Rallis India reported a 14% increase in sales and 151% increase in profits for the fourth quarter of fiscal year 2010, in line with analyst estimates. Strong demand from farmers during the Rabi season and a 1000 basis point expansion in operating margins from 10% to 20% drove results. For the full fiscal year, Rallis saw a path-breaking performance with net sales growth of 5.2% and profit growth of 45.9% despite a drought in India and lower export prices for commodities. Going forward, analysts expect continued strong growth over the next few years supported by high agro-commodity prices and the upcoming commissioning of a new export facility.

1. 4QFY2010 Result Update I Agrichemicals
April 27, 2010
Rallis India ACCUMULATE
CMP Rs1,438
Performance Highlights Target Price Rs1,611
Rallis India’s (RAIL) 4QFY2010 Sales and PAT growth of 14% and 151%, Investment Period 12 Months
respectively, was in line with our estimates. RAIL’s strong performance was on
the back of strong demand from farmers during the Rabi season. The major Stock Info
improvement was on the EBITDA front, where margins expanded by 1,000bp,
Sector Agrichemicals
from 10% to 20%. Overall, we consider RAIL’s FY2010 performance to be
path breaking, considering that India witnessed a drought and with exports Market Cap (Rs cr) 1,864
being hit by a sharp correction in commodity prices. Going ahead, we expect
Beta 0.6
the company to be on a strong growth path for the next few years, on account
of the high prices of agro-commodities and the commissioning of the Dahej 52 WK High / Low 1,520/449
plant for the export market. We have marginally revised our estimates
upwards. However, at the current valuations, the stock offers a limited upside; Avg. Daily Volume 14,760
hence, we recommend an Accumulate on the stock. Face Value (Rs) 10
Pricing power helps improve EBITDA margin: RAIL improved its EBITDA BSE Sensex 17,690
margin from 10% in 4QFY2009 to 20% in 4QFY2010; this was possible on
account of strong pricing power. Gross margins for the quarters have Nifty 5,308
improved from 35% to 48%, indicating the strong pricing power that the Reuters Code RALL.BO
company commands. For the full year, the EBITDA margin stood at 19%,
against 16% in FY2009. Bloomberg Code RALI@IN
Outlook and Valuation: Given the high probability of a normal monsoon in Shareholding Pattern (%)
the current year, the management expects the industry to witness a healthy
growth of 10-12% in FY2011E. RAIL is a major player in the Domestic market; Promoters 50.2
thus, we expect the company to grow at a higher pace than the industry. MF/Banks/Indian FLs 27.7
Additionally, we estimate RAIL’s Export to receive a major leg-up once its new
plant at Dahej comes on stream in June 2010. However, as the Dahej plant FII/NRIs/OCBs 1.6
ramps up and the contribution from exports starts increasing, we expect Indian Public 20.5
Rallis’s margins to witness some pressure, as exports have a lower margin
vis-a-vis domestic sales. Overall, we estimate RAIL to register a CAGR of 18% Abs. (%) 3m 1yr 3yr
and 36% in Net Sales and Profit over FY2010-12E, respectively. At the current
Sensex 8.6 55.6 27.2
level, the stock is trading at 13.7x and 10.7x its FY2011E and FY2012E
earnings, respectively. We recommend an Accumulate on the stock, with a
Rallis 62.5 173.9 363.9
Target Price of Rs1,611.
Key Financials (Consolidated)
Y/E March (Rs cr) FY2009 FY2010E FY2011E FY2012E
Net Sales 856 901 1050 1256
% chg 26.9 5.2 16.6 19.6
Net Profit 64 94 136 174
% chg 110.2 45.9 45.3 27.7
EBITDA Margin (%) 53.6 72.3 105.1 134.2
FDEPS (Rs) 16.0 19.4 19.1 18.4
P/E (x) 26.8 19.9 13.7 10.7
P/BV (x) 6.6 4.5 3.7 2.9
RoE (%) 19.6 24.6 29.6 30.3
RoACE (%) 28.9 36.9 37.7 34.3
Sageraj Bariya
EV/Sales (x) 1.9 1.9 1.6 1.3
Tel: 022 – 4040 3800 Ext: 346
EV/EBITDA (x) 12.1 10.0 8.5 7.1 E-mail: sageraj.bariya@angeltrade.com
Source: Company, Angel Research
1
Please refer to important disclosures at the end of this report Sebi Registration No: INB 010996539

2. Rallis I 4QFY2010 Result Update
Exhibit 1: 4QFY2010 Performance (Consolidated)
Y/E March (Rs cr) 4Q2010 4Q2009 % chg FY2010 FY2009 % chg
Total Revenue 2029 1782 13.9 9005 8562 5.2
Total RM 1050 1164 (9.7) 5055 5072 (0.3)
as % of sales 52 65 56 59
Gross Profit 979 618 58.4 3950 3490 13.2
Gross margin (%) 48 35 44 41
Staff cost 142 140 0.9 673 669 0.6
as % of sales 7 8 7 8
Other Expenses 432 301 43.4 1528 1454 5.0
as % of sales 21 17 17 17
Total Exp 1624 1605 1.2 7256 7195 0.8
as % of sales 80 90 81 84
EBITDA 406 177 129.6 1750 1367 28.0
EBITDA % 20.0 9.9 19.4 16.0 346.4
Depreciation 68 52 31.4 183 229 (20.2)
EBIT 338 125 170.2 1567 1137 37.7
EBIT % 17 7 17 13
Other Income 16 14 19.9 66 29 126.1
Interest* 5 6 (5.5) 100 108 (7.4)
PBT 349 133 162.1 1533 1059 44.8
Extra-ord Items (13) 18 (171.8) (83) (64) 29.5
PBT 362 115 214.6 1450 995 45.7
Total tax 113 16 608.8 512 352 45.4
tax rate 33 12 33 33
PAT 248 99 150.9 938 643 45.9
NPM (%) 12.2 5.6 10.4 6.0
Equity 130 120 130 120
EPS 19 8 72 54
Source: Company, Angel Research. Note * - Full year numbers are adjusted for preference dividend
Key highlights for FY2010 performance
RAIL’s gross margins have been steadily improving, from a low of 35% in FY2007 to
44% at the end of FY2010, an improvement of 800bp over 3 years. Moreover, it
improved by 300bp from FY2009 to FY2010, when India faced a drought situation.
We believe that this indicates the strong pricing power that Rallis commands in the
domestic market.
Exhibit 2: Improving gross margin indicating strong pricing power
45 20
42 15 (%)
(%)
39 10
36 5
33 0
FY2006 FY2007 FY2008 FY2009 FY2010
Gross margin (LHS) EBITDA Margin (RHS)
Source: Company, Angel Research
RAIL’s cost reduction plan has been visible through the closure of its Hyderabad
plant and a low growth in other costs. Some of the indicators pointing towards cost-
control measures are: Staff costs and other costs for FY2010 increased by a mere
0.6% and 5%, respectively.
April 27, 2010 2

3. Rallis I 4QFY2010 Result Update
Key takeaways from the management meet
• The domestic pesticides industry grew by 10-12% in value terms, while volumes
grew at a slightly higher pace. With RAIL being a key player in the domestic
market, we expect it to outperform industry growth and believe that its domestic
business has grown in the range of 19-25% in FY2010.
• Some of the key agricultural states that had a high share of migrant workers
have witnessed a good demand for herbicides. After the introduction of the
National Rural Employment Guarantee Scheme (NREG), the availability of cost-
effective labour has reduced. This, in turn, has increased the demand for
Herbicides.
• RAIL had launched a new product (fungicide) under the brand name ‘Ergon’ in
2QFY2010. The key differentiating factor for this product is that it offers crop
protection and yield enhancement. The market has received the product well
and the company continues to promote it strongly. We expect ‘Ergon’ to be one
of the best brands in the company’s portfolio within the next three years.
• Overall, the company is targeting strong growth in the domestic market, with
dominant market share.
Other developments
The Company has announced a final dividend of Rs10/share for FY2010; this is in
addition to the interim dividend of Rs8/share declared earlier. The company has also
recommended an issuance of bonus shares (1 share for every 2 held).
April 27, 2010 3

4. Rallis I 4QFY2010 Result Update
Outlook and Valuation
We have marginally revised our estimates upward for FY2011E and FY2012E. We
expect the company to maintain its EBITDA margin at 19% in FY2011E; however,
with the ramp-up in the Dahej facility and with the increasing contribution from low-
margin exports, we expect the blended EBITDA margin to reduce in FY2012E.
However, we expect the company to maintain its PAT margin, due to a reduction in
the interest outflow (as debt would be redeemed on the back of higher cash
generation from operations), better working capital management and a lower tax
rate (EOU status for the Dahej unit). We have increased our EPS estimates by 9%
and 10% for FY2011E and FY2012E, respectively.
Exhibit 3: Revised Estimates
Rs cr Old New % chg
FY2011E FY2012E FY2011E FY2012E FY2011E FY2012E
Sales 982 1130 1050 1256 7 11
EBITDA 188 214 201 231 7 8
EBITDA % 19 19 19 18
PAT 125 158 136 174 9 10
EPS 96 122 105 134 9 10
Source: Company, Angel Research
At the CMP, the stock is trading at 13.7x and 10.7x its FY2011E and FY2012E
Earnings, respectively. Given its limited upside potential, we recommend an
Accumulate on the stock, with a Target Price of Rs1,611 (Rs1,464 earlier).
Exhibit 4: One year forward P/E band
2,000
1,800 17x
1,600
14x
1,400
Share Price (Rs)
11x
1,200
1,000
8x
800
600 5x
400
200
0
Apr-04
Apr-05
Apr-06
Apr-07
Apr-08
Apr-09
Apr-10
Oct-04
Oct-05
Oct-06
Oct-07
Oct-08
Oct-09
Source: Company, Angel Research
April 27, 2010 4

5. Rallis I 4QFY2010 Result Update
Profit & Loss Statement (Consolidated) (Rs Cr)
Y/E March FY2007 FY2008 FY2009 FY2010 FY2011E FY2012E
Gross sales 675 743 930 959 1,124 1,344
Less: Excise duty 58 69 74 58 74 88
Net Sales 617 675 856 901 1,050 1,256
Other operating income - - - - - -
Total operating income 617 675 856 901 1,050 1,256
% chg 4.2 9.4 26.9 5.2 16.6 19.6
Total Expenditure 603 615 719 726 850 1,025
Net Raw Materials 401 411 507 506 604 735
Other Mfg costs 138 134 134 153 147 160
Personnel 55 62 67 67 88 105
Other 9 9 11 - 11 25
EBITDA 13 59 137 175 201 231
% chg (56.0) 340.6 131.2 28.0 14.7 15.2
(% of Net Sales) 2.2 8.8 16.0 19.4 19.1 18.4
Depreciation& Amortisation 31 20 23 18 23 28
EBIT (18) 39 114 157 178 203
% chg (227.9) - 191.3 37.7 13.3 14.5
(% of Net Sales) - 5.8 13.3 17.4 16.9 16.2
Interest & other Charges 19 12 11 10 0 -
Other Income 84 112 3 7 24 24
(% of PBT) 176 81 3 4 12 11
Recurring PBT 48 139 106 153 202 228
% chg 30.0 190.4 (23.6) 44.8 31.6 12.8
Extraordinary Expense/(Inc.) (57) (87) (6) (8) - -
PBT (reported) (9) 52 100 145 202 228
Tax (3) 21 35 51 65 54
(% of PBT) (6.5) 15.2 33.3 33.4 32.4 23.6
PAT (reported) (6) 31 64 94 136 174
Add: Share of earnings of
associate - - - - - -
Less: Minority interest (MI) - - - - - -
Prior period items - - - - - -
PAT after MI (reported) (6) 31 64 94 136 174
ADJ. PAT (6) 31 64 94 136 174
% chg (116.0) - 110.2 45.9 45.3 27.7
(% of Net Sales) - 3.9 7.5 10.3 12.7 13.6
Basic EPS (Rs) - 26 54 72 105 134
Fully Diluted EPS (Rs) - 26 54 72 105 134
% chg - - 110.2 34.9 45.3 27.7
April 27, 2010 5

6. Rallis I 4QFY2010 Result Update
Balance Sheet (Consolidated) (Rs Cr)
Y/E March FY2007 FY2008 FY2009 FY2010E FY2011E FY2012E
SOURCES OF FUNDS
Equity Share Capital 12 12 12 13 13 13
Preference Capital 88 88 88 - - -
Reserves& Surplus 112 208 250 399 497 624
Shareholders Funds 212 308 350 412 510 637
Minority Interest - - - - - -
Total Loans 36 47 82 4 - -
Deferred Tax Liability - - - 2 15 23
Total Liabilities 248 354 432 417 524 660
APPLICATION OF FUNDS
Gross Block 285 296 338 339 484 508
Less: Acc. Depreciation 146 161 179 197 220 248
Net Block 139 135 159 142 264 260
Capital Work-in-Progress 5 13 29 137 18 18
Goodwill
Investments 32 56 136 99 99 99
Current Assets
Cash 23 8 8 14 61 129
Loans & Advances 75 79 77 72 84 113
Other 218 250 266 248 332 437
Current liabilities 258 201 261 294 332 395
Net Current Assets 58 137 91 39 145 284
Mis. Exp. not written off 12 13 10 - - -
Total Assets 248 354 432 417 524 660
Cash Flow (Consolidated) (Rs Cr)
Y/E March FY2007 FY2008 FY2009 FY2010E FY2011E FY2012E
Profit before tax 55 146 107 162 202 228
Depreciation 31 20 23 18 23 28
Change in Working Capital (26) (185) 40 59 (64) (77)
Less: Other income
Direct taxes paid (17) (26) (31) (45) (58) (47)
Cash Flow from Operations 44 (45) 139 194 103 131
(Inc.)/ Dec. in Fixed Assets 47 63 (64) (110) (25) (24)
(Inc.)/ Dec. in Investments 20 (21) (78) (38) - -
Inc./ (Dec.) in loans and
advances
Other income
Cash Flow from Investing 67 42 (142) (72) (25) (24)
Issue of Equity - - - (5) - -
Inc./(Dec.) in loans (78) 11 37 (79) (4) -
Dividend Paid (Incl. Tax) (13) (19) (30) (22) (27) (38)
Others (11) (4) (3) (10) (0) -
Cash Flow from Financing (102) (13) 3 (116) (31) (38)
Inc./(Dec.) in Cash 9 (15) (0) 6 47 69
Opening Cash balances 13 23 8 8 14 61
Closing Cash balances 22 8 8 14 61 129
April 27, 2010 6

7. Rallis I 4QFY2010 Result Update
Key Ratios (Rs Cr)
Y/E March FY2007 FY2008 FY2009 FY2010E FY2011E FY2012E
Valuation Ratio (x)
P/E (on FDEPS) - 56.3 26.8 19.9 13.7 10.7
P/CEPS 69.5 34.0 19.7 16.6 11.7 9.2
P/BV 13.9 7.8 6.6 4.5 3.7 2.9
Dividend yield (%) 0.6 1.1 1.1 1.3 1.7 2.2
EV/Sales 2.8 2.5 1.9 1.9 1.6 1.3
EV/EBITDA 126.9 28.8 12.1 10.0 8.5 7.1
EV / Total Assets 6.9 4.8 3.8 4.2 3.2 2.5
Per Share Data (Rs)
EPS (Basic) - 25.5 53.6 72.3 105.1 134.2
EPS (fully diluted) - 25.5 53.6 72.3 105.1 134.2
Cash EPS 20.7 42.3 72.8 86.5 122.9 155.7
DPS 8.0 16.0 16.0 18.0 25.0 31.0
Book Value 103.6 183.4 218.4 317.4 393.3 491.2
Dupont Analysis
EBIT margin - 5.8 13.3 17.4 16.9 16.2
Tax retention ratio 106.5 84.8 66.7 66.6 67.6 76.4
Asset turnover (x) 5.5 2.4 2.6 2.8 2.9 2.9
ROIC (Post-tax) - 11.6 22.9 32.0 32.9 36.3
Cost of Debt (Post Tax) 12.1 8.9 3.2 5.3 5.4 -
Leverage (x) 0.4 0.2 - - - -
Operating ROE - 12.1 22.9 32.0 32.9 36.3
Returns (%)
ROCE (Pre-tax) - 13.0 28.9 36.9 37.7 34.3
Angel ROIC (Pre-tax) - 11.3 35.8 46.8 45.0 44.0
ROE - 11.8 19.6 24.6 29.6 30.3
Turnover ratios (x)
Asset Turnover (Gross Block) 2.2 2.3 2.7 2.7 2.6 2.5
Inventory / Sales (days) 80.0 74.3 63.3 57.7 56.1 62.2
Receivables (days) 52.4 52.0 46.4 46.0 44.3 47.4
Payables (days) 122.5 104.9 85.7 104.3 99.7 96.8
Working capital cycle (ex-cash)
(days) 26.1 44.1 45.1 22.0 19.0 34.7
Solvency ratios (x)
Net debt to equity 0.4 0.2 - - - -
Net debt to EBITDA 3.4 0.8 - - - -
Interest Coverage (EBIT /
Interest) - 3.2 10.6 15.7 - -
April 27, 2010 7

8. Rallis I 4QFY2010 Result Update
Research Team Tel: 022-4040 3800 E-mail: research@angeltrade.com Website: www.angeltrade.com
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Disclosure of Interest Statement Rallis
1. Analyst ownership of the stock No
2. Angel and its Group companies ownership of the stock No
3. Angel and its Group companies’ Directors ownership of the stock No
4. Broking relationship with company covered No
Note: We have not considered any Exposure below Rs 1 lakh for Angel and its Group companies.
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Tel : (022) 3952 4568 / 4040 3800
Angel Broking Ltd: BSE Sebi Regn No : INB 010996539 / CDSL Regn No: IN - DP - CDSL - 234 - 2004 / PMS Regn Code: PM/INP000001546 Angel Securities Ltd:BSE: INB010994639/INF010994639 NSE:
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April 27, 2010 8