December 28, 2007| Healthcare

Initiating Coverage

Fortis Healthcare (FORHEA)

On the path to recovery
Fortis Healthcare is a leading player in the nascent healthcare services market that has high growth potential. It currently has a network of 12 hospitals with more than 1,800 beds, and focuses on secondary and tertiary care with specialisation in cardiology, orthopedics and neurology. The company has unveiled a three-pronged approach of greenfield facilities, acquisitions and management contracts. Fortis aims to expand its network by 28 more hospitals by investing Rs 1,800 crore to make it a 7000-bed healthcare company. The company has announced capex of Rs 600 crore to enhance its capacity to 3137-beds by 2011.

Current price Rs 102 Potential upside 9.8%

Target price Rs 112 Time Frame 12-15 months

HOLD

Analyst Name Himani Singh himani.singh@icicidirect.com

Expenditure on healthcare set to rise

Currently, the expenditure in healthcare in India is low at ~ 5.2% of GDP. The government's spending on healthcare is a meagre 1.2% of GDP. With the econony growing and incomes rising, healthcare spending is expected to grow about 5.5% of GDP by 2012. The healthcare services market in India is expected to grow from Rs 125,300 crore in 2006 to Rs 217,200 crore by 2011.

Sales & EPS trend

1200 1000 800 600 400 200 0 FY07 FY08E Net Sales FY09E FY10E 2 0 2 4 6

Fortis on growth path with aggressive expansion plans

Fortis has unveiled an expansion plan to strengthen its position in the NCR (National Capital Region), and spread to the western and southern regions of the country. It aims to expand its network by 28 more hospitals by investing Rs 1,800 crore to make it a 7000-bed healthcare company. The company has announced capex of Rs 600 crore to enhance its capacity to 3137-beds by 2011.

Diluted EPS (Rs)

To benefit from both organic and inorganic growth

The company will adopt a three-pronged approach of greenfield facilities, acquisitions and management contracts for increasing its capacity. We believe it would benefiting in the long-run due to its ablity to ramp-up bed capacity within a short period along with extensive plans of greenfield hospitals in revenue intensive procedures.

Stock metrics Promoters holding Market Cap 52-week H/L Sensex Average volume

74.44% Rs 2,266 crore Rs 111 / 68 20206 681076

Valuations
We expect Fortis to face pressure in expanding returns due to the capital intensive nature of the business, while our outlook remains positive for the long-term. We believe the current business is fairly valued and upsides could be expected once the extended bed base is operational in FY10. We arrive at a target price of Rs 112 through a DCF valuation on a base case scenario. We initiate coverage on the stock with a HOLD rating. Price Trend FY07 -98.12 18.07 -5.43 FY08E -55.00 22.67 -2.43 -41.21 2.80 43.86 -6.9% -2.6% FY09E 2.32 22.67 0.10 976.07 2.79 25.35 0.3% 1.7% FY10E 34.47 22.67 1.52 65.75 2.67 17.50 4.1% 4.3%
140 120 100 80 60 40 20 0 Jun-07

Comparative return metrics (%) Stock return 3M 6M Apollo Hospital 7.79 -1.48 Indraprasth M 36.13 69.36 Fortis 15.67 15.80

12M 17.56 66.77 NA

Exhibit 1: Key Financials Year to March 31 Net Profit Shares in issue (crore) EPS (Rs) P/E (x) Price/Book (x) EV/EBIDTA RoNW (%) RoCE (%)

Absolute Sell Target Price Absolute Buy

-25.9% -4.7%

Jun-07

Jul-07

Jul-07

Aug-07

Aug-07

Nov-07

May-07

May-07

Nov-07

Sep-07

Sep-07

Oct-07

Oct-07

Oct-07

ICICIdirect | Equity Research

1|Page

Dec-07

Source: ICICIdirect Research

Table of Contents Industry Outlook ......3

Expenditure on healthcare set to rise ...3 Incidence of lifestyle related diseases increasing ...4 Rising penetration of healthcare .......5 Medical tourism to provide further fillip ...5 Demand expected to overshoot announced supply ......7 Fortis on growth path with aggressive expansion plans ......8 Foray into REITS to boost returns .......11 Larger market penetration, cost efficiency through Hub & Spoke model .11 Good team of skilled doctors, nurses .11

Investment Rationale ..........7

Escorts Acquisition ...12 Company Background ...13 Risks & Concerns ..14 Financials ..15
Consistent topline growth ...15 Margins to improve substantially, better ARPOB in FY10 ..15 Returns to remain capped, asset turnover under strain .16

Revenue Model .17 Valuations .18 Financial Summary ...19 Annexe ..22
Structure of healthcare service industry 22

Exhibits
Exhibit 1: Key Financials 1 Exhibit 2: Indias per capita expenditure on healthcare is among the lowest ...3 Exhibit 3: Private expenditure on healthcare amongst the highest ...3 Exhibit 4: Growth in healthcare contributed by lifestyle-related disease on rise ..4 Exhibit 5: Cardio-vascular diseases, cancer to increase in-patient registration ...5 Exhibit 6: In-patient revenues to be driven by lifestyle diseases ...5 Exhibit 7: Indias comparative cost advantage in medical tourism .......6 Exhibit 8: Infrastructure needs a major fillip .7 Exhibit 9: Major capex plans announced by private players .7 Exhibit 10: Fortis at advantage with a 700 bed extension capacity present 8 Exhibit 11: Fortis capex focus on greater profitability ..9 Exhibit 12: Fortis graph of organic & inorganic growth ...10 Exhibit 13: Management contract to increase reach ..10 Exhibit 14: Escorts history & litigations ..12 Exhibit 15: Subsidiary structure ...13 Exhibit 16: Bottomline to make a mark by FY10 ..11 Exhibit 17: Margins under strain; uo-move in FY10 with improved ARPOB 12 Exhibit 18: Returns to improve with asset turnover improvement ..13 Exhibit 19: Discounted Cash Flow ...14 Exhibit 20: Revenue breakdown ..23

2|Page

INDUSTRY OUTLOOK
Expenditure on healthcare set to rise
Currently, the expenditure on healthcare in India is very low. According to the WHO (World Health Organisation), spending on healthcare in 2004 was US$34.9 billion, or 5.2% of GDP. The governments contribution was a meager 1.2% of the GDP. With the economy growing and incomes rising, healthcare spending is expected to rise to 5.5% of GDP (~US$60.9 billion) by 2012. Further, the total healthcare services market in India is expected to grow from Rs 125,300 crore in 2006 to Rs 217,200 crore by 2011, and further to Rs 364,200 crore by 2016. Exhibit 2: Indias per capita expenditure on healthcare is among the lowest
USA UK Japan Brazil Korea Mexico Russia Malaysia Thailand China India 0 1000 2000 3000 4000 5000 6000 7000

Scope of increase in healthcare spending huge

International Dollar Rate

Source: WHO 2004

Private expenditure on healthcare in India is among the highest in the world. Private healthcare providers stand to gain the most from the expected growth in demand in healthcare services. Exhibit 3: Private expenditure on healthcare amongst the highest (%)
UK Japan Thailand Russia Malaysia Brazil Korea Mexico USA China India 0 10 20 30 40 50 60 70 80 90

Private expenditure amounts to 82.7 % of the total expenditure on health in India

Source: WHO 2004

3|Page

Changing demographic and disease profiles and rising treatment costs are likely to result in increased healthcare spending (more than double) over the next 10 years. The private healthcare sector is likely to contribute the largest component in 2012, rising to Rs 156000 crore from the current level of Rs 69000 crore. With the expected growth in the pharmaceutical market, the total healthcare market in India could rise from Rs 103000 crore currently (5.2% of GDP) to Rs 232000 320000 crore (6.2%-8.5% of GDP) by 2012.

Incidence of lifestyle-related diseases increasing

The average real household disposable income of Indians is expected to almost triple from Rs 113,744 in 2005 to Rs 318,896 in 2025 (CAGR of 5.3%). It has been observed in countries that as incomes rise, people would be willing to spend more on healthcare. Fast-changing socio-economic and demographic changes in India have increased the incidence of lifestyle diseases like cancer, diabetes and cardiovascular (heart) ailments. Lifestyle-related diseases are more expensive to treat than communicable and infectious diseases. Further, the number of people aged between 15 years and 64 years (the age group more prone to lifestyle diseases) is expected to increase from 61.5% of the total population in 2000 to 65% in 2010. Exhibit 4: Growth in healthcare contributed by lifestyle related diseases on rise Rs 44,000 crore
18 %

Rs 82,000 crore
17 %

Other Diseases
57 % 41 %

Communicable & Infectious Diseases Lifestyle Diseases

Greater share of lifestyle related diseases on a bigger market base

42 % 25 %

2001

2012

Source: CII-McKinsey The rapid growth of the middle and upper urban middle class, a segment that accounts for substantial proportion of healthcare expenditure, will lead to increased per capita expenditure on treating lifestyle-related diseases. By 2012, in-patient spending is expected to rise from the current levels of 39% to 50% of the total expenditure. Currently, in the US, in-patient spending accounts for 62% of total healthcare spending.

4|Page

Exhibit 5: Cardio-vascular diseases, cancer to increase In-patient registration

Exhibit 6: In-patient revenue to be driven by lifestyle diseases

73%

65%

64%

48%

27% 2001

35% 2012 Others

36% 2001

52.50%

2012 Others

Cardio-vascular diseases & Cancer

Cardiology, Oncology & Diabetes

Source: CII McKinsey Cardio-vascular diseases and cancer to grow at a faster rate, resulting in a greater share of in-patient registrations

Cardiology, oncology and diabetes that require longer stays and costlier treatments would have a greater share of inpatient revenues

Fortis is expected to benefit the most from the trend with its brand recognised for cardiology and other multi-specialities.

Rising penetration of health insurance

According to a 2002 Planning Commission report, less than 10% of Indias population is covered under some form of health insurance. Mediclaim penetration was only 1.6%, although the number of people with health insurance is increasing. The total health insurance premium paid in India amounted to US$ 533.3 million in 2005-06 as compared to US$ 385 million in 2004-05. The number of people covered under health insurance plans has increased from 4 to 5 million in 2001 to over 12 million in 2006. According to CRIS-INFAC, approximately 30% of the inpatients in private hospitals had insurance cover in 2006. Going forward, with an increase in employment and disposable incomes, we believe that a significant proportion of population will be under medical insurance cover.

Medical tourism to provide further fillip

Medical tourism has gained momentum over recent years and India is fast becoming a major medical tourism hub in the world. As governments worldwide grapple with soaring healthcare cost, the relative low cost of surgery and critical care in India is drawing the attention of global healthcare providers. Medical value travel contributes only 0.9% of the total hospital revenues. However, it is expected to become a US$1.4 billion industry and contribute more than 2.5% of the total hospital revenues by 2012. In 2006, around 180,000 to 200,000 international patients received medical treatment in India, up from approximately 10,000 in 2000. Currently, most foreign patients are from nearby developing countries, prominently SAARC nations, which lack top quality hospitals and health professionals. Patients from the US and Europe are relatively few. International patients choose India primarily because of the substantial India emerging as a medical tourism hub

5|Page

difference in the cost of high-end surgery and critical care and quicker access to medical care vis--vis some highly developed countries. The cost of such medical care also compares favourably against costs of other more established medical tourism destinations like Thailand.

Exhibit 7: India's comparative cost advantage in medical tourism (in US$) Procedure Angioplasty Gastric bypass Heart bypass Heart-valve replacement (single) Hip replacement Hysterectomy Knee replacement Mastectomy Spinal fusion US insurer's cost 25,704 to 37,128 27,717 to 40,035 54,741 to 79,071 71,401 to 103,136 18,281 to 26,407 9,591 to 13,854 17,627 to 25,462 9,774 to 14,118 25,302 to 36,547 US retail price 57,262 to 82,711 47,988 to 69,316 122,424 to 176,835 159,326 to 230,138 43,780 to 63,238 20,416 to 29,489 40,640 to 58,702 23,709 to 34,246 62,778 to 90,679 India 11,000 11,000 10,000 9,500 9,000 2,900 8,500 7,500 5,500 Thailand Singapore 13,000 15,000 12,000 10,500 12,000 4,500 10,000 9,000 7,000 13,000 15,000 20,000 13,000 12,000 4,500 13,000 12,400 9,000

Sources: Subimo (US rates, including at least one day of hospitalisation); PlanetHospital (international rates)

6|Page

INVESTMENT RATIONALE
Demand expected to overshoot announced supply
Currently, India has capacity of around 1.05 million beds. To meet the projected demand and maintain the ratio of bed to population at 1.9:1000, India will need to expand its bed capacity by 632,000 to 1.68 million by 2016, translating to Rs 165,300 crore worth of investment. Exhibit 8: Infrastructure needs a major fillip
Japan (2001) Russia (2005) Korea (2002) UK (2004) USA (2003) Brazil (2002) Thailand (2000) China (2003) Malaysia (2001) Mexico (2004) India (2002) 0 20 40 60 80 100 120 140

Even to maintain the current ratio on an increased base of population, Indian healthcare sector would experience huge supply shortfall

Hospital beds per 10000 people

Source: WHO

A CII-McKinsey study estimates that 20% of the additional beds will be required for specialty healthcare needs such as cancer and cardiac diseases. In India, privately operated healthcare services accounts for over half of all in-patient hospital visits and 82% of all out-patient visits. Going forward, we expect the investment to come in from the public vs. private for provisioning the demand growth in the same proportion. Exhibit 9: Major capex plans announced by private players No of hospitals 25 20 8 12 7 7 Number of beds 6952 7629 1390 1800 765 1020 Location Pan India Southern India Southern, Western & Eastern Northern India & Chennai NCR Southern India & Nagpur Planned beds ~3200 3025 1850 1337 585 315 Beds by 2011 ~10000 10654 3240 3137 1350 1335 Type of Facility* PT PST T ST PST PST

Apollo Hosp Manipal HC Wockhardt Fortis HC Max HC Care

Announced capex plans inadequate to quench the expected demand

Source: CRIS-INFAC, ICICIdirect Research * P: Primary Care; S: Secondary Care; T: Tertiary Care

Hospitals with a capacity for a fast ramp-up of bed base and having a geographical spread in metros, where incidence of lifestyle-related diseases is high, would benefit the most from the increased demand for healthcare services. Fortis, with its focus on tertiary care in cardiac

7|Page

ailments along with multi-speciality, would stand to benefit from the demand supply mismatch scenario.

Fortis on growth path with aggressive expansion plans

Fortis was incorporated in 1996 with a 400-bed base, which increased at a slow pace to 788 by 2004. Since then, the company has been expanding aggressively through green-field projects, acquisitions and management contracts. It currently has a bed base of 1,800, including 286-managed beds. Going forward, the company plans to continue with its aggressive expansion by strengthening its position in the NCR region and spread to the western and southern regions of India. Fortis has announced plans to invest Rs 1,800 crore that would give it a pan-India presence through the addition of 28 more hospitals to increase its capacity to 7,000 beds in the future. Fortis has embarked upon a capex plan of Rs 600 crore to enhance its capacity to 3137-beds by 2011.

Organic growth Rapid scale-up of existing bed capacity

Fortis Healthcare has a current installed capacity of 1,800 beds. It has created infrastructure (building & equipments) to expand its bed base to 2,500 at a rapid pace without much investment needed at the time of expansion. It costs about Rs 40-60 lakh to create infrastructure for one hospital bed (ex-land). For a green-field project, per bed cost, inclusive of land would range between Rs 6080 lakh depending upon the facility of treatment. Looking at the demand-supply gap of hospital beds in India, Fortis would benefit in the long-run due to its ability to expand by around 700 hospital beds within a very small time lag. The bed expansion is present in its hospitals which have either turned around or would be booking profits on a standalone basis by FY09-10. Thus any addition to the capacity in these hospitals would have incremental positive affect on the bottomline. Exhibit 10: Fortis at advantage with a 700 -bed extension capacity present Hospitals with extendible capacity Current bed count Post bed extension Fortis Hospital Mohali 225 300 Fortis Hospital Noida 150 350 Fortis Flt Lt Rajan Dhall Hospital Vasant Kunj 120 200 EHRC Faridabad 220 250 EHSSI Amritsar 128 166 Malar Chennai 180 400 Fortis Hospital Amritsar 45 50 Jessa Ram Hospital Delhi 100 150 Fortis La Femme 36 50 Khyber Medical Institute, Srinagar 30 50 Total 1234 1966
Source: ICICIdirect Research

Fortis to benefit from bed extension capacity of 700 in the existing hospitals

8|Page

Capex in revenue intensive specialties

Fortis has undertaken an Rs 200-crore capex and commenced first phase to develop a 258-bed multi-specialty hospital at Shalimar Bagh, New Delhi, which is expected to be operational by June 2009. In the second phase, the facility would be expanded to 550 beds. The company plans to enter into the quaternary care facility with its Rs 800 crore Gurgaon medicity project, which is under development. This super-specialty hospital would have the flagship focus on oncology along with trauma, pediatrics, cardiology, neuroscience, organ transplant and orthopedics. In the first phase, Fortis would be investing Rs 350 crore for 350 beds expected to be operational by January 2010. Exhibit 11: Fortis capex focus on greater profitability Procedure ALOS Avg realisations (Rs) Cardiac 5 200,000 Orthopedics 10 150,000 Oncology 6 to 7 70,000-100,000 Neurosurgery 4 to 5 Differs
Source: CRIS-INFAC, Company data ; ALOS: average length of stay

Fortis to focus on tertiary and multi & super speciality facilities creating a brand recognized pan India Announced projects by Fortis
Location Shalimar bagh ,ND Gugaon Medicity No. of beds 258 Phase I 550 Phase II 350 Phase I 850 Phase II Commencement June 2009 Phase I January 2010 Phase I

Operating Margins 25-30% 25-30% 18-20% 16-18%

Capex focused on procedures with high average length of stay, realisation per patient and high margins

On an average, a Fortis hospital takes 20-24 months to breakeven at the operating level. Breaking even at the book, takes around 48 months. Although these expansion plans would pose a burden on the books in the short-term, FY10 would be the year when most of its existing hospitals would turnaround and Fortis should start booking net profits thereon.

Inorganic growth Acquisitions to firm up market position & brand equity

Fortis has aggressively used the acquisition route to firm up its position in the market and strengthen its brand value. The acquisition of Escorts Heart Institute Research Center (EHIRCL) in 2005 (90% stake), (owned three major hospitals and 15 satellites and heart command centers), and International Hospitals (IHL) in 2006 (99.9% stake), (owned Fortis Noida Hospital), has helped the company become a stronger player in cardiology and other specialties in northern India. In September 2007, Fortis marked its footprint in southern India by acquiring Chennai-based 180-bed Malar Hospital. Malar Hospital is a multi-specialty hospital with a focus on mother-child care. Fortis plans to turn it into a superspecialty institution in line with the company's plans for southern India. This strategy works for the company when expansion is desired at a fast pace and a running hospital would start generating revenue from the day of acquisition. Fortis entered into a joint venture with real estate major DLF in September 2007 for setting 15 hospitals over the next five years. The total investment on these 15 hospitals is likely to be to the tune of Rs 3,000 crore. The hospitals will be set up in townships being developed by DLF, and will belong to the super-speciality category. They are likely to be of 250-400-bed capacity and each hospital would require an investment of about Rs 200 crore. Fortis is likely to hold a 74% stake in the joint venture with DLF owning the balance

Aggressive plans to expand base at a fast pace through acquisitions and management contracts

9|Page

26%. On further clarity on business plans we would include these hospitals into our projections. Exhibit 12: Fortis graph of organic & inorganic growth 2007 Acquire 100% stake in Hiranandani Healthcare, Vashi Acquire 46% stake in Malar Hospital, Chennai JV with DLF for setting up 15 Hospitals

2003 Fortis Hospital, Amritsar 2001 Fortis Hospital, Mohali Mgmt C. of Jessa Ram Hospital, ND

2004 Fortis Hospital, Noida

2005 Acquire 90% stake in EHIRCL resulting in acquisition of EHCL, EHSSIL, EHSSHL & EHIRCL

2006 Mgmt C. & 5% stake in La Femme ND, Mgmt C. of Khyber Med. Inst. Srinagr. Acquire 99.99% stake in IHL Acquire 100% stake in Oscar Bio-Tech

Source: Company data, ICICIdirect Research For details on corporate structure refer exhibit 15

Management contracts to expand, yet remain asset light

The hospital business is very capital-intensive with major investments required in infrastructure and medical appliances. Management contract of hospitals is one way of expanding brand reach without blocking funds in assets. Fortis first entered into a management contract with the 100-bed Jessa Ram Hospital in New Delhi. Currently, Fortis has four management contracts with a total bed base of 286, amongst which the 120-bed Vasant Kunj Hospital is the star performer focused on renal care, cardiac, pulmonology and orthopedics. The fee structure for management contract varies on case-by-case basis between 8-10% of revenue or 30-40% of operating profits or 60-70% of net profits. Exhibit 13: Management contracts to increase reach Facility Beds Fortis Flt Lt Rajan Dhall Hospital Vasant Kunj 120 Jessa Ram Hospital Delhi 100 Fortis La Femme 36 Khyber Medical Institute, Srinagar 30
Source: Company, ICICIdirect Research

Management Fee Structure 70% of Net profit or 10% of Revenues till the hospital is loss making 35% of EBIDTA 8% of Revenue 8% of Revenue

Of the current 12 hospitals, Fortis has equal proportion of greenfield projects, acquisitions and management contracts. Going forward, the company plans to increase the number of hospitals to 40 with 7,000 beds. It plans to maintain the ratio between greenfield projects, acquisitions and management contracts.

10 | P a g e

Foray into REITs to help valuations

Fortis has announced its intentions to try out a real estate investment trust (REIT) agreement. It is contemplating one REIT for its existing facilities on a trial basis whereby the land and building would be transferred to an SPV (special purpose vehicle). Private investors could invest in the SPV and bringing in cash. The SPV would then lease the assets to Fortis, which would pay the SPV the lease rental. Fortis would have an option to buyback the assets after a specified period of time. REITs would help reduce capital employed and would generate higher return on the invested capital. This arrangement would release the blocked capital for either reducing debt or accelerating growth of Fortis. REITs could prove a trigger for the stock accelerating better returns

Larger market penetration, cost efficiency through Hub & Spoke model
The company follows a hub and spoke model for its hospital network. This strategy helps the company fulfil the dual objective of having a larger market penetration and cost efficiency. The business model helps it serve the medical needs of patients at multi-specialty facilities located close to them. The model also helps deliver sophisticated, advanced procedures and quaternary care at its hub. This helps the company to reach out to patients, who are not even in area of reach of its local multi-specialty hospitals. Through this model, it can efficiently deploy resources across its network and its super-specialty experts to provide their expertise and support at its multi-specialty hospitals. The company plans to have 4 hubs and 12-15 spokes in northern India in the next 2-4 years. This strategy works for tapping patients in the metro through the hub as well as extending reach to tier II cities through spoke.

Good team of skilled doctors, nurses

Fortis follows the staff model whereby doctors are on the rolls of the company. This minimises personnel expenses and also capacity utilisation increases as the same doctor can treat more patients. The company has a team of 626 doctors at its owned hospitals and EHCR, and 2,619 nurses and 526 other medical personnel. The company focuses on building the Fortis brand in contrast to the more prevalent visiting doctors brand, to set a standard of facilities, treatment and service across al its hospitals for its patients. Healthcare delivery industry faces shortage of medical personnel. To meet the increased requirement of medical professionals, Fortis aims to develop 10 medicities over the next decade. A medicity typically includes a superspeciality hospital, medical and dental college, institutes that provide courses in para-medicine and allied medicine, and research facilities. Fortis has already identified a few cities for setting up medicities like Gurgaon, Lucknow, Jaipur, Ahmedabad, and two cities in Punjab. Plans of setting up medicities would cope with the challenge of appointing and retaining quality medical professionals

11 | P a g e

ESCORTS ACQUISITION
In September of 2005, Fortis acquired 90% interest in EHIRCL, a provider of private healthcare services that owned and operates three majorityowned hospitals in north India and operated a fourth hospital in collaboration with the Government of Chhattisgarh, at the time of the acquisition, 10 satellite and heart command centres for total consideration of Rs. 585.01 crore. Post the acquisition Fortis has initiated the process of integrating the Escorts hospitals and their other hospitals, the Escorts hospitals generally continue to exist as a discrete unit with their own resources, employees and management. While the process of integration of EHRC and EHSSI with the Company has been completed to a significant extent, Fortis is still in the process of integrating the operations of EHIRC with the Company. If they are unable to manage the tax payments and land rights, and such litigations, may adversely affect Fortis operations and financial condition and could cause the valuations to decline significantly as EHIRCL consolidated contributes a significant 60% to the revenues of Fortis. Exhibit 14: Escorts history & litigations Oct 21, 1981 Incorporation of Escorts Heart Institute & Research Center (EHIRC) as a Charitable Society, New Delhi, under Society Registration Act (SRA) 1860

DDA, the owner of the land on which the EHIRC hospital is located, has treated both the initial amalgamation of the societies and the subsequent conversion to a company as prohibited transfers of property under the terms of its lease and, accordingly, has terminated the lease deeds and allotment letters in respect of the land on which the EHIRC hospital is located and challenged the same in Delhi High Court. EHIRCL has successfully brought a stay order thereby, restraining DDA from recovering physical possession of property. Due to the cancellation of lease deed by DDA, EHIRCLs nursing licence, which expired on March 31, 2005, also remains suspended for renewal
Source: Company

Nov 11, 1999 EHIRC amalgamated with a Non Charitable Society under the SRA with Registrar of Society Chandigarh

May 30, 2000 Incorporation of EHIRCL post conversion of EHIRC from a NON Charitable Society to a Limited Company under Companies Act

Sep 25, 2005 Fortis acquires 90% share capital of EHIRCL for Rs. 585.01 crore

Delhi High court, on March 22, 2007, ruled that EHIRCL has to provide free medical service to the extent of 25% of Outpatients and 10% of Inpatients as it has received land at concessional rates from DDA. However, EHIRCL is currently planning to file an appeal the in the Supreme Court.

12 | P a g e

Company Background
Dr Parvinder Singh, the promoter of Ranbaxy Laboratories, established Fortis Healthcare in 1996. The company is the second largest private healthcare company in India with a network of 12 hospitals in northern India. In addition, it has 15 satellite and heart command centres in India, and one heart command centre in Afghanistan. Most of its hospitals are multi-specialty, which provide secondary and tertiary healthcare services. Some of the multi-specialty hospitals also include super-specialty centres of excellence providing quaternary healthcare services in areas such as cardiac care, orthopedics, neuro-sciences, oncology, renal care, gastroenterology, and mother and child care. Two of its hospitals, Escorts Heart Institute & Research Centre at New Delhi (EHIRC) and Escorts Heart Centre at Raipur (EHCR), focus primarily on cardiac patients, with EHIRC serving as a super-specialty centre of excellence for cardiac care. It also operates Fortis La Femme, a boutique-style hospital that focuses on womens health and maternity care. Exhibit 15: Subsidiary structure

Share holding pattern Shareholder Promoters Institutional investors Other investors General public

% holding 74.44 7.44 9.71 8.41

Promoter & Institutional holding trend

120 100 80 60 40 20 0 99.2 74.5 74.5 74.4

0.0 Q3FY07

15.9 Q4FY07

8.3 Q1FY08 FII

7.4 Q2FY08

Promoter

Fortis Healthcare
Fortis Hospital Mohali Fortis Hospital Amritsar Fortis La Femme New Delhi (O&M) Jessa Ram Hospital New Delhi (O&M) Khyber Medical Institute Srinagar (O&M) 1 satellite center Fortis Hospital Gurgaon

International Hospital (99.90%) Fortis Hospital Noida

Escorts Heart Institute Research Oscar Biotech Center (90%) (100%) Escorts Heart Institute & Fortis Flt. Lt. Rajan Dhall Research Center New Delhi Hospital Vasant Kunj, New Delhi (O&M) Escorts Heart Center Raipur * Fortis Hospital 15 satellite & Heart command Shalimarbagh New Delhi center (7%)

Hiranandani Healthcare (100%) Hiranandani Hospital Navi Mumbai

(39%)

Malar Hospital (46%) Malar Hospital Chennai

Escorts Hospital & Research Center (100%) Escorts Hospital & Research Center Faridabad

Escorts Heart & Super Speciality Institute (82.61%) Escorts Heart & Super Speciality Institute Amritsar

Escorts Heart & Super Speciality Hospital (100%) Escorts Jaipur

Escorts Heart Center (100%)

Source: Company, ICICIdirect Research * In collaboration with the Govt. of Chhattisgarh

13 | P a g e

RISKS & CONCERNS

Litigations pending
There are various cases pending against the company. Apart from the pending suit regarding the Escort acquisition, there are lawsuits on termination of lease license and nursing licenses also. If the Escorts case goes against the company, it would result in suspension of EHIRC operations, which contributed around 60% to Fortis revenues in FY07.

Execution risk
While Fortis plans seem robust, timely execution would be a key variable. Any delay in the development of the upcoming hospitals would shift the revenue estimates downwards thereby affect the profitability negatively. We believe that going forward, the growth will be propelled mainly through owned-hospitals (new facility or acquired). Any deviation in the companys strategy of future acquisitions and developments would shift the profitability estimates forward.

Availability and retention of medical professionals

With the surge in global demand for medical professionals, the attrition rate in the sector is expected to increase. This trend has posed crucial challenge to identify fresh talent, developing mechanics to train and retain them. Fortis has taken steps to mitigate this risk through plans to put up medicities with medical colleges and other training support systems. Any deferment in this plan could expose Fortis to the talent crunch.

Rapid technological advances

The hospital sector is highly capital-intensive in nature, with 40-45% of the expenditure being incurred on equipment. The industry is charaterised by frequent innovations and changing technology. Normally equipment is upgraded every 7-10 years, which requires cash inputs. Any frequent shift in technology and impairment of equipment would put a dent on the profitability.

14 | P a g e

FINANCIALS
Consistent top line growth
Fortis has shown a consistent growth in top line since its inception. During FY05-07, when the private healthcare sector gained substantial weight in the overall healthcare industry, Fortiss top line increased at a phenomenal 172% CAGR to Rs 546 crore in FY07 from Rs 73 crore in FY05, with the company breaking even at the operating level in FY06. This growth was achieved through expansion of rooms in Fortis (Mohali and Noida) and Escorts (Delhi and Amritsar). Going forward, the increased demand in the tertiary acre segment is expected to remain in the favour of Fortis. We believe Fortis would be able to improve its bottom line despite the strain due to the ongoing capex and low asset turnover. During FY07-10, Fortis is expected to witness a 29.3% CAGR growth in net sales (Rs 530 crore in FY08, Rs 789 crore in FY09, and Rs 1108 crore in FY10). It is expected to book marginal profits of Rs 2.32 crore at the net level for the first time in FY09, which should improve substantially to Rs 34.47 crore in FY10E. Exhibit 16: Bottomline to make a mark by FY10 (Rs crore)
1200 1000 800 600 400 200 0 200 FY07 FY08E Net Sales
Source: Company, ICICIdirect Research

Top line to grow by 29 % CAGR FY07-10

FY09E Net Profit

FY10E

Margins to improve substantially, higher ARPOB in FY10

Fortis has been steady improving its operating margins and broke even at operating level in FY06. Going forward, we expect the company to optimise on the sharing of doctors amongst its hospitals in the NCR thereby improving medical professionals per bed count to 2.9 levels from 3.4 currently, thereby Fortis would be able to contain the surge in employee expense. Fortis has also initiated the campaign of linking the systems of all its hospitals to improve its operating and other expenses, which would help in margin improvement by around 100 basis points. We believe with increased demand for better medical services in the cardiac, orthopedics, neurology and oncology, where Fortis focuses, would help it garner better average revenue per occupied bed (ARPOB) from Rs 60 lakh in FY07 to Rs 69 lakh in FY10 at an increased bed base. Due to ongoing capex, the company has taken a beating at the net profit levels. We expect improvement in net profits in FY10 at Rs 34.47 crore on the back of room expansions in Fortis Mohali and Noida, Escorts Faridabad and Amritsar, Malar Hospital and the launch of Fortis Shalimarbagh. We expect net profit

15 | P a g e

margin to improve to 3.1% in FY10E when Fortiss planned expansions become operational. Exhibit 17: Margins under strain; up-move in FY10 with improved ARPOB

20 15 10 5 % 0 5 10 15 20 25 ARPOB (RHS) Operating Profit Margin Net Profit Margin FY07 FY08E FY09E FY10E

0.8 0.7 0.6 Rs Crore 0.5 0.4 0.3 0.2 0.1 0.0

Average revenue per occupied bed to increase post FY08 along with booking profits at net level from FY09

Source: Company, ICICIdirect Research ; ARPOB: Average Revenue per Occupied Bed

Returns to remain capped, asset turnover under strain

Healthcare is a capital-intensive industry and does not experience high return ratios. Share of investment into medical equipments is as large as 50% for Fortis. Due to competitive forces, Indian demography and the fact that 82% of the healthcare spending comes from private out-of-pocket funding, it is not feasible to hike up realizations thereby putting a constraint on the asset turnover ratio. In FY10 when we expect bed expansions in the existing facilities, leading to better asset utilisation is when we foresee an improvement in the asset turnover ratio to 0.82 from 0.58 in FY09E and 0.45 in FY08E. Consequently in FY10 we foresee an improvement in ROE from 0.29% in FY09E to 4.1% in F10 while ROCE would increase from 1.7% to 4.3% in the same period. It must be noted that Fortis would be increasing its leverage for the capex and future acquisitions. Exhibit 18: Returns to improve with asset turnover improvement
10 5 0 5 10 15 20 25 30 RONW (LHS)
Source: Company, ICICIdirect Research

0.9 0.8 0.7 FY07 FY08E FY09E FY10E 0.6 0.4 0.3 0.2 0.1 0.0 ROCE (LHS) Asset Turnover (RHS) Days 0.5

Improved asset turnover to result an improvement in RONW

16 | P a g e

Revenue Model
Owned Beds (in Nos.) Fortis Hospital Mohali EHIRC, Delhi Fortis Hospital Noida EHRC Faridabad EHSSI Amritsar Fortis Hospital Amritsar Fortis Hospital Shalimar Bagh Mallar Hospital Hiranandani Fortis Vashi Escorts Jaipur EHCR Raipur Management Contract Fortis Flt Lt Rajan Dhall Hospital Vasant Kunj Jessa Ram Hospital Delhi Fortis La Femme Khyber Medical Institute, Srinagar Total Beds Occupancy Fortis Hospital Mohali EHIRC, Delhi Fortis Hospital Noida EHRC Faridabad EHSSI Amritsar Fortis Hospital Amritsar Fortis Hospital Shalimar Bagh Mallar Hospital Hiranandani Fortis Vashi Escorts Jaipur EHCR Raipur Fortis Flt Lt Rajan Dhall Hospital Vasant Kunj Jessa Ram Hospital Delhi Fortis La Femme Khyber Medical Institute, Srinagar ARPOB (in Rs. Crore) Fortis Hospital Mohali EHIRC, Delhi Fortis Hospital Noida EHRC Faridabad EHSSI Amritsar Fortis Hospital Amritsar Fortis Hospital Shalimar Bagh Mallar Hospital Hiranandani Fortis Vashi Escorts Jaipur EHCR Raipur Fortis Flt Lt Rajan Dhall Hospital Vasant Kunj Jessa Ram Hospital Delhi Fortis La Femme Khyber Medical Institute, Srinagar
Source: Company, ICICIdirect Research

FY07 212 331 125 202 128 37

FY08E 225 331 150 220 128 45 180 150 163 45 120 100 36 30 1923 FY08E 80% 60% 83% 92% 60% 58% 30% 30% 30% 40% 60% 65% 60% 60% FY08E 0.82 0.9 0.75 0.29 0.54 0.23 0.40 0.50 0.40 0.74 0.80 0.16 0.55 0.27

FY09E 250 331 178 240 128 45 180 150 163 45 145 100 36 30 2021 FY09E 80% 72% 84% 92% 65% 65% 40% 50% 50% 50% 65% 75% 70% 70% FY09E 0.90 1.00 0.85 0.45 0.59 0.25 0.50 0.60 0.50 0.75 0.90 0.25 0.61 0.35

45 120 100 36 10 1346 FY07 76% 83% 81% 92% 47% 50%

FY10E 275 331 200 250 150 50 258 400 150 163 50 165 150 50 50 2692 FY10E 85% 77% 85% 92% 75% 70% 40% 50% 70% 70% 60% 75% 80% 80% 80% FY10E 0.95 1.05 0.90 0.60 0.65 0.27 0.60 0.60 0.70 0.70 0.75 0.95 0.30 0.67 0.40

Room base to grow substantially by FY10

30% 40% 55% 50% 50% FY07 0.75 0.90 0.68 0.26 0.49 0.23

ARPOB improve across locations

0.69 0.69 0.15 0.45 0.25

17 | P a g e

VALUATIONS
India is under-serviced as far as healthcare services. With the huge expected demand in the tertiary care segment, along with the changes in demography, we expect Fortis would benefit in the long-term from its metro-focused multispeciality facilities with expertise in cardiac care. We expect the company to maintain its average occupancy at 70% on an extended room base. We expect Fortis to face pressure in expanding returns due to the nature of the business while our long-term outlook remains positive. We believe that the current business seems fairly valued while the up tick can be expected once the extended bed base is operational in FY10. We arrive at the target price through DCF valuation of Rs 112 on a base case scenario. We initiate coverage with a HOLD rating. On an EV/EBIDTA valuation, Fortis is valued at 43.8x in FY08E. Going forward an EV/EBIDTA of 25.3x in FY09E seems on the higher side while 17.5x in FY10E look fairly priced in at current levels. Fortis acquired Escorts at the deal valued 15.9x EV/EBIDTA. Apollo, the segment leader, trades at an EV/EBIDTA multiple of 18.6. By discounting FY10 earnings by 18x EV/EBIDTA we arrive at Rs 103 per share valuation. On EV/Sales basis, Fortis looks rich at current levels trading at 4.8x and 3.4x FY08 and FY09 net sales. While a multiple of 2.38 of FY10 sales looks reasonable considering Escorts valuation at the time of acquisition been done at 2.45x and Apollo trading 2.97x EV/Sales at current levels. By discounting Fortis by an EV/Sales multiple of 2.6, we arrive at per share value of Rs 110. Our Discounted Cash Flow (DCF) valuation gives a value of Rs 111.86 to the stock. We have assumed terminal growth rate at 2.5%. Risk free rate of return is 7.8% while market rate of return is taken as 15%. WACC works out to be 10.81%. Exhibit 19: Discounted Cash Flow Year ending March FY08E Number of beds 1637 Occupancy (%) 60% ARPOB (Rs. crore) 0.54 Revenue 529.98 EBIDTA 58.01 Interest 33.32 Depreciation 42.14 Goodwill Amortised 42.41 PBT -47.11 Tax 8.48 PAT -55.00 FCF 135.96 NPV 2738.63 Equity Value Per Share 111.86
Source: ICICIdirect Research

FY09E 1710 69% 0.66 789.08 105.66 38.66 42.32 42.41 -1.24 -0.34 2.32 1.03

FY10E 2277 70% 0.69 1108.61 150.94 36.69 54.78 42.41 39.51 10.67 34.47 98.50

FY11E 2352 65% 0.79 1219.44 160.35 34.27 80.08 42.41 42.34 13.97 34.88 -12.31

FY12E 2702 65% 0.80 1412.54 268.38 28.87 54.97 42.41 196.02 64.69 138.48 57.12

FY13E 3052 64% 0.80 1571.12 329.94 22.16 59.59 42.41 271.48 89.59 189.03 116.09

FY14E 3402 64% 0.82 1795.37 412.94 21.31 63.99 42.41 358.00 118.14 247.18 171.42

FY15E 3752 63% 0.82 1948.78 471.61 20.46 68.20 42.41 422.15 139.31 290.16 226.40

FY16E 4102 63% 0.84 2182.28 576.12 18.46 72.22 20.18 557.85 184.09 381.26 290.47

FY17E 4452 62% 0.84 2331.10 615.41 14.46 72.57 0.00 627.76 207.16 428.09 404.29

18 | P a g e

FINANCIAL SUMMARY
Profit & Loss
Y/e March Net Sales YoY Growth(%) Other Income Income from Mgmt Contract Expenses Employee Cost % of NS Material Consumed % of NS Power & Fuel % of NS Other Operating % of NS Admin & Others % of NS Total Expenses EBIDTA YoY Growth(%) % of NS Goodwill Amortisation Depriciation Interest PBT Tax Share in profit/( loss) of associates PAT % of NS
Source: Company, ICICIdirect Research

Rs Crore
FY07 512.35 75.1% 13.05 FY08E 529.98 3.4% 5.00 7.75 FY09E 789.08 48.9% 5.00 11.48 FY10E 1108.61 40.5% 5.00 17.45 Top line to grow at 29% CAGR over FY07-10

175.53 34.3% 177.27 34.6% 18.42 3.6% 45.90 9.0% 46.77 9.1% 463.88 48.47 72.2% 9.5% 45.53 38.28 66.00 (88.29) 7.28 (2.55) (98.12) -19.2%

184.72 34.9% 180.19 34.0% 16.96 3.2% 45.05 8.5% 45.05 8.5% 471.97 58.01 1.7% 10.9% 42.41 42.14 33.32 (47.11) 8.48 0.59 (55.00) -10.4%

255.74 32.4% 268.29 34.0% 25.25 3.2% 67.07 8.5% 67.07 8.5% 683.42 105.66 44.8% 13.4% 42.41 42.32 38.66 (1.24) -0.34 3.23 2.32 0.3%

372.32 33.6% 376.93 34.0% 33.26 3.0% 88.69 8.0% 86.47 7.8% 957.66 150.94 40.1% 13.6% 42.41 54.78 36.69 39.51 10.67 5.63 34.47 3.1% Profits at net level in FY09 with substantial bottom line growth in FY10

19 | P a g e

Balance Sheet
Y/e March Sources of Funds Equity Capital Pref. Share Capital Reserves & Surplus Networth Total Debt Minority Interest Deferred Tax Total Liabilities Application of Funds Gross Block Less: Acc. Depreciation Net Block Capital WIP Investments & Goodwill * Current Assets Less: Current Liabilities & Provisions Net Working Capital Misc. Exp not w/o Total Assets FY07 180.67 27.00 161.19 368.86 592.20 19.35 4.99 985.40 FY08E 226.67 27.00 556.95 810.62 338.96 19.35 4.99 1173.92 FY09E 226.67 27.00 559.27 812.94 508.24 19.35 4.99 1345.52

Rs Crore
FY10E 226.67 27.00 593.75 847.42 468.24 19.35 4.99 1340.00

660.68 254.79 405.89 102.59 401.59 233.71 158.47 75.24 0.09 985.40

702.40 296.93 405.47 312.59 359.18 275.33 178.70 96.63 0.04 1173.92

705.26 339.25 366.01 562.59 316.77 335.68 235.55 100.13 0.02 1345.52

912.94 394.02 518.92 522.59 274.36 352.20 328.08 24.11 0.01 1340.00

Source: Company, ICICIdirect Research * Goodwill amounting Rs 381.71 crore in FY07 is to be amortised till first half of 2016 by approximately Rs 42.41 crore per annum. Escorts and IHL were acquired at a gross goodwill of Rs 419.56 crores and Rs 14.85 crore in FY05 and FY06 respectively.

Cash Flow
Y/e March Opening Cash Profit After Tax Depreciation & Goodwill Provisions & Others Cash Profit Changes in WC Net Increase in CL Net increase in CA Cash Flow after change in working capital Capex & Other Investing Activities Cash Flow after investing activity Proceeds from financing actvity Cash Flow after financing activity Net Cash inflow Closing Cash
Source: Company, ICICIdirect Research

Rs Crore
FY07 16.74 -88.29 83.80 1.22 -3.27 FY08E 30.68 -55.00 84.56 0.04 29.60 FY09E 61.22 2.32 84.73 0.02 87.07 FY10E 96.89 34.47 97.19 0.01 131.67

47.04 23.49 20.28 -52.22 -31.94 45.87 13.94 13.94 30.68

20.22 11.08 38.74 -251.72 -212.98 243.52 30.54 30.54 61.22

56.85 24.68 119.25 -252.86 -133.61 169.28 35.67 35.67 96.89

92.53 19.33 204.87 -167.68 37.19 -40.00 -2.81 -2.81 94.08

20 | P a g e

Ratio Analysis
Y/e March Margins (%) EBIDTA PAT Asset based ratios (%) RONW / ROE ROCE / ROI Gearing Debt / Equity Per Share (Rs) Earnings Book Value Cash EPS Turnover (Days) Asset Inventory Debtor Creditor Valuations (x) P/E P / BV M.Cap / Sales EV / EBIDTA EV / Sales Market Cap. (Rs Crore) EV (Rs Crore)
Source: Company, ICICIdirect Research

FY07 9.5% -18.7%

FY08E 10.9% -10.5%

FY09E 13.4% 0.3%

FY10E 13.6% 3.1% Consistent growth in operating margin with positive EPS from FY09

-25.9% -4.7%

-6.9% -2.6%

0.3% 1.7%

4.1% 4.3%

1.61

0.42

0.63

0.55

-5.43 20.42 -3.49

-2.43 35.76 -0.78

0.10 35.87 1.08

1.52 37.39 3.17

0.56 42.80 5.81 4.86

0.45 38.72 5.81 4.85

0.58 43.30 7.14 4.85

0.82 43.19 9.09 4.85

-41.21 2.80 4.28 43.86 4.80 2266.67 2544.40

976.07 2.79 2.87 25.35 3.39 2266.67 2678.01

65.75 2.67 2.04 17.50 2.38 2266.67 2640.83

21 | P a g e

Annexe
Structure of healthcare service industry Types of Facilities
Healthcare facilities in India vary by the level and complexity of treatment offered, quality of infrastructure facilities and availability of qualified doctors and support staff. They can be divided into:

Primary care facilities offer basic, point-of-contact medical services and

healthcare prevention services in an outpatient setting. Primary care facilities are typically clinics with one or more general practitioners on site. CII-McKinsey estimates that the total spending in this market in India was approximately Rs 37000 crore in 2001.

Secondary care facilities offer both inpatient and outpatient medical services, including simple surgical procedures. Such facilities offer basic medical specialties including internal medicine, pediatrics, obstetrics and gynecology, and limited coverage of other specialties including gastroenterology, urology, dermatology, and cardiology. CII-McKinsey estimates that the total spending in this market in India was approximately Rs 25000 crore in 2001. Tertiary care facilities offer highly specialised and sophisticated medical
care and surgical procedures in a primarily inpatient setting. Such facilities offer treatment in specialty and super-specialty areas of cardiology, neurology, oncology, and orthopedics, among others. CRISINFAC estimates that expenditure on tertiary care hospitals comprised approximately 15-20% of the total Rs 125300 crore spending for healthcare delivery in India in 2006. According to CRIS-INFAC, this segment is expected to grow faster than the primary or secondary care segments because of an expected rise in complex lifestyle

Quaternary care facilities offer similar services to tertiary care facilities

with a focus on super specialty surgical procedures, including advanced cardiac, neurosurgical and joint-replacement surgeries. Healthcare facilities in India typically have both in-patient (IPD) and outpatient (OPD) departments. IPD facilities typically require more extensive capital expenditures for beds, operating theaters, intensive care units, nursing services, pharmaceutical services, laboratory and diagnostic centers and a central sterile supply department. OPD facilities, by contrast, require more basic facilities such as examination rooms and less complex operating rooms. OPDs are an important source of patients for a hospitals diagnostic centers and IPD, referring an average of approximately 30% of outpatients in 2004 to the IPD.

Ownership and operating models

There are five basic operating models for hospitals in India: 1. Facilities owned and operated by the government and local bodies; 2. Facilities owned and operated by charitable trusts; 3. Facilities owned and operated by for-profit corporations;

22 | P a g e

4. Facilities and institutions owned by charitable trusts, the government, local bodies or for-profit institutions, but operated by separate for-profit institutions; and 5. Collaborations between government bodies and for-profit corporations (i.e., joint ventures and public-private partnerships). Certain for-profit hospital operators have become integrated healthcare services providers by expanding into a wide variety of healthcare services including pharmacy, health insurance and telemedicine. Other for-profit hospital operators have chosen to focus primarily on healthcare delivery, adding tertiary and quaternary care facilities that serve as hubs for, and admit patients from, smaller primary and secondary care facilities in local communities. Exhibit 20: Revenue breakdown (FY07: Rs 546 Crore)

Revenue Mix

In-patient (90.3%)

Out-patient (7.6%)

Rental

Consultancy

Consultancy Diagnostic & Pathology Lab Consumables

Diagnostic & Pathology Lab

Source: Company, ICICIdirect Research

23 | P a g e

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.

Harendra Kumar

Head - Research & Advisory ICICIdirect Research Desk, ICICI Securities Limited, Gr. Floor, Mafatlal House, 163, H.T.Parekh Marg, Backbay Reclamation Churchgate, Mumbai 400 020 research@icicidirect.com

harendra.kumar@icicidirect.com

Disclaimer
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 or to the media or reproduced in any form, without prior written consent of ICICI Securities Ltd (I-Sec). The author of the report does not hold any investment in any of the companies mentioned in this report. I-Sec may be holding a small number of shares/position in the above-referred companies as on date of release of this report. This report is based on information obtained from public sources and sources believed to be reliable, but no independent verification has been made nor is its accuracy or completeness guaranteed. This report and information herein is solely for informational purpose and may not be used or considered as an offer document or solicitation of offer to buy or sell or subscribe for securities or other financial instruments. Nothing in this report constitutes investment, legal, accounting and tax advice or a representation that any investment or strategy is suitable or appropriate to your specific circumstances. The securities discussed and opinions expressed in this report may not be suitable for all investors, who must make their own investment decisions, based on their own investment objectives, financial positions and needs of specific recipient. This report may not be taken in substitution for the exercise of independent judgement by any recipient. The recipient should independently evaluate the investment risks. I-Sec and affiliates accept no liabilities for any loss or damage of any kind arising out of the use of this report. Past performance is not necessarily a guide to future performance. Actual results may differ materially from those set forth in projections. I-Sec may have issued other reports that are inconsistent with and reach different conclusion from the information presented in this report. This report is not directed or intended for distribution to, or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction, where such distribution, publication, availability or use would be contrary to law, regulation or which would subject I-Sec and affiliates to any registration or licensing requirement within such jurisdiction. The securities described herein may or may not be eligible for sale in all jurisdictions or to certain category of investors. Persons in whose possession this document may come are required to inform themselves of and to observe such restriction.

24 | P a g e