>SWARAJ ENGINES: Capacity expansion to drive growth

We are impressed with Swaraj Engines' conservative management style, negative working capital high margin (17%) and RoE (32%) and high asset turnover (10x). While Swaraj Engines was unable to fulfill demand of Swaraj Tractors in FY11 due to capacity constratints, given 33,000 units expansion of capacity (up 79%) over FY12-13, we expect 22%, revenue and 14% profit CAGR over FY11-13E

Keypoints

• Major capacity expansion to meet rising demand
• Strong possibility of Swaraj Engines being used for Mahindra tractors
• Construction equipment business
• Good FY12 monsoons positive for tractor industry

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