Granules India
BSE SENSEX
31,814
S&P CNX
9,980
6 October 2017
Update
| Sector:
Healthcare
CMP: INR122
TP: INR200 (+64%)
Buy
Story unfolding on expected lines
Vizag-based facility under JV with Omnichem receives EIR
Stock Info
Bloomberg
Equity Shares (m)
52-Week Range (INR)
1, 6, 12 Rel. Per (%)
M.Cap. (INR b)
M.Cap. (USD b)
Avg Val, INRm
Free float (%)
GRAN IN
254
157 / 91
-5/-19/-12
30.9
0.5
224
46.6
Financials Snapshot (INR b)
2017 2018E 2019E
Y/E Mar
Net Sales
14.4
17.4
23.4
EBITDA
3.0
3.6
5.1
PAT
1.7
2.0
2.8
EPS (INR)
7.2
8.0
11.0
Gr. (%)
32.3
10.5
37.3
BV/Sh (INR)
39.5
56.9
65.7
RoE (%)
21.1
17.7
18.8
RoCE (%)
17.9
16.1
18.3
P/E (x)
16.8
15.3
11.1
P/BV (x)
3.1
2.6
2.3
Shareholding pattern (%)
As On
Jun-17 Mar-17 Jun-16
Promoter
53.4
53.5
51.1
DII
1.5
1.6
1.0
FII
12.2
10.0
7.2
Others
32.9
35.0
40.8
FII Includes depository receipts
Stock Performance (1-year)
Granules India
Sensex - Rebased
170
150
130
110
90
Granules India’s (GRAN) Vizag facility was inspected by the US FDA in Dec-16,
post which it was issued seven 483 observations. This is a new facility, and
currently the JV is manufacturing pre-APIs from this facility. EIR will clear the
road for the JV to reach out to innovators to supply APIs. We expect GRAN to
make APIs in 2HFY19E from this plant (~12-15 months will be required for
making exhibit batches and site transfers). This would lead to margin inflection
(from ~21% now to ~30% by 2HFY19E).
Granules-Omnichem JV – a potential cash cow:
This is a 50:50 JV between
GRAN and Ajinomoto’s subsidiary Omnichem. Omnichem would be transferring
large-scale production of intermediates and APIs to the JV. It will also provide
full support for quality, engineering, tech transfer, procurement, sales and
management-related matters. FY17 was the first full year of operation for this
JV. This JV manufactures pre-APIs of four products. Sales stood at ~INR2b in
FY17, with EBITDA margin of ~22% and PAT margin of ~12%. We expect this JV
to record revenue of ~INR4.5b, with EBITDA margin of>30% in FY20E.
Base business – augmented capacity to fuel growth; focus on formulations to
boost margins:
Currently, API is running at 100% capacity and PFI at 75-80%
utilization. The company had planned to increase its API capacity by ~40% and
PFI capacity by >20% (expansion plan to get over in FY18), which will help fuel
growth in formulations (as GRAN is dependent on backward integration). This
will help grow the base business at mid-to-high teens until at least FY20 (~27%
CAGR over FY17-20E v/s ~7% in FY17).
US business – plans niche foray into Rx business:
GRAN plans to file ~25
ANDAs in the US by FY19E. Of this, ~12-15 complex ANDAs will be filed from its
US-based Virginia facility and rest from the India facility in Gagilapur. The
company has already filed two complex generic ANDAs from its Virginia facility
in March/April-17 (mkt. size of USD500m). Of these, in 1 product, GRAN could
be the only generic player in the near term (TAD of Jan-18).
PAT CAGR of >30% till FY20E despite full R&D expensing:
We expect ~35% PAT
CAGR over FY17-20E. This is after assuming R&D expense of USD12m. This
strong growth will be driven primarily by ramp-up of the base business (led by
capacity expansion), shift in product mix, Omnichem JV, and OTC business
expansion. Although FY19E will be the first year of US business sales, the full
impact of investments in the US business will be visible from FY20E.
Stock trading at ~11x FY19E PER; US business ramp-up an option value:
GRAN
trades at ~11x FY19E EPS (despite assuming >10% equity dilution). We believe
the stock has the potential to deliver >50% return in the next 12-18 months on
the back of multiple re rating (to >18x forward earnings) and strong EPS CAGR
of ~30% till FY20E. At 18x FY19E PER, fair value of GRAN’s stock is INR200.
Investors are advised to refer through important disclosures made at the last page of the Research Report.
Motilal Oswal research is available on www.motilaloswal.com/Institutional-Equities, Bloomberg, Thomson Reuters, Factset and S&P Capital.
Kumar Saurabh-Research analyst
(Kumar.Saurabh@MotilalOswal.com); +91 22 6129 1519
Ankeet Pandya-Research analyst
(Ankeet.Pandya@MotilalOswal.com)

Granules India
Legacy business: Capacity expansion to fuel growth
GRAN plans to expand its API capacity by ~40% and PFI capacity by >20% by mid-FY18.
This will help it meet growing demand for Paracetamol/Metformin/Guaifenesin
molecules across the globe. At present, the top five molecules contribute 85% of its
total sales.
Strong base business; augmented capacity to fuel growth
GRAN is among the largest manufacturers of Paracetamol and Ibuprofen APIs
for the regulated markets. Along with this, it has been supplying Metformin,
Guaifensin and Methacarbamol APIs. Until FY17, ~85% of its business has come
from these five base molecules. Currently, API is running at 100% capacity and
PFI at 73% utilization.
The company is increasing its API capacity for Metformin, Paracetamol and
Guaifensin by 15,000 TPA, and PFI capacity by >20%. Paracetamol supply will
commence from 2QFY18, while Metformin supply to developed markets will
start from FY19 (as clinical trial will be required). This capacity expansion in
PFI/API will also help fuel growth in formulations (as the company is dependent
on backward integration). This will help grow the base business at high-teens till
at least FY20.
GRAN’s base business covers 75% of the analgesics market (Paracetamol,
Ibuprofen) and ~50% of the diabetes market (Metformin). Paracetamol,
Ibuprofen and Metformin have maintained their status as the first line of
defense in their respective segments, and have no direct replacements in the
pipeline.
Exhibit 2:
Geography-wise share (%)
Paracetamol
5
North America
42
Europe
India
latin America
25
ROW
Exhibit 1:
Molecule-wise share (%)
14
5
3
34
10
Metformin
Ibuprofen
Guaifenesin
Methocarbamol
Others
18
13
30
Exhibit 3:
Product mix changing (%)
Paracetamol
11
4
23
10
53
9
4
25
17
45
FY12
Metformin
5
5
21
22
48
FY13
Ibuprofen
6
5
22
25
41
FY14
Guaifenecin
15
5
16
23
41
FY15
16
6
12
26
40
FY16
Others
18
5
13
30
34
FY17
FY11
Source: Company, MOSL
6 October 2017
2

Granules India
API capacities:
GRAN’s existing API business is primarily driven by higher capacities,
which augment production yield for the five APIs and improve profitability.
Over the years, GRAN has increased Paracetamol capacity from 8,000MTPA to
18,000MTPA, becoming the second largest Paracetamol producer in the world for
the regulated markets (behind Mallinckrodt). Due to growing demand for internal
and external consumption of Paracetamol in the regulated markets, GRAN has
expanded its API capacities via de-bottlenecking.
Similarly, it intends to expand Metformin capacities in two phases (from 2,000MTPA
to 9,000MTPA) by FY19E. Post expansion, GRAN would become one of the top three
Metformin API producers in the world. The Metformin API market is growing at 8-
10%/year, reflecting healthy demand for Metformin molecules due to combination
products.
Exhibit 4:
Growing API capacities
Paracetamol
Metformin
Ibuprofen
Guanfenesin
Methocarbamol
FY08
8,000
960
3,600
640
96
FY12
10,000
2,000
4,800
1,200
180
FY15
14,400
2,000
4,800
1,200
360
FY16
18,000
2,000
4,800
1,200
360
FY18E
24,000
9,000
4,800
3,200
360
Source: Company, MOSL
PFI capacities:
GRAN has one of the largest PFI capacities globally at Gagilarpur in
Andhra Pradesh, India. It is the only company in the world with capacity to handle
6MT PFI batch size. This gives GRAN a significant edge over competitors in terms of
scale and profitability. GRAN already expanded its PFI capacity to 18,400MTPA in
FY16 from 13,200MTPA in FY15. These PFI capacities are operating at 70-75%
utilization, which is enough to support 17-18% growth in the existing PFI business
over next two years.
Exhibit 5:
PFI capacities at 18,400MTPA
PFA
18,400
13,200
7,200
13,200
22,400
FY08
FY12
FY15
FY16
FY18
Source: Company, MOSL
Finished dosages capacity:
GRAN had set up its first formulations facility in FY08,
with annual capacity of 6b tablets. In FY12, it tripled this capacity to 18b tablets. It is
still operating at 50-55% utilization and can comfortably support 26-30% revenue
CAGR in the existing formulations business over next two years.
6 October 2017
3

Granules India
Exhibit 6:
Finished dosage capacity at 18b tablets
FD
18
18
18
18.5
6
FY08
FY12
FY15
FY16
FY18
Source: Company, MOSL
Exhibit 7:
Utilization levels of the base business (%)
100
75-80
~55
API
PFI
FDs
Source: Company, MOSL
Exhibit 8:
API capacities of top five molecules
Paracetamol Regulated Market Suppliers (MTPA)
Mallinckrodt
Granules
Novocel
Ibuprofen Suppliers (MTPA)
Shasun
IOL Chemicals
Albemarle
BASF
Granules Biocause
Metformin Suppliers (MTPA)
Granules
USV Ltd
Wanbury
Harman
Methocarbamol Suppliers (MTPA)
Granules
Synthochem
Guaifenesin Suppliers (MTPA)
Granules
Synthochem
25,000
18,000
6,000
6,000
6,000
5,200
5,000
4,800
2,000
10,100
9,000
6,000
360
250
1,200
800
Source: Company, MOSL
6 October 2017
4

Granules India
US business: Plans niche foray into Rx business
Full potential will be visible in FY20
GRAN is planning to file ~25-30 ANDAs in the US till FY19. Of these, ~10 complex
ANDAs will be filed from its US-based Virginia facility and the rest of them from
the India-based facility in Gagilapur. In FY18, GRAN plans to file 10-12 ANDAs, of
which six will be filed from Gagilapur and the rest from Virginia.
Virginia facility – focus on complex filings:
GRAN acquired the Virginia-based
facility for a consideration of USD1.5m. Through this plant, GRAN can focus on
products with specific release properties, ODTs and DEA-controlled substances.
The company plans to invest ~USD70m in this facility toward capacity expansion
(currently capacity of 0.5b tablets), R&D and employee addition.
The company has already filed two complex generic ANDAs from its Virginia
facility in March/April-17 (market size of USD660m), where it expects to be
3
rd
/4
th
player at the time of launch (2HFY19). We expect own new filings for
GRAN to contribute USD50-60m in FY20E.
US Pharma product acquisition to drive growth from FY19:
GRAN has also
acquired marketing rights from US Pharma for four ANDAs (scheduled to be
launched from late-FY18 to FY19). The market size of these products is >USD5b,
with revenue potential of USD30-35m in FY19E.
Costs to be built in P&L from FY19E, but revenue potential to be visible from
FY20:
Although we are already building in R&D spend of ~USD12m for FY19E,
full-year revenue from own filings will start only FY20 onward. Despite this, we
estimate an improvement in the consolidated EBITDA margins of 100bp due to
traction in the base business and a shift in the product mix toward formulations.
Exhibit 9: Revenues
from
US formulation business will start contributing from FY19 (~20%
of sales)
US Formulations (USD m)
85
45
FY19E
FY20E
Source: Company, MOSL
6 October 2017
5

Granules India
Omnichem CRAMs JV – entry into high-value APIs
Partner profile:
Hubei Biocause is a public listed company involved in the
pharmaceuticals, chemicals and new energy fuel businesses. Biocause’s
pharmaceuticals business involves contract research, contract manufacturing and
production of APIs, intermediates and formulations, including tablets, granules and
capsules. Biocause is one of the leading pharmaceutical product producers and
exporters to China, with a strong production, R&D and quality system. The company
has eight APIs registered with the FDA and four APIs with CEP.
Joint venture details:
The JV between Biocause and GRAN had set up a facility in
Wuhan, China to manufacture Ibuprofen for the regulated markets. Currently, it is
operating at 4,800MTPA capacity, making it among the five largest Ibuprofen
suppliers in the world.
Granules-Omnichem JV: Established in FY15
Partner profile:
Ajinomoto-Omnichem is a Belgium-based company specializing in
the manufacture of pharmaceutical products and fine chemicals. It is a wholly
owned subsidiary of Japan-based Ajinomoto Co Inc (known for amino acids and food
products). Omnichem, a division of Ajinomoto-Omnichem, focuses on development
and manufacture of intermediates and active ingredients for the pharmaceutical
industry (CRAMs). Each project is supported by an R&D team of ~80 people, who
work on integrating the first lab experiments and pilot trials to full industrial
production while maintaining confidentiality.
Omnichem JV sales expected to reach INR4.5b by FY20
Granules-Omnichem is a 50:50 JV between GRAN and Ajinimoto-Omnichem,
Belgium. Omnichem would be transferring large-scale production of intermediates
and APIs to Granules-Omnichem JV. It will also provide full support for quality,
engineering, tech transfer, procurement, sales and management-related matters.
API supply to developed markets will start from 2HFY19E. Currently, the JV
manufactures various intermediates for Omnichem. Post approval, the JV would
start manufacturing high-value APIs for Omnichem’s CRAMs customers. These APIs
are likely for innovators and MNCs to compete with generic players.
In FY17, this business generated revenue of ~INR2b. However, upon required
regulatory approvals for products, Omnichem JV sales are expected to reach a peak
of INR4.5b by FY20. These product approvals should kick in from FY18. Until then,
the JV would continue supplying intermediates to Omnichem from this facility,
which reported sales of INR1,000m in FY17. It is likely to achieve >30% EBITDA
margin by selling high-value APIs (Oncology, CVS, etc.) to innovators.
6 October 2017
6

Granules India
Exhibit 10:
Expect significant ramp-up in FY19
Omnichem (INR m)
2250
1750
1250
750
0
FY15
250
FY16E
FY17E
FY18E
FY19E
FY20E
Omnichem sales (INR m)
To supply
intermediate
till FY17E
Scale up
expected
on API approvals
0
FY15
71.5
FY16
1000
FY17
1250
FY18E
1750
FY19E
2250
FY20E
Source: Company, MOSL
6 October 2017
7

Granules India
Return from investments visible; adding legs to growth
GRAN plans to invest INR10.5b over three years starting FY16. In FY16 and FY17,
it incurred capex of ~INR1.3b and INR3.4b, respectively. Although full-scale
benefits of these investments will be visible from FY19/20E, FY18E will be a
critical year as: 1) revenue contribution from capacity expansion in traditional
business will kick in, 2) filings from the US (already done 2, and ~8 by FY18E-end)
will provide visibility on areas of investment in that country, 3) FDA approval to
Omnichem JV plant will provide visibility on API sales from this plant (and, in
turn, lead to margin improvement to >30% from ~21% currently) and 4)
oncology plant should be ready.
The company plans to incur capex of INR6.5b in FY18. It plans to invest ~INR4.5b
in the US (USD10m in FY16, USD18m in FY17 and ~USD40m in FY18), mainly on
R&D (~60-65% of total) and the rest on expanding capacity and buying
equipment. Capex of INR2.1b has been incurred on traditional business capacity
expansion (revenue contribution to start from 2QFY18), while INR2.6b will be
spent on developing the oncology API/formulations plant (to get commissioned
by FY19 beginning).
Exhibit 11:
Total planned capex of ~INR10.5b over FY16-19E (INR m)
2,100
2,600
4,500
10,500
600
700
US Biz
Vizag onco
API/ PFI
expansion
Small Projects Maintenance
Capex
Total
Source: Company, MOSL
Capex to be funded via new fresh fund raising and internal accruals:
GRAN plans to
invest ~INR6.5b in FY18E and ~INR2-2.5b in FY19E. GRAN will generate ~INR3.5b
through internal accruals, while the rest can be funded through debt/equity. The
company has already lined-up a line of credit of ~USD60m at an attractive rate of
EURIBOR+2%. Also, recently, the company has raised INR3b through QIP route.
6 October 2017
8

Granules India
Strong regulatory history
At present, the company conducts business via six API/intermediate facilities, two PFI
facilities and two formulation facilities. There is also one API facility under
construction for multi-product APIs in Vizag.
Historically, GRAN has demonstrated a strong regulatory record, with no warning
letter or import alert for any facility in last eight FDA inspections.
Exhibit 12:
List of plants and recent inspections outcome
Locations
API facilities
Jeedimetla
Bothapally 1
Bothapally 2
Wuhan
Vizag 1
Vizag 2
Vizag 3
PFI facilties
Jeedimetla
Gagilapur
FD facilties
Gagilapur
US
Products
Metformin,
Paracetamol
Intermediate (Auctus)
Ibuprofen
Approvals
USFDA, KFDA, TGA, EDQM
USFDA, WHO, GMP, EDQM,
Infarmed (EU) approved
USFDA, EDQM, TPD – Canada,
MCC approved
Multiproduct (Auctus)
US FDA approved
Oncology (Omnichem JV)
Yet to approve
Multiproduct (Granules Under Development
Multiproduct small scale USFDA, Australian TGA,
German HA approved
Multiproduct large scale USFDA, German HA, Australian
TGA approved
Tablets
Infarmed (EU), USFDA
Complex product filings
Source: Company, MOSL
6 October 2017
9

Granules India
Building a strong management team
Granule is building a strong management team as it enters the US generic
space.
Name
Mr. Sreekanth Muttineni
Mr. Ganesh K
Mr M Gopi Reddy
Mr. Jaishokan Velusami
Designation
COO
CFO
Sr. VP - Quality
Hear - R&D (Granules Pharma Inc.)
Hired in
16-Sep
17-May
16-Sep
16-Apr
Previous Company
Aurobindo Pharma
Dr. Reddy
Cipla
Actavis & Par Pharma Inc.
Management team profile
Mr C. Krishna Prasad – Chairman and Managing Director
Mr Prasad is the founder of Granules and has three decades of experience in the
pharmaceutical industry. In 1984, he set up a Paracetamol manufacturing facility,
focused on capital and process efficiency. Pharmaceutical Formulations
Intermediates (PFIs) as a cost-efficient product for global formulations
manufacturers is a concept pioneered and popularized by him.
Dr. Prasada Raju – Executive Director
Dr Raju has over two decades of techno commercial experience in the global
pharmaceutical space. His previous experience at Dr Reddy’s encompasses new
product development, fostering strategic partnerships, driving synergies between
Industry and Academia, expanding into newer geographies, IP-driven early product
portfolio development and program management.
Mr Sreekanth Muttineni – Chief Operating Officer
Mr Muttineni joined Granules India in September 2016. During his nine-year tenure
at Lupin Ltd, he was responsible for manufacturing operations. Prior to that, Mr
Muttineni worked at Aurobindo Pharma as general manager – operations, and led
the establishment of generic pharmaceutical facilities and commercialization.
Mr. Ganesh K – Chief Financial Offer
Mr. Ganesh joined Granules India in May 2017. Before joining Granules, he was
associated with Dr Reddy’s for a span of 12 years as senior vice president –
corporate finance. Mr Ganesh is a chartered accountant, having professional
experience of more than 27 years. He specializes in leading large-scale M&A and
treasury operations, with skills in executing business/financial management
strategies and strengthening fiscal efficiency.
Mr M Gopi Reddy – Sr. Vice President (Quality)
Mr Reddy joined Granules India in September 2016. He started his career 1995 as
assistant manager production at GSK Pharma, where he worked for six years. He has
21 years of experience in corporate quality assurance, working with some of the
biggest pharma companies in India. In his previous stint in Cipla as head quality
compliance, he was responsible for developing systems and skills to ensure
compliance at all the company’s manufacturing sites globally.
6 October 2017
10

Granules India
Mr Jaishokan Velusami – Head R&D (Granules Pharmaceuticals Inc.)
Mr Velusami has over 15 years of extensive multi-disciplinary expertise in drug
development and portfolio management across a broad range of therapeutic areas,
drug delivery systems and novel platform technologies. His extensive experience
includes technology transfer, commercializing R&D assets, strategic planning and
optimizing operation strategy across cross-functional teams. Prior to Granules, he
led R&D programs at Actavis and Par Pharmaceutical Inc., and has also laid the
foundation for successful start-ups (Novel and Kali Laboratories) in drug
development and operational strategy.
Mr. Stefan Lohle – Chief Marketing Officer
Mr Lohle has over two decades of experience in the pharmaceutical industry. He has
been associated with Granules since 2001, and previously was head of Latin
American operations, where he primarily focused on the PFI business. Mr Lohle has
also served at Kimberly Clark Corporation for new project development.
6 October 2017
11

Granules India
Valuation and view
Over the last six years, GRAN reported 39% earnings CAGR on improved
profitability, higher operating leverage and superior business mix. It expanded
its finished dosages business at a CAGR of 24% over FY12-17, leading to higher
profitability and improved utilization of the existing capacity of 18b tablets.
Profitability of the PFI business has also improved substantially, with the
implementation of 6MT order capacity. As a result, GRAN has expanded its
EBITDA margins from 11.8% in FY11 to ~21% in FY17.
Going ahead, we expect >30% PAT CAGR to continue till FY20E, supported by
27% revenue CAGR and ~250bp margin expansion. Our target price of INR200
discounts GRAN’s FY19E EPS at 18x, which (a) is at 5-10% premium to peers, and
(b) implies a PEG of 0.5x (FY17-20E EPS CAGR of ~30%).
GRAN is currently trading at ~11x FY19E EPS. We argue for a P/E re-rating for
GRAN, given (a) strong PAT growth outlook – >30% CAGR over FY17-20E, backed
by 27% revenue CAGR and (b) expansion in high-margin CRAMs and US generic
business.
Exhibit 13: Peer comparison
CMP
122
48
626
520
181
1065
Mkt CAP
(USD m)
407
301
771
1035
356
145
P/E
FY18E
16.4
26.6
28.4
31.4
21.8
22.8
FY19E
12.6
16.2
19.3
19.4
18.9
14.22
EV/EBITDA
FY18E
FY19E
8.1
5.9
15.1
10.8
20.1
13.9
11.9
11.8
12.8
10.9
10.5
7.5
RoE (%)
FY18E
17.7
16.6
17.7
8.2
14.9
19.2
FY19E
18.8
22.3
21.5
12.2
15.2
25.2
Granules India
Marksans Pharma
Shilpa Medicare
IPCA
Suven
Neuland
Key catalysts to drive stock’s performance over the medium term
Finished dosages product approvals from regulated markets.
Commercialization of new capacity.
Higher than expected realizations from Omnichem JV.
Risks to our investment thesis
Pricing pressure on existing products.
Regulatory risks related to already approved manufacturing facilities.
6 October 2017
12

Granules India
Story in Charts
Exhibit 14: Revenues to exhibit 27% CAGR over FY17-20E
Revenues (INR b)
Exhibit 15: Revenues from US biz to drive growth
FD (%)
PFI (%)
API (%)
US Formulations (%)
Oncology API (%)
4.8
6.5
7.6
11.0 12.9 14.3 14.4 17.1 22.9 29.4
2 3
13 19
39 45 51 46 40 44 39 44 37 38 38
33 29
29 24 29 24 23 19 17
33 31 29
61 52 41
29 27 32 32 35 38 38 33 31
8 21
0 3
Exhibit 16: EBITDA margins to expand to 23% by FY20E
EBITDA (INR b)
16.1
19.4
EBITDA margin (%)
20.8
21.4
22.4
22.8
Exhibit 17: PAT to exhibit 33% CAGR over FY17-20E
PAT
11.8
12.1
11.1
14.4
1
1
1
2
2
3
3
4
5
7
209
300
326
753
909 1,185 1,645 2,027 2,782 3,860
Exhibit 18: Geography wise revenue break-up
North America
10.0
11.0
42.0
14.0
23.0
8.0
15.0
34.0
12.0
31.0
Latin America
14.0
12.0
29.0
15.0
30.0
Europe
10.0
16.0
31.0
11.0
32.0
India
6.0
21.0
22.0
12.0
39.0
Others
5.0
18.0
25.0
10.0
42.0
Exhibit 19: Product mix changing (%)
Paracetamol
Metformin
Ibuprofen
Guaifenecin
Others
11
4
23
10
53
9
4
25
17
45
5
5
21
22
48
6
5
22
25
41
15
5
16
23
41
16
6
12
26
40
18
5
13
30
34
Exhibit 20: Capex needs to continue with growth
Capex (INR m)
4,918
2,649
250
550
1,163
1,473 1,335
2,317
2,852
2,386
Exhibit 21: Return ratios to improve post FY18
ROE (%)
ROCE (%)
17.7
18.3
16.1
18.8
23.9 23.1
21.4
21.1
15.2
8.8
9.9
12.9
19.8
18.7
21.6
17.9
12.9 12.5
Source: Company, MOSL
Source: Company, MOSL
6 October 2017
13

Granules India
Exhibit 22: P/E band Significant re-rating over past 30
months
P/E (x)
Avg (x)
Max (x)
60.0
45.0
30.0
15.0
0.0
45.9
Exhibit 23: P/B chart
P/B (x)
6.0
4.5
3.0
Avg (x)
Max (x)
4.4
2.5
1.5
0.4
0.4
19.9
11.3
2.7
2.6
11.5
1.5
0.0
1.8
Source: MOSL, Company
Source: MOSL, Company
6 October 2017
14

Granules India
Financials and Valuations
Consolidated - Income Statement
Y/E March
Income from Operations
Less: Excise Duty
Total Income from Operations
Change (%)
Total Expenditure
% of Sales
EBITDA
Margin (%)
Depreciation
EBIT
Int. and Finance Charges
Other Income
PBT bef. EO Exp.
EO Items
PBT after EO Exp.
Current Tax
Deferred Tax
Tax Rate (%)
Add: Associate income
Reported PAT
Adjusted PAT
Change (%)
Margin (%)
FY14
11,167
209
10,959
43.4
9,376
85.6
1,583
14.4
298
1,285
204
43
1,124
0
1,124
305
66
33.0
0
753
753
130.8
6.9
FY15
13,279
350
12,929
18.0
10,843
83.9
2,086
16.1
527
1,560
323
43
1,280
0
1,280
287
83
29.0
0
909
909
20.8
7.0
FY16
14,603
308
14,295
10.6
11,528
80.6
2,767
19.4
643
2,124
399
77
1,802
0
1,802
535
82
34.2
0
1,185
1,185
30.3
8.3
FY17
14,599
247
14,353
0.4
11,364
79.2
2,988
20.8
715
2,273
323
99
2,050
0
2,050
652
-9
31.4
247
1,654
1,654
39.6
11.5
FY18E
17,426
375
17,051
18.8
13,402
78.6
3,649
21.4
1,001
2,648
359
140
2,429
0
2,429
777
0
32.0
375
2,027
2,027
22.5
11.9
(INR Million)
FY19E
23,373
458
22,915
34.4
17,782
77.6
5,133
22.4
1,428
3,705
561
137
3,282
0
3,282
1,050
0
32.0
550
2,782
2,782
37.3
12.1
Consolidated - Balance Sheet
Y/E March
Equity Share Capital
Total Reserves
Net Worth
Minority Interest
Deferred Liabilities
Total Loans
Capital Employed
Gross Block
Less: Accum. Deprn.
Net Fixed Assets
Goodwill on Consolidation
Capital WIP
Total Investments
Curr. Assets, Loans&Adv.
Inventory
Account Receivables
Cash and Bank Balance
Loans and Advances
Curr. Liability & Prov.
Account Payables
Other Current Liabilities
Provisions
Net Current Assets
Appl. of Funds
E: MOSL Estimates
FY14
203
3,357
3,560
0
403
4,417
8,380
6,539
1,714
4,825
0
1,246
2
3,848
1,742
1,109
418
580
1,640
1,355
162
123
2,208
8,379
FY15
204
4,107
4,312
0
549
4,872
9,732
8,438
2,272
6,166
0
620
2
5,184
2,245
1,326
653
959
2,295
1,887
233
175
2,888
9,732
FY16
217
6,444
6,660
0
646
4,767
12,074
9,622
2,941
6,681
0
766
2
7,080
3,071
1,526
1,419
1,065
2,521
1,791
608
122
4,559
12,074
FY17
229
8,807
9,036
0
565
5,981
15,582
10,099
3,656
6,443
0
2,605
1,082
8,633
2,761
4,177
498
1,198
3,183
2,160
934
89
5,451
15,582
FY18E
254
14,174
14,427
0
565
5,981
20,973
16,599
4,657
11,942
0
1,023
2
12,616
3,305
4,671
3,378
1,270
2,856
1,652
725
483
9,760
21,831
(INR Million)
FY19E
254
16,420
16,674
0
565
6,481
23,719
19,099
6,085
13,014
0
1,375
2
14,716
4,385
5,964
2,411
1,707
3,691
1,949
974
708
11,025
24,577
6 October 2017
15

Granules India
Financials and Valuations
Ratios
Y/E March
Basic (INR)
EPS
Cash EPS
BV/Share
DPS
Payout (%)
Valuation (x)
P/E
Cash P/E
P/BV
EV/Sales
EV/EBITDA
Dividend Yield (%)
Return Ratios (%)
RoE
RoCE
RoIC
Working Capital Ratios
Asset Turnover (x)
Inventory (Days)
Debtor (Days)
Creditor (Days)
Leverage Ratio (x)
Current Ratio
Interest Cover Ratio
Debt/Equity
FY14
3.7
5.2
17.6
0.4
11.0
32.8
23.5
6.9
2.8
19.6
0.3
23.9
19.8
15.9
1.3
58
36
77
2.3
6
1.2
FY15
4.5
7.0
21.1
0.5
13.6
27.4
17.3
5.8
2.4
15.0
0.4
23.1
18.7
14.6
1.3
63
36
92
2.3
5
1.1
FY16
5.5
8.4
30.7
0.6
13.9
22.3
14.4
4.0
2.1
11.0
0.5
21.6
21.4
15.2
1.2
78
38
86
2.8
5
0.7
FY17
7.2
10.4
39.5
1.0
16.2
16.8
11.8
3.1
2.3
10.9
0.8
21.1
17.9
14.7
0.9
70
104
116
2.7
7
0.7
FY18E
8.0
11.9
56.9
1.5
22.1
15.3
10.2
2.6
1.7
8.1
1.2
17.7
16.1
13.2
0.8
71
98
75
4.4
7
0.4
FY19E
11.0
16.6
65.7
2.2
23.2
11.1
7.3
2.3
1.3
5.9
1.8
18.8
18.3
14.3
1.0
70
93
67
4.0
7
0.4
Consolidated - Cash Flow Statement
Y/E March
OP/(Loss) before Tax
Depreciation
Interest & Finance Charges
Direct Taxes Paid
(Inc)/Dec in WC
CF from Operations
Others
CF from Operating incl EO
(inc)/dec in FA
(Pur)/Sale of Investments
Others
CF from Investments
Issue of Shares
(Inc)/Dec in Debt
Interest Paid
Dividend Paid
Others
CF from Fin. Activity
Inc/Dec of Cash
Opening Balance
Closing Balance
E: MOSL Estimates
FY14
1,124
298
190
-238
-310
1,064
16
1,080
-2,649
95
8
-2,546
11
1,709
-205
-47
0
1,467
0
417
417
FY15
1,280
527
309
-317
-363
1,435
18
1,453
-1,473
0
17
-1,456
11
628
-319
-83
0
238
236
417
653
FY16
1,801
643
347
-490
-915
1,387
51
1,438
-1,335
0
53
-1,281
1,059
191
-406
-234
0
609
766
653
1,419
FY17
2,050
715
223
-652
-1,813
524
0
524
-2,317
-1,080
0
-3,397
1,874
1,214
-323
-268
247
2,744
-129
1,419
1,290
(INR Million)
FY18E
2,429
1,001
219
-777
-1,266
1,617
-163
1,454
-4,918
1,080
140
-3,697
3,775
0
-359
-459
375
3,332
2,088
1,290
3,378
FY19E
3,282
1,428
423
-1,050
-2,029
2,116
-203
1,913
-2,852
0
137
-2,714
0
500
-561
-679
550
-140
-967
3,378
2,411
6 October 2017
16

Granules India
NOTES
6 October 2017
17

Disclosures:
The following Disclosures are being made in compliance with the SEBI Research Analyst Regulations 2014 (herein after referred to as the Regulations).
Motilal Oswal Securities Ltd. (MOSL) is a SEBI Registered Research Analyst having registration no. INH000000412. MOSL, the Research Entity (RE) as defined in the Regulations, is engaged in the business of providing Stock
broking services, Investment Advisory Services, Depository participant services & distribution of various financial products. MOSL is a subsidiary company of Motilal Oswal Financial Service Ltd. (MOFSL). MOFSL is a listed
public company, the details in respect of which are available on
www.motilaloswal.com.
MOSL is registered with the Securities & Exchange Board of India (SEBI) and is a registered Trading Member with National Stock
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from time to time, have a long or short position in, act as principal in, and buy or sell the securities or derivatives thereof of companies mentioned herein. (b) be engaged in any other transaction involving such securities and
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a)
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b)
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c)
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MOSL and it’s associates have not received any compensation or other benefits from the subject company or third party in connection with the research report. To enhance transparency, MOSL has incorporated a Disclosure
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copied or distributed, in part or in whole, to any other person or to the media or reproduced in any form, without prior written consent of MOSL. The report is based on the facts, figures and information that are considered
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The report is prepared solely for informational purpose and does not constitute an offer document or solicitation of offer to buy or sell or subscribe for securities or other financial instruments for the clients. Though
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The views expressed in this research report accurately reflect the personal views of the analyst(s) about the subject securities or issues, and no part of the compensation of the research analyst(s) was, is, or will be directly or
indirectly related to the specific recommendations and views expressed by research analyst(s) in this report.
Granules India
Disclosure of Interest Statement
Analyst ownership of the stock
Granules India
No
A graph of daily closing prices of securities is available at
www.nseindia.com, www.bseindia.com.
Research Analyst views on Subject Company may vary based on Fundamental research and Technical Research. Proprietary
trading desk of MOSL or its associates maintains arm’s length distance with Research Team as all the activities are segregated from MOSL research activity and therefore it can have an independent view with regards to
subject company for which Research Team have expressed their views.
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For U.S.
Motilal Oswal Securities Limited (MOSL) is not a registered broker - dealer under the U.S. Securities Exchange Act of 1934, as amended (the"1934 act") and under applicable state laws in the United States. In addition MOSL is
not a registered investment adviser under the U.S. Investment Advisers Act of 1940, as amended (the "Advisers Act" and together with the 1934 Act, the "Acts), and under applicable state laws in the United States.
Accordingly, in the absence of specific exemption under the Acts, any brokerage and investment services provided by MOSL, including the products and services described herein are not available to or intended for U.S.
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interpretations thereof by the U.S. Securities and Exchange Commission ("SEC") in order to conduct business with Institutional Investors based in the U.S., MOSL has entered into a chaperoning agreement with a U.S.
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therefore, may not be subject to NASD rule 2711 and NYSE Rule 472 restrictions on communication with a subject company, public appearances and trading securities held by a research analyst account.
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The report and information contained herein is strictly confidential and meant solely for the selected recipient and may not be altered in any way, transmitted to, copied or distributed, in part or in whole, to any other person
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the information and opinions contained in this document. The Disclosures of Interest Statement incorporated in this document is provided solely to enhance the transparency and should not be treated as endorsement of the
views expressed in the report. This information is subject to change without any prior notice. The Company reserves the right to make modifications and alternations to this statement as may be required from time to time
without any prior approval. MOSL, its associates, their directors and the employees may from time to time, effect or have effected an own account transaction in, or deal as principal or agent in or for the securities
mentioned in this document. They may perform or seek to perform investment banking or other services for, or solicit investment banking or other business from, any company referred to in this report. Each of these entities
functions as a separate, distinct and independent of each other. The recipient should take this into account before interpreting the document. This report has been prepared on the basis of information that is already
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information due to any errors and delays.
Registered Office Address: Motilal Oswal Tower, Rahimtullah Sayani Road, Opposite Parel ST Depot, Prabhadevi, Mumbai-400025; Tel No.: 022-3980 4263; www.motilaloswal.com. Correspondence Address: Palm Spring
Centre, 2nd Floor, Palm Court Complex, New Link Road, Malad (West), Mumbai- 400 064. Tel No: 022 3080 1000. Compliance Officer: Neeraj Agarwal, Email Id:
na@motilaloswal.com,
Contact No.:022-30801085.
Registration details of group entities.: MOSL: NSE (Cash): INB231041238; NSE (F&O): INF231041238; NSE (CD): INE231041238; BSE (Cash): INB011041257; BSE(F&O): INF011041257; BSE(CD); MSE(Cash): INB261041231;
MSE(F&O): INF261041231; MSE(CD): INE261041231; CDSL: IN-DP-16-2015; NSDL: IN-DP-NSDL-152-2000; Research Analyst: INH000000412. AMFI: ARN 17397. Investment Adviser: INA000007100. Motilal Oswal Asset
Management Company Ltd. (MOAMC): PMS (Registration No.: INP000000670) offers PMS and Mutual Funds products. Motilal Oswal Wealth Management Ltd. (MOWML): PMS (Registration No.: INP000004409) offers wealth
management solutions. *Motilal Oswal Securities Ltd. is a distributor of Mutual Funds, PMS, Fixed Deposit, Bond, NCDs, Insurance and IPO products. * Motilal Oswal Commodities Broker Pvt. Ltd. offers Commodities
Products. * Motilal Oswal Real Estate Investment Advisors II Pvt. Ltd. offers Real Estate products. * Motilal Oswal Private Equity Investment Advisors Pvt. Ltd. offers Private Equity products
6 October 2017
18