RESEARCH

CRISIL IER Independent Equity Research

Butterfly Gandhimathi
Appliances Ltd

Detailed Report

Enhancing investment decisions

 CRISIL IER Independent Equity Research

Explanation of CRISIL Fundamental and Valuation (CFV) matrix

The CFV Matrix (CRISIL Fundamental and Valuation Matrix) addresses the two important analysis of an investment making process – Analysis
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point scale from grade 5 (indicating strong upside from the current market price (CMP)) to grade 1 (strong downside from the CMP).

CRISIL CRISIL
Fundamental Grade Assessment Valuation Grade Assessment
5/5 Excellent fundamentals 5/5 Strong upside (>25% from CMP)
4/5 Superior fundamentals 4/5 Upside (10-25% from CMP)
3/5 Good fundamentals 3/5 Align (+-10% from CMP)
2/5 Moderate fundamentals 2/5 Downside (negative 10-25% from CMP)
1/5 Poor fundamentals 1/5 Strong downside (<-25% from CMP)

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Analyst Disclosure
Each member of the team involved in the preparation of the grading report, hereby affirms that there exists no conflict of interest that can bias
the grading recommendation of the company.

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purpose.
Butterfly Gandhimathi Appliances Ltd
RESEARCH
Growth momentum intact despite difficult business environment

Fundamental Grade 3/5 (Good fundamentals) April 04, 2014

Valuation Grade 5/5 (CMP has strong upside) Fair Value ₹380
Industry Household Appliances CMP ₹292

Butterfly Gandhimathi Appliances Ltd (Gandhimathi) reported healthy y-o-y revenue growth of
24% (only branded products, excluding government orders) in FY13 and 27% in 9MFY14
CFV MATRIX
despite industry headwinds. The company’s strong position in South India, penetration into Excellent
Fundamentals
northern and western markets, and increasing awareness through brand-building initiatives
have put the company on a firm footing and are expected to drive growth going forward as 5

Fundamental Grade
well. Though stretched working capital cycle and increasing competition are challenges, we
4
are positive on the long-term growth prospects of the company and maintain our fundamental
grade of 3/5. 3

Geographic expansion, brand-building initiatives boosted the top line 2

Driven by expansion into the northern and western markets, several brand-building initiatives
and introduction of new products and product variances, Gandhimathi’s branded product 1

sales recorded 53% CAGR over FY11-13. This growth momentum continued in 9MFY14; Poor
1 2 3 4 5
despite a challenging business environment, it posted 27% growth y-o-y, higher than its Fundamentals

peers. During 9MFY14, the company was able to diversify its revenue base; the non-southern
Valuation Grade
markets contributed 18.5% to revenues against 11% in FY13. Additionally, the company

Downside
Strong

Upside
Strong
introduced new product variants in FY13 and 9MFY14. We expect these initiatives to
strengthen the Butterfly brand and drive up demand going forward.
Key challenges: Competition and long working capital cycle
With many organised and unorganised players in the fray, the kitchen appliances industry in KEY STOCK STATISTICS
India is highly fragmented. We expect Gandhimathi to face stiff competition especially from NIFTY/SENSEX 6694/22360
established players such as TTK Prestige Ltd (TTK Prestige) and Hawkins Cookers Ltd NSE/BSE ticker BLFYGANDHI
(Hawkins). Additionally, many international players (Royal Philips Electronics, Groupe SEB) Face value (₹ per share) 10
have entered the market, which has intensified competition further. Moreover, the company’s Shares outstanding (mn) 17.9
operations are more working capital intensive (79 days in FY13) than that of peers which Market cap (₹ mn)/(US$ mn) 5,226/87
results in lower cash accruals. Enterprise value (₹ mn)/(US$ mn) 6,307/105
52-week range (₹)/(H/L) 400/240
Valuation: Current market price has strong upside
Beta 0.6
We continue to use the discounted cash flow (DCF) method to value Gandhimathi and
Free float (%) 35.3%
reiterate our fair value of ₹380. The fair value implies P/E multiples of 19.3x and 17.3x FY15
and FY16 EPS estimates, respectively. At the current market price of ₹292, the valuation Avg daily volumes (30-days) 2,801
grade is 5/5. Avg daily value (30-days) (₹ mn) 0.8

SHAREHOLDING PATTERN
KEY FORECAST 100%
19.5% 19.5% 19.4% 19.0%
(₹ mn) FY12 FY13 FY14E FY15E FY16E
80%
Operating income 5,946 7,286 7,657 7,920 7,726 15.8% 15.8% 15.9% 15.9%
EBITDA 620 732 680 786 859 60%
Adj net income 190 329 285 351 392
40%
Adj EPS (₹) 12.3 18.4 15.9 19.6 21.9 64.7% 64.7% 64.7% 65.1%
EPS growth (%) -17% 49% -13% 23% 12% 20%
Dividend yield (%) 0.8% 0.9% 0.9% 1.1% 1.6%
RoCE (%) 37.5% 23.9% 16.1% 17.5% 18.4% 0%
Mar-13 Jun-13 Sep-13 Dec-13
RoE (%) 32.6% 23.7% 13.4% 14.7% 14.7% Promoter DII Others
PE (x) 23.7 15.9 18.3 14.9 13.3
PERFORMANCE VIS-À-VIS MARKET
P/BV (x) 6.0 2.6 2.3 2.1 1.9
EV/EBITDA (x) 9.0 8.9 9.3 8.0 6.8 Returns
1-m 3-m 6-m 12-m
Source: Company, CRISIL Research estimates
Gandhimathi -4% 3% -16% 8%
CNX500 -4% 0% 6% -2%

ANALYTICAL CONTACT
Mohit Modi (Director) mohit.modi@crisil.com
Sayan Das Sharma sayan.sharma@crisil.com
Bhaskar Bukrediwala bhaskar.bukrediwala@crisil.com
Client servicing desk
+91 22 3342 3561 clientservicing@crisil.com

For detailed initiating coverage report please visit: www.ier.co.in

CRISIL Independent Equity Research reports are also available on Bloomberg (CRI <go>) and Thomson Reuters.

1
 CRISIL IER Independent Equity Research

Table 1: Butterfly Gandhimathi - Business environment

Table top wet
Product / segment Pressure cookers Gas stoves Mixer grinders Flasks and others
grinders
Revenue contribution
8.6% 51.7%* 23.5%* 16.3% 0%
(FY13)
Revenue contribution
10.5% 31.9%** 29.4%** 19.9% 8.7%
(FY15E)
Geographic presence ■ Predominantly South India based player with a strong presence in Tamil Nadu (TN); also present in Karnataka,
Kerala and Andhra Pradesh. Gradually expanding to northern, western and eastern India
■ Derived around 18.5% of total revenues from the non-southern markets during compared to 11% in FY13
Market position Strong player in Market leader in Market leader in Second largest NA
Tamil Nadu South India in the Tamil Nadu but selling entity in
organised space limited pan-India South India after
presence Preethi (acquired by
Royal Philips
Electronics)
Industry growth ■ The kitchen appliances industry is growing at a steady pace - the non-electrical segment at 10-11% and the
expectations electrical appliances segment at 15%
■ Because of increase in disposable income, urbanisation and preference for lifestyle products from the younger
population of India, the branded product segment is expected to gain market share and grow at a relatively faster
rate
Sales growth
42.7% 35.6% 47.4% 20.2% NA
(FY11-13 – 2-yr CAGR)
Sales forecast
15.8% 22.8% 23.0% 28.3% NA
(FY13-15E – 2-yr CAGR)
Demand drivers ■ Rise in disposable income and preference for branded products have led to a shift in consumer preference from
smaller unorganised players to organised players, which bode well for the long-term growth prospects of the
company. However, consumer spending, particularly for the discretionary items, has been muted over the past
one year owing to an uncertain macro-economic environment and persistently high inflation
■ Increased penetration in northern and western markets is expected to drive demand for Gandhimathi’s products
■ The company has launched a number of product variants (60 SKUs as of 9MFY14), which are expected to
increase the company’s brand recall and market share
■ Gandhimathi is aggressively investing in brand-building and marketing initiatives
TTK Prestige in
Preethi Appliances in
South India,
TTK Prestige and South India; Bajaj
Key competitors Elgi Ultra Industries Sunflame NA
Hawkins Electricals in North
Enterprises in North
India.
India
■ Rising input prices owing to volatility in raw material prices (aluminium and steel) and high inflation
■ Significant depreciation in the rupee against US$ is likely to increase raw material prices (aluminium, stainless
Key risks
steel motors and ABS plastics)
■ Intense competition from organised and unorganised players may dampen future growth prospects
* Sales contribution and growth are higher because the sale of table top grinders worth ₹3.3 bn and mixer grinders worth ₹0.3 bn to the TN government
in FY13 are included.
**FY14 and FY15 sales estimates include sales of ₹3.3 bn and ₹2.0 bn, respectively, to the TN government compared to sales of ₹3.7 bn in FY13.
Source: Company, CRISIL Research

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Butterfly Gandhimathi Appliances Ltd
RESEARCH

Grading Rationale
Sluggish macro-economic condition lowered private
consumption expenditure in recent times…
After a period of rapid growth over 2005-06 to 2011-12, driven by favourable demographic and
macro-economic factors, macro headwinds slowed down household consumption expenditure Persistently high inflation, slowdown

(represented by private consumption expenditure). Private consumption expenditure declined in economic growth and stubborn
to 10-year lows of 1.6% and 2.2% in Q1FY14 and Q2FY14, respectively. Weak consumer interest rates have led to weak
sentiments across the country led to a subsequent decline in discretionary consumer consumer sentiment
spending. All these factors adversely impacted the demand for consumer goods – including
kitchen appliances. As per industry sources, demand for kitchen appliance products declined
by ~20% in H1FY14. The situation exacerbated in South India, a key market for Gandhimathi,
owing to acute power shortage (in Tamil Nadu and Kerala) and political uncertainty (in Andhra
Pradesh).

The slowdown in consumption was primarily driven by three factors –

■ Slowdown in GDP growth, which dropped to 4.8% in September 2013, resulted in

subdued industrial output which, in turn, impacted the rise in wages. Rural and urban
wage growth slowed in 2013, thereby impacting spending power.

■ Persistently high inflation, driven by a steep rise in food prices, has reduced the
household’s purchasing power. CPI inflation averaged ~10% in 2013.

■ Elevated inflation levels resulted in high interest rates, which adversely impacted
consumption in interest-rate sensitive sectors, including consumer goods.

Figure 1: Inflation continues to be high... Figure 2: ... leading to a decline in private consumption
145.0 12%
140.0
Consumer price index remained 10%
135.0 above the average of last three
year (2011-2013) during 2013
130.0 8%
125.0
6%
120.0
115.0 4% Private consumption expenditure
stooped to 10 year lows during
110.0
2% the first three quarters of FY14
105.0
100.0 0%
Jun 08

Dec 08

Jun 09

Dec 09

Jun 10

Dec 10

Jun 11

Dec 11

Jun 12

Dec 12

Jun 13

Dec 13
Mar 08

Mar 09

Mar 10

Mar 11

Mar 12

Mar 13
Sep 08

Sep 09

Sep 10

Sep 11

Sep 12

Sep 13
Feb-12

Feb-13
Apr-11

Aug-11
Oct-11
Dec-11

Apr-12

Aug-12
Oct-12
Dec-12

Apr-13

Aug-13
Oct-13
Dec-13
Jan-11

Jun-11

Jun-12

Jun-13

CPI Three year average CPI Private consumption expenditure (y-o-y growth)
CPI=Consumer price index; indexed to 100

Source: Ministry of Commerce and Industry, CRISIL Research Source: Central Statistical Organisation

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 CRISIL IER Independent Equity Research

… but Gandhimathi fared well driven by geographical

expansion, brand-building initiatives and new product launches
Gandhimathi’s branded product business recorded a two-year revenue CAGR of 18% to
₹4,413 mn in FY13. This growth was more pronounced in 9MFY14 at 27% (y-o-y) despite a
challenging business environment and was the key driver for overall revenue growth. During
the same period, some of the other kitchen appliances manufacturers (TTK Prestige and
Gandhimathi grew faster than its much
Hawkins) recorded marginal growth in their top line, indicating that Gandhimathi has gained
larger peers during 9MFY14, driven by
market share in the kitchen appliance space. This growth was the result of the company’s
geographic expansion, marketing
concerted efforts over the years to expand to non-south markets in India (primarily the
initiatives and launch of new products
northern and western regions), brand-building initiatives and introduction of new products and
variants of existing products.

Figure 3: Steady growth in revenues continued in FY13... Figure 4: ...driven by healthy growth in branded sales
(₹ mn) (₹ mn)
8,000 140% 5,000 93% 100%

7,000 116% 4,500 90%

120%
4,000 72% 80%
6,000
100% 3,500 70%
5,000 3,000 60%
62% 80%
4,000 2,500 50%
60% 2,000 40%
3,000 3,584 27%
31% 1,500 22% 30%
40%
2,000 23% 1,000 20%
1,000 20% 3%
500 10%
1,700 2,758 5,946 7,286 5,942 2,716 2,617 4,387 3,998
- 0% - 0%
FY10 FY11 FY12 FY13 9MFY14 FY10 FY11 FY12 FY13 9MFY14*

Revenue y-o-y growth (RHS) Branded sales (gross sales) y-o-y growth (RHS)
*Sales figures have been annualised for y-o-y comparison. FY10 and *y-o-y growth on H1FY13 sales of ₹2,021.5 mn
FY11 comprise 18 and nine months
Source: Company, CRISIL Research Source: Company, CRISIL Research

Penetration into non-south markets supports long-term growth

After establishing its presence in the South Indian market, Gandhimathi is focussing on
penetrating newer markets in northern and western India (non-south) to tap the pan-India
growth opportunity and to reduce the revenue concentration risk. The company has been
working on gaining a strong foothold in these markets by 1) establishing a strong dealer
network and incentivising dealers by providing better payment terms and higher margin than
other players; 2) ramping up the marketing and promotional activities focusing on the non-
Gandhimathi has been able to increase
South market to increase brand awareness in the region; and 3) improving after-sales services
the revenue share of the non-South
to customers. The geographic expansion appears to be well on track as the share of the non-
markets leading to lowered geographic
south market increased to 18.5% in 9MFY14 from 10.5% in FY12. The company has
established ~185 dealer touch points in the non-south markets. It has also forayed into the
concentration risk

eastern region, albeit the region’s contribution to overall revenues remains small.

Although the company is likely to face stiff competition from both organised players (such as
TTK Prestige, Hawkins and Sunflame) and unorganised players, penetration into new markets
is a key positive; we expect the revenue contribution from these markets to grow in the future.

4
Butterfly Gandhimathi Appliances Ltd
RESEARCH

Figure 5: The non-south markets’ contribution to revenues has increased

10.5%
FY12
18.5%

9MFY14

81.5%

89.5% South
Non-south

Source: Company, CRISIL Research

Brand awareness improving steadily aided by higher marketing spend

Our interactions with kitchenware distributors/dealers suggest that consumer awareness for
Gandhimathi’s products has improved steadily over the past few years, which has helped the
company to gain market share particularly from the unorganised players. In the pressure
Gandhimathi’s advertisement and
cooker segment, TTK Prestige and Hawkins are the preferred brands although the awareness
marketing spend is higher than that of
of Butterfly brand has increased. In the gas stoves and mixer segments, Gandhimathi is the
its peers
leader. Increase in brand awareness is supported by extensive marketing and promotional
activities undertaken by the company, which includes advertisement campaigns across
multiple media channels such as newspaper, television, and the web. Gandhimathi’s
advertising spend as a percentage of revenues is the highest among its peers – in FY13, its
marketing expense was 6.8% of sales compared to TTK Prestige’s 5.8% and Hawkins’ 2.8%.
Going forward, marketing expense is likely to remain at the current levels as the company is
expected to continue to invest in brand-building activities.

Figure 6: Gandhimathi’s marketing spend is higher than that of peers

10%
8.6%
9%
7.8%
7.5%
8%
6.8%
7%
6% 7.0% 6.9%
6.5%
5% 5.8%
4%
3% 4.0%
3.4%
3.2%
2% 2.8%

1%
1.5% 1.3% 1.3% 1.3%
0%
FY10 FY11 FY12 FY13

Butterfly Gandhimathi TTK Prestige

Hawkins Cooker Bajaj Electricals

Source: Company, CRISIL Research

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 CRISIL IER Independent Equity Research

New product launches expected to help gain market share

Over the past few years, rise in disposable income has empowered Indian consumers to
choose premium products and consider different product variants with better aesthetics and
functionalities. Although TTK Prestige has benefitted from this trend by regularly launching
new products, we believe Gandhimathi has been slow in introducing new product variants and
its product line lacks diversity compared to TTK Prestige and Hawkins (in the pressure cooker Gandhimathi launched 60 SKUs in

category). However, over the past few years, Gandhimathi has been developing and 9MFY14 and plans to introduce 20-25
introducing new product variants. It has launched 60 new SKUs until 9MFY13. It introduced more in FY14
new variants of kitchen chimney and hand blenders in 9MFY14; and the Rhino model of mixer
grinder and table top wet grinder in FY13 which registered healthy sales growth. Going
forward, the company plans to launch more than 50 SKUs every year. We believe the focus
on introducing new product variants is likely to diversify the product line and help the company
increase its share in the existing as well as new markets.

Plans to shift focus away from government orders

In 2011, the TN government announced a plan to distribute home and kitchen appliances
(including table fans, mixer grinders and table top grinders) to 18 mn households over four
years. The company was qualified as a L1 bidder in the table top wet grinder and mixer
grinder categories under this scheme and bagged orders worth ₹2.9 bn and ₹3.7 bn in FY12
The company has bid for supplying 1

and FY13, respectively. Although this boosted the top line and created a replacement market mn pieces of appliances to the TN
for these products, these orders fetched lower margins and limited the management government compared to 2.1 mn in
bandwidth available for the branded product business. FY13 to focus on sales through retail
channels
Witnessing healthy demand for its branded products, Gandhimathi’s management has
decided to cut down on government orders - it has bid for 1 mn pieces in FY14 compared to
2.1 mn pieces in FY13. Although it is likely to result in revenue shortfall in the near term, it
should be positive in the long term as the government orders are expected to expire in FY15.
Further, focus on the branded product sales will help the company strengthen its brand.

Healthy growth across product segments led by LPG gas

stoves, mixer grinders
Over FY10-13, Gandhimathi recorded sales growth across all product segments – pressure
cookers, LPG gas stoves, non-stick cookware, mixer grinders, table top grinders and others. All six product categories have
LPG gas stoves sales registered a CAGR of 36% and table top grinders 14% CAGR recorded healthy growth in the recent
(excluding TN government orders) during FY10-13. Mixer grinder and pressure cooker past
segments recorded growth of 9% and 11%, respectively. LPG gas stoves remain the largest
segment and accounted for 41% of the total retail sales in FY13, followed by mixer grinders
with a 21% share.

Rising LPG penetration in India has been a key demand driver of LPG gas stoves. According
to Census data, 29% of the Indian households used LPG as the primary cooking fuel in 2011
compared to 18% in 2001; the proportion of people using LPG gas stoves is substantially Although LPG penetration increased in
higher in urban areas (~80%). Gandhimathi has been a major beneficiary of this. The
recent years, it is still low in rural
company also has tie-ups with major oil marketing companies such as BPCL, HPCL and
areas
others, which has aided the sale of gas stoves. Going forward, we expect LPG penetration to
increase driven by increasing disposable income and growing urbanisation. The central

6
Butterfly Gandhimathi Appliances Ltd
RESEARCH

government’s decision to relax the cap on subsidised LPG cylinders from six to nine (it is
expected to be relaxed further to 12) is also likely to contribute to the demand for LPG gas
stoves.

Figure 8: Rise in LPG penetration drives up gas stove sales

(₹ mn)

2,000 70%
59%
1,800 55% 60%
1,600
1,400 50%
42%
1,200
40%
1,000
30%
800 1,790
600 20%
400
10%
200 2%
707 1,099 1,747
- 0%
FY10 FY11 FY12 FY13
Sales y-o-y growth (RHS)

Source: Company, CRISIL Research

Competition has intensified in the kitchen appliance industry

The kitchen appliances industry in India is fragmented into innumerable organised and
unorganised players. Apart from competition from unorganised regional players, Gandhimathi Entry of international players has
faces stiff competition from established players such as TTK Prestige, Hawkins, Bajaj increased competition in the kitchen
Electricals, Preethi, Elgi and Sunflame. All these players are well known brands and are appliances space
strongly positioned in their respective product categories (Preethi in mixer grinders, Hawkins
in pressure cookers and Sunflame in gas stoves).

Attracted by the lucrative market opportunities, many large global companies have entered the
Indian kitchen appliance industry by way of mergers and acquisitions and joint ventures. For
example, Groupe SEB of France (owner of the Tefal brand), acquired a 55% stake in
Maharaja Whitelines, a leading manufacturer of kitchen appliance products in India. The entry
of established global players in the Indian market is expected to intensify competition further.

Table 2: Entry of leading global kitchen appliance manufacturers in India

Acquirer Target
Royal Philips Electronics (Netherlands) Acquired the well-known Preethi brand from Maya Appliances in 2011
Groupe SEB (France) Acquired 55% stake in Maharaja Whitelines, a manufacturer of home and kitchen appliance products
Tied up with Shivam Industrial Corp, a Gurgaon-based retail and distribution company, to market its
Fisher and Paykel Appliances (USA)
products in the country
Source: Industry sources, CRISIL Research

Although, over the past few years, Gandhimathi has been able to gain market share,
particularly from unorganised players, it still lags large players such as TTK Prestige in terms
of product diversity and distribution network. Its gross margins are also below that of TTK
Prestige and Hawkins, indicating weaker brand strength. The company’s working capital cycle
is also longer compared to peers.

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 CRISIL IER Independent Equity Research

Table 3: Gandhimathi’s positioning compared to leading peers

Gandhimathi TTK Prestige Hawkins
Product offerings Gas stoves, pressure cookers, mixer Only company in India that has a Strong in pressure cookers and non-
grinders and table top grinders. However, product portfolio covering the entire stick cookware
the products and variants are not as range of kitchen appliance products
diversified as TTK Prestige’s offerings
Market positioning Market leader in gas stoves in South Market leader in the cookware Market leader in the pressure cooker
India, gradually expanding presence in segment, strong positioning in other segment
the non-South markets product categories
Key markets Tamil Nadu, also strong in other southern South India North and East India
states
Distribution network Wide distribution network; however, Has a wide distribution network and Wide distribution network and markets
limited presence in retail stores as well as markets its products through products through distributors and large
large format store franchisee-based retail outlets; and format stores. Does not have retail
also through distributors, dealers, outlets
and large format retail stores
Target segment Focused on the middle and lower income Caters to all income classes, does Catering to all income classes. Has
categories, does not cater to the ultra- not have many products for the launched a range of cookware products
premium category middle income category for the ultra-premium customers
Brand awareness Strong brand recall in Tamil Nadu, Strong brand recall among Strong brand recall in East and North
gradually improving in other markets customers across South India as well India
as in parts of northern and western
markets
Source: Company, CRISIL Research

Weaker margin profile; stretched working capital cycle

compared to peers
Although Gandhimathi’s top line has grown ahead of its peers in recent years (revenues grew
at a CAGR of 53% [ex-government orders] over FY11-13 compared to TTK Prestige’s 33%
and Hawkins’ 13%), its margin profile remains weaker than its key competitors. Average gross
margin (adjusted for discounts on sales which is reported under other expenses) for the
company over the last three years has been 26%, lower than that of TTK Prestige (32%) and
Gandhimathi’s margin profile is
Hawkins (13%); this indicates that the company’s brand strength is weaker compared to
peers. Subsequently, Gandhimathi’s EBITDA margin is also lower than that of its peers;
weaker than that of TTK Prestige and

average EBITDA margin over FY11-13 was 10.7% compared to 16.1% for TTK Prestige and Hawkins

13% for Hawkins. However, we believe that Gandhimathi is taking steps in the right direction
by investing in brand-building initiatives. We expect operating leverage to kick-in once the
company’s operations reach a certain scale.

Gandhimathi’s operations are more working capital intensive compared to its peer group. In
FY13, Gandhimathi’s working capital days stood at 79 days compared to 35 days for TTK
Prestige and four days for Hawkins. The company derives sales through institutional dealers,
which includes oil marketing companies, and has to offer them a credit period of 80-90 days
which leads to a longer working capital cycle. As a result of the elongated working capital
cycle, the company’s gearing is also higher compared to other kitchen appliances
manufacturers, although leverage has declined in FY13.

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Butterfly Gandhimathi Appliances Ltd
RESEARCH

Figure 9: Working capital intensive operations... Figure 10: ... leading to relatively higher leverage than peers
(Days) (%) 2.5x
100 89 2.5x
76 79 1.9x
80 2.0x 1.7x
70

60 61 1.5x
67 51
65 0.9x
1.0x
40
35 0.3x 0.4x 0.4x
21 20 0.4x
12 0.5x
20 0.3x
4 0.3x 0.2x 0.2x
1 0.0x 0.3x
(7) 0.0x 0.2x
- 0.0x
2 -0.5x

FY10

FY11

FY12

FY13
(20)
FY10 FY11 FY12 FY13

Butterfly Gandhimathi TTK Prestige Butterfly Gandhimathi TTK Prestige

Hawkins Cooker Bajaj Electricals Hawkins Cooker Bajaj Electricals

Source: Company, CRISIL Research Source: Company, CRISIL Research

Capacity expansion deferred until H1FY15

Gandhimathi had plans of investing ₹400 mn to expand its manufacturing facilities in Tamil
Nadu in FY14. However, the company has only invested ~25% of the planned amount as of The company plans to ramp up
H1FY14 and is expected to invest the balance by H1FY15. Post completion of the planned
capacity to support the next phase of
expansion, the company’s capacity for manufacturing LPG gas stoves is expected to increase
growth
to 2.4 mn from 1.8 mn, while the pressure cooker capacity is expected to increase to 3 mn
from 1.6 mn. Capacity expansion is expected to support the aggressive growth plans of the
company in the near future.

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 CRISIL IER Independent Equity Research

Key Risks
Volatile raw material prices may impact margins
The key raw materials used in Gandhimathi’s products – steel and aluminium - are available
both domestically and internationally, and the prices of these commodities are linked to
various global factors. These raw materials form a major part of the total operating expense
and account for 50-60% of sales. Although Gandhimathi has been able to pass on the
increase in raw material prices to consumers owing to its strong brand, any significant
Any significant increase in raw
increase in raw material prices and the company’s inability to pass on the increase may
adversely impact margins. material prices and foreign exchange
volatility may adversely impact
operating margins
Potential risk from exchange rate movement
The company imports key components such as stainless steel motors and ABS plastics for
table top grinders and mixer grinders and is, therefore, exposed to foreign exchange
fluctuation risks. Additionally, the company plans to gradually increase its focus on exports.
Though the company generally goes for a forward cover to hedge raw material imports,
volatility in foreign exchange is a potential risk to our estimates.

Highly competitive industry

The kitchen appliance industry is fragmented into organised and unorganised players.
Gandhimathi faces stiff competition from large and established players such as TTK Prestige,
Hawkins, Bajaj Electricals, Preethi Kitchen Appliances and Sunflame. All these players have
The kitchen appliances industry is
individual strengths and are constantly trying to increase market share by introducing new
fragmented with low industry barriers
products and through various marketing initiatives. Although we acknowledge that
Gandhimathi has achieved faster growth than its competitors in the recent quarters, future
growth and profitability can be adversely impacted if a price war is triggered in the kitchen
appliance industry.

10
Butterfly Gandhimathi Appliances Ltd
RESEARCH

Financial Outlook
Revenues estimated to rise to ₹7.7 bn in FY16 at 2.0% CAGR
Gandhimathi’s revenues are expected to grow at a three-year CAGR of 2.0% to ₹7.7 bn in
FY16. We expect the company to execute TN government orders worth ₹3.4 bn and ₹2 bn in
FY14 and FY15, respectively, compared to orders worth ₹3.7 bn in FY13. This is expected to Revenue growth excluding TN
lead to a significant shortfall in revenues in FY14 and FY15; however, this is expected to be government order is expected to
partially offset by healthy growth in branded product sales. Overall revenues are expected to remain healthy at 24% CAGR over
decline in FY16 as the government orders are likely to expire. FY13-16

We expect the branded product business to remain healthy and estimate growth at 24.4%
CAGR over FY13-16 to ₹8.4 bn (gross sales before excise duty).

Figure 11: Revenues expected to grow at 2.7% CAGR over Figure 12: Sale of branded products expected to remain
FY13-16 healthy
(₹ mn) (₹ mn)
115.6%
9,000 120% 9,000 30.8% 35%
8,000 8,000 27.6%
100% 30%
7,000 7,000 22.4%
80% 25%
6,000 6,000
5,000 60% 5,000 20%
15.2%
4,000 40% 4,000 15%
22.5%
3,000 3,000 3,584
5.1% 3.4% 20% 10%
2,000 -2.5% 2,000
0% 2.7% 5%
1,000 1,000
5,946 7,286 7,657 7,920 7,726 4,387 5,056 6,615 8,442
- -20% - 0%
FY12 FY13 FY14E FY15E FY16E FY12 FY13 FY14E FY15E FY16E

Revenue y-o-y growth (RHS) Branded sales y-o-y growth (RHS)

Source: Company, CRISIL Research Source: Company, CRISIL Research

Expect EBITDA margin to expand post FY14

We expect Gandhimathi’s EBITDA margin to improve to 11.1% in FY16 from 10% in FY13 as
the share of low-margin government orders is expected to decline. In FY14, EBITDA margin is
expected to decline to 8.9% in FY14 following steep depreciation of the rupee and high
inflation which raised input costs. Advertising and marketing expense also remained high
during the year. However, we expect operating leverage to kick in from FY15 as the company
reaches substantial scale of operations, resulting in improvement in EBITDA margin.

Adjusted PAT expected to grow at a CAGR of 6.1% over FY13-16

We expect adjusted PAT to increase to ₹392 mn in FY16 from ₹329 mn in FY13 at a CAGR of
6.1%. PAT margin is expected to decline to 3.7% in FY14 from 4.4% in FY13, owing to
contracting EBITDA margin. However, driven by improvement in EBITDA margin, we expect
PAT margin to increase to 5.1% in FY16. Adjusted EPS is estimated to grow to ₹21.9 in FY16
from ₹18.4 in FY13.

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Figure 13: EBITDA margin to gradually expand post FY14 Figure 14: PAT estimated to increase to ₹392 mn by FY16
(₹ mn) (₹ mn)
1,000 12% 450 6%
5.1%
900 400
4.5% 4.4% 5%
800 11.1%
11% 350
700 3.7%
10.4% 300 4%
10.0% 3.2%
600 9.9% 250
500 10% 3%
200
400
8.9% 150 2%
300
9% 100
200 1%
100 50
620 732 680 786 859 190 329 285 351 392
- 8% - 0%
FY12 FY13 FY14E FY15E FY16E FY12 FY13 FY14E FY15E FY16E

EBITDA EBITDA margin (RHS) PAT PAT margin (RHS)

Source: Company, CRISIL Research Source: Company, CRISIL Research

Expect return ratios to decline in FY14

We expect return ratios to moderate over FY13-16 from the current levels. RoE is expected to
decline to 13.4% in FY14 and increased to 14.7% in FY15. RoCE is expected to decline to
16.1% in FY14 on account of contracting PAT margin and declining asset utilisation. Return
ratios are expected to gradually improve post FY15 driven by expanding PAT margin.

Figure 15: Return ratios to moderate over FY13-16... Figure 16: ... due to decline in asset utilisation
40% 37.5% (x)
1.8x 1.7x 6%
5.1%
35% 1.6x
4.5% 4.4% 5%
1.4x 1.3x
30% 32.6% 3.7%
1.2x 4%
3.2%
23.9% 1.0x
25% 0.9x
0.9x 0.8x 3%
0.8x 0.7x 0.7x
23.7% 18.4%
20% 17.5% 0.6x 0.7x 2%
16.1% 0.6x
0.4x 0.5x
15% 1%
0.2x
13.4% 14.7% 14.7%
10% 0.0x 0%
FY12 FY13 FY14E FY15E FY16E FY12 FY13 FY14E FY15E FY16E

RoE RoCE Debt to equity Total asset turnover PAT margin

Source: Company, CRISIL Research Source: Company, CRISIL Research

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Butterfly Gandhimathi Appliances Ltd
RESEARCH

Earnings Estimates Revised

FY14E FY15E FY16E
Particulars Unit Old New % change Old New % change Old New % change
Revenues (₹ mn) 7,856 7,657 -3% 7,920 7,920 0% 7,726 7,726 0%
EBITDA (₹ mn) 697 680 -3% 786 786 0% 859 859 0%
EBITDA margin % 8.9% 8.9% 0bps 9.9% 9.9% 0bps 11.1% 11.1% 0bps
PAT (₹ mn) 297 285 -4% 351 351 0% 392 392 0%
PAT margin % 3.7% 3.7% -6bps 4.4% 4.4% 0bps 5.1% 5.1% 0bps
EPS (₹) 16.6 15.9 -4% 19.6 19.6 0% 21.9 21.9 0%
Source: CRISIL Research estimates

Reasons for changes in estimates

Line item FY14E FY15E
Revenues We have changed our revenue estimate for FY14 by 3% No change
EBITDA margins No change No change
PAT No change No change

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Management Overview
CRISIL's fundamental grading methodology includes a broad assessment of management
quality, apart from other key factors such as industry and business prospects, and financial
performance.

Based on our interactions with the management over the past one year, our confidence in the
management’s understanding of the business, their ability to execute strategy and meet the
targets has increased.

Experienced management with strong domain expertise

Gandhimathi is led by Mr V.M. Seshadri, Managing Director, who has over 30 years of
experience in the home appliances industry. We believe the management has shown
expertise in running the business in an efficient manner. Over the past couple of years, the
management has successfully executed the geographic expansion strategy and currently
derives ~8% of its total revenues from the northern markets. Moreover, the management has
successfully turned the business into a profit-making unit from a sick entity under the BIFR Act Our confidence on execution
in 2003. capability of the management
team has increased over the
Confidence on second line of management
past two years
Though decision-making is centralised around Mr Seshadri, we believe the second line of
management has also contributed to the growth of the company. Over the past two years, we
have interacted with various members of the management and found them capable and
qualified to run the company. We interacted with Mr V.M.G. Mayuresan – General Manager,
Strategy; and found him to be well versed with the business. The second line of management
also includes Mr V.M.L. Karthikeyan – Executive Vice President, Sales and Marketing; Mr
V.M.G. Viswanathan – Senior General Manager, Materials Management; Mr V.M.L.
Senthilnathan – Senior General Manager, Technical; Mr V.M.L. Ganesan – General Manager,
Sales and Marketing; and Mr V.M.S. Selvamuthukumaran – General Manager, Sales and
Marketing.

14
Butterfly Gandhimathi Appliances Ltd
RESEARCH

Corporate Governance
CRISIL’s fundamental grading methodology includes a broad assessment of corporate
governance and management quality, apart from other key factors such as industry and
business prospects, and financial performance. In this context, CRISIL Research analyses the
shareholding structure, board composition, typical board processes, disclosure standards and
related-party transactions. Any qualifications by regulators or auditors also serve as useful
inputs while assessing a company’s corporate governance.

Overall, the corporate governance at Gandhimathi meets the desired levels, and is supported
by an independent board and adequate disclosure levels.

Board composition meets the required criteria

The board of Gandhimathi comprises 14 directors, of whom seven are independent directors.
This meets the minimum requirements as per clause 49 of SEBI’s listing guidelines. The board Board consists of 14
is chaired by Mr V. M. Lakshminarayanan, who belongs to the promoter group. The directors
directors, seven of whom are
have over two decades of experience in the home appliances industry. The independent
independent directors
directors have diverse backgrounds and years of experience in their related fields. The equity
investor, Reliance Private Equity, also has a nominee director on the board.

Board processes are in place

Board meeting notices along with the agenda papers are circulated well in advance. The
requisite committees – audit, investor grievance and remuneration – are in place. The audit
and investor grievances committees are headed by Mr K. Ganesan, an independent director.
Both the committees primarily comprise independent directors, which indicate good corporate
governance practices. In FY13, Gandhimathi held nine board meetings, which were attended
by most directors.

Disclosure standards are adequate

The company’s disclosure standards are reasonably good judged by the information and
details furnished in the annual report, websites and other publicly available data. The
disclosure levels are sufficient to analyse most business aspects. Based on our interaction
with the management, we have found them to be transparent in disclosing various business
related data. Additionally, the company has implemented the SAP system in FY14, which is
expected to improve internal controls and systems.

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Valuation Grade: 5/5

We continue to use the DCF method to value Gandhimathi and maintain our fair value of
₹380. The fair value estimate implies P/E multiples of 19.3x and 17.3x FY15E and FY16E
EPS estimates, respectively. The stock is currently trading at ₹292, which implies P/E
multiples of 14.9x and 13.3x FY15E and FY16E estimates, respectively. At the current market
price, the valuation grade is 5/5.

Key assumptions
We have considered the discounted value of the firm’s estimated free cash flow over FY16-25
to sufficiently capture the growth of the company. In the terminal year, we have assumed a
growth rate of 5% and EBITDA margin of 9.5%. We have assumed cost of equity of 18.7%.

WACC assumptions
Explicit period Terminal value
Cost of equity 18.7% 18.7%
Cost of debt (post tax) 8.4% 8.4%
WACC 12.8% 13.2%
Terminal growth rate 5.0%

Sensitivity of fair value to terminal growth and WACC Sensitivity of fair value to terminal EBITDA and WACC
Terminal growth EBITDA margin %
3.0% 4.0% 5.0% 6.0% 7.0% 7.5% 8.5% 9.5% 10.5% 11.5%
10.8% 351 373 401 437 484 10.8% 330 365 401 437 473
WACC

WACC

11.8% 340 362 390 426 473 11.8% 319 355 390 426 461
12.8% 330 352 380 416 463 12.8% 310 345 380 415 450
13.8% 321 343 371 406 453 13.8% 301 336 371 406 441
14.8% 312 334 362 397 444 14.8% 292 327 362 397 431

Source: Company, CRISIL Research Source: Company, CRISIL Research

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Butterfly Gandhimathi Appliances Ltd
RESEARCH

One-year forward P/E band One-year forward EV/EBITDA band

(₹) (₹ mn)
500 9,000
450 8,000
7,000
400
6,000
350
5,000
300 4,000
250 3,000
200 2,000
1,000
150
Dec-11

Jun-12

Aug-12

Sep-12

Nov-12

Jan-13

Jul-13

Aug-13

Dec-13
Feb-12

Apr-12

Mar-13

May-13

Oct-13

Feb-14

Apr-14
0

Dec-11

Feb-12

Apr-12

Aug-12

Sep-12

Nov-12

Mar-13

May-13

Aug-13

Dec-13

Feb-14

Apr-14
Jun-12

Jan-13

Jul-13

Oct-13
Gandhimathi 15x 17x
19x 21x 23x EV 4x 6x 8x 10x

Source: NSE, CRISIL Research Source: NSE, CRISIL Research

P/E – premium / discount to CNX 500 P/E movement

120% (Times)
24
100%
22 +1 std dev
80%
20
60%
18

40% -1 std dev

16

20% 14

12
0%
Feb-12

Apr-12

Mar-13

May-13

Feb-14

Apr-14
Dec-11

Jun-12

Aug-12

Sep-12

Nov-12

Jan-13

Jul-13

Aug-13

Dec-13
Oct-13

10
Feb-12

Apr-12

Mar-13

May-13

Feb-14

Apr-14
Dec-11

Jun-12

Aug-12

Sep-12

Nov-12

Jan-13

Jul-13

Aug-13

Dec-13
Oct-13
Premium/Discount to CNX 500
Median premium/discount to CNX 500 1yr Fwd PE (x) Median PE

Source: NSE, CRISIL Research Source: NSE, CRISIL Research

CRISIL IER reports released on Butterfly Gandhimathi Appliances Ltd

Fundamental Valuation CMP
Date Nature of report grade Fair value grade (on the date of report)
09-Nov-11 Initiating coverage 3/5 ₹378 4/5 ₹317
17-Nov-11 Q2FY12 result update 3/5 ₹378 4/5 ₹311
01-Mar-12 Q3FY12 result update 3/5 ₹378 3/5 ₹368
15-Mar-12 Event Update 3/5 ₹460 4/5 ₹390
22-Jun-12 Q4FY12 results 3/5 ₹405 4/5 ₹325
22-Aug-12 Q1FY13 results 3/5 ₹405 4/5 ₹325
05-Nov-12 Q2FY13 results 3/5 ₹412 5/5 ₹312
22-Feb-13 Q3FY13 results 3/5 ₹412 5/5 ₹290
05-June-13 Q4FY13 results 3/5 ₹412 4/5 ₹370
06-Aug-13 Q1FY14 results 3/5 ₹380 4/5 ₹344
19-Nov-13 Q2FY14 results 3/5 ₹380 5/5 ₹297
14-Feb-14 Q3FY14 results 3/5 ₹380 5/5 ₹272
04-Apr-14 Detailed report 3/5 ₹380 5/5 ₹292

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Company Overview
Incorporated in 1986, Gandhimathi manufactures various kitchen appliance products, and
markets them under the Butterfly brand. Headquartered in Chennai, the company has a major
presence in Tamil Nadu. The Butterfly brand of stainless steel kitchenware products were
launched in 1970. Butterfly, over the past three decades, has become a household name in
South India. Besides Tamil Nadu, the company also markets its products in Kerala, Karnataka
and Andhra Pradesh and has recently forayed into other parts of the country. The company
has a facility in Pudupakkam, near Chennai, where it manufactures gas stoves, pressure
cookers, table top wet grinders, mixer grinders and vacuum flasks. The company was referred
to BIFR in 2003 and came out of it in 2008.

Milestones
1986 Incorporated as a private limited company

1987 Began commercial production of LPG gas stoves and geysers

1989 Began commercial production of mixer grinders

1990 Got listed on the Bombay Stock Exchange (BSE)

FY03 Was declared a sick company under the BIFR Act

FY03-08 Started to focus on the gas stoves market and came out of BIFR in 2008

FY12 Bagged an order worth ₹2.8 bn from the TN government for mixer grinders and table top wet grinders

As an L1 bidder, got a bigger order worth ₹4.6 bn from the TN government

FY13
Merged Gangadharam Appliances, a promoter group company

Witnessed strong sales from retail channels despite a slowdown in the industry. Owing to this, the company
FY14
decided to bid for a lower amount of TN government order and focus on sales from retail channels

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Butterfly Gandhimathi Appliances Ltd
RESEARCH

Annexure: Financials
Income statement Balance Sheet
(₹ mn) FY12 FY13 FY14E FY15E FY16E (₹ mn) FY12 FY13 FY14E FY15E FY16E
Operating income 5,946 7,286 7,657 7,920 7,726 Liabilities
EBITDA 620 732 680 786 859 Equity share capital 154 179 179 179 179
EBITDA margin 10.4% 10.0% 8.9% 9.9% 11.1% Reserves 602 1,834 2,062 2,343 2,637
Depreciation 17 42 59 74 82 Minorities - - - - -
EBIT 603 690 621 712 777 Net worth 756 2,013 2,241 2,522 2,816
Interest 175 223 219 214 220 Convertible debt - - - - -
Operating PBT 428 467 402 498 558 Other debt 1,279 1,739 1,739 1,639 1,475
Other income 11 19 21 26 37 Total debt 1,279 1,739 1,739 1,639 1,475
Exceptional inc/(exp) 114 6 - - - Deferred tax liability (net) (46) (34) (34) (34) (34)
PBT 552 491 423 524 594 Total liabilities 1,990 3,719 3,947 4,128 4,259
Tax provision 248 157 137 173 202 Assets
Minority interest - - - - - Net fixed assets 758 930 1,124 1,263 1,294
PAT (Reported) 304 334 285 351 392 Capital WIP 29 52 - 92 97
Less: Exceptionals 114 6 - - - Total fixed assets 787 982 1,124 1,355 1,391
Adjusted PAT 190 329 285 351 392 Investments - - - - -
Current assets
Ratios Inventory 717 1,588 1,468 1,410 1,270
FY12 FY13 FY14E FY15E FY16E Sundry debtors 950 1,972 1,994 2,062 1,906
Growth Loans and advances 146 327 383 396 386
Operating income (%) 115.6 22.5 5.1 3.4 (2.5) Cash & bank balance 221 463 631 557 839
EBITDA (%) 93.2 18.1 (7.2) 15.6 9.3 Marketable securities - - - - -
Adj PAT (%) 32.3 72.6 (13.2) 23.0 11.7 Total current assets 2,034 4,349 4,476 4,426 4,401
Adj EPS (%) (17.3) 49.0 (13.2) 23.0 11.7 Total current liabilities 869 1,664 1,705 1,704 1,585
Net current assets 1,165 2,685 2,772 2,722 2,817
Profitability Intangibles/Misc. expenditure 37 50 50 50 50
EBITDA margin (%) 10.4 10.0 8.9 9.9 11.1 Total assets 1,990 3,719 3,947 4,128 4,259
Adj PAT Margin (%) 3.2 4.5 3.7 4.4 5.1
RoE (%) 32.6 23.7 13.4 14.7 14.7 Cash flow
RoCE (%) 37.5 23.9 16.1 17.5 18.4 (₹ mn) FY12 FY13 FY14E FY15E FY16E
RoIC (%) 25.9 22.4 15.8 17.0 18.4 Pre-tax profit 438 486 423 524 594
Total tax paid (230) (145) (137) (173) (202)
Valuations Depreciation 17 42 59 74 82
Price-earnings (x) 23.7 15.9 18.3 14.9 13.3 Working capital changes (220) (1,278) 82 (24) 187
Price-book (x) 6.0 2.6 2.3 2.1 1.9 Net cash from operations 5 (896) 426 401 661
EV/EBITDA (x) 9.0 8.9 9.3 8.0 6.8 Cash from investments
EV/Sales (x) 0.9 0.9 0.8 0.8 0.8 Capital expenditure (538) (251) (200) (305) (118)
Dividend payout ratio (%) 11.8 13.4 17.1 17.1 21.4 Investments and others - - - - -
Dividend yield (%) 0.8 0.9 0.9 1.1 1.6 Net cash from investments (538) (251) (200) (305) (118)
Cash from financing
B/S ratios Equity raised/(repaid) 58 25 - - -
Inventory days 44 80 70 65 60 Debt raised/(repaid) 512 460 - (100) (163)
Creditors days 52 81 78 76 73 Dividend (incl. tax) (42) (52) (57) (70) (98)
Debtor days 58 99 95 95 90 Others (incl extraordinaries) 136 956 - - 0
Working capital days 51 79 104 99 98 Net cash from financing 664 1,388 (57) (170) (262)
Gross asset turnover (x) 9.1 7.2 6.1 5.4 4.7 Change in cash position 132 241 169 (74) 282
Net asset turnover (x) 11.6 8.6 7.5 6.6 6.0 Closing cash 221 463 631 557 839
Sales/operating assets (x) 11.2 8.2 7.3 6.4 5.6 631 557
Current ratio (x) 2.3 2.6 2.6 2.6 2.8
Debt-equity (x) 1.7 0.9 0.8 0.6 0.5 Quarterly financials
Net debt/equity (x) 1.4 0.6 0.5 0.4 0.2 (₹ mn) Q3FY13 Q4FY13 Q1FY14 Q2FY14 Q3FY14
EBITDA/interest 3.5 3.3 3.1 3.7 3.9 Net Sales 1,989 3,232 2,078 1,448 2,416
EBIT/interest 3.4 3.1 2.8 3.3 3.5 Change (q-o-q) 95% 62% -36% -30% 67%
EBITDA 178 312 170 183 172
Per share Change (q-o-q) 52% 75% -45% 8% -6%
FY12 FY13 FY14E FY15E FY16E EBITDA margin 8.9% 9.6% 8.2% 12.6% 7.1%
Adj EPS (₹) 12.3 18.4 15.9 19.6 21.9 PAT 70 154 89 67 59
CEPS 13.4 20.7 19.2 23.8 26.5 Adj PAT 70 154 89 67 59
Book value 49.0 112.5 125.2 140.9 157.4 Change (q-o-q) 11% 121% -43% -25% -12%
Dividend (₹) 2.3 2.5 2.7 3.4 4.7 Adj PAT margin 3.5% 4.8% 4.3% 4.6% 2.4%
Actual o/s shares (mn) 15.4 17.9 17.9 17.9 17.9 Adj EPS 3.9 8.6 4.9 3.7 3.3

Source: CRISIL Research

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Focus Charts
Revenues to grow at a CAGR of 2.0% over FY13-16 Sale of branded products to remain strong
(₹ mn) (₹ mn)
115.6%
9,000 120% 9,000 30.8% 35%
8,000 8,000 27.6%
100% 30%
7,000 7,000 22.4%
80% 25%
6,000 6,000
5,000 60% 5,000 20%
15.2%
4,000 40% 4,000 15%
22.5%
3,000 3,000 3,584
5.1% 3.4% 20% 10%
2,000 -2.5% 2,000
0% 2.7% 5%
1,000 1,000
5,946 7,286 7,657 7,920 7,726 4,387 5,056 6,615 8,442
- -20% - 0%
FY12 FY13 FY14E FY15E FY16E FY12 FY13 FY14E FY15E FY16E

Revenue y-o-y growth (RHS) Branded sales y-o-y growth (RHS)

Source: Company, CRISIL Research Source: Company, CRISIL Research

EBITDA margin to gradually expand post FY14 PAT estimated to increase to ₹392 mn in FY16
(₹ mn) (₹ mn)
1,000 12% 450 6%
5.1%
900 400
4.5% 4.4% 5%
800 11.1%
11% 350
700 3.7%
10.4% 300 4%
10.0% 3.2%
600 9.9% 250
500 10% 3%
200
400
8.9% 150 2%
300
9% 100
200 1%
100 50
620 732 680 786 859 190 329 285 351 392
- 8% - 0%
FY12 FY13 FY14E FY15E FY16E FY12 FY13 FY14E FY15E FY16E

EBITDA EBITDA margin (RHS) PAT PAT margin (RHS)

Source: Company, CRISIL Research Source: Company, CRISIL Research

Expect return ratios to moderate in FY14 Stock movement trend vs CNX 500
40% 37.5% 700

600
35%
500
30% 32.6%
400
23.9%
25% 300

23.7% 18.4% 200

20% 17.5%
16.1%
100
15%
0
13.4% 14.7% 14.7%
May-13
Apr-10

Jul-10

Feb-11

Apr-12

Jul-12

Oct-12

Feb-13

Mar-14
Jan-10

Nov-10

Jun-11

Sep-11

Dec-11

Sep-13

Dec-13

10%
FY12 FY13 FY14E FY15E FY16E
RoE RoCE Gandhimathi CNX 500
-Indexed to 100
Source: Company, CRISIL Research Source: Company, CRISIL Research

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 RESEARCH

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CRISIL IER Independent Equity Research

CRISIL Research Team

President
Mukesh Agarwal CRISIL Research +91 22 3342 3035 mukesh.agarwal@crisil.com

Analytical Contacts
Sandeep Sabharwal Senior Director, Capital Markets +91 22 4097 8052 sandeep.sabharwal@crisil.com

Prasad Koparkar Senior Director, Industry & Customised Research +91 22 3342 3137 prasad.koparkar@crisil.com

Binaifer Jehani Director, Customised Research +91 22 3342 4091 binaifer.jehani@crisil.com

Manoj Mohta Director, Customised Research +91 22 3342 3554 manoj.mohta@crisil.com

Sudhir Nair Director, Customised Research +91 22 3342 3526 sudhir.nair@crisil.com

Mohit Modi Director, Equity Research +91 22 4254 2860 mohit.modi@crisil.com

Jiju Vidyadharan Director, Funds & Fixed Income Research +91 22 3342 8091 jiju.vidyadharan@crisil.com

Ajay D'Souza Director, Industry Research +91 22 3342 3567 ajay.dsouza@crisil.com

Ajay Srinivasan Director, Industry Research +91 22 3342 3530 ajay.srinivasan@crisil.com

Rahul Prithiani Director, Industry Research +91 22 3342 3574 rahul.prithiani@crisil.com

Business Development
Hani Jalan Director, Capital Markets +91 22 3342 3077 hani.jalan@crisil.com

Prosenjit Ghosh Director, Industry & Customised Research +91 22 3342 8008 prosenjit.ghosh@crisil.com

Business Development – Equity Research

Vishal Shah – Regional Manager Priyanka Murarka – Regional Manager

Email : vishal.shah@crisil.com Email : priyanka.murarka@crisil.com
Phone : +91 9820598908 Phone : +91 9903060685

Shweta Adukia – Regional Manager Ankur Nehra – Regional Manager

Email : Shweta.Adukia@crisil.com Email : Ankur.Nehra@crisil.com
Phone : +91 9987855771 Phone : +91 9999575639
 RESEARCH

Our Capabilities
Making Markets Function Better

Economy and Industry Research

▪ Largest team of economy and industry research analysts in India
▪ Coverage on 70 industries and 139 sub-sectors; provide growth forecasts, profitability analysis, emerging trends,
expected investments, industry structure and regulatory frameworks
▪ 90 per cent of India’s commercial banks use our industry research for credit decisions
▪ Special coverage on key growth sectors including real estate, infrastructure, logistics, and financial services
▪ Inputs to India’s leading corporates in market sizing, demand forecasting, and project feasibility
▪ Published the first India-focused report on Ultra High Net-worth Individuals
▪ All opinions and forecasts reviewed by a highly qualified panel with over 200 years of cumulative experience

Funds and Fixed Income Research

▪ Largest and most comprehensive database on India’s debt market, covering more than 15,000 securities
▪ Largest provider of fixed income valuations in India
▪ Value more than ₹53 trillion (USD 960 billion) of Indian debt securities, comprising outstanding securities
▪ Sole provider of fixed income and hybrid indices to mutual funds and insurance companies; we maintain 12
standard indices and over 100 customised indices
▪ Ranking of Indian mutual fund schemes covering 70 per cent of assets under management and ₹4.7 trillion
(USD 85 billion) by value
▪ Retained by India’s Employees’ Provident Fund Organisation, the world’s largest retirement scheme covering
over 60 million individuals, for selecting fund managers and monitoring their performance

Equity and Company Research

▪ Largest independent equity research house in India, focusing on small and mid-cap companies; coverage
exceeds 125 companies
▪ Released company reports on 1,442 companies listed and traded on the National Stock Exchange; a global first
for any stock exchange
▪ First research house to release exchange-commissioned equity research reports in India
▪ Assigned the first IPO grade in India
Our Office
Ahmedabad Hyderabad
706, Venus Atlantis 3rd Floor, Uma Chambers
Nr. Reliance Petrol Pump Plot No. 9&10, Nagarjuna Hills,
Prahladnagar, Ahmedabad, India (Near Punjagutta Cross Road)
Phone: +91 79 4024 4500 Hyderabad - 500 482, India
Fax: +91 79 2755 9863 Phone: +91 40 2335 8103/05
Fax: +91 40 2335 7507

Bengaluru Kolkata
W-101, Sunrise Chambers, Horizon, Block 'B', 4th Floor
22, Ulsoor Road, 57 Chowringhee Road
Bengaluru - 560 042, India Kolkata - 700 071, India
Phone: +91 80 2558 0899 Phone: +91 33 2289 1949/50
+91 80 2559 4802 Fax: +91 33 2283 0597
Fax: +91 80 2559 4801

Chennai Pune
Thapar House, 1187/17, Ghole Road,
43/44, Montieth Road, Egmore, Shivaji Nagar,
Chennai - 600 008, India Pune - 411 005, India
Phone: +91 44 2854 6205/06 Phone: +91 20 2553 9064/67
+91 44 2854 6093 Fax: +91 20 4018 1930
Fax: +91 44 2854 7531

Gurgaon
Plot No. 46
Sector 44
Opp. PF Office
Gurgaon - 122 003, India
Phone: +91 124 6722 000

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