Idea Cellular - PhillipCapitalbackoffice.phillipcapital.in/Backoffice/Researchfiles/PC_-_Idea_Co... · Idea Cellular Concerns seem overdone TELECOM: Company Update 27 January 2014

Please refer to Disclosures and Disclaimers at the end of the Research Report.

Idea Cellular Concerns seem overdone

TELECOM: Company Update 27 January 2014

PhillipCapital (India) Pvt. Ltd.

Idea has seen a stock price correction of 15% over 3 months because of four concerns —1) Reliance Jio’s entry leading to more competition and a fall in voice tariff, 2) high capex for completing its data footprint, 3) renewal capex and 4), a slowdown in minutes growth. We believe the concerns are overdone, and even after incorporating all the risk factors, Idea will still deliver impressive earnings CAGR of 18% over FY14‐16. We reiterate our conviction Buy while marginally cutting our target price to Rs 195 to factor uncertainties around auctions and new data investments. R‐Jio’s entry may not necessarily mean a decline in voice tariffs: The market is overestimating the impact of R‐Jio’s entry into the voice category — rather than indulge in a price cutting war, we strongly believe that R‐Jio will focus on providing attractive data and voice bundling packages, with data being the mainstay (game changing strategy). Our base‐case model for R‐Jio shows that even if it achieves a minutes market share of 5%, it will have to price its voice offering at 37paise/minute to achieve operating breakeven. Besides, R‐Jio is still almost a year away, ample time for incumbents to create a tariff cushion by raising tariffs. We believe voice tariffs will continue to rise albeit at a moderate pace and have modeled for only a mild improvement in voice realizations over the next three years. However, our and consensus estimates for realizations are conservative and price‐led growth can continue to surprise positively as competition will shape up in a very different manner. Capex for data footprint and spectrum renewal: We believe that participants will indulge in rational bidding in the upcoming auctions. Therefore, pan‐India 1800MHz spectrum could potentially be only around 5% higher than the reserve price. In this case, Idea’s license renewal costs will be Rs 164bn (for payments until FY26) and its data footprint completion costs will be Rs 47bn (largely NPV neutral). The associated depreciation and interest costs for the data capex will be Rs 7bn annually, but revenues will be back ended. Assuming front loading of costs, we estimate an earnings impact of Rs 5bn in FY15, which will reduce from FY16 onwards as incremental data revenue accretion starts. Most of its renewal capex (cumulative payments of Rs 130bn) will be by the end of FY15 and the impact will be seen in FY16 financials. Idea will capitalise the interest cost for the renewal of license and spectrum in FY15. While it will have to bid for data spectrum in order to improve its long‐term growth prospects, considering its history in auctions, it will continue to have a cautious approach especially as plenty of spectrum (both quantum and quality) is going to be available. Slowdown in minutes growth: The minutes growth trajectory for the Indian telecom industry is slackening on account of slowdown in GDP growth and increase in tariffs. We are now assuming Idea’s volume growth for FY14 at 8.9% from 9.5% earlier and 6.6% for FY15 (from 7.7%). Even as we lower our minutes growth estimates, the impact on EBIDTA margins and absolute EBIDTA is not very significant (negative impact on EBITDA margin assumptions for FY15 is just 38bps). Any improvement in GDP growth in FY15 could boost volumes in H2FY15. Strong earnings growth: Since we are accounting for spectrum renewal capex on a cash basis, our FY15 EPS estimate has taken a 30% cut. However, despite the front loading of costs associated with data capex, a slowdown in minutes growth, and renewal capex we estimate Idea’s FY14‐16 earnings CAGR will be 18% and there could actually be a positive surprise depending on tariff hikes in the voice segment. Return ratios will also see improvement as utilization of its past 2G and 3G investments improves.

BUY IDEA IN | CMP RS 145

TARGET RS 195 (+34%) Company Data

O/S SHARES (MN) : 3318MARKET CAP (RSBN) : 482MARKET CAP (USDBN) : 7.652 ‐ WK HI/LO (RS) : 188 / 101LIQUIDITY 3M (USDMN) : 14.5FACE VALUE (RS) : 10

Share Holding Pattern, %

PROMOTERS : 45.9FII / NRI : 47.2FI / MF : 4.9NON PROMOTER CORP. HOLDINGS : 0.6PUBLIC & OTHERS : 1.5

Price Performance, % 1mth 3mth 1yr

ABS ‐13.2 ‐15.4 28.1REL TO BSE ‐10.9 ‐15.5 25.1

Price Vs. Sensex (Rebased values)

50

100

150

200

250

300

Apr‐10 May‐11 Jun‐12 Jul‐13

Idea BSE Sensex

Source: PhillipCapital India Research

Other Key Ratios

Rs mn FY14E FY15E FY16E

Net Sales 263,701 301,327 344,065EBIDTA 82,688 98,080 115,669Net Profit 19,868 24,168 31,676EPS, Rs 5.6 6.8 9.0PER, x 25.8 21.2 16.2EV/EBIDTA, x 7.1 6.8 5.7P/BV, x 2.6 2.3 2.0ROE, % 9.9 10.8 12.5Debt/Equity (%) 75.1 89.8 77.1Source: PhillipCapital India Research Est. Naveen Kulkarni, CFA, FRM (+ 9122 66679947) [email protected] Vivekanand Subbaraman (+ 91 22 66679766) [email protected]

– 2 of 22 –

27 January 2014 / INDIA EQUITY RESEARCH / IDEA CELLULAR COMPANY UPDATE

The story in charts…

Moderating our minutes (bn) growth estimates… …even then margin improvement continues

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100

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300

400

500

600

700

800

FY14E FY15E FY16E FY17E FY18E

Earlier estimate Current estimate

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10

20

30

40

30.0

30.5

31.0

31.5

32.0

32.5

33.0

33.5


EBITDA margin (%) ‐ LHS EBITDA growth (%) ‐ RHS

FY14/15 to see data investments and renewal capex… …but earnings growth trajectory remains strong

86

160

91 81 84

0

50

100

150

200


Spectrum renewal capex New spectrum & biz. capex

Business capex

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5

10

15

20

25

30

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5.0

10.0

15.0

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25.0

30.0

35.0

40.0


PAT (Rs bn) ‐ LHS PAT growth (%) ‐ RHS

Return ratios set to see improvement …albeit FCF generation will be back‐ended

9.9 10.8

12.5 11.7

12.8

7.7 7.9 8.3 8.8 9.7

‐

2.0

4.0

6.0

8.0

10.0

12.0

14.0


ROE (%) ROCE (%)

(20.4)

(85.3)

11.3 19.2 23.4

(100.0)

(80.0)

(60.0)

(40.0)

(20.0)

‐

20.0

40.0


FCF (Rs bn)

Source: Company, PhillipCapital India Research Estimates

– 3 of 22 –


R‐Jio's entry will not mean lower tariffs Rather than indulge in a price cutting war, we strongly believe that Reliance Jio (R‐Jio)’s business model will focus on providing attractive data and voice bundling (with data being its mainstay) and also on providing better quality of service. Therefore, market concerns of lower voice tariffs are unwarranted. R‐Jio unlikely to start a price war with strong established incumbents... The combined past experience of new entrants such as Aircel, Reliance Communications, Telenor and Tata Teleservices has clearly shown that adopting a tariff under‐cutting strategy does not benefit anybody in the long run. Besides, R‐Jio will struggle to match the efficiencies in the voice domain created by Bharti, Idea and Vodafone over their 15+ years of operations, not to mention their extensive spectrum/network footprint. All this reassures us that R‐Jio will not try to compete with incumbent operators on voice offerings via a tariff war. Additionally, our base‐case voice services business model for R‐Jio shows that even if the company manages to achieve a minutes market share of 5%, to achieve operating breakeven, it will have to price its voice offering at 37paise/minute ‐‐‐ which is not likely to prove damaging to competition.

R‐Jio: Possible business model for offering voice services (Rs mn) KPIs Voice RPM (Rs) Revenue Comment

Minutes annual (mn) 200,000 0.37 74,000 R‐Jio would achieve ~5% minutes market share Monthly mins (mn) (a) 16,667 MOU (b) 400 Assuming 10% discount to Airtel's MOU of ~450 Voice ARPU 148 Subs (mn) (c) = (a)/(b) 42 Subs/BTS (d) 1,000 70% of Idea's 1400 subscribers/BTS BTS (e) = (c)/(d) 41,667 NOC/site (Rs/mo) (f) 60,000 Similar to what Idea Cellular incurs NOC = (e)*(f) 30,000 Statutory charges 26,000 13paise/minute for access and license fee Employee cost 8,326 Assuming employee cost is 30% lower than Idea Cellular SG&A 4,375 Assuming churn of 70%/annum and SAC of Rs 150/sub Admin costs 3,782 Assuming admin costs are 40% lower than Idea Cellular Total costs 72,483 EBITDA 1,517


…but, it may change the rules of the game – data could most likely be its mainstay R‐Jio will launch a technologically advanced 4G‐LTE product on a pan‐India basis (4G spectrum, also called Long‐Term Evolution). While this ensures significantly higher quality of service (as discussed in the appendix), the product ecosystem for 4G is not as well developed as the WCDMA ecosystem (Wideband CDMA is a 3G wireless standard, which uses one 5 MHz channel for both voice and data). Also, its economic viability or breakeven is at a significantly higher ARPU than established 3G services. Higher ARPU generally means a smaller addressable market. Currently, a large part of the ARPU’s of telecom players comes from voice. Data accounts for less than a 10th of the total ARPUs of GSM players. We believe a good strategy for R‐Jio will be to turn this on its head.

R‐Jio will have to price its voice offering at 37paise/minute to achieve operating breakeven

For R‐Jio, data is likely to be a mainstay with voice offered alongside

– 4 of 22 –


Current GSM industry model (ARPU in Rs)… …skewed towards prepaid subscribers

100.0 , 81%

10.0 , 8%

9.5 , 8% 4.0 , 3%

Total ARPU of Rs 124/month

Voice

Data

VAS

SMS

96%

84%

4%

16%

75%

80%

85%

90%

95%

100%

Subscriber split Revenue split

Prepaid Postpaid

Source: Company, TRAI, PhillipCapital India Research Estimates

We believe the following could be R‐Jio’s game‐changing paradigms: 1. Total ARPU of Rs 700 2. Data ARPU of Rs 400 3. Voice outgoing ARPU of Rs 200 4. Voice incoming ARPU of Rs 100 5. Negligible VAS/SMS ARPU 6. A postpaid model with possible device bundling R‐Jio’s target offering

400 , 57%

300 , 43%

Total ARPU of Rs 700/month

Data

Voice

VAS

SMS

Source: Company, PhillipCapital India Research

R‐Jio can develop a strong business model by inverting this value proposition, with data being the mainstay and voice offered alongside. With a data ARPU of Rs 400, it could provide 5GB of data and give 500 outgoing minutes per month at Rs 0.4. With such an attractive data plan and superior quality of service, it can target a subscriber base of 50mn in two years. With a focus on higher data based ARPUs, even with a subscriber base of 50mn, R‐Jio could earn substantial revenues (Rs 420bn) and remain profitable.

R‐Jio is likely to target postpaid subscribers since they have the propensity to pay higher as seen in the chart above

R‐Jio can do well with an ARPU target of Rs 700, of which Rs 400 comes from data

– 5 of 22 –


R‐Jio’s still almost a year away, ample time for incumbents to create a tariff cushion While R‐Jio’s network rollout has already begun (our on‐the‐ground channel checks show deployment of uni‐pole towers, particularly focused in tier‐2 cities), the company is inexperienced in telecom sales. It may have to use the front‐end of a dedicated telecom operator. We believe that RCOM is most suited to provide this service, else there could be branding issues — with Reliance Communications and Reliance Jio both in telecom, customer confusion will be rampant. R‐Jio’s uni‐pole deployments


All said and done, R‐Jio’s time‐to‐market is still 9‐12 months away — while it sorts out marketing, product offering and other related issues, we believe that incumbents (including new players) have enough time to raise tariffs to cushion themselves against a potential increase in competition in the future. Price wars will be naturally restricted by limited volume growth potential The voice market in India is already mature with limited volume growth potential over the next five years. The scope for price wars is fairly limited as most pricing interventions have been well tested. Uninor continues to be the price leader in the market but it has not been able to build a scalable business model. Despite its price leadership strategy, the company has had to scale back operations. While it continues with its price leadership strategy, it has reduced market participation to achieve breakeven. New operators are already at a much lower tariff level than incumbents. However, the strategy of merely pricing voice lower has not worked for any operator, and more importantly, the industry has realized that it is not a sustainable strategy.

Incumbents are already battle‐hardened and new entrants have failed to make a mark despite their tariff levels being significantly lower

– 6 of 22 –


Last reported voice RPM (paisa/minute) of industry participants

37.5 36.7

33.4

25.9 23.0

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5.0

10.0

15.0

20.0

25.0

30.0

35.0

40.0

Idea Bharti RCom Industry Uninor*

Idea Bharti RCom Industry Uninor*

Source: Company, DoT, PhillipCapital India Research * Uninor’s voice RPM’s aren’t known, hence we’ve taken the total RPM

Even so, our assumptions of voice RPM improvement are conservative Even if R‐Jio’s entry will increase competitive pressures on incumbents, scope for tariff hikes will be limited. However, to factor in such competitive pressures, we have assumed only a modest improvement in RPM. While there will be quarterly volatility, over a 2‐3 year period, our forecasts are not likely to see significant negative surprises.

Our voice RPM assumptions are tepid... …implying modest pricing‐led revenue addition

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0.100

0.200

0.300

0.400

0.500

0.600


Voice RPM (Rs) Total RPM (Rs)

(15.0)

(10.0)

(5.0)

‐

5.0

10.0

15.0

20.0


Voice revenue addition (Rs bn) ‐ LHS


Our estimates for voice RPM improvement are conservative and do not factor in any tariff cushion that incumbents could create

– 7 of 22 –


R‐Jio’s participation in the Feb auctions will not hike spectrum renewals We believe that participants will indulge in rational bidding in the upcoming auctions. Therefore, the pan‐India 1800MHz spectrum could potentially be only around 5% higher than the reserve price. In this case, Idea’s license renewal costs will be Rs 164bn (for renewals up to Rs FY26) and the price it needs to pay for completing its data footprint will be Rs 47bn. Market‐determined spectrum price unlikely to be much higher than reserve price In a recent note (Click here for details), we had said that the February 2014 auction is likely to be a ‘data auction,’ with existing players looking to shore up their data footprint by acquiring a 1800MHz footprint. In the note, we had arrived at two scenarios: 1) Normative: With rational bidding, circles which account for just about 20% of the

pan‐India spectrum pricing will see demand exceeding supply. 2) Worst‐case: Where there is aggressive bidding by incumbents — Airtel and

Vodafone renew their spectrum and close their data footprint gaps (Idea, too, is expected to do so) and acquire an incremental 5MHz in the 1800MHz band wherever contiguous spectrum is available.

Likely circle‐wise pricing scenario of the February 2014 auctions ______NORMATIVE SCENARIO______ _____WORST CASE SCENARIO_____

Circle Contiguous blocks

No. of possible bidders Possible bidders

Reserve price/MHz

Demand ‐ supply Increment

Realized price

Demand ‐ supply Increment

Realized price

METROS Delhi 3 2 Idea, R‐Jio 2,190 (1) 0% 2,190 1 30% 2,847Mumbai 3 2 Idea, R‐Jio 2,070 (1) 0% 2,070 1 30% 2,691Kolkata 4 3 Airtel, Idea, R‐Jio 730 (1) 0% 730 1 30% 949A circles Andhra Pradesh 3 1 Vodafone, R‐Jio 1,630 (2) 0% 1,630 ‐ 0% 1,630Gujarat 1 2 Airtel, R‐Jio, Uninor 1,430 1 30% 1,859 3 90% 2,717Karnataka 4 4 Idea, Voda, R‐Jio, Tata 1,550 ‐ 0% 1,550 2 60% 2,480Maharashtra 2 2 Airtel, R‐Jio 1,730 ‐ 0% 1,730 2 60% 2,768Tamil Nadu 4 2 Idea, R‐Jio 2,080 (2) 0% 2,080 ‐ 0% 2,080B circles Haryana 1 2 Airtel, R‐Jio 270 1 30% 351 3 90% 513Kerala 5 3 Airtel, Voda, R‐Jio 520 (2) 0% 520 ‐ 0% 520Madhya Pradesh 2 3 Airtel, Voda, R‐Jio 430 1 30% 559 3 90% 817Punjab 2 3 Airtel, Voda, R‐Jio 540 1 30% 702 3 90% 1,026Rajasthan 2 2 Idea, R‐Jio 260 ‐ 0% 260 2 60% 416UP(E) ‐ NA 610 ‐ 610 ‐ 610UP(W) ‐ NA 620 ‐ 620 ‐ 620West Bengal 1 2 Idea, R‐Jio 210 1 30% 273 3 90% 399C circles Assam 1 3 Idea, Voda, R‐Jio, Tata 70 2 60% 112 4 120% 154Bihar ‐ NA 370 ‐ 370 ‐ 370Himachal Pradesh 1 2 Voda, R‐Jio 60 1 30% 78 3 90% 114Jammu & Kashmir ‐ NA 50 ‐ 0% 50 ‐ 0% 50North East 3 4 Idea, Voda, R‐Jio, Tata 70 1 30% 91 3 90% 133Orissa 5 4 Airtel, Idea, Voda, R‐Jio 160 (1) 0% 160 1 30% 208

TOTAL 17,650 18,595 24,112

Source: DoT, PhillipCapital India Research, Company

Note: Circles marked in red are likely to see demand exceed supply.

An aggressive bidding scenario seems unlikely. Demand will exceed supply in only about 20% of the spectrum pricing

– 8 of 22 –


To calculate the auction price in circles where demand could potentially exceed supply, our assumptions are: Increment on reserve price Scenario Increment over reserve price

Demand = Supply 0%Demand > Supply By 1 bidder 30%By 2 bidders 60%By 3 bidders 90%By 4 bidders 120%


Our calculations indicate that if the normative scenario plays out, the pan‐India 1800MHz spectrum could potentially be around 5% higher than the reserve price and if the worst‐case scenario plays out, the price could be about 37% higher. We believe that it is more likely that the normative scenario will play out, under which our estimates for Idea’s license renewal cost are Rs 164bn and the price it needs to pay for completing its data footprint will be Rs 47bn.

Implications of the February 2014 auctions for Idea Cellular _____NORMATIVE SCENARIO_____ _____WORST‐CASE SCENARIO_____

__Spectrum held__ Auction price (Rs

mn/MHz) WORST CASE BID price

(Rs mn/MHz) Circle

License expiry

Importance for Idea % of AGR 900 MHz 1800 MHz 900 MHz 1800 MHz

For data footprint (Rs mn)

Cost of renewal (Rs mn) 900 MHz 1800 MHz

For data footprint (Rs mn)

Cost of renewal (Rs mn)

Maharashtra Dec‐15 16.5 7.8 2.0 3,460 1,730 ‐ 4,205 2,102 Gujarat Dec‐15 6.9 6.2 ‐ 3,597 1,799 ‐ 22,304 3,597 1,799 ‐ 22,304Kerala Dec‐15 11.5 6.2 1.8 1,040 520 ‐ 7,384 1,040 520 ‐ 7,384Haryana Dec‐15 2.9 6.2 ‐ 702 351 ‐ 4,352 744 372 ‐ 4,615UP ‐ West Dec‐15 8.8 6.2 1.8 1,240 620 ‐ 8,804 1,240 620 ‐ 8,804M.P. Dec‐15 11.6 6.2 1.8 864 432 ‐ 6,133 864 432 ‐ 6,133AP Dec‐15 11.1 6.2 1.8 3,260 1,630 ‐ 23,146 3,260 1,630 ‐ 23,146Karnataka Apr‐16 4.2 6.2 ‐ 3,100 1,550 7,750 19,220 3,697 1,849 9,243 22,923Punjab Apr‐16 5.4 7.8 ‐ 1,076 538 ‐ 8,397 1,076 538 ‐ 8,397Delhi Sep‐21 3.6 ‐ 8.0 3,600 2,190 10,950 17,520 3,600 2,847 14,235 22,776UP ‐ East Sep‐21 5.0 ‐ 6.2 1,219 609 ‐ 3,778 1,219 609 ‐ 3,778Rajasthan Sep‐21 3.5 ‐ 6.2 520 260 1,300 1,612 751 376 1,878 2,329H.P. Sep‐21 0.3 ‐ 4.4 124 62 ‐ 274 124 62 ‐ 274Mumbai Nov‐26 2.3 ‐ 4.4 3,280 2,070 10,350 9,108 3,280 2,691 13,455 11,840Bihar Dec‐26 3.7 ‐ 4.4 680 340 ‐ 1,496 680 340 ‐ 1,496Total 46,950 163,977 56,305 183,203Kolkata Jan‐28 0.2 ‐ 5.0 1,250 730 3,650 3,650 1,250 910 4,549 4,549Tamil Nadu Jan‐28 0.6 ‐ 5.0 4,160 2,080 10,400 10,400 4,160 2,080 10,400 10,400West Bengal Jan‐28 1.1 ‐ 5.0 420 210 1,050 1,050 413 207 1,034 1,034Orissa Jan‐28 0.4 ‐ 5.0 320 160 800 800 324 162 811 811Assam Jan‐28 0.2 ‐ 5.0 140 70 350 350 139 69 347 347North East Jan‐28 0.1 ‐ 5.0 140 70 350 350 141 71 354 354J&K Jan‐28 0.2 ‐ 5.0 100 50 ‐ 250 100 50 ‐ 250

Source: DoT, PhillipCapital India Research, Company

Note: Cells highlighted in RED are circles where Idea doesn’t have 3G spectrum & the current auction doesn’t provide 5MHz of contiguous spectrum

– 9 of 22 –


Building in new capex estimates: We believe it will be NPV neutral While Idea will spend Rs 47bn on acquiring contiguous spectrum, it will spend Rs 103bn and Rs 31bn for spectrum renewal in FY15 and FY16. However, it will also rope in more subscribers in 3G/4G— we now think that 42% of its subscribers will use 3G/4G by FY20 (had assumed 27% earlier). However, its incremental data investments will be able to become free cash flow positive only in FY18. We believe Idea will spend Rs 47bn to acquire 5MHz of contiguous spectrum in FY14 in circles such as Karnataka, Delhi, Mumbai, Tamil Nadu among others, followed by Rs 103bn and Rs 31bn for spectrum renewal in FY15 and FY16. Idea Cellular: Cash outflow for spectrum capex (data, as well as renewal)

47

103

28 23

11

56

109

31 29

13

‐

20

40

60

80

100

120

FY14 FY15 FY16 FY21 FY26Payments Worst‐case scenario

Source: Company, DoT, PhillipCapital India Research

Circles that account for ~70% of Idea’s revenue are coming up for renewal in Dec 2015/April 2016, implying that the company will have to participate in auctions in FY15/16. Idea’s upcoming license renewal payments Idea Cellular FY14 FY15 FY16

@ WORST case auction prices 109,390 31,320

@ possible auction prices 102,572 27,644

@ reserve price 96,968 27,644

Increase @ worst case (%) 12.8 13.3

Expected Increase (%) 5.8 ‐

Circles AP, Guj, Haryana, Punjab

Kerala, UP(W) Karnataka


While outlining capex requirements, we are also factoring in the incremental data subscribers that it would gain as a result of additional spectrum. Since the existing players and R‐Jio will be the only four major players in the data market, Idea will be able to command a respectable market share in data services. Currently 4.8% of Idea’s subscribers use 3G — we had earlier assumed that around 27% of its subscribers would use 3G/4G by FY20, which we are now revising upwards to around 42% based on our belief that the company can achieve a 10% market share of 3G/4G subscribers in its new‐3G circles.

We now think that 42% of its subscribers will use 3G/4G by FY20 vs. our earlier estimate of 27%

– 10 of 22 –


Moving from NPV‐adjustment to cash impact Considering that spectrum renewal auctions are imminent and auction participation by incumbents seems almost certain, we now account for spectrum renewal capex on a cash basis (a year before licence expiry for the each circle vs. the earlier methodology where we would assign an impairment charge to our target price for renewals). This results in a >30% cut in our FY15 EPS as depreciation and interest on the Rs 103bn of spectrum renewal are accounted for. Also, now that we are incorporating the complete data spectrum capex, we are discarding our earlier assumption of Rs 10bn annual data capex from FY15‐20.

Idea Cellular: 3G/4G subscriber trajectory

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10.0

20.0

30.0

40.0

50.0

60.0

70.0

80.0

FY12 FY13 FY14E FY15E FY16E FY17E FY18E FY19E FY20E

3G/4G subs ‐ earlier (mn) 3G/4G subscribers ‐ current estimates (mn)


Our operating model for the data spectrum shows that the 1800MHz spectrum acquisition is a long‐gestation investment for Idea. Factoring the time taken for handset and network off take, we assume incremental data subscribers only from FY16. Based on our conservative estimates, Idea will be able to become free cash flow positive (after interest and capex) only in FY18. Idea’s business model with new data spectrum Rs mn FY14 FY15 FY16 FY17 FY18 FY19 FY20

Subscribers ‐ ‐ 5.0 10.0 15.0 20.0 25.0Revenue ‐ ‐ 4,250 13,516 24,104 35,770 48,290NOC ‐ 987 3,258 6,689 11,563 17,344 24,166Other operating costs ‐ 1,500 3,880 5,866 7,870 9,891 11,933Incremental EBITDA ‐ (2,487) (2,887) 961 4,671 8,535 12,190Incremental EBITDA margin (%) (67.9) 7.1 19.4 23.9 25.2Depreciation 2,348 2,848 3,348 4,148 4,948 5,748 6,548Incremental EBIT (2,348) (5,335) (6,235) (3,187) (276) 2,787 5,643Total Capex 46,950 5,000 5,000 8,000 8,000 8,000 8,000Capex to sales (%) 117.6 59.2 33.2 22.4 16.6Interest 4,695 5,195 5,695 6,495 7,295 7,214 6,839Tax ‐ ‐ ‐ ‐ ‐ ‐ ‐

FCF (51,645) (10,195) (6,445) (979) 8,809 20,556 33,451


Change in assumption about the equity raising In view of the recent stock price correction, we are now assuming equity dilution (we still believe it will happen before the end of FY14) at a lower share price Rs 150/share instead of Rs 170/share earlier. Idea has a target to raise Rs 37.5bn, implying a dilution of around 8%.

Subscriber additions to the 1800MHz spectrum to begin only in FY16. FCF positive only in FY18

– 11 of 22 –


Negligible impact on EBITDA from lowering minutes growth estimates The Indian telecom industry is seeing a slowdown led by price increases, persistently high consumer inflation, and muted GDP growth. The minutes growth trajectory for Idea Cellular and the Indian telecom industry has been falling continuously for some time now — industry minute growth was just 7% yoy in Q1FY14. Idea and industry minutes growth trajectory heading lower

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5.0

10.0

15.0

20.0

25.0

30.0

35.0

Q1FY12 Q2FY12 Q3FY12 Q4FY12 Q1FY13 Q2FY13 Q3FY13 Q4FY13 Q1FY14 Q2FY14

Industry YoY minutes growth (%) Idea YoY minutes growth (%)

Source: PhillipCapital India Research Estimates

In view of this, we tone down our minutes growth estimates for Idea Cellular. We still believe that it will gain minutes and revenue market share in the industry and a macroeconomic recovery could result in minutes growth topping our estimates. We are now assuming Idea’s volume growth for FY14 at 8.9% from 9.5% earlier and 6.6% for FY15 from 7.7% before. Incorporating the sluggish volume growth outlook for Idea Cellular


583 627

672 712

580 618

655 686 9.5

7.7 7.1

6.0

8.9

6.6 6.0

4.8

‐1.0 2.0 3.0 4.0 5.0 6.0 7.0 8.0 9.0 10.0

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100

200

300

400

500

600

700

800

FY14E FY15E FY16E FY17E

Prior estimates (bn mins) New estimates (bn mins)

Prior growth est. (%) ‐ RHS New growth est. (%) ‐ RHS

We cut our volume growth estimates by 60bps in FY14 and 110bps in FY15

– 12 of 22 –


Cut volume growth estimates, maintain modest RPM growth, EBITDA impact negligible While we cut our volume growth estimates for Idea, we maintain our modest voice RPM assumptions. We assume a voice RPM CAGR of just 1.6% over FY14‐17, significantly lower than the 7.1% voice RPM improvement that we model in FY14. Since our voice RPM assumptions are conservative, they could see a sharp upward revision if incumbents decide to offset license renewal payouts before the entry of R‐Jio. Idea Cellular – volume sluggishness not to have material EBITDA impact (Rs mn) FY13 FY14E FY15E FY16E FY17E

Voice RPM (Rs) 0.349 0.373 0.383 0.389 0.391Growth (%) (4.7) 7.1 2.7 1.5 0.6Blended RPM (Rs) 0.412 0.447 0.479 0.514 0.546Revenue growth 29,166 39,123 36,419 40,527 37,617Incremental voice revenue 19,809 30,825 20,427 18,114 13,856Increase due to volume 28,941 16,624 14,311 14,359 12,212Increase due to pricing (9,131) 14,201 6,116 3,754 1,644Incremental non‐voice revenue 9,357 8,298 15,992 22,414 23,762Revenue 224,578 263,701 300,120 340,647 378,264EBITDA 60,046 82,688 97,237 113,127 123,166EBITDA margin (%) 26.7 31.4 32.4 33.2 32.6EBITDA margin downgrade 0bps ‐27bps ‐38bps ‐80bps ‐214bps


Despite heavy capex + slowing minutes, 18% earnings CAGR in FY14‐16E Even after considering its investments towards acquiring incremental data assets and renewal of its spectrum/licenses, and despite slowing minutes growth, Idea can see an earnings CAGR of 16% over FY14‐18. Idea can manage 16% earnings CAGR from FY14‐18

10.1

18.3 20.4

22.7

27.4

33.8

39.8

81.4

11.3 11.2

20.9 23.2

‐

10.0

20.0

30.0

40.0

50.0

60.0

70.0

80.0

90.0

‐

5.0

10.0

15.0

20.0

25.0

30.0

35.0

40.0

FY13 FY14E FY15E FY16E FY17E FY18E

PAT PAT growth (%) ‐ RHS


Return ratios, too, will see improvement as utilization of its past 2G and 3G investments improves. This will clearly reflect in its ROE improving from 7.7% in FY14 to 9.7% in FY18.

Negative impact on EBITDA margin assumptions for FY15 is just 38bps and for FY16 it is 80bps

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Idea can manage 16% earnings CAGR from FY14‐18

9.9 10.8

12.5 11.7

12.8

7.7 7.9 8.3 8.8 9.7

‐

2.0

4.0

6.0

8.0

10.0

12.0

14.0


ROE (%) ROCE (%)


Changes to our estimates (Rs mn) Earlier ____Revised estimates____ Upgrade / (downgrade) (%) FY15E FY15E FY16E FY15E FY16E

Net Sales 307,897 301,327 344,065 (2.1)EBITDA 99,987 98,080 115,669 (1.9)EBITDA margin (%) 32.5 32.5 33.6 8 bpsPBT 58,354 47,018 56,021 (19.4)EBITDA MARGIN (%) 19.0 14.4 15.6 ‐453 bpsPBT 53,353 30,442 36,619 (42.9)Adj PAT* 35,218 24,168 31,676 (31.4)Adj PAT margin (%) 11.4 8.0 9.2 ‐342 bpsAdj EPS (Rs) 10.0 6.8 9.0 (31.4)

Source: PhillipCapital India Research Estimates

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Annual forecasts for the company

Key revenue segments with drivers and parameters Wireless Business (Consol, Idea + 100% spice) FY2013 FY2014E FY2015E FY2016E FY2017E FY2018E

Wireless Revenues (Rs mn) 224,578 263,701 301,327 344,065 385,019 428,259Growth/ (Decline) (%) 15 17 14 14 12 11Absolute Revenue Growth (Rs mn) 29,166 39,123 37,627 42,738 40,953 43,241Total minutes traffic (mn) 532,092 579,606 620,960 661,744 696,766 731,645Growth/ (Decline) (%) 17 9 7 7 5 5Subscriptions EoP (mn) 121.6 136.2 144.2 150.2 155.2 159.2Growth/ (Decline) (%) 7.9 12.0 5.9 4.2 3.3 2.6Average wireless subscriptions (mn) 117 129 140 147 153 157Growth/ (Decline) (%) 16 10 9 5 4 3Wireless ARPU (Rs per subs/month) 160 170 179 195 210 227Growth/ (Decline) (%) (1) 7 5 9 8 8MoU (minutes per subs/month) 378 375 369 375 380 388Growth/ (Decline) (%) 1 ‐1 ‐2 2 2 23G Revenues (Rs mn) 4,224 8,970 18,733 37,242 58,942 83,134Contribution to wireless revenues (%) 1.9 3.4 6.2 10.8 15.3 19.43G subscribers EoP (mn) 5.1 7.9 16.8 27.0 38.4 47.83G ARPU 91.4 115.0 126.5 141.7 150.2 160.7

Source: Company, PhillipCapital Research estimates

Minute factory economics FY2013 FY2014E FY2015E FY2016E FY2017E FY2018E

RPM (Rs/minute) 0.41 0.45 0.48 0.51 0.55 0.58Growth/ (Decline) (%) (4.47) 8.47 7.07 7.40 6.47 6.08Total Variable cost per min (Access + License charges) (Rs/minute) 0.12 0.12 0.12 0.12 0.13 0.13Growth/ (Decline) (%) (1.36) (4.90) 2.43 3.15 2.88 2.81Total Fixed cost per min (Rs/minute) 0.17 0.18 0.19 0.20 0.22 0.24Growth/ (Decline) (%) (5.38) 3.30 6.20 7.21 8.00 7.80Total Opex per min (Rs/minute) 0.29 0.29 0.31 0.32 0.34 0.36Growth/ (Decline) (%) (3.7) (0.1) 4.7 5.6 6.1 6.0EBIDTA per min ( (Rs/minute) 0.12 0.15 0.17 0.19 0.20 0.22Growth/ (Decline) (%) 0.3 29.7 11.6 10.6 7.2 6.3

Source: Company, PhillipCapital Research Estimates

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Idea Cellular income statement (annual) Idea Cellular consol (Prop conso, Rs mn) FY2013 FY2014E FY2015E FY2016E FY2017E FY2018E

Total Revenues (Rs mn) 224,578 263,701 301,327 344,065 385,019 428,259YoY Growth (%) 15 17 14 14 12 11Access + License charges 67,216 71,906 79,223 87,003 94,116 101,491% of sales 29.9 27.3 26.3 25.3 24.4 23.7Network opex 55,361 65,283 76,121 88,687 102,900 118,392% of sales 24.7 24.8 25.3 25.8 26.7 27.6Employee costs 11,225 13,876 16,527 18,935 21,588 24,604% of sales 5.0 5.3 5.5 5.5 5.6 5.7SG&A 30,729 29,947 31,376 33,772 36,006 38,406% of sales 13.7 11.4 10.4 9.8 9.4 9.0Total Opex 164,531 181,012 203,247 228,396 254,609 282,893EBIDTA 60,046 82,688 98,080 115,669 130,409 145,367EBIDTA margin (%) 26.7 31.4 32.5 33.6 33.9 33.9YoY growth (%) 17.9 37.7 18.6 17.9 12.7 11.5EBIT 25,269 38,028 47,018 56,021 62,185 72,905EBIT margin (%) 11.3 14.4 15.6 16.3 16.2 17.0PBT 15,774 30,442 36,619 47,994 48,283 61,220PAT 10,110 19,868 24,168 31,676 31,867 40,405PAT margin (%) 4.5 7.5 8.0 9.2 8.3 9.4YoY growth (%) 40 97 22 31 1 27EPS Adjusted diluted 3.1 5.6 6.8 8.9 8.9 11.3


Expense parameters FY2013 FY2014E FY2015E FY2016E FY2017E FY2018E

Capex (Rs mn) 61,987 85,767 155,184 91,892 67,253 76,229As a % of Sales 27.6 32.5 51.5 26.7 17.5 17.8As a % of EBIDTA 103.2 103.7 158.2 79.4 51.6 52.4Opex + Capex (Rs mn) 226,518 266,779 358,431 320,289 321,862 359,122As a % of Sales 100.9 101.2 119.0 93.1 83.6 83.9As a % of EBIDTA 377.2 322.6 365.4 276.9 246.8 247.0


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Fair‐value calculation Idea will clock a revenue CAGR of 12% over the next 6 years. The company is currently in a high‐growth phase and will post robust revenue growth over the next two years (FY14‐16 CAGR of 14%). Our estimates are conservative and 3G and data services have significant scope to surprise positively. Segmental growth and margin

Segments, Rs mn Sales FY14Sales CAGR (6‐year %)

Sales FY20E

EBIT margin (%) EBIT

Wireless services 263,701 12.1 524,690 21.0 110,185Tower business services 25,368 9.0 42,503 40.0 17,001Intersegment 25,368 9.0 42,503 20.0 8,501Total 263,701 12.1 524,690 22.6 118,686

In our DCF model, we expect Idea to raise Rs 37.5bn equity at Rs 150/share implying a dilution of around 8%. Our target price of Rs 210 was factoring in Rs 132bn (Rs 37/share) to account for the increased likelihood of reduced spectrum prices. We have now modeled the cash impact of spectrum renewal at Rs 130bn in our FY15‐16 capex assumptions and the remaining Rs 20bn separately to arrive at a target price. We also assign a 5% discount to our fair value calculations to incorporate the risk associated with the upcoming auctions and data investments by Idea. Derivation of Enterprise Value (EV) 2020 (excluding intermediate FCF) Segments (Rs mn) EBIT (N) Yield required (%) P/E, x EV/EBIT, x EV (2020)

Wireless services 110,185 6.0 16.7 11.7 1,285,491Tower business services 17,001 8.5 11.8 8.2 140,010Intersegment 8,501 8.5 11.8 8.2 70,005Total 118,686 6.1 16.3 11.4 1,355,497

Medium‐term cash flow generation Cash Flows (Rs mn) FY15E FY16E FY17E FY18E FY19E FY20E

EBIT 47,018 56,021 62,185 72,905 86,595 99,435NOPLAT 31,032 36,974 41,042 48,117 57,153 65,627Depreciation 51,063 59,647 68,224 72,462 76,480 80,117Capex 155,184 91,892 67,253 76,229 79,619 80,909FCF (73,089) 4,729 42,013 44,350 54,014 64,835% conversion (155) 8 68 61 62 65Discount factor 0.9 0.8 0.7 0.6 0.6 0.5PV (65,258) 3,770 29,904 28,185 30,649 32,847NPV (65,258) (61,488) (31,584) (3,399) 27,250 60,097

Derivation of fundamental value Rs mn/ Rs per share Value

Enterprise value‐2020 1,355,497 NPV Intermediate FCF 60,097 Net cash‐ end of FY2014 (81,345)Return requirement 12%EV value end of FY2014 746,834 Target value end of FY2015 745,347 Target value per share (end March 2015) 210Regulatory risks captured (Rs mn) 20,000 Value/share (Rs/share) 6 Discount to fair value due 5%Adj. target value per share (end of March 2015) 194


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Appendix 1800MHz could be used for FD‐LTE deployments Aircel, Airtel, Reliance Jio and others have spectrum in the 2300MHz band, where Time Division Duplexing – Long‐Term Evolution (TDD‐LTE) is being used for 4G deployments. Despite significant investments made by Chinese telecom companies, the technology/device ecosystem has been unsatisfactory. Frequency Division Duplexing ‐ Long‐Term Evolution (FDD‐LTE) has become the preferred choice for global operators to rollout out LTE and there has been a substantial LTE rollout in the 1800MHz band ‐ 235 of the 263 operators worldwide who have launched LTE have done it in FDE‐LTE and almost half of those deployments are in the 1800MHz band. The 1800MHz spectrum could be used for FD‐LTE rollout in India as well.

LTE deployments in various frequency bands

Source: GSA (www.gsacom.com), PhillipCapital India Research

With LTE, operators can provide a significantly superior offering Incumbents currently offer wireless broadband services riding on HSPA/HSPA+ technology – an International Mobile Telecommunication 2000 system. We believe that R‐Jio’s focus on the broadband wireless opportunity could potentially translate into potential LTE deployments in both the 1800 as well as the 2300MHz bands. To date, there has been widespread adoption of GSM/CDMA as 2G technologies and WCDMA/UMTS/HSPA/CDMA 2000/EVDO as 3G ones. LTE has been defined as the next step in the technological roadmap. It evolved from 3G technology, which was based on WCDMA, and defines the long‐term evolution of the 3GPP UMTS/HSPA cellular technology. LTE supports high‐performance mobile access functional up to 350Km/h with 500Km/h under consideration. Peak data rates range from 100 to 326.4Mbps on the downlink and 50 to 86.4 Mbps on the uplink depending on the antenna configuration and modulation depth. LTE is compatible with HSPA, UMTS and GSM‐based technologies and hence offers a simple evolutionary path for all existing GSM and HSPA operators. However, this technologies’ complementary core network also offers the ability to

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support the handover of services between LTE and CDMA‐2000 networks, making it a compelling option as a next step for CDMA‐2000/EV‐DO operators as well. Comparison of wireless broadband technologies WCDMA

(UMTS) HDPA HSPA+ LTE LTE Advanced

Max downlink speed( bps) 384 k 14 M 28 M 300M 1G Max uplink speed (bps) 128 k 5.7 M 11 M 75 M 500 M Latency round trip time (approx) 150 ms 100 ms 50ms (max) ~10 ms less than 5 ms 3GPP releases Rel 99/4 Rel 5 / 6 Rel 7 Rel 8 Rel 10 Approx years of initial roll out 2003 / 4 2005 / 6 HSDPA

2007 / 8 HSUPA 2008/ 9 2009/ 10

Access methodology CDMA CDMA CDMA OFDMA /SC‐FDMA

OFDMA / SC‐FDMA

Source: TRAI, GSMA, GSA, PhillipCapital India Research

LTE has been developed to offer both Frequency Division Duplex (FDD) and Time Division Duplex (TDD) modes, enabling TD‐SCDMA networks to also make a smooth transition to TDD LTE. A combined FDD and TDD LTE deployment is expected to gain a broad foothold in many markets. Comparison of frequency bands for LTE deployments

Source: TRAI, GSMA, GSA, PhillipCapital India Research

Global deployments of telecom technologies in various frequency bands Region\Technology LTE UMTS GSM

Europe 800/900/1800/ 2100/2600 900/2100 900/1800

North America 700/2100/AWS 850/1900 850/1900

Latin America 900/1800/AWS /2100 850/900/1900 /2100 850/900/1800 /1900

Asia Pacific 1800/2300/2600 850/900/2100 900/1800

Africa and Middle East 900/1800/2100 900/2100 900/1800

Source: TRAI, PhillipCapital India Research

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Financials

Income Statement Y/E Mar, Rs mn FY13 FY14E FY15E FY16E

Net sales 224,578 263,701 301,327 344,065

Growth, % 15 17 14 14

Total income 224,578 263,701 301,327 344,065

Other Operating expenses ‐164,531 ‐181,012 ‐203,247 ‐228,396

EBITDA (Core) 60,046 82,688 98,080 115,669

Growth, % 17.9 37.7 18.6 17.9

Margin, % 26.7 31.4 32.5 33.6

Depreciation ‐34,778 ‐44,660 ‐51,063 ‐59,647

EBIT 25,269 38,028 47,018 56,021

Growth, % 19.7 50.5 23.6 19.1

Margin, % 11.3 14.4 15.6 16.3

Interest paid ‐9,495 ‐7,586 ‐10,399 ‐8,027

Pre‐tax profit 15,774 30,442 36,619 47,994

Tax provided ‐5,664 ‐10,574 ‐12,450 ‐16,318

Profit after tax 10,110 19,868 24,168 31,676

Net Profit 10,110 19,868 24,168 31,676

Growth, % 39.8 96.5 21.6 31.1

Net Profit (adjusted) 10,110 19,868 24,168 31,676

Unadj. shares (m) 3,309 3,530 3,530 3,530

Wtd avg shares (m) 3,309 3,530 3,530 3,530

Balance Sheet Y/E Mar, Rs mn FY13 FY14E FY15E FY16E

Cash & bank 1,429 31,592 3,270 1,547

Marketable securities at cost 40,748 40,748 40,748 40,748

Debtors 9,601 10,021 11,450 13,074

Inventory 726 1,319 1,507 1,720

Loans & advances 10,859 18,459 21,093 24,085

Other current assets 9 264 301 344

Total current assets 63,372 102,402 78,369 81,518

Gross fixed assets 466,111 551,877 707,061 792,799

Less: Depreciation ‐179,681 ‐219,170 ‐270,233 ‐329,880

Add: Capital WIP 8,811 8,811 8,811 14,965

Net fixed assets 295,240 341,518 445,639 477,884

Total assets 363,781 447,783 527,871 557,111

Current liabilities 79,250 92,559 99,739 103,564

Total current liabilities 79,250 92,559 99,739 103,564

Non‐current liabilities 140,315 154,900 204,900 199,900

Total liabilities 219,565 247,459 304,640 303,464

Paid‐up capital 33,143 35,643 35,643 35,643

Reserves & surplus 111,073 164,681 187,588 218,004

Shareholders’ equity 144,216 200,324 223,231 253,647

Total equity & liabilities 363,781 447,783 527,871 557,111


Note: We assume equity raising of Rs 37.5bn at Rs 150/share in FY14‐end

Cash Flow Y/E Mar, Rs mn FY13 FY14E FY15E FY16E

Pre‐tax profit 15,774 30,442 36,619 47,994

Depreciation 34,778 44,660 51,063 59,647

Chg in working capital ‐5,511 4,442 2,891 ‐1,048

Total tax paid 4,098 ‐10,574 ‐12,450 ‐16,318

Cash flow from operating activities 49,139 68,970 78,122 90,276

Capital expenditure ‐53,282 ‐90,937 ‐155,184 ‐91,892

Chg in marketable securities ‐17,209 0 0 0

Cash flow from investing activities ‐70,491 ‐90,937 ‐155,184 ‐91,892

Equity raised/(repaid) 55 37,500 0 0

Debt raised/(repaid) 22,825 14,585 50,000 ‐5,000

Cash flow from financing activities 22,880 52,085 50,000 ‐5,000

Net chg in cash 1,528 30,118 ‐27,062 ‐6,617

Valuation Ratios & Per Share Data FY13 FY14E FY15E FY16E

Per Share data

EPS (INR) 3.1 5.6 6.8 9.0

Growth, % 39.8 84.2 21.6 31.1

Book NAV/share (INR) 43.6 56.8 63.2 71.9

FDEPS (INR) 3.1 5.6 6.8 9.0

CEPS (INR) 13.6 18.3 21.3 25.9

CFPS (INR) 15.8 19.5 22.1 25.6

Return ratios

Return on assets (%) 4.7 6.2 6.4 6.8

Return on equity (%) 7.0 9.9 10.8 12.5

Return on capital employed (%) 6.2 7.7 7.9 8.3

Turnover ratios

Asset turnover (x) 0.9 1.0 0.9 0.8

Sales/Total assets (x) 0.7 0.7 0.6 0.6

Sales/Net FA (x) 0.8 0.8 0.8 0.7

Working capital/Sales (x) (0.3) (0.2) (0.2) (0.2)

Fixed capital/Sales (x) 2.1 2.1 2.3 2.3

Working capital days (94.4) (86.5) (79.2) (68.3)

Liquidity ratios

Current ratio (x) 0.8 1.1 0.8 0.8

Quick ratio (x) 0.8 1.1 0.8 0.8

Interest cover (x) 2.7 5.0 4.5 7.0

Total debt/Equity (%) 94.2 75.1 89.8 77.1

Net debt/Equity (%) 93.2 59.3 88.3 76.4

Valuation

PER (x) 47.5 25.8 21.2 16.2

Price/Book (x) 3.3 2.6 2.3 2.0

EV/Net sales (x) 2.6 2.2 2.2 1.9

EV/EBITDA (x) 9.6 7.1 6.8 5.7

EV/EBIT (x) 22.7 15.5 14.2 11.9

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Recommendation Chart

B (TP 195)

B (TP 210)

B (TP 195)

B ( TP 190)

B (TP 87)B (TP 115)

B (TP 110)B (TP 105)

S (TP 67)

N (TP 115)

B (TP 142)

0

20

40

60

80

100

120

140

160

180

200

1/3/2011 5/30/201110/21/20113/16/2012 8/7/2012 1/3/2013 5/29/201310/23/2013


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Management (91 22) 2300 2999(91 22) 6667 9735

Research Engineering, Capital Goods Pharma

Deepak Jain (9122) 6667 9758 Ankur Sharma (9122) 6667 9759 Surya Patra (9122) 6667 9768Priya Ranjan (9122) 6667 9965 Aditya Bahety (9122) 6667 9986

Retail, Real EstateInfrastructure & IT Services Abhishek Ranganathan, CFA (9122) 6667 9952

Manish Agarwalla (9122) 6667 9962 Vibhor Singhal (9122) 6667 9949 Neha Garg (9122) 6667 9996Sachit Motwani, CFA, FRM (9122) 6667 9953 Varun Vijayan (9122) 6667 9992

TechnicalsMetals Subodh Gupta (9122) 6667 9762

Naveen Kulkarni, CFA, FRM (9122) 6667 9947 Dhawal Doshi (9122) 6667 9769Vivekanand Subbaraman (9122) 6667 9766 Dharmesh Shah (9122) 6667 9974 Database ManagerManish Pushkar (9122) 6667 9764 Vishal Randive (9122) 6667 9944

Oil&Gas, Agri InputsCement Gauri Anand (9122) 6667 9943 Sr. Manager – Equities SupportVaibhav Agarwal (9122) 6667 9967 Deepak Pareek (9122) 6667 9950 Rosie Ferns (9122) 6667 9971

Anjali Verma (9122) 6667 9969

Sales & Distribution Kinshuk Tiwari (9122) 6667 9946 Sales Trader ExecutionAshvin Patil (9122) 6667 9991 Dilesh Doshi (9122) 6667 9747 Mayur Shah (9122) 6667 9945Shubhangi Agrawal (9122) 6667 9964 Suniil Pandit (9122) 6667 9745Kishor Binwal (9122) 6667 9989Sidharth Agrawal (9122) 6667 9934Dipesh Sohani (9122) 6667 9756

Economics

Consumer, Media, Telecom

Vineet Bhatnagar (Managing Director)Jignesh Shah (Head – Equity Derivatives)

Automobiles

Banking, NBFCs

Contact Information (Regional Member Companies)

SINGAPORE

Phillip Securities Pte Ltd 250 North Bridge Road, #06‐00 Raffles City Tower,

Singapore 179101 Tel : (65) 6533 6001 Fax: (65) 6535 3834

www.phillip.com.sg

MALAYSIA Phillip Capital Management Sdn Bhd B‐3‐6 Block B Level 3, Megan Avenue II,

No. 12, Jalan Yap Kwan Seng, 50450 Kuala Lumpur Tel (60) 3 2162 8841 Fax (60) 3 2166 5099

www.poems.com.my

HONG KONG Phillip Securities (HK) Ltd

11/F United Centre 95 Queensway Hong Kong Tel (852) 2277 6600 Fax: (852) 2868 5307

www.phillip.com.hk

JAPAN Phillip Securities Japan, Ltd

4‐2 Nihonbashi Kabutocho, Chuo‐ku Tokyo 103‐0026

Tel: (81) 3 3666 2101 Fax: (81) 3 3664 0141 www.phillip.co.jp

INDONESIA PT Phillip Securities Indonesia

ANZ Tower Level 23B, Jl Jend Sudirman Kav 33A, Jakarta 10220, Indonesia

Tel (62) 21 5790 0800 Fax: (62) 21 5790 0809 www.phillip.co.id

CHINA Phillip Financial Advisory (Shanghai) Co. Ltd.

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Tel (86) 21 5169 9200 Fax: (86) 21 6351 2940 www.phillip.com.cn

THAILAND Phillip Securities (Thailand) Public Co. Ltd.

15th Floor, Vorawat Building, 849 Silom Road, Silom, Bangrak, Bangkok 10500 Thailand

Tel (66) 2 2268 0999 Fax: (66) 2 2268 0921 www.phillip.co.th

FRANCE King & Shaxson Capital Ltd.

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UNITED KINGDOM King & Shaxson Ltd.

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UNITED STATES Phillip Futures Inc.

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Chicago, IL 60604 USA Tel (1) 312 356 9000 Fax: (1) 312 356 9005

AUSTRALIA PhillipCapital Australia

Level 37, 530 Collins Street Melbourne, Victoria 3000, Australia

Tel: (61) 3 9629 8380 Fax: (61) 3 9614 8309 www.phillipcapital.com.au

SRI LANKA Asha Phillip Securities Limited

Level 4, Millennium House, 46/58 Navam Mawatha, Colombo 2, Sri Lanka

Tel: (94) 11 2429 100 Fax: (94) 11 2429 199 www.ashaphillip.net/home.htm

INDIA PhillipCapital (India) Private Limited

No. 1, C‐Block, 2nd Floor, Modern Center , Jacob Circle, K. K. Marg, Mahalaxmi Mumbai 400011 Tel: (9122) 2300 2999 Fax: (9122) 6667 9955 www.phillipcapital.in

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Disclosures and Disclaimers PhillipCapital (India) Pvt. Ltd. has three independent equity research groups: Institutional Equities, Institutional Equity Derivatives and Private Client Group. This report has been prepared by Institutional Equities Group. The views and opinions expressed in this document may or may not match or may be contrary at times with the views, estimates, rating, target price of the other equity research groups of PhillipCapital (India) Pvt. Ltd. This report is issued by PhillipCapital (India) Pvt. Ltd. which is regulated by SEBI. PhillipCapital (India) Pvt. Ltd. is a subsidiary of Phillip (Mauritius) Pvt. Ltd. References to "PCIPL" in this report shall mean PhillipCapital (India) Pvt. Ltd unless otherwise stated. This report is prepared and distributed by PCIPL for information purposes only and neither the information contained herein nor any opinion expressed should be construed or deemed to be construed as solicitation or as offering advice for the purposes of the purchase or sale of any security, investment or derivatives. The information and opinions contained in the Report were considered by PCIPL to be valid when published. The report also contains information provided to PCIPL by third parties. The source of such information will usually be disclosed in the report. Whilst PCIPL has taken all reasonable steps to ensure that this information is correct, PCIPL does not offer any warranty as to the accuracy or completeness of such information. Any person placing reliance on the report to undertake trading does so entirely at his or her own risk and PCIPL does not accept any liability as a result. 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