oil & gas | india...lowest petrol pump addition; marketing margins inverse crude play: bpcl’s...

BPCLOil & Gas | India

Institutional Equity Research

Initiating Coverage | July 03, 2019

1

Target Price: Rs330

CMP* (Rs) 379

Upside/ (Downside) (%) (12.8)

Bloomberg Ticker BPCL IN

Market Cap. (Rs bn) 821

Free Float (%) 31.5

Shares O/S (mn) 2,169

REDUCE

Share price (%) 1 mth 3 mth 12 mth

Absolute performance (7.5) (0.5) 2.5

Relative to Nifty (7.4) (2.2) (9.2)

Shareholding Pattern (%) Dec-18 Mar-19

Promoter 53.9 53.3

Public 46.1 46.7

R Sec Vs consensus

Change % FY20E FY21E

Net Sales (18) (21)

EBITDA (10) (5)

PBT (9) (4)

PAT (6) (2)

Research Analyst : Yogesh Patil

Contact : (022) 3303 4632

Email : [email protected]

The Elephant in the Room

Y/E March (Rs.mn) FY18 FY19 FY20E FY21ENet sales 23,58,951 29,82,256 26,13,827 26,97,284

EBITDA 1,52,810 1,51,122 1,36,573 1,58,502

EBITDA Margins (%) 6.5 5.1 5.2 5.9

PBT 1,41,735 1,29,054 1,14,735 1,34,196

PAT 97,919 85,278 77,579 90,416

Group Net profit 90,086 78,023 71,249 84,192

Source: Company, RSec Research

1 Year Stock Price Performance

Note: * CMP as on July 02, 2019

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EPS (Rs) 39.7 36.2 42.8

P/E 8.8 10.5 8.9

P/BV 1.8 1.8 1.7

EV/EBITDA 7.9 8.8 7.8

Dividend yield (%) 5.4 4.5 5.0

We initiate coverage of Bharat Petroleum Corporation Ltd. (BPCL) with REDUCE recommendation with an SOTP-based Target Price of Rs 330 (on 6x EV/EBITDA-FY21E), which implies potential downside of 13%. Benchmark complex refining margins may remain weak led by low crude differentials, while margin upliftment from the Kochi project may take time. While the company has guided US$2/bbl delayed refining margins upliftment from Kochi refinery, we expect US$1bbl to translate negative (0.2%) RoE. Further, the slowest rate retail outlet addition in FY19 and expansion focus more on rural and north east area could be throughput-dilutive. Hence, we believe BPCL’s auto fuel marketing margin to remain soft (normal), going forward. BPCL’s aggressive capital spending in the past few years (i.e. US$2.5bn for Kochi project) has also eroded its capital efficiency, driving down its RoCE/ROE. We expect BPCL’s RoCE/RoE to fall from 15%/22% in FY19 to 13%/20% in FY21E, as the Company is unlikely to sustain consistent growth in EBITDA and PAT. As we envisage fall in EBITDA (10% in FY20E) and limited growth potential, which may warrant a de-rating in EV/EBITDA multiples from the current levels. With return ratios now similar to peers and E&P assets in the lower oil/gas price environment, BPCL is trading at 7.8x FY21E EV/EBITDA expensive compared to the peers (HPCL- 6.1x and IOCL -6.0x of FY21 EV/EBITDA-Consensus).

Lower Crude Differentials to Dampen GRM Performance: BPCL has invested US$2.5bn to upgrade Kochi refinery to process 100% sour crude. Due to structural change in global crude basket, Brent Dubai crude price differentials are near low (US$1.2/bbl). BPCL expects to earn higher GRMs owing to higher differential. Further, cheaper source of Iran crude is stopped which forms 8% of its total crude basket. Our expectations of US$1/bbl delayed refining margins upliftment ( 4QFY20 onwards) from Kochi refinery will deliver negative (0.2%) ROE vs. company guidance of ofUS$2/bbl which will deliver 7% ROE.

Lowest Petrol Pump Addition; Marketing Margins inverse crude play: BPCL’s total number of petrol pump addition is the lowest amongst the peers. It added only 355 (historically low) in FY19. Though BPCL plans to add 6,000 retail outlets over the next 3 years, its monthly retail outlet addition run rate currently stands at mere 20. We expect BPCL to add 500-600 outlets annually vs. the guidance of 2,000. Less number of retail outlet addition will continue to impact BPCL’s fuel market share, which decreased to 22% in FY19 from 24% FY16. BPCL share price has appreciated by ~50% over 8 month with the crude moving higher level of US$86/bbl to $65/bbl. We believe this is largely a macro concern overmarketing margins, as the prices continue to be manoeuvred by the government. This is evident from no upward revision in the prices (despite higher crude prices) during elections which happened several times in last 2½ years. Next 12month, ~8 states are going for election for state assemblies. Thus, in case the crude prices move up sharply during electioneering period, it could drag the marketing margin of the OMCs.

Outlook & Valuation: We expect BPCL earnings could be more uncertain than before too with every US$1 change in GRM impacting EPS by 17% in FY20E, which makes us uncertain about its valuation premium. We have assumed US$4.25/bbl=FY20E /US$5.12/bbl=FY21E of total BPCL’s GRM (Current Sing GRM $3.5/bbl in 1QFY20) and gross marketing margin of Rs2.4/lt. Further, Govt has delayed cooking fuel subsidy payments in FY19 and likely to delay in FY20 also on shortfall of budgeted amount which will increase debt burden of BPCL. We recommend REDUCE with Target Price of Rs 330 on 6X EV/EBITDA of FY21E.



2

Target Price: Rs330

CMP* (Rs) 379



REDUCE

Exhibit 1: BPCL’s Gross profit fall in FY20E, refining & marketing Exhibit 2: BPCL’s gross profit rise in FY21E, IMO & petchem

Source: RSec Research estimates

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Refinery Retail fuels LPG/kero Ind. & Comm.

Pipeline Others FY20E- Gross Profit

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Exhibit 3: Brent - Dubai crude price differentials Exhibit 4: Arab Light- Arab Heavy crude price differentials

Source: RSec Research, Bloomberg, Reuters

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Exhibit 5: SOTP valuation

Segment Valuation Method FY21E MultipleValuation

USD bn Rs bn Rs/share

Refining EV/EBITDA 69,078 5.0 5.0 345 176

Marketing EV/EBITDA 74,578 6.5 7.0 481 245

Pipelines EV/EBITDA 7,707 6.5 0.7 50 25

Petchem EV/EBITDA 7,139 5.0 0.5 36 18

E&P NPV 16 8

Aggregate EV 13 928 472

Less

Net Debt, FY20E 4.3 294 149

Govt. receivables 0.8 55 28

Market value of Investments 30% Discount 1.0 70 35

Adjusted Net Debt 4.1 279 142

Shares 1,967

Exchange Rate 69

Sum of the parts valuation 330


Key Focus Charts



3

Target Price: Rs330

CMP* (Rs) 379



REDUCE

Exhibit 7: Company Guidance for Kochi GRM upliftment Exhibit 8: Our assumptions for Kochi GRM upliftment

Source: RSec Research

Exhibit 6: $1/bbl Rise in BPCL's GRM to increase net profit by ~17% in FY20

BPCL NRL BORL Total

Throughput MMTPA 30.00 2.9 8.0

Stake % 100% 61.7% 50%

USDINR 68.5 68.5 68.5

Conversion bbl to tonne 7.5 7.5 7.2

Impact of $1/GRM (Rsm) 15,413 1,495 3,978 20,886

Impact adjusted for stake 15,413 922 1,989 18,323

Adjusted for tax 10,172 608 1,313 12,093

FY20 consolidated net profit 71249

17%


Exhibit 9: Gross Marketing Margins of IOCL on Diesel Exhibit 10: Gross Marketing Margins of IOCL on Petrol

Source: Company, RSec Research estimates, PPAC

change existing additional

Kochi expanded capacity (MMTPA) 6.0 9.5 15.5

Addl GRM net of additional opex ($/bbl) 2.0 4.2 6.2

Opex ($/bbl) 0.5 1.5 2.0

Addl net gross margin ($/bbl) 20,504 12,697 33,201

Deprn on new capex (Rs mn) 6,270

Interest assuming 50% debt at 7% 5,775

Additional PBT (Rs mn) 8,459

Additional PAT (Rs mn) 5,921

Equity needed (Rs mn) 82,500

ROE (%) 7




Opex ($/bbl) 0.5 1.5 2.0




Additional PBT (Rs mn) (190)

Additional PAT (Rs mn) (133)


ROE (%) (0.2)



4

Target Price: Rs330

CMP* (Rs) 379



REDUCE

Rationale for REDUCE RecommendationLower Crude Differentials to Dampen GRM Performance

BPCL has invested ~US$2.5bn to upgrade and modify Kochi refinery to process 100% heavy or medium quality crude (sour). Due to structural change in global crude basket, Brent Dubai crude price differentials are currently near low (US$1.2/bbl). BPCL expects to earn higher GRMs owing to higher differential. Further, Iran crude source, which is cheaper for BPCL and forms 8% of its total crude basket, has been stopped. We believe it will impact BPCL’s margin to some extent. Our expectations of US$1/bbl delayed refining margins upliftment ( 4QFY20 onwards) from Kochi refinery will deliver negative (0.2%) ROE vs. company guidance of ofUS$2/bbl which will deliver 7% ROE. We expect the upgrade to deliver negative/low RoE, going ahead while BPCL has delivered 22% RoE over the past 7 years. Even in a rise in GRM would still earnings accretive (every US$1/bbl rise in GRM to enhance FY20E EPS by 17%) but this is also shifting the earning mix towards refining, as historically we have seen BPCL’s EBITDA break up of 50% weight to each segment, rising refining (commodity business) EBITDA share which always attracts lower valuation multiple (5.0x EV/EBITDA) compared to marketing segment (6.5x EV/EBITDA)

Crude Differential Changing with Crude Supply Pattern: Global crude basket is becoming sweeter based on structural changes in crude supply, which could be the biggest structural change in global crude supply market over the past 10 years. In our view, so far OPEC+ output crude (medium and heavy quality) supply contracted by 2.3mbpd since Oct’18. Along with this, the US has tightened sanction on Iran and Venezuela, limiting the supply of heavy crude. US oil (lighter sweet) is now exported to global markets. Continuous rise in the US oil production (shale oil) has enforced OPEC+ countries to keep tap on global supplies. Notably, the production cuts by the OPEC have been very effective at rebalancing the Global crude markets. The key regional benchmark, Dubai, is now at pricing parity with Brent (US$1.6/bbl), a relatively rare event historically. Moreover, Maya is also trading very close to Brent crude oil prices (price differential US$7/bbl), helped by lower oil production in Venezuela. But more broadly, despite the IMO2020 risk, medium and heavy grades have remained well bid, as world’s biggest producers of heavy grades have pared back output for one reason or another.

Exhibit 11: Loss of crude supply 2.3mbpd from OPEC+ Russia Exhibit 12: US crude oil production touching new high


25.6425.6425.7425.9626.6927.0926.66

2.632.712.752.722.83.013.34

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OPEC 11 Venezuela Iran Libya Russia

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Recently, the OPEC has warned of potential further oil supply cuts, as international trade disputes continue to fester, building a case for prolonged supply restraint over the rest of 2019. Despite world oil demand growth of 1.14mbpd at same level (IEA projections) in Jun’19 and the OPEC will further cut crude supply, which will create the case for lower Brent Dubai differentials in the long-term. Higher pricing differential between Brent and Dubai crude always aids the GRM of complex refiners in Asian continent.



5

Target Price: Rs330

CMP* (Rs) 379



REDUCE

Exhibit 13: Global CDU capacity, addition 1.3/2.1 mbpd in CY19/20 Exhibit 14: Global Refinery utilisation rates more than 80%


Exhibit 15: India’s CDU capacity Exhibit 16: Refinery capacity addition in India


Exhibit 17: Global Oil demand growth is projected 1.14mbpd for 2019 Exhibit 18: Fall in oil (sour) production from OPEC+

Source: RSec Research, Bloomberg, Reuters, OPEC

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mbpdRefinery Capacity (kbpd) Capex (Rs bn) Schedule

HPCL-Mumbai 40.2 50.6 Jan’2020

HPCL- Vizag 133.9 209.3 Jul’2020

HPCL- Barmer 180.7 430.0 FY23/24

OMC’s- Raigad 1204.9 NA NA

IOCL - Panipat 200.8 NA FY23/24

CPCL - TamilNadu 180.7 274.6 FY23/24

BPCL- Numaligargh 120.5 229.5 FY23/24

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kbpdkbpd

SAUDI RUSSIA VENEZUELA (RHS) IRAN (RHS)



6

Target Price: Rs330

CMP* (Rs) 379



REDUCE

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Propylene Gasoline LPG SKO HSD ATF Naphtha Bitumen FO/LSHS Sulphur Petcoke

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49%-Diesel54%- Diesel

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Crude differentials really matter to Kochi refining margins: BPCL has invested ~US$2.5bn to upgrade and modify Kochi refinery to process 100% heavy or medium quality crude (sour). In last few years, the crude processing capacity increased to 15.5MMTPA from 9MMTPA and fully commissioned in FY19. Notably, Kochi refinery’s complexity index improved to 10.3 in FY19. Due to structural change in global crude supply, Brent Dubai crude price differentials are very low (US$1.6/bbl). BPCL expects to earn higher GRM owing to higher differential. Further, Iran crude source, which forms 8% of BPCL’s total crude supply, has also been stopped. Kochi was upgraded to process the worst heavy/sour crude and avoid producing any furnace oil (FO). Though the FO output has become 0% at Kochi (a key positive for IMO2020 regulations), non-availability of sour crude at discounted price will not aid Kochi refinery’s GRM.

Exhibit 19: Kochi refienry expansion, a key product slate change Exhibit 20: Brent- Maya crude price differential

Source: Company, RSec Research, Bloomberg

Exhibit 21: Arab Light- Arab Heavy crude price differential Exhibit 22: Brent - Dubai crude price differentials

Source: RSec Research, Bloomberg

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Exhibit 23: $1/bbl Rise in BPCL's GRM to increase net profit by ~17% in FY20

BPCL NRL BORL Total

Throughput MMTPA 30.00 2.9 8.0

Stake % 100% 61.7% 50%

USDINR 68.5 68.5 68.5

Conversion bbl to tonne 7.5 7.5 7.2

Impact of $1/GRM (Rsm) 15,413 1,495 3,978 20,886

Impact adjusted for stake 15,413 922 1,989 18,323

Adjusted for tax 10,172 608 1,313 12,093

FY20 consolidated net profit 71,249

17%




7

Target Price: Rs330

CMP* (Rs) 379



REDUCE

Kochi Unit is Likely to be RoE-dilutive: BPCL invested US$2.5bn in Kochi refinery for upgrade and expansion, which is likely to improve its gross refining margins. It expects most margin uplift to come from cheaper crude processing. BPCL is expecting US$2/bbl rise in GRM. But, after 4QFY20, the Management guided to consider Kochi Refinery as new upgraded refinery, which will take time to enhance performance. We expect the upgrade to deliver only ~7% RoE. we expect US$1/bbl GRM upliftment from Kochi refinery will deliver negative (0.2%) ROE.

Kochi Unit is Likely to be EPS-accretive: Whilst a rise in GRM would still be earnings accretive (every US$1/bbl rise in Kochi GRM to enhance EPS by 7%), it will shift the earning-mix towards refining. Historically, we have seen BPCL’s EBITDA break-up with 50% weightage to each segment. Rising refining (commodity business) EBITDA share always attracts lower valuation multiple (5.0x of EV/EBITDA) compared to the marketing segment (6.5x of EV/EBITDA). At the same time, BPCL has lost 2.5% market share to the private players over 5 years.

Exhibit 26: BPCL’s EBITDA break up Exhibit 27: In last 4 years, BPCL lost 2% auto fuel market share

Source: Company, RSec Research estimates

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Refining Marketing Pipeline petchem

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IMO2020 Regulations Likely to Aid BPCL’s GRM in FY21: Restriction on sulphur emission in shipping have been in place since 2005, with global suphur limits and separate emission control area (ECA) limits for certain areas surrounding ports. Whilst the limits within ECA’s have already fallen to 0.1%, the global limits are very high at 3.5%. This is going to be corrected in Jan’20 to 0.5% sulphur limit for shipping globally. The impact of this will be significant, as current fuels used will be replaced by low sulphur alternatives. The IMO 2020 regulation will increase diesel demand by ~1.5mbpd (5%) (source: Reuters). Increase in demand mainly due to muted scrubber uptake, LNG as bunker fuel limited and high compliance. We estimate this will cause increase in diesel product cracks and led to improvement in gross refining margins, mostly benefitting to diesel as higher share of product slate. BPCL would be one

Exhibit 24: Company Guidance for Kochi GRM upliftment Exhibit 25: Our assumptions for Kochi GRM upliftment





Opex ($/bbl) 0.5 1.5 2.0




Additional PBT (Rs mn) 8,459

Additional PAT (Rs mn) 5,921


ROE (%) 7




Opex ($/bbl) 0.5 1.5 2.0




Additional PBT (Rs mn) (190)

Additional PAT (Rs mn) (133)


ROE (%) (0.2)



8

Target Price: Rs330

CMP* (Rs) 379



REDUCE

of the biggest beneficiaries of IMO driven diesel spread increase. With diesel contributing to 47.64% (the highest in India) of its product slate with fuel oil being less than 3.85%, it is well-placed to gain from the likely widening of diesel spreads. Assuming the current Bloomberg future values for these products, the net positive impact on BPCL’s GRM would be ~US$1.0/bbl (vis-à-vis FY19 margins), though we believe that the diesel supply shortfall could drive a much higher spread.

Exhibit 28: MARPOL Annex VI fuel sulphur content limits Exhibit 29: HSFO bunker demand by vessel type

Source: RSec Research, IMO, Reuters

Exhibit 30: Marine fuel demand split by region (total =5mbpd) Exhibit 31: Forward Gasoil price

Source: RSec Research, IMO, Reuters

Exhibit 32: Fuel oil forward price Exhibit 33: Global Distribution of heavy sweet crude

Source: RSec Research, Reuters

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Container ship 26%Bulk Carrier

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Latin America 7%

Middle East 10%

N. America 13%

Europe 22%

APAC44%

Africa2%

FSU 2%



9

Target Price: Rs330

CMP* (Rs) 379



REDUCE

17% 17% 14.72% 18%

49% 46% 45.73%40%

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BPCL-KR BPCL-MR IOCL HPCL

LPG Naphtha Petrol Jet fuel Kerosene Diesel

Petcoke Furnace oil LSHS Bitumen Others

Impact of Diesel Cracks on BPCL: BPCL’s Kochi refinery is best-placed to take advantage of rise in diesel cracks. Diesel forms 49.49% of Kochi refinery’s total product slate, while FO forms 0%. However, diesel will continue to form 45.63% of Mumbai refinery’s product slate (vs. HPCL 40% and IOCL 45.73%). As per the Management, only at Mumbai refinery FO will continue to form 7% of total product slate, which will be sold to domestic industrial users. Currently, diesel forward cracks hover at US$11/bbl, which is lower than the market consensus of US$16/bbl. We expect every US$1/bbl rise in diesel cracks will improve BPCL’s GRM by ~US$0.5/bbl.( Keeping all other product cracks constant)

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BPCL IOCL HPCL

Exhibit 34: Product slate comparision between peers Exhibit 35: BPCL reported lowest GRM among peers since FY17

Source: RSec Research, Reuters

Exhibit 36: Diesel and Fuel oil cracks directions opposite to IMO expectations

Exhibit 37: BPCL’s GRM impacted by fall in Gasoline and Gasoil crcaks

Source: RSec Research, Reuters, Bloomberg

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Gasoline Cracks Gasoil Crcaks BPCL

Latest Pricing Trends have been Contrary to Expectations: Towards the end of 2019, it was expected that diesel cracks would command premium in the run-up to IMO2020, as demand increase for expensive very low sulphur fuel oil (VLSFO). On the contrary, the diesel cracks are decreased to US$11.2/bbl from Nov’18 level of US$15.1/bbl.

Low Sulphur Limit in 2020 to Rev-up Marine FO: On 1st January 2020, the International Marine Organisation (IMO) will reduce the limit on global sulphur emission in shipping to 0.5% from 3.5% currently. Around 70% of marine fuels will no longer be compliant, since high sulphur fuel oil is currently dominant source of marine fuel. We believe that this will result in a major shock to the marine fuel market with direct impact on both refiners and shipping globally.

The shippers will have 4 options to comply with the IMO’s lower sulphur emission cap. As the cost of Bunker fuel accounts for ~50% of the running cost of the ship, the freight charges could increase by 35%.



10

Target Price: Rs330

CMP* (Rs) 379



REDUCE

f Non-Compliance: As the IMO does not have any legal power, it will rely on member nations to ensure the surplus cap is enforced.

f Scrubbers: Ship can continue to burn high sulphur FO (HSFO) in 2020 if they install scrubbers (exhaust gas cleaning system) on the ships. This device to account for just 5% (Reuters) global marine fuel demand in 2020. Upfront cost (installation) varies from US$2mn to US$5mn. Payback period for the scrubbers is 1-10 years depending on the average bunker consumption. Lead time for installation for retrofit is 1 year and installation is 20-30 days.

f LNG: LNG usage satisfies the new regulation owing to low sulphur emission. However, we expect it will account for only ~1.3% of marine fuel demand in 2020E.

f Low Sulphur Marine Fuel: The shippers have final option is to use ultra low sulphur fuel oil (ULSFO), which emits <0.5% sulphur. Being cheaper, switching to ULSFO is natural option.

Exhibit 38: Several options available to shippers as IMO 2020 approaches


IMO 2020 Options

MGO

Scrubbers (HSFO)

ULSFO

LNG

Non-compliance (HSFO)

High Expense , No risk

High Expense, No risk

High Expense, No risk

Low Expense, High Risk

No Expense, High Risk



11

Target Price: Rs330

CMP* (Rs) 379



REDUCE

Marketing SegmentMarketing Margin Inversely Related to Crude Prices; Supernormal Margin is Very Unlikely : The share price of BPCL has appreciated by 50% over period of 8 month with the crude moving higher level of US$86/bbl to $65/bbl. We believe this is largely a macro concern over the Company’s P&L, as the prices continue to be manoeuvred by the government. This is evident from no upward revision in the prices (despite higher crude prices) during elections which happened several times in last 2½ years. In the next 1 year, ~8 states are going for election for state assemblies. Thus, in case the crude prices move up sharply during electioneering period, it could drag the marketing margin of the OMCs. Notably, fuel marketing segment contributed 62% in BPCL’s gross profit in FY19.

Exhibit 39: Gross Marketing Margins of BPCL on Diesel Exhibit 40: Gross Marketing Margins of BPCL on Petrol

Source: Company, RSec Research, PPAC

Exhibit 41: Petrol & diesel prices at Delhi Exhibit 42: Brent oil Prices

Source: RSec Research, PPAC, Bloomberg

Lowest Petrol Pump Addition Run Rate to Continue: BPCL’s total number of petrol pump addition is the lowest amongst the peers. It added only 355 retail outlets (historically low) in FY19 vs. historical average of ~500/annum. Though BPCL plans to add 6,000 retail outlets over the next 3 years, its monthly retail outlet addition run rate currently stands at mere 20. Taking this into cognizance, we expect BPCL to add 500-600 outlets annually vs. the guidance of 2,000. Less number of retail outlet addition will continue to impact BPCL’s fuel market share, which decreased to 24.4% in FY19, while the private players gained ground to 9.5% in FY19.

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12

Target Price: Rs330

CMP* (Rs) 379



REDUCE

Throughput/Outlet Remains Flat; Fall in Market Share Continues: The state-owned retailers operated ~90% of the fuel outlets in the country (out of 64,802) as of Jun’19. Yet, 40% (3,544 in number) of new pumps, started over the last 3 years was with the private companies (mostly Essar). Headline throughput/outlet has remained flat or decreased marginally over period of 3 years. In case of BPCL, headline retail output remains flat mainly led by less number of outlet addition over a period of time. The private retailers have suggested that throughput/outlet is twice that of other competitors. Essar (Nayara Energy) may look to outlet count to >6,000 in next few years (added 655 in FY19) from 5,128 outlets now. Looking ahead, we believe that the headline throughput/outlet may not increase meaningfully despite growing fuel consumption.

Exhibit 43: BPCL added lowest number of retail outlets in last 3 year Exhibit 44: In last 4 years, BPCL lost 2% auto fuel market share

Source: RSec Research, PPAC

Exhibit 45: In last 4 years, BPCL lost 2% Petrol market share Exhibit 46: In last 4 years, BPCL lost 2% Diesel market share


Exhibit 47: BPCL leads in Petrol throughput/month/ outlet basis Exhibit 48: BPCL leads in Diesel throughput/month per retail outlet


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13

Target Price: Rs330

CMP* (Rs) 379



REDUCE

Retail Outlet Addition: The OMCs have planned to open 50K new fuel retail outlets over the next 3 years, while BPCL plans to set up 6,000 retail outlets. Notably, it costs between Rs6-30mn to open a fuel outlet depending on the location. But the process was paused during General Elections. As the polls are over now, they might resume the process. The advertisements brought out in Nov’18 and applications have already been received. In all, 95% of locations received interest with 39% getting single application and 56% getting multiple applications. The three companies have already declared winners for about a third of the locations advertised following draw of lots and examination of bids and are now verifying the credentials of winners.

Exhibit 49: Break up of India’s total retail outlet


43%

23%

24%

2%8%

IOC BPCL HPCL RIL Essar

Relaxed Norms for Setting up New Retail Outlets Signifies More Competition: A committee, appointed by the Government of India for reviewing the process of granting marketing authorisation of petrol/diesel, has recommended considerable simplification of investment norms (e.g. abolishing the Rs20bn investment criteria) to create a level-playing field. The committee mentioned that there is feedback from the private players to implement a common infra set up by the PSUs as a requisite for opening up the market in true spirit.BS-VI Fuel – No Additional Burden on Consumers; Return on Refinery Up-gradation a Concern: IOCL has invested Rs160bn for BS-VI projects for refinery upgradation. As per our estimate, BPCL would have invested Rs66bn to upgrade refineries for BS-VI fuel. Earlier when everyone migrated to BS-IV from BS-III there was a premium involved, which was allowed to be recovered as part of the retail pricing. Few months before, the OMCs indicated an extra charge of Rs 0.63/1.4 per lt on diesel & petrol to be recovered for BS-VI compliant fuel (news Link). Now, they are guiding, BS-VI compliant auto fuel prices will be benchmarked to Euro-VI fuel prices and the difference between the 2 fuels will be recovered. Hence, no extra charge for BS-VI compliant fuel could dilute BPCL’s RoCE. The amount of sulphur in both petrol and diesel in BS-VI fuel is limited to a maximum of 10ppm, similar to that of its Euro counterpart. The OMCs introduced the BS-IV grade auto fuel across the country in Apr’17 and plan to introduce BS-VI grade fuel by Apr’20.

Exhibit 50: Brent - Dubai crude price differentials Exhibit 51: Arab Light- Arab Heavy crude price differentials


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14

Target Price: Rs330

CMP* (Rs) 379



REDUCE

Exhibit 52: Brent - Maya Crude price differentials Exhibit 53: Arab Heavy - Dubai crude price differentials


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Exhibit 54: Propylene Derivative petrochemical project - process flow


Petrochemicals Propylene Refining Unit: BPCL entered into production of niche petrochemicals Acrylic acid, Acrylates and Oxo alcohols utilising 250KTPA out of 500KTPA of polymer grade propylene capacity. BPCL will market the products in Gujarat and surrounding regions for consumption by paint and chemical factories. Transportation of petrochemicals from Kochi to market places will lead to higher opex, which will drag its margin. Though BPCL expects higher margin, we expect lower margin from these products. We saw similar euphoria when GAIL launched niche polyethylene i.e. Metallocene, which yielded Rs5-7/kg kind of margin vis-à-vis expected margin of Rs10/kg due to lower import prices. BPCL invested US$700mn in petrochemical project. Based on 4QFY19 prices and cracks (acrylates), we are building a higher unit operating expense ($210/t) for FY21E, we estimate Petrochemical EBITDA of Rs7.1bn on gross margins of Rs11.9bn (~ $520/t). this project seems to deliver ROIC 10% and asset turnover of 0.65x.

Petchem Unit: In Sept’18, BPCL’s Board approved the proposal to set up a petrochemical unit at Kochi with Rs111.3bn investment, which is likely to be ready in the next 3-4 years. 250KTPA propylene refining capacity will be used as feedstock to produce propylene glycol and MEG. Currently, Kochi refinery is producing propylene and propane intermittently but once PDPP and new petchem expansion plans start it will improve Kochi refinery’s GRM by US$0.7/bbl. We are building a GRM of US$5/bbl for FY21 and US$5/bbl for FY21E for Kochi refinery.



15

Target Price: Rs330

CMP* (Rs) 379



REDUCE

Exploration & ProductionWe valued BPCL’s E&P producing assets, as on date 4 assets are producing or likely to start production in near term. Based on current oil price of $65/bbl and remaining 2P reserve the NPV of these assets to BPRL are $2.3bn. while BPRL’s total net debt is $2.09bn so the equity value of BPRL comes to $229mn and equity value per share for BPCL is Rs 8 only.

Exhibit 55: BPCL upstream producing asset valuation

Asset/Block Stake 2P Liquid Reserve (bn boe) (remaining) 2P Gas Reserve (bcf) NPV@10% ($ mn) Value to BPRL

Vankor Field 7.9% 1.9 2.5 9,190 725

Tass- Yuryak 9.9% 0.81 0 6,334 625

Mozambique 10.0% 0.08 17.9 9,330 933

Wahoo -Brazil 12.5% 0.07 0 43.8

BPRL Net Debt details

Long Term Borrowings in FY18 (Rs mn) 1,48,253

Cash & Equivalents in FY18 (Rs mn) 3,490

Net Debt @ end of FY18 (Rs mn) 1,44,762

Exchange rate 69.0

Net Debt in $ mn Current 2,098

NPV of BRL $ mn 2,327

Equity value of BPRL $ mn 229

Equity Share Of BPCL mn 1,967

Equity value for BPCL (Rs./sh) 8.15


$20bn FID sanctioned at Mozambique Mozambique LNG (Area 1) has reached a Final Investment Decision (FID) on Phase 1. This comes 9 years after the first gas discovery on Area 1 and will develop the deep water Golfinho-Atum fields to support 12.88 mmtpa of LNG. BPCL will likely do a capex of $2.5bn on this project. Despite considerable progress, the project is lagging the schedule by 4-5 years and unlikely begin before 2024. Despite excellent reservoir conditions in Mozambique, there are multiple over-ground risks. Infrastructure is non-existent, access to manpower/services is challenging and the host country’s political, legal and economic environment is unfavourable.



16

Target Price: Rs330

CMP* (Rs) 379



REDUCE

Outlook & ValuationOur FY20E/FY21E Net profit estimates are 6%/2% lower than street consensus. We have assumed US$4.2/bbl=FY20E /US$5.1/bbl=FY21E of total BPCL’s GRM (Current Sing GRM $3.5/bbl in 1QFY20) and gross marketing margin of Rs2.4/lt. Even with rising refining margin and marketing EBITDA, standalone EPS could fall by 8% YoY in FY20E, as the Company envisaged delayed improvement in GRM. We expect EPS to recover thereafter albeit at a slower pace than the street consensus for FY21E with risks for further downgrade. With the rise in share of refining in overall earnings to about half (and 50% on a consolidated basis), earnings could be more uncertain than before too with every US$1 change in GRM impacting EPS by 17% in FY20E, which makes us uncertain about its valuation premium. Though we assume that the upgrade will lift Kochi EBITDA by ~ US$1/bbl (marginally below BPCL’s guidance), we find US$2.5bn project will deliver negative RoE. More generally, higher capex in recent years has diluted BPCL’s edge on capital efficiency with its 20% RoE now similar to its peers.We initiate coverage of Bharat Petroleum Corporation Ltd. (BPCL) with REDUCE recommendation with an SOTP-based Target Price of Rs 330 (on 6x EV/EBITDA-FY21E), which implies potential downside of 13%.

As we envisage fall in EBITDA (10% in FY20E) and limited growth potential, which may warrant a de-rating in EV/EBITDA multiples from the current levels. BPCL is trading at 8x at FY20E EBITDA and 7.8x at FY21E EBITDA expensive compared to the peers (HPCL- 6.1x and IOCL -6.0x of FY21 EV/EBITDA-Consensus).

Further, we expect BPCL’s RoCE/RoE to fall from 15%/22% in FY19 to 13%/20% in FY21E, as the Company is unlikely to sustain consistent growth in EBITDA and PAT over the next 2 years.

Exhibit 56: SOTP valuation

Segment Valuation Method FY21E MultipleValuation

USD bn Rs bn Rs/share

Refining EV/EBITDA 69,078 5.0 5.0 345 176

Marketing EV/EBITDA 74,578 6.5 7.0 481 245

Pipelines EV/EBITDA 7,707 6.5 0.7 50 25

Petchem EV/EBITDA 7,139 5.0 0.5 36 18

E&P NPV 16 8

Aggregate EV 13 928 472

Less

Net Debt, FY20E 4.3 294 149

Govt. receivables 0.8 55 28

Market value of Investments 30% Discount 1.0 70 35

Adjusted Net Debt 4.1 279 142

Shares 1,967

Exchange Rate 69

Sum of the parts valuation 330




17

Target Price: Rs330

CMP* (Rs) 379



REDUCE

56.6121.8 106.8 96.6

133.3 135.7

-94.4 -96.9 -76.5-109.7 -92.7 -112.8

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Key Risks f Sharp recovery in gross refining margin.

f Super-normal marketing margin.

Exhibit 57: BPCL 1 Year Forward P/E Valuation Exhibit 58: BPCL 1 Year Forward Ev/EBITDA Valuation

Source: Bloomberg, RSec Research

Exhibit 59: BPCL 1 Year Forward P/BV Valuation Exhibit 60: Deteriorating BPCL’s Return Ratio

Source: Bloomberg, RSec Research

Exhibit 61: BPCL likley to report -ve cash flow Exhibit 62: Rise in total debt on increase in outstanding from Govt.


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18

Target Price: Rs330

CMP* (Rs) 379



REDUCE

Company Background Bharat Petroleum Corporation Limited (BPCL) is engaged in the business of refining of crude oil and marketing of petroleum products. It operates through 2 segments i.e. downstream petroleum and Exploration and Production of Hydrocarbons (E&P). The former segment includes refining and marketing of petroleum products. It is engaged in the production of liquid and gaseous fuels, illuminating oils, lubricating oils or greases or other products from crude petroleum or bituminous minerals. The Company also manufactures other petroleum products, including petroleum bitumen and other residues of petroleum oils or of oils obtained from bituminous minerals. BPCL has LPG bottling plants and lube blending plants. Its marketing infrastructure includes network of installations, depots, retail outlets, aviation service stations and LPG distributors. The Company is having participating interests in 24 E&P blocks across 8 countries and JVs.

Exhibit 63: Company structure


Bharat Petroleum

Subsidiaries

Upstream

Bharat PetroResources

Limited

Gas

Bharat Gas Resources Limited

Aviation

BOCL-KIAL Fuel Farm Facility PVT.

LTD.

Refining

Numaligarh Refinery Limited

Joint Venture& Associates

Refining

Bharat Oman Refineries Ltd.

Ratnagiri Refinery & Petrochemicals

Ltd.

City Gas Distribution Pipelines Aviation

Services Trading

ActivitiesLNG Others

Indraprastha Gas Limited

Central UP Gas Limited

MaharashtraNatural Gas

Limited

Sabarmati Gas Limited

Haridwar Natural Gas Private

Limited

Goa Natural Gas Private Limited

Kochi Salem Pipeline Private

Ltd.

GSPL India Transco

GSPL India Gasnet

Bharat StarServices Private

Ltd.

Delhi Aviation Fuel Facility (P)

Limited

KannurInternational Airport Ltd.

Mumbai Aviation Fuel Facility (P)

Ltd.

Matrix Bharat Pte. Ltd.

Petronet LNG FINO Paytech Ltd.



19

Target Price: Rs330

CMP* (Rs) 379



REDUCE

10.32 10.4 10.71 11.79 14.25 16.23

13.03 12.96 13.41 13.614.29

14.782.61 2.78 2.52 2.682.81

2.9

2.73 3.1 3.2 3.183.35

2.85

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Kochi Mumbai Numaliagarh Bina

Exhibit 64: Rise in refinery throughput of BPCL Exhibit 65: Total refined product sales of BPCL


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Refining: BPCL owns 2 refineries i.e. Mumbai (12MMT) and Kochi (15.5MMT after full expansion). It has 61.7% stake in 3MMT Numaligarh refinery, which enjoys excise duty benefits on its production and has a significantly higher GRM than other refineries. BPCL holds 50% stake in 7.8MMT Bina refinery.

Marketing: BPCL’s marketing infrastructure includes network of installations, depots, retail outlets, aviation service stations and LPG distributors. It has retail outlet network of 14,813 and 24.9% volume market share in auto fuel sales. Of these outlets, 240 are Company owned and Company operated (COCO) outlets, are 9,000 are controlled by the Company and remaining are dealer controlled. BPCL’s throughput/outlet is ~195 KL/month, which is the highest among peers. BPCL has added 10mn new active LPG consumers taking total to 68mn with LPG bottling plant capacity of 4.2MMTPA. BPCL has more than ~22% volume share in the aviation fuel segment in the country. It is also is present in the lubricants business through its renowned brand “MAK”. The Company claims to have ~21% market share in the segment.

E&P: BPCL through wholly owned subsidiary i.e. BRPL has participating stake in 24 blocks in 8 countries. 13 are in India. BRPL’s biggest exposure in the segment is through its 10% PI in the Rovuma Offshore Area 1 concession in Mozambique with −Estimated 2P reserves of about 19 TCF till date in Rovuma basin. Apart from the above, BPRL has 7.88% and 9.86% stake in the Russian fields of Vankor and Taas, respectively and 3% stake in Abu Dhabi’s Lower Zakum concession.



20

Target Price: Rs330

CMP* (Rs) 379



REDUCE

Petrochemicals: BPCL is scheduled to commission its 250KTPA Propylene Derivatives Petrochemical Project (PDPP) at its Kochi refinery in a couple of months. The plant is being built at a cost of $700mn. The Company’s board has also approved the construction of Polyols, Propylene Glycol and Mono Ethylene Glycol plants at the Kochi Refinery at a cost of Rs111bn.

Exhibit 66: BPRL (BPCL) Exploration and production asset portfolio

Exploration Block Operator BPCL Stake Basin Country Status

Domestic

CY/ONN/2002/2 ONGC 40.0% Cauvery India FDPapproved/ Development Wells

CY/ONN/2004/2 ONGC 20.0% Cauvery India Development Phase

RJ/ONN/2005/1 BPRL, HOEC 33.3% RJ India To relinquish block to DGH

CB/ONN/2010/11 GAIL, BPRL 25.0% Cambay India Exploration Phase

AA/ONN/2010/3 OIL 20.0% Assam-Arakan India MWP well

CB-ONN-2010/8 BPRL 25.0% Cambay India Exploration Phase

MB-OSN-2010/2 BPRL 20.0% Mumbai Basin India To relinquish block to DGH

RJ/ONDSF/BAKHRI TIBBA/20 BPRL 100% RJ India Exploration Phase

RJ/ONDSF/SADEWALA/2016 BPRL 100% RJ India Exploration Phase

MB/OSDSF/B15/2016 BPRL 100% Mumbai Offshore India Exploration Phase

MB/OSDSF/B127E/2016 BPRL 100% Mumbai Offshore India Exploration Phase

CY/ONDSF/KARAIKAL/2016 BPRL 100% Cauvery India Exploration Phase

OLAP -1 BPRL 100% India Exploration Phase

Outside India

BM-SEAL-11 (3blocks) Petrobras 20.0% Brazil Exploration Phase

BM-C-30 (1 Block) Andarko 12.50% Brazil Appraisal Phase

BM-POT-16- (2 block) Petrobras 10.00% Brazil Appraisal Phase

Rovuma Basin Area-1 Andarko 10% Mozambique FID

Vankor (2 Blocks) Vankorneft 7.89% Russia Producing

Srednebotuobinskoe TYNGD 9.87% Russia Producing

JPDA 6-103 Oilex 20% East Timor Exploration Phase

EP-413 Norwest Energy 27.80% Australia Exploration Phase

Nunukan PSC Pertamina 12.50% Tarakan Indonesia Exploration phase completed

Lower Zhakum Andarko 3.00% UAE Producing

Block -32 OVL 25.00% Israel NA




21

Target Price: Rs330

CMP* (Rs) 379



REDUCE

Profit & Loss Statement

Y/E Mar (Rs mn) FY18 FY19 FY20E FY21E

Net sales 23,58,951 29,82,256 26,13,827 26,97,284

Growth (%) 17 26 (12) 3

Raw material consumed 9,01,108 13,06,933 12,01,272 12,37,384

Finished goods purchases 11,20,009 13,04,492 10,79,722 10,97,894

Other operating expenses 1,85,024 2,19,709 1,96,259 2,03,505

Operating cost 22,06,141 28,31,134 24,77,254 25,38,782

EBITDA 1,52,810 1,51,122 1,36,573 1,58,502

EBITDA Margins (%) 6.5 5.1 5.2 5.9

Interest (11,857) (17,640) (16,427) (16,081)

Depreciation (28,850) (34,178) (34,419) (37,732)

Other income (incl forex) 16,744 20,375 15,573 15,349

Profit/loss from associates/JVs

12,889 9,373 13,436 14,158

PBT 1,41,735 1,29,054 1,14,735 1,34,196

Current tax (29,294) (30,100) (30,817) (36,338)

Deferred tax (14,522) (13,675) (6,339) (7,442)

Tax rate (%) 31 34 32 33

PAT 97,919 85,278 77,579 90,416

Net Profit margins (%) 4 3 3 3

Minority Interest (7,833) (7,256) (6,330) (6,224)

Group Net profit 90,086 78,023 71,249 84,192

Weighted avg no of shares (m)

1966.9 1966.9 1966.9 1966.9

EPS (Rs) 45.8 39.7 36.2 42.8

CFPS (Rs) 60.5 57.0 53.7 62.0

DPS (Rs) 21.0 19.0 17.0 19.0

BV per share (Rs) 186.2 197.1 206.5 221.9



22

Target Price: Rs330

CMP* (Rs) 379



REDUCE

Balance Sheet Statement


Gross fixed assets 5,23,539 5,65,392 7,04,275 7,56,227

Less: Depreciation (68,146) (1,01,983) (1,36,437) (1,74,204)

Add: Capital WIP 99,535 1,44,670 1,20,916 1,81,806

Net fixed assets 5,54,140 6,29,693 6,87,967 7,63,043

Long term investments 182753 191078 192420 198860

Goodwill 0 0 0 0

Cash & Marketable securities 68,031 64,616 71,109 72,435

Inventories 2,25,309 2,29,349 2,71,837 2,79,964

Sundry debtors 52,093 69,063 58,622 60,432

Loans & advances 94,432 1,55,268 97,913 99,627

Other current assets 26,802 30,237 23,201 23,201

Total current assets 4,66,667 5,48,532 5,22,682 5,35,660

Current liabilities 3,59,666 4,25,389 4,17,666 4,36,420

Provisions 32,029 35,662 32,029 32,029

Total current liabilities 3,91,695 4,61,051 4,49,695 4,68,448

Net current assets 74,972 87,482 72,987 67,211

Total assets 8,11,866 9,08,253 9,53,374 10,29,113

Long-term debt 2,90,475 3,45,996 3,08,738 3,21,495

Short-term debt 80,930 85,990 1,41,575 1,65,789

Total debt 3,71,405 4,31,985 4,50,313 4,87,284

Total non-current liabilities 55,224 67,920 74,043 81,030

Equity share capital 19,669 19,669 19,669 19,669

Reserves & surplus 3,46,517 3,67,978 3,86,392 4,16,705

Less: Miscellaneous exp. - - - -

Total shareholders' funds 3,66,186 3,87,647 4,06,061 4,36,374

Minority interest 19,051 20,700 22,957 24,426

Total liabilities 8,11,866 9,08,253 9,53,374 10,29,113



23

Target Price: Rs330

CMP* (Rs) 379



REDUCE

Cash Flow Statement


Profit before tax 1,41,735 1,29,054 1,14,735 1,34,196

Depreciation 28,850 34,178 34,419 37,732

Tax paid (43,816) (43,775) (37,156) (43,780)

Gross cash flow 1,26,769 1,19,456 1,11,999 1,28,148

Capital expenditure (76,473) (1,09,731) (92,693) (1,12,808)

Net change in investments (26,210) (8,325) (1,342) (6,440)

Change in working capital (19,992) (22,866) 20,987 7,102

Non-current liabilities 14,676 12,696 6,123 6,987

Other operating expenditure (7,410) (14,513) (4,206) (16,112)

Equity issues (incl. premium) 0 - - -

Dividend paid (incl tax) (33,053) (40,714) (52,702) (42,523)

Net cash flow (21,692) (63,996) (11,833) (35,646)

Key Ratios

Y/E Mar FY18 FY19 FY20E FY21E

Valuation Ratio (x)

P/E 9.7 8.8 10.5 8.9

P/CEPS 7.4 6.1 7.1 6.1

P/BV 2.4 1.8 1.8 1.7

Dividend yield (%) 4.7 5.4 4.5 5.0

EV/EBITDA 7.4 7.9 8.8 7.8

BVPS 186.2 197.1 206.5 221.9

Per Share Data (Rs)

EPS 45.8 39.7 36.2 42.8

Cash EPS 60.5 57.0 53.7 62.0

DPS 21.0 19.0 17.0 19.0

Returns (%)

RoCE 17.8 14.7 11.8 13.1

RoE 26.7 21.7 18.0 20.0

Turnover ratios (x)

Sales/Total assets (x) 2.9 3.3 2.7 2.6

Sales/Fixed assets (x) 4.3 4.7 3.8 3.5

Debtor turnover (days) 8.1 8.5 8.2 8.2

Stock turnover (days) 34.9 28.1 38.0 37.9



24

Target Price: Rs330

CMP* (Rs) 379



REDUCE

Reliance Securities Limited (RSL), the broking arm of Reliance Capital is one of the India’s leading retail broking houses. Reliance Capital is amongst India’s leading and most valuable

financial services companies in the private sector. Reliance Capital has interests in asset management and mutual funds, life and general insurance, commercial finance, equities and

commodities broking, wealth management services, distribution of financial products, private equity, asset reconstruction, proprietary investments and other activities in financial services.

The list of associates of RSL is available on the website www.reliancecapital.co.in. RSL is registered as a Research Analyst under SEBI (Research Analyst) Regulations, 2014

General Disclaimers: This Research Report (hereinafter called ‘Report’) is prepared and distributed by RSL for information purposes only. The recommendations, if any, made herein are

expression of views and/or opinions and should not be deemed or construed to be neither advice for the purpose of purchase or sale of any security, derivatives or any other security

through RSL nor any solicitation or offering of any investment /trading opportunity on behalf of the issuer(s) of the respective security(ies) referred to herein. These information / opinions /

views are not meant to serve as a professional investment guide for the readers. No action is solicited based upon the information provided herein. Recipients of this Report should rely

on information/data arising out of their own investigations. Readers are advised to seek independent professional advice and arrive at an informed trading/investment decision before

executing any trades or making any investments. This Report has been prepared on the basis of publicly available information, internally developed data and other sources believed by

RSL to be reliable. RSL or its directors, employees, affiliates or representatives do not assume any responsibility for, or warrant the accuracy, completeness, adequacy and reliability of such

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information / opinions / views contained in this Report.

Risks: Trading and investment in securities are subject to market risks. There are no assurances or guarantees that the objectives of any of trading / investment in securities will be achieved.

The trades/ investments referred to herein may not be suitable to all categories of traders/investors. The names of securities mentioned herein do not in any manner indicate their prospects

or returns. The value of securities referred to herein may be adversely affected by the performance or otherwise of the respective issuer companies, changes in the market conditions,

micro and macro factors and forces affecting capital markets like interest rate risk, credit risk, liquidity risk and reinvestment risk. Derivative products may also be affected by various risks

including but not limited to counter party risk, market risk, valuation risk, liquidity risk and other risks. Besides the price of the underlying asset, volatility, tenor and interest rates may affect

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Courts in India.

Disclosure of Interest: The research analysts who have prepared this Report hereby certify that the views /opinions expressed in this Report are their personal independent views/opinions

in respect of the securities and their respective issuers. None of RSL, research analysts, or their relatives had any known direct /indirect material conflict of interest including any long/short

position(s) in any specific security on which views/opinions have been made in this Report, during its preparation. RSL’s Associates may have other potential/material conflict of interest

with respect to any recommendation and related information and opinions at the time of publication of research report. RSL, its Associates, the research analysts, or their relatives might

have financial interest in the issuer company(ies) of the said securities. RSL or its Associates may have received a compensation from the said issuer company(ies) in last 12 months for the

brokerage or non brokerage services.RSL, its Associates, the research analysts or their relatives have not received any compensation or other benefits directly or indirectly from the said

issuer company(ies) or any third party in last 12 months in any respect whatsoever for preparation of this report.

The research analysts has served as an officer, director or employee of the said issuer company(ies)?: No

RSL, its Associates, the research analysts or their relatives holds ownership of 1% or more, in respect of the said issuer company(ies).?: No

Copyright: The copyright in this Report belongs exclusively to RSL. This Report shall only be read by those persons to whom it has been delivered. No reprinting, reproduction, copying,

distribution of this Report in any manner whatsoever, in whole or in part, is permitted without the prior express written consent of RSL.

RSL’s activities were neither suspended nor have defaulted with any stock exchange with whom RSL is registered. Further, there does not exist any material adverse order/judgments/

strictures assessed by any regulatory, government or public authority or agency or any law enforcing agency in last three years. Further, there does not exist any material enquiry of

whatsoever nature instituted or pending against RSL as on the date of this Report.

Important These disclaimers, risks and other disclosures must be read in conjunction with the information / opinions / views of which they form part of.

RSL CIN: U65990MH2005PLC154052. SEBI registration no. (Stock Broker: INZ000172433, Depository Participants: CDSL IN-DP-257-2016 IN-DP-NSDL-363-2013, Research Analyst:

INH000002384); AMFI ARN No.29889.

Rating GuidesRating Expected absolute returns (%) over 12 monthsBUY >10%

HOLD -5% to 10%

REDUCE >-5%

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