GICS Industry : Electronic Equip., Instruments l Sub Industry : Electronic Equipment & Instrum l Website : www.honeywellautomationindia.

com

Honeywell Automation India Ltd

Key Stock Indicators
NSE Ticker : Bloomberg Ticker : Face value / Share: Div. Yield (%): HONAUT HWA:IN 10.0 0.5 CMP (as on 14 Feb 2011Rs/share): 52-week range up to 14 Feb 2011 (Rs)(H/L): Market Cap as on 14 Feb 2011 (Rs mn): Enterprise Value as on 14 Feb 2011 (Rs mn): Div. Yield (%): 0.0 2157.8 3204.45/2042.80 19,078 18,018 Shares outstanding (mn) : Free Float (%) : Average daily volumes (12 months) : Beta (2 year) : 8.8 18.8 3,030 0.8

Honeywell Automation India Ltd (HAIL) was incorporated in 1987, as a joint venture between TATA group and Honeywell. It is a leading provider of integrated automation and software solutions for improving productivity, enhance comfort and ensure safety and security. HAIL has 5 strategic business divisions viz. Honeywell Process Solutions (HPS), Honeywell Building Solutions (HBS), Environment and Combustion Control (ECC), Sensing & Control (S&C) and Exports Business Group (EBG).

Key Financial Indicators

Revenue (Rs mn) EBITDA ma rgins (%) PAT (Rs mn) PAT ma rgins (%) Gea ring (x) EPS (Rs /s ha re) PE (x) P/BV (x) RoCE (%) RoE (%) EV/EBITDA (x)
n.m. : Not meaningful

KEY HIGHLIGHTS
Amongst the largest Building Automation Solution providers in India Honeywell Building Solutions (HBS) is one of the largest and most technically skilled Building Automation Solutions providers in the Indian Subcontinent. HBSs include fire automation, security solutions, HVAC control, integrated building management systems, energy reduction contracts and various other facility management services for facilities, commercial and industrial buildings, hospital, hotels, airport and mass rapid transit. During CY09, HAIL got several new contracts in each of the three focus areas. The intelligent buildings space got several major projects from ICICI Bank, Delhi Metro, HCL Technologies, TCS and Bharti Airtel. In the field of operational efficiency, the company got major after market services contracts from ICICI Bank, TCS, TTSL and Hyderabad Airport. The company also got Energy Contracts from the Renaissance (leveraging the Clinton Climate Initiative), Titan, Thermax, Rahejas, TATA Steel and SKF during the year. Diversified business mix combat revenue cyclicality HAIL diversified its business in 5 major business segments viz. Process Solutions, Building Solutions, Environment & Combustion Control, Sensing & Control and Exports Business Group. The company is a market leader in most of these business segments. With its business segments, HAIL operates in the core business sectors in India like, Infrastructure, Petrochemicals, Refining, Chemicals, Mining & Metals, Automobiles and Hospitality. HAIL has a wide range of product portfolio. Its brand can be seen on the thermostats in buildings, in the electronic voting machines, process control systems in refineries and factories and on sensors in automobiles. A well-diversified business activity helps the company combat revenue cyclicality. Expands their Energy Efficiency Portfolio The company forayed into the renewable energy business by introducing the Honeywell Solar Water Heating System in CY09. The Honeywell Solar Water Heaters are available in a variety of sizes, from basic 100 LPD standalone systems to large, customized systems of several LPD.

Dec-07 8,662.8 13.0 650.3 7.5 0.1 73.5 33.5 9.3 48.9 31.8 18.9

Dec-08 9,625.7 13.6 818.5 8.5 92.6 9.4 2.4 40.6 29.8 5.9

Dec-09 11,734.2 16.6 1,327.9 11.3 150.2 14.4 4.4 50.9 35.2 9.3

Shareholding (As on December 31, 2010)

FII 1% DII 4%

Others 14%

Promoter 81%

KEY RISKS

Indexed price chart

(index) 160 140 120 100 80 60 40 ('000) 60 50 40 30 20 10 0 Nov-10 Apr-10 Mar-10 May-10 Dec-10 Aug-10 Feb-10 Sep-10 Oct-10 Jun-10 Jul-10 Jan-11 NIFTY

Competition from Chinese low cost electronic equipment Intense competition from domestic players Fluctuations in foreign exchange rates as exports contributed ~41% of CY09 revenues

Stock Performances vis--vis market

Returns (%) YTD HONAUT NIFTY
Note: 1) YTD returns are since Jan 04, 2010 to Feb 14, 2011. 2) 1-m, 3-m and 12-m returns are up to Feb 14, 2011.

1-m -9 -4

3-m -18 -11

12-m -5 14

20 0

-1 4

Volumes (RHS)

HONAUT

CRISIL COMPANY REPORT | 1

Honeywell Automation India Ltd

BACKGROUND
HAIL was incorporated in 1987 as a joint venture between TATA group and Honeywell. The company has manufacturing, design and engineering facilities in Pune (Maharashtra). The companys joint venture with Honeywell ended in 2004, with Honeywell buying out the entire TATA stake. HAIL is a market leader in Electronicsinstrumentation and process control equipment industry. It is a leading provider of Integration automation and software solutions that improve the productivity, enhance the comfort and ensure safety and security to homes and business premises. HAIL has a 36,000 sq ft. manufacturing facility in Pune with 8 offices all over India. The company provides innovative solutions, high-end consulting and engineering designs to organizations, both in India and globally. HAILs process solutions offered Field Instruments, PLC's, Distributed Control Systems, Emergency Shut down Systems (ESD), Quality Controls Systems (QCS), Advanced Software Solutions and various value added services. Its environment and combustion control products include thermostats, valves and HVAC controllers for building automation. HAIL sensing and control product includes sensor and switches. During CY10, domestic segment contributed ~59% of revenues, while the overseas segment contributed ~41%.Honeywell directly employs more than 10,000 people based in Delhi, Pune, Bangalore, Hyderabad, Chennai, Gurgaon, Madurai and several other cities.

COMPETITIVE POSITION
Peer Comparison

Revenue (Rs mn) EBITDA ma rgins (%) PAT (Rs mn) PAT ma rgins (%) Gea ring (x) EPS (Rs /s ha re) PE (x) P/BV (x) RoCE (%) RoE (%) EV/EBITDA (x)
n.m: Not meaningful

Honeywell Automation India Ltd Dec-09 11,734.2 16.6 1,327.9 11.3 150.2 14.4 4.4 50.9 35.2 9.3

Bartronics India Ltd. Mar-10 5,807.7 37.3 650.4 11.2 2.5 15.9 4.0 0.5 14.4 24.5 4.0

Siemens Ltd Sep-09 93,358.7 11.3 7,005.0 7.5 20.8 37.4 10.3 50.6 29.8 23.4

Crompton Greaves Ltd. Mar-10 93,382.2 14.0 8,624.2 9.2 0.3 13.4 23.3 9.3 48.4 47.6 15.2

FINANCIAL PROFILE
Steady growth in top-line accompanied by margin improvement

Key Financial Indicators Units Revenue Rs mi ll ion Rs mi ll ion Per cent Per cent Per cent Times Per cent Per cent EBITDA ma rgins Per cent PAT PAT ma rgins EBITDA growth PAT growth Gea ring RoCE RoE

Dec-07
8,662.8 13.0 650.3 7.5 34.6 30.5 12.1 0.1 48.9 31.8

Dec-08
9,625.7 13.6 818.5 8.5 11.1 15.8 25.9 0.0 40.6 29.8

Dec-09
11,734.2 16.6 1,327.9 11.3 21.9 48.6 62.2 0.0 50.9 35.2

During CY09, HAIL reported top-line of Rs 11.7 bn as compared to Rs 9.6 bn in CY08, a growth of ~22% over the last year. The growth was mainly on account of growth in exports of services and Contract Manufacturing. Exports grew by ~15% over CY08, due to increased volume of contract manufacturing and increase in global engineering services due to large global projects. This along with decline in material cost and employee cost as a percentage of sales helped the company improve its operating margins from 13.6% in CY08 to 16.6% in CY09, a growth of ~300 basis points y-o-y.

Revenue growth Per cent

INDUSTRY PROFILE
Electric equipments The electrical equipment industry comprises several products such as transformers, switchgears, motors and control equipment. In 2009-10, the size of the electrical equipment industry stood at Rs 525 billion. The electrical equipment industry grew at 11.3 per cent during 2009-10. The main buyers of electrical equipment are power utilities. A typical electric equipment component has a life of 20-25 years; hence, replacement demand would incrementally add to the growth opportunities. The raw material cost of electrical equipment manufacturers is estimated at 50-60 per cent of sales. Primary raw materials include copper, aluminium and steel. A few large players dominate the electrical equipment industry. However, several other small and medium-sized players too specialise in specific product lines. In addition, there has been substantial competition from Chinese equipments manufacturers especially in the high voltage category. The electrical equipment industry is highly working-capital intensive as it takes 4-5 months to recover payments from SEBs, which are their major clients Engineering The heavy engineering industry comprises electrical equipment, earthmovers, mining equipment and defence equipment, amongst others. It also includes companies working on turnkey projects that require skills from conception to execution. The industry is characterised by low competition and moderate capital intensity, and is growth is linked to growth in gross domestic product (GDP) and capital formation in the country. Further, although the sector is not capital-intensive, it needs technical expertise and skilled manpower. In India, there are about 40-50 companies in the heavy engineering sector. The demand for heavy engineering equipment is derived from user industries such as power, construction, cement, steel, chemicals, petrochemicals and refining. In addition, significant investments in power generation, and transmission and distribution (T&D) have driven growth of the engineering goods sector. With investment demand picking up, the engineering sector is expected to register higher growth. CRISIL COMPANY REPORT | 2

Honeywell Automation India Ltd

ANNUAL RESULTS
Income Statement (Rs million ) Net Sales Operating Income EBITDA EBITDA Margin Depreciation Interest Other Income PBT PAT PAT Margin No. of shares (Mn No.) Earnings per share (EPS) Cash flow (Rs million ) Pre-tax profit Total tax paid Depreciation Change in working capital Cash flow from operating activities Capital Expenditure Investments and others Balance sheet (Rs million ) Equity share capital Reserves and surplus Tangible net worth Deferred tax liablity:|asset| Long-term debt Short-term-debt Total debt Current liabilities Total provisions Total liabilities Gross block Net fixed assets Investments Current assets Receivables Inventories Cash Total assets Ratio Dec-07 863.8 -303.3 141.4 -233.0 468.9 -225.7 0.0 Dec-08 1,276.2 -353.6 85.2 -1,019.8 -12.0 -179.0 0.0 Dec-09 1,796.9 -535.7 118.6 -104.7 1,275.1 -168.9 0.0 Revenue growth (%) EBITDA growth(%) PAT growth(%) EBITDA margins(%) Tax rate (%) PAT margins (%) Dividend payout (%) Dividend per share (Rs) BV (Rs) Return on Equity (%) Return on capital employed (%) Gearing (x) Interest coverage (x) Debt/EBITDA (x) Asset turnover (x) Current ratio (x) Gross current assets (days) Dec-07 34.6 30.5 12.1 13.0 34.6 7.5 13.6 10.0 263.3 31.8 48.9 0.1 8.9 0.1 10.2 1.5 179 Dec-08 11.1 15.8 25.9 13.6 31.2 8.5 0.0 0.0 357.5 29.8 40.6 0.0 0.0 0.1 9.3 1.6 185 Dec-09 21.9 48.6 62.2 16.6 30.1 11.3 6.7 10.0 496.0 35.2 50.9 0.0 39.7 0.0 9.1 1.8 165

Dec-07 8,661.3 8,662.8 1,129.6 13.0 141.4 126.4 2.0 876.3 650.3 7.5 8.8 73.5

Dec-08 9,623.4 9,625.7 1,308.0 13.6 85.2 -39.0 14.3 1,131.7 818.5 8.5 8.8 92.6

Dec-09 11,730.7 11,734.2 1,943.5 16.6 118.6 48.9 21.0 1,779.4 1,327.9 11.3 8.8 150.2

Dec-07 88.4 2,239.6 2,328.1 -157.2 96.8 31.2 128.0 2,500.2 382.3 5,181.4 892.5 593.4 0.0 4,588.0 2,281.0 1,076.6 538.5 5,181.4

Dec-08 88.4 3,072.2 3,160.6 -197.6 84.7 35.0 119.7 2,803.3 264.3 6,150.3 1,180.1 701.3 0.0 5,449.0 3,548.8 744.6 194.7 6,150.3

Dec-09 88.4 4,296.7 4,385.1 -281.9 0.0 1.2 1.2 2,550.9 476.1 7,131.4 1,412.2 751.6 0.0 6,380.0 2,891.7 805.5 1,061.5 7,131.6

Cash flow from investing activities Equity raised/(repaid) Debt raised/(repaid) Dividend (incl. tax) Others (incl extraordinaries)

-225.7 0.0 2.6 -106.1 12.5

-179.0 0.0 -8.3 0.0 -144.5

-168.9 0.0 -118.4 -103.4 -17.6

Cash flow from financing activities Change in cash position Opening cash Closing cash
n.m : Not meaningful;

-91.0 152.2 386.3 538.5

-152.8 -343.8 538.5 194.7

-239.4 866.8 194.7 1,061.5

QUARTERLY RESULTS
Profit and loss account (Rs million) No of Months Revenue EBITDA Interes t Depreci a tion PBT PAT Sep-10 3 3,671.2 343.9 31.6 312.3 258.8 % of Revenue 100.0 9.4 0.9 8.5 7.0 Sep-09 3 2,697.9 485.7 1.3 29.3 455.1 361.4 % of Revenue 100.0 18.0 0.0 1.1 16.9 13.4 Jun-10 3 3,379.6 272.0 0.2 30.7 241.1 227.8 % of Revenue 100.0 8.0 0.0 0.9 7.1 6.7 Sep-10 9 9,808.8 1,043.7 1.3 92.6 949.8 793.0 % of Revenue 100.0 10.6 0.0 0.9 9.7 8.1 Sep-09 9 8,217.8 1,437.3 3.1 87.9 1,346.3 978.1 % of Revenue 100.0 17.5 0.0 1.1 16.4 11.9

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Honeywell Automation India Ltd

FOCUS CHARTS & TABLES
Rs mn 4,000 3,500 3,000 2,500 2,000 1,500 1,000 500 0 Dec-07 Mar-08

Quarterly sales & y-o-y growth

Dec-07

Dec-08

Dec-09

Sep-08

Sep-09

Mar-08

Mar-09

Dec-08

Dec-09

Sep-08

Sep-09

Mar-09

Sales

Sales growth y-o-y (RHS)

Mar-10

Sep-10

Jun-08

Jun-09

Jun-10

Net Profit

Net profit growth y-o-y (RHS)

Rs/share 60 50 40 30 20 10 0 Dec-07 Dec-08

EPS

Per cent 20 18 16 14 12 10 8 6 4 2 0 Dec-07 Mar-08 Dec-09 Sep-09 Mar-10 Sep-10 Jun-09 Jun-10

Movement in operating and net margins

Dec-08

Dec-09

Sep-08

Sep-09

Mar-10

Mar-09

Mar-08

Sep-08

Jun-08

Mar-09

OPM

NPM

Shareholding Pattern (Per cent) Mar 2010 Jun 2010 Promoter 81.2 81.2 FII 0.3 0.3 DII 4.0 4.5 Others 14.5 14.0

Sep 2010 81.2 0.2 4.4 14.1

Dec 2010 81.2 0.6 4.1 14.0

Board of Directors Director Name Ana nt Ha ri Ma hes hwa ri (Mr.) Ma dhuka r Na ra ya n Bha gwa t (Mr.) Norma n Lee Gil s dorf (Mr.) Surendra La xmi na ra ya n Ra o (Mr.) Sha ne Sha hrooz Tedja ra ti (Mr.) Gera rd Wil li s (Mr.)

Designation Ma na gi ng Di rector Non-Executive Di rector Promoter-Di rector Non-Executive Di rector Promoter-Di rector Promoter-Di rector

Additional Disclosure This report has been sponsored by NSE - Investor Protection Fund Trust (NSEIPFT). Disclaimer This report is based on data publicly available or from sources considered reliable. CRISIL Ltd. (CRISIL) does not represent that it is accurate or complete and hence, it should not be relied upon as such. The data / report is subject to change without any prior notice. Opinions expressed herein are our current opinions as on the date of this report. Nothing in this report constitutes investment, legal, accounting or tax advice or any solicitation, whatsoever. The subscriber / user assume the entire risk of any use made of this data / report. CRISIL especially states that, it has no financial liability whatsoever, to the subscribers / users of this report. This report is for the personal information only of the authorised recipient in India only. This report should not be reproduced or redistributed or communicated directly or indirectly in any form to any other person especially outside India or published or copied in whole or in part, for any purpose. CRISIL is not responsible for any errors and especially states that it has no financial liability whatsoever to the subscribers / users / transmitters / distributors of this report. For information please contact 'Client Servicing' at +91-22-33423561, or via e-mail: clientservicing@crisil.com.

CRISIL COMPANY REPORT | 4

Mar-10

Sep-10

Jun-08

Jun-09

Jun-10

Sep-10

Jun-08

Jun-09

Jun-10

Per cent 40 35 30 25 20 15 10 5 0

Rs mn 400 350 300 250 200 150 100 50 0

Quarterly PAT & y-o-y growth

Per cent 200 150 100 50 0 -50