India Daily, September 26, 2012 - Kotak Securities · McDonald’s, KFC, Nirula’s, Domino’s, Haldiram’s, Bikanerwala, Agarwal Sweets and Pizza Hut Food Courts Typically a collection

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

INDIA DAILYSeptember 26, 2012 India 25-Sep 1-day1-mo 3-mo

Sensex 18,694 0.1 5.1 10.6

Nifty 5,674 0.1 5.3 10.8

Global/Regional indices

Dow Jones 13,458 (0.7) 2.3 7.4

Nasdaq Composite 3,118 (1.4) 1.6 9.2

FTSE 5,860 0.4 1.4 7.6

Nikkie 8,956 (1.5) (1.3) 3.4

Hang Seng 20,546 (0.7) 3.4 8.2

KOSPI 1,984 (0.4) 3.3 9.1

Value traded – India

Cash (NSE+BSE) 232 119 118

Derivatives (NSE) 1,917 1,285 1,765

Deri. open interest 1,704 1,550 1,381

Forex/money market

Change, basis points

25-Sep 1-day 1-mo 3-mo

Rs/US$ 53.5 4 (228) (357)

10yr govt bond, % 8.3 (3) (3) (4)

Net investment (US$mn)

24-Sep MTD CYTD

FIIs 310 2,467 14,755

MFs (118) (488) (282)

Top movers -3mo basis

Change, %

Best performers 25-Sep 1-day 1-mo 3-mo

UNSP IN Equity 1148.7 8.9 22.7 73.8

GRASIM IN Equity 3250.6 1.5 7.2 28.2

Z IN Equity 178.0 1.4 6.8 27.2

FTECH IN Equity 927.1 (0.4) 10.6 26.4

ICICIBC IN Equity 1066.9 (0.4) 11.8 26.4

Worst performers

WLCO IN Equity 101.1 (0.9) 5.0 (14.9)

BOI IN Equity 302.0 1.0 10.8 (12.4)

NACL IN Equity 51.9 (0.9) (0.4) (11.7)

BHARTI IN Equity 275.6 (1.2) 11.2 (9.9)

HPCL IN Equity 307.1 0.7 (3.7) (9.2)

Contents

Special Reports

Initiating Coverage

Speciality Restaurants: A menu full of offerings

Nascent business with strong growth potential; 10% potential upside. ADD

SRL: A pioneer with first-mover advantage

Expansion-driven sales growth

Key risks: Heavy dependence on a single brand, food inflation, failure of new restaurants

Daily Alerts

Sector

Banks/Financial Institutions: Banks' earnings to slow, retail NBFCs well placed

Earnings growth to slow to 14% yoy; opportunity to book profits

NIM to remain under pressure; wholesale fund entities well placed

Outlook on loan impairment negative; credit costs to stay high

NBFCs: Loan growth to stay strong, margins stable

Telecom: Just how wide is the operational gap between the top-3 and the rest?

The best (placed) versus the rest - a few numbers

Utilities: SEBs: After restructuring, larger challenges

Restructuring to address immediate cash crunch, political will key to long-term sustainability

Fuel availability and unviable sale arrangements pose earnings risks

We maintain a conservative stance despite recent tariff hikes and policy impetus

The paradox of fixing tariffs and Government ownership

Strategy

Strategy: Redemptions worth US$1.3 bn expected in the next three months

FCCB activity - previous and upcoming

FCCB universe - Tulip Telecom corrects ~50% last month

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

Nascent business with strong growth potential; 10% potential upside. ADD

We arrive at a PE-based target price of `200 and initiate coverage with an ADD rating. We value the company at 27X September 2013E EPS; ~15% premium to global food service companies given strong growth prospects and the nascent stage of the out-of-home eating market in India. We expect PAT CAGR of 26% over FY2013-15E. Our positive view stems from our confidence in (1) the brand equity of Mainland China, (2) proven execution capability of the management; SRL is the only pan-India food-service chain in the fine-dining space and (3) robust back-end processes that are in place.

SRL: A pioneer with first-mover advantage

SRL forms part of the organized food-service market, which is in a nascent stage and forms only ~20% of the industry. The organized industry is growing at 25% a year, driven by demographic and socio-economic changes such as rising disposable income, increasing number of working women and growing urbanization. Fine-dining restaurants are at the top of the evolution of eating habits. SRL is favorably placed in this market as it is backed by (1) the strength of a professional management, (2) robust supply chain, (3) a scalable model, (4) customer focused and innovative marketing and (5) first-mover advantage. Key focus areas are (1) expansion of the presence of Mainland China, (2) emphasizing the owned-restaurant format versus a franchise and (3) improvement of profitability and economies of scale.

Expansion-driven sales growth

We model sales CAGR of 30%, EBITDA CAGR of 30% and PAT CAGR of 26% over FY2013-15E. We expect SRL to open 11 Mainland China restaurants in FY2013E and nine in FY2014E and two new Sigree restaurants in each of the two years. We model 10% reduction in Mainland China’s churn rate in FY2013E over FY2012 and assume churn rates will stay flat in FY2014E to account for slowing discretionary spends, rising competition and lower-than-average churn rates of the new restaurants. SRL raised `1.8 bn from a public issue, which will be used to open new restaurants in a phased manner.

Key risks: Heavy dependence on a single brand, food inflation, failure of new restaurants

The key risks are (1) ~62% of sales come from a single brand, (2) food inflation and (3) failure of new restaurants.

Speciality Restaurants (SRL)

Consumer products

A menu full of offerings. We initiate coverage of Speciality Restaurants Ltd (SRL) with an ADD rating and target price of `200. SRL is a pan-India food-service chain and is favorably placed as it is backed by (1) a professional management, (2) robust supply chain and (3) a scalable model. It is focusing on expanding the presence of its flagship brand, Mainland China, due to wide acceptance of Chinese cuisine and relatively superior margins. We value the company at 27X Sept13E EPS; PAT CAGR of 26% over FY2013E-15E. The key risk is significant dependence on a single brand.

Speciality RestaurantsStock data Forecasts/Valuations 2012 2013E 2014E

52-week range (Rs) (high,low) EPS (Rs) 4.9 6.6 8.5Market Cap. (Rs bn) 8.5 EPS growth (%) 7.6 34.9 28.5

Shareholding pattern (%) P/E (X) 36.9 27.4 21.3Promoters 60.7 Sales (Rs bn) 2.0 2.5 3.3FIIs 5.3 Net profits (Rs bn) 0.2 0.3 0.4MFs 10.0 EBITDA (Rs bn) 0.4 0.5 0.7

Price performance (%) 1M 3M 12M EV/EBITDA (X) 23.4 14.4 10.6Absolute 8.7 (17.2) 0.0 ROE (%) 16.2 14.7 12.2Rel. to BSE-30 3.4 (25.3) 0.0 Div. Yield (%) 0.0 0.0 0.0

Company data and valuation summary

227-150

ADD

SEPTEMBER 25, 2012

INITIATING COVERAGE

Coverage view: Cautious

Price (Rs): 181

Target price (Rs): 200

BSE-30: 18,694

Speciality Restaurants Consumer products

KOTAK INSTITUTIONAL EQUITIES RESEARCH 3

Overview of the restaurant industry

Description Examples

Fine Dining Restaurants

Characterised by full service with a specific dedicated meal course, décor features high quality material and highly trained staff in formal attire.

Olive

Casual Dining Restaurants

Characterised by moderately priced food in a causal atmosphere with table service (except in buffet-style restaurants) and sometimes a full bar with separate bar staff. Caters to the market segment between fine dining and quick-service restaurants.

Geoffrey’s in NCR

Bars and LoungesCharacterised by a focus on beverages, particularly alcoholic beverages. The higher-end bars with premium pricing are referred to as lounges

F Bar & Lounges, Elevate, Steel, Mocha, Den, Hard Rock Café, Sports Bar and TGIF

Quick Service Restaurants

Characterised by minimal table service. Some restaurants also feature takeaway and home delivery formats.

McDonald’s, KFC, Nirula’s, Domino’s, Haldiram’s, Bikanerwala, Agarwal Sweets and Pizza Hut

Food CourtsTypically a collection of multiple quick service restaurants with a common seating area: A relatively new format, popularised by shopping malls. Typically present in shared spaces including malls, airports, hospitals and office complexes

No dominant brand

Cafes Comprises modern format beverage retailing chains including coffee bars, parlors and tea bars.

Barista Lavazza and Café Coffee Day

KiosksA relatively new format comprising mainly Chinese food, corn, savoury Indian snacks including chaat and ice-cream.

Café Coffee Day, Nirula's

Source: NRAI, Kotak Institutional Equities

From cooking at home to destination restaurants Evolution of eating habits plotted in terms of cost and convenience

Cost

Convenience

Cooking at home

Ready to cook meal makers

Snack meal

Cold storage ready to cook

Cold storage ready to eat

Destination restaurants

Home delivery / QSRs

Did not find much success due to preference for hot fresh food. Anything frozen is considered stale in India

Making headway due to high level of convenience and freshness of food

Priced higher than QSRs due to better ambience

Source: Kotak Institutional Equities, Industry sources

Consumer products Speciality Restaurants

4 KOTAK INSTITUTIONAL EQUITIES RESEARCH

Significant potential for SRL to scale-up in cities in which it operates and to enter new cities City-wise restaurant status on June 30, 2012

City StatusMainland

ChinaOh!

Calcutta Haka SigreeFlame &

Grill Machaan Kibbeh Kix ShackJust

BiryaniSweet Bengal Total

Ahmedabad F 1 1

Aurangabad O 1 1 2

Bangalore O 5 1 1 7

Baroda F 1 1

Bhubhaneshwar F 1 1 2

Chandigarh F 1 1

Chennai F/0 4 1 5

Cochin O 1 1

Delhi O 1 1 2

Dhaka F 1 1 2

Durgapur F 1 1

Gurgaon O 1 1

Guwahati F 1 1 2

Hyderabad O 2 1 1 1 5

Kolkata O 3 2 2 1 2 1 1 1 13

Ludhiana F 1 1 2

Lucknow F 1 1

Mangalore F 1 1

Mumbai O 8 2 1 1 1 12 25

Nasik F 1 1 1 3

Noida O 1 1

Pune O 3 1 1 5

Surat F 1 1 2

Total 42 8 3 5 7 5 1 1 1 1 12 86 Note: (a) F is franchised; O is owned. (b) In Chennai there are three owned Mainland China restaurants, one franchised Mainland China and one owned Sigree restaurant.

Source: Company, Kotak Institutional Equities

Summary of year-on-year growth in the number of restaurants in the SRL network

Brands All Franchise All Franchise All Franchise All Franchise All Franchise All Franchise All Franchise All FranchiseMainland China 7 — 9 — 13 1 17 2 26 8 30 11 38 13 42 13Oh! Calcutta 3 — 4 — 4 — 7 — 7 — 8 1 8 1 8 1Haka 1 — 1 — 6 — 7 — 4 — 4 — 3 — 3 —Sigree — — 2 — 3 — 4 — 4 — 4 — 5 — 5 —Flame & Grill — — — — 1 — 1 — 4 1 7 2 7 2 7 2Machaan — — — — 1 — 2 — 4 2 6 4 6 4 5 3Shack — — — — — — 1 — 1 — 1 — 1 — 1 —Kix — — 1 — 2 — 1 — 1 — 1 — 1 — 1 —Kibbeh — — — — — — — — — — 1 — 1 — 1 —Just Biryani — — — — 1 — 1 — 1 — 1 — 1 — 1 —IVY — — — — — — 1 — — — — — — — — —Sub-total 11 — 17 — 31 1 42 2 52 11 63 18 71 20 74 19 Sweet Bengal — — — — 9 — 10 — 11 — 11 — 12 — 12Total 11 — 17 — 40 1 52 2 63 11 74 18 83 20 86 19

30-Jun-1220122006 2007 2008 2009 2010 2011

Source: Company

Speciality Restaurants Consumer products


SRL has a pan-India presence with brands across various cuisines and price points Summary of SRL’s brands

No. of cities

Brand Concept FY2012 FY2012 FY2012 (mn) 31-Mar-12 (`) (sq. ft) (hr)Mainland China Authentic chinese food 62% 38 1.71 1994 23 400-850 110 - 240 4000 - 6000 >1Oh! Calcutta Authentic bengali food 12% 8 0.25 1996 6 700-1100 62 - 150 2000 - 4000 >1Sigree Nothwest Indian cuisine 9% 5 0.27 2006 5 500-650 138 - 264 4000 - 6000 >1Haka On-the-go chinese 3% 3 0.16 2006 2 250-350 70 - 168 1500 - 3000 <1Machaan Jungle theme 4% 6 0.14 2007 6 500-550 168 - 188 5000 - 9000 >1Flame & Grill Cook kebab at your table! 5% 7 0.17 2008 6 450-650 60 - 106 2500-5000 >1Sweet Bengal Confectionary shop 4% 12 1Other smaller brands:Kix Bar with dance floor 1 2006 1Just Biryani Take-away format 1% 1 2001 1Shack Bar lounge 1 0.01 2008 1Kibbeh Lebanese bar lounge 1 0.02 2010 1

Typical store size

Typical time spent by customer

Avg. bill value range per

person Seating capacity

% of sales

No. of customers served in Start-off

date

No. of outlets


Economics of a typical Mainland China restaurant, March fiscal year-end, 2013E

Capex to set up a new store (` mn) 35Covers per restaurant (#) 142Average bill value per cover (`) 730Churn (X) 1.38Annual sales (` mn) 52 Store EBITDA % 32Store EBITDA (` mn) 17 Break-even at store level (years) 2

Source: Kotak Institutional Equities estimates

Consumer products Speciality Restaurants


Specialty Restaurants: Profit model, balance sheet, cash model, March fiscal year-ends, 2009-15E (` mn)

2009 2010 2011 2012 2013E 2014E 2015EProfit modelNet revenues 1,156 1,288 1,732 1,962 2,476 3,299 4,173 EBITDA 197 264 381 370 496 667 844 Other income 10 10 19 27 92 123 143 Interest expense (19) (17) (17) (27) (7) (1) (1) Depreciation (69) (114) (143) (123) (163) (220) (264) Pretax profits 119 142 241 247 419 569 723 Tax (44) (46) (81) (74) (109) (171) (231) Net income 75 97 160 172 310 398 492 Adjustments on account of restatements (10) — — — — — —Restated profits 65 97 160 172 310 398 492 Earnings per share (`) 1.9 2.7 4.6 4.9 6.6 8.5 10.5 Balance sheetTotal shareholder equity 556 706 976 1,149 3,070 3,468 3,960 Total borrowings 242 237 198 223 (0) (0) (0) Deferred tax liability (2) (6) (24) (43) (43) (43) (43) Total liabilities and equity 796 937 1,150 1,328 3,026 3,425 3,916 Net fixed assets 679 731 727 879 1,191 1,406 1,493 Investments 0 55 251 150 150 150 150 Cash 9 40 48 47 1,361 1,434 1,720 Net current assets 108 111 124 251 324 434 554 Total assets 796 937 1,150 1,328 3,026 3,425 3,916 Free cash flowOperating cash flow, excl. working capital 158 181 293 281 473 619 755 Working capital changes 3 (23) (22) (161) (72) (111) (119) Capital expenditure (308) (142) (140) (312) (475) (435) (350) Free cash flow (148) 16 131 (192) (74) 73 286 RatiosNet debt/equity (%) 41.8 27.9 15.3 15.3 (44.3) (41.3) (43.4) Net debt/EBITDA (X) 118.1 74.4 39.3 47.5 (274.1) (215.0) (203.7) Return on equity (%) 12.4 15.3 19.1 16.2 14.7 12.2 13.2 Book value per share (`) 15.8 20.1 27.7 32.6 65.4 73.9 84.3 RoACE (%) 16.3 17.3 22.8 19.9 15.3 13.9 15.8



Earnings growth to slow to 14% yoy; opportunity to book profits

We see banks’ overall earnings growth slowing to 14% yoy with public banks growing by 12% yoy (ex-SBI by 7% yoy) and private banks by 19% yoy as revenue growth is slowing and overall provisions remain high. We believe (1) interest rates are unlikely to decline sharply, (2) stress on the balance sheet is yet to peak as we see impairments from infrastructure and (3) revenue growth may be challenging. Stocks rallied sharply and we would use the opportunity to reduce exposure. We downgrade PNB to REDUCE (from ADD), OBC to ADD (from BUY) and HDFC Bank to SELL (from REDUCE). We like ICICI Bank, Federal Bank and SBI at current levels despite limited upside.

NIM to remain under pressure; wholesale fund entities well placed

We expect NIM in the sector to be under pressure (+/- 10 bps) though banks with significant dependence on wholesale funds should start reporting NIM expansion (Canara, OBC, Yes and IndusInd). The full impact of the reduction of base rate (May 2012) should be reflected in the current quarter. NBFCs are unlikely to report significant NIM improvement in 2QFY13 though recent trends in liquidity offer comfort due to (1) CRR/SLR reduction and (2) seasonally slack demand for loans. Overall loan growth is showing signs of slowing (17% yoy, 0% qoq until September 07, 2012). Banks will find it difficult to maintain high NIM as the impact of higher cost of funds in an environment of slower economic growth may increase NPLs.

Outlook on loan impairment negative; credit costs to stay high

Our outlook on fresh loan impairment is negative even though some concerns, like SEB exposure, are being addressed. Retail portfolios (for banks and NBFCs) should see marginal rise in stress; however, the corporate portfolio, especially in the SME and mid-corporate segments are expected to report higher stress. Incrementally, we believe stress in the infrastructure value chain should begin to be reflected in the current quarter; exposure to several other segments (like textiles, iron and steel) has not yet provided respite. Fresh additions to restructured loans will be lower as SEB-related restructuring would be low. We expect loan-loss provisions to grow 20% (public banks 16% due to a higher base from their transition to the stringent NPL platform in 2QFY12).

NBFCs: Loan growth to stay strong, margins stable

We expect most NBFCs to report stable operating performance in 2QFY13: 20-30% loan growth, almost stable margins qoq driving 25-30% growth in core earnings. Most retail asset classes reported stable collections/ NPLs though we expect NBFCs to accelerate provisions in light of a tighter regulatory framework. Improved monsoons over the last few weeks provide comfort to rural-focused NBFCs. Asset finance companies with fixed-rate asset book (Shriram Transport, Mahindra Finance and Shriram City Union Finance) will be key beneficiaries of improving liquidity. We prefer IDFC and LICHF in the infrastructure finance and housing finance segments respectively. We find moderate upside after rolling over price targets of NBFCs to September 2013.

Banks/Financial Institutions India

Banks’ earnings to slow, retail NBFCs well placed. 2QFY13 should see overall earnings growth of 14% yoy; we expect revenue growth of 12% yoy and overall provisions to remain high (20% yoy) as we believe stress on the balance sheet will continue. We believe the recent run-up in prices is an attractive opportunity to reduce exposure to banks. We downgrade HDFC Bank (SELL), PNB (REDUCE) and OBC (ADD). Despite limited upside, we like ICICI Bank, Federal Bank and SBI and asset-finance companies among NBFCs like Shriram Transport, Mahindra Finance and Shriram City.

CAUTIOUS

SEPTEMBER 25, 2012

UPDATE

BSE-30: 18,673

QUICK NUMBERS

• Earnings growth of 14% yoy

• We downgrade HDFC Bank, PNB and OBC after a recent rise in prices

• ICICI Bank, Federal Bank and SBI are our preferred picks

India Banks/Financial Institutions


Most bank valuations offer little comfort; use positive sentiment to cut exposure

Strong rally in financials. We note that financial stocks, especially banks, rallied by 10-30% over the past month after a (1) cut in CRR, offering an outlook of a more subdued interest rate environment, (2) action from policymakers with hike in fuel prices, relaxations on investments (FDI in retail) and addressing bottlenecks that required immediate attention, (3) possible revival in the investment cycle and (4) inexpensive valuation in select banks, especially mid-tier PSU banks.

Several macro challenges persist. We believe that taking a constructive call on the sector is a bit early as we see headwinds and would use the underlying positive sentiment to reduce our exposure. (1) We believe the RBI would find it challenging to cut interest rates aggressively despite signs of slowdown in economic activity till inflation moves to a comfortable zone; our economist expects RBI to reduce policy rates by another 50 bps in 2HFY13; (2) the Government is yet to address its fiscal imbalance and has probably addressed short-term issues (fuel hikes) to prevent the system from destabilizing. We are yet to see meaningful reforms; (3) loan sanctions broadly indicate a weak outlook in FY2012-14E; (4) the non-retail portfolio remains under stress. While stress in the infrastructure portfolio is slowly emerging, other segments like textiles, iron and steel are yet to see a revival in demand and regulatory issues (mining ban and non-availability of fuel). We believe that adjusting for these numbers, the stocks are not as inexpensive as headline valuations suggest.

Downgrade select banks. We use the underlying positive sentiment to reduce our exposure to banks. We downgrade PNB to REDUCE (from ADD as risk to the balance sheet remains high), OBC to ADD (from BUY as the impact of SEB-related restructuring and decline in funding costs are reasonably reflected at current multiples). In private banks, we downgrade HDFC Bank as we find valuations expensive at 3.6X book and 18X FY2014E EPS for RoEs of 18-19% and earnings growth of ~25% CAGR over FY2012-14E. We revise our TP to `580 from (`575 earlier).

Retail NBFCs better placed. With limited exposure to corporate assets (except infrastructure NBFCs), we believe retail NBFCs are relatively better placed in the current environment. Strong growth, high margins and RoE and low NPL compare retail NPL with private banks. Toping off of interest rates (even as we don’t expect the RBI to aggressively cut lending rates) offers comfort to retail NBFCs. Retail NBFCs (except housing finance) have a fixed-rate asset book while a large portion of their liabilities carry a floating rate. Likely stable/lower borrowing costs and a steadily reprising loan portfolio yield will improve margins for retail/asset finance NBFCs. An increase in meaningful competition from banks, slippages in retail segments remain key risks.



PAT growth expected to be 14% yoy; private banks are expected to report 19% yoy growth and public banks, 12% yoy Growth in PAT, March fiscal year-ends, 4QFY08-2QFY13E, (%)

(20)

-

20

40

60

80

4QFY

08

1QFY

09

2QFY

09

3QFY

09

4QFY

09

1QFY

10

2QFY

10

3QFY

10

4QFY

10

1QFY

11

2QFY

11

3QFY

11

4QFY

11

1QFY

12

2QFY

12

3QFY

12

4QFY

12

1QFY

13

2QFY

13E

Public Private Sector


NII growth to slow further to 13% yoy Growth in NII, March fiscal year-ends, 4QFY08-2QFY13E (%)

-

12

24

36

48

60

4QFY

081Q

FY09

2QFY

093Q

FY09

4QFY

091Q

FY10

2QFY

103Q

FY10

4QFY

101Q

FY11

2QFY

113Q

FY11

4QFY

111Q

FY12

2QFY

123Q

FY12

4QFY

121Q

FY13

2QFY

13E

Public Private Sector


We expect loan-loss provisions to remain high Loan-loss provisions, March fiscal year-ends, 4QFY08-2QFY13E (` bn)

-

20

40

60

80

100

4QFY

081Q

FY09

2QFY

093Q

FY09

4QFY

091Q

FY10

2QFY

103Q

FY10

4QFY

101Q

FY11

2QFY

113Q

FY11

4QFY

111Q

FY12

2QFY

123Q

FY12

4QFY

121Q

FY13

2QFY

13E

Public Private




Strong PAT growth, led by SBI, HDFC Bank, ICICI Bank and select mid-tier banks (lower base), yoy growth in PAT, March fiscal year-ends, 1QFY12-2QFY13E (%)

1QFY12 2QFY12 3QFY12 4QFY12 1QFY13 2QFY13EPublic banksAndhra Bank 20.1 4.3 (8.4) 8.6 (6.2) (7.4) Bank of Baroda 20.2 16.3 20.7 17.3 10.3 (4.9) Bank of India (26.8) (20.4) 9.6 93.0 68.2 47.0 Canara Bank (28.4) (15.4) (20.8) (7.8) 6.8 (14.5) Corporation Bank 5.3 14.0 5.2 1.7 5.4 (11.5) Indian Bank 10.5 12.7 7.0 (21.3) 13.5 0.2 IOB 2.6 0.6 (53.3) 21.8 14.0 63.5 OBC (2.4) (57.8) (13.6) (20.5) 10.2 99.4 PNB 3.4 12.1 5.5 18.6 12.7 (14.3) State Bank of India (45.7) 12.4 15.4 19,297.8 136.9 23.6 Union Bank (22.8) 16.2 (66.0) 29.4 10.1 70.9 Old private banksFederal Bank 10.8 36.2 41.1 38.4 30.2 (3.0) J&K Bank 24.6 20.9 27.1 50.2 35.0 9.2 New private banksAxis Bank 27.0 25.2 23.7 25.2 22.4 12.7 IndusInd Bank 52.0 45.0 33.9 30.1 31.1 14.2 HDFC Bank 33.7 31.5 31.4 30.4 30.6 29.2 ICICI Bank 29.8 21.6 20.3 31.0 36.2 19.9 Yes Bank 44.1 10.2 18.9 7.0 15.2 20.7 Total banks (5.6) 10.3 8.1 59.3 37.9 14.5 Public sector banks (18.5) 3.2 0.2 78.6 41.8 12.1 Private sector banks 30.4 27.0 26.1 30.4 31.0 19.0

Source: Companies, Kotak Institutional Equities estimates

NBFCs: Steady trends in 2QFY13

Loan growth will likely remain steady. We expect most NBFCs to deliver steady yoy loan growth. After a seasonally weak 1QFY13, we expect business traction to pick-up in 2QFY13. However, 2HFY13 is crucial for most consumption-linked plays; pick-up in traction in infrastructure development after the monsoons boosts demand for derived segments like construction during the second half of the financial year.

High traction will help IDFC to accelerate loan growth to 33%; stable qoq;

Mahindra Finance may deliver 33% loan growth due to 40% loan growth in FY2012 and 37% loan growth in 1QFY13. Improvement in the monsoon offers a respite even as the next three months remain crucial;

Demand for housing remains weak. Business in smaller towns will drive business for housing finance companies. SBI’s recent home loan rate cut is a risk for other players;

Gold loan companies’ guidance is for a stable loan book.

Margins: Stable in 2QFY13E. We expect reported NIM to be stable qoq for most NBFCs. Short-term rates declined by about 1% over the last three months; since short-term loans have a small share (10-20%) in the overall borrowings of NBFCs, the impact will not be significant. Reprising of old low-cost debt may raise costs though higher rates on new loan assets are likely to offset this, in most cases.

We don’t expect significant NPLs though provisions to be high



According to most banks and NBFCs, retail assets continue to deliver stable collections. Some banks/ NBFCs have reported higher slippages in CE/CVs though the decline is manageable, in their view. Improvement in the monsoons boosted collections towards the end of the quarter. We however expect provisions to increase as most NBFCs are likely to make excess provisions in light of expectations of NPL and likely tightening regulations. The draft NBFC Committee (Usha Thorat) report has provided for three months days-past-due norm for recognition of NPLs (in line with banks) from the current practice of six months days-past-due basis. While NBFC may get a longer period (2-3 years, as highlighted by news reports) to comply with these guidelines, most NBFCs might make accelerated provisions to comply faster with the guidelines. Notably, the guidelines are currently in draft form.

Rolling over price target to September 2013E

We are raising our price targets by 5-6% for non-banks as we rollover to September 2013E--12-months forward. We consider the average of fair value estimates for FY2013E and FY2014E to calculate our September 2013E-based price target.

NBFC: Old and new price targets (Rs)

2013E 2014EAverage for 2013E and

2014E(Rs) (Rs) (Rs)

Bajaj Finserv 680 768 724HDFC 660 725 692IDFC 155 175 165LICHF 270 305 288Muthoot Finance 190 215 202PFC 205 232 218REC 220 249 234SCUF 850 961 905Shriram Transport 650 735 692


Mahindra Finance: Pick-up in monsoon is positive

We are revising our estimates for Mahindra Finance by 8% and 2% in FY2013 and FY2014 to factor faster loan growth and somewhat better margins and capital gains from stake sale in the insurance distribution business. We are raising our fair value estimate for the stock to `850 (based on FY2013E) and `960 (based on FY2014E); our target price (average of the two) is `905 as compared to `775 earlier.

Improvement in monsoon over the last month vis-à-vis 25% deficit in the first two months makes us more assertive about near-term growth and NPL performance of the company. MMFS’s business (primarily asset-quality performance) has historically reported high linkages with the monsoon though incrementally the linkages are reducing. We now expect MMFS to report 31% and 25% loan growth over FY2013E and FY2014E respectively against 22% and 24% assumed earlier.

MMFS sold 12.4% stake in the insurance distribution company to leapfrog investments at Rs643 mn, thereby valuing the business at Rs5.2 bn or about 18X annualized earnings of 1QFY13. The deal is awaiting regulatory approval and will likely be completed in 2HFY13. The company will realize capital gains of Rs600 mn (before tax) on this deal.



Monsoons in September provide comfort Monthly deficit in monsoon and GNPL of MMFS in the following financial year-end, 2001-2012

June July August September June-Sept

(cumulative)G NPLs of

MMFSYear (%) (%) (%) (%) (%) (%)

2001 36 (5) (20) (36) (8) 4.02002 9 (54) (2) (13) (19) 7.42003 10 7 (5) (2) 2 7.82004 (1) (20) (4) (30) (14) 8.12005 (10) 15 (28) 20 (1) 6.82006 (13) (2) 7 2 (0) 4.92007 19 (2) (2) 18 6 5.52008 24 (17) 1 (6) (2) 7.62009 (47) (4) (27) (20) (22) 9.62010 (16) 3 5 12 2 7.02011 10 (14) 5 11 9 3.12012 (29) (22) (2) 17 (10)

Source: Metrological Department of India

Mahindra Finance: Old and new estimates March fiscal year-ends, 2013-2014 (%)

Old estimates New estimates % change 2013E 2014E 2013E 2014E 2013E 2014E

Net interest income 20,645 25,652 21,852 27,534 6 7Loan book (Rs bn) 213 265 230 288 8 9

Loan growth (%) 22 24 31 25

NIM (%) 10.1 10.3 10.3 10.2 0 0NPL provisions 2,913 4,068 3,036 4,919 4 21Other income 1,050 1,200 860 500 (18) (58)

Securitization 350 500 350 500 0 0Operating expenses 7,304 8,782 7,304 8,782 0 0

Employee 2,355 2,614 2,355 2,614 0 0Others 4,948 6,168 4,948 6,168 0 0

PBT 11,478 14,002 12,373 14,333 8 2Tax 3,754 4,580 4,045 4,700 8 3

PAT 7,724 9,422 8,328 9,633 8 2PBT-secu income+ provisions 14,041 17,570 15,058 18,752 7 7EPS(Rs) 75 92 81 94 8 2


Margins to remain almost stable in 2QFY13E Quarterly trends in NIM, 2QFY12-2QFY13E (%)

2QFY12 3QFY12 4QFY12 1QFY13 2Q13E Comments HDFC 3.7 3.5 4.8 3.4 3.9 - IDFC 4.3 4.5 4.5 4.4 4.5 NIM stable qoqLIC Housing Finance 2.5 2.3 2.4 2.2 2.3 Marginal pick-up in margins qoqMahindra Finance 10.5 10.1 11.7 10.6 10.1 Higher colelctions boost yieldMuthoot Finance 11.4 10.8 9.7 9.9 10.1 Slight NIM imporvement Power Finance Corporation 4.0 3.8 4.0 4.2 4.1 Margins flat qoqRural Electrification Corporation 4.4 4.5 4.2 4.6 4.6 Margins flat qoqShriram Transport Finance 8.9 8.3 8.1 7.8 7.7 Margins flat qoqSCUF 10.2 10.1 11.0 10.5 10.4 Margins flat qoq

Source: Company, Kotak Institutional Equities estimates



YoY loan growth to moderate Quarterly trends in loan growth, 2QFY12-2QFY13E (%)

2QFY12 3QFY12 4QFY12 1QFY13E 2QFY13E CommentsIDFC 14 25 28 34 33 Loan growth impressiveLIC Housing Finance 29 27 23 24 22 Retail loan growth remains high at 26%Mahindra Finance 54 50 40 37 33 Loan traction remains strongMuthoot Finance 81 66 55 30 11 Loan book flat qoqPower Finance Corporation 26 28 31 30 27 Loan growth will likley moderateRural Electrification Corporation 24 25 23 24 23 Stable loan growthSCUF 57 62 68 69 55 Loan growth moderates but remains highShriram Transport Finance 20 16 11 13 13 Growth remains moderate in 2QFY13


Mixed trends in PAT growth Quarterly trends in yoy earnings growth, 2FY12-2QFY13E (%)

2QFY12 3QFY12 4QFY12 1QFY13 2QFY13EHDFC 20 10 16 19 21 IDFC 55 19 15 21 (25) LICHF (58) 43 (19) (11) 173 Mahindra Finance 17 34 45 57 37 Muthoot Finance 85 74 40 26 19 PFC (40) 69 35 42 131 REC 1 16 9 32 45 Shriram Transport (0) 0 (10) (7) 15 SCUF 45 41 29 29 36


Loan growth at 17% yoy; loan growth slowing down

We see loan growth slowing down, albeit slowly, in 2QFY12. We broadly expect loan growth at 17-18% levels with YTD growth at 3%, no growth in overall loans qoq in 2QFY12. Sectors like infrastructure segment has been slowing down as concern rise on the viability of various projects especially given the regulatory action and economic slowdown. Credit substitutes seem to have picked up as indicated by the recent issuances of commercial paper and bank’s investment in these issuances (85% qoq growth though overall proportion to loans is lower). As highlighted in our recent report, ‘Weak loan growth outlook’, dated September 13, 2012, we expect overall loan growth to further decelerate to 14% levels over the next few months.

Funding seems to be less of a concern as the underlying liquidity environment has become comfortable post the CRR and SLR reduction in recent quarters.

.



Deposit growth steadily improving yoy growth in deposits, March fiscal year-ends (%)

10

15

20

25

30

Apr

May Jun Jul

Aug Se

p

Oct

Nov

Dec Jan

Feb

Mar

2013 2010

2012 2011

Source: Kotak Institutional Equities

Demand for loans is showing signs of slowdown yoy growth in advances, March fiscal year-ends (%)

8

14

20

26

32

38

Apr

May Jun Jul

Aug Se

p

Oct

Nov

Dec Jan

Feb

Mar

2010 20112012 2013


NIM to remain under pressure; NII expected to grow 13% yoy

We broadly expect NIM to remain under pressure in the current quarter though wholesale banks should start witnessing marginal benefit from the recent decline in short term rates. We expect overall NII growth at 13% yoy with public banks at 9% and private banks at 22% yoy. The full impact of base rate reduction taken in May 2012 should be reflected in the current quarter and select banks have been reducing their underlying spreads across products to ease the strain on corporates. Select banks which reported higher income de-recognition in 1QFY13 on the back of (1) loans restructured in the aviation sector (like Bank of India) and (2) higher slippages are likely to see some marginal relief qoq.

We expect ICICI Bank and HDFC Bank to report stable margin qoq. Axis Bank, Yes Bank and IndusInd Bank should report marginal improvement in NIM qoq largely on the back of lower cost of funds and run-off of PSL portfolio. Amongst public banks we expect OBC, Corporation Bank and BoI to report marginally higher NIM while most of the other banks to report stable/marginal decline in NIM.

NII growth to be lower than loan growth in the quarter YoY growth in NII, March fiscal year-ends, 1QFY12-2QFY13E (%)

1QFY12 2QFY12 3QFY12 4QFY12 1QFY13 2QFY13E

Public banksAndhra Bank 23.6 21.4 17.1 6.1 3.1 1.6 Bank of Baroda 23.6 27.0 15.8 7.0 21.8 11.0 Bank of India 6.6 7.2 4.1 8.4 10.4 14.4 Canara Bank 3.8 (2.1) (8.2) 5.0 2.8 (0.4) Corporation Bank 1.4 4.0 2.3 9.5 14.3 14.3 Indian Bank 11.2 15.5 12.8 (2.6) 12.0 2.9 IOB 31.0 32.4 8.1 10.3 11.8 10.5 OBC (3.7) (8.2) 10.7 5.4 10.6 22.5 PNB 19.9 16.0 10.4 9.3 18.6 7.7 State Bank of India 32.8 28.4 26.7 45.2 14.6 9.6 Union Bank 18.0 8.2 10.2 9.3 14.6 13.2

Old private banksFederal Bank 11.2 8.2 18.1 9.7 6.9 7.0 J&K Bank 19.2 16.0 15.7 24.1 22.5 23.3

New private banksAxis Bank 13.9 24.3 23.5 26.2 26.4 13.4 IndusInd Bank 31.9 27.1 18.6 19.7 24.1 24.5 HDFC Bank 18.6 16.6 12.2 19.3 22.3 21.3 ICICI Bank 21.1 13.7 17.3 23.7 32.4 29.0 Yes Bank 35.1 23.1 32.3 28.6 33.3 31.7




Short-term rates have declined in recent months CP and CD rates, September 2009- September 2012 (%)

0

3

6

9

12

15

Sep-

09

Dec

-09

Mar

-10

Jun-

10

Sep-

10

Dec

-10

Mar

-11

Jun-

11

Sep-

11

Dec

-11

Mar

-12

Jun-

12

Sep-

12

CP rate CD rate

Source: Bloomberg, Kotak Institutional Equities

Liquidity at comfortable levels Net Reverse Repo, September 2009- September 2012 (` bn)

(2,000)

(1,250)

(500)

250

1,000

1,750

Sep-

09

Dec

-09

Mar

-10

Jun-

10

Sep-

10

Dec

-10

Mar

-11

Jun-

11

Sep-

11

Dec

-11

Mar

-12

Jun-

12

Sep-

12

Source: Bloomberg, Kotak Institutional Equities

Base rate hikes taken in the past Base rates (%)

Oct-10 Dec-10 Jan-11 Feb-11 Apr-11 May-11 Jul-11 Aug-11 Dec-11 Apr-12 May-12 Aug-12 Sep-12Andhra Bank 8.50 9.00 9.50 10.00 10.25 10.75 10.50 Bank of Baroda 8.50 9.00 9.50 10.00 10.25 10.75 10.50 Bank of India 8.50 9.00 9.50 10.00 10.75 10.50 Canara Bank 8.50 9.00 9.50 10.00 10.25 10.75 10.50 Indian Bank 8.50 9.00 9.50 10.00 10.25 10.75 10.50 IOB 8.50 9.00 9.50 10.00 10.25 10.75 10.50 OBC 8.50 9.00 9.50 10.00 10.25 10.75 10.65 10.50 10.40 PNB 8.50 9.00 9.50 10.00 10.75 10.50 SBI 7.60 8.00 8.25 8.50 9.25 9.50 10.00 9.75Union Bank 8.50 9.00 9.50 10.00 10.25 10.75 10.65 10.50


Non-interest income to grow 11% yoy; core fee income growth muted

We expect overall non-interest income to grow 11% yoy (up 4% qoq) primarily due to higher contribution from treasury income. Core fee income growth would be muted as corporate activity remains subdued. ICICI Bank (dividend income to decline sharply qoq) and Axis Bank are likely to continue to report a weak performance.

Recovery from written-off assets should be marginally higher than they were in 1QFY13 as mid-tier banks wrote off higher loans in 2HFY12 primarily on loans that slipped during the migration-related exercise.

We expect overall treasury income to more than double yoy (75% yoy adjusting for SBI which reported a marginal gain in 2QFY12). At the end of the quarter, the yield curve closed flat across the medium and the longer end of the curve. 10 year, 5 year, 2 year were flat +/-1 bps change while the one-year showed a marginal decline of 7 bps over June 2012. Over the past few quarters yields have declined from their peak of 9% to 8- 8.4%.



Treasury income for the quarter to be higher than in 1QFY13 March fiscal year-ends, 1QFY12 - 2QFY13E (` mn)

1QFY12 2QFY12 3QFY12 4QFY12 1QFY13 2QFY13EPublic banksAndhra Bank 594 222 163 232 250 260 Bank of Baroda 740 102 3,855 1,370 815 1,141 Bank of India 1,097 1,544 712 736 1,004 1,305 Canara Bank (770) 1,490 1,570 950 988 1,285 Corporation Bank 343 1,576 1,115 959 426 852 Indian Bank 450 210 160 272 223 857 IOB (152) 490 350 670 440 528 OBC 717 183 365 438 (133) 600 PNB 1,740 1,050 950 1,650 1,360 1,360 State Bank of India 1,689 281 (10,904) (263) 2,210 3,429 Union Bank 1,130 1,000 1,010 1,270 550 1,100 Old private banksFederal Bank 160 141 156 364 262 275 J&K Bank 101 85 88 85 202 222 New private banksAxis Bank 702 280 1,180 1,460 1,502 1,653 IndusInd Bank 278 239 131 274 497 334 HDFC Bank (413) (13) (818) (715) 665 678 ICICI Bank (250) (800) (650) 1,580 (210) 1,000 Yes Bank - 50 25 350 350 350


Non-interest income (ex-treasury) to remain under pressure YoY growth in non-interest income (ex-treasury), March fiscal year-ends, 1QFY12-2QFY13E (%)

1QFY12 2QFY12 3QFY12 4QFY12 1QFY13 2QFY13EPublic banksAndhra Bank (1.7) (10.3) 16.1 (11.6) 33.8 26.6 Bank of Baroda 15.9 26.8 29.2 6.6 21.6 (5.1) Bank of India 13.3 25.3 32.6 28.3 34.5 9.5 Canara Bank 18.4 36.5 15.8 (31.2) (1.7) 5.9 Corporation Bank 1.1 8.8 30.1 (19.9) 11.6 6.0 Indian Bank (31.5) 42.8 19.6 5.1 (1.9) (5.0) IOB 103.8 45.7 14.5 23.2 (6.1) (2.4) OBC 27.5 21.5 29.4 9.6 67.3 5.8 PNB 27.6 15.2 11.5 14.3 13.2 3.8 State Bank of India (4.3) (10.7) 4.0 18.1 (2.6) 2.3 Union Bank 15.2 5.9 27.4 28.6 17.6 16.1 Old private banksFederal Bank 8.1 (20.8) 7.8 (7.4) (2.8) (7.5) J&K Bank (5.3) 11.4 8.9 18.2 28.7 22.0 New private banksAxis Bank 36.4 30.4 29.5 3.5 8.0 (1.9) IndusInd Bank 33.0 32.8 46.6 63.0 43.5 20.0 HDFC Bank 19.8 19.8 29.6 25.4 26.0 19.9 ICICI Bank 5.8 5.7 13.3 12.7 14.0 3.2 Yes Bank 8.9 38.4 29.2 23.9 53.1 17.5




Yields stable at the end of 2QFY13… Yield of 1-year GSec (%)

7.4

7.8

8.2

8.6

9.0

Sep-

11

Oct

-11

Nov

-11

Dec

-11

Jan-

12

Feb-

12

Mar

-12

Apr

-12

May

-12

Jun-

12

Jul-1

2

Aug

-12

Sep-

12


…yield at the longer end shows similar movement Yield of 10-year GSec (%)

7.8

8.1

8.4

8.7

9.0

Sep-

11

Oct

-11

Nov

-11

Dec

-11

Jan-

12

Feb-

12

Mar

-12

Apr

-12

May

-12

Jun-

12

Jul-1

2

Aug

-12

Sep-

12


Provisions unlikely to be sharp as proportion, duration of investments and change in rates is low Impact of 20 bps yield change on investments as on 1QFY13, March fiscal year-ends

Investment AFS% of book Duration Impact PBT 2013E Impact

(Rs bn) (Rs bn) (%) (Years) (Rs mn) (Rs mn) (%)Public banksAndhra Bank 313 49 15.7 0.7 72 16,250 0.4 Bank of Baroda 982 113 11.5 2.6 579 61,328 0.9 Bank of India 894 250 28.0 2.6 1,307 47,711 2.7 Canara Bank 1,112 360 32.4 3.0 2,183 37,815 5.8 Corporation Bank 478 98 20.4 2.6 513 16,516 3.1 OBC 542 73 13.5 3.5 506 22,018 2.3 PNB 1,207 281 23.3 2.7 1,531 71,418 2.1 Union Bank 724 155 21.4 1.7 524 30,561 1.7 Old private banksAxis Bank 880 366 41.6 2.1 1,561 63,426 2.5


Asset quality pressure to continue; fresh restructured loans to decelerate marginally

We expect fresh loan impairments (slippages and restructuring of loans) at elevated levels in the 2QFY13. Retail-focused banks could probably see a marginal rise in NPLs but focus would continue in the non-retail loan dominated portfolios in which we expect slippages to stay high, especially SME and mid-corporate loans.

However, fresh restructuring is likely to be relatively lower than the previous quarter as we don’t expect large restructuring from the SEB portfolio across banks (50% have already been restructured), especially with the restructuring package just being announced.

Recovery trends will marginally improve sequentially as the focus has shifted to strengthening the balance sheet. We maintain a fairly cautious outlook about asset quality and expect overall loan-loss provisions to remain elevated (20% yoy). Public banks would be relatively lower (16% yoy) as the movement towards a stringent NPL recognition platform peaked in 2QFY12 resulting in significantly higher provisions.



Restructured loans and net NPL are at nearly 9% for public banks Restructured loans and slippages from restructured loans, March fiscal year-ends, 1QFY13

3QFY11 4QFY11 1QFY12 2QFY12 3QFY12 4QFY12 1QFY13Public banksAndhra 4.3 3.8 4.1 5.2 5.8 8.1 9.3BoB 3.3 3.3 3.5 3.8 4.3 7.0 7.5BoI 6.2 5.8 6.4 7.1 7.6 8.0 9.5Canara 5.7 4.9 5.3 5.3 6.0 4.9 7.9Corporation 4.8 4.1 4.6 5.6 5.9 8.1 9.7Indian 8.4 7.4 6.9 6.7 7.1 11.2 11.6IOB 9.1 7.3 6.7 6.8 8.8 10.3 10.5OBC 6.6 6.4 4.8 5.8 7.4 10.7 11.6PNB 7.2 7.2 5.6 6.8 7.5 10.0 10.3SBI 6.1 6.2 6.1 6.5 6.7 6.8 6.9Union 5.1 4.8 5.3 6.5 7.4 8.2 9.9Total 6.0 5.7 5.6 6.1 6.7 7.8 8.6PrivateAxis Bank 1.9 1.5 1.8 1.9 2.0 1.9 2.3HDFC Bank 0.5 0.5 0.5 0.6 0.6 0.6 0.5ICICI Bank 2.6 2.0 2.0 2.0 2.1 2.4 2.3

Net NPL and restructured loans to total loans (%)


NPL provisions will remain elevated for all public banks Loan-loss provisions of banks, March fiscal year-ends, 1QFY12-2QFY13E (` mn)

1QFY12 2QFY12 3QFY12 4QFY12 1QFY13 2QFY13E YoY (%)Public banksAndhra Bank 1,501 2,509 2,880 2,170 1,923 2,692 7.3 Bank of Baroda 1,320 2,981 5,089 9,262 8,121 7,155 140.0 Bank of India 4,090 8,240 4,830 4,807 6,302 6,932 (15.9) Canara Bank 2,850 4,768 3,020 5,010 5,420 6,233 30.7 Corporation Bank 901 1,727 1,487 1,783 2,394 2,514 45.6 Indian Bank 1,250 1,170 1,720 5,340 1,316 2,631 124.9 IOB 4,427 4,900 5,090 2,796 4,065 4,472 (8.7) OBC 1,354 3,422 2,440 5,000 4,301 3,308 (3.3) PNB 7,250 4,930 7,460 13,030 10,830 10,938 121.9 State Bank of India 27,817 29,212 30,061 28,368 27,903 28,740 (1.6) Union Bank 3,700 4,950 8,000 4,070 4,370 4,589 (7.3) Old private banksFederal Bank 1,141 654 920 255 759 683 4.5 J&K Bank 367 206 211 345 264 659 220.1 New private banksAxis Bank 1,530 2,470 3,360 1,810 3,150 3,843 55.6 IndusInd Bank 387 399 285 355 453 588 47.4 HDFC Bank 4,137 3,461 2,893 2,917 4,748 3,324 (4.0) ICICI Bank 4,539 3,188 3,411 4,693 3,899 5,458 71.2 Yes Bank - 350 344 200 210 630 80.0 Total 68,560 79,537 83,501 92,212 90,426 95,388 19.9 Total - Public sector 56,459 68,810 72,077 81,637 76,944 80,203 16.6 Total - Private sector 12,101 10,727 11,423 10,575 13,482 15,185 41.6




We expect lower restructuring from the SEB portfolio in the current quarter Details of restructured loans, March fiscal year-end, 1QFY13

Total Infra Power loans SEB restructured/

loans exposure SEB Non SEB SEB loans

(Rs bn) (% of loans) (% of loans) Total SEB Aviation Others (%)

Public banks

Andhra 866 13 6 6 8 2 1 5 30

Allahabad 1,093 19 5 7 10 4 0 5 82

BOB 2,858 10 2 3 7 1 1 5 38

BOI 2,640 11 4 3 8 1 1 6 27

BoMH 569 14 10 1 6 3 0 3 29

Canara Bank 2,256 18 5 6 6 2 1 3 50

Central Bank 1,542 21 8 7 13 6 1 7 75

Corporation 985 16 3 7 8 2 1 5 84

Dena Bank 596 18 10 4 7 4 2 2 37

IDBI Bank 1,678 21 0 10 6 0 0 6 -

Indian Bank 939 18 7 3 11 2 1 7 34

IOB 1,484 12 4 3 9 2 1 6 38

OBC 1,139 23 6 7 10 5 1 3 83

PNB 2,945 16 3 5 8 2 1 5 87

SBI 9,458 9 0 4 5 0 0 4 -

UCO Bank 1,192 26 5 9 5 4 1 0 80 Union 1,739 17 6 4 8 2 0 6 28

United 636 23 1 14 6 0 1 5 38

Vijaya Bank 593 18 8 2 6 4 0 2 46

Syndicate bank 1,292 13 5 4 6 1 1 4 22

Total 36,992 14.5 3 5 7 2 1 5 50

Restructured as % of total loans




Key valuation metrics of key banks March fiscal year-ends, 2012-2014E

Price(Rs) EPS (Rs) PER (X) ABVPS (Rs) APBR (X) RoE (%)

Reco. 24-Sep-12 US $bn 2012 2013E 2014E 2012 2013E 2014E 2012 2013E 2014E 2012 2013E 2014E 2012 2013E 2014EPublic banksAndhra Bank ADD 112 1.2 24 21 24 4.6 5.2 4.6 124 134 150 0.9 0.8 0.7 19 15 15Bank of Baroda REDUCE 772 5.7 121 116 117 6.4 6.6 6.6 614 675 750 1.3 1.1 1.0 22 17 15Bank of India BUY 299 3.2 47 60 63 6.4 5.0 4.8 302 341 393 1.0 0.9 0.8 15 16 15Canara Bank REDUCE 428 3.5 74 69 83 5.8 6.2 5.2 416 462 522 1.0 0.9 0.8 15 13 14Corporation Bank BUY 406 1.1 102 88 115 4.0 4.6 3.5 521 564 632 0.8 0.7 0.6 20 15 17Indian Bank BUY 194 1.6 40 40 43 4.9 4.9 4.5 197 224 252 1.0 0.9 0.8 20 17 16IOB REDUCE 77 1.2 13 17 21 5.9 4.4 3.6 120 121 132 0.6 0.6 0.6 10 11 12OBC ADD 283 1.5 39 55 57 7.2 5.1 5.0 325 355 387 0.9 0.8 0.7 10 13 12PNB REDUCE 821 5.2 144 145 159 5.7 5.7 5.2 688 766 884 1.2 1.1 0.9 21 17 16SBI ADD 2,198 27.6 174 206 219 12.6 10.7 10.0 1,093 1,179 1,317 2.0 1.9 1.7 16 16 15

SBI incl. banking subs 2,030 25.5 217 254 271 9.3 8.0 7.5 1,417 1,550 1,794 1.4 1.3 1.1 16 15 15SBI (core banking business) 1,742 21.9 163 194 200 10.7 9.0 8.7 988 1,074 1,212 1.8 1.6 1.4 17 17 17

Union Bank BUY 204 2.1 32 39 41 6.3 5.2 5.0 200 226 254 1.0 0.9 0.8 15 16 15Old private banksFederal Bank BUY 440 1.4 45 43 47 9.7 10.2 9.4 326 351 380 1.3 1.3 1.2 14 12 12J&K Bank ADD 920 0.8 166 174 174 5.6 5.3 5.3 837 964 1,086 1.1 1.0 0.8 21 19 17New private banksAxis Bank ADD 1,133 8.8 103 103 105 11.0 11.0 10.8 545 624 702 2.1 1.8 1.6 20 17 15IndusInd Bank ADD 345 3.0 17 19 23 20.1 17.9 15.2 95 110 127 3.6 3.1 2.7 20 19 18HDFC Bank SELL 635 28.0 22 28 35 28.8 22.7 18.1 127 147 173 5.0 4.3 3.7 19 20 22ICICI Bank ADD 1,071 23.0 56 62 65 19.1 17.3 16.5 513 546 583 2.1 2.0 1.8 11 11 11

ICICI standalone 851 18.3 50 55 58 17.1 15.3 14.7 401 435 473 2.1 2.0 1.8 13 14 14Yes Bank ADD 377 2.5 28 32 38 13.6 11.9 9.8 132 157 187 2.9 2.4 2.0 23 22 22Non-banksHDFC SELL 759 21.9 28 32 38 27.2 23.7 20.0 129 164 185 5.9 4.6 4.1 23 22 22

HDFC core 493 14.2 24 28 33 20.5 17.6 14.7 67 103 123 7.3 4.8 4.0 38 33 30IDFC ADD 158 4.5 10 12 14 15.4 13.5 11.2 81 90 101 1.9 1.8 1.6 14 14 15India Infoline REDUCE 59 0.3 5 6 7 13.1 10.2 8.4 61 62 68 1.0 1.0 0.9 9 11 12LIC Hsg Fin ADD 277 2.6 18 22 28 15.3 12.5 9.7 111 124 147 2.5 2.2 1.9 19 18 20Mahindra Finance ADD 860 1.7 60 81 94 14.2 10.6 9.2 284 322 399 3.0 2.7 2.2 23 26 25Power Finance Corporation ADD 200 4.9 23 28 31 8.7 7.2 6.5 151 155 163 1.3 1.3 1.2 17 17 16Rural Electrification Corp. REDUCE 231 4.3 29 36 39 8.1 6.5 5.9 145 151 163 1.6 1.5 1.4 21 22 21Reliance Capital ADD 409 1.9 9 21 23 32.8 43.9 19.4 285 449 463 0.8 0.5 0.5 6 5 5

Market cap.

Source: Companies, Bloomberg, Kotak Institutional Equities estimates



Restructured loans hold the key; very difficult to judge potential NPLs from restructured loans Adjusted book value of Indian banks, March fiscal year-ends, 2012-15E

PBR adjusted for net NPLsPrice (Rs) PBR (Rs) PBR adjusted for net NPLs (Rs) & restructured loans (Rs) Restructured loans (Rs bn) Default r24-Sep-12 2012 2013E 2014E 2015E 2012 2013E 2014E 2015E 2012 2013E 2014E 2015E 2012 2013E 2014E 2015E (%)

Public banksAndhra Bank 112 0.8 0.7 0.7 0.6 0.9 0.8 0.7 0.7 1.1 1.1 1.0 0.9 61 73 88 105 35.0Bank of Baroda 772 1.2 1.1 0.9 0.8 1.3 1.1 1.0 0.9 1.4 1.3 1.2 1.0 186 223 268 322 20.0Bank of India 299 0.9 0.8 0.7 0.6 1.0 0.9 0.8 0.7 1.1 1.0 0.9 0.8 164 197 236 283 20.0Canara Bank 428 0.9 0.8 0.7 0.6 1.0 0.9 0.8 0.7 1.1 1.0 0.9 0.8 79 118 142 171 15.0Corporation Bank 406 0.7 0.6 0.6 0.5 0.8 0.7 0.6 0.6 1.0 0.9 0.8 0.8 73 87 105 126 30.0Indian Bank 194 0.9 0.8 0.7 0.6 1.0 0.9 0.8 0.7 1.3 1.2 1.1 1.0 89 105 126 151 35.0Indian Overseas Bank 77 0.6 0.5 0.5 0.4 0.6 0.6 0.6 0.5 1.0 1.0 1.0 0.9 126 154 185 222 35.0OBC 283 0.7 0.7 0.6 0.6 0.9 0.8 0.7 0.7 1.2 1.1 1.0 1.0 95 114 137 164 35.0Punjab National Bank 821 1.1 0.9 0.8 0.7 1.2 1.1 0.9 0.8 1.4 1.3 1.1 1.0 250 313 375 469 20.0State Bank of India 2,198 1.5 1.3 1.2 1.0 1.8 1.6 1.4 1.2 1.9 1.8 1.6 1.4 427 534 695 903 20.0Union Bank 204 0.9 0.8 0.7 0.6 1.0 0.9 0.8 0.7 1.2 1.1 1.0 0.9 119 145 174 209 20.0Old private banksFederal Bank 440 1.3 1.2 1.1 1.0 1.3 1.3 1.2 1.1 1.5 1.4 1.3 1.2 24 30 36 43 35.0J&K Bank 920 1.1 0.9 0.8 0.7 1.1 1.0 0.8 0.8 1.2 1.0 0.9 0.9 14 17 20 25 35.0New private banksAxis Bank 1,133 2.1 1.8 1.6 1.4 2.1 1.8 1.6 1.4 2.1 1.9 1.7 1.5 31 40 56 81 30.0HDFC Bank 635 5.0 4.3 3.6 3.0 5.0 4.3 3.7 3.1 5.1 4.4 3.7 3.1 8 10 11 13 15.0ICICI Bank 1,071 2.1 1.9 1.7 1.6 2.1 2.0 1.8 1.7 2.1 2.0 1.8 1.7 43 62 93 139 20.0IndusInd Bank 345 3.6 3.1 2.6 2.2 3.6 3.1 2.7 2.4 3.6 3.2 2.7 2.4 1 1 1 2 35.0Yes Bank 377 2.8 2.4 2.0 1.7 2.9 2.4 2.0 1.7 2.9 2.4 2.0 1.7 2 3 4 5 35.0 Notes: (a) We have assumed a run-rate on restructured loans based on net accretion in the past few quarters for individual banks. (b) Adjusted book is net of revaluation reserves, net NPLs and restructured loans adjusted at 70% with default rates for restructured loans adjusted at 15-35%.

Source: Company, Bloomberg, Kotak Institutional Equities



Most banks have done well over the past month Stock price performance: Absolute and relative (%)

52 week high

52 week low

1 month 3 month 6 month 12 month Ytd 1 month 3 month 6 month 12 month Ytd (Rs) (Rs)Public banksAndhra Bank 17.0 (6.7) (11.4) (7.8) 39.7 11.4 (15.2) (17.6) (20.2) 15.6 139 77Bank of Baroda 19.9 8.9 (3.9) (0.5) 16.0 14.1 (1.0) (10.6) (13.9) (4.0) 881 606Bank of India 9.7 (13.2) (17.2) (0.6) 12.3 4.5 (21.1) (23.0) (14.0) (7.1) 408 253Canara Bank 28.6 2.9 (7.8) (1.5) 17.3 22.4 (6.5) (14.3) (14.7) (2.9) 566 306Corporation Bank 7.5 (2.3) (9.5) (4.5) 15.9 2.3 (11.2) (15.9) (17.4) (4.1) 540 335Indian Bank 16.2 7.6 (16.9) (3.1) 4.8 10.6 (2.2) (22.8) (16.2) (13.3) 265 151IOB 9.3 (7.9) (19.4) (18.8) 5.2 4.1 (16.3) (25.0) (29.7) (12.9) 119 66OBC 23.0 16.0 5.9 1.0 44.1 17.1 5.4 (1.6) (12.6) 19.3 324 190PNB 15.5 5.3 (13.7) (15.4) 5.2 10.0 (4.3) (19.8) (26.7) (13.0) 1,091 659SBI 16.1 1.9 1.5 12.7 35.8 10.5 (7.4) (5.7) (2.4) 12.4 2,475 1,571Union Bank 28.6 1.3 (6.7) (16.0) 20.1 22.5 (7.9) (13.3) (27.3) (0.6) 274 150Old private banksFederal Bank 3.2 0.6 2.9 22.2 30.6 (1.7) (8.6) (4.4) 5.8 8.1 480 322J&K Bank (1.8) (2.0) 4.9 16.9 36.1 (6.4) (11.0) (2.5) 1.2 12.7 1,033 645New private banksAxis Bank 5.3 11.7 (4.0) 4.2 40.2 0.3 1.5 (10.7) (9.8) 16.0 1,309 784IndusInd Bank 5.1 6.4 10.8 35.9 52.9 5.1 6.4 10.8 35.9 52.9 370 222HDFC Bank 6.5 16.7 23.6 39.1 48.8 1.4 6.0 14.9 20.4 23.1 637 400ICICI Bank 12.2 25.7 17.6 26.9 56.4 6.9 14.3 9.4 9.9 29.5 1,087 641Yes Bank 9.4 10.8 1.3 41.0 57.9 4.2 0.7 (5.8) 22.0 30.7 389 231Non-banksHDFC 5.1 18.6 15.0 21.5 16.5 0.1 7.8 6.9 5.2 (3.6) 785 600IDFC 12.3 (9.7) 17.1 4.6 42.8 1.9 5.8 8.9 10.4 30.2 161 90LIC Housing Finance 11.1 6.9 4.3 34.2 24.9 5.8 (2.9) (3.0) 16.2 3.4 290 201MMFS 10.9 35.4 26.9 30.2 40.9 5.7 23.1 18.0 12.7 16.6 872 568PFC 17.3 20.4 8.0 33.3 44.7 11.7 9.4 0.4 15.3 19.8 225 131Shriram Transport 1.6 21.5 4.1 3.5 48.2 (3.2) 10.4 (3.2) (10.5) 22.7 680 416SREI 4.3 16.1 (10.3) (23.1) 3.5 (0.6) 5.5 (16.6) (33.4) (14.4) 38 19REC 13.9 29.9 11.1 33.0 50.1 8.5 18.0 3.3 15.1 24.3 252 142

Change in price (%) Relative performance to sensex (%)

Source: Bloomberg



Quarterly result expectations of companies under coverage

Sep-11 Jun-12 Sep-12E yoy qoq Comments

BankingAndhra BankNet interest income 9,510 9,385 9,665 1.6 3.0

Operating profit 6,577 6,775 6,468 (1.7) (4.5)

Treasury income (net) 192 116 193 0.2 66.9

Loan loss provision 2,509 1,923 2,692 7.3 40.0

PAT 3,160 3,618 2,926 (7.4) (19.1)

Axis BankNet interest income 20,073 21,799 22,771 13.4 4.5

Operating profit 17,476 18,134 17,830 2.0 (1.7)

Treasury income (net) 280 1,502 1,653 490.2 10.0

Loan provision 2,470 3,150 3,843 55.6 22.0

PAT 9,203 11,535 10,375 12.7 (10.1)

Bank of BarodaNet interest income 25,669 27,981 28,482 11.0 1.8


Treasury income (net) (1,398) 55 381 (127.3) 590.7

Loan loss provision 2,981 8,121 7,155 140.0 (11.9)

PAT 11,661 11,389 11,084 (4.9) (2.7)

Bank of IndiaNet interest income 19,039 20,436 21,787 14.4 6.6

Operating profit 15,541 14,376 16,026 3.1 11.5

Treasury income (net) (26) 2,360 1,105 (4,350.8) (53.2)

Loan loss provision 8,240 6,302 6,932 (15.9) 10.0

PAT 4,911 8,875 7,220 47.0 (18.6)

Canara BankNet interest income 19,617 18,435 19,539 (0.4) 6.0


Treasury income (net) 827 3,038 485 (41.3) (84.0)

Loan provision 4,768 5,420 6,233 30.7 15.0

PAT 8,522 7,752 7,288 (14.5) (6.0)

Corporation BankNet interest income 7,436 8,084 8,498 14.3 5.1


Treasury income (net) 1,384 1,070 1,174 (15.2) 9.7

Loan provision 1,727 2,394 2,514 45.6 5.0

PAT 4,011 3,703 3,549 (11.5) (4.1)

Federal BankNet interest income 4,744 4,916 5,077 7.0 3.3

PBT 3,472 3,129 3,192 (8.1) 2.0

Treasury income (net) 72 468 200 176.2 (57.2)

Loan provision 654 759 683 4.5 (10.0)

PAT 1,912 1,904 1,853 (3.0) (2.6)

HDFCNet operational income 14,734 15,464 17,779 20.7 15.0 We expect HDFC to deliver 19% disbursements growth

PBT 13,377 13,799 16,103 20.4 16.7

PAT 9,707 10,019 11,755 21.1 17.3

Provisions to remain higher factoring higher delinquencies and provisions for restructured loans. PAT to decline 12% yoy

Reported spreads will likely remain above 2%, dividend income from HDFC Bank will boost other income

Overall earnings to decline 15% yoy on the back of lower revenue growth 0.4% yoy and higher provisions of 22% yoy

Expect slippages to remain at elevated levels at ~2% levels. NIM to improve 15 bps qoq on the back of lower cost of funds

NIM to be stable qoq at 3.3% levels. Fee income trends to remain weak

Revenue growth to remain with NIM under pressure, industry average loan growth and slower fee income growth. Overall earnings to decline 3% yoy

Slippages trend on SME and retail to be stable. Large corporate slippages would be a key monitorable

Earnings growth of 13% yoy driven by sharp decline in revenue growth (12% yoy). Fee income to be disappointing at 2-5% levels but treasury income could surprise

Loan growth to slowdown to 20% levels as the impact of currency depreciation is lower. NIMs to decline 10 bps qoq.

NII growth to be inline with loan growth at 19% yoy. NIM to improve qoq on the back of lower income de-recognition

Change (%)

Loan growth at about 15-16% levels. Slippages to be lower than previous quarter and better qoq

PAT expected to grow 47% yoy primarily on a lower base. Slippages and fresh restructuring to be lower qoq

NII growth healthy at 18% yoy on the back of NIM expansion of 15 bps qoq. NIM to remain below average at 2.4-2.5%

Broad trends on slippages and restructured loans to remain stable qoq. Higher loan-loss provisions (140% yoy) to result 5% decline in PAT

Expect slippages and fresh restructuring to be marginally higher (>1.5% of loans each) than previous quarter levels.




Quarterly result expectations of companies under our coverage


HDFC BankNet interest income 29,445 34,841 35,725 21.3 2.5

PBT 21,071 25,019 25,184 19.5 0.7

Treasury income (net) (13) 665 678 (5,317.7) 2.0

Loan provision 3,461 4,748 3,324 (4.0) (30.0)

PAT 11,994 14,174 15,499 29.2 9.4

ICICI BankNet interest income 25,064 31,929 32,327 29.0 1.2


Treasury income (net) (800) (210) 1,000 (225.0) (576.2)

Loan provision 3,188 3,899 5,458 71.2 40.0

PAT 15,032 18,151 18,021 19.9 (0.7)

IDFCNet operational income 8,997 7,716 8,435 (6.2) 9.3 We expect loan growth to remain strong- up 32% yoy, NIM will liklely be stable

Operating profit 6,953 5,530 5,699 (18.0) 3.0

PAT 5,242 3,804 3,947 (24.7) 3.8

Indian BankNet interest income 11,354 11,532 11,680 2.9 1.3

Operating profit 8,925 8,063 8,754 (1.9) 8.6

Treasury income (net) (750) 197 780 (204.0) 295.3

Loan provision 1,170 1,316 2,631 124.9 100.0

PAT 4,687 4,617 4,694 0.2 1.7

India InfolineNet sales 4,109 5,825 6,065 47.6 4.1 Loan growth will continue to grow at secular pace- 4% qoq

PBT 352 821 865 146.1 5.4

PAT 220 523 580 164.1 11.0

Indian Overseas BankNet interest income 12,664 13,283 13,997 10.5 5.4


Treasury income (net) (270) (72) 592 (319.3) (922.2)

Loan provision 4,900 4,065 4,472 (8.7) 10.0

PAT 2,075 2,344 3,391 63.5 44.7

IndusInd BankNet interest income 4,192 4,841 5,218 24.5 7.8 Operating profit 3,020 3,461 3,604 19.3 4.1 Loan provision 399 453 588 47.4 30.0

PAT 1,931 2,363 2,205 14.2 (6.7)

J&K BankNet interest income 4,343 5,356 5,356 23.3 0.0

Operating profit 3,070 3,710 3,757 22.4 1.3 Treasury income (net) 40 202 162 306.0 (19.7) Loan provision 206 264 659 220.1 150.0 PAT 1,997 2,461 2,180 9.2 (11.4)

LIC Housing FinanceNet interest income 3,787 3,791 4,079 7.7 7.6


PAT 985 2,277 2,691 173.2 18.2 NIM will move up from the low base of 1QFY13

We expect retail loan growth of 26% yoy

Lower capital gains as compared to high base of 2QFY12 will pull down reported earnings

NIM to remain stable qoq at 2.9-3% levels. Loan growth inline with industry average at 17% levels.

Non interest income to be weak with fee income growth at 3% and lower dividend income qoq. Asset quality trends to be stable qoq. PAT growth at 20% yoy driven by revenue growth of 23% yoy

Floating provisions is likely to be made, albeit a lower amount as compared to the previous quarter, as stress marginally rises in the retail portfolio

Slippages to be higher qoq which would keep provisions at elevated levels

Loan growth to be marginally below industry average. NII to grow 14% yoy (QoQ NIM to decline 10 bps qoq).

Loan growth focus likely to continue (>20% levels). NIM to remain stable qoq given the healthy CD ratio

NIM which are at the upper end at 4.3% is likely to decline marginally by ~10 bps qoq. Loan growth expected at 20% yoy

Change (%)

Recent spurt in volumes will boost broking business qoq though broking income will be flat yoy

The bank is likely to move towards a stringent reporting platform on NPLs this quarter which should result in higher slippages

NII growth lower at 11% yoy as compared to loan growth of ~20% yoy. NIM to remain stable qoq at 2.7-2.8%

NIM should see a marginal expansion on the back of lower cost of funds.

Limited asset quality stress in retail loans. PAT growth at 14% yoy on the back of rising provisions. Cost-income to remain at 49-50% levels.

Slippages to remain high at >2% levels. Provisions to remain high as the bank is yet to meet regulatory requirements




Quarterly result expectations of companies under our coverage


Mahindra & Mahindra FinancialNet interest income 3,903 4,872 5,064 29.8 4.0 Loan growth will likely remain strong at 33% yoy

PBT 2,017 2,391 2,784 38.0 16.4

PAT 1,357 1,607 1,865 37.4 16.1

Muthoot FinanceNet interest income 5,532 5,911 5,900 6.7 (0.2) Operating profit 3,182 3,641 3,775 18.6 3.7

PAT 2,155 2,461 2,567 19.1 4.3

Oriental Bank of CommerceNet interest income 9,893 11,258 12,121 22.5 7.7


Treasury income (net) (618) 1,185 350 (156.6) (70.5)

Loan loss provision 3,422 4,301 3,308 (3.3) (23.1)

PAT 1,676 3,914 3,348 99.7 (14.5)

PFCNet interest income 10,880 14,040 14,140 30.0 0.7 Loan growth will likely be strong at 27%

PBT 5,515 12,965 12,912 134.1 (0.4)

PAT 4,195 9,725 9,684 130.9 (0.4)

Punjab National BankNet interest income 34,526 36,951 37,186 7.7 0.6


Treasury income (net) (560) 2,410 960 (271.4) (60.2)

Loan loss provision 4,930 10,830 10,938 121.9 1.0

PAT 12,050 12,457 10,327 (14.3) (17.1)

Rural Electrification Corp.Net interest income 9,673 11,896 12,434 28.5 4.5 Loan growth to strong at 23%PBT 8,341 11,785 12,174 46.0 3.3

PAT 6,222 8,769 9,009 44.8 2.7

Shriram City Union FinanceNet interest income 2,399 3,709 3,932 63.9 6.0

PBT 1,226 1,532 1,647 34.4 7.5

PAT 811 1,036 1,103 36.1 6.5

PAT-reported 811 1,036 1,103 36.1 6.5

Shriram TransportNet interest income 8,347 8,024 8,200 (1.8) 2.2

PBT 4,455 4,759 5,050 13.4 6.1

PAT 2,995 3,217 3,434 14.7 6.8

PAT-reported 2,995 3,217 3,434 14.7 6.8

State Bank of IndiaNet interest income 104,219 111,189 114,181 9.6 2.7 Operating profit 74,402 77,691 76,601 3.0 (1.4)

Treasury income (net) (4,302) 7,416 3,229 (175.1) (56.5)

Loan provision 29,212 27,903 28,740 (1.6) 3.0

PAT 28,104 37,517 34,741 23.6 (7.4)

Union BankNet interest income 16,612 18,216 18,813 13.2 3.3


Treasury income (net) 180 60 1,263 601.9 2,005.6

Loan provision 4,950 4,370 4,589 (7.3) 5.0

PAT 3,525 5,115 6,024 70.9 17.8

Yes BankNet interest income 3,856 4,722 5,079 31.7 7.6


Treasury income (net) 143 217 228 59.3 5.0

Loan provision 350 210 630 80.0 200.0

PAT 2,350 2,901 2,710 15.3 (6.6)

Improvement in CASA ratio and performance on slippages or restructuring would be key monitorable. PAT growth at 15% yoy.

YoY rise in NIM by 20 bps (stable qoq) and lower forex losses will drive high earnings growth

Comparable profits (excluding forex losses) up 29% yoy on the back of high loan growth and stable NIM

We expect 13% loan growth

We model marginal 0.5% decline in NIM qoq, trends in NPLs will be crucial

NIM to expand 10 bps qoq to 2.9% on the back of better funding environment. Expect loan growth to be below industry average

Expect lower increase in the restructured loans this quarter but slippages would remain at elevated levels. Strong earnings growth on the back of lower base

NIM likely to improve as funding costs have declined. Loan growth would be at 17% levels though balance sheet growth would be >25% levels

Change (%)

Loan growth to be marginally higher than industry average at ~20% yoy. NIM to remain stable qoq at 3.5%

Loan book will likey be stable qoq, up 11% yoy

NIM will imporve by 20 bps qoq

Slippages would continue to be at elevated levels of ~3% resulting in higher credit costs. Restructured loans should rise marginally

We expect NIM to remain broadly stable qoq at 3.7% on the back of lower income derecognition. Loan growth inline with industry average 17%. Fee income growth to remain weak

NIM will remain stable qoq, credit cost will likely remain high

We expect loan growth of 55%

Slippages to remain lower than previous quarter. Fresh restructuring to be lower qoq. Earnings growth higher on a lower base

PAT growth ay 24% yoy. Slippages to decline qoq but to remain at elevated levels (>2.5%). Provisions to remain high to improve the coverage ratio requirements

NII to grow 13% yoy on the back of ~18-20% yoy growth in loans. NIM to remain stable qoq at 3% levels



The best (placed) versus the rest – a few numbers

Exhibit 1 compares the incumbent wireless operator pack (top-3: Bharti, Vodafone and Idea) with the challenger pack on their FY2012 performance and some derived metrics. A quick look at some key metrics and our thoughts on the same—

Revenues. Incumbents had a combined revenue market share of a little below 66% in FY2012. We note that the incumbents’ combined market share has stayed constant despite the sharp increase in the breadth (#) and depth (network coverage) of challengers; Vodafone’s and Idea’s RMS gains have made up for Bharti’s loss. We must mention here that the top-3 players’ RMS share of 66% is low by global standards (see Exhibit 2 for the subs market share of top-3 players in select global markets; RMS for top-3 is typically higher than subs market share).

EBITDA. The inherent ‘economies of scale’ nature of wireless business reflects in the EBITDA levels of the incumbent pack versus the challenger pack. Challengers as a pack generated negative EBITDA in FY2012, while the incumbents had an EBITDA margin of 28%. Again, this is not to say that incumbents are in the best of shapes from an absolute profitability perspective. Challengers’ market share aspiration has brought down incumbents’ OPM below what good-return-economics would demand. More important point is that challengers are struggling to achieve even EBITDA break-even despite now being in the market for 3+ years. We also note that the incumbents’ combined EBITDA includes EBITDA losses for Voda/Idea in their new circles.

Quality of subs. Comparing RMS relative to subs market share provides a fair indicator of quality of subs of the challenger pack versus the incumbent pack. Here’s how reported subs market share, VLR (proxy for active subs) market share, and RMS stacked for challengers in FY2012 – 51.3%, 40.6%, and 34.3% respectively. The same for incumbents – 48.7%, 59.4%, and 65.7% respectively.

ARPU, MOU, RPM. These are some derived metrics where the quality of subs shows up, again. Incumbents as a pack enjoyed 2X the ARPU of the challenger pack, 1.57X the MOU and 1.28X blended RPM. Interestingly, the incumbents’ RPM premium is despite the challengers’ having higher contribution from non-voice revenues (thanks primarily to the EVDO dongle business of RCOM, TTSL and Sistema). Non-voice revenues are by definition RPM-accretive given that they do not add to the denominator (minutes) of the RPM (revenues/minutes) equation. Incumbents’ voice RPM was 35% higher than the challengers, clearly suggesting that (1) a voice tariff premium for better quality networks in not only possible, but also sustainable, and (2) aggressive price discounting has not yielded meaningfully enough market share gains for the challenger pack.

Telecom India

Just how wide is the operational gap between the top-3 and the rest? Even as the large number of high-stake players in the Indian wireless market defies conventional ‘scale economies’ of the business, the underlying financial and operational metrics do not. We make an attempt to compare the challengers (as a pack) with the incumbents (top-3, as a pack) on a few such metrics. The deep dive only serves to confirm our long-held view – none of the challengers has a viable pan-India business case. This is not to suggest any of them is going to stop trying to build one. There is more to business decisions (especially at-the-margin ones) than spreadsheet-suggested odds, we surmise.

CAUTIOUS

SEPTEMBER 25, 2012

UPDATE

BSE-30: 18,694

Telecom India


Asset utilization. Interestingly, the challenger pack has the same number of 2G cell sites on the ground as the incumbents pack and in fact has higher gross capital employed. The trouble is substantially lower asset turn (or revenue per unit of gross block) for the challenger pack as compared to the incumbents. Our computations suggest that the incumbent pack had a TTM revenues/gross block of 0.55X for FY2012 while the challenger pack had a materially lower 0.20X (65% lower). In addition to the inferior per-sub revenue metrics, a couple of other factors contributes to this – (1) duplication of networks across challengers – most of the challengers, for obvious economic reasons, have focused exclusively on the urban/sub-urban markets, driving some asset turn inefficiency, and (2) challengers participated aggressively in the 3G/BWA auctions, taking their gross capital employed higher; this has not yielded revenue share benefits, however. Even adjusted for spectrum, ex-spectrum asset turn for the challengers (0.28X) was 63% lower than the incumbents’ 0.74X.

What then keeps the challengers around and what is the way forward for them?

Tricky questions both and the best we can do is guess. Price aggression, 3G/BWA investments and MNP have not yielded enough market share gains for any of the challengers to have a viable business proposition thus far. A few % points of pricing uptick (i.e. a larger market) are unlikely to do the same, either. In this context, two possible reasons keeping the challengers fighting, in our view, are—

There are rewards to be reaped if a challenger can sustain and at some point become the fourth largest operator in a more normal market structure (let’s say a six-player market). An exit at this point would mean forgoing that opportunity. There is light at the end of the tunnel, perhaps, and none of them want to jump off the train, just yet.

Lack of ‘graceful’ exit options, in the form of being acquired. Poor business economics and stressed debt-laden large balance sheets across challengers make the possibility of exiting (selling out) with a gain or even a modest loss on equity capital invested extremely slim, in our view. Selling out at this point would only convert ‘unrealized’ losses into ‘realized’ ones, something that people/companies are generally averse to.

Way forward—challengers could look at curtailing their pan-India ambitions and pick their circles of focus, in our view. Achieving a top-4 RMS rank (necessary in our view to have a viable long-term business case) in a few circles is likely to be easier than creating a pan-India business case, in our opinion. Uninor has already done the same, clearly stating its intentions to curtail its operations to nine circles in India. For some challengers, this also opens up the possibility of monetizing spectrum in the non-focus circles.

Disclaimers

Several datapoints used for the analysis represent our estimates.

We have clubbed the incumbents and challengers into packs to keep the analysis simple. Even as broad conclusions would apply to all players in either pack, there are player-wise differences that our analysis does not capture.

India Telecom


Exhibit 1: India wireless FY2012 performance—top-3 versus the rest

Industry Top-3 (a) The rest (b) Top-3 versus the restRevenues (Rs bn) 1,335 877 458 RMS (%) 65.7 34.3 1.91XOf which

Voice revenues (Rs bn) 1,114 744 370 Voice RMS (%) 66.8 33.2 2.01XNon-voice revenues (Rs bn) 221 133 88 Non-voice RMS (%) 60.1 39.9 1.50X

Voice contribution (%) 83.4 84.8 80.7 413bpsNon-voice contribution (%) 16.6 15.2 19.3 EBITDA (Rs bn) 222 246 (25) EBITDA margin (%) 16.6 28.1 (5.4) 33% ptsAverage subs (mn) 853 415 438 Avg subs market share (%) 48.7 51.3 0.95XVLR subs (mn) 625 371 254 VLR subs market share (%) 59.4 40.6 1.46XVLR ratio (%) 73.3 89.4 58.0 31% ptsVoice minutes (bn) 3,393 2,031 1,362 Minutes market share (%) 59.9 40.1 1.49XARPU (Rs/sub/month) 130 176 87 2.02XMOU (min/sub/month) 331 407 259 1.57XTotal RPM (Rs/min) 0.394 0.432 0.337 1.28XVoice RPM (Rs/min) 0.328 0.366 0.272 1.35XNon-voice RPM (Rs/min) 0.065 0.065 0.065 1.01XCost per minute (Rs/min) 0.328 0.311 0.355 0.88XEBITDA per minute (Rs/min) 0.065 0.121 (0.018) # of 2G cell sites 617,474 308,994 308,480 Cell-site market share (%) 50.0 50.0 1.00XRevenue per cell site (Rs/month) 180,202 236,494 123,816 1.91XCost per cell site (Rs/month) 150,296 170,101 130,457 1.30XEBITDA per cell site (Rs/month) 29,907 66,393 (6,641) Gross block (Rs bn) 3,931 1,593 2,338 0.68XRevenue/ gross block (X) 0.34 0.55 0.20 2.81XRevenue/ gross block (ex-spectrum) (X) 0.47 0.74 0.28 2.68X

Note:(a) By revenue market share - Bharti, Vodafone, and Idea.(b) Others include RCOM, TTSL, Aircel, BSNL, MTNL, Uninor, Sistema, Loop, HFCL, and S Tel.

Source: Companies, TRAI, Kotak Institutional Equities estimates

Telecom India


Exhibit 2: India—the most fragmented wireless market in the world

0

2

4

6

8

10

12

14

16

30 40 50 60 70 80 90 100

Top-3 subs market share (%)

# of

pla

yers

India

Brazil

China

Nigeria Canada

Indonesia

Russia

UK

USA

India (on rev mkt share)

Hong Kong

Pakistan

Source: Telegeography, Kotak Institutional Equities


Restructuring to address immediate cash crunch, political will key to long-term sustainability

The Cabinet has approved a loan-restructuring package for cash-strapped distribution utilities, according to which, half their outstanding short-term loans as on March 2012 will be taken over by state governments and the balance will be restructured with a three-year moratorium. The Central Government will also offer performance-linked incentives for AT&C loss reduction, though experience of similar programs (APDRP) is less encouraging.

The recent spate of tariff increases (while insufficient) seems to suggest a new political will (or commercial compulsion) to improve operations of state distribution utilities, though we are of the opinion that state ownership of distribution utilities continues to pose a risk to commercial viability of distribution utilities in the long-term (see detailed discussion).

Fuel availability and unviable sale arrangements pose earnings risks

Availability of fuel: (1) Linkage coal from Coal India, (2) dwindling gas supplies, (3) potential de-allocation of captive coal blocks and (4) cost-prohibitive imports against a backdrop of unviable sale arrangements threaten earnings of new generation companies (Lanco, Adani Power, Tata Power).

The burden of SEB losses over the past decade has been borne by the banking system (see Exhibit 2), unlike in the previous cycle when generation/transmission utilities funded losses. We view the current restructuring as a help to generation/transmission companies to contain their working capital commitment: FY2012 saw an increase in debtor days beyond the mandated 60 days.

We maintain a conservative stance despite recent tariff hikes and policy impetus

We are encouraged by (1) tariff hikes being announced/implemented in various states, (2) urgency shown by policy makers to address the problem of deteriorating SEB finances and (3) more prudent lending by the banking system. However, in a situation of deteriorating demand-supply balance of coal, we recommend aligning with utilities with no fuel dependence (NHPC, Powergrid).

The paradox of fixing tariffs and Government ownership

The Shunglu Committee, in its recent report, attributed lack of regular tariff revisions to all stakeholders: The regulator, the Government and the distribution utility itself. The committee notes the deficiency does not lie in the “structure” of regulatory mechanism but in its functioning and implementation. The committee lists reasons ranging from political intervention to a lackadaisical approach of utilities as the potential causes. We highlight some key reasons as identified by the committee.

Utilities India

SEBs: After restructuring, larger challenges. Even as state distribution utilities continue to service bonds, issued about a decade ago, the Government has infused a fresh lease of life into their cash-strapped operations by offering restructuring of short-term loans. We view the developments favorably for cash-strapped distribution utilities, but they address only in a limited way the concerns about generation companies as fuel availability and unviable sale arrangements will continue to bog-down earnings.

ATTRACTIVE

SEPTEMBER 25, 2012

UPDATE

BSE-30: 18,673

Utilities India


Regulator: Avoiding “tariff shocks” even for validated costs

The regulator often disallows even validated costs, leading to the creation of ‘regulatory assets’ to avoid tariff shocks to consumers. We note that the regulatory asset is as high as Rs79 bn (in Tamil Nadu, for instance).

Absence of tariff revisions without annual accounts/annual revenue requirement, has led to the regulator not revising tariffs, in some cases. The committee believes the regulator could make reasonable estimates even in the absence of audited accounts or revenue petitions and thus should not delay the tariff-determination exercise.

Tariffs for state utilities are fixed on targeted T&D loss reduction and failure to achieve the targets leads to under-recovery.

The committee points out that a part of action (or inaction) of the regulator could be attributed to the influence of a given State Government. The committee notes many state regulators failed to act as independent bodies and work under undue influence of the corresponding State Government.

State utilities: A lackadaisical approach

One of the key reasons for lack of frequent tariff revisions has been the failure of state utilities to update annual accounts, which in turn delays the auditing of the accounts. Regulators insist on audited accounts to reconcile past expenses and absence of updated accounts tends to delay the process, and delay fixing future tariffs. The committee notes that some distribution utilities do not file their Annual Revenue Requirement (ARR) petitions.

State governments: Using regulatory powers to address political goals

The state governments (through power vested by Section 108 of the Electricity Act, 2003) have at times (1) forced regulators to reserve the cheapest available power for a specified category, which distorts tariffs and (2) overridden the functioning of regulatory bodies.

Exhibit 1: SEB losses increased in 2009 and 2010 SEB losses, including and excluding subsidy received, March fiscal year-ends, 2001-10 (Rs bn)

0

100

200

300

400

500

600

700

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

Loss (excluding subsidy) Subsidy received

Loss (inlcuding subsidy)

Source: PFC, , Kotak Institutional Equities

India Utilities


Exhibit 2: The bulk of losses have been funded by loans from banks and FIs Cash outgo and inflow for SEBs, March fiscal year-ends, 2008-2010 (Rs bn)

2008 2009 2010Cash loss without subsidy 199 414 479Capex 433 529 597Cash outgo 633 943 1,076From banks 261 437 647

Other loans (56) 86 83Equity infusion 199 165 159Subsidy received 165 157 191Others 63 97 (3)Cash inflow 633 943 1,076

Source: PFC, Kotak Institutional Equities

Exhibit 3: Utilities valuation summary

Mkt Cap. Price Target EV/EBITDA (X) P/E (X)Rating (US$ bn) 24-Sep price 2011 2012E 2013E 2014E 2011 2012E 2013E 2014E

Adani Power SELL 2.1 51 33 28.1 35.0 23.3 10.2 21.5 (119.7) (13.5) 20.5 CESC BUY 0.8 330 350 8.1 8.8 9.1 6.0 13.7 15.2 13.1 9.4

JSW Energy SELL 1.7 56 50 12.2 14.2 8.2 6.4 11.0 27.9 13.9 13.3 Lanco Infratech RS 0.6 15 — 8.7 10.3 8.6 4.9 9.2 (28.8) (20.7) 15.5 NHPC BUY 4.3 19 26 9.6 6.5 6.5 6.2 14.0 7.8 9.5 8.7 NTPC REDUCE 25.7 166 160 11.6 12.9 11.8 9.0 15.2 14.9 13.9 10.9

Power Grid ADD 10.3 118 140 12.8 12.5 11.2 8.8 20.3 16.8 14.6 11.8 Reliance Infrastructure BUY 2.8 561 890 13.5 7.2 7.9 7.0 9.5 8.3 7.7 7.4 Reliance Power SELL 5.1 96 76 116.6 49.5 27.7 17.1 35.5 31.1 30.2 31.1

Tata Power ADD 4.8 103 109 10.6 11.0 8.1 6.9 13.3 22.4 17.4 15.8

P/BV (X)Div Yield

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

Adani Power 1.8 1.8 2.3 2.1 — 2.1 (0.3) (1.6) 1.3 8.5 (1.5) (15.2) 10.7 CESC 0.9 0.9 0.8 0.8 1.3 — — — — — — — —

JSW Energy 1.6 1.6 1.5 1.3 — 7.2 2.6 4.4 4.8 16.1 5.8 11.0 10.3 Lanco Infratech 0.7 0.7 0.8 0.7 — 9.7 5.1 4.9 7.9 9.2 (2.5) (3.6) 4.8 NHPC 0.9 0.8 0.8 0.8 3.9 5.0 7.5 6.1 6.4 6.7 11.3 8.6 8.9 NTPC 2.0 1.9 1.7 1.6 2.0 9.4 8.8 8.6 9.9 13.6 12.8 12.6 14.7

Power Grid 2.6 2.3 2.1 1.9 1.8 6.5 6.3 6.6 6.9 13.5 13.7 14.1 15.5 Reliance Infrastructure 0.6 0.6 0.6 0.5 1.9 5.5 5.7 5.8 5.6 6.8 11.7 8.9 8.3 Reliance Power 1.6 1.5 1.5 1.4 — 3.9 3.4 3.2 2.8 4.9 5.0 4.9 4.6

Tata Power 1.9 2.1 1.9 1.8 1.7 7.1 4.3 6.0 6.6 14.9 8.7 11.4 11.6



FCCB activity – previous and upcoming

As we finally reach the lag end of the FCCB redemption season, the number of issuers with refinancing issues has been far less than previously anticipated. While redemption clarity is yet to emerge for the likes of Moser Baer, Sterling Biotech and Tulip Telecom, most of the prominent issuers have managed to refinance their obligations without much fuss. Everest Kanto Cylinder was one of the issuers which requested for the extension of its maturity date from October 2012 to February 2013 in recent times. On the other hand, Geodesic submitted an application to the RBI seeking its approval to buy back its outstanding FCCBs prior to its maturity date. Suzlon, after successfully redeeming two FCCB tranches earlier, has two more tranches cumulatively worth US$142 mn (face value) maturing in October 2012. Among the other issuers whose FCCBs come up for maturity next month, Karuturi Global has already informed the exchange that it is looking to restructure its obligation and has received a principal approval from the RBI for extension of maturity period by one year for this proposal.

FCCB universe – Tulip Telecom corrects ~50% last month

Tulip Telecom saw its stock price correct 50% last month as it delayed repayment of its FCCB obligation (redemption value of US$140 mn). The market pessimism towards Tulip Telecom has been overshadowed only by Sterling Biotech which is down ~90% on a 12-month basis. On the positive front, Geodesic saw its FCCB price spike (along with its stock prices) as it announced an equity buyback while seeking approval for an FCCB buyback. Some of the FCCBs like Everest Kanto Cylinder, GTL Infrastructure and Plethico Pharmaceuticals have been trading at heavy discounts to redemption value even as we approach their maturity date.

Strategy.dot

Strategy India convertibles monthly

Redemptions worth US$1.3 bn expected in the next three months. For the remaining period of CY2012, Indian issuers are set to repay FCCB obligations cumulatively worth ~US$1.3 bn. While Suzlon has two more tranches due in October, Great Offshore and Everest Kanto Cylinders are some of the other issuers who have FCCBs maturing in the same month.

INDIA

SEPTEMBER 25, 2012

UPDATE

BSE-30: 18,673

QUICK NUMBERS

• FCCB redemptions worth US$1.3 bn by 20 issuers in the next three months

• Moser Baer delays bondholder meeting

• Geodesic seeks approval for FCCB buyback

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Kotak Institutional Equities: Valuation summary of KIE Universe stocks

25-Sep-12 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

Apollo Tyres 92 BUY 46,528 870 504 8.1 11.7 14.0 (7.0) 43.8 20.0 11.4 7.9 6.6 6.3 4.8 4.1 1.4 1.2 1.0 0.5 0.7 0.9 15.6 19.0 19.1 110 19.2 5.8

Ashok Leyland 25 REDUCE 65,187 1,220 2,661 2.1 1.3 2.6 (10.6) (39.7) 105.3 11.6 19.2 9.3 7.6 9.5 6.5 1.4 1.4 1.3 4.1 4.1 4.1 17.7 10.3 20.3 23 (6.1) 3.4

Bajaj Auto 1,788 ADD 517,462 9,681 289 103.8 101.3 130.9 14.9 (2.4) 29.2 17.2 17.7 13.7 12.5 13.4 10.4 8.5 6.8 5.4 2.5 2.3 2.9 54.5 42.7 43.8 1,850 3.5 15.5

Bharat Forge 303 REDUCE 71,807 1,343 237 17.4 17.5 22.0 38.5 0.9 25.7 17.4 17.3 13.7 9.3 8.7 7.5 2.9 2.5 2.1 0.3 0.3 0.3 15.1 15.5 15.1 300 (0.9) 1.7

Exide Industries 145 SELL 123,293 2,307 850 5.4 6.9 7.9 (27.2) 27.2 14.7 26.7 21.0 18.3 17.9 13.7 12.3 4.0 3.6 3.1 1.0 1.2 1.4 15.9 18.0 18.2 115 (20.7) 3.0

Hero Motocorp 1,892 SELL 377,772 7,068 200 119.1 125.5 128.8 19.9 5.4 2.6 15.9 15.1 14.7 12.1 11.7 9.9 6.9 5.3 4.3 1.6 2.0 2.0 61.8 47.2 37.0 1,800 (4.8) 13.9

Mahindra & Mahindra 846 BUY 519,475 9,719 614 45.1 50.7 57.8 8.1 12.4 14.0 18.7 16.7 14.6 14.3 11.7 10.0 4.1 3.5 3.0 1.4 1.8 2.1 24.6 23.6 23.1 910 7.6 16.1

Maruti Suzuki 1,322 SELL 399,259 7,470 302 56.6 60.6 83.8 (28.6) 7.1 38.3 23.4 21.8 15.8 18.3 15.1 10.2 2.6 2.3 2.1 0.5 0.6 0.6 11.1 11.3 13.9 1,000 (24.3) 23.6

Motherson Sumi Systems 222 BUY 86,926 1,626 392 6.9 14.0 22.8 (31.9) 103.8 62.8 32.3 15.9 9.7 15.5 9.4 4.8 4.6 3.9 2.7 1.0 1.4 3.1 15.5 26.8 33.1 255 15.0 1.3

Tata Motors 269 BUY 865,279 16,189 3,218 44.6 35.3 51.8 58.7 (20.9) 47.0 6.0 7.6 5.2 5.2 4.9 3.7 2.6 2.0 1.5 1.5 1.9 2.0 54.8 30.0 33.5 320 19.0 51.9

Automobiles Neutral 3,072,987 57,493 25.8 (7.9) 34.7 11.7 12.7 9.4 8.5 7.9 6.0 3.5 2.9 2.3 1.5 1.7 2.0 29.7 22.7 24.7

Banks/Financial Institutions

Andhra Bank 111 ADD 62,169 1,163 560 24.0 21.4 24.3 6.1 (10.9) 13.8 4.6 5.2 4.6 — — — 0.9 0.8 0.7 5.0 4.4 5.0 19.2 15.1 15.4 120 8.0 1.5

Axis Bank 1,102 ADD 455,330 8,519 413 102.7 103.2 104.7 24.4 0.5 1.5 10.7 10.7 10.5 — — — 2.0 1.8 1.6 1.5 1.5 1.5 20.3 17.4 15.4 1,200 8.9 58.9

Bajaj Finserv 823 REDUCE 119,079 2,228 145 94.8 71.8 71.1 21.3 (24.3) (1.1) 8.7 11.5 11.6 — — — 2.4 2.0 1.7 1.8 1.8 1.8 32.2 19.0 16.1 725 (11.9) 3.2

Bank of Baroda 780 REDUCE 321,495 6,015 412 121.4 116.1 117.0 12.4 (4.3) 0.7 6.4 6.7 6.7 — — — 1.3 1.2 1.0 2.2 2.5 2.5 21.7 17.0 15.0 710 (8.9) 9.8

Bank of India 302 BUY 173,505 3,246 575 46.6 59.8 62.7 2.5 28.3 4.9 6.5 5.1 4.8 — — — 1.0 0.9 0.8 2.3 2.9 3.1 15.0 16.2 15.0 370 22.5 4.4

Canara Bank 434 REDUCE 192,417 3,600 443 74.1 68.6 82.8 (18.5) (7.4) 20.6 5.9 6.3 5.2 — — — 1.0 0.9 0.8 2.5 2.8 2.8 15.4 12.7 13.8 420 (3.3) 6.8

Corporation Bank 408 BUY 60,392 1,130 148 101.7 88.1 114.7 6.6 (13.3) 30.1 4.0 4.6 3.6 — — — 0.8 0.7 0.6 5.0 4.4 5.7 19.5 14.9 17.1 510 25.1 0.5

Federal Bank 449 BUY 76,732 1,436 171 45.4 43.3 47.0 32.3 (4.7) 8.5 9.9 10.4 9.6 — — — 1.4 1.3 1.2 2.0 1.9 2.1 14.4 12.4 12.2 500 11.5 3.6

HDFC 769 SELL 1,177,585 22,032 1,532 27.9 32.0 37.9 15.8 14.7 18.5 27.5 24.0 20.3 — — — 6.2 4.7 4.1 1.4 1.5 1.8 22.7 22.2 21.7 690 (10.2) 45.2

HDFC Bank 637 SELL 1,494,606 27,963 2,347 22.0 28.0 35.0 30.4 27.3 24.9 28.9 22.7 18.2 — — — 5.0 4.3 3.7 0.7 0.9 1.1 18.7 20.3 21.5 580 (8.9) 29.5

ICICI Bank 1,067 ADD 1,229,888 23,010 1,153 56.1 61.9 64.8 25.4 10.3 4.7 19.0 17.2 16.5 — — — 2.1 2.0 1.8 1.5 1.7 1.8 11.2 11.4 11.1 1,085 1.7 73.1

IDFC 160 ADD 242,431 4,536 1,512 10.3 12.4 14.8 17.2 20.6 19.1 15.6 12.9 10.8 — — — 2.0 1.8 1.6 — 1.5 1.8 13.7 14.5 15.4 165 2.9 15.4

India Infoline 58 REDUCE 18,888 353 327 4.5 5.8 7.0 (38.3) 28.3 20.6 12.7 9.9 8.2 — — — 1.1 0.9 0.9 2.3 3.5 2.1 7.7 10.0 10.8 60 3.7 0.4

Indian Bank 193 BUY 83,096 1,555 430 39.6 39.9 42.6 1.2 0.9 6.7 4.9 4.8 4.5 — — — 1.0 0.9 0.8 3.9 3.8 4.1 19.4 17.0 16.0 260 34.5 1.0

Indian Overseas Bank 78 REDUCE 62,206 1,164 797 13.2 17.4 21.2 (24.0) 32.3 21.6 5.9 4.5 3.7 — — — 0.7 0.6 0.6 5.7 5.2 6.4 9.9 11.2 12.4 80 2.5 1.8

IndusInd Bank 345 ADD 161,217 3,016 468 17.2 19.3 22.7 38.5 12.4 17.6 20.1 17.9 15.2 — — — 3.6 3.1 2.7 0.6 0.7 0.8 20.1 18.7 18.5 360 4.4 3.0

J&K Bank 814 ADD 39,473 738 48 165.6 173.8 174.0 30.6 4.9 0.1 4.9 4.7 4.7 — — — 1.0 0.8 0.7 4.1 4.3 4.3 21.2 19.1 16.7 1,000 22.9 0.9

LIC Housing Finance 279 ADD 141,033 2,639 505 18.1 22.1 28.4 (11.8) 22.2 28.6 15.4 12.6 9.8 — — — 2.5 2.2 1.9 1.3 1.6 2.0 18.6 18.3 20.2 290 3.8 9.0

L&T Finance Holdings 49 ADD 84,452 1,580 1,715 2.7 3.7 4.9 (5.6) 39.2 32.3 18.6 13.3 10.1 — — — 1.8 1.6 1.4 — — — 11.9 12.5 14.4 55 11.7 0.7

Mahindra & Mahindra Financial 863 ADD 88,587 1,657 103 60.4 81.1 93.8 33.6 34.3 15.7 14.3 10.6 9.2 — — — 3.0 2.7 2.2 1.6 2.2 2.6 22.8 25.6 24.7 905 4.9 1.2

Muthoot Finance 166 BUY 61,834 1,157 372 24.0 21.4 22.6 52.4 (11.0) 5.5 6.9 7.8 7.4 — — — 2.1 1.7 1.4 2.4 — — 41.9 25.4 21.5 200 20.2 —

Oriental Bank of Commerce 285 ADD 83,064 1,554 292 39.1 55.1 57.0 (24.0) 40.9 3.4 7.3 5.2 5.0 — — — 0.9 0.8 0.7 2.8 3.9 4.0 9.9 12.8 12.1 310 8.9 2.5

PFC 198 ADD 260,898 4,881 1,319 23.0 27.7 30.6 0.9 20.3 10.3 8.6 7.1 6.5 — — — 1.3 1.3 1.2 3.0 3.7 4.0 16.9 16.6 16.4 220 11.3 10.3

Punjab National Bank 824 REDUCE 279,331 5,226 339 144.0 145.3 158.6 2.9 0.9 9.2 5.7 5.7 5.2 — — — 1.2 1.1 0.9 2.7 2.7 2.9 21.1 17.4 16.5 820 (0.4) 11.2

Reliance Capital 410 ADD 100,926 1,888 246 21.1 22.8 21.8 126.7 8.2 (4.5) 19.4 18.0 18.8 — — — 0.9 0.9 0.9 1.8 1.7 1.6 5.7 5.0 4.6 450 9.8 25.5

Rural Electrification Corp. 224 REDUCE 221,521 4,144 987 28.6 35.7 39.1 10.0 24.9 9.7 7.9 6.3 5.7 — — — 1.5 1.5 1.4 3.3 4.2 4.6 20.5 22.1 20.9 234 4.3 8.2

Shriram City Union Finance 771 BUY 42,652 798 55 65.4 81.2 97.5 34.7 24.1 20.1 11.8 9.5 7.9 — — — 2.5 1.9 1.5 0.8 1.4 1.7 23.3 22.6 22.3 905 17.4 0.2

Shriram Transport 620 ADD 138,347 2,588 223 56.4 61.9 71.7 2.3 9.8 15.9 11.0 10.0 8.6 — — — 2.3 2.1 1.8 1.1 2.0 2.3 23.1 21.2 20.9 700 12.9 2.7

SKS Microfinance 123 RS 9,004 168 73 (189.0) (32.2) 0.5 (1,304.4) (83.0) (101.4) (0.7) (3.8) 273.2 — — — 2.1 3.9 3.5 — — — (122.9) (70.7) 1.4 — — 7.3

State Bank of India 2,197 ADD 1,473,941 27,576 671 174.5 206.3 219.2 34.0 18.3 6.2 12.6 10.6 10.0 — — — 2.2 2.0 1.8 1.8 1.9 2.0 15.7 15.5 14.7 2,300 4.7 121.3

Union Bank 202 BUY 111,459 2,085 551 32.3 39.2 40.7 (18.2) 21.3 4.0 6.3 5.2 5.0 — — — 1.0 0.9 0.8 4.0 3.8 4.0 14.9 15.7 14.5 240 18.5 4.1

Yes Bank 375 ADD 132,494 2,479 353 27.7 31.7 38.3 32.1 14.4 21.0 13.6 11.8 9.8 — — — 2.8 2.4 2.0 1.1 1.2 1.5 23.1 21.7 21.9 385 2.6 20.7

Banks/Financial Institutions Cautious 9,200,050 172,124 14.6 13.3 11.0 12.7 11.2 10.1 — — — 2.1 1.9 1.7 1.7 1.9 2.1 16.4 16.8 16.6

Cement

ACC 1,377 SELL 258,636 4,839 188 57.1 71.6 78.6 7.8 25.4 9.7 24.1 19.2 17.5 13.9 10.2 8.7 3.4 3.0 2.7 2.4 1.7 1.7 16.9 17.9 17.4 1,160 (15.7) 7.1

Ambuja Cements 195 SELL 296,711 5,551 1,522 7.8 10.6 12.3 (1.2) 36.2 15.9 25.0 18.4 15.9 14.5 10.7 9.2 3.4 3.1 2.9 1.1 1.4 2.0 14.6 18.2 18.9 160 (17.9) 7.8

Grasim Industries 3,251 BUY 298,140 5,578 92 288.6 307.1 327.0 24.4 6.4 6.5 11.3 10.6 9.9 7.4 6.1 5.2 1.7 1.5 1.3 1.1 1.1 1.1 16.7 15.4 14.4 2,900 (10.8) 4.6

India Cements 86 ADD 26,371 493 307 9.0 10.5 13.4 373.8 17.2 27.3 9.6 8.2 6.4 5.1 4.5 3.6 0.6 0.6 0.5 2.5 3.7 3.7 6.9 7.8 9.2 100 16.5 2.1

Shree Cement 3,624 SELL 126,245 2,362 35 159.6 230.2 231.3 179.3 44.2 0.5 22.7 15.7 15.7 6.4 8.2 7.2 4.7 4.4 3.5 0.6 0.6 0.6 24.3 28.9 24.9 2,850 (21.4) 0.7

UltraTech Cement 1,836 SELL 503,275 9,416 274 89.3 95.7 109.4 99.0 7.2 14.3 20.6 19.2 16.8 12.6 11.1 9.3 3.4 2.9 2.5 0.5 0.5 0.5 20.8 18.7 18.1 1,360 (25.9) 3.8

Cement Cautious 1,509,378 28,239 40.8 16.4 10.9 18.4 15.8 14.3 10.1 8.7 7.4 2.7 2.4 2.1 1.1 1.1 1.2 14.9 15.3 14.9

Price/BV (X) Dividend yield (%)

Source: Company, Bloomberg, Kotak Institutional Equities estimates

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UITIES RESEARCH



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

ADVT-3mo


Consumer products

Asian Paints 3,937 SELL 377,588 7,064 96 99.9 115.9 137.8 23.6 16.0 18.9 39.4 34.0 28.6 27.5 22.8 18.9 14.7 11.6 9.1 1.0 0.9 0.9 42.9 39.3 36.4 3,000 (23.8) 6.2

Bajaj Corp. 167 BUY 24,618 461 148 8.1 9.6 11.4 16.5 18.4 18.5 20.5 17.3 14.6 21.1 16.5 13.5 5.8 5.0 4.4 2.4 2.8 3.4 29.9 31.0 32.1 200 19.8 0.7

Colgate-Palmolive (India) 1,167 SELL 158,731 2,970 136 32.8 39.5 45.7 10.9 20.2 15.8 35.6 29.6 25.6 30.4 24.7 21.1 36.5 29.8 26.1 2.1 2.4 2.9 109.0 110.9 108.9 1,150 (1.5) 1.6

Dabur India 125 ADD 218,207 4,082 1,753 3.7 4.4 5.1 12.6 18.5 16.4 33.8 28.6 24.5 26.8 22.1 18.8 12.5 9.9 8.0 1.0 1.2 1.4 41.4 39.4 36.6 125 0.4 2.8

GlaxoSmithkline Consumer 2,956 ADD 124,304 2,326 42 84.5 104.6 122.4 18.5 23.9 17.0 35.0 28.3 24.2 26.7 22.3 18.5 11.3 9.4 7.8 1.2 1.5 1.7 33.8 35.0 34.2 3,000 1.5 1.3

Godrej Consumer Products 673 ADD 217,614 4,071 324 17.7 23.6 26.2 18.7 33.7 11.1 38.1 28.5 25.6 26.4 20.4 17.7 7.7 6.0 5.3 0.7 0.7 0.8 25.2 24.8 25.3 660 (1.9) 3.1

Hindustan Unilever 528 REDUCE 1,141,046 21,348 2,159 11.9 14.5 16.7 23.9 22.0 15.2 44.4 36.4 31.5 37.8 29.8 24.8 32.5 28.1 24.2 1.7 2.3 2.6 83.4 82.8 83.1 510 (3.5) 24.5

ITC 261 ADD 2,026,665 37,917 7,771 7.9 9.1 10.3 23.7 15.3 12.9 32.9 28.5 25.3 23.2 19.5 17.0 10.3 9.2 8.2 1.7 2.0 2.2 35.5 35.6 35.6 265 1.6 27.9

Jubilant Foodworks 1,299 SELL 85,231 1,595 66 16.7 23.9 35.2 49.3 42.7 47.6 77.7 54.5 36.9 44.8 30.5 21.5 28.5 18.7 12.4 — — — 44.7 41.4 40.4 1,000 (23.0) 11.3

Jyothy Laboratories 160 ADD 26,126 489 164 5.5 4.6 6.9 (46.6) (17.3) 51.1 28.9 34.9 23.1 37.9 20.6 15.9 4.3 3.8 3.3 — — — 6.1 11.6 15.3 130 (18.6) 0.8

Marico 194 ADD 124,973 2,338 645 5.3 6.6 7.9 36.3 25.5 19.4 36.7 29.2 24.5 27.6 20.2 16.5 10.7 8.2 6.4 0.4 0.5 0.6 31.5 32.3 29.8 205 5.7 1.3

Nestle India 4,351 SELL 419,466 7,848 96 104.6 118.7 142.7 20.5 13.5 20.2 41.6 36.7 30.5 27.5 22.4 18.8 32.9 23.8 17.0 1.1 1.3 1.4 94.7 75.3 65.1 4,000 (8.1) 2.8

Tata Global Beverages 129 BUY 79,681 1,491 618 5.4 6.4 7.8 36.3 19.1 21.2 23.9 20.1 16.5 14.2 11.8 10.0 1.4 1.3 1.2 1.4 1.7 2.0 7.8 8.5 9.7 130 0.9 5.2

Titan Industries 245 ADD 217,463 4,069 888 6.7 7.8 9.3 36.5 16.5 19.4 36.5 31.4 26.2 24.9 21.2 17.1 15.0 11.6 8.4 0.9 1.2 0.4 47.9 41.8 37.1 255 4.1 8.2

United Spirits 1,149 ADD 144,270 2,699 126 16.6 33.5 38.2 (53.0) 102.2 13.9 69.2 34.3 30.1 20.3 14.7 13.3 3.1 2.9 2.6 0.1 0.2 0.3 4.7 8.7 9.1 770 (33.0) 69.2

Consumer products Cautious 5,394,474 100,926 19.8 20.1 15.8 37.3 31.0 26.8 26.5 21.4 18.2 11.3 9.8 8.5 1.4 1.7 1.9 30.4 31.6 31.6

Constructions

IVRCL 49 REDUCE 13,003 243 267 0.9 3.3 6.1 (84.7) 265.1 85.8 54.0 14.8 8.0 10.5 7.5 6.0 0.7 0.6 0.6 0.8 0.8 0.8 1.2 4.3 7.6 43 (11.7) 6.1

NCC 46 ADD 11,893 223 257 1.4 2.5 3.6 (78.0) 81.5 43.1 33.0 18.2 12.7 8.4 7.2 7.9 0.5 0.5 0.5 1.3 1.3 2.2 12.9 11.3 11.2 55 18.7 2.3

Punj Lloyd 54 REDUCE 18,304 342 340 3.3 3.9 7.6 (322.9) 18.7 94.5 16.3 13.7 7.1 9.9 6.7 5.7 0.6 0.6 0.6 0.2 0.6 1.2 3.8 4.5 8.2 60 11.3 2.8

Sadbhav Engineering 144 BUY 21,643 405 150 9.4 8.1 11.3 20.5 (13.4) 39.9 15.4 17.8 12.7 8.9 9.2 7.3 2.8 2.4 2.0 0.4 0.4 0.4 17.9 13.6 16.1 180 25.0 0.4

Construction Cautious 64,844 1,213 (19.2) 30.5 68.1 20.7 15.9 9.4 9.5 7.2 6.4 0.8 0.8 0.7 0.6 0.7 1.1 3.9 4.8 7.6

Energy

Aban Offshore 433 RS 18,850 353 44 68.3 66.5 79.6 (49.1) (2.6) 19.7 6.3 6.5 5.4 8.4 7.1 6.5 0.7 0.6 0.6 0.8 1.0 1.2 12.3 11.6 11.6 — — 7.6

Bharat Petroleum 349 ADD 252,608 4,726 723 18.1 22.8 23.8 (6.8) 25.5 4.6 19.3 15.3 14.7 10.3 8.5 9.2 1.5 1.5 1.4 1.6 2.0 2.1 7.9 9.3 9.1 410 17.4 7.6

Cairn india 334 ADD 636,593 11,910 1,907 41.6 60.5 54.2 25.0 45.3 (10.3) 8.0 5.5 6.2 6.0 3.9 3.9 1.3 1.1 1.1 — 3.6 4.8 17.7 22.0 17.8 375 12.4 45.3

Castrol India 302 SELL 149,283 2,793 495 9.5 10.1 11.0 (4.4) 7.0 8.5 31.9 29.8 27.5 21.8 20.6 18.6 27.2 24.9 22.9 2.5 2.6 2.8 87.9 87.2 86.7 215 (28.8) 2.1

GAIL (India) 384 ADD 486,716 9,106 1,268 28.8 30.9 31.8 2.3 7.3 2.7 13.3 12.4 12.1 8.6 7.7 7.2 2.1 1.8 1.7 2.3 2.5 2.6 15.7 15.0 13.7 410 6.9 6.7

GSPL 78 BUY 43,890 821 563 9.3 7.7 7.9 4.7 (17.1) 2.2 8.4 10.1 9.9 5.1 5.7 5.3 1.6 1.4 1.2 1.3 1.3 1.3 20.7 14.5 12.9 85 9.0 1.9

Hindustan Petroleum 307 REDUCE 104,110 1,948 339 26.9 23.4 28.3 (34.2) (13.1) 21.2 11.4 13.1 10.8 2.6 2.7 2.7 0.6 0.6 0.6 2.8 2.3 2.8 5.4 4.6 5.3 330 7.5 6.6

Indian Oil Corporation 254 ADD 617,063 11,545 2,428 32.7 22.7 27.0 0.8 (30.5) 19.1 7.8 11.2 9.4 5.7 7.1 6.7 1.0 0.9 0.9 2.0 2.0 3.0 12.9 8.4 9.3 300 18.0 2.1

Oil India 476 BUY 286,166 5,354 601 57.3 60.2 64.1 19.5 4.9 6.6 8.3 7.9 7.4 3.2 2.6 2.1 1.5 1.3 1.2 4.0 4.4 4.8 17.2 15.9 15.3 575 20.8 1.3

Oil & Natural Gas Corporation 284 ADD 2,428,057 45,427 8,556 32.1 31.8 33.5 30.2 (0.9) 5.4 8.8 8.9 8.5 3.8 3.6 3.1 1.4 1.3 1.2 3.4 3.5 3.9 16.5 14.6 13.8 310 9.2 15.0

Petronet LNG 162 ADD 121,613 2,275 750 14.1 13.8 13.3 70.7 (1.8) (4.0) 11.5 11.7 12.2 7.8 8.1 7.1 3.1 2.5 2.1 1.5 1.5 1.5 29.7 23.1 18.1 155 (4.4) 4.0

Reliance Industries 840 SELL 2,503,295 46,834 2,981 61.3 64.0 63.0 (1.1) 4.5 (1.6) 13.7 13.1 13.3 8.0 8.4 7.8 1.4 1.3 1.2 1.0 1.1 1.1 11.7 11.2 10.1 750 (10.7) 49.8

Energy Neutral 7,648,243 143,092 12.0 2.8 2.1 10.2 9.9 9.7 5.7 5.5 5.0 1.4 1.3 1.2 2.0 2.4 2.8 13.9 13.0 12.1

Industrials

ABB 772 SELL 163,551 3,060 212 8.7 19.9 23.7 192.0 128.7 19.1 88.6 38.8 32.5 56.7 23.8 20.2 6.5 5.7 5.0 0.4 0.4 0.4 7.4 15.6 16.3 500 (35.2) 0.8

BGR Energy Systems 279 REDUCE 20,140 377 72 31.1 27.9 33.9 (30.7) (10.1) 21.5 9.0 10.0 8.2 6.0 5.5 5.1 1.8 1.6 1.4 2.5 2.0 2.4 21.7 16.9 18.0 280 0.3 3.6

Bharat Electronics 1,183 REDUCE 94,672 1,771 80 106.3 110.7 125.7 (0.9) 4.1 13.5 11.1 10.7 9.4 5.2 4.2 2.9 1.6 1.5 1.3 1.8 2.5 2.5 15.3 14.3 14.6 1,300 9.9 0.9

Bharat Heavy Electricals 254 SELL 620,956 11,618 2,448 28.8 29.5 24.2 17.1 2.6 (17.9) 8.8 8.6 10.5 6.0 6.0 6.7 2.4 2.0 1.8 2.5 2.5 2.0 30.9 25.7 18.0 205 (19.2) 20.2

Crompton Greaves 130 ADD 83,491 1,562 642 5.7 6.9 10.4 (60.0) 20.8 49.6 22.7 18.8 12.6 10.1 10.4 7.5 2.3 2.1 1.9 1.1 1.1 1.2 10.6 11.7 15.7 145 11.4 5.2

Cummins India 479 REDUCE 132,668 2,482 277 22.0 25.1 29.0 (0.9) 13.8 15.7 21.7 19.1 16.5 19.9 15.9 13.6 6.5 5.7 5.1 2.3 2.6 3.0 30.7 30.6 31.0 480 0.3 2.6

Kalpataru Power Transmission 88 BUY 13,535 253 153 13.3 13.9 15.8 (4.1) 4.3 14.1 6.6 6.4 5.6 4.7 4.5 4.2 0.7 0.7 0.6 1.7 1.7 1.7 10.7 10.0 10.5 120 36.1 0.3

KEC International 70 BUY 17,945 336 257 6.9 7.9 8.9 (14.1) 14.3 13.8 10.2 8.9 7.8 6.1 6.1 5.5 1.5 1.4 1.2 1.7 1.7 1.9 16.4 16.3 16.2 75 7.4 0.3

Larsen & Toubro 1,574 REDUCE 964,193 18,039 612 76.1 83.7 90.4 12.4 10.0 8.0 20.7 18.8 17.4 16.0 14.0 12.4 3.1 2.6 2.3 0.9 0.9 0.9 16.1 14.9 13.8 1,450 (7.9) 44.3

Maharashtra Seamless 348 BUY 24,527 459 71 45.0 42.1 47.4 (6.6) (6.5) 12.6 7.7 8.3 7.3 4.8 4.2 3.4 0.9 0.8 0.8 2.6 2.4 2.7 11.8 10.3 10.8 430 23.7 0.1

Siemens 699 REDUCE 237,968 4,452 340 18.0 26.6 31.7 (29.3) 47.8 19.2 38.8 26.2 22.0 23.9 16.1 13.4 5.5 4.7 4.1 0.5 0.8 0.9 14.9 19.3 19.8 640 (8.5) 4.3

Suzlon Energy 19 REDUCE 32,970 617 1,777 (4.0) (3.7) (0.4) (34.1) (6.0) (88.1) (4.7) (5.0) (41.9) 8.1 8.2 6.6 0.6 0.7 0.8 — 1.1 1.1 (11.7) (13.7) (1.8) 15 (19.1) 6.0

Tecpro Systems 161 ADD 8,129 152 50 24.4 24.1 25.9 (9.6) (1.2) 7.5 6.6 6.7 6.2 5.0 4.9 4.6 1.1 0.9 0.8 — — — 17.1 14.7 14.0 200 24.2 0.0

Thermax 557 REDUCE 66,402 1,242 119 32.9 26.4 30.9 4.0 (19.9) 17.2 16.9 21.1 18.0 11.2 13.5 11.0 4.1 3.6 3.2 1.3 1.5 1.6 26.6 18.2 18.8 430 (22.8) 0.6

Voltas 127 ADD 41,938 785 331 9.4 8.3 9.1 (3.4) (11.7) 8.7 13.4 15.2 14.0 11.1 11.1 9.4 2.8 2.5 2.2 1.3 2.0 2.1 21.7 17.4 16.9 125 (1.4) 4.2

Industrials Cautious 2,523,086 47,205 7.1 8.3 3.7 16.5 15.2 14.7 11.3 10.3 9.7 2.8 2.4 2.1 1.4 1.5 1.4 16.8 15.8 14.5

Infrastructure

Adani Port and SEZ 120 BUY 242,094 4,529 2,017 5.5 6.8 10.7 20.0 25.2 56.8 22.0 17.5 11.2 20.1 12.7 9.5 4.9 3.8 3.0 0.9 1.1 1.5 23.8 24.5 30.0 150 25.0 2.9

Container Corporation 954 ADD 123,971 2,319 130 65.6 82.4 93.6 (3.0) 25.7 13.6 14.5 11.6 10.2 9.4 7.7 6.4 2.2 1.9 1.7 1.6 2.0 2.3 16.1 17.9 17.8 1,050 10.1 0.8

GMR Infrastructure 25 RS 95,753 1,791 3,892 (1.1) 0.1 1.1 236.7 (113.0) 645.0 (21.7) 167.0 22.4 19.4 8.3 5.4 1.0 0.8 0.7 — — — (5.8) 0.8 5.5 — — 3.4

Gujarat Pipavav Port 52 ADD 25,139 470 483 1.4 2.1 3.0 (212.6) 55.9 44.6 38.5 24.7 17.1 16.3 12.4 10.9 3.2 2.0 1.8 — — — 10.4 10.3 13.5 63 21.2 0.5

GVK Power & Infrastructure 15 RS 22,899 428 1,579 0.4 1.0 3.5 (60.3) 165.6 243.1 37.3 14.0 4.1 26.4 11.9 6.8 0.7 0.5 0.4 2.1 2.4 5.5 1.8 3.9 11.1 — — 3.2

IRB Infrastructure 152 BUY 50,536 945 332 14.9 13.0 10.4 9.5 (13.1) (19.5) 10.2 11.7 14.6 7.4 7.5 6.6 1.5 1.3 1.2 — — — 16.9 11.7 8.3 175 15.1 8.4

Infrastructure Neutral 560,391 10,484 (4.3) 50.6 51.7 26.3 17.5 11.5 16.4 10.1 7.2 2.0 1.6 1.4 0.8 1.0 1.4 7.8 9.3 12.3

Dividend yield (%)


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ADVT-3mo


Media

DB Corp 196 BUY 36,011 674 183 11.0 11.6 14.3 (14.5) 4.9 24.1 17.8 17.0 13.7 10.3 9.5 7.7 3.9 3.6 3.3 2.5 3.0 4.1 23.0 21.9 24.9 260 32.3 0.5

DishTV 78 ADD 82,801 1,549 1,064 (1.0) 0.3 1.2 (45.3) (130.3) 306.3 (76.8) 253.2 62.3 18.6 13.9 11.3 (88.3) (135.5) 115.4 — — — 694.0 (42.2) 2,497 80 2.8 4.6

Eros International 167 BUY 15,307 286 91 15.8 18.7 21.0 26.8 18.3 12.0 10.6 8.9 8.0 7.1 5.9 5.2 1.9 1.5 1.3 — — — 19.3 18.8 17.4 260 55.3 0.7

Hindustan Media Ventures 126 BUY 9,229 173 73 8.9 10.4 12.5 22.3 16.0 20.6 14.1 12.1 10.1 7.4 6.1 4.7 2.1 1.8 1.7 0.8 1.6 3.2 15.9 16.2 17.3 190 51.1 0.0

HT Media 94 ADD 22,050 413 235 7.0 7.5 10.9 (8.4) 5.8 46.7 13.3 12.6 8.6 5.6 4.6 2.9 1.4 1.3 1.2 0.4 2.1 4.3 11.0 10.6 14.3 130 38.7 0.3

Jagran Prakashan 92 BUY 29,111 545 316 5.6 6.0 7.0 (17.4) 6.7 16.8 16.4 15.3 13.1 9.0 8.4 7.3 3.9 3.6 3.2 3.8 3.8 3.8 24.5 24.3 25.8 130 41.2 0.4

Sun TV Network 323 ADD 127,229 2,380 394 17.6 17.7 19.1 (10.0) 0.6 8.1 18.4 18.3 16.9 11.5 10.9 10.1 4.8 4.4 4.1 2.9 3.1 3.7 28.6 26.1 26.0 340 5.3 7.0

Zee Entertainment Enterprises 178 BUY 170,880 3,197 960 6.0 7.2 8.7 (0.5) 20.1 21.8 29.8 24.9 20.4 21.1 16.8 13.4 3.7 3.5 3.4 0.7 0.9 1.1 13.0 14.8 17.2 170 (4.5) 6.8

Media Attractive 492,617 9,216 (1.8) 17.1 22.6 25.7 22.0 17.9 13.3 11.5 9.5 4.2 3.9 3.5 1.5 1.7 2.1 16.4 17.6 19.8

Metals & Mining

Coal India 369 BUY 2,328,528 43,565 6,316 23.2 25.8 31.1 34.4 11.0 20.7 15.9 14.3 11.8 10.2 9.0 6.9 5.5 4.4 3.5 2.7 2.1 2.5 38.0 34.1 32.8 390 5.8 12.8

Hindalco Industries 120 REDUCE 228,926 4,283 1,915 17.7 14.9 14.5 38.9 (15.9) (2.7) 6.7 8.0 8.2 6.9 7.4 7.3 0.7 0.7 0.6 1.3 1.3 1.3 11.1 8.6 7.8 115 (3.8) 15.8

Hindustan Zinc 131 ADD 553,475 10,355 4,225 13.2 13.1 13.3 13.2 (1.0) 1.7 9.9 10.0 9.9 6.2 5.8 5.0 2.1 1.8 1.6 1.8 1.8 1.8 22.6 19.0 16.8 135 3.1 2.1

Jindal Steel and Power 425 ADD 397,337 7,434 935 42.4 34.4 45.2 5.6 (18.9) 31.3 10.0 12.3 9.4 8.3 8.4 7.5 2.2 1.9 1.6 0.4 0.4 0.4 24.8 16.5 18.3 445 4.7 24.1

JSW Steel 745 SELL 166,247 3,110 223 24.1 46.7 64.3 (69.3) 93.8 37.7 30.9 16.0 11.6 5.5 6.1 6.3 1.0 1.0 0.9 1.0 1.3 1.3 8.2 9.5 7.9 585 (21.5) 23.5

National Aluminium Co. 52 SELL 133,630 2,500 2,577 3.4 3.1 3.2 (19.7) (6.5) 2.3 15.4 16.5 16.1 7.4 6.5 5.5 1.1 1.1 1.0 1.9 1.9 1.9 7.6 6.8 6.6 50 (3.6) 0.2

Sesa Goa 178 ADD 154,570 2,892 869 31.0 43.9 38.2 (36.2) 41.7 (13.2) 5.7 4.0 4.7 5.5 5.7 7.5 1.0 0.8 0.7 2.6 2.6 2.6 11.1 9.5 7.2 196 10.2 9.5

Sterlite Industries 101 ADD 340,153 6,364 3,361 15.8 13.8 14.0 3.9 (12.4) 1.4 6.4 7.3 7.2 3.8 3.5 3.0 0.7 0.7 0.6 2.0 2.0 2.0 12.1 9.7 9.1 117 15.6 14.6

Tata Steel 400 ADD 388,904 7,276 971 17.2 34.8 49.9 (72.3) 102.1 43.2 23.2 11.5 8.0 7.8 6.5 5.8 0.9 0.9 0.8 3.0 3.0 3.0 6.4 7.7 10.4 390 (2.6) 35.9

Metals & Mining Cautious 4,691,769 87,779 (1.5) 8.6 10.3 11.9 10.9 9.9 7.3 6.9 6.1 1.9 1.7 1.5 2.2 1.9 2.2 15.7 15.2 14.8

Pharmaceutical

Apollo Hospitals 701 ADD 97,560 1,825 139 15.8 21.5 27.1 19.3 35.9 26.1 44.4 32.7 25.9 19.0 16.5 13.8 3.9 3.4 3.2 — — — 9.6 11.2 12.7 700 (0.2) 1.9

Biocon 278 ADD 55,650 1,041 200 16.9 19.9 21.5 (8.0) 17.7 8.2 16.4 14.0 12.9 8.9 7.2 6.5 2.4 2.2 2.0 — — — 15.7 16.5 16.0 265 (4.8) 2.1

Cipla 363 REDUCE 291,460 5,453 803 14.0 18.8 19.7 13.5 34.7 4.6 25.9 19.3 18.4 17.6 13.2 12.0 3.8 3.3 2.8 0.6 0.6 0.6 15.7 16.6 16.4 400 10.2 12.2

Cadila Healthcare 833 ADD 170,484 3,190 205 31.9 39.6 49.0 (8.2) 24.2 23.7 26.1 21.0 17.0 20.1 15.5 12.5 6.6 5.4 4.4 0.9 1.2 1.5 27.8 28.3 28.7 980 17.7 2.2

Dishman Pharma & chemicals 99 REDUCE 8,080 151 81 7.0 9.7 12.0 (29.0) 38.7 23.7 14.2 10.3 8.3 7.9 6.5 5.7 0.9 0.8 0.8 — — — 4.6 7.2 8.4 50 (49.7) 2.6

Divi's Laboratories 1,064 ADD 141,098 2,640 133 40.2 52.1 59.9 24.0 29.7 14.8 26.5 20.4 17.8 20.0 15.4 12.6 6.6 5.5 4.6 1.2 1.6 1.8 27.1 29.5 28.2 1,197 12.6 5.1

Dr Reddy's Laboratories 1,655 REDUCE 281,644 5,269 170 83.8 93.4 98.9 29.0 11.4 5.9 19.7 17.7 16.7 13.1 11.4 10.6 4.9 4.0 3.3 0.8 1.0 1.1 27.6 24.9 21.8 1,740 5.1 11.0

GlaxoSmithkline Pharmaceuticals 1,987 SELL 168,428 3,151 85 74.3 83.2 91.1 8.8 12.0 9.6 26.8 23.9 21.8 18.9 17.5 15.6 8.7 8.2 7.7 2.3 2.6 3.2 32.4 35.3 36.4 2,035 2.4 1.6

Glenmark Pharmaceuticals 416 REDUCE 112,451 2,104 271 21.9 22.1 28.5 31.1 1.2 29.0 19.0 18.8 14.6 22.2 13.4 10.9 4.7 3.9 3.1 — 0.6 0.8 26.7 22.5 23.8 400 (3.7) 3.7

Jubilant Life Sciences 222 REDUCE 35,436 663 159 22.9 31.0 37.4 58.7 35.4 20.7 9.7 7.2 5.9 8.5 6.6 5.6 1.5 1.2 1.0 0.9 1.3 1.8 16.2 19.4 19.7 185 (16.8) 0.7

Lupin 583 ADD 260,493 4,874 447 19.5 28.2 30.3 1.2 45.1 7.3 29.9 20.6 19.2 21.1 13.3 12.2 6.4 5.1 4.2 0.5 0.8 0.9 23.9 27.9 24.3 600 2.9 9.3

Ranbaxy Laboratories 531 SELL 223,909 4,189 422 (18.5) 22.0 25.2 (145.7) 218.4 14.8 (28.6) 24.2 21.0 15.7 12.8 14.5 7.8 6.0 4.8 — — — (68.5) 28.0 25.3 436 (17.8) 9.9

Sun Pharmaceuticals 676 REDUCE 700,306 13,102 1,036 25.0 34.6 33.0 42.5 38.4 (4.6) 27.1 19.5 20.5 19.9 12.6 12.5 5.3 4.3 3.7 0.6 0.8 0.9 21.9 24.2 19.4 664 (1.8) 10.3

Pharmaceuticals Attractive 2,547,001 47,652 (8.2) 50.1 7.7 29.5 19.7 18.3 17.1 12.7 11.8 5.0 4.2 3.6 0.7 0.9 1.0 17.0 21.2 19.5

Property

DLF 236 NR 404,382 7,566 1,715 7.1 12.7 16.9 (22.1) 79.7 33.1 33.3 18.6 13.9 16.5 12.5 9.6 1.5 1.4 1.3 1.0 1.3 1.5 4.5 7.6 9.5 — — 22.0

Housing Development & Infrastructure 93 NR 39,135 732 419 22.0 28.8 28.8 11.3 30.5 0.2 4.2 3.2 3.2 5.2 4.6 4.2 0.4 0.3 0.3 — 1.6 2.1 8.3 10.8 9.6 — — 31.2 Mahindra Life Space Developer 382 NR 15,575 291 41 29.4 29.8 34.3 18.0 1.3 15.1 13.0 12.8 11.1 12.7 10.0 9.6 1.4 1.3 1.2 1.2 1.3 1.4 11.2 10.4 11.0 — — 0.1

Oberoi Realty 259 NR 85,485 1,599 330 14.1 14.3 22.4 (10.5) 1.4 57.3 18.5 18.2 11.6 15.0 11.7 7.4 2.3 2.1 1.8 0.8 1.0 1.2 13.1 12.0 16.9 — — 0.5

Phoenix Mills 196 NR 28,361 531 145 7.3 10.7 11.5 14.9 46.9 7.9 26.9 18.3 17.0 20.5 14.3 13.6 1.7 1.6 1.5 1.0 1.0 1.0 6.4 8.9 9.0 — — 0.2 Sobha Developers 352 NR 34,469 645 98 21.4 25.1 37.4 13.8 17.1 49.2 16.4 14.0 9.4 9.8 8.8 6.2 1.7 1.6 1.4 1.4 1.4 1.4 10.9 11.7 15.6 — — 0.9

Unitech 25 NR 65,277 1,221 2,616 0.9 1.8 2.3 (56.1) 84.8 32.7 26.3 14.2 10.7 28.1 15.4 11.8 0.5 0.5 0.5 0.4 0.4 0.4 2.1 3.7 4.7 — — 6.3

Property Cautious 672,683 12,585 (17.4) 52.1 26.7 21.3 14.0 11.0 14.2 10.9 8.6 1.2 1.1 1.0 1.1 1.3 1.5 5.4 7.7 9.0

Dividend yield (%)


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ADVT-3mo


Technology

HCL Technologies 565 REDUCE 404,190 7,562 715 34.6 46.1 49.4 51.2 33.5 7.1 16.4 12.3 11.4 10.1 7.7 6.9 4.1 3.0 2.5 1.4 1.4 1.4 25.1 27.5 24.3 575 1.7 11.8

Hexaware Technologies 123 REDUCE 36,233 678 294 9.1 12.5 12.9 207.9 37.9 3.1 13.6 9.8 9.5 12.1 7.0 6.4 3.6 3.1 2.7 2.4 5.1 5.2 26.9 33.7 30.4 130 5.3 3.2

Infosys 2,598 REDUCE 1,491,281 27,900 574 144.9 170.0 185.8 21.0 17.3 9.3 17.9 15.3 14.0 12.0 10.0 8.8 4.8 4.0 3.4 1.8 2.0 2.3 29.0 28.3 26.1 2,600 0.1 51.4

Mahindra Satyam 107 ADD 125,303 2,344 1,176 10.2 10.6 11.2 142.3 4.2 5.4 10.5 10.0 9.5 9.5 5.8 5.0 4.2 3.0 2.4 — — 2.1 50.4 35.0 28.1 118 10.7 8.7

Mindtree 679 ADD 27,924 522 41 53.1 80.5 85.3 115.1 51.7 6.0 12.8 8.4 8.0 9.5 5.3 4.9 2.9 2.3 1.9 0.8 2.4 3.8 25.2 30.6 26.5 830 22.3 1.7

Mphasis 401 SELL 84,468 1,580 211 39.0 38.0 39.3 (24.6) (2.7) 3.5 10.3 10.6 10.2 8.6 7.3 6.4 2.2 1.8 1.6 1.1 1.2 1.4 22.8 18.9 16.8 375 (6.4) 1.2

Polaris Financial Technology 134 REDUCE 13,320 249 100 20.8 22.6 22.6 7.4 9.0 0.1 6.4 5.9 5.9 3.7 3.1 2.6 1.1 0.9 0.8 2.9 3.1 3.2 18.1 16.8 14.9 130 (2.7) 2.1

TCS 1,293 REDUCE 2,531,051 47,354 1,957 54.4 71.1 78.8 22.0 30.7 10.9 23.8 18.2 16.4 16.9 13.1 11.6 7.8 6.3 5.2 1.9 2.2 2.4 36.8 38.4 35.0 1,250 (3.3) 32.8

Tech Mahindra 928 ADD 118,256 2,212 128 80.1 96.0 102.9 63.5 19.8 7.2 11.6 9.7 9.0 14.7 10.4 9.2 2.9 2.5 2.2 0.4 0.6 0.9 28.4 28.8 26.9 1,000 7.8 12.0

Wipro 377 REDUCE 926,526 17,334 2,456 22.7 27.1 29.4 5.2 19.4 8.6 16.6 13.9 12.8 11.5 9.1 8.1 3.2 2.7 2.4 1.3 1.6 1.8 21.2 21.4 19.8 375 (0.6) 10.3

Technology Cautious 5,758,551 107,737 21.2 23.1 9.1 18.5 15.0 13.8 13.0 10.2 9.1 4.8 3.9 3.3 1.7 1.9 2.2 26.0 26.3 24.2

Telecom

Bharti Airtel 276 NR 1,046,619 19,581 3,798 11.2 8.6 12.9 (29.6) (23.7) 50.2 24.6 32.2 21.4 7.2 6.8 5.7 2.1 2.0 1.8 — 0.5 0.5 8.6 6.2 8.8 — — 35.2

IDEA 87 ADD 285,735 5,346 3,303 2.2 3.6 6.2 (19.6) 62.8 74.8 39.5 24.3 13.9 8.3 6.9 5.4 2.2 2.0 1.8 — — — 5.7 8.6 13.5 90 4.0 3.5

MTNL 38 RS 23,972 448 630 (9.1) (8.4) (8.3) (11.9) (8.1) (1.7) (4.2) (4.5) (4.6) (1.0) (1.3) (1.5) 0.2 0.3 0.3 — — — (5.7) (5.5) (5.8) — — 5.6

Reliance Communications 64 SELL 132,406 2,477 2,064 4.5 3.3 4.6 (31.0) (26.0) 38.2 14.3 19.3 14.0 8.7 7.2 6.2 0.4 0.4 0.3 — — — 2.4 1.9 2.5 45 (29.9) 12.6

Tata Communications 246 REDUCE 70,096 1,311 285 (27.9) (27.5) (21.2) 12.0 (1.5) (23.0) (8.8) (9.0) (11.6) 9.9 7.6 6.9 3.1 4.2 6.5 — — — (27.0) (39.7) (44.2) 215 (12.6) 1.2

Telecom Cautious 1,558,827 29,164 (34.4) (16.3) 77.9 34.3 41.0 23.0 7.9 7.0 5.9 1.4 1.3 1.3 — — 0.3 4.0 3.3 5.5

Utilities

Adani Power 51 SELL 111,507 2,086 2,180 (0.4) (3.8) 2.5 (118.0) 786.4 (165.8) (120.7) (13.6) 20.7 35.5 23.4 10.3 1.8 2.3 2.1 — — — (1.5) (15.2) 10.7 33 (35.5) 2.5

CESC 334 BUY 41,779 782 125 21.7 25.2 35.2 (9.3) 16.0 39.7 15.4 13.3 9.5 8.9 9.3 6.1 0.7 0.7 0.6 — 1.5 1.6 4.5 5.1 6.7 350 4.7 1.2

JSW Energy 60 SELL 98,318 1,839 1,640 2.0 4.1 4.2 (60.6) 100.8 4.3 29.7 14.8 14.2 14.3 8.2 6.4 1.7 1.5 1.4 — — — 5.8 11.0 10.3 50 (16.6) 2.3

Lanco Infratech 15 RS 34,345 643 2,223 (0.5) (0.7) 1.0 (131.8) 39.2 (233.2) (29.5) (21.2) 15.9 10.9 10.6 7.1 0.7 0.8 0.7 — — — (2.5) (3.6) 4.8 — — 7.5

NHPC 20 BUY 239,864 4,488 12,301 2.4 2.0 2.2 79.5 (18.5) 9.9 8.1 9.9 9.0 7.4 8.2 6.9 0.8 0.8 0.7 3.5 2.8 3.2 10.8 8.3 8.6 26 33.3 1.5

NTPC 165 REDUCE 1,360,089 25,446 8,245 11.2 12.0 15.3 2.4 6.9 27.6 14.7 13.8 10.8 12.9 11.7 8.9 1.8 1.7 1.5 2.0 2.2 2.8 12.8 12.6 14.7 160 (3.0) 8.1

Power Grid 117 ADD 543,530 10,169 4,630 7.1 8.1 10.0 22.9 14.3 23.8 16.6 14.5 11.7 13.0 11.6 9.2 2.3 2.1 1.9 1.8 2.1 2.6 14.6 15.1 16.9 140 19.3 6.5

Reliance Infrastructure 559 BUY 146,902 2,748 263 60.3 66.7 73.6 4.0 10.6 10.3 9.3 8.4 7.6 11.1 9.7 8.2 0.6 0.6 0.5 1.8 2.0 2.0 8.9 9.8 10.2 890 59.4 23.9

Reliance Power 97 SELL 272,658 5,101 2,805 3.1 3.2 3.1 14.0 3.0 (2.7) 31.5 30.5 31.4 49.9 27.9 17.2 1.5 1.5 1.4 — — — 5.0 4.9 4.6 76 (21.8) 10.3

Tata Power 103 ADD 254,363 4,759 2,468 4.6 5.9 6.5 (40.6) 29.0 9.8 22.4 17.3 15.8 11.2 8.4 7.1 1.9 1.8 1.6 1.5 1.6 1.6 8.1 10.6 10.8 109 5.8 6.4

Utilities Attractive 3,103,356 58,061 (0.6) 3.5 30.0 15.9 15.4 11.9 13.1 11.6 8.8 1.5 1.4 1.3 1.7 1.8 2.2 9.5 9.3 11.1

Others

Carborundum Universal 147 REDUCE 27,490 514 187 11.6 10.9 12.8 27.0 (5.7) 17.3 12.7 13.4 11.5 7.8 7.7 6.5 2.7 2.3 2.0 1.7 1.6 1.8 26.0 20.7 20.6 150 2.0 0.1

Coromandel International 286 SELL 80,772 1,511 283 22.5 22.7 24.6 (8.5) 0.9 8.5 12.7 12.6 11.6 10.4 8.9 8.3 3.4 2.9 2.5 2.6 2.7 2.8 27.5 23.3 21.9 260 (9.0) 0.6

Havells India 622 ADD 77,548 1,451 125 31.5 33.0 39.7 61.6 4.8 20.5 19.8 18.8 15.6 12.5 10.8 9.2 7.7 5.9 4.6 1.0 1.2 1.3 45.6 35.3 32.9 600 (3.5) 2.8

Jaiprakash Associates 82 BUY 175,326 3,280 2,126 2.9 6.5 10.8 (51.5) 123.0 65.6 28.2 12.7 7.6 11.7 8.8 6.7 1.5 1.4 1.2 — — — 5.6 11.6 16.9 86 4.3 22.8

Jet Airways 358 SELL 30,928 579 86 (184.6) (34.2) 21.5 1,735.6 (81) (162.9) (1.9) (10.5) 16.7 (596.5) 10.7 7.1 23.6 (18.8) 145.9 — — — 6.0 6.0 6.0 312 (12.9) 16.2

Rallis India 144 BUY 28,091 526 194 5.1 7.6 8.8 (21.6) 48 15.8 28.3 19.1 16.5 14.4 11.0 9.2 5.1 4.3 3.6 1.5 1.5 1.5 20.4 23.6 24.0 150 3.8 0.7

SpiceJet 36 BUY 15,690 294 441 (13.7) 0.2 2.4 (650.1) (101.4) 1,103.7 (2.6) 181.1 15.0 (4.4) 19.7 7.5 (9.9) (10.5) (34.3) — — — (746) (5.6) (106.5) 45 26.6 3.4

Tata Chemicals 318 REDUCE 81,076 1,517 255 32.9 38.8 42.3 25.4 17.9 9.0 9.7 8.2 7.5 5.2 4.4 3.7 1.3 1.2 1.0 3.8 4.7 5.3 18.6 19.5 19.4 365 14.7 2.4

United Phosphorus 125 REDUCE 57,933 1,084 462 12.0 15.8 17.5 (0.4) 31.5 10.5 10.4 7.9 7.2 5.7 4.8 4.3 1.4 1.2 1.1 2.0 2.0 2.0 0.1 0.2 — 130 3.6 2.3

Others 574,854 10,755 (67.4) 262.4 43.8 49.3 13.6 9.5 11.7 8.1 6.3 2.2 1.9 1.6 1.4 1.5 1.7 4.4 14.1 17.3

KS universe (b) 49,373,112 923,725 9.0 11.2 13.0 15.2 13.7 12.1 9.7 8.7 7.5 2.3 2.1 1.8 1.6 1.8 2.0 15.2 15.1 15.2

KS universe (b) ex-Energy 41,724,869 780,634 8.1 13.7 16.0 16.8 14.7 12.7 11.5 9.8 8.3 2.6 2.3 2.1 1.5 1.7 1.8 15.6 15.8 16.2

KS universe (d) ex-Energy & ex-Commodities 35,523,722 664,616 9.2 14.6 17.3 17.7 15.4 13.1 12.8 10.7 8.8 2.8 2.5 2.2 1.4 1.6 1.8 15.6 15.9 16.6

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$)= 53.45

Dividend yield (%)



Disclosures

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

Source: Kotak Institutional Equities As of June 30, 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 30/06/2012 Kotak Institutional Equities Investment Research had investment ratings on 167 equity securities.

18.0%

32.3% 33.5%

16.2%

4.2%0.6% 0.6% 1.2%

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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Documents

India Daily, September 26, 2012 - Kotak Securities · McDonald’s, KFC, Nirula’s, Domino’s, Haldiram’s, Bikanerwala, Agarwal Sweets and Pizza Hut Food Courts Typically a collection