Minda Industries Limited - Research & Rankingresearchandranking.com/wp-content/uploads/2015/11/MIL...2 MINDA INDUSTRIES LIMITED (MIL) Disclaimer: This “Initiating Coverage” note

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Minda Industries Limited

Independent Equity Research

Investment Note

Equentis Wealth Advisory Services (P) Ltd

Registered Office: 712, Raheja Chambers, Nariman Point,

Mumbai – 400021 India

Tel: +91 22 61013800

Email: [email protected]

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MINDA INDUSTRIES LIMITED (MIL)

Disclaimer: This “Initiating Coverage” note has been prepared in June 2017 and is refreshed as and

when deemed necessary. Our recommended companies are tracked regularly (quarterly) and for latest

information on the company and latest 15-18 months and 5-year targets, please visit the quarterly

result report section on our website. Detailed quarterly results are uploaded every quarter in this

section. Additionally, clients are also updated on any major events as and when they occur

I. BACKGROUND AND BUSINESS

� Group - Minda Industries Limited (MIL) -- M.Cap Rs.52bn ($800mn @ Rs.64.38/$); FY17 consolidated revenues Rs.35bn) is the flagship entity of Nirmal Kumar (NK) Minda Group; the group recently rebranded itself as “UNO MINDA”. With humble beginnings way back in 1958 by Late Shri S.L. Minda, the company over the last five decades has evolved into a leading Tier-1 supplier of Proprietary Automotive Solutions to original equipment manufacturers OEMs across a range of automotive components.

� Segments (Current) - UNO Minda is widely present in almost all the domains of vehicles production such as –

electrical & electronics, body & structure, chassis & motor systems, engine & exhaust, interior controls and safety, clean‐tech, distribution & institutional businesses. As a Tier‐1 supplier, the Company designs, develops and manufactures a wide range of automotive components such as - switches – 2W/HBA & 4W/HVAC, sensor and body electronics, relay, actuators, accelerator pedal assembly, automotive lighting, automotive horns, alternate fuel systems, non-automotive LED lighting, solar renewable energy, automatic gear shifters, blow molding and fuel caps.

� Business Overview – As % Consolidated turnover – FY2017

Products % of sales Channels % of sales Geography % of sales Segments % of sales

Switches 32% OEM 86% India 81% 2 wheelers 61%

Lighting 25% Replacement 14% International 19% 4 wheelers 39%

Horns 17%

Alloy Wheels & Die-Casting 11%

Blow Molding 4%

Others 11%

TOTAL 100% 100% 100% 100%

� Segments (New) – During FY17, MIL entered into JVs with Onkyo (Japan) for Infotainment (Sound Amplifier

Systems), with TTE (Taiwan) for Driving Assistance Systems & Products (DAPS) and with Katolec (Japan) for Printed Circuit Boards and Box Build Assemblies. MIL brought back its stake in the erstwhile JV with Panasonic -- Minda Storage Batteries India Pvt Ltd and made it a 100% subsidiary. Subsequently, the battery division of MIL was hived off to Minda Storage Batteries, a Wholly Owned Subsidiary of MIL, w.e.f. 1st April 2017.

Evolution of MIL’s product portfolio

Evolution of Product Portfolio

Pre-2001 2001-08 2010-14 2015-16 2017

1. Automotive Lighting 2. Automotive Switches

1.Blow Moulding 2. Batteries 3.CNG/LPG Kits 4. Automotive Horns

1.Fuel Caps 2. Aluminum Die Casting 3.Air Filtration Systems

1.Hoses 2.Alloy Wheels

1.Speakers & Infotainment 2.EMS Services 3. DAPS

Localization through JVs

Pre-2001 2001-08 2010-14 2015-16 2017

JV with Tokai Rika (Japan) for 4W switches

1.JV with Toyoda Gosei (Japan) for Hoses 2. JV with Kyoraku for blow molding

JV with Torica (Subsidiary of Tokai Rika) for procurement of raw materials

JV with Kosei (Japan) for Alloy wheels

JV with Katoltec (Japan) for printed circuit boards (PCB) and box build assemblies.

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Key Milestones and the way forward

FY05-FY15 FY16-FY17 Way forward

New Products Blow Molding, Hoses, Batteries, Air Filtration Systems, Aluminum Die-Casting,Fuel Caps Acquisition Clarton Horns (Horns, Spain)

Joint Venture JV With Kosei Aluminum for alloy wheels

Group Business Consolidation Acquisition Rinder Group (Lighting, Spain)

New Joint Ventures

JV with Onkyo Japan (Infotainment) JV with Katolec Japan (Printed Circuit Boards)

1.Complete realignment of group structure. 2.Invest in the latest technology, focus on R&D and work with the best people. 3.Continue hedged status by being a prominent player in the 2W/3W, 4W segments and Off road. 4.Achieve market leadership within each product category 5.Keep pace with increasing electronic content in vehicles (JV with TTE, step in this direction)

� Business strengths - MIL has 32 manufacturing facilities across 14 locations in India. Presently, MIL is the second

largest manufacturer of horns globally (post Clarton Horns acquisition) and the third largest manufacturer of automotive switches in India (after Lumax Industries and Fiem Industries). It has nearly 145 registered / filed patents, 165 design registrations till date, five R&D centres and 14 design centres across the country. MIL employs more than 3,200 people and through its network of more than 700 business partners and 10,000 dealers, it serves more than 50 OEMs in India and abroad.

MIL’s Manufacturing Facilities at a glance

Switching Systems Lighting Systems Acoustic Systems Other Products

1. Manesar 1. Patnagar 1. Manesar 1.Hosur- Die Casting

2. Pune 2. Sonepat 2. Pantnagar 2. Bawal- F-Ten, Alloy Wheels, Die Casting, Blow Molding

3. Patnagar 3. Haridwar 3.Bangalore- F-Ten, Blow Molding, Roki Minda.

4. Hosur 4. Chennai 4. Manesar- Fuel Caps, Alloy Wheels.

5. Aurangabad 5.Chennai & Gujarat- Roki Minda.

ASEAN Entities Rinder's Facilities Clarton Horn Facilities 6. Neemrana- TG Minda.

7. Patnagar (Minda Storage Battery)

1. Indonesia 1. India 1. Spain

2. Vietnam Chakan 2. Morocco

Bahadurgargh 3. Mexico

2. Overseas

Columbia

Design Centre in Spain.

� Recent acquisitions - Its most recent acquisition was that of Rinder Group of Spain in June 2016. MIL invested €20mn

(Enterprise Value) to acquire the Spanish company which is a pioneer and has a formidable presence in LED lighting technology for automotive lamps. In addition to the 100% stake in equity in Light Systems and Technical Centre, Spain and Rinder, India, MIL acquired 50% equity in Rinder Riducu, Colombia. The Rinder acquisition established MIL as a technology leader and helped increase its market share in automotive lighting solutions. The technology centre in Spain will help build global competitive capabilities through R&D. Rinder India Private Limited (RIPL) has three manufacturing plants – two in Pune (Maharashtra) and one in Bahadurgarh (Haryana).

� Business Integration Exercise - As part of broader reorganization at the consolidated level, MIL is increasing its stake

in various group companies which have synergies with the portfolio of the company. The objective is to consolidate all businesses of the Uno Minda Group. The business integration exercise is a two-phase of which Phase-I has been completed in two stages while Phase 2 is expected to be completed by March 2018. It has appointed KPMG to work on a scheme to simplify corporate structure in a tax efficient manner. We view this initiative as highly constructive and are

of the opinion that it would give a huge fillip to the turnover and profits of MIL. (More details on the business

consolidation exercise have been explained in the “Investment Thesis” portion of this report).

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� Group Companies - MIL has formed associations with several global automotive technology players through joint ventures and partnerships. These are summarized, along with the entire group structure in Annexure IV

� Management effectiveness - From its humble beginnings as primarily a maker of automotive switches, the management

has been very proactive in diversifying its product portfolio which now includes - lighting products, horns, batteries, fuel caps, auto gas, alloy wheels, etc. Further, it has also successfully ramped up its operations by forging successful partnerships with global leaders which have helped the business add new clients and become a dominant Tier-I vendor for its product portfolio. Alongside it has built a strong brand recall in the after-market segments.

� Financial Performance – A Glimpse – Over the past five years, Consolidated Net Revenues, EBITDA and PAT have

grown at a robust pace of 25%, 40% and 45% CaGR respectively. This is an impressive run rate and is expected to improve going ahead given that several of its recently formed JVs and associations would turn around and start generating profits over the next 1 – 2 years. Debt-Equity ratio is at a comfortable level of 0.50xs (as on 31st March 2017) while RoCE and RoE have been steadily going up over past five years. While RoCE has improved from 8% in FY12 to 20% in FY17, RoE has gone up from 12% to 25% during the period. Free Cash Flow generation has turned negative in the past two years (cumulative Rs. 2.8bn in FY16&17) due to heavy capex of Rs. 7.5bn incurred for the ongoing consolidated exercise. Going ahead, we expect MIL to incur capex of Rs. 5bn in FY18, Rs. 2.5bn in FY19 and Rs. 2.8bn in FY20. Owing to the high capex in FY18, FCFF is expected to be negative in FY18 (negative Rs. 2.7bn). However, it is expected to turn positive thereafter (Rs. 2.2bn in FY19 and Rs. 3.5bn in FY20).

� Ownership Profile - The promoters have maintained their stake in the company at a steady level (65% - 75%) over the past decade. At the same time no part of the promoter holding is pledged. The management has been quite transparent regarding periodic disclosures addressing analyst and investor queries through regular quarterly post-result conference calls and analyst meets. As on 3rd April 2017 (the latest available shareholding figures on BSE), promoters (mainly Minda family members) own 67.94% in the company. As per BSE disclosures on 3rd April 2017, DII holding in MIL was 3% while FII holding was 3.91%. Marquee stakeholders in the company are Canara Robeco Mutual Fund A/C – Canara Robeco Emerging Equities (1.26%), HSBC Global Investment Funds – Asia Ex. Japan Equity Smaller Companies (2.55%), DB International Asia Limited (2.52%) and DSP Blackrock Core Fund (1.09%).

� QIP Issue - In March 2017, MIL successfully raised Rs. 3bn through Qualified Institutional Placement (QIP) of equity

shares. The initial size was proposed for Rs. 2.75bn, but given the over-subscription of 2xs, MIL exercised the green-shoe option and raised the issue size to Rs. 3bn. The QIP was priced at Rs. 423 / share, discount of Rs. 13.66 / share (3.2% discount) to the floor price of Rs. 436.66 / share. The investors who participated in the issue included DSP Blackrock, Sundaram, IDFC, Canara Robeco, IDBI Federal, HSBC Global, Bajaj Allianz and Lloyd Baughan among others. Funds received from the share placement will arm the company with additional ammunition to undertake its consolidation exercise and investment in new projects. Given the increase in cash balance post the issue, the company may go in for suitable acquisitions or capacity expansion or expansion in new geographies and (related) product lines. Hence, we continue to have a positive view on the company. Impact of the issue on share count and promoter shareholding is summarized in the following table:

Sr. No. Particulars Amount Comments

1 O/S share count prior to QIP issue (Mn.) 79.3 Source: BSE Website

2 QIP Fund Raising (Rs. Mn.) 3,000 Actual

3 Floor Price (Rs. / share) 436.7

4 Actual Subscription Price (Rs.) 423.0

5 Premium (Discount) (%) -3%

6 CMP (Rs.) 432.0 BSE Closing on 24-Mar-17 -- date of announcement of QIP

7 Premium (Discount) (%) to CMP -2%

8 No. of shares issued in QIP (Mn.) -- (2) / (4) 7.1

9 Total shares o/s post QIP (Mn.) -- (1) + (8) 86.4

10 Total Dilution (%) 8.9%

11 Promoter Shareholding (Mn. Shares) 58.7 Pre-QIP Source: BSE Website -- as on 30-Sep-16

12 Promoter Shareholding (%) -- (1) / (11) 74.02% Pre-QIP Source: BSE Website -- as on 30-Sep-16

13 Promoter Shareholding (%) -- (9) / (11) 67.9% Post QIP Issue. Tallies with shareholding on BSE as on 3-Apr-17

14 Promoter Stake dilution (%) -- (12) - (13) 6.1% Post QIP Issue.

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II. INVESTMENT THESIS

Recommendation - BUY Internal Rating Score -- 4.62 out of 5

15-18M Review Price -- Rs. 940 – 1,130 Upside: 70 – 100% absolute upside

5yr Review Price -- Rs. 1,745 - 2,615 Upside: 25-35% CaGR

MIL is at the cusp of a strong ‘new growth cycle’, led by a powerful play of twin factors of a highly attractive opportunity

at its end-user Indian automotive industry, as well as by its dominant Tier-I auto vendor status, resulting in high entry barriers and market leadership across its diversified product portfolio. Over the years, the management has shown tremendous foresight in scaling up the operations, led by successful

diversification of product portfolio and strong client additions. Importantly, this successful ramp-up has been supported by partnerships with global leaders, which in turn has ensured high quality products and robust acceptance of the same amongst OEMs. Alongside, the company has built strong brand equity in the more profitable after-market, which also helps to some extent smoothen business cycle volatilities. In our opinion, the next leg of growth would be driven by the following –

a) Steady growth in existing product portfolio mainly of switches, lighting, acoustics and alloy wheels led by its dominant market leadership across OEMs and after-markets. For the same, MIL has already invested in building new capacities that offer visibility to support strong double digit revenue CaGR over the next 3-5 years.

b) The group has initiated a ‘Business Integration Exercise’, with the objective to bring the operations of various

group companies mostly owned by the promoters into the books of MIL. The management plans to execute this exercise in two Phases of which Phase I (comprising of two stages) is completed while Phase II is expected to be completed by March 2018.

PHASE-I Stage-1 Stage-2

Increasing MIL stake through investment in JV

& Group companies

Increasing MIL stake in JV

& Group companies

� Additional 50% in MJ Castings for Rs.152 mn, increasing stake to 100%

� Invested Rs. 194mn SAM Global Pte Ltd, Singapore for 51% equity stake

� SAM Global Pte Ltd, Singapore holds 37% equity shares in PT Minda Asean Automotive, Indonesia (PTMA)

� Invested Rs. 61.30mn for additional 13% in PT Minda Asean Automotive (Indonesia), increasing holding to 32%

� Invested Rs. 178.5mn in Minda TG Rubber for 51% equity stake

� Invested Rs. 122.8mn in Kosei Minda Aluminum Co. for 30% shareholding

� ASEAN has been consolidated from 51% to

100% from April 2017 for a consideration of ~Rs. 290mn

� PTMA, Indonesia has become 100% subsidiary of MIL

� SAM Global, Singapore has become 100% subsidiary of MIL

� 49% interest in Roki Minda has been purchased for a consideration of ~Rs429mn, the entity has been consolidated from October 1, 2016

� Minda Storage Batteries Pvt Ltd (Erstwhile Panasonic Minda Storage Batteries India Pvt Ltd) became 100% subsidiary

� Battery Division of MIL is being hived off to Minda Storage batteries (A WOS of MIL) w.e.f. 1st April 2017

MIL has a technological alliance with Tokai Rika of Japan for manufacturing 4W switches; called Mindarika Private Limited (MRPL) in which MIL has a 27% stake. This is classified as an associate company under MIL. As mentioned by the management during Q4FY17 post-result conference call, MRPL will be consolidated into MIL from H2FY18. MRPL reported Revenues, EBITDA margin and PAT of Rs. 6.5bn, 14% and Rs. 500mn respectively in FY17. This business has huge synergies with MIL’s existing mainstay business of 2W / 3W / Off-Road vehicles, hence bringing it into the books of the company will be hugely beneficial for MIL.

c) Investments in new business lines – Alloy wheels (70% subsidiary with Japanese leader Kosei Aluminum, largest manufacturer of alloy wheels in India, marquee customers include MSIL, Toyota, M&M, Honda and Renault Nissan.

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MIL’s capacity for Alloy Wheels stood at 55,000 wheels per month between October 2016 to February 2017, ramping up to 75,000 in March 2017. MIL is planning to increase the capacity to 1,20,000 p.m. by August 2017 from current capacity of 90,000 p.m. in Bawal plant. Another plant for alloy wheel in Gujarat will be commissioned in 2 phases. In first phase (By April 2018), 60,000 p.m. alloy-wheels per month will be manufactured. The company will spend Rs. 1.5bn for the expansion. For majority of the expansion, MIL has orders in place), Brake and Fuel hoses

(through 51% subsidiary Minda TG Rubber Pvt. Ltd., capacity of 5.1mn mtrs, caters to MSIL and TKML).

Key assumptions for Base Case Forecasts over FY17-22E

� Revenue: As per our estimates, consolidated turnover of MIL is projected to report strong double-digit CaGR in

the range of 20-25% over FY17-22E, Accordingly, turnover of Rs. 35bn in FY17 is estimated to grow to Rs. 100bn in FY22 a growth of 25% CaGR.

FY17 was the first full year reflecting the revenues on account of integration and revenue from new product additions like alloy wheels and batteries. Consequently, growth in FY17 saw an upward spike with consolidated revenues growing nearly 40% YoY against an average top-line growth of 20% seen during the five years before FY17. The integration exercise is still going on and we expect the next couple of years to see high revenue growth (30% YoY in FY18 and 33% YoY in FY19) and normalizing thereafter (average 18% YoY over FYFY20-22). Basis these assumptions, consolidated turnover is expected to grow nearly 3xs over FY17-22.

� EBITDA: We estimate consolidated EBITDA to grow at a CaGR of 26% over FY17-22E, higher than the

topline CaGR, aided by EBITDA margin expansion of 125bps over FY17-22E. MIL’s EBITDA margins have seen a huge expansion since FY14, of 638bps over FY14-17. This margin expansion has been driven by entry into more profitable segments, capacity expansion, improved capacity utilization leading to operating leverage kicking in. The integration exercise being carried out currently has also led to significant operating synergies, saving of costs and has contributed to margin expansion. Going ahead, we expect EBITDA margins to stabilize in the 11-12% range.

� Capex & Asset-sweating: MIL’s capex has shown some interesting trends over FY11-17. FY11 and FY12 were

relatively capex-light years with cumulative capex of Rs. 1.5bn during the two years. The next two years (FY13 & FY14) saw cumulative capex of Rs. 6bn. The company acquired Clarton Horn, Spain in FY14 for €6.8mn and also invested in partnership entities. FY15 was a relatively capex-light year with capex of only Rs. 510mn. Again, FY16&17 saw heavy investment (cumulative Rs. 7.5bn) by the company towards capacity expansion and consolidation of entities under its fold. Over the period FY17-22E, we estimate cumulative capex of Rs. 22bn. We expect steady improvement in asset sweating from current levels of 2xs to 3xs over FY22E.

� Cap-structure: Based on the above assumptions, we estimate MIL to become debt-free by FY21. Over the near-

term we expect leverage to remain well below 0.5xs and with a steadily declining bias.

� PAT: With a topline CaGR of 25%, EBITDA CaGR of 26%, we estimate PAT CaGR of 35% over FY17-22E. We have assumed tax rates at 22% each year in our forecasted period.

� Dividend Payout: We have maintained dividend payout ratio as % net profits to be constant at 15% over our forecasted period.

� Working Capital Intensity: MIL has an efficient working capital management with Net working capital as % net sales at around 5%. We expect it to remain slightly elevated, though manageable (at 8% of sales) over the forecasted period.

� Return Metrics: RoCE and RoE have more than doubled over the past five years to 19% and 22% respectively.

Going ahead, we expect RoCE to jump to 33% and RoE to move up to 26% by FY22E.

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Particulars (Rs. Mn.) 3yr CaGR (FY14-17) 5yr CaGR (FY12-17) 5yr CaGR (FY17-22E)

Revenues 27.1% 24.3% 23.4%

EBITDA 70.2% 38.3% 26.1%

PAT 187.5% 43.2% 32.7%

Cumulative Capex (8,014) (13,953) (17,036)

Avg. D/E (xs) 0.7 0.8 0.1

Avg. Dividend Payout (%) 14.0% 28.2% 15.0%

Avg. Working Capital Intensity (%) 5.0% 5.2% 8.1%

Avg. RoCE (%) 15.5% 11.7% 25.7%

Avg. RoE (%) 22.6% 15.9% 24.9%

Cumulative FCFF (1,955) (6,860) 13,225

Avg. Cash & Liquid Investments 1,545 1,105 2,918

Basis the above growth opportunity and MIL’s strong opportunity, over FY17 – 22E, our key estimates are as follows:

1. Turnover increase by approx. 3xs 2. EBITDA increase by 3.2xs 3. PAT increase by 4xs 4. Cumulative Capex over five years = Rs. 17bn 5. Cumulative FCFF over five years = Rs. 13bn 6. Avg. Cash and investments portfolio of Rs. 3bn 7. Avg. Gearing NIL 8. Avg. Working Capital Intensity = 8% of sales 9. Avg. Dividend Payout at 15% of consolidated PAT 10. Avg. RoCE of 26% with increasing bias

MIL FY17 FY18 FY19 FY20 FY21 FY22 CaGR FY17-22E

EPS (Rs.) 21.2 31.4 43.9 56.1 70.6 87.1 32.7%

YoY (%) 48.1% 39.8% 28.0% 25.8% 23.4%

P/E (xs) 26.4 17.8 12.8 10.0 7.9 6.4

Over the next 15-18 months, we expect the stock has the potential of delivering 70 - 100% upside over current levels. This

is based on valuing average FY18 & 19 estimated EPS of ~ Rs. 38/- at 25 - 30xs PE multiple.

Particulars FY17A FY18E FY19E FY20E

EPS (Rs.) 21.2 31.4 43.9 56.1

YoY (%) 48.1% 39.8% 28.0%

CMP (Rs.) 559 559 559 559

P/E (xs) 26.4 17.8 12.8 10.0

Avg EPS (FY18E-19E) 37.6

Attach Multiple (xs) 25.00 30.00

Case I Case II

Intrinsic Value (Rs.) 940 1,128

Upside (%) 68.1% 101.7%

Avg. Intrinsic Value (Rs.) 1,034

Avg. Upside (%) 84.9%

Basis the above explained growth opportunity and MIL’s strong competitive positioning, alongside benefits of scaling up through business integration exercise and new product additions; over FY17-22, we forecast Consolidated Turnover to grow

3xs, EBITDA to grow 3.2xs and PAT to grow 4xs. We estimate MIL to become debt-free by FY21, with cumulative free

cash flows to the firm worth Rs. 13bn over FY18-22E. After more than doubling from 9% to 19% over past five years

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leading to FY17, RoCE is expected to further move upwards to 33% by FY22E. Such rampant pace of improvement in

financials puts MIL in a sweet spot, wherein it should see the twin benefits of sharp upward revision in earnings as well

as multiple re-rating. We forecast base case EPS at Rs. 31/- in FY18 (48% YoY), Rs. 44/- in FY19 (40% YoY), Rs. 56/- in FY20 (28% YoY), Rs. 71/- in FY21 (26% YoY) and Rs. 87/- in FY22 (23%) YoY. This implies EPS CaGR of 33% over FY17-22E.

Given our high conviction in the business model and the favourable medium-term outlook, we are of the opinion, that apart from the strong near-term stock price appreciation, MIL also has the potential of creating significant wealth and fits well

into our 5x5 strategy. The table below details the sensitivity of FY22 Target Price to different levels of EPS estimates and PE multiple.

FY-22 EPS sensitivity -5% -10% -15% 0% 5% 10% 15%

FY-22 EPS est. (Rs./-) 83 78 74 87 91 96 100

PE 10xs 827.83 784.26 740.69 871.40 914.97 958.54 1,002.11

PE 12xs 993.40 941.11 888.83 1,045.68 1,097.97 1,150.25 1,202.54

PE 15xs 1,241.75 1,176.39 1,111.04 1,307.10 1,372.46 1,437.81 1,503.17

PE 20xs 1,655.66 1,568.52 1,481.38 1,742.80 1,829.95 1,917.09 2,004.23

PE 25xs 2,069.58 1,960.66 1,851.73 2,178.51 2,287.43 2,396.36 2,505.28

PE 30xs 2,483.50 2,352.79 2,222.08 2,614.21 2,744.92 2,875.63 3,006.34

PE 35xs 2,897.41 2,744.92 2,592.42 3,049.91 3,202.40 3,354.90 3,507.39

Note – shaded cells indicate fair value of equity range Recommendation - MIL forms part of our top conviction investment ideas with strong potential of delivering 3-5xs returns over current levels through FY22. We have a strong BUY recommendation on the stock and would advise adding the stock at current levels. We have high levels of confidence in the business model, its product portfolio and sustainability of demand

drivers in its end-markets across OEMs and aftermarket, as well as on the management’s ability to deliver going forward.

Sensitivity The table below runs the sensitivity of EPS CaGR over FY17-22 at different levels of topline CaGR and EBITDA margin

estimates:

Consolidated Top-line CaGR FY17-22E

EB

ITD

A M

arg

in E

stim

ate

FY

22E

5% 10% 15% 20% 25% 30%

8.0% -36.30% -11.59% 1.21% 10.97% 19.30% 26.79%

8.5% -26.90% -7.67% 4.15% 13.52% 21.66% 29.05%

9.0% -20.75% -4.31% 6.80% 15.86% 23.84% 31.16%

9.5% -16.07% -1.37% 9.20% 18.03% 25.89% 33.14%

10.0% -12.25% 1.25% 11.41% 20.04% 27.80% 35.01%

10.5% -9.00% 3.63% 13.46% 21.93% 29.61% 36.78%

11.0% -6.15% 5.81% 15.37% 23.71% 31.33% 38.47%

11.5% -3.62% 7.82% 17.16% 25.39% 32.96% 40.07%

12.0% -1.32% 9.70% 18.85% 26.99% 34.51% 41.61%

12.5% 0.78% 11.45% 20.45% 28.51% 35.99% 43.08%

13.0% 2.72% 13.10% 21.96% 29.96% 37.41% 44.49%

13.5% 4.52% 14.66% 23.41% 31.35% 38.78% 45.85%

14.0% 6.20% 16.13% 24.79% 32.68% 40.09% 47.16%

14.5% 7.79% 17.54% 26.11% 33.97% 41.36% 48.43%

15.0% 9.28% 18.88% 27.38% 35.20% 42.58% 49.66%

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As can be seen in the ‘yellow’ highlighted cell above – At topline CaGR of approximately 25% CaGR and ~12% EBITDA

margins in FY22, we project EPS CaGR of ~40% over FY17-22.

Risks to the recommendation

� Slower than estimated growth in revenues led by decline in market share, loss of business to other players and/or inability to successfully ramp up the operations after the business integration exercise.

� Any pressure on core operating profitability would impact our estimates of net earnings and would have negative implications on our estimates of fair value of equity.

� Any large capex and or funds outflow/ deterioration in cap-metrics to fund large acquisitions would have material impact to our estimates of intrinsic value of equity.

� Growth in business for Auto Ancillary companies like MIL depends on volume growth for domestic OEMs. Hence, any decline in their growth due to broader macro-economic issues or company-specific issues can adversely affect MIL’s business.

� Given that exports contribute more than 20% to MIL’s consolidated revenues, company is exposed to a risk or loss from changes in foreign exchange rates whenever it enters into a purchase or sales agreement in a currency other than INR. Movements in exchange rates and volatility in interest rates could have an adverse effect on operating results.

Near-term catalysts

• Synergy benefits arising from the ongoing consolidation exercise which is expected to contribute handsomely to revenue and profitability growth.

• Impending rebound in India’s GDP growth, which will stimulate demand in Auto sector, considered to be a barometer of economic growth.

• As per industry experts, GST implementation will be beneficial for the auto ancillary with effective tax rate for the industry coming down from current levels of 28 – 30% to 18%. This is expected to provide a much-needed shot-in-the-arm for the $39bn domestic auto ancillary industry.

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BUSINESS SEGMENTS

1. SWITCHES

� What is the division about? -- Started in 1960, the Switch division of MIL is the largest manufacturer, by volume, of automotive switches in India with market share of ~70%. MIL as a company started its operations with manufacture of switches and then diversified into several other product lines. It is present in the entire value chain of switches; from product development to manufacturing and after-market sales.

� Products -- Within the switches category, MIL has products that cater to Two-Wheelers (2W) and Three-Wheelers (3W) (Handle Bar Switch, Modular Switch, Gear Indication Switch, Lever Holder Assembly, Panel Switch, Brake

Switch) and Off-Highway segment (Rocker Switch, Plunger Switch, Ignition Switch, Column Switch, Push Button

Switch, Rotary Switch, Keypad Switch, Brake Switch, Push-Pull Switch, Hazard Warning Switch, Horn Switch, Lever

Combination Switch, Neutral Safety Switch, Push-Push Switch, Heater Starter Switch and Ignition Starter Switch). In 2014, MIL launched illuminated switches for 2W and acquired patents for the same. These kinds of switches provide more reliability and visibility at night.

� New Products -- R&D department of the company is currently working on new developments in switching technology namely -- Tactile Switching Technology, Smart Switch System, and Integrated Blinker with Hazard

Switching System. A new range of patented Rocker Switches, Keypads and Illuminated Column Switches are being introduced with special focus on exports.

� Plants –The Switch Division operates five plants in India and two overseas plants in Indonesia and Vietnam. The company added a plant at Hosur in FY14 for manufacturing switches for TVS Motors.

� Subsidiaries, Joint Ventures (JVs) and Associates – MIL conducts business in the switching division through the following entities:

Sr. No.

Name of Entity Nature of

Entity Function MIL's stake Partner Entity and Stake

1 Minda Auto Components Limited

Subsidiary Manufacturing / Assembling of switches for automobiles

100.00% NA

2 MindaRika Private Limited

Associate

Design, development and Manufacturing all kinds of Electrical Switches, HVAC Control Panels, Clock Springs, Cigarette Lighters and Wheel Covers with Japanese Technology.

27.08% Tokai Rika Co. Ltd., Japan (72.92%)

3 Yogendra Engineering

Associate (Partnership Firm)

Manufacturing / Assembling of switches for automobiles

48.90% Sanjeev Garg (12.50%), Birender Garg (12.50%) and Suman Minda (26.10%)

4 Minda Distribution and Services Limited (MDSL)

Subsidiary Development of distribution network

100.00% NA

Note: MIL stake is as mentioned in FY17 Investor Presentation

� Customers – Within the switching segment, Bajaj Auto is the largest client contributing 28% to FY17 segmental

revenues, followed by TVS (7%), Royal Enfield (3%), Hero MotoCorp (3%) and Others (52%). In addition, it also supplies switches in the Aftermarket segment in India and exports to countries such as USA, France, Italy, Austria, etc., contributing 6% to Switch sales in FY17.

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Client-wise Revenue break-up FY17 for Switching Division:

Switching Systems

OEM Clients % to Sales

Bajaj Auto Ltd 28%

TVS Motor 7%

HMSI 7%

Royal Enfield 3%

Hero MotoCorp 3%

Others 52%

Total 100%

� Outlook – MIL currently supplies to most OEMs operating in India and is increasingly focusing on improving higher

margin exports. As mentioned above, the company’s R&D division is currently working on developing new switch products with certain products being specially developed for exports (Rocker Switches, Keypads and Illuminated Column Switches). Going ahead, the management aims to increase market share of switches in India, tap more markets globally and improve blended capacity utilization. Led by revival in domestic economy and auto sector demand, company expects capacity utilization to improve going forward from current 80% level to higher than 90%.

2. LIGHTING

� What is the division about? – MIL entered into manufacturing of lighting products in 1980 and is currently the 3rd largest player in the segment in India after Lumax Industries and Fiem Industries. MIL commands a market share of ~20% in India in the Lighting segment. Owing to their better design and looks, longer life, robust functionality and emission of lesser heat, LED adoption by Automakers is expected to pick up going ahead. Increasing adoption of LEDs by OEMs offers an opportunity for Auto Lighting players to expand their customer base and get more business from existing clients.

� Products – MIL has products catering to all vehicle segments such as 4W (Room Lamp Assembly, Front Lamp

Assembly, Front Turn Signal Lamp, High Mount Stop Lamp, Spot Lamp, Reflex Reflector, Warning Triangle, Lamp

Assembly Side Turn Signal, Licence Lamp Assembly, Head Lamp Assembly, Tail Lamp Assembly and Fog Lamp), 2W (Number Plate Lamp, Tail Lamp Assembly, Head Lamp Assembly and Indicator) and Off Road (Plough Lamp

Assembly, Tail Assembly, Head Lamp Assembly, Rear Fender Lamp, Front Fender Lamp and Plough Lamp). During FY15, MIL’s Lighting Division at Manesar, Haryana expanded its manufacturing capacity for production of Tail Lamp for K-10 Model for Maruti Suzuki India Limited (MSIL). The said expansion was completed on schedule and commercial production commenced from the month of September, 2014.

� Plants -- Lighting division operates through Pantnagar, Sonepat, Haridwar, Manesar and Chennai. As explained above, capacity at Manesar was expanded in FY15 for production of Tail Lamp for K-10 Model of MSIL.

� Subsidiaries, JVs and Associates – MIL conducts business in the Lighting division through the standalone entity

and through its newly acquired entity Rinder. MIL acquired global lighting business of Spain based Rinder Group in June 2016 for €20mn. The acquisition will provide the Company with cutting edge lighting technology, backed by extensive R&D centre in Spain. The acquisition will include the facilities in India and one in Spain and Columbia each. In FY13, the company entered into Technical Assistance Agreement with M/s. AMS Company Ltd. (Korean Corporation) for manufacturing of automotive lighting Equipments and Component Parts for Combination as Head Lamps, Rear Combination Lamps and Small Exterior Lamps. In addition, the Company has design centre in Taiwan for lighting business.

� Consolidation of Vietnam and Indonesian arms -- As part of the broader reorganization at the consolidated level,

MIL increased stake in PT Minda Asean Automotive (Indonesia) that makes switches and lighting products and SAM Global Pte Ltd, Singapore (100% holding company of PT Minda Vietnam Company) to 100% in FY17 from 19% in FY15. The transaction would enable MIL to tap new platforms of premium Japanese two-wheeler customers namely Yamaha, Suzuki and Kawasaki. MIL spent Rs.194mn (purchased 3,18,750 shares at Rs.609.08 per share

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from Minda Investments and Singhal Fincap) for acquisition of stake in Sam Global Pte Ltd and Rs.61mn (purchased 13,845 shares at Rs.4432.40 per share from Minda Investments) for acquisition of stake in PT Minda Asean Automotive, Indonesia.

� Customers -- For its Lighting segment, MSIL is the largest client with 19% revenue contribution, followed by Bajaj

Auto (16%), TVS Motor (13%), M&M (7%), Toyota Boshoku Automotive (5%) and Others (40%). In the lighting division, MIL caters to OEMs such as Yamaha, Suzuki, Swaraj Mazda, New Holland, Eicher, Mahindra, Tafe, Royal Enfield, Maruti, General Motors, Fiat, Volkswagen, Toyota, Tata, Ford etc. International customer base includes Daihatsu, Mbk, Suzuki, Piaggio, Kawasaki, Torica, Volkwagen etc. MIL supplies switches in the Aftermarket segment in India and exports to countries such as Italy, Indonesia, France, Japan, etc. Exports contributed 8% to Lighting sales in FY16.

Client-wise Revenue break-up FY17 for Lighting Division

Lighting Systems


MSIL 19%

Bajaj Auto 16%

TVS Motor 13%

M&M 7%

Toyota Boshoku Automotive 5%

Others 40%

Total 100%

� Outlook –MIL is the third largest player in Auto Lighting segment in India. It supplies products to almost all major

OEMs in India while also actively catering to the replacement and export segments. With the shift in focus from tail and interior lighting to head lamps, we expect segment margins to move upwards going ahead. Owing to their better design and looks, longer life, robust functionality and emission of lesser heat, LED adoption by Automakers is expected to pick up going ahead. Increasing adoption of LEDs by OEMs offers an opportunity for Auto Lighting players to expand their customer base and get more business from existing clients. MIL is jointly working with Honda & Panasonic (Japan) to develop high end LED lamps. Given that LED comprises less than 20% of the domestic auto lighting market currently, it provides ample scope for revenue growth going ahead for the auto lighting segment as a whole.

3. HORNS (including CLARTON HORNS)

� What is the division about – The Acoustics division of MIL is the leading manufacturer of horns in India with a market share of almost 50%. The company diversified into horns in 1993 as a part of its transformation from a switch manufacturer to a diversified auto component manufacturer. The horns business of MIL was initially housed in the company, Minda Acoustics Limited (MAL), which was amalgamated into MIL in FY11. MAL was earlier known as Fiamm Minda Automotive Limited wherein Fiamm S.p.A. was its JV partner. In August, 2009 the partner transferred all its equity to promoters of MAL.

� Acquisition of Clarton Horns (CH) – MIL acquired Spain based company Clarton Horn S.A.U. in April, 2013 for

€6.8mn ($8.9mn, Rs.580mn). Quantum Kapital had acquired CH from auto component giant Robert Bosch GmbH in 2008 and restructured to turn around the unit, so that it became one of the top manufacturers of automotive horns globally. The CH acquisition catapulted MIL to being the second largest manufacturer of automotive horns globally after Fiamm. CH has 7 fully automated assembly lines equipped with modern technologies like Milkrun & KANBAN along with 9 product patents.

� Products – The Acoustic division of MIL produces different variants of horns – Hypertone Horn, Trumpet Horn,

Air Horn and Electronic Horn. It also makes Water-proof Horns. The acquisition of CH added several new technologically advanced products to MIL’s portfolio besides increasing its exposure to global OEMs. Backed by CH’s technology, MIL is exploring options to introduce electronic horns in India.

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� Plants – MIL has plants in Manesar and Pantnagar dedicated to manufacturing of horns along with more than 600

employees. CH has its facilities at La Carolina (Spain) and Tanger (Morocco). The facility at Morocco was started in 2013. A new facility is being set up in Mexico for Clarton Horns (CH) which will be operational in April, 2016. This plant is expected to cater to major orders that MIL received from North America. MIL plans to invest €6mn over next 3 years in this facility. In addition, Clarton Horn has Sales offices in Germany, France, South Korea, USA and Brazil.

� Subsidiaries, JVs and Associates – Clarton Horn and its subsidiaries are housed under the Special Purpose Vehicle (SPV), Global Mazinkert S.L. Hence, Global Mazinkert, S.L., Spain is a foreign subsidiary and Clarton Horn S.A., Spain, Clarton Horn, Asia, Clarton Horn, Morocco and Clarton Horn, Signalkoustik, CH Mexico are the step down subsidiaries of Global Mazinkert S.L.

� Customers -- Within its customers in the Acoustics segment, Daimler is the largest revenue contributor (9%),

followed by Hyundai (7%), PSA (4%), Bajaj Auto (4%), TVS Motors (3%) and Others (73%). In India, MIL Acoustics division caters to all OEMs in 2W, 4Ws, Off-road and Commercial Vehicles segment like Bajaj Auto Ltd., Honda Motorcycle and Scooter India, Royal Enfield Motorcycles, India Yamaha Motor, Suzuki Motorcycle India, TVS Motor Company, Maruti Suzuki India, Renault India, Tata Motors, General Motors, Mahindra & Mahindra, Ashok Leyland, Ford India, Hyundai Motors, Fiat India Automobiles, Swaraj, Escorts Group, Sonalika Group, etc. In addition, it also caters to global OEM majors such as Mazda, BMW, Renault, Ford, Piaggio, Torica, GM - Global, Hino Motors, Piaggio, Kawasaki, Peugot, Seat, etc.

Client-wise Revenue break-up FY17 for Acoustic Systems

Acoustic Systems


Daimler 9%

Hyundai 7%

PSA 4%

Bajaj Auto 4%

TVS Motor 3%

Others 73%

Total 100%

� Outlook – Boosted by the CH acquisition, MIL’s horns division is the largest automotive horn manufacturer in India

and second largest in the world. We expect the horns division (standalone) to continue to report superior margins as the company would get access to CH’s technology. For CH, margins are expected to improve on the back of increasing synergies between the two entities and increasing local manufacturing. Given that MIL has almost all Indian OEMs as its clients, the company would be a beneficiary of any resurgence in automobile sales and growth in its export markets.

4. BATTERIES �� What is the division about – MIL’s batteries division, started in 2007, has had a mixed performance track record. It entered into this segment, dominated by Exide and Amara Raja but suffered due to issues with service network, product quality and stiff competition. Consequently, the division started incurred losses due to which it obtained shareholder approval in December, 2011for hiving off into a separate entity. However, the decision to hive off was reviewed in March, 2012 and later on it was decided to scale down operations instead. During this time, the division catered only to the 2W after-market segment. The company created impairment charges of Rs.220mn and Rs.19mn during FY12 and FY13 respectively to account for the scaling down of operations. In FY15, MIL entered into a JV with Panasonic Corporation of Japan to form a new company “Panasonic Minda Storage Batteries India Private Limited (PMSBIPL)” in order to revive the fortunes of the business. The JV, which began production in Q1FY16, currently manufactures batteries only for 2Ws and plans to catering to the 4W segment going ahead.

14

�� Products – The batteries division manufactures all types of batteries for two wheelers ranging from Valve Regulated Lead Acid (VRLA) Battery to Flooded Batteries. The warrantees on batteries range from 15 to 36 months, depending upon the model and the type. The company has over 650 distributors and the distribution is done through its arm Minda Distribution and Services Limited (MDSL). The batteries are available under the brands ‘ULTIMO’ and ‘POWERPLUS’ and are available in three sizes – 2.5Ah, 5.0Ah and 9.0Ah. �� New Products – Through the JV, MIL plans to increase coverage from 2W segment to 4Ws and industrial segment as well. It also plans to increase capacity to 4mn units by 2018 from current 3mn units. �� Plants – MIL has a battery manufacturing plant at Pantnagar which will be used by the JV (PMSBIPL) going ahead. Management targets to increase capacity to 4mn units by 2018 from 3mn units currently. �� Subsidiaries, JVs and Associates – In order to turn around the fortunes of its flagging batteries division, MIL entered into a JV with Panasonic Corporation of Japan in FY15 to make automotive batteries in India. MIL held 40% stake in the JV with the remaining 60% being owned by Panasonic Corporation. However, the JV failed to match up to performance expectations. Consequently, in FY15, the company reported impairment charges to the tune of 160mn. In FY17, the erstwhile Panasonic Minda Storage Batteries India Pvt. Ltd. was rechristened as Minda Storage Batteries Pvt. Ltd. and made a 100% subsidiary of MIL. Battery Division of MIL was hived off to Minda Storage batteries (A 100% subsidiary of MIL) w.e.f. 1st April 2017. The business is currently being managed with the existing 2W battery business. MIL is said to be actively scouting for a JV partner and an announcement to this effect could be made in the next couple of quarters. �� Outlook – MIL’s currently focus in the battery division in on the After-Market and on expanding its reach. Introduction of a technology partner would the company tap the OEM market as well. MIL would not have it easy with its entry and expansion into OEM segment given that the automotive battery market in India is strongly held (more than 80%) by Exide Industries and Amara Raja Batteries and also considering the shaky history that this division has had in the past. Hence, we would keep a close eye on the progress of this division.

5. OTHER BUSINESSES –

A) FUEL CAPS �� What is the division about? -- MIL started manufacturing fuel caps in 2014 and has a technology tie-up with Toyoda Gosei and Toyota Tsusho for manufacturing fuel caps along with other safety parts. �� Plants –The company has a unit at Manesar (Gurgaon) for the manufacture of Fuel Caps for four wheelers. �� Subsidiaries, JVs and Associates – The FY14 Annual Report states that MIL manufactures fuel caps through Toyota Gosei Minda India Private Limited. This company is a JV between MIL, Toyoda Gosei and Toyota Tsusho from Japan. However, there is no mention of the company in the FY15 and FY16 Annual Reports and also no financial data available for the same. �� Outlook – Fuel tank caps are relatively new category for MIL started in 2014 with a view to diversify its product portfolio. Also, the product enjoys higher margins compared to most other products under MIL’s fold. Traditionally, OEMs used to rely on imported products for fuel tank caps; mainly from China and Thailand. However, some OEMs are considering local sourcing of the same. Incremental revenue growth for this division would come from OEMs that start local sourcing of fuel tank caps and also from newer models of existing clients (MSIL).

B) AUTO GAS The Auto gas business of MIL was previously housed under Minda Autogas Limited (MAL). However, MAL was amalgamated with the company during in FY12 and is now a part of the standalone entity. The Auto Gas Division manufactures LPG/CNG kits and components for OEMs as well as for A.M.s. The OEMs client profile includes MSIL, TAFE, TML and M&M. It also supplies kits & components to Honda Power for Industrial Genset. While the price differential between petrol / diesel and LPG/CNG led to rapid adoption of LPG/CNG kits by car owners, the current scenario of lower crude oil prices has led to a slowdown in the same. However, over the longer term, with increasing Government emphasis on

15

using clean fuels and stricter emission norms, CNG/LPG (especially CNG) would be back in reckoning. Hence, we feel that the business has a steady growth potential in the long term.

C) ALLOY WHEELS �� What is the division about? – In 2015, MIL entered into JV with Kosei Aluminum Company Limited of Japan for manufacturing of Alloy Wheels for Passenger vehicles (PVs). The JV, called Minda Kosei Alloy Wheels Private Limited, will have stakes of MIL and Kosei in the ratio of 70:30 respectively and will set up a plant at Bawal (Haryana) for manufacturing. �� Products – Alloy wheels will be manufactured in Minda Kosei Aluminum Wheel Pvt. Ltd. and Kosei Minda Aluminum Co. Limited. MIL through its holding in the above companies will be largest manufacturer of Alloy wheel in India with capacity in excess of 1.44 Mn wheels per annum. Marquee Customers include Maruti, Toyota, M&M, Honda and Renault Nissan. �� Plants – MIL’s capacity for Alloy Wheels stood at 55,000 wheels per month between October 2016 to February 2017, ramping up to 75,000 in March 2017. MIL is planning to increase the capacity to 1,20,000 p.m. by August 2017 from current capacity of 90,000 p.m. in Bawal plant. Another plant for alloy wheel in Gujarat will be commissioned in 2 phases. In first phase (By April 2018), 60,000 p.m. alloy-wheels per month will be manufactured. The company will spend Rs. 1.5bn for the expansion. �� Customers – – In the first phase, the JV will supply to OEMs and will cater to After Markets in the later phase. Going ahead, the company plans to leverage its existing OEM relationships and distribution network in order to rope in more clients in the business. �� Potential - The JV will create a very strong local production base to offer market-leading, technology intensive Alloy wheels and Aluminum Die Casting Parts to India and global OEMs. The most important aspect of the JV is the availability of top-notch Japanese technology in aluminum casting, which KOSEI will infuse in this joint venture. �� Subsidiaries, JVs and Associates –MIL has JV with Kosei Aluminum Company of Japan for manufacturing Aluminum Alloy Wheels in India. MIL owns 30% in the JV with the remaining stake held by Kosei of Japan. �� Outlook – The Aluminum Alloy wheels (AAW) market in India is currently dominated by Steel Strips Wheels Limited and Wheels India Limited that control nearly 80% of the market. The fortunes of this business are dependent on growth in OEM demand as there is hardly any replacement market for alloy wheels. Aluminum wheels are lower in weight; however they are 4 times more expensive than steel wheels. Hence, they are mainly used in higher end cars. Currently there is over-capacity of AAW globally hence majority demand would be driven domestically. The Alloy Wheels business reported revenues of Rs. 3.95bn in FY17, growth of 115% YoY and EBITDA of Rs. 806mn, implying EBITDA margin of 21%.

D) BLOW MOULDING MIL operates in the blow molding business through its subsidiary – “Minda Kyoraku Company Limited”, in which it holds 72% stake with the remaining stake being held by Kyoraku Company Limited (Japan) and Nagase Company Limited (Japan). The company has products such as Roof Duct, Air Inlet Duct, Spoiler, Deck Board, Pallet Energy Absorbing Pad, Reserve

Tank, Washer Tank, Lapin Energy Absorbing Pad and Resonator. It caters to OEMs such as MSIL, Toyota, Nissan, Honda, GM, Ford, etc. MIL had a technical tie-up with the two companies since 2007 for Engine Rooms, Interior-Exterior Blow Molding Components for Toyota Innova. The tie-up was extended to other OEMs and in 2011, MIL’s running units of blow molding division were hived off to Minda Kyoraku Company Limited (MCAL) which has facilities in Bawal (Haryana) and Bangalore. The Blow Moulding segment reported Revenues of Rs. 1.3bn in FY17 (40% YoY) and EBITDA of Rs. 230mn, implying EBITDA margin of 16%.

16

E) CASTING MIL started manufacturing Aluminum Die Casting products for Automobiles in 2010 and in 2011 it formed a 50:50 JV with the JBM Group – MJ Casting Limited (MJCL). Over the past couple of years, MIL has increased stake in the entity to 98% as a part of its consolidation exercise. The JV has facilities at Bawal (Haryana) and Hosur (near Bangalore). MJCL supplies Aluminum Pressure Die-Casting and Precision Machining components for Engine Parts, Side Covers and Crank Cases. Client-wise Revenue break-up FY17 for all business segments clubbed under “Others”

Others

Alloy Wheels (MKA) Die Casting (MJ Casting) Blow Molding

OEM Clients % Sales OEM Clients % Sales OEM Clients % Sales

Suzuki Motors 5% WABCO India 10% MSIL 23%

M&M 5% HMSI 68% TKML 23%

MSIL 90% TVS Motor 22% Renault Nissan 15%

- - - - Honda Cars India 9%

- - - - Others 30%

Total 100% 100% 100%

17

ANNEXURE - I

Credit Rating Outstanding

Date Instrument Type Rating Agency Rating Amount Rating Status

03-Oct-16 Commercial Paper / Short Term Debt ICRA A1+ Rs. 300mn Assigned

03-Oct-16 Cash Credit Facility ICRA AA- (Stable) Rs. 985mn New

03-Oct-16 Term Loan Facilities ICRA AA- (Stable) Rs. 201.7mn New

03-Oct-16 Unallocated ICRA AA- (Stable) Rs. 113.3mn New

03-Oct-16 Non Fund Based Facilities ICRA A1+ Rs. 270mn New

Source: ACE Equity

Synopsis of Rating Rationale As per ICRA report on MIL dated September 2016: “ICRA has assigned a Short-Term rating of [ICRA]A1+ (pronounced ICRA A One Plus) to the Rs. 30 crore Commercial

Paper/Short-Term Debt Programme of Minda Industries Limited. ICRA also has Long-Term rating of [ICRA]AA-

(pronounced ICRA double A minus) and Short-Term rating of [ICRA]A1+ outstanding on the Rs. 157 crore Working Capital

Facilities and Term Loans of the Company. The outlook on the Long-Term rating is ‘Stable’.

The assigned rating takes into account the steady improvement in MIL’s consolidated financial profile aided by strong growth

in revenues as well as profitability indicators across key product segments like lighting, switches and horns and steady ramp-

up of operations at newly set-up manufacturing units on account of increased orders from existing OEMs and acquisition of

new customers. While significant improvement in profitability at standalone level was driven by increasing operating

leverage, increasing cost efficiencies and favorable change in product mix, at consolidated level, the margin expansion was

on account of steady improvement in financial performance of key subsidiaries/JVs such as Clarton Horns, MJ Casting

Limited and Minda Kyoraku Limited. MIL has also been gaining market share across key segments, especially in the lighting

segment, which has further got cemented by the acquisition of Rinder Group in June 2016. The recent acquisition has added

three manufacturing plants (Pune, Haryana and Colombia) catering to the domestic and foreign two wheeler lighting industry

and a technical centre that would improve MIL’s share of business in the lighting segment and strengthen the technical

expertise, respectively.

Although at a consolidated level, the debt levels have increased in FY2016 and in Q1 FY2017 on account of greenfield

investments at Minda TG Rubber Pvt. Ltd. and Minda Kosei Aluminum Wheel Pvt. Ltd. (Minda Kosei) and the acquisition of

Rinder Group, the overall credit metrics have improved (interest cover increased from 6.1x to 9.3x in FY2016, the DSCR

improved from 3.8x to 5.2x in FY2016) and continue to remain strong (gearing at 0.8x in FY2016) on account of stronger

cash accruals and strengthening of profitability.

MIL is currently in the process of consolidating majority of auto component business within the group and shall pursue in-

organic growth opportunities through increasing stake in current JVs and subsidiaries or investing in other related group

companies in the medium term. While ICRA expects MIL’s future acquisitions to be funded in a manner that sustains the

company’s credit profile, the impact of such acquisitions would be evaluated on a case-to-case basis.

Over the last one year, the company acquired Rinder Group, part stake in Kosei Minda and has proposed to increase stake

in Roki Minda. In addition, the company has also increased stake in three group companies such as (MJ casting Limited, PT

Minda Asean Automotive and Minda Vietnam Industries Limited) while investing in Greenfield ventures Minda TG Rubber

and Minda-Kosei that would expand the product portfolio further.

Going forward, any acquisition of stake in group companies is not expected to impact credit metrics at standalone level as

funding for the same would be supported by issuance of equity or preference capital to promoter/group companies. ICRA

expects MIL’s credit profile to continue to remain strong with steadily improving profitability, gradual reduction in long-term

debt and limited greenfield investment plans in the medium term further strengthened by the management’s focus on

maintaining capital structure below 1x. MIL’s consolidated profitability is also expected to improve in the medium term on

the back of expected improvement For complete rating scale and definitions, please refer to ICRA's Website www.icra.in or

other ICRA Rating Publications in capacity utilization at Clarton Horns, Minda Kosei and Minda TG Rubber, changing

18

product mix in favor of high value added products (for eg. Over-head console unit in the lighting segment), cost reduction

measures and synergy benefits from the Rinder Group acquisition in the form of sourcing, technical support among others.

The ratings continue to draw comfort from MIL’s diversified product portfolio that is increasingly catering to a broad-based

customer profile across new geographies and is backed by strong in-house technical capabilities. MIL’s standalone product

portfolio is well diversified with the company engaged in the manufacture of switches (57.7% of total sales), lighting systems

(24.2% of total sales), horns (12.7% of total sales), batteries (2.9% of total sales), CNG/LPG kits (0.2% of total sales) and

fuel caps (2.0% of total sales) for automotive applications. The portfolio further expands into blow molding, aluminum die-

casting, alloy wheels etc. at the consolidated level, thereby providing scope to grow while offering a comprehensive solution

to the automotive OEMs. MIL has an established market presence as a supplier of automotive switches to all major 2W

manufacturers in the domestic market. The company also benefits from the strength of its in-house technical team in the

switch, lighting and horn divisions.

MIL’s consolidated business currently has high concentration on the 2W segment (64% contribution to total sales in FY

2016); however, the company has progressed in its efforts to diversify its customer base to include Passenger vehicle (PV),

commercial vehicle and off-highway segments with the acquisition of new clients in key segments and increased orders from

existing 4W OEMs. The acquisition of Clarton Horn (CH) in April 2013, has supported the Horns segment of MIL by

increasing revenues and also added to geographical diversification by opening the European and American markets. With

CH, the company has increased its global market share in horns, coming second to market leader Fiamm and has gained

access to better technology and global clients.

ICRA factors in the strong technical support MIL derives from JV partner Toyoda Gosei at Minda TG Rubber and Kosei

Group of Japan (30% share) at Minda Kosei and further the assured business of alloy wheels from MSIL and M&M at Minda

Kosei. The profitability will however be subject to the level of scalability in the gestation period, inherent project execution

risk in the initial phase and any possibility of the upliftment of the Anti-Dumping Duty on imported Chinese Wheels (for Minda

Kosei).”

19

ANNEXURE - II

Management Background and Pedigree MIL, part of the UNO Minda Group, was founded by Late Shri S. L. Minda in 1958. The company started as a manufacturer of switches and later diversified into several other auto component segments. The company is currently headed by Mr. Nirmal K. Minda who is the Chairman and Managing Director while Mr. Sudhir Jain is the Group CFO. The management of MIL has exhibited a great deal of agility in taking business decisions – whether related to increasing number of clients (company currently caters to almost all OEMs in India in 2W, 3W, 4W and Off-road segments and most major global OEMs), setting up new plants closer to clients whenever necessary (most plants in India are located in Auto hubs while the company recently set up Clarton Horn’s plants in Mexico and Morocco to cater to orders from clients in North America and Africa respectively), successfully acquiring and turning around loss-making companies (e.g., CH which MIL turned around in the second year itself and which catapulted MIL to the position of second largest horn manufacturer globally) while at the same time maintaining financial discipline (Net Sales, EBITDA and PAT have grown at 25%, 40% and 45% CAGR respectively over past five years, D/E ratio has steadily moved downwards, from 1.1xs in FY14 to 0.34xs in FY17. ROCE has steadily improved over the period, from 3% in FY14 to 20% in FY17) and rewarding shareholders (Dividend Payout Ratio has averaged 30% over past 5 years while share price has grown at a staggering 80% CAGR during that period). Business Integration Exercise - As part of broader reorganization at the consolidated level, MIL is increasing its stake in various group companies which have synergies with the portfolio of the company. The objective is to consolidate all businesses of the Uno Minda Group. The business integration exercise is a two-phase of which Phase-I has been completed in two stages while Phase 2 is expected to be completed by March 2018. It has appointed KPMG to work on a scheme to simplify corporate structure in a tax efficient manner. We view this initiative as highly constructive and are of the opinion

that it would give a huge fillip to the turnover and profits of MIL. (More details on the business consolidation exercise have

been explained in the “Investment Thesis” portion of this report).

Management profile

� Chairman & MD - Mr. Nirmal K. Minda is an industrialist with rich business experience of more than 3 decades in Auto Components Sector. Under his dynamic leadership, the Group has grown manifold (UNO MINDA has revenue of US$ 642 mn) and has received numerous awards and recognitions. He is the Chairman & Managing Director of the company. Under his dynamic leadership, the company has established footprints across the globe. He has been instrumental in forging new alliances and joint venture partnership with globally renowned names. “Haryana Ratna Award” has been bestowed upon him for his professional and social achievements. He is also the Chairman of ACMA Northern region.

� Director - Mr. Anand Kumar Minda is the Non-Executive Director of our Company. He has over 35 years of

hands on experience in financial control, reviews, manufacturing, and project management. He has been appointed as member of the Board since 2011. He plays a pivotal role in new projects and strategy formulation. He is also the member of Audit Committee, Stakeholders Relationship Committee and CSR Committee of the Company.

� Director - Mr. Sekhri is an Engineering Graduate in Mechanical stream from Delhi College of Engineering and a

Master of Business Administration (MBA). He has more than 40 years of experience in the field of automotive industry. He has held various senior positions, including Managing Director of Bosch Chassis Systems India Ltd. (from 1995 to March 2010). He has been a member of the Executive Committee of professional bodies like Automotive Components Manufacturers Association, Maharatta Chamber of Commerce Industries and Agriculture and CII Pune Zone Council. After his retirement in 2010, he has been serving on the boards of Auto Component Companies and management institutes.

Shareholding Pattern As on 3rd April 2017 (the latest available shareholding figures on BSE), promoters (mainly Minda family members) own 67.94% in the company with none of their holding pledged. The promoter holding has ranged between 65% and 75% over the past decade. As per BSE disclosures on 3rd April 2017, DII holding in MIL was 3% while FII holding was 3.91%. Marquee stakeholders in the company are Canara Robeco Mutual Fund A/C – Canara Robeco Emerging Equities (1.26%), HSBC

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Global Investment Funds – Asia Ex. Japan Equity Smaller Companies (2.55%), DB International Asia Limited (2.52%) and DSP Blackrock Core Fund (1.09%).

Particulars As on Date bps change

3-Apr-17 31-Dec-16 31-Mar-16 QoQ YoY

Promoter and Promoter Group Holding 67.94% 74.02% 70.89% (608) (295)

-- Promoter Holding Pledged 0.00% 0.00% 0.00% - -

Total Institutional Shareholding 14.55% 6.47% 3.83% 808 1,072

-- FII Holding 7.60% 3.46% 2.16% 414 544

-- DII Holding 6.95% 3.01% 1.67% 394 528

Note: Please note that the latest available shareholding data on BSE is for 3rd April 2017 in place of 31st March 2017 since there was a

change in shareholding post QIP issue in which new Institutional shareholders entered MIL. For sake of comparison, we have taken 31st

March 2016 as “Year-ago” period and “31st December 2016 as “quarter-ago” period.

QIP Issue - In March 2017, MIL successfully raised Rs. 3bn through Qualified Institutional Placement (QIP) of equity shares. The initial size was proposed for Rs. 2.75bn, but given the over-subscription of 2xs, MIL exercised the green-shoe option and raised the issue size to Rs. 3bn. The QIP was priced at Rs. 423 / share, discount of Rs. 13.66 / share (3.2% discount) to the floor price of Rs. 436.66 / share. The investors who participated in the issue included DSP Blackrock, Sundaram, IDFC, Canara Robeco, IDBI Federal, HSBC Global, Bajaj Allianz and Lloyd Baughan among others. Funds received from the share placement will arm the company with additional ammunition to undertake its consolidation exercise and investment in new projects. Given the increase in cash balance post the issue, the company may go in for suitable acquisitions or capacity expansion or expansion in new geographies and (related) product lines. Hence, we continue to have a positive view on the company. Impact of the issue on share count and promoter shareholding is summarized in the following table:

Sr. No. Particulars Amount Comments

1 O/S share count prior to QIP issue (Mn.) 79.3 Source: BSE Website

2 QIP Fund Raising (Rs. Mn.) 3,000 Actual

3 Floor Price (Rs. / share) 436.7

4 Actual Subscription Price (Rs.) 423.0

5 Premium (Discount) (%) -3%

6 CMP (Rs.) 432.0 BSE Closing on 24-Mar-17 -- date of announcement of QIP

7 Premium (Discount) (%) to CMP -2%

8 No. of shares issued in QIP (Mn.) -- (2) / (4) 7.1

9 Total shares o/s post QIP (Mn.) -- (1) + (8) 86.4

10 Total Dilution (%) 8.9%

11 Promoter Shareholding (Mn. Shares) 58.7 Pre-QIP Source: BSE Website -- as on 30-Sep-16

12 Promoter Shareholding (%) -- (1) / (11) 74.02% Pre-QIP Source: BSE Website -- as on 30-Sep-16

13 Promoter Shareholding (%) -- (9) / (11) 67.9% Post QIP Issue. Tallies with shareholding on BSE as on 3-Apr-17

14 Promoter Stake dilution (%) -- (12) - (13) 6.1% Post QIP Issue.

21

Key Market Data

Bloomberg Code MNDA IN

Last Price, M. Cap, 52w H/L Rs. 559.45, Rs. 52bn, Rs. 648.95 / Rs. 214.35

Shares outstanding, Face Value 86.42mn, Rs. 2/-

Promoter holding (as on 3rd April 2017) Promoter holding at 67.94% (Nil share pledge) versus 70.89% as on 31st March 2016 and

74.02% as on 31st December 2016

Institutional holding (as on 3rd April 2017) FII – 7.60% (versus 2.16% as on 31st March 2016 and 3.46% as on 31st December 2016).

DII – 6.95% (versus 1.67% as on 31st March 2016 and 3.01% as on 31st December 2016)

Marquee Investors (as on 3rd April 2017)

Canara Robeco Mutual Fund A/C – Canara Robeco Emerging Equities (1.26%), HSBC Global

Investment Funds – Asia Ex. Japan Equity Smaller Companies (2.55%), DB International Asia

Limited (2.52%) and DSP Blackrock Core Fund (1.09%).

Note: Please note that the latest available shareholding data on BSE is for 3rd April 2017 in place of 31st March 2017 since there was a

change in shareholding post QIP issue in which new Institutional shareholders entered MIL. For sake of comparison, we have taken 31st

March 2016 as “Year-ago” period and “31st December 2016 as “quarter-ago” period.

Key Financial Parameters for Investment Screening

Sr. No.

Aspect Required Criteria for

Equentis 5x5 strategy

FY12-17 Grading of historical

performance

FY17-22E Grading of

future estimates

Actual Value (Historical)

Future Value (Forecast)

1 Top-line CaGR 20-30% CaGR over 5yr period 25% 25%

2 EBITDA CaGR 25-35% CaGR over 5yr period 40% 26%

3 PAT CaGR 30-40% CaGR over 5yr period 45% 35%

4 RoCE At least 15% with increasing bias

12% 25%

5 D/E Ratio (xs) Around 1-1.5xs with declining bias

0.8 0.1

6 Working Capital Intensity Less than 25-30% of net sales 5% 8%

7 Dividend Payout 15-20% 30% 15%

Note - Above – Blue, In-Line – Green, Below – Red

22

ANNEXURE - III

� Q4 & Full Year FY17 Performance Snapshot -- Standalone

Rs. Mn. Q4FY17 Q4FY16 YoY (%) Q3FY17 QoQ (%) FY17 FY16 YoY (%) Comments

Net Sales 3,996 3,806 5.0% 4,002 -0.1% 16,395 14,687 11.6%

MIL continued with its strong growth momentum with revenues growing 5% YoY in Q4FY17 against the backdrop of weak growth for the automobile sector; first affected by the demonetization phenomenon and then with implementation of BS-IV norms. Good growth is a testimony to the fact that MIL has been increasing content per car, introducing new products to its range and tweaks to existing products. Revenue growth was further aided by consolidation of businesses under MIL -- aluminum, blow-molding, die-casting, alloy wheels, hoses and ASEAN business. For FY17, standalone revenues were at their all-time high level of Rs. 16.4bn and growing 12% YoY.

Raw Material 2,538 2,479 2.4% 2,553 -0.6% 10,556 9,649 9.4% The company managed raw material price fluctuations well during the quarter with Gross Profit Margin at multi-quarter high of 36.5% while Gross Profit was up 10% YoY. Raw Material costs have come down significantly from the high levels of 70% of sales in Q4FY12 to 63.5% in Q4FY17. MIL has a pass-through arrangement with its OEM clients w.r.t. RM prices and hence is not affected to a large extent by input cost fluctuations. For FY17, standalone Gross Profit grew 16% YoY while Gross Profit Margin expanded more than 130bps YoY to 36%.

as % of net sales 63.5% 65.1% -163bps 63.8% -30bps 64.4% 65.7% -131bps

Gross Profit 1,459 1,327 9.9% 1,449 0.7% 5,839 5,039 15.9%

Gross Profit Margin (%) 36.5% 34.9% 163bps 36.2% 30bps 35.6% 34.3% 131bps

Employee Costs 567 476 19.3% 558 1.7% 2,175 1,864 16.7%

A strong show at the Gross Profit level was diluted by high Operating and Employee expenses leading to flattish EBITDA growth and a 43bps YoY slippage in EBITDA margins to 9.3%. The cost control measures undertaken by the management are exepcetd to show effect over the next couple of quarters, taking EBITDA higher. For FY17, EBITDA was up 12% while EBITDA margin remained steady at 9.5%. The company's EBITDA margin has surpassed the 9.5% mark in 5 out of past 7 quarters, hence the current level has become a "new normal" for MIL. The management's decision of extending focus from tail and interior lighting to headlamps, which command premium, thereby improving scope for margin expansion going ahead.

as % of net sales 14.2% 12.5% 170bps 13.9% 26bps 13.3% 12.7% 57bps

Operating & Manufacturing expenses 521 482 8.1% 507 2.7% 2,103 1,780 18.2%


Other Expenses - - #DIV/0! - #DIV/0! - - #DIV/0!


Total Operating Expenses 3,626 3,436 5.5% 3,618 0.2% 14,835 13,293 11.6%

as % of net sales 90.7% 90.3% 43bps 90.4% 31bps 90.5% 90.5% -2bps

Core EBITDA 371 370 0.3% 384 -3.4% 1,560 1,395 11.9%

as % of net sales 9.3% 9.7% -43bps 9.6% -31bps 9.5% 9.5% 2bps

Less: depreciation & amortization 131 153 -14.6% 124 5.7% 480 528 -9.2% The management had mentioned at the beginning of the financial year itself that there would be no major capex during FY17 and most

23

Rs. Mn. Q4FY17 Q4FY16 YoY (%) Q3FY17 QoQ (%) FY17 FY16 YoY (%) Comments

as % of net sales 3.3% 4.0% -75bps 3.1% 18bps 2.9% 3.6% -67bps of the capex incurred would be for maintenance purpose. This is evident from the trend in depreciation, which has remained more or less steady as % of sales.

EBIT 240 217 10.8% 260 -7.7% 1,081 867 24.6%

as % of net sales 6.0% 5.7% 32bps 6.5% -49bps 6.6% 5.9% 69bps

Less: Interest & finance charges 23 22 4.5% 37 -37.0% 139 102 35.7% MIL has commenced a debt-reduction exercise and has begun to actively tap the CP market to reduce its cost of borrowing. Interest as % of EBIT 9.7% 10.3% -59bps 14.2% -452bps 12.8% 11.8% 105bps

Add: Non-op income 10 62 -83.5% 38 -73.1% 248 224 10.9%

PBT 227 256 -11.4% 261 -13.1% 1,190 988 20.4%


Less: taxes 25 34 -25.3% 72 -64.9% 242 195 24.1%

Tax/PBT 11.1% 13.1% -205bps 27.4% -1633bps 20.3% 19.7% 62bps

PAT before EO 202 223 -9.3% 190 6.5% 948 794 19.5% Despite lower depreciation (15% YoY lower), flattish interest cost (up 5% YoY) and lower tax outgo (down 25% YoY), Standalone PAT for the quarter declined 9% YoY as a result of lower Other Income (84% down YoY) and flat EBITDA growth (up 0.3% YoY). PAT margin contracted 80bps YoY to 5.1%. For FY17, Standalone PAT was up 20% YoY while PAT margin expanded nearly 40bps YoY to 6%, helped by strong PAT growth (31% YoY) in 9MFY17.

as % of net sales 5.1% 5.9% -80bps 4.7% 31bps 5.8% 5.4% 38bps

Extra-Ordinary Items - - #DIV/0! - #DIV/0! - - #DIV/0!

PAT after EO 202 223 -9.3% 190 6.5% 948 794 19.5%


Cash PAT 333 376 -11.5% 313 6.2% 1,428 1,322 8.0%

as % of net sales 8.3% 9.9% -155bps 7.8% 49bps 8.7% 9.0% -29bps

No. of shares (Mn.) 79 16 79 79 16

EPS before EO (Rs.) 2.54 14.03 -81.9% 2.39 6.5% 11.95 50.02 -76.1%

EPS after EO (Rs.) 2.54 14.03 -81.9% 2.39 6.5% 11.95 50.02 -76.1%

Cash EPS (Rs.) 4.19 23.67 -82.3% 3.95 6.2% 17.99 83.28 -78.4%

EPS before EO (Rs.) at current share count 2.54 2.81 -9.3% 2.39 6.5% 11.95 10.00 19.5%

EPS after EO (Rs.) at current share count 2.54 2.81 -9.3% 2.39 6.5% 11.95 10.00 19.5%

Cash EPS (Rs.) at current share count 4.19 4.73 -11.5% 3.95 6.2% 17.99 16.66 8.0%

24

� Q4 & Full Year FY17 Performance Snapshot -- Subsidiaries

Rs. Mn. Q4FY17 Q4FY16 YoY (%) Q3FY17 QoQ (%) FY17 FY16 YoY (%)

Net Sales 5,484 3,368 62.8% 4,844 13.2% 18,656 10,586 76.2%

Raw Material 3,303 1,992 65.8% 2,833 16.6% 11,183 6,449 73.4%


GROSS PROFIT 2,181 1,376 58.5% 2,010 8.5% 7,473 4,137 80.6%

Gross Profit Margin (%) 39.8% 40.8% -109bps 41.5% -174bps 40.1% 39.1% 98bps

Employee Costs 678 396 71.2% 658 3.0% 2,445 1,399 74.8%


Operating & Manufacturing expenses 766 534 43.4% 664 15.2% 2,752 1,754 56.9%




Core EBITDA 737 446 65.4% 688 7.2% 2,276 984 131.4%


Less: depreciation & amortization 230 129 77.8% 252 -8.9% 877 398 120.2%


EBIT 508 317 60.3% 436 16.4% 1,399 585 139.0%


Less: Interest & finance charges 47 32 45.0% 56 -15.9% 255 155 64.7%

Interest as % of EBIT 9.2% 10.2% -97bps 12.7% -353bps 18.2% 26.4% -821bps

Add: Non-op income 25 (44) -156.1% 5 371.2% (109) (84) 30.1%

PBT 485 241 101.6% 386 25.9% 1,035 347 198.6%


Less: taxes 106 34 216.4% 61 73.2% 247 83 198.4%

Tax/PBT 21.8% 13.9% 792bps 15.9% 597bps 23.9% 23.9% -1bps

PAT before EO 379 207 83.1% 324 16.9% 788 264 198.6%


Extra-Ordinary Items - 26 - - - - 52 -

PAT after EO 376 203 85.4% 258 45.8% 933 433 115.7%


No. of shares (Mn.) 79 16 79 79 16

EPS before EO (Rs.) 4.78 13.06 -63.4% 4.09 16.9% 9.93 16.62 -40.3%

EPS after EO (Rs.) 4.74 12.78 -62.9% 3.25 45.8% 11.76 27.25 -56.9%

EPS before EO (Rs.) at current share count 4.78 2.61 83.1% 4.09 16.9% 9.93 3.32 198.6%

EPS after EO (Rs.) at current share count 4.74 2.56 85.4% 3.25 45.8% 11.76 5.45 115.7%

25

� Q4 & Full Year FY17 Performance Snapshot -- Consolidated

Rs. Mn. Q4FY17 Q4FY16 YoY (%) Q3FY17 QoQ (%) FY17 FY16 YoY (%)

Net Sales 9,481 7,173 32.2% 8,846 7.2% 35,050 25,273 38.7%

Raw Material 5,841 4,471 30.7% 5,387 8.4% 21,739 16,098 35.0%


Gross Profit 3,639 2,703 34.7% 3,459 5.2% 13,312 9,176 45.1%

Gross Profit Margin (%) 38.4% 37.7% 71bps 39.1% -72bps 38.0% 36.3% 167bps

Employee Costs 1,245 872 42.9% 1,216 2.4% 4,620 3,263 41.6%


Operating & Manufacturing expenses 1,286 1,016 26.6% 1,171 9.8% 4,856 3,534 37.4%




Core EBITDA 1,108 815 35.9% 1,072 3.4% 3,836 2,378 61.3%


Less: depreciation & amortization 360 282 27.7% 376 -4.1% 1,357 926 46.5%


EBIT 748 533 40.2% 696 7.4% 2,479 1,452 70.7%


Less: Interest & finance charges 70 55 28.4% 93 -24.3% 393 257 53.2%

Interest as % of EBIT 9.4% 10.2% -86bps 13.3% -393bps 15.9% 17.7% -182bps

Add: Non-op income 35 18 89.6% 43 -19.5% 139 140 -0.7%

PBT 712 497 43.3% 647 10.1% 2,225 1,335 66.6%


Less: taxes 131 67 95.4% 133 -1.2% 489 277 76.1%

Tax/PBT 18.4% 13.5% 490bps 20.5% -211bps 22.0% 20.8% 118bps

PAT before MI&EO 581 430 35.2% 514 13.1% 1,736 1,058 64.1%


Minority Interest (65) (68) -4.4% (82) -20.5% 200 115 74.3%

Share of Profit of Associates 62 38 63.1% 15 310.0% 145 117 24.3%

Extra-Ordinary Items - 26 - - - - 52 -

PAT after MI&EO 578 426 35.8% 447 29.1% 1,681 1,111 51.2%


Cash PAT 938 708 32.6% 823 14.0% 3,038 2,038 49.1%


No. of shares (Mn.) 79 16 79 79 16

EPS before MI&EO (Rs.) 7.32 27.09 -73.0% 6.48 13.1% 21.88 66.64 -67.2%

EPS after MI&EO (Rs.) 7.28 26.81 -72.8% 5.64 29.1% 21.18 70.03 -69.8%

Cash PAT (Rs.) 11.82 44.58 -73.5% 10.37 14.0% 38.28 128.39 -70.2%

EPS before MI&EO (Rs.) at current share count 7.32 5.42 35.2% 6.48 13.1% 21.88 13.33 64.1%

EPS after MI&EO (Rs.) at current share count 7.28 5.36 35.8% 5.64 29.1% 21.18 14.01 51.2%

Cash PAT (Rs.) at current share count 11.82 8.92 32.6% 10.37 14.0% 38.28 25.68 49.1%

26

� Q4 & Full Year FY17 Balance Sheet Snapshot – Consolidated & Standalone

Particulars Standalone Consolidated

Comments FY16 FY17 FY16 FY17

Networth 4,387 8,223 4,717 10,274 Growth in Net Worth due to proceeds of Rs. 3bn from recent QIP issue

Long Term Debt 435 657 2,117 2,672 Company raised debt to fund the ongoing consolidated exercise and to fund its capex plans. As per latest commentary, no further debt would be taken.

Short Term Debt 818 1,393 1,841 2,616

Total debt 1,253 2,051 3,958 5,288

Gearing (D/E) (xs) 0.29 0.25 0.84 0.51

Deferred Tax Liabilities (18) (38) (72) (132)

Minority Interest - - 1,096 1,390

Total Liabilities 5,622 10,236 9,699 16,819

Net Block 2,563 2,714 7,029 10,327

Cash 168 3,190 567 3,766 Cash from recent QIP issue worth Rs. 3bn

Liquid Investments - - - -

Total Cash & Liquid Investments 168 3,190 567 3,766

Other Investments 1,947 3,446 436 545 Investment in group entities has gone up due to ongoingg consolidation exercise.

Inventories 891 876 1,838 2,513 The rise in absolute value of inventories has been accompanied by a robust growth in revenues (40% YoY at consolidated level), hence overall days of inventory have remained stable. as days of sales 22 20 27 26

Debtors 2,513 2,443 3,639 5,235

as days of sales 62 54 53 55

Loans and Advances 407 448 1,124 1,400

as % of sales 2.8% 2.7% 4.4% 4.0%

Other Current Assets 111 118 164 192


Total Current Assets 3,922 3,885 6,765 9,341

Current Liabilities 2,823 2,926 4,909 6,989


Provisions 153 74 189 172


Total Current Liabilities and Provisions 2,977 3,000 5,098 7,161

Net Working Capital / Net Sales 6.4% 5.4% 5.3% 4.6% Working capital cycle continues to remain very good.

Total Assets 5,622 10,236 9,699 16,819

RoCE (%) 15.7% 13.6% 17.7% 18.7% RoCE expected to improve significantly over next couple of years as synergistic effects of the consolidation exercise become more visible.

NET DEBT = Debt Minus Cash & Cash Eq 1,085 (1,139) 3,391 1,521

NET DEBT / EQUITY (xs) 0.25 (0.14) 0.72 0.15

27

� Comments from post-result interview of CMD Mr. N. K. Minda to CNBC-TV18 dated 17th May,

2017:

• Revenue guidance of 20-25% CaGR for the company versus expected industry growth of 10% YoY over the medium term. To clock Rs. 45bn consolidated revenues in FY18 (28% YoY growth) and Rs. 70bn by FY2020 (25% CaGR).

• Target EBITDA margins in FY18 to be 11.5-12% (versus 11% in FY17).

• Capacity utilization is currently between 50% and 60%.

• Debt on consolidated books of the company at Rs. 5bn as on 31st March 2017. No further fund raising will be required and expansions will be funded through internal accruals.

• New plant of Minda Kyoraku is being set up in Gujarat for Blow Molding.

• The recent acquisition of TTE, Taiwan is expected to generate revenues of Rs. 2.5bn over the next 2 – 3 years.

� Conference Call Highlights (Call held on 18th May 2017 at 4PM):

Particulars Details Outlook

Revenue growth Standalone growth was only 5% in Q4FY17. However, company has not lost any share to competitors.

Guidance Management is expecting revenue growth of ~20-25% in FY18 and ~15-20% in FY19, on a conservative basis, post factoring the impact of the newly added and to be added businesses.

Investments and Capex

Total outlay in Gujarat = Rs. 3bn

Investments in pipeline: o Plant being set up in Gujarat, o JV with Katolec facility being set up in Pune o JV with TTE facility to be set up in Manesar.

Capex guidance = Rs. 5bn in FY18 (Consolidated). At standalone level, it is Rs. 1 – 1.25bn over next 18 months, most of it will be maintenance capex. Of this, partly will go for debottlenecking.

Investment in Onkyo JV is Rs. 500mn (total project cost). Revenue to touch Rs. 1.5bn in two years.

JV with TTE Plant for TTE JV should be ready by 9MFY18. Customer for the JV is MSIL. Currently, TTE already supplies to MSIL; it imports parts from abroad and supplies them to MSIL in India. Revenue Estimate from the JV = Rs. 2.5bn in 2 – 3 years.

Subsidiary performance

Minda Rika should consolidate in next 8 months. Rs. 6.5bn in FY17 revenues, EBITDA margin = 14%, PAT = Rs. 500mn, PATM = 8.5%.

Minda Kyoraku revenues for FY17 = Rs. 1.29bn.

TG Minda FY17 Revenues = Rs. 3.7bn, PBT = Rs. 173mn, 70% of revenues = airbags, 30% = sealing parts. Market share = 35-40% in airbags.

MJ Castings FY18 Revenue guidance = Rs. 2.3bn.

METL (at break-even PBT) and Clarton Horns (Rs. 40mn PBT loss), Mexico also loss-making.

Alloy wheels

Alloy wheels production stood at an average of 55,000 wheels / month from Oct-2016 to Feb-2017 and 75,000-80,000 in Mar-2017 with total capacity at 90,000 / month by end of FY2017 in the Haryana plant. MIL is planning to increase the capacity to 1,20,000 / month by Aug-2017 for this plant and add a similar capacity in 2 phases in the to be constructed plant in Gujarat, with first phase of 60,000 / month alloy-wheels per month to be ready by Apr-2018. Revenue from the alloy wheel segment stood at Rs. 1.9bn with PBT of Rs. 270mn.

JV with Katolec PCB designing requires technological prowess. Mounting also requires the same. JV with Katolec. Currently, company would concentrate on automobile components. May cater to non-auto also in 2 – 3 years.

Consolidation of entities Minda Rika Pvt Ltd, MI Torika, Minda Fujitsu will be consolidated in FY18.

28

� Important Announcements post 9th February 2017:

Sr. No. Event Date of

announcement to stock exchange

Details

1 JV with Katolec Corporation, Japan* 22-Feb-17

• The JV is intended to manufacture high electronic products like Printed Circuit Boards and Box Build Assemblies. • Shareholding in the JV by MIL and Katolec will be in the ratio 51% : 49% respectively and initial paid-up equity share capital will be Rs. 151mn to contributed by both partners in the ratio of their shareholding in the JV. • Manufacturing base of the JV will be set up in Pune, Maharashtra. • There would be five directors on the Board of the proposed JV company, of which three will be nominated by MIL and two by Katolec. Managing Director (MD) of the JV company will be nominated by MIL while Deputy MD will be nominated by Katolec.

2 Fund raising via QIP** 24-Mar-17 & 29-Mar-17

• MIL successfully raised Rs. 3bn through Qualified Institutional Placement (QIP) of shares. The initial size was proposed for Rs. 2.75bn, but given the over-subscription of 2xs, MIL exercised the green-shoe option and raised the issue size to Rs. 3bn. • The QIP was priced at Rs. 423 / share, discount of Rs. 13.66 / share (3.2% discount) to the floor price of Rs. 436.66 / share. • The investors who participated in the issue included DSP Blackrock, Sundaram, IDFC, Canara Robeco, IDBI Federal, HSBC Global, Bajaj Allianz and Lloyd Baughan among others.

3 Redemption of commercial paper 31-Mar-17 MIL redeemed commercial paper (CP) worth Rs. 300mn issued on 31-Jan-2017 with maturity date of 31-Mar-2017.

4 JV with Tung Thih Electronic Co. Ltd., Taiwan*** 27-Apr-17

• The JV is intended to develop, market and sell Driver Assistance Products & Systems (DAPS) and Safety Systems including Reverse Parking Assistance System (RPAS), Camera, Automatic Parking Systems, Tyre Pressure Monitoring Systems (TPMS). • Shareholding in the JV by MIL and TTE will be in the ratio 50%:50%. • The initial investment outlay for the JV company in Phase I will be Rs. 350mn to invested by each company in the ratio 50:50. Additional investment of Rs. 350mn has been proposed in Phase II, although timeline for Phase II have not yet been specified. • Proposed greenfield manufacturing location of the JV will be in NCR, Delhi. • In the JV company, two directors will be nominated by each partner. However, Managing Director of the proposed JV company will be nominated by MIL. Chief Technical Officer of the proposed JV company will be nominated by TTE.

5 Update on ongoing Consolidation exercise 16-May-17 ASEAN business became 100% subsidiary w.e.f. 1st April 2017.

6 Other business updates during Q4FY17 16-May-17

• Following facilities are being currently set up: 1. Blow Molding plant in Gujarat for Minda Kyoraku. 2. Facility for manufacturing Driving Assistance Products & Systems at Manesar for JV with TTE (Check Point 4). 3. Facility for Electronic System Design & Manufacturing at Pune for JV with Katolec (Check Point 1).

Notes: 1. Please note that we had presented a summary of all important announcements made by the company to stock exchanges till 8th February 2017 in our previous quarter result update. Hence, this

note summarizes all announcements made to stock exchanges post 9th February 2017.

2. * For details on the JV announcement with Katolec Corporation, Japan, please see our even flash dated 22nd February 2017.

3. ** For details on the fund raising through QIP route, please refer to our event update notes released on 25th March 2017 and 30th March 2017.

4. *** For details on the JV announcement with Tung Thih Electronic Co. Ltd., Taiwan, please refer to our Event Flash dated 27th April 2017.

29

� Revenue break-up for the quarter and Full Year:

Rs. Mn. Q1FY16 Q2FY16 Q3FY16 Q4FY16 Q1FY17 Q2FY17 Q3FY17 Q4FY17 FY16 FY17

REVENUE

-Standalone 3,412 3,767 3,702 3,806 4,008 4,388 4,002 3,996 14,687 16,395

-Subsidiary 1,914 2,750 2,555 3,368 3,657 4,671 4,844 5,484 10,586 18,656

Consolidated 5,326 6,517 6,257 7,173 7,666 9,059 8,846 9,481 25,273 35,050

REVENUE YoY

-Standalone 12.0% 8.6% 2.2% 6.8% 17.5% 16.5% 8.1% 5.0% 7.2% 11.6%

-Subsidiary 7.5% 38.5% 32.3% 75.4% 91.1% 69.8% 89.6% 62.8% 23.6% 76.2%

Consolidated 10.4% 19.5% 12.7% 30.8% 43.9% 39.0% 41.4% 32.2% 13.5% 38.7%

REVENUE QoQ

-Standalone -4.3% 10.4% -1.7% 2.8% 5.3% 9.5% -8.8% -0.1%

-Subsidiary -0.3% 43.7% -7.1% 31.8% 8.6% 27.7% 3.7% 13.2%

Consolidated -2.9% 22.4% -4.0% 14.6% 6.9% 18.2% -2.4% 7.2%

REVENUE Mix

-Standalone 64.1% 57.8% 59.2% 53.1% 52.3% 48.4% 45.2% 42.2% 58.1% 46.8%

-Subsidiary 35.9% 42.2% 40.8% 46.9% 47.7% 51.6% 54.8% 57.8% 41.9% 53.2%

� EBITDA break-up for the quarter and Full Year:


EBITDA

-Standalone 268 404 354 370 395 410 384 371 1,395 1,560

-Subsidiary 74 228 236 446 329 522 688 737 984 2,276

Consolidated 342 632 589 815 724 932 1,072 1,108 2,378 3,836

EBITDA YoY

-Standalone -1.2% 46.9% 13.2% 34.1% 47.4% 1.7% 8.6% 0.3% 23.4% 11.9%

-Subsidiary -13.0% 144.0% 149.8% 323.4% 345.3% 128.6% 191.7% 65.4% 156.4% 131.4%

Consolidated -4.0% 71.6% 44.9% 114.0% 111.8% 47.5% 81.9% 35.9% 57.1% 61.3%

EBITDA QoQ

-Standalone -2.7% 50.5% -12.4% 4.5% 7.0% 3.8% -6.4% -3.4%

-Subsidiary -29.8% 208.9% 3.3% 89.0% -26.2% 58.6% 31.8% 7.2%

Consolidated -10.2% 84.7% -6.7% 38.3% -11.1% 28.7% 15.0% 3.4%

EBITDA Mix

-Standalone 78.4% 63.9% 60.0% 45.3% 54.6% 44.0% 35.8% 33.5% 58.6% 40.7%

-Subsidiary 21.6% 36.1% 40.0% 54.7% 45.4% 56.0% 64.2% 66.5% 41.4% 59.3%

EBITDA Margin (%)

-Standalone 7.9% 10.7% 9.5% 9.7% 9.9% 9.3% 9.6% 9.3% 9.5% 9.5%

-Subsidiary 3.9% 8.3% 9.2% 13.2% 9.0% 11.2% 14.2% 13.4% 9.3% 12.2%

Consolidated 6.4% 9.7% 9.4% 11.4% 9.4% 10.3% 12.1% 11.7% 9.4% 10.9%

30

� PBT break-up for the quarter:


PBT

-Standalone 173 291 269 256 287 415 261 227 988 1,190

-Subsidiary (14) 59 109 241 51 113 386 485 347 1,035

Consolidated 159 351 378 497 338 528 647 712 1,335 2,225

PBT YoY

-Standalone 21.7% 65.6% 55.7% 52.5% 66.1% 42.6% -2.8% -11.4% 6.7% 7.3%

-Subsidiary 260.8% -319.3% 18283.8% -4186.6% -465.7% 89.1% 253.1% 101.6% 132.3% 198.6%

Consolidated 14.9% 135.9% 118.2% 206.4% 113.1% 50.5% 71.1% 43.3% 57.8% 66.6%

PBT QoQ

-Standalone 2.6% 68.8% -7.7% -4.6% 11.8% 44.9% -37.1% -13.1%

-Subsidiary 137.7% -525.0% 83.5% 120.4% -78.7% 119.7% 242.8% 25.9%

Consolidated -2.3% 121.2% 7.8% 31.5% -32.0% 56.2% 22.6% 10.1%

PBT Mix

-Standalone 108.8% 83.0% 71.1% 51.6% 84.8% 78.7% 40.4% 31.9% 74.0% 53.5%

-Subsidiary -8.8% 17.0% 28.9% 48.4% 15.2% 21.3% 59.6% 68.1% 26.0% 46.5%

PBT Margin (%)

-Standalone 5.1% 7.7% 7.3% 6.7% 7.2% 9.5% 6.5% 5.7% 6.7% 7.3%

-Subsidiary -0.7% 2.2% 4.3% 7.1% 1.4% 2.4% 8.0% 8.8% 3.3% 5.5%

Consolidated 3.0% 5.4% 6.0% 6.9% 4.4% 5.8% 7.3% 7.5% 5.3% 6.3%

� PAT break-up for the quarter:


PAT

-Standalone 136 232 204 223 226 331 190 202 794 948

-Subsidiary 1 29 85 203 45 54 258 376 318 733

Consolidated 137 261 288 426 271 384 447 578 1,111 1,681

PAT YoY

-Standalone 7.7% 136.1% 61.1% 56.2% 66.2% 42.7% -6.8% -9.3% 49.2% 19.5%

-Subsidiary 434.3% -242.0% 8922.4% -3780.3% -286.5% 59.0% 283.7% 83.1% 162.6% 149.5%

Consolidated -1.9% 265.8% 126.4% 213.9% 109.2% 44.9% 78.4% 35.2% 63.8% 51.2%

PAT QoQ

-Standalone -4.6% 70.4% -12.2% 9.4% 1.5% 46.3% -42.6% 6.5%

-Subsidiary 162.9% -340.5% 137.5% 145.1% -86.7% 105.1% 473.1% 16.9%

Consolidated -11.5% 120.5% 7.8% 49.3% -41.0% 52.7% 32.7% 13.1%

PAT Mix

-Standalone 99.6% 88.9% 70.5% 52.3% 83.3% 86.0% 42.4% 34.9% 71.4% 56.4%

-Subsidiary 0.4% 11.1% 29.5% 47.7% 16.7% 14.0% 57.6% 65.1% 28.6% 43.6%

PAT Margin (%)

-Standalone 4.0% 6.2% 5.5% 5.9% 5.6% 7.5% 4.7% 5.1% 5.4% 5.8%

-Subsidiary 0.0% 1.1% 3.3% 6.0% 1.2% 1.1% 5.3% 6.9% 3.0% 3.9%

Consolidated 2.6% 4.0% 4.6% 5.9% 3.5% 4.2% 5.1% 6.1% 4.4% 4.8%

31

ANNEXURE - IV

MIL Industries – Corporate Structure

Source: Investor Presentation for FY2016-17 (May 2017)

32

Group Product Portfolio – 2 Wheeler


33

Group Product Portfolio – 4 Wheeler


34

ANNEXURE – V

Consolidated Financial Summary

Particulars (Rs. Mn.) FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21 FY22 3yr CaGR 5yr CaGR 3yr CaGR 5yr CaGR

FY14-17 FY12-17 FY17-20E FY17-22E

Net Revenues 9,542 11,792 13,404 17,061 22,266 25,273 35,050 45,187 60,241 72,881 86,251 100,157 27% 24% 28% 23% CaGR

YoY (%) 23.6% 13.7% 27.3% 30.5% 13.5% 38.7% 28.9% 33.3% 21.0% 18.3% 16.1%

EBITDA 837 759 935 778 1,514 2,378 3,836 5,058 6,894 8,523 10,302 12,213 70% 38% 30% 26% CaGR

YoY (%) -9.4% 23.2% -16.7% 94.5% 57.1% 61.3% 31.9% 36.3% 23.6% 20.9% 18.6%

EBITDA Margins (%) 8.8% 6.4% 7.0% 4.6% 6.8% 9.4% 10.9% 11.2% 11.4% 11.7% 11.9% 12.2% 9.1% 7.7% 11.4% 11.7% Average

Reported PAT 340 279 281 71 679 1,111 1,681 2,490 3,480 4,455 5,604 6,915 188% 43% 38% 33% CaGR

YoY (%) -17.9% 0.7% -74.8% 859.6% 63.8% 51.2% 48.1% 39.8% 28.0% 25.8% 23.4%

PAT Margins (%) 3.6% 2.4% 2.1% 0.4% 3.0% 4.4% 4.8% 5.5% 5.8% 6.1% 6.5% 6.9% 4.1% 3.0% 5.8% 6.2% Average

FCFF (130) (480) (463) (4,443) 878 (1,161) (1,671) (2,702) 2,192 3,457 4,552 5,727 (1,955) (6,860) 2,946 13,225 Cumulative

Debt:Equity 0.79 0.71 0.76 1.11 0.77 0.84 0.51 0.42 0.29 0.12 (0.04) (0.18) 0.71 0.80 0.28 0.12 Average

Asset Turns 2.37 2.38 2.23 1.59 1.96 1.93 1.99 2.00 2.40 2.61 2.78 2.89 1.96 1.94 2.34 2.54 Average

RoCE (%) 15% 8% 9% 3% 10% 18% 19% 18% 22% 26% 29% 33% 16% 12% 22% 26% Average

RoE (%) 20% 12% 9% 2% 20% 25% 22% 22% 25% 26% 26% 26% 23% 16% 24% 25% Average

Wkg Capital Intensity (%) 5.5% 7.0% 4.9% 5.9% 5.3% 5.3% 4.6% 8.1% 8.1% 8.1% 8.1% 8.1% 5.0% 5.2% 8.1% 8.1% Average

Capex / Net Sales (%) 5.7% 7.6% 10.7% 26.4% 2.3% 11.6% 13.1% 11.1% 4.2% 3.9% 3.7% 3.6% 9.0% 12.8% 6.4% 5.3% Average

EPS (Rs.)-current share count 4.28 3.52 3.54 0.89 8.55 14.01 21.18 31.37 43.86 56.14 70.62 87.14 188% 43% 38% 33% CaGR

P/E (xs) 26.41 17.83 12.76 9.97 7.92 6.42

EV: 47,303 49,221 47,816 45,156 41,406 36,434

-- M. Cap 44,392 44,392 44,392 44,392 44,392 44,392

-- Add: Debt 6,677 6,636 5,834 3,679 464 (3,952)

-- Less: Cash & Equivalents 3,766 1,807 2,410 2,915 3,450 4,006

EV / EBITDA (xs) 12.33 9.73 6.94 5.30 4.02 2.98

BVPS (Rs.) 129 156 193 241 301 375

P / BV (xs) 4.32 3.58 2.89 2.32 1.86 1.49

Dividend Payout as % of PAT 14.0% 20.2% 19.9% 79.0% 16.9% 12.6% 12.5% 15.0% 15.0% 15.0% 15.0% 15.0%

35

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