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IPO Review October 25, 2016 Rating matrix Varun Beverages Rating : Price band | 440-445 Subscribe Issue Details Issue Opens 26-Oct-16 Issue Closes 28-Oct-16 Leveraging strong brand name of PepsiCo… QIB (%) 49.0 Non-Institutional (%) 15.0 Retail (%) 34.0 Varun Beverages (Varun) is the one of the largest franchisees for PepsiCo globally (ex-US) in production and distribution of carbonated soft drinks (CSDs) and non-carbonated beverages (NCBs) sold under trademarks owned by PepsiCo. The company has been associated with PepsiCo since 1990 and has expanded its presence to 17 states and two union territories in India, Nepal, Sri Lanka, Morocco, Mozambique and Zambia with an estimated annual production capacity of 3,43.8 crore litre in India and 99.2 crore litre in international production facilities. Minimum lot size (No. of shares) 33.0 Investment Rationale Issue Size (| Crore) 1100-1112.5 Price Band (|) 440-445 Total no. of Shares on Offer (crore) 1.0 Fresh issue (crore) 1.5 Strong presence of PepsiCo brand in soft drink market Objects of issue Debt repayment | 540 crore Fresh issue proceeds General corporate purposes | 445 crore | 128 crore Shareholding Pattern Promoter & promoter group Pre-Issue Post-Issue 86.4% 73.7% Institutional Non-institutional 0.0% 0.0% 13.7% 26.3% Financial Summary | Crore Net sales CY12 CY13 CY14 CY15 HYCY16 1,844.2 2,132.5 2,517.1 3,408.4 2,539.4 272.2 308.5 399.2 648.3 613.9 15.1 14.6 16.0 19.1 24.3 25.1 (39.5) (20.2) 87.0 209.7 1.4 (2.2) (1.1) 4.8 11.5 EBITDA EBITDA margin (%) Net profit Diluted EPS Valuation Summary (at | 445; upper price band) (x) P/E CY12 CY13 CY14 CY15 322.5 NA NA 93.0 4.5 3.8 3.2 2.4 35.9 32.7 25.6 15.2 Mcap/Sales EV/EBITDA PepsiCo is the second largest player after Coca Cola in India with 31.1%, 26.4% and 11.6% volume share in carbonates, juices and bottled water, respectively, as of 2015 (Source: RHP). The carbonates and juice segments are expected to grow at a volume CAGR of 7.8% and 21.5%, respectively, in 2015-20E giving Varun a huge opportunity to increase its distribution presence to grow in future. Varun contributed 44.1% to PepsiCo’s total soft drinks volume sales in India in CY15. Expansion through acquisition key for company The company expanded its operations in India (mainly North and North east India) through the acquisition of additional territories from PepsiCo in the last few years. The presence of PepsiCo in the fastest growing beverage markets, viz. India, Nepal, Morocco and Sri Lanka (source: RHP), provides a strong volume growth outlook for the company. Decline in interest cost The company has a significant debt of | 2,138 crore on its books (H1CY16), out of which | 600 crore is interest free (from PepsiCo). As per the objects of the offer, the company plans to utilise ~| 540 crore of the net proceeds towards prepayment and scheduled repayment, thus, reducing its interest payout (to ~| 60-80 crore annually) and, in turn, improving the profitability going forward. Concerns • Uptrend in raw material prices • Higher GST on soft drinks may adversely affect company’s growth • Slowdown in CSDs market with change in consumers’ preference Sanjay Manyal [email protected] • Dependence on PepsiCo for brand promotion Tejashwini Kumari [email protected] Varun beverage is available at 15.2x EV/EBITDA for CY15 at the upper end of the price band of | 440-445. Leveraging the strong brand name of PepsiCo and strong growth outlook of carbonates and juice segments which are estimated to grow at a volume CAGR of 7.8% and 21.5% in 2015-2020E respectively, we believe Varun has a strong opportunity for growing volume sales. We believe Varun is available at fair valuations considering the market growth opportunity and strong brand name associated with it. We recommend SUBSCRIBE on the IPO. Research Analyst ICICI Securities Ltd | Retail Equity Research Huge market opportunity, strong brand association to drive volume Company Background Varun Beverage (Varun) is the one of the largest franchisees for PepsiCo in the world (ex-US) for production and distribution of the carbonated soft drinks (CSDs) and non-carbonated beverages (NCBs) sold under trademarks owned by PepsiCo. The company has been associated with PepsiCo since 1990 and has expanded its territories to 17 states (mainly North and North East India) and two Union Territories in India, Nepal, Sri Lanka, Morocco, Mozambique and Zambia. The company has a history of improving the market share of PepsiCo in the territories in which it operates, e.g. it has successfully grown the volume market share for PepsiCo from 6% to 45% for Nepal and 9% to 52% for Sri Lanka post acquisition of these territories. Additionally, it has increased its share of PepsiCo’s total soft drinks volume sales in India from 26.5% in 2011 to 44.12% in 2015. Further, in anticipation of gaining the franchisee in Zimbabwe, the company has undertaken a greenfield facility there which will further add to the volumes of the company. Currently, the company’s estimated annual production capacity is 343.8 crore litre (~to 60.6 crore unit cases) in India and 99.2 crore litre (~17.5 crore unit cases) in international production facilities. In India, the company has 16 manufacturing facilities, including two production facilities at Kosi, Uttar Pradesh and Guwahati, Assam and five manufacturing units in international territories, which includes one production facility in Sri Lanka. Additionally, the company has two backward integrated facilities in Jaipur and Alwar, both in Rajasthan which manufacture crowns, plastic shells, corrugated boxes, pads and shrink wrap film. The company has a 10-year agreement with PepsiCo with auto renewal. It procures the concentrate from PepsiCo for which it pays ~22% of sales (net taxes). However, it has to pay a 5% royalty for using the trademark Lehar comprising Aquafina (bottled water) and Evervess (club soda). Exhibit 1: Licensed products and respective territories Licenced product Pepsi Seven-Up Mountain Dew Mirinda Evervess Tropicana Slice Nimbooz Tropicana Frutz Aquafina Territories India, Nepal, Sri Lanka, Morocco, Zambia, Mozambique India, Nepal, Sri Lanka, Morocco, Zambia, Mozambique India, Nepal, Sri Lanka , Zambia India, Nepal, Sri Lanka, Morocco, Zambia, Mozambique India, Nepal, Sri Lanka, Zambia, Mozambique India, Nepal India India, Sri Lanka India and Sri Lanka Source: RHP, ICICIdirect.com Research Exhibit 2: Financial Summary (| Crore) Total Revenue EBITDA EBITDA Margin (%) Depreciation Interest Total Tax Net profit Diluted EPS (post issue) CY12 1,844.2 272.2 15.1 135.8 115.6 (4.3) 25.1 1.4 CY13 2,132.5 308.5 14.6 184.4 169.7 (5.2) (39.5) (2.2) CY14 2,517.1 399.2 16.0 210.1 185.4 24.8 (20.2) (1.1) CY15 3,408.4 648.3 19.1 317.4 168.8 76.6 87.0 4.8 HYCY16 2,539.4 613.9 24.3 189.5 111.2 99.7 209.7 11.5 CY16 3,794.5 732.3 19.4 371.8 153.7 68.3 138.6 7.6 Source: RHP, ICICIdirect.com Research ICICI Securities Ltd | Retail Equity Research Page 2 Investment Rationale Strong presence of PepsiCo brand in soft drink market PepsiCo is the second largest player after Coca Cola in India with 31.1%, 26.4% and 11.6% volume share in carbonates, juices and bottled water, respectively. In value terms, it has 33.2%, 24.2% and 10.8% market share in the carbonates, juices and bottled water market, respectively. The total carbonates segment grew at a CAGR of 10.7% by volume in 2010-15 and is expected to grow at a CAGR of 7.8% in 2015-20E (source: RHP). Additionally, North India is expected to deliver highest volume and value growth of 8.6% and 10.9% in 2015-20P, providing the company strong growth potential as it has a strong presence in the region post acquisition in 2015. With rising health consciousness and changing food habits, the juice segment has grown at a faster rate than carbonates at a volume CAGR of 21.6% and value CAGR of 26.3% in 2010-15 (Source: RHP). The segment is further expected to grow at a volume CAGR of 21.5% and value CAGR of 26.0% in 2015-20E. Additionally, growing health consciousness has also driven the bottled water segment strongly at a volume CAGR of 25.4% and value CAGR of 31.2% in 2010-15. The strong foothold of PepsiCo brand in these segments with a strong growth outlook and Varun’s increasing contribution to PepsiCo’s total soft drinks volume sales in India (44.1% in CY15 from 26.5% in CY11), provides the company a strong potential to increase volumes through increasing penetration. Exhibit 3: Market share details in India for CY15 (%) Carbonates The Coca Cola Co Sprite Thums Up Coca-Cola Limca Fanta PepsiCo Inc Pepsi 7-Up Mountain Dew Mirinda Evervess Others Packaged juices Maaza (The Coca-Cola Co) PepsiCo Inc Slice Tropicana Frooti (Parle Agro Pvt Ltd) Réal (Dabur India Ltd) Others Bottled water Bisleri (Parle Bisleri Ltd) Kinley (The Coca-Cola Co) Aquafina (PepsiCo Inc) Others Volume Value 56.5 18.0 16.0 8.4 8.3 5.8 31.1 12.4 6.0 5.8 5.7 1.2 12.4 58.7 20.0 15.7 8.8 9.0 5.2 33.2 13.7 5.8 7.1 5.4 1.2 8.1 30.1 26.4 20.9 5.5 15.1 8.4 20.0 22.3 24.2 15.3 8.9 12.1 13.6 27.8 25.3 13.0 11.6 50.1 25.8 17.9 10.8 45.5 Source: RHP, ICICIdirect.com Research ICICI Securities Ltd | Retail Equity Research Page 3 Expansion through acquisition key for company The company has expanded its operations in India (mainly North and North east India) through the acquisition of additional territories from PepsiCo in the last few years. Till February 2015, the licensed subterritories in India included Delhi, Rajasthan, West Bengal, Goa, Arunachal Pradesh, Assam, Meghalaya, Manipur, Mizoram, Nagaland, Tripura and certain designated parts of Madhya Pradesh, Uttar Pradesh (UP), Uttarakhand, Haryana and Maharashtra. With effect from February 28, 2015, the company successfully acquired franchises for Punjab, Himachal Pradesh, Chandigarh and the remaining parts of Haryana, Uttarakhand and UP. The acquisition of these franchisees resulted in a significant increase in sales volumes for the company resulting in an increase in its share from 26.5% in 2011 to 44.12% in 2015 to PepsiCo’s total soft drinks volume sales in India. Also, the company is in the process of setting up a greenfield facility in Zimbabwe in anticipation of franchise rights being granted by PepsiCo. Presence of PepsiCo in fastest growing beverage markets, viz. India, Nepal, Morocco, Sri Lanka (source: RHP), gives Varun a huge opportunity to penetrate newer markets that would be a key driver for volume growth. Exhibit 4: Contribution of various territories in revenue (CY15) Sri Lanka 4% Morocco 6% Nepal 7% India 83% Source: RHP, ICICIdirect.com Research Benign raw material prices aiding margins Raw materials constitute the major cost for the company and include primarily concentrate, sugar and packaging materials. Concentrates, which form the major contributor of raw material cost, have witnessed a decline of 244 bps from 15.6% in CY10 to 13.2% in CY15 of sales. Sugar cost as a percentage of sales has also declined substantially from 15.3% in CY10 to 11.1% in CY15 given stable sugar prices during 2011 and 2015. Though sugar prices have seen a sharp increase in the last six months, we expect prices to remain benign considering six to seven months sugar inventories in the system. ICICI Securities Ltd | Retail Equity Research Page 4 Exhibit 5: Sugar price trend (| per kg) Exhibit 6: Declining raw material trend (% of net sales) 45 20.0 40 15.0 35 30 10.0 25 5.0 0.0 Jul-16 Jan-16 Jul-15 Jan-15 Jul-14 Jan-14 Jul-13 Jan-13 Jul-12 Jan-12 Jul-11 Jan-11 20 CY12 CY13 Concentrate Source: RHP, ICICIdirect.com Research CY14 Sugar Pet chips CY15 Others Source: RHP, ICICIdirect.com Research Strategically located production units and integrated distribution network The company’s production facilities across India are strategically located to serve the various target markets at a lower transportation and distribution expenses enabling it to leverage economies of scale. Currently, the company’s estimated annual production capacity is 343.8 crore litre (~to 60.6 crore unit cases) in India and 99.2 crore litre (~17.5 crore unit cases) in international production facilities. The capacity along with proximity to market and well connected distribution network of 57 depots and 1,389 delivery vehicles in India and six depots and 342 delivery vehicles in international territories, provide the company the benefits of a) effective market penetration and b) effectively responding to competitive pressure and consumer demand in short time. Further, in India, Varun has 578 primary distributors, 1,600 self owned trucks and 4,500 visi coolers at the retailer’s end. Decline in interest cost The company has a significant debt of | 2,138 crore on its books (H1CY16), out of which | 600 crore is interest free (from PepsiCo). As per the objects of offer, the company plans to utilise ~| 540 crore of the net proceeds towards the prepayment and scheduled repayment. This would help the company reduce its interest payout by ~| 60-80 crore annually (considering repayment of | 540 crore), which will directly add to the profitability of the company. Additionally, the company is expected to incur average capex of | 200 crore annually expand in newer territories and it would also incur a maintenance capex of | 100 crore, which would be written off from the P&L. The company is currently operating at a capacity utilisation of 67% and does not expect to incur any major capex in the next two or three years. Thus, with no new significant capex planned, the company would be further able to pay debt from the internal cash flow. ICICI Securities Ltd | Retail Equity Research Page 5 Exhibit 7: Revenue trend (| crore) 4,000.0 3,500.0 3,000.0 2,500.0 2,000.0 1,500.0 1,000.0 500.0 - Exhibit 8: EBITDA margin trend (%) 3,394.1 1,800.0 2,115.1 60.0 56.7 55.0 50.6 47.4 50.0 2,529.7 2,502.4 57.1 40.0 30.0 20.0 15.1 14.6 16.0 CY12 CY13 CY14 24.3 19.1 10.0 CY12 CY13 CY14 CY15 HYCY16 Net revenue (| crore) Total Raw material (% of net sales) CY15 HYCY16 EBITDA Margin (%) Source: RHP, ICICIdirect.com Research Source: RHP, ICICIdirect.com Research Soft drink industry The soft drinks market which comprises of carbonated soft drinks, juices and bottled water, is still underdeveloped in India in terms of per capita consumption of 9.4 litre in 2015, compared to the world average of 91.9 litre (US market - 347.3 litre). It has grown at a volume CAGR of 17.9% and a value CAGR of 18.7% in 2010-15 to 1,208 crore litre and | 52,400 crore, respectively. It is further expected to grow to 2513.1 crore litre (| 117,600 crore) by 2020PE at a volume CAGR of 15.8% and value CAGR of 17.5% over 2015-20E (source: RHP). Exhibit 9: Market share of cheese category in 2015 (%) 3000 140000 2500 120000 100000 2000 80000 1500 60000 1000 40000 500 20000 0 0 2010 2011 2012 2013 2014 2015 2016P 2017P 2018P 2019P 2020P Volume (crore litre) Value (| crore) Source: RHP, ICICIdirect.com Research Exhibit 10: Growth projection (region-wise) West India North India South India East and Northeast India Volume (crore litre) 418.4 410.4 274.4 104.9 value (| million) 18088.5 18200.4 11864.1 4280.0 Share (%) CAGR (%) 2015-2020P Volume value Volume value 3.5 3.5 15.4 17.6 3.4 3.5 16.4 18.2 2.3 2.3 15.8 16.7 0.9 0.8 14.7 16.9 Source: RHP, ICICIdirect.com Research The total sale of carbonates grew at a CAGR of 10.7% and 12.5% by volume and value was to 457.8 crore litre and | 25,100 crore, respectively. The segment is estimated to grow at a volume CAGR of 7.8% in 2015-20E led by a) increase in per capita income in rural and semi-urban consumers, b) changing preferences of consumers coupled with affordable pricing (in different SKUs). ICICI Securities Ltd | Retail Equity Research Page 6 With rising health consciousness and changing food habits, the juice segment has grown at a faster rate than carbonates at a volume CAGR of 21.6% and value CAGR of 26.3% in 2010-15. The segment is further expected to grow at a volume CAGR of 21.5% and value CAGR of 26.0% in 2015-20E. Additionally, growing health consciousness has also driven the bottled water segment strongly at a volume CAGR of 25.4% and value CAGR of 31.2% in 2010-15. ICICI Securities Ltd | Retail Equity Research Page 7 Key risks and concerns Uptrend in raw material prices Raw materials constitute 50-57% of the cost for the company. Key raw materials are concentrates, sugar and packaging material. The company procures concentrates from PepsiCo and the price of the same may be impacted by any change in global demand supply environment. Additionally, the company procures sugar and packaging materials locally (pre-approved by PepsiCo) for which it does not enter into any long term supply contract. Further, the company has very limited pricing power. Hence, any fluctuation in prices may put pressure on the company’s profitability as it would be unable to pass on higher prices to customers. Higher GST on soft drinks may adversely affect company’s growth The existing excise duty and VAT on soft drinks in India comes to ~30%. If the segment is placed in the tax slab of 40% (along with tobacco), it will lead to price hikes of ~10%, which could result in decline in consumer purchase. Being a volume driven industry, any such decline in demand could dampen the financials on the company. Slowdown in CSDs market with change in consumers’ preference Consumers are nowadays more concerned about the health problems caused by sugar sweetened products including CSDs. CSDs contributed 81.7% and 83.5% to the total volume of the company in FY15 and FY14, respectively. Increasing public concern about obesity, additional governmental regulations concerning the marketing, labelling, packaging or sale of sugar-sweetened beverages may adversely affect the profitability of the company. Dependence on PepsiCo for brand promotion The company is currently dependent on PepsiCo for all brand promotion activities. The company makes no contribution to the cost of the same in India. However, in future, they could be asked to share such expenses as PepsiCo is under no obligation to make such contribution or maintain historical levels of funding in future. Any such additional expense may put the company’s profitability under pressure. Additionally, the ability of the company to expand the product portfolio and promotion of the same is dependent on PepsiCo. Any reduction in marketing efforts or slowdown in product innovation by PepsiCo could lead to pressure on the company as it may be unable to compete in the markets with other players. ICICI Securities Ltd | Retail Equity Research Page 8 Valuation Varun Beverages is available at 15.2x EV/EBITDA for CY15 at the upper end of the price band of | 440-445. Leveraging the strong brand name of PepsiCo and the strong growth outlook of the carbonates and juice segments, it is estimated to grow at a volume CAGR of 7.8% and 21.5% in 2015-2020E. We believe Varun has a huge opportunity to penetrate in newer regions, which will help the company drive volume sales. Additionally, the company has expanded its operations in India (mainly North and North east India) through the acquisition of additional territories from PepsiCo in the last few years, resulting in a significant increase in sales volumes for the company. Hence, it is able to enjoy the benefit of economies of scale. Further, with the repayment of debt to an extent of | 540 crore, the company will be able to save ~| 60-80 crore annually, which will aid profitability. We believe Varun is available at fair valuations considering the market growth opportunity and strong brand name associated with it. We recommend SUBSCRIBE on the IPO. Exhibit 11: Peer valuation (FY15) Varun Beverage Coca Cola consolidated* FEMSA** EBITDA margin P/E Mcap/Sales EV/EBITDA 19.1% 93.0 2.4 15.2 12.9% RoE 4.3% 27.6 0.6 10.9 27.7% 14.7% 33.7 1.7 12.6 10.7% Source: RHP, ICICIdirect.com Research; * Bloomberg estimates, ** Fomento Económico Mexicano, S.A.B. de C.V ICICI Securities Ltd | Retail Equity Research Page 9 Financial Summary Exhibit 12: Profit and Loss Statement (Consolidated) (Rs Crore) Net revenue Other income Total Revenue Cost of raw material consumed Employee benefits expense Other expenses Total Operating Expenditure EBITDA Interest Depreciation PBT Total Tax Net profit before minority interest Share of profit in associate Minority interest Net profit CY12 1,800.0 44.2 1,844.2 1,027.8 152.4 391.7 1,572.0 272.2 115.6 135.8 20.8 (4.3) 25.1 0.0 25.1 CY13 2,115.1 17.4 2,132.5 1,199.2 183.0 441.8 1,824.0 308.5 169.7 184.4 (45.6) (5.2) (40.4) 0.8 (0.0) (39.5) CY14 2,502.4 14.7 2,517.1 1,376.1 216.8 525.0 2,117.9 399.2 185.4 210.1 3.8 24.8 (21.0) 0.9 (20.2) CY15 3,394.1 14.3 3,408.4 1,716.5 323.8 719.9 2,760.1 648.3 168.8 317.4 162.1 76.6 85.5 1.5 87.0 HYCY16 2,529.7 9.7 2,539.4 1,197.8 210.8 516.8 1,925.5 613.9 111.2 189.5 313.2 99.7 213.4 1.5 5.2 209.7 Source: RHP, ICICIdirect.com Research Exhibit 13: Balance Sheet (Consolidated) (Rs Crore) Share Capital Reserve & Surplus Total Shareholders funds Share application money pending Minority Interest Long term borrowings Deferred tax liabilities Other long term liabilities Long term provisions Total non-current liabilities Short term borrowings Creditors Other current liabilities Short term provisions Total current liabilities Total liabilities CY12 26.8 144.9 171.6 0.0 1,362.8 71.1 35.2 13.8 1,483.0 338.4 90.7 463.3 6.5 898.8 2553.5 CY13 133.8 41.6 175.4 40.0 0.0 1,695.2 60.0 31.4 17.6 1,804.2 337.6 139.2 482.9 6.3 966.0 2985.6 CY14 333.8 9.3 343.1 1,630.2 77.8 11.1 25.9 1,745.0 508.5 180.6 496.7 17.6 1,203.5 3291.6 CY15 583.8 88.5 672.3 1,579.5 148.4 636.3 44.0 2,408.2 252.4 184.6 879.8 37.4 1,354.2 4434.7 HYCY16 585.7 325.8 911.5 0.0 1,837.5 226.3 315.1 53.3 2,432.2 300.4 329.7 1,240.7 78.1 1,949.0 5292.7 Fixed assets Goodwill Non-current investments Long term loans & advances Other non-current assets Total non-current assets Current investment Inventory Debtors Cash & bank balances Short term loans & advances Other current assets Total current assets Total assets 1,892.6 9.5 0.0 64.4 2.5 66.9 0.0 230.6 90.7 38.4 219.8 5.0 584.4 2553.5 2,392.5 9.5 0.9 36.9 2.1 39.9 0.0 246.4 65.2 50.9 170.9 10.2 543.6 2985.6 2,370.1 9.5 1.8 44.6 6.8 53.1 302.0 289.3 97.3 34.4 125.1 10.8 858.9 3291.6 3,527.5 9.5 3.3 119.0 5.0 127.2 0.0 424.7 97.9 58.1 180.4 9.4 770.4 4434.7 3,820.6 236.7 4.8 184.6 5.3 194.6 0.0 559.2 147.9 115.5 202.4 15.9 1,040.8 5292.7 Source: RHP, ICICIdirect.com Research ICICI Securities Ltd | Retail Equity Research Page 10 RATING RATIONALE ICICIdirect.com endeavours to provide objective opinions and recommendations. ICICIdirect.com assigns ratings to its stocks according to their notional target price vs. current market price and then categorises them as Strong Buy, Buy, Hold and Sell. The performance horizon is two years unless specified and the notional target price is defined as the analysts' valuation for a stock. Strong Buy: >15%/20% for large caps/midcaps, respectively, with high conviction; Buy: >10%/15% for large caps/midcaps, respectively; Hold: Up to +/-10%; Sell: -10% or more; Pankaj Pandey Head – Research [email protected] ICICIdirect.com Research Desk, ICICI Securities Limited, 1st Floor, Akruti Trade Centre, Road No 7, MIDC, Andheri (East) Mumbai – 400 093 [email protected] ICICI Securities Ltd | Retail Equity Research Page 11 ANALYST CERTIFICATION We /I, Sanjay Manyal, MBA (Finance) and Tejashwini Kumari, MBA (Finance), Research Analysts, authors and the names subscribed to this report, hereby certify that all of the views expressed in this research report accurately reflect our views about the subject issuer(s) or securities. We also certify that no part of our compensation was, is, or will be directly or indirectly related to the specific recommendation(s) or view(s) in this report. Terms & conditions and other disclosures: ICICI Securities Limited (ICICI Securities) is a Sebi registered Research Analyst having registration no. INH000000990. ICICI Securities is full-service, integrated investment banking and is, inter alia, engaged in the business of stock brokering and distribution of financial products. ICICI Securities is a wholly-owned subsidiary of ICICI Bank which is India’s largest private sector bank and has its various subsidiaries engaged in businesses of housing finance, asset management, life insurance, general insurance, venture capital fund management, etc. (“associates”), the details in respect of which are available on www.icicibank.com ICICI Securities is one of the leading merchant bankers/ underwriters of securities and participate in virtually all securities trading markets in India. 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Accordingly, neither ICICI Securities nor Research Analysts have any material conflict of interest at the time of publication of this report. It is confirmed that Sanjay Manyal, MBA (Finance) and Tejashwini Kumari, MBA (Finance), Research Analysts of this report have not received any compensation from the companies mentioned in the report in the preceding twelve months. Compensation of our Research Analysts is not based on any specific merchant banking, investment banking or brokerage service transactions. ICICI Securities or its subsidiaries collectively or Research Analysts do not own 1% or more of the equity securities of the Company mentioned in the report as of the last day of the month preceding the publication of the research report. Since associates of ICICI Securities are engaged in various financial service businesses, they might have financial interests or beneficial ownership in various companies including the subject company/companies mentioned in this report. It is confirmed that Sanjay Manyal, MBA (Finance) and Tejashwini Kumari, MBA (Finance), Research Analysts do not serve as an officer, director or employee of the companies mentioned in the report. ICICI Securities may have issued other reports that are inconsistent with and reach different conclusion from the information presented in this report. Neither the Research Analysts nor ICICI Securities have been engaged in market making activity for the companies mentioned in the report. We submit that no material disciplinary action has been taken on ICICI Securities by any Regulatory Authority impacting Equity Research Analysis activities. 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