Morning Insight€¦ · NALCO’s chairman Tapan Kumar Chand unveiled new business plan. The main objective being to increase the company’s three-digit profit figure to five-digit

OCTOBER 3, 2018

Morning Insight

Kotak Securities Limited has two independent equity research groups: Institutional Equities and Private Client Group. This report has been prepared by the Private Client Group. The views and opinions expressed in this document may or may not match or may be contrary with the views, estimates, rating, target price of the Institutional Equities Research Group of Kotak Securities Limited.

News Highlights The government is mulling permitting 100 percent foreign direct

investment (FDI) in insurance broking to give a boost to the sector, sources said. The FDI policy, at present, allows 49 percent foreign investment in the insurance sector. (Bloomberg)

MOIL revised manganese ore prices with effect from Oct. 1. Ferro grade, SMGR, Chemical Grade and Fines prices have increased by about 10 percent on existing prices. Basic price of Electrolytic Manganese Dioxide has also been increased by Rs. 9,000 per metric ton. (BSE)

IL&FS: NCLT allowed appointment of a new board and approves induction of six directors with Uday Kotak acting as the non-executive chairman. The new board is tasked with the responsibility of preparing a robust and time bound resolution.(ET)

Vedanta plans to spend Rs 40 bn in exploration. The company may spend up to US$4 bn in 41 blocks if it finds oil. Chairman Anil Agarwal also said that company wants to expand oil output to 40,000 barrel per day in two years.(Bloomberg)

Coal India’s coal production for September up 3.8 percent at 40.24 MT versus 38.76 MT on a year to year basis and for the April to September quarter up 10.6 percent at 256.47 MT versus 231.88 MT.(BSE)

NALCO’s chairman Tapan Kumar Chand unveiled new business plan. The main objective being to increase the company’s three-digit profit figure to five-digit profit number. (ET)

Edelweiss Financial Services reported that the company’s current liquidity stands at Rs 54 bn and the liquidity cushion of 9 percent to 10 percent of balance sheet has been maintained all times. (BL)

Glenmark Pharma completed the sale of its orthopaedic and pain management business in India and Nepal to Private Equity firm True North (BSE)

Mphasis board approved share buyback at Rs 1,350 per share. (Bloomberg)

Media reports Reliance Industries in talks to buy Hathway Cable, bring broadband home; deal still at an exploratory stage (ET).

Dr Reddy’s has sold its antibiotic manufacturing facility and related assets in Bristol, Tennessee, to Abu Dhabi-based Neopharma. It didn't disclose the financial details of the sale. DRL also announced that its subsidiary Promius Pharma, LLC, has sold its rights of Cloderm (clocortolone pivalate) Cream, 0.1% and its authorised generic to EPI Health, LLC, an affiliate of EPI Group, LLC. (Bloomberg)

Jubilant Life Sciences plans to invest Rs 5.5 bn in capex in FY19 to meet the increased demand in its business. (ET)

What’s Inside Company Update: Bajaj Electicals Ltd.

Company Visit Note: Jindal Stainless Ltd (JSL)

Sector Update: Gas price hike; Auto Industry volume update: Sep 2018 Source: ET = Economic Times, BS = Business Standard, FE = Financial Express, IE = Indian Express, BL = Business Line, ToI: Times of India, BSE = Bombay Stock Exchange, MC = Moneycontrol

1-Oct 1 Day 1 Mth 3 Mths

Indian Indices SENSEX Index 36,526 0.8 (5.5) 3.1 NIFTY Index 11,008 0.7 (5.8) 2.7 NSEBANK Index 25,367 1.0 (9.6) (3.8) NIFTY 500 Index 9,166 0.5 (8.3) 0.0 CNXMcap Index 17,285 0.8 (13.2) (4.9) BSESMCAP Index 14,395 (0.2) (16.3) (10.2)

World IndicesDow Jones 26,774 0.5 3.1 10.8 Nasdaq 8,000 (0.5) (1.4) 6.6 FTSE 7,475 (0.3) (0.4) (1.6) NIKKEI 24,271 0.1 6.8 11.3 Hangseng 24,271 0.1 6.8 11.3 Shanghai 27,126 (2.4) (2.0) (4.8)

Value traded (Rs cr)Cash BSE (3.3) Cash NSE (14.3) Derivatives 8.4

Net inflows (Rs cr) 28-Sep MTD YTDFII (1,699) (9,623) (15,062)Mutual Fund (917) 7,905 84,522

Nifty Gainers & Losers Price Chg Vol1-Oct (Rs) (%) (mn)

GainersYes Bank Ltd 200 8.8 130.9 Hindalco Ind 244 6.3 12.6 Indiabulls Housing 892 4.1 14.9

LosersBharti Airtel 324 (4.2) 9.8 HPCL 243 (3.4) 4.4 Axis Bank 593 (3.3) 20.1

Advances / Declines (BSE)1-Oct A B T Total % totalAdvances 237 357 37 631 100 Declines 194 651 108 953 151 Unchanged 1 15 12 28 4

Commodity1-Oct 1 Day 1 Mth 3 Mths

Crude (US$/BBL) 84.9 0.1 8.6 9.1 Gold (US$/OZ) 1,204.0 1.3 0.5 (3.6) Silver (US$/OZ) 14.7 1.5 2.1 (7.5)

Debt / forex market 1-Oct 1 Day 1 Mth 3 Mths10 yr G-Sec yield % 8.0 8.0 8.0 7.9 Re/US$ 72.9 72.5 71.2 68.8

Nifty

Source: Bloomberg

% Chg

774,323

% Chg

% Chg Day1-Oct3,375

38,663

9,400

10,000

10,600

11,200

11,800

Sep-17 Dec-17 Mar-18 Jun-18 Sep-18

Kotak Securities – Private Client Research Please see the Disclosure/Disclaimer on the last page For Private Circulation 2

OCTOBER 3, 2018

BAJAJ ELECTRICALS LTD (BAEL) PRICE RS.508 TARGET RS.545 ACCUMULATE

We note that BAEL stock has fallen sharply post Q1FY19 result and current valuations looks reasonable vis-à-vis potential growth in earnings going ahead. In view of upside from current levels, we upgrade our recommendation to ‘ACCUMULATE’ from ‘SELL’ earlier; maintain target price at Rs 545.

Key Highlights

In our earnings model, we build 1/ cautious view on sales and margin come back in the consumer business post RREP implementation and 2/ deterioration in working capital requirement and debt accretion on balance sheet driven by higher proportion of E&P business.

RREP roll out has been encouraging so far and company would likely report recovery from the current year onwards. Currently BAEL has covered nearly 85-90% of its distribution under RREP.

Valuation & Outlook

We still maintain BAEL valuation discount vis-à-vis the peer group due to 1/ lower margin/return ratios and 2/ company’s presence in capital intensive E&P business. We maintain SOTP based target price of Rs 545. Due to upside to our target price we change rating to ‘Accumulate’ on company’s stock.

E&P business headed for turnaround; BAEL likely to report margin expansion across segments going ahead We project revenue growth at 19% CAGR between FY18-10 on back of 20% CAGR growth in lighting and consumer durable business, in the same period. We build higher margin in consumer business in FY20, driven by operating leverage.

In E&P business, we build revenue growth at 18% CAGR between FY18-20 driven by current order book at Rs 76.5 Bn. We project EBIT margin at 6% in FY19/20 for the segment.

BAEL management has stated that the loss making legacy orders in E&P business are over and current orders enjoys superior margins. E&P order book at the end of Q1FY19 stood at Rs 76.5 Bn. USD 4.2 mn power distribution turnkey order in Africa (Zambia) and c. Rs 50 Bn in UP (rural power distribution project) it won in FY18.

Revenues

FY18 FY19E FY20E

Consumer durables/Lighting

Sales 22285 26742 32090

YoY -3.7% 20.0% 20.0%

EBIT 1087 2273 2888

EBIT % 7.0% 8.5% 9.0%

Engineering & Projects

Sales 24876 32338 34602

YoY 10% 30% 7%

EBIT 1946 2102 2422

EBIT % 7.5% 6.5% 7.0%

Source: Company, Kotak Securities – Private Client Research

Company Update

Stock Details

Market cap (Rs mn) : 51122

52-wk Hi/Lo (Rs) : 706 / 352

Face Value (Rs) : 2

3M Avg. daily vol (Nos) : 640,902

Shares o/s (mn) : 102

Source: Bloomberg

Financial Summary

Y/E Mar (Rs mn) FY18 FY19E FY20E

Revenue 47,075 59,110 66,722

Growth (%) 10.5 25.6 12.9

EBITDA 2,934 4,138 5,138

EBITDA margin (%) 6.2 7.0 7.7

Adj. PAT 1,730 1,991 2,588

EPS 17.0 19.5 25.4

EPS Growth (%) 60.6 15.1 30.0

BV (Rs/share) 92 106 125

Dividend/share (Rs) 4.2 5.2 6.2

ROE (%) 19.2 19.7 21.9

ROCE (%) 10.2 9.2 9.8

P/E (x) 29.9 26.0 20.0

EV/EBITDA (x) 20.0 14.2 11.4

P/BV (x) 6.5 5.6 4.8

Source: Company, Kotak Securities - PCG

Shareholding Pattern (%)

(%) Jun-18 Mar-18 Dec-17

Promoters 62.9 63.0

FII 9.7 9.8

DII 5.3 4.6

Others 22.1 22.6

Source: Company

Price Performance (%)

(%) 1M 3M 6M

Bajaj Electricals (11.7) (7.9) (11.3)

Nifty (5.8) 2.7 8.8

Source: Bloomberg

Price chart (Rs)

Source: Bloomberg

Ruchir Khare [email protected] +91 22 6218 6431

280

480

680

Oct-17 Feb-18 Jun-18 Oct-1


OCTOBER 3, 2018

RREP program should get implemented over the period of next two years

BAEL launched RREP (Retail reach expansion program) in FY16 to reach out to dealers more efficiently as against traditional wholesaler based model of selling. The RREP programs (TOC-Theory of constraints based model) is currently under implementation and has had diminishing effect on company’s primary sales over the last few quarters. Management has earlier highlighted that TOC model would start yielding benefits (partially) form FY18 onwards. However, full benefits from TOC based distribution model are expected to materialize from FY18.

Management believes that TOC based RREP model would provide benefits in terms of 1) improved engagement with dealers, 2) establish efficient feedback mechanism, 3) expand product reach for premium/newly launched products and 4) achieve lower inventory levels.

Under RREP (where supply chain is highly centralized) company is optimistic of seeking benefits from 1) improved purchases in terms of bulk buying, 2) savings from lower investment in ideal inventory (slow moving products) and 3) reduction in discounts offered to large wholesalers.

As a second step under TOC based selling, company would aim at increasing sales and expect recovery from FY18 onwards. We suspect that the company has lost market share in the past few quarters (reflected in company’s poor sales in last few quarters’ vis-à-vis competitors). As of now, TOC covers nearly 90% of distributors.

We note that in the past, some of the other competitors have also made attempts to realign the distributor discounts. For instance, in FY16 Havells too has averted the practice of offering additional discounts to the large distributors and had experiences temporary fall in sales. However, we fail to identify any major players who have completely done away with wholesalers’ based selling. Most of the players, we believe have resorted to a combination (40-60 or 50-50) of wholesalers and direct selling model. We therefore believe that the company would have to be swift and efficient in ramping up sales (by means of aggressive advertising campaigns to create demand pull) post full commencement of RREP and regain lost market share. We believe that the successful rollout of RREP is critical for the company and remain watchful of the developments and progress made in this direction.


OCTOBER 3, 2018

Valuation and recommendation We still maintain BAEL valuation discount vis-à-vis the peer group due to 1/ lower margin/return ratios and 2/ company’s presence in capital intensive E&P business. We maintain SOTP based target price of Rs 545. Due to upside to our target price we change rating to ‘Accumulate’ on company’s stock.

Valuation

Rs mn FY20

B2C

EBIT B2C 2888

Interest (300.00)

Tax (854.07)

PAT 1734

Target PER 27

Target Market Capitalization (B2C) (a) 46818

EBIT B2B 2422

Interest (800)

Tax (535)

PAT 1087

Target PER 8

Target Market Capitalization (B2B)(b) 8695

Target Market Capitalization (BAEL) (a+b) 55513

Target price per share (BAEL) 545

Source: Kotak Securities – Private Client Research

About the company

Bajaj Electricals business is spread across – consumer Products, exports, luminaires and EPC (Illumination, Transmission Towers and Power Distribution). . Within consumer products, it deals in a wide range of products from fans, mixers, heaters, oven, toasters etc and enjoys reasonable market share of 15-18% in each vertical. Moreover company keeps on adding new revenue streams on constant basis by introducing new product lines in the consumer business. Bajaj Electricals has pan India presence which is being supported by a chain of distributors, authorized dealers, retail outlets, and exclusive showrooms called ‘Bajaj World’. BAEL also have a presence in the hi-end range of appliances with brands like Platini and Morphy Richards in India.


OCTOBER 3, 2018

Financials: Consolidated

Profit and Loss Statement (Rs mn)

(Year-end Mar) FY17 FY18 FY19E FY20E

Revenues 42,617 47,075 59,110 66,722 % change yoy (7.6) 10.5 25.6 12.9 EBITDA 2,427 2,934 4,138 5,138 % change yoy (6.4) 20.9 41.0 24.2 Depreciation 299 339 360 370 EBIT 2,129 2,595 3,778 4,768 % change yoy (8.3) 21.9 45.6 26.2 Net Interest 804 589 1,014 1,086 Earnings Before Tax 1,681 1,748 3,064 3,981 % change yoy 9.5 51.0 20.7 30.0 Tax 604 809 1,072 1,394 as % of EBT 35.9 46.2 35.0 35.0 Recurring PAT 1,077 1,730 1,991 2,588 % change yoy 12.7 60.6 15.1 30.0 Shares outstanding (mn) 101.9 101.9 101.9 101.9 EPS (Rs) 10.6 17.0 19.5 25.4 DPS (Rs) 2.8 4.2 5.2 6.2 CEPS 13.5 20.3 23.1 29.0


Cash flow Statement (Rs mn)


PBT 1,681 1,748 3,064 3,981 Depreciation 299 339 360 370 Current liabilities incl provisions (3,613) 1,414 5,713 3,032 inc in inventory (645) (80) (3,601) (1,027) inc in sundry Debtors (2,846) (3,655) (8,219) (3,650) inc in advances (13) (12) 5 - Tax Paid (604) (809) (1,072) (1,394) Other Adjustments 2,466 (942) (69) (476) Net cash from operations (3,275) (1,995) (3,820) 837 Purchase of fixed Assets (482) (321) (715) (500) Net investments (126) 643 - - Long term provisions 313.2 20.9 0 0 Net cash from investing (294) 343 (715) (500) Change in Borrowings 3,487 1,721 5,500 900 Dividend Paid (341) (428) (530) (632) Net Cash from financing 3,145 1,293 4,970 268 Net Cash Flow (423) (359) 436 606

Cash at the end of year 653 294 730 1,335


Balance sheet (Rs mn)


Cash and cash equivalents 653 294 730 1,335 Accounts receivable 16,467 20,121 28,340 31,990 Inventories 5,712 5,792 9,393 10,420 Other current assets 2,130 3,546 3,988 5,011 Current Assets 24,308 29,459 41,722 47,421 Investments 720 77 77 77 Net fixed assets 3,179 3,161 3,515 3,645 Other non-current assets 1924 1669 1290 744

Total Assets 30,783 34,659 47,333 53,222 Debt 5,455 7,176 12,676 13,576 Equity & reserves 8,429 9,161 10,623 12,579 Other liabilities 1,795 1,803 1,802 1,803 Current Liabilities 15,104 16,519 22,232 25,264 Total Liabilities 30,783 34,659 47,333 53,222 BVPS (Rs) 84.7 91.9 106.3 125.5


Ratio Analysis


EBITDA margin (%) 5.7 6.2 7.0 7.7 EBIT margin (%) 5.0 5.5 6.4 7.1 Net profit margin (%) 2.4 1.8 3.4 3.9 Receivables (days) 141.0 156.0 175.0 175.0 Inventory (days) 48.9 44.9 58.0 57.0 Sales / Net Fixed Assets (x) 3.2 3.4 4.0 4.2

Interest coverage (x) 2.6 4.4 3.7 4.4 Debt/ equity ratio 0.6 0.8 1.2 1.1 ROE (%) 13.3 19.2 19.7 21.9 ROCE (%) 8.4 10.2 9.2 9.8 EV/ Sales 1.4 1.2 1.0 0.9 EV/EBITDA 24.2 20.0 14.2 11.4 Price to earnings (P/E) 48.1 29.9 26.0 20.0 Price to book value (P/B) 7.1 6.5 5.6 4.8 Price to cash earnings 44.4 29.5 26.0 20.7



OCTOBER 3, 2018

JINDAL STAINLESS LTD (JSL) PRICE RS.55 NOT RATED

We visited Jindal Stainless plant, where management reiterated that, dynamics of India’s stainless steel industry continues to remain favorable, with a demand growth of 8-9% CAGR, over the next 4-5 years. The JSL group (including JSL Hisar), which is a market leader with ~54% market share, stands to gain in the future. In order to meet the future demand, JSL undertook debottlenecking initiatives that would expand the capacity to 1.1MT from 0.8MT by end of FY19E, at a much lower capex of Rs400-500mn. In addition, the company is also focusing on cost optimization, ensuring logistics facilities and mining plan (backward integration – chrome ore).

Key Highlights

With the debottlenecking initiatives, JSL can augment its capacity to 1.1MT by end of FY19E and possibly of 1.6MT in the near term, at low incremental capex. The plant has been configured in a way to take the total installed capacity to 3.2MT, as resources and logistics facilities are in place.

The company review final product selling price periodically, in a manner that passes on the fluctuation in input costs. Management expects margin to remain in the range of 11-14%.

Despite, the safeguard duty, imports continues to remain high in the domestic markets, as it’s been routed through FTA countries.

Domestic demand is expected to grow at a CAGR of 8.9% over the next 4-5 years, supported by automotive, railways, construction (infrastructure) and process industry. Given JSHL’s market position we believe the group is well poised to capture higher market share.

Valuation & outlook

Given the higher market share and improving profitability with a change in product mix to value added product (VAP) (post the ramp up of the facilities), return ratios are likely to remain strong and will be higher compared to its European peers. Higher domestic demand, market leadership and superior return, the company have an edge over its overseas counterparts. Besides this, in the domestic market, with the robust demand, the company is likely to strengthen its position further, as no new capacities coming on stream. Post the completion of debottlenecking activities, there is a possibility of margin going down, as strengthening of product mix would take some time. But absolute numbers in terms of EBITDA and PAT would increase.

Key risks

Increase in raw material prices; slowdown in economy

Company Visit Note

Stock Details

Market cap (Rs mn) : 26166

52-wk Hi/Lo (Rs) : 133 / 51

Face Value (Rs) : 2

3M Avg. daily vol (Nos) : 827,194

Shares o/s (mn) : 479

Source: Bloomberg

Financial Summary

Y/E Mar (Rs mn) FY16 FY17 FY18

Revenue 71,436 92,787 116,377

Growth (%) 2.8 29.9 25.4

EBITDA 5,727 11,656 13,403

EBITDA margin (%) 8.0 12.6 11.5

PAT (5,569) 816 3,430

EPS (22.3) 1.4 7.1

EPS Growth (%) --- --- 320.2

Book value (Rs/share) 74.0 45.6 51.4

Dividend per share (Rs) 0 0 0

ROE (%) (54.1) 3.2 15.8

ROCE (%) 2.4 8.2 13.7

P/E (x) (2.4) 38.4 7.6

EV/EBITDA (x) 23.6 5.7 3.4

P/BV (x) 0.7 1.2 1.0


Shareholding Pattern (%)

(%) Jun-18 Mar-18 Dec-17

Promoters 66.5 66.5 65.1

FII 11 11.2 11.3

DII 12.8 12.8 14

Others 9.7 9.5 9.5

Source: Company


(%) 1M 3M 6M

Jindal Stainless (18.9) (19.2) (30.5)

Nifty (5.8) 2.7 8.8

Source: Bloomberg

Price chart (Rs)

Source: Bloomberg

Jatin Damania [email protected] +91 22 6218 6440

40 60 80

100 120 140


OCTOBER 3, 2018

Stainless steel demand looks buoyant Supported by higher spending by the government on infrastructure activities and increase in per capita GDP, the SS per capita consumption has increased to 2.5kg and is expected to double in the next decade. Domestic SS consumption grew at 7.6% CAGR in the last decade and going ahead also demand looks buoyant, given its under penetration in medical and infra applications. Demand for stainless steel has grown multifold both in the domestic market as well as globally. As the application has moved from mere crockery to architecture, building, and other infrastructure related activities, which currently account for 25% of the total stainless steel consumption. As per industry estimates, the demand is likely to grow at 8-9% CAGR during 2017-28E.

Global SS demand to grow to 46.2MT by 2020 Domestic demand growth (%)

Source: Outopumpu Source: Company, Crisil

Leader in stainless steel

At the combined level, JSL group is the market leader in domestic stainless steel production, with a consistent ~50% market share for more than a decade. Of the total domestic installed capacity of 3.3MT, the group accounts for 50% (1.6MT) of installed capacity, Salem accounts for 0.18MT and the remaining comes from unorganized players.

Table

Company Capacity (MT)

Jindal Stainless Hisar 0.80

Jindal Stainless 0.80

Salem Steel 0.18

Unorganised Players 1.52

Total 3.30

Source: Company, Industry data

In the domestic market, the flat product accounts for 71% of the total demand, while the balance is long products. We believe, the Jindal group (JSL) stands to gain in the domestic market as compared to other players in SS markets, as other SS units are not being utilized optimally and reporting losses, as compared to JSL operations. In addition, JSL is the only player, who is expanding capacity and will thereby able to capture additional market share in the near to medium term.

Odisha Facilities – 800acre land occupied

Facility SMS Slab HSM* Millplate & Annealing Pickling HRAP CRAP Ferro Alloys Power Plant

Capacity 0.8MT 1.025MT 1.6MT 100KT 950KT 450KT 250KT 264MW Equipment SMS Siemag, SMS Siemag, Andritz, Andritz, SMS Siemag, BEHL,

Germany Germany Austria Austria Germany India

Note: *Facility in JUSL; Source: Company

2.4 2.62.8 3 3.1

3.4 3.5

5

7.3


OCTOBER 3, 2018

Capacity expansion to 1.1 MT

Given the robust domestic demand, JSL is the only domestic company who is currently expanding its capacity to 1.1MT from 0.8MT by end of FY19E, through debottlenecking initiatives. Possibility of further expanding the same to 1.6MT (at low incremental capex) and then to 3.2MT is in place, as the company have enough resources and logistics facilities are in place. The company is currently operating at monthly run-rate of 80KT production and expect the exit rate of 1MT production by end of FY19E. The capacity will be augmented by upgrading EAF-1 from 1x50MVA to 1x120MVA. The critical equipment have been sourced from renowned European suppliers such as SMS Seimag and Andritz, Austria.

The company has also made the provision to add another argon oxygen decarburiser (AOD), a slab caster and a ladle furnace. This would increase the crude steel capacity to 1.6MT. Post expansion, there is a high possibility of shift in product mix to HRC, resulting in a marginal decline in blended EBITDA/T.

Logistics facilities in place to cater to expansion

The Jajpur, Odisha facility is well connected to both road and rail network and is strategically located in a proximity to the key raw materials. The company currently dependent on Vishakhapatnam port (500 km) for containerized movement. Post the operational of the Paradip port (110 km) for container handling in the next 3-4 months, will result into decline in transportation costs and turnaround time. Besides this, their railway sidings is also capable of handling containers and bulk material. In addition, plant is located in mineral rich belt of Odisha, which ensure consistent supplies of ferro alloys. Larger portion of the Chrome ore reserves of the Country is available at Sukinda region of Jajpur district which is around 30km away from the plant.

Distance from the plant

Excess Distance from Jajpur plant (km)

National Highway 16

Mine < 100

Sukinda Chrome ore mine 30

Road Rail

Paradip Port 110 120

Road Rail

Dhamra Port 120 150

River Brahmani 12

Source: Company


OCTOBER 3, 2018

Process Flow

Source: Company

Company Background

Jindal Stainless Ltd., part of the larger O.P. Jindal group and is one of the largest manufacturers of stainless steel (SS) in India with a 0.8MT capacity. Located in Jajpur, Orissa, Jindal Stainless Ltd. is a pioneer in the stainless steel industry with state-of-the-art machinery and engineering from the best of European suppliers, capable of producing globally competitive stainless steel products. The plant comprises 250,000 tonnes of ferro alloy facilities with world-class technology and equipment sourced from Germany. The production facilities, well equipped with a power generation facility of 264MW, can be scaled up if required to 3.2MT of stainless steel.


OCTOBER 3, 2018

NATURAL GAS SECTOR UPDATE Half yearly gas price revision – positive for upstream companies

The government of India/Ministry of petroleum and natural gas, as per the New Domestic Gas Pricing Guidelines, 2014, has revised the price of natural gas, produced domestically.

With effect from 1st October 2018, the domestic gas price is revised upwards to US$ 3.36/mmbtu (+10%) from US$3.06/mmbtu on Gross Calorific value (GCV). On Net Calorific value (NCV), the domestic gas price is revised upwards to US$3.73/mmbtu from US$3.40/mmbtu.

Domestic gas prices are calculated by taking weighted average price at Henry Hub of the US, National Balancing Point of the UK, rates in Alberta (Canada) and Russia with a lag of one quarter.

The revised gas price is applicable from 1st October 2018 till 31st March 2019. As per the new gas pricing formula, gas prices are to be revised every six months.

Deep-water, Ultra deep water and high Pressure-High Temperature arears: Similarly, with effect from 1st October 2018, the domestic gas price for gas to be produced from discoveries in Deep-water, Ultra deep water and high Pressure-High Temperature arears, is revised upwards to US$ 7.67/mmbtu (+13%) from US$6.78/mmbtu on Gross Calorific value (GCV). On Net Calorific value (NCV), the domestic gas price is revised upwards to US$8.52/mmbtu from US$7.53/mmbtu.

Upstream companies like ONGC (biggest beneficiary), OIL India and RIL are the key beneficiaries of higher domestic gas prices. Along with this, weaker rupee will further boost its earnings. Every US$1/mmbtu increase in gas price led to increase in ONGC’s revenue by Rs.40 bn.

In August 2018, India’s gas production was up by 0.6% yoy to 90 mmscmd supported by higher gas production by ONGC. ONGC gas production rose by 5.6% yoy to 67 mmscmd. Whereas, Oil India’s production declined to 7.6 mmscmd (–9% yoy) and production from private players/JVs continued to decline and stands at 16 mmscmd (–12% yoy).

On the flip side, higher gas price along with weak INR will negatively impact city gas distribution (CGD) companies and may impact margins. IGL has increased CNG prices by 4% to Rs.44.3/ kg and PNG price increased by 4.6% to Rs.29.55/SCM in Delhi. Similarly, MGL has increased the CNG price by 7.5% to Rs.49.61/kg and PNG price by 7.9% to Rs.29.4/scm (slab 1) and by 6.5% to Rs.35/scm (Slab 2) from 1st October 2018 to partly combat higher raw material cost.

India’s total Gas consumption mix: Major consuming sectors are fertilizer (25%), power (18%), CGD (15%), refinery (12%), petrochemicals (6%) sector and balance by others.

With higher crude oil prices, weak currency and higher domestic gas price, we remain bullish on OIL India (BUY, TP Rs.245).

Due to higher valuation, we remain SELL on IGL (TP Rs.257/share). However, remains positive on MGL due to attractive valuation (ACCUMULATE, TP Rs. 1030/share).

Sector Update

Details

BSE Oil Ind Mkt cap (Rs bn) : 6,127

52-wk Hi/Lo (Rs) : 16727 / 13232

No.of members : 10

BSE OIL Index Value : 14,793

O&G weightage in Sensex : 10.48

Source: Bloomberg

Comparison

3M 6M 1Y

SENSEX 3 11 17

NIFTY 3 9 14

BSEOIL 9 2 3

OINL 6 3 (2)

ONGC 14 1 8

BPCL 1 (12) (18)

IOCL (0) (12) (18)

HPCL (6) (29) (40)

RIL 26.7 40.4 58.7

GAIL 12 16 24

PLNG 3 (2) (2)

IGL (2) (11) (15)

MAHGL (1) (14) (24)

GSPL 2 (3) (8)

MRPL (14) (34) (43)

CPCL (2) (9) (26)

ABAN (29) (49) (56)

GGAS (13) (24) (25)



(%) 1M 3M 6M

BSE Oil and Gas Sector (1.9) 8.3 1.2

Nifty (5.8) 2.7 8.8

Source: Bloomberg

BSE Oil and Gas Index chart

Source: Bloomberg

Sumit Pokharna [email protected] +91 22 6218 438

12,500

14,500

16,500

18,500

Apr-17Aug-17Dec-17Apr-18Aug-18


OCTOBER 3, 2018

Half yearly domestic gas prices revision

The government of India/Ministry of petroleum and natural gas, as per the New Domestic Gas Pricing Guidelines, 2014, has revised the price of natural gas produced domestically (as part of the six-monthly official revision of rates).

With effect from 1st October 2018, the domestic gas price is revised upwards to US$ 3.36/mmbtu (+10%) from US$3.06/mmbtu on Gross Calorific value (GCV). On Net Calorific value (NCV), the domestic gas price is revised upwards to US$3.73/mmbtu from US$3.40/mmbtu.

Domestic gas prices are calculated by taking weighted average price at Henry Hub of the US, National Balancing Point of the UK, rates in Alberta (Canada) and Russia with a lag of one quarter. So, the rate for Oct’18 to Mar’19 is based on average price at the international hubs during Apr’17 to Mar’18.

Domestic gas prices have increased since April 2017 (US$/mmbtu)

Source: PPAC. Note: GCV: Gross Calorific value and NCV: Net Calorific value

Deep-water, Ultra deep water and high Pressure-High Temperature areas

Similarly, with effect from 1st Oct’18, the domestic gas price for gas to be produced from discoveries in Deep-water, Ultra deep water and high Pressure-High Temperature areas, is revised upwards to US$ 7.67/mmbtu (+13%) from US$6.78/mmbtu on Gross Calorific value (GCV). On Net Calorific value (NCV), the domestic gas price is revised upwards to US$8.52/mmbtu from US$7.53/mmbtu.

Gas prices for Deep-water, Ultra deep water and High Pressure-High Temperature areas

Source: PPAC. Note: GCV: Gross Calorific value and NCV: Net Calorific value

Upstream companies like ONGC (biggest beneficiary), OIL India and RIL are the key beneficiaries of higher domestic gas prices. Higher gas prices along with weaker rupee will further boost earnings of upstream companies.

4.2

5.61

5.18

4.24

3.40

2.78 2.76 3.21

3.40 3.73

3.78

5.05

4.66

3.82

3.062.50

2.482.89 3.06

3.36

2.00

2.50

3.00

3.50

4.00

4.50

5.00

5.50

6.00

Till Oct

2014

Nov'14-

Mar'15

Apr'15-

Sep'15

Oct'15-

Mar'16

Apr'16-

Sep'16

Oct'16-

Mar'17

Apr'17-

Sep'17

Oct'17-

Mar'18

Apr'18-

Sep'18

Oct'18-

Mar'19

NCV GCV

7.34

5.89 6.18

7.00 7.53

8.52

6.61

5.3 5.566.3

6.78

7.67

4.00

5.00

6.00

7.00

8.00

9.00

Apr'16-

Sep'16

Oct'16-

Mar'17

Apr'17-

Sep'17

Oct'17-

Mar'18

Apr'18-

Sep'18

Oct'18-

Mar'19

NCV GCV

The price of domestically produced

natural gas is revised every six months (i.e.

April and October) using weighted average of rates

prevalent in gas surplus markets like Henry Hub (U.S.), National Balancing Point

(U.K. excluding Russia), Alberta

(Canada) and Russia


OCTOBER 3, 2018

India’s total gas production – (mmscmd)

Source: PPAC and Kotak Securities – Private Client Research

ONGC’s gas production from domestic fields (mmscmd)


Oil India monthly gas production (MMSCMD)


66 63 65 65 65 65 63 64 65 66 64 65 66 67

8 8 8 8 8 8 8 7 8 7 7 7 7.5 7.6

18 18 18 18 17 17 16 17 17 16 17 17 14 16

92 89 91 91 91 89 87 89 90 89 88 89 88 90

-

10

20

30

40

50

60

70

80

90

100

mm

scm

d

ONGC Oil India Limited Private/Joint Ventures (JVs)

66

63

65

65 65

65

63

64

65

66

64

65

66

67

62

63

63

64

64

65

65

66

66

67

67

8.1

8.4

8.2

7.8 7.8

7.6 7.7

7.5

7.6

7.4 7.3 7.37.5

7.6

7.0

7.5

8.0

8.5

Domestic gas supply yoy basis increased

due to higher supply from ONGC

ONGC is the biggest domestic gas producer.

ONGC’s gas supply stands higher by 5.6%

yoy

Natural gas

is ~45% of ONCG's total crude oil and natural gas

production volume


OCTOBER 3, 2018

India’s domestic gas consumption – Industry wise (mmscmd)

Source: PPAC and Kotak Securities – Private Client Research. Note: Upstream companies use some gas as internal consumption while some quantity of gas is flared as a part of technical requirement.

India’s total Gas consumption mix

Major consuming sectors are fertilizer (25%), power (18%), CGD (15%), refinery (12%), petrochemicals (6%) sector and balance by others.

India’s total natural gas consumption mix (%)


20 19 18 18 19 18 17 19 18 17 16 19 17 18

27 24 25 28 28 25 25 25 26 27 25 23 25 25

13 13 13 13 13 13 13 14 13 14 13 13 14 14

1 3 3 3 3 3 3 6 3 3 3 3 3 3

13 8 9 8 2 2 2 2 2 3 2 2 2 2

0 3 5 2 2 7 8

9 8 8 8 8 8 8

19 19 18 18 18 18 18 19

19 18 18 19 18 18

91 91 89 90 90 85 87 86

93 89 90 86 88 86

-

10

20

30

40

50

60

70

80

90

100

Fertilizer Power City Gas Refinery Petrochemical Others Flare

Fertilizer, 25

Power, 18

City Gas, 15

Refinery, 12

Petrochemical, 6

Others, 13 Flare/Internal consumption,

11

Domestic gas consumption declined marginally by 0.5% yoy

due to decline in gas consumption in petrochemical

and fertilizer segment


OCTOBER 3, 2018

AUTO INDUSTRY VOLUME UPDATE – SEP 2018 Automobile companies reported mixed sales performance in September 2018. Overall performance for different segments were impacted due to mix of factors that includes Kerala flood, below expected monsoon in August/September 2018 in various regions, mandatory driving license for two wheeler registration in West Bengal, delayed festive season (peak festive season is spread in October and November this year as compared to October in 2017) and negative macro sentiments (rise in fuel prices and interest rates). As expected, growth for the all the segments slowed down in 2QFY19, in comparison with 1QFY19. Going ahead 2HFY19, we expect gradual improvement in growth (over 2QFY19) for the two wheeler, passenger vehicle and tractor segment. However, due to below expected monsoon and rising fuel prices, growth is expected to remain impacted to some extent. For the commercial vehicle segment, growth is likely to stay healthy.

Two wheeler segment post growth despite certain headwinds Since August 2018, the two wheeler industry has been facing headwinds due to Kerala flood and mandatory license for registering two wheelers in West Bengal. Both Kerala and West Bengal together accounts for ~8-8.5% of the domestic two wheeler volumes. Furthermore, the base was also on the higher side (September 2017 domestic two wheeler were the highest ever reported by the industry). Despite the above-mentioned reasons, the domestic two wheeler volumes are expected to have grown by 7-8% over September 2017. Amongst players, Bajaj Auto and TVS Motors posted strong volume growth. Bajaj Auto reported 11% volume increase in domestic segment and 30% increase in exports. TVSM reported strong double-digit volume growth across all segments. Hero MotorCorp’s volume grew by 7% YoY. Royal Enfield reported weak performance impacted by Kerala floods (accounts for 11% of Royal Enfield volumes) and labour strike at the plant. Going ahead , we expect the performance to improve as compared to 2QFY19.

Passenger vehicle industry expected to have declined YoY for third consecutive month

Domestic passenger vehicle segment reported 2-3% YoY volume decline in July 2018/August 2018 and our calculation suggest that September 2018 was no different. Kerala accounts for ~8% of domestic passenger vehicle industry and with severe floods the demand there witnessed sharp downturn. Apart from that, high base (industry grew in strong double-digit in 2QFY18) and somewhat subdued sentiments (from weaker than expected monsoon, high fuel prices, etc) seems to have led to de-growth in industry volumes in September 2018. Maruti posted low growth in domestic market and decline in exports. For M&M too, the performance in the passenger vehicle segment was below expected; though new product led to 8% sequential growth in volumes. Within the passenger vehicle industry, Tata Motors reported 6.6% volume increase; highest among the key players. Passenger vehicle industry posted volume de-growth in 2QFY19 and we expect the industry to return to growth in 3QFY19.

Auto Sector Report

Arun Agarwal [email protected] +91 22 6218 6443


OCTOBER 3, 2018

Commercial vehicle segment performance remains robust With various factors impacting growth in different segments, commercial vehicle performance has remained largely unchallenged. In September 2018, we believe the industry (LCV and MHCV) grew by 23% YoY. Tata Motors and Ashok Leyland reported ~26% YoY growth in volumes. M&M’s volume growth in the segment was 20% and Volvo Eicher posted 10% volume increase. SML Isuzu reported 9% YoY increase in sales volume. We expect the commercial vehicle industry to grow in double-digits in 2HFY19.

Summary – September 2018 volumes (Nos)

Sep Aug Sep YoY gth MoM gth FY18 FY19 Growth 2017 2018 2018 (%) (%) YTD YTD (%)

Ashok Leyland

MHCV 11,805 13,158 14,232 20.6 8.2 51,281 69,032 34.6

LCV 3,566 4,228 5,141 44.2 21.6 18,206 25,053 37.6

Total 15,371 17,386 19,373 26.0 11.4 69,487 94,085 35.4

Atul Auto

3W 4,799 4,430 5,106 6.4 15.3 21,198 23,959 13.0

Bajaj Auto

Domestic 2W 247,418 218,437 273,029 10.4 25.0 1,010,559 1,287,133 27.4

Domestic 3W 34,361 37,194 38,474 12.0 3.4 137,285 206,177 50.2

Domestic Total 281,779 255,631 311,503 10.5 21.9 1,147,844 1,493,310 30.1

Export 2W 122,260 144,486 157,910 29.2 9.3 683,876 869,373 27.1

Export 3W 24,713 36,975 32,596 31.9 (11.8) 128,224 203,402 58.6

Export Total 146,973 181,461 190,506 29.6 5.0 812,100 1,072,775 32.1

Overall Volumes 428,752 437,092 502,009 17.1 14.9 1,959,944 2,566,085 30.9

Eicher Motors

Royal Enfield (2W) 70,431 69,377 71,662 1.7 3.3 386,865 435,463 12.6

Commercial Vehicle 6,083 6,069 6,663 9.5 9.8 26,567 34,919 31.4

Escorts

Tractors 10,353 4,812 10,617 2.5 120.6 37,919 45,533 20.1

Hero MotoCorp

2W 720,739 685,047 769,138 6.7 12.3 3,872,180 4,238,996 9.5

Maruti Suzuki

Mini Segment 38,479 35,895 34,971 (9.1) (2.6) 219,727 213,615 (2.8)

Compact Segment 72,804 71,364 74,011 1.7 3.7 365,246 452,415 23.9

Mid-Size Segment 5,603 7,002 6,246 11.5 (10.8) 34,135 24,015 (29.6)

UV Segment 19,900 17,971 21,639 8.7 20.4 124,248 129,869 4.5

Van Segment 13,735 13,663 14,645 6.6 7.2 79,119 88,887 12.3

Total Domestic 151,400 147,700 153,550 1.4 4.0 825,832 919,240 11.3

Export 11,671 10,489 8,740 (25.1) (16.7) 60,857 56,087 (7.8)

Total Sales 163,071 158,189 162,290 (0.5) 2.6 886,689 975,327 10.0

M&M

Passenger Vehicle 25,414 19,758 21,411 (15.8) 8.4 121,849 121,729 (0.1)

Commercial Vehicle 19,203 20,326 22,917 19.3 12.7 96,982 119,467 23.2

3W 5,928 5,289 6,940 17.1 31.2 23,666 30,774 30.0

Total Domestic 50,545 45,373 51,268 1.4 13.0 242,497 271,970 12.2

Export 3,207 2,951 3,754 17.1 27.2 12,460 18,675 49.9

Total Sales 53,752 48,324 55,022 2.4 13.9 254,957 290,645 14.0

Tractors 45,788 17,785 37,581 (17.9) 111.3 166,379 178,829 7.5

SML Isuzu

Commercial Vehicle 932 744 1,014 8.8 36.3 5,401 7,042 30.4


OCTOBER 3, 2018

Summary – September 2018 volumes (Nos)

Sep Aug Sep YoY gth MoM gth FY18 FY19 Growth 2017 2018 2018 (%) (%) YTD YTD (%)

Tata Motors

Commercial Vehicles 36,678 39,859 46,169 25.9 15.8 161,369 232,487 44.1

Passenger Vehicles 17,286 18,420 18,429 6.6 0.0 81,417 106,865 31.3

Total Domestic 53,964 58,279 64,598 19.7 10.8 242,786 339,352 39.8

Export 3,887 5,478 5,250 35.1 (4.2) 19,942 27,654 38.7

Total Sales 57,851 63,757 69,848 20.7 9.6 262,728 367,006 39.7

TVS Motors

Scooters 121,601 126,676 142,562 17.2 12.5 585,905 676,121 15.4

Motorcycles 143,923 131,743 166,489 15.7 26.4 695,327 806,906 16.0

Mopeds 85,330 71,657 101,645 19.1 41.8 427,175 458,355 7.3

Total 2W sales 350,854 330,076 410,696 17.1 24.4 1,708,407 1,941,382 13.6

2W Exports (incl. above) 43,694 54,388 49,560 13.4 (8.9) 236,740 323,165 36.5

3W 8,996 13,141 13,282 47.6 1.1 42,285 75,266 78.0

Overall sales 359,850 343,217 423,978 17.8 23.5 1,750,692 2,016,648 15.2

Source: Companies


OCTOBER 3, 2018

Ashok Leyland - Commercial Vehicle Sales Volume Atul Auto - Three Wheeler Sales Volume

Source: Company Source: Company

Bajaj Auto - Domestic Two Wheeler Sales Volume Bajaj Auto - Export Sales Volume


Bajaj Auto - Total Sales Volume Eicher Motors (Royal Enfield) - TW Sales Volume


-

25.0

50.0

75.0

100.0

-

6,000

12,000

18,000

24,000

Volume (Units - LHS) % YoY growth (RHS)

(25)

-

25

50

75

100

-

70,000

140,000

210,000

280,000


-

40

80

120

-

100,000

200,000

300,000

400,000

500,000

600,000


(40.0)

(20.0)

-

20.0

40.0

60.0

80.0

-

1,500

3,000

4,500

6,000


-

20

40

60

-

50,000

100,000

150,000

200,000

250,000


-

9.0

18.0

27.0

36.0

60,000

65,000

70,000

75,000

80,000



OCTOBER 3, 2018

Eicher Motors (VECV) - Commercial Vehicle Sales Volume Escorts - Tractor Sales Volume


Force Motors - Total Sales Volume HMC - Two Wheeler Sales Volume


Maruti Suzuki - Total Passenger Vehcile Sales Volume M&M - Auto Segment Sales Volume


-

15.0

30.0

45.0

60.0

75.0

-

2,500

5,000

7,500

10,000


(30.0)

(20.0)

(10.0)

-

10.0

20.0

-

1,000

2,000

3,000

4,000

5,000


(15)

-

15

30

45

-

50,000

100,000

150,000

200,000


-

30.0

60.0

90.0

-

3,000

6,000

9,000

12,000

15,000


(10)

-

10

20

30

40

-

15,000

30,000

45,000

60,000

75,000


(10.0)

5.0

20.0

35.0

50.0

-

200,000

400,000

600,000

800,000

1,000,000



OCTOBER 3, 2018

M&M - Tractor Segment Sales Volume SML Isuzu - Commercial Vehicle Sales Volume


Tata Motors - Domestic Commercial Vehicle Sales Volume Tata Motors - Domestic Passenger Vehicle Sales Volume


Tata Motors - Total Sales Volume TVS Motors - Total Sales Volume


(40)

(20)

-

20

40

60

-

15,000

30,000

45,000

60,000


-

30

60

90

120

150

-

15,000

30,000

45,000

60,000


-

30

60

90

-

20,000

40,000

60,000

80,000


(40.0)

(20.0)

-

20.0

40.0

60.0

-

500

1,000

1,500

2,000


-

30

60

90

-

5,000

10,000

15,000

20,000

25,000


-

10

20

30

40

50

-

100,000

200,000

300,000

400,000

500,000



OCTOBER 3, 2018

RATING SCALE

Definitions of ratings

BUY – We expect the stock to deliver more than 12% returns over the next 12 months

ACCUMULATE – We expect the stock to deliver 5% - 12% returns over the next 12 months

REDUCE – We expect the stock to deliver 0% - 5% returns over the next 12 months

SELL – We expect the stock to deliver negative returns over the next 12 months

NR – Not Rated. Kotak Securities is not assigning any rating or price target to the stock. The report has been prepared for information purposes only.

SUBSCRIBE - We advise investor to subscribe to the IPO.

RS – Rating Suspended. Kotak Securities has suspended the investment rating and price target for this stock, either because there is not a Sufficient fundamental basis for determining, or there are legal, regulatory or policy constraints around publishing, an investment rating or target. The previous investment rating and price target, if any, are no longer in effect for this stock and should not be relied upon.

NA – Not Available or Not Applicable. The information is not available for display or is not applicable

NM – Not Meaningful. The information is not meaningful and is therefore excluded.

NOTE – Our target prices are with a 12-month perspective. Returns stated in the rating scale are our internal benchmark.

FUNDAMENTAL RESEARCH TEAM

Rusmik Oza Arun Agarwal Amit Agarwal Nipun Gupta Deval Shah Head of Research Auto & Auto Ancillary Transportation, Paints, FMCG Information Tech, Midcap Research Associate [email protected] [email protected] [email protected] [email protected] [email protected] +91 22 6218 6441 +91 22 6218 6443 +91 22 6218 6439 +91 22 6218 6433 +91 22 6218 6423

Sanjeev Zarbade Ruchir Khare Jatin Damania Cyndrella Carvalho Ledo Padinjarathala Cap. Goods & Cons. Durables Cap. Goods & Cons. Durables Metals & Mining, Midcap Pharmaceuticals Research Associate [email protected] [email protected] [email protected] [email protected] [email protected] +91 22 6218 6424 +91 22 6218 6431 +91 22 6218 6440 +91 22 6218 6426 +91 22 6218 7021

Teena Virmani Sumit Pokharna Pankaj Kumar Jayesh Kumar Krishna Nain Construction, Cement, Buildg Mat Oil and Gas, Information Tech Midcap Economist M&A, Corporate actions [email protected] [email protected] [email protected] [email protected] [email protected] +91 22 6218 6432 +91 22 6218 6438 +91 22 6218 6434 +91 22 6218 5373 +91 22 6218 7907

K. Kathirvelu Support Executive [email protected] +91 22 6218 6427

TECHNICAL RESEARCH TEAM

Shrikant Chouhan Amol Athawale [email protected] [email protected] +91 22 6218 5408 +91 20 6620 3350

DERIVATIVES RESEARCH TEAM

Sahaj Agrawal Malay Gandhi Prashanth Lalu Prasenjit Biswas, CMT, CFTe [email protected] [email protected] [email protected] [email protected] +91 79 6607 2231 +91 22 6218 6420 +91 22 6218 5497 +91 33 6625 9810

mailto:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]


OCTOBER 3, 2018

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The investor is requested to take into consideration all the risk factors including their financial condition, suitability to risk return profile and the like and take professional advice before investing. Investments in securities market are subject to market risks, read all the related documents carefully before investing. Derivatives are a sophisticated investment device. The investor is requested to take into consideration all the risk factors before actually trading in derivative contracts. Compliance Officer Details: Mr. Manoj Agarwal. Call: 022 - 4285 8484, or Email: [email protected]. In case you require any clarification or have any concern, kindly write to us at below email ids: Level 1: For Trading related queries, contact our customer service at '[email protected]' and for demat account related queries contact us at

[email protected] or call us on: Toll free numbers 18002099191 / 1800222299, Offline Customers - 18002099292 Level 2: If you do not receive a satisfactory response at Level 1 within 3 working days, you may write to us at [email protected] or call us on 022-42858445 and

if you feel you are still unheard, write to our customer service HOD at [email protected] or call us on 022-42858208. Level 3: If you still have not received a satisfactory response at Level 2 within 3 working days, you may contact our Compliance Officer (Mr. Manoj Agarwal) at

[email protected] or call on 91- (022) 4285 8484. Level 4: If you have not received a satisfactory response at Level 3 within 7 working days, you may also approach CEO (Mr. Kamlesh Rao) at [email protected] or call

on 91- (022) 4285 8301.

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Morning Insight€¦ · NALCO’s chairman Tapan Kumar Chand unveiled new business plan. The main objective being to increase the company’s three-digit profit figure to five-digit