1. 31 May 2012
4QFY12 Results Update | Sector: Capital Goods
Havells India
BSE SENSEX S&P CNX
16,312 4,951
CMP: INR547 TP: INR614 Buy
Bloomberg HAVL IN
Equity Shares (m) 124.8
52-Week Range (INR) 616/313
1,6,12 Rel. Perf. (%) 4/32/44
M.Cap. (INR b) 68.2
M.Cap. (USD b) 1.2
* Consolidated nos, pre exceptionals
 4QFY12 operating performance in-line: Standalone revenues grew 25% (~21% adjusted for amalgamation of
Standard Electricals) in-line with our estimates, while Adjusted PAT grew 45% at INR1b, marginally ahead of
our estimate of INR983m, up 26% YoY. Forex gains (net INR119m), higher depreciation cost (INR75m for FY12,
provided in 4Q pertaining to 3-shift operations of cable business) and increased warranty provisioning
(INR260m pertaining to FY12, on several product segments including switchgears and luminaires) have been
the key adjustments in 4QFY12. Cables, Lighting and Consumer Durables segments showed strong growth
in revenues, while Switchgear segment continue to show sluggish growth impacted by sluggish domestic
market and lower exports of MCP to UK.
 Sustained performance in Sylvania: Sylvania continues to deliver improved performance on profitability
front. The subsidiary delivered an EBITDA margin of 8.5% despite adverse currency movement in Brazilian
market. In 4QFY12, adjusted PAT (adjusted for pension liability) stood at EUR4.3m v/s EUR3.4m during 4QFY11.
 Guidance - expect 15-20% growth in standalone entity and 5% growth in Sylvania; Margins to be maintained
at current level: Management guided for a 15-20% growth in sales in standalone entity on the back of 10-15%
growth in Switchgear, 15-20% in Cables and Wires and 20%+ growth in Consumer Durables along with Lighting
and Fixtures. EBITDA margins are expected to be maintained at current level 12.5-13% despite adverse currency
movement being positively impacted by lower sourcing from China. Sylvania is expected to post a growth of
~5% in euro terms in FY13 while EBITDA margins would be maintained at current level of 8-9%.
 Valuation and view: We have cut our consolidated earnings estimate by 3/7% for FY13/14 to factor in slowing
domestic market particularly Switchgear segment and also the macro volatility in European markets. We
believe Havells is well on track as far as profitability improvement in Sylvania is concerned. We estimate
FY12-14 revenue CAGR of 11% and EPS CAGR of 18%. Maintain Buy, with a TP of INR614 (14x FY14E EPS).
Satyam Agarwal (AgarwalS@MotilalOswal.com) ; +91 22 3982 5410
Deepak Narnolia (Deepak.Narnolia@MotilalOswal.com); +91 22 3029 5126

2. Havells India
Standalone: Operating performance in line; Margins impacted by forex
losses and warranty provisioning
 Standalone revenues stood at INR10.4b, up 25% YoY, in line with our estimates.
Sales were supported by amalgamation of Standard Electricals in the Switchgear
segment, adjusted for which growth was 21-22% YoY. All segments, except for
Swithgear posted strong growth. Cables revenue grew 32% YoY led by the domestic
market, Lighting by 20% and Consumer durables 17%. Consumer Durable division
sales were supported by new appliances launched during the year and growth in
water heaters over a low base which was launched last year. Consumer appliances
including water heater sales was INR250m during the quarter v/s INR40m in FY11.
Excluding the positive impact of the same, sales of fans grew by ~4% YoY. Adjusted
for Standard Electricals, Switchgears segment sales grew moderately by ~6% YoY
impacted by declining exports of MCP to UK.
 Contribution margin improved across business segments particularly in Lighting
and Fixtures division driven by rationalization of warranty cost especially in the
CFL business. EBITDA margins increased by 210bp to 13.8% v/s 11.7% during 3QFY11.
The quarter included MTM exchange gain of INR214m vs INR11m gain in 4QFY11
and increase in warranty cost by INR260m driven by additional warranty
provisioning on other products (Switchgear and Luminaries) in contrast to the
earlier practice of warranty provisioning in CFL and fans business only. Adjusted
for this, EBITDA margin stood at 13.6% which is marginally higher that our estimate
of 13.4%.
 Standalone PAT stood at INR915m up 33% YoY, marginally below our estimate of
INR983m due to higher than expected depreciation and interest cost. Interest
cost was higher due to ~INR950m MTM loss on ECB while depreciation cost was
higher due to additional charge in Cable factory related to additional 3rd shift on
which it is currently operating. The total charge of INR75m was taken in the fourth
quarter. Adjusted PAT stood at INR1b which is in line with our estimates.
 For FY12 sales grew 26% YoY, marginally above our estimate of 25% YoY while PAT
was up 26% YoY in line with our estimates. EBITDA margin stood at 12.6% in line
with our estimates. All the division posted strong growth except for Swithgear
which continue to remain impacted by lower exports (~10% of Swithgear sales) of
MCB to UK due to closure of OEM contract. Export of MCB to UK dropped by 16%
YoY while domestic sales (adjusted for Standard Electricals) grew by 11% YoY. Cable
Standalone sales grew strongly across business segments Forex gain mitigated by higher warranty provisoning
Source: Company, MOSL
31 May 2012 2

3. Havells India
business posted strong growth of 26% YoY on the back of 12% YoY volume growth
in Cable (~60% of sales) and 19% YoY growth in Wire (~40% of sales). Growth in
Cables business was strongly helped by cost led price increases. The total revenue
from domestic appliances (part of Consumer Durable division) including water
heater was INR 840m over INR22m achieved last year. The core fans business in
Consumer Durable segment grew 9% YoY.
Havells India: Standalone Segmental perfromance (INR m)
YoY (%)
1QFY11 2QFY11 3QFY11 4QFY11 FY11 1QFY12 2QFY12 3QFY12 4QFY12 FY12 4QFY12 FY12
Revenues
Switchgear 1,858 1,747 1,739 2,000 7,344 1,883 2,218 2,261 2,376 8,962 19 22.0
Cables & wires 2,835 2,839 3,036 3,608 12,318 3,564 3,692 3,907 4,767 15,930 32 29.3
Electr. consumer durables 1,179 972 999 1,542 4,692 1,342 1,220 1,346 1,813 5,721 18 21.9
Lighting 1,003 1,053 1,133 1,258 4,447 1,210 1,374 1,448 1,511 5,544 20 24.7
Others 13 3 0 0 15 0
Total 6,889 6,613 6,907 8,408 28,816 7,999 8,504 8,962 10,467 36,156 24 25.5
PBIT margin (%)
Switchgear 38.9 37.0 37.4 34.9 37.0 38.4 37.8 39.5 34.7 37.5 -26bp 50bp
Cables & wires 7.0 9.6 8.8 4.5 7.3 8.7 9.3 9.9 8.9 9.2 439bp 186bp
Elect. consumer durables 28.3 27.9 27.8 26.8 27.6 31.1 27.7 28.9 27.9 28.8 111bp 125bp
Lighting 16.6 18.0 21.1 18.0 18.4 25.6 24.5 26.2 24.9 25.1 690bp 669bp
Others 36.6 37.5 nm nm 40.7 nm nm nm nm nm nm nm
Revenue Change % YoY
Switchgear 8.4 -0.1 2.9 9.6 9.1 1.4 26.9 30.0 18.8 20
Cables & wires 17.0 17.0 22.2 33.5 25.1 25.7 30.0 28.7 32.1 26
Electr. consumer durables 30.4 21.8 42.2 39.1 40.4 13.8 25.6 34.7 17.6 23
Lighting 33.7 16.4 21.0 22.9 27.3 20.6 30.6 27.8 20.1 25
Source: Company, MOSL
Sylvania: Sustained performance
 Sylvania reported 4QFY12 revenue of EUR112m, down 1% YoY. Revenues continue
to show slowdown in European and North American market, compounded by
adverse currency movement in Brazil. Sales in European market declined 4% YoY
while in American market it grew 8% YoY on the back of better performance in
Mexico, Columbia and Argentina. Sales in Brazil grew 4-5% in local currency;
however, adverse currency movement continued to suppress growth.
 EBITDA margins (adjusted for pension benefit/write off) stood at 8.5%, up 50bp
YoY. Sylvania has been showing sustained improvement in profitability after turning
around in 1QFY11 from the losses in FY10. During 4QFY12, Adjusted PAT (adjusted
for pension liability) stood at EUR4.3m, up 26% YoY v/s EUR3.4m during 4QFY11.
 Sylvania refinanced its outstanding term loan and working loan facility of
Euro102mn. Havells India has raised Euro40 million debt in Havells Holding Limited,
Isle of Man, a wholly owned subsidiary for providing equity participation and
shareholders loan to Sylvania. This Euro40m debt is repayable in one year (April'13
at a cost of EURIBOR plus 190bp). In addition to this, Sylvania has raised Euro77.5m
from Standard Chartered Bank, HSBC Bank plc and ICICI Bank, UK PLC at a cost of
EURIBOR plus margins 350bp, and is on reducing basis reaching upto 250bp provided
Debt: EBITDA < 1.5:1 as compared to current Debt: EBITDA of 2.5:1
31 May 2012 3

4. Havells India
Sylvania Financials (Euro m)
1QFY11 2QFY11 3QFY11 4QFY11 1QFY12 2QFY12 3QFY12 4QFY12 Gr %
Revenues 105.4 111.7 118.8 113.4 106.7 115.5 113.9 112 (1.2)
EBITDA 5.7 6.6 6 9.1 7.8 8.6 11.1 9.5 4.4
Margin (%) 5.4 5.9 5.1 8.0 7.3 7.4 9.7 8.5 na
Depreciation 2.1 2.1 2.1 2.1 1.9 1.9 1.8 1.9 (9.5)
Interest 2.9 2.5 2.7 2.3 2.9 3.2 2.7 2.1 (8.7)
Other Income/ (loss) 0.1 0.4 -0.1 1.4 0.3 1.9 0.6 1.3 (7.1)
Forex gain/(loss) 0.1 0.1 -2.6 -0.9 nm
PBT 0.8 2.5 1.2 6.1 3.3 2.8 6.3 6.8 11.5
Tax 1 1.2 0.7 2.7 0.9 1.1 1.1 2.5 (7.4)
Adj PAT -0.2 1.3 0.5 3.4 2.4 1.7 5.2 4.3 26.5
Less exceptional gain/(loss) 0 0 3.4 2.9 0 (3.3) 0 nm
Net Profit -0.2 1.3 3.9 6.3 2.4 1.7 1.9 4.3 (31.7)
Source: Company, MOSL
Sylvania geographical performance (Euro m)
1QFY10 2QFY10 3QFY10 4QFY10 1QFY11 2QFY11 3QFY11 4QFY11 1QFY12 2QFY12 3QFY12 4QFY12
Europe 70.6 65.5 74.5 75.0 65.7 66.5 75.2 73.2 64.0 69.0 71.8 70.3
Growth (%) (20.2) (21.0) (12.8) (3.5) (7.0) 1.6 0.9 (2.4) (2.6) 3.8 (4.5) (4.0)
America 24.9 26.0 27.5 29.7 33.4 38.7 37.4 35.5 36.1 39.7 35.8 38.2
Growth (%) (21.8) (23.8) (13.0) 3.3 34.2 49.1 35.9 19.5 8.1 2.6 (4.3) 7.6
Others 2.0 1.2 4.4 5.4 6.3 6.5 6.2 4.8 6.6 6.8 6.3 3.5
Total 97.5 92.6 106.5 110.1 105.4 111.7 118.8 113.5 106.7 115.5 113.9 112.0
Source: Company, MOSL
Expect 15-20% revenue growth in Standalone sales in FY13; Sylvania to
register 5% growth in Euro terms
 Management guided for a 15-20% growth in sales in standalone entity on the back
of 10-15% growth in Switchgear, 15-20% in Cables and Wires and 20%+ growth in
Consumer Durables along with Lighting and Fixtures. Sales is growing strongly in
Consumer Durable segment on the back of encouraging response for consumer
appliances. Management stated that the strategy going forward would be to
penetrate into B and C class cities through aggressive expansion of distribution
network. Fans business has been showing strong performance beginning FY13 in
contrast to last year in which it was muted due to weaker summers. Management
is deliberately reducing sourcing from China to counter adverse currency
movement. As of now the total sourcing from China is around 7-8% of the cost of
sales which is expected to decline and will help margins. The company is confident
of maintaining its margin levels at current level.
 Sylvania is expected to post a growth of ~5% in euro terms in FY13 while EBITDA
margins would be maintained at current level of 8-9%.
 Dividend payout ratio increased significantly during FY12 to 20% from earlier 10%.
Management stated that with re-financing of Sylvania debt over and no major
capex plan in the forthcoming future, dividend payout has increased. Payout ratio
is likely to be at this level for the next 2-3 years.
31 May 2012 4

5. Havells India
Valuation and view
 We have cut our consolidated earnings estimate by 3/7% for FY13/14 to factor in
slowing domestic market particularly Switchgear segment and also the macro
volatility in European markets.
 Our EPS estimate for FY13 stands at INR38.1 (up 21%) and for FY14 at INR43.8 (up
15%). We believe Havells is well on track as far as profitability improvement in
Sylvania is concerned. We estimate FY12-14 revenue CAGR of 11% and EPS CAGR
of 18%. The stock trades at 14.3x FY13E and 12.5x FY14E consolidated EPS. We
maintain Buy, with a target price of INR614 (14x FY14E EPS).
Change in estimates (INR m)
Revised Old Change (%)
FY13 FY14 FY13 FY14 FY13 FY14
Standalone
Sales 42,937 50,047 43,208 51,820 (0.6) (3.4)
Growth (%) 18.8 16.6 20.1 19.9
EBITDA 5,496 6,306 5,747 6,944 (4.4) (9.2)
Margin (%) 12.8 12.6 13.3 13.4 -50bp -80bp
PAT 3,846 4,445 3,980 4,934 (3.4) (9.9)
Growth (%) 25.9 15.6 30.5 24.0
EPS (INR) 30.8 35.6 31.9 39.5 (3.4) (9.8)
Growth (%) 25.9 15.6 30.5 24.0
Consolidated
Sales 72,769 80,392 73,626 83,759 (1.2) (4.0)
Growth (%) 11.6 10.5 13.3 13.8
EBITDA 7,984 8,767 6,881 8,345 16.0 5.1
Margin (%) 11.0 10.9 9.3 10.0 163bp 94bp
PAT 4,757 5,472 4,885 5,891 (2.6) (7.1)
Growth (%) 20.9 15.0 31.0 20.6
EPS (INR) 38.1 43.8 39.1 47.2 (2.5) (7.2)
Growth (%) 20.9 15.0 31.0 20.6
Source: Company, MOSL
31 May 2012 5

6. Havells India
Havells India: an investment profile
Company description Key investment risks
Havells India (HAVL) is one of the largest electrical and  Rising domestic competition: Most of HAVL's markets
power distribution equipment manufacturers with over are prone to price wars, especially cables and CFL,
billion dollar sales. The company offers products ranging where there is considerable competition.
from industrial & domestic circuit protection switchgear,  Prolonged slowdown in European region: HAVL has
cables & wires, motors, fans, power capacitors, CFL significant operations in Europe through its
lamps and luminaires for domestic, commercial and subsidiary Sylvania. Any prolonged slowdown in the
industrial applications. The company owns global brands region will have adverse impact on earnings.
like Crabtree, Sylvania, Concord, Luminance, Linolite and  Forex risk: Appreciation of other currencies against
SLI Lighting. the EUR will impact earnings estimates.
Recent developments
Key investment arguments  Osram Sylvania Inc (Osram) filed a complaint in a US
 Domestic business: Strong macro fundamentals, district court against HAVL and its associated nine
rising income levels and demographic changes will entities for infringement of the Sylvania brand and
keep demand for consumer electrical robust. unfair competition in North America. The court
 A turnaround story: Sylvania continue to show dismissed the complaint against all the entities
impressive performance after its turnaround in the except Havells USA, citing lack of jurisdiction. Havells
second half of FY11 from losses in FY10. Although USA is resisting the complaint and the matter is
European market continue to show sluggish demand subjudicial.
trend however an uptick in demand can provide Valuation and view
significant upside to profitability while cost  Our EPS estimate for FY13 stands at INR38.1 (up 21%)
competitiveness and improvement in profitability and for FY14 at INR43.8 (up 15%). We estimate FY12-
will drive HAVL's growth in Europe. 14 revenue CAGR of 11% and EPS CAGR of 18%. The
 New products: HAVL new products in consumer stock trades at 14.3x FY13E and 12.5x FY14E cons. EPS.
durables are showing encouraging response. The We maintain Buy, with a TP of INR614 (14x FY14E EPS).
company expects ~ INR2b sales from new products Sector view
in FY13 over INR860m achieved in FY12.  We remain Neutral on the sector.
Comparative valuations EPS: MOSL forecast v/s consensus (INR)
Havells India Crompton L&T MOSL Consensus Variation
P/E (x) FY13E 14.3 12.8 13.8 Forecast Forecast (%)
FY14E 12.5 9.5 13.5 FY13 38.1 36.9 3.4
P/BV (x) FY13E 5.5 1.8 2.6 FY14 43.8 43.4 1.0
FY14E 3.7 1.6 2.3
EV/Sales (x) FY13E 1.0 0.6 1.4 Target price and recommendation
FY14E 0.9 0.5 1.3 Current Target Upside Reco.
EV/EBITDA (x) FY13E 9.2 6.9 11.8 Price (INR) Price (INR) (%)
FY14E 8.0 5.4 11.3 547 614 12.2 Buy
Stock performance (1 year)
Shareholding pattern (%)
Mar-12 Dec-11 Mar-11
Promoter 61.6 61.6 61.6
Domestic Inst 1.1 1.2 2.4
Foreign 30.6 30.0 27.4
Others 6.7 7.3 8.7
31 May 2012 6

7. Havells India
Financials and Valuation
31 May 2012 7

8. Disclosures
This report is for personal information of the authorized recipient and does not construe to be any investment, legal or taxation advice to you. This research report does not constitute an offer, invitation or inducement
to invest in securities or other investments and Motilal Oswal Securities Limited (hereinafter referred as MOSt) is not soliciting any action based upon it. This report is not for public distribution and has been
furnished to you solely for your information and should not be reproduced or redistributed to any other person in any form.
Unauthorized disclosure, use, dissemination or copying (either whole or partial) of this information, is prohibited. The person accessing this information specifically agrees to exempt MOSt or any of its affiliates
or employees from, any and all responsibility/liability arising from such misuse and agrees not to hold MOSt or any of its affiliates or employees responsible for any such misuse and further agrees to hold MOSt
or any of its affiliates or employees free and harmless from all losses, costs, damages, expenses that may be suffered by the person accessing this information due to any errors and delays.
The information contained herein is based on publicly available data or other sources believed to be reliable. While we would endeavour to update the information herein on reasonable basis, MOSt and/or its
affiliates are under no obligation to update the information. Also there may be regulatory, compliance, or other reasons that may prevent MOSt and/or its affiliates from doing so. MOSt or any of its affiliates or
employees shall not be in any way responsible and liable for any loss or damage that may arise to any person from any inadvertent error in the information contained in this report . MOSt or any of its affiliates
or employees do not provide, at any time, any express or implied warranty of any kind, regarding any matter pertaining to this report, including without limitation the implied warranties of merchantability, fitness
for a particular purpose, and non-infringement. The recipients of this report should rely on their own investigations.
This report is intended for distribution to institutional investors. Recipients who are not institutional investors should seek advice of their independent financial advisor prior to taking any investment decision
based on this report or for any necessary explanation of its contents.
MOSt and/or its affiliates and/or employees may have interests/positions, financial or otherwise in the securities mentioned in this report. To enhance transparency, MOSt has incorporated a Disclosure of Interest
Statement in this document. This should, however, not be treated as endorsement of the views expressed in the report.
Disclosure of Interest Statement Havells India
1. Analyst ownership of the stock No
2. Group/Directors ownership of the stock No
3. Broking relationship with company covered No
4. Investment Banking relationship with company covered No
Analyst Certification
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. The research analysts, strategists, or research associates principally responsible
for preparation of MOSt research receive compensation based upon various factors, including quality of research, investor client feedback, stock picking, competitive factors and firm revenues.
Regional Disclosures (outside India)
This report is not directed or intended for distribution to or use by any person or entity resident in a state, country or any jurisdiction, where such distribution, publication, availability or use would be contrary to
law, regulation or which would subject MOSt & its group companies to registration or licensing requirements within such jurisdictions.
For U.K.
This report is intended for distribution only to persons having professional experience in matters relating to investments as described in Article 19 of the Financial Services and Markets Act 2000 (Financial
Promotion) Order 2005 (referred to as "investment professionals"). This document must not be acted on or relied on by persons who are not investment professionals. Any investment or investment activity to
which this document relates is only available to investment professionals and will be engaged in only with such persons.
For U.S.
MOSt is not a registered broker-dealer in the United States (U.S.) and, therefore, is not subject to U.S. rules. In reliance on the exemption from registration provided by Rule 15a-6 of the U.S. Securities Exchange
Act of 1934, as amended (the "Exchange Act") and interpretations thereof by the U.S. Securities and Exchange Commission ("SEC") in order to conduct business with Institutional Investors based in the U.S.,
Motilal Oswal has entered into a chaperoning agreement with a U.S. registered broker-dealer, Marco Polo Securities Inc. ("Marco Polo").
This report is intended for distribution only to "Major Institutional Investors" as defined by Rule 15a-6(b)(4) of the Exchange Act and interpretations thereof by SEC (henceforth referred to as "major institutional
investors"). This document must not be acted on or relied on by persons who are not major institutional investors. Any investment or investment activity to which this document relates is only available to major
institutional investors and will be engaged in only with major institutional investors.
The Research Analysts contributing to the report may not be registered /qualified as research analyst with FINRA. Such research analyst may not be associated persons of the U.S. registered broker-dealer, Marco
Polo and 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.
Motilal Oswal Securities Ltd
3rd Floor, Hoechst House, Nariman Point, Mumbai 400 021
Phone: +91 22 3982 5500 E-mail: reports@motilaloswal.com