Finolex Industries was incorporated in the year 1981 as a manufacturer of PVC (Poly Vinyl Chloride) pipes plant at Pune. After that, the company has expanded its facility at Ratnagiri in Maharashtra and Masar in Gujarat. It is the only PVC pipe manufacturing company in India which enjoys backward integration with its own PVC resin unit.

1. Date: 17th
August 2018
COMPANY BACKGROUND
Finolex Industries was incorporated in the year 1981
as a manufacturer of PVC (Poly Vinyl Chloride) pipes
plant at Pune. After that the company has expanded
its facility at Ratnagiri in Maharashtra and Masar in
Gujarat. It is the only PVC pipe manufacturing
company in India which enjoys backward integration
with its own PVC resin unit. Company is a leading
manufacturer of PVC-U pipes and second largest
manufacturer of PVC resin with more than 20%
market share in organised segment. In February
2017, Finolex and Lubrizol Corporation entered into
an agreement, for the manufacture and sale of
‘Finolex FlowGuard’ Plus CPVC pipes and fittings in
India.
INVESTMENT RATIONALE:
Points of Appreciation:
GOVERNMENT INITIATIVES
Under the Prime Minister Awas Scheme it is
proposed to complete construction of 1 crore
houses by 2019 in rural areas. In urban areas 37
lakhs houses has been sanctioned for construction.
To give a fillip to affordable housing sector, the
government of India in its recently unveiled federal
budget, announced setting up a dedicated
affordable housing fund under the National Housing
Overview
CMP – 621.70
Market Cap – 7715.01 cr.
52 week high – 752.80
52 week low – 530.00
Industry – Plastic Products
Sector – Plastic Products
Share Holding Pattern
Promoters – 52.47%
Free Float – 47.53%
Summary
Financials (cr.)
FY16 FY17 FY18
Revenues 2481.90 2602.42 2737.81
PAT 254.37 352.20 298.51
EPS 18.72 28.38 24.10
P/E 17.77 20.35 22.65
EV/EBITDA 10.63 12.33 15.33
D/E 0.13 0.04 0.04
ROCE 26.08 25.55 -
ROE 21.59 18.24 -

2. Date: 17th
August 2018
Board (NHB) – funded by priority sector leading shortfall and GOI’S authorized bonds.
Widening the reach of AMRUT, the federal budget 2019 announced that the scheme
would focus on the water supply to all the household in 500 cities.
SWACHH BHARAT MISSION ( Gramin) has benefited all. Sanitation coverage in rural
areas has increased and govt is focussed on covering a wider area.
LUBRIZOL TIE UP
Finolex tied up with the American Company Lubrizol Corporation, inventors and largest
manufacturers of CPVC compound worldwide, for supply of CPVC compound for
production and sale of Finolex FlowGuard Plus pipes and fittings in India for sale to the
building and construction industry. CPVC Pipes is largely used for hot and cool water
application in housing and industrial sector. It accounts for less than 10% of the overall
pipes and fittings market by volumes. But the demand will increase as builders have also
started using common CPVC pipes for both hot water and cold water application instead
of separate pipes. All the initiatives by the government to promote housing sector –
both rural and urban – will also lead to increase in demand. For FY18 CPVC volume sale
was 5000 MT which is 5% of the total market share of CPVC pipes. And this margin will
increase in the coming years.
Enhancing Distribution Strength And Regional Revenue
The distribution network of Finolex is very strong and the company is expanding it. From
setting up a PVC manufacturing plant in Masar, Gujarat for conquering the North Indian
market to setting up a pipes and fittings warehouse in Cuttack to expand operations in
East India and North East India to establishing warehouses in Delhi and Indore to service
North and Central India markets. Company has 500+ distributors, 1500 sub dealers and
18000 retail touch points. Company has focus on expanding revenue in the northern and
eastern regions.

3. Date: 17th
August 2018
CASH-N-CARRY MODEL
Company has adopted cash-n-carry business model and due to cash-n=carry model,
receivables continuously remain low. This strategy has helped the company to lower
down receivable days and cash conversion cycle.
FY13 FY14 FY15 FY16 FY17
Receivable days 6.42 5.22 5.79 3.78 3.79
Inventory Days 60.68 64.75 68.72 57.29 54.36
Payable days 31.90 25.04 25.78 33.68 34.40
Cash Conversion Cycle 35.20 44.93 48.73 27.39 23.75
Consumption of PVC
India’s per capita PVC consumption is around 2 kg, which is low compared to 11.8 kg in
the US and over 10 kg in China. Since US and China are developed countries and India is
still a developing country, there are good chances for India to rise above the current
scenario as PVC per capita consumption is much higher in the global market.
Impact of GST
GST implementation will help to improve the competitive positioning of the organised
sector and hasten the shift from unorganised to organised sector in the PVC pipes
industry. GST will wipe out tax evasion and hence it will be beneficial for Finolex
industries in long run.

4. Date: 17th
August 2018
BACKWARD INTEGRATION
One of the major advantage of Finolex Industries is it has its own PVC Resin plant set up
in Ratnagiri for regular supply of PVC Resin for PVC pipes and fittings. It helps in cost
optimization. Finolex captive power plant at Ratnagiri ensures regular supply of power
to the plant.
Expansion Of Capacity
The PVC Resin capacity has not increased since FY13. In FY13 it increased by 12000 MT
making the PVC Resin capacity 272000 MT p.a. The reason for not expanding the PVC
Resin capacity further is high capital cost and shortage of raw materials. The Company is
regularly expanding its PVC pipes capacity to meet the growing demand of PVC pipes.
FIL’S PVC pipe capacity is 3,30,000 MT p.a for FY18 which will increase to 3,70,000 MT
p.a by the end of the year.
RISKS:
Foreign Exchange Risk –
Although Finolex is greatly exposed to fluctuations in exchange rates – not least due to
its very large import bill, its revenues (arising from PVC resin) are linked to import parity
pricing of PVC Resin, acting as a natural hedge.
Monsoon and Slowdown in Agriculture Sector –
Out of the total sales, approximately 70% was in the Agriculture sector and 30% was in
the Non-Agriculture Sector. So that the monsoon and slowdown in agriculture sector has
an adverse impact on future growth of the company.

5. Date: 17th
August 2018
Volatility in PVC/EDC spread –
Any volatility in PVC/EDC spread is a key monitor for the company, and could potentially
affect profitability. Company largely import Ethylene, EDC, VCM for manufacturing of
the PVC Resin so that currency exchange rate fluctuation also risk to company.
.
Source: Company presentation
Commodity Price Fluctuations –
For PVC Resin manufacturing, Finolex imports key petrochemical products namely, Vinyl
Chloride Monomer (VCM), ethylene and ethylene dichloride (EDC) from international
markets. Though its PVC prices are regularly adjusted for import parity price of PVC in
international market, little scope exists for evading adverse impact of short term
fluctuations in key raw material prices. Crude oil prices continue to exert great impact
on prices of its finished goods: VCM, EDC and ethylene together constituted nearly 60%
of total raw material cost.

6. Date: 17th
August 2018
PAST PERFORMANCE OF FINOLEX

7. Date: 17th
August 2018
PRESENCE OF FINOLEX
 Headquartered in Pune, Maharashtra
 Three manufacturing plants at: -
o Ratnagiri (Maharashtra) for the manufacture of PVC resin and PVC pipes
including a captive power plant
o Urse (Pune, Maharashtra) for the manufacture of PVC pipes
o Masar (Gujarat) for the manufacture of PVC pipes
 Four distribution warehouses: Chinchwad (Maharashtra), Cuttack (Odisha), Delhi, and
Indore (Madhya Pradesh)
 10 branch offices across India viz., Ahmedabad, Bengaluru, Chennai, Kochi, Coimbatore,
Delhi, Hyderabad, Indore, Kolkata and Mumbai
 Jetty in Ratnagiri for the import of raw materials
 800 dealers and 18000 retail houses

8. Date: 17th
August 2018
BUSINESS STRATEGY
 Expanding Footprint- The Company has more than 800 dealers and 18,000 retail outlets
and is planning to expand its distribution network in all geographies
 Capacity Expansion – The company is adding capacity for pipes and fittings every year
and has reached 3,30,000 MT as of FY18 and is planning to increase it to 3,70,000 MT by
the end of the year.
 Cash-n-carry – The Company because of its strong distribution network follows the
model of cash-n-carry which helps to keep the balance sheet tight.
 Branding – Finolex brand is well recognized and appreciated in the market. The
company spends a lot of money on advertisement, sales and promotion mainly in rural
areas.

9. Date: 17th
August 2018
PRODUCT PROFILE
PVC Resin Division-
Finolex resin manufacturing plant set up in Ratnagiri import key raw materials like
Ethylene, EDC and VCM from international markets for producing PVC resin of both
suspension and emulsion types. It uses its own jetty in Ratnagiri to import these raw
materials. It has an installed capacity of 2,72,000 MT p.a.
PVC-U Pipes Division-
Pipes of various sizes, pressure classes and diameters are being rolled out from its plants
at Ratnagiri, Urse and Masar for catering to both agricultural and non-agricultural
sectors including housing, industrial and construction. To meet the rising demand
Finolex is continuously increasing its pipes capacity.

10. Date: 17th
August 2018
Company Details-
Segment wise Performance
SALES PROFIT
42%
55%
3%
2017-18
PVC Resin PVC Pipes Power
43%
54%
3%
2016-17
PVC Resin PVC Pipes Power
70%
28%
2%
2017-18
PVC Resin PVC Pipes Power
63%
31%
6%
2016-17
PVC Resin PVC Pipes Power

11. Date: 17th
August 2018
PRODUCTS
AGRICULTURE PIPES
 Agriculture Pipes and Fittings –
 PVC-U Selfit Agriculture Pipes –
They have one end self – socketed and the
other end plain, which fits snugly without the use of
copiers. The strong solvent cement joint is permanent and
trouble-free.
 PVC-U Ringfit Agriculture Pipes –
They have been specially designed for higher
diameter requirements and eliminate the need for solvent
cement. The sealing ring ensures leak-free joints and easy
installation.
 Various types of moulded and fabricated fittings
 Column Pipes
 PVC-U Column Pipes –
They are manufactured using highly advanced
CNC machines. Having the proprietary of lead free compound it
offers excellent hassle free performance
 Casing Pipes –
It is specifically designed and manufactured for tube well
system and helps extracting clean and clear water from the bore-
wells. They are made using the quality UPVC material.
 CS Casing Pipes
 CM Casing Pipes
 Screen Pipes with ribs
 SDR series casing pipes

12. Date: 17th
August 2018
 Solvent Cement –
 PVC-U Solvent Cement for agriculture applications
 PVC-U Solvent Cement for higher diameter agriculture
applications
 Rubber lubricant
 Primer
NON-AGRICULTURE PIPES
 Finolex Flowguard Plus CPVC Pipes and Fittings –
It is specially designed for hot water lines purpose.
It has low thermal conductivity and is fire resistant. It is corrosion and
rust free and is highly suitable for hot temperatures
 Finolex Flowguard Plus CPVC Pipes
 Various Types of Finolex Flowguard Fittings
 Plumbing Pipes and Fittings –
 Heavy pressure Plumbing Pipes –
These pipes are plain at both the ends and are joined using
solvent cement in which mating and fusion between the pipe &
fitting takes place creating a homogenous point
 ASTM PVC-U Pipes –
These pipes are manufactured as per ASTM D 1785 and are
available in Sch. 40 and 80 pressure classes.
 Various types of fittings

13. Date: 17th
August 2018
 Sewerage Pipes –
 Underground Sewerage Pipes –
These pipes are specially designed for underground non-
pressure applications like gravity drainage & sewer flow for
transportation of soil & waste discharge of domestic origin,
surface water and industrial effluent.
 SWR pipes and Fittings
 SWR Selfit Pipes
 SWR pipes with integrated rings
 SWR selfit moulded fittings
 SWR fittings with integrated rings
 Solvent Cement
 Medium Duty PVC-U solvent cement for plumbing applications
 Heavy Duty PVC-U solvent Cement for plumbing applications
 PVC-U solvent cement for SWR applications
 CPVC solvent cement for hot and cold water plumbing applications
 Rubber lubricant
 Primer

14. Date: 17th
August 2018
BUSINESS PROCESS
FIL have integrated production plants that enable them to ensure a steady supply of raw
material to control the quality of their pipes and fittings. The process starts with importing the
raw material – Ethylene dichloride (EDC), Ethylene, Vinyl Chloride Monomer (VCM) and Coal
from international markets through their own jetty. They are stored in bulk at their plant in
Ratnagiri and used for manufacturing PVC Resin. The advantage of a captive power plant is
that it ensures a steady power supply and reduces the manufacturing costs. The majority of
the PVC Resin manufactured is transported to their PVC pipes and fittings manufacturing
plants. The rest is sold in the open market. At the PVC pipes and fittings plants, numerous
products are manufactured which are transported to the dealers and various warehouses
around the country.

15. Date: 17th
August 2018
PVC VALUE CHAIN
PVC is a synthetic resin made from the polymerization of Vinyl Chloride. PVC is a product which
is derived at the end of the value chain that begins with the industrial grade salt (NaCl). Caustic
and chlorine are produced from the salt. Chlorine and Ethylene gives EDC, which is used to
produce VCM. PVC is derived from VCM.

16. Date: 17th
August 2018
DIFFERENCE BETWEEN PVC AND CPVC
PARAMETERS PVC CPCV
Full Form Poly Vinyl Chloride Chlorinated Poly Vinyl Chloride
Define PVC is a thermoplastic polymer
that is moulded into different
shapes to create pipes, fittings,
valves and other liquid handling
supplies
CPVC is a thermoplastic
produced by the chlorination of
PVC
Composition Chlorine/Ethylene/Colour
Pigments/Additives
Chlorine/Ethylene/Colour
Pigments/Additives
Hot Water Lines Only for Cold Water Supply Both Hot & Cold Water Supply
Uses Used for Water Supply and
Drain Pipes
Used for Water Supply/ Hot
Water Supply Pipes
Fire Resistance No Yes/ Chlorination process
makes the CPVC pipes Fire
Retardant up to 220 Degrees
Fahrenheit
Chlorine Resistance Reactive to Chlorine Unaffected by Chlorine
Pipe Length (metres) 15/ 20/ 25/ 32/ 40/ 50 20/25/32/40/50
Temperature Max temp 140° F Max temp 200° F

17. Date: 17th
August 2018
PEER COMPARISION
Finolex Astral Poly Supreme Industries Prince Ashirvad
Products UPVC,CPVC
PIPES AND
FITTINGS
UPVC,
CPVC PIPES
AND
FITTINGS
UPVC,CPVC,HDPE,PPR
pipes and fittings
UPVC,CPVC,PPR
pipes and fittings
UPVC,
CPVC
PIPES AND
FITTINGS
Distributors 800 750 916 766 1110
Touch
Points
18000 25000 25000 - 36000
Plants Maharashtra,
Pune and
Gujarat
Gandhinagar
and
Ahmedabad
(Gujarat) and
Tamil Nadu
Maharashtra, Uttar
Pradesh, Madhya
Pradesh, Rajasthan, West
Bengal, Gujarat, Assam,
Tamil Nadu,
Maharashtra,
TamilNadu,
Uttarakhand,
Dadra and Nagar
Haveli
Karnataka
Capacity PVC pipes –
3,30,000 MT
PVC Resin –
2,72,000 MT
1,37,708 MT - 2,10,646 MT 1,08,000 MT
Market
Share
9% 6% 11% 5% 7%
Promoter
Holding
52.47% 58.49% 49.70% - -
Revenue
(Rs.Cr.)
2017
2602.42 1476.69 4462.26 1262.58 2029
Market Cap 7715 13529 15135 - -
PAT (Rs.
Cr.) 2017
352.18 106.62 376.67 74.36 217
PATM(%)
2017
11.78 7.18 8.44 5.88 10.7%
CFO (Rs.
Cr.) 2017
234.15 86.91 464.98 93.91 -
FCF (Rs.
Cr.) 2017
159.70 -29.63 194.46 - -
Debt/Equity
(x) 2017
0.04 0.2 0.16 - -
ROCE (%)
2017
25.54 18.18 33.29 22.46 23.06
ROE (%)
2017
18.24 13.61 25.02 30.53 23.67
EPS (Rs.)
2017
28.37 8.90 29.85 15.74 -
Price/BV (x)
2017
3.12 7.85 8.9 - -
P/E (X) 22.65 71.64 33.22 - -

18. Date: 17th
August 2018
INDUSTRY
The market of PVC is expected to witness a double digit growth rate in the coming years. Some
of the major drivers contributing the overall market growth of Polyvinyl Chloride (PVC) market
include high growth in the building and construction sector, high growth in the automobile
industry and growing medical devices. Some of the major restraints for PVC market include
increasing competition from steel and concrete pipes and prohibited use of PVC in the
construction of green building.
The Indian plastic pipe market is forecast to grow at a CAGR of 10.4 % till 2021. The major
growth drivers for this market are the growth of government infrastructural spending,
increasing residential and commercial construction, industrial production, irrigation sector,
and replacement of aging pipelines. Agriculture sector is expected to remain major contributor
in the growth of plastic pipe market in India.
Plastic products in water management are being used as compared to various alternate
competitive materials like metal, cement, due to light and weight durability, rust free,
smoother surface.
Infrastructural spending – buttressed by electricity and power projects and higher investments
in railways, road projects, airports and docks and water and sewage projects – would enhance
global PVC demand.

19. Date: 17th
August 2018
OPPORTUNITIES
Total allocation for rural, agriculture sector is Rs. 14.34 lakh crore. Scope of Long Term
Irrigation Fund to be expanded to cover specified command area development projects.
Under the Pradhan Mantri Krishi Sinchai Yojana, 48 AIBP priority projects of Rs 15000 crore to
be completed by December 2019 and utilisation of irrigation potential of 15 lakh hectares a
project of Rs 2300 crores to be undertaken.
Under the Prime Minister Awas Scheme it is proposed to complete construction of one crore
houses by 2019 in the rural areas. In urban areas 37 lakh houses has been sanctioned for
construction.
The Indian pipes business has been growing rapidly in the past decade, largely due to
increasing demand for pipes in the irrigation sector and construction industry. Among the
several varieties of pipes available in the market, the demand for plastic pipes such as PVC,
CPVC in particular, is on a rise largely due to
• Gaining popularity of plastic pipes over traditional/ galvanised iron (GI) pipes
• Huge replacement demand
• Flexibility in terms of transportation, less corrosive and long lasting life (25 years v/s 8-10
years of GI pipes)
• Easy installation and competitive price in nature (20-25% cheaper over GI pipes)

20. Date: 17th
August 2018
APPLICATION BREAK-UP OF PVC-INDIA APPLICATION BREAK-UP OF PVC-GLOBAL
In India, approximately 73% of the PVC is consumed by the Pipes & Fittings industries with the
other sectors comprising only 27%. Globally, Pipes & Fittings account for only 43% of the PVC
consumption, showing that PVC applications in India other than Pipes & Fittings are still in the
early stages and are primed for growth. This, along with the relatively low per capita PVC
consumption in India, shows that future prospects for the Indian PVC processing industry are
bright. Although, CPVC pipes and fittings contributed just ~10% to the overall production
capacity in FY15, it is the fastest growing segment of the PVC pipes and fittings industry in
India.

21. Date: 17th
August 2018
FINANCIALS
PROFIT & LOSS STATEMENT
FY16 FY17 FY18
Income from operations 2481.90 2602.42 2737.81
Growth (%) 0.23% 4.85% 5.20%
Total Expenses 2077.50 2039.41 2253.90
Operating Profit 404.40 563.01 483.90
Operating Profit Margin 16.29% 21.63% 17.67%
Other Income 64.12 24.30 25.40
Other income as % of sales 2.58% 0.93% 0.93%
Depreciation 50.57 55.00 60.64
Interest 44.71 15.31 9.85
Profit Before Tax (PBT) 373.24 517.00 438.81
PBT Margin 15.04% 19.87% 16.03%
Tax 118.87 164.80 140.30
Net Profit 254.37 352.20 298.51
Net Profit Margin 10.25% 13.53% 10.90%
EPS 18.72 28.38 24.10
SEGMENT RESULTS
FY17 FY18 %change
Segment Revenue
PVC 1756.67 1778.38 1.24%
PVC Pipes & Fittings 2216.87 2328.84 5.05%
Power 144.88 142.31 -1.77%
Total 4118.42 4249.53 3.18%
Less: Inter-segment revenue 1130.78 1418.12 25.41%
Income from operations 2987.64 2831.41 -5.23%
Segment EBIT
PVC 354.68 338.84 -4.47%
PVC Pipes & Fittings 177.41 133.93 -24.51%
Power 32.90 7.89 -76.02%
Total 564.99 480.66 -14.93%
Interest (15.38) (9.82) -36.15%
Unallocable exp.(net of income) (32.64) (32.02) -1.90%
PBT 516.97 438.82 -15.12%

22. Date: 17th
August 2018
RATIO ANALYSIS
Performance Ratios 2013 2014 2015 2016 2017
RoA % 6.67 8.64 2.52 12.09 13.29%
RoE % 19.68 22.52 6.06 21.59 18.24
RoCE % 14.80 20.12 10.33 26.08 25.55
Efficiency Ratios 2013 2014 2015 2016 2017
Receivable Days 6.42 5.22 5.79 3.78 3.79
Inventory Days 60.68 64.75 68.72 57.29 54.36
Payable Days 31.90 25.04 25.78 33.68 34.40
Cash Conversion Cycle 35.2 44.93 48.73 27.39 23.75
Financial Stability Ratios 2013 2014 2015 2016 2017
Total debt/equity (x) 1.16 0.90 0.81 0.13 0.04
Current Ratio (x) 0.89 1.02 1.04 1.31 1.70
Interest Ratio (x) 4.70 4.64 2.15 9.35 34.69
Cash Flow Ratios 2013 2014 2015 2016 2017
Cash flow per Share 22.11 19.78 17.10 45.85 18.87
Price to Cash flow 4.35 9.67 16.59 7.95 30.60
Free Cash flow per share 5.43 5.12 10.02 38.11 12.87
Price to Free cash flow 17.70 37.37 28.30 9.56 44.87
Sales to Cash flow 7.82 9.99 11.67 5.00 12.76
Valuation Ratios 2013 2014 2015 2016 2017
EPS (x) 10.97 13.71 3.85 20.50 28.38
P/E (x) 8.77 13.95 73.67 17.77 20.35
P/BV (x) 1.66 3.00 4.47 2.88 3.13
EV/EBITDA (x) 5.16 6.96 17.92 10.63 12.33
Du-Pont ratios 2013 2014 2015 2016 2017
RoE (%) 19.68 22.52 6.06 21.59 18.24
PATM (%) 8.87 9.86 3.26 13.13 17.30
Sales/Total Assets (x) 244.21 271.39 286.31 335.68 350.80
Assets to Equity (x) 128.18 89.86 86.26 37.82 21.62

23. Date: 17th
August 2018
CASH FLOW
FY15 FY16 FY17
Cash Flow from Operating Activity 212.20 569.00 234.15
Cash Flow from Investing Activity 22.14 -77.23 47.91
Cash Flow from Financing Activity -242.96 -493.66 -276.13
Net Cash Flow -8.62 -1.89 5.93
BALANCE SHEET
METRIC/FIGURES (cr) 2016 2017 2018
CASH & CASH EQUIVALENTS 10.41 5.51 6.82
DEBTORS 17.63 52.49 43.14
INVENTORY 447.22 557.40 611.55
LOANS & ADVANCES 0.23 0.22 0.26
INVESTMENTS 817.21 1259.52 1584.31
FIXED ASSETS 846.98 851.66 881.68
OTHER ASSETS 208.98 269.9 378.28
TOTAL ASSETS 2348.66 2996.70 3506.04
SHARE CAPITAL 124.10 124.10 124.10
TOTAL RESERVE 1445.75 2190.70 2671.03
TOTAL NETWORTH 1569.85 2314.80 2795.13
CURRENT LIABILITIES & PROVISION 586.84 459.45 491.07
DEBT 0.39 0.35 0.32
OTHER LIABILITIES 191.58 222.10 219.52
TOTAL LIABILITIES 2348.66 2996.70 3506.04

24. Date: 17th
August 2018
QUARTERLY HIGHLIGHTS
Particulars Q1FY19 Q1FY18 %ch
Income from operations* 827.81 730.70 13.29%
EBIDTA 193.90 130.60 48.47%
EBITDA margin (%) 23.42% 17.87%
Depreciation 16.20 14.50
EBIT 177.70 116.10 53.06%
EBIT % 21.47% 15.89%
Other income 13.70 3.80
Finance Cost 5.20 3.00
PBT before Exceptional
items
186.20 117.01 59.14%
PBT % 22.49% 16.01%
Exceptional items* 27.90 0
PBT after exceptional items 158.30 117.01 35.30%
Tax 55.00 37.20
PAT 103.30 79.80 29.45%
PAT% 12.48% 10.92%
* excluding duties and taxes
* Derivative claim disclosed as contingent liability as at 31st
March 2018 is settled and the
expenditure thereon is shown as exceptional item. There are no more claims or liabilities on
account of derivatives.

25. Date: 17th
August 2018
VALUATION
Scenario 1 assumption:
As per Q3FY18 concall, management mentioned about achieving a target of USD $1 billion (Rs.
6870 cr.) by 2020. So to be little on the conservative side, the target is assumed to be achieved
by 2021 in the base case scenario.
Scenario 1 Part-1 is based on 5yrs and 3yrs average PATM% and Scenario 1 Part-2 is based on
5yrs and 3yrs average PBIDTM%.
Scenario 1 (Base Case Scenario) Part-1
FY21
5 yrs. avg. PATM (%) 3 yrs. avg. PATM (%)
Sales 6870 6870
PATM (%) 7.33% 9.62%
PAT 504 661
P/E 22.79 22.79
MCap(cr.) 11476 15062
No. of shares 12.410 12.410
Price 925 1214
Scenario 1 Part-2
FY21
5 yrs. avg. PBIDTM (%) 3 yrs. avg. PBIDTM (%)
Sales 6870 6870
PBIDTM (%) 14.57% 16.29%
PBIDT 1001 1119
EV/EBITDA (x) 13.89 13.89
EV (cr.) 13903 15545
Mcap (cr.) 13826 15467
No. of shares 12410 12410
Price 1114 1246

26. Date: 17th
August 2018
Scenario 2 assumption:
In the worst case scenario the target of USD $1billion is assumed to be achieved by 75% by
2021.
Scenario 2 Part-2
FY21
5 yrs. avg. PBIDTM (%) 3 yrs. avg. PBIDTM (%)
Sales 5153 5153
PBIDTM (%) 14.57% 16.29%
PBIDT 751 839
EV/EBITDA (x) 13.89 13.89
EV (cr.) 10427 11658
Mcap (cr.) 10350 11581
No. of shares 12.410 12.410
Price 834 933
Scenario 2(Worst Case Scenario) Part-1
FY21
5 yrs. avg. PATM (%) 3 yrs. avg. PATM (%)
Sales 5153 5153
PATM(%) 7.33% 9.62%
PAT 378 496
P/E 22.79 22.79
MCap(cr.) 8607 11296
No. of shares 12.410 12.410
Price 694 910

27. Date: 17th
August 2018
Conclusion
Government focus on building rural water and sanitation infrastructure and ‘smart cities’ will
definately increase the PVC demand. Government housing scheme for both rural and urban
areas – Prime Minister Awas Scheme proposes to complete 10m rural houses by 2019,
construction of 3.7m houses in urban areas have already been sanctioned.
FIL’S tie up with American Company Lubrizol Corporation to provide CPVC compound for
manufacturing of CPVC Pipes and fittings will strengthen the Company’s track record of
providing superior products for the domestic market. For FY18 CPVC volume sale was 5000
MT which is 5% of the total market share of CPVC pipes. And this margin will increase in the
coming years.
FIL is expanding its distribution network by increasing number of retail touch points and
dealers. The Company is also doing capacity expansion which will help them to meet the
growing demand. FIL’S PVC pipe capacity is 3,30,000 MT p.a for FY18 which will increase to
3,70,000 MT p.a by the end of the year.
Company is benefited with backward integration of PVC Resin plant for regular supply of PVC
Resin for PVC pipes which help in cost optimisation. Yet the volatility in the prices of crude
based raw materials like EDC, VCM and Ethylene have oftentimes affected the benefits of
backward integration.
The demand of PVC pipes is also affected by unseasonal monsoon which has a direct effect
on company’s revenues and profit margin.
Finolex has a great scope in future because of its quality products and wide distribution
network. It also has a brand name which will help the company to capture the market.

28. Date: 17th
August 2018
DISCLAIMER
I am not a SEBI registered Research Analyst. No recommendations are given for the company
discussed in the report. Any valuation discussed in the report is solely for informational
reasons and not to be taken as an investment recommendation. I do not hold any shares of the
company, neither am I beneficiary to any shares of the company.
Authored by: Radhika Modi
Head of Research: Tejas Jariwala
SOURCES
 Annual Report
 Investor Presentation
 Conference Call
 BSE website
 Web based Software – Ace Analyser