001

2000

1999

1998

1997

0

Source: Trai website

Banking sector will also be a major revenue driver once Cheque Truncation System becomes a reality. Here the digital copy of cheque will be presentated for clearance, which Electronic will reduce the manual intervention of collecting and presenting the cheque to RBI. The 28% human error of posting , time taken for physically carring the cheque will also be reduced. The cheque 21 as it is called in US, will facilitate the T+0 settlement for the entire banking system. Company’s products like Cheque Deposit Machine will continue be the major Paper-based revenue earner as paper based system still accounts for 72% of clearing transaction. The 72% importance can be derived from the fact that daily around 3.6 mn cheques are presented Source: RBI Report on Trend and for clearing. 2004-05

Progress of Banking in India, 04-05

Paper-based versus Electronic TransatctionsRelative Flows (Value)

Growth registered since last quarter is expected to continue in future

Interim Results Year end 31st March Net Sales % Growth Operating & other Exp. Other Income EBIDTA % Growth Depreciation Total Interest PBT % Growth Taxes PAT % Growth EPS (Rs) no. of shares ( in mn)

(Rs.mn) 2QFY06 19.6 111.8 16.6 0.1 3.1 505.9 0.2 0.0 2.9 708.3 0.9 2.0 680.8 0.4 5.0

1QFY06 9.3 -66.6 9.0 0.2 0.5 -82.0 0.2 0.0 0.4 -86.2 0.1 0.3 -88.3 0.1 5.0

4QFY05 27.7 130.4 24.9 0.1 2.8 -3637.5 0.2 0.0 2.6 -941.9 0.4 2.2 -816.1 0.4 5.0

3QFY05 12.0 62.5 12.2 0.1 -0.1 -260.0 0.2 0.0 -0.3 72.2 0.0 -0.3 72.2 -0.1 5.0

2QFY05 7.4 7.4 0.0 0.0 0.2 0.0 -0.2 0.0 -0.2 0.0 5.0

Source: Comapny Reports/UTISEC Estimates

The revenues of company has shown a decent increase of 265% for the quarter ending September 2005 as compared to the quarter ending Sept. 2004. Revenues were higher by 112% QoQ due to implementation of telecom and banking orders. The company has already received orders for its Bills payment terminal, Q-Manager, Cheque Deposit Machines and ATMs. Its current order book is around Rs 40 mn & a few more orders are expected during the year. The impact of this will be visible in 3rd and 4th quarter of FY06. We believe that the company will register a strong growth in the second half of FY06 as orders for supplying various machines would add to the topline & bottomline 8

UTISEC - Equity Research

Share of Net Revenues (FY05) Operating Profit Other Exp 4% Raw Materials 1% 51%

Staff Cost 44%

Net Revenue & Adj. PAT Net Revenue

PAT 160 140

400

120 100

300

80 200

60 40

100

Adj. PAT (Rs mn)

Net Revenue (Rs mn)

500

20 2008P

2007P

2005

2006P

0 2004

0

Margin Trend (%) EBIDTA Margin

Net Margin

100% 50%

2008P

2007P

2006P

2005

2004

0%

ROE & ROCE (%) ROE

ROCE

0.50 0.40 0.30 0.20 0.10 2008P

2007P

2006P

2005

2004

0.00

Income Statement Year end 31st March (Rs mn) Net Sales Other Income Total Expenses EBIDTA Depreciation Total Interest PBT Taxes PAT Operating Profit Balance Sheet Year end 31st March (Rs mn) Equity Capital Share Application Money Preference Capital Fully Conv. Warrants(12mn) Share Premium Reserves & Surplus Total Loans Other liab.(deffered tax liab.) Total Liabilities Net Fixed Assets + Cap. WIP Total Investments Sundry Debtors Cash & Bank Balance Other Current Assets Total Current Liab.& prov. Net Current Assets Miscellaneous Expenses Total Assets Cash Flows Year end 31st March (Rs mn) Profit before Tax Depreciation non operating income non operating exp tax paid Net Change in WC Cash from operating activities Cash from operating activities (after adj. Dividend received) Change in Fixed Assets Change in Investments Income/Int.from Subsidiaries Cash from Investing Activities Share Cap. Raised/ Redeemed Loans Raised/(Paid) Dividends Paid Cash from Financing Act. Chg. in Cash & Cash Equi. Ratio Analysis Year end 31st March Operating margin PBT margin PAT margin DPS (Rs) Cash EPS (Rs) Book Value (Rs) Gearing

Charts end at prior week’s closing price unless specified otherwise

2004 41.2 0.1 38.0 3.3 1.0 0.0 2.3 0.3 2.0 4.0

2005 53.1 0.2 51.3 2.0 0.8 0.1 1.1 0.3 0.8 1.8

2006P 102.3 0.3 59.8 42.9 0.6 0.1 42.2 14.2 28.0 42.6

2007P 255.8 0.0 139.2 116.5 0.8 0.1 115.7 39.3 76.3 116.5

2008P 447.6 0.0 237.4 210.1 0.9 0.0 209.2 71.1 138.1 210.1

2004 50.0 0.0 0.0 0.0 0.0 4.3 0.4 0.0 54.7 3.6 12.8 6.4 3.4 29.5 0.9 38.3 0.0 54.7

2005 50.0 0.0 0.0 0.0 0.0 5.0 0.3 0.1 55.3 2.5 10.2 13.6 4.5 28.0 3.6 42.6 0.0 55.3

2006P 58.6 0.0 0.0 12.2 60.6 30.0 0.3 0.0 161.6 3.8 10.2 26.3 98.7 25.7 3.1 147.6 0.0 161.6

2007P 70.8 0.0 0.0 0.0 149.1 100.7 0.0 0.0 320.6 5.3 10.2 65.9 215.3 32.7 8.8 305.1 0.0 320.6

2008P 70.8 0.0 0.0 0.0 149.1 231.7 0.0 0.0 451.6 7.0 10.2 115.3 293.1 41.4 15.5 434.3 0.0 451.6

2004 2.1 1.0 0.0 0.8 0.0 -3.1 0.8

2005 0.8 0.8 0.0 0.0 0.0 -3.1 -1.5

2006P 42.2 0.6 0.0 0.0 14.3 -10.9 17.6

2007P 115.7 0.8 0.0 0.0 39.3 -40.8 36.3

2008P 209.2 0.9 0.0 0.0 71.1 -51.5 87.5

0.8 0.5 2.5 0.0 -3.0 -0.1 0.4 0.0 0.4 -1.9

-1.5 -0.3 -2.5

17.6 1.9 0.0

36.3 2.3 0.0

87.5 2.7 0.0

2.8 0.0 -0.2 0.0 -0.2 1.2

-1.9 81.3 0.0 2.9 78.4 94.1

-2.3 88.6 -0.3 5.7 82.6 116.7

-2.7 0.0 0.0 7.1 -7.1 77.8

2004 9.7% 5.6% 4.9% 0.00 0.7 10.9 0.8%

2005 3.3% 2.1% 1.5% 0.00 0.3 11.0 0.5%

2006P 41.6% 41.2% 27.3% 0.00 4.9 27.5 0.2%

2007P 45.6% 45.2% 29.9% 0.50 10.9 45.3 0.0%

2008P 47.0% 46.7% 30.9% 0.80 19.6 63.8 0.0%

Source: Company Reports/UTISEC Estimates

DCF Valuation Rs mn PAT Depreciation Capex Change in NWC FCF Terminal Value Discounted Value DCF valuation per share Total PV of CF from above table Less:Present Debt Sharehoders value Value per share

2006P 28.0 0.6 1.9 10.9 15.8

2007P 76.3 0.8 2.3 40.8 34.0

2008P 138.1 0.9 2.7 51.5 84.8

2009P 246.9 1.2 3.2 91.7 153.2

14.1

26.9

59.7

96.0 Total PV

2010P 373.8 1.5 3.9 107.4 264.0 3268.9 1969.4 2166.2

2166.2 0.3 2165.9 369.5

ANALYST STOCK RATINGS Rating Indicative Absolute Price Returns Buy Estimated upside of 20% from the current price level Market Outperformer Estimated upside of 10%-20% from the current price level Market Performer Estimated to move in-line with market with movements of +/- 10% from the current level Market Underperformer Estimated downside of 10%-20% from the current price level Sell Estimated downside of 20% from the current price level • The above rating structure is based on our 12-month view of expected price performance. Short term fluctuations need not necessarily reflect these medium to long term expectations • The market price targets are dependent on the analyst’s subjective assessment of the company’s fundamentals and future outlook. Investors must bear in mind that stock prices are impacted by both systemic as well as stock specific risks. Institutional Desk Milind Pradhan Nikhil Thacker Equity Research Purvesh Shelatkar Ajit Dange Nishant Patel Komal Iyer Neha Bubna Akshit Shah Subhadip Mitra Padmaja Ambekar Equity Sales Team Gitu Singh Rajeev Kasat Jiten Mehta Sunil Pandit Derivatives Desk Sanjay Singh

Tel No. (022) 5551 5999 Head of Equities Head of Research

Fax : (022) 5551 5998 [email protected] [email protected]

Tel No. (Direct) (022) 2658 0701 (022) 5551 5917

Midcap, Power, Engineering Banking & Metals Pharmaceuticals & Specialty Chemicals Auto & Auto Ancillaries Textiles Information Technology Research Associate Production (91 22) 56772133 - 37 Equity Sales Equity Sales Equity Sales Equity Sales

[email protected] [email protected] [email protected] [email protected] [email protected] [email protected] [email protected] [email protected] Fax : (022) 2658 0700 [email protected] [email protected] [email protected] [email protected]

(022) (022) (022) (022) (022) (022) (022) (022)

5551 5551 5551 5551 5551 5551 5551 5551

5912 5913 5911 5914 5916 5939 5912 5915

(022) (022) (022) (022)

2658 2658 2658 2658

0702 0703 0704 0708

Head of Derivatives (Institution)

[email protected]

(022) 2658 0706

Disclaimer:- The information and opinions expressed in this report are compiled by UTI Securities Limited (UTI Sec) from the sources as are available and which UTI Sec believe to be reliable. But UTI Sec shall not be responsible for its completeness and accuracy. This report is for your private information only and UTI Sec is not soliciting any action based upon it. Opinions and views expressed and statements made herein are of UTI Sec as of the date appearing in this report only and its opinion may change. This report and any recommendations contained herein may not be applicable to specific investment objectives, financial situation or particular needs of recipients of this report and should not be used in substitution for the exercise of independent judgement If any person takes any action based upon this report UTI Sec shall not be responsible for any loss incurred by such person. UTI Sec, the distributors, other members of the UTI group and/or their affiliates and/or their directors, officers and employees may from time to time buy or sell or otherwise deal with securities described or recommended in their report. No part of this report may be cited, quoted, copied, photocopied, duplicated or alluded to by any means, or redistributed in any form, without prior written consent of UTI Sec. It may contain confidential, proprietary or legally privileged information. It should not be used by anyone who is not the original intended recipient. If you have erroneously received this by e-mail, please delete it immediately and notify the sender. The e-mail recipient of this note acknowledges that UTI Sec or its associated organisations, are unable to exercise control or ensure or guarantee the integrity over the contents of the information contained in e-mail transmissions and further acknowledges that any views expressed in this message are those of the individual sender and no binding nature of the message shall be implied or assumed unless the sender does so expressly with due authority of UTI Securities.