INSTITUTIONAL EQUITY RESEARCH Cadila Healthcare (CDH …backoffice.phillipcapital.in/Backoffice/Research...and Remdesivir, Peg-Interferon Alpha, etc.) and even portable oxygen cylinders

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.

Cadila Healthcare (CDH IN)

Innovation-led growth on all fronts

INDIA | PHARMACEUTICALS | Company Update

13 October 2020

US generic is set for profitable growth led by improvement in its Mesalamine portfolio: CDH has seen a robust 77% jump in its gLialda (mesalamine; used mainly to treat inflammatory bowel diseases) prescriptions in the US in Q2 (July-August 2020), due to weakening generic competition for the drug, which also led to rising prices. CDH is fully integrated for mesalamine (leading to high profitability) and this portfolio (including Asacol HD and gLialda) is its leading sales/earning contributor. CDH gaining prominence in the overall mesalamine portfolio will drive profitable growth ahead.

Concerns of generic competition in Asacol HD are over exaggerated: CDH regained its lost exclusivity in gLialda with a prescription share of 70% in August 2020 from 50% in December 2019. None of the generic competitors (Mylan, Teva, Sun Pharma) currently hold more than 4% prescription share. Simultaneously, gLialda’s pricing also saw steady appreciation largely due to the regulatory complexity involved in formulating mesalamine. Given the competitive background in gLialda, the biggest prevailing concerns for CDH i.e. “likely generic competition in Asacol HD and consequent impact on its future earnings” are over exaggerated. CDH being the only approved supplier of the entire mesalamine portfolio (gLialda, gAsacol HD and gCanasa) and an integrated mesalamine manufacturer, should maintain its leadership in mesalamine in the US.

Covid portfolio could be a real game changer: CDH is one of the few global players with an extensive portfolio of products targeting Covid including – diagnostic kits, Covid vaccine, wellness products (sanitizers), multiple drugs for treatment (such as dexamethasone, HCQS and Remdesivir, Peg-Interferon Alpha, etc.) and even portable oxygen cylinders.

Remdesivir launch to raise earnings by 5% in FY21: CDH, so far the only integrated manufacturer of Remdesivir in India, has captialised on this fact by launching the drug at Rs 2,800/vial, i.e., a 30-48% discount over competitors. This shows its aggression in the drug; the management has already said it would use four of its lypholised facilities for producing the drug. We estimate the drug to earn incremental revenue/ earnings of Rs 1.83bn/858mn in FY21 itself, implying an earning upgrade of 5%.

Covid vaccine is a solid opportunity; could result in 9-50% earnings upgrade in FY22: Cadila is one of the three players from India engaged in vaccine development with its DNA plasmid vaccine “Zycov-D”, which is in advanced phase-2 trials. CDH expects to complete phase 3 trials by March 2021. The vaccine is a good opportunity for CDH, as its successful launch could earn an incremental sales/profit of Rs 38/10bn (50% earning upside) in FY22. If CDH fails in clinical development, it can still offer contract manufacturing services to earn incremental sales/profit of Rs 3.8/1.8bn (9% earnings upside) in FY22. However, we haven’t factored this potential upside in our earnings.

Financial deleveraging results in 4% earnings upgrade in FY22: CDH (having cut its net debt by Rs 15bn in Q1) already expects to reduce its overall debt by Rs 10bn in FY21. Moreover, Zydus Wellness’ Rs 11bn QIP (it is a 58% subsidiary of Cadila) would also be utilised to repay high-cost (9.14%) INR debt of Rs 15bn. With the total reduction in debt at c.Rs 20bn in FY21, CDH will save interest of Rs 1.2bn, implying an earnings upgrade of 4% in FY22.

BUY; target raised to Rs 550: Factoring the most likely profitable growth, both in US generics (led by mesalamine) and domestic formulations (led by specialty focus), benefit from the launch of Remdesivir, and financial deleverage, we raise our FY21/22 earnings by 8%/16% and introduce FY23 EPS estimate at Rs 25. Accordingly, we rate CDH a Buy with a target of Rs 550, i.e., 23x September 2022 EPS (earlier target was Rs 450 at 23x FY22 EPS). Any progress in the covid vaccine and clearance of the Moraiya facility by USFDA could surprise our estimates positively.

BUY (Maintain) CMP RS 441 / TARGET RS 550 (+25%)

SEBI CATEGORY: MID CAP

COMPANY DATA

O/S SHARES (MN) : 1024

MARKET CAP (RSBN) : 445

MARKET CAP (USDBN) : 6.1

52 - WK HI/LO (RS) : 438 / 202

LIQUIDITY 3M (USDMN) : 25.7

PAR VALUE (RS) : 1

SHARE HOLDING PATTERN, %

Jun 20 Mar 20 Dec 19

PROMOTERS : 74.9 74.9 74.9

FII / NRI : 4.8 4.6 4.8

FI / MF : 12.5 12.8 12.6

NON PRO : 2.0 2.0 1.9

PUBLIC & OTHERS : 5.8 5.6 5.9

KEY FINANCIALS

Rs mn FY21E FY22E FY23E

Net Sales 154,952 169,082 187,933

EBIDTA 33,005 37,198 41,721

Net Profit 18,426 22,098 25,242

EPS, Rs 18.0 21.6 24.7

PER, x 23.0 19.2 16.8

EV/EBIDTA, x 14.6 12.7 11.0

PBV, x 3.7 3.3 2.9

ROE, % 15.9 17.1 17.3

Debt/Equity (%) 52.4 40.1 36.0

PRICE VS. SENSEX

Source: Phillip Capital India Research

Surya Patra, Research Analyst (+ 9122 6246 4121) [email protected] Hrishikesh Patole, (+ 91 22 6246 4123) [email protected]

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mailto:[email protected]

mailto:[email protected]

Page | 2 | PHILLIPCAPITAL INDIA RESEARCH

CADILA HEALTHCARE COMPANY UPDATE

US generic is set for profitable growth as mesalamine portfolio gains momentum In recent years, Cadila has emerged as the fastest gainer (market share) of prescriptions in US generics with a share of 4.1% and rank of #4 in FY20 (from #7 in FY19 and #9 in FY18) – a gain of five positions over the last two years.

Cadila’s rank improved to #4 in FY20 from #9 in FY18 It gained market share in US generics to touch 4.1% in FY20

Source: Company

This momentum (in gaining prescription market share) continues even in FY21, thanks to the Covid-led shortages, CDH’s integrated manufacturing, and aggressive filings. However, qualitatively, the gains are led by gLialda – which has seen a robust 77% jump in its prescriptions in the US in Q2 (July-August 2020) due to weakening generic competition for the drug, which also led to rising price trend in gLialda. Incidentally, CDH is fully integrated for mesalamine (indicating high profitability) and its mesalamine portfolio (including Asacol HD as well as gLialda) is its leading sales/earning contributor.

Cadila shows strong growth in gLialda Trx YTD

Source: Symphony

Cadila

Cadila

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CDH’s rising prominence in the overall mesalamine portfolio will drive profitable growth



Improving pricing trend for Cadila in gLialda to improve profitability

Source: Symphony

Moreover, the anticipated rise in the flu season in H2, given the ongoing Covid scenario, should boost CDH’s overall US generic operations – which are currently seeing enhanced supply opportunity due to the improved product mix. Concerns of generic competition in Asacol HD are over-exaggerated: CDH lost exclusivity on gLialda in the US during December 2017. However, due to complexity of the product, global peers such as Teva, Mylan and Sun Pharma entered late, and could not create any significant dent in CDH’s market share and prices. Only Mylan could achieve a peak market share of 29% in gLialda before losing the entire stake to CDH in recent months. Teva and Sun Pharma struggled to achieve only 2-4% market share. CDH has now regained its leadership in gLialda with a prescription share of 70% in August 2020 from 50% in December 2019. With weakening generic competition (largely due to the regulatory complexity involved in formulating mesalamine), mesalamine pricing is gaining momentum.

Cadila has practically regained its lost exclusivity in gLialda in the US

Source: Symphony CDH, being the only approved supplier of the entire mesalamine portfolio (gLialda, gAsacol HD and gCanasa) and an integrated mesalamine manufacturer, will maintain its leadership in mesalamine in the US. Additionally, its aggressive approach toward US generics in upgrading its product portfolio (led by the launch of liposomal injection, strong pipeline of 54 injectables, and 9 in-licensed drug opportunities) should ensure sustained profitable growth for its US business over the next couple of years.

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The biggest prevailing concerns – of likely generic competition in Asacol HD and consequent impact on CDH’s future earnings – seem over exaggerated.



Covid portfolio could be a real game changer CDH is one of the few global players with an extensive portfolio of products targeting Covid, which includes diagnostic kits, Covid vaccine, wellness products (sanitizers), and multiple drugs for covid treatments (such as dexamethasone, HCQS and Remdesivir, Peg-Interferon Alpha, etc) and even portable oxygen cylinders. While the Covid-led drug shortages were initially considered short-term supply opportunities for few drug manufacturers, the unabated spread of Covid cases across the world (including in developed areas such as the US and EU) makes it a global threat and longer business opportunity for drug manufacturers with the relevant product portfolio.

A) Remdesivir launch upgrades earnings by 5% in FY21: Due to the varying nature

of the virus (in terms of symptoms, progress, availability of vaccine, regional differences, etc), there is no great clarity about the scope of various Covid targeted products. However, Remdesivir has emerged almost as the only widely approved product worldwide after it was cleared by the USFDA, although under emergency use authorisation only for critical patients. However, the USFDA has subsequently expanded the usage of Remdesivir for low/moderately serious patients. Meanwhile, multiple pharma manufacturers (including CDH) have in-licensed the molecule from the innovator (Gilead) for producing and marketing in India and 127 other low, middle income, and upper middle income countries on a no-royalty basis, till the time a pharmaceutical product other than Remdesivir or a vaccine is approved to treat or prevent COVID-19, whichever is earlier. CDH, so far, is the only integrated manufacturer of Remdesivir in India and has capitalised on this fact by launching the drug at Rs 2800/vial – a 30-48% discount to competitors’ prices. This shows its aggression for the drug and the management has already said it would use four of its lypholised facilities for producing the drug. We estimate the drug to earn incremental revenue/ earnings of Rs 1.83bn/Rs 858mn in FY21 itself, implying an earning upgrade of 5%. We have not factored any exports sales of Remdesivir in FY21 as we still facing shortage within India. Hence, there is visible upside risk to our Remdesivir sales estimates.

SegmentDiagnostic

products

Wellness

products

Prophylactic

Vaccines

Therapeutic

productsNCE & Biologicals

Immunity

booster biz

NameKAVACH

ELISANycil Zycov-D

Remdesivir, HCQ,

Dexamethasone

Pegylated

Interferon Alpha

2b & Desidustat

Launched

cimune &

Supermune

Type Test kits SanitizerDNA vaccine

in Ph2Treatment options

Clinical trials in

Mexico for Covid

Immunity

booster

Cadila Covid portfolio



Key Remdesivir Competitors Brand Launch date Pricing Strength Dosage Treatment cost

Cadila Remdac Aug-20 2,800 100mg vial 6 16,800 Mylan Desrem Jul-20 4,800 100mg vial 6 28,800 Dr Reddy's Redyx Sep-20 5,400 100mg vial 6 32,400 Jubilant Jubi-R Aug-20 4,700 100mg vial 6 28,200 Hetero Covifor Jun-20 5,400 100mg vial 6 32,400 Cipla Cipremi May-20 4,000 100mg vial 6 24,000

Remdesivir opportunity

Fig in Rs mn FY21

Sales 1,834

COGS 734

EBITDA 1,100

PBT 1,087

Tax 239

PAT 848

Earnings Upgrade (%) 4.6

Source: PhillipCapital India Research Estimates

B) Covid vaccine is a definite opportunity: A vaccine is considered a major weapon

against covid and various global pharma giants are reallocating resources for developing an effective one. As per WHO, as of October 2020, 42 candidates were in clinical evaluation – with AstraZeneca, Pfizer, J&J and Novavax leading the race as they entered phase-3 clinical trials. Developed countries have already made supply deals with potential leading players that have completed phase 2 trials for prices ranging from US$ 10-20 per vial.

Cadila is one of the three players from India that are engaged in vaccine development – with its DNA plasmid vaccine “Zycov-D”, which is in advanced phase-2 trials. While most of the vaccines under development are based on RNA technology, CDH’s vaccine is based on DNA technology. The advantage of DNA-based vaccines is that they do not require cold storage of -15°C to -25°C; they can be stored at -2°C to -8°C, which could be important in emerging markets which lack cold chain logistics infrastructure. Additionally, DNA-based vaccines offer the advantage of prevention for longer periods. CDH is expected to complete phase-3 trials by March 2021, with a capacity to produce up to 100mn doses a year initially. We believe a potential vaccine is a great opportunity for CDH, and present two scenarios below:

In scenario 1, we consider a successful launch of a vaccine after development

In scenario 2 it fails in trials, but CDH uses its facility to ‘fill and finish’ for successful global vaccine players (because its facility is WHO pre-qualified,available global capacity is short of visible demand, and transporting ready vaccines under -15°C to -25°C globally could substantially push up the vaccine costs).

Assuming a pricing of US$ 5 per vial (compared to global price of US$ 10-20), we estimate scenario 1 to offer incremental sales/profit/earning upside of Rs 38bn/10bn/50% to CDH in FY22. Scenario 2 could offer incremental sales/profit/earning upside of Rs 3.8bn/1.8bn/9%. Hence, we believe CDH’s vaccine initiative will definitely add value, irrespective of its success.



Opportunity from Vaccine Scenario 1 Scenario 2

success failure

Capacity (mn) 100 100

Volumes 100 100

Pricing 375 37.5

Sales (INR mn) 37,500 3,750

EBITDA 13,125 2,438

PBT 12,844 2,409

Tax 3,211 602

PAT 9,633 1,807

Likely upgrade (%) 50 9


Focus on specialty portfolio to drive value growth for domestic formulations CDH, having suffered from low growth in domestic formulations, has restructured its Indian formulation business into mass (with a revenue share of 55%; resources share of 65%) and specialty (sales mix of 45% and 35% resources share) in FY20. In the process, it rationalised non-performing mass products and extended their reach/penetration. On the other hand, it adequately reallocated resources towards specialty portfolio build up. Given its enhanced specialty infrastructure, CDH expects new qualitative drug launches such as complex branded generics, biosimilars, novel biologics, vaccines, and covid portfolio. CDH’s recent launch of Forglyn pMDI, India’s first pressurized Metered Dose Inhaler (pMDI) with a combination of Long Acting Muscarinic Antagonist (LAMA) and Long Acting Beta Agonist (LABA) for patients suffering from Chronic Obstructive Pulmonary Disease (COPD) is one of its specialty initiatives. Factoring Covid impact in H1 and initial sales from Remdesivir, we estimate 6% sales growth in FY21 but build c.11% domestic formulations sales CAGR over FY21-23 to Rs 49.4bn.

Specialty focus to drive stronger value growth in domestic formulation FY22 onwards:


Successful integration and financial deleveraging addresses the long-standing concerns of a leveraged buy-out of Heinz The following factors provide visibility for steady profitable growth in CDH’s overall consumer business – the successful integration of Heinz’s portfolio, consequent curtailed cost redundancies, initiatives to expand direct distribution network (by

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rationalising distributors) and brand extension (like timely launch of multiple sanitisers under “Nycil”). Additionally, financial deleveraging (as per guidance) provides improved earning visibility. CDH (having cut its net debt by Rs 15bn in Q1) already expects to reduce its overall debt by Rs 10bn in FY21. Moreover, Zydus Wellness’ Rs 11bn QIP (it is a 58% subsidiary of Cadila) would also be utilised to repay high-cost (9.14%) INR debt of Rs 15bn. With the total reduction in debt at c.Rs 20bn in FY21, CDH will save interest of Rs 1.2bn, implying an earnings upgrade of 4% in FY22

Rs 20bn Debt repayment in FY21 to strengthen B/S and drive profit growth


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Financials

Income Statement Y/E Mar, Rs mn FY20 FY21E FY22E FY23E

Net sales 138,121 151,617 165,767 184,248 Growth, % 8 10 9 11 Other income 4,410 3,336 3,315 3,685 Total income 142,531 154,952 169,082 187,933 Raw material expenses -49,327 -52,994 -57,488 -63,521 Employee expenses -24,145 -26,342 -29,589 -32,888 Other Operating expenses -41,352 -42,612 -44,807 -49,802 EBITDA (Core) 27,707 33,005 37,198 41,721 Growth, % (6.6) 19.1 12.7 12.2 Margin, % 20.1 21.8 22.4 22.6 Depreciation -6,965 -7,486 -7,959 -8,446 EBIT 20,742 25,519 29,239 33,276 Growth, % (12.4) 23.0 14.6 13.8 Margin, % 15.0 16.8 17.6 18.1 Interest paid -3,418 -2,698 -1,529 -1,554 Other Non-Operating Income 627 852 1,014 1,128 Pre-tax profit 14,442 23,673 28,725 32,849 Tax provided -3,198 -4,735 -5,745 -6,570 Profit after tax 11,244 18,938 22,980 26,279 Others (Minorities, Associates) -278 -829 -1,230 -1,421 Net Profit 10,966 18,110 21,750 24,858 Growth, % (17.0) 23.9 19.9 14.2 Net Profit (adjusted) 14,873 18,426 22,098 25,242 Unadj. shares (m) 1,024 1,024 1,024 1,024 Wtd avg shares (m) 1,024 1,024 1,024 1,024

Balance Sheet Y/E Mar, Rs mn FY20 FY21E FY22E FY23E

Cash & bank 9,649 1,893 3,493 17,938 Debtors 36,632 40,890 46,028 51,160 Inventory 27,890 30,487 32,971 36,553 Loans & advances 5,166 4,184 4,565 5,074 Other current assets 10,124 10,124 10,124 10,124 Total current assets 89,461 87,577 97,181 120,849 Investments 7,650 7,650 7,650 7,650 Gross fixed assets 113,345 120,745 128,368 136,219 Less: Depreciation -44,955 -52,441 -60,400 -68,846 Add: Capital WIP 61,330 61,415 61,416 61,416 Net fixed assets 129,720 129,719 129,384 128,789 Total assets 236,866 234,982 244,250 267,323

Current liabilities 32,724 40,890 44,619 49,593 Provisions 4,784 5,262 5,789 6,368 Total current liabilities 37,508 46,153 50,408 55,961 Non-current liabilities 82,254 61,868 53,351 54,197 Total liabilities 119,762 108,020 103,758 110,158 Paid-up capital 1,024 1,024 1,024 1,024 Reserves & surplus 102,733 112,590 126,121 142,794 Shareholders’ equity 117,104 126,961 140,492 157,165 Total equity & liabilities 236,866 234,982 244,250 267,323

Source: Company, PhillipCapital India Research Estimates

Cash Flow Y/E Mar, Rs mn FY20 FY21E FY22E FY23E

Pre-tax profit 14,442 23,673 28,725 32,849 Depreciation 6,965 7,486 7,959 8,446 Chg in working capital 2,537 2,772 -3,748 -3,669 Total tax paid -3,135 -4,735 -5,745 -6,570 Other operating activities -2,142 -2,142 -2,142 -2,142 Cash flow from operating activities 18,667 27,054 25,048 28,914 Capital expenditure -6,676 -7,485 -7,623 -7,851 Chg in investments -915 0 0 0 Cash flow from investing activities -7,591 -7,485 -7,623 -7,851 Free cash flow 11,887 21,199 0 19,587 Debt raised/(repaid) 870 -20,386 -8,517 846 Cash flow from financing activities -2,726 -21,335 -9,839 -667 Net chg in cash 8,350 -1,766 7,586 20,396

Valuation Ratios

FY20 FY21E FY22E FY23E

Per Share data

EPS (INR) 14.5 18.0 21.6 24.7 Growth, % (17.0) 23.9 19.9 14.2 Book NAV/share (INR) 101.4 111.0 124.2 140.5 FDEPS (INR) 14.5 18.0 21.6 24.7 CEPS (INR) 24.9 25.3 29.4 32.9 CFPS (INR) 19.7 27.7 25.6 29.2 Return ratios

Return on assets (%) 5.6 8.7 10.0 10.6 Return on equity (%) 10.6 15.9 17.1 17.3 Return on capital employed (%) 10.7 14.0 15.6 16.3 Turnover ratios

Asset turnover (x) 0.8 0.9 0.9 1.0 Sales/Total assets (x) 0.6 0.6 0.7 0.7 Sales/Net FA (x) 1.1 1.2 1.3 1.4 Working capital/Sales (x) 0.3 0.3 0.3 0.3 Receivable days 96.8 98.4 101.3 101.3 Working capital days 124.4 107.8 108.0 105.6 Liquidity ratios Current ratio (x) 2.7 2.1 2.2 2.4 Quick ratio (x) 1.9 1.4 1.4 1.7 Interest cover (x) 6.1 9.5 19.1 21.4 Total debt/Equity (%) 77.0 52.4 40.1 36.0 Net debt/Equity (%) 67.7 50.7 37.3 23.5 Valuation PER (x) 28.5 23.0 19.2 16.8 PEG (x) - y-o-y growth (1.7) 1.0 1.0 1.2 Price/Book (x) 4.1 3.7 3.3 2.9 EV/Net sales (x) 3.6 3.2 2.8 2.5 EV/EBITDA (x) 17.8 14.6 12.7 11.0 EV/EBIT (x) 23.8 18.9 16.1 13.8



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.

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N (TP 430) B (TP 415) B (TP 415)

B (TP 440)

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B (TP 320) B (TP 320)

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A-17 O-17 N-17 J-18 F-18 A-18M-18 J-18 A-18 O-18 N-18 D-18 F-19 M-19M-19 J-19 A-19 S-19 N-19 D-19 F-20 M-20M-20 J-20 J-20



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.

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 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.

PhillipCapital (India) Pvt. Ltd. Registered office: 18th floor, Urmi Estate, Ganpatrao Kadam Marg, Lower Parel (West), Mumbai – 400013, India.

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