INDIA STORY: FUNDAMENTALS DRIVEN VALUE CREATION “ Manufacturing leads the charge” April 23, 2007

INDIA STORY: FUNDAMENTALS DRIVEN VALUE CREATION

“Manufacturing leads the charge”

April 23, 2007

Value Creators Report

India Supplement

PREFACE

This document has been prepared as a supplement to BCG’s global value creators report 2006 (“Spotlight on Growth”) and provides further insights into the value creation by Indian companies over and above what is highlighted in the global report.

The methodology for analyzing a larger set of Indian companies is the same as that for the global set. Please refer to the section on methodology for a detailed explanation on TSR decomposition analysis and selection of sample.

Total shareholder returns (TSR) analysis for a sample of Indian companies has been conducted for the period Apr ’02 – Mar ’07 and top performers have been identified. In order to make a like-to-like comparison of Indian companies with relevant international set, Apr ‘01 – Mar ‘06 financials of Indian companies are used. Further, published financials of Indian companies as on Mar ’06 are used to decompose the share holder returns from 01-06 into sub-components (growth, profitability, multiple change, etc).

AGENDA

The remarkable Indian value creation story

Decomposing the value creation of Indian companies

Overall winners

TSR Decomposition Methodology

Contacts

Appendix: Industry-wise top value creators

0

150

300

450

600

750

Mar

-01

Jun-

01

Sep-

01

Dec

-01

Mar

-02

Jun-

02

Sep-

02

Dec

-02

Mar

-03

Jun-

03

Sep-

03

Dec

-03

Mar

-04

Jun-

04

Sep-

04

Dec

-04

Mar

-05

Jun-

05

Sep-

05

Dec

-05

Mar

-06

Jun-

06

Sep-

06

Dec

-06

Mar

-07

NIFTY NSE 500 MIDCAP

4%-3%

INDIAN STOCK MARKETS HAVE TAKEN OFF SINCE 2003Mid Cap Stocks Have Led The Rally

74%60%50%

CAGR

-6%

Source: Capitalline

INDIAN MARKETS HAVE OUTPERFORMED MANY GLOBAL INDICES

41%37%

28%21% 20% 19%

12%8%

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

RTS Merval Nifty WIG-20 All Share SSE IBEX-35 NYSEComposite

Russia

37%

35%

Argentina

21%

17%

India

29%

12%

Poland

26%

23%

S. Africa

37%

34%

China

30%

194%

Spain

22%

24%

USA

12%

21%

Country

3 yr

1 yr

Source: Capitaline, Factiva (Tradeline), Yahoo Finance, BCG Analysis

5 year performance (%)

2002-07 returns of select global indices

AGENDA



Overall winners


Contacts


~20 TIMES SHAREHOLDER RETURN IN INDIA COMPARED TO GLOBAL AVERAGE


2%

40%38%

0%

10%

20%

30%

40%

India sample (N=191)'02 - '07

India sample (N=200)'01 - '06

Global sample(N=1056) '01 - '06

%

Shareholder return

X 17-20

PROFITABLE GROWTH AND MULTIPLE RE-RATING PRIMARY LEVERS OF HIGHER TSR IN INDIAN SAMPLE

No Dip In Profitability Despite Much Higher Growth


TSR decomposition of overall sample (2001-06)

17%

2%

10%

5%

3%

5%

40%

2%

0% 10% 20% 30% 40% 50% 60%

Revenue

EBITDA

Multiple

MV/EV

NOSH

DY

AllocationTerm

TSR

Contributing factors

% contribution

India (N=200)


% contribution

Global Sample (N=1056)

2%

1%

2%

0%

-4%

1%

4%

-2%

0% 10% 20% 30% 40% 50% 60%

Revenue

EBITDA

Multiple

MV/EV

NOSH

DY

AllocationTerm

TSR

TOP DECILE RELIED ON FUNDAMENTAL BUSINESS DRIVERSAND DEBT REDUCTION

Sales Growth 50% Faster, Margin improvement at Above 10% pa

TSR decomposition of overall sample

Source: Capitaline, BCG Analysis

17%

2%

10%

5%

3%

5%

40%

-2%

0% 50% 100% 150%

Revenue

EBITDA

Multiple

MV/EV

NOSH

DY

AllocationTerm

TSR


% contribution

Overall Sample


% contribution

Top Decile (n=20)

27%

13%

6%

38%

5%

4%

24%

116%

0% 50% 100% 150%

Revenue

EBITDA

Multiple

MV/EV

NOSH

DY

AllocationTerm

TSR

AGENDA


Decomposing the value creation of Indian companies• Industry sectors• Ownership types• Large caps Vs mid caps

Overall winners


Contacts


Industry

Engineering & Construction

Industrial Manufacturing

Materials & Commodities

Automotive & Supply

Telecom

Transportation & Logistics

Chemicals & Plastics

Oil & Gas

Pharma, Biotech & Healthcare

IT

FMCG, Retail & Durables

Others

Total

Number of companies in top 20’01-’06 ’02-’07

Large cap Mid cap Large cap Mid cap

OLD ECONOMY HAS DOMINATED VALUE CREATION (I) Four Industries Account For ~70% Of Top Performers

4

6

4

2

-

-

1

-

1

-

-

2

20

2

1

3

5

-

-

1

-

3

-

-

5

20

3

3

5

-

1

-

2

-

1

-

3

2

20

8

3

5

-

-

-

2

-

1

-

-

1

20

Industry(1) 1. Engineering & Construction

2. Industrial Manufacturing

3. Materials & Commodities

4. Telecom

5. Chemicals & Plastics

6. Automotive & Supply

7. Transportation & Logistics

8. Oil & Gas

9. Pharmaceuticals, Biotech & Healthcare

10. IT

11. FMCG, Retail & Durables

TSR (%)’02-’07(1)

81%

72%

57%

51%

47%

46%

43%

34%

28%

26%

18%

(1) 10 Large Cap and 15 Mid Cap companies classified as ‘Others not included’Source: Capitaline, BCG analysis

TSR (%)’01-’06

64%

67%

65%

47%

54%

63%

62%

43%

33%

23%

20%

OLD ECONOMY HAS DOMINATED VALUE CREATION (II)

0%

25%

50%

75%

100%

0 200 400 600 800 1000 1200 1400 1600 18002007 Market Cap (‘000 Cr)

(XX) – Total Value Created (‘000 Cr)(1)(1)Total Value Created = Change in total market cap + Total dividend paid outiSource: Capitaline, BCG Analysis

5 year TSR and 2006 market cap of top value creating industry segments

OLD ECONOMY HAS DOMINATED VALUE CREATION (III)

Engineering & Construction (109) Industrial Manufacturing (137)Materials & Commodities (248)

Telecom (148)Chemicals & Plastics (50)Automotive & Supply (116)

Transport & Logistics (19)Oil & Gas (231)Pharma, Biotech & Healthcare (95)

IT (186)FMCG, Retail & Durables (97)

Industrial Manufacturing

Materials & Commodities


Automotive & Supply

Transportation & Logistics

Chemicals & Plastics

Telecom

Oil & Gas

Pharma

IT

FMCG & Durables

Overall

Dividend yield %

7

16

8

9

7

8

2

3

1

-3

0

5

TOP TSR INDUSTRIES SHOWED SUBSTANTIAL PROFITABILITY IMPROVEMENT SUPPLEMENTING ABOVE AVERAGE GROWTH

TSR % Revenue %

EBITDA % Multiple % Allocation term

Value creation = Fundamental value + Valuation

multiple + Cash Flow attribution

67

65

64

63

62

54

47

43

33

23

20

40

19

21

22

23

5

15

12

14

18

33

11

17

9

7

-1

7

9

0

-6

2

2

-6

-1

2

25

2

22

14

19

11

35

14

12

-2

7

10

MV / EV %

6

14

10

8

12

16

4

9

0

0

0

5

Share change %

3

1

1

2

-2

0

1

5

2

2

1

2

3

4

5

4

8

4

1

6

2

1

3

3

Source: Capitaline, Company Financials 01-06, BCG Analysis


% contribution

INDUSTRIAL MANUFACTURINGStrong Fundamentals Backed By Multiple Re-rating

TSR decomposition of Industrial Manufacturing

17%

2%

10%

5%

3%

5%

40%

2%

0% 25% 50%

Revenue

EBITDA

Multiple

MV/EV

NOSH

DY

AllocationTerm

TSR


Overall

% contribution

Industrial Manufacturing (India)

19%

9%

25%

6%

3%

7%

67%

-3%

0% 50% 100%

Revenue

EBITDA

Multiple

MV/EV

NOSH

DY

AllocationTerm

TSR


Machinery & Construction (Global top 10)

% contribution

14%

7%

7%

3%

0%

37%

8%

-2%

0% 50% 100%

Revenue

EBITDA

Multiple

MV/EV

NOSH

DY

AllocationTerm

TSR

4%

0%

-8%

0%

-2%

1%

-1%

-6%

Global Avg

Source: Capitaline, Company Financials 01-06, BCG report – Spotlight on Growth, BCG Analysis


% contribution

MATERIALS & COMMODITIESTop Performer Driven Purely By Fundamentals

TSR decomposition of Materials & Commodities


Overall

% contribution

Materials & Commodities (India)

21%

14%

4%

16%

64%

7%

2%

-1%

0% 20% 40% 60% 80%

Revenue

EBITDA

Multiple

MV/EV

NOSH

DY

AllocationTerm

TSR


Materials & Mining (Global top 10)

% contribution

32%

7%

12%

0%

58%

9%

-1%

-1%

0% 50% 100%

Revenue

EBITDA

Multiple

MV/EV

NOSH

DY

AllocationTerm

TSR

8%

5%

-2%

6%

-2%

4%

0%

19%

Global Avg

17%

2%

10%

5%

3%

5%

40%

2%

0% 25% 50%

Revenue

EBITDA

Multiple

MV/EV

NOSH

DY

AllocationTerm

TSR

Source: Capitaline, Company Financials 01-06, BCG report – Spotlight on Growth,BCG Analysis


% contribution

ENGINEERING AND CONSTRUCTIONRiding the Infrastructure and Real Estate Wave

TSR decomposition of Engineering & Construction


Overall

% contribution

Engineering & Construction (India)

22%

10%

5%

8%

64%

-1%

22%

-2%

0% 20% 40% 60% 80%

Revenue

EBITDA

Multiple

MV/EV

NOSH

DY

AllocationTerm

TSR


Machinery & Construction (Global top 10)

% contribution

14%

7%

7%

3%

0%

37%

8%

-2%

0% 50% 100%

Revenue

EBITDA

Multiple

MV/EV

NOSH

DY

AllocationTerm

TSR

4%

0%

-8%

0%

-2%

1%

-1%

-6%

Global Avg

17%

2%

10%

5%

3%

5%

40%

2%

0% 25% 50%

Revenue

EBITDA

Multiple

MV/EV

NOSH

DY

AllocationTerm

TSR


AUTOMOTIVE AND SUPPLYBeating the World’s Best on Sales Growth and Profitability Improvement

TSR decomposition of Automotive and Supply industry


Overall

% contribution


Automotive & supply (India)

% contribution


Automotive & supply (Global top 10)

% contribution

23%

7%

14%

8%

4%

9%

63%

-2%

0% 20% 40% 60% 80%

Revenue

EBITDA

Multiple

MV/EV

NOSH

DY

AllocationTerm

TSR

15%

0%

13%

20%

6%

0%

51%

-3%

0% 20% 40% 60% 80%

Revenue

EBITDA

Multiple

MV/EV

NOSH

DY

AllocationTerm

TSR

Global Avg

4%

-1%

5%

1%

-3%

3%

0%

9%

17%

2%

10%

5%

3%

5%

40%

2%

0% 25% 50%

Revenue

EBITDA

Multiple

MV/EV

NOSH

DY

AllocationTerm

TSR



% contribution

TRANSPORTATION & LOGISTICSStrong Performance Driven by Change In Expectations and Profitability Improvement

TSR decomposition of Transportation & Logistics


Overall

% contribution

Transportation & Logistics (India)Contributing factors

Transportation & Logistics (Global top 10)

% contribution

12%

8%

7%

62%

5%

9%

19%

2%

0% 20% 40% 60% 80%

Revenue

EBITDA

Multiple

MV/EV

NOSH

DY

AllocationTerm

TSR

10%

8%

14%

0%

34%

3%

0%

-1%

0% 20% 40% 60% 80%

Revenue

EBITDA

Multiple

MV/EV

NOSH

DY

AllocationTerm

TSR

6%

1%

0%

4%

0%

1%

0%

12%

Global Avg

17%

2%

10%

5%

3%

5%

40%

2%

0% 25% 50%

Revenue

EBITDA

Multiple

MV/EV

NOSH

DY

AllocationTerm

TSR



% contribution

CHEMICALS & PLASTICSAverage, Balanced Fundamental Performance Combined with Capital Structure Changes

TSR decomposition of Chemicals & Plastics


Overall

% contribution

Chemicals & Plastics (India)Contributing factors

Chemicals (Global top 10)

% contribution

15%

0%

11%

16%

4%

8%

54%

0%

0% 20% 40% 60% 80%

Revenue

EBITDA

Multiple

MV/EV

NOSH

DY

AllocationTerm

TSR

10%

2%

8%

7%

4%

0%

31%

0%

0% 20% 40% 60% 80%

Revenue

EBITDA

Multiple

MV/EV

NOSH

DY

AllocationTerm

TSR

8%

-2%

-1%

3%

-1%

3%

-1%

9%

Global Avg

17%

2%

10%

5%

3%

5%

40%

2%

0% 25% 50%

Revenue

EBITDA

Multiple

MV/EV

NOSH

DY

AllocationTerm

TSR



% contribution

TELECOMWeak Fundamental Performance, TSR Driven by Significant Multiple Re-rating

TSR decomposition of Telecom


Overall

% contribution

Telecom (India)

12%

4%

1%

2%

47%

-6%

35%

-1%

0% 20% 40%

Revenue

EBITDA

Multiple

MV/EV

NOSH

DY

AllocationTerm

TSR

17%

2%

10%

5%

3%

5%

40%

2%

0% 25% 50%

Revenue

EBITDA

Multiple

MV/EV

NOSH

DY

AllocationTerm

TSR



% contribution

OIL & GASBroadly Representative of Overall Market, Slightly Slower Revenue Growth

TSR decomposition of Oil & Gas


Overall

% contribution

Oil & Gas (India)

14%

9%

6%

3%

43%

2%

14%

-5%

0% 20% 40% 60% 80%

Revenue

EBITDA

Multiple

MV/EV

NOSH

DY

AllocationTerm

TSR

17%

2%

10%

5%

3%

5%

40%

2%

0% 25% 50%

Revenue

EBITDA

Multiple

MV/EV

NOSH

DY

AllocationTerm

TSR



% contribution

PHARMACEUTICALS, BIOTECH & HEALTHCAREBroadly Representative of Overall Market, Slower Growth Than Global Top 10

TSR decomposition of Pharmaceuticals, Biotech & Healthcare


Overall

% contribution

Pharma, Biotech & HC (India)Contributing factors

Pharma & Biotech (Global top 10)

% contribution

18%

0%

2%

1%

33%

2%

12%

-2%

0% 20% 40% 60% 80%

Revenue

EBITDA

Multiple

MV/EV

NOSH

DY

AllocationTerm

TSR

22%

5%

0%

2%

22%

1%

-5%

-3%

0% 20% 40% 60% 80%

Revenue

EBITDA

Multiple

MV/EV

NOSH

DY

AllocationTerm

TSR

8%

2%

-12%

0%

-1%

1%

0%

-2%

Global Avg

17%

2%

10%

5%

3%

5%

40%

2%

0% 25% 50%

Revenue

EBITDA

Multiple

MV/EV

NOSH

DY

AllocationTerm

TSR



% contribution

ITStrong Revenue Growth but Margin Erosion and Downward Multiple Re-rating

TSR decomposition of IT


Overall

% contribution

IT (India)

33%

0%

1%

23%

-4%

-6%

-2%

2%

0% 20% 40% 60% 80%

Revenue

EBITDA

Multiple

MV/EV

NOSH

DY

AllocationTerm

TSR


Technology (Global top 10)

% contribution

12%

18%

7%

1%

0%

34%

-3%

-1%

0% 50% 100%

Revenue

EBITDA

Multiple

MV/EV

NOSH

DY

AllocationTerm

TSR

4%

0%

-8%

0%

-2%

1%

-1%

-6%

Global Avg

17%

2%

10%

5%

3%

5%

40%

2%

0% 25% 50%

Revenue

EBITDA

Multiple

MV/EV

NOSH

DY

AllocationTerm

TSR



% contribution

FMCG, RETAIL & DURABLESWeak Performance Across Parameters, Global Top 10 Outperformed Indian Sample

TSR decomposition of FMCG, Retail & Durables


Overall

% contribution

FMCG & Durables (India)Contributing factors

Consumer Goods (Global top 10)

% contribution

11%

0%

3%

-1%

20%

-1%

7%

1%

0% 20% 40%

Revenue

EBITDA

Multiple

MV/EV

NOSH

DY

AllocationTerm

TSR

7%

3%

15%

3%

4%

30%

-1%

0% 20% 40% 60% 80%

Revenue

EBITDA

Multiple

MV/EV

NOSH

DY

AllocationTerm

TSR

4%

1%

-2%

0%

0%

3%

-1%

5%

Global Avg

17%

2%

10%

5%

3%

5%

40%

2%

0% 25% 50%

Revenue

EBITDA

Multiple

MV/EV

NOSH

DY

AllocationTerm

TSR


AGENDA



Overall winners


Contacts


INDIAN COMPANIES HAVE OUTPERFORMED MNC’s PSUs outperformed private sector in FY2001-06

37%

56%

42%38%

18%21%

2002-07 2001-06

MNC

PSU Pvt

MNC

PSU

Pvt

(1) (1) (2)

(2)

(3) (3)

(1) PSU’s - N=21 for 2001-06 and N=20 for 2002-07(2) Pvt - N = 157 for 2001-06 and N=151 for 2002-07(3) MNC’s - N=21 for 2001-06 and N=19 for 2002-07Source: BCG Analysis

TSR by ownership type (2002-07 and 2001-06)

PSU’s HAVE OUTPERFORMED MNC’s AND PRIVATE SECTOR2001-2006

8%

2%

8%

0%

3%

1%

21%

-1%

0% 10% 20% 30% 40% 50% 60%

Revenue

EBITDA

Multiple

MV/EV

NOSH

DY

AllocationTerm

TSR


% contribution

MNC


PSU

12%

16%

12%

6%

9%

56%

3%

-1%

0% 10% 20% 30% 40% 50% 60%

Revenue

EBITDA

Multiple

MV/EV

NOSH

DY

AllocationTerm

TSR

23%

7%

4%

2%

5%

38%

-1%

-2%

0% 10% 20% 30% 40% 50% 60%

Revenue

EBITDA

Multiple

MV/EV

NOSH

DY

AllocationTerm

TSR


% contribution % contribution

Private Sector


PSU TSR DRIVEN BY MULTIPLE CHANGE AND CASH FLOW EFFECTS Fundamental Performance Key Drivers Of Private Sector And MNC TSR

31%

67%50%

34%

21%40%

35%

12% 10%

0%

25%

50%

75%

100%

PSU Private sector MNC

% of TSR

TSR composition of PSUs v/s Private sector v/s MNCs

56% 21%

21 21

5-year TSR (’01-’06)

No. of companies in sample

Cash flow effect (debt, dividend, shares)

Expectations (multiple)

Business fundamentals (sales, margin)

37%

158


72% OF TOTAL VALUE CREATED COMES FROM PRIVATE COMPANIES

5 year TSR and 2007 market cap of MNCs, PSUs and Private companies%TSR

(1)Total Value Created = Change in total market cap + Total dividend paid outiSource: Capitaline, BCG Analysis

2007 Market Cap (‘000 Cr)

(XX) – Total Value Created (‘000 Cr)(1)

MNC (76)

PSU (397)

Pvt Cos. (1228)

0%

25%

50%

75%

100%

0 500 1000 1500 2000 2500

AGENDA



Overall winners


Contacts


MID CAPS DELIVERED HIGHER TSR THAN LARGE CAPS‘02- ‘07 and ‘01- ‘06

37%

46%

Large Cap

Mid Cap

88%

135%

37%

51%

Large Cap

Mid Cap

Absolute TSR ( 2002-07) TSR of Top 20 ( 2002-07)

Absolute TSR (2001-06) TSR of Top 20 ( 2001-06)

82%

107%

(1)

(2)

(1) Large Caps N=76, Min-Cap N=115(2) Large Caps N=68, Mid-Cap N=132Source: BCG Analysis

MID-CAPS TOOK A PROFITABILITY DIP AND RELIED MORE ON MULTIPLE RE-RATING

2001-06TSR decomposition of overall sample


17%

3%

8%

4%

3%

3%

37%

-1%

0% 10% 20% 30% 40% 50% 60%

Revenue

EBITDA

Multiple

MV/EV

NOSH

DY

AllocationTerm

TSR


% contribution

Large Cap ( Market Cap > $ 1 bn)


% contribution

Mid Cap ( Market Cap < $ 1 bn)

18%

17%

9%

3%

9%

51%

-2%

-3%

0% 10% 20% 30% 40% 50% 60%

Revenue

EBITDA

Multiple

MV/EV

NOSH

DY

AllocationTerm

TSR

LARGE CAP TSR DRIVEN MORE BY FUNDAMENTAL PERFORMANCEMultiple Change More Important In Mid-caps

51%31%

22%

33%

27%35%

0%

25%

50%

75%

100%

Large caps Mid-caps

% of TSR

TSR composition of large caps v/s mid-caps (2001-06)

37% 51%

68 132

5-year TSR (’01-’06)

No. of companies in sample

Cash flow effect (debt, dividend, shares)

Expectations (multiple)

Business fundamentals (sales, margin)


TOPPERS IN LARGE CAP RELIED EVEN MORE ON FUNDAMENTALS, LESS ON MULTIPLE CHANGE



% contribution

Large Cap (n=68)


% contribution

Large Cap Top 20 (n=20)

24%

11%

6%

19%

4%

19%

82%

0%

0% 25% 50% 75% 100%

Revenue

EBITDA

Multiple

MV/EV

NOSH

DY

AllocationTerm

TSR

17%

3%

8%

4%

3%

3%

37%

-1%

0% 10% 20% 30% 40% 50% 60%

Revenue

EBITDA

Multiple

MV/EV

NOSH

DY

AllocationTerm

TSR


TOPPERS IN MID CAP RELIED EVEN MORE ON MULTIPLE CHANGE



% contribution

Mid Cap (n=132)


% contribution

Mid Cap Top 20 (n=20)

18%

7%

29%

30%

5%

20%

107%

-3%

0% 20% 40% 60% 80% 100% 120% 140%

Revenue

EBITDA

Multiple

MV/EV

NOSH

DY

AllocationTerm

TSR

18%

17%

9%

3%

9%

51%

-2%

-3%

0% 10% 20% 30% 40% 50% 60%

Revenue

EBITDA

Multiple

MV/EV

NOSH

DY

AllocationTerm

TSR


40

27

-30

-3

7

34

-1

47

0

28

8

10

32

37

35

23

40

14

11

4

75

16

4

5

-10

0

35

0

0

-11

12

0

-55

-3

-1

-2

FOR THE BEST PERFORMING LARGE CAP COS, PROFITABILITY AND TOP-LINE GROWTH ARE KEY DRIVERS OF VALUE

2001-06Value

creation = Fundamental value + Valuation multiple + Cash Flow attribution

Bajaj Hindustan

Bharat EarthMove

JSW Steel

Sesa Goa

Crompton Greaves

Gammon India

Sterlite Inds.

Bharat Electron

United Phosp.

Bharat Forge

Large Cap

Overall

145

140

131

125

116

111

106

97

95

94

37

40

37

10

39

40

27

32

35

17

48

45

17

17

15

22

13

30

13

15

19

9

17

-7

3

2

6

5

2

8

3

2

5

3

1

1

3

3

39

38

37

27

27

25

25

17

10

15

3

5

Dividend yield %TSR % Revenue

%EBITDA % Multiple % Allocation

termMV / EV % Share

change %

Note: Financials as on Mar 06Source: Capitaline, Company Financials 01-06, BCG Analysis

-5

-3

-1

-15

-23

0

0

-4

0

-6

-3

-2

56

46

23

22

38

27

27

29

74

56

17

10

Praj Inds.

Aban Offshore Lt

Balkrishna Inds.

Peninsula Land

Nag. Constructn.

Unitech

Kalpataru Power

Lupin

Guj. Flourochem.

Hind.Construct.

Mid

Overall

206

176

167

165

161

151

146

142

137

134

51

40

31

26

41

102

53

28

26

65

-1

31

9

5

FOR THE BEST PERFORMING MID CAP COS, MULTIPLE CHANGE IS A MAJOR DRIVER OF VALUE

2001-06Value

creation = Fundamental value + Valuation multiple + Cash Flow attribution

46

42

32

-2

49

39

40

15

19

36

18

17

5

7

16

25

2

7

6

0

12

-15

-2

2

5

7

1

0

0

9

9

5

7

9

3

3

67

52

54

32

42

41

38

32

25

22

9

5

Dividend yield %TSR % Revenue

%EBITDA % Multiple % Allocation

termMV / EV % Share

change %

Note: Financials as on Mar 06Source: Capitaline, Company Financials 01-06, BCG Analysis

0%

25%

50%

75%

100%

0 500 1000 1500 2000 2500

86% OF TOTAL VALUE CREATED COMES FROM LARGE CAP SEGMENT

5 year TSR and 2007 market cap of large and small cap segments

(XX) – Total Value Created (‘000 Cr)(1)(1)Total Value Created = Change in total market cap + Total dividend paid outiSource: Capitaline, BCG Analysis

2007 Market Cap (‘000 Cr)

Mid Cap (237)

Large Cap (1463)

AGENDA



Overall winners


Contacts


7 INDIAN COMPANIES IN GLOBAL TOP 10 VALUE CREATORS IN THEIR RESPECTIVE SECTORS

Larsen & Toubro

Bajaj Auto

Bharat Heavy Electricals

Mahindra & Mahindra

Tata Motors

Hero Honda Motors

Indian Hotels

CompanyEngineering & Construction

Automotive & Supply


Automotive & Supply

Automotive & Supply

Automotive & Supply

Travel & Tourism

Sector70%

57%

56%

52%

50%

45%

36%

TSR

1

2

3

4

5

6

7

Company

1. Unitech2. JSW Steel3. Aban Offshore 4. Godrej Industries5. Sesa Goa6. Pantaloon Retail7. United Phosporous8. Videocon Industries9. Jindal Steel10. Thermax11. Glenmark Pharma12. S A I L13. Crompton Greaves14. Siemens15. Larsen & Toubro16. Bharti Airtel17. Century Textiles18. United Spirits19. Hindustan Zinc20. Aditya Birla Nuvo

Market Cap(Rs. cr) Mar 07

31,4498,0847,4744,7106,7055,5266,0879,8907,3234,5607,338

47,2107,315

18,38945,663

144,8265,0767,863

23,8039,992

TSR (02-07)

257%197%173%146%140%121%114%103%101%

95%92%92%88%86%86%82%78%78%76%75%

Industry

Engineering & ConstructionMaterials & CommoditiesEngineering & ConstructionChemicals & PlasticsMaterials & CommoditiesFMCG, Retail & DurablesChemicals & PlasticsFMCG, Retail & DurablesMaterials & CommoditiesIndustrial ManufacturingPharma, Biotech & HealthcareMaterials & CommoditiesIndustrial ManufacturingIndustrial ManufacturingEngineering & ConstructionTelecomOthersFMCG, Retail & DurablesMaterials & CommoditiesOthers

TOP 20 TSR COMPANIES IN LARGE CAP SEGMENTSample of 76 companies

TOP 20 TSR COMPANIES IN MID-CAP SEGMENTSample of 115 companies

Company

1. Praj Industries.2. Shree Precoated Steels3. Ansal Properties4. Kalpataru Power5. Simplex Infrastructure6. Gujarat Flourochem7. Nagarjuna Construction8. Jai Corp9. Greaves Cotton10. Peninsula Land11. IVRCL Infrastructure12. Sintex Industries13. Lakshmi Mach. Works14. Jubilant Organosys15. Bajaj Hindustan16. Jyoti Structures17. Bhushan Steel18. Rajesh Exports19. Mahindra Gesco20. Maharashtra Seamless


3,1752,5053,0382,8851,5533,2443,3341,9641,5431,5403,7782,3523,6903,7342,7571,3752,1811,3882,1063,575

TSR (02-07)

224%206%192%162%143%140%135%134%133%125%120%116%115%112%109%106%102%101%

98%93%

Industry

Industrial ManufacturingMaterials & CommoditiesEngineering & ConstructionEngineering & ConstructionEngineering & ConstructionChemicals & PlasticsEngineering & ConstructionMaterials & CommoditiesIndustrial ManufacturingEngineering & ConstructionEngineering & ConstructionChemicals & PlasticsIndustrial ManufacturingPharma, Biotech & HealthcareMaterials & CommoditiesEngineering & ConstructionMaterials & CommoditiesOthersEngineering & ConstructionMaterials & Commodities

AGENDA



Overall winners


Contacts


1 2 3 4

3,365 3,1272,366 2,053

238

761

313

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

Cos listed on NSEon March 31, 2006

Top 300 by marketcap

Cos listed onMarch 31, 2001

Excluding bankingand financialservices firms

Market cap of excluded cosMarket cap represented

SAMPLE STUDIED CONSISTS OF 191 COMPANIES AND REPRESENTS 61% OF TOTAL MARKET CAP

Rs ‘000 cr Market capitalization by sample

Note: Sample excludes firms with non-comparable valuation paradigms, TSR Breakdown analysis done on similar screening for companies with published financialsSource: Capitaline

Final Sample

No. of Cos. 1068 300 218 191

Filter

1 2 3 4

2,814 2,6362,004 1,741

178

632

253

0

500

1,000

1,500

2,000

2,500

3,000

Cos listed on NSEon March 31, 2006

Top 300 by marketcap

Cos listed onMarch 31, 2001

Excluding bankingand financialservices firms

Market cap of excluded cosMarket cap represented

INDUSTRY-WISE TSR DECOMPOSITION WAS CONDUCTED FOR FY01-06 RESULTS OF 200 COMPANIES BASED ON SIMILAR SCREENING

Represents 62% Of Total Market Cap

Rs ‘000 cr Market capitalization by sample

Note: Sample excludes firms with non-comparable valuation paradigmsSource: Capitaline

Final Sample for industry-wise TSR decomposition

No. of Cos. 918 300 226 199

Filter

SHARE PRICE CAN BE BROKEN INTO FIVE COMPONENTS

Share price = MVNOSH

=MVEV

EV

NOSH

x

(EBITDA) x (EBITDA multiple) x MVEV

NOSH=

(Sales x EBITDA margin) x (EBITDA multiple) x x MVEV

1NOSH

1 2 3 4 5

=Share price

=Share price S x M x m x F x 1N

Methodology

MV : Market value of companyNOSH : Number of shares outstandingEV : Enterprise value S : Sales

M : EBITDA Margin

m : EBITDA multiple

F : MV/EV

TOTAL SHARE HOLDER RETURN CAN BE BROKEN INTO SIX COMPONENTS

Methodology

Total shareholder return (TSR) =SP2

SP1

DividendSP1

– 1

=S2M2m2F2

S1M1m1F1

N1

N2

x + DY – 1

+ DY – 1S2

S1( ) M2

M1( ) m2

m1( ) F2

F1( ) N2

N1( )–1

=

= MM( )1 +

SS( )1 +

mm( )1 +

FF( )1 +

NN( )1 + + DY – 1

–1

SCAGR + MCAGR + FCAGR+ mCAGR – NCAGR + DY + allocation termTotal shareholder return (TSR) =

SP2 = Share price at end of yearSP1 = Share price at beginning of yearDividend = Dividend during the year

TOTAL SHARE HOLDER RETURN CAN BE STUDIED IN THREE SEGMENTS

Total shareholder return (TSR)

Sales + EBITDA margin + EBITDA multiple + – + DY + Allocation term= MVEV

No. ofshares( ))

Fundamental value Multiple Cash flow effect

Methodology

(

1 2 3

Growth in sales

Growth in EBITDA margin

Growth in EBITDA multiple

Growth in MV/EV ratio(1)

Growth in no. of shares

Dividend Yield+ + + - +

(1) MV/EV ratio represents the market value creation as proportion of total enterprise value - highlights the extent of debt taken by the company in relation to its market value

=

COMPANIES DIVIDED INTO 12 INDUSTRY SEGMENTS

Automotive & SupplyChemicals & PlasticsIndustrial ManufacturingFMCG, Retail & DurablesITEngineering & ConstructionMaterials & CommoditiesOil & GasOthers(1) Pharmaceuticals, Biotech & HealthcareTelecomTransportation & LogisticsOverall

Segment8577531261083276

Large CapMarket Cap >

$ 1 bn9

1411108

12191

151411

115

Mid CapMarket Cap <

$ 1 bn171918171315317

252243

191

Total

Number of companies

(1) Others includes the segments for which the number of players was unrepresentative of industry: 4 multi-businesses, 1 jewellery maker, 1 paper mfg,, 1 networks provider, 1 design and eng. company, Textile companies etcSource: Capitaline, BCG analysis

Companies representing 70% of

the world's total market capitalization

Number of selected

companies

Number of companies

included in the analysis

3,562

1,056

# of companiesin sample

Selection criteria (I): • Company could be

classified into one of

14 industry sectors• Listed for at least 5

years

(1) Hurdle rates differ across industriesSources: BCG Value Creators Report "Spotlight on growth", 2006; BCG analysis

4,924

Focus on: • 120 sub-industry

segments (excl. service firms, banks and insurances)

• Capital markets in 45 countries

Selection criteria (II): • Meets minimum

market capitalization(1)

• Free float above 25%• Satisfied company

accounts data availability

WORLDWIDE MORE THAN 1,000 COMPANIES ANALYZED Selection Process

TOTAL WORLDWIDE SAMPLE DISTRIBUTED TO REFLECT EACH INDUSTRY APPROPRIATELY

Companies Clustered by Industries and Regions

Africa (14)

Asia-Pacific (308)

Europe (287)

North America (429)

South America (18)

Industries(# companies)

Regions (# companies)

= 1,056companies

Auto-motive

& Supply

(62)

Che-micals

(78)

ConsumerGoods(104)

Machi-nery

& Con-struction

(81)

Media&

Enter-tain-ment(76)

Mining&

Mate-rials(88)

Multi-busi-ness(41)

Phar-ma&

Bio-tech(65)

Pulp&

Paper(27)

Retail(119)

Tech-nology(107)

Trans-port

&Logistics

(58)

Travel&

Tourism(67)

Utilities(83)

Sources: BCG Value Creators Report "Spotlight on growth", 2006; BCG analysis

AGENDA



Overall winners


Contacts


AGENDA



Overall winners


Contacts


INDUSTRIAL MANUFACTURINGTop Performers

Company

1. Thermax2. Crompton Greaves3. Siemens

1. Praj Industries Ltd2. Greaves Cotton Ltd3. Lakshmi Machine Works


4,5607,315

18,389

317515433690

TSR (02-07)

95%88%86%

224%133%115%

TSR (01-06)

101%116%

90%

206%119%

98%

Large Cap

Mid Cap

MATERIALS AND COMMODITIES Top Performers

Company

1. Thermax2. Crompton Greaves3. Siemens

1. Praj Industries Ltd2. Greaves Cotton Ltd3. Lakshmi Machine Works


4,5607,315

18,389

317515433690

TSR (02-07)

95%88%86%

224%133%115%

TSR (01-06)

101%116%

90%

206%119%

98%

Large Cap

Mid Cap

ENGINEERING AND CONSTRUCTIONTop Performers

Company

1. Unitech2. Aban Offshore Lt3. Larsen & Toubro

1. Ansal Properties2. Kalpataru Power3. Simplex Infrastructure


31,4497,474

45,663

3,0382,8851,553

TSR (02-07)

257%173%

86%

192%162%143%

TSR (01-06)

151%176%

70%

NA146%

NA

Large Cap

Mid Cap

AUTOMOTIVE AND SUPPLYTop Performers

Company

1. M & M2. M I C O3. Amtek Auto

1. Bharat Earth Movers2. Motherson Sumitomo3. Exide Industries


19,14910,459

4,701

3,9782,5203,188

TSR (02-07)

73%70%55%

91%80%71%

TSR (01-06)

65%63%55%

140%72%53%

Large Cap

Mid Cap

TRANSPORTATION AND LOGISTICS Top Performers

Company

1. Container Corporation2. Shipping Corporation of India

1. Great Eastern Shipping


12,6604,913

3,090

TSR (02-07)

54%27%

55%

TSR (01-06)

63%50%

70%

Large Cap

Mid Cap

CHEMICALS AND PLASTICS Top Performers

Company

1. Godrej Industries2. United Phosporous3. Tata Chemicals

1. Gujarat Flourochem2. Sintex Industries3. GHCL


4,7106,0874,464

3,2442,3521,614

TSR (02-07)

146%114%

37%

140%116%

77%

TSR (01-06)

91%95%48%

137%117%

98%

Large Cap

Mid Cap

TELECOMTop Performers

Company

1. Bharti Airtel2. V S N L3. M T N L

1. Tata Teleservice


144,82611,466

9,245

3,818

TSR (02-07)

82%17%

3%

25%

TSR (01-06)

NA11%10%

23%

Large Cap

Mid Cap

OIL AND GAS Top Performers

Company

1. Essar Oil2. O N G C3. Mangalore Refineries

1. Chennai Petroleum


6,224188,392

5,934

2,796

TSR (02-07)

55%43%38%

48%

TSR (01-06)

53%64%

2%

58%

Large Cap

Mid Cap

PHARMACEUTICALS, BIOTECH AND HEALTHCARE Top Performers

Company

1. Glenmark Pharma2. Lupin3. Sun Pharma

1. Jubilant Organosys2. Ipca Labs3. Panacea Biotech


7,3384,870

20,341

3,7341,5052,739

TSR (02-07)

92%62%46%

112%71%66%

TSR (01-06)

94%142%

46%

134%NA

55%

Large Cap

Mid Cap

IT Top Performers

Company

1. Infosys Technologies2. MphasiS Ltd3. Satyam Computers

1. Hexaware2. Infotech Enterprises3. Rolta India


112,9804,619

31,142

2,1911,6692,654

TSR (02-07)

35%34%30%

70%31%29%

TSR (01-06)

25%50%31%

44%NA

35%

Large Cap

Mid Cap

FMCG, RETAIL AND DURABLES Top Performers

Company

1. Pantaloon Retail2. Videocon Industries3. United Spirits

1. S Kumars 2. Titan Industries3. Godrej Consumer


5,5269,8907,863

1,3883,7413,316

TSR (02-07)

121%103%

78%

67%67%62%

TSR (01-06)

NA78%

NA

NA84%

NA

Large Cap

Mid Cap

End of deck

Documents

INDIA STORY: FUNDAMENTALS DRIVEN VALUE CREATION “ Manufacturing leads the charge” April 23, 2007