India Daily, March 19, 2013 - Kotak Securities...For Private Circulation Only. FOR IMPORTANT INFORMATION ABOUT KOTAK SECURITIES’ RATING SYSTEM AND OTHER DISCLOSURES. REFER TO THE

For Private Circulation Only. FOR IMPORTANT INFORMATION ABOUT KOTAK SECURITIES’ RATING SYSTEM AND OTHER DISCLOSURES. REFER TO THE END OF THIS MATERIAL.

INDIA DAILYMarch 19, 2013 India 18-Mar 1-day1-mo 3-mo

Sensex 19,293 (0.7) (1.7) (0.9)

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Global/Regional indices

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Value traded – India

Cash (NSE+BSE) 103 131 127

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Deri. open interest 1,494 1,475 1,634

Forex/money market

Change, basis points

18-Mar 1-day 1-mo 3-mo

Rs/US$ 54.1 (5) (27) (61)

10yr govt bond, % 8.0 - 2 (27)

Net investment (US$mn)

14-Mar MTD CYTD

FIIs 105 1,233 9,471

MFs (20) (250) (1,263)

Top movers -3mo basis

Change, %

Best performers 18-Mar 1-day 1-mo 3-mo

TCS IN Equity 1567.0 (0.2) 8.5 27.1

HCLT IN Equity 802.1 1.3 13.7 25.0

INFO IN Equity 2860.8 (0.6) 1.4 24.6

ONGC IN Equity 317.7 (0.5) (3.7) 20.0

DLFU IN Equity 270.1 (0.9) (0.0) 19.9

Worst performers

MMTC IN Equity 288.9 (2.5) (51.6) (55.6)

WLCO IN Equity 52.0 (1.0) (43.2) (51.6)

EDSL IN Equity 78.1 (1.9) (31.2) (47.5)

HDIL IN Equity 64.1 (2.2) (10.4) (45.3)

IVRC IN Equity 24.8 (2.0) (20.9) (43.7)

Contents

Special Reports

Theme Report

Industrials: How to bell the CAD: Manufacturing exports

Daily Alerts

Company

Lupin: FY2014 promises to be an eventful year for US generics

Hexaware Technologies: Growth pangs

Sector

Utilities: Coal pooling: A status check

Economy

Economy: 1HFY14 borrowings lower, but we maintain caution

For private Circulation Only. FOR IMPORTANT INFORMATION ABOUT KOTAK SECURITIES’ RATING SYSTEM AND OTHER DISCLOSURES, REFER TO THE END OF THIS MATERIAL.

The manufacturing sector remains stunted with ensuing socio-economic consequences

The manufacturing sector accounts for a small portion of GDP, leading to over-dependence of a large part of the population on agriculture. The National Manufacturing Policy (NMP) 2011 intends to boost manufacturing growth so that the sector accounts for a quarter of GDP and generates employment for 100 mn more workers over 10 years. India’s manufacturing exports seem to have large potential when compared with countries like China and Thailand. However, manufacturing has actually slowed and lost share in GDP over the past two years.

All factors of production costlier/unreliable; business is difficult; competitiveness a long way off

The costs of all factors of production have been rising, compared with emerging economies, and their availability is uncertain, affecting India’s competitiveness. (1) Land (acquisition is tough and has stalled several infrastructure and industrial projects); (2) labor (wage costs are rising and skilled and unskilled labor is scarce); (3) material (key industrial raw materials like coal, gas and iron ore are scarce); (4) capital (costs are high and access for small enterprises is difficult). Infrastructure is not fully supportive and regulations are difficult for companies to comply with. While India is grappling with its issues, global manufacturing is shifting from outsourcing due to technology (less dependence on labor for scale-up), resources (shale gas in the US) and political attitudes (rising unemployment).

Currency depreciation and wage differential not enough; much hard work remains

The Rupee’s depreciation and wage growth in peer countries may improve competitiveness. However, much remains to be done. Areas that must be addressed include: (1) Labor – flexible laws, training in certain skills, and productivity, (2) infrastructure – momentum needs to be restored in roads (unviable bids), power (coal, distribution), telecom (spectrum), (3) taxation and trade policies (GST is crucial), (4) technology and depth – needs encouragement by leveraging domestic procurement, R&D incentives and getting PSUs to spearhead and open new vistas. Emphasis on clustering and regulatory framework (compliance costs) can lower costs and risks and encourage innovation and entrepreneurship.

Leverage quality, design, engineering-based competitive advantage

India has attracted MNCs that focus on design and engineering and Indian companies have met quality requirements of global OEMs. India must leverage these strengths rather than emulate only a low labor-cost based strategy as the space is crowded and unsustainable. The relative success of sectors (pharmaceuticals and automobiles) in scaling up their global share and failure to capture a larger market in labor-intensive sectors (textiles) suggest the same. India must nurture sectors such as automobiles and pharmaceuticals, textiles, food and agriculture, which have large untapped potential, and build new sectors (shipbuilding, capital goods and electronics) that can scale up due to the advantage of similar skills.

We identify a few leaders that can manufacture for global demand

(1) Bajaj Auto, (2) Bharat Forge, (3) Cadila, (4) Divi’s, (5) Cummins and (6) Crompton.

Industrials India

How to bell the CAD: Manufacturing exports. India’s manufacturing sector accounts for a small portion of its GDP, compared with other countries, with socio-economic consequences of inadequate jobs and rising import dependence. While the National Manufacturing Policy lists the right goals and intentions, fundamental improvements in labor, infrastructure, tax and encouragement of indigenized technology are needed. India must leverage engineering talent and reliable quality along with lower labor costs to boost its global share of targeted industries.

CAUTIOUS

MARCH 19, 2013

THEME

BSE-30: 19,293


Pipeline visibility in generics offers comfort in US growth

We estimate core US sales of US$738 mn for Lupin in FY2014 (12% yoy). Growth will be driven by generics – we estimate an addition of US$102 mn (20% yoy). The branded business is expected to decline 15% (to US$128 mn) due to generic Antara launch by Mylan. The generics business is likely to sustain growth momentum over the next few years – visible pipeline offers comfort in generic launches. Life-cycle management of Suprax may provide near-term support—Lupin has an acquisition driven growth strategy for US branded business. Generic Suprax is the key risk factor.

Niaspan may provide near-term upside

We expect generic launches to gain momentum in 2HFY14: Niaspan will be the key launch, expected in September 2013. We estimate US$30 mn in generic Niaspan sales for Lupin in FY2014—there are nine filers but generic entry may be phased and may provide near-term upside.

Key litigations: Trizivir, Ranexa, Nuvigil, Zymar/Zymaxid

We highlight US patent lawsuits in which litigation outcome is expected over the next 12 months:

Zymar/Zymaxid (US$100 mn). We expect the district trial verdict: Trial was held in January 2013. We expect the generics to prevail and assume US$13 mn in sales for Lupin.

Nuvigil (US$200 mn). The district trial was held in July 2012 and the verdict is expected in the near term. With five filers, we expect the Nuvigil opportunity to be limited for Lupin.

Trizivir (US$100 mn). District trial is expected to be held in September 2013. We estimate 6% upside to FY2015E EPS from Trizivir in the event of a favorable ruling/launch.

Ranexa (US$370 mn). District trial date set for April 2013. In March 2013, the district court rejected Lupin’s summary judgment motion on invalidity.

Except Zymar/Zymaxid, we do not factor the launch of products under litigation. In the OC segment, the appeals verdict in Yaz will be of interest.

Lupin (LPC)

Pharmaceuticals

FY2014 promises to be an eventful year for US generics. We expect FY2014 to be eventful for Lupin with improved momentum in US launches and pending patent litigation outcomes. We expect Lupin’s US performance in FY2014 to be driven by (1) the launch of Niaspan, (2) ramp-up in the OC portfolio and (3) the launch of ophthalmic products. We do not factor sales from products under litigation (except Zymar) which provides favorable risk-reward, given multiple litigation outcomes in FY2014. We also factor the full impact of generic Antara launch. Higher visibility in the US pipeline and stable branded markets will drive stock returns. We maintain our ADD rating with TP of Rs655 (Rs645 earlier) – 22X FY2014E EPS (no change to estimates).

LupinStock data Forecasts/Valuations 2013 2014E 2015E

52-week range (Rs) (high,low) EPS (Rs) 27.1 29.8 34.2Market Cap. (Rs bn) 274.5 EPS growth (%) 39.0 10.1 14.7

Shareholding pattern (%) P/E (X) 22.7 20.6 18.0Promoters 46.8 Sales (Rs bn) 93.1 103.3 118.6FIIs 27.8 Net profits (Rs bn) 12.1 13.3 15.3MFs 5.2 EBITDA (Rs bn) 21.2 21.9 24.8

Price performance (%) 1M 3M 12M EV/EBITDA (X) 13.4 12.8 11.1Absolute 3.6 0.7 22.0 ROE (%) 26.9 24.2 22.9Rel. to BSE-30 4.8 1.1 10.4 Div. Yield (%) 0.8 0.8 1.0

Company data and valuation summary

632-496

ADD

MARCH 19, 2013

UPDATE

Coverage view: Attractive

Price (Rs): 614

Target price (Rs): 655

BSE-30: 19,293

QUICK NUMBERS

• Core US sales of US$738 mn in FY2014E

• Addition of US$102 mn in generics partly offset by US$22 mn decline in brands

• Maintain ADD with TP of Rs655 (from Rs645 due to roll forward).

Lupin Pharmaceuticals

KOTAK INSTITUTIONAL EQUITIES RESEARCH 5

US launches expected to gain momentum in 2HFY14

We expect a busy US launch calendar for Lupin in FY2014. It is expected to gain momentum in 2HFY14, driven by (1) date-certain settlements: Niaspan, Cymbalta, Trilipix and Renagel; (2) ramp-up in the oral contraceptive portfolio and (3) launch of ophthalmic products: Zymar/Zymaxid.

We estimate ~US$80 mn in addition to core US sales in FY2014—this excludes US$35 mn in Ziprasidone sales in FY2013 during the180-day period. We factor US$100 mn in addition to the US generics business, partly offset by a US$22 mn decline in US brands (generic entry of Antara). We present segment-wise US sales in Exhibit 1.

Our estimate is based on the following assumptions:

Marginal increase in the base business. Higher base effect given FY2013E benefited from a strong flu season.

Limited competition portfolio, driven mainly by the launch of Niaspan. We expect US$60 mn in generic Tricor sales in FY2014 (versus US$50 mn in FY2013E). We assume incremental competition in Tricor (launch of Mylan, Wockhardt) over the next 12 months. There may be upside to our Tricor estimates depending on the entry of competition.

Ramp-up in the OC portfolio. US$68 mn in sales in FY2014E and peak sales of US$100 mn in FY2015E.

Launch of ophthalmic products. The launch of Zymar/Zymaxid is expected to contribute US$13 mn in FY2014E.

Lower Antara sales. We expect Antara sales to decline to US$10 mn in FY2014 (from US$39mn in FY2013E) due to the launch of generic by Mylan.

We do not build in estimates for the potential launch of filings under litigation, Ranexa, Trizivir and Nuvigil. We expect the outcome of litigation in these products in FY2014.

Our estimates do not include the authorized generic launch of Asacol (mesalamine). Generic Asacol approval timeline is uncertain (given that the draft bioequivalence was issued by the FDA in September 2012) with patent expiry in July 2013. Even in the event of a generic launch, we expect the AG launch to be a low-margin opportunity. Lupin received AG rights for Asacol as part of the settlement agreement with Warner Chilcott for Femcon Fe/Loestrin 24 Fe.

Competitive dynamics in Tricor and Niaspan are key assumptions. The FDA warning letter issue for Impax is likely to be favorable for Lupin in certain products (Tricor, Trilipix, Renvela and Renagel) with full impact in FY2015E.

While we do not explicitly provide estimates, we account for the launch of limited-competition modified release products. We believe Lupin may be able to launch a few of these opportunities in FY2014 (Ambien CR, Invega, Glucotrol XL).

Pharmaceuticals Lupin

6 KOTAK INSTITUTIONAL EQUITIES RESEARCH

Exhibit 1: Lupin: US sales, summary 2010-15E, March fiscal year ends, (Rs mn)

2010 2011 2012 2013E 2014E 2015EBase business 198 256 294 336 346 390Limited competition 24 60 38 147 184 196 - Tricor 50 60 35 - Niaspan 30 15Oral contraceptives — — 6 26 68 100Opthalmics — — — — 13 26First to file — — 23 35 — —US generics 222 316 361 544 611 712US generics - excluding FTF 222 316 338 509 611 686Suprax 60 74 83 91 100 110Aerochamber 36 36 22 20 18 15Antara 31 23 38 39 10 —US brands 127 133 143 150 128 125Total US sales 349 449 504 694 739 837Total US sales - excluding FTF 349 449 481 659 739 837Percentage of US salesBase business 57 57 58 48 47 47Limited competition 7 13 8 21 25 23Oral contraceptives — — 1 4 9 12Opthalmics — — — — 2 3First to file — — 5 5 — —US generics - total 64 70 72 78 83 85Suprax 17 16 16 13 14 13Aerochamber 10 8 4 3 2 2Antara 9 5 8 6 1 —US brands - total 36 30 28 22 17 15yoy growth (%)Base business 30 15 14 3 13Limited competition 150 (37) 287 25 6Oral contraceptives 332 161 48Opthalmics 100US generics - total 43 14 51 12 17Suprax 23 12 10 10 10Aerochamber — (39) (9) (10) (17)Antara (26) 65 3 (74)US brands - total 5 8 5 (15) (2)Total US sales 29 12 38 6 13Total US sales - excluding FTF 29 7 37 12 13

Source: Company, Kotak Institutional Equities estimates

Exhibit 2: Lupin: US sales, 2010-15E, March fiscal year ends, (Rs mn)

(US$ mn)

349

449504

697 738

835

349

449 481

662738

835

0

200

400

600

800

1,000

2010

2011

2012

2013

E

2014

E

2015

E

US

sale

s




Exhibit 3: Lupin: US litigations for oral solids (excluding OC products)

Molecule Name Brand Name Innovator

US brand size

(US$ mn) FTF statusTentative

launch Tentative approval

Final approval

Litigation status Competition Comments

Valsartan; HCTZ Diovan HCTZ Novartis 1,000 No 20-Mar-13 No No Settled Expect multiple players.Mylan is the sole FTF, launched on September 21, 2012. We expect other generics on day 181.

Niacin Niaspan Abbott 920 No Sep-13 No No SettledTeva, Sun, Sandoz, Cadila, Amneal, Mylan, Kremers Urban and Watson are other known filers.

Teva is the FTF and has settled for a launch on September 20, 2013. Lupin has also settled but the terms have not been disclosed. Teva (Barr) may not have the 180-day exclusivity, given the settlement agreement also includes Niaspan co-promotion revenues for Barr.

Duloxetine Cymbalta Eli Lilly 2,900Joint (with 7 more filers)

Dec-13 8-Dec-11 No SettledWe expect competition to be intense during the 180-day period and beyond.

District court ruled in favor of the innovator and upheld the '269 patent, which expires in June 2013 (December 2013 incl the pediatric excl).

Repaglinide; metformin

Prandimet Novo Nordisk 70 No FY2014 12-Mar-12 No Appeals

Actavis and Sandoz are early filers: May have lost exclusivity given no tentative approval within 30 months. Lupin is the only other known filer.

The '358 patent (expiry 2018) has been invalidated by the district court in the Prandin litigation. Novo has appealed the decision.

Choline fenofibrate

Trilipix Abbott 250 No Jan-14 No No SettledImpax, Actavis, Sandoz, Mylan, Anchen are other filers.

Impax settled Trilipix for launch on July 15, 2013 (under certain circumstances) or January 1, 2014. Impax has lost exclusivty, hence other generics may also enter at the same time. Except Sandoz the other generics have settled.

Sevelamer HCl Renagel Sanofi 200 No Mar-14 No No SettledSandoz, Impax and Endo are other known filers. We expect other generics to enter in September 2014, after patent expiry.

Lupin has not received the tentative approval within 30 months.

Sevelamer Carbonate

Renvela Sanofi 450Sole (on Susp); None on Tabs

Mar-14 (on suspension) / Sep-14 (tablet)

No No Settled

Impax is the FTF on tablets. Watson has filed for suspension; Watson, Endo and Sandoz have filed for tablets. We expect other generics to enter in September 2014 after patent expiry.

Impax/Lupin have not received the tentative approval within 30 months. Suspension market may be US$50 mn.

Eszopiclone Lunesta Sunovion 750Joint (with 11 more filers)

May-14 19-Mar-10 No SettledWe expect competition to be intense during the 180-day period and beyond.

Esomeprazole magnesium

Nexium AstraZeneca 2,700 No Nov-14 No No Settled

Ranbaxy is the FTF and has settled for a launch on May 27, 2014. Other filers such as DRL and Teva have settled for a launch in November 2014. Sandoz/Lupin have settled but terms have not been disclosed. Hetero, Torrent, Mylan have also filed.

Memantine Namenda Forest Labs 1,030 No 11-Jan-15 19-Jan-10 No Closed We expect competition to be intense. All the generics have settled the case.

CiprofloxacinCipro (Suspension)

Bayer NA Sole Jan-15 No No SettledOther players are likely to have filed a PIII and may enter after patent expiry, in June 2015.

Lupin settlement terms are unknown: May be six months ahead of the '784 patent expiry (in June 2015). Lupin has not received the tentative approval within 30 months.

Colesevelam WelcholDaiichi Sankyo

350Sole (on

suspension); None on Tabs

Jun-15 No No Settled

Impax is the FTF on tablets: May have lost exclusivity. Impax, Watson and Glenmark have filed for suspension; Glenmark settled for suspension launch in April 2015. Watson and Lupin have filed for tablets.

Suspension sales: US$50 mn; rest comes from tablets. We expect more generics to enter after patent expiry in June 2015. Lupin has not received tentative approval within 30 months.

Lanthanum carbonate

Fosrenol Shire 100Joint (with 2 more filers)

FY2015 No No DistrictLupin/Natco, Teva and Mylan are joint FTFs. Alkem is the other known filer.

Teva and Mylan case settled. Lupin partnered Natco.

Metformin Glumetza Santarus 45 Sole Feb-16 27-Jan-12 No Settled Sun/Watson are other known filers. Lupin has settled for a launch in February 2016.Tenofovir disoproxil fumarate; emtricitabine

Truvada Gilead 1,600 No > Dec-17 No No District Teva is the FTF. Earliest launch in December 2017.

Tenofovir disoproxil fumarate

Viread Gilead 370 No 15-Jan-18 No No District Teva is the FTF.Teva has settled for a launch on December 15, 2017.

Pregabalin Lyrica Pfizer 1,500Joint (with 7 more filers)

Dec-18 Jun-11 3-Jul-12 AppealsWe expect competition to be intense during the 180-day period and beyond.

The district court has upheld the patent expiring in December 2018.

Doxycycline Oracea Galderma 100 No Dec-27 No No AppealsMylan is the FTF. Impax, Amneal and Sandoz are other filers.

532 patent has been held valid in Mylan's case; expires in December 2027.

Valsartan; HCTZ; amlodipine

Exforge HCTZ Novartis 50 No Not known No No Settled Expect multiple players.Marginal opportunity. Teva has received final approval but it is unclear whether it has launched.

Carvedilol Phosphate

Coreg CR GSK 250 No Not Known No No SettledSun Pharma (URL) is the FTF. Anchen is the only other known filer.

All generics have settled, terms unknown. No tentative approvals so far.

Calcium acetate PhosLo Fresenius 50 No Not Known No No SettledRoxane is FTF and has launched. Paddock has also launched. Amneal, Invagen, Nostrum and Cadila are other filers.

Ranolazine Ranexa XR Gilead 370 Sole Not Known No No District Other players may have a para-III filing.Patents expire in May 2019. District trial scheduled for April 2013.

Armodafinil Nuvigil Teva 200 No Not Known No No DistrictActavis and Mylan are FTFs. Watson, Sandoz and Apotex are other filers.

Mylan settled for launch in June 2016. District trial held in July 2012, we expect veridict in the near term.

Abacavir sulfate; Lamivudine; Zidovudine

Trizivir ViiV 100 Sole Not Known No No District No other known filers so far.The litigation in consolidated with Teva (filed for Epzicom). District trial due in September 2013.

Naproxen + Esomeprazole

Vimovo AstraZeneca 250 No Not Known No No DistrictDRL is the FTF. Anchen is the other known filer.

Darunavir Prezista J&J 400Joint (with

Mylan) - only on higher strengths

Not Known No No DistrictTeva and Hetero are other filers. We expect more filers.

Desvenlafaxine Succinate

Pristiq Pfizer 470Shared with 10

filers.Not Known No No District

We expect competition to be intense during the 180-day period and beyond.

We expect generics to file for alternative salt - patent covers only the succinate salt. Alembic launched a 505(b)(2), which is desvenlafaxine-based and hence non-infringing.

Diclofenac sodium Pennsaid Mallinckrodt 50 No Not Known No No District Apotex is the other filer and has settled.

Mesalamine Apriso Salix 50 Sole Not Known No No District No other known filers so far.

Quetiapine fumarate

Seroquel XR AstraZeneca 800 No Not Known No No District Multiple filers.437 patent (expires in 2017) has been upheld by the district court.

LansoprazolePrevacid Solutab

Takeda 400 No Not Known No No District Cadila and Mylan are other known filers.

Celecoxib Celebrex Pfizer 1,600 No Not Known No No District



Source: Company, Kotak Institutional Equities, Bloomberg

Exhibit 4: Lupin: Key US DMF filings

US brand sizeMolecule name Brand name Innovator (US$ mn) Tentative launch Comments

Rabeprazole 25-Oct-06 Aciphex Eisai 400Launch on patent expiry (on November 08, 2013)

Delayed release tablet. We expect multiple players.

Rifaximin 31-Mar-07 Xifaxan Salix 370 Patents extend until 2029. Tablet. No para-IV filer till date.

Glipizide 3-Jan-08 Glucotrol XL Pfizer 100The last patent ('454) expires on January 07, 2014.

Extended release tablet. Watson is the only generic in the market; launched in 2003 under a settlement with Alza/Pfizer.

Doxercalciferol 7-Apr-10 Hectorol Sanofi 100

The only patent in issue ('116) has been upheld by the district court; expires on February 11, 2014. Lupin may enter after Roxane exclusivity.

Soft gelatin capsule. Roxane (FTF) is a known filer and has received final approval.

Ezetimibe 7-Apr-10 Vytorin /Zetia Merck 770/1,300

Glenmark/Par is the sole FTF and settled for a launch in December 2016. In Mylan case for both Vytorin/Zetia, appeals have upheld the validity of the '721 patent (expires April 2017). We expect other generics to launch in April 2017 for Zetia and after Mylan.

Tablet. We expect multiple players.

Atazanavir sulfate 12-Apr-10 ReyatazBristol Myers

Squibb760

Teva (FTF) settled for a launch in July 2017. We expect other generics after the 180-day period.

Capsule.

Abacavir sulfate / Lamivudine

4/8/2010 / 10-Jan-2008

Epzicom ViiV 400

Teva is the only known filer and has challenged patents expiring in 2016 ('082, '191). ViiV did not sue generics on the patent expiring in 2018 ('540). Teva trial is scheduled for September 2013.

Tablet.

Paliperidone 31-Mar-11 Invega J&J 400No patent protection. Launch on FDA approval.

Extended release tablet. A revised draft guidance for bioequivalence was issued in March 2012.

Telmisartan31-Mar-11

Micardis/Micardis HCTZ/Twynsta

Boehringer Ingelheim

400 Patent expires in January 2014. Tablet. We expect multiple players.

Brimonidine tartrate

11-Oct-11Alphagan P / Combigan

Allergan 200 / 100

No generic entry until January 2022; patent upheld in Apotex case by appeals. Watson filed for Combigan, litigation is ongoing.

Opthalmic solution. Combigan is a combination of brimonidine and timolol maleate.

Fosamprenavir calcium

24-Feb-12 Lexiva ViiV 110

Ranbaxy is the FTF: Filed para-IV against the 2020 expiring patent ('953) but did not challenge the compound patent (expires in 2018). Mylan challenged both and a litigation has been initiated. Lupin may not have challenged the 2018 patent.

Tablet. We expect multiple players.

Raltegravir 2-Apr-12 Isentress Merck 820No litigation is seen; generics may not have challenged the compound patent, which expires in 2023.

Tablet/chewable tablet. Para-IV for Isentress was received in October 2011 (NCE-1).

Fesoterodine fumarate

31-Oct-12 Toviaz Pfizer 100Earliest launch in April 2016 (expiry of 30-month stay). Earliest patent expiry in May 2019.

NCE-1 date on October 2012. We expect multiple generic filers. The filing is not yet reflected on the para-IV update.

Rufinamide 9-Oct-12 Banzel Eisai naEarliest launch in May 2016 (expiry of 30-month stay). Patents expire between 2018 and 2022.

NCE-1 date on November 18, 2012. We expect multiple generic filers. The filing is not yet reflected on the para-IV update.

Date of DMF filing

Source: US FDA, Kotak Institutional Equities



Niaspan: Phased generic entry can provide near-term upside

Niaspan (generic name: Niacin; extended release tablet; Abbott) is used to control cholesterol and has annual US sales of US$920 mn. Teva (Barr) was the sole FTF on all strengths (500, 750 and 1,000 mg) and the product is due to be launched on September 20, 2013. Teva has also received FDA final approval for all strengths.

In April 2005, Barr entered into a settlement agreement with the innovator for Niaspan. As part of the settlement, Barr received co-promotion rights for Niaspan, Advicor (Niacin + Lovastatin) in the US (Barr received royalty on sales). In addition, Barr received upfront/quarterly payments for being an alternative supplier of Niaspan for the innovator. Finally, Barr will be allowed to launch the generic version of Niaspan on September 20, 2013 and will need to pay a part of the profits as royalty to the innovator.

Lupin was the second generic to file in January 2009 and has settled the patent litigation. However, the terms of the settlement have not been disclosed. It is unclear whether Teva will still hold 180-day exclusivity as part of the settlement agreement. It appears Teva may have relinquished FTF rights in return for the co-promotion/upfront payments.

We expect Lupin to launch generic Niaspan on September 20, 2013, assuming it gets FDA final approval. There are nine generic filers for the product, but we expect staggered generic entry. We expect 3-4 generics to launch in September 2013 assuming a 24-month approval timeline. In case of a launch in March 2014 (post Teva’s 180-day exclusivity), the upside for Lupin is likely to be limited, given additional generic competition.

We estimate US$30 mn in FY2014 generic Niaspan sales for Lupin: 75% price erosion, 30% share for six months. We expect the margin profile to be superior, given limited competition in FY2014. However, we expect additional competition in CY2014. We estimate FY2015 generic Niaspan sales to erode to US$15 mn with sharp price erosion (we expect the market to erode by over 90%). The entry of additional generic competition is a key risk to FY2014 Niaspan estimates for Lupin.

Exhibit 5: Generic competition for Niaspan

Generic filer Filing period Litigation statusTeva (Barr) Oct-01 Settled

Lupin Jan-09 Settled

Sun Jan-10 Settled

Sandoz May-10 District

Cadila Dec-11 District

Amneal Jan-12 Settled

Mylan Jan-12 District

Watson Feb-12 District

Kremers Urban Apr-12 District

Source: Bloomberg, Kotak Institutional Equities

Oral contraceptives: Ramp-up stays below expectations

Lupin sales in the US oral contraceptive (OC) portfolio have been less than expected, driven by stretched approval timelines, delayed launches (Yasmin) and litigation setbacks in large brands (Yaz, Ortho Tri-cyclen Lo). The number of competitors/filers has also turned out to be higher than initially expected.



There has been some action on the OC front in 2HFY13: Six approvals have been received. Lupin received nine approvals so far—the company launched eight OC products. Generic Yasmin launch is under evaluation, given the ongoing product liability lawsuit against the innovator. Lupin launched the AG for Femcon Fe (in October 2011).

We moderate our estimates for the US OC segment. We estimate sales of US$68 mn in FY2014 (from US$90 mn). We expect the launch of Seasonique and Yasmin in FY2014 and the full-year impact of recent approvals. Timely approvals are crucial and there could be upside to our estimate with the launch of larger opportunities (Ortho tri-Cyclen, Ortho Cyclen, Mircette). There is limited litigation-related news flow expected in the OC segment—appeals verdict on Yaz may be the key event (the district court has ruled in the innovators’ favor).

In our view, delayed launches reduce the opportunity for Lupin given that the company has been an early filer for most of the products. We believe Lupin holds a one-year advantage in filing over its competitors such as Mylan. Lupin filed for the complete portfolio of OC products. However, for key products the market does not seem to reflect a limited-competition opportunity.



Exhibit 6: Lupin’s US OC portfolio

Molecule Brand Innovator

US market size

(US$ mn)Litigation

statusApproval

status Launch detailsCompeititors (launched/final approval) Other known filers Comments

Norethindrone Nor-QD Watson 40 None YesLupin launched in September 2011.

Teva (October 2002), Glenmark (April 2010)

Ethinyl estradiol; norethindrone

Femcon FeWarner Chilcott

50 Settled NoLupin launched the AG version in October 2011 under the settlement.

Teva (launched: March 2011), Watson (launched: September 2011)

Mylan (filed: August 2010)

Patent expires in April 2019.

Ethinyl estradiol; levonorgestrel

Lo-seasonique Teva 28 Active YesLupin launched at-risk in December 2011 (shared FTF with Watson).

Watson (launched: December 2011)

Mylan (filed: January 2010)

Patent expires in June 2023. Watson/Mylan settled litigation.

Ethinyl estradiol; norgestimate

Ortho Tri-cyclen Lo

J&J 420 Appeals Yes

Received approval in July 2012; we expect Lupin launch 180-days after Teva's entry in December 2015.

Teva, WatsonSandoz, Mylan, Sun, Ranbaxy, Glenmark

The patent ('819) has been upheld by the district court. Lupin has appealed, we expect a settlement.


Seasonale Teva 70 Settled Yes Launched in Ocober 2012.Watson (launched: September 2006), Sandoz (launched: January 2011)

No more P-IV filers.Patent expires in June 2017. All generics have settled the litigation.


Nordette-28 Teva 60 None YesLupin launched in October 2012

Watson (December 1993), Sandoz (August 2010), Glenmark (February 2012), Mylan (December 2012)

Ethinyl estradiol; drospirenone

Yasmin Bayer 275 Closed Yes

Lupin received approval in December 2012, yet to be launched. The company is awaiting ruling in the product-liability case for Bayer; still evaluating the launch.

Teva (launched: July 2008), Watson (launched: September 2010), Sandoz (launched: June 2011)

In April 2012, the appeals court ruled that generics were non-infringing on the '652 patent. More competition is expected in October 2013 on expiry of the '652 patent.


Alesse Wyeth 100 None YesLupin launched in January 2013

Teva (April 2001), Watson (November 2004), Vintage (May 2011), Novast (March 2012)

Levonorgestrel Plan B Teva 70 None YesLupin launched in January 2013

Watson (June 2009), Perrigo (December 2010)

The market has moved OTC (for girls over 16 years). Limited opportunity for Lupin.

Ethinyl estradiol; desogestrel

Ortho-cept J&J 65 None YesLupin launched in March 2013

Teva (August 1999), Watson (July 2005), Vintage (February 2011)

Other known filings:


Seasonique Teva 60 Appeals No

Lupin is expected to launch at-risk on approval (FY2014), filed in December 2009. We expect few more filers to convert from PIII to PIV given that the patent has been invalidated.

Watson (launched: July 2011)Mylan (filed: January 2010)

969 patent expires in January 2024; was held invalid by the district court in June 2012.

Ethinyl estradiol; drospirenone

Yaz Bayer 500 Appeals NoLupin launch expected on expiry of '564 patent (June 2014)

Teva (launched: June 2010), Sandoz (launched: May 2011), Watson (launched: January 2012).

Sun (filed: November 2010), Mylan (filed: March 2011).

In March 2012, the district court upheld the '564 patent as valid.


Loestrin 24FeWarner Chilcott

300 Settled NoLupin has settled for a launch in July 2014 (after expiry of the '394 patent).

Watson is the FTF and has settled for a launch in January 2014.

We expect other players to have filed a PIII and to launch along with Lupin in July 2014.

Ethinyl estradiol; norethindrone; ferrous fumarate

Generess Fe Watson 10 District NoWe expect Lupin launch in July 2014 on expiry of the '394 patent.

Mylan is the only other known filer.

30-month stay expires in April 2014.


Lo Loestrin FeWarner Chilcott

100 District No

Lupin is the sole FTF; 30-month expires in January 2014 but may not be able to launch until expiry of the '394 patent (in July 2014).

Watson is the only other known filer.

Watson is a known filer.

Estradiol valerate; dienogest

Natazia Bayer NA District NoWatson is the only other known filer.

Source: Company, US FDA, Kotak Institutional Equities



Exhibit 7: Recent entrants in the US oral contraceptives market

Company Status Details

Amneal PharmsRecently received approval for first OC product.

Manufactured at Hauppauge, NY.

Glenmark10 approvals so far: Continues to file for key products.

Manufactured in Goa, India.

Lupin10 approvals so far: Has filed for 35 products.

Manufactured at Indore SEZ, India.

MylanRecently received approval for its first OC product; over 30 filings.

Partnered with Famy Care (India).

Novast Labs Manufactured in Nantong, China.

The products are marketed by Northstar Rx (a subsidiary of Mckesson).

Ranbaxy There have been selective filings. Partnered with Haupt Pharma, Germany (contract development/manufacturing).

Sandoz There have been selective filings. Manufactured in Spain by the Chemo group (contract manufacturer).

Sun Pharma There have been selective filings. Details unknown.

10 approvals so far: Continues to file for key products.

Source: Kotak Institutional Equities

Exhibit 8: Glenmark: US oral contraceptives portfolio

US generic market size FDA approval Generic name Brand (US$ mn)26-Apr-10 Norethindrone (Heather) Nor-QD (Watson) 40

22-Jul-10 Norethindrone acetate Aygestin (Teva) 25

23-Jul-10 Norethindrone Micronor (J&J) 18

23-Mar-11 Ethinyl estradiol + norethindrone (Briellyn) Ovcon 35 (Warner Chilcott) 30

20-Jun-11 Ethinyl estradiol + norgestimate Ortho Tri-Cyclen (J&J) 230

20-Jan-12 Ethinyl estradiol + norethindrone (Alyacen 1/35) Ortho-Novum 1/35-28 (J&J) 62

20-Jan-12 Ethinyl estradiol + norethindrone (Alyacen 7/7/7) Ortho-Novum 7/7/7-28 (J&J) 42

1-Mar-12 Ethinyl estradiol + levonorgestrel (Marlissa) Nordette (Teva) 50

3-Apr-12 Ethinyl estradiol + desogestrel (Viorele) Mircette (Teva) 98

5-Apr-12 Ethinyl estradiol + norgestimate Ortho Cyclen (J&J) 90


Exhibit 9: Novast Laboratories: US oral contraceptives portfolio

US generic market size FDA approval Generic name Brand (US$ mn)29-Dec-10 Ethinyl estradiol + levonorgestrel (Levonest) Triphasil-28 32

22-Dec-11 Ethinyl estradiol + norethindrone (Dasetta 1/35) Ortho-Novum 1/35-28 (J&J) 6222-Dec-11 Ethinyl estradiol + norethindrone (Dasetta 7/7/7) Ortho-Novum 7/7/7-28 (J&J) 42

22-Dec-11 Ethinyl estradiol + norethindrone (Philith) Ovcon 35 (Warner Chilcott) 3027-Mar-12 Ethinyl estradiol + norethindrone (Wera) Modicon 28 10

28-Mar-12 Ethinyl estradiol + levonorgestrel (Falmina) Alesse 7028-Mar-12 Ethinyl estradiol + norgestrel (Elinest) Lo-Ovral 28 (Wyeth) 65

23-May-12 Ethinyl estradiol + norgestimate (Mono-linyah) Ortho Cyclen (J&J) 9030-May-12 Ethinyl estradiol + norgestimate (Tri-linyah) Ortho Tri-Cyclen (J&J) 230




Generic Zymar/Zymaxid likely to be first ophthalmic launch for Lupin

Lupin initiated filings in the US ophthalmic segment from CY2011 and has eight ANDAs pending approval. We expect the launch of the first ophthalmic product for Lupin in FY2014—the launch of generic Zymar and Zymaxid.

Zymar (molecule: Gatifloxacin; 0.3%; Allergan) is an ophthalmic solution to treat anti-bacterial infections. Apotex was the sole FTF on Zymar and received final approval in August 2011. The district court has ruled in favor of Apotex and the appeals verdict is awaited.

Lupin is the FTF for Zymaxid and the earliest launch can be in May 2013 (expiry of three-year exclusivity). Lupin is yet to receive tentative approval for Zymaxid.

In the Lupin litigation for Zymar/Zymaxid (consolidated), the bench trial was held in the district court in January 2013. We expect Lupin to launch generic Zymar following the 180-day exclusivity for Apotex.

Zymaxid was approved in May 2010 and Allergan discontinued sales of Zymar in February 2011. The US market size is US$100 mn. We estimate US$13 mn in FY2014 sales from Zymar/Zymaxid for Lupin: We assume a litigation win for generics and potential launch in mid-CY2013.

Exhibit 10: Zymar/Zymaxid: Product details

US brand size Molecule Brand Strength (US$ mn) Approval date Para-IV submission Patent no ExpiryGatifloxacin Zymar 0.30% 0 28-Mar-03 19-Jul-07 5880283*PED 5-Jun-16

6333045*PED 20-Feb-20

Zymaxid 0.50% 100 18-May-10 7-Dec-10 5880283*PED 5-Jun-16

6333045*PED 20-Feb-20

Source: US FDA, US PTO, Kotak Institutional Equities

Exhibit 11: Zymar/Zymaxid: Litigation details

Brand Generic filers Filing date Current statusZymar Apotex Oct-07 District court has ruled in Apotex's favor; awaiting appeals verdict.

Zymaxid Apotex Jan-12 District court trial scheduled for January 2014.

Zymar/Zymaxid Lupin Apr-11/Feb-11

Zymar/Zymaxid Hi-Tech Pharmacal Sep-11/Aug-11

Zymar/Zymaxid litigations in Lupin/Hi-Tech case have been consolidated. The district court held a bench trial in January 2013; verdict awaited.




Exhibit 12: Zymar: Litigation timeline

Date Litigation - event detailsNov-07 Allergan initiates patent litigation for Zymar versus Apotex on the '045 patent.

Jan-10 Bench trial held in district court of Delaware.

Jun-10 District court rules claims 1-3 and 6-9 of '045 patent are invalid due to obviousness.

Allergan files motion for new trial on claim 7 of '045 patent.

Oct-11Allergan receives re-examination certificate for the '045 patent from the USPTO; cancels claims 1-3 and 8-11 and issues amended claim 6 and new claims 12-16.Allergan does not request re-examination of claims 4, 5 and 7.

Dec-11 US district court invalidates claim 7 of the '045 patent. Allergan appeals the verdict.

Sep-12 District court dismisses Allergan litigation based on re-examined patent claims. Allergan appeals verdict.

Nov-12 Appeals court upholds the district court verdict issued in December 2011; holds '045 patent invalid.

Jan-13Bench trial in district court of Delaware in the Lupin/Hi-Tech Pharmacal filing for Zymar/Zymaxid litigation (has been consolidated).


Exhibit 13: Lupin: US ophthalmic filings

Molecule Brand InnovatorUS market

size StrengthTentative

launch Competition CommentsKetorolac tromethamine

Acular LS Allergan NA 0.40% FY2014Akorn, Alcon, Apotex, Sandoz

Marginal opportunity.

Gatifloxacin Zymar Allergan 0 0.30% FY14Apotex, Hi-Tech Pharmacal

Apotex is FTF. The district court has ruled in favor of generics and the decision has been appealed. Apotex has not launched.

Gatifloxacin Zymaxid Allergan 100 0.50% FY14Apotex, Hi-Tech Pharmacal

Lupin is the sole FTF. Patents are the same as Zymar. District trial held in January 2013.

Bimatroprost Lumigan Allergan 300 0.01% >Aug'14Hi-Tech Pharmacal, Sandoz, Watson

US district court upholds '819 and '649 patents (expire in August 2014). Lupin has been sued on the '504 patent, which expires in June 2027. Bench trial in Lupin case has been set for July 2013. Earliest launch in August 2014.

Moxifloxacin Vigamox Alcon 280 0.50% > Mar'20Apotex, Teva, Watson, Lupin

The '830 patent (expires in March 2020) upheld by the district court. Currently in appeal.

Moxifloxacin Moxeza Alcon 50 0.50% > Mar'20 LupinThe '830 patent (expires in March 2020) upheld by the district court. Currently in appeal.

Source: US FDA, Bloomberg, Kotak Institutional Equities

Trizivir: District trial scheduled for September 2013

Lupin was the first filer for Trizivir and was sued on the ‘191 patent (expires on March 28, 2016). There have been no other known generic filers for Trizivir. Teva was the FTF on Epzicom (filed in September 2007) and did not challenge the 2016-expiring patents. In June 2011, Teva converted the filing to para-IV on the 2016-expiring patents with a 30-month stay, expiring in December 2013.

Trizivir and Epzicom are combination products of molecules belonging to a class of anti-HIV drugs called NRTI and covered by common patents. The patents on the individual molecules have already expired with only the combination patent (‘191) still in force.

The Epzicom and Trizivir cases have been consolidated. Lupin has not received tentative approval with 30 months expiring in November 2013. The generics have not been sued on the other patents (‘082 and ‘540).



Exhibit 14: Trizivir/Epzicom: Product details

US brand size Molecule Brand (US$ mn) Approval date Para-IV submission Patent no Expiry Coverage

Trizivir 100 14-Nov-00 22-Mar-11 6417191 28-Mar-16 Combination

5905082*PED 18-Nov-16 Bipyramidal crystalline form

6294540*PED 14-Nov-18 Hemisulfate salt

Epzicom 386 2-Aug-04 27-Sep-07 6417191 28-Mar-16 Combination

5905082*PED 18-Nov-16 Bipyramidal crystalline form

6294540*PED 14-Nov-18 Hemisulfate salt

Abacavir sulfate; lamivudine; zidovudine

Abacavir sulfate; lamivudine

Source: US FDA, USPTO, Kotak Institutional Equities

We do not estimate generic Trizivir sales for Lupin. We expect the patent to be upheld and a generic launch in March 2016 (on ‘191 patent expiry).

The district court trial in the ‘191 patent litigation is scheduled for September 2013. A positive ruling for the generic may provide a limited-competition opportunity for Lupin (assuming FDA approval and at-risk-launch). We would expect a few more generic filers—Mylan has tentative approval under the PEPFAR program.

We estimate peak EPS upside of 6% (net profit of US$16 mn) from the generic Trizivir launch in FY2015. We assume sole generic, 50% erosion, 50% share, 95% EBITDA margin and 30% tax rate.

Claim construction ruling in favor of innovator

The Delaware district court held a joint-claim construction in the Teva/Lupin case. In November 2012, the Delaware district court provided the claim-construction ruling for the ‘191 patent.

The key terms construed were as follows.

Synergism. Synergism is not mentioned in the patent but several claims are related to the synergistic benefit from the combination. Generics claim that synergism is an essential part of the invention and that non-synergistic drug combinations have been disclaimed by the inventor. GSK argues that the synergy was an unexpected result, which was used to overcome obviousness rejections during the patent prosecution.

The ‘191 patent was rejected several times for obviousness given that it was a combination of known molecules that were anyway being used to suppress ant-viral activity. GSK had to repeatedly emphasize the unexpected synergistic action of the combination to overcome the obviousness challenge by the patent examiner – the combination of similar drugs may at best be expected to be additive but may not be synergistic and hence not obvious to one skilled in the art to combine the three drugs to achieve a synergistic result.

Generics argue that the prosecution history provides evidence that GSK did not claim the non-synergistic combinations. The court believes there was never an anticipation rejection for the patent due to previous patents (prior art) but was due to obviousness. Hence there was no need for GSK to start with a narrow claim and then widen the scope at a later point during the prosecution. The court concluded that the innovator had not disclaimed non-synergistic combinations.

A single combined formulation. The dispute in this term is whether “combined” requires the drug compounds to be mixed together within the same mixture (as claimed by Lupin) or to be just part of the same formulation (as claimed by GSK). The court ruled in favor of the innovator.

Following the claim construction ruling, Teva stipulated that its ANDA would be infringing certain claims of the ‘191 patent. The Teva challenge is now only on grounds of patent validity.



Exhibit 15: Patent details for 6417191

Title Synergistic combinations of zidovudine, abacavir and lamivudine

DetailsThe present invention relates to therapeutic combinations of zidovudine, abacavir and lamivudine, which have anti-HIV activity. The present invention is also concerned with pharmaceutical compositions containing the said combinations and their use in the treatment of HIV infections including infections with HIV mutants bearing resistance to nucleoside and/or non-nucleoside inhibitors.

Inventor GlaxoSmithKline

Issued 9-Jul-02

Expiry 28-Mar-16

Source: USPTO, Kotak Institutional Equities

Ranexa XR

Ranexa (molecule: Ranolazine; Gilead/Roche) is an extended release tablet used to treat angina with US sales of US$370 mn. Lupin is the only known generic filer and it filed in May 2010. Lupin has not received tentative approval within the 30-month period. Lupin has been sued on the following patents, all of which expire in May 2019: ‘607, ‘496, ‘911, ‘057, ‘826, ‘328, ‘814, ‘724, ‘258, ‘062.

The claim-construction hearing was held in January 2012 with ruling provided by the court in March 2012.

In March 2013, the district court of New Jersey rejected the summary judgment motion of invalidity from Lupin.

The district court trial in the patent litigation is scheduled for April 22, 2013.

We do not build generic Ranexa estimates for Lupin. We believe there may be other generic filers that may not have challenged the patents.

Nuvigil: Awaiting district court ruling; limited upside for Lupin

Nuvigil (molecule: Armodafinil from Teva) is a US$200 mn brand, used to treat sleep disorders. Mylan and Watson are the sole FTFs—Mylan on 50,150 and 250 mg tablets and Watson on 100 and 200 mg tablets. There are three other generic filers: Lupin, Sandoz and Apotex.

In July 2011, the Delaware district court issued claim construction ruling on the ‘570 patent (expires in June 2024).

In March 2012, Apotex settled the patent litigation.

In April 2012, Mylan settled for a launch in June 2016.

In July 2012, the trial in the Watson case was held in the district court.

Even in the event of a positive ruling for generics, generic Nuvigil may not be a large opportunity for Lupin.

Exhibit 16: Nuvigil: Product details

US brand size Molecule Brand (US$ mn) Approval date Patent no ExpiryArmodafinil Nuvigil 200 15-Jun-07 24-Jul-09 RE37516*PED 6-Apr-15

7297346*PED 29-May-24

7132570*PED 18-Jun-24

Para-IV submission

Source: US FDA, US PTO, Kotak Institutional Equities



Exhibit 17: ANDA filings summary, March fiscal year-ends, 2005-3QFY13

>2005 2005 2006 2007 2008 2009 2010 2011 2012 1QFY13 2QFY13 3QFY13No of ANDAs filed during the period 5 14 17 15 11 28 37 21 25 3 2 8ANDA filings 19 36 51 62 90 127 148 173 176 178 168ANDA approvals so far 10 18 27 34 40 48 64 65 65 68Pending ANDA approvals so far 14 26 33 35 56 87 100 109 111 113 100 - of which para-IV filings 77 86 - of which FTF filings 12 20 22

Source: Company, Kotak Institutional Equities

Exhibit 18: Lupin: Sales summary, March fiscal year-ends, 2010-15E (Rs bn)

2010 2011 2012 2013E 2014E 2015EFormulations 39.9 47.9 59.7 83.6 93.8 109.1

Domestic 13.4 15.5 19.1 22.4 26.4 31.1US 16.5 20.2 23.9 37.6 39.9 45.9Japan 5.3 6.2 8.6 13.4 15.4 17.7South Africa 1.3 1.8 2.6 3.2 3.8 4.5EU 1.4 1.8 2.0 2.2 2.4 2.6Others 1.9 2.3 3.6 5.0 6.0 7.2

API 7.8 8.6 8.5 9.5 9.5 9.5Total 47.7 56.5 68.2 93.1 103.3 118.6yoy growth (%)Formulations 27.1 20.0 24.7 40.0 12.1 16.3

Domestic 17.8 15.3 22.9 17.3 18.0 18.0US 31.3 22.5 18.4 57.0 6.1 15.2Japan 20.7 16.3 38.6 55.2 15.0 15.0South Africa 44.2 38.0 39.6 23.3 20.0 20.0EU 30.5 29.6 9.2 9.0 10.0 10.0Others 87.9 21.1 55.4 39.2 20.0 20.0

API 3.1 10.5 -1.1 11.8 0.0 0.0Total 22.5 18.4 20.8 36.5 10.9 14.8


Exhibit 19: Lupin: Financial summary, March fiscal year-ends, 2011-15E (Rs mn)

2011 2012 2013E 2014E 2015ENet sales 56,126 68,186 93,111 103,270 118,595yoy growth, % 18.4 21.5 36.6 10.9 14.8Sales from exclusivity launches 0 1,104 2,060 0 0Core sales 56,126 67,082 91,051 103,270 118,595yoy growth 18.4 19.5 35.7 13.4 14.8EBITDA 10,704 12,905 21,161 21,925 24,843yoy growth, % 13.3 20.6 64.0 3.6 13.3margin, % 19.1 18.9 22.7 21.2 20.9EBITDA - exclusivity launches 0 1,049 1,836 0 0Base EBITDA 10,704 11,857 19,325 21,925 24,843yoy growth, % 13.3 10.8 63.0 13.5 13.3margin, % 19.1 17.7 21.2 21.2 20.9Adj Net Profit 7,547 6,822 10,818 13,317 15,274yoy growth, % 13.4 -9.6 58.6 23.1 14.7Adj EPS 16.9 15.3 24.2 29.8 34.2yoy growth, % 13.0 -9.7 58.5 23.1 14.7




Exhibit 20: Lupin: Profit and loss statement, March fiscal year-ends, 2009-14E (Rs mn)

2009 2010 2011 2012 2013E 2014E 2015ENet sales 37,759 47,405 56,126 68,186 93,111 103,270 118,595Materials (15,697) (19,445) (21,977) (25,513) (34,849) (37,798) (42,694)

Employee cost (4,570) (5,872) (7,677) (9,695) (12,354) (14,578) (17,202)

R&D (2,318) (3,650) (4,660) (5,228) (6,899) (7,306) (8,083)

Others (7,638) (8,990) (11,108) (14,844) (17,848) (21,664) (25,773)

Total expenditure (30,224) (37,956) (45,422) (55,281) (71,950) (81,345) (93,751)EBITDA 7,535 9,449 10,704 12,905 21,161 21,925 24,843Depreciation and amortisation (880) (1,239) (1,712) (2,275) (2,752) (3,052) (3,352)

EBIT 6,655 8,210 8,992 10,630 18,409 18,873 21,492Net finance cost (456) (336) (261) (315) (358) (200) (100)

Other income 162 142 72 144 644 100 100

Non-recurring income (301) 342 807 1,524 — — —

Pre-tax profits 6,060 8,358 9,611 11,983 18,695 18,773 21,492Current tax (983) (1,360) (1,169) (3,086) (6,352) (5,256) (6,018)

Reported net profit 5,077 6,997 8,441 8,897 12,344 13,517 15,474Minority Interests (62) (180) (168) (199) (247) (200) (200)

Reported net profit after minority interests 5,015 6,817 8,273 8,699 12,097 13,317 15,274Adjusted net profit 5,015 6,654 7,547 6,822 10,818 13,317 15,274Adjusted EPS 11.3 15.0 16.9 15.3 24.2 29.8 34.2


Exhibit 21: Lupin: Balance sheet, cash model, March fiscal year-ends, 2009-15E (Rs mn)

2009 2010 2011 2012 2013E 2014E 2015EBalance sheetTotal equity 14,248 25,678 32,811 40,129 49,807 60,460 72,679Total debt 12,233 11,399 11,624 16,400 13,610 10,352 5,299Current liabilities 12,162 11,893 14,518 20,178 22,275 24,686 26,904Minority Interests 143 255 515 723 723 723 723Deferred tax liabilities 1,164 1,435 1,411 1,442 1,442 1,442 1,442Total equity and liabilities 39,950 50,659 60,879 78,872 87,857 97,664 107,048Cash and cash equivalents 778 2,015 4,201 4,025 4,025 4,025 4,025Current assets 21,531 25,739 30,766 42,886 49,122 56,481 63,716Net fixed assets 15,186 19,062 20,568 27,497 30,245 32,693 34,842Capital -WIP 2,240 3,579 5,312 4,437 4,437 4,437 4,437Investments 216 264 32 28 28 28 28Deferred tax assetTotal assets 39,950 50,659 60,879 78,872 87,857 97,664 107,048Free cash flow Operating cash flow, excl. working capital 6,434 8,130 9,575 11,407 15,453 16,768 18,926Working capital (1,739) (1,366) (1,596) (5,816) (4,139) (4,947) (5,018)Capital expenditure (3,399) (6,709) (4,287) (5,099) (5,500) (5,500) (5,500)Acquisitions (1,566) 0 (80) (2,289) 0 0 0Free cash flow (270) 56 3,613 (1,797) 5,814 6,321 8,408



Near-term revenue growth challenge to be high on management priority list

The most pressing issue for Hexaware is regaining lost growth momentum. After growing revenues at an impressive 6.7% CQGR from Mar 2010 to Sep 2012, growth has slowed down considerably with 4QCY12 seeing qoq revenue decline of 0.4%. The impact of project restructuring at its top client will continue to have an impact in 1QCY13 as well. Management’s guidance of ‘at least 10%’ revenue growth in CY2013E could be challenging. Growth in the past couple of years was led largely by strong deal wins and improved account mining at some of the top existing accounts. Hexaware needs to win large deals to even grow in line with its mid-cap peers, challenging in our view in a hypercompetitive market.

Competition and high account mortality beyond Top-20 could hurt Hexaware

Hexaware’s growth phase for the past two years was aided by a more rational competitive environment and in many cases uncontested revenues from the Top-10. However, slowdown in outsourcing is driving large companies to chase even small-sized deals which were considered outside the sweet spot for many. As a result, competition has increased and had a direct impact on deal wins for Hexaware, and could continue to hurt its revenue growth prospects if demand environments stay subdued.

Having seen reasonable success in mining large accounts for incremental revenues, Hexaware now needs to extend the same to accounts beyond its Top-20. High account mortality rate among its non-Top-20 clients and low scalability of some of the new accounts acquired in CY2011 and early CY2012 are concerns for Hexaware.

Revenue growth versus profitability: Challenges on both fronts

While revenue growth will be management’s priority in the near term, it needs to do so profitably. Margins had risen to unsustainable levels due to (1) flow-through benefits of Rupee depreciation and (2) under-investment in S&M in CY2012. Correction in 4QCY12 has brought margins to manageable levels and could take longer to recover given the investment in strengthening its sales and account management teams. We stay cautious on Hexaware with a REDUCE rating and an unchanged target price of Rs90/share.

Hexaware Technologies (HEXW)

Technology

Growth pangs. After two-and-a-half years of excellent performance, Hexaware has lost momentum on growth and is dealing with the typical challenge of mid-sized companies, i.e. striking a right balance between growth and profitability. Building momentum, investing in domain and reducing mortality rate of clients outside Top-20 are the top priorities for the company. The company may achieve its next quarter guidance but will struggle to keep pace with the industry in CY2013E. We maintain our REDUCE rating.

Hexaware TechnologiesStock data Forecasts/Valuations 2013 2014E 2015E

52-week range (Rs) (high,low) EPS (Rs) 11.2 9.9 10.5Market Cap. (Rs bn) 26.5 EPS growth (%) 22.8 (11.1) 5.5

Shareholding pattern (%) P/E (X) 8.1 9.1 8.6Promoters 28.1 Sales (Rs bn) 19.5 21.3 23.5FIIs 46.8 Net profits (Rs bn) 3.3 2.9 3.1MFs 4.9 EBITDA (Rs bn) 4.1 3.9 4.2

Price performance (%) 1M 3M 12M EV/EBITDA (X) 5.5 5.8 5.3Absolute 5.6 0.6 (22.9) ROE (%) 29.5 23.0 22.1Rel. to BSE-30 6.7 1.0 (30.2) Div. Yield (%) 6.0 5.5 5.8

Company data and valuation summary

142-73

REDUCE

MARCH 19, 2013

UPDATE

Coverage view: Cautious

Price (Rs): 90

Target price (Rs): 90

BSE-30: 19,293

Technology Hexaware Technologies


Exhibit 1: Consolidated financials for Hexaware, December year-ends, 2010-14E (Rs mn)

2010 2011 2012 2013E 2014EProfit model Total income 10,546 14,505 19,482 21,344 23,455

EBITDA 938 2,646 4,074 3,941 4,205 Depreciation and ammortisation (242) (248) (324) (379) (441) Other income 249 677 290 201 187

Pretax profits 945 3,076 4,041 3,765 3,952 Tax (92) (407) (764) (852) (880)

Profit after tax 853 2,669 3,277 2,912 3,072 Diluted recurring EPS (Rs/share) 3.0 9.1 11.2 9.9 10.5 Balance sheetTotal equity 9,655 10,161 12,039 13,247 14,522

Deferred taxation liability (169) (162) (73) (73) (73) Current liabilities 2,785 4,331 3,614 3,530 3,688

Total liabilities and equity 12,382 14,330 15,580 16,705 18,137 Cash 4,356 4,209 4,075 3,660 4,003

Other current assets 3,551 4,939 5,909 6,716 7,245 Tangible fixed assets 4,078 4,785 5,199 5,932 6,492

Total assets 12,382 14,330 15,580 16,705 18,137 Free cash flowOperating cash flow, excl. WC 1,084 1,617 3,925 3,158 3,388 Working capital changes (836) 159 (1,687) (890) (371)

Capital expenditure (340) (884) (710) (1,112) (1,001)

Free cash flow (92) 892 1,528 1,156 2,016 Ratios (%)EBITDA margin 8.9 18.2 20.9 18.5 17.9

ROE 9.4 26.9 29.5 23.0 22.1 ROCE 7.6 24.1 33.8 28.2 27.1



Still working out the modalities, but full price-pooling does not appear to be forthcoming

Full price-pooling, wherein the incremental cost of imports is borne by all power utilities (old and new), does not seem to be forthcoming, thereby substantially diluting the benefits of the process. Industry sources are talking about supplying imported coal at a pre-determined price to actual users of coal, while distributing the deficit (between actual price and supplied price) among the others (old alone or old+new).

In our view, price pooling restricted to new capacities will result in an increase in blended costs of coal by Rs500/ton (Rs0.35/kWh), while distributing the burden over the entire base would yield a more nominal Rs130/ton increase in coal prices (Rs0.09/kWh).

Regulators do not have favorable views on pooling; tariff hikes may meet with stiff resistance

Ten out of 15 state distribution utilities are supposed to have opposed price pooling of coal on the pretext that their finances do not allow them to bear any cost incidence meant to subsidize generation companies. Regulators are of the opinion that it is unfair to pass the burden of higher imports to the consumer due to the inability of Coal India to honor LoAs and generation companies to source alternative fuel.

Physical pooling may be more plausible; logistics may improve

The proposal further seeks to optimize the logistics chain for coal supplies, so that linkage coal, supplied to coastal plants (old and new), is now substituted with imported coal and vice-versa for inland plants. It is estimated that the correspondent savings in logistics costs would be more than Rs10 bn.

We highlight that the actual implementation would be dependent on technical viability and skewed distribution of capacities. According to CEA, up to 20% blending is viable for power plants with some old plants unlikely to run on imported coal at all.

Utilities with no pass-through to benefit from full-price pooling

Coal price pooling (and probably full-price pooling) would be beneficial to private power utilities with no pass-through arrangements (as they save potential import costs). Lanco Infratech and Adani Power, among companies in our coverage universe, rank high among utilities dependent on Coal India, with long-term sale arrangements that do not allow for a fuel cost pass-through.

NTPC and Tata Power may be subjected to lower fuel availability from Coal India, which may be offset through higher fuel-saving incentives (as operational efficiencies will be priced at higher coal prices).

Utilities India

Coal pooling: A status check. A recent directive from the Coal Ministry suggests that coal will be supplied to old power plants (pre-2009 FSAs) at notified prices only—suggesting that the benefit (or absence) of price pooling will be restricted to new power plants. However, physical pooling will be more plausible with coastal power plants likely to receive a higher quantum of imported coal than inland plants, optimizing logistics availability and costs. We see the current proposals as negative for private utilities that have been hopeful of some concessions on import costs.

ATTRACTIVE

MARCH 19, 2013

UPDATE

BSE-30: 19,293

India Utilities


Potential of the pooling scheme

The pooling scheme is proposed to bridge the shortfall in expected coal demand from power plants commissioned over 2009-2015 and supplies from Coal India (CIL). Since CIL is expected to be able to meet just 65% of coal requirement as per letters of assurance (LoAs), the shortfall would be met through expensive imports.

Capacities. We estimate ~47 GW of capacities are likely to be commissioned by FY2015, with potential contracted quantity of 227 mn tons. At 80% of annual contracted quantity (ACQ) the demand for coal works out to ~181 mtpa against coal availability of 104 mtpa. We estimate ~20 mtpa of imports to plug the deficit, meeting ~60% of contracted quantity.

Prices. We factor notified prices of coal at Rs1,398 in FY2015 and price of imported coal at Rs6,000/ton (US$110/ton @ Rs55/US$). The blended price of domestic coal works out to ~Rs1,900/ton assuming only new plants share the burden of imports (35% premium), while the premium is muted (10%) if all utilities share the burden of imports.

Exhibit 1: CIL would need to import 26 mn tons to meet demand from the pooling scheme Projections of imports if CIL were to meet demand from new FSAs eligible under the pooling scheme

2013E 2014E 2015E[A] Production [KIE estimates] 461 471 490[B] Demand from extant FSAsCommitted quantity under pre 2009 FSAs (mtpa) 306 306 306Committed supply (%) 90 90 90Actual supply (mtpa) 275 275 275Committed quantity for non power sector (mtpa) 102 102 102Committed supply (%) 60 60 60Actual supply (mtpa) 61 61 61[B] Demand from extant FSAs (mtpa) 337 337 337[C] Demand from e-auction[C] Assumed e-auction quantity (mtpa) 47 48 50[D] Coal available for new FSAs [A-B-C] 78 87 104[E] Demand from new FSAsLinkage based capacity post-2009 (MW) 27,007 37,350 46,858PLF of new plants (%) 80 80 80[E] Demand from new FSAs 131 181 227

[F] Shortfall (mn tons)[E-D] 53 94 123[G] Commitment (Domestic) (%) [F/E] 60 48 46Commitment (Domestic+Imports) (%) [G+15%] 75 63 61[H] Imports (mn tons) 20 27 34[I] Imports (mn tons) 11 15 19

Notified price of coal (Rs/ton) 1,292 1,338 1,398 Imported price of coal (Rs/ton) 6,000 6,000 6,000 Import burden (Rs mn) 66,716 92,265 115,753

Scenario I (New Plants share the burden)Old Plants 1,292 1,338 1,398 New Plants 1,716 1,828 1,893 Increase over notified 33 37 35 Scenario II (Old and New Share the burden)Old+New 1,387 1,462 1,541 Increase over notified 7 9 10

Notes:(1) We have assumed a scenario wherein CIL cuts supply of its extant power-FSA to 90% and non-power-FSA to 60% and capacities are delayed

Source: Kotak Institutional Equities, Company

Utilities India


Exhibit 2: 48 GW of capacities slated for commissioning post 2009 are eligible for the pooling scheme Details of power-plant capacities commissioned after 2009 and under construction (MW)

Linkage Captive Imported Linkage Captive ImportedPPA (Bid/Regulated)NTPC 4,810 — — 9,890 1,320 —Others 3,275 1,250 — 3,000 1,200 —Total central sector 8,085 1,250 — 12,890 2,520 —Total state sector 7,265 1,200 — 6,050 4,190 500Adani Power 1,000 — 2,138 2,912 — —JSW Energy — 540 300 — — —Lanco Infratech 1,500 — 600 441 — 600Reliance Power 600 — — 900 4,960 4,000Tata Power 525 — — 525 0 4,000Others 210 250 — 6,199 4,720 2,290Total private sector 3,835 790 3,038 10,977 9,680 10,890Total 19,185 3,240 3,038 29,917 16,390 11,390MerchantAdani Power 320 — 502 1,048 — —JSW Energy — — 1,500 — — —Lanco Infratech 300 — — 819 — —Reliance Power — — — 300 — —Tata Power — — — — — —Others 270 2,340 — 2,116 4,110 410Total 890 2,340 2,002 4,283 4,110 410Total 20,075 5,580 5,040 34,200 20,500 11,800

Plants commissioned (Post 2009) Under construction (Upto 2015)


Exhibit 3: Pre-2009 capacities would be assured 90% of ACQ supplies Proposed blending of domestic and imported coal (as a percentage of ACQ/LOA quantity)

Domestic Imported TotalPre 2009 capacitiesPithead 90 — 90Coastal 80 10 90Others 90 — 90Post 2009 capacitiesPithead 80 — 80Coastal 65 15 80Others 80 — 80

Blend (% of ACQ/LOA)


India Utilities


Exhibit 4: Adani Power and Lanco Infratech are likely to benefit more from the pooling scheme Company-wise break-up of capacities by fuel mix and sales mix (MW)

Fuel Mix Linkage Sales MixCapacities Linkage Captive Imported Gas Renewable Competitive Merchant Cost-plus Linkage Competitive

NTPC 41,680 36,405 — — 3,955 1,320 — — 36,405 87 —Reliance Power 9,720 1,800 7,920 — — — 600 — 1,200 19 33 Tata Power 8,147 3,299 — 4,000 200 648 — — 3,299 40 —CESC 1,825 1,225 600 — — — — 600 625 67 —Adani Power 6,600 3,960 — 2,640 — — 2,970 990 — 60 75 JSW Energy 3,140 — 1,080 2,060 — — — — — — —Lanco Infratech 7,234 4,440 — 1,200 854 740 300 2,940 1,200 61 7 JPVL 3,520 500 1,320 — — 1,700 — 500 — 14 —Jindal Power 2,200 1,200 1,000 — — — — 1,200 — 55 —


Exhibit 5: Adani Power and Reliance Power trade on rich multiples and NTPC and Power Grid seem attractive Summary valuation of utility companies

Mkt Cap. Price Target EV/EBITDA (X) P/E (X)Rating (US$ bn) 18-Mar price 2011 2012 2013E 2014E 2011 2012 2013E 2014E

Adani Power SELL 2.0 46 35 28.1 35.0 43.6 12.0 21.6 (119.8) (7.2) (51.9)

CESC REDUCE 0.7 289 306 7.5 8.2 8.6 5.6 12.1 13.3 11.1 9.0

JSW Energy SELL 1.7 57 61 12.3 14.3 6.9 5.6 11.2 28.4 8.6 8.1

Lanco Infratech RS 0.5 12 — 8.3 9.9 8.3 4.8 7.2 (22.5) (16.2) 12.1

NHPC ADD 4.6 20 26 10.2 7.6 8.1 6.5 15.2 8.2 10.5 8.9

NTPC ADD 22.2 146 180 10.4 10.8 9.2 8.4 13.4 13.5 11.5 10.7

Power Grid BUY 9.3 109 140 12.2 11.9 10.8 8.5 18.7 15.5 13.4 10.9

Reliance Infrastructure BUY 2.0 412 820 11.0 5.8 6.2 5.3 7.0 6.1 5.6 5.4

Reliance Power SELL 3.8 74 80 88.8 39.3 23.1 14.8 27.1 23.8 23.1 23.7

Tata Power ADD 4.5 98 113 10.3 10.7 8.7 6.8 12.7 21.3 29.3 16.5

P/BV (X)Div Yield

(%) ROCE (%) ROE (%)2011 2012 2013E 2014E 2012 2011 2012 2013E 2014E 2011 2012 2013E 2014E

Adani Power 1.8 1.8 2.5 2.6 - 2.1 (0.3) (3.3) (0.3) 8.5 (1.5) (29.3) (4.9)

CESC 0.8 0.7 0.7 0.7 1.3 6.8 5.9 5.2 7.8 5.2 4.5 3.7 6.8

JSW Energy 1.7 1.7 1.4 1.2 - 7.2 2.6 7.7 7.9 16.1 5.8 17.5 15.7

Lanco Infratech 0.6 0.6 0.6 0.6 - 9.7 5.1 4.9 7.9 9.2 (2.5) (3.6) 4.8

NHPC 1.0 0.9 0.9 0.8 3.9 5.0 7.7 5.7 6.4 6.7 11.6 8.5 9.4

NTPC 1.8 1.6 1.5 1.4 2.0 9.4 8.8 8.6 9.9 13.6 12.8 12.6 14.7

Power Grid 2.4 2.1 1.9 1.7 2.0 6.5 6.3 6.6 6.9 13.5 13.7 14.2 15.5

Reliance Infrastructure 0.5 0.4 0.4 0.4 1.9 5.5 5.7 5.8 5.6 6.8 11.7 8.9 8.3

Reliance Power 1.2 1.2 1.1 1.1 - 3.9 3.4 3.2 2.8 4.9 5.0 4.9 4.6

Tata Power 1.8 2.0 1.9 1.8 1.7 7.1 4.3 4.8 6.6 14.9 8.7 6.6 11.1


For Private Circulation Only.

1HFY14 borrowing front-loaded, albeit less than in 1HFY13

The Central Government will borrow Rs3.49 tn on a gross basis in 1HFY14, completing 60% of its gross borrowing program for FY2014BE. As in most other years, FY2014 borrowing remains front-loaded, but the extent of borrowing is lower than the 66% borrowed in 1HFY13. Given the redemptions in 1HFY14, net borrowing will be Rs2.74 tn, ~4% lower than in 1HFY13. The Government also plans to issue Rs120-200 bn of inflation-indexed bonds, likely to be indexed with WPI inflation.

Rs800 bn of cash balance implies lower WMA of Rs300 bn

Additionally, the Government indicated it would likely carry forward a cash balance of Rs800 bn. Based on this, the WMA limit has been announced at Rs300 bn for 1HFY14 against Rs500 bn at the end of 1HFY13. The Government also announced that in 1QFY14 it would borrow Rs750 bn through the 91-day T-bill (~Rs10 bn less than the 4QFY13 weekly auction size), Rs300 bn through the 182-day T-bill and Rs350 bn through the 364-day T-bill.

Borrowing concentrated in the 10-14 year segment

As per the detailed borrowing calendar, issued by the RBI, the weekly dated securities auction size is Rs150 bn (except for two weeks in August, see Exhibits1 and 2). The borrowing has been spread over 23 weeks similar to 1HFY13 (24 weeks). The borrowing calendar has been spaced out to accommodate the RBI’s FY2014 credit policy and the two advance-tax payment weeks in June and September. The quantum of weekly borrowings has also been broadly maintained. The borrowing has been concentrated again in the 10-14 year bucket with 43.1% of gross borrowings being in this bucket (see Exhibit 3).

Yield movement could be restricted in FY2014

The 10-year benchmark (8.15% GS2022) yield ended on March 18 at 7.88% as the bond market was worried about the 1HFY13 borrowing program announcement. Broadly, the expectation was for 65-67% being scheduled in 1HFY14, as has generally been the norm. We believe this lower borrowing, scheduled for 1HFY14, should not readily be associated with a fall in the bond yield given the lack of clarity on the exact nature of debt-switch that is expected to be announced in mid-April. The debt-switch is likely to imply that the market needs to give up G-Secs maturing in FY2015-17 in lieu of longer-term securities (see Exhibit 4). In this case there is a likely elongation of the duration of the banks’ holdings of G-Secs—a negative for yields. On the other hand, we do not expect yields to rise sharply as the supplies, to a large extent, are likely to be neutralized by OMO auctions—the preferred route for RBI to infuse liquidity given the lack of adequate room on the CRR side. We expect the 10-year benchmark yield to be in the 7.5-8.0% range in FY2014.

Economy.dot

Economy Government Borrowing

1HFY14 borrowings lower, but we maintain caution. The 1HFY14 borrowing calendar was expectedly front-loaded, accounting for 60% of FY2014 budgeted gross borrowing. Even as gross and net borrowing in 1HFY14 is lower than in 1HFY13 it might not be prudent to expect yields to fall significantly in April as the nature of debt-switching strategy to be followed by the RBI/Government is unclear. With our expectation of a floor repo rate of 7.25% we expect the 10-year bond yield to be in the 7.5-8.0% range through most of the year, conditional on the RBI’s OMO schedule.

INDIA

MARCH 19, 2013

UPDATE

BSE-30: 19,293

QUICK NUMBERS

• 1HFY14 borrowing Rs3.49 tn, 60% of budgeted borrowing; net borrowing Rs2.74 tn

• Weekly auction size ~Rs150 bn

• Expect 10-year yield to be 7.5-8.0% in FY2014

India Economy

26 KOTAK ECONOMIC RESEARCH

Exhibit 1: On a gross as well as net basis, the issuance pressure… Monthly gross borrowing (Rs bn)

-

100

200

300

400

500

600

700

800

900

Apr

il

May

June July

Aug

ust

Sept

embe

r

FY2013 FY2014

Source: RBI, Kotak Economic Research

Exhibit 2: …is the highest in August Monthly net borrowing (Rs bn)

-100

0

100

200

300

400

500

600

700

800

Apr

il

May

June July

Aug

ust

Sept

embe

r

FY2013 FY2014


Exhibit 3: The borrowing is concentrated in the 10-14 year segment Borrowing calendar for different tenures for 1HFY14, (Rs bn)

Borrowing 5-9 years 10-14 years 15-19 years 20 years+April 450 90-120 180-210 60-90 60-90

May 750 150-200 300-350 100-150 100-150

June 450 90-120 180-210 60-90 60-90

July 600 120-160 240-280 80-120 80-120

August 790 170-220 310-360 100-150 100-150

September 450 90-120 180-210 60-90 60-90


Economy

KOTAK ECONOMIC RESEARCH 27

Exhibit 4: Redemption pressure will be high in the coming 5-9 years Maturity pattern of outstanding Government stock (Rs bn)

0

500

1,000

1,500

2,000

2,500

3,000

FY20

14FY

2015

FY20

16FY

2017

FY20

18FY

2019

FY20

20FY

2021

FY20

22FY

2023

FY20

24FY

2025

FY20

26FY

2027

FY20

28FY

2029

FY20

30FY

2031

FY20

32FY

2033

FY20

34FY

2035

FY20

36FY

2037

FY20

38FY

2039

FY20

40FY

2041

FY20

42FY

2043

G-sec redemptions


KO

TAK INSTITUTIO

NAL EQ

UITIES RESEARCH 28

In

dia D

aily Sum

mary - M

arch 1

Ind

ia Daily Su

mm

ary - March

19, 2013

Kotak Institutional Equities: Valuation summary of KIE Universe stocks

18-Mar-13 Mkt cap.O/S

shares EPS (Rs) EPS growth (%) PER (X) EV/EBITDA (X) RoE (%)Target price Upside

ADVT-3mo

Company Price (Rs) Rating (Rs mn) (US$ mn) (mn) 2012 2013E 2014E 2012 2013E 2014E 2012 2013E 2014E 2012 2013E 2014E 2012 2013E 2014E 2012 2013E 2014E 2012 2013E 2014E (Rs) (%) (US$ mn)Automobiles

Amara Raja Batteries 267 SELL 45,658 844 171 12.6 17.5 18.6 45.2 38.8 6.2 21.2 15.3 14.4 12.5 9.7 9.1 5.5 4.3 3.5 0.7 1.3 1.4 29.3 31.8 27.0 260 (2.7) 1.8

Apollo Tyres 84 BUY 42,570 787 504 8.1 12.3 13.9 (7.0) 51.6 13.1 10.4 6.9 6.1 5.9 4.5 4.0 1.3 1.1 1.0 0.6 0.8 0.9 15.6 19.9 18.8 110 30.3 3.6

Ashok Leyland 23 ADD 60,664 1,122 2,661 2.1 0.8 2.1 (10.6) (60.9) 156.0 10.7 27.5 10.7 7.2 10.6 7.4 1.3 1.2 1.2 4.4 1.1 3.7 17.7 11.0 15.3 26 14.0 3.3

Bajaj Auto 1,812 REDUCE 524,422 9,697 289 103.8 107.6 126.6 14.9 3.7 17.6 17.5 16.8 14.3 12.7 13.2 11.2 8.6 6.8 5.4 2.5 2.4 2.8 54.5 45.0 42.0 1,900 4.9 16.7

Bharat Forge 220 REDUCE 52,289 967 237 17.4 10.9 14.0 38.5 (37.4) 28.4 12.7 20.3 15.8 7.4 9.4 8.2 2.1 2.0 1.8 0.5 0.5 0.5 15.1 13.0 10.5 200 (9.2) 1.9

Exide Industries 131 SELL 111,095 2,054 850 5.4 5.9 7.2 (27.2) 9.6 20.8 24.1 22.0 18.2 16.2 14.1 12.0 3.6 3.3 2.9 1.1 1.2 1.4 15.9 15.6 16.8 110 (15.8) 4.6

Hero Motocorp 1,691 ADD 337,593 6,242 200 119.1 102.8 104.2 19.9 (13.7) 1.3 14.2 16.4 16.2 10.6 12.1 11.0 6.1 4.9 4.1 1.8 1.8 1.8 61.8 39.8 32.0 1,800 6.5 10.8

Mahindra & Mahindra 914 ADD 560,920 10,372 614 45.1 53.4 57.8 8.1 18.4 8.2 20.2 17.1 15.8 15.4 12.4 11.3 4.4 3.8 3.3 1.3 1.8 1.9 24.6 24.7 22.9 1,000 9.5 22.4

Maruti Suzuki 1,361 SELL 411,146 7,603 302 56.6 63.0 87.0 (28.6) 11.2 38.2 24.0 21.6 15.6 18.9 14.6 9.7 2.7 2.4 2.1 0.5 0.6 0.6 11.1 11.7 14.4 1,300 (4.5) 23.9

Motherson Sumi Systems 206 BUY 120,981 2,237 588 4.4 8.1 16.2 (34.3) 82.9 100.8 46.6 25.5 12.7 19.6 10.3 5.8 6.5 5.5 3.8 1.1 1.2 2.0 15.5 31.2 33.9 240 16.6 2.1

Tata Motors 287 BUY 923,039 17,068 3,218 44.6 30.2 44.1 58.7 (32.2) 46.0 6.4 9.5 6.5 5.4 5.1 3.9 2.8 2.2 1.7 1.4 1.6 1.2 46.3 25.8 29.2 340 18.5 57.9

Automobiles Neutral 3,190,377 58,994 25.9 (11.1) 25.7 12.0 13.5 10.8 8.7 8.2 6.3 3.6 3.0 2.4 1.5 1.6 1.6 29.6 22.0 22.6

Banks/Financial Institutions

Andhra Bank 99 ADD 55,650 1,029 560 24.0 22.2 22.4 6.1 (7.7) 1.1 4.1 4.5 4.4 — — — 0.8 0.8 0.7 5.5 5.1 5.2 19.2 15.6 14.2 125 25.7 2.6

Axis Bank 1,325 ADD 600,326 11,101 453 102.7 108.8 114.1 24.4 5.9 4.9 12.9 12.2 11.6 — — — 2.7 2.3 2.0 1.1 1.3 1.3 20.3 17.9 15.0 1,525 15.1 52.5

Bajaj Finserv 773 SELL 122,936 2,273 159 94.8 69.2 72.1 21.3 (27.1) 4.2 8.1 11.2 10.7 — — — 2.4 1.8 1.5 1.8 1.8 1.8 32.2 18.5 15.0 810 4.8 2.7

Bank of Baroda 718 REDUCE 296,278 5,479 412 121.4 111.4 116.4 12.4 (8.2) 4.4 5.9 6.4 6.2 — — — 1.2 1.1 0.9 2.3 2.6 2.7 21.7 16.3 15.0 770 7.2 13.9

Bank of India 327 ADD 187,696 3,471 575 46.6 52.1 58.9 2.5 11.8 13.0 7.0 6.3 5.5 — — — 1.1 1.0 0.9 2.1 2.4 2.7 15.0 14.3 14.3 365 11.7 8.3

Canara Bank 427 REDUCE 189,250 3,499 443 74.1 68.5 70.6 (18.5) (7.5) 3.0 5.8 6.2 6.1 — — — 1.0 1.0 0.9 2.6 2.8 2.8 15.4 12.7 11.9 415 (2.9) 7.8

Corporation Bank 397 BUY 59,448 1,099 150 101.7 85.9 110.1 6.6 (15.5) 28.2 3.9 4.6 3.6 — — — 0.8 0.7 0.7 5.1 4.4 5.6 19.5 15.1 16.6 480 20.8 0.7

Federal Bank 487 ADD 83,232 1,539 171 45.4 47.7 47.5 32.3 5.0 (0.3) 10.7 10.2 10.2 — — — 1.5 1.4 1.2 1.8 1.9 1.9 14.4 13.5 12.2 540 11.0 4.7

HDFC 810 SELL 1,240,845 22,945 1,532 27.9 31.6 37.4 15.8 13.2 18.3 29.0 25.6 21.7 — — — 6.5 5.0 4.4 1.3 1.4 1.7 22.7 22.0 21.5 730 (9.9) 35.5

HDFC Bank 643 REDUCE 1,509,625 27,915 2,347 22.0 28.6 36.5 30.4 30.1 27.3 29.2 22.5 17.6 — — — 5.1 4.3 3.7 0.7 0.9 1.1 18.7 20.7 22.3 625 (2.8) 35.6

ICICI Bank 1,051 ADD 1,212,021 22,412 1,153 56.1 72.3 70.8 25.4 29.0 (2.2) 18.7 14.5 14.9 — — — 2.0 1.9 1.8 1.6 2.1 2.0 11.2 13.2 11.9 1,260 19.8 62.6

IDFC 152 BUY 229,879 4,251 1,512 10.3 12.3 14.5 17.2 19.8 17.6 14.8 12.3 10.5 — — — 1.9 1.7 1.5 1.6 1.5 1.8 13.7 14.4 15.1 180 18.4 18.4

India Infoline 62 REDUCE 20,259 375 327 4.5 8.5 10.9 (38.3) 86.3 28.2 13.6 7.3 5.7 — — — 1.2 1.0 0.9 2.1 4.7 3.0 7.7 14.4 15.9 75 20.9 0.6

Indian Bank 178 BUY 76,327 1,411 430 39.6 35.3 39.6 1.2 (10.7) 12.1 4.5 5.0 4.5 — — — 0.9 0.8 0.7 4.2 3.7 4.1 19.4 15.2 15.1 260 46.4 0.9

Indian Overseas Bank 70 REDUCE 55,949 1,035 797 13.2 12.1 20.2 (24.0) (8.1) 67.0 5.3 5.8 3.5 — — — 0.6 0.6 0.5 6.4 4.0 6.7 9.9 7.8 12.1 70 (0.3) 2.1

IndusInd Bank 415 ADD 215,796 3,990 520 17.2 19.9 22.8 38.5 16.0 14.6 24.2 20.9 18.2 — — — 4.8 3.0 2.6 0.5 0.8 0.9 20.1 17.6 15.1 460 10.8 11.0

J&K Bank 1,293 REDUCE 62,705 1,159 48 165.6 213.6 185.3 30.6 29.0 (13.2) 7.8 6.1 7.0 — — — 1.5 1.3 1.2 2.6 3.3 2.9 21.2 23.1 17.2 1,300 0.5 1.6

LIC Housing Finance 242 NR 121,945 2,255 505 18.1 19.9 23.5 (11.8) 9.8 18.0 13.3 12.1 10.3 — — — 2.2 2.0 1.4 1.5 1.6 2.1 18.6 16.5 17.1 — — 15.0

L&T Finance Holdings 79 SELL 135,980 2,514 1,715 2.7 4.4 4.1 (5.6) 66.2 (5.9) 29.9 18.0 19.1 — — — 2.9 2.5 2.2 — — — 11.9 14.7 12.1 60 (24.3) 2.5

Mahindra & Mahindra Financial 202 REDUCE 114,784 2,122 568 12.1 15.5 18.3 33.6 28.0 18.3 16.7 13.1 11.0 — — — 3.9 2.7 2.2 1.3 1.8 2.1 22.8 23.4 21.0 220 8.9 5.6

Muthoot Finance 206 NR 76,554 1,416 372 24.0 27.6 29.8 52.4 15.0 8.0 8.6 7.5 6.9 — — — 2.6 2.0 1.5 1.9 2.0 2.3 41.9 30.6 26.2 — — —

Oriental Bank of Commerce 268 REDUCE 78,309 1,448 292 39.1 50.0 55.3 (24.0) 27.9 10.6 6.9 5.4 4.8 — — — 0.8 0.7 0.7 2.9 3.8 4.2 9.9 11.7 11.9 325 21.1 4.9

PFC 194 ADD 255,950 4,733 1,319 23.0 32.0 35.0 0.9 38.8 9.4 8.4 6.1 5.5 — — — 1.3 1.1 1.1 3.1 4.3 4.7 16.9 19.0 18.3 240 23.7 11.6

Punjab National Bank 795 REDUCE 269,477 4,983 339 144.0 139.4 145.3 2.9 (3.2) 4.2 5.5 5.7 5.5 — — — 1.2 1.1 1.0 2.8 2.7 2.8 21.1 16.7 15.3 820 3.2 13.4

Reliance Capital 368 ADD 90,599 1,675 246 21.1 30.5 21.3 126.7 44.3 (30.0) 17.4 12.1 17.3 — — — 0.8 0.8 0.8 2.0 2.5 1.7 5.7 6.6 4.5 500 35.9 32.8

Rural Electrification Corp. 216 REDUCE 213,128 3,941 987 28.6 38.2 41.6 10.0 33.7 9.0 7.6 5.6 5.2 — — — 1.5 1.2 1.2 3.5 4.0 4.3 20.5 23.4 21.6 255 18.1 8.8

Shriram City Union Finance 1,060 NR 58,639 1,084 55 65.4 80.2 98.3 34.7 22.6 22.6 16.2 13.2 10.8 — — — 3.4 2.6 2.1 0.6 1.0 1.3 23.3 22.3 22.5 — — 0.6

Shriram Transport 718 ADD 160,125 2,961 223 56.4 60.5 72.2 2.3 7.3 19.4 12.7 11.9 9.9 — — — 2.7 2.4 2.1 0.9 1.7 2.0 23.1 20.7 21.1 775 8.0 11.7

State Bank of India 2,250 ADD 1,509,708 27,916 671 174.5 213.5 215.7 34.0 22.4 1.0 12.9 10.5 10.4 — — — 2.3 2.2 1.9 1.8 1.8 1.9 15.7 16.0 14.4 2,420 7.6 99.1

Union Bank 234 ADD 128,746 2,381 551 32.3 35.7 40.1 (18.2) 10.7 12.3 7.2 6.5 5.8 — — — 1.2 1.0 0.9 3.4 3.0 3.4 14.9 14.4 14.4 285 21.9 8.6

Yes Bank 459 REDUCE 162,162 2,999 353 27.7 35.3 39.0 32.1 27.5 10.6 16.6 13.0 11.8 — — — 3.5 2.8 2.4 0.9 1.1 1.2 23.1 24.0 21.9 450 (2.0) 23.1

Banks/Financial Institutions Cautious 9,594,328 177,410 17.0 15.0 8.8 13.0 11.3 10.4 — — — 2.2 1.9 1.7 1.6 1.9 2.0 16.8 17.2 16.8

Cement

ACC 1,226 SELL 230,369 4,260 188 57.1 73.6 79.7 7.8 28.9 8.2 21.5 16.7 15.4 12.2 8.8 7.6 3.0 2.7 2.4 2.6 1.9 1.9 16.9 18.4 17.5 1,300 6.0 9.4

Ambuja Cements 182 SELL 276,539 5,114 1,522 7.8 10.3 12.9 (1.2) 32.9 24.2 23.3 17.6 14.1 13.4 10.4 8.2 3.2 3.0 2.7 1.2 1.5 2.1 14.6 18.1 20.4 190 4.6 9.7

Grasim Industries 2,949 ADD 270,441 5,001 92 288.6 335.4 363.9 24.4 16.2 8.5 10.2 8.8 8.1 6.9 5.3 4.5 1.6 1.4 1.2 1.2 1.2 1.2 16.7 16.7 15.7 3,500 18.7 4.7

India Cements 85 ADD 26,079 482 307 9.0 7.0 11.7 373.8 (22.4) 68.6 9.5 12.2 7.2 5.1 5.1 3.9 0.6 0.6 0.5 2.5 3.8 3.8 6.9 5.3 8.3 95 11.9 2.2

Shree Cement 4,103 SELL 142,942 2,643 35 159.6 272.8 286.5 179.3 70.9 5.0 25.7 15.0 14.3 7.9 8.6 7.2 5.4 4.1 3.3 0.5 0.5 0.5 24.3 31.1 25.8 3,427 (16.5) 1.5

UltraTech Cement 1,904 SELL 521,816 9,649 274 89.3 101.8 121.9 99.0 14.0 19.7 21.3 18.7 15.6 13.1 10.7 8.7 3.6 3.0 2.5 0.5 0.5 0.5 20.8 19.7 19.7 1,700 (10.7) 7.3

Cement Cautious 1,468,187 27,148 40.8 22.1 15.0 17.9 14.7 12.8 9.9 8.1 6.7 2.7 2.3 2.0 1.1 1.1 1.2 14.9 15.9 15.9

Price/BV (X) Dividend yield (%)

Source: Company, Bloomberg, Kotak Institutional Equities estimates

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ADVT-3mo

Company Price (Rs) Rating (Rs mn) (US$ mn) (mn) 2012 2013E 2014E 2012 2013E 2014E 2012 2013E 2014E 2012 2013E 2014E 2012 2013E 2014E 2012 2013E 2014E 2012 2013E 2014E (Rs) (%) (US$ mn)Consumer products

Asian Paints 5,003 SELL 479,840 8,873 96 103.1 122.6 141.5 17.3 18.9 15.5 48.5 40.8 35.3 31.6 26.2 22.1 17.5 14.2 11.8 0.8 1.0 1.2 41.4 40.1 38.1 3,550 (29.0) 7.3

Bajaj Corp. 231 BUY 33,999 629 148 8.1 11.5 14.0 16.5 40.7 21.8 28.3 20.1 16.5 29.2 18.9 14.8 7.9 7.0 6.2 1.7 2.8 3.6 29.9 37.0 39.9 280 21.5 0.4

Colgate-Palmolive (India) 1,329 SELL 180,714 3,342 136 32.8 37.7 44.3 10.9 14.7 17.6 40.5 35.3 30.0 34.8 29.4 24.9 41.5 34.2 30.0 1.9 2.0 2.5 109.0 106.3 106.6 1,150 (13.5) 3.7

Dabur India 138 ADD 241,605 4,468 1,753 3.7 4.4 5.2 12.6 19.4 18.6 37.5 31.4 26.5 29.6 24.2 20.0 13.8 11.0 8.8 0.9 1.1 1.3 41.4 39.6 37.5 140 1.6 2.4

GlaxoSmithkline Consumer 4,212 SELL 177,122 3,275 42 86.0 103.9 119.5 20.8 20.7 15.1 48.9 40.6 35.2 39.1 35.1 30.8 15.5 13.0 11.1 0.8 1.1 1.3 34.4 34.9 34.0 3,200 (24.0) 3.2

Godrej Consumer Products 749 ADD 242,304 4,480 324 17.7 20.8 26.4 18.7 17.6 26.9 42.4 36.0 28.4 29.5 24.1 19.1 8.6 7.1 6.1 0.6 0.7 0.7 25.2 23.0 26.8 760 1.5 2.6

Hindustan Unilever 463 REDUCE 1,001,747 18,523 2,162 11.9 14.9 16.5 22.4 25.4 10.6 38.9 31.0 28.1 33.8 29.5 26.0 28.5 29.0 26.6 1.6 3.7 2.4 83.4 99.1 105.5 450 (2.9) 25.1

ITC 304 ADD 2,391,455 44,221 7,860 7.8 9.4 11.2 22.3 19.4 19.1 38.8 32.5 27.3 27.9 22.8 18.9 12.7 11.4 10.2 1.5 1.8 2.3 35.5 37.0 39.4 330 8.5 45.7

Jubilant Foodworks 1,264 SELL 82,905 1,533 66 16.4 21.9 32.8 46.1 33.6 50.0 77.2 57.8 38.5 44.0 32.4 22.6 27.3 18.6 13.9 — — — 44.0 39.0 39.3 1,000 (20.9) 11.0

Jyothy Laboratories 166 ADD 27,189 503 164 2.8 3.9 7.2 (73.3) 40.7 86.0 60.1 42.7 23.0 39.2 22.7 15.5 4.4 4.1 3.5 — — — 6.1 9.9 16.2 195 17.4 0.5

Marico 217 ADD 140,022 2,589 645 5.2 6.3 7.7 34.2 20.8 22.5 41.7 34.5 28.2 30.3 22.3 18.4 12.0 7.1 5.9 0.3 0.4 0.7 31.0 26.0 22.9 240 10.5 0.8

Nestle India 4,677 SELL 450,956 8,339 96 104.6 112.2 129.7 20.5 7.3 15.6 44.7 41.7 36.1 29.5 24.9 20.8 35.4 25.1 18.9 1.0 1.0 1.3 94.7 70.4 59.7 4,000 (14.5) 3.1

Speciality Restaurants 169 ADD 7,932 147 47 4.9 5.4 8.1 7.6 11.1 48.0 34.5 31.1 21.0 21.9 20.0 13.2 6.9 5.2 4.2 — — — 16.2 12.3 11.8 190 12.5 0.4

Tata Global Beverages 131 BUY 81,072 1,499 618 5.4 6.3 7.6 36.3 16.9 20.1 24.3 20.8 17.3 14.4 12.2 10.2 1.4 1.3 1.3 1.4 1.6 1.9 7.8 8.3 9.5 165 25.9 8.9

Titan Industries 245 ADD 217,286 4,018 888 6.8 8.2 10.3 37.5 21.8 25.7 36.2 29.7 23.6 25.0 19.6 14.9 15.0 12.0 8.3 0.9 1.2 0.4 48.3 44.8 41.3 325 32.8 11.9

United Breweries 685 SELL 181,210 3,351 264 4.8 8.7 12.9 (17.2) 81.1 48.1 142.9 78.9 53.3 46.2 35.1 24.6 13.3 12.3 10.5 0.1 0.3 0.4 9.3 15.7 20.6 700 2.1 12.0

United Spirits 1,996 ADD 253,949 4,696 127 15.8 36.8 64.8 (55.4) 133.6 76.0 126.6 54.2 30.8 31.5 20.4 16.0 5.4 3.1 2.8 0.0 0.5 0.3 4.5 7.3 11.0 2,000 0.2 59.6

Consumer products Cautious 6,191,308 114,484 19.8 22.5 20.7 42.2 34.5 28.6 29.9 24.3 20.1 12.8 10.6 9.3 1.2 1.7 1.7 30.4 30.8 32.4

Constructions

NCC 39 ADD 10,097 187 257 1.4 2.4 2.4 (78.0) 67.8 1.9 28.1 16.7 16.4 8.0 7.5 8.1 0.4 0.4 0.4 0.8 1.5 2.5 1.5 2.5 2.5 55 39.8 1.4

Punj Lloyd 49 REDUCE 16,657 308 340 3.3 0.4 2.9 (322.9) (88.3) 657.0 14.8 126.6 16.7 9.6 5.4 5.1 0.6 0.6 0.5 0.3 0.2 0.5 3.8 0.4 3.3 50 1.9 4.2

Sadbhav Engineering 114 BUY 17,074 316 150 9.3 3.3 7.9 20.4 (64.8) 140.1 12.2 34.5 14.4 7.2 12.1 7.6 2.2 2.1 1.8 0.5 0.5 0.5 17.9 6.0 12.7 180 58.5 0.4

Construction Cautious 43,828 810 25.9 (57.4) 127.5 15.2 35.6 15.7 8.6 6.5 6.2 0.7 0.7 0.7 0.5 0.6 1.0 4.7 2.0 4.3

Energy

Aban Offshore 293 RS 12,745 236 44 68.3 43.2 79.4 (49.1) (36.7) 83.6 4.3 6.8 3.7 8.0 7.3 6.4 0.4 0.5 0.4 1.2 1.5 1.7 12.3 8.9 12.9 — — 2.1

Bharat Petroleum 392 BUY 283,520 5,243 723 18.3 38.8 21.8 (5.7) 111.4 (43.8) 21.4 10.1 18.0 11.4 6.5 9.5 1.7 1.6 1.5 1.4 3.0 1.7 8.1 15.4 8.0 465 18.6 11.6

Cairn india 297 ADD 566,592 10,477 1,907 41.6 63.7 55.1 25.0 53.2 (13.5) 7.1 4.7 5.4 5.3 3.3 3.3 1.2 1.0 0.9 — 4.2 3.7 17.7 23.2 17.9 350 17.8 19.2

Castrol India 330 SELL 163,391 3,021 495 9.5 9.0 9.8 (4.4) (4.4) 8.6 34.9 36.5 33.6 24.0 25.3 23.1 29.8 28.0 26.9 2.3 2.1 2.4 87.9 79.0 81.6 200 (39.5) 1.3

GAIL (India) 314 ADD 397,922 7,358 1,268 28.8 30.4 30.8 2.3 5.6 1.3 10.9 10.3 10.2 7.1 6.9 6.4 1.7 1.5 1.4 2.8 2.9 3.0 15.7 14.7 13.3 400 27.5 8.4

GSPL 64 ADD 35,815 662 563 9.3 8.8 8.3 4.7 (5.1) (6.2) 6.8 7.2 7.7 4.3 4.2 4.1 1.3 1.1 1.0 1.6 1.6 1.6 20.7 16.4 13.3 83 30.4 1.2

Hindustan Petroleum 301 REDUCE 102,144 1,889 339 26.8 5.2 20.7 (34.4) (80.5) 295.5 11.2 57.5 14.5 2.5 3.3 2.8 0.6 0.6 0.6 2.8 0.5 2.1 5.4 1.0 4.0 340 12.8 11.9

Indian Oil Corporation 311 ADD 754,364 13,949 2,428 32.9 16.5 24.9 1.3 (49.6) 50.5 9.5 18.8 12.5 7.5 9.3 7.6 1.2 1.2 1.1 1.6 1.3 2.4 13.0 6.2 8.8 345 11.0 7.6

Oil India 544 BUY 326,982 6,046 601 57.3 56.5 62.5 19.5 (1.5) 10.7 9.5 9.6 8.7 4.1 3.9 3.0 1.7 1.5 1.4 3.5 3.9 4.2 17.2 15.0 15.1 700 28.7 5.6

Oil & Natural Gas Corporation 318 BUY 2,717,661 50,253 8,556 32.8 29.4 33.0 33.1 (10.5) 12.2 9.7 10.8 9.6 4.1 4.5 3.8 1.6 1.4 1.3 3.1 3.1 3.5 16.8 13.3 13.5 375 18.1 29.4

Petronet LNG 147 ADD 109,950 2,033 750 14.1 16.3 13.0 70.7 15.8 (20.6) 10.4 9.0 11.3 7.2 6.6 7.2 2.8 2.2 1.9 1.7 1.9 2.0 29.7 27.2 17.5 180 22.8 3.7

Reliance Industries 834 REDUCE 2,449,505 45,294 2,936 61.3 65.4 64.3 (1.1) 6.8 (1.7) 13.6 12.8 13.0 7.9 8.2 8.1 1.4 1.3 1.2 1.0 1.1 1.1 11.7 11.4 10.3 850 1.9 53.2

Energy Attractive 7,920,590 146,461 12.9 (1.1) 3.8 10.5 10.6 10.2 5.9 6.0 5.5 1.5 1.3 1.2 2.0 2.3 2.5 13.9 12.6 12.0

Industrials

ABB 558 SELL 118,298 2,187 212 8.7 6.5 17.9 192.0 (25.5) 175.6 64.1 86.1 31.2 40.7 49.7 19.6 4.7 4.6 4.1 0.5 0.6 0.6 7.4 5.4 13.8 500 (10.4) 0.8

BGR Energy Systems 202 REDUCE 14,580 270 72 31.1 24.9 27.3 (30.7) (19.7) 9.6 6.5 8.1 7.4 4.8 4.3 4.1 1.3 1.2 1.0 3.4 2.5 2.7 21.7 15.2 14.8 280 38.6 0.7

Bharat Electronics 1,153 REDUCE 92,224 1,705 80 106.3 110.7 125.7 (0.9) 4.1 13.5 10.8 10.4 9.2 4.7 3.8 2.7 1.6 1.4 1.3 1.8 2.6 2.6 15.3 14.3 14.6 1,300 12.8 0.7

Bharat Heavy Electricals 196 SELL 479,118 8,859 2,448 28.8 24.3 21.3 17.1 (15.5) (12.5) 6.8 8.0 9.2 4.5 5.3 5.3 1.9 1.6 1.4 3.3 2.7 2.3 30.9 21.6 16.4 205 4.7 14.8

Crompton Greaves 99 ADD 63,573 1,176 642 5.7 1.9 8.4 (60.0) (67.3) 347.9 17.3 52.8 11.8 7.6 14.0 7.0 1.8 1.7 1.6 1.4 1.3 1.5 10.6 3.3 13.9 130 31.2 6.2

Cummins India 494 ADD 136,978 2,533 277 22.0 25.4 29.4 (0.9) 15.2 15.9 22.4 19.5 16.8 20.6 16.7 14.1 6.7 5.9 5.2 2.2 2.6 2.9 30.7 31.1 31.6 550 11.3 2.8

Kalpataru Power Transmission 80 BUY 12,223 226 153 13.3 11.6 14.5 (4.1) (12.6) 24.8 6.0 6.9 5.5 4.4 4.6 4.2 0.7 0.6 0.6 1.9 1.9 1.9 10.7 8.7 9.9 120 50.7 0.4

KEC International 54 BUY 13,831 256 257 6.9 5.7 8.6 (14.1) (16.8) 49.5 7.8 9.4 6.3 5.2 6.1 5.1 1.2 1.1 0.9 2.2 1.6 2.4 16.4 12.1 16.0 80 48.7 0.3

Larsen & Toubro 1,510 ADD 924,938 17,103 612 75.7 80.3 81.2 12.4 6.1 1.1 20.0 18.8 18.6 15.6 14.4 12.9 3.0 2.5 2.2 1.1 0.9 0.9 16.1 14.4 12.5 1,525 1.0 47.4

Maharashtra Seamless 221 BUY 15,555 288 71 43.9 33.9 39.1 (9.0) (22.6) 15.3 5.0 6.5 5.6 3.0 3.2 2.4 0.6 0.5 0.5 3.4 3.1 3.5 11.5 8.3 9.2 400 81.4 0.2

Siemens 583 SELL 205,286 3,796 352 13.6 23.3 27.4 (46.6) 71.2 17.6 42.9 25.0 21.3 25.7 14.2 11.8 4.8 4.2 3.6 0.3 0.8 0.9 11.7 17.9 18.3 575 (1.4) 2.5

Suzlon Energy 15 RS 26,571 491 1,777 (4.0) (3.7) (0.4) (34.1) (6.0) (88.1) (3.8) (4.0) (33.8) 7.7 7.9 6.4 0.5 0.6 0.6 — 1.3 1.3 (11.7) (13.7) (1.8) — — 21.7

Tecpro Systems 98 ADD 4,931 91 50 24.4 25.1 27.6 (9.6) 2.9 9.9 4.0 3.9 3.5 4.2 4.5 4.1 0.6 0.6 0.5 — — — 17.1 15.3 14.8 200 104.7 0.1

Thermax 591 REDUCE 70,465 1,303 119 32.9 26.7 34.0 4.0 (19.0) 27.5 18.0 22.2 17.4 12.0 14.5 10.8 4.3 3.8 3.3 1.2 1.4 1.6 26.6 18.3 20.6 575 (2.8) 0.8

Voltas 84 REDUCE 27,733 513 331 9.4 6.2 7.7 (3.4) (34.4) 23.5 8.9 13.5 11.0 6.9 9.8 7.0 1.9 1.7 1.5 1.9 2.2 2.7 21.7 13.1 14.8 100 19.3 3.5

Industrials Cautious 2,190,751 40,509 6.5 (5.8) 8.6 14.7 15.7 14.4 10.2 10.5 9.4 2.5 2.2 1.9 1.6 1.5 1.5 16.8 14.0 13.5

Dividend yield (%)


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ADVT-3mo

Company Price (Rs) Rating (Rs mn) (US$ mn) (mn) 2012 2013E 2014E 2012 2013E 2014E 2012 2013E 2014E 2012 2013E 2014E 2012 2013E 2014E 2012 2013E 2014E 2012 2013E 2014E (Rs) (%) (US$ mn)Infrastructure

Adani Port and SEZ 139 BUY 280,526 5,187 2,017 5.5 6.2 9.5 20.0 13.1 54.5 25.5 22.5 14.6 22.0 15.1 11.3 5.6 4.7 3.4 0.7 0.9 1.2 23.8 22.7 26.9 160 15.1 6.7

Container Corporation 1,051 ADD 136,625 2,526 130 67.5 75.2 83.2 (0.1) 11.4 10.7 15.6 14.0 12.6 10.6 9.6 8.5 2.4 2.2 1.9 1.5 1.7 1.8 16.6 16.4 16.1 1,000 (4.9) 1.8

GMR Infrastructure 21 RS 82,324 1,522 3,892 (1.1) (1.2) 0.0 236.7 6.3 (100.3) (18.7) (17.5) - 26.1 10.8 5.8 0.9 0.8 0.7 — — — (5.8) (6.4) 0.0 — — 3.5

Gujarat Pipavav Port 49 BUY 23,689 438 483 1.2 1.5 3.0 (212.0) 29.7 93.2 41.6 32.0 16.6 14.7 13.3 11.8 3.0 2.0 1.7 — — — 10.3 7.6 13.3 55 12.2 0.4

GVK Power & Infrastructure 11 RS 17,766 329 1,579 0.4 1.0 3.5 (60.3) 165.6 243.1 28.9 10.9 3.2 25.8 12.6 7.3 0.5 0.4 0.3 — 3.1 7.1 1.8 3.9 11.1 — — 2.5

IRB Infrastructure 122 BUY 40,499 749 332 15.1 14.3 16.6 10.8 (4.8) 15.8 8.1 8.5 7.3 6.8 6.8 5.6 1.4 0.9 0.8 — — — 18.1 12.9 11.8 170 39.5 6.5

Infrastructure Cautious 581,429 10,751 (2.9) 14.4 72.7 26.9 23.6 13.6 18.3 11.6 7.6 2.1 1.8 1.5 0.7 0.9 1.2 8.0 7.5 11.1

Media

DB Corp 251 BUY 46,038 851 183 11.0 11.4 13.8 (14.5) 3.3 21.5 22.8 22.0 18.2 13.2 12.4 10.3 5.0 4.6 4.2 2.0 2.4 3.2 23.0 21.6 24.1 260 3.5 0.4

DishTV 65 ADD 69,187 1,279 1,064 (1.0) (1.3) 0.6 (45.3) 32.4 (146.9) (64.2) (48.5) 103.3 15.9 13.2 10.3 (73.7) (43.2) (74.3) — — — 694.0 112.4 (53) 80 23.0 4.5

Eros International 178 ADD 16,307 302 92 16.5 15.8 20.1 31.9 (4.0) 27.2 10.8 11.2 8.8 8.0 7.6 6.1 1.9 1.6 1.4 — — — 20.0 15.9 17.0 230 29.4 1.8

Hindustan Media Ventures 141 BUY 10,359 192 73 8.9 11.1 12.1 21.9 25.0 8.6 15.9 12.7 11.7 8.5 6.6 5.7 2.4 2.1 1.9 0.9 1.4 2.8 15.9 17.3 16.7 200 41.7 0.0

HT Media 102 BUY 24,037 444 235 7.0 7.0 8.8 (8.5) (0.1) 25.1 14.5 14.5 11.6 6.4 6.2 4.6 1.6 1.4 1.4 0.4 2.0 3.9 11.1 10.3 12.0 130 27.2 0.1

Jagran Prakashan 98 BUY 31,087 575 316 5.6 5.9 7.1 (17.2) 3.8 20.5 17.4 16.8 13.9 10.8 9.2 8.0 4.1 3.5 3.2 3.6 3.6 4.1 24.5 22.5 23.9 130 32.2 0.3

Sun TV Network 438 REDUCE 172,410 3,188 394 17.6 17.5 20.5 (10.0) (0.3) 17.2 24.9 25.0 21.3 15.7 15.1 13.0 6.5 5.9 5.4 2.2 2.3 2.7 28.6 25.9 27.7 410 (6.3) 9.8

Zee Entertainment Enterprises 216 REDUCE 205,248 3,795 950 6.0 7.3 8.9 (0.5) 20.6 22.0 35.8 29.7 24.4 25.7 20.4 16.4 4.5 4.3 4.0 0.6 0.7 0.9 13.0 14.9 17.3 190 (12.1) 13.5

Media Neutral 574,674 10,626 (1.5) 5.4 32.2 29.9 28.4 21.5 15.7 14.0 11.5 4.9 4.6 4.2 1.3 1.4 1.8 16.5 16.0 19.5

Metals & Mining

Coal India 302 BUY 1,909,437 35,308 6,316 23.2 25.9 28.9 34.4 11.4 11.4 13.0 11.7 10.5 7.8 6.3 5.1 4.5 3.6 2.9 3.3 2.6 2.9 38.0 34.2 30.6 404 33.6 14.3

Hindalco Industries 95 SELL 182,509 3,375 1,915 17.7 14.1 12.2 38.8 (20.8) (12.9) 5.4 6.8 7.8 6.4 8.0 7.8 0.6 0.5 0.5 1.6 1.6 1.6 11.1 8.1 6.7 110 15.4 19.0

Hindustan Zinc 117 ADD 494,748 9,148 4,225 13.2 15.5 15.6 13.2 17.6 0.9 8.9 7.6 7.5 5.2 4.5 3.4 1.8 1.5 1.3 2.0 2.2 2.2 22.6 22.3 19.0 156 33.2 2.2

Jindal Steel and Power 354 REDUCE 331,013 6,121 935 42.4 34.2 42.3 5.6 (19.3) 23.5 8.3 10.3 8.4 7.4 7.5 7.4 1.8 1.6 1.3 0.5 0.5 0.5 24.8 16.4 17.2 420 18.6 17.2

JSW Steel 687 SELL 153,239 2,834 223 24.1 65.6 56.3 (69.3) 172.3 (14.1) 28.5 10.5 12.2 5.3 5.6 6.1 0.9 0.9 0.8 1.1 1.5 1.5 8.2 11.3 6.8 585 (14.8) 16.1

National Aluminium Co. 39 SELL 99,224 1,835 2,577 3.4 2.2 3.6 (19.7) (35.7) 65.4 11.4 17.8 10.7 4.4 5.9 3.1 0.8 0.8 0.8 2.6 2.6 2.6 7.6 4.7 7.5 50 29.9 0.4

NMDC 138 BUY 547,525 10,124 3,965 18.5 16.6 17.5 12.6 (9.8) 5.0 7.5 8.3 7.9 3.9 4.3 3.8 2.2 1.9 1.6 3.3 3.6 3.6 33.3 24.9 22.4 180 30.3 13.3

Sesa Goa 162 ADD 140,707 2,602 869 31.0 26.6 28.0 (36.2) (14.2) 5.3 5.2 6.1 5.8 5.1 26.2 14.7 0.9 0.8 0.7 2.9 0.7 0.7 11.1 (0.2) 2.2 203 25.4 5.8

Sterlite Industries 96 ADD 324,020 5,991 3,361 15.8 16.6 16.5 3.9 5.4 (0.8) 6.1 5.8 5.8 3.7 3.4 2.7 0.7 0.6 0.6 2.1 2.1 2.1 12.1 11.5 10.4 120 24.5 12.2

Tata Steel 349 ADD 339,314 6,274 971 17.2 (1.8) 39.4 (72.3) (110.2) (2,339.5) 20.3 (198.3) 8.9 7.3 8.4 6.0 0.8 0.8 0.8 3.4 3.4 3.4 6.4 (0.4) 9.0 400 14.5 34.0

Metals & Mining Neutral 4,521,734 83,612 0.5 (1.0) 12.0 9.6 9.7 8.7 6.0 6.3 5.4 1.6 1.5 1.3 2.7 2.4 2.5 17.0 15.0 14.9

Pharmaceutical

Apollo Hospitals 803 ADD 111,645 2,064 139 15.8 22.4 30.1 19.3 41.7 34.7 50.8 35.9 26.6 21.8 18.1 14.2 4.4 3.9 3.5 0.5 0.7 1.0 9.6 11.6 14.0 870 8.4 5.5

Biocon 273 ADD 54,630 1,010 200 17.1 17.7 20.6 (6.9) 3.4 16.5 16.0 15.4 13.3 9.0 8.9 7.4 2.4 2.2 2.0 1.8 1.9 2.3 15.7 14.8 15.6 300 9.8 2.7

Cipla 391 ADD 314,223 5,810 803 14.0 19.7 20.0 13.5 40.8 1.6 28.0 19.9 19.6 19.0 13.9 12.4 4.1 3.5 3.1 0.5 0.7 0.7 15.7 17.0 16.7 440 12.4 14.7

Cadila Healthcare 738 ADD 151,198 2,796 205 31.9 25.4 41.8 (8.2) (20.2) 64.4 23.2 29.0 17.7 18.1 18.3 12.3 5.9 5.1 4.3 1.0 0.9 1.4 27.5 18.9 26.3 840 13.8 1.9

Divi's Laboratories 1,025 REDUCE 135,996 2,515 133 40.2 50.6 58.6 24.0 25.9 15.8 25.5 20.2 17.5 19.3 15.5 12.4 6.4 5.3 4.5 1.3 1.6 1.8 27.1 28.7 27.8 1,140 11.2 3.6

Dr Reddy's Laboratories 1,803 BUY 306,812 5,673 170 84.0 100.4 110.4 29.4 19.5 9.9 21.5 17.9 16.3 13.5 12.1 10.8 5.3 4.3 3.5 0.8 0.8 0.8 23.4 24.4 22.7 2,100 16.5 13.6

GlaxoSmithkline Pharmaceuticals 2,160 SELL 183,108 3,386 85 74.3 78.1 88.9 8.8 5.2 13.9 29.1 27.7 24.3 20.8 19.5 17.5 9.5 9.1 8.3 2.1 2.3 2.5 22.1 28.5 35.7 1,920 (11.1) 1.1

Glenmark Pharmaceuticals 500 REDUCE 135,309 2,502 271 21.9 22.3 27.5 31.1 1.9 23.5 22.8 22.4 18.1 25.6 16.0 12.9 5.6 4.6 3.8 0.4 0.5 0.7 20.7 22.7 23.0 510 2.0 6.9

Lupin 614 ADD 274,525 5,076 447 19.5 27.1 29.8 1.2 39.0 10.1 31.5 22.7 20.6 22.2 13.4 12.8 6.7 5.4 4.5 0.5 0.8 0.8 23.9 26.9 24.2 655 6.7 7.9

Ranbaxy Laboratories 433 REDUCE 182,803 3,380 422 (18.5) 21.9 18.2 (145.7) (217.9) (16.9) (23.4) 19.8 23.8 12.9 9.9 14.9 6.4 4.5 3.2 — — — (68.5) 26.5 15.8 420 (3.0) 7.5

Sun Pharmaceuticals 832 REDUCE 862,062 15,941 1,036 25.0 28.6 35.1 42.5 14.4 22.7 33.3 29.1 23.7 24.9 15.7 14.7 6.5 5.3 4.4 0.5 0.6 0.7 21.9 20.0 20.2 750 (9.9) 13.3

Pharmaceuticals Attractive 2,712,313 50,154 (9.6) 41.0 14.1 33.1 23.5 20.6 19.1 14.3 13.2 5.7 4.7 3.9 0.7 0.8 1.0 17.2 20.2 19.2

Real Estate

DLF 270 ADD 458,649 8,481 1,698 6.8 5.8 5.8 (25.6) (15.7) 1.5 39.6 46.9 46.3 17.8 26.4 21.3 1.7 1.6 1.6 0.7 0.4 0.4 4.3 3.5 3.5 313 15.9 45.9

Godrej Properties 538 REDUCE 41,949 776 78 12.5 12.1 39.8 (33.0) (3.2) 227.7 42.8 44.3 13.5 36.4 19.6 8.1 2.9 2.8 2.4 0.6 0.7 0.7 8.3 6.4 18.9 586 9.0 0.4 HDIL 64 NR 26,837 496 419 22.0 28.8 28.8 11.3 30.5 0.2 2.9 2.2 2.2 6.9 6.0 6.3 0.3 0.2 0.2 — — — 8.3 6.6 5.8 — — 40.5

Oberoi Realty 279 ADD 91,446 1,691 328 13.3 14.5 30.3 (11.7) 9.3 108.7 21.0 19.2 9.2 17.2 14.7 6.5 2.4 2.2 1.8 0.7 0.7 0.7 12.3 12.1 21.4 307 10.2 0.6

Prestige Estates Projects 181 ADD 63,263 1,170 350 2.5 4.3 13.1 (51.7) 72.4 203.0 71.8 41.6 13.7 26.9 17.6 9.1 2.9 2.4 2.1 0.6 — — 3.9 6.4 16.3 200 10.7 1.2 Sobha Developers 405 BUY 39,706 734 98 21.0 22.8 26.8 13.6 8.5 17.5 19.3 17.8 15.1 11.0 10.3 9.3 2.0 1.8 1.7 1.2 1.2 1.2 10.7 10.7 11.6 495 22.3 1.8

Real Estate Cautious 721,849 13,348 (16.7) (6.0) 39.7 25.8 27.4 19.6 16.5 18.6 13.1 1.5 1.5 1.4 0.7 0.4 0.4 6.0 5.3 7.0

Dividend yield (%)


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Company Price (Rs) Rating (Rs mn) (US$ mn) (mn) 2012 2013E 2014E 2012 2013E 2014E 2012 2013E 2014E 2012 2013E 2014E 2012 2013E 2014E 2012 2013E 2014E 2012 2013E 2014E (Rs) (%) (US$ mn)Technology

HCL Technologies 802 REDUCE 570,258 10,545 711 34.6 51.6 53.7 51.2 49.4 3.9 23.2 15.5 14.9 14.3 10.0 9.4 5.8 4.2 3.4 1.0 1.0 1.0 25.1 30.7 25.5 650 (19.0) 20.2

Hexaware Technologies 90 REDUCE 26,474 490 294 9.1 11.2 9.9 206.1 22.8 (11.1) 9.9 8.1 9.1 8.4 5.5 5.8 2.6 2.2 2.0 4.4 6.0 5.5 26.9 29.5 23.0 90 (0.2) 6.0

Infosys 2,861 REDUCE 1,642,071 30,364 574 144.9 162.9 177.2 21.0 12.5 8.7 19.7 17.6 16.1 13.4 12.0 10.4 5.2 4.4 3.8 1.6 1.9 2.1 29.0 27.3 25.3 2,700 (5.6) 68.3

Mahindra Satyam 130 REDUCE 152,821 2,826 1,176 10.2 11.0 11.2 142.3 8.4 1.2 12.8 11.8 11.6 12.2 7.4 6.9 5.1 3.8 3.1 — — 1.7 50.4 37.6 29.6 120 (7.7) 7.1

Mindtree 894 ADD 36,809 681 41 53.1 79.7 86.1 115.1 50.1 8.1 16.8 11.2 10.4 12.5 7.0 6.5 3.8 3.0 2.6 0.6 1.8 2.9 25.2 30.3 26.8 825 (7.8) 1.4

Mphasis 396 SELL 83,425 1,543 211 39.0 37.6 35.8 (24.6) (3.7) (4.7) 10.1 10.5 11.1 8.5 7.8 7.9 2.1 1.9 1.8 1.6 4.3 4.5 22.8 19.1 16.5 350 (11.6) 0.8

Polaris Financial Technology 118 REDUCE 11,735 217 100 20.8 21.1 18.7 7.4 1.9 (11.4) 5.7 5.6 6.3 3.1 2.8 2.5 0.9 0.8 0.8 3.3 3.5 3.7 18.1 15.8 12.6 120 2.0 1.5

TCS 1,567 REDUCE 3,066,835 56,709 1,957 54.4 72.0 80.0 22.0 32.4 11.1 28.8 21.8 19.6 20.6 16.0 14.1 9.4 7.7 6.3 1.6 1.8 2.0 36.8 38.8 35.4 1,320 (15.8) 40.0

Tech Mahindra 1,090 REDUCE 138,962 2,570 128 80.1 105.1 106.3 63.5 31.2 1.1 13.6 10.4 10.3 17.2 10.9 10.2 3.4 2.9 2.5 0.4 0.6 0.7 28.4 31.2 27.1 1,025 (6.0) 10.8

Wipro 434 REDUCE 1,065,044 19,694 2,456 22.7 27.4 29.4 5.2 20.6 7.2 19.1 15.8 14.8 13.3 10.7 9.5 3.7 3.1 2.7 1.1 1.4 1.6 21.2 21.5 19.7 400 (7.8) 13.3

Technology Cautious 6,794,433 125,637 21.2 24.1 7.8 21.8 17.6 16.3 15.6 12.4 11.0 5.7 4.7 4.0 1.4 1.7 1.9 26.0 26.6 24.3

Telecom

Bharti Airtel 308 ADD 1,167,762 21,593 3,798 11.2 7.2 13.3 (29.6) (36.0) 84.8 27.4 42.8 23.2 7.7 7.2 6.0 2.3 2.2 2.0 — 0.5 0.4 8.6 5.3 9.2 350 13.8 31.7

Bharti Infratel 184 ADD 346,709 6,411 1,889 4.3 5.2 6.7 36.1 20.2 30.1 42.6 35.5 27.2 10.7 8.9 7.9 2.4 1.9 1.8 — 1.4 1.6 5.3 6.0 6.9 215 17.2 —

IDEA 112 ADD 371,291 6,866 3,303 2.2 3.0 5.6 (19.6) 36.0 87.5 51.4 37.8 20.1 10.0 8.6 6.6 2.8 2.6 2.3 — — — 5.7 7.3 12.3 125 11.2 9.0

Reliance Communications 65 SELL 134,263 2,483 2,064 4.5 2.7 4.8 (31.0) (40.2) 79.8 14.5 24.2 13.5 8.7 7.4 6.2 0.4 0.4 0.4 — — — 2.4 1.5 2.6 60 (7.8) 21.3

Tata Communications 228 REDUCE 64,852 1,199 285 (27.9) (27.0) (19.4) 12.0 (3.3) (28.1) (8.2) (8.4) (11.7) 9.6 8.2 7.3 2.8 4.3 6.8 — — — (27.0) (40.3) (44.7) 220 (3.3) 1.1

Telecom Neutral 2,084,877 38,552 (27.8) (23.7) 92.2 35.5 46.6 24.2 8.5 7.6 6.3 1.8 1.7 1.6 — 0.5 0.5 5.0 3.6 6.6

Utilities

Adani Power 46 SELL 110,689 2,047 2,393 (0.4) (6.4) (0.9) (118.0) 1,418.2 (86.1) (109.1) (7.2) (51.9) 35.5 43.6 12.0 1.8 2.5 2.6 — — — (1.5) (29.3) (4.9) 35 (24.3) 4.0

CESC 289 REDUCE 36,100 668 125 21.7 18.0 34.7 (9.3) (17.2) 92.6 13.3 16.1 8.3 8.3 9.9 5.7 0.6 0.6 0.5 — 1.4 1.9 4.5 3.7 6.8 306 5.9 2.4

JSW Energy 57 SELL 94,136 1,741 1,640 2.0 6.7 7.1 (60.6) 230.6 5.9 28.4 8.6 8.1 14.0 6.8 5.4 1.7 1.4 1.2 — — — 5.8 17.5 15.7 61 6.3 2.4

Lanco Infratech 12 RS 26,231 485 2,223 (0.5) (0.7) 1.0 (131.8) 39.2 (233.2) (22.5) (16.2) 12.1 10.5 10.3 6.9 0.6 0.6 0.6 — — — (2.5) (3.6) 4.8 — — 4.1

NHPC 20 ADD 251,550 4,651 12,301 2.5 1.9 2.1 84.5 (25.2) 10.6 8.2 11.0 9.9 8.4 10.5 8.8 0.9 0.8 0.8 3.3 2.4 2.7 11.1 7.8 8.2 26 27.1 12.7

NTPC 146 ADD 1,202,601 22,237 8,245 10.8 13.3 13.9 (1.1) 22.8 5.0 13.5 11.0 10.5 11.2 9.9 8.9 1.6 1.5 1.4 2.3 2.7 2.9 12.6 14.2 13.7 180 23.4 18.9

Power Grid 109 BUY 503,483 9,310 4,630 7.1 9.3 10.7 22.9 32.0 14.8 15.4 11.7 10.2 12.5 10.7 8.5 2.1 1.9 1.7 2.0 2.6 3.0 14.6 17.4 17.8 140 28.7 8.8

Reliance Infrastructure 412 BUY 108,355 2,004 263 60.3 50.7 68.0 4.0 (16.0) 34.3 6.8 8.1 6.1 9.3 4.2 2.8 0.4 0.4 0.4 2.5 2.7 2.7 8.9 8.6 9.7 820 99.1 19.2

Reliance Power 74 SELL 206,177 3,812 2,805 3.1 3.4 3.7 14.0 9.5 10.2 23.8 21.7 19.7 59.9 23.1 18.4 1.2 1.1 1.1 — — — 5.0 5.3 5.5 80 8.8 12.0

Tata Power 98 ADD 242,638 4,487 2,468 4.6 4.2 5.6 (40.6) (9.3) 34.2 21.3 23.5 17.5 11.0 8.3 6.9 1.8 1.9 1.8 1.5 1.7 1.7 8.1 7.8 10.4 113 15.0 5.2

Utilities Attractive 2,781,961 51,442 (1.8) 6.5 21.1 14.5 13.6 11.2 12.6 10.7 8.5 1.4 1.3 1.2 1.9 2.1 2.3 9.5 9.5 10.7

Others

Carborundum Universal 128 BUY 23,893 442 187 11.6 5.4 10.5 27.0 (53.0) 92.0 11.0 23.4 12.2 6.9 11.0 6.8 2.2 2.1 1.8 1.6 0.7 1.4 24.8 9.8 17.1 180 41.2 0.3

Coromandel International 198 SELL 55,935 1,034 283 22.6 18.1 19.7 (7.9) (19.7) 8.6 8.8 10.9 10.0 7.5 9.4 6.8 2.3 2.1 1.9 3.5 3.7 3.9 27.8 18.8 18.3 170 (14.1) 0.5

Havells India 637 REDUCE 79,475 1,470 125 31.5 31.7 37.3 28.2 0.8 17.6 20.2 20.1 17.1 12.7 11.5 9.9 7.9 5.4 4.3 1.0 1.1 1.2 45.6 31.8 28.2 580 (8.9) 4.7

Jaiprakash Associates 74 BUY 162,108 2,998 2,191 2.9 4.0 9.9 (51.5) 36.5 149.0 25.3 18.5 7.4 13.0 10.1 6.9 1.4 1.3 1.1 — — — 5.6 7.2 16.0 100 35.1 32.4

Jet Airways 559 SELL 48,293 893 86 (184.6) 1.2 26.0 1,735.6 (101) 2,095.1 (3.0) 473.1 21.6 (662.0) 10.2 8.6 36.9 34.2 13.2 — — — (164.4) 7.5 88.5 400 (28.5) 38.1

Rallis India 122 BUY 23,774 440 194 5.1 6.3 8.6 (21.6) 23 37.6 24.0 19.5 14.2 12.3 11.6 7.9 4.3 3.8 3.2 1.8 1.8 1.8 20.4 19.6 24.5 155 26.8 0.7

SpiceJet 33 BUY 16,130 298 484 (13.7) 0.4 3.5 (649.9) (103.2) 679.1 (2.4) 75.2 9.6 (4.4) 20.2 6.5 (10.5) (50.1) 11.9 — — — (721) (23.2) 325.1 60 80.2 3.0

Tata Chemicals 321 ADD 81,772 1,512 255 32.9 33.6 37.7 28.2 2.2 12.2 9.8 9.6 8.5 5.6 5.7 4.9 1.2 1.1 0.9 3.1 3.1 3.1 12.3 11.1 11.2 370 15.3 3.7

United Phosphorus 123 REDUCE 56,686 1,048 462 12.0 15.0 16.0 (0.4) 24.9 6.5 10.2 8.2 7.7 5.6 5.1 4.6 1.4 1.2 1.1 2.0 2.0 2.0 14.5 16.0 15.0 120 (2.2) 4.7

Others 548,066 10,134 (67.8) 207.9 57.5 47.0 15.3 9.7 12.2 9.0 6.8 2.0 1.8 1.5 1.3 1.3 1.4 4.2 11.5 15.7

KIE universe 51,920,705 960,072 9.8 7.3 13.2 15.6 14.5 12.8 10.0 9.3 7.9 2.4 2.2 1.9 1.5 1.8 1.9 15.5 14.9 15.1

KIE universe ex-energy 44,000,114 813,612 8.9 9.8 15.7 17.1 15.6 13.4 11.7 10.4 8.7 2.7 2.4 2.2 1.5 1.7 1.8 16.1 15.7 16.1

KIE universe ex-energy & ex-commodities 38,010,193 702,851 10.0 11.8 16.5 18.8 16.8 14.4 13.6 11.7 9.6 3.0 2.7 2.4 1.3 1.6 1.7 15.9 15.8 16.3

Notes:

(a) For banks we have used adjusted book values.(b) 2012 means calendar year 2011, similarly for 2013 and 2014 for these particular companies.

(c) EV/Sales & EV/EBITDA for KS universe excludes Banking Sector.

(d) Rupee-US Dollar exchange rate (Rs/US$)= 54.08

Dividend yield (%)



Disclosures

Kotak Institutional Equities Research coverage universeDistribution of ratings/investment banking relationships

Source: Kotak Institutional Equities As of December 31, 2012

Percentage of companies covered by Kotak Institutional Equities, within the specified category.

Percentage of companies within each category for which Kotak Institutional Equities and or its affiliates has provided investment banking services within the previous 12 months.

* The above categories are defined as follows: Buy = We expect this stock to deliver more than 15% returns over the next 12 months; Add = We expect this stock to deliver 5-15% returns over the next 12 months; Reduce = We expect this stock to deliver -5-+5% returns over the next 12 months; Sell = We expect this stock to deliver less than -5% returns over the next 12 months. Our target prices are also on a 12-month horizon basis. These ratings are used illustratively to comply with applicable regulations. As of 31/12/2012 Kotak Institutional Equities Investment Research had investment ratings on 173 equity securities.

19.7%22.0%

35.3%

23.1%

4.0% 4.6%1.7% 2.3%

0%

10%

20%

30%

40%

50%

60%

70%

BUY ADD REDUCE SELL

Ratings and other definitions/identifiers

Definitions of ratings

BUY. We expect this stock to deliver more than 15% returns over the next 12 months.

ADD. We expect this stock to deliver 5-15% returns over the next 12 months.

REDUCE. We expect this stock to deliver -5-+5% returns over the next 12 months.

SELL. We expect this stock to deliver <-5% returns over the next 12 months.

Our target prices are also on a 12-month horizon basis.

Other definitions

Coverage view. The coverage view represents each analyst’s overall fundamental outlook on the Sector. The coverage view will consist of one of the following designations: Attractive, Neutral, Cautious.

Other ratings/identifiers

NR = Not Rated. The investment rating and target price, if any, have been suspended temporarily. Such suspension is in compliance with applicable regulation(s) and/or Kotak Securities policies in circumstances when Kotak Securities or its affiliates is acting in an advisory capacity in a merger or strategic transaction involving this company and in certain other circumstances.

CS = Coverage Suspended. Kotak Securities has suspended coverage of this company.

NC = Not Covered. Kotak Securities does not cover this company.

RS = Rating Suspended. Kotak Securities Research has suspended the investment rating and price target, if any, for this stock, because there is not a sufficient fundamental basis for determining an investment rating or target. The previous investment rating and price target, if any, are no longer in effect for this stock and should not be relied upon.

NA = Not Available or Not Applicable. The information is not available for display or is not applicable.

NM = Not Meaningful. The information is not meaningful and is therefore excluded.

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2. Such research analysts may not be associated persons of Kotak Mahindra Inc and therefore, may not be subject to NASD Rule 2711 restrictions on communications with a subject company, public appearances and trading securities held by a research analyst account.

Kotak Securities Limited and its affiliates are a full-service, integrated investment banking, investment management, brokerage and financing group. We along with our affiliates are leading underwriter of securities and participants in virtually all securities trading markets in India. We and our affiliates have investment banking and other business relationships with a significant percentage of the companies covered by our Investment Research Department. Our research professionals provide important input into our investment banking and other business selection processes. Investors should assume that Kotak Securities Limited and/or its affiliates are seeking or will seek investment banking or other business from the company or companies that are the subject of this material and that the research professionals who were involved in preparing this material may participate in the solicitation of such business. Our research professionals are paid in part based on the profitability of Kotak Securities Limited, which include earnings from investment banking and other business. Kotak Securities Limited generally prohibits its analysts, persons reporting to analysts, and members of their households from maintaining a financial interest in the securities or derivatives of any companies that the analysts cover. Additionally, Kotak Securities Limited generally prohibits its analysts and persons reporting to analysts from serving as an officer, director, or advisory board member of any companies that the analysts cover. Our salespeople, traders, and other professionals may provide oral or written market commentary or trading strategies to our clients that reflect opinions that are contrary to the opinions expressed herein, and our proprietary trading and investing businesses may make investment decisions that are inconsistent with the recommendations expressed herein. In reviewing these materials, you should be aware that any or all of the foregoing, among other things, may give rise to real or potential conflicts of interest. Additionally, other important information regarding our relationships with the company or companies that are the subject of this material is provided herein.

This material should not be construed as an offer to sell or the solicitation of an offer to buy any security in any jurisdiction where such an offer or solicitation would be illegal. We are not soliciting any action based on this material. It is for the general information of clients of Kotak Securities Limited. It does not constitute a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual clients. Before acting on any advice or recommendation in this material, clients should consider whether it is suitable for their particular circumstances and, if necessary, seek professional advice. The price and value of the investments referred to in this material and the income from them may go down as well as up, and investors may realize losses on any investments. Past performance is not a guide for future performance, future returns are not guaranteed and a loss of original capital may occur. Kotak Securities Limited does not provide tax advise to its clients, and all investors are strongly advised to consult with their tax advisers regarding any potential investment.

Certain transactions -including those involving futures, options, and other derivatives as well as non-investment-grade securities - give rise to substantial risk and are not suitable for all investors. The material is based on information that we consider reliable, but we do not represent that it is accurate or complete, and it should not be relied on as such. Opinions expressed are our current opinions as of the date appearing on this material only. We endeavor to update on a reasonable basis the information discussed in this material, but regulatory, compliance, or other reasons may prevent us from doing so. We and our affiliates, officers, directors, and employees, including persons involved in the preparation or issuance of this material, may from time to time have “long” or “short” positions in, act as principal in, and buy or sell the securities or derivatives thereof of companies mentioned herein. For the purpose of calculating whether Kotak Securities Limited and its affiliates holds beneficially owns or controls, including the right to vote for directors, 1% of more of the equity shares of the subject issuer of a research report, the holdings does not include accounts managed by Kotak Mahindra Mutual Fund. Kotak Securities Limited and its non US affiliates may, to the extent permissible under applicable laws, have acted on or used this research to the extent that it relates to non US issuers, prior to or immediately following its publication. Foreign currency denominated securities are subject to fluctuations in exchange rates that could have an adverse effect on the value or price of or income derived from the investment. In addition, investors in securities such as ADRs, the value of which are influenced by foreign currencies affectively assume currency risk. In addition options involve risks and are not suitable for all investors. Please ensure that you have read and understood the current derivatives risk disclosure document before entering into any derivative transactions.

This report has not been prepared by Kotak Mahindra Inc. (KMInc). However KMInc has reviewed the report and, in so far as it includes current or historical information, it is believed to be reliable, although its accuracy and completeness cannot be guaranteed. Any reference to Kotak Securities Limited shall also be deemed to mean and include Kotak Mahindra Inc.

Documents

India Daily, March 19, 2013 - Kotak Securities...For Private Circulation Only. FOR IMPORTANT INFORMATION ABOUT KOTAK SECURITIES’ RATING SYSTEM AND OTHER DISCLOSURES. REFER TO THE