Industry

Overview
Industry
Market Size Peer Set
Structure 30000
25200
HVAC 25000

20000 17136 17920 17640

Residential Commercia Industrial 15000
14820
12896 12160
HVAC l HVAC HVAC 9848
11628
8926
10000
5194
Process 5000 2167 3049 2222
3229
Window AC Ceiling AC
Cooling 0
VRF FY19 FY20 FY21 FY22 FY23
Split AC Refrigeration
Systems RAC Industry Size at Market Operating Price RAC Industry size at OEM level
Amber Sales (RAC+RAC Components)

Raw Material
Growth Drivers
Prices
250000 140

120
200000
100
150000 80
Low RAC Rising Increasing
Penetratio Power Disposable 60
n Adequacy Income 100000
40
50000
20

0 0
2014 2015 2016 2017 2018 2019 2020 2021 2022
Growing Increasing
Urbanizati Global Aluminium Iron Ore
on Warming

Industry Company Competiti Investme Valuation Financial ESG Risk

Overview Overview ve nt Analysis Profile
Positioni Summary
 Company
Overview Amber Enterprises is a leading Indian consumer durables and components Shareholding
manufacturer. It has a diversified product portfolio that includes air conditioners,
Pattern Key Financial
Description refrigerators, washing machines, microwave ovens, and other consumer
Metrics
electronics. The company also manufactures components for the HVAC,
automotive, and telecom industries.
For the Year 2022-23
• Amber Enterprises aims to become the No. 1 OEM/ODM and parts
manufacturing company 22.80%
Vision • It wants to ensure that each customer receives excellent service
• They want to create growth for all associated with the organization 40.30% ₹ 6927 Cr.
Consolidated Revenue
• 29% Market Share of overall RAC volumes 12.70%
Key Value • Largest player in supplying air conditioner & Components for Indian Railways
Propositions •
•
Diversified portfolio of critical and reliability components
Strong R&D team equipped with best-in-class infrastructure & software 24.20% ₹ 471 Cr.
EBITDA
Performance • ROCE Improved from 11% to 15% and is expected to improve further in the
Based range of 19% ~ 21% in the next 3 years ₹ 164 Cr.
• Improved share in RAC business from 26% to 29% in FY23 Consolidated PAT
Milestones Promoter FII
DII Public
Scaling Up the Value Chain and ₹ 662 Cr.
Management
Backward Integration Capital Expenditure

₹ 321 Cr.
Cashflow from
Sheet Injection
Printed Operations
metal, IDU Heat Multi-flow Inductio Circuit Mobility
Exchangers Molding Board
Condensers n Application
and ODU Components
Motors Assemble
(PCBA)
s
Mr. Jasbir Mr. Daljit Mr. Sudhir
x%
2003 2007 2009 2010 2012 2018 2019 Singh Singh Goyal Return on Equity
Chairman & Managing Chief Financial
CEO Director Officer

Industry Company Competiti Investme Valuation Financial ESG Risk

Overview Overview ve nt Analysis Profile
Positioni Summary
 Company
Overview Segment Wise
Key Subsidiaries
Break Up
RAC
Segments Products Key Highlights
6%
Motors
Electron- • Inverter & Fixed Speed RAC • Added new customers during FY23
100% 70% 30% 43%
RAC & • Indoor, Outdoor, Window AC • Realigned strategies to offer
ics
Subsidiary Subsidiary Commercia • Cassette & Ductable AC comprehensive solutions in
Com- • Roof mounted ACs components in tandem with the
po- l AC • Defence HVAC products strategy of the RAC customers
nents
Mobilitiy
Applica- • At advanced stages to add marquee
100% 16% 4% • Electric Motors
tions clients in export business
Subsidiary Motors • BLDC Motors
• Developing Advanced motors for
• Single Phase Motors
new application
Company
Expectations Next
Stock Performance • Smartwatch
• RAC PCBA market share crossed
5000 • Bluetooth Speaker
20% and is consistently growing
Year Electronics • PCBA
• Pilot run for various telecom product
4000 • Unit Control Setups for various
has started
appliances
30%~35% 3000
Growth • RAC & Non-RAC Components
Component • Smooth integration post recent
2000 • Heat Exchanger
acquisition of AmberPR and
s • Copper Tubing
Pravartaka Tooling
1000 • Sheet Metal Component
35%~40%
Growth 0 • Secured orders for Vande Bharat
• Bus Air Conditioners
18 19 19 19 20 20 21 21 22 22 22 23 Mobility Express and the new regional rapid
/20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 • Defence Air Conditioners
transit system
1 1 1 1 1 1 1 1 1 1 1 1
9/ 2/ 7/ 12/ 5/ 10/ 3/ 8/ 1/ 6/ 11/ 4/ Application • Railway Air Conditioners
• Strong order book of more than ₹700
15%~20% • Telecom & IT Air Conditioners
Crores
Growth Amber NIFTY 500

Industry Company Competiti Investme Valuation Financial ESG Risk

Overview Overview ve nt Analysis Profile
Positioni Summary
 Financial Analysis
Liquidity Ratios - company has shown decent Margin Ratios- company has lower margin ratios Solvency - company should increase its earnings
liquidity compared to industry standards. as compared to industry standards to improve its solvency with rising leverage

1.4 1.29 1.31 12 0.8 7

1.2 6.53 6.65 0.7
1.2 1.13 1.11 0.7 6
10 5.87 5.55 0.59
5.83 0.6 5
1 0.88 8 5.31
0.8 0.81 0.8 4.77 0.5 4.21
0.75 4.78 3.93 4
0.8 0.4
6 0.28 3
0.6 0.3 0.23 0.22
4 4.14 0.2 2
0.4 3.44
2.74 2.64 2.36 0.1 1
2
0.2 0 0
0 0 FY 19 FY 20 FY 21 FY 22 Mar-23
FY 19 FY 20 FY 21 FY 22 FY 23 FY 19 FY 20 FY 21 FY 22 FY 23

Current ratio Quick Ratio Net Profit Margin Operating margin Debt-Equity Interest Coverage ratio

Earnings - Company has been able to increase its Additional investment in Capex is expected to ROCE/ ROA - Company needs to efficiently use its
book value per share at a CAGR of 16.06%. increase revenue in the future resources in the form of assets and equity.
80 18
60 700
50.37 579.94 64.68 16 15.97
50 526.17 600 60
14
489.92 46.66 44 13.09
38.8
500 40 35.74 12 11.86
40
319.63 369.9 26.73
32.41 400
22.16
16.03 10
30.14 20 8.43 8.78
30 7.5 8
24.96 300
0 6 5.45
20 FY 19 FY 20 FY 21 FY 22 FY 23
200 -23.53 4 3.94
-20 -28.07
10 100 2 2.27 2.22 2.51
-40 0
0 0 FY 19 FY 20 FY 21 FY 22 FY 23
FY 19 FY 20 FY 21 FY 22 FY 23
% Inc in capex % inc in sales
Return on Capital Employed Return on Asset
Earnings per share Book value per share

Industry Company Competiti Investme Valuation Financial ESG Risk

Overview Overview ve nt Analysis Profile
Positioni Summary
 Environmental, Social and
Governance
Parameter Metric CY PY ESG Score
Factors Weights
(Out of 100)
Recycled input Material Over-all recycling % of raw 0.69 .81
materials Environmental 31% 46
Energy intensity Total energy consumption/ 0.49 .52
turnover in rupees Social 27% 40

Water intensity Water consumed / turnover in 0.22 0.24

rupees Governance 42% 71

Energy from renewable GJ 13,351 10,694

sources ESG Rating 100% 55

R&D to improve impacts % of overall expenditure 27.97 67.36

% % Notable Initiatives
Material sourced from small % of overall source 3.66% 12% Vocational Skill
Carbon Board of
producer Development Board ofDirectors
Directors improved
Neutrality its composition, oversight,
Promotion of ‘Go Green’ Skill-development activities
Total work related injuries Total injury count 12 72 practices across its and training programs and governance processes,
manufacturing units and aimed at equipping young serving our commitment to
implementation solar succession planning and
Diverse Board Members % of females 16.66 16.17 rooftops in various
individuals through
effective corporate
collaboration
% % facilities oversight.
Waste Collaborating Code of Conduct
Awareness programs for % age of value chain partners 23.47 22.57 Management with Community Employees are expected to
Facilitation of proper maintain ethical conduct,
value chain partners covered % % treatment of waste by
Collaboration with
with a high degree of
indigenous people to create
enhancing operational personal integrity.
mutually beneficial
Independent Board Member Independent board member 3 3 efficiency, reducing waste
relationships based on
Employees take mandated
produced and managing training every year to
count proper disposal of waste.
respect, cooperation, and
ensure they are aware of
economic inclusion
their responsibilities
Board Committees Total Committee Count 7 6
Auditor and fee disclosure % change in audit fee 0.21 8
Industry Company Competiti Investme Valuation Financial ESG Risk
Overview Overview ve nt Analysis Profile
Positioni Summary
Executive Summary

 Mahindra and Mahindra operates through Automotive, Farm Equipment, Financial Services, Real Estate, Hospitality and other segments
1 Overview  The company’s vision is to build new emergent categories with differentiated product propositions & expand its market reach
 The Management is investing in Industry Trends, Product Research and Bolt-on Acquisitions to expand brand and product portfolio

 The Indian battery industry has witnessed a surge in demand due to the rapid adoption of renewable energy sources, EVs, and energy storage solutions
2 Industry Analysis  Batteries are used not only in electric vehicles but also in a wide range of applications, including renewable energy storage, consumer electronics, etc.
 Indian Government launched several initiatives to support the battery industry such as FAME scheme providing incentives for domestic battery production

 Peer set consists of shortlisted potential targets for Mahindra and Mahindra based on business segments and strategic fit

3 Target Universe  Evaluation of each and every peer on the financial and strategic synergies ground and the compatibility of the business with Mahindra and Mahindra
 Peer benchmarking on the profitability, operational, coverage and leverage metrics suggest Amara Raja Batteries as a potential target

 Amara Raja Batteries produces, sells lead-acid storage batteries for industrial and automotive applications under the Amaron and Powerzone brands
Target Overview  The company is planning to expand operations and manufacture LiB with full potential and will pivot towards the new age batteries in the future
4
 The scope for Amara Raja is immense as there is a boom in EV adoption, Renewable Energy Integration, Energy Storage Systems and IoT

 With this acquisition, it will help Mahindra in expanding operations with consistent support from in-house battery production

5 Investment Rationale  Amara Raja Batteries’ products are already customized to meet Mahindra’s needs, hence it will cater to the expansion plans of Mahindra
 The backward integration deal will help Mahindra to form an end-to-end supply provider and a one stop solution for customers

 Based on the multiple valuation techniques employed, the intrinsic value of the share price of is in the range of ₹653 to ₹922 per share
Valuation and Deal
6  Acquisition of 100% stake in the target with a premium of 25% over the current share price of ₹616 for the acquisition is suggested
Structure
 A 40% equity & 60% debt deal is suggested, as it proves to be the most accretive in terms of EPS of the combined entity

1
 Target Overview
Background
Incorporated in 1985, Amara Raja Batteries specializes in the manufacture of lead-acid storage batteries catering to various
customer groups such as telecom, solar, power control, UPS, automobile OEMs, replacement markets and private label customers
Overview Financial Summary
 Headquartered in Tirupati, Amara Raja is one of the largest manufacturers of lead-acid In ₹Mn FY19A FY20 FY21A FY22A FY23A
Description batteries for both industrial and automotive applications in the Indian storage battery
industry Revenue 67,931 68,392 71,498 86,972 1,03,882
Flagship brand with Include Automotive Batteries, % Growth 31% 35% 33% 29% 31%
presence in 50+ Two-wheeler batteries,
Brands countries and 40,000+ inverter batteries and UPS Gross Profit 21,378 23,771 23,888 25,533 31,745
dealers
Gross Profit % 31% 35% 33% 29% 31%
Shareholding  Promoters (28%), Public (47%), FII (35%)
Pattern EBITDA 9,533 10,778 10,892 9,957 13,285

Geographic  520+ cities across India EBITDA % 14% 16% 15% 11% 13%
Presence  350,000+ Active Restaurant Listings
EBIT 6,938 7,978 7,987 6,488 9,539
 Largest exporter of 4W Batteries in India
 EBIT % 10% 12% 11% 7% 9%
Key Highlights 7 Battery Manufacturing Plants in 2 locations
 23 Branches, 500+ Amaron Franchisees, 2000+ Extensive Service Hubs, 100,000+ PoS EPS 28.3 38.7 37.9 30.0 40.7

Key Managerial Personnel Revenue Split – Geography and Industry wise

12%
Harshavardhana G 9% 17%
Jaydev Galla Y Delli Babu
Chairman, MD & CEO CFO
ED, Automotive & 10%
Industrial

Global Revenue Segment Revenue

Breakdown 11%
Planned Initiatives FY23
Breakdown
FY23
 Going Digital: Hyperlocal activity, Digital Warranty, Geographic Targeting Campaigns
 New Products: Introducing New Products with channel and brand synergy
 88% 10% 43%
New Brands: To explore new customer segments
 Geographical Expansion: Expand manufacturing and distribution presence to Europe and American
Markets, deepen presence in SE Asia, West Asia and African Markets
India Outside India 2W 4W Telecom UPS Railways Others
Source: Company Website, Annual Report, Investor Presentation.
Note: 1. Not an exhaustive list; 2. Taken from MSCI Index and Bloomberg data as on 13 th August, 2023.
5
 Investment Rationale

Amara Raja Batteries will be a game-changing purchase for Mahindra, strengthening its position in meeting the demand for the New Age Battery
cells and solidifying its presence in the Indian and International industry
Deal Rationale
ESG Rationale and Public Image
Matchingrequirements
Matching requirements
from
 Both Amara Raja and the Mahindra Group are eyeing on sustainable practices as customers are now
from in-house
in-house expansion
expansion
becoming aware and shifting to such products gradually
 The storage battery industry is built on the pillars of energy efficiency, greenhouse gases mitigation, Backward Integration  Mahindra and stated in their
responsible water management, pollution control and waste management Backward Integration No Supply Chain Hold-up
and Cost Synergies Annual report that they are
and Cost Synergies looking to expand their
Good practices in waste and manufacturing capacity and
Effective use of Natural Resources 
pollution control management  Acquiring Amara Raja also launch various models in Enhance the reliability
would help Mahindra upcoming years and consistency of the
Reduction of greenhouse gas Focus on Biodiversity achieve significant cost  This deal could help support supply chain
emissions reduction in the  Mahindra can rely that
their expansion plans
manufacturing process there would be no
100% PPE compliance Solar Power for Energy Requirement
 It would enable manufacturing
 Pioneered in introducing air pollution control equipment with the latest technologies which include the competitive advantage breakdowns due to any
and greater quality future pandemic like
HEPA filters situations
control over the batteries
 Lock Out Tag Out (LOTO) an international best practice implemented across all locations
 Has aligned business operations with ISO 14001 and 45001 frameworks for over two decades

Past Success Stories

Management
ManagementCommentary
Commentary Keeping Up with Peers
Past Acquisitions Deal Rationale
 Mr. Anish Shah mentioned  In June’23, TATA has
 Nissan acquired 100% stake in Vehicle Energy Japan in Nov’22 in the Q1FY24 con-call signed an outline deal on
 It will allow Nissan to secure a stable battery supplier and that Mahindra is actively building a lithium-ion cell
contribute to the development of LiB batteries in terms of both looking to expand its factory, based on
performance and cost operations within the investment of about
segments it currently US$1.58Bn
 Porsche acquired majority stake in Group14 Technologies in operates in  International Battery
May’22  Hence, a backward Company to invest Rs.
 Aims to produce self-developed high performance battery cells integration will assist 8,000 to setup a
with silicon anodes for small series production and high- Mahindra who are looking proprietary Lithium Nickle
performance vehicles to scale their auto Manganese Cobalt
production prismatic cell
 Nikola acquired controlling stake in Romeo Power in Aug’22
manufacturing plant in 6

Peer Benchmarking (1/2)

Nokian Tyres has mainly experienced a profitability hit as an aftermath of the Ukraine Russia war which disrupted its supply chain, however with the
support of MRF, it can diversify its production facilities and be well prepared for such future contingencies
EBITDA Margins Operating Margins
2022A 2023E 2022A 2023E
16% 10%
10%
14% 14% 9%
13% 13%
8% 8%

9% 9% 6% 6%
9% 9%
8% 8%
5% 5%
7% 4%

3%
2%

Series1 Series1

Return on Equity Return on Assets

2022A 2023E 5%
4% 5%
10% 4%
8% 8% 8% 8% 8%
4% 4%
5% 5% 3%
4% 3% 3%

1% 3%
2022A 2023E
Series1

1% 1%

-10%
-12%

Series1
Source: Capital IQ, Bloomberg as on 12 th February 2024.
8
Risks and Benefits to target shareholders

Key risks include integration challenges, locus of focus and regulatory/financial risk, while manufacturing capabilities and an
established distribution network remain key offerings

Risks Magnitude & Mitigation

Risk Degree Mitigation
Dedicated integration teams (HR, IT, Finance, Operations),
Integration Challenges High conducting cultural assessments & using feedback for promoting
Supply cross-cultural understanding
Chain
Probability of Occurrence

Conduct antitrust assessments with the aid of legal advisors to

disruption Market Consolidation Moderate identify any product lines/market segments where divestiture or
Geopolitical other remedies might be necessary & seek approval for the same
Risk
Establishing strategic priorities and core business objectives to
Locus of Focus Low
ensure that key initiatives remain on track

Contingency planning for funding, keeping a tax buffer in case of any

Operational Regulatory/Financial
Medium

Moderate regulatory changes, & keeping legal teams ready on both the sides
Strain
Integration to ensure a seamless & efficient process
Market Proper targeting and marketing for the premium range of tyres,
Consolidation Product Fit Moderate
especially the multiple utility tyres

Benefits to Nokian Shareholders

 Premium to shareholders: The current shareholders of Nokian Tyres will be getting a premium
Synergy of 20% over the current market price, a movement in the price for which they have been waiting
Realisation since the last few years

Regulatory  Manufacturing plant utilization: With MRF investing over ₹1000cr in the development of its
new manufacturing plant in Telangana, Nokian Tyres can utilize the same to cope up with the
Integration loss of its Russian Market, till the time its factory in Romania becomes functional

 Distribution diversification: Making use of MRF’s existing network of 2500+ dealers and
exports to more than 65 countries through various channels will provide an instant boost to
Nokian Tyres’ supply chain

 Instant push to the business: Nokain Tyres has been severely impacted by the exit from the
Minor Signifi cant Serious Russian market and has taken a hit in the last 2 years. MRF’s capabilities will act as a catalyst
Impact of risks on the company towards boosting Nokian’s business and providing better than existing returns
Source: Company Website
v
 Indian Gaming Industry Analysis

Statistics & Facts Growth Drivers PESTLE Analysis

• The India Gaming Market size is expected to Rise in Smartphone
State government lifted bans on online gaming.
grow from USD 3.02 billion in 2023 to USD users Government organization needed to monitor
6.26 billion by 2028, at a CAGR of 15.68% Driven by the rising use of smartphones and high-speed operations, assure consumer protection, etc.
during the forecast period (2023-2028) internet, is one of the major factors driving the market
growth rate in the country Increasing young population, increased disposable
• WEB3, a new version of the internet that incomes & low cost internet are major boosters of
integrates ideas like decentralization, VR, AR, the Industry
and the metaverse, has become a more Affordable Mobile Data Increasing demand amongst youth due to the
frequently used technology in video games entrepreneurial spirit and games being classified
The average cost of a gigabyte (GB) in India is USD 0.26,
• Android Games dominate the Indian Gaming compared to USD 6.66 in the United Kingdom and USD as games of skill
market share. Major brands Samsung & 12.37 in the United States. 46% of Nation uses internet Increased deployment of AR/VR, AI, 3D designs &
OnePlus – these offer Android OS cloud technology
IT Infrastructure New legal regime for operators of online games by
Share of Android Users in India In enabling faster game downloads than current 4G amendments to Information Technology Rules,
95.2 95.8 95.5 networks, 5G networks also supported the growth of 2021
mobile-based cloud gaming services and augmented As foreign video game businesses increase their
90.6 reality (AR) games. investments, global game developers, have opened
88.6 operations in India (Microsoft, Ubisoft)

Smartphone Users in India (Mn) Key Players

2018 2019 2020 2021 2022
Source : MaximisemarketResearch.com 13.51
%
760 830
748
Government Initiatives
500 Sony Nintendo Microsoft
• The GOI has permitted 100% Foreign Direct Investment
(FDI) in gaming under automatic route under the
Electronic System and IT & BPM sectors.
• Start-up India Seed Fund Scheme (SISFS) – target to
2019 2020 2021 2022
provide seed funding to 3600 startups through 300
incubators Rolocule Games Electronic Arts Nazara Technologies
Source : MaximisemarketResearch.com 2
 Company Overview
Product Offerings (2/2)

Nazara Technologies, one of the leading India based diversified gaming and sports media platform primarily operates across 3
segments - Gaming, eSports and Ad-tech offering an interactive gaming, gamified early learning experience
Product Portfolio

Gaming eSports Ad-Tech

Brands

 Kiddopia continues to be #2 grossing app for  Revenue streams include:  Over the last year, Nazara has been focusing on
kids under 5 years of age in the US  Media Rights licensing original content higher-margin business lines & simultaneously
 The World Cricket Championship (WCC) is  commercial sponsorships for both offline & expanding client base to minimize dependency
Key Highlights

India’s leading cricket simulation game and has online events on a few customers.
around 9 million MAU1 and 1.5 million DAU2  Sponsorships from brands targeting the  As a result, the overall gross margin of the
 Revenues increased +10% YoY and EBITDA millennial audience business improved from 18.4% to 22.9%
Margin increased from 18.4% to 28.0% YoY in  M&A driven expansion of offerings/ adjacencies  The product-led businesses - Vizibl and HighR
Q1FY24 across emerging markets are showing signs of good market acceptance &
MAU (mn)  NODWIN Gaming signed definitive and binding growing revenue
agreements for a funding round of $28M (INR  This segment expects Revenue & EBITDA
11.7 232 Cr) from marquee new and existing growth to pick up from Q3 onwards as the
9.8 10.3 10.6
8.9 8.7 investors company aims to build out a more diversified,
 Significant media revenues from broadcast higher margin client base
TV + OTT

Source: Company Information, Annual Report, Investor Presentation.

Note: 1. MAU: Monthly Active Users; 2. DAU: Daily Active Users. 4
 ESG Analysis

Top KPIs Scores 2 Weight*


Nazara v/s Peers
Environment Conduct regular tree plantation initiatives to
offset greenhouse gas emissions
 Utilise cloud servers for data storage,
conserving energy while also reducing
8.2 30%
emissions and enhancing air quality
 Installed LED lights and energy efficient air
conditioners
8.2 7.6
Social 

Compliant with all EHS Regulations
Strict policy against sexual harassment with


clear guidelines outlined in the POSH1 policy
Gender diversity in workforce
8.6 30%
 Prioritising the needs and well-being of
employees

8.6 8.4
Governance
 Sound risk management policy
 Adopted fair practices 8.1 40%
 Strict policy against corruption
 Diversified board

8.1 7.9
Ratings are based on MSCI Materiality Map Peers considered
*Integrity, competence, and reliability are core values to industry;
hence 40% weight to governance

Source: Bloomberg as on 22nd September, 2023.

11
Note: 1. POSH: Prevention of Sexual Harassment; 2. ESG Scores are given on a scale of 1 TO 10, with 10 being the highest.
Company Overview
Company Trajectory Key Performance
Ventured into Defence Received TOT for
Indicators
Emerged as
India’s largest Segment for mass production of 25 Years of
Listed shares on Crucial component of excellence in Crossed market
explosives manufacturing HMX
BSE and NSE & cap of 25,000 cr., Sales
manufacturer and Propellants BrahMos missiles the field of 550,092 MT
Commenced
Commenced Explosives 1st lot of PSOM- Volume
Exports XL motor
explosives
delivered to
trading
2010 ISRO Revenue 6,070 cr
business
2006 2009 2018 2020
1983 2022
EBITDA 1,414 cr
Shareholding Pattern Company Metrics
PAT 875 cr
1%
6%
6% Promoter's Hold-
ing INR 37 cr DPS 8.5
10,000+ 10,457 R&D expense
Suppliers Total employees (last 5 years)
14% Mutual Funds
CAPEX 668 cr
Public & Others

FII & FPI ROE 25.28 %

73% 2,600+ cr
Other Bodies 39
Corporate INR 12.37 cr Total Order
CSR expenditure Book Value
Manufacturing ROCE 19.30 %
Facilities
Source: Broker research report, businessresearch.com

Industry Overview Company Overview Competitor Analysis Financial Analysis Valuation Methodology Investment Rationale ESG Analysis Risk Profile
 Company Overview
Segment Wise Revenue Solar’s Product Portfolio
14% 9%
Explosives Segment Products About
13%
16%
Industry o SIIL explosives enable precise
FY24 FY23 Initiating Explosives rock breaking, tunneling, &
Systems demolition
70%
o Ammonium nitrate-based
78% formulas ensure optimal
Defence
performance with strict
regulations

Regional Revenue Split Initiating o SIIL initiates blasts precisely

Others - 2%
Systems (mining, construction, demolition)
International
40%
Housing &
CIL o Ensures safe handling and
Infrastructure
30%
25% prevents accidental
detonations for personnel and
equipment protection
FY24 FY24

Military o Military explosives (C4, TNT) &

Explosives, drones deliver targeted strikes
Non-CIL &
Institutional Drones & with minimal risk
Domestic Defence o Ammunition advancements
60% 15%
28% Ammunitions
improve accuracy & reduce
Medium-Term Expectations civilian harm

Bombs & o Bombs & warheads deliver

Warheads targeted destruction (air, missile)
for offense & defense
o Advanced tech guides bombs &
15%-20% Rise in exports with 15% warheads for minimal civilian
expanding overseas Revenue harm
Share of Defence
in total Revenue presence Growth Source: Annual report, Investor Presentation, broker research report

Industry Overview Company Overview Competitor Analysis Financial Analysis Valuation Methodology Investment Rationale ESG Analysis Risk Profile
Company Overview
Geographical Presence
82+ Footprints
Middle East India

Africa Asia/Oceania

Upcoming North & South Saudi Arabia

America
Europe/
Kazakhstan
Balkans/
Turkey

Share Price Chart 52-week high: 13,298 52-week low: 3,655.15 5-year CAGR: 57% 3-year CAGR: 82% Y-O-Y Return: 151%

First Indian company To SOIL wins 994

Acquisition of 45% in SOIL wins order
1,000.0 make Fully Indigenous crores export 9000000
Z Motion Autonomous worth 455 cr
900.0 Weaponized Drones order
System 8000000
And Loitering Munitions
800.0 7000000
700.0 Volume
6000000
600.0 SOIL
5000000 BSE
500.0
4000000 MIDCAP
400.0
300.0 3000000
200.0 2000000
100.0 1000000
0.0 0
01/Aug/19 01/Aug/20 01/Aug/21 01/Aug/22 01/Aug/23 Source: Annual report, Investor Presentation, broker report

Industry Overview Company Overview Competitor Analysis Financial Analysis Valuation Methodology Investment Rationale ESG Analysis Risk Profile
Competitor Analysis
Segment Wise Competitor Analysis
Industry Explosives
Industry Explosives Defence
Defence Initiating Systems
Initiating Systems

o Shifting to electronic detonation from traditional o Players aiming to integrate drones, counter-drone o Increase in the number of blasting applications
technology systems, and secure networks o Growing focus on enhancing safety measures
o Diversifying portfolio for Indian Air Force and for o ISR solutions, signature reduction tech, network- and reducing environmental impact of explosives
missile program centricity, autonomous systems o Indian manufacturers exploring export
o Increasing emphasis on sustainability o India transforming from net importer to net opportunities
exporter

Inventory Turnover Ratio R&D-to-Sales EBITDA-to-Sales

Chart Title
18 0.9%
16 15.3 40.0%
33.2%
14
0.6%
12 0.6% 30.0%
23.3%
10
8 20.0%
6 0.3%
3.9 0.2%
4 2.7 10.0% 12.6%
2 0.1%
0 0.0% 0.0%
SOIL Premier Explosives GOCL Corp SOIL Premier Explosives GOCL Corp SOIL Premier Explosives GOCL Corp
Source: Annual reports, Investor Presentation, broker report

Industry Overview Company Overview Competitor Analysis Financial Analysis Valuation Methodology Investment Rationale ESG Analysis Risk Profile
Competitor Analysis
Return on Equity Dupont Analysis- RoE Deep Dive
SOIL GOCL Premier Explosives SOIL GOCL Premier Explosives
35%

30%
Net Profit 19%
23%
26% Margin 11% 12% 10% 12% 11% 12%
14%
10%
8% 7%
22% 4% 3%
3%
20% nm nm

2019 2020 2021 2022 2023 2024

15% 15%
12% 13% SOIL GOCL Premier Explosives
10% 85%
7% 68%
5% 5%
Asset 54%
64% 60%
4% 1%
3% 4% 3% Turnover 39%
32% 29% 28%
nm nm Ratio 22% 22%
17% 17%
27% 22%
13% 12%
2019 2020 2021 2022 2023 2024

2019 2020 2021 2022 2023 2024

• In 2024, SOIL’s net profit margin improved when compared to its
competitors driven solely by top line growth and better order book SOIL GOCL Premier Explosives

value 2.5 2.6

2.3 2.3
• SOIL’s asset turnover ratio has shown a steady improvement over 2.0 2 2.1 2.1
2
the years. Their efficiency is comparatively better than the peers in Financial 1.8 1.8 1.8
1.57
1.9
2
1.8 2 1.7

the industry Leverage

• The company has maintained a consistent financial leverage which
is in line with the industry peers
• SOIL has consistently delivered above average return to its investors 2019 2020 2021 2022 2023 2024
Source: Annual reports, Broker report

Industry Overview Company Overview Competitor Analysis Financial Analysis Valuation Methodology Investment Rationale ESG Analysis Risk Profile
Financial Analysis
Probability Ratios- Shows a steady increase, Solvency Ratios- Management expects lower Liquidity Ratios- Stable liquidity position, less
driven by topline growth 19%
Debt levels and better coverage ratio incremental move Y-O-Y
8000 20% 16 2 9
14.42
7.99
16% 14 13.09 1.8 8
15% 6,954 12.5 1.76
15% 1.6
6000 16% 6,113 15% 12 7
9.75 1.4 1.5 1.49 1.53
14% 10 6
11% 1.2 1.34
12% 12% 5
4000 11% 10% 8 7.1 1
3,967
6
4
0.8
2,537 0.6 3
2000 2,278 5% 4
0.4 2
2 0.89
0.5 0.39 0.41 0.35 0.19 1
0.2 1.20
0 0% 0 0.96 0.86
2020 2021 2022 2023 2024 2020 2021 2022 2023 2024 0 0
2020 2021 2022 2023 2024
Revenue (in INR cr) EBIT Margin
PAT Margin Int Coverage Ratio Net D/E Current Ratio Quick Ratio

Return Ratios- ROA and ROE shows an increase Payout Ratios- Stable dividend payment, with 1600 Capex& OCF- Increased capex driven by growth
100
trend and expected to have an upward EPS driven by Earnings growth 92.38 and tailwind factors in economy 1406
90 1400
25%movement 83.68
80 1200
21%
20% 19% 70
1000
16% 60
15% 14% 48.77 800
16%
15% 50 656 668
12%
12% 40 600
10% 11% 29.55 30.54 471
10% 30 357
400 325 293 298
20 235 264
5%
7.5 8 8.5 200
10 6 6

0% 0 0
2020 2021 2022 2023 2024 2020 2021 2022 2023 2024 2020 2021 2022 2023 2024
Capex OCF
ROA ROCE DPS EPS Source: Annual reports, Broker report

Industry Overview Company Overview Competitor Analysis Financial Analysis Valuation Methodology Investment Rationale ESG Analysis Risk Profile
Investment Rationale
Government Initiatives – A Game Changer Stable CFO and a robust growth expected ROA/ROE expected to have linear growth
o Make in India, smart cities and rural electrification have given 10000 23.0% 9,321 25%
8,228 29.5%
significance impetus to explosive industry 8000 20% 25.5%
27.7%
o Defence sector has transformed from being a net importer to 6,853 23.4%
6,009 19.0% 19.0%
a net exporter, with around 16,000 crore worth of exports in 6000 15% 12.5%
FY23, a growth of 433% 3,908
o Government’s vision for ‘Developed Nation’ by 2047 is driving 4000 10%
10.0%
the infrastructure sector, with initiatives like Bharatmala, 2000
8.0%
5% 3.4% 4.6% 4.1% 4.8% 4.2%
Sagarmala, UDAN and Gati Shakti programmes
o Defence ministry estimates contracts worth almost 4 Lakh 0 0% FY22 FY23 FY24 FY25E FY26E
crore to be given to domestic industry in next 5-7 years FY22 FY23 FY24 FY25E FY26E
ROA ROE
Sales CFO (%)

Robust growth in Explosives and Defence EBITDA Margins expected to grow Strong Order Book Value

o SOIL had developed three new explosives: SEBEX-2,

SITBEX-1 and SIMEX-4 and Indian Navy has successfully 10000 23.4% 9,321.42
2 5 .0 0 %

8%
completed its certification test 9000 14%
23.1%
o SOIL is in final stages of securing much anticipated orders 8,227.92 22.5%
8000 19.3% 19.0% 2 0 .0 0 %

for PINAKA rocket, which is expected to make the defence 7000 6,853.30
revenue grow three-fold in FY25 6000 6,008.82 14.4%
1 5 .0 0 %
Total Order 15%
o Received largest-ever order from CIL – Rs.1,853 Cr bulk 15.1% Book Value:
5000 11.5% 14.3%
explosives 4,802
4000 3,908.13 11.7%
o Current market share is around 27%-28%. In near future, it 47%
1 0 .0 0 %

3000 Crores
plans to move towards 30% on all India basis 15%
o The management expects defence to grow from 9% current 2000 5 .0 0 %

to around 15-16% by next year 1000

o Actively engaged in acquisition in explosives segment with 0 0 .0 0 %

CIL Non-CIL and Institutional

FY22 FY23 FY24 FY25E FY26E
recent acquisitions of Problast BS, South Africa and HNI Export/Overseas
Rajasthan Explosives and Chemicals Defence
Sales EBITA (%) PAT (%) Source: Annual reports, Broker report

Industry Overview Company Overview Competitor Analysis Financial Analysis Valuation Methodology Investment Rationale ESG Analysis Risk Profile
ESG Analysis
Environment Description Metrics
Scores SOIL GOCL Corp Premier Explosives
Amount of GHG Emissions CO2 (Tonnes) 70,871

73,988
Increase in Utilisation Increase in Utilisation
FY22 597,719 of Solar Energy of Biomass

FY23 163,470 604,461

56% 17%
FY24 199,769 641,203 As compared to As compared to
FY 22-23 FY 22-23
Environmental Social Governance ESG Score
Renewable Source (GJ) Non-Renewable Source (GJ)

Social Description Metrics

ESG Risk Rating Ranking
Board of Directors Gender composition Total Board member 8:1 Female

28.9 Medium Industry group (1st = lower risk)

CSR Expenditure Y-O-Y %age Change 44.9%
Risk Chemicals 249 out of 609
Workforce received full coverage Female employees covered Inputs sourced sustainably
on Health & Accident Insurance for Maternity leave for FY-23
Negligible Low Medium High Severe
100% 100 31

0
Instances %
% of Sexual Harassment Exposure Risk Low Medium High

Employee complaints under Vigil Mechanism

Cases of insider trading reported Management Risk Low Medium High

Cases of corruption reported

Source: Annual report, CRISIL ESG, Sustainalytics

Industry Overview Company Overview Competitor Analysis Financial Analysis Valuation Methodology Investment Rationale ESG Analysis Risk Profile