Finolex Cables (BUY) - ERr GRP - Play On Industrial Capex Recovery

Ambit Capital and / or its affiliates do and seek to do business including investment banking with companies covered in its
s research reports. As a result, investors should be aware that Ambit Capital

may have a conflict of interest that could affect the objectivity of this report. Investors should not consider this report as the only factor in making their investment decision.

Play on industrial capex recovery
Finolex is levered to a demand recovery in the B2B sector. IIP growth
recovered after each of the past three Union Elections, which is also
corroborated by our dealer checks. Hence, we expect a recovery after
the ongoing Union Elections. We upgrade our revenue estimates by 4%
for FY15 and 9% for FY15 and EBITDA estimates by 6% for FY15 and 12%
for FY16. We now value the investment book at `41 (95% upgrade), as
we now value investment in Finolex Industries at a 50% discount to its
market value (earlier book value). Our SOTP-based TP is revised up by
33% to `159. Valuation at 1.4x FY16 P/B is attractive given FY16 RoEs of
23% and FY14-16 EPS CAGR of 31%. At CMP, the stock is trading at a
55% discount to its peers FY16 P/E, despite its FY16 RoE of 23% and
FY14-16 EPS CAGR of 31% (vs peers 22%). BUY.
Bet on a recovery in industrial capex
Almost 85% of Finolexs revenues come from B2B businesses (auto, industries,
state electricity boards and housing). Empirical evidence suggests a strong
correlation between IIP growth (represents B2B businesses) and Finolexs
revenue growth. Further Finolexs revenues have also recovered sharply post the
last three Union elections. This was also corroborated in our recent dealer
checks at Bhagirath palace which is Asias largest electrical market.
EBITDA margin to improve with positive impact of operating leverage
Finolexs EBITDA margins in the past have expanded in line with a high revenue
growth led by a favourable impact of operating leverage. Given our expectation
of revenue growth of 25% in FY16 and 16% in FY17, we expect EBITDA margins
to improve 60bps in FY16 and 100bps in FY17 over 10% in FY14. Even in FY15,
we expect a margin improvement of 50bps YoY but not led by operating
leverage given 50% YoY increase in ad spends.
Success in switchgears not completely factored in our estimates
We estimate switchgear revenue of `1bn in FY15, which is 50% lower than the
managements guidance. Also, in FY18, we model revenue of `2.9bn which
implies a meagre 4% market share although 70% of the market share is
controlled by Havells, Legrand and Schneider and ~35% of the market is in
south India where Finolexs brand is very strong. If we assume 8% market share
in FY18 then our DCF-based target prices increases to `180/share.
Valuations: Crying for a re-rating; steep discount to peers unjustified
Finolex is trading at 1.4x FY16 P/B despite its FY16 RoE of 23% and FY14-16
EPS CAGR of 31%. Compared with its peers, it is trading at a steep discount of
55% on FY16 EPS despite its higher FY14-16 EPS CAGR of 31% (vs peers 22%)
and FY16 RoE of 23% (similar to peers). Also, compared with its cross-cycle
average one-year forward P/B over FY04-09 (as FY09-13 is not comparable due
to derivative loss), the stock is trading at a 36% discount despite its FY04-08 RoE
of 9.6% and EPS CAGR of 32%.
Finolex Cables
BUY
COMPANY INSIGHT FNXC IN EQUITY May 08, 2014
Key financials
Year to March (` mn) FY12 FY13 FY14E FY15E FY16E
Revenue 20,640 22,707 23,550 28,885 36,169
EBITDA margin (%) 8.5 10.1 10.0 10.5 10.9
EPS (`) 8.8 11.0 11.5 15.0 19.6
Reported RoE (%) 12.9 16.8 17.8 20.1 22.9
Core RoE (%)* 19.0 24.8 18.6 21.1 23.8
P/E (x) 14.2 11.4 10.9 8.4 6.4
P/B (x) 2.4 2.1 1.8 1.6 1.4
Source: Company, Ambit Capital research, Note: * adjusted for derivative loss and other income on
investments
Light Electricals
Recommendation
Mcap (bn): `19/US$0.3
6M ADV (mn): `93/US$1.5
CMP: `127
TP (12 mths): ` 159
Upside (%): 25%
Flags
Accounting: GREEN
Predictability: RED
Earnings Momentum: GREEN
Catalyst
Increase in infra spend by Telcos
Success in switchgears
Performance (%)

Source: Bloomberg, Ambit Capital research

Analyst Details
Bhargav Buddhadev
+91 22 3043 3252
bhargavbuddhadev@ambitcapital.com
Deepesh Agarwal
+91 22 3043 3275
deepeshagarwal@ambitcapital.com

80
180
280
A
p
r
-
1
3
J
u
n
-
1
3
A
u
g
-
1
3
O
c
t
-
1
3
D
e
c
-
1
3
F
e
b
-
1
4
A
p
r
-
1
4
FNXC NIFTY

Finolex Cables

08 May, 2014 Ambit Capital Pvt. Ltd. Page 2

Recovery in project demand benefits
Finolex
Finolexs revenue growth strongly correlated to IIP recovery
Almost 85% of Finolexs revenues come from project-based businesses (like auto and
other industries), state electricity boards (SEBs), new housing, and the construction
sector (see Exhibit 2 below). Due to the weak IIP print in FY14 (declined by 1.1% YoY
till February 2014), Finolexs revenue growth so far in 9MFY14 has been weak at 4%
YoY. Empirical evidence suggests a strong correlation between IIP growth (which
represents project demand) and Finolexs revenue growth (see Exhibit 1 below).
Consequently, a recovery in project demand augurs well for Finolex.
Exhibit 1: Finolexs revenue growth has a strong
correlation with the IIP print

Source: Source: MOSPI, Company, Ambit Capital research
Exhibit 2: Almost 85% of Finolexs revenue is linked to
project demand
Customer type
Finolex Cables - revenue share
(%)
Auto 15%
Industry 15%
Power 15%
Construction Institutional 15%
Construction Retail 25%
Total Project demand 85%
Agriculture 15%
Total demand 100%
Source: Source: Industry, Ambit Capital research

Empirical evidence suggests a recovery in project demand post the Union
Elections
Empirical evidence suggests sluggish growth in IIP six months preceding the Union
Elections followed by a strong recovery in the six months post the elections. This was
also corroborated in our recent dealer meetings at the Bhagirath market in Delhi,
Asias largest electrical market. Whilst IIP growth in the six months preceding the
Union Elections in September 1999, May 2004 and May 2009 was sluggish at 6%,
9% and 1% respectively, IIP growth recovered to 7%, 12% and 9% six months after
each Union Election (see Exhibit 3 below). Consequently, Finolexs full-year revenue
growth also recovered from 2% in FY99, 4% in FY04 and -6% in FY09 to 24% in
FY00, 26% in FY05 and 15% in FY10. Consequently, we are assuming higher
revenue growth of 21% in FY15 and 25% in FY16 as compared to a weak revenue
growth of 4% in FY14. Note that the higher revenue growth in FY15 and FY16 will
also be led by switchgears, which is a new product launch. We model switchgears
revenues of `1bn in FY15 and `1.6bn in FY16, which is equivalent to 3.5% and 4.5%
of FY15 and FY16 revenues respectively.

-10%
0%
10%
20%
30%
40%
0%
3%
6%
9%
12%
15%
18%
F
Y
0
8
F
Y
0
9
F
Y
1
0
F
Y
1
1
F
Y
1
2
F
Y
1
3
IIP (LHS) Finolex's revenue growth (%)

Finolex Cables


Exhibit 3: Empirical evidence shows strong recovery in IIP
post elections (representing IIP growth YoY in %)

Source: MOSPI, Ambit Capital research
Exhibit 4: Historically, Finolexs revenue growth has been
higher post-election

Source: MOSPI, Company, Ambit Capital research, Note pre-election year
represent FY99, FY04, FY09 and FY14 and post-election year represent
FY00, FY05, FY10 and FY15E.
0%
3%
6%
9%
12%
15%
Sep-99 May-04 May-09
Six months preceeding election
Six months following election
-10%
-5%
0%
5%
10%
15%
20%
25%
30%
Sep-99 May-04 May-09 May-14
Pre-election year Post election year

Finolex Cables


High revenue growth boosts margin given
favourable impact of operating leverage
Finolexs EBITDA margin has recovered in periods of strong revenue growth
Historically, Finolexs EBITDA margins have expanded in years where revenue growth
has recovered. This recovery has primarily been led by a favourable impact of
operating leverage, as shown in Exhibit 5 below. We assess the impact of operating
leverage by calculating the change in EBITDA margin on a YoY basis and then
deducting the change in gross margins from this. Given our expectation of higher
revenue growth of 21% in FY15 and 25% in FY16, we expect an EBITDA margin
improvement of 60bps YoY and 40bps YoY. As mentioned earlier, the higher revenue
growth in FY15 and FY16 is also led by the launch of switchgears in FY15.
Exhibit 5: Higher revenue growth led to favourable operating leverage for Finolex

Source: Company, Ambit Capital research; Note: we calculate operating leverage as YoY change in EBITDA
margin minus YoY change in gross margin.

Impact of operating leverage more in FY16 and FY17 given higher ad spends
in FY15
After Deepak Chhabria, the nephew of Prahlad Chhabria, became the MD in July
2013, Finolex has become aggressive in adding dealers in north India (dealer count
doubled in the last three years) and in incurring ad spends (up ~50% YoY so far in
FY14). Consequently we expect the favourable impact of operating leverage to be
offset by an increase in advertisement spend in FY15. However, we expect the EBITDA
margins improvement of 30bps YoY in FY16 and 20bps YoY in FY17 to be
contributed by the favourable impact of operating leverage. This would be primarily
led by a 30bps and 10bps decrease in employee expense as a percentage of
revenues in FY16 and FY17, respectively.

-300
-200
-100
0
100
200
300
400
500
-25%
-15%
-5%
5%
15%
25%
35%
45%
F
Y
0
2
F
Y
0
3
F
Y
0
4
F
Y
0
5
F
Y
0
6
F
Y
0
7
F
Y
0
8
F
Y
0
9
F
Y
1
0
F
Y
1
1
F
Y
1
2
F
Y
1
3
Revenue growth (%) Operatiiong leverage (bps) on RHS

Finolex Cables


Exhibit 6: Impact of operating leverage more in FY16 and FY17 given higher ad spends in FY15
(in ` mn unless specified) FY12 FY13 FY14E FY15E FY16E FY17E
Revenues 20,385 22,438 23,310 28,592 35,804 41,617
Raw Material costs 15,694 16,621 17,250 20,876 26,027 30,162
YoY growth -0.6% 5.9% 3.8% 21.0% 24.7% 15.9%
as % of sales 77.0% 74.1% 74.0% 73.0% 72.7% 72.5%
Gross Margin 4,691 5,818 6,061 7,715 9,777 11,455
YoY growth 9.1% 24.0% 4.2% 27.3% 26.7% 17.2%
Gross margin (%) 23.0% 25.9% 26.0% 27.0% 27.3% 27.5%
Gross margin expansion/ (contraction) 160bps 290bps 10bps 100bps 30bps 20bps
Employee expenses 695 846 915 1,016 1,189 1,324
YoY growth 7.3% 21.7% 8.2% 11.1% 16.9% 11.4%
as % of sales 3.4% 3.8% 3.9% 3.6% 3.3% 3.2%
Manufacturing related 322 402 466 572 716 832
YoY growth -2.2% 24.5% 16.1% 22.7% 25.2% 16.2%
as % of sales 1.6% 1.8% 2.0% 2.0% 2.0% 2.0%
Advertising/marketing 1,791 2,042 2,094 2,859 3,580 4,162
YoY growth 16.5% 14.0% 2.5% 36.6% 25.2% 16.2%
as % of sales 8.8% 9.1% 9.0% 10.0% 10.0% 10.0%
Others 389 500 466 572 716 832
YoY growth 19.0% 28.5% -6.8% 22.7% 25.2% 16.2%
as % of sales 1.9% 2.2% 2.0% 2.0% 2.0% 2.0%
EBITDA 1,748 2,297 2,360 2,989 3,941 4,728
YoY growth 0.9% 31.4% 2.8% 26.7% 31.8% 20.0%
EBITDA margin 8.6% 10.2% 10.1% 10.5% 11.0% 11.4%
EBITDA margin expansion/ (contraction) -10bps 170bps -10bps 30bps 60bps 40bps
Operating leverage -160bps -130bps -20bps -70bps 30bps 20bps
Source: Company, Ambit Capital research

Finolex Cables


Success in Switchgear business not
completely factored in our estimates
Our switchgear revenue estimate is conservative
Our switchgear revenue estimates for FY15 is lower than the managements
guidance. The management is guiding for switchgear revenues of `2bn in FY15,
which implies a market share of ~4% in the first year of launch. Our estimate is lower
at `1bn, as the management is guiding for a launch of switchgears in 1QFY15, but
we expect a launch after 2QFY15, as the product has not been showcased to the
dealer community yet. Consequently, we have modelled in a conservative revenue
estimate of `1bn in FY15 and `1.6bn in FY16. We estimate 4% market share only in
FY18 vs the managements target of achieving this market share in FY15.
If Finolex makes a successful debut in launching switchgears then there is
tremendous opportunity for the company to capture a large market share, given that
70% of the market is controlled by three players: Havells, Schneider and Legrand
(acquired Indo Asian Fusegear in FY11).
Exhibit 7: Sensitivity analysis of Finolexs switchgear business

High case Base case Low case
Switchgear revenues
Assumed FY15 revenue of `1.5bn and
revenue growth of 70% in FY16 and 60%
in FY17. Consequently, revenue CAGR
over FY15-20 comes to 42% and
Finolex's market share in FY20 comes to
4%.
Assumed FY15 revenue of `1.0bn
and revenue growth of 60% in FY16
and 40% in FY17. Consequently
assumed revenue CAGR over FY15-
20 is at 34% and Finolex's market
share in FY20 comes to 1.8%.
Assumed FY15 revenue of `0.5bn and
revenue growth of 15% in FY16 and
10% in FY17. Consequently revenue
CAGR over FY15-20 comes to 16% and
Finolex's market share in FY20 comes
to 0.4%.
Switchgear EBIT margin (%)
Assumed Finolex will continue its
premium pricing policy in switchgears
and consequently EBIT margin would be
20% in FY15 and 25% in FY16 and FY17.
Assumed Finolex will earn margin
lower than established players
initially and improve its margin
sequentially. We assume EBIT margin
of 10% in FY15, 15% in FY16 and
18% in FY17.
Assumed Finolex will struggle to break-
even in switchgear in FY15 with EBIT
margin of -10%. Further we assume nil
EBIT margin in FY16 and 10% in FY17.
Gross block turnover
Consequent to increase in revenue from
switchgears, assumed improvement in
Finolex's gross block turnover ratio from
2.4x in FY14 to 2.8x in FY15 to 3.2x in
FY16 and 3.4x in FY17.
Consequent to our base-case
assumption of modest revenue
growth in switchgears, we have
assumed Finolex's gross block
turnover ratio to improve from 2.4x in
FY14 to 2.8x in FY15, to 3.1x in FY16
and 3.2x in FY17.
Consequent to low revenues of
switchgears, we assume only marginal
improvement in Finolex's gross block
turnover ratio from 2.4x in FY14 to 2.7x
in FY15, to 3.0x in FY16 and 3.1x in
FY17.
Fair value (`/share) 180 159 148
Source: Ambit Capital research

Can Finolex capture a large market share in switchgears?
Large opportunity with limited entry barriers: The market share in switchgears is
highly concentrated, with the top-3 players accounting for a market share of ~70% in
the US$2.9bn switchgear industry. This leaves a lot of scope for new entrants like
Finolex to take away market share from the incumbents. Whilst 6-7 years ago, all the
Indian companies imported switchgears (Havells imported from a German
manufacturer), now with virtually all players manufacturing switchgears in India, the
technology is no longer an entry barrier. Havells, Schneider and Legrand still hold a
large market share primarily because the per annum market size for this product is
small at ~`50bn for large players like ABB, Siemens or L&T to aggressively tap this
market. Also, their brand perception amidst consumers is very strong.
Finolexs brand perception as a safety brand is strong: Our discussions with
the dealer community suggest that the perception of Finolexs brand in the mind of a
consumer as a safety brand is very high. Hence, if Finolex launches any new
product, its product quality by default would be superior and will be accepted for any
application where safety is of prime importance. Consequently, if Finolex is able to
re-create the brand perception of its electrical wires then it can challenge the industry
leader by capturing a large market share.

Finolex Cables


Leverage on the existing distribution network; ~50% is replacement market:
The replacement market forms almost 50% of the market, as the life of the product is
2-3 years and the buying decision is driven by the dealer who sells the product to the
final consumer. The remaining 50% of the market is driven by architects/consultants
who certify vendors based on the product quality and pricing. Given that Finolex
already has a strong relationship with these architects/consultants, due to its
reputation as a successful cables and wires company, the gestation period to start
selling in the retail market is minimal. We believe Finolex will first launch the product
in south and west India (~50% of Indias overall electrical market), given Finolexs
strong brand recall in these geographies.

Sensitivity analysis relating to the switchgear business - Target price
increases to `180/share based on management guidance, which is our high-
case scenario
If we factor in managements revenue guidance of `1.5bn in FY15 and assume this to
nearly triple to `4bn by FY17, EBIT margin of 20% in FY15 and 25% in FY16 and
FY17, and an improvement in the gross block turnover from 2.4x in FY14 to 2.8x in
FY15 and 3.2x in FY16, our target price increases to `180/share vs the current target
price of `159/share, implying 45% upside.
However, in the low-case scenario we assume: (a) revenue of `0.5bn in FY15 and
revenue growth of 15% in FY16 and 10% in FY17, (b) loss of `50mn in FY15, break-
even in FY16 and EBIT margin of 10% in FY17, and (c) marginal improvement in
gross block turnover ratio from 2.4x in FY14 to 2.7x in FY15 to 3x in FY16. Thus, our
target price declines to `148/share vs `159/share. However, compared with the
current market price of `127, it still implies an upside of 16%.

Finolex Cables


Key assumptions
We expect Finolex to report 22% revenue CAGR and 29% PAT CAGR over FY14-16
led by the detailed assumptions given in the exhibit below.
Exhibit 8: Finolex Key assumptions
Particulars FY12 FY13 FY14 FY15E FY16E Comments
Key assumptions (in ` mn unless otherwise specified)
Electrical cables

We expect 22% revenue CAGR over FY14-16 which is higher as
compared to the last five-year industry growth of ~11%. The higher
growth is on account of: (a) rising share of north and east India given
the brown-field expansion at Roorkee and (b) recovery in industrial
capex in 2HFY15.
Net Revenues 17,705 20,859 21,901 26,282 32,852
% YoY growth 34% 18% 5% 20% 25%
Communication cables

We expect 20% revenue CAGR over FY14-16 driven by Reliance Jios
expansion of the optical fibre footprint. Reliance Jio is expanding its
backhaul fibre infrastructure for the launch of services on the
2,300MHz spectrum band by September 2014. Wireless coverage
using the 2,300MHz band needs more cell sites, the thumb rule being
3.2x the cell sites under 900MHz and 1.6x the cell sites under
1,800MHz.
Net Revenues 1,420 1,991 2,190 2,628 3,153
% YoY growth -24% 40% 10% 20% 20%
Copper rod

We expect external sales to decline, as it is likely to be used for captive
consumption given the brownfield expansion at Roorkee.
Net Revenues 2,051 836 418 209 167
% YoY growth -21% -59% -50% -50% -20%
Switches, lamps and others

We expect revenue growth of 45% in FY14 given the already strong
performance in 9MFY14. For FY15 and FY16, we expect lower growth
of 15% given that the market is now shifting towards premium
products, which is a gap in Finolexs portfolio.
Net Revenues 394 282 409 470 541
% YoY growth 9% -28% 45% 15% 15%
Switchgears

The management has indicated that Finolex would add industrial
switchgears to its product-line in FY15, with targeted revenue of `2bn
in FY15. However, we are assuming only 50% of the guidance, as
Finolex is a new entrant and `2bn implies a market share of ~4%
which may be difficult to achieve in the first year of operation. In FY18,
we model revenue of `2.9bn which implies a market share of ~4%.
Net Revenues - - - 1,000 1,600
% YoY growth NA NA NA NA 60%
Key estimates (all figures in ` mn unless otherwise specified)
Net revenues 20,640 22,707 23,550 28,885 36,169
Based on the above assumptions, we expect the company to report
revenue CAGR of 24% over FY14-16.
% YoY growth 1% 10% 4% 23% 25%
EBITDA 1,748 2,297 2,360 3,028 3,944
We expect EBITDA margin to decline marginally by 10bps in FY14 and
then expand by 50bps in FY15 and 40bps in FY16 on the back of an
increase in the revenue share of switchgears from 0% in FY14 to ~3%
in FY15 and ~4% in FY16. We have modelled EBIT margin of 10% for
switchgears in FY15 and 15% in FY16 as compared to ~13.2% in
cables for FY15. Established players like Havells make more than
~30% margins in switchgears.
EBITDA margin (%) 8.5% 10.1% 10.0% 10.5% 10.9%
Consequently, we expect EBITDA margins to improve by 50bps YoY in
FY15 and 40bps YoY in FY16.
EBITDA (YoY growth) (%) 1% 31% 3% 28% 30%

Interest expense 261 134 138 138 138
We model flat YoY growth in interest expense in FY15 and FY16 given
that Finolex has a debt of `1.5bn on the balance sheet.
PBT 1,093 1,708 2,257 2,934 3,852

Tax rate (%) 10% 15% 22% 22% 22%
We assume a higher tax rate of 22% as compared to 15% in FY13
because the MAT credit, which was available in FY12 and FY13, has
been set off. However, our average tax rate continues to be lower than
the marginal tax rate given that the Roorkee plant enjoys a tax
exemption.
Adj. PAT 982 1,453 1,761 2,288 3,004 Adjusted for derivative losses.
PAT (YoY growth) (%) -14% 48% 21% 30% 31%

Cash flow from operations (CFO) 2,064 1,572 2,015 2,633 3,345
We expect cash conversion to improve to 40 days in FY15 and 36 days
in FY16 as compared to 44 days in FY14 as share of revenues from
north India increase. Consequently, we expect CFO CAGR of 28% over
FY14-16.
Capex 461 498 705 774 1,634
We expect the company to incur higher capex in FY16, as it plans to
build a manufacturing facility for switchgears.
Free cash flow 2,525 2,071 2,719 3,407 4,978 Finolex will continue to generate free cash flow.
EPS 8.6 10.8 11.5 15.0 19.6 Consequently, we expect EPS CAGR of 31% over FY14-16.

Finolex Cables


Exhibit 9: Change in estimates
In ` mn
New Old Change (%)
Comments
FY15 FY16 FY15 FY16 FY15 FY16
Recommendation BUY

BUY

Target Price 159

120 32%

Due to upgrade in revenue and EBITDA margin, improvement in cash
conversion in FY15 and FY16 and upgrade to valuation assigned to the
investment book
Electrical Cables 26,282 32,852 25,274 30,329 4% 8%
Given the likelihood of recovery in industrial capex in 2HFY15, we
upgrade our revenue estimate for electrical wires by 4% for FY15 and
8% for FY16.
Communication cables 2,628 3,153 2,518 3,022 4% 4% Marginal upgrade.
Copper rods 209 167 209 167 0% 0%

Switches, lamps and others 470 541 470 541 0% 0%

Switchgears 1,000 1,600 800 1,120 25% 43%
We upgrade our revenue estimates given the improving confidence on
the switchgear market for Finolex from our primary checks.
Net Revenues (excl. excise) 28,592 35,804 27,369 32,888 4% 9% Consequent increase in revenue estimates.
Gross Profit (` mn) 8,065 10,208 7,725 9,380 4% 9% Consequent to increase in revenues.
Gross Margin (%) 28.2% 28.5% 28.2% 28.5%

No change.
EBITDA (` mn) 3,028 3,944 2,858 3,524 6% 12% Consequent to increase in revenue and EBITDA margin expansion.
EBITDA Margin (%) 10.6% 11.0% 10.4% 10.7% 20bps 30bps Favourable operating leverage will result in EBITDA margin expansion.
EBIT (` mn) 2,497 3,343 2,328 2,924 7% 14% Consequent to increase in EBIT.
EBIT Margin (%) 8.7% 9.3% 8.5% 8.9%

PBT (` mn) 2,934 3,852 2,764 3,398 6% 13%
Consequent to increase in PBT and PAT.
PAT (` mn) 2,288 3,004 2,156 2,651 6% 13%
Change in WC (` mn)
-
323
-
398
-
714
- 981 -55% -59%
Higher revenue growth will result in improvement in cash
conversion cycle. We have assumed working capital days
of 40 days in FY15 and 36 days in FY16 (vs 44 days in FY14).
CFO (` mn) 2,633 3,345 2,110 2,408 25% 39%
Consequent to increase in PBT and reduction in working
capital.
FCF (` mn) 1,859 1,711 1,336 774 39% 121% Consequent to increase in CFO.
Capex (` mn) (774) (1,634) (774) (1,634) 0% 0% No change.

Ambit vs consensus
Our revenue estimates are ahead of consensus by 5% for FY15 and 13% for FY16
due to our recent dealer checks in Bhagirath Palace (Asias largest electrical market),
Karol Bagh and Lohar Chawl where dealers expect a pick-up in the project business
from 2HFY15 onwards (refer to page 2 for more details). Consequently, our EBITDA
estimates are ahead of consensus estimates as well for FY15 and FY16. However, the
difference is high at 20% and 33% due to the positive impact of operating leverage
(as articulated on Exhibit 6) and higher margins in the switchgear business.
Exhibit 10: Ambit vs consensus estimates for Finolex

Consensus Ambit % change
Sales (` mn)

FY14E 23,922 23,310 -3%
FY15E 27,361 28,592 5%
FY16E 31,732 35,804 13%
EBITDA (` mn)

FY14E 2,052 2,360 15%
FY15E 2,522 3,030 20%
FY16E 2,975 3,944 33%

Finolex Cables


Valuations - steep discount to peers;
crying for a P/E re-rating
Finolex is trading at 1.4x FY16 P/B despite its FY16 RoE of 23% and FY14-16 EPS
CAGR of 31%. As compared to its peers, it is trading at a steep discount of 55% on
FY16 earnings despite its FY14-16 EPS CAGR of 31% (vs peers 22%) and FY16 RoE of
23%, which is similar to its peers. Such a steep valuation discount to its peers does
not appear fair. Also, as compared to its cross-cycle average one-year forward P/B
over FY04-09 (as FY09-13 is not comparable due to derivative loss), the stock is
trading at a 36% discount despite its FY04-08 RoE of 9.6% and EPS CAGR of 32%.

DCF valuation TP of `159/share
We value Finolex Cables using a DCF methodology wherein EBITDA margin, working
capital turnover and capital expenditure are the key variables controlling the
valuation. Furthermore, we use a free cash flow to firm methodology given that
Finolex is a cash-surplus company. We undertake a combined valuation for all the
segments given the homogeneous nature of the product market, combined cost and
inter-segmental revenue. We value the stock at `159/share, which implies a
valuation of 8.1x FY16 EPS. The assumptions underlying our valuation are:
Two-stage valuation model: We have valued Finolex Cables using the two-stage
free cash (FCFF) model:
High-growth period (FY14-19): We have modelled revenue CAGR of 18% over
FY14-19 due to: (a) rising market share in north and east India given the
brownfield expansion at Roorkee; (b) addition of new products (we have assumed
share of these products to reach to 6% of overall revenues by FY19) which
includes switchgears, motors and transformers; and (c) recovery in industrial
capex in 2HFY15 (~85% of the business is driven by industrial capex). We expect
23.8% core RoE in FY16, an improvement of 520bps as compared to FY14.
Declining-growth period (FY20-24): We have modelled a decline in revenue
growth, with FY24 revenue growth of 10% and FY20-24 CAGR of 10%. Further,
we expect EBIT margin to gradually decline to 8.5% in FY24 from 9.4% in FY19,
with FY20-24 average EBIT margin of 9.0%.
Terminal valuation: We have assumed a terminal growth rate of 2% on free cash
flow from FY25 onwards.
Decline in RoCE: We expect Finolexs RoCE to decline to 12.8% in FY14 as
compared to 15.5% in FY13, given the muted growth in the first three quarters.
Further, we expect average FY15-21 RoCE to increase to 17.7% (led by an increase in
margins) and to decline gradually to 16.6% in FY24.
Capex: Finolex has undertaken major capacity expansion at the Roorkee plant in
FY13 and FY14 and expects the expanded unit to commence operations in FY15. We
have modelled higher capex of `1.6bn in FY16 given that the management intends to
incur major capex on the switchgear facility in FY16. For other years, we have
modelled maintenance capex based on the expected depreciation on the assets.
15% WACC and 2% terminal growth: We assume a WACC of 15.0%. The terminal
growth rate is 2% given the commoditised nature of the business. Based on these
assumptions, our FCFF model values the business at Finolex Cables at `118/share.

Assumption on WACC
Cost of equity 15%
Cost of debt NA
Debt/Equity -
Corporate Tax Rate 30%
WACC 15%

Finolex Cables


Exhibit 11: Our free cash flow (FCF) valuation for Finolex
is `118/share
Particulars in `mn unless specified
Net PV of free cash flows 10,446
Terminal value 8,646
Total value of firm 19,092
less net debt (cash) 1,067
Total Equity Value 18,025
Number of shares outstanding (mn) 153
Value per share (`/share) 118
Exhibit 12: FCF profile FCF is to likely increase on a
consistent basis

Finolex Cables also has a large investment book of ~`3.2bn which is equivalent to
~35% of FY13 net worth. Market value of these investments is ~3.5x of the book
value with the market value of Finolex Industries accounting for 80% of the total
value. We value Finolexs cables stake in Finolex industries at a 50% discount to the
market value. We assign a higher discount to market price because these investments
are illiquid.
Exhibit 13: Details of Finolex Cables investments (in ` mn unless specified)
Particulars Book value Market value
Non-trade (A) 2,174 9,844
Finolex Industries 1,519 9,003
IndusInd Bank 4 176
Bharat Forge 1 13
Unquoted equity shares 171 171
Joint venture 481 481
Trade Investments (B) 1,067 1,421
Equity shares 6 116
Mutual Funds 1,061 1,189
Total Investment value (A+B) 3,241 11,264
Per share value 21 74
Source: Company, Moneycontrol, Ambit Capital research; Note: For unquoted equity shares and joint ventures,
we have assumed market value to be equal to book value; Valuation as on 6 May 2014
Adding the value of investments of `41/share (which values Finolex Industries at 50%
discount to market value and others at cost) to the DCF valuation ascribed to the
business of `118/share leads to a target price of `159/share. This implies FY16 P/E
and P/B of 8.15x and 1.7x respectively.
Relative valuation unjustified steep discount to peers
Exhibit 14: Finolex trades at a 54% FY16 earnings discount to its peers

CMP M Cap P/E (x) P/B (x) EV/EBITDA (x) ROE (%) EPS CAGR (%)

(INR) (US$ mn) FY15 FY16 FY15 FY16 FY15 FY16 FY15 FY16 FY14-16
Havells India 905 1,882 20.4 17.4 5.1 4.2 13.8 11.6 28% 26% 19%
TTK Prestige 3,000 566 23.3 18.4 5.7 5.3 15.2 12.2 25% 30% 30%
Sterlite Technologies 12 195 12.9 12.9 0.9 0.9 13.6 13.6 7% 7% 7%
V-guard industries 523 260 16.6 14.3 4.0 3.4 10.7 9.3 27% 26% 25%
Finolex Cables* 127 321 8.4 6.4 1.6 1.4 6.7 5.2 20% 23% 31%
Average (excl. Finolex)

16.3 13.9 3.5 3.0 12.0 10.4 21% 23% 22%
Divergence from Mean

-48% -54% -54% -55% -44% -50% -100bps 0 900bps
Source: Bloomberg, Ambit Capital research; Note: Valuation is as on 6 May 2014; * Reported RoE
10%
12%
14%
16%
18%
20%
-
1,000
2,000
3,000
4,000
FY13 FY15 FY17 FY19 FY21 FY23
PV of FCF (Rs mn) (LHS) RoCE (%) (RHS)

Finolex Cables


Exhibit 15: Finolex is trading at a 36% FY16 earnings discount to its global peers
Companies
Country

Mcap P/E (x) P/B (x) EV/ EBITDA (x) ROE (%)
EPS CAGR
(%)
US$ mn FY15 FY16 FY15 FY16 FY15 FY16 FY15 FY16 FY14-16
Nexans SA# France 2,324 13.5 11.0 0.9 0.9 5.0 4.6 7% 9% 53%
Sumitomo Electric Japan 11,150 11.9 10.7 0.9 0.8 6.4 5.9 8% 8% 18%
General Cable Corp # USA 1,162 11.0 8.7 0.7 NA 5.9 5.6 8% NA 38%
Furukawa Electric Co Japan 1,655 11.1 9.2 0.9 0.8 8.7 8.0 9% 10% 73%
Fujikura Japan 1,598 12.5 10.8 0.7 0.7 6.5 6.1 6% 6% 58%
Finolex Cables* India 321 8.4 6.4 1.6 1.4 6.7 5.2 20% 23% 31%
Average (excl. Finolex)

12.0 10.1 0.8 0.8 6.5 6.0 8% 8% 48%
Divergence from mean

-30% -36% 89% 67% 3% -15% 1200bps 1500bps -1700bps
Source: Bloomberg, Ambit Capital research, Note: Valuation as on 6 May 2014, # December year ending, * Reported RoE

Cross cycle valuation: Steep discount to FY04-09
valuation despite higher EPS CAGR and higher ROE
The stock is currently trading at a 71% and 39% premium to its five-year consensus
one-year forward P/B and P/E multiple respectively. We believe the comparison with
the five-year average is not fair due to the concerns over derivative losses from
outstanding derivative instruments. Finolex had incurred a loss of `3bn (~33% of
FY13 net worth) over FY08-13 due to investments in these derivative options. Also,
the management during this period had shied away from meeting investors.
However, if we compare the current one-year forward P/B with the average one-year
forward P/B over FY04-09, the stock is trading at a 36% discount despite its FY04-08
RoE of 9.6% being lower than its FY14 RoE of 17% and EPS CAGR of 32% over FY04-
08 only marginally higher to EPS CAGR of 31% over FY14-16. Now, with no exposure
to these derivative options (as on FY13 there are no exotic derivative options
outstanding in the books) and with the management also committing to stay away
from these contracts in the future, the biggest concern which persisted in the last five
years has ended.
With our expectation of an EBIT margin improvement to 9.1% over FY14-19 vs 8.2%
in FY13 coupled with the rising share of the consumer portfolio from ~40% of
revenues to ~50% by FY19, we expect the valuation multiples to rerate. Our target
price of `159/share implies FY16 P/B of 1.7x and FY16 P/E of 8.1x.
Exhibit 16: Finolex is currently trading at a 71% premium
to its five-year one-year forward P/B


Exhibit 17: Finolex is currently trading at a 39% premium
to its five-year one-year forward P/E

0
30
60
90
120
150
180
J
a
n
-
0
4
J
a
n
-
0
5
J
a
n
-
0
6
J
a
n
-
0
7
J
a
n
-
0
8
J
a
n
-
0
9
J
a
n
-
1
0
J
a
n
-
1
1
J
a
n
-
1
2
J
a
n
-
1
3
J
a
n
-
1
4
1.8x
0.5x
1.4
0
30
60
90
120
150
180
J
a
n
-
0
4
J
a
n
-
0
5
J
a
n
-
0
6
J
a
n
-
0
7
J
a
n
-
0
8
J
a
n
-
0
9
J
a
n
-
1
0
J
a
n
-
1
1
J
a
n
-
1
2
J
a
n
-
1
3
J
a
n
-
1
4
14.0x
3.0x
8.0x

Finolex Cables


Exhibit 18: However, Finolex is trading at a 36% discount to its average one-year forward multiple over FY04-09

Risks to our BUY stance
Group company investments: Finolexs investment book, which accounted for 20%
of the FY13 capital employed, yielded only a paltry return of 6% in FY13. This is
dragging down Finolexs overall RoCE. Had Finolex invested this money in the
business, the RoE would have increased to 25% in FY13.
In FY13, Finolex had investments of `2.2bn in group companies. The largest
investment chunk was in the group company, Finolex Industries Ltd, of `1.5bn, at an
acquisition cost of `38/share. The other investments are in the JV with J-Power
Systems of `480mn, Finolex Infrastructure Ltd (`53.4), Finolex Plasson Industries
(`10mn) and Corning Finolex Optical Fibre Pvt Ltd (`0.5mn). If Finolex continues to
further enhance its investment book, its RoCE will continue to be lower. Further, none
of the group companies are subsidiaries, and thus, minority shareholders have no
access to the detailed financial statements of the group companies. Lastly, Finolex
does not report the share in profits from associates in its P&L, which further dilutes
the RoCE.
Expansion into highly competitive business: The annual report highlights that
Finolex wants to diversify into the manufacturing of transformers and switchgears. In
FY13, the transformer industry was the worst hit in the entire electricals space, with
industry revenue declining by 26% YoY. This was due to inconsistencies in
government procurement policies and the tendering procedures of the government-
sponsored power utilities, which are the largest customers for transformer
manufacturers. Also, the delivery schedules of state transmission and distribution
companies were extended, as these companies faced a credit squeeze. Switchgear is
facing intense competition especially from MNC players like Schneider, Legrand, and
Panasonic, given their superior technology (from strong parental pedigree) and
higher margins (Havells makes EBIT margins of more than 30%). Further, these
companies have also increased their advertisement budgets given the success of
Havells. This could hurt Finolex which is not only a late entrant in this segment but
also does not have any clear advertising strategy in place.
Catalyst
Increase in infra spends by telcos: Reliance Jio is the only telecom player which is
expanding its backhaul fibre infrastructure currently. We believe if other telecom
companies start spending on fibre optics infrastructure, given the recent successful
telecom auctions, Finolex could emerge as a major beneficiary. The recent telecom
auction saw bids aggregating to `611bn vs government expectations of `401bn.
Another positive surprise could be NOFNs single order in FY15 for laying ~15mn
fkms as compared to ~7mn fkms laid in India in FY13.
Success in switchgears: If Finolex is able to successfully launch its switchgears in
FY15, then this could lead to the valuations being re-rated, due to the superior
margins (of more than 20%) in switchgears and the large annual market size of
`50bn. More importantly, the company perception would also change from an
industrial company to a consumer electrical company.
-
5
10
15
20
25
30
J
a
n
-
0
4
J
u
l
-
0
4
J
a
n
-
0
5
J
u
l
-
0
5
J
a
n
-
0
6
J
u
l
-
0
6
J
a
n
-
0
7
J
u
l
-
0
7
J
a
n
-
0
8
J
u
l
-
0
8
J
a
n
-
0
9
J
u
l
-
0
9
J
a
n
-
1
0
J
u
l
-
1
0
J
a
n
-
1
1
J
u
l
-
1
1
J
a
n
-
1
2
J
u
l
-
1
2
J
a
n
-
1
3
J
u
l
-
1
3
J
a
n
-
1
4
P/E (x) Pre-derivative average P/E (x) Post-derivative average P/E
Commencement of
derivative losses
Fall in average P/E due to
derivative losses

Finolex Cables


Accounting analysis Clean chit
Exhibit 19: Accounting flags
Field Score Comments
Accounting GREEN
In our accounting analysis of cable companies, Finolex has the best CFO/EBITDA ratio on account of lower
working capital cycle. However, cash conversion for Finolex at 59 days in FY13 is higher than peers average
of 53. RoEs for Finolex have been lower at 15.7% in FY13 on account of forex losses on exotic options and
lower exposure to consumer durable categories like switchgears and lightings. Also, Finolex reported a
significant improvement in FY13 RoE due to higher PAT margins.
Predictability RED
Over the last five years, the company has curtailed interactions with the analyst community given the huge
forex losses on exotic options.
Earnings momentum GREEN
Over the last three months, consensus EPS estimates for FY14 and FY15 have been revised marginally
upwards by ~4%.

Finolex Cables


Balance Sheet
Cash 490 398 1,130 2,165 2,687
Debtors 1,141 1,497 1,533 1,958 2,550
Inventory 2,811 3,296 3,576 4,152 5,003
Loans & advances 815 938 958 1,175 1,471
Other Current Assets 121 193 193 193 193
Investments 2,372 3,241 3,241 3,241 3,241
Fixed assets 4,413 4,478 4,999 5,243 6,276
Miscellaneous 0 0 0 0 0
Total assets 12,163 14,041 15,630 18,127 21,421
Current liabilities & provisions 2,467 2,988 3,257 4,152 5,493
Debt 1,366 1,465 1,465 1,465 1,465
Other liabilities - Deferred Tax Liability 326 345 345 345 345
Total liabilities 4,159 4,798 5,067 5,961 7,303
Shareholders' equity 306 306 306 306 306
Reserves & surpluses 7,698 8,937 10,258 11,859 13,812
Total networth 8,004 9,243 10,564 12,165 14,118
Net working capital 2,422 2,936 3,003 3,326 3,724
Net debt (cash) 876 1,067 335 (700) (1,221)
Income statement
Operating income 20,640 22,707 23,550 28,885 36,169
% growth 1.4 10.0 3.7 22.7 25.2
Operating expenditure 18,892 20,410 21,191 25,857 32,225
EBITDA 1,748 2,297 2,360 3,028 3,944
% growth 0.9 31.4 2.8 28.3 30.3
Depreciation 395 466 488 530 600
EBIT 1,353 1,830 1,872 2,497 3,343
Interest expenditure 261 134 138 138 138
Non-operational income / Exceptional items 0 12 523 574 646
PBT 1,093 1,708 2,257 2,934 3,852
Tax 111 255 497 645 847
Reported PAT 982 1,453 1,761 2,288 3,004
Adjustments (364) (230) - - -
Adjusted PAT 1,346 1,683 1,761 2,288 3,004
% growth 11.1 25.1 4.6 30.0 31.3

Finolex Cables


Cash flow statement
PBT 1,093 1,708 2,257 2,934 3,852
Depreciation 395 466 488 530 600
Interest paid 249 125 138 138 138
Direct taxes paid 49 (335) (497) (645) (847)
(Incr) / decr in net working capital 153 (478) (67) (323) (398)
Others 126 86 (304) - -
CFO 2,064 1,572 2,015 2,633 3,345
(Incr) / decr in capital expenditure (461) (498) (705) (774) (1,634)
(Incr) / decr in investments (56) 22 - - -
Others 214 152 - - -
CFI (304) (325) (705) (774) (1,634)
Issuance of equity - - - - -
Incr / (decr) in borrowings (884) 90 - - -
Dividends paid (124) (142) (440) (686) (1,052)
Others (652) (404) (138) (138) (138)
CFF (1,660) (456) (578) (824) (1,189)
Net change in cash 100 792 732 1,035 522
FCF 1,760 1,248 1,310 1,859 1,711
Ratio analysis
Year to March (%) FY12 FY13 FY14E FY15E FY16E
Revenue growth 1.4 10.0 3.7 22.7 25.2
EBITDA growth 0.9 31.4 2.8 28.3 30.3
APAT growth 11.1 25.1 4.6 30.0 31.3
EPS growth 11.1 25.1 4.6 30.0 31.3
EBITDA margin 8.5 10.1 10.0 10.5 10.9
EBIT margin 6.6 8.1 8.0 8.6 9.2
Net profit margin 4.8 7.4 7.5 7.9 8.3
Reported ROCE 12.8 15.5 12.8 15.2 17.9
Reported ROE 12.9 16.8 17.8 20.1 22.9
Adjusted ROCE 12.8 15.5 12.8 15.2 17.9
Adjusted ROE 19.0 24.8 18.6 21.1 23.8
Debt:Equity ratio (x) 0.2 0.2 0.1 0.1 0.1
Current ratio (x) 2.1 2.1 2.2 2.3 2.1
Valuation parameters
Year to March FY12 FY13 FY14E FY15E FY16E
EPS (`) 8.8 11.0 11.5 15.0 19.6
Book value per share (`) 52.3 60.4 69.1 79.5 92.3
P/E (x) 14.2 11.4 10.9 8.4 6.4
P/BV (x) 2.4 2.1 1.8 1.6 1.4
EV/EBITDA (x) 11.7 8.9 8.7 6.7 5.2
EV/Sales (x) 1.0 0.9 0.9 0.7 0.6
EV/EBIT (x) 15.1 11.2 10.9 8.2 6.1
CFO/EBITDA 115% 83% 106% 108% 106%
Gross Block Turnover (x) 2.4 2.5 2.4 2.8 3.1
Working Capital Turnover (x) 7.7 8.5 7.9 9.1 10.3

Finolex Cables


Institutional Equities Team
Saurabh Mukherjea, CFA CEO, Institutional Equities (022) 30433174 saurabhmukherjea@ambitcapital.com
Research
Analysts Industry Sectors Desk-Phone E-mail
Nitin Bhasin - Head of Research E&C / Infrastructure / Cement (022) 30433241 nitinbhasin@ambitcapital.com
Aadesh Mehta Banking / Financial Services (022) 30433239 aadeshmehta@ambitcapital.com
Achint Bhagat Cement / Infrastructure (022) 30433178 achintbhagat@ambitcapital.com
Aditya Khemka Healthcare (022) 30433272 adityakhemka@ambitcapital.com
Akshay Wadhwa Banking & Financial Services (022) 30433005 akshaywadhwa@ambitcapital.com
Ashvin Shetty, CFA Automobile (022) 30433285 ashvinshetty@ambitcapital.com
Bhargav Buddhadev Power / Capital Goods (022) 30433252 bhargavbuddhadev@ambitcapital.com
Dayanand Mittal, CFA Oil & Gas / Metals & Mining (022) 30433202 dayanandmittal@ambitcapital.com
Deepesh Agarwal Power / Capital Goods (022) 30433275 deepeshagarwal@ambitcapital.com
Gaurav Mehta, CFA Strategy / Derivatives Research (022) 30433255 gauravmehta@ambitcapital.com
Karan Khanna Strategy (022) 30433251 karankhanna@ambitcapital.com
Krishnan ASV Real Estate (022) 30433205 vkrishnan@ambitcapital.com
Nitin Jain Technology (022) 30433291 nitinjain@ambitcapital.com
Pankaj Agarwal, CFA Banking / Financial Services (022) 30433206 pankajagarwal@ambitcapital.com
Pratik Singhania Real Estate / Retail (022) 30433264 pratiksinghania@ambitcapital.com
Parita Ashar Metals & Mining / Oil & Gas (022) 30433223 paritaashar@ambitcapital.com
Rakshit Ranjan, CFA Consumer / Real Estate / Retail (022) 30433201 rakshitranjan@ambitcapital.com
Ravi Singh Banking / Financial Services (022) 30433181 ravisingh@ambitcapital.com
Ritika Mankar Mukherjee, CFA Economy / Strategy (022) 30433175 ritikamankar@ambitcapital.com
Ritu Modi Automobile (022) 30433292 ritumodi@ambitcapital.com
Tanuj Mukhija, CFA E&C / Infrastructure (022) 30433203 tanujmukhija@ambitcapital.com
Sales
Name Regions Desk-Phone E-mail
Sarojini Ramachandran - Head of Sales UK +44 (0) 20 7614 8374 sarojini@panmure.com
Deepak Sawhney India / Asia (022) 30433295 deepaksawhney@ambitcapital.com
Dharmen Shah India / Asia (022) 30433289 dharmenshah@ambitcapital.com
Dipti Mehta India / USA (022) 30433053 diptimehta@ambitcapital.com
Nityam Shah, CFA USA / Europe (022) 30433259 nityamshah@ambitcapital.com
Parees Purohit, CFA UK / USA (022) 30433169 pareespurohit@ambitcapital.com
Praveena Pattabiraman India / Asia (022) 30433268 praveenapattabiraman@ambitcapital.com
Production
Sajid Merchant Production (022) 30433247 sajidmerchant@ambitcapital.com
Sharoz G Hussain Production (022) 30433183 sharozghussain@ambitcapital.com
Joel Pereira Editor (022) 30433284 joelpereira@ambitcapital.com
Nikhil Pillai Database (022) 30433265 nikhilpillai@ambitcapital.com
E&C = Engineering & Construction

Finolex Cables


Explanation of Investment Rating

Investment Rating Expected return
(over 12-month period from date of initial rating)
Buy >5%
Sell <5%

Disclaimer

This report or any portion hereof may not be reprinted, sold or redistributed without the written consent of Ambit Capital. AMBIT Capital Research is disseminated and available primarily electronically, and,
in some cases, in printed form.
Additional information on recommended securities is available on request.
Disclaimer
1. AMBIT Capital Private Limited (AMBIT Capital) and its affiliates are a full service, integrated investment banking, investment advisory and brokerage group. AMBIT Capital is a Stock
Broker, Portfolio Manager and Depository Participant registered with Securities and Exchange Board of India Limited (SEBI) and is regulated by SEBI
2. The recommendations, opinions and views contained in this Research Report reflect the views of the research analyst named on the Research Report and are based upon publicly
available information and rates of taxation at the time of publication, which are subject to change from time to time without any prior notice.
3. AMBIT Capital makes best endeavours to ensure that the research analyst(s) use current, reliable, comprehensive information and obtain such information from sources which the
analyst(s) believes to be reliable. However, such information has not been independently verified by AMBIT Capital and/or the analyst(s) and no representation or warranty, express or
implied, is made as to the accuracy or completeness of any information obtained from third parties. The information or opinions are provided as at the date of this Research Report and
are subject to change without notice.
4. If you are dissatisfied with the contents of this complimentary Research Report or with the terms of this Disclaimer, your sole and exclusive remedy is to stop using this Research Report
and AMBIT Capital shall not be responsible and/ or liable in any manner.
5. If this Research Report is received by any client of AMBIT Capital or its affiliate, the relationship of AMBIT Capital/its affiliate with such client will continue to be governed by the terms
and conditions in place between AMBIT Capital/ such affiliate and the client.
6. This Research Report is issued for information only and should not be construed as an investment advice to any recipient to acquire, subscribe, purchase, sell, dispose of, retain any
securities. Recipients should consider this Research Report as only a single factor in making any investment decisions. This Research Report is not an offer to sell or the solicitation of an
offer to purchase or subscribe for any investment or as an official endorsement of any investment.
7. If 'Buy', 'Sell', or 'Hold' recommendation is made in this Research Report such recommendation or view or opinion expressed on investments in this Research Report is not intended to
constitute investment advice and should not be intended or treated as a substitute for necessary review or validation or any professional advice. The views expressed in this Research
Report are those of the research analyst which are subject to change and do not represent to be an authority on the subject. AMBIT Capital may or may not subscribe to any and/ or all
the views expressed herein.
8. AMBIT Capital makes no guarantee, representation or warranty, express or implied; and accepts no responsibility or liability as to the accuracy or completeness or currentess of the
information in this Research Report. AMBIT Capital or its affiliates do not accept any liability whatsoever for any direct or consequential loss howsoever arising, directly or indirectly, from
any use of this Research Report.
9. Past performance is not necessarily a guide to evaluate future performance.
10. AMBIT Capital and/or its affiliates (as principal or on behalf of its/their clients) and their respective officers directors and employees may hold positions in any securities mentioned in this
Research Report (or in any related investment) and may from time to time add to or dispose of any such securities (or investment). Such positions in securities may be contrary to or
inconsistent with this Research Report.
11. This Research Report should be read and relied upon at the sole discretion and risk of the recipient.
12. The value of any investment made at your discretion based on this Research Report or income therefrom may be affected by changes in economic, financial and/ or political factors and
may go down as well as up and you may not get back the full or the expected amount invested. Some securities and/ or investments involve substantial risk and are not suitable for all
investors.
13. This Research Report is being supplied to you solely for your information and may not be reproduced, redistributed or passed on, directly or indirectly, to any other person or published,
copied in whole or in part, for any purpose. Neither this Research Report nor any copy of it may be taken or transmitted or distributed, directly or indirectly within India or into any other
country including United States (to US Persons), Canada or Japan or to any resident thereof. The distribution of this Research Report in other jurisdictions may be strictly restricted and/ or
prohibited by law or contract, and persons into whose possession this Research Report comes should inform themselves about such restriction and/ or prohibition, and observe any such
restrictions and/ or prohibition.
14. Neither AMBIT Capital nor its affiliates or their respective directors, employees, agents or representatives, shall be responsible or liable in any manner, directly or indirectly, for views or
opinions expressed in this Report or the contents or any errors or discrepancies herein or for any decisions or actions taken in reliance on the Report or inability to use or access our
service or this Research Report or for any loss or damages whether direct or indirect, incidental, special or consequential including without limitation loss of revenue or profits that may
arise from or in connection with the use of or reliance on this Research Report or inability to use or access our service or this Research Report.
Conflict of Interests
15. In the normal course of AMBIT Capitals business circumstances may arise that could result in the interests of AMBIT Capital conflicting with the interests of clients or one clients interests
conflicting with the interest of another client. AMBIT Capital makes best efforts to ensure that conflicts are identified and managed and that clients interests are protected. AMBIT Capital
has policies and procedures in place to control the flow and use of non-public, price sensitive information and employees personal account trading. Where appropriate and reasonably
achievable, AMBIT Capital segregates the activities of staff working in areas where conflicts of interest may arise. However, clients/potential clients of AMBIT Capital should be aware of
these possible conflicts of interests and should make informed decisions in relation to AMBIT Capitals services.
16. AMBIT Capital and/or its affiliates may from time to time have investment banking, investment advisory and other business relationships with companies covered in this Research Report
and may receive compensation for the same. Research analysts provide important inputs into AMBIT Capitals investment banking and other business selection processes.
17. AMBIT Capital and/or its affiliates may seek investment banking or other businesses from the companies covered in this Research Report and research analysts involved in preparing this
Research Report may participate in the solicitation of such business.
18. In addition to the foregoing, the companies covered in this Research Report may be clients of AMBIT Capital where AMBIT Capital may be required, inter alia, to prepare and publish
research reports covering such companies and AMBIT Capital may receive compensation from such companies in relation to such services. However, the views reflected in this Research
Report are objective views, independent of AMBIT Capitals relationship with such company.
19. In addition, AMBIT Capital may also act as a market maker or risk arbitrator or liquidity provider or may have assumed an underwriting commitment in the securities of companies
covered in this Research Report (or in related investments) and may also be represented in the supervisory board or on any other committee of those companies.
Additional Disclaimer for U.S. Persons
20. The research report is solely a product of AMBIT Capital
21. AMBIT Capital is the employer of the research analyst(s) who has prepared the research report
22. Any subsequent transactions in securities discussed in the research reports should be effected through J.P.P. Euro-Securities, Inc. (JPP).
23. JPP does not accept or receive any compensation of any kind for the dissemination of the AMBIT Capital research reports.
24. The research analyst(s) preparing the research report is resident outside the United States and is/are not associated persons of any U.S. regulated broker-dealer and that therefore the
analyst(s) is/are not subject to supervision by a U.S. broker-dealer, and is/are not required to satisfy the regulatory licensing requirements of FINRA or required to otherwise comply with
U.S. rules or regulations regarding, among other things, communications with a subject company, public appearances and trading securities held by a research analyst account.

Copyright 2014 AMBIT Capital Private Limited. All rights reserved.

Ambit Capital Pvt. Ltd.
Ambit House, 3rd Floor
449, Senapati Bapat Marg, Lower
Parel, Mumbai 400 013, India.
Phone: +91-22-3043 3000
Fax: +91-22-3043 3100
CIN: U74140MH1997PTC107598
www.ambitcapital.com

Finolex Cables (BUY) - ERr GRP - Play On Industrial Capex Recovery

Transféré par

Informations du document

Titre original

Copyright

Formats disponibles

Partager ce document

Partager ou intégrer le document

Options de partage

Avez-vous trouvé ce document utile ?

Ce contenu est-il inapproprié ?

Droits d'auteur :

Formats disponibles

Finolex Cables (BUY) - ERr GRP - Play On Industrial Capex Recovery

Transféré par

Droits d'auteur :

Formats disponibles

Ambit Capital and / or its affiliates do and seek to do business including investment banking with companies covered in its

s research reports. As a result, investors should be aware that Ambit Capital

Vous aimerez peut-être aussi