Compettitve Analysis

7/31/2019 Compettitve Analysis

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September 10, 2012

Prabhudas Lilladher Pvt. Ltd. and/o r its associates (the 'Firm') does and/ or seeks to do business with companies covered in its research rep orts. As a result investors sthe Firm m ay have a conflict of interest that could affect the o bjectivity of the report . Investors should consider this report as only a single factor in m aking their inves

Please refer to im portant disclosures and disclaimers at th e end of t he repor t

Financials

A story of contracting halves

Adarsh Parasrampuria [email protected]+91-22-66322236

Parul Gulati [email protected]+91-22-66322242

Table of Contents Page No.

List of Participants 2

Snapshot Key takeaways 3

Regulatory trip:

RBI- Banks regulat ion s 4

RBI -NBFC regulat ion s 5

CIBIL take aw ays 6

CRISIL ta keaw ays 7

ICICI Bank 8

HDFC Bank 10

SBI 12

Kotak Bank 14

YES Ban k 16IndusInd 18

HDFC Limit ed 20

Shriram Transport 22

M ahindra Finance 24

PFC/ REC 26

IDFC 29

LIC Hou sing 31

Union Bank 33

Centr al Bank 35

Indian Overseas Bank 37

UCO Bank 39

City Union Bank 41

We conducted our Banks/Financials conference with participation from ~20banks/NBFCs and banking tour covering regulators/industry experts. Overall feedback suggested very weak credit offtake but extremely mixed views on near term asset quality. Apart from easing rates, the most certain positive outcome was

on easing regulatory pressure for the sector especially for NBFCs. Overall feedback was split in two contrasting halves with PSU banks at one end and retail banks/NBFCs on the other (positive) and corporate banks/financiers like ICICI/IDFhaving a mixed outlook. We continue our preference for ICICI/Axis/Yes and alsobelieve most retail NBFCs are well positioned for an easing rate cycle and risks from tightening regulations is nearing the end.

Growth targets revised down; a few exceptions though: M ost banks harevised their system growth target to ~14-15% with negligible terrelated o ff take and SM E/ Retail is thus the focus area.PSU banks were moscautious on growt h out look also constrained by FinM in dictat on bulkAmong private banks/NBFCs,kotak's caution inched up (~20% now v/s earlier) andShriram (12 15%) continues with i ts low growth expectaMahindra Finance (~30%) still remains most sanguine on growth, followIndusInd (+25%) . ICICI bank still remains positive on domestic loan bookgrowth) but expects slower core fee income m om entum (


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Septem ber 10, 2012

Financia

List of Participants Monday, 3rd September Day 1 Tuesday, 4th September Day 2

HDFC Bank M r. Sashi Jagdishan CFO ICICI Bank M r. Anin dya Banerjee Head, Corp .

M r. Bhavin Lakhpatw ala VP, Finance M r. Rakesh M ookim Investor RelatStat e Bank of India M r. Vishvesh Ramam oort hy CGM , FRT Kotak Bank M r. Dipak Gupta Jt. M D

M s. Rita G GM , PPR M r. Sund ar Raman AVP Ex. VP

PFC M r. Nagarajan Dir. Finance

REC M r. D S Ahluw alia Ex. Dir. Finance IDFC M r. Bimal Giri Dir. Corp. Pl

M r. Sanjay Kumar DGM , Finance HDFC Ltd. M r. Keki M istry Vice Chairm

YES Bank M r. Jaideep Iyer Deput y CFO IndusInd Bank M r. Paul Abraham COO

M r. Aparajit Bhandarkar Ex. VP M r. Sohali Chander Head, Corp. Ba

LIC Housing M r. Suresh Samt ani CFO Indian Overseas Bank M r. Narendr a CM D

M r. Sudi pt o Sil ACM , Fin. & IR City Unio n Bank M r. S Sun dar CFO & Sr. G

Shriram Transport M r.Um esh Revankar M D M r. S Rajam Asst. GM

M r. Sanjay M undra VP

Union Bank M r. D Sarkar CM D Wednesday, 5th September (Regulatory Tour, Mumbai) Day 3

M r. S S M un dra ED CIBIL (Cred it Bureau ) M r. Satish Pillai COO

M r. S K Jain ED RBI- Banking regul atio ns M r. Deepak Singhal CGM

M ahindra Finance M r. Ramesh Iyer M D RBI - NBFC regulations M rs. M angala Vaidyanathan GM

M r. V Ravi CFO M rs. Tuli Roy GM

M r. Dinesh Prajapati Sr. GM M r. RK W angu GM

Cent ral Bank M r. VK Tanksale CM D CRISIL M r. Sudi p Sural Direct or

M r. K Eswar GM , Treasury M r. Sum an Chow dhary Director

UCO Bank M r. Arun Kaul CM D


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Septem ber 10, 2012

Snapshot of Conference takeaways for coverage companies

Outlook on Positive Feedback

Growth NIMs Fees Opex Asset

QualityICICI Bank 1. Still expect dom estic grow th of ~20%

2. M argins stable at 3.0% near term . Expect ~20bpsimprovem ent over next 2 yrs

1. Core fees grow

HDFC Bank 1. Next leg of ROA improvem ent from operating costefficiency improvem ent (2-3% reduction in C/ I expected)

1. Som e strain

Kotak Bank 1. Asset book p ositioned f or a rising rate cycle.2. Conservative m gt view to help avoid futu re stress

1. G2. Signifcant pr

IndusInd 1. Still very positive on grow th expectat ions2. Expects fee incom e mo ment um to continue as well

1. M anagement

Yes Bank1. Biggest b eneficiary of easing wh olesale rates 1. Growth

2. NPA SBI 1. SBI still m aintaining guidance o f 3.75% on m argins --

Deposit rate cut positive

1. Growth o2. M acro situa

weaknesHDFC Ltd 1. Grow th continues to rem ain robust

2. No impact from pre-payment charges aboli t ion

LICHF 1. Grow th out look robust2. No impact from pre-payment charges aboli t ion

1. M argin recovedue to slow e

PFC/ REC 1. M anagement positive on SEB reform s. UP tariffs to b eraised in Sep-12

1. PFC involv2. CRISIL not

M M F S 1. M ost bull ish on growth -- ~30% expectat ion2. Asset quality on tracto r/ CV cycle manageable - Mo nsoon

recovery positiveSHTF 1. Grow th expectat ion continue to rem ain moderate

2. M anagement not unduly concerned on CV cycle - 80%custom ers linked to mo vement of essentials

1. Feedbac

Positive feedback/im provem ent Neutral/ No change in guidance Negative feedback/Deter


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Financia

Septem ber 10, 2012

RBI Meeting with Head of Banking regulations:

Provisions on restructuring necessary: RBI believes with ~10% NPV hits an

standard provisioning recommended, overall provisioning for resaccounts is meaningful now. RBI does not distinguish between secprovisioning on restructu red accounts but for system ic issues they h avpast given exception s on restructuring and low er pro vision o n SEB restcould be a po ssibilit y on ce th e FRP for SEBs is finalised.

Dynamic provisioning: RBI is currently working on the final guidelidynamic provisioning and what surprised was that RBI still believes could start implementation of dynamic provisions by FY14 v/sexpectations of som e pu sh back given t he curren t credit cycle. Accordin just 8-9 ban ks m ost ly p r iv at e sect or ban ks hav e segm en t al dat a to c

internal credit loss ratios and hence dynam ic provisions when im plem ebe a d rag for m ost PSU banks.

Comfortable with gold lending by Banks: After t ightening of gold lending nfor NBFCs, the regulatory gap for gold lend ing betw een ban ks and NBincreased but RBI seemed comfortable with lower restrictions on golby banks and the key reason is the limited complaints they have ragainst banks in past eit her regard ing pricing or auct ions. Also, gold expa lot less concentrated for banks v/ s standalone gold lending comp anies

Basel III capital requirements not a systemic issue: RBI has recently estima

that banks wou ld need Rs1.75trn over FY12-18 to comp ly w ith Basel guidelines. Though some sm all PSU banks w ill have to face significanRBI does not believe that capital raising will be a systemic issue cocapital raised/ generated by banks in the last 4-5yrs.

Other highlights: (1) RBI in its banking supervision has not come acrossevidence of evergreening by banks using NBFCs as a conduit as this wathe larger investor concern in our meetings. (2) RBI acknowledges thhazard issues have led to higher Agri NPAs but believes that it is a necessity and considerations on new PSL guidelines will be limit ed.

Increase in provisions for restructuringrecommended more likely to be accepte d

RBI intends to implement dynamic provisions by FY14 We expect banks

resistance may delay implementation.

RBI comfortable with Gold lending by banks We dont expect adverse

regulations for banks concentrating ongold lending

RBI does not see Basel III capital needs as asystemic challenge


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Financia

Septem ber 10, 2012

RBI Meeting with Head of NBFC regulations:

Overall regulatory landscape for NBFCs: RBI indicated that the tig

regulations for NBFCs over the last ~24m nts, is just a catch up on r egulNBFCs v/s Banks as th ere have n ot been significant changes in NBFC refrom 1997-98 to 2010 while Basel-I/II and other periodic regulatoryhapp ened f or Banks. RBI appr eciates NBFCs role in pro m ot ing financiaand considers them system ically very import ant.

Regulatory window for PSU NBFCs: PFC/RECs NPA recognition and provisioning norm s allow ed are m uch less stringent than oth er PSUs. InUsha Thorat committee recos, RBI wants to close the regulatory introducing standard provisioning for PFC/REC. Feedback from RBI suggests that the window to provide standard provisioning will be up

limitin g provisioning to on ly 0.05% of advances a yr. Restructu riincrease for IFCs and RBI is w orkin g on t he same .

Gold NBFCs: High grow th and som e pricing and auctions process was Rissues w ith Gold NBFCs and w ith grow th comin g off and also lesser comauctions/p ricing, w e sense regulatory int ervention w ill be fairly limiteno intention of any regulations regarding auctions. RBI is cognizancalculation m isuse (including m aking charges) but do es not see any neregulatory int ervention on t his. Also, RBI is w illing to reconsider relatightening of these regulations if they see industry wide disciplinprocesses mentio ned above.

NPA recognition 180 to 90days: RBI intend s to bring dow n NPA recognitNBFCs from 180 to 90 d ays but d oes not inten d to im plem ent t his in a dmanner and this stance seemed a lit t le different from our earlier intehint ing to higher t ransi t ion t im e to mo ve from 180 to 90 days NPA reco

Others: (1) On investor concerns on smaller NBFCs being used as a conever greening by banks, RBI m ention ed that not hing mat erial has comeattention and this is regularly monitored by both the Banks/NBFCs suteam (2) Do not intend to extend dynamic provisions for NBFCs in tt e rm.

Overall, we continue to maintain that regulatory intensity will significantly comeoff for NBFCs and peaking rate cycle + manageable retail asset quality builds a positive environment for most NBFCs.

Overall, RBI comfortable with NBFCs ingeneral

Convergence on NPA recognition and provision for PSU NBFCs (PFC/REC) only by

FY16

Comfortable now with slow growth of Gold NBFCs. Does not intend to micro manage

pricing and auctioning process of gold NBFCs

Implementation of NPA recognition from180 to 90 days only in non disruptive

manner


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Financia

Septem ber 10, 2012

CIBIL Credit bureau

Update on current retail asset quality: Retail asset q uality cont inues to h ol

and CIBIL believes the structural story of bett er un derw riting by b ankdata from CIBIL continues. Auto especially CVs is the only segment whis sensing som e marginal deterior ation in credit b ehaviour and t hey area close watch but even in these categories they have not seen mdeter iorat ion in 30/ 60/90 day del inquencies.

Details from our July12 Update on CIBIL:

CIBIL Breadth and depth: All Banks/ NBFC/ Financial institu tions are m ato subm it m ont hly data on retail loans to any one credit bureau, largestbeing CIBIL. CIBILs coverage is extensive with ~230m a/cs and

individuals covering ~800 financial institutions. Unlike general per CIBILisaton of o nly ur ban/ m etro centres, only 35% of CIBILs retail from top -20 cities, w ith 65% from smaller tow ns and rural areas. CIBIgets data on NPAs but also repaym ent d etails of every ret ail loan o/ s anthey can generate rep orts on early stress indicators like 30/60 d ay ovewell .

CIBIL, gauging usageand the impact: M ost retail loan applications referred to CIBIL and the hit rate (probability of finding a CIBIL raggregate basis is ~70-75%, w ith credit cards having a hit rat e of +90wheelers of


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Financia

Septem ber 10, 2012

S&P CRISIL: Meeting with Head of Infra and Banks rating

Increase in restructructing from RS2trn to Rs3.25trn does not still consider

problem of private power sector largely: CRISIL recently increased its FYforecast for additional restructuring from Rs2.0trn to Rs3.25trn with lof the increase coming from SEB restructuring increasing from Rs0Rs1.5trn in line with the FRP (financial restructuring package) for SEdiscussed. CRISIL does not expect large scale restructuring on theirpower portfolio in FY13 and hence their increased restructuring forenot capture restructuring expected in private po w er m ainly in FY14-15

Infra Concerned with gas; also not very convinced on SEB health: On the Infside, CRISIL is extremely concerned on private gas based power psubstitu ting do m estic gas for im port ed LNG is still not viable in spite o

in RPLNG short t erm cont racts. On coal based plant s, CRISIL expecrestructuring but w ith dom est ic coal product ion ramp up does not expprojects to be duds though the recent scams makes it difficult to put ato the overall private power restructuring expected. Though most SEtaken back to back hikes, CRISIL overall was not too sanguine about SEas even the b est ou tcom e on current reform s at best redu ce current losthe estimated Rs3.0trn of loans will cont inue to rem ain a burd en and hdo n ot r ule ou t som e NPV hits in the FRP for SEBs.

Upgrade: downgrade ratio still worsening: The upgrade to dow ngrade racontinue to worsen and currently is just under 1.0x v/s 1.15x 6mnts

CRISIL does not expected t he ratio to w orsen to 0.85x low seen in thecrisis. All CRISIL's estimates are based on GDP growth expectationgrowth and downside to this GDP growth est imate could implydeter iorat ion.

Some positive news flow though: Though CRISIL was not at all sanguinasset quality som e possible positives in th e near term according t o th ebe (1) The FRP for SEBs could provide some liquidity to the SEB chain ancillary industries facing stress due to cash flow constraints could grelief post the implementation of the FRP, though CRISIL cautioadditional liquidity will stil l be required to fund interim SEB losses.(2) Longe

term NPA worries from thermal power plants seem l imited givealternate of imported coal and more importantly increase in domesprod uction expected at a steady pace.

Retail asset quality except for some stressin CVs at the margin

In Infra Gas assets remain a real worry. Also, CRISIL is not very convinced about the

reform process


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ICICI Bank

September 10, 2012

PrabhudasLilladher Pvt. Ltd. and/or its associates (the 'Firm') does and/ or seeks to do business with companies covered in its research report s. As a result investors shouFirm may have a conflict of inter est that could affect t he objectivity of t he report . Investors should consider this report as only a single factor in m aking their investme

Please refer to im port ant disclosures and disclaimers at the end of th e report

Adarsh Parasrampur [email protected]

+91-22-66322236

Parul [email protected]+91-22-66322242

Rating BUY Price Rs934Target Price Rs1,100Imp lied Upside 17.8%Sensex 17,767Nifty 5,363

(Prices as on September 10, 2012)

Trading data

M arket Cap. (Rs bn) 1,079.3Shares o/ s (m) 1,155.23M Avg. Daily value (Rs m ) 4008.9Major shareholders

Promoters 0.00%Foreign 34.85%Dom estic Inst. 27.79%Public & Other 37.36%Stock Performance

(%) 1M 6M 12M Absolute (2.1) 2.2 4.2Relative (3.3) 0.7 (1.2)How we differ from Consensus

EPS (Rs) PL Cons. % Diff.

2013 68.0 79.4 14.4 2014 78.8 92.6 14.9

Price Performance (RIC:ICBK.BO, BB:ICICIBC IN)

Source: Bloomberg

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Still targeting 20% growth in domestic loan book: ICICI maintained its grotarget o f 20% in t he do m estic business largely driven b y pro ject disbupick up in retail credit and such an out com e will be positive in our viebanks did indicate that system grow th cou ld be ~15%. The target areas

are hou sing, Auto, and CVs, even tho ugh price com petit ion has intensifi Fee income could miss guidance: Growt h in fees incom e looks challenging

the weak environment especially large corporate related fund and nbased fees and hence core fee could be lower than double digit guidance. But w ith a low base of project finance, 3rd party and corporICICI expects pick up in fee grow th f rom FY14.

Structural improvement in margins: M gt m aintained th eir overall FY13guidance of +3.0% and expects m argins to inch fu rther to 3.2% over th3yrs due to (1) Lower share of overseas boo k (2) Higher share of non-msecured credit and (3) easing rates. Wholesale TD rates are comm arginally bu t t he cost of retail depo sits rem ains sticky (before SBI cut ICICI is aw aiting imp act of SBIs low er m ortgage rates on t heir volumm oving on mort gage rates.

RIDF investments: There could be a rise in RIDF requirements, but uallocatio n t o ICICI could b e less as the to tal PSL short fall in t he system due to increased r equirem ents fro m foreign b anks. Within PSL, ICICI is gold loans and tractor loans but do es not w ant to d o direct Agri lending

Asset Quality: ICICI maint ained its credit cost guidance of 75b ps and notthe guidance has buffer for slippages like Deccan (Rs5bn exposure)quality continues to remain robust and but ICICI is seeing some inslippages in th eir SM E bo ok bu t stress seems man ageable. Restru

pipeline continues to remain th in. ICICI does have som e non funexposur e to Essar (NavBharat acqu isition) w hich is facing CBI scrut iny c

Key financials ( Y/e March) 2011 2012 2013E 2014Net in terest inco me (Rs m ) 90,169 107,342 131,311 Growth (%) 11.1 19.0 22.3 17Operat ing p ro fit (Rs m ) 90,476 103,865 1 29,986PAT (Rs m ) 51,514 64,653 78,535EPS (Rs) 44.7 56.0 68.0 Growth (%) 23.9 25.1 21.5 15Net DPS (Rs) 14.0 14.0 17.0

Profitability & Valuation 2011 2012 2013E 2014NIM (%) 2.34 2.44 2.62 2.7RoAE (%) 9.7 11.2 12.4 13RoAA (%) 1.34 1.47 1.57 1.6P / BV (x) 2.0 1.8 1.6P / ABV (x) 2.0 1.8 1 .6PE (x) 20.9 16.7 13.7Net dividend yield (%) 1.5 1.5 1.8 2

Source: Company Data; PL Research


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Septem ber 10, 2012

ICICI Ban

Income Statement (Rs m) Y/e March 2011 2012 2013E 2014EInt . Ea rned f rom Adv. 164,248 221 ,299 259,119 293,749Int . Ea rned f rom Invt . 79 ,052 96 ,840 113,373 127,783Ot her s 1 6,4 41 17 ,2 87 1 9,0 16 2 1,7 39To ta l I nt e r est I ncome 259,740 335,427 391,508 443,271

In t er est e xp en se 1 69 ,5 71 2 28 ,0 85 2 60 ,1 97 2 88 ,8 27NII 90,169 107,342 131,311 154,445 Growth (%) 11.1 19.0 22.3 17.6Tr easu ry In co m e (2 ,02 3) (7 57 ) 4,0 00 4 ,5 00N TN II 6 8,5 01 75 ,7 84 8 5,6 27 9 9,5 84N o n In t er est In co m e 6 6,4 79 7 5,0 28 8 9, 62 7 1 04 ,0 84To t al In co m e 3 26 ,2 19 4 10 ,4 54 4 81 ,1 35 5 47 ,3 55 Growth (%) (1.7) 25.8 17.2 13.8O pe ra ti ng Exp e nse 6 6,1 72 7 8,5 04 9 0, 95 3 1 04 ,5 15Operating Profit 90,476 103,865 129,986 154,013 Growth (%) (7.0) 14.8 25.1 18.5N PA Pr ovi sio n s 1 9,7 69 9 ,9 32 2 1,4 04 2 8,3 45In ve st m en t Pr ovi si on s 2 ,0 38 4 ,1 32 1 ,0 00 1 ,0 00

To t al Pr o vi si on s 2 2,8 68 1 5,8 91 2 2, 40 4 2 9,3 45PBT 67,607 87,973 107,582 124,668Ta x Pr o vi si on s 1 6,0 93 2 3,3 21 2 9, 04 7 3 3,6 60 Effective Tax Rate (%) 23.8 26.5 27.0 27.0PAT 51,514 64,653 78,535 91,008 Growth (%) 28.0 25.5 21.5 15.9

Balance Sheet (Rs m) Y/e March 2011 2012 2013E 2014EPar Value 10 10 10 10N o. o f e qu it y sh ar es 1 ,1 52 1 ,1 55 1 ,1 55 1 ,1 55Eq ui ty 11,5 18 11,5 52 11,5 52 11,5 52N et w o r th 5 50 ,9 09 6 04 ,0 52 6 59 ,6 03 7 23 ,9 76A dj . N et w o r th 5 26 ,8 36 5 85 ,4 44 6 38 ,4 28 6 98 ,6 71

Deposi ts 2 ,256,021 2 ,555,000 2 ,995,777 3,560,326 Growth (%) 11.6 13.3 17.3 18.8Low Cost deposits 1,016,465 1,110,194 1,304,715 1,554,147 % of total deposits 45.1 43.5 43.6 43.7 Total Liabilities 4,062,336 4,736,471 5,272,929 6,132,489Net Advances 2 ,163,659 2 ,537,277 2 ,917,868 3,399,316 Growth (%) 19.4 17.3 15.0 16.5Investments 1 ,346,859 1 ,595,600 1 ,702,078 1,962,952Total Assets 4,062,336 4,736,471 5,272,929 6,132,489Source: Company Data, PL Research.

Quarterly Financials (Rs m) Y/e March Q2FY12 Q3FY12 Q4FY12 Q1FY1In t erest Incom e 81,576 85,919 91,746 95Int erest Expense 56,512 58,799 60,699 63Net Interest Income 25,064 27,120 31,048 31,929Non Int erest Inco me 17,396 18,919 22,285 1

CEB 18,200 19,570 20,700 19Treasury (800) (650) 1,580 (Net Total Income 42,460 46,039 53,332 50,729Op er at in g Exp en ses 18,9 22 19,168 22,216 2

Em ployee Expenses 8,427 8,366 11,031 9Ot her Expenses 10,495 10,495 11,185 11

Operating Profit 23,538 26,871 31,116 29,493Co re Op er at in g Pr ofit 24,3 38 27,521 29,536 2Provisions 3,188 3,411 4,693 4

Loan loss provisions Investm ent Depreciat ion

Profit before tax 20,350 23,460 26,423 24,835Tax 5,318 6,179 7,405 6,

PAT before

EO

15,032

17,281 19,018 18,151

Ext raordinary it em PAT 15,032 17,281 19,018 18,151

Key Ratios Y/e March 2011 2012 2013E 2014ECM P (Rs) 934 934 934Equity Shrs. Os. (m ) 1,152 1,155 1,155Market Cap (Rs m) 1 ,076,145 1 ,079,260 1 ,079,260 1 ,0 M/Cap to AUM (%) 26.5 22.8 20.5 17.6EPS (Rs) 44.7 56.0 68.0 7Book Value (Rs) 478 523 571Adj. BV (75%) (Rs) 478 523 571P/ E (x) 20.9 16.7 13.7 1

P/ BV (x) 2.0 1.8 1.6P/ ABV (x) 2.0 1.8 1.6DPS (Rs) 14.0 14.0 17.0 1 Dividend Yield (%) 1.5 1.5 1.8 2.1

Profitability (%) Y/e March 2011 2012 2013E 2014ENIM 2.3 2.4 2.6RoAA 1.3 1.5 1.6RoAE 9.7 11.2 12.4 1

Efficiency Y/e March 2011 2012 2013E 2014ECost Income Ratio (%) 42.2 43.0 41.2 40.4C D Ratio (%) 95.9 99.3 97.4 95.5

Business per Em p. (Rs m ) 78 78 78Profit per Em p. (Rs m ) 9 10 10Business per Branch (Rs m ) 1,748 1,751 1,768Profit per Branch (Rs m ) 20 22 23

Asset Quality Y/e March 2011 2012 2013E 2014EGr oss N PA s (Rs m ) 1 00 ,3 33 9 4,7 44 1 07 ,8 11 1 2Net NPAs (Rs m ) 24,074 18,608 21,175 2Gr. NPAs to Gross Adv. (%) 4.6 3.7 3.7 3.8Net NPAs to Net Adv. (%) 1.1 0.7 0.7 0.7NPA Coverage (%) 76.0 80.4 80.4 80.4Source: Company Data, PL Research.


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HDFC Bank

September 10, 2012


Please refer to im port ant disclosures and disclaimers at the end o f the r eport


+91-22-66322236

Parul Gulat [email protected]+91-22-66322242

Rating Accumulate Price Rs591Target Price Rs610Imp lied Upside 3.2%Sensex 17,767Nifty 5,363


Trading data

M arket Cap. (Rs bn) 1,387.2Shares o/ s (m) 2,346.73M Avg. Daily value (Rs m ) 1574Major shareholders


(%) 1M 6M 12M Absolute (1.8) 13.0 24.9Relative (3.0) 11.5 19.6How we differ from Consensus


2013 28.1 27.8 1.3 2014 33.4 34.6 3.4

Price Performance (RIC:HDBK.BO, BB:HDFCB IN)

Source: Bloomberg

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Asset Quality: Marginally cautious on CVs; sanguine on others: HDFCB wsanguine on all parts of their ret ail book except som e pockets of pain segments. In the mid sized fleet category (~50 fleet size), HDFCB hcheque bou nce rates going up bu t again they believe that d elinquency just norm al isin g from ve ry lo w cr ed it co st s le ve ls. In sp it e o f som e idelinquencies expected in CVs, HDFCB continues to maintain its ~80-credit cost guidance which has proven to be conservative over last 6 q tr

Maintain margin guidance: HDFCB maintained their margin guidance o4.3% range in spite o f some pricing comp etition in Cars/CVs as they befalling rate environment will be positive for their fixed rate lendinghence expect to maint ain margin in a tight range.

Cost efficiency improvement Next profitability driver: As credit costs are cyclical low s, HDFCB believes that the next ro und of ROA improvem eled by cost efficiency improvement with 50-100bps yrly improvemenincom e to be expected over t he n ext 2-3yrs. HDFCB is not the m ost aggterms of employee compensat ion (operat ing current ly at the 2nd quartile) anbelieves the n ew b ranch strain w ill get low er over th e next 2-3 yrs andkey factor in im proving cost efficiency.

PSL targets Opportunity rather than burden HDFCB well positioned: Of abanks in ou r conf erence, HDFCB was the o nly on e w hich sees the PSL gas an oppo rtun ity. M anagement said that t hey are present in ~400 disthe 650 districts and th ey can tap ~200 m ore districts profitably. Also, tadded PSL targets to branch staff KRAs over last 2-3 yrs and have seenbranch d riven tr action on PSL lending.

Key financials ( Y/e March) 2011 2012 2013E 2014Net in terest inco me (Rs m ) 105,431 122,968 152,369 Growth (%) 25.7 16.6 23.9 20Operat ing profit (Rs m ) 77,254 89,504 1 14,322PAT (Rs m ) 39,264 51,671 65,952EPS (Rs) 16.9 22.0 28.1 Growth (%) 31.0 30.4 27.6 19Net DPS (Rs) 3.3 4.3 5.5




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Septem ber 10, 2012

HDFC Ban

Income Statement (Rs m) Y/e March 2011 2012 2013E 2014EInt . Ea rned f rom Adv. 150,850 205 ,366 243,405 294,714In t . Ea rn ed f ro m In vt . 4 6,7 54 6 5,0 46 8 2, 54 1 9 5,4 28Others 1,678 2,452 2,319 2,481To ta l I nt e r est I ncome 199,282 272,864 328,264 392,623

In t er est e xp en se 9 3,8 51 1 49 ,8 96 1 75 ,8 95 2 08 ,8 24NII 105,431 122,968 152,369 183,798 Growth (%) 25.7 16.6 23.9 20.6Tr easu ry In co m e (5 34 ) (1,9 44 ) 2,0 00 3 ,0 00N TN II 4 3,8 86 54 ,3 81 6 6,1 63 8 0,8 02N on In t er est In co m e 4 3,3 52 52 ,4 37 6 8,1 63 8 3,8 02To t al In co m e 2 42 ,6 34 3 25 ,3 00 3 96 ,4 27 4 76 ,4 24 Growth (%) 21.4 34.1 21.9 20.2Opera t ing Expense 71 ,529 85 ,901 106,210 126,526Operating Profit 77,254 89,504 114,322 141,074 Growth (%) 20.2 15.9 27.7 23.4N PA Pr ovi sio n s 1 4,4 30 8 ,0 21 1 6,8 70 2 4,7 47Investm ent Provisions

To t al Pr o vi si on s 1 9,0 61 1 4,3 67 1 8, 04 3 2 6,5 06PBT 58,193 75,137 96,280 114,568Ta x Pr o vi si on s 1 8,9 29 2 3,4 66 3 0, 32 8 3 6,0 89 Effective Tax Rate (%) 32.5 31.2 31.5 31.5PAT 39,264 51,671 65,952 78,479 Growth (%) 33.1 31.6 27.6 19.0

Balance Sheet (Rs m) Y/e March 2011 2012 2013E 2014EPar Value 2 2 2 2N o. o f e qu it y sh ar es 2 ,3 26 2 ,3 47 2 ,3 47 2 ,3 47Equ it y 4,652 4,693 4,693 4,69 3N et w o r th 2 53 ,7 93 2 99 ,2 44 3 50 ,1 26 4 12 ,9 87A dj . N et w o r th 2 50 ,8 29 2 95 ,7 20 3 45 ,5 61 4 06 ,3 37

Deposi ts 2 ,085,864 2 ,467,064 2 ,937,985 3,686,418 Growth (%) 24.6 18.3 19.1 25.5Low Cost deposits 1,099,083 1,194,059 1,445,488 1,824,776 % of total deposits 52.7 48.4 49.2 49.5Total Liabilities 2,773,517 3,379,093 3,969,988 4,870,093Net Advances 1 ,599,827 1 ,954,200 2 ,345,040 2,931,300 Growth (%) 27.1 22.2 20.0 25.0Investments 709,293 974,829 1 ,081,949 1,300,729Total Assets 2,773,517 3,379,098 3,969,988 4,870,093Source: Company Data, PL Research.

Quarterly Financials (Rs m) Y/e March Q2FY12 Q3FY12 Q4FY12 Q1FY1In t erest Incom e 67,177 72,026 73,880 80Int erest Expense 37,732 40,867 39,997 45Net Interest Income 29,445 31,160 33,883 34,841Non Int erest Inco me 12,117 14,200 14,920 1

CEB 12,059 14,932 15,625 14Treasury (13) (818) (715)Net Total Income 41,562 45,360 48,803 50,135Op er at in g Exp en ses 20,304 21,580 24,671 2

Em ployee Expenses 8,231 8,674 9,284 9Ot her Expenses 12,073 12,905 15,387 14

Operating Profit 21,258 23,780 24,132 25,809Co re Op er at in g Pr ofit 21,271 24,598 24,847 2Provisions 3,661 3,292 2,983 4



PAT before

EO

11,994

14,297 14,531 14,174


Key Ratios Y/e March 2011 2012 2013E 2014ECM P (Rs) 591 591 591Equity Shrs. Os. (m ) 2,326 2,347 2,347Market Cap (Rs m) 1 ,375,089 1 ,387,245 1 ,387,245 1 ,3 M/Cap to AUM (%) 49.6 41.1 34.9 28.5EPS (Rs) 16.9 22.0 28.1 3Book Value (Rs) 109 128 149Adj. BV (75%) (Rs) 108 126 148P/ E (x) 35.0 26.8 21.0 1

P/ BV (x) 5.4 4.6 4.0P/ ABV (x) 5.5 4.7 4.0DPS (Rs) 3.3 4.3 5.5 Dividend Yield (%) 0.6 0.7 0.9 1.0




Asset Quality Y/e March 2011 2012 2013E 2014EGro ss NPAs (Rs m ) 16,943 19,994 25,906 3Net NPAs (Rs m ) 2,964 3,523 4,565 6Gr. NPAs to Gross Adv. (%) 1.1 1.0 1.1 1.3Net NPAs to Net Adv. (%) 0.2 0.2 0.2 0.2NPA Coverage (%) 82.5 82.4 82.4 82.4Source: Company Data, PL Research.


12/44

State Bank of India

September 10, 2012




+91-22-66322236


Rating Accumulate Price Rs1,861Target Price Rs2,100Imp lied Upside 12.8%Sensex 17,767Nifty 5,363


Trading data

M arket Cap. (Rs bn) 1,248.9Shares o/ s (m) 671.03M Avg. Daily value (Rs m ) 7885.8Major shareholders


(%) 1M 6M 12M Absolute (1.4) (16.4) (4.7)Relative (2.6) (17.9) (10.0)How we differ from Consensus


2013 281.9 269.1 4.8 2014 316.1 315.4 0.2

Price Performance (RIC: SBI.BO, BB: SBIN IN)

Source: Bloomberg

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Credit growth sluggish; push on retail to continue: SBI is seeing very limpickup in industrial credit and hence acknowledged that they nowsystem credit growth of 14-15%. For SBI, deposit growth was stronindustry t rend o f 13-14% and hence SBI has moved o n low ering depositgrowth remain elusive in other segments, SBI management said that tcontinue to concentrate on retail segments as perceived risk is lower still too early to ascertain im pact from the cut in rates in mort gages/ aut

Maintains margin guidance of 3.75%; we see some risks: In spite of iaggressive retail pricing, SBI maintained its margin guidance of 3.75%and management believes that they are just passing on the benefit of and not offering low rates at th e cost of m argins. SBI has reduced depby 50-100bps which is again positive for margins, but very low rates cut in r ates for SM E custom ers and high NPA % will pressure m argins in

Corporate asset quality Weak Macro will continue to weight: Aftedisappoin ting th e street in 1Q13 on d elinquencies, SBI continues to refproviding guidance on slippages as Macro situation cont inues to remM anagement re-iterat ed that t hey w ill have ~Rs30bn of recoveries ovqtrs from slippages they h ad in 1Q13. W e believe a significant p ick uquality is unlikely in th e near t erm given weak m acros. Also, SBI seemsome expo sure to comp anies where CBI respective coal block allocation

Key financials ( Y/e March) 2011 2012 2013E 2014Net in terest inco me (Rs m ) 455,500 578,778 621,348 Growth (%) 36.2 27.1 7.4 12Operat ing p ro fit (Rs m ) 328,735 403,012 423,520PAT (Rs m ) 108,139 154,173 189,193 2EPS (Rs) 170.3 229.8 281.9 3 Growth (%) (7.6) 34.9 22.7 12Net DPS (Rs) 25.2 35.0 42.0




13/44

Septem ber 10, 2012

Stat e Bank of Ind

Income Statement (Rs m) Y/e March 2011 2012 2013E 2014EIn t . Earned f rom Adv. 837,972 1 ,113,415 1 ,283,663 1,468,166Int . Ea rned f rom Invt . 276,795 337 ,052 380,777 425,667Ot her s 2 1,5 97 21 ,5 07 2 5,0 32 2 9,1 85Tota l In terest Income 1 ,136,364 1 ,471,974 1 ,689,472 1,923,017

Interest expense 680,864 893,196 1 ,068,124 1,222,857NII 455,500 578,778 621,348 700,160 Growth (%) 36.2 27.1 7.4 12.7 Tr easu ry In co m e 1 0,6 14 (9 ,6 68 ) 4 ,4 00 6 ,6 00N TN II 1 84 ,1 97 1 93 ,1 71 2 09 ,2 39 2 34 ,3 47N o n In t er est In co m e 1 94 ,8 11 1 83 ,5 03 2 13 ,6 39 2 40 ,9 47Tota l Income 1 ,331,176 1 ,655,477 1 ,903,111 2,163,965 Growth (%) 13.0 24.4 15.0 13.7 Opera t ing Expense 321,577 359,269 411,467 477,036Operating Profit 328,735 403,012 423,520 464,071 Growth (%) 34.1 22.6 5.1 9.6NPA Provi sions 125,176 155,147 138,739 139,563Invest ment Provisions 7,661 8,556 (5,000)

Tota l Provi sions 133,198 162,444 136,864 142,688PBT 195,537 240,568 286,656 321,383Ta x Pr o vi si on s 8 7,3 98 8 6,3 95 9 7, 46 3 1 09 ,2 70 Effective Tax Rate (%) 44.7 35.9 34.0 34.0PAT 108,139 154,173 189,193 212,113 Growth (%) (7.6) 42.6 22.7 12.1

Balance Sheet (Rs m) Y/e March 2011 2012 2013E 2014EPar Value 10 10 10 10No. of equit y shares 635 671 671 671Equ it y 6,350 6,710 6,710 6,71 0Networth 834,712 1 ,062,300 1 ,218,518 1,391,061A dj . N et w o r th 6 71 ,9 81 8 51 ,3 49 8 85 ,7 42 9 90 ,8 90

Deposits 12,555,625 14,146,894 16,045,051 18,754,242 Growth (%) 12.5 12.7 13.4 16.9Low Cost deposits 5,637,899 5,755,887 6,528,182 7,630,460 % of total deposits 44.9 40.7 40.7 40.7 Total Liabilities 16,449,168 18,262,305 20,760,254 24,164,779Net Advances 10,064,015 11,636,702 13,382,207 15,657,183 Growth (%) 15.7 15.6 15.0 17.0Investments 4 ,191,564 4 ,609,491 4 ,951,629 5,683,186Total Assets 16,449,168 18,262,305 20,760,254 24,164,779Source: Company Data, PL Research.

Quarterly Financials (Rs m) Y/e March Q2FY12 Q3FY12 Q4FY12 Q1FY1In ter est In co m e 2 59,6 71 2 76,6 14 2 86 ,95 5 2 8In te re st Exp en se 1 55 ,4 52 1 61 ,9 56 1 69 ,9 18 1 7Net Interest Income 104,219 114,659 117,038 111,189Non Int erest Inco me 34,272 21,260 52,640 3

CEB 26,003 26,415 42,160 26Treasury 281 (10,904) (260) 2Net Total Income 138,492 135,918 169,678 146,177Op er at in g Exp en ses 63,7 49 63,318 73,710 6

Em plo yee Exp en ses 39,1 43 39,113 54,310 4Ot her Expenses 24,605 24,205 19,400 23

Operating Profit 74,743 72,600 95,968 81,767Co re Op er at in g Pr ofit 74,4 62 83,504 96,228 7Provisions 33,855 24,074 31,404 24


Profit before tax 40,888 48,526 64,564 57,204Tax 12,784 15,895 24,061 19

PAT before

EO

28,104

32,631 40,503 37,516


Key Ratios Y/e March 2011 2012 2013E 2014ECM P (Rs) 1,861 1,861 1,861 1Equity Shrs. Os. (m ) 635 671 671Market Cap (Rs m) 1 ,181,812 1 ,248,915 1 ,248,915 1 ,2 M/Cap to AUM (%) 7.2 6.8 6.0 5.2EPS (Rs) 170.3 229.8 281.9 3Book Value (Rs) 1,315 1,583 1,816 2Adj. BV (75%) (Rs) 1,213 1,493 1,658P/ E (x) 10.9 8.1 6.6

P/ BV (x) 1.4 1.2 1.0P/ ABV (x) 1.5 1.2 1.1DPS (Rs) 25.2 35.0 42.0 5 Dividend Yield (%) 1.4 1.9 2.3 2.7




Asset Quality Y/e March 2011 2012 2013E 2014EGr oss N PA s (Rs m ) 3 23 ,1 63 4 96 ,4 87 7 45 ,8 14 9 3N et N PAs (Rs m ) 16 2,7 31 21 0,9 51 3 32 ,77 6 40Gr. NPAs to Gross Adv. (%) 3.2 4.3 5.6 6.0Net NPAs to Net Adv. (%) 1.6 1.8 2.5 2.6NPA Coverage (%) 49.6 57.5 55.4 57.4Source: Company Data, PL Research.


14/44

Kotak Mahindra Bank

September 10, 2012




+91-22-66322236


Rating Reduce Price Rs571Target Price Rs530Imp lied Upside -7.2%Sensex 17,767Nifty 5,363


Trading data

M arket Cap. (Rs bn) 463.0Shares o/ s (m) 810.33M Avg. Daily value (Rs m ) 545.9Major shareholders


(%) 1M 6M 12M Absolute (1.6) 2.3 24.3Relative (2.8) 0.8 19.0How we differ from Consensus


2013 23.7 28.2 16.2 2014 29.2 34.3 14.9

Price Performance (RIC: KTKM.BO, BB: KMB IN)

Source: Bloomberg

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Slowing on Growth: With managements s low economic growth scmaterializing, Kotak has moderated growth targets significantly to ~+30% grow th delivered over t he last few q trs with significant slowdo wport folio. Core fee income w ill also m oderate bu t kotak expects to m oassets in th eir distressed po rtfolio and th at could aid P&L over next 12m

Momentum on SA acquisition strong: SA account accretion continu es at a bpace with ~40-45% of the acquisition being coroprate salary accountbelieves that even at ~100bp s low er term deposit rates from curren t levwould be willing to hold on their SA rate of 6% as once acquired balagenerally sticky and SA offer s them a signifcant cross sell opp urtu nity.

Asset quality Extremely cautious on CVs: Kotak has been sounding cautionCVs for the last 3 mnts but management commentary on CV cycle wdraconian now especially considering an impending diesel price hikexpects some negative outcome for mid level fleet operators over t6mnts. Kotaks corporate book asset quality is manageable but concerned on some ind ustry Infra exposures.

Asset quality Very early in picking up weaking signal in SME/corporates : Kot adiscussed t hat t heir ability t o exit pr oblem accoun ts early is linked to (size of their exposure in most corporates (2) short term nature of th eirand (3) Cashflow escrow ing in m ost cases.

Key financials ( Y/e March) 2011 2012 2013E 2014Net in t erest incom e (Rs m ) 29,972 34,698 42,694 Growth (%) 15.7 15.8 23.0 21Operat ing profit (Rs m ) 23,135 25,533 31,397PAT (Rs m ) 14,924 16,650 19,178EPS (Rs) 20.3 20.5 23.7 Growth (%) 14.5 1.5 15.2 23Net DPS (Rs) 0.5 0.6 0.7




15/44

Septem ber 10, 2012

Kotak M ahindra Ba

Income Statement (Rs m) Y/e March 2011 2012 2013E 2014EIn t . Ea rn ed f r om A dv. 4 8,6 91 6 9,0 14 8 7, 72 8 1 05 ,3 14In t . Ea rn ed f ro m In vt . 9 ,5 72 1 3,0 64 1 6, 47 2 2 0,4 73Others 182 64 64 64To ta l I nt e r est I ncome 58 ,445 82 ,141 104,265 125,852

In te re st e xp en se 2 8,4 73 4 7,4 44 6 1,5 70 7 3,8 42NII 29,972 34,698 42,694 52,010 Growth (%) 15.7 15.8 23.0 21.8Treasury Inco me 912 920 800 1,100N TN II 1 6,8 15 17 ,1 30 1 9,4 57 2 3,3 50N on In t er est In co m e 1 7,7 27 18 ,0 50 2 0,2 57 2 4,4 50To t al In co m e 7 6,1 71 1 00 ,1 91 1 24 ,5 21 1 50 ,3 02 Growth (%) 21.5 31.5 24.3 20.7 O pe ra ti ng Exp e nse 2 4,5 63 2 7,2 14 3 1, 55 4 3 6,8 56Operating Profit 23,135 25,533 31,397 39,604 Growth (%) (1.4) 10.4 23.0 26.1N PA Pr ovisio ns 1,2 50 1 ,2 00 3,1 28 4 ,7 25Investm ent Provisions 531 (181)

To tal Pr ovisio ns 1,6 13 1 ,0 07 3,1 28 4 ,7 25PBT 21,522 24,526 28,269 34,879Ta x Pr ov isio ns 6 ,5 98 7 ,8 76 9 ,0 92 11,2 37 Effective Tax Rate (%) 30.7 32.1 32.2 32.2PAT 14,924 16,650 19,178 23,642 Growth (%) 21.1 11.6 15.2 23.3

Balance Sheet (Rs m) Y/e March 2011 2012 2013E 2014EPar Value 5 5 5 5No. of equit y shares 737 810 810 810Equ it y 3,684 4,052 4,052 4,05 2N et w o r th 111 ,1 34 1 28 ,8 24 1 46 ,8 64 1 66 ,2 75A dj . N et w o r th 1 07 ,2 18 1 24 ,8 89 1 43 ,4 58 1 62 ,4 86

Deposi t s 292,610 385,365 486,415 628,842 Growth (%) 22.5 31.7 26.2 29.3Low Cost deposi t s 87 ,905 124,024 160,517 216,950 % of total deposits 30.0 32.2 33.0 34.5Total Liabilities 656,622 825,262 1,006,134 1,238,997Net Advances 422,706 541,637 664,545 819,872 Growth (%) 37.4 28.1 22.7 23.4Investmen t s 167,789 212,377 258,245 319,900Total Assets 656,622 825,262 1,006,134 1,238,997Source: Company Data, PL Research.

Quarterly Financials (Rs m) Y/e March Q2FY12 Q3FY12 Q4FY12 Q1FY1In t erest Incom e 14,646 16,410 17,448 18Int erest Expense 8,592 9,895 10,571 10Net Interest Income 6,055 6,515 6,877 7,213Non Int erest Incom e 2,125 2,820 2,542 2

CEB Treasury Net Total Income 8,179 9,334 9,420 9,625Operat ing Expenses 4,379 4,898 4,966 5

Em ployee Expenses 2,152 2,260 2,248 2Other Expenses 2,228 2,638 2,718 2

Operating Profit 3,800 4,436 4,453 4,484Core Operat ing Profit 3,800 4,436 4,453Provisions (24) 307 46



PAT before

EO

2,600

2,761 2,969 2,824


Key Ratios Y/e March 2011 2012 2013E 2014ECM P (Rs) 571 571 571Equity Shrs. Os. (m ) 737 810 810M a rke t Cap (Rs m ) 42 1,0 48 4 63 ,0 23 46 3,0 23 46 M/Cap to AUM (%) 64.1 56.1 46.0 37.4EPS (Rs) 20.3 20.5 23.7 2Book Value (Rs) 151 159 181Adj. BV (75%) (Rs) 149 157 179P/ E (x) 28.2 27.8 24.1 1





Asset Quality Y/e March 2011 2012 2013E 2014EGross NPAs (Rs m ) 6,977 7,141 8,722 1Net NPAs (Rs m ) 3,916 3,935 3,406 3Gr. NPAs to Gross Adv. (%) 1.7 1.3 1.3 1.3Net NPAs to Net Adv. (%) 0.9 0.7 0.5 0.5NPA Coverage (%) 43.9 44.9 60.9 65.2Source: Company Data, PL Research.


16/44

YES Bank

September 10, 2012




+91-22-66322236


Rating BUY Price Rs333Target Price Rs450Imp lied Upside 35.1%Sensex 17,767Nifty 5,363


Trading data



(%) 1M 6M 12M Absolute (6.6) (9.1) 13.3Relative (7.8) (10.6) 8.0How we differ from Consensus


2013 33.4 33.3 0.4 2014 41.6 39.8 4.4

Price Performance (RIC: YESB.BO, BB: YES IN)

Source: Bloomberg

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Growth moderating: Yes bank is aiming a growth of mid 20s, but noteRW A growt h could be less than b alance sheet grow th as share of ret ail increases. As of now the approach to growth is that of flight to safetybank has sold of som e of th e loans/credit substitutes. The bank has a boapproach tow ards opp ortu nities and have not t aken a sectoral focus on l

Asset Quality Not seeing much stress as of now: The bank is not seeing alarge concerns on asset quality even at 5-6% GDP growth and arestructuring pipeline continues to remain slim. The bank pointed delinquency should not exceed 2008 levels but put a caveat that in 2econom ic down cycle was very short .

Margins Expected to improve: Yes bank point ed out positive impact on mfrom increasing pro port ion o f CASA, lower cost o f w holesale funds ascut dow n on bulk depo sits. Also w ith t he rate cycle expected t o ease, w ill be a beneficiary of w holesale rates com ing off.

Trade off between growth and Opex efficiency: In spite of slow ing growt hintends to cont inue to bui ld i ts branch netw ork to 800 by FY15. M anbelieves that ~150-180 branches added over last 1.5 yrs will impefficiency and aid improvement in operating efficiency even as new add to the branch strain. Cost income have moved up to 38% from 35%and management is comfortable with ~40-42% cot income as they gretail bot h o n liabilities and assets.

Key financials ( Y/e March) 2011 2012 2013E 2014Net in t erest incom e (Rs m ) 12,469 16,156 21,172 Growth (%) 58.3 29.6 31.0 25Operat ing profit (Rs m ) 11,904 15,417 20,152PAT (Rs m ) 7,271 9,784 11,805 1EPS (Rs) 20.9 27.7 33.4 Growth (%) 48.9 32.1 20.8 24Net DPS (Rs) 2.5 2.5 3.5




17/44

Septem ber 10, 2012

YES Ban

Income Statement (Rs m) Y/e March 2011 2012 2013E 2014EIn t . Ea rn ed f r om A dv. 2 9,8 91 4 4,2 68 5 1, 13 4 6 1,2 44In t . Ea rn ed f ro m In vt . 1 0,2 73 1 8,4 70 2 4, 91 3 2 8,2 11Others 253 335 436 463To t al In t er est In co m e 4 0,4 17 6 3,0 74 7 6, 48 3 8 9,9 17

In te re st e xp en se 2 7,9 48 4 6,9 17 5 5,3 11 6 3,3 96NII 12,469 16,156 21,172 26,521 Growth (%) 58.3 29.6 31.0 25.3Tr easu ry In co me (464) 379 800 1,000N TN II 6,6 96 8 ,2 07 1 0,7 72 1 4,2 27N on In t er est In co m e 6 ,2 33 8 ,5 86 11,5 72 1 5,2 27To t al In co m e 4 6,6 50 7 1,6 59 8 8, 05 6 1 05 ,1 44 Growth (%) 58.4 53.6 22.9 19.4O pe rat in g Exp en se 6 ,7 98 9 ,3 25 1 2,5 93 1 6,4 00Operating Profit 11,904 15,417 20,152 25,348 Growth (%) 37.9 29.5 30.7 25.8NPA Pr ovisio ns 914 523 2,631 3,574Investm ent Provisions (72) 160

To tal Pro visio ns 982 902 2,631 3,574PBT 10,922 14,514 17,521 21,774Tax Pr ovisio ns 3,6 50 4 ,7 30 5,7 16 7 ,1 03 Effective Tax Rate (%) 33.4 32.6 32.6 32.6PAT 7,271 9,784 11,805 14,671 Growth (%) 52.2 34.6 20.7 24.3

Balance Sheet (Rs m) Y/e March 2011 2012 2013E 2014EPar Value 10 10 10 10No. of equit y shares 347 353 353 353Equ it y 3,471 3,530 3,530 3,53 0N et w o rt h 3 7,9 41 4 6,7 66 5 7,1 26 6 9,9 39A dj . N et w o rt h 3 7,8 49 4 6,5 92 5 6,7 93 6 9,3 68

Deposi t s 459,389 491,517 629,884 760,552 Growth (%) 71.4 7.0 28.2 20.7 Low Cost deposi t s 47 ,509 73,921 113,379 152,110 % of total deposits 10.3 15.0 18.0 20.0Total Liabilities 590,070 736,621 890,364 1,070,678Net Advances 343,636 379,886 455,864 578,947 Growth (%) 54.8 10.5 20.0 27.0Investmen t s 188,288 277,573 336,986 374,528Total Assets 590,070 736,621 890,364 1,070,678Source: Company Data, PL Research.

Quarterly Financials (Rs m) Y/e March Q2FY12 Q3FY12 Q4FY12 Q1FY1In t erest Incom e 14,387 16,841 17,851 18Int erest Expense 10,530 12,565 13,369 14Net Interest Income 3,856 4,276 4,482 4,722Non Int erest Incom e 2,141 2,114 2,664

CEB Treasury Net Total Income 5,997 6,390 7,146 7,603Operat ing Expenses 2,138 2,402 2,842 3


Operating Profit 3,859 3,988 4,304 4,596Core Operat ing Profit 3,859 3,988 4,304Provisions 379 224 285



PAT before

EO

2,350

2,541 2,718 2,901


Key Ratios Y/e March 2011 2012 2013E 2014ECM P (Rs) 333 333 333Equity Shrs. Os. (m ) 347 353 353M a rke t Cap (Rs m ) 11 5,6 35 1 17 ,5 80 11 7,5 80 11 M/Cap to AUM (%) 19.6 16.0 13.2 11.0EPS (Rs) 20.9 27.7 33.4 4Book Value (Rs) 109 132 162Adj. BV (75%) (Rs) 109 132 162P/ E (x) 15.9 12.0 10.0





Asset Quality Y/e March 2011 2012 2013E 2014EGross NPAs (Rs m ) 805 839 1,600 2Net NPAs (Rs m ) 92 175 333Gr. NPAs to Gross Adv. (%) 0.2 0.2 0.4 0.5Net NPAs to Net Adv. (%) 0.1 0.1NPA Coverage (%) 88.6 79.2 79.2 79.2Source: Company Data, PL Research.


18/44

IndusInd Bank

September 10, 2012




+91-22-66322236




Trading data



(%) 1M 6M 12M Absolute (2.9) (1.0) 17.0Relative (4.0) (2.5) 11.7How we differ from Consensus


2013 21.4 21.5 0.4 2014 26.5 27.1 2.4

Price Performance (RIC: INBK.BO, BB: IIB IN)

Source: Bloomberg

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Growth Outlook: M anagement seemed less cautious than Kotak bankexpects to grow ~25-30% in FY13. M anagement is still seeing opportbuilding up a 2nd hand vehicle, car and LAP business. IIB has stayed awm ortgages given low yields but is increasing focus on LAP and expects significant b ook t hough comp etition is increasing in th e LAP space.

Margins Worst behind us: Like most retail banks, IIB believes that woterm s of margins is behind and easing rates shou ld aid in im proving m ahas seen its NIMs come o ff for 5 q trs now and low er fund ing costs willgoing forward.

Fee income traction to continue: Fee income/assets for IIB has already reaindustry best levels of 2% but m anagement expects the grow th t o still They believe on th e corpo rate side, FX and IB business still have significfor growth and outstrip B/S growth. On the retail side, increasing diw ill add t o cross sell oppo rtun ities w hich has been lim ited.

Asset quality sanguine: Falling CV rentals have been our concern echoKotak/HDFCB but IIB is not seeing any material stress in their CVcurrently th ough diesel price hike can be a risk to t his portfolio. Corpois working capital l inked and with no Infra exposure, managementstrong trend to con tinue. Overall IIB cont inues to guide 60-70bps of crv/ s our 75-80bp s credit cost assumpt ion.

Key financials ( Y/e March) 2011 2012 2013E 2014Net in t erest incom e (Rs m ) 13,765 17,042 21,654 Growth (%) 55.3 23.8 27.1 27Operat ing profit (Rs m ) 10,817 13,730 17,712PAT (Rs m ) 5,773 8,026 10,010 1EPS (Rs) 12.4 17.2 21.4 Growth (%) 46.1 38.5 24.7 23Net DPS (Rs) 2.0 2.2 3.2




19/44

Septem ber 10, 2012

IndusInd Ban

Income Statement (Rs m) Y/e March 2011 2012 2013E 2014EIn t . Ea rn ed f r om A dv. 2 8,3 46 4 2,1 66 5 3, 30 4 6 3,2 48In t . Ea rn ed f ro m In v t. 7 ,3 33 1 0,7 82 1 2, 39 7 1 5,2 92Others 215 644 644 725To t al In t er est In co m e 3 5,8 94 5 3,5 92 6 6, 34 5 7 9,2 65

In te re st e xp en se 2 2,1 29 3 6,5 49 4 4,6 91 5 1,6 44NII 13,765 17,042 21,654 27,621 Growth (%) 55.3 23.8 27.1 27.6Treasury Incom e 376 583 800 800N TN II 6,7 61 9 ,5 35 1 2,3 95 1 6,1 14N on In t er est In co m e 7 ,1 37 1 0,118 1 3,1 95 1 6,9 14To t al In co m e 4 3,0 30 6 3,7 10 7 9,5 40 9 6,1 79 Growth (%) 32.0 48.1 24.8 20.9O pe ra ti ng Ex pe n se 1 0,0 85 1 3,4 30 1 7, 13 8 2 2,0 04Operating Profit 10,817 13,730 17,712 22,531 Growth (%) 53.7 26.9 29.0 27.2N PA Pr ovisio ns 1,8 41 1 ,7 83 2,8 38 4 ,1 42Investm ent Provisions 76 (10)

To tal Pr ov isio ns 2,0 19 1 ,8 04 2,8 38 4 ,1 42PBT 8,798 11,927 14,874 18,388Tax Pr ov isio ns 3,0 25 3 ,9 00 4,8 64 6 ,0 14 Effective Tax Rate (%) 34.4 32.7 32.7 32.7 PAT 5,773 8,026 10,010 12,375 Growth (%) 64.8 39.0 24.7 23.6

Balance Sheet (Rs m) Y/e March 2011 2012 2013E 2014EPar Value 10 10 10 10No. of equit y shares 466 468 468 468Equ it y 4,658 4,677 4,677 4,67 7N et w o rt h 3 8,2 47 4 5,114 5 3,3 73 6 3,4 49A dj . N et w o rt h 3 7,5 18 4 4,1 68 5 2,2 82 6 1,8 80

D ep o si t s 3 43 ,6 54 4 23 ,6 15 5 31 ,5 87 6 67 ,4 86 Growth (%) 28.7 23.3 25.5 25.6Low Cost deposi t s 93 ,309 115,631 161,050 216,240 % of total deposits 27.2 27.3 30.3 32.4Total Liabilities 454,104 573,753 713,452 893,198Net Advances 261,656 350,640 434,793 547,839 Growth (%) 27.3 34.0 24.0 26.0Investmen t s 135,508 145,719 181,811 223,615Total Assets 454,104 573,764 713,452 893,198Source: Company Data, PL Research.

Quarterly Financials (Rs m) Y/e March Q2FY12 Q3FY12 Q4FY12 Q1FY1In t erest Incom e 13,239 13,897 14,810 1Int erest Expense 9,047 9,591 10,166 11Net Interest Income 4,192 4,307 4,644 4,841Non Int erest Incom e 2,392 2,651 2,921

CEB 2,119 2,503 2,640 2,Treasury Net Total Income 6,584 6,958 7,565 8,029Operat ing Expenses 3,254 3,465 3,774 3


Operating Profit 3,330 3,492 3,791 4,040Core Operat ing Profit 3,330 3,492 3,791Provisions 470 428 460


Profit before tax 2,860 3,064 3,331 3,505Tax 929 1,005 1,097 1,

PAT before

EO

1,931

2,060 2,234 2,363


Key Ratios Y/e March 2011 2012 2013E 2014ECM P (Rs) 313 313 313Equity Shrs. Os. (m ) 466 468 468M a rke t Cap (Rs m ) 14 5,9 27 1 46 ,5 31 14 6,5 31 14 M/Cap to AUM (%) 32.1 25.5 20.5 16.4EPS (Rs) 12.4 17.2 21.4 2Book Value (Rs) 82 96 114Adj. BV (75%) (Rs) 82 96 114P/ E (x) 25.3 18.3 14.6 1





Asset Quality Y/e March 2011 2012 2013E 2014EGross NPAs (Rs m ) 2,659 3,471 4,001Net NPAs (Rs m ) 728 947 1,091 1Gr. NPAs to Gross Adv. (%) 1.0 1.0 0.9 1.0Net NPAs to Net Adv. (%) 0.3 0.3 0.3 0.3NPA Coverage (%) 72.6 72.7 72.7 72.7Source: Company Data, PL Research.


20/44

HDFC

September 10, 2012




+91-22-66322236




Trading data

M arket Cap. (Rs bn) 1,094.7Shares o/ s (m) 1,477.03M Avg. Daily value (Rs m ) 2337.8Major shareholders


(%) 1M 6M 12M Absolute 7.4 8.9 12.0Relative 6.2 7.4 6.7How we differ from Consensus


2013 32.3 31.8 1.5 2014 37.8 37.7 0.5

Price Performance (RIC: HDFC.BO, BB: HDFC IN)

Source: Bloomberg

0

1 0 0

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Growth outlook Sanguine: HDFC maintained its growth guidance of ~20ex-Mu m bai portfo lio seeing robust growt h in individual segmendifferent ials w ith SBI is very limited at t he m om ent to imp act volumeltd. M anagement h as not seen any increase in pre-payment rates dueabolition of pre-payment charges and believes operational hassles/chswitching to a new financier will prevent their dual rate customers over to SBI.

Margins stable: M argins continue t o rem ain stable for HDFC and wholesale rates are further aiding margins as pricing environment icompeti t ive.

Reiterated safe nature of non individual loan portfolio: HDFC re-em phasisthat non-individual portfol io r isk profi le to be low with obuilder/construction finance and rest ~20% constituted by rental disand corporate construction loans. Even in the builder portfolioemphasised they lend only at SPV level for construction with signifcomfor t .

Accounting: Com pany w ill declare IFRS related account s from Sep-12 ashould help address investor concerns on som e aggressive account ing fby HDFC Ltd. Also, HDFC in its recent presentation have clarified oconsolidated accounts as well adjusting for the interest o n ZCBs.

Key Financials (Y/e March) 2011 2012 2013E 2014Net in t erest incom e (Rs m ) 41,335 49,765 62,220 Growth (%) 26.1 20.4 25.0 19.Non-in t erest incom e (Rs m ) 11,847 12,210 12,554Operat ing Prof it (Rs m ) 49,370 57,456 69,542PAT (Rs m ) 35,350 41,226 49,462EPS (Rs) 24.1 27.9 32.3 Growth (%) 22.4 15.8 15.7 17.Net DPS (Rs) 9.0 11.0 13.2

Profitability & valuation 2011 2012 2013E 2014Spreads / Margins (%) 3.2 3.2 3.4 3RoAE (%) 21.7 22.7 22.4 21.RoAA (%) 2.8 2.7 2.7 2P/ E (x) 30.8 26.6 23.0P/ BV (x) 6.3 5.8 4.5P/ ABV (x) 6.3 5.8 4.5Net dividend yield (%) 1.2 1.5 1.8 2



21/44

Septem ber 10, 2012

HDF

Income Statement (Rs m) Y/e March 2011 2012 2013E 2014EInt . I nc . / Op t . I nc . 116,934 161 ,333 188,615 226,627Int e r est Expenses 75 ,599 111,568 126,395 152,472Net interest income 41,335 49,765 62,220 74,155 Growth (%) 26.1 20.4 25.0 19.2

N on in t er est i nco m e 11,8 47 1 2,2 10 1 2,5 54 1 3,4 76 Growth (%) 16.1 3.1 2.8 7.3N et o pe rat in g i nco m e 5 3,1 81 6 1,9 75 7 4,7 75 8 7,6 31Expenditure

Em plo yees 1,755 2,058 2,367 2,722Ot her exp en ses 2 ,0 56 2 ,4 61 2 ,8 65 3,3 39Depreciat ion To tal exp en dit ur e 3 ,8 12 4 ,5 19 5 ,2 32 6,0 61PPP 49,370 57,456 69,542 81,570 Growth (%) 24.2 16.4 21.0 17.3Provision 700 800 880 968Other incom e Exchange Gain / (Loss) 700 800 880 968

Profit before tax 48,670 56,656 68,662 80,602Tax 13 ,3 20 15 ,4 30 1 9,2 01 2 2,6 28 Effective tax rate (%) 27.4 27.2 28.0 28.1PAT 35,350 41,226 49,462 57,975 Growth (%) 25.1 16.6 20.0 17.2

Balance Sheet (Rs m) Y/e March 2011 2012 2013E 2014ESources of funds

Eq uit y 2,934 2,954 3,063 3,063Rese rves & Surp lus 163,572 180,563 242,550 276,831N et w o r th 1 73 ,1 65 1 90 ,1 76 2 52 ,2 73 2 86 ,5 54 Growth (%) 13.9 9.8 32.7 13.6

Loan funds 907,854 1 ,028,347 1 ,208,347 1,413,347 Growth (%) 13.3 17.5 17.0Deposi t s 246,251 362,928 422,928 552,928O t he r Li ab il it ie s 6 7,7 51 9 3,7 49 9 3,7 49 9 3,7 49Total 1,395,021 1,675,199 1,977,297 2,346,578Application of funds

N et f ix ed asse ts 2 ,3 40 2,3 40 2,3 25 2 ,2 95Advances 1 ,171,266 1 ,408,746 1 ,684,892 2,025,259 Growth (%) 19.6 20.3 19.6 20.2Net cu rr en t a sse t s 121,537 112,350 140,729 153,642In ve st m en ts 2 0,9 55 3 9,2 05 2 2,9 49 2 2,9 49 Growth (%) 58.7 87.1 (41.5) Deferred t ax asset

Other Asset s 78 ,923 112,559 126,403 142,432Total 1,395,021 1,675,199 1,977,297 2,346,578Source: Company Data, PL Research.

Quarterly Financials (Rs m) Y/e March Q2FY12 Q3FY12 Q4FY12 Q1FY13In t . In c. / O pe ra ti ng In c. 3 9,9 70 4 3,0 18 4 7,4 38 4Incom e from secur it izat ion In t er est Ex pe nse s 2 6,9 05 3 0,1 24 2 9,3 89 3 3Net Interest Income 13,064 12,894 18,049 14,638

Growth 18.0 17.2 26.3 19.3No n in terest in co me 1,722 1,707 1,472Net operating income 14,786 14,601 19,521 15,541Growth 18.0 10.0 17.9 18.9O pe rat in g e xp en dit u re 1 ,4 09 1,3 19 1,2 80PPP 13,377 13,282 18,242 13,799Growth 18.0 9.6 17.3 17.4Provision Exchange Gain / (Loss) Pr o fi t b e fo r e t ax 1 3,3 77 1 3,2 82 1 8,2 42 1Tax 3,670 3,470 4,980 3,Prov. for deferred t ax liabilit y Effective tax rate (%) 27.4 26.1 27.3 27.4

PAT 9,707 9,812 13,262 10,019Growth 20.2 10.3 16.0 18.6

Key Ratios Y/e March 2011 2012 2013E 2014ECM P (Rs) 741 741 741Eq . Sh rs. O / s. (m ) 1 ,4 67 1 ,4 77 1 ,5 32 1M arket Cap (Rs m) 1 ,087,229 1 ,094,715 1 ,135,296 1,1M arket Cap to AUM (%) 0.8 0.7 0.6EPS (Rs) 24.1 27.9 32.3 3

Bo ok Valu e (Rs) 1 18.1 12 8.8 16 4.7A dj ust ed Bo ok Valu e (Rs) 118 .1 1 28 .8 1 64 .7P/ E (x) 30.8 26.6 23.0 1P/ BV (x) 6.3 5.8 4.5P/ ABV (x) 6.3 5.8 4.5DPS (Rs) 9.0 11.0 13.2 1Dividend Yield (%) 1.2 1.5 1.8

Asset Quality Y/e March 2011 2012 2013E 2014EGross NPAs (Rs m ) 9,019 10,425 12,468 1Net NPAs (Rs m ) Gross NPAs to Gross Adv. (%) 0.8 0.7 0.7

Net NPAs to Net Adv. (%) NPA Coverage (%)

Profitability (%) Y/e March 2011 2012 2013E 2014ENIM 3.2 3.2 3.4RoAA 2.8 2.7 2.7RoAE 21.7 22.7 22.4 2Source: Company Data, PL Research.


22/44

Shriram Transport Finance

September 10, 2012




+91-22-66322236


Rating Accumulate Price Rs636Target Price Rs575Imp lied Upside -9.6%Sensex 17,767Nifty 5,363


Trading data



(%) 1M 6M 12M Absolute 12.1 13.2 (4.6)Relative 10.9 11.7 (9.9)How we differ from Consensus


2013 60.3 62.3 3.3 2014 67.2 71.8 6.4

Price Performance (RIC: SRTR.BO, BB: SHTF IN)

Source: Bloomberg

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Growth outook remains tepid: SHTF is com fort able wit h 12-15% of growcontinues to maintain LTVs at ~65% and does not want to comproquality for growth. SHTF also noted they have restricted the groconstruction equipment business as well. SHTF was positive on rurawhere they have increased presence through small centres which coconverted to b ranches in line w ith t he increase in business. As of no w of t ransactions are being sourced th rough it s Autom alls.

Margins: Due to com petit ion in new CV business, hence large part of t hew ill have to be dr iven by higher m argin old CVs. M argins have come oby ~30bps to ~7.5% and t hey expect m argins to stay in the 7.3-7.7% rang

Asset quality Not as cautious as peers: SHTF has recognised all m ining r eassets and does not expect any negative surprise. M anagement re-iteratonly ~20% of their exposure is in industrial transportation and otherlinked to tr ansport ation of essentials and does not expect mat erial detein asset quality. With overall freight availability coming off, impendprice hike and negative feedback on p eers like HDFC/ KMB w e rem ainon t he CV cycle.

Accessing regulations : (1) Final securitisation guidelines w arrant m ovingb/s sheet book from direct assignment to PTC route. Though manabelieves that im pact will be limited, actual im plem entatio n w ill be tes2H w hich is a seasonally qt r for securitisations. (2) On t he 90 v/ s 180recognition, managem ent believes that transition t ime w ill be large (3-feedback from RBI also suggested that th e implem entatio n w ill happendisrupt ive manner.

Key Financials (Y/e March) 2011 2012 2013E 2014Net in t erest incom e (Rs m ) 14,107 12,377 15,847 Growth (%) 3.1 (12.3) 28.0 39.Non-in t erest incom e (Rs m ) 955 1,015 981Operat ing Profit (Rs m ) 24,037 26,492 27,761PAT (Rs m ) 12,299 12,574 13,647EPS (Rs) 54.4 55.6 60.3 Growth (%) 40.5 2.2 8.5 11Net DPS (Rs) 6.5 6.5 7.2

Profitability & valuation 2011 2012 2013E 2014Spreads / Margins (%) 6.0 4.6 4.9 5RoAE (%) 28.1 23.1 20.7 19.RoAA (%) 5.2 4.7 4.2 4P/ E (x) 11.7 11.4 10.5P/ BV (x) 2.9 2.4 2.0P/ ABV (x) 3.0 2.4 2.0Net dividend yield (%) 1.0 1.0 1.1 1



23/44

Septem ber 10, 2012

Shriram Transport Finan

Income Statement (Rs m) Y/e March 2011 2012 2013E 2014EIn t . In c. / O pt . In c. 3 7,115 3 6,9 89 4 4,7 26 5 5,2 99In t er est Exp en se s 2 3,0 08 2 4,6 12 2 8,8 78 3 3,1 70Net interest income 14,107 12,377 15,847 22,129 Growth (%) 3.1 (12.3) 28.0 39.6

No n in ter est inco me 955 1,015 981 1,005 Growth (%) (1.3) 6.3 (3.4) 2.5N et o pe rat in g i nco m e 3 0,4 10 3 4,3 27 3 6,3 85 4 0,6 40Expenditure

Em plo yees 2,732 3,701 4,219 4,809Ot her exp en ses 3 ,5 33 3 ,9 99 4 ,2 63 4,6 27Depreciat ion 108 135 141 148To tal exp en dit ur e 6 ,3 74 7 ,8 35 8 ,6 23 9,5 85PPP 24,037 26,492 27,761 31,056 Growth (%) 38.8 10.2 4.8 11.9Pro visio n 5,548 7,683 7,348 8,177Other incom e Exchange Gain / (Loss)

Profit before tax 18,489 18,809 20,413 22,878Tax 6,190 6,235 6,766 7,664 Effective tax rate (%) 33.5 33.1 33.1 33.5PAT 12,299 12,574 13,647 15,214 Growth (%) 40.9 2.2 8.5 11.5


Eq uit y 2,262 2,263 2,263 2,263Re se rv es & Su r pl us 4 6,7 82 5 7,6 60 6 9 ,3 91 8 1,9 35N et w o rt h 4 9,0 44 5 9,9 23 7 1,6 54 8 4,1 98 Growth (%) 27.6 22.2 19.6 17.5

Loan funds 198,817 231,219 289,113 325,143 Growth (%) 16.3 25.0 12.5Others M inorit y In t erest Deferred Tax Liabilit y Total 247,861 291,142 360,767 409,341Application of funds

Net fixed asset s 384 397 467 490Advances 198,656 219,019 292,438 350,925 Growth (%) 10.5 10.3 33.5 20.0N et cu rr en t asse ts 1 0,4 07 29 ,9 12 18 ,6 15 1 ,1 98In ve st m en ts 3 6,5 07 3 9,6 46 4 7,0 81 5 4,5 61 Growth (%) 96.7 8.6 18.8 15.9

Ot her Asset s 1 ,9 06 2 ,1 67 2,1 67 2 ,1 67Total 247,861 291,142 360,767 409,341Source: Company Data, PL Research.

Quarterly Financials (Rs m) Y/e March Q2FY12 Q3FY12 Q4FY12 Q1FY13In t . In c. / O pe ra ti ng In c. 9 ,6 75 9 ,4 58 9 ,1 58In co m e f ro m se cu ri ti zat io n 4 ,8 25 4 ,9 27 5 ,1 57In te re st Exp en se s 6 ,1 53 6 ,3 47 6 ,2 59 6Net Interest Income 3,522 3,110 2,899 2,702

Growth (4.4) (23.2) (10.6) 1.8Non in terest incom e 258 294 255Net operating income 8,605 8,331 8,311 8,727Growth 19.0 2.1 5.4 1.2O pe rat in g e xp en dit u re 1 ,7 88 1,8 67 1,7 82PPP 6,560 6,171 6,274 6,085Growth 18.9 (1.9) 0.8 (5.9)Pr ovisio n 2 ,3 63 1 ,9 20 1 ,9 18 2Exchange Gain / (Loss) Pr of it b ef or e t ax 4 ,4 54 4,5 45 4,6 11 4Tax 1,460 1,518 1,530 1,5Prov. for deferred t ax liabilit y Effective tax rate (%) 32.8 33.4 33.2 32.4

PAT 2,994 3,027 3,081 3,219Growth 0.2 0.4 (9.6) (7.3)

Key Ratios Y/e March 2011 2012 2013E 2014ECM P (Rs) 636 636 636Eq. Shrs. O/ s. (m ) 226 226 226Market Cap (Rs m) 143,865 143 ,951 143 ,951 14M ar ket Cap t o AUM (%) 58.0 49.4 39.9EPS (Rs) 54.4 55.6 60.3 6

Bo ok Valu e (Rs) 2 16.8 26 4.8 31 6.6A dj ust ed Bo ok Valu e (Rs) 2 13 .5 2 60 .5 3 11 .6P/ E (x) 11.7 11.4 10.5P/ BV (x) 2.9 2.4 2.0P/ ABV (x) 3.0 2.4 2.0DPS (Rs) 6.5 6.5 7.2 1Dividend Yield (%) 1.0 1.0 1.1

Asset Quality Y/e March 2011 2012 2013E 2014EGross NPAs (Rs m ) 5,286 6,938 8,325 9Net NPAs (Rs m ) 745 977 1,129 1Gross NPAs to Gross Adv. (%) 2.7 3.2 2.8

Net NPAs to Net Adv. (%) 0.4 0.4 0.4NPA Coverage (%) 85.9 85.9 86.4

Profitability (%) Y/e March 2011 2012 2013E 2014ENIM 6.0 4.6 4.9RoAA 5.2 4.7 4.2RoAE 28.1 23.1 20.7 1Source: Company Data, PL Research.


24/44

Mahindra & Mahindra Financial Services

September 10, 2012




+91-22-66322236




Trading data



(%) 1M 6M 12M Absolute 3.8 15.0 24.4Relative 2.6 13.5 19.1How we differ from Consensus


2013 72.4 73.5 1.5 2014 87.6 89.3 1.9

Price Performance (RIC:MMFS.BO,BB:MMFS IN)

Source: Bloomberg

01 0 02 0 03 0 04 0 05 0 06 0 07 0 0

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Bullish on Growth: M anagement rem ains extrem ely bullish on grow th, an except ion to the overal l tone of signif icant s lowdow n. M anagememinimum intends to double their current ~Rs200bn loan book in 3 believe that they will achieve their 2x size faster than 3yrs as they copenet rate new OEM s and add new pro duct categories.

Adding new growth drivers: M ahindra's biggest advant age is that it isdiversified in 4-5 product categories and management is adding newcategories. M ahindra Finance plans to bu ild a SM E book largely lendiM ahindra ecosystem. Also apart from penet rating new OEM s in moproduct categories, they plan to increase the share of high yielding 2vehicle port folio to 12-15% of their loan book fro m 7-8% current ly.

Positioned to benefit from an easing rate cycle: M argins have com e off overlast 6 q trs as M ahindra Finance has not passed on the en tire rate hcustom ers and w ith an easing rate cycle, expects margins to imp rove ov14. Long term fund ing rates have already come o ff by 20-30bps and w idepend ence on direct assignment s, M M FS expects m argins to im prove.

Asset quality Maintaining LTV discipline key: M anagement bel ieves that thave had a tight contro l on LTVs (avg. 66-67%) in spite o f th e high grhence do es not expect large negative asset quality surprises. Tractor pcould have been part ia l ly exposed to the low monsoon but recent ppositive. We factor in ~170bps of credit costs from ~100bps deliveredand hen ce som e pick up delinq uencies in Tractor/ CV book is factored bthe street.

Key Financials (Y/e March) 2011 2012 2013E 2014Net in t erest incom e (Rs m ) 12,231 15,549 20,999 Growth (%) 35.4 27.1 35.1 23.Non-in t erest incom e (Rs m ) 387 269 277Operat ing Prof it (Rs m ) 8,623 10,823 14,672PAT (Rs m ) 4,631 6,201 7,434EPS (Rs) 45.2 60.4 72.4 Growth (%) 26.0 33.6 19.9 21.Net DPS (Rs) 10.2 14.2 16.3

Profitability & valuation 2011 2012 2013E 2014Spreads / Margins (%) 12.0 10.7 11.1 10.RoAE (%) 22.0 22.8 22.7 22.RoAA (%) 4.6 4.3 3.9 3P/ E (x) 18.0 13.5 11.3P/ BV (x) 3.4 2.8 2.3P/ ABV (x) 3.5 3.0 2.4Net dividend yield (%) 1.2 1.7 2.0 2



25/44

Septem ber 10, 2012

M ahindra & M ahindra Financial Ser

Income Statement (Rs m) Y/e March 2011 2012 2013E 2014EIn t . In c. / O pt . In c. 1 8,8 33 2 6,7 52 3 4,9 17 4 3,0 30In t er est Exp en se s 6 ,6 02 11,2 03 1 3,9 18 1 7,0 15Net interest income 12,231 15,549 20,999 26,016 Growth (%) 35.4 27.1 35.1 23.9

Non in t erest incom e 387 269 277 319 Growth (%) 1.6 (30.4) 3.1 15.0N et o pe rat in g i nco m e 1 3,5 24 1 6,7 43 2 2,1 69 2 7,2 27Expenditure

Em plo yees 2,062 2,955 3,694 4,617Other expenses 511 511 511 511Depreciat ion 158 196 314 206To tal exp en dit ur e 2 ,7 31 3 ,6 62 4 ,5 20 5,3 35PPP 8,623 10,823 14,672 18,008 Growth (%) 16.1 25.5 35.6 22.7 Pro visio n 1,598 1,570 3,739 4,783Other incom e Exchange Gain / (Loss)

Profit before tax 7,025 9,253 10,932 13,225Tax 2,393 3,051 3,498 4,232 Effective tax rate (%) 34.1 33.0 32.0 32.0PAT 4,631 6,201 7,434 8,993 Growth (%) 34.5 33.9 19.9 21.0


Eq uit y 1,025 1,027 1,027 1,027Re se rv es & Su r pl us 2 3,8 56 2 8,4 83 3 4 ,9 91 4 1,6 21N et w o rt h 2 4,9 01 2 9,5 10 3 6,0 18 4 2,6 48 Growth (%) 44.1 18.5 22.1 18.4

Loan funds 96 ,750 139,611 173,154 227,194 Growth (%) 44.3 24.0 31.2Others M inorit y In t erest Deferred Tax Liabilit y 1 Total 121,652 169,121 209,172 269,842Application of funds

N et f ixed asset s 81 8 1 ,0 00 1,0 29 1 ,2 35Advances 123,844 174,963 215,524 275,899 Growth (%) 48.5 41.3 23.2 28.0Net current asse ts (9 ,827) (11,867) (13,571) (15,216)In ve st m en ts 6 ,7 46 5 ,0 25 6,1 90 7 ,9 24 Growth (%) 212.4 (25.5) 23.2 28.0

Other Asset s Total 121,652 169,121 209,172 269,842Source: Company Data, PL Research.

Quarterly Financials (Rs m) Y/e March Q2FY12 Q3FY12 Q4FY12 Q1FY13In t . In c. / O pe ra ti ng In c. 6 ,4 91 7 ,3 28 8 ,3 89Incom e from secur it izat ion In te re st Exp en se s 2 ,5 89 3 ,1 50 3 ,3 04 3Net Interest Income 3,902 4,178 5,085 4,876

Growth 22.8 23.2 28.4 47.0Non in terest incom e 196 138 81Net operating income 4,098 4,316 5,166 4,916Growth 21.3 18.8 24.5 39.3O pe rat in g e xp en dit u re 1 ,5 21 1,5 20 1,6 03PPP 2,539 2,797 3,563 3,248Growth 22.3 22.8 37.9 56.6Provision 523 494 142 8Exchange Gain / (Loss) Pr of it b ef or e t ax 2 ,0 16 2,3 03 3,4 21 2Tax 661 756 1,144 7Prov. for deferred t ax liabilit y Effective tax rate (%) 32.8 32.8 33.4 32.8

PAT 1,355 1,547 2,277 1,610Growth 16.3 33.5 45.4 57.6

Key Ratios Y/e March 2011 2012 2013E 2014ECM P (Rs) 815 815 815Eq. Shrs. O/ s. (m ) 102 103 103M a rke t Cap (Rs m ) 8 3,4 56 8 3,6 49 8 3,6 49 8M ar ket Cap t o AUM (%) 68.6 49.5 40.0EPS (Rs) 45.2 60.4 72.4 8

Bo ok Valu e (Rs) 2 43.1 28 7.4 35 0.8 4A dj ust ed Bo ok Valu e (Rs) 2 35 .8 2 75 .5 3 36 .1P/ E (x) 18.0 13.5 11.3P/ BV (x) 3.4 2.8 2.3P/ ABV (x) 3.5 3.0 2.4DPS (Rs) 10.2 14.2 16.3 1Dividend Yield (%) 1.2 1.7 2.0

Asset Quality Y/e March 2011 2012 2013E 2014EGross NPAs (Rs m ) 5,488 5,543 6,839 8Net NPAs (Rs m ) 745 1,219 1,504 1Gross NPAs to Gross Adv. (%) 4.4 3.2 3.2

Net NPAs to Net Adv. (%) 0.5 0.7 0.7NPA Coverage (%) 86.4 78.0 78.0

Profitability (%) Y/e March 2011 2012 2013E 2014ENIM 12.0 10.7 11.1 1RoAA 4.6 4.3 3.9RoAE 22.0 22.8 22.7 2Source: Company Data, PL Research.


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Prabhudas Lilladher Pvt. Ltd. and/o r its associates (the 'Firm') does and/ or seeks to do business with companies covered in its research rep orts. As a result investors sthe Firm m ay have a conflict of interest that could affect the o bjectivity of the report . Investors should consider this report as only a single factor in m aking their inves

Please refer to im portant disclosures and disclaimers at th e end of t he repor t

Power Finance Corporation / REC

Adarsh Parasrampur iaadarshparasrampuria@plindi

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