Company Report

Price (Dec 18) Target Price

Rs. 205 Rs. 282
Riddhi Siddhi Gluco Biols
Agro Processing Potential upside Time Frame
OUTPERFORMER 38% 12 mths
December 23, 2006
ICICIdirect Code: RIDSID Riddhi Siddhi Gluco Biols Ltd is India’s largest cornstarch producer. It is
well positioned to capitalise on the current consumption-led boom in the
economy, which should see a spurt in demand for cornstarch and its
Company Profile
derivatives. We rate the stock an OUTPERFORMER.
Registered Office
701, Sakar-1, Ashram Road, KEY TRIGGERS
Opp. Gandhigram Railway Station,
Ahmedabad, ❑ Aggressive capacity expansion to drive volume growth
Gujarat - 380 009.
Riddhi Siddhi has ramped up its corn crushing capacity by 2.5x over FY05-
Website: www.riddhisiddhi.co.in
07E to evolve as one of the largest players in the sub-continent. The
Chairman: Sampatraj Chowdhary company will have a capacity of 1,500 tonnes per day (tpd) by the end of
Business Group: Riddhi Siddhi Group
FY07. Currently, it is setting up a green-field unit at Uttaranchal at an
estimated cost of Rs 110 crore. These expansions will help boost sales on
back of the huge demand expected for cornstarch and its derivatives.
Shareholding Pattern as on 31/03/2006
Major Holders % ❑ Domestic starch comsumption at an inflection point
Promoters 45.11 India’s GDP has been growing at a rapid rate and we believe that we are at
Institutional Investors 1.75 the beginning of a consumption-led boom. Demand for cornstarch and
Other Investors 30.78 its derivatives, which find application in food, confectionery,
General Public 22.36
pharmaceutical, energy drinks, paper, textiles, adhesives, etc., is expected
to grow at 1.5x the GDP growth rate.
❑ Strategic alliance with Roquette Freres
Stock Data
Market Cap (Rs crore) 195.98 Roquette Freres of France has picked up a 14.95% stake in the company.
Shares Outstanding (in crore) 0.956 Roquette is a leading producer of starch derivatives and the largest producer
52-week High (Rs) 239.75 of polyols (sugar-free sweeteners) in the world. Riddhi Siddhi will benefit
52-week Low (Rs) 105.00 from Roquette’s expertise, use its know-how for product and process
Avg. Volume 26,017 upgradation, and technology for introducing high-end value added
Absolute Return 3 mth (%) 15.24 products from its stable of more than 650 products.
Absolute Return 12 mth (%) 76.48
VALUATIONS
Sensex Return 3 mth (%) 12.30
Sensex Return 12 mth (%) 47.07 At the current price of Rs 205, the stock trades at a P/E of 10.75x its FY07E EPS
of Rs 19.07 and 7.98x its FY08E EPS of Rs 25.68. Sales are expected to grow at
a CAGR of 31.22%, while net profits are expected to grow faster at a CAGR of
Performance Chart 58.26% over FY06-08E. We initiate coverage on the company with an
OUTPERFORMER rating and a price target of Rs 282, an upside potential of
38%, in the next 12 months.

Exhibit 1: Key Financials

Year to March 31 FY05 FY06 FY07E FY08E
Net Profit (Rs crore) 3.71 11.42 20.12 28.61
EPS (Rs) 5.75 13.52 19.07 25.68
% Growth 155.1% 135.2% 41.0% 34.7%
P/E (x) 35.66 15.16 10.75 7.98
Price/Book (x) 2.41 2.21 1.60 1.35
Siddhartha Khemka
siddhartha.khemka@icicidirect.com EV/EBIDTA (x) 10.61 9.34 8.82 6.55
NPM (%) 2.03 4.96 7.45 7.17
ICICI Brokerage Services Limited, RoNW (%) 5.81 9.02 14.23 16.46
2nd Floor, Stanrose House, RoCE (%) 8.93 9.13 10.92 13.69
Appasaheb Marathe Road,
Prabhadevi, Mumbai - 400 025. Source: ICICIdirect Research

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COMPANY BACKGROUND
Riddhi Siddhi Gluco Biols Ltd is promoted by the Chowdhary family, who were earlier involved
in the trading of corn, cornstarch and its derivatives. It commenced operations in 1993-94 with a corn
crushing capacity of 75 tonnes per day (tpd) and is currently the largest wet corn miller in the country
with crushing capacity of 850 tpd.
The company manufactures starch and its derivatives. Its product range includes native starch,
liquid glucose, corn syrup, dextrose syrup and Maltodextrin. Currently the company owns three state-
of-the art plants located in Gokak (Karnataka), Viramgam (Gujarat) and Pondicherry. A fourth unit is
under construction in Pantnagar, Uttaranchal, and is expected to be commissioned by the first month
of next financial year.
Recently, Roquette Freres of France, the world’s third largest corn miller, invested Rs 31.73 crore
in the company and acquired a 14.95% stake. Riddhi Siddhi has entered into a technical co-operation
agreement with Roquette, which provides for transfer of know-how for product and process upgradation
and technology for new products to be introduced by the company. The company, in association with
Roquette, plans to introduce value-added products to cater to the specific needs of the food,
pharmaceutical, textile and paper industries.

Exhibit 2: Operational Process

Shelled Maize

Maize cleaners

Germ Grinding mills Centrifugal Hydroclone

Steep tanks Screens
separators separators starch washing

Steep water Germ Fiber Gluten

Germ washing
and drying

Clean,
Refinery
dry germ

Oil expellers Germ meal

and extractors Starch conver-
Starch products
sion products
Crude Oil Feed product
Nutritive sweeteners
Maltodextrins Syrups Dextrose
Oil refining
Maltodextrins Liquid glucose high Dextrose Syrups
powder Maltosecorn and Dextrose Monohy-
other type drate Glucose D
Refined oil

Product composition flexibility

Source: Company, ICICIdirect Research

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 INDUSTRY OVERVIEW
Promising outlook for domestic cornstarch industy
The Indian cornstarch industry, with an estimated size of around Rs 1,500 crore per annum, is regarded as a
sunrise industry. The number of cornstarch players in the country is restricted to a handful of companies, each
possessing decades of experience. Most of them have small-sized plants scattered around corn producing regions.

India is the world’s seventh largest corn producer (about 15 million tonnes). However, yield at 1953 kg/hectare is
low as compared to 9285 kg/hectare in the US. Approximately 80-85% of the maize crop is grown during the kharif
season (June-October). Of the total production, starch manufacturers consume around 20%. The government
allows imports of a fixed quantity (decided annually) of maize at a concession duty rate of 15% and imports over
the annual limits attract a hefty 50% duty.

The diverse uses of starch make it a very versatile product. Maize or cornstarch is a typical cereal starch with
distinctly low protein and ash contents. Its carbohydrate content of high purity makes it useful in several industries.
Maize contains about 66% of starch, which can be separated from other ingredients by various processes such as
steeping, grinding, purifying and drying.

Riddhi Siddhi produces about 35 products comprising starch of all grades including liquid glucose, high maltose
corn syrup, dextrose monohydrate, dextrose syrup and malto-dextrin. These products are used in diverse sectors
and have specific applications.

Exhibit 3: Sector and product applications

Sector Products offered
Food & Drink Native starch, Liquid glucose, High
Maltose Corn Syrup, Maltodextrin,
Dextrose Syrup, Dextrose Monohydrate
Textile & Yarn Native starch, Modified starch
Paper Native starch, Modified starch
Pharmaceutical Native starch, Liquid glucose,
Maltodextrin, Dextrose Syrup,
Dextrose Monohydrate, Glucose D
Adhesive Native starch, Modified starch
Bakery Liquid glucose, Dextrose Monohydrate
Leather Liquid glucose
Industrial application Native Starch, Modified starch, Liquid
Glucose, High Maltose Corn Syrup,
Dextrose Monohydrate
Ice-creams and frozen dessert Maltodextrin
Source: Company, ICICIdirect Research
Application
Thickening agent in sauces, gravies, puddings and pies,
preparation of baking powder and salad dressing
Sizing, finishing and printing, imparts strength to the yarn and
stiffness to fabric
Gives strength, surface fuzz and stiffness to paper
Compressing agent in tablet manufacture, dusting agent in the
manufacture of surgical gloves
Used as an adhesive in pigment coating for paperboard
Provides necessary sweetness, longevity and freshness
Imparts glossiness, fineness and optimum weightage
Manufacture of antibiotics, sorbitol and gluconates
Lowers the freezing point, provide a soft, creamy and pleasant
mouth-feel, without increasing the sweetness

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 INVESTMENT RATIONALE
I) Aggressive capacity expansion to drive volume growth
Riddhi Siddhi has evolved from a small player with an installed capacity of 100 tpd (corn grinding capacity) in
1994-95 to one of the largest players in the sub-continent with capacity of 1,500 tpd by the end of FY07. It has
adopted both the organic as well as inorganic route to grow. The company will have augmented its capacity
by 2.5x over FY05-07E. Currently, the company owns three state-of-the art plants located at Gokak (Karnataka),
Viramgam (Gujarat) and Pondicherry.

Inorganic initiatives

Gokak
One of the most significant opportunities that Riddhi Siddhi capitalised upon was the acquisition of the Gokak
unit in 1995-96 (then a sick unit with an installed capacity of 125 tpd) promoted and set-up by multinational
Glaxo. Over the years, the company has regularly expanded capacities at this location and it is now the largest
single location plant in the sub continent.

Pondicherry
Riddhi Siddhi acquired a functional biopolymer unit from Hindustan Lever in 2005-06. The unit has a capacity
to process 8,000 tpa of tapioca and corn-based specialty modified starches. The state of-the-art R&D facilities is
among the best in India. The acquisition gave the company a significant share of high-end starch derivatives
market catering to the domestic paper industry, more than 20 brands and know-how for the manufacture of
value-added starch.

Organic initiatives

Uttaranchal
Currently, it is setting up a green-field unit at Uttaranchal at an estimated investment of Rs 110 crore. The unit
will enjoy both excise and income tax benefits and will have a capacity of 500 tpd. It is expected to commence
operations in April 2007. This unit will enable the company to cater effectively to the many pharmaceutical,
food and confectionary units that have been recently set up in Uttaranchal to take advantage of the tax friendly
policies.

Exhibit 4: Capacity expansion over the years

Production capacity (tpd)
Plant Viramgam Gokak Uttaranchal Total
1993 – 94 75 - - 75
1994 – 95 100 - - 100
1995 – 96 100 125 - 225
1998 – 99 100 200 - 300
1999 – 00 100 300 - 400
2002 – 03 100 400 - 500
2003 – 04 100 400 - 500
2004 – 05 100 500 - 600
2005 – 06 100 750 - 850
2006 – 07 250 750 500 1,500
Source: Company, ICICIdirect Research

II) Starch consumption in India at an inflection point

i) Low per capita consumption
Per capita starch consumption in India is less than 1 kg compared to 64 kg in the US and lower than the global
average of 6 kg. India’s gross domestic product (GDP) has been growing at a rapid rate and the county is at the
beginning of a consumption-led boom. We believe this should result in an explosive growth in the demand for
cornstarch and its derivatives, which find applications in food, confectionery, pharmaceutical, energy drinks,
paper, textile, adhesive and host of other industries.

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 Exhibit 5: Outlook of key user industries

Sector Outlook
Pharmaceuticals Healthcare as a % of GDP to double to 9% by 2010
Textiles Expected to grow at a CAGR of 8-9% between 2005 and 2010
Paper Expected to grow at 6% per annum for the next 3 years
Food processing Expected to grow at 9-12%. Investments of Rs 1.5 lakh crore expected over next decade
Source: Company, ICICIdirect Research

ii)Marquee clients
Riddhi Siddhi’s clientele include well-known companies like Nestle, Heinz, Cadburys, Ranbaxy, Pfizer, BILT, ITC,
Grasim, Hindalco, and United Breweries among others. It has emerged as a dependable vendor and has been
engaged in a stable outsourcing relationship with them for more than five years due to its ability to customise
products and grades as per client requirements. The company retains an inventory of diverse products at its
end and supplies just-in-time so that clients do not have to block their working capital. In doing so, it has evolved
from product to service delivery, which has helped it to gain repeated orders and market share in the institutional
segment.

Exhibit 6: Key clients

Food and confectionery Pharmaceutical Paper Textile Others
Nestle Ranbaxy BILT Grasim Amul
Heinz Novartis ITC Bombay Dyeing Hindalco
Cadbury Nicholas Piramal J K Paper Indian Rayon Emami
HLL Wockhardt TNPL Lakshmi Mills SAB
Britannia Lupin West Coast Precot Mills United Breweries
Wrigley’s Pfizer Seshasayee Anglo French Micro Inks
Perfetti Biocon APPM Paramount Godrej Agrovet

Source: Company, ICICIdirect Research

III) Most competitive manufacturer in India

Riddhi Siddhi is among the lowest cost manufacturers of quality starch in India. It has strategically taken steps
to minimise costs and improve quality.

i) Experienced management
The promoters have over 30 years of experience, which spans across the entire value chain from trading to
manufacturing. They entered the business as intermediaries, providing manufacturers with raw material corn.
They also got involved in trading of the final products. This has given them tremendous insight into the
intricacies and functioning of the cornstarch business.

In 1994, the management leveraged their expertise by setting up a 75 tpd corn processing facility at Viramgam
in Gujarat. Over the next decade, the management imbibed global best practices, innovated new product
varieties and reinvested earnings. Today, it is the fastest growing company in the industry in India with a capital
cost per tonne of installed capacity that is amongst the lowest. It is also the most profitable.

ii) Strategic location of plants

The Gokak plant is located in one of the most favourable locations to manufacture starch in India, the heart of
the corn-belt in Karnataka. The state accounts for about 17% of the total corn output in India with a yield of 2.8
tonnes per hectare as against the national average of 1.9 tonnes per hectare. Riddhi Siddhi’s consumption
accounts for a mere 8% of the state’s entire produce, an adequate scope for sustainable growth over the
coming years.

The Pondicherry unit is in proximity to the country’s principal tapioca growing regions and sources its entire
raw material requirement from Kerala and Tamil Nadu. The unit manufactures value-added starches, the majority
of which is used by paper mills located in these regions.

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 Exhibit 7: Top five maize producing states (2005-06)
State Production Contribution Yield
(‘000 tonnes) (%) (kg/hectare)
Andhra Pradesh 3,058 20.26 4,034
Karnataka 2,651 17.57 2,851
Bihar 1,424 9.44 2,289
Madhya Pradesh 1,249 8.28 1,449
Maharashtra 1,119 7.42 1,785
Others 5,590 37.04
India 15,091 1,953
Source: Ministry of agriculture

iii) Efficient procurement of raw materials

Riddhi Siddhi has initiated measures like direct procurement of corn from farmers and mandis to reduce its
raw material costs. The company procures 20-25% of its requirement directly, thus enabling it to reduce
procurement cost by 2-5% and eliminate middlemen and corn traders. Riddhi Siddhi is able to procure about
70% of its raw material requirement from within a radius of 100 km of its plants. It has emerged as the single
largest corn buyer in Karnataka, enabling it to avail attractive volume-based concessions.

Aditionally, Riddhi Siddhi has secured water requirements for its wet milling process from the perennial
Ghataprabha river in Gokak. This helps the company to cut costs, as producers in other places need to process
the water before using it.

iv) Captive power plant to save costs

The company has set up a 6.2 MW captive power plant due to which its power cost per unit is only Rs 2.31 as
compared to Rs 4.7 per unit charged by the state electricity board. Since power constitiutes the second major
cost component in the cornstarch processing industry, this has helped Riddhi Siddhi in lowering its manufacturing
costs considerably. Power cost as a proportion of net sales declined from 12% in 2004-05 to 10% in 2005-06
and is expected to come down further.

Exhibit 8: Power cost per tonne of end product

Source: Company, ICICIdirect Research

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 IV)Strategic alliance with Roquette Freres
Riddhi Siddhi is set to benefit from a recent tie-up with Roquette, France which is one of the worlds leading
cornstarch manufacturers. Roquette has picked up a 14.95% stake in the company at Rs 200/share. Roquette
will provide transfer of know-how for product and process up-gradation as well as technology for introducing
new value added products from its stable of more than 650 products. The partnership is the first ever tie-up by
Roquette with any company. The fact that it selected Riddhi Siddhi is a validation of the latter’s excellent
manufacturing facilities and products of global standards.

One of the products Riddhi Siddhi hopes to develop using Roquette’s expertise is a sugar-free product. With
India having the largest population of diabetics in the world, the potential for this product is immense. Further,
with India’s young population becoming health conscious, sugar-free products are likely to see huge demand
in the near future. Riddhi Siddhi will serve as a low-cost Research & Development base for Roquette to carry out
work in the area of application innovation, which will facilitate an intellectual cost arbitrage in a global competitive
business making it more profitable. It will also give Roquette an opportunity to serve the other growing markets
like the Middle East and South East Asia and benefit from savings in logistics costs.

[Note: About Roquette

Roquette is a private family owned business, specializing in starch and starch derivatives. Started in 1933,
today its consolidated turnover is close to 2 billion euros with production facilities in Europe, US and Asia. Its
products are sold in more than 100 countries, backed up by its global network of subsidiaries and agents.
Roquette is one of Europe’s most significant suppliers of starches, glucose syrups, maltodextrins and dextrose.
It is also the world ‘s leading producer of Polyols in particular sorbitol, mannitol, xylitol and a group of special
products which together form the foundation of Roquette’s expanding family of sugarless sweeteners.]

V) Focus on value-added products to boost contributions

Riddhi Siddhi is now turning its focus towards value-added products to cater to the specific needs of the food,
pharmaceutical, textile and paper industry. It has outlined a strategy to increase the contribution from value-
added derivatives in the next two to three years. It will expand its capacity in modified starches to extend its
success in high value paper grade starch products. The company also expects to introduce import substitute
products like the Pyrogen-free dextrose used in the manufacture of IV fluids and denim grade starch that
enhances fabric smoothness permitting Indian textile manufacturers to produce world-class cotton fabric. In
addition the company’s international alliance with Roquette will facilitate its entry into products for the nutrition,
health, construction, biotech and fermentation categories.

Exhibit 9: Average realisation per tonne

Source: Company, ICICIdirect Research

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 KEY CONCERNS
Increase in raw material prices
The major input is corn and its prices have been rising continuously since last couple of months both in the local
and global markets. There is a demand-supply mismatch as the current estimated production in India is around 12
million tonnes against the annual consumption of approximately 14 million tonnes. A significant rise in corn prices
can affect the company’s profitability. However, the company is confident that it will be able to pass on price
increases to customers due to lack of viable substitutes.

FINANCIALS
Net sales, PAT to register strong growth
Riddhi Siddhi is expected to reap the full benefits of its expansion in FY08, as the Uttaranchal unit would be
operational by then. We expect net sales to grow from Rs 229.86 crore in FY06 to Rs 268.05 crore in FY07E and
surge to Rs 395.82 crore in FY08E at a CAGR of 31.22%. The company is also likely to benefit from an increased
focus on value-added products that would reflect in its bottom line as PAT is expected to grow at a CAGR of
58.26% from Rs 11.42 crore in FY06 to Rs 28.61 crore in FY08E.

Exhibit 10: Aggressive ramp up in sales

Source: Company, ICICIdirect Research

Profitability, return ratios to expand

The benefits from the increased scale of operations will be visible from the current year onwards. NPM is likely to
expand from 4.96% in FY06 to 7.17% in FY08E. RoNW at 9.02% in FY06 is likely to expand to 16.46% in FY08E.

Exhibit 11: Margins/Return ratios on the uptick

Source: Company, ICICIdirect Research

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 VALUATIONS
Exhibit 12: P/E and P/B Band

Source: ICICIdirect Research

At the current price of Rs 205, the stock is available at an EV/EBIDTA of 8.82x FY07E earnings and 6.55x FY08E
earnings. The stock trades at a P/E of 10.75x FY07E EPS of 13.52 and 7.98x FY08E EPS of Rs 25.68, which is well
below the BSE Small Cap P/E of 11.7x. Riddhi Siddhi is the market leader and well placed to capitalise on the boom
in the Indian cornstarch industry. Its selection by Roquette as its partner for its Indian foray is a validation of its
superior business model. Its sales are expected to grow at a CAGR of 31.22% while net profits are expected to
grow faster at a CAGR of 58.26% over FY06-08E. Considering these factors we believe that the stock is undervalued.
We rate the stock an OUTPERFORMER with a price target of Rs 288 at P/E of 11x its FY08E earnings.

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 FINANCIAL SUMMARY

Profit and Loss Account (Rs crore)

Sales to grow at a CAGR of FY08E FY07E FY06 FY05

31% over FY06-FY08E Sales 395.82 268.05 229.86 183.87
.................................................................................................................................................
% Growth 47.7% 16.6% 25.0% 27.5%
.................................................................................................................................................
Operating Profit 65.88 45.97 33.10 25.32
.................................................................................................................................................
% Growth 43.3% 38.9% 30.7% 12.4%
.................................................................................................................................................
Other Income 0.00 0.00 0.29 0.18
.................................................................................................................................................
EBIT 52.88 37.42 24.88 17.56
.................................................................................................................................................
% Growth 41.3% 50.4% 41.7% 15.3%
.................................................................................................................................................
Interest 17.06 14.19 11.90 12.19
Net profit to grow at a CAGR .................................................................................................................................................
of 58% over FY06-FY08E PBT 35.81 23.22 12.98 5.37
.................................................................................................................................................
% Growth 54.2% 78.9% 141.8% 88.0%
.................................................................................................................................................
Taxation 7.21 3.10 1.56 1.66
.................................................................................................................................................
PAT 28.61 20.12 11.42 3.71
.................................................................................................................................................
% Change YoY 42.1% 76.2% 208.2% 145.5%

Balance Sheet (Rs crore)

FY08E FY07E FY06 FY05
Sources of funds
.................................................................................................................................................
Share Capital (including Preference) 16.14 15.55 13.45 15.45
.................................................................................................................................................
App. money of Shares & Warrants 0.00 1.17 43.29 0.00
.................................................................................................................................................
Reserves & Surplus 157.61 124.69 69.84 48.37
.................................................................................................................................................
Secured Loans 200.73 191.48 127.56 114.01
.................................................................................................................................................
Unsecured Loans 11.80 9.80 18.30 18.88
.................................................................................................................................................
Deferred Tax Liability 10.67 6.67 5.67 5.27
.................................................................................................................................................
Current Liabilities & Provisions 37.19 22.96 17.51 14.01
.................................................................................................................................................
Total Liability 434.13 372.31 295.61 215.98
.................................................................................................................................................
Increase in net block on Application of Funds
.................................................................................................................................................
account of ongoing expansion Net Block 236.59 226.22 161.40 139.06
.................................................................................................................................................
Capital WIP 0.00 15.00 5.90 1.99
.................................................................................................................................................
Investments 0.09 0.09 0.09 0.09
.................................................................................................................................................
Cash 20.03 18.82 15.55 2.00
.................................................................................................................................................
Trade Receivables 79.16 53.61 50.38 36.19
.................................................................................................................................................
Loans & Advances 7.92 5.36 4.63 2.72
.................................................................................................................................................
Inventory 90.34 53.20 57.64 33.93
.................................................................................................................................................
Total Asset 434.13 372.31 295.61 215.98

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 Cash Flow Statement (Rs crore)
FY08E FY07E FY06 FY05
Opening Cash Balance 18.82 15.55 2.00 1.92
.................................................................................................................................................
Profit after Tax 28.61 20.12 11.34 3.95
.................................................................................................................................................
Dividend Paid -5.17 -3.67 -2.75 -2.02
.................................................................................................................................................
Depreciation 13.00 8.56 8.22 7.72
.................................................................................................................................................
Provision for deferred tax 4.00 1.00 0.40 1.11
.................................................................................................................................................
Cash Flow before WC Changes 40.44 26.01 17.22 10.81
.................................................................................................................................................
Net Increase in Current Liabilities 14.23 5.45 3.50 1.15
.................................................................................................................................................
Net Increase in Current Assets 65.24 -0.49 39.82 5.12
.................................................................................................................................................
Cash Flow after WC Changes -10.57 31.94 -19.11 6.84
.................................................................................................................................................
Purchase of Fixed Assets -10.00 -84.10 -36.10 -14.01
.................................................................................................................................................
(Increase) / Decrease in Investment 0.00 0.00 0.00 -0.05
.................................................................................................................................................
Inc. / (Decrease) in Loan Funds 11.25 55.42 12.97 7.56
.................................................................................................................................................
Inc. / (Decrease) in Preference Cap. 0.00 0.00 -4.00 0.00
.................................................................................................................................................
Inc. / (Decrease) in Equity Capital 10.53 0.00 59.79 -0.25
.................................................................................................................................................
Net Change in Cash 1.21 3.27 13.55 0.09
.................................................................................................................................................
Closing Cash Balance 20.03 18.82 15.55 2.00

Ratios
FY08E FY07E FY06 FY05
EPS (Rs.) 25.68 19.07 13.52 5.75
.................................................................................................................................................
Book Value (Rs. Crore) 151.51 128.15 92.69 85.03
.................................................................................................................................................
Enterprise Value (Rs. Crore) 431.49 405.46 309.13 268.30
.................................................................................................................................................
EV/Sales (x) 1.09 1.51 1.34 1.46
.................................................................................................................................................
EV/EBIDTA (x) 6.55 8.82 9.34 10.61
.................................................................................................................................................
Market Cap to sales (x) 0.58 0.81 0.75 0.72
.................................................................................................................................................
Price to Book Value (x) 1.35 1.60 2.21 2.41
.................................................................................................................................................
Improvement in net profit margin Operating Margin (%) 16.64 17.15 14.40 13.77
.................................................................................................................................................
on account of higher realisations Net Profit Margin (%) 7.17 7.45 4.96 2.03
.................................................................................................................................................
Strong improvement in return on RONW (%) 16.46 14.23 9.02 5.81
.................................................................................................................................................
capital employed on account of
ROCE (%) 13.69 10.92 9.13 8.93
.................................................................................................................................................
efficient utilisation of incremental
capital employed Debt/ Equity (x) 1.28 1.47 1.20 2.16
.................................................................................................................................................
Current Ratio 1.46 1.44 1.81 1.29
.................................................................................................................................................
Debtors Turnover Ratio 5.00 5.00 4.56 5.08
.................................................................................................................................................
Inventory Turnover Ratio 4.38 5.04 3.99 5.42
.................................................................................................................................................
Fixed Assets Turnover Ratio 1.67 1.11 1.37 1.30

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 RATING RATIONALE
ICICIdirect endeavours to provide objective opinions and recommendations. ICICIdirect assigns ratings to its stocks
according to their notional target price vs current market price and then categorises them as Outperformer,
Performer, Hold, and Underperformer. The performance horizon is 2 years unless specified and the notional target
price is defined as the analysts’ valuation for a stock.

Outperformer: 20% or more;

Performer: Between 10% and 20%;
Hold: +10% return;
Underperformer: -10% or more.

Research Team
Harendra Kumar Head - Research and Content harendra.kumar@icicidirect.com

ICICIdirect Research Desk

ICICI Brokerage Services Limited,
2nd Floor, Stanrose House,
Appasaheb Marathe Road,
Prabhadevi, Mumbai - 400 025
research@icicidirect.com

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