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| India Infoline Research Team / 12:41 , Nov 01, 2011 |
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- Net sales for Q2 FY12 rises 19.4% yoy driven by higher average realizations and 6.7% increase in market sales
- Upstream companies shared under recovery burden worth Rs16.4bn in Q2 FY12 v/s Rs8.2bn in Q2 FY11
- No government contribution was accounted for during Q2 FY12 leading to below expected results
- Throughput was flat at 5.6mn tons, but GRMs were lower by 41% yoy to US$1.65/bbl
- Uncertainty over subsidy sharing pattern to continue, keeping the impact of recent reforms limited, maintain MP rating
Result table
(Rs m)
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Q2 FY12
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Q2 FY11
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% yoy
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Q1 FY12
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% qoq
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Net sales
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423,019
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354,348
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19.4
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461,396
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(8.3)
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Material costs
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(198,637)
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(135,429)
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46.7
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(186,127)
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6.7
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Purchases
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(219,959)
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(166,127)
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32.4
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(276,334)
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(20.4)
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Personnel costs
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(4,381)
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(4,526)
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(3.2)
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(6,574)
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(33.4)
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Other overheads
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(26,990)
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(23,401)
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15.3
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(14,003)
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92.7
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Operating profit
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(26,948)
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24,865
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(208.4)
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(21,642)
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24.5
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OPM (%)
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(6.4)
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7.0
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(1,339) bps
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(4.7)
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(168) bps
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Depreciation
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(4,600)
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(4,019)
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14.5
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(4,901)
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(6.1)
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Interest
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(4,532)
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(2,780)
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63.0
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(3,349)
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35.3
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Other income
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3,787
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5,336
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(29.0)
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4,273
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(11.4)
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PBT
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(32,293)
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23,402
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(238.0)
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(25,619)
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26.1
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Tax
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-
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(1,980)
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-
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-
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-
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Effective tax rate (%)
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-
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8.5
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-
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-
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-
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Reported PAT
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(32,293)
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21,422
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(250.7)
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(25,619)
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26.1
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PAT margin (%)
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(7.6)
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6.0
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(1,368) bps
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(5.6)
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(208) bps
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Ann. EPS (Rs)
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(357.3)
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237.0
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(250.7)
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(283.4)
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26.1
| Source: Company, India Infoline Research
Higher realizations and volumes drive topline growth
Bharat Petroleum Corporation Ltd (BPCL) reported 19.4% yoy rise in net sales to Rs423bn for Q2 FY12. Market sales at 7.04mn tons were higher by 6.7% yoy on the back of 4.9% and 11.4% increase in volumes of petrol and diesel respectively. Furthermore, LPG and ATF volumes were higher by 10.7% and 10.8% yoy respectively. However, volumes of naphtha and furnace oil witnessed a sharp fall. Realizations have been higher in line with average crude oil prices during the period and price hike implemented towards the end of Q1 FY12 for LPG and HSD. Petrol prices were also raised during the quarter. During Q2 FY12, BPCL accounted for Rs16.4bn as compared to Rs8.2bn in Q2 FY11 from upstream companies in the form of discounts on purchase of crude oil, LPG and SKO. For Q2 FY12, Rs35.2bn no contribution has been accounted from the government. has been accounted as receivable from government compared to nil during Q1 FY11.
Uncertainty on subsidy sharing pattern continues
During Q2 FY12, upstream companies bore about one-third of the gross under recoveries in the industry as compared to 39% in FY11. No contribution has come from the government in Q2 FY12. Nevertheless, we believe government will contribute to the subsidy sharing pattern to the tune of 45-50%. But the uncertainty element with respect to the pattern will continue. During Q2 FY12, gross under recoveries for BPCL were at Rs48.7bn and net under recoveries were at Rs32.3bn.
Refining segment disappoints
During Q2 FY12, BPCL refineries had a combined throughput of 5.6mn tons, flat on yoy basis. With market sales growing by 6.7%, the marketing volumes to total throughput ratio increased from 1.18x in Q2 FY11 to 1.26x in Q2 FY12. Total GRMs for Q2 FY12 were at US$1.6/bbl v/s US$2.8/bbl in Q2 FY11. This was despite an improvement in global refining improvement. The disappointment was primarily on account of foreign exchange losses in the refining division owing to adverse movement of rupee against the USD. At the operating level, the company reported a loss of Rs26.9bn vis-à-vis Rs24.9bn profit in Q2 FY11.
Higher interest and lower other income worsens profitability
During Q2 FY12, BPCL reported a net loss of Rs32.2n vs Rs21.4bn profit in Q2 FY11. Apart from higher net under recoveries, poor refining segment performance and higher interest costs resulted in such performance.
Reforms played out but uncertainty continues
The government has made bold moves through completely de-regulating petrol prices and through price hikes for diesel, LPG and Kerosene. This has reduced gross under recoveries estimate considerably for FY12. However, with no formula arrived for subsidy sharing pattern, uncertainty on earnings for oil marketing companies continues. The situation seems to be better off vis-à-vis previous few years, which we believe is adequately factored in the current price. For BPCL, we maintain our Market Performer rating, with a 9-month target price of Rs650.
Cost analysis
As a % of net sales
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Q2 FY12
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Q2 FY11
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bps yoy
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Q1 FY12
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bps qoq
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Material costs
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47.0
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38.2
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874
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40.3
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662
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Purchases
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52.0
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46.9
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512
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59.9
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(789)
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Personnel Costs
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1.0
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1.3
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(24)
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1.4
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(39)
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Other overheads
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6.4
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6.6
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(22)
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3.0
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335
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Total costs
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106.4
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93.0
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1,339
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104.7
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168
| Source: Company, India Infoline Research
Financial summary
Y/e 31 Mar (Rs m)
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FY10
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FY11
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FY12E
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FY13E
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Revenues
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1,222,760
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1,516,252
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1,631,645
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1,827,986
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yoy growth (%)
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(9.6)
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24.0
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7.6
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12.0
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Operating profit
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23,791
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34,940
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41,027
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44,865
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OPM (%)
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1.9
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2.3
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2.5
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2.5
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Pre-exceptional PAT
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15,376
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15,467
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20,764
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24,097
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Reported PAT
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15,376
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15,467
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20,764
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24,097
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yoy growth (%)
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108.9
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0.6
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34.2
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16.1
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EPS (Rs)
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42.5
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42.8
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57.4
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66.7
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P/E (x)
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14.6
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14.6
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10.8
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9.3
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Price/Book (x)
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1.7
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1.6
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1.4
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1.3
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EV/EBITDA (x)
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18.7
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11.8
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10.1
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9.6
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Debt/Equity (x)
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1.7
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1.3
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1.2
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1.2
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RoE (%)
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12.2
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11.4
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13.9
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14.3
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RoCE (%)
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9.6
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10.0
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12.6
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13.2
| Source: Company, India Infoline Research
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