INITIATING COVERAGE Grasim Industries Ltd. BUY Steady ......Grasim a part of USD 44bn Aditya Birla Group, is one of the largest VSF manufacturers globally with a capacity of 0.546mn

© CHOICE INSTITUTIONAL RESEARCH

Grasim Industries Ltd. Steady standalone business; fund infusion in group companies a concern

INITIATING COVERAGE

Relative Capital Market Strength

Grasim Industries Ltd. (Grasim) a part of Aditya Birla Group (worth USD 44bn), is one of the largest viscose staple fiber (VSF) manufacturers globally with a capacity of 0.546mn tonnes (as of 30th Sept. 2018). Globally, on standalone basis, it has a global market share of 9.5% and 16% market share on group level. The company has the monopolistic market position in Indian VSF market. It is also the leading player in caustic soda (a raw material for VSF) and epoxy in India with a market share of around 30% in FY18. Apart from these, through its subsidiaries Ultratech Cement Ltd., Grasim has presence in the domestic cement sector and is the largest player with a capacity of around 93mn tonnes. Aditya Birla Capital Ltd., a subsidiary of Grasim; is one of the most diversified financial services (NBFC, AMC, Life & General Insurance, Wealth Management, Housing Finance, Private Equity, ARC etc.) players in India.

Investment rationale: (Page: 7-11)

• Stagnant cotton production – positive for VSF demand

• Monopolistic market share with backward integration

• LIVA – creating a demand of VSF in domestic market

• Capacity expansion to provide next leg of growth

• Global price to be volatile, but domestic realization to be resilient

• Consistent financial performance with robust cash flow generation

• Fund infusion in group companies - a key concern

Risk and concerns: (Page: 14)

• Fund infusion in group companies

• Slowdown in general economy

• Delay in capacity expansion

• Volatility in the raw material prices

Valuation: (Page: 15)

• We estimate Grasim’s total operating revenue to grow at 12.6% CAGR over FY18-21 to Rs. 225,515.6mn, while PAT to grow at 13.9% CAGR over the same period to Rs. 30,131.6mn. EBITDA to increase by 14.9% CAGR to Rs. 46,705.6mn with 120bps expansion in the margin.

• At the CMP of Rs. 824, Grasim’s share is trading at TTM P/E multiple of 21.5x. Additionally, it is trading at a P/BVPS and EV/EBITDA multiple of 1.2x and 14.3x, respectively. We initiate coverage on Grasim with a “BUY” rating and target price of Rs. 1,130.5 per share using SOTP methodology.

Rajnath Yadav | Board line: +91 22 6707 9999; Ext. 912 | [email protected]

1

19th Jan. 2019

Rating Matrix

CMP Rs. 824

Face Value Rs. 2

MCAP Rs. 541,855.2mn

Enterprise Value Rs. 551,525.6mn

Target price Rs. 1,130.5

Upside potential 37.2%

52 week H/L Rs. 1,254.5 / 756

Investment horizon 18 Months

Category Large cap

Sector Diversified

Shareholding Pattern as on 31st Dec. 2018

Particulars Mar-18 Jun-18 Sept-18 Dec-18

Promoters 40.1% 40.1% 40.1% 40.2%

FIIs 27.4% 24.9% 23.5% 21.2%

DIIs 12.6% 15.1% 16.7% 17.8%

Non institutions 19.9% 19.9% 19.7% 20.9%

Financial Snapshot (Rs. bn)

Projections FY16 FY17 FY18 FY19E FY20E FY21E

Revenue 89.7 103.5 157.9 197.6 204.5 225.5

EBITDA 14.9 21.5 30.8 39.6 41.9 46.7

Adjusted PAT 10.0 15.6 20.4 28.5 27.0 30.1

EBITDA (%) 16.6% 20.8% 19.5% 20.0% 20.5% 20.7%

PAT (%) 11.1% 15.1% 12.9% 14.4% 13.2% 13.4%

EPS 15.2 23.7 31.0 43.3 41.0 45.8

BVPS 210.9 246.8 681.1 681.3 714.3 751.2

RoNW (%) 7.2% 9.6% 4.6% 6.4% 5.7% 6.1%

RoCE (%) 6.8% 9.7% 5.1% 6.7% 6.8% 7.3%

P / E 19.0 20.1 18.0

P / BVPS 1.2 1.2 1.1

EV / Sales 2.9 2.8 2.5

EV / EBITDA 14.6 13.8 12.1

P / S 2.7 2.7 2.4

BUY

50

60

70

80

90

100

110

120

17

-Jan

-18

17

-Feb

-18

17

-Mar

-18

17

-Ap

r-1

8

17

-May

-18

17

-Ju

n-1

8

17

-Ju

l-1

8

17

-Au

g-1

8

17

-Sep

-18

17

-Oct

-18

17

-No

v-1

8

17

-Dec

-18

17

-Jan

-19

Grasim Industries Ltd. Sensex

© CHOICE INSTITUTIONAL RESEARCH 2

Management team:

Name Designation Mr. Kumar Mangalam Birla Chairman Mrs. Rajashree Birla Non-Executive Director Mr. Himanshu Kapania Vice Chairman Mr. Dilip Gaur Managing Director Mr. Sushil Agarwal Whole-time Director & Chief Financial Officer Mr. Shailendra K. Jain Non-Executive Director Mrs. Usha Sangwan Non-Executive Director Mr. Arun Thiagarajan Independent Director Mr. M. L. Apte Independent Director Mr. B. V. Bhargava Independent Director Mr. Cyril Shroff Independent Director Dr. Thomas Connelly, Jr. Independent Director Mr. O. P. Rungta Independent Director Mrs. Anita Ramachandran Independent Director Mrs. Hutokshi Wadia Sr. Vice President & Company Secretary

Shareholding pattern (as on 31st Dec. 2018):

Source: Choice Broking Research


Shareholders more than 1% (as on 30th Sept. 2018):

Shareholder name Stake (%) Turquoise Investments & Finance Pvt. Ltd. 6.41 Trapti Trading & Investment Pvt. Ltd. 6.31 Life Insurance Corp. of India 5.81 TGS Investment & Trade Pvt. Ltd. 5.46 IGH Holdings Pvt. Ltd. 5.09 Hindalco Industries Ltd. 4.29 Umang Commercial Co. Ltd. 4.07 Pilani Investment & Industries Corp. 3.69 Standard Life Aberdeen PLC 2.69 BlackRock Inc. 1.87 Reliance Capital Trustee Co. Ltd. 1.83 Vanguard Group Inc. 1.72 ICICI Prudential Life Insurance Co. Ltd. 1.37


40.2%

21.2%

17.8%

20.9%

Promoters FII DII Non-Institution


Man-made fiber industry outlook:

Fiber can be classified as natural or man-made fibers (MMF). Natural fibers are fibers, which come from natural sources like plants, animals etc. While MMFs are fibers, the basic unit is either formed by chemical synthesis followed by fiber formation or the polymers from the natural sources are dissolved and regenerated to form fibers. MMF can be classified as synthetic fiber/yarn and cellulosic fiber/yarn. Products like polyester staple fiber & yarn (PSF & PSY) and acrylic staple fibers come under polyester fiber/yarn, while products like viscose staple fiber (VSF) and viscose filament yarn (VFY) are categorized as cellulosic fiber/yarn.

MMF value chain:

Polyester and Viscose fiber formed around 94% of the total MMF market of around 2,500mn kgs (in volume terms) in FY17. PSF and PSY contributed 36% and 42%, respectively. Cellulose fiber like VSF and VFY contributed around 15% and 1%, respectively to the MMF market.

Source: Care Rating report dated 13th Nov. 2017; Choice Broking Research

MMF

Synthetic fiber

Polyester

PSF PSY

Acrylic

Acrylic staple fiber

Others

Cellulose fiber

Rayon

Viscose

VSF VFY

Others

Others

Source: Care Rating report dated 13th Nov. 2017; Choice Broking Research Source: Care Rating report dated 13th Nov. 2017; Choice Broking Research

Domestic MMF market break-up Global fiber market break-up

36.0%

42.4%

14.6%

0.6% 6.4%

PSF PFY VSF VFY Others

62%

26%

6% 5%

1%

Synthetic fiber Cotton fiber

Wood based cellulose fiber Other natural fiber

Others (Wool)


Man-made fiber industry outlook (Contd…):

Cellulose fiber: These fibers are made from plants containing properties of fibers. Cellulose fibers primarily find application in textile industry. Cellulose fibers are made from plants, which are processed into a pulp and extruded into a fiber in a way similar to synthetic fibers.

Characteristics of rayon fibers:

• Silk like aesthetics with a confortable drape and feel qualities

• Moisture absorbent and can be easily dyed in vivid colour

• Can be easily blended with other fibers

• No static build-up

• Being a cellulosic fiber can get damaged by weak acid.

Applications of rayon fibers:

• Apparels: Viscose is used in the manufacturing of all kinds of apparels and home furnishing like bed sheets, sheets, pillows, furniture, carpets and curtains.

• Industrial use: High-tenacity rayon is used as reinforcement for mechanical rubber goods like tyres, conveyor belts and hoses. It also finds application in aerospace, agriculture and technical textile industry.

Rayon (Viscose) is one of the widely manufactured cellulose fibers and is made from wood pulp. Key raw materials of VSF are wood pulp, caustic soda and sulphur. Since it is not synthetic, its properties are similar to natural fibers like cotton and linen. Popular rayon is VSF, which is mainly used in producing blended fibers. VSF demand drivers are the global apparel and the home textile industry. Domestic production of VSF increased by 2% CAGR over FY13-17 and was highest among the man-made fibers. On consumption front it reported a modest decline of 0.5% CAGR over the same period.

Source: Care Rating report dated 13th Nov. 2017; Choice Broking Research Source: Care Rating report dated 13th Nov. 2017; Choice Broking Research

Man-made fiber production (mn kgs) Man-made fiber consumption (mn kgs)

848 846 882 894 899

1,288 1,212

1,158 1,069 1,060

337 361 365 342 365

43 44 44 45 46

0

200

400

600

800

1,000

1,200

1,400

FY13 FY14 FY15 FY16 FY17

PSF PFY VSF VFY

697 691

782 806 780

934

773 715

575

460

249 286 258 224 244

46 53 53 51 47

0

200

400

600

800

1,000

FY13 FY14 FY15 FY16 FY17

PSF PFY VSF VFY


Man-made fiber industry outlook (Contd…) / Company introduction:

Lenzing Aktiengesellschaft (Lenzing) is the global leader in the VSF market with a production capacity of 1mn tonnes, i.e. 16.3% global share in the installed capacity. Grasim Industries Ltd. (Grasim) is second largest producer of VSF in world with a capacity market share of 9.5%. On group level (including JVs), it has a global capacity share of 16%. Other players are Zhongtai (capacity market share of 11%), Sateri (9%), Tangshan (8%) etc. Globally, China has around 60-65% of the VSF capacity. In 2017, global VSF capacity was around 6.2mn tonnes, with a production of 5.3mn tonnes i.e. global capacity utilization of 85.5%.

According to Lenzing, global fiber market is anticipated to grow at 3-4% CAGR over 2017-22. Major demand driver would be cellulose fibers and synthetic fiber, which are expected to grow at 5-6% and 4-5% CAGR, respectively over the same period. Cotton fiber demand is forecasted to be flat. Asia Pacific would continue to be the growth engine for the global fiber market.

On capacity addition front, around 1mn tonnes of the incremental capacity is anticipated to be added across the globe in 2019. This oversupply position would pressurize the realization of the VSF. Additionally, increase in the raw material prices would impact the profitability of the VSF players in 2019. Nevertheless, integrated players with presence in specialty fibers would be less impacted as compared to a non-integrated standard VSF player. Long term outlook of the cellulose manufactures are positive considering the rising population coupled with increasing demand of apparels and overall increasing acceptance of the VSF fibers.

Company introduction:

Grasim a part of USD 44bn Aditya Birla Group, is one of the largest VSF manufacturers globally with a capacity of 0.546mn tonnes (as of 30th Sept. 2018). Globally, on standalone basis, it has a market share of 9.5% and 16% market share on group level. The company has the monopolistic market position in Indian VSF market. It is also the leading player in caustic soda (a raw material for VSF) and epoxy in India with a market share of around 30% in FY18. Apart from these, through its subsidiaries Ultratech Cement Ltd., Grasim has presence in the domestic cement sector and is the largest player with a capacity of around 93mn tonnes. Aditya Birla Capital Ltd., a subsidiary of Grasim; is one of the diversified financial services (NBFC, AMC, Life & General Insurance, Wealth Management, Housing Finance, Private Equity, ARC etc.) players in India.

Other business of Grasim includes:

• Indo Gulf Fertilizers (IGF), which a leading agri-solution provider. Its product covers the entire value chain from sowing to harvesting. The company’s agri-solutions include urea, other soil & crop specific fertilizers, seeds, agrochemicals and plant & soil health products. IGF has strong presence in the Indo-Gangatic plain states like UP, Bihar, West Bengal and Jharkhand and is expanding into new states like Punjab, Haryana and Uttarakhand. Cumulatively, it covers around 60% of India’s agricultural land.

• Aditya Birla Insulators is the largest manufacturers of insulators in India and is among the top four globally. Its products are used for the transmission & distribution of electric power. The company is one of the largest exporters of ceramic insulators globally.

• Jaya Shree Textile, is India's top linen brand manufacturing company. It is the only integrated linen factory in the country with state-of-the-art facilities equipped with the latest spinning, weaving and finishing systems from Switzerland and Italy. The company sells its products in over 50 countries, spanning across six continents.

Grasim’s prominent associate companies are Vodafone Idea Ltd., Aditya Birla Fashion & Retail Ltd. and Hindalco Industries Ltd.


Company introduction (Contd…):

Corporate structure:


As of FY18, on standalone basis the company operated under three segments, namely – Viscose, Chemicals and Others (which mainly include Textiles).

Source: Choice Broking Research Source: Choice Broking Research

Standalone segmental gross revenue break-up in FY18 Consolidated segmental gross revenue break-up in FY18

50.2%

30.0%

19.7%

Viscose Chemicals Others

14.7%

55.3%

8.8%

15.5% 5.8%

Viscose Cement Chemicals Financial Services Others


Investment rationale:

1) Stagnant cotton production – positive for VSF demand: Over 2010-18, global cotton harvested area and production was almost flat, while India’s cotton harvested area and production increased by 1.3% and 0.5% CAGR, respectively. During the same period, due to rise in population and higher demand of textile, cellulose gap started emerging, leading to an increase in demand of cellulose (a substitute to cotton) like VSF. In domestic market, during 2010-18, VSF sales increased by 6.9% CAGR.

According to USDA, global cotton production for 2019 is forecasted to decline by 0.6%. On account of erratic rains in key cotton producing regions and farmer shifting to other cash crop, India’s cotton production is expected to decline by 1.8% in 2019. Moreover, domestic cotton consumption in 2019 is forecasted to be at a level similar to 2018, thereby leading to an increase in demand for cellulose fibers. Going forward, with increasing population, stagnant cotton production and increasing demand of textile fibers, we are anticipating a continued higher substitution of cotton by man-made fibers like VSF. According to Lenzing, global VSF demand is forecasted to grow by 5-6% CAGR over 2017-2020, while cotton and synthetic fiber demand are likely to increase by 0-1% and 4-5% CAGR, respectively. Grasim management too shared the same view on the global outlook, but is anticipating a 2ppts additional growth in the domestic VSF demand.

Source: USDA; Choice Broking Research Source: USDA; Choice Broking Research

Global cotton harvest area and production India’s cotton harvest area and production

0

20

40

60

80

100

120

140

Global cotton harvested area (mn hectares)

Global cotton production (mn 480-pound bales)

0

5

10

15

20

25

30

35

India cotton harvested area (mn hectares)

India cotton production (mn 480-pound bales)

Source: Lenzing presentation dated 7th Nov. 2018; Choice Broking Research


Investment rationale (Contd…):

Source: Lenzing presentation dated 7th Nov. 2018; Choice Broking Research

2) Monopolistic market share with backward integration: Grasim is second largest producer of VSF in world with a capacity market share of 9.5%. On group level (including JVs), it has a global capacity share of 16%. The company is the sole VSF manufacturer in India.

Source: Lenzing presentation dated 7th Nov. 2018; Choice Broking Research Source: Lenzing presentation dated 7th Nov. 2018; Choice Broking Research

Global VSF capacity market share in 2017 Global VSF production market share in 2017

16%

16%

11%

9% 8%

5%

5%

5%

4%

21%

Lenzing Birla Group Zhongtai SateriTangshan Yamei Grace Aoyang

Xiangsheng Others

17%

17%

11%

9% 8%

5%

5%

5%

5% 18%

Lenzing Birla Group Zhongtai SateriTangshan Yamei Grace AoyangXiangsheng Others

Key raw materials for VSF are wood pulp (forming around 50% of the total raw material cost), caustic soda and power. Grasim’s VSF operations are 80% backward integrated. Around 50% of the dissolving wood pulp requirement is captively met, while the rest is procured through long term contracts. Caustic soda and power requirement are fully captively met. Thus the company is better placed to withstand any rising cost environment.



3) LIVA – creating a demand of VSF in domestic market: With the focus on expanding the VSF usage and application in domestic market, Grasim launched its first fabric brand “LIVA” in FY15. Since then, the brand has well established itself in the textile value chain and is creating a huge pull for viscose fiber in the market. The usage of VSF in women’s clothing has witnessed a steady rise. The reach of LIVA has expanded manifolds, starting with 16 brands & 2.1mn LIVA tagged garments in Autumn-Winter 2015 (AW15) to 33 brands & 26.3mn LIVA tagged garment in Summer-Season 2018 (SS18). The management is focused on further expanding the VSF market in India by partnering with textile value chain, better customer connect through LIVA brand and enriching the VSF product-mix through a larger share of specialty fibers.

4) Capacity expansion to provide next leg of growth: Over the last couple of years, there is an increase in demand of cellulose fiber like VSF, thereby registering a higher growth as compared to other competing fibers. Grasim was not behind in getting benefit from the same and through greenfield route and through various debottlenecking increased its VSF capacity by almost 40% over FY13-18 to 0.498mn tonnes in FY18. Still during that period, the company operated its facility at rated capacity. This reflects the continued customer’s traction towards VSF as a replacement for cotton and polymer fibers. Similarly, through various debottlenecking and group company restructuring, Grasim has increased the Chemicals (i.e. caustic soda) capacity from 0.26mn tonnes in FY13 to 0.94mn tonnes in FY18. In FY16, the company completed the amalgamation of its group company (Aditya Birla Chemicals (India) Ltd.) with itself, resulting to an additional capacity of 0.35mn tonnes.


LIVA tagging (mn)

1.8

2.1

7.0

8.6

11.6

17.6

26.3

0 5 10 15 20 25 30

SS15

AW15

SS16

AW16

SS17

AW17

SS18




VSF capacity and utilization level Chemicals capacity and utilization level

0.35 0.38

0.50 0.50 0.50 0.54

0.61 0.66

0.83

0%

20%

40%

60%

80%

100%

120%

0.0

0.2

0.4

0.6

0.8

1.0

FY13 FY14 FY15 FY16 FY17 FY18 FY19EFY20EFY21E

VSF installed capacity (mn tonnes)

0.26

0.45 0.45

0.80 0.84 0.94

1.14 1.18 1.27

0%

20%

40%

60%

80%

100%

120%

0.0

0.2

0.4

0.6

0.8

1.0

1.2

1.4

Chemicals installed capacity (mn tonnes)

Anticipating higher growth in the cellulose fibers in future, the company has planned a capex of around Rs. 45.2bn, which would increase the VSF capacity by 58% (i.e. by 0.29mn tonnes) to 0.79mn tonnes by FY21. In the Chemicals segment, it has planned a capex of Rs. 13.1bn, which would increase the caustic soda capacity by 14% to 1.3mn tonnes by FY21. Since in VSF industry, the capacity comes in steps, while the demand is continuous, we are of the opinion that Grasim would continue to operated at higher capacity.

5) Global price to be volatile, but domestic realization to be resilient: We are expecting volatility in the international VSF

prices, mainly due to the capacity addition of around 1mn tonnes in China, annual capacity shutdown in the China on account of pollution in winter and expected lower global cotton production. However, Grasim has over the last couple of years has kept its domestic realization resilient, which was primarily due to its monopolistic position and higher proportion of value added products (VAP) in the sales-mix. The company has significantly changed its geographical sales-mix to address the volatility in the VSF realization. It has increased its business in the domestic market, where the realizations are at premium to the global prices. Grasim has reduced its export sales from 36% in Q3 FY17 to around 16% in Q2 FY19, however, the revenue contribution from VAP remained constant at around 36%.


VSF geographical revenue break-up

64% 69% 83% 82% 84%

36% 31% 17% 18% 16%

0%

20%

40%

60%

80%

100%

Q3 FY17 Q1 FY18 Q4 FY18 Q1 FY19 Q2 FY19

VSF - Export sales contribution (%) VSF - Domestic sales contribution (%)



In the Chemical segment, around 30% of the caustic soda produced is internally consumed and rest capacity is sold in the open market. The demand drivers for caustic soda are key users like alumina, textile, consumer product companies etc. With the expansion in the domestic economy, the management is expecting an increased demand of caustic soda in future. For chlorine, which is the by-product of caustic, the realization was subdued due to over-supply in the market. However, at the end of FY18 the realization picked-up. Going forward, the company intends to use the existing and the proposed expanded capacity mainly for the production of chlorine VAPs like Epoxy, chloromethane and ECH. One third of the domestic chloromethane are imported, so the new capacity would replace the imports. Also it is working with large city municipals communities to help them find solutions for sewage treatment using chlorine VAPs. Thus an increased domestic VSF business and higher chlorine integration would assist Grasim in maintaining the profitability margins.

6) Consistent financial performance with robust cash flow generation: Over FY14-18, Grasim reported a 29.6% CAGR rise in standalone top-line to Rs. 157,884.8mn in FY18. Higher growth was mainly due to the amalgamation of one of its group company and greenfield expansion. Total operating expenditure increased by 27.9% CAGR over FY14-18, leading to a 37.5% CAGR rise in the standalone EBITDA to Rs. 30,801.8mn in FY18. EBITDA margin increased by over 4ppts over the period to 19.5% in FY18. Average EBITDA margin over the period stood at 16.6%. Higher depreciation charge and finance cost led to a 26.4% CAGR rise in pre-tax profit. Tax expenses increased by 70.1% CAGR, resulting to a 22.9% CAGR rise in adjusted PAT to Rs. 20,412.7mn in FY18. PAT margin contracted by around 3ppts to 12.9%. Average PAT margin during FY14-18 stood at 12.8%. Cash flow before working capital changes increased by 35.6% CAGR, with average cash flow of Rs. 17.2bn. RoE and RoCE stood at 4.6% and 5.1%, respectively, in FY18 as compared to 8.3% and 5.1% in FY14. However, RoIC improved from 7.7% in FY14 to 12.4% in FY18. Average dividend payout stood at 21.3% over FY14-18.

Going forward, we are estimating a 13.9% CAGR rise in the earning over FY18-21. Top-line and EBITDA are expected to increase by 12.6% and 14.9%, respectively, during the period. RoE and RoIC would improve to 5.7% and 14.6%, respectively, in FY21.

7) Fund infusion in group companies - a key concern: In Q2 FY19, Aditya Birla Group company - Vodafone Idea Cellular Ltd. (VIL) is planning for fund infusion of Rs. 250bn, of which the promoters would put around Rs. 180bn. Till date, nothing has been finalized on the mode of fund raising. Grasim management has indicated that, the company would only put money to the extent of its ownership (11.6%) in VIL. Additionally, according to certain media report, due to overall tightening of liquidity in the economy in last quarter, the company is planning to infuse capital in its subsidiary Aditya Birla Capital Ltd. Since it has already planned a massive capex of around Rs. 75bn over the next 2-3 years on standalone basis, any plan by Grasim to participate in the fund raising proposal of group companies, would create a fund constraint. Despite having a strong balance sheet, we estimate that it would require an external funding of around Rs. 17.3bn over the next two year to partially meet its capex plan. So a participation in the fund raising plans of group companies would create a concern for the Grasim investors.


Recent quarter and annual performance analysis:

Q2 FY19 quarter result analysis: On the back of solid growth across the segments in Q2 FY19, Grasim reported a 26.1% Y-o-Y rise in standalone top-line to Rs. 51,184.5mn. This was the highest quarterly standalone revenue in the history of the company. Sequentially, it increased by 6.9%. H1 FY19, standalone top-line increased by 45.7% Y-o-Y to Rs. 99,076.3mn.

The Viscose segment, which contributed 48.5% to the standalone gross revenue reported an 22.9% Y-o-Y increase in business to Rs. 26,060mn in Q2 FY19. The growth was aided by 9.6% and 12.1% Y-o-Y rise in sales volume and realization, respectively. Higher business development efforts and LIVA initiative, mainly led to robust demand of VSF. While higher international fiber prices and increased sales in the premium domestic market held up the VSF realization during the quarter. In the Chemicals segment (30% of the standalone gross revenue), higher demand led to a 17.3% Y-o-Y rise in the sales volume, while higher caustic soda price and positive chlorine realization led to a 17.7% Y-o-Y increase in blended realization. Consequently, the Chemical segment business increased by 38% Y-o-Y to Rs. 16,120mn in Q2 FY19. The Others segment, which included business like textile, insulators and fertilizers, reported 14.6% Y-o-Y rise in revenue to Rs. 11,520mn.

Total operating expenditure increased by 23.9% Y-o-Y, was mainly driven by higher power & fuel cost. Cost of goods sold (net of inventory change and traded goods) increased by 25.4% Y-o-Y, however as a percent of top-line it remained flat. In Q2 FY19, standalone EBITDA increased by 35.4% with 144bps Y-o-Y expansion in the margin. Despite increase in pulp and sulphur price, Viscose EBITDA was flat on Y-o-Y to 22%. Higher business mainly expanded the Chemicals segment EBITDA margin by 370bps Y-o-Y to 28.1% in Q2 FY19. In H1 FY19, standalone EBITDA increased by 57.9% Y-o-Y with 165bps Y-o-Y expansion in the margin.

With the increase in capacities, depreciation charge increased by 12.7% Y-o-Y, while the increase in borrowings led to a 22% Y-o-Y rise in finance charge. Other income increased by 7% Y-o-Y. During the quarter, the company reported an exceptional loss of Rs. 22,833.5mn, which was on account of the difference between the book value and fair value of investment in VIL. In Q2 FY19, with the reduction in the holding from 23.1% to 11.6%, VIL ceased to be an associate company of Grasim and now will be considered as a financial investment. Pre-tax profit was at a loss of Rs. 11,706.3bn in Q2 FY19 as compared to a pre-tax profit of Rs. 7,908.9mn in Q2 FY18. Reported PAT stood at a loss of Rs. 11,866.6mn as compared to a profit of Rs. 5,745mn in the same quarter a year earlier. Q2 FY19 adjusted PAT increased by 30% Y-o-Y to Rs. 8,166.9mn with 47bps expansion in margin to 16%. H1 FY19 adjusted PAT increased by 49.6% Y-o-Y to Rs. 14,592.4mn with 38bps expansion in margin.


Quarterly operating performance Quarterly financial performance

0

50,000

100,000

150,000

200,000

0.0

0.1

0.2

0.3


Viscose sales volume (mn tonnes)Chemicals sales volume (mn tonnes)Viscose sales realization (Rs. per tonne)Chemicals blended realization (Rs. per tonne)

0%

5%

10%

15%

20%

25%

0

10,000

20,000

30,000

40,000

50,000

60,000


Total operating revenue (Rs. mn)EBITDA margin (%)Adjusted PAT margin (%)


Recent quarter and annual performance analysis:

FY18 annual performance: In FY18, Grasim reported a 52.6% Y-o-Y rise in standalone top-line to Rs. 157,884.8mn. This was mainly due the merger of Aditya Birla Nova Ltd. (effective date: 01st Jul. 2017) and in increase in the viscose & chemicals capacities arising from the debottlenecking exercise. During the year, viscose and chemical capacities stood at 0.544mn tonnes and 0.938mn tonnes, respectively. The Viscose segment business increased by 17.9% to Rs. 83,740mn, on the back of 5.4% and 11.9% rise in sales volume and realization, respectively. The chemical segment business increased by 31.2% to Rs. 50,020mn, due to 9.7% and 19.6% increase in sales volume and blended realization, respectively. Cost of goods sold (net of inventory change and traded goods) increased by 51.2%, mainly due to the rise in input cost like caustic soda and sulphur. However as a percent of top-line it stood at 46.3% in FY18 as compared to 46.7% in FY17. Employee expenses, power & fuel cost and other expenses increased by 68.5%, 53.6% and 69.7%, respectively. Consequently, standalone EBITDA increased by 42.9% to Rs. 30,801.8mn. EBITDA margin contracted by 132bps to 19.5% in FY18. Integration of group company and increase in capacities led to a 40.7% rise in depreciation charge, while finance cost increased by 122.4%. Other income declined by 2.7%, while tax expenses increased by 31.8%. As a result, adjusted PAT increased by 30.9% to Rs. 20,412.7mn with 215bps contraction in PAT margin to 12.9%. RoE and RoCE stood at 4.6% and 5.1%, respectively in FY18 as compared to 9.6% and 9.7% in FY17. Expectations over FY18-21E: Grasim has planned a massive capex of Rs. 75bn over the next 2-3 years, through which it will increase the VSF and chemicals capacity to 0.79mn tonnes and 1.3mn tonnes, respectively. Since VSF capacities come in phase, while the demand is continuous, we expect the company would continue to operate at the rated capacities. Also we are anticipating there would be volatility in the international viscose prices, mainly due the capacity addition in China and fall in global cotton production. However, the viscose realization for Grasim would be resilient on account of continuous domestic demand growth and higher proportion of VAPs in the sales-mix. Chemicals blended realization too will be volatile in future. Consequently, we are forecasting a 12.6% CAGR increase in top-line to Rs. 225,515.6mn. The Viscose and Chemicals segments business are expected to rise by 12% and 13.3%, respectively during the same period. Net cost of revenue to increase by 13.4% CAGR, while power & fuel cost to increase by 13.5% CAGR over FY18-21. EBITDA to increase by 14.9% CAGR over FY18-21 to Rs. 46,705.6mn in FY21. EBITDA margin to expand by 120bps over the period to 20.7% in FY21. With increase in capacities, depreciation and finance charge would increase by 12% and 29.6% CAGR. As a result, adjusted PAT to increase by 13.9% CAGR to Rs. 30,131.6mn in FY21. PAT margin to expand by 43bps to 13.4% in FY21. RoE and RoCE to improve to 6.1% and 7.3% in FY21E from 4.6%and 5.1% n FY18. RoIC too would improve to 15.5% in FY21 from 12.4% in FY18.


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Risk & concern:

• Fund infusion in group companies: In Q2 FY19, Aditya Birla Group company - Vodafone Idea Cellular Ltd. (VIL) is planning for fund infusion of Rs. 250bn, of which the promoters would put around Rs. 180bn. Additionally, according to certain media report, due to overall tightening of liquidity in the economy in last quarter, the company is planning to infuse capital in its subsidiary Aditya Birla Capital Ltd. Since it has already planned a massive capex of around Rs. 75bn over the next 2-3 years on standalone basis, any plan by Grasim to participates in the fund raising proposal of both the companies, would create a fund constraint. So a participation in the fund raising plans of group companies would create a concern for the Grasim investors.

• Slowdown in general economy: Grasim business is largely depended on the consumer spending towards apparels. Any slowdown in the general economy would negatively affect the spending of the consumer.

• Delay in capacity expansion: The company’s capacities are currently operating at rated capacity. It has planned a massive capex, which would increase the viscose capacity by around 58% and is anticipated to be completed by FY21. Since the demand of viscose is growing continuously in the domestic market, inability of the company to commission the additional capacities on time would hurt its business.

• Volatility in the raw material prices: Raw material cost forms around 50% of the top-line. Grasim is partially integrated on dissolvable wood pulp, while it is fully integrated on caustic soda and power requirement front. Thus any volatility in the raw material prices, would impact the profitability of the company.

Peer comparison:

Company Name Currency CMP (Rs.)

MCAP (Rs. mn)

EV (Rs. mn)

Stock Return (%) TTM Total Operating Revenue (Rs. mn)

TTM EBITDA (Rs. mn)

TTM PAT (Rs. mn)

TTM EBITDA

Margin (%)

TTM PAT

Margin (%) 1 M 3 M 6 M 1 Y

Grasim Industries Ltd. INR 824.0 541,855.2 551,525.6 -2.2% -6.3% -12.1% -33.5% 188,970.2 38,589.0 25,248.6 20.4% 13.4% Lenzing AG EUR 83.0 2,206.5 2,367.6 2,169.0 400.1 194.5 18.4% 9.0%

Company Name EPS (Rs.)

BVPS (Rs.)

DPS (Rs.)

Debt Equity Ratio

Fixed Asset Turnover

Ratio

RoE (%)

RoCE (%)

P / E (x)

P / B (x)

EV / Sales (x)

EV / EBITDA (x)

MCAP / Sales (x)

Earning Yield (%)

Grasim Industries Ltd. 38.4 681.1 5.6 0.1 1.6 5.6% 6.5% 21.5 1.2 2.9 14.3 2.9 4.7% Lenzing AG 7.3 56.0 5.0 0.3 0.9 19.8% 15.1% 11.3 1.5 1.1 5.9 1.0 8.8%

Note: Non domestic data in their respective currency; Source: Choice Broking Research; Ace Equity

There are no peers having similar kind of business in domestic market. The above peer is global leader in the viscose and have similar business model as compared to Grasim. Based on above criteria, below are the pros and cons of Grasim over its peerset. • Monopolistic position in domestic market, where the viscose demand growth is in excess of 2ppts over the global growth

rate. • Since VSF operations are 80% backward integrated, the company is better placed to withstand any rising cost

environment. • Increased acceptance of viscose as the replacement fiber for cotton fibers. Cellulose gap emerging and would be positive

for the viscose industry. • Operating at the rated capacity, despite capacity addition in last couple of years. • Has planned a capex of Rs. 75bn over the next 2-3 years to increase the VSF and chemicals capacity by 58% and 14% by

FY21. Since the VSF demand is continuous, the plants are expected to operate at full capacities in future. • Domestic realization to be resilient in future, mainly due to increased business in domestic market and higher proportion

of VAPs in the sales-mix. • Fund infusion in group companies is one of the key concerns.


Valuation:

We estimate Grasim’s total operating revenue to grow at 12.6% CAGR over FY18-21 to Rs. 225,515.6mn, while PAT to grow at 13.9% CAGR over the same period to Rs. 30,131.6mn. EBITDA to increase by 14.9% CAGR to Rs. 46,705.6mn with 120bps expansion in the margin.

Key operational assumptions FY19E FY20E FY21E

Viscose installed capacity (mn tonnes) 0.61 0.66 0.83 Viscose capacity utilization (%) 96.6% 91.5% 93.3% Viscose sales volume (mn tonnes) 0.59 0.61 0.75 Viscose sales realization (Rs.) 166,819.9 163,076.9 157,531.5 Chemicals installed capacity (mn tonnes) 1.14 1.18 1.27 Chemicals capacity utilization (%) 90.9% 91.1% 91.9% Chemicals sales volume (mn tonnes) 1.04 1.08 1.18 Chemical sales realization (Rs. mn) 62,956.18 63,958.02 61,541.08 Effective tax rate (%) 60.8% 30.0% 30.0%

At the CMP of Rs. 824, Grasim’s share is trading at TTM P/E multiple of 21.5x. Additionally, it is trading at a P/BVPS and EV/EBITDA multiple of 1.2x and 14.3x, respectively. We initiate coverage on Grasim with a “BUY” rating and target price of Rs. 1,130.5 per share using SOTP methodology.


SOTP valuation Standalone valuation

Standalone FY21E EBITDA (Rs. mn) 46,705.6 EV/EBITDA (x) 5.0 Standalone EV (Rs. mn) 233,527.8 Less: Debt (26,200.8) Add: C&CE 2,027.9 Implied standalone MCAP (Rs. mn) 209,354.9 Number of shares outstanding (mn) 657.6 Value of standalone business (Rs. per share) 318.4

Valuation of Ultratech Cement Ltd. (UCL) CMP (Rs. per share) 3,820.6 Number of shares outstanding of UCL (mn) 274.6 Derived MCAP (Rs. mn) 1,049,221.9 Grasim's stake 60.20% Attributable MCAP to Grasim (Rs. mn) 631,631.6 Holding company discount 30.00% Resulting MCAP (Rs. mn) 442,142.1 Value of cement business (Rs. per share) 672.4

Valuation of Aditya Birla Capital Ltd. (ABCL) CMP (Rs. per share) 93.8 Number of shares outstanding of ABCL (mn) 2,201.4 Derived MCAP (Rs. mn) 206,380.8 Grasim's stake 55.98% Attributable MCAP to Grasim (Rs. mn) 115,532.0 Holding company discount 30.00% Resulting MCAP (Rs. mn) 80,872.4 Value of NBFC business (Rs. per share) 123.0 Value of other investments at book value (Rs.) 11,047.3 Value of other investments (Rs. per share) 16.8

Total value (Rs. per share) 1,130.5 CMP (Rs.) 824.0 Expected return 37.2%



Financial statement:

Standalone profit and loss statement Rs. mn FY16 FY17 FY18 FY19E FY20E FY21E

Revenue from Operations 89,692.5 103,456.5 157,884.8 197,569.2 204,471.9 225,515.6 Cost of Materials Consumed (43,896.7) (46,802.7) (70,881.4) (91,276.5) (95,477.7) (104,864.7) Purchases of Stock in Trade (405.8) (596.8) (1,704.8) (2,537.0) (1,696.3) (1,870.9) Decrease / (Increase) in Inventories of Finished Goods, Work in Progress and Stock in Trade

68.3 (954.7) (518.7) 1,344.0 58.2 64.2

Employee Benefits Expense (6,173.4) (6,780.0) (11,427.3) (13,989.1) (14,075.2) (15,523.8) Power and Fuel Cost (14,037.5) (14,902.6) (22,897.2) (30,792.2) (30,377.1) (33,503.4) Freight and Handling Expense (1,591.3) (1,803.2) (2,568.1) (2,999.4) (3,203.4) (3,533.1) Other Expenses (8,729.7) (10,068.8) (17,085.5) (17,768.3) (17,751.4) (19,578.3) EBITDA 14,926.4 21,547.7 30,801.8 39,550.7 41,949.0 46,705.6 Depreciation and Amortization Expense (4,448.7) (4,461.4) (6,276.7) (7,571.6) (8,115.3) (8,828.7) EBIT 10,477.7 17,086.3 24,525.1 31,979.1 33,833.8 37,876.9 Finance Costs (1,474.0) (576.2) (1,281.3) (2,311.5) (2,858.4) (2,788.7) Other Income 3,584.7 4,739.3 4,613.7 7,583.0 7,527.8 7,956.9 Exceptional Items (291.9) 0.0 (2,726.1) (22,833.5) 0.0 0.0 PBT 12,296.5 21,249.4 25,131.4 14,417.1 38,503.2 43,045.1 Tax Expense (Regular) (2,590.1) (5,649.4) (7,444.8) (8,766.4) (11,551.0) (12,913.5) Reported PAT 9,706.4 15,600.0 17,686.6 5,650.7 26,952.2 30,131.6 Adjusted PAT 9,998.3 15,600.0 20,412.7 28,484.2 26,952.2 30,131.6

Standalone balance sheet statement Rs. mn FY16 FY17 FY18 FY19E FY20E FY21E

Equity Share Capital 933.6 933.7 1,314.8 1,314.8 1,314.8 1,314.8 Other Equity 137,784.9 161,376.1 446,583.5 446,681.3 468,379.3 492,636.8 Long Term Borrowings 8,575.0 6,406.8 12,394.5 18,878.6 17,034.3 7,345.8 Other Non Current Financial Liabilities 19.4 27.0 55.8 25.0 25.9 28.5 Long Term Provisions 722.8 76.0 313.2 268.5 277.9 306.5 Deferred Tax Liabilities (Net) 4,941.1 6,629.8 18,349.6 13,212.3 13,673.9 15,081.2 Other Non Current Liabilities 214.5 294.9 386.8 505.0 522.7 576.5 Short Term Borrowings 9,818.5 608.1 17,293.2 18,060.7 18,855.0 18,855.0 Trade Payables 5,932.2 11,139.3 21,317.9 16,038.1 16,843.9 18,501.2 Other Current Financial Liabilities 1,114.9 1,071.8 2,723.0 2,636.7 2,728.8 3,009.6 Other Current Liabilities 4,401.0 5,980.0 9,206.9 10,878.4 11,258.5 12,417.2 Short Term Provisions 979.6 1,549.7 4,773.9 3,697.0 3,826.2 4,220.0 Current Tax Liabilities (Net) 2,526.2 2,417.8 2,575.5 4,468.2 4,624.3 5,100.2 Total Liabilities 177,963.7 198,511.0 537,288.6 536,664.7 559,365.5 579,393.5

Property, Plant and Equipment 69,448.8 68,579.8 95,396.9 116,904.5 130,191.6 139,991.0 Other Intangible Assets 181.7 288.3 12,768.7 Capital Work in Progress 3,176.5 3,754.8 7,451.1 18,794.2 26,011.4 20,914.3 Long Term Investments 58,869.1 74,240.9 335,867.4 335,867.4 335,867.4 343,165.2 Long Term Loans and Advances 1,269.4 1,418.0 1,383.2 1,383.2 1,383.2 1,498.8 Other Non Current Financial Assets 10.9 13.6 366.0 63.5 65.7 72.5 Non Current Tax Assets (Net) 943.9 316.9 320.4 385.7 399.1 440.2 Other Non Current Assets 605.6 576.4 2,365.7 963.1 996.7 1,099.3 Current Investments 12,127.1 15,723.3 19,598.5 0.0 0.0 1,151.9 Inventories 16,053.7 17,327.4 25,916.6 30,787.7 31,863.4 35,142.7 Trade Receivables 9,923.7 11,895.5 26,093.2 21,034.6 21,769.6 24,010.0 Cash & Cash Equivalent 350.1 527.4 418.8 767.5 794.3 876.0 Short Term Loans & Advances 653.7 505.5 849.0 849.0 849.0 913.3 Other Current Financial Assets 207.1 432.0 2,180.1 1,336.4 1,383.1 1,525.5 Current Tax Assets (Net) 836.6 0.0 845.3 966.9 1,000.6 1,103.6 Other Current Assets 3,268.6 2,898.4 5,442.3 6,515.0 6,742.7 7,436.6 Assets Held for Disposal 37.2 12.8 25.4 46.1 47.7 52.6 Total Assets 177,963.7 198,511.0 537,288.6 536,664.7 559,365.5 579,393.5


Financial statement (Contd…)


Standalone financial ratios FY16 FY17 FY18 FY19E FY20E FY21E

Profitability & Return Ratios EBITDA Margin (%) 16.6% 20.8% 19.5% 20.0% 20.5% 20.7% Adjusted PAT Margin (%) 11.1% 15.1% 12.9% 14.4% 13.2% 13.4% RoNW (%) 7.2% 9.6% 4.6% 6.4% 5.7% 6.1% RoCE (%) 6.8% 9.7% 5.1% 6.7% 6.8% 7.3%

Working Capital & Liquidity Ratios Current Ratio (x) 1.8 2.2 1.4 1.1 1.1 1.2 Quick Ratio (x) 1.1 1.4 1.0 0.6 0.6 0.6 Net Debt to EBITDA (x) 0.4 (0.4) 0.3 0.9 0.8 0.5

Turnover & Leverage Ratios Fixed Asset Turnover (x) 1.2 1.4 1.4 1.5 1.3 1.4 Total Asset Turnover (x) 0.5 0.5 0.3 0.4 0.4 0.4 Debt Equity Ratio (X) 0.1 0.0 0.1 0.1 0.1 0.1 Dividend Pay Out Ratio 17.7% 13.1% 17.9% 16.2% 16.2% 16.2%

Valuation Ratios EPS (Rs.) 15.2 23.7 31.0 43.3 41.0 45.8 DPS (Rs.) 2.7 3.1 5.6 7.0 6.7 7.4 BVPS (Rs. Cr) 210.9 246.8 681.1 681.3 714.3 751.2 P / E (X) 19.0 20.1 18.0 P / BVPS (x) 1.2 1.2 1.1 EV / Sales (x) 2.9 2.8 2.5 EV / EBITDA (x) 14.6 13.8 12.1 P / S (x) 2.7 2.7 2.4

Standalone cash flow statement Particulars (Rs. mn) FY16 FY17 FY18 FY19E FY20E FY21E Profit before Tax 12,296.5 21,249.4 25,131.4 14,417.1 38,503.2 43,045.1 Depreciation and Amortization 4,448.7 4,461.4 6,276.7 7,571.6 8,115.3 8,828.7 Finance Costs 1,474.0 576.2 1,281.3 2,311.5 2,858.4 2,788.7 Interest Income (543.7) (1,167.2) (553.4) (1,373.0) (1,421.0) (1,567.3) Dividend Income (1,789.9) (2,018.0) (2,267.9) (3,554.7) (3,358.7) (3,358.7) Others 162.6 (1,100.3) 1,717.0 0.0 0.0 0.0 Operating Cash Flow before Working Capital Changes

16,048.2 22,001.5 31,585.1 19,372.5 44,697.1 49,736.5

Change in Working Capital 570.5 2,801.9 (2,796.6) (6,517.3) (116.8) (1,155.4) Direct Taxes Paid (Net of Refunds) (3,211.8) (2,210.2) (5,233.3) (8,766.4) (11,551.0) (12,913.5) Cash Flow from Operating Activities 13,406.9 22,593.2 23,555.2 4,088.8 33,029.4 35,667.6

Purchase of Fixed Assets (6,450.4) (4,324.6) (10,688.5) (27,653.5) (28,619.7) (13,530.9) Change in Investments 0.0 0.0 0.0 19,598.5 0.0 (8,449.7) Change in Loans & Advances 0.0 0.0 0.0 0.0 0.0 (179.9) Dividend Income 1,789.9 2,018.0 2,267.9 3,554.7 3,358.7 3,358.7 Interest Income 543.7 1,167.2 553.4 1,373.0 1,421.0 1,567.3 Others (2,894.7) (7,301.0) (11,380.1) 0.0 0.0 0.0 Cash Flow from Investing Activities (7,011.5) (8,440.4) (19,247.3) (3,127.3) (23,840.0) (17,234.6)

Borrowings (Net) (3,274.6) (11,321.9) 942.1 7,251.6 (1,050.0) (9,688.5) Finance Costs (1,474.0) (576.2) (1,281.3) (2,311.5) (2,858.4) (2,788.7) Dividend Paid (1,774.2) (2,037.3) (3,660.4) (4,627.4) (4,378.5) (4,895.0) Others (107.8) (102.1) (512.7) (925.5) (875.7) (979.0) Cash Flow from Financing Activities (6,630.6) (14,037.5) (4,512.3) (612.8) (9,162.6) (18,351.2)

Net Cash Flow (235.2) 115.3 (204.4) 348.7 26.8 81.7 Opening Balance of Cash & Cash Balance 465.8 230.6 465.2 418.8 767.5 794.3 Closing Balance of Cash & Cash Balance 230.6 345.9 260.8 767.5 794.3 876.0

© CHOICE INSTITUTIONAL RESEARCH

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18

Disclaimer

This is solely for information of clients of Choice Broking and does not construe to be an investment advice. It is also not intended as an offer or solicitation for the purchase and sale of any financial instruments. Any action taken by you on the basis of the information contained herein is your responsibility alone and Choice Broking its subsidiaries or its employees or associates will not be liable in any manner for the consequences of such action taken by you. We have exercised due diligence in checking the correctness and authenticity of the information contained in this recommendation, but Choice Broking or any of its subsidiaries or associates or employees shall not be in any way responsible for any loss or damage that may arise to any person from any inadvertent error in the information contained in this recommendation or any action taken on basis of this information. This report is based on the fundamental analysis with a view to forecast future price. The Research analysts for this report certifies that all of the views expressed in this report accurately reflect his or her personal views about the subject company or companies and its or their securities, and no part of his or her compensation was, is or will be, directly or indirectly related to specific recommendations or views expressed in this report. Choice Broking has based this document on information obtained from sources it believes to be reliable but which it has not independently verified; Choice Broking makes no guarantee, representation or warranty and accepts no responsibility or liability as to its accuracy or completeness. The opinions contained within the report are based upon publicly available information at the time of publication and are subject to change without notice. The information and any disclosures provided herein are in summary form and have been prepared for informational purposes. The recommendations and suggested price levels are intended purely for stock market investment purposes. The recommendations are valid for the day of the report and will remain valid till the target period. The information and any disclosures provided herein may be considered confidential. Any use, distribution, modification, copying, forwarding or disclosure by any person is strictly prohibited. The information and any disclosures provided herein do not constitute a solicitation or offer to purchase or sell any security or other financial product or instrument. The current performance may be unaudited. Past performance does not guarantee future returns. There can be no assurance that investments will achieve any targeted rates of return, and there is no guarantee against the loss of your entire investment.

POTENTIAL CONFLICT OF INTEREST DISCLOSURE (as on date of report) Disclosure of interest statement – • Analyst interest of the stock /Instrument(s): - No. • Firm interest of the stock / Instrument (s): - No.

Choice’s Rating Rationale The price target for a large cap stock represents the value the analyst expects the stock to reach over next 12 months. For a stock to be classified as Outperform, the expected return must exceed the local risk free return by at least 5% over the next 12 months. For a stock to be classified as Underperform, the stock return must be below the local risk free return by at least 5% over the next 12 months. Stocks between these bands are classified as Neutral.

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Rating Legend Rating Upside

BUY Absolute Return >15% Accumulate Absolute Return Between 10-15% Hold Absolute Return Between 0-10% Reduce Absolute Return 0 To Negative 10% Sell Absolute Return > Negative 10%

Equity Research Team

Name Designation Email id Contact No.

Ajay Kejriwal President [email protected] 022 - 6707 9850

Sundar Bhagwandas Head of Research - Fundamental [email protected] 022 - 6707 9910

Sumeet Bagadia Head of Research - Technical [email protected] 022 - 6707 9830

Amit Singh VP - Institutional Sales [email protected] 022 - 6707 9530

Rajnath Yadav Research Analyst [email protected] 022 - 6707 9912

Satish Kumar Research Analyst [email protected] 022 - 6707 9913

Aman Lamba Research Associate [email protected] 022 - 6707 9917

Shrey Gandhi Research Associate [email protected] 022 - 6707 9914

Kkunal Parar Sr. Research Associate [email protected] 022 - 6707 9982

Sachin Gupta Research Associate [email protected] 022 - 6707 9978

Surendra Bhaskar Research Associate [email protected] 022 - 6707 9978

Palak Kothari Research Associate [email protected] 022 - 6707 9946

Sunand Subramaniam Sr. Research Analyst [email protected] 022 - 6707 9929

Sunil Rokade Research Analyst [email protected] 022 - 6707 9972

Harsha Sharma Research Analyst [email protected] 022 - 6707 9979

Karan Bhatt Research Advisor [email protected] 022 - 6707 9906

Diksha Mhatre Research Advisor [email protected] 022 - 6707 9933

Neeraj Dubey Research Advisor [email protected] 022 - 6707 9971

Documents

INITIATING COVERAGE Grasim Industries Ltd. BUY Steady ......Grasim a part of USD 44bn Aditya Birla Group, is one of the largest VSF manufacturers globally with a capacity of 0.546mn