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INSTITUTIONAL EQUITY RESEARCH
Page | 1 | PHILLIPCAPITAL INDIA RESEARCH Please see penultimate page for additional important disclosures. PhillipCapital (India) Private Limited. (“PHILLIPCAP”) is a foreign broker-dealer unregistered in the USA. PHILLIPCAP research is prepared by research analysts who are not registered in the USA. PHILLIPCAP research is distributed in the USA pursuant to Rule 15a-6 of the Securities Exchange Act of 1934 solely by Rosenblatt Securities Inc, an SEC registered and FINRA-member broker-dealer.
Kalpataru Power (KPP IN)
Promoter leverage bogs down a strong fundamental story
INDIA | CAPITAL GOODS | Company Update
14 January 2020
We believe that the recent underperformance of KPP’s stock price (-22% in 6 months vs. peers) has more to do with issues outside its core operations. The promoter group’s exposure to real estate with high leverage, exacerbated by a subdued demand environment, has led to concerns. We analysed the group’s unlisted property holdcos’ financials and concluded that while there could be a mismatch in cash flows in the near term, the group should progressively pare down its debt based on a maturing asset base, sale of lease-earning projects, and some large launches. We maintain our BUY rating on KPP as it continues to outperform on all its ‘controllable’ factors – order inflows, execution and working capital – while also delivering on improving its capital allocation. Core business remains on track; taking steps to offset a long-term slowdown in T&D KPP’s performance YTD FY20 has been above par. It has already secured Rs 60bn of new orders in 9M and is L1 for Rs 24bn vs. its FY20 guidance of Rs 90bn. The management revised up its sales guidance to 20%+ vs. 15-20% earlier after 2Q, indicating a robust sales growth, despite a challenging environment. Its working-capital intensity, at 30%, is in line with estimates and guidance. KPP is working on (1) offsetting higher competition in the railway segment in the near term and (2) the risk of a structural slowdown in domestic T&D beyond FY22 – by growing JMC’s presence in the international market.
Walking the talk on setting right its capital-allocation policy Cash flows from the sale of T&D BOOT assets have started to materialise; transfer of the first asset (Satpura) took place in 3Q, while part payment on another asset (Alipurduar) is likely in 4Q; Kohima will be commissioned in 2HFY21. These inflows (c.Rs 10bn), along with the sale of the Indore real-estate project (c.Rs 3bn), will pave the way for KPP to turn net-cash by FY22 on a standalone basis. Management expects to restructure its roads portfolio in JMC by FY21; these currently require an annual loss funding of Rs 800-900mn (50% of JMC’s PAT).
Promoters’ real-estate business – issues in the near term, but not unresolvable KPP’s promoters have exposure to real estate through their unlisted group companies; limited information on these is an issue, since the performance of the property business has historically had an impact on the promoter pledge level or stake in KPP. To better understand the current state of these unlisted entities, we sifted through FY18-19 financials. Key findings: Gross external leverage in the two holdcos (for over 30+ subsidiaries) was c. Rs 85bn (flat yoy); this debt is supported by inventories of Rs 80bn. Cash-flow mismatch was acute in FY19-20, as payments were made to acquire large land parcels in Mumbai, while end projects could not be launched due to delay in clearances, which have since come through. Nonetheless, the business generated collections of c.Rs 10bn p.a for the past four years, and as multiple projects are likely to be completed in the next two years, cash flows should improve from here, which would help repay debt.
Outlook and valuation KPP, combined with JMC, are plays on seven key infrastructure segments in India and abroad. A 1.9x book-to-bill (B-t-B) for KPP standalone, 2.6x B-t-B for JMC, and an identified opportunity of US$ 117bn over the next five years offers strong revenue visibility, which translates to 24% CAGR for FY19-22 earnings. We see KPP as a prime rerating candidate, as it delivers on improving its capital allocation and as the risk of further stake sale/increase in pledge by promoters reduces over the next two years. The standalone entity trades at 8x PE FY20, for 20% earnings CAGR and visibility on becoming net-cash.
We maintain our BUY rating. However, we have cut our target multiples – for KPP (to 13x from 14x) and JMC (to 10x from 12x) to reflect the risk from promoter-level debt. Consequently, we revise our SOTP-based target to Rs 595 from Rs 695 earlier. Our estimates do not include financials of Linjemontage. Key risks: Material increase in pledge by the promoter and faster-than-anticipated slowdown in domestic T&D ordering.
BUY (Maintain) CMP RS 420 TARGET RS 595 (42%)
SEBI CATEGORY: SMALL CAP
COMPANY DATA
O/S SHARES (MN) : 155
MARKET CAP (RSBN) : 61
MARKET CAP (USDBN) : 0.9
52 - WK HI/LO (RS) : 554 / 327
LIQUIDITY 3M (USDMN) : 0.7
PAR VALUE (RS) : 2
SHARE HOLDING PATTERN, %
Sep 19 Jun 19 Mar 19
PROMOTERS : 54.4 59.3 59.3
FII / NRI : 7.6 4.6 4.4
FI / MF : 28.8 25.6 25.3
NON PRO : 2.1 1.3 1.4
PUBLIC & OTHERS : 7.1 9.1 9.7
PRICE PERFORMANCE, %
1MTH 3MTH 1YR
ABS -12.8 -20.1 5.0
REL TO BSE -14.2 -27.6 -11.9
PRICE VS. SENSEX
KEY FINANCIALS
Rs bn FY19 FY20E FY21E
Net Sales 108.40 127.99 137.03
EBIDTA 13.03 16.17 16.57
Net Profit 4.41 5.66 6.40
EPS, Rs 28.8 36.6 41.4
PER, x 14.6 11.5 10.2
EV/EBIDTA, x 7.4 6.2 4.9
P/BV, x 2.1 1.8 1.5
ROE, % 15.2 17.1 16.2
Total debt/Equity (%) 108.4 101.8 51.5
Source: PhillipCapital India Research Est.
Jonas Bhutta, Research Analyst Vikram Rawat, Research Associate Sandesh Shetty, Research Associate
80
130
180
230
280
Apr-16 Apr-17 Apr-18 Apr-19
Kalpataru Power BSE Sensex
Page | 2 | PHILLIPCAPITAL INDIA RESEARCH
KALPATARU POWER COMPANY UPDATE
KPP’s standalone order inflows are on track to meet guidance
JMC’s order inflows should improve in 2HFY20 on large international orders
KPP Group order inflows
KPP standalone order inflows mix: Share of T&D to reduce structurally
*includes Linjemontage
TBCB projects awarded in the past 6 months
Project Agency Project cost
(Rs mn) L1 or
Winner
Rampur Sambhal Transco RECTPCL 8,000 PGCIL
Lakadia Banaskantha Transco RECTPCL 10,750 Adani
Jam Khambaliya Transco RECTPCL 2,660 Adani
WRSS XXI (A) Transco RECTPCL 8,560 Adani
Ajmer Phagi Transco - Rajasthan SEZ Part-A RECTPCL 5,830 PGCIL
Bhind Guna Transmission RECTPCL 7,100 PGCIL
Udupi Kasargode Transmission RECTPCL 6,200 Sterlite
Khetri Transco - Rajasthan SEZ Part -C RECTPCL 13,650 PGCIL
TS at Meerut & Simbhaoli PFCCL 10,000 PGCIL
RE Projects at BhujII (2000 MW) PFCCL 6,450 PGCIL
WRSS-21 Part-B PFCCL 18,650 Sterlite
TS for Rajasthan SEZ Part-B PFCCL 6,760 PGCIL
TS for Rajasthan SEZ Part-D PFCCL 12,080 Adani
Total
1,16,690
Trend in TBCB projects awarding – a spike after three years of lull
Source: PhillipCapital India Research, Company
74
.5
62
.3
93
.4
83
.4
79
.7 1
02
.4
10
8.7
61
.4
49
.0
22
.1
30
.7
0
20
40
60
80
100
120
FY1
6
FY1
7
FY1
8
FY1
9
FY2
0E
FY2
1E
FY2
2E
9M
FY1
9
9M
FY2
0
4Q
FY1
9
4Q
FY2
0E
(Rs bn) Order inflows - KPP
39%
-20%
31
.6
32
.0
33
.4
56
.3
56
.9
62
.6
69
.2
45
.7
33
.6
10
.6
23
.3
0
20
40
60
80
FY1
6
FY1
7
FY1
8
FY1
9
FY2
0E
FY2
1E
FY2
2E
9M
FY1
9
9M
FY2
0
4Q
FY1
9
4Q
FY2
0E
(Rs bn) Order inflows - JMC
121%
-26%
10
6.0
94
.3 1
26
.8
13
9.7
14
6.8
17
5.2
18
8.0
0
20
40
60
80
100
120
140
160
180
200
FY1
6
FY1
7
FY1
8
FY1
9
FY2
0E
FY2
1E
FY2
2E
(Rs bn) Order inflows - KPTL Group*
59% 50%
58% 54% 54%
23%
19%
23% 20% 21%
18% 31%
20% 25% 26%
0%
20%
40%
60%
80%
100%
FY18 FY19 FY20E FY21E FY22E
Power T&D O&G (pipeline) Railways
-
50
100
150
200
250
FY1
0
FY1
1
FY1
2
FY1
4
FY1
5
FY1
6
FY1
7
FY1
8
FY1
9
FY2
0 Y
TD
(Rs bn) TBCB projects awarding
Page | 3 | PHILLIPCAPITAL INDIA RESEARCH
KALPATARU POWER COMPANY UPDATE
Upcoming T&D opportunities likely to be awarded in the next 12 months
S. No. Transmission project Total Project costs (Rs bn)
GEC projects costs (Rs bn)
1 TS for RE projects in Rapar (3GW) & Lakadia (2GW) SEZ - Part A 9.3 9.3
2 TS for RE projects in Rapar (3GW) & Lakadia (2GW) SEZ– Part B 13.7 13.7
3 TS for RE projects in Rapar (3GW) & Lakadia (2GW) SEZ – Part C 21.7 21.7
4 TS for RE projects in Banaskantha (2.5GW) REZ- Part B 3.1 3.1
5 TS for RE projects in at Jamnagar (2.5GW) REZ 13.5 13.5
6 TS for RE projects in Sholapur (1GW Ph-I + 500MW Ph-II) SEZ & Osmanabad area (1 GW) in Maharashtra 5.3 5.3
7 TS for RE projects in Wardha (2.5GW) SEZ in Maharastra 4.7 4.7
8 TS for RE projects in Rajgarh (2.5GW) SEZ in Madhya Pradesh 6.4 6.4
9 TS for RE projects in Khandwa (2.5GW) in Madhya Pradesh 4.5 4.5
10 TS for providing immediate connectivity to 4GW Dholera UMSP 14.2 14.2
11 TS for Solar Energy Zone in Ananthpuram (Ananthapur) (2.5GW) & Kurnool (1GW), Andhra Pradesh 8.2 8.2
12 TS for Solar Energy Zone in Gadag (2.5GW), Karnataka - Part A 5.5 5.5
13 TS Solar Energy Zone in Bidar (2.5GW), Karnataka 13.7 13.7
14 TS for solar energy zones in Rajasthan (8.1 GW) Ph-II - Part A 6.2 6.2
15 TS for solar energy zones in Rajasthan (8.1 GW) Ph-II - Part B 11.2 11.2
16 TS for solar energy zones in Rajasthan (8.1 GW) Ph-II - Part C 21.8 21.8
17 TS for solar energy zones in Rajasthan (8.1 GW) Ph-II - Part D 17.4 17.4
18 TS for solar energy zones in Rajasthan (8.1 GW) Ph-II - Part E 16.4 16.4
19 TS for solar energy zones in Rajasthan (8.1 GW) Ph-II - Part F 21.0 21.0
20 TS for solar energy zones in Rajasthan (8.1 GW) Ph-II - Part G 16.2 16.2
21 TS in Jharkhand (Package-1) 10.3 -
22 TS in Jharkhand (Package-2) 9.6 -
23 TS in Jharkhand (Package-3) 7.0 -
24 TS in Jharkhand (Package-4) 11.8 -
25 TS for Vikhroli scheme (Maharashtra) 7.8 -
Total 280.4 233.9
Source: PhillipCapital India Research, Company
Oil & gas pipeline opportunities Project Length (kms) Project cost (Rs bn)
North-East Natural gas pipeline grid 1,656 93 Mumbai-Angul NG pipeline 1,400 63 Kanai Chhata - Shrirampur gas pipeline 250 10 Langtala - Jodhpur - Bhilwara NG pipeline 580 23 Srikakulam - Angul NG pipeline 390 16 Kukrahati-Itinda Natural gas pipeline 125 5 Total Natural gas pipelines 4,401 210 Kandla-Gorakhpur LPG pipeline 1,987 90 Guwahati-Silchar-Imphal product pipeline 610 25 Paradip-Somnathpur-Haldia Pipeline 330 11 Paradip to Numaligarh crude oil pipeline 1,398 54 Numaligarh - Siliguri expansion 654 26 Numaligarh - Dimapur -Imphal 304 12 Numaligarh- Gohpur-Itanagar 54 2 Total Oil product pipelines 5,337 220
Total 9,738 430
Indradhanush: Plans to build a gas grid in the northeast
Source: PhillipCapital India Research, Company
Page | 4 | PHILLIPCAPITAL INDIA RESEARCH
KALPATARU POWER COMPANY UPDATE
JMC standalone order inflows mix
Potential value accretion if JMC merges with KPP (Rs)
JMC Market cap (Rs bn) 17.0
Value of 33% stake of JMC Minority (Rs bn) 5.6
KPP's CMP (Rs) 416
KPP's shares to JMC Minorities (mn) 13.4
KPPs shares O/s - current (mn) 154.7
KPPs shares O/s - revised (mn) 168.1
% Increase in KPP shares O/s 8.6%
KPP standalone EPS - ex-subs dividend (Rs) 34.9
JMC standalone EPS (Rs) 11.2
KPP's Standalone FY21 EPS on diluted base (Rs) 32.1
JMC's FY21 EPS on KPP's diluted base (Rs) 11.2
KPP & JMC merged entity EPS (Rs) 43.3
Target PE multiple (x) 13.0
Target value of Merged standalone (Rs / share) 563
Less: Loss funding of Road SPVs (Rs) (8)
Target value of Merged entity (Rs / share) 555
KPP standalone @ 13x FY21 EPS - (a) 453
67% stake in JMC @ 10x FY21E less 20% holdco disc- (b) 65
Current Valuate in SOTP (Rs /share) - (a+b) 519
Value accretion through merger 6.9%
Source: PhillipCapital India Research, Company
KPP book-to-bill should remain healthy at 1.9x…
…JMC’s book-to-bill is 2.6x…
Source: PhillipCapital India Research, Company
…offering visibility of 11% CAGR (FY19-22) in KPP revenues…
… and 15% in JMC revenues
Source: PhillipCapital India Research, Company
79%
44%
60% 60% 60%
21%
56%
40% 40% 40%
0%
20%
40%
60%
80%
100%
FY18 FY19 FY20E FY21E FY22E
B&F Infra
-
0.5
1.0
1.5
2.0
2.5
0
25
50
75
100
125
150
175
FY18 FY19 FY20E FY21E FY22E
(Rs bn) Order book - KPP Book-to-bill (x)
2.5
2.6
2.7
2.8
2.9
3.0
3.1
3.2
0
25
50
75
100
125
150
175
FY18 FY19 FY20E FY21E FY22E
(Rs bn) Order book - JMC Book-to-bill (x)
43
.0
48
.9
57
.4 71
.2
84
.0
88
.6
96
.6
29
.0
36
.2
42
.2
47
.7
0
20
40
60
80
100
120
FY1
6
FY1
7
FY1
8
FY1
9
FY2
0E
FY2
1E
FY2
2E
1H
FY19
1H
FY20
2H
FY19
2H
FY2
0E
(Rs bn) Revenues - KPP (SA)
13%
25%
24
.0
23
.3
27
.6
32
.5 3
9.7
44
.5 49
.9
14
.2
18
.5
18
.3
21
.2
0
10
20
30
40
50
FY1
6
FY1
7
FY1
8
FY1
9
FY2
0E
FY2
1E
FY2
2E
1H
FY19
1H
FY20
2H
FY19
2H
FY2
0E
(Rs bn) Revenues - JMC (SA)
16% 30%
Page | 5 | PHILLIPCAPITAL INDIA RESEARCH
KALPATARU POWER COMPANY UPDATE
KPP has been able to maintain margins despite growing share on non-T&D business
JMC’s margins should stabilise after expanding over FY16-20
Source: PhillipCapital India Research, Company
KPP + JMC should manage working-capital intensity without foregoing growth
Source: PhillipCapital India Research, Company
Cash flows from T&D BOOT sales have started and should accelerate in FY21… Stake Project cost & funding Deal value & Cash flows
(Rs bn) (%) TPC Grant Equity Sub debt Ext. debt KPPs Invest Total EV KPP share FY20E FY21E FY22E
Satpura 100% 3.4 0.6 0.6 0.1 2.1 0.7 2.3 2.3 2.3 - -
Alipurduar 100% 10.8 - 2.4 - 8.4 2.4 12.5 12.5 3.7 8.7 -
Kohima-Mariani 74% 12.8 - 2.9 - 9.9 2.1 18.0 13.3 - 6.7 6.7
Total
27.0 0.6 5.9 0.1 20.4 5.2 32.8 28.1 6.0 15.4 6.7
Source: PhillipCapital India Research, Company
11
.0%
11
.1%
11
.1%
10
.7%
11
.0%
11
.0%
11
.0%
11
.3%
11
.0%
10
.7%
10
.9%
0%
2%
4%
6%
8%
10%
12%
FY1
6
FY1
7
FY1
8
FY1
9
FY2
0E
FY2
1E
FY2
2E
1H
FY19
1H
FY20
2H
FY19
2H
FY2
0E
EBITDA margin - KPP (SA)
8.2
%
8.3
% 9.8
%
9.6
%
10
.9%
10
.9%
10
.9%
10
.4%
10
.9%
10
.3%
10
.9%
0%
2%
4%
6%
8%
10%
12%
FY1
6
FY1
7
FY1
8
FY1
9
FY2
0E
FY2
1E
FY2
2E
1H
FY19
1H
FY20
2H
FY19
2H
FY2
0E
EBITDA margin - JMC (SA)
20
%
17
% 19
%
19
%
18
%
27
%
23
%
25
%
23
% 27
%
8%
14
%
15
%
15
%
16
%
0%
5%
10%
15%
20%
25%
30%
FY18 FY19 FY20E FY21E FY22E
NWC ex loans to subs & acceptances - % of sales
KPP (CS) KPP (SA) JMC (SA)
Page | 6 | PHILLIPCAPITAL INDIA RESEARCH
KALPATARU POWER COMPANY UPDATE
… which should help KPP turn net cash in FY22
KPP standalone investments and loans to related parties will peak in FY20 and reduce thereafter (Rs mn) FY18 FY19 FY20E FY21E FY22E
JMC 3,209 3,209 3,209 3,209 3,209
SSL 1,163 1,230 1,886 1,886 1,886
Energy link 520 1,540 1,540 1,540 1,540
Kalpataru Metfab 220 220 220 220 220
Amber Real Estate 10 10 10 10 10
KPT Mauritius 29 29 1,457 1,457 1,457
Kalpataru Satpura 565 565 - - -
Alipurduar 1,450 1,946 2,856 - -
Kohima-Mariani 0 777 1,974 2,980 -
Jhajjar KT Transco 382 382 382 382 382
SSL - Pref capital 117 144 1,144 1,144 1,144
Total share capital 7,664 10,050 14,677 12,826 9,847
SSL 639 693 2,140 2,290 2,440
KPT Mauritius 77 56 56 56 56
Kalpataru Satpura 60 - - - -
Alipurduar 355 477 - - -
Kohima-Mariani 251 275 - - -
Jhajjar KT Transco 37 37 - - -
Amber Real Estate 1,413 632 632 632 632
Saicharan Properties 2,696 1,800 2,030 2,330 -
Total loan funding 5,527 3,969 4,858 5,308 3,128
Total Funding 13,191 14,020 19,535 18,135 12,975
Source: PhillipCapital India Research, Company
However, JMC’s leverage may stay, due to continued loss funding of its road projects…
…resulting in higher loans to related parties (Rs mn) FY18 FY19 FY20E FY21E FY22E
Brij Bhoomi 228 228 228 228 228
Wainganga 303 303 303 303 303
Vindhyachal 275 275 275 275 275
Kurukshetra 983 983 983 983 983
Equity by JMC 1,788 1,788 1,788 1,788 1,788
Brij Bhoomi 197 197 197 197 197
Wainganga 697 697 697 697 697
Vindhyachal 1,476 1,476 1,476 1,476 1,476
Sub debt by JMC 2,371 2,371 2,371 2,371 2,371
Brij Bhoomi 300 308 355 443 482
Wainganga 680 723 1,000 1,290 1,685
Vindhyachal 505 614 735 926 1,179
Kurukshetra 1,380 1,630 2,048 2,400 2,705
Loans by JMC 2,865 3,275 4,139 5,057 6,051
Brij Bhoomi 725 733 780 867 907
Wainganga 1,681 1,724 2,000 2,290 2,686
Vindhyachal 2,257 2,365 2,486 2,677 2,930
Kurukshetra 2,362 2,612 3,031 3,382 3,688
Total 7,024 7,434 8,297 9,216 10,210
Source: PhillipCapital India Research, Company
7.7 6.5
11.3
6.5
3.4
6.9
4.8
9.0
-0.2
-6.4
-8
-6
-4
-2
0
2
4
6
8
10
12
14
FY18 FY19 FY20E FY21E FY22E
(Rs bn) Gross debt - KPP (SA) Net debt - KPP (SA)
7.4 7.7
9.3 8.7 8.6
5.7
6.5
7.5 6.9
6.3
0
2
4
6
8
10
FY18 FY19 FY20E FY21E FY22E
(Rs bn)
Gross debt - JMC (SA) Net debt - JMC (SA)
Page | 7 | PHILLIPCAPITAL INDIA RESEARCH
KALPATARU POWER COMPANY UPDATE
Promoter’s exposure to real estate is a near-term challenge KPP’s promoters have exposure to real estate through their unlisted group companies. Lack of information on these entities is an issue since the performance of the property business has historically had an impact on the level of promoter pledge or stake in KPP. The Kalpataru group has two major holdcos, Kalpataru Ltd and Kalpataru Properties, which house a majority of its real-estate operations. These two entities have 30+ subsidiaries between themselves. In our effort to better understand the current state of the unlisted entities we sifted through their FY18-19 financials. We also referred to data on RERA websites to accumulate updates about the status of various projects. Our key findings from this data are:
Gross external leverage in the two holdcos was c.Rs 85bn (flat yoy). This debt is supported by inventories of Rs 80bn.
Cash-flow mismatch was acute in FY19-20, as payments were made to acquire large land parcels in Mumbai while end projects could not be launched due to delay in clearances, which have now come through.
Nonetheless, the business generated collections of c.Rs 10bn p.a for the past four years.
Multiple projects are likely to be completed (OC) in the next two years. Cash flows should improve from here, which will help repay debt.
Kalpataru – Consolidated summary (Rs mn) FY16 FY17 FY18 FY19
Revenues 9,704 9,141 14,871 13,993
EBITDA 1,251 1,957 1,754 1,899
EBITDA margin (%) 12.9% 21.4% 11.8% 13.6%
Depreciation 371 513 462 417
Finance costs 1,189 1,889 2,143 3,223
Interest coverage (x) 1.05 1.04 0.82 0.59
Other income 1,220 1,446 1,818 2,734
PBT 912 1,000 966 992
Taxes 185 222 418 325
PAT 710 749 439 548
Networth incl. Minority 12,272 13,002 13,440 13,787
Long term debt 14,425 15,864 20,582 26,731
CM of long term debt 3,128 1,217 2,490 4,482
Short term debt 23,318 24,891 35,445 28,923
Gross debt 40,872 41,972 58,517 60,136
Cash 213 789 548 401
Net debt 40,659 41,182 57,968 59,735
Net Debt to Equity (x) 3.3 3.2 4.3 4.3
Customer advances 3,709 5,556 3,898 1,913
Fixed assets 2,795 2,904 2,934 3,134
Investment properties 6,986 6,556 6,429 6,325
Investments 499 521 7,722 7,646
Inventories 35,522 40,472 41,668 40,745
Receivables 1,739 2,145 4,499 5,584
Loans to related parties 2,392 1,771 11,005 10,566
Loans to others 8,620 7,103 3,672 3,713
Kalpataru Properties – Consolidated summary (Rs mn) FY16 FY17 FY18
Revenues 864 1,219 1,983
EBITDA 607 436 231
EBITDA margin (%) 70.2% 35.7% 11.6%
Depreciation 11 7 12
Finance costs 836 843 475
Interest coverage (x) 0.73 0.52 0.49
Other income 63 38 226
PBT (178) (377) (30)
Taxes (37) (5) 10
PAT (143) (373) (42)
Networth incl. Minority 1,067 665 394
Long term debt 3,203 2,613 7,564
CM of long term debt 10 0 13
Short term debt 17,050 15,833 30,721
Gross debt 20,263 18,446 38,298
Cash 28 116 114
Net debt 20,235 18,330 38,184
Net Debt to Equity (x) 19.0 27.6 97.0
Customer advances 8 1,518 3,394
Fixed assets 176 132 830
Investment properties - - -
Investments 3,254 1,487 637
Inventories 15,499 18,372 39,254
Receivables 43 88 617
Loans to related parties 3,868 46 92
Loans to others 1,704 1,845 2,897
Source: PhillipCapital India Research, Company
Page | 8 | PHILLIPCAPITAL INDIA RESEARCH
KALPATARU POWER COMPANY UPDATE
Kalpataru Ltd – consolidated cash flows (Rs mn) FY16 FY17 FY18 FY19
PBT 912 1,000 966 992
Add: Depreciation 371 513 462 417
Add: Finance costs 5,047 1,778 1,974 3,159
Less: Interest & dividend income (1,144) (1,190) (1,489) (2,333)
Other adjustments 66 11 199 (108)
Cash from operations WC changes 5,252 2,112 2,113 2,128
- Changes in Inventories (3,234) (4,951) (1,197) 590
- Changes in trade receivables (988) (706) (2,694) (7,937)
- Changes in trade & other liabilities 488 1,853 (566) (1,613)
Change in working capital (3,734) (3,804) (4,457) (8,959)
Cash from operations 1,519 (1,692) (2,344) (6,831)
Taxes paid (495) (415) (471) (578)
Cash flow from operating activities 1,024 (2,108) (2,815) (7,409)
Capex, net (1,034) (122) (409) (570)
Changes in investments (274) (273) (191) (3,258)
Loans/debentures to related parties (2,090) 912 (16,723) 1,092
L&A to other parties 1,452 1,460 3,571 (241)
Interest & other income 1,139 1,185 1,489 2,333
Others incl. CA of partnership firms/LLP 647 131 (13) 3,406
Cash flow from investing activities (160) 3,293 (12,275) 2,762
Changes in share capital - (2,700) - -
Changes in debt 2,583 3,832 16,358 9,086
Interest paid (4,959) (1,825) (1,974) (3,137)
Other adjustments (incl MI) 1,164 71 72 (1,692)
Cash Flow from Financing Activities (1,211) (622) 14,456 4,257
Changes in cash & cash equivalent (347) 563 (634) (389)
Kalpataru Properties – consolidated cash flows (Rs mn) FY16 FY17 FY18
PBT (178) (377) (30)
Add: Depreciation 13 14 12
Add: Finance costs 836 783 436
Less: Interest & dividend income 42 0 28
Other adjustments (614) (517) (301)
Cash from operations WC changes 99 (96) 145
- Changes in Inventories (2,119) (2,881) (4,328)
- Changes in trade receivables 436 (203) (712)
- Changes in trade & other liabilities (165) (861) (1,639)
Change in working capital (1,848) (3,944) (6,679)
Cash from operations (1,749) (4,040) (6,534)
Taxes paid (20) (34) (49)
Cash flow from operating activities (1,769) (4,075) (6,584)
Capex, net (11) (13) (144)
Changes in investments -372.98 1792.2 -98.516
Loans/debentures to related parties - - -
L&A to other parties (2,296) 4,013 29
Interest & other income 443 690 195
Others incl. CA of partnership firms/LLP 331 (25) 15
Cash flow from investing activities (1,906) 6,458 (4)
Changes in share capital - - -
Changes in debt 4,490 (1,074) 7,843
Interest paid (851) (1,228) (490)
Other adjustments (incl MI) - - (876)
Cash Flow from Financing Activities 3,639 (2,302) 6,477
Changes in cash & cash equivalent (36) 81 (111)
Source: PhillipCapital India Research, Company
Collections have been c.Rs 10bn/year for the past four years (Rs mn) FY16 FY17 FY18 FY19
Kalpataru Ltd (CS) Receivables, net of advances - Opening (3,273) (1,970) (3,411) 601
Add: Sales 9,704 9,141 14,871 13,993
Less: Receivables, net of advances - Closing (1,970) (3,411) 601 3,671
Cash collected 8,400 10,582 10,859 10,924
Kalpataru Properties (CS) Receivables, net of advances - Opening (600) 35 (1,431) NA
Add: Sales 864 1,219 1,983 NA
Less: Receivables, net of advances - Closing 35 (1,431) (2,778) NA
Cash collected 230 2,685 3,330 NA
Monetization of unsold inventory and investment properties (leased) should lead to further cash flows (Rs mn) FY16 FY17 FY18 FY19
Inventories Kalpataru Ltd (CS) 35,522 40,472 41,668 40,745
- Kalpataru Properties (SA) 2,408 3,350 4,090 NA
- Subsidiaries incl. Agile* 13,090 15,022 35,164 36,573
Kalpataru Properties (CS) 15,499 18,372 39,254 36,573
Total Inventories 51,020 58,844 80,922 77,319
Investment Properties incl. CWIP Kalpataru Ltd (CS) 6,986 6,556 6,429 6,325
Inventories & Investment properties 58,006 65,399 87,351 83,643
Source: PhillipCapital India Research, Company
Page | 9 | PHILLIPCAPITAL INDIA RESEARCH
KALPATARU POWER COMPANY UPDATE
Currently the group has 20 ongoing projects…
Promoter Project Location Project
Timeline Booking
(%)
Kalpataru Properties Magnus BKC Jun-23 31% Agile Real Estate Immensa Thane Dec-24 65% Agile Real Estate Sector 5 Thane Dec-26 8% Agile Real Estate Sunrise Thane Dec-22 89% Agile - Total
49%
Total (A)
48% Kalpataru Ltd Avana Parel-Sewri Dec-21 54% Kalpataru Ltd Imperia Santacruz (W) Jun-23 4% Kalpataru Ltd Solitaire JVPD scheme Dec-19 51% Kalpataru Const. (Pune) Estate Pune Jun-22 0% Kalpataru Gardens Crest Bhandup (W) Dec-19 88% Kalpataru Gardens Serenity Pune Dec-21-Oct-23 64% Kalpataru Plus Sharyans Waterfront Panvel Dec-20 75% Kalpataru Plus Sharyans Woodsville Chandivali Dec-22 13% Kalpataru Prop. (Thane) Hills Thane Dec-21 94% Kalpataru Prop. (Thane) Amoda Reserve Pune Dec-23 29% Kalpataru Prop. Ventures Yashodhan Andheri Apr-21 83% Kalpataru Retail Ventures Exquisite Pune Dec-23-Dec-24 56% Kiyana Ventures LLP Radiance Goregaon (W) Dec-21 72% Ananta Landmarks Paramount Thane Jun-24 54% Neo Pharma Pvt Avenue Kandivali Dec-20 22% Neo Pharma Pvt Jade Residence Pune Dec-23 65% Total (B)
61%
TOTAL
54%
…most of which should be commissioned in the next three years
Source: PhillipCapital India Research, RERA
KPP promoters’ holding declined by 5% in 2QFY20, as funds were raised to meet demands in the real-estate business
41% of promoters’ holding is pledged and should reduce once leverage in the property business reduces
Source: PhillipCapital India Research, Company
-
20
40
60
80
100
120
140
160
180
Dec-19 Dec-20 Dec-21 Dec-22 Dec-23 Dec-24 Dec-25 Dec-26
Projects completion schedule ('000 sqm)
63
.7%
63
.7%
55
.0%
55
.8%
57
.8%
59
.5%
59
.5%
59
.5%
59
.5%
59
.3%
59
.3%
59
.3%
54
.4%
54
.4%
0%
10%
20%
30%
40%
50%
60%
70%
Mar
-09
Mar
-10
Mar
-11
Mar
-12
Mar
-13
Mar
-14
Mar
-15
Mar
-16
Mar
-17
Mar
-18
Mar
-19
Jun
-19
Sep
-19
Dec
-19
Promoters holding (%)
32
.9%
9.4
%
16
.9%
43
.8%
33
.2%
36
.9%
22
.7%
35
.9%
38
.3%
34
.1%
43
.7%
39
.1%
41
.9%
41
.4%
0%
10%
20%
30%
40%
50%
Mar
-09
Mar
-10
Mar
-11
Mar
-12
Mar
-13
Mar
-14
Mar
-15
Mar
-16
Mar
-17
Mar
-18
Mar
-19
Jun
-19
Sep
-19
Dec
-19
Pledged shares (% of promoter holding)
Page | 10 | PHILLIPCAPITAL INDIA RESEARCH
KALPATARU POWER COMPANY UPDATE
Maintain BUY due to deep value KPP, combined with JMC, is a play on seven key infrastructure segments in India and abroad. A 1.9x book-to-bill (B-t-B) for KPP standalone and 2.6x B-t-B for JMC offers strong revenue visibility. This, along with exits from loss-making roads and Indore real-estate segments, and a turnaround in SSL, should translate to 24% CAGR in FY19-22 earnings. We see KPP as a prime rerating candidate, as it delivers on improving its capital allocation and as the risk of further stake sale/increase in pledge by promoters reduces over the next two years. The standalone entity trades at 8x PE FY20, for 20% earnings CAGR and visibility on becoming net cash positive by FY22. We maintain our BUY rating.
SSL and roads have historically dragged KPP’s consolidated earnings
FY22: Turnaround in SSL and lower losses in roads improve the quality of KPP’s earnings
Source: Company, PhillipCapital India Research
KPP currently trades well below its long-term average PE
…and so does JMC
Source: Bloomberg, PhillipCapital India Research
KPP estimates change: Our estimates do not include financials of Linjemontage
__Revised Est. __ __% Revision__
(Rs bn) FY21E FY22E FY20E FY21E
Sales 137.0 155.4 -1% -3% EBITDA 16.6 18.8 -1% -3%
EBITDA margin (%) 12.1% 12.1% 3 bps 0 bps
Recurring PAT 6.4 8.5 -1% -6%
Recurring EPS (Rs) 41.4 54.6 -1% -6%
Source: PhillipCapital India Research, Company
3.28
2.71
0.59 0.08 0.30 0.60
0.35
-
1.0
2.0
3.0
4.0
5.0
KP
P (
SA)
JMC
(SA
)
Tran
sco
s
SSL
Ro
ad S
PV
s
Inte
r-gr
ou
p
KP
P (
CS)
(Rs bn) KPP FY18 - PAT Reconciliation
-17%
6.77
8.45 1.52 0.24 0.33 0.21
-
1.0
2.0
3.0
4.0
5.0
6.0
7.0
8.0
9.0
KP
P(S
A)
JMC
(SA
)
SSL
Ro
adSP
Vs
Inte
r-gr
ou
p
KP
P (
CS)
(Rs bn) KPP FY22 - PAT Reconciliation
25%
0
5
10
15
20
25
30
35
40
Ap
r-0
6O
ct-0
6A
pr-
07
Oct
-07
Ap
r-0
8O
ct-0
8A
pr-
09
Oct
-09
Ap
r-1
0O
ct-1
0A
pr-
11
Oct
-11
Ap
r-1
2O
ct-1
2A
pr-
13
Oct
-13
Ap
r-1
4O
ct-1
4A
pr-
15
Oct
-15
Ap
r-1
6O
ct-1
6A
pr-
17
Oct
-17
Ap
r-1
8O
ct-1
8A
pr-
19
Oct
-19
KPP 1yr fwd PE (x) Avg +1SD -1SD
0
5
10
15
20
25
30
Ap
r-0
6O
ct-0
6A
pr-
07
Oct
-07
Ap
r-0
8O
ct-0
8A
pr-
09
Oct
-09
Ap
r-1
0O
ct-1
0A
pr-
11
Oct
-11
Ap
r-1
2O
ct-1
2A
pr-
13
Oct
-13
Ap
r-1
4O
ct-1
4A
pr-
15
Oct
-15
Ap
r-1
6O
ct-1
6A
pr-
17
Oct
-17
Ap
r-1
8O
ct-1
8A
pr-
19
Oct
-19
JMC 1yr fwd PE (x) Avg +1SD -1SD
Page | 11 | PHILLIPCAPITAL INDIA RESEARCH
KALPATARU POWER COMPANY UPDATE
Revise target price to Rs 595 We revise our SOTP-based target to Rs 595 (Rs 695 earlier) as we have cut our target multiples for KPP (to 13x from 14x) and JMC (to 10x from 12x) to reflect the risk from promoter-level debt.
KPP sum-of-the-parts valuation KPP's Multiple Total Value Holdco KPP's value Value
Subsidiary or business stake (%) Valuation basis or CoE (Rs bn) disc (%) (Rs bn) (Rs/sh)
KPP (parent ex-subs dividend) 100% PE - FY21E 13.0 70.3
70.3 454
JMC standalone 67% PE - FY21E 10.0 18.8 20% 10.1 65
Brij Bhoomi expressway 67% Loss funding FY20-24E
(0.2) 0% (0.1) (1)
Wainganga expressway 67% Loss funding FY20-24E
(1.5) 0% (1.0) (6)
Vindhyachal expressway 67% Loss funding FY20-24E
(0.9) 0% (0.6) (4)
Kurukshetra expressway 33% Loss funding FY20-24E
(1.6) 0% (0.5) (3)
JMC Total
14.6
7.8 51
Shree Shubham Logistics 100% PE - FY21E 8.0 1.0 20% 0.8 5
Linjemontage 85% At acquisition value
1.7 0% 1.4 9
Transmission SPVs (ex-Jhajjar) 100% At net cash from deal
9.1 0% 9.1 59
Jhajjar Transco 50% At DCF value 12.5% 0.4 0% 0.2 1
Real Estate (Indore) 100% At 70% of IC
3.9 30% 2.7 18
Total SOTP value
101.0
92.4 597
Source: PhillipCapital India Research
Page | 12 | PHILLIPCAPITAL INDIA RESEARCH
KALPATARU POWER COMPANY UPDATE
Financials (KPP Consolidated) Income Statement Y/E Mar, Rs mn FY19 FY20e FY21e FY22e
Net sales 1,08,405 1,27,986 1,37,032 1,55,423
Growth, % 25 18 7 13
Raw material expenses (78,819) (92,997) (99,927) (1,13,939)
Employee expenses (7,885) (9,287) (10,086) (11,145)
Other Operating expenses (8,666) (9,532) (10,447) (11,550)
EBITDA (Core) 13,035 16,171 16,571 18,789
Growth, % 28 24 2 13
Margin, % 12.0 12.6 12.1 12.1
Depreciation (2,109) (2,984) (3,414) (3,771)
EBIT 10,925 13,186 13,157 15,018
Growth, % 32 21 (0) 14
Margin, % 10.1 10.3 9.6 9.7
Interest paid (3,959) (5,075) (4,156) (3,372)
Other Income 441 444 589 806
Pre-tax profit 7,407 8,554 9,590 12,451
Tax provided (2,611) (2,465) (2,696) (3,414)
PAT (pre-minority) 4,797 6,090 6,894 9,037
Others (Minority, associates) (384) (429) (496) (586)
Net Profit (recurring) 4,412 5,660 6,398 8,451
Growth, % 63 28 13 32
Net Profit (reported) 4,667 7,185 9,379 8,451
Unadj. shares (m) 153 155 155 155
Wtd avg shares (m) 153 155 155 155
Balance Sheet Y/E Mar, Rs mn FY19 FY20e FY21e FY22e
Cash & bank 2,974 2,618 6,992 12,351
Debtors 67,666 79,403 85,822 95,582
Inventory 11,165 13,679 14,602 11,864
Other current assets 26,693 28,904 20,810 19,400
Total current assets 1,08,498 1,24,604 1,28,225 1,39,198
Investments 15 14 14 14
Gross fixed assets 38,113 41,592 44,171 46,040
Less: Depreciation (6,706) (9,690) (13,104) (16,875)
Add: Capital WIP 158 226 178 140
Net fixed assets 31,565 32,128 31,245 29,306
Total assets 1,40,078 1,56,746 1,59,484 1,68,518
Current liabilities 67,925 77,751 85,046 90,469
Provisions 5,056 5,742 6,339 6,898
Total current liabilities 72,981 83,493 91,385 97,367
Deferred tax liabilities, net (1,270) (1,270) (1,270) (1,270)
Borrowings 35,565 37,596 23,572 18,815
Total liabilities 34,295 36,325 22,302 17,545
Minority & Preference 1,607 1,753 2,150 2,708
Paid-up capital 307 309 309 309
Reserves & surplus 30,888 34,864 43,338 50,588
Shareholders’ equity 31,195 35,173 43,648 50,898
Total equity & liabilities 1,40,078 1,56,746 1,59,484 1,68,518
Source: Company, PhillipCapital India Research Estimates
Cash Flow Y/E Mar, Rs mn FY19 FY20e FY21e FY22e
Pre-tax profit 7,613 8,554 9,590 12,451
Depreciation 2,109 2,984 3,414 3,771
Chg in working capital (483) (6,203) 8,645 368
Total tax paid (2,918) (2,465) (2,696) (3,414)
Cash flow from operating activities 10,353 7,502 22,519 15,742
Capital expenditure (7,120) (3,547) (2,532) (1,831)
Chg in investments (841) 0 - -
Cash flow from investing activities (8,349) (1,325) 1,039 (1,026)
Free cash flow 3,233 3,955 19,988 13,911
Equity raised/(repaid) - - - -
Debt raised/(repaid) 2,322 2,030 (14,024) (4,757)
Dividend (incl. tax) (469) (539) (629) (1,003)
Other financing activities (4,038) (8,025) (4,533) (3,597)
Cash flow from financing activities (2,185) (6,534) (19,185) (9,357)
Net chg in cash (182) (357) 4,374 5,360
Valuation Ratios
FY19 FY20e FY21e FY22e
Per Share data
EPS (INR) 28.8 36.6 41.4 54.6
Growth, % 63 27 13 32
Book NAV/share (INR) 203.3 227.3 282.1 329.0
FDEPS (INR) 28.8 36.6 41.4 54.6
CEPS (INR) 42.3 55.9 63.4 79.0
DPS (INR) 3.0 3.5 5.5 5.3
Return ratios Return on assets (%) 5.5 6.4 6.2 7.0
Return on equity (%) 15.2 17.1 16.2 17.9
Return on capital employed (%) 11.3 13.6 13.8 16.4
Turnover ratios Asset turnover (x) 2.1 2.5 2.5 2.8
Sales/Total assets (x) 0.8 0.9 0.9 0.9
Sales/Net FA (x) 3.1 4.0 4.3 5.1
Working capital/Sales (x) 0.2 0.2 0.2 0.2
Working capital days 62 70 68 66
Liquidity ratios
Current ratio (x) 1.5 1.5 1.4 1.4
Quick ratio (x) 1.3 1.3 1.2 1.3
Interest cover (x) 0.4 0.4 0.3 0.2
Dividend cover (x) 9.6 10.6 7.5 10.4
Total debt/Equity (%) 108 102 51 35
Net debt/Equity (%) 99 95 36 12
Valuation
PER (x) 14.6 11.5 10.2 7.7
PEG (x) - y-o-y growth 0.2 0.4 0.8 0.2
Price/Book (x) 2.1 1.8 1.5 1.3
Yield (%) 0.7 0.8 1.3 1.3
EV/Net sales (x) 0.9 0.8 0.6 0.5
EV/EBITDA (x) 7.4 6.2 4.9 3.8
Page | 13 | PHILLIPCAPITAL INDIA RESEARCH
KALPATARU POWER COMPANY UPDATE
Stock Price, Price Target and Rating History
Rating Methodology We rate stock on absolute return basis. Our target price for the stocks has an investment horizon of one year. We have different threshold for large market capitalisation stock and Mid/small market capitalisation stock. The categorisation of stock based on market capitalisation is as per the SEBI requirement.
Large cap stocks Rating Criteria Definition
BUY >= +10% Target price is equal to or more than 10% of current market price
NEUTRAL -10% > to < +10% Target price is less than +10% but more than -10%
SELL <= -10% Target price is less than or equal to -10%.
Mid cap and Small cap stocks Rating Criteria Definition
BUY >= +15% Target price is equal to or more than 15% of current market price
NEUTRAL -15% > to < +15% Target price is less than +15% but more than -15%
SELL <= -15% Target price is less than or equal to -15%.
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, may not match, or may be contrary at times with the views, estimates, rating, and 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 the 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. Securities and Derivatives markets may be subject to rapid and unexpected price movements and past performance is not necessarily an indication of future performance.
This report does not regard the specific investment objectives, financial situation, and the particular needs of any specific person who may receive this report. Investors must undertake independent analysis with their own legal, tax, and financial advisors and reach their own conclusions regarding the appropriateness of investing in any securities or investment strategies discussed or recommended in this report and should understand that statements regarding future prospects may not be realised. Under no circumstances can it be used or considered as an offer to sell or as a solicitation of any offer to buy or sell the securities mentioned within it. The information contained in the research reports may have been taken from trade and statistical services and other sources, which PCIL believe is reliable. PhillipCapital (India) Pvt. Ltd. or any of its group/associate/affiliate companies do not guarantee that such information is accurate or complete and it should not be relied upon as such. Any opinions expressed reflect judgments at this date and are subject to change without notice.
J-19 B (TP 700)
B (TP 675)
B (TP 695)
0
100
200
300
400
500
600
D-16 F-17 M-17 M-17 J-17 A-17 O-17 N-17 J-18 F-18 A-18 J-18 J-18 S-18 O-18 D-18 F-19 M-19 M-19 J-19 A-19 O-19 N-19
Page | 14 | PHILLIPCAPITAL INDIA RESEARCH
KALPATARU POWER COMPANY UPDATE
Important: These disclosures and disclaimers must be read in conjunction with the research report of which it forms part. Receipt and use of the research report is subject to all aspects of these disclosures and disclaimers. Additional information about the issuers and securities discussed in this research report is available on request.
Certifications: The research analyst(s) who prepared this research report hereby certifies that the views expressed in this research report accurately reflect the research analyst’s personal views about all of the subject issuers and/or securities, that the analyst(s) have no known conflict of interest and no part of the research analyst’s compensation was, is, or will be, directly or indirectly, related to the specific views or recommendations contained in this research report.
Additional Disclosures of Interest: Unless specifically mentioned in Point No. 9 below: 1. The Research Analyst(s), PCIL, or its associates or relatives of the Research Analyst does not have any financial interest in the company(ies) covered in
this report. 2. The Research Analyst, PCIL or its associates or relatives of the Research Analyst affiliates collectively do not hold more than 1% of the securities of the
company (ies)covered in this report as of the end of the month immediately preceding the distribution of the research report. 3. The Research Analyst, his/her associate, his/her relative, and PCIL, do not have any other material conflict of interest at the time of publication of this
research report. 4. The Research Analyst, PCIL, and its associates have not received compensation for investment banking or merchant banking or brokerage services or for
any other products or services from the company(ies) covered in this report, in the past twelve months. 5. The Research Analyst, PCIL or its associates have not managed or co-managed in the previous twelve months, a private or public offering of securities for
the company (ies) covered in this report. 6. PCIL or its associates have not received compensation or other benefits from the company(ies) covered in this report or from any third party, in
connection with the research report. 7. The Research Analyst has not served as an Officer, Director, or employee of the company (ies) covered in the Research report. 8. The Research Analyst and PCIL has not been engaged in market making activity for the company(ies) covered in the Research report. 9. Details of PCIL, Research Analyst and its associates pertaining to the companies covered in the Research report:
Sr. no. Particulars Yes/No
1 Whether compensation has been received from the company(ies) covered in the Research report in the past 12 months for investment banking transaction by PCIL
No
2 Whether Research Analyst, PCIL or its associates or relatives of the Research Analyst affiliates collectively hold more than 1% of the company(ies) covered in the Research report
No
3 Whether compensation has been received by PCIL or its associates from the company(ies) covered in the Research report No
4 PCIL or its affiliates have managed or co-managed in the previous twelve months a private or public offering of securities for the company(ies) covered in the Research report
No
5 Research Analyst, his associate, PCIL or its associates have received compensation for investment banking or merchant banking or brokerage services or for any other products or services from the company(ies) covered in the Research report, in the last twelve months
No
Independence: PhillipCapital (India) Pvt. Ltd. has not had an investment banking relationship with, and has not received any compensation for investment banking services from, the subject issuers in the past twelve (12) months, and PhillipCapital (India) Pvt. Ltd does not anticipate receiving or intend to seek compensation for investment banking services from the subject issuers in the next three (3) months. PhillipCapital (India) Pvt. Ltd is not a market maker in the securities mentioned in this research report, although it, or its affiliates/employees, may have positions in, purchase or sell, or be materially interested in any of the securities covered in the report.
Suitability and Risks: This research report is for informational purposes only and is not tailored to the specific investment objectives, financial situation or particular requirements of any individual recipient hereof. Certain securities may give rise to substantial risks and may not be suitable for certain investors. Each investor must make its own determination as to the appropriateness of any securities referred to in this research report based upon the legal, tax and accounting considerations applicable to such investor and its own investment objectives or strategy, its financial situation and its investing experience. The value of any security may be positively or adversely affected by changes in foreign exchange or interest rates, as well as by other financial, economic, or political factors. Past performance is not necessarily indicative of future performance or results.
Sources, Completeness and Accuracy: The material herein is based upon information obtained from sources that PCIPL and the research analyst believe to be reliable, but neither PCIPL nor the research analyst represents or guarantees that the information contained herein is accurate or complete and it should not be relied upon as such. Opinions expressed herein are current opinions as of the date appearing on this material, and are subject to change without notice. Furthermore, PCIPL is under no obligation to update or keep the information current. Without limiting any of the foregoing, in no event shall PCIL, any of its affiliates/employees or any third party involved in, or related to computing or compiling the information have any liability for any damages of any kind including but not limited to any direct or consequential loss or damage, however arising, from the use of this document.
Copyright: The copyright in this research report belongs exclusively to PCIPL. All rights are reserved. Any unauthorised use or disclosure is prohibited. No reprinting or reproduction, in whole or in part, is permitted without the PCIPL’s prior consent, except that a recipient may reprint it for internal circulation only and only if it is reprinted in its entirety.
Caution: Risk of loss in trading/investment can be substantial and even more than the amount / margin given by you. Investment in securities market are subject to market risks, you are requested to read all the related documents carefully before investing. You should carefully consider whether trading/investment is appropriate for you in light of your experience, objectives, financial resources and other relevant circumstances. PhillipCapital and any of its employees, directors, associates, group entities, or affiliates shall not be liable for losses, if any, incurred by you. You are further cautioned that trading/investments in financial markets are subject to market risks and are advised to seek independent third party trading/investment advice outside PhillipCapital/group/associates/affiliates/directors/employees before and during your trading/investment. There is no guarantee/assurance as to returns or profits or capital protection or appreciation. PhillipCapital and any of its employees, directors, associates, and/or employees, directors, associates of PhillipCapital’s group entities or affiliates is not inducing you for trading/investing in the financial market(s). Trading/Investment decision is your sole responsibility. You must also read the Risk Disclosure Document and Do’s and Don’ts before investing.
Kindly note that past performance is not necessarily a guide to future performance.
For Detailed Disclaimer: Please visit our website www.phillipcapital.in
Page | 15 | PHILLIPCAPITAL INDIA RESEARCH
KALPATARU POWER COMPANY UPDATE
IMPORTANT DISCLOSURES FOR U.S. PERSONS This research report is a product of PhillipCapital (India) Pvt. Ltd. which is the employer of the research analyst(s) who has prepared the research report. PhillipCapital (India) Pvt Ltd. is authorized to engage in securities activities in India. PHILLIPCAP is not a registered broker-dealer in the United States and, therefore, is not subject to U.S. rules regarding the preparation of research reports and the independence of research analysts. This research report is provided for distribution to “major U.S. institutional investors” in reliance on the exemption from registration provided by Rule 15a-6 of the U.S. Securities Exchange Act of 1934, as amended (the “Exchange Act”). If the recipient of this report is not a Major Institutional Investor as specified above, then it should not act upon this report and return the same to the sender. Further, this report may not be copied, duplicated and/or transmitted onward to any U.S. person, which is not a Major Institutional Investor.
Any U.S. recipient of this research report wishing to effect any transaction to buy or sell securities or related financial instruments based on the information provided in this research report should do so only through Rosenblatt Securities Inc, 40 Wall Street 59th Floor, New York NY 10005, a registered broker dealer in the United States. Under no circumstances should any recipient of this research report effect any transaction to buy or sell securities or related financial instruments through PHILLIPCAP. Rosenblatt Securities Inc. accepts responsibility for the contents of this research report, subject to the terms set out below, to the extent that it is delivered to a U.S. person other than a major U.S. institutional investor.
The analyst whose name appears in this research report is not registered or qualified as a research analyst with the Financial Industry Regulatory Authority (“FINRA”) and may not be an associated person of Rosenblatt Securities Inc. and, therefore, may not be subject to applicable restrictions under FINRA Rules on communications with a subject company, public appearances and trading securities held by a research analyst account. Ownership and Material Conflicts of Interest Rosenblatt Securities Inc. or its affiliates does not ‘beneficially own,’ as determined in accordance with Section 13(d) of the Exchange Act, 1% or more of any of the equity securities mentioned in the report. Rosenblatt Securities Inc, its affiliates and/or their respective officers, directors or employees may have interests, or long or short positions, and may at any time make purchases or sales as a principal or agent of the securities referred to herein. Rosenblatt Securities Inc. is not aware of any material conflict of interest as of the date of this publication Compensation and Investment Banking Activities Rosenblatt Securities Inc. or any affiliate has not managed or co-managed a public offering of securities for the subject company in the past 12 months, nor received compensation for investment banking services from the subject company in the past 12 months, neither does it or any affiliate expect to receive, or intends to seek compensation for investment banking services from the subject company in the next 3 months. Additional Disclosures This research report is for distribution only under such circumstances as may be permitted by applicable law. This research report has no regard to the specific investment objectives, financial situation or particular needs of any specific recipient, even if sent only to a single recipient. This research report is not guaranteed to be a complete statement or summary of any securities, markets, reports or developments referred to in this research report. Neither PHILLIPCAP nor any of its directors, officers, employees or agents shall have any liability, however arising, for any error, inaccuracy or incompleteness of fact or opinion in this research report or lack of care in this research report’s preparation or publication, or any losses or damages which may arise from the use of this research report.
PHILLIPCAP may rely on information barriers, such as “Chinese Walls” to control the flow of information within the areas, units, divisions, groups, or affiliates of PHILLIPCAP.
Investing in any non-U.S. securities or related financial instruments (including ADRs) discussed in this research report may present certain risks. The securities of non-U.S. issuers may not be registered with, or be subject to the regulations of, the U.S. Securities and Exchange Commission. Information on such non-U.S. securities or related financial instruments may be limited. Foreign companies may not be subject to audit and reporting standards and regulatory requirements comparable to those in effect within the United States.
The value of any investment or income from any securities or related financial instruments discussed in this research report denominated in a currency other than U.S. dollars is subject to exchange rate fluctuations that may have a positive or adverse effect on the value of or income from such securities or related financial instruments.
Past performance is not necessarily a guide to future performance and no representation or warranty, express or implied, is made by PHILLIPCAP with respect to future performance. Income from investments may fluctuate. The price or value of the investments to which this research report relates, either directly or indirectly, may fall or rise against the interest of investors. Any recommendation or opinion contained in this research report may become outdated as a consequence of changes in the environment in which the issuer of the securities under analysis operates, in addition to changes in the estimates and forecasts, assumptions and valuation methodology used herein.
No part of the content of this research report may be copied, forwarded or duplicated in any form or by any means without the prior written consent of PHILLIPCAP and PHILLIPCAP accepts no liability whatsoever for the actions of third parties in this respect.
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