Balkrishna Industries Ltd. February 2014

B

alkrishna Industries Ltd (BKT), is the flagship company of the Siyaram Poddar Group, and is engaged in manufacturing of specialty tyres used by the agriculture and Off The Road (OTR) segments. BKT earns around 90% of its revenue from exports with Europe and US being the highest contributors. It has around 4% global market share, over 2200 SKUs (Stock Keeping Units) and four plants across India. Considering BKT’s presence in niche market, exports oriented business model and above industry average margins, the company deserves a higher valuation multiple. We recommend a buy on BKT with a price target of `412 (8x FY15e EPS of `51.54) implying an upside of 25.0% from current market price.

KEY HIGHLIGHTS Excellent Q3FY14 Results: BKT net sales for Q3FY14 were at `884.4 crores up 25.5% (YoY) & 5.3% (QoQ). EBIDTA margins for Q3FY14 were at 25.9% v/s 22.1% (YoY) and 24.1% (QoQ). PAT for Q3FY14 was at `124 crores up 66.4% (YoY) and 14.7% (QoQ). EPS for Q3FY14 stood at `12.80 v/s `7.70 (YoY) & `11.17 (QoQ).
Presence in niche OTR segment: BKT mainly addresses the high-margin tyre segments – off-road vehicles (34% of sales) and agricultural tyres (63% of sales). Off highway tyres is a highly customized segment of the tyre industry. OTR users consider the twin aspects of product portfolio and product quality while deciding on a purchase from a particular manufacturer. Backed by experience in the industry, BKT has created a brand for itself in the global market that has enabled it to penetrate the market.
Capacity expansion to drive growth going forward: As a part of its de-bottlenecking program BKT has added further capacities, taking the overall production capacity to 160,000 MTPA as at Q3FY14 end. BKT has commenced commercial production at its new greenfield plant at Bhuj, Gujarat. The current production capacity at Bhuj stands at 30,000 MTPA which will be expanded to 60,000 MTPA by FY14e end. The production capacity at Bhuj plant will be further expanded to 120,000 MTPA by FY15e end and then to 140,000 MTPA by FY16e end in phases.
ABKTity to provide quality product at competitive price: On the back of stable raw materials prices and the head room available due to lower employee costs and vast distribution network of more than 200 plus distributors present across 120 countries, BKT has been able to provide quality product at competitive prices.


Net Sales Growth % EBIDTA % PAT EPS

5.33% 20.67% 271.21 28.06

24.64% 334.23 34.58

FY11 1996.94 44.0% 17.74% 185.62 19.20

STOCK INFO CO. NAME BSE NSE BLOOMBERG REUTERS SECTOR INDUSTRY FACE VALUE (` cr) EQUITY CAPITAL (` cr) MKT CAP (` cr) 52W H/L (`) AVG DAILY VOL (BSE+NSE)

Balkrishna Industries Ltd. 502355 BALKRISIND BIL IN BLKI.BO Auto Ancillary Tyres 2 19.33 3190 349 / 199 57,000

SHAREHOLDING PATTERN (Dec 2013) FOREIGN INSTITUTIONS INDIAN INSTITUTIONS OTHERS, INCL PUBLIC PROMOTERS PERFORMANCE BKT BSE SENSEX

% 10.13 18.25 13.32 58.30

3m 14.63 % 2.54 %

12m 18.95% -4.84%

BKT VS. BSE SENSEX 22000

3 9 5 .0 0 3 4 5 .0 0 2 9 5 .0 0 2 4 5 .0 0 1 9 5 .0 0

21000 20000 19000 18000

Financial Summary (standalone) 9mResults 9mFY12 9mFY13 2539.88 2411.27

`330 BUY `412

CMP RECOMMENDATION Target Price

(in ` crores) Year Ended (March) FY12 FY13 FY14e 2820.80 3190.57 3430.54 41.3% 13.1% 7.5% 17.95% 20.83% 25.03% 268.88 355.86 454.92 27.82 36.82 47.06

FY15e 3902.25 13.8% 25.09% 498.17 51.54

Key Ratios RoCE % RoNW % P/E P/BV EV/EBIDTA

FY11 23.1% 24.9% 17.2 3.8 10.2

Year Ended (March) FY12 FY13 FY14e 20.3% 18.0% 18.3% 28.1% 28.5% 27.9% 11.9 9.0 7.0 3.0 2.2 1.7 8.8 7.5 5.7

1 4 5 .0 0 9 5 .0 0 4 5 .0 0

17000 16000

FY15e 18.4% 24.1% 6.4 1.4 4.9

F e b -1 3 M a y -1 3

A u g -1 3

SENSEX

CONTACT ANALYST PHONE EMAIL

N o v -1 3 BK T

Saurabh Ginodia +91-9836140444 [email protected]

Balkrishna Industries Ltd. February 2014
We expect BKT to post core EBIDTA margin of 25.03% and 25.09% in FY14e and FY15e respectively.

FINANCIAL PERFORMANCE (Standalone) Net Sales

1200

26.66%

25.03%

1000
BKT reported total income of `884.4 crores for Q3FY14 up 25.5% (YoY) & 5.3% (QoQ). For 9mFY14 BKT reported total income of `2540 crores which was up 5.3% (YoY).

(Rs crores)

For Q3FY14 volume growth was 12.5% (YoY) & 2.3% (QoQ) at 33,901 MT, while the rest of the growth came from growth in realizations and product mix.

30% 25%

20.83% 17.74%

800




25.09%

17.95%

20%

600

15%

400

10%

200

5%

0

0% FY10

FY11

FY12

FY13

EBIDTA (LHS)

We expect BKT to report net sales of `3430.54 crores and `3902.25 crores in FY14e and FY54e respectively.




FY14e

FY15e

EBIDTA Margins (RHS)

PAT 5000 3902

(Rs crores)

4000 2821

3000

3191

3431

FY13

FY14e

In Q3FY14 BKT reported PAT of `124 crores up 66.4% (YoY) and 14.7% (QoQ). For 9mFY14 BKT reported PAT of `334 crores up 23.4% (YoY).
We expect the company to post PAT of `454.92 crores and `498.17 crores in FY14e and FY15e respectively.


1997 2000

1387

1000 0 FY10

FY11

FY12

FY15e

EBIDTA BKT reported EBIDTA of `228.9 crores in Q3FY14. EBIDTA margins stood at 25.9% for Q3FY14 v/s 22.1% (YoY) and 24.1% (QoQ).




Improvement in EBIDTA margins was on account of lower raw material price (rubber) & currency benefit on account of rupee depreciation.

(Rs crores)

Net Sales

600 500 400 300 200 100 0

14.89% 9.30%

9.53%

11.15%

13.26% 12.77% 20% 15% 10% 5% 0%

FY10

FY11

FY12

FY13

FY14e




PAT (LHS)

PAT Margin (RHS)

FY15e

Balkrishna Industries Ltd. February 2014

INVESTMENT RATIONALE

construction and earthmoving purposes. The Off highway tyre segment focuses on highly customized requirements, unlike automobile tyres.

PRESENCE IN NICHE OFF THE ROAD (OTR) TYRES

Off Highway Tyre business serves to the following industries:

SEGEMNT

a) Agriculture Industry b) Construction and Earthmoving Industry

Off highway tyre is a highly customized segment of the tyre industry. OTR users consider the twin aspects of product portfolio and product quality while deciding on a purchase from a particular manufacturer. Backed by experience in the industry, BKT has created a brand for itself in the global market that has enabled it to penetrate the market. BKT mainly addresses the higher-margin tyre segments – off-road vehicles and agricultural tyres. BKT markets its tyres under the brand name ‘BKT’. BKT’s competitive pricing has enabled it to grow at 26.3% CAGR over FY09-FY13, which is much higher than the industry rate of growth. This has enabled BKT to increase market penetration and capture market share. It has around 4% market share in the global OTR tyre segment. Over the years BKT has developed over 2,200 SKU’s through its research & development capaBKTities. It rolls out around 150 new products every year to cater to the requirements of varied industries. It has a large product portfolio that will be difficult for the new players to replicate hence creating an entry barrier. BKT is a speciality tyre manufacturer, whose 90% of revenues are derived from export markets and has presence in the niche off highway tyres businesses like agricultural tyres (tractor tyres) and off the road (construction equipment) tyres business. Globally, off highway tyres accounts for 10% of the total tyre sales. There is a very high degree of concentration in the segment, with the top 3 players (Bridgestone, Goodyear and Michelin) having a 5055% market share. Off highway tyres are used for agricultural, industrial, and

c) Forestry Ports and Material Handling d) Lawn and Garden Owing to the inherent nature (varied applications) of such industries, they have very personalized requirements demanding a high degree of customization. Hence a kind of pre-requisite for an OTR manufacturer is to have a wide range of product portfolio in order to suffice the specific requirement of client. Out of total sales of BKT in Q3FY14, 77% came from the replacement market, 20% from original equipment manufacturers (OEMs) and 3% from off takes. Revenue Segmentation by Customer in Q3FY14 Off take 3% OEM 20%

Replacement 77%

Source: Company, Stewart & Mackertich Research

Balkrishna Industries Ltd. February 2014 Since BKT’s revenues are primarily derived from the replacement demand, the company has established a robust distribution network in Europe, US and Middle East. It currently has more than 200 plus dealers worldwide. Collectively, these factors have helped the company to position itself in the segment. Going forward, we believe its lower pricing strategy would enable it to garner a higher market share in the coming years. While India’s share of BKT’s turnover is just 12%, on completion of its greenfield plant, BKT would be in a position to further penetrate its presence in India. Some of the key demand drivers for BKT constitute: 1) Large farms in Europe have a high degree of mechanisation. Hence, agricultural-tyre requirement is higher, both from OEMs and in the replacement market. 2) Growth in the agricultural and mining sector in the Americas, coupled with the fast-growing South American economies. 3) Trend towards large farm equipment in America. 4) Growth in agriculture and infrastructure in Asia-Pacific and movement from traditional to larger equipment. 5) Growth in the off-road segment in India would be an additional demand driver.

CAPACITY EXPANSION TO DRIVE GROWTH GOING FORWARD BKT has been continuously adding capacity over the last 4-5 years with an aim to increase its market penetration. BKT has four manufacturing plants at present, with an achievable capacity of 160,000 MTPA. As a part of their debottlenecking program BKT has added further capacities to achieve the present production capacity of 160,000 MTPA from 156,000 MTPA. BKT plans to expand its current capacity from 160,000 MTPA to 300,000 MTPA by FY16e end in phases. BKT has commenced commercial production at its new greenfield plant at Bhuj, Gujarat. The current production capacity at Bhuj stands at 30,000 MTPA which will be expanded to 60,000 MTPA by FY14e end. The production capacity at Bhuj plant will them be further expanded to 120,000 MTPA by FY15e end and then to 140,000 MTPA by FY16e end in phases. The new capacity at Bhuj should help BKT to increase its OTR revenues as well as enhance supplies to the OEM’s. BKT has dedicated 40% of the new capacity to the OTR segment and 60% for agriculture tyres. The total capex estimated for expansion at Bhuj is estimated at around `2800 crores. The expansion at Bhuj is funded through a mix of ECB loan and part by internal accruals. ECB loan is at an interest rate of LIBOR + 250bps. The company has spent around `2325 crores till Q3FY14 end of the total estimated capex and an amount of `970 crores has been capitalized till Q3FY14 end. We believe expected strong cash flows on improved business profile will help the company to repay its debts on schedule going forward. Furthermore, since the company is raising debt through the ECB route which has low interest rate, the company will not witness a huge surge in its interest expenses as well.

Balkrishna Industries Ltd. February 2014

ABILITY TO PROVIDE QUALITY PRODUCT AT COMPETITIVE PRICE BKT’s realizations are currently at a 30% discount to its global peers like Michelin, Bridgestone, Continental and Goodyear leaving BKT with an ample scope for increasing its prices and ability to pass on the increase in its raw material prices at regular intervals and avoid taking a steep hit on its margins. Some of the reasons for better margins compared to its peer companies are:

a) Availability of Cheap Labour: All manufacturing facilities of BKT are located domestically and India has a competitive advantage over its other western equivalents in terms of labour costs as it is a developing economy., thus BKT’s labour cost as a percentage of sales is lowest compared to its global competitors. BKT’s labour charges form approximately 3-4% of its net sales as compared to 25% of its global counterparts.

b) Huge distribution network: Exports contribute approximately 90% of BKT’s revenue. To cater the huge export market BKT sells its products through a distribution network of more than 200 distributors who are situated at varied key locations across 120 countries and caters to the replacement market. As a result BKT makes its presence feel worldwide and has to spend less on advertisement and promotional expenses. Usually BKT spends 2.5% to 3.5% of its sales on advertisement and promotional expenses.

c) Raw material cost in line with global players:

By virtue of

advance licensing scheme (ALS), unlike domestic tyre manufacturers, BKT imports rubber without any duty thus ensuring lower rubber cost. Hence by exporting 90% of tyres produced BKT enjoys duty free import benefits and thus procures the raw material at costs comparable to the global peers.

d) Hedging Policy:

As a company policy BKT covers its net exposure to

foreign currency in advance. Forward hedges on natural rubber and sales revenue insulates the company from spurt in raw material prices and adverse currency movement and thus protecting margins. BKT has booked its net exposure to Euros for FY14e and FY15e in advance. Net exposure to Euro is booked at Euro 75-76 to `. Hence it has a negligible impact of foreign currency movement. Out of the total sales around 50% of the revenues are in Euros. In volume terms rubber forms around 48% of total raw material cost, while carbon black 27% and fiber 6% are the critical raw material for the company. Generally the company maintains an inventory of 45-60 days for natural rubber. Lower rubber prices and rupee depreciation impact in the recent quarters has helped the company to post EBIDTA margins of 24.6% in 9mFY14 compared to 20.83% in FY13. The company exports oriented business model (90% of revenue from exports) provides a natural hedge against currency related raw material price fluctuation.

Balkrishna Industries Ltd. February 2014

WIDE PRODUCT RANGE DEVELOP NEW PRODUCTS

AND

ABILITY

TO

BKT has over 2,200 SKU’s in its product basket. It supplies tyre’s weighing from 3 kgs to 3000 kgs. Agricultural tyres form around 60% of the total sales mix. These include tyres for tractors, trailers, farm equipment, and forestry. These tyres are specifically designed as per farm requirements ranging from 12” bead diameter to 48”. Tractor radial tyres are marketed under the brand “Agrimax”. OTR are also an integral part of BKT’s product offerings as these constitute almost 30%-35% of company’s sales mix. This segment includes tyres used for industrial, construction and earth mover equipments such as articulate dump trucks, loaders, underground mines, port applications, ranging from 8 inches bead diameter to 51”. Steel Radial OTR tyres are marketed under the brand “Earthmax”. Other segments which include 2%-3% of the sales mix include tyres for Sports, Utility vehicles such as Golf-cart, Lawn & Garden tyres. BKT keeps on developing over 150-160 new sizes every year in the fastest turnaround time of 8 to 10 weeks for new product development. BKT has established its brand image through quality and after sales service and the brand “BKT” enjoys good reputation in the domestic as well as international market. The key reason BKT tyres are globally competitive is because of its engineering talent and continuous investment in R&D. Over the years a dedicated team of engineers have taken on the task of designing and manufacturing better tyres more quickly after precise and complex planning.

Balkrishna Industries Ltd. February 2014

CONCERNS

EXECUTION DELAY

FLUCTUATION IN RAW MATERIAL PRICES

Capacity expansion driven volume growth will be affected in case of delay in commissioning of new capacities. Any delay in executing the capex plans for greenfield capacity expansion could negatively impact our estimates.

Volatility in natural rubber and synthetic rubber prices remain a cause of concern for the tyre industry and BKT is no exception for that matter. Even though these have been hedged, but any significant volatility in the prices of raw materials could impact the company adversely.

SLOWDOWN IN DEMAND Around 48%-50% of the company's revenues are from Europe. This regional concentration could become a risk for the company if there is any sudden slowdown in demand in European region going forward. Demand for replacement tyres in each country where BKT operates is also a function of national trends in consumer spending and a range of other local market variables. Any combination of trends that might cause demand for replacement tyres to decline or to grow at a slower rate could adversely affect our estimates.

CURRENCY RISK Since majority of the company’s revenues are generated through exports and the company also imports lot of its raw materials and capital equipments, it is exposed to risks due to currency fluctuations. However the company follows the system of hedging its receivables and major payments well in advance by entering into forward contracts thereby protects itself largely from fluctuations in currencies. BKT exports most of its products to Europe and America, any significant rupee appreciation against Euro or US dollar could impact the operating results and the financial position of the company.

Update on Scheme of Arrangement The management has approved a scheme of arrangement under section 391 to 394 of the companies act for amalgamation of Balkrishna Paper Mills Ltd. (BPML) (a wholly owned subsidiary) with company and demerger of the Paper board business division, together with investments in Balkrishna Synthetics Ltd. on a going concern basis in Nirvikara Paper Mills Ltd. (NPML) a new entity. Upon completion of the scheme, existing shareholders of BKT will get 1 share of NPML (of `10/-each) for every 9 shares of BKT (of `2/- each). NPML is proposed to be listed on both the exchanges. We believe this demerger to be positive given lack of any synergies between the tyres and paper business of BKT.

Balkrishna Industries Ltd. February 2014

COMPANY OVERVIEW BKT is the flagship company of Siyaram Poddar Group. The company has three business activities under their umbrella namely tyre, paper and textile processing. The tyre business is a focused business activity of the company and has become the core business. BKT manufactures specialty tyres suited for offhighway, off-road equipments. BKT has an achievable capacity at 75% of installed capacity due to the high variety-low volume nature of the business. It has a wide portfolio of over 2,200 SKU’s and has market presence in more than 120 countries through a vast network of 200 dealers with an overall global market share of around 4%. The company has manufacturing facilities situated at Bhiwadi & Chopanki in Rajasthan, Waluj in Maharashtra & Bhuj in Gujarat, with an aggregate production capacity of 160,000 MTPA. BKT has set up a new greenfield tyre manufacturing plant at Bhuj in the state of Gujarat which has already commenced commercial production. Replacement demand formed 77% of total sales in Q3FY14.The company has a worldwide distribution network ensuring extensive reach and penetration. The company exports around 90% of its output to varied geographies such as Middle East, Europe, USA, Australia, New Zealand and Russia. BKT focuses on the production of range of off-highway tyres that includes agricultural, industry, material handling, forestry, lawn and garden, construction and earth moving tyres. The company has a worldwide distribution network ensuring extensive reach and penetration. In order to focus on the tyre business BKT de-merged its paper and textile business into 100% subsidiaries. (Balkrishna Paper mills Ltd. & Balkrishna Synthetics Ltd.).

BALKRISHNA PAPER MILLS LTD. (BPL) BPL manufactures coated duplex/triplex paperboards. This segment is highly competitive hence BPL’s operating margins have been under pressure for the last 3-4 years.

BALKRISHNA SYNTHETICS LTD. (BSL) BSL provides necessary support to Siyaram Mills Ltd. through various processing services. This operation is currently yielding negative returns. Being India’s largest exporter of “Off –Highway Tyers”, the company exports more than 90% of its sales to diverse geographies including Europe, South America, Latin America, Africa, Russia, Asia etc. BKT has a market presence in over 120 countries. Supported by a strong distribution network of more than 200 distributors, BKT has a product portfolio of over 2,200 SKUs to offer. In Q3FY14 BKT has earned around 49% of its revenue from Europe, 23% from America, 12% from India, 4% from Asia and 12% from rest of the world. Europe and US are the highest contributors to sales for BKT. Geography Wise Breakup Of Revenue in Q3FY14

Asia, 4%

Rest of World, 12%

India, 12%

Europe, 49%

America, 23%

Source: Company Stewart & Mackertich Research

Balkrishna Industries Ltd. February 2014 The user segments for BKT’s off-highway tyres include:

Agriculture:

Agriculture tyres form around 65% of revenues of the

company. These include tyres for tractors, trailers, forestry, farm equipment, and specifically designed as per farm requirement. The agriculture segment also has more pricing power. The company operates under the brand “AGRIMAX” in the agriculture tyre segment.

OTR: Constituting: OTR segment forms around 30-35% of revenues, these include industrial, construction, and earthmover tyres, for dump trucks, loaders, underground mines, and port applications. The company operates under the brand “EARTHMAX” in the OTR tyre segment.

Others: Other segments forms around 3-5% of revenues, these include tyres for sports and utility vehicles such as golf carts, lawn & garden tyres, and all terrain- vehicle tyres. Segment Wise Break Of Revenue In Q3FY14

Others, 3% OTR, 34% Agriculture, 63%

Source: Company, Stewart & Mackertich Research In OEM segment, BKT supplies tyres to all major earthmoving & construction equipment manufacturers liked Volvo, BOMAG, John Deere, SAME, CNH, Ferrari, Class, JCB, Escorts, M&M. With any of these companies expanding capacities or gaining strong demand momentum, BKT in our view would

benefit. For instance with M&M expanding its tractor capacities in South India, BKT will be one of the beneficiaries.

Competitors 1) There is a very high degree of concentration in off-highway tyres segment, with the top 3 players like Bridgestone, Goodyear and Michelin has a 50-55% market share. 2) The Chinese are largely absent in the agri-segment, which has low volumes and great variety of products which is a positive for BKT. 3) BKT’s line of business is differentiated from other tyre manufacturers and is tough to replicate. In India, apart from BKT other players like Apollo Tyres have small amount of capacity in the niche OTR segment. Their focus is mainly on high volume segments i.e. commercial vehicle and passenger vehicle tyres. BKT does not supply extensively in the home market, but prefers to export. We believe that the domestic competition will not be a threat to BKT since the company has had a major head start in this capital intensive business, replication of which will take a long time for a new player. BKT has created a brand for itself in the global market, which will help it to penetrate the market much faster resulting in higher growth as compared to the new entrants.

Balkrishna Industries Ltd. February 2014

VALUATION Considering BKT’s presence in niche market, exports oriented business model and above industry average margins, the company deserves a higher valuation multiple. We recommend a buy on BKT with a price target of `412 (8xFY15e EPS of `51.54) implying upside of 25.0% from current price.

Balkrishna Industries Ltd. February 2014 STANDALONE INCOME STATEMENT PARTICULARS Net sales Other Income Stock Adjustment Total Income Raw Material Consumed Power & Fuel Employee Expenses Selling & Admin Exp Other Manufacturing Exp General & Admin Exp Misc Expenses Total Expenditure Core EBIDTA EBIDTA Interest Depreciation PBT Extra Ordinary Item * Tax PAT Adj PAT

FY11 1,996.94 16.35 2.99 2,016.28 1215.86 75.91 48.48 140.84 114.56 23.82 26.16 1645.62 354.31 370.66 21.22 74.44 275.00 89.38 185.62 185.62

FY12 2,820.80 3.29 47.78 2,871.87 1759.06 96.75 72.33 196.74 184.44 22.28 30.72 2362.32 506.26 509.55 27.83 83.14 398.58 129.70 268.88 268.88

FY13 3,190.57 4.21 36.01 3,230.79 1827.40 117.81 107.48 236.90 211.04 33.23 28.17 2562.03 664.55 668.76 25.82 107.71 535.23 179.37 355.86 355.86

FY14e 3,430.54 4.96 3.15 3,438.65 1760.47 113.21 125.21 265.52 234.99 38.49 37.15 2575.05 858.64 863.60 29.96 159.69 673.96 219.04 454.92 454.92

(in Rs crores) FY15e 3,902.25 5.48 (6.02) 3,901.71 1984.82 130.73 144.00 302.03 267.30 43.78 44.51 2917.17 979.05 984.54 43.77 202.74 738.03 239.86 498.17 498.17

Total Current Assets TOTAL ASSETS

FY11 19.33 812.44 831.78 598.10 56.99 21.21 1.66 344.34 114.50 110.88 18.07 2,097.53 1,052.99 321.51 731.49 32.24 461.55 0.81

FY12 19.33 1,060.76 1,080.09 1,662.95 62.59 31.70 2.36 (0.62) 200.41 56.06 19.97 3,115.51 1,676.53 398.51 1,278.02 32.24 265.99 1.38

FY13 19.33 1,399.64 1,418.97 2,063.55 99.86 92.55 1.54 (0.17) 241.00 49.74 21.68 3,988.72 2,729.73 506.51 2,223.22 32.91 277.72 1.45

FY14e 19.33 1,820.68 1,840.01 2,363.55 113.13 92.55 1.54 (0.17) 245.98 40.91 38.83 4,736.34 3,229.73 666.20 2,563.53 32.91 277.95 1.45

FY15e 19.33 2,279.25 2,298.58 2,013.55 113.13 92.55 1.54 (0.17) 271.89 45.06 44.80 4,880.94 3,729.73 868.94 2,860.79 32.91 278.33 1.45

410.38 324.24 10.99 88.48 37.36

481.07 479.61 357.40 194.99 24.81

432.55 504.49 266.31 243.78 6.30

465.87 526.33 607.93 254.07 6.30

504.56 598.70 334.39 263.51 6.30

871.45 2,097.53

1,537.89 3,115.51

1,453.43 3,988.72

1,860.49 4,736.34

1,707.46 4,880.94

FY11 275.00 74.44 14.33 -2.83 (293.10)

FY12 398.58 83.14 25.54 -0.31 (388.15)

FY13 535.23 107.71 24.72 -0.87 (88.17)

FY14e 673.96 159.69 28.80 -0.37 (278.64)

FY15e 738.03 202.74 42.56 -0.37 (337.07)

67.84

118.80

578.62

583.43

645.88

Capital issuances Debt raised (retired) Dividend (paid) Interest (paid) Others FINANCING cash flow

142.70 (15.78) (21.22) 0.00 105.70

1,040.00 (15.72) (27.83) 0.00 996.45

401.25 (16.91) (25.82) 0.00 358.52

289.12 (16.91) (29.96) 0.00 242.26

(350.00) (33.79) (43.77) 0.00 (427.56)

Gross block (added) Investments (added) Dividend Received Interest Received Investment (Others) INVESTING cash flow

(224.99) 48.49 2.83 6.89 0.00 (166.78)

(623.54) 0.16 2.29 (147.75) (768.84)

(1,053.19) 0.68 0.37 1.10 22.81 (1,028.24)

(500.00) 0.37 1.16 14.41 (484.07)

(500.00) 0.37 1.21 6.56 (491.86)

341.62 266.31 607.93

(273.54) 607.93 334.39

TOTAL CASH FLOW Add : opening cash Closing cash

BALANCE SHEET PARTICULARS Equity Reserves NET WORTH Total Debt Deferred Tax Other Long Term Liabilities Long Term Trade Payable Long Term Provisions Trade Payables Other current liabilities Short Term Provisions TOTAL LIABILITIES Gross block + CWIP Accum. Depreciation Net block Non current Investments Long Term Loans & Advances Other non-crrent assets CURRENT ASSETS Inventory Debtors Cash/Bank Loans & advances Other Current Assets

CASH FLOW PARTICULARS PBT Adj: Depreciation Interest (net) Others Add: Working cap changes (net of cash) OPERATING cash flow

6.76 4.23 10.99

346.41 10.99 357.40

(91.09) 357.40 266.31

Balkrishna Industries Ltd. February 2014 KEY RATIOS & PARAMETERS PER SHARE (Rs) Face value CMP Book value Dividend per share EPS EPS (Adjusted) CEPS (Adjusted) VALUATION P/E P/CEPS P/B EV/EBIDTA EV/Net sales Dividend yield % GROWTH Topline growth % Core EBIDTA growth % APAT growth %

FY11 2.00 330.00 86.05 1.40 19.20 19.20 26.90 FY11 17.2 12.3 3.8 10.2 1.9 0.4% FY11 43.98% -4.2% -10.1%

FY12

FY13

2.00 330.00 111.74 1.50 27.82 27.82 36.42 FY12 11.9 9.1 3.0 8.8 1.6 0.5% FY12 41.26% 42.9% 44.9%

2.00 330.00 146.80 1.50 36.82 36.82 47.96 FY13 9.0 6.9 2.2 7.5 1.6 0.5% FY13 13.11% 31.3% 32.3%

FY14e 2.00 330.00 190.36 3.00 47.06 47.06 63.59 FY14e 7.0 5.2 1.7 5.7 1.4 0.9% FY14e 7.52% 29.2% 27.8%

FY15e 2.00 330.00 237.80 3.50 51.54 51.54 72.51 FY15e 6.4 4.6 1.4 4.9 1.2 1.1% FY15e 13.75% 14.0% 9.5%

MARGINS Core EBIDTA % PAT% Adj PAT (%) Tax % PROFITABILITY ROCE% RONW% OTHERS Topline/Gross block Debtors/topline (days) Creditors Days Net D/E

FY11 17.74% 9.30% 9.30% 32.5% FY11 23.1% 24.9% FY11 1.9 52 45 0.72

FY12 17.95% 9.53% 9.53% 32.5% FY12 20.3% 28.1% FY12 1.7 52 33 1.22

FY13 20.83% 11.15% 11.15% 33.5% FY13 18.0% 28.5% FY13 1.2 56 44 1.27

FY14e 25.03% 13.26% 13.26% 32.5% FY14e 18.3% 27.9% FY14e 1.1 56 51 0.95

FY15e 25.09% 12.77% 12.77% 32.5% FY15e 18.4% 24.1% FY14e 1.0 56 50 0.73

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