13 September 2013

INDIA DAILY
September 13, 2013 India 12-Sep 1-day1-mo 3-mo
Sensex 19,782 (1.1) 2.9 5.1
Nifty 5,851 (1.1) 2.7 2.7

Contents Global/Regional indices
Dow Jones 15,301 (0.2) (1.0) 0.8

Special Reports
Nasdaq Composite 3,716 (0.2) 0.9 7.9
Strategy FTSE 6,589 0.0 (0.3) 4.5
Strategy: Trade secrets Nikkei 14,382 (0.0) 3.7 15.6

Hang Seng 22,932 (0.1) 1.7 9.8
Daily Alerts KOSPI 2,000 (0.2) 4.5 6.2
Company Value traded India
Cash (NSE+BSE) 154 150 134

Tech Mahindra: Analysts meet highlights
Derivatives (NSE) 1,319 1,203 1,466
Castrol India: Rich multiples in a challenging environment Deri. open interest 1,478 1,385 1,404
Sunteck Realty: FY2013 annual report analysis
Sector
Forex/money market
Industrials: Another giant enters Indian T&D market Change, basis points
Infrastructure: Premium restructuring may not be enough; cancel and rebid 12-Sep 1-day 1-mo 3-mo
may be the only option Rs/US$ 63.7 8 223 585

10yr govt bond, % 8.9 7 20 133
NBFCs: Normal monsoon positive, margins and NPLs are key monitorable Net investment (US$mn)
11-Sep MTD CYTD
Economy FIIs 86 851 12,260
MFs 2 (132) (2,522)
Economy: India: Lumpy industrial production and sticky inflation
Top movers
Change, %
Best performers 12-Sep 1-day 1-mo 3-mo
HCLT IN Equity 1074.4 0.7 14.2 41.8
WPRO IN Equity 471.9 (0.7) 0.9 38.8
TCS IN Equity 1967.9 (1.3) 8.1 36.1
RCOM IN Equity 141.3 (1.8) 7.1 33.9
SESA IN Equity 183.5 (2.5) 34.8 31.4
Worst performers
MMTC IN Equity 53.2 (2.1) 3.0 (71.9)
FTECH IN Equity 217.4 18.1 28.3 (71.1)
UNBK IN Equity 119.1 1.1 (1.1) (42.7)
TPW IN Equity 73.6 0.8 (11.5) (41.1)
BOI IN Equity 165.8 (1.0) (7.7) (40.8)
Kotak Institutional Equities Research

kotak.research@kotak.com . Mumbai: +94-22-6634-1100
For Private Circulation Only. FOR IMPORTANT INFORMATION ABOUT KOTAK SECURITIES RATING SYSTEM AND OTHER DISCLOSURES.
REFER TO THE END OF THIS MATERIAL.
Strategy.dot
INDIA
Strategy
INDIA SEPTEMBER 13, 2013
UPDATE
BSE-30: 19,782
Trade secrets. It may be too early to assume that Indias trade deficit and CAD problems
have been addressed based on low trade deficit figures for June-August 2013. Lower
gold imports over this period may simply reflect the temporary impact of the RBIs curbs
on gold-on-lease arrangements rather than a fundamental downshift in gold demand in
India. Also, granular data on exports for July-August 2013 (not yet available) would be
helpful in appreciating the sustainability of the recent strength in Indias exports.
QUICK NUMBERS
Indias trade deficit

narrowed to
Recent improvement in trade deficit; more data required to feel comfortable about Indias CAD US$10.9 bn in
We are not sure if the recent improvement in Indias trade deficit (see Exhibit 1) reflects a strong August
underlying improvement in Indias trade dynamics or temporary factors. It may be too early to
Indias exports have
assume that Indias CAD problem has been addressed, especially as (1) oil prices remain sticky
grown 11-13% in
(Libya production problem remains even as the Syria issue has been deferred) and (2) gold imports
can surprise negatively in 2HFY14 (festival season) if underlying consumption (different from Jul-Aug 2013
imports) is intact. We stick to our FY2014 CAD estimate of ~US$75 bn (see Exhibit 2).
US$19 bn of gold
Sustainability of the recent pick-up in exports will be important to manage the CAD imports in Apr-Aug
2013
Exports have grown 11-13% yoy in July and August (see Exhibit 3) leading to expectations of a
sustainable recovery in exports, which can help reduce the CAD. Given Indias notoriously poor
trade data, it may be useful to see the breakdown of exports before reaching conclusions either
way. Granular data by category is not yet available for the past two months. It is also possible that
exporters may have bunched up exports to take advantage of a weak Rupee. April-June 2013
data did not show any meaningful pick-up in the major export segments (see Exhibit 4).
Too early to assume that gold imports are under control; consumption is key and not imports
Low gold imports in the past three months (see Exhibit 5) have helped reduce Indias trade deficit
to a more manageable US$11-12 bn per month. However, we are not sure if the reduction in gold
imports is permanent or a temporary phenomenon due to restrictions on gold-on-lease schemes
earlier available to the industry. Also, large imports in April-May may have obviated the need of
imports in subsequent months. We would rest easy if there is evidence of lower gold consumption
rather than of imports for a few months; a domestic transaction tax on gold will help significantly
in controlling the use of gold as a store of black money and reduce consumption considerably.
No room for complacency on CAD and BOP
With the likely tapering of the US Feds bond buyback program, India may have to contend with Sanjeev Prasad
volatility in capital flows arising from global factors. Any hardening of yields globally will reduce sanjeev.prasad@kotak.com
Mumbai: +91-22-6634-1229
Indias appeal as a destination for short-term debt flows and render domestic efforts to attract
debt capital flows meaningless. We believe the focus should be on (1) curtailing CAD by cutting Akhilesh Tilotia
akhilesh.tilotia@kotak.com
out superfluous imports and (2) encouraging equity flows rather than financing the CAD through Mumbai: +91-22-6634-1139
debt flows. India has very low exposure to short-term foreign currency debt (excluding trade credit
Sunita Baldawa
and NRI deposits; see Exhibit 6) and it would be in Indias longer-term financial interest to avoid sunita.baldawa@kotak.com
the temptation of borrowing aggressively to finance a recalcitrant CAD. Mumbai: +91-22-6634-1325

kotak.research@kotak.com
Mumbai: +91-22-6634-1100
For private Circulation Only. FOR IMPORTANT INFORMATION ABOUT KOTAK SECURITIES RATING SYSTEM AND OTHER DISCLOSURES, REFER TO THE END OF THIS MATERIAL.
Strategy India
Exhibit 1: India's trade deficit narrowed to US$10.9 bn in August

Trends in India's trade performance, 2013-14 (US$ bn)
Imports Exports Trade deficit

50 45 46 45
42 43 42
41 41 41
37 38 37
40 36
31
30 25 26 26 26 26 26
23 24 23 24 24 24
20
10
-
(9.8)
(14.2) (12.2) (12.3) (10.9)
(10) (16.9) (15.5)
(18.1) (17.8) (20.0) (18.2)
(20)
Sep-12
Aug-12
Oct-12
Nov-12
Dec-12
Jan-13
Feb-13
Mar-13
Apr-13
May-13
Jun-13
Jul-13
Aug-13
Source: Ministry of Finance, Kotak Institutional Equities
KOTAK INSTITUTIONAL EQUITIES RESEARCH 3

India Strategy
Exhibit 2: Stress on the BOP expected to continue with wide CAD and volatile capital flows
India's balance of payments, March fiscal year-ends, 2011-14E (US$ bn)
2014E
2011 2012 2013 Oil@100 Oil@105 Oil@110
Current account (45.9) (78.2) (88.2) (67.9) (73.6) (79.3)
GDP 1,708 1,871 1,842 1,840 1,840 1,840
CAD/GDP (%) (2.7) (4.2) (4.8) (3.7) (4.0) (4.3)
Trade balance (130.6) (189.8) (195.7) (179.5) (185.2) (190.9)
Trade balance/GDP (%) (7.7) (10.3) (10.6) (9.8) (10.1) (10.4)
- Exports 250 310 307 308 310 312
- Imports 381 500 502 487 495 503
- oil imports 105 155 170 154 162 169
- non-oil imports 276 345 332 333 333 333
Invisibles (net) 85 112 107 112 112 112
- Services 49 64 65 71 71 71
- software 53 61 64 69 69 69
- non-software (4.4) 3.1 1.4 2.0 2.0 2.0
- Transfers 53 63 64 65 65 65
- Income (net) (17.3) (16.0) (21.5) (24.0) (24.0) (24.0)
Capital account 62.1 67.8 89.4 77.0 77.0 77.0
Percentage of GDP 3.7 3.7 4.9 4.2 4.2 4.2
Foreign investment 39.7 39.2 46.7 35.0 35.0 35.0
- FDI 9.4 22.1 19.8 20.0 20.0 20.0
- FII 30.3 17.2 26.9 15.0 15.0 15.0
- Equities 18.9 7.1 23.3
- Debt 10.5 9.8 4.3
Banking capital 5.0 16.2 16.6 17.0 17.0 17.0
- NRI deposits 3.2 11.9 14.8 12.0 12.0 12.0
Short-term credit 11.0 6.7 21.7 20.0 20.0 20.0
ECBs 12.5 10.3 8.5 8.0 8.0 8.0
External assistance 4.9 2.3 1.0 2.0 2.0 2.0
Other capital account items (11.0) (6.9) (5.0) (5.0) (5.0) (5.0)
E&O (3.0) (2.4) 2.7 0.0 0.0 0.0
Overall balance 13.1 (12.8) 3.9 9.1 3.4 (2.3)
Memo items
Average USD/INR 45.63 47.96 54.41 60.24 60.24 60.24
Average crude (US$/bbl) 85.1 111.7 108.2 100.0 105.0 110.0
Source: RBI, Kotak Institutional Equities estimates
4 KOTAK INSTITUTIONAL EQUITIES RESEARCH

Strategy India
Exhibit 3: Sustainability of the recent pick-up in exports will be important to manage the CAD
Yoy growth in imports and exports, March fiscal year-ends, 2013-14 (%)
15
Exports Imports
10
0
Aug-12
Oct-12
Nov-12
Dec-12
Jan-13
Feb-13
Mar-13
Apr-13
Sep-12
May-13
Jun-13
Aug-13
Jul-13
(5)
(10)
Exhibit 4: April-June 2013 data did not show any meaningful pick-up in the major export segments
India's major export items, March fiscal year-ends, 2013-14 (US$ bn)
FY2014 FY2013 Apr-Jun Chg.

Apr May Jun Apr May Jun FY2014 FY2013 (%)
Engineering goods 5 5 4 5 5 5 14 15 (7)
Textile 2 2 2 2 2 2 7 6 9
Gems and Jewellery 3 3 3 3 4 5 10 11 (8)
Chemical products 3 3 3 3 3 3 10 9 3
Exports 24 24 24 24 25 25 71 73 (3)
Exhibit 5: Gold imports have declined in the past few months

Value of gold imports, March fiscal year-ends, 2013-14 (US$ bn)
8 7.2 7.5
6.8 6.9
7
5.7 5.5
6 5.3
5 4.5
4
3.1
3 2.5
2.0 2.2
2
1 0.7
0
Aug-12
Sep-12
Oct-12
Nov-12
Dec-12
Jan-13
Feb-13
Mar-13
Apr-13
May-13
Jun-13
Aug-13
Jul-13

India Strategy
Exhibit 6: India has very low exposure to short-term foreign currency debt
Components of short-term debt by residual maturity, 2013 (US$ bn)
Short-term Long-term
< 1 year 1-2 years 2-3 years > 3 years
1. Sovereign debt (long-term) 5.6 5.8 6.0 60.4
2. External Commercial Borrowings 21.0 19.7 23.6 80.3
3. NRI deposits 49.0 7.3 4.5 10.0
FCNR(B) 11.8 1.6 1.1 0.7
NR(E)RA 29.6 4.6 3.0 8.7
NRO 7.6 1.0 0.4 0.7
4. Short-term debt (Original maturity) 96.7
Total (1 to 4) 172.3 32.7 34.2 150.8
Memo Items
ST debt (Residual maturity, % of external debt) 44.2 8.4 8.8 38.7
ST debt (Residual maturity, % of Reserves) 59.0 11.2 11.7 51.6
Source: RBI, Kotak Institutional Equities

ADD
Tech Mahindra (TECHM)
Technology SEPTEMBER 13, 2013
UPDATE
Coverage view: Attractive
Analysts meet highlights. Tech Mahindra reiterated its ambition to reach revenues of Price (`): 1,333
US$5 bn 2015 and expressed confidence that it would better industry growth in FY2014. Target price (`): 1,500
The company has taken several steps to strengthen core areas, such as greater emphasis
BSE-30: 19,997
on cross-sell of services, hiring of senior sales professionals and reorganization on the
enterprise side, to achieve near-term and longer-term objectives. While the company still
has a lot of work to do on the enterprise side, improved deal wins give us confidence
about the near term. Inexpensive valuations of 9.8X FY2015E EPS offer good upside.
We retain ADD with an increased target price of `1,500 (`1,430 earlier).
Company data and valuation summary

Tech Mahindra
Stock data Forecasts/Valuations 2013 2014E 2015E
52-week range (Rs) (high,low) 1,435-865 EPS (Rs) 101.9 125.0 136.3
Market Cap. (Rs bn) 309.8 EPS growth (%) 16.7 22.6 9.0
Shareholding pattern (%) P/E (X) 13.1 10.7 9.8
Promoters 47.4 Sales (Rs bn) 143.3 180.3 207.4
FIIs 27.3 Net profits (Rs bn) 21.2 26.2 28.6
MFs 5.5 EBITDA (Rs bn) 30.6 37.8 40.7
Price performance (%) 1M 3M 12M EV/EBITDA (X) 9.3 7.3 6.5
Absolute 7.1 37.7 49.4 ROE (%) 36.3 32.4 26.7
Rel. to BSE-30 0.7 31.9 33.4 Div. Yield (%) 0.4 0.4 0.4
Confident of bettering industry growth; reiterates US$5 bn revenue ambition by 2015
Tech Mahindra (TM) said it was confident of growing in line with or bettering industry growth on
an organic basis in FY2014 and FY2015. The recent depreciation of the Rupee against the US
Dollar offers TM comfort in keeping EBITDA margins at 20-21%. While management expectations
of organic growth in FY2014 appear stretched, recent deal wins offer the comfort of improved
growth trajectory. We forecast 7.2% organic revenue growth in FY2014.
The management also reiterated its stretched revenue target of US$5 bn by 2015. TM indicated
the path to this revenue target had been drilled down to unit-level targets though it did not wish
to share specifics. While inorganic initiatives will be an important element in achieving the
US$5 bn number, TM will not acquire just to bulk-up or meet a target. Instead acquisitions will
focus on (1) geographic expansion, (2) capabilities, especially in financial services, and (3) platforms.
Wider offerings, deeper engagements one-stop shop for telcos
TM is a leader in the telecom vertical and is confident of strong growth despite severe headwinds.
TM is structured around six pillars of differentiationend-to-end services in infrastructure
management, networks, enterprise, mobility, analytics and security. These service offerings can
address requirements of the entire CxO level. TM derives 32% of revenues from non-traditional
services in telcos. TM has taken several organic and inorganic measures to defend or increase its
lead; some of the inorganic ones are the acquisitions of HGS and Comviva. Kawaljeet Saluja
kawaljeet.saluja@kotak.com
Growth at inexpensive valuations; ADD Mumbai: +91-22-6634-1243
We believe TMs recent measures will help to drive revenue growth in the medium term and Rohit Chordia
rohit.chordia@kotak.com
organic revenue growth is likely to be in line with industry growth from FY2015. Rupee Mumbai: +91-22-6634-1397
depreciation will help to ease margin pressure of new-deal-ramp-up and business investments.
Shyam M.
The stock trades at 9.8X FY2015E earnings and offers reasonable upside. We maintain our ADD
shyam.m@kotak.com
rating with a 12-month forward target price of `1,500, valuing the company at 11X earnings. Mumbai: +91-22-6634-1470

Mumbai: +91-22-6634-1100
Technology Tech Mahindra
Manufacturing, BFSI critical to achieve scale

Tech Mahindra is leveraging the erstwhile Satyams strength in manufacturing and the
Mahindra groups strong presence in the vertical to win new deals, especially in areas like
enterprise applications, engineering services and R&D. Pipeline and win rates are improving
in BFSI with Tech Mahindra expanding to LatAm, APAC and some African markets. It is also
using its telecom experience to take network, mobility and security-driven offerings like
mobile payment platforms, digital enterprise and connected devices to its clients in other
verticals. While still in its early stages, there are encouraging signs in terms of client
acceptance and deal wins. The success of these bets is critical for Tech Mahindra to achieve
scale and catch up with the industry on organic revenue growth.
Other key highlights from the analyst meet
` TM has revamped its sales structure with a separate sales force for each vertical in well
developed geographies like the US and the UK. In other areas like continental Europe,
APAC and the Middle East, TM has hired new sales leaders to drive improved new-deal
participation and wins. It has identified key accounts to focus on to drive improved
account mining.
` IMS contributes 17% of overall company revenues and TM draws heavily on its
experience in managing data centers and networks for large telcos. It expects the market
spend to grow in this area with focus largely on storage, networks and computing
capabilities.
` Comviva reported revenues of US$88 mn in FY2013 and continues to invest in developing

new products. A large part (~58%) of its revenues comes from Africa. Comviva will look
to leverage TMs strong presence in North America, Europe and APAC to expand its
market reach and help to fill gaps in TMs offerings. TM is also investing in developing
platformsproducts and platforms are key components of its wider service offerings
strategy.
` Engineering services will focus on five main verticalsaviation, automobiles, hi-tech,

industrial and energy & utilities. The first three are likely to be the fastest growing areas
within engineering services. Strong tie-ups with the Mahindra group will help TM to win
new deals in this space.

Tech Mahindra Technology
Exhibit 1: Consolidated financials for Tech Mahindra, March fiscal year-ends (` mn), 2013-2016E
2013 2014E 2015E 2016E

Profit model
Revenues 143,320 180,319 207,439 227,477
EBITDA 30,633 37,773 40,723 43,035
Interest (expense)/income (921) (519)
Depreciation (3,896) (4,812) (5,207) (5,750)
Other income 2,122 3,127 3,258 4,141
Pretax profits 27,938 35,570 38,774 41,426
Tax (6,479) (8,829) (9,597) (10,253)
Minority Interest (301) (544) (612) (672)
Profit after tax (recurring) 21,158 26,198 28,565 30,501
Exceptional items (1,601)
Net profit 19,557 26,198 28,565 30,501
Diluted EPS (Rs) ex-treasury shares 101.9 125.0 136.3 145.5
Balance sheet
Total equity 68,535 93,281 120,375 149,405
Total borrowings 11,526
Minority interest 1,344 1,888 2,500 3,172
Current liabilities 38,220 33,512 35,570 36,575
Other liabilities (incl suspense account) 18,480 18,480 18,480 18,480
Total liabilities and equity 138,105 147,161 176,926 207,631
Cash 34,629 32,929 45,036 61,906
Other current assets 55,005 61,385 70,355 76,359
Fixed assets 24,913 27,314 34,553 41,314
Investments (incl treasury shares) 12,429 12,429 12,429 12,429
Other assets 11,129 13,104 14,552 15,622
Total assets 138,105 147,161 176,926 207,631
Cash flows
Operating CF, excl. working capital 32,895 37,773 40,723 43,035
Working capital changes (11,251) (13,063) (8,360) (6,070)
Capital expenditure (10,250) (7,213) (12,446) (12,511)
Taxes paid (6,200) (8,181) (8,790) (9,228)
Free cash flow 5,193 9,316 11,127 15,226
Ratios (%)
EBITDA margin 21.4 20.9 19.6 18.9
EBIT margin 18.7 18.3 17.1 16.4
Debt/equity 0.2
RoAE 36.3 32.4 26.7 22.6
Source: Company, Kotak Institutional Equities estimates

SELL
Castrol India (CSTRL)
Energy SEPTEMBER 13, 2013
UPDATE
Coverage view: Attractive
Rich multiples in a challenging environment. We met the management of Castrol Price (`): 319
India recently. The company is wary of contraction in margins due to sharp depreciation Target price (`): 230
of Rupee. While an imminent price hike may mitigate the loss of margins, it will not
BSE-30: 19,782
augur well for volumes given a subdued demand situation for lubricants in India. Rich
valuations reflect higher expectations, which may be difficult to meet in a challenging
macro-environment. We retain SELL rating with a TP of `230 (`240 previously).

Castrol India
52-week range (Rs) (high,low) 372-278 EPS (Rs) 9.0 9.8 10.3
Market Cap. (Rs bn) 158.3 EPS growth (%) (4.4) 7.9 5.8 QUICK NUMBERS
Shareholding pattern (%) P/E (X) 35.4 32.8 31.0
Promoters 42.2 Sales (Rs bn) 31.2 32.1 34.1 2-2.5% decline in
FIIs 20.8 Net profits (Rs bn) 4.5 4.8 5.1 EPS from `1/US$
MFs 6.9 EBITDA (Rs bn) 6.9 7.6 8.1 depreciation in
Price performance (%) 1M 3M 12M EV/EBITDA (X) 22.0 20.1 19.2
exchange rate
Absolute 1.4 (6.4) 11.3 ROE (%) 79.0 80.6 102.8
Rel. to BSE-30 (4.7) (10.4) (0.6) Div. Yield (%) 2.2 2.5 2.7
Risks exist to our
assumption of 2%
Key takeaways from our meeting with the management growth in volumes
for CY2014-15E
` Concerns on margins due to weakening of Rupee. The management is concerned on
potential erosion of margins due to sharp depreciation of Rupee versus US Dollar in the past Stock trading at 31X
one month. Castrol has not taken a price hike since the beginning of August, when the forward earnings
exchange rate was ~`60/US$; current exchange rate is ~`64/US$. We note that a `1/US$
depreciation in exchange rate impacts EBITDA margins by 50 bps.
` Price hike in the near term. The company is planning to increase prices of key products in the
automotive segment following some stability in Rupee exchange rate. The management is
expecting price hikes across the industry given that the competition is operating at relatively
lower margins (than Castrol), which leaves limited headroom against rising raw material costs.
` Subdued outlook on volumes. Castrol maintained its subdued outlook on lubricant sales
volumes in the near term given (1) declining automobile sales and (2) slowdown in industrial
output. The management is also wary of potential loss in market share due to down-trading by
consumers given an inflationary environment.
Cut our estimates by 3-5% to factor in weaker Rupee assumptions
We have reduced our CY2013-15E EPS estimates to `9.8, `10.3 and `11.4 from `10, `10.9 and
`12 to reflect (1) weaker exchange rate assumptions, (2) lower volumes, (3) higher realizations and
(4) other minor changes. We do not rule out downside risks to our generous assumptions(1) 2%
growth in volumes in CY2014-15E versus 4.7% yoy decline in 1HCY13 and (2) ~90 bps expansion
in EBITDA margins to 23.1% by CY2015E reflecting our assumption of increase in net realizations
to ~`80/liter in CY2014E versus `71/liter in 1HCY13.
Tarun Lakhotia
Retain SELL given rich valuations tarun.lakhotia@kotak.com
Mumbai: +91-22-6634-1188
We maintain our SELL rating on the stock with a revised target price of `230 (`240 previously)
based on 22X forward EPS. Expensive valuations at 31X forward EPS (see Exhibit 1) despite weaker Vinay Kumar
vinay.h.kumar@kotak.com
earnings profile (even on generous assumptions) as compared to FMCG companies (see Exhibit 2) Mumbai: +91-22-6634-1216
constrain us from taking a positive stance on the stock.

Mumbai: +91-22-6634-1100
Castrol India Energy
Exhibit 1: Castrol stock is trading near its peak multiple at 31X forward earnings
12-month forward P/E for Castrol India
(X)
40
CSTRL 12-month forward P/E
35
30
25
Five-year average P/E
20
15
10
-
Jan-02
Jul-02
Jan-03
Jul-03
Jan-04
Jul-04
Jan-05
Jul-05
Jan-06
Jul-06
Jan-07
Jul-07
Jan-08
Jul-08
Jan-09
Jul-09
Jan-10
Jul-10
Jan-11
Jul-11
Jan-12
Jul-12
Jan-13
Jul-13
Source: Bloomberg, Kotak Institutional Equities estimates
Exhibit 2: Valuation summary of consumer sector companies, March fiscal year-ends, 2012-15E
12-Sep-13 Mkt cap. EPS growth (%) P/E (X)

Company Price (Rs) (US$ m) 2012 2013 2014E 2015E 2012 2013 2014E 2015E
Asian Paints 439 6,596 17.3 12.7 4.1 16.1 42.5 37.8 36.3 31.2
Castrol India (a) 319 2,472 (4.4) (4.4) 7.9 5.8 33.7 35.2 32.7 30.9
Colgate-Palmolive (India) 1,219 2,599 10.9 11.3 7.9 16.0 37.1 33.4 30.9 26.7
Dabur India 170 4,639 13.3 19.0 21.8 18.4 45.9 38.5 31.6 26.7
GlaxoSmithKline Consumer (a) 4,762 3,141 20.8 20.7 18.1 18.4 55.4 45.9 38.8 32.8
Godrej Consumer Products 848 4,527 13.0 20.4 16.2 25.1 50.4 41.9 36.0 28.8
Hindustan Unilever 626 21,238 21.1 28.1 3.3 9.6 52.1 40.7 39.4 35.9
ITC 337 42,011 22.3 19.0 16.9 18.0 42.9 36.1 30.8 26.1
Jubilant Foodworks 1,067 1,109 49.4 21.7 21.1 36.8 65.2 53.5 44.2 32.3
Marico 214 2,167 34.2 8.0 31.1 16.2 41.2 38.1 29.1 25.0
Nestle India (a) 4,960 7,499 17.5 11.1 12.0 17.3 49.7 44.8 40.0 34.1
Tata Global Beverages 151 1,462 37.3 14.8 20.1 13.4 27.3 23.8 19.8 17.5
Titan Industries 232 3,223 37.5 20.9 10.1 13.5 34.2 28.3 25.7 22.7
Mean 22.3 15.6 14.7 17.3 44.4 38.3 33.5 28.5
Median 20.8 19.0 16.2 16.2 42.9 38.1 32.7 28.8
Notes:
(a) Calendar year-ends; FY2012 represents CY2011.
Source: Company, Bloomberg, Kotak Institutional Equities estimates

Energy Castrol India
Key assumptions
Exhibit 3 gives the key assumptions behind our earnings estimates. We discuss the same in
detail below.
Exhibit 3: Castrol: Key assumptions, calendar year-ends, 2009-15E
2009 2010 2011 2012 2013E 2014E 2015E

Volume (Kilo litres)
Industrial grades 27,394 28,653 30,989 27,487 25,426 25,934 26,453
Automotive grades 175,528 188,418 170,240 170,069 168,369 171,736 175,171
Traded items 1,614 2,063 7,465 6,345 6,282 6,407 6,536
Total 204,536 219,134 208,694 203,902 200,077 204,078 208,160
Growth (%) (4.7) 7.1 (4.8) (2.3) (1.9) 2.0 2.0
Raw material prices (US$/ton)
LOBS prices 717 918 1,248 1,152 1,047 1,022 997
Macro assumptions
Exchange rate (Rs/US$) 48.6 45.8 46.0 53.2 58.5 62.5 62.0
Realization (Rs/lt)
Gross realization 113.3 124.8 142.9 153.1 160.4 167.0 170.3
Raw material cost 53.6 64.1 81.8 89.6 90.0 92.2 90.4
Net realization 59.8 60.7 61.1 63.4 70.4 74.8 79.9
EBITDA margin (%) 24.8 26.5 22.1 19.9 21.2 21.8 23.1
` Volumes. We model ~2% yoy increase in sales volumes for CY2014-15E and a decline of
1.9% in CY2013E versus a decline of 4.7% yoy in 1HCY13 and 2% yoy in CY2012. The
decline in sales volume in the recent years presumably reflects loss of market share.
` Lubes prices. We model blended realization for lubes to increase by 4-5% in CY2013-
14E and ~2% in CY2015E.
` LOBS prices. We assume LOBS prices to decline by US$105/ton in CY2013E, US$25/ton

in CY2014E and US$25/ton in CY2015E reflecting our assumption of lower crude oil
prices.
` Net realization. We estimate Castrols net realization to increase to `70.4/liter in

CY2013E and `74.8/liter in CY2014E versus `63.4/liter in CY2012 and `61.1/liter in
CY2011. The increase in net realization reflects expansion in margins due to increase in
gross realizations.
` Exchange rate assumption. We have revised our exchange rate assumptions for
CY2013, CY2014 and CY2015 to `58.5/US$, `62.5/US$ and `62/US$ versus `56.75/US$,
`57.75/US$ and `57/US$ earlier.

Castrol India Energy
Exhibit 4: Castrol has high leverage to exchange rate and raw material prices
Sensitivity of Castrol's earnings to key variables
CY2013E CY2014E CY2015E

Downside Base case Upside Downside Base case Upside Downside Base case Upside
Exchange rate
Rupee dollar 59.5 58.5 57.5 63.5 62.5 61.5 63.0 62.0 61.0
Net profits (Rs mn) 4,709 4,828 4,947 4,990 5,108 5,226 5,507 5,624 5,741
EPS (Rs) 9.5 9.8 10.0 10.1 10.3 10.6 11.1 11.4 11.6
% upside/(downside) (2.5) 2.5 (2.3) 2.3 (2.1) 2.1
Raw material price

Raw material price (US$/ton) 1,072 1,047 1,022 1,047 1,022 997 1,022 997 972
Net profits (Rs mn) 4,662 4,828 4,994 4,928 5,108 5,288 5,442 5,624 5,806
EPS (Rs) 9.4 9.8 10.1 10.0 10.3 10.7 11.0 11.4 11.7
% upside/(downside) (3.4) 3.4 (3.5) 3.5 (3.2) 3.2
Source: Kotak Institutional Equities estimates
Exhibit 5: Castrol: Profit model, balance sheet, cash model, calendar year-ends, 2009-15E (` mn)
2009 2010 2011 2012 2013E 2014E 2015E

Profit model (Rs mn)
Net sales 23,182 27,348 29,818 31,209 32,097 34,081 35,457
EBITDA 5,754 7,251 6,584 6,226 6,813 7,436 8,206
Other income 361 395 651 722 775 625 650
Interest (35) (24) (19) (18) (25) (25) (25)
Depreciation (272) (243) (251) (266) (292) (298) (311)
Pretax profits 5,808 7,378 6,964 6,663 7,271 7,738 8,520
Tax (2,075) (2,511) (2,541) (2,278) (2,548) (2,676) (2,947)
Deferred taxation 78 25 191 89 38 46 51
Adjusted net profits 3,811 4,896 4,679 4,474 4,828 5,108 5,624
Earnings per share (Rs) 7.7 9.9 9.5 9.0 9.8 10.3 11.4
Balance sheet (Rs mn)

Total equity 4,950 5,535 6,042 6,492 6,822 4,539 4,667
Deferred taxation liability (346) (371) (562) (651) (689) (735) (786)
Total borrowings
Currrent liabilities 6,812 7,692 7,991 8,303 8,470 8,682 8,667
Total liabilities and equity 11,416 12,856 13,471 14,145 14,604 12,486 12,548
Cash 5,258 6,193 5,490 5,746 6,111 3,720 3,670
Current assets 4,778 5,294 6,545 6,828 6,965 7,286 7,459
Total fixed assets 1,375 1,369 1,436 1,571 1,528 1,480 1,420
Investments 5
Total assets 11,416 12,856 13,471 14,145 14,604 12,486 12,548
Free cash flow (Rs mn)

Operating cash flow, excl. working capital 3,834 4,988 4,433 4,428 4,438 4,735 5,234
Working capital 1,792 135 (948) 223 30 (109) (188)
Capital expenditure (344) (257) (366) (348) (250) (250) (250)
Free cash flow 5,281 4,867 3,119 4,303 4,219 4,376 4,796
Investments 5
Other income 188 244 480 356 775 625 650
Ratios (%)
RoAE 83.8 100.4 90.4 79.0 82.8 102.8 146.4
RoACE 84.1 100.6 88.2 79.3 80.9 103.1 146.8
Assumptions
Volume (mn litres) 204.5 219.1 208.7 203.9 200.1 204.1 208.2
Gross realization (Rs/lt) 113.3 124.8 142.9 153.1 160.4 167.0 170.3
Net realization (Rs/lt) 59.8 60.7 61.1 63.4 70.4 74.8 79.9
EBITDA margin (%) 24.8 26.5 22.1 19.9 21.2 21.8 23.1

BUY
Sunteck Realty (SRIN)
Real Estate SEPTEMBER 13, 2013
UPDATE
Coverage view: Cautious
FY2013 annual report analysis. In FY2013, Sunteck recorded its first year of positive Price (`): 310
cash flow from operations. This was a result of progressive collections from BKC Target price (`): 560
projects with no expenditure on land and low construction spends. Restructuring of
BSE-30: 19,782
select joint ventures (JVs) resulted in increase in medium-term commitments and in
incremental stake in its high-value projects. However, construction pick-up remains a
concern and has not matched its smart land acquisitions. We maintain a positive stance,
with a target price of `560.

Sunteck Realty
52-week range (Rs) (high,low) 564-290 EPS (Rs) 0.7 76.5 25.4
QUICK NUMBERS
Market Cap. (Rs bn) 19.4 EPS growth (%) 29.1 NA (66.8)
Shareholding pattern (%) P/E (X) 458.4 4.0 12.1 `1.6 bn of secured
Promoters 73.4 Sales (Rs bn) 0.3 12.2 4.0 debt was repaid in
FIIs 5.7 Net profits (Rs bn) 0.1 5.3 1.7 FY2013
MFs 0.1 EBITDA (Rs bn) 0.1 7.9 2.5
Price performance (%) 1M 3M 12M EV/EBITDA (X) 443.2 3.2 5.7 `2.75 bn of APG
Absolute (12.8) (27.6) (1.6) ROE (%) 0.7 64.3 15.2
Rel. to BSE-30 (18.1) (29.6) (13.0) Div. Yield (%) 0.0 0.7 0.7
debt to be repaid
over three years
Cash flows exhibit smart money management
Sunteck used its equity and structured debt raised (over FY2006-11) to acquire high-value (high
margin) projects in Mumbai (see Exhibit 2). These projects helped Sunteck to establish a strong
project portfolio in the Mumbai market. In FY2013, Sunteck did not spend on land acquisition
(versus expenditures each year over FY2006-12). This, along with the progressive collections made
from its residential projects, was used to pare secured debt raised in over FY2011-12. Debt
reduced by `1.6 bn in FY2013.
Balance sheet: Restructuring to result in increased medium-term payments
Sunteck restructured a few joint ventures (JVs) in FY2013. This resulted in (1) Sunteck letting go of
its stake in a project (Thane), (2) conversion of `2.75 bn worth of OCRPS into debt and (3) increase
in Suntecks stake in two high-value projects. This restructuring will increase expenditure related to
(a) approval-related expenses and (3) repayment of debt over the next three years. Expected
revenue recognition from four projects in FY2014 is also likely to result in over `2 bn of tax outgo.
Although we expect debt to increase in FY2014, we are confident about Suntecks growth as it
has a collections order-book of about `14 bn from area sold and over `62 bn of unsold stock in its
ongoing projects.
Management discussion and analysis, chairmans message: Focus now on construction
The MDA and chairmans address emphasize increase in employee strength in the construction
vertical. Sunteck needs to ramp up its slow constructionit completed only 0.23 mn sq. ft of
projects until March 2013. Sunteck recently strengthened its construction team by recruiting
industry experts. We expect the company to have a shortened project-monetization cycle in future.
Guidance from the chairmans address indicates completion of four projects in FY2014.
Key risks: Low sales, slow construction, FSI delay

Samar Sarda
Key risks are (1) low sales, (2) slow construction and (3) delay in getting higher FSI in key projects samar.sarda@kotak.com
(Goregaon West). Mumbai: +91-22-6634-1417

Mumbai: +91-22-6634-1100
Sunteck Realty Real Estate
Qualifications from auditors

There were no auditor qualifications for FY2013.The auditor evaluated the parent company
and not key subsidiaries (evaluated by other auditors) developing ongoing projects in BKC,
Mumbai.
Cash flow statement: First year of positive operating cash flow

FY2013 marked Suntecks first year of positive operating cash flow generation. This was
achieved with increased collections from its ongoing projects in Bandra Kurla Complex (BKC),
Mumbai and no expenditure on new land acquisition (Sunteck spent on acquisitions each
year since FY2006). Sunteck used the excess cash generated to repay secured debt.
Exhibit 1: No land acquisition in FY2013 resulted in reduction in debt from operating cash flows
Sunteck: Cash flow model, March fiscal year-ends, 2009-14E (` mn)
2009 2010 2011 2012 2013 2014E Remark

Operating
Consolidated PAT 168 62 32 31 40 4,599
Depreciation 14 12 15 15 14 16
Deferred tax 1 1 4
Operating cash flow 184 74 48 50 55 4,615
(Increase)/decrease in WC (1,270) (7,028) (901) (523) 1,251 (5,589)
Operating cash flow (1,086) (6,954) (853) (472) 1,306 (975) No land acquisition in FY2013..
Investing
Capex (104) (1,151) 373 37 32 (12)
Investments (1,808) 1,334 (132) (64) 305
Free cash flow (2,997) (6,771) (613) (500) 1,643 (986)
Financing
Dividend (26) (9) (14) (140)
Equity raised 1,770 1,962 37 (49)
Debt raised 1,185 4,863 840 545 (1,455) 995 ..resulted in debt reduction
Minority interest 49 309 (333) 14 (36)
Miscellaneous items (0) 1 (1)
Net cash flow 8 336 (70) (0) 139 (131)
Opening cash 8 344 274 274 413
Closing cash 8 344 274 274 413 282
However, we expect cash flow from operations to be negative again in FY2014 and hence
lead to increase in debt with increased outgo on (1) approval costs, (2) repayment of Ajay
Piramal Group (APG) debt and (3) likely addition of the Goregaon (W) land parcel acquired
in FY2013 on books.

Real Estate Sunteck Realty
Exhibit 2: Smart use of money to establish the business

Sunteck: Money raised, collections and spends, March fiscal-year ends, 2006-13 (` mn)
2006 2007 2008 2009 2010 2011 2012 2013

Amount raised
Equity 70 1,400 1,580
PE/structured debt 1,368 1,460 1,497 1,060 - 196
Customer advances 524 434 202 570 4,750 2,835 3,911
Debt 313 1,740 335 690
Deployment
Land 1,464 1,695 136 507 5,014 2,604 720
Construction, approval costs 415 1,425 1,962 2,201 1,955
PE/structured debt repayment 1,978
Debt repayment 444 1,604
Source: Company, Kotak Institutional Equities
Balance sheet: JV restructuring to result in increased medium-term commitment

Sunteck collected around `3.8 bn form residential projects in FY2013 and expenditure on
construction, approvals and interest was `1.7 bn. FY2013 was the first year (since active real
estate operations commenced) in which Sunteck didnt buy land/pay advances for land
parcels. Hence this resulted in decreasing of secured debt of `1.6 bn.
Certain JVs were restructured in FY2013. This resulted in increase in stake of Sunteck at its
BKC, Mumbai projects while it let go of its interest in the JV holding of a proposed project in
Thane. Also, certain Optionally Convertible Redeemable Preference Shares (OCRPS) allotted
to APG were converted into debt with a defined repayment schedule (see Exhibit 3). As per
the management, this debt has to be repaid over three years, with a minimum payment of
`375 mn in FY2014.
Exhibit 3: Restructuring resulted in increase in unsecured borrowings

Sunteck: Borrowings, March fiscal year-ends, 2009-13 (` mn)
2009 2010 2011 2012 2013 Remark

Long-termdebt 8 1 1
Current maturities of long-term debt
Short-term debt
Secured loans: term loans from banks 1 1,610 1,942 2,634 1,028 Reduction in debt
Unsecured loans: from
body coporats and others 225 807 499 1,192 1,299
OCRPS converted to unsecured loans 2,755 APG OCRPS converted to debt
OCDs, NCDs 959 1,549 1,574 1,055
Total debt 1,185 3,966 4,023 4,882 5,083
Secured debt 1 1,610 1,945 2,634 1,029

Unsecured debt 1,184 2,356 2,079 2,248 4,054
Total loan 1,185 3,966 4,023 4,882 5,083
Trade payables mainly approval payments

Trade payables include an estimated `2.83 bn of payments to be made to the Government
for higher Floor Space Index (FSI) at the BKC projects. No payment was made in this regard
in FY2013. Sunteck subsequently made payments for its Signature Island project post March
2013. We expect the project to be completed by March 2014, hence we expect Sunteck to
pay `770 mn of approval costs related to Signature Island in FY2014. We also expect about
`1.2 bn of global FSI payments related to Signia Isles and Signia Pearl in FY2014.

Sunteck Realty Real Estate
Trade receivables, bills in advance and unbilled revenue

Sunteck follows the project completion method of accounting. Here revenues are
recognized when significant risks and rewards are passed to the buyer, which ideally
coincides with the completion of a project and handing possession of units to buyers/getting
Occupancy Certificate (OC) of a project. Ideally, such a recognition policy should not have
debtors (as possession is offered against complete payment of unit price by the buyer to the
developer).
` Although minimal (as few projects under construction), debtors of `540 mn in FY2013
represent actual debtors (not from revenue recognized in the income statement). They
represent money called and not collected from buyers at the end of an accounting period.
` Also although 100% revenue is recognized on a completed project, as per the

management, a final call of 5% from buyers is linked to the grant of OC for a project.
Since only one project (Sunteck Grandeur) was completed in FY2013, which was small in
size and is yet to receive OC, unbilled revenue was small. With four projects expected to
be completed in FY2014 (including its flagship project Signature Island) we expect
unbilled revenue to increase in FY2014 as achieving OC (post building completion) could
take 3-6 months, or longer. This could also delay possession of the units (and hence
revenue recognition) though the building is complete.

Real Estate Sunteck Realty
Exhibit 4: Balance sheet remains well capitalized with a strong sales order book and high-margin projects
Sunteck: Balance sheet, March fiscal year-ends, 2009-13 (` mn)
2009 2010 2011 2012 2013 Remark

Share capital 114 120 120 120 120
Share application money - 2,082 2,864 2,550 895 Converted into debt
Reserves/surplus 1,824 3,816 3,884 3,857 3,884
Shareholders' funds 1,938 6,018 6,869 6,527 4,898
Minority interests 49 358 25 40 4
Long-term borrowings - - 8 1 1
Deferred tax liabilities 1 2 4 9 9
Other long-term liabilities 11 104 85 79 93
Long-term provisions - - 1 2 3
Non-current liabilities 13 105 91 90 106
Short-term borrowings 1,185 3,966 4,015 4,881 5,082
Trade payables 774 2,614 2,976 3,248 3,170 No FSI payment in FY2013
Other current liabilities 1,358 1,879 6,884 10,028 13,863 Over Rs3.8 bn collected in FY2013
Short-term provisions 28 76 15 10 15
Current liabilities 3,345 8,534 13,889 18,167 22,131
Total equity and liabilities 5,345 15,015 20,874 24,824 27,139
Net block 81 106 154 156 145
Capital work-in-progress 8 7
Goodwill on consolidation 1,123 680 634 599
Non-current investments 346 452 338 Includes cost for its corporate office
Deferred tax assets 1 1 2
Long-term loans and advances 433 359 205 177 288
Other non-current assets 42 2
Non-current assets 522 1,588 1,436 1,421 1,373
Current investments 1,808 473 259 218 27
Inventories 2,723 8,864 15,696 19,036 20,763 Second project completed in FY2013
Trade receivables 24 80 16 369 576
Cash and cash equivalents 8 344 274 274 413
Short-term loans and advances 260 3,667 3,197 3,498 3,920 Cash surplus from subsidiary utilised
Other current assets 3 9 68
Miscellaneous expenditure (1)
Current assets 4,823 13,428 19,447 23,403 25,766
Total assets 5,345 15,015 20,882 24,824 27,139
Management discussion and analysis, chairmans speech: Key takeaways

The MD&A and the chairmans speech emphasize improved execution going ahead. In
FY2013 and post March 2013, Sunteck recruited several industry experts across various
construction and allied verticals to improve the planning, development and construction
scale of the company. As we pointed out in an earlier note, we believe Suntecks
construction is not commensurate with its land acquisitions. The addition of experienced
professionals could improve execution, but this will be visible over 4-5 quarters. Guidance in
the chairmans address indicated completion of four projects in FY2014.

CAUTIOUS
Industrials
India SEPTEMBER 13, 2013
UPDATE
BSE-30: 19,782
Another giant enters Indian T&D market. Toshiba is set to enter the Indian T&D
equipment market through acquisition of Vijai Electricals Hyderabad facility for US$200
mn, with a long-term plan of adding more product, R&D capabilities and use it as a
manufacturing hub for global markets. In the near-term, market is crowded with weak
demand and excess supply, leading to margin pressure. While competition would
increase, it may not disturb recent stability in pricing as it is local mfg. based competition.
Toshiba to acquire Vijai Electricals facility; to enter a crowded Indian electrical equipment market
Toshiba Corp., Japan is set to acquire a major portion of Vijai Electricals T&D business with an aim
to enter the crowded space of the Indian electrical equipment manufacturing market. The
acquisition would help the company to enter the Indian market through an already established
manufacturing base. Toshiba also plans to expand it by integrating its own design and
manufacturing technologies for T&D systems, expanding into other product segments in power
electronics systems and railway power supply systems and use this facility as a manufacturing hub
for its international markets. While it would increase competition, it may possibly not disturb
recent stability in pricing as it is local mfg. based competition.
Vijai Electricals: Distribution transformer manufacturer; has capacity in EHV also
Vijai Electricals is a power and distribution transformer manufacturer with manufacturing facilities
in Hyderabad, Haridwar, Brazil and Mexico. It recorded revenue of about `13 bn in FY2012 (`18.8
bn in FY2011) based on Capital-line data. While most of the business is focused on distribution
transformers, Vijai also has capacity in the Extra High Voltage segment and switchgears.
Electrical equipment marketovercapacity, sluggish demand lead to sharp margin contractions
The Indian electrical-equipment industry declined by 8% in FY2013 (6-7% growth in FY2012). The
decline was the first in the past 10 years according to industry data by IEEMA. The decline was
attributed to sluggish domestic demand, significant project delays and intense international
competition. The T&D equipment space had a market size of about `640 bn in FY2012 (declined
to about `590 bn in FY2013) primarily comprising transformers (19%), transmission lines and
conductors (23%), switchgear and control equipment (15%) and cables (28%).
PGCIL ordering activity in 1HFY14 lackluster
PGCIL ordering activity remained relatively low in 1HFY14 after a slow FY2013 (declined 27% yoy
post adjusting for a large HVDC order last year) led by a decline in almost all segments.
While we note some moderation in international competition (especially in the equipment space,
based on market share), international players still have a meaningful market share (about 28% in
equipment orders). Also, international players continued to dominate the substation segment with
about 61% share in 1HFY14 (about 68% in FY2013).
Lokesh Garg
lokesh.garg@kotak.com
Mumbai: +91-22-6634-1496
Supriya Subramanian
supriya.subramanian@kotak.com
Mumbai: +44-20-79776918
Aditya Mongia
aditya.mongia@kotak.com
Mumbai: +91-22-6634-1453

Mumbai: +91-22-6634-1100
India Industrials
Toshiba to acquire Vijai Electricals facility; to enter Indian T&D market

Toshiba Corp., Japan is set to acquire a major portion of Vijai Electricals electrical
transmission and distribution (T&D) business. The acquisition is likely to be at a value of
US$200 mn (about `12.8 bn) . With this acquisition, Toshiba aims to enter the relatively
crowded space of the Indian electrical equipment manufacturing market.
While Toshibas joint venture with BHEL (for generation equipment) did not make significant
progress, the company this time plans to enter the Indian market through an already
established manufacturing base (rather than set up green-field facilities). Toshiba plans to
use the existing manufacturing base, expand it and integrate its own design and
manufacturing technologies for T&D systems. The company also plans to expand into other
products in the power electronics systems and railway power supply systems areas. Toshiba
aims to secure 20% market share within five years.
Apart from access to the Indian market, Toshiba plans to use this facility as a manufacturing
hub for its international markets.
Vijai Electricals: Distribution transformer manufacturer; had capacity in EHV also

Vijai Electricals manufactures power and distribution transformers up to 15 MVA in India
and had revenue of about `13 bn in FY2012 (`18.8 bn in FY2011) based on capitaline data
and MCA website. The company has manufacturing facilities across several geographies
including Hyderabad (India), Haridwar (India), Brazil and Mexico.
Exhibit 1: Summary financial highlights of Vijai Electricals, March fiscal year-ends, 2003-12 (Rs mn)
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Balance sheet
Share capital 79 79 79 79 874 909 909 909 909 909
Reserves & surplus 139 274 496 938 1,026 3,320 3,941 3,945 4,132 4,297
Networth 218 353 575 1,017 1,900 4,229 4,850 4,854 5,040 5,206
Total capital employed 1,030 1,051 1,446 2,056 4,979 8,574 11,642 13,789 12,357 13,305
Gross Block 416 761 872 1,103 1,356 1,829 4,106 5,368 6,002 6,328
Net working capital 479 461 718 1,209 2,936 4,479 6,044 7,840 6,314 7,345
Income statement
Net Sales 1,185 1,746 2,668 5,408 8,494 13,211 13,294 14,246 16,090 18,836 13,047
Operating expenses (943) (1,407) (2,250) (4,579) (6,943) (10,766) (11,592) (12,861) (14,667) (16,907) (13,153)
EBITDA 241 339 418 829 1,551 2,446 1,702 1,385 1,423 1,929 (106)
Other Income 18 29 69 74 131 186 300 324 475 109 210
Interest cost (95) (91) (78) (118) (239) (461) (829) (1,327) (1,342) (1,438) (1,848)
Depreciation (21) (27) (46) (55) (70) (94) (162) (278) (302) (330) (346)
PBT 143 250 363 730 1,373 2,077 1,011 105 254 270 (2,090)
Tax paid (8) (96) (123) (269) (475) (721) (363) (84) (51) (85) 79
PAT 135 154 240 461 898 1,356 648 21 203 185 (2,010)
Key Ratios (%)

Revenue growth 11.4 47.3 52.9 102.7 57.1 55.5 0.6 7.2 12.9 17.1 (30.7)
EBITDA margin 20.4 19.4 15.7 15.3 18.3 18.5 12.8 9.7 8.8 10.2 (0.8)
PAT margin 11.4 8.8 9.0 8.5 10.6 10.3 4.9 0.1 1.3 1.0 (15.4)
Effective tax rate 5.8 38.5 33.9 36.9 34.6 34.7 35.9 80.3 20.2 31.6 3.8
EPS (Rs) 1.5 1.7 2.6 5.1 9.9 14.9 7.1 0.2 2.2 2.0 (22.1)
RoE 91.1 53.8 51.7 57.9 61.6 44.2 14.3 0.4 4.1 3.6
Source: Capital line, Kotak Institutional Equities

Industrials India
Electrical equipmentlow domestic demand, high competition hit market

According to the annual industry data released by IEEMA (Indian Electrical and Electronics
Manufacturers Association), the Indian electrical equipment industry declined by 8% in
FY2013 (6-7% growth in FY2012). The decline is the first time in the last 10 years. The
decline was primarily attributed to sluggish domestic demand, significant project delays,
especially by state electricity boards, and intense competition from international players
(especially Chinese and Korean).
Exhibit 2: Electrical equipment market declines for the first time in 10 years
Industry size of major T&D equipment, March fiscal year-ends, 2006-13 (Rs bn)
700 T&D equipment industry size 640

600 589
600
520
500 460 470
390
400
300
180
200
100
-
2006 2007 2008 2009 2010 2011 2012 2013
Source: IEEMA, Kotak Institutional Equities
The industry decline was led by the transformers segment (declined by 26%) and the
capacitors segment (declined by 24%). All segments except the transmission segment
recorded a yoy decline in FY2013.
Exhibit 3: Annual production of transformers, March fiscal year-ends, 2005-13 (MVA)
(MVA) Distribution transformers Power transformers

200,000
180,000
160,000
140,000
120,000
100,000
80,000
60,000
40,000
20,000
-
2005 2006 2007 2008 2009 2010 2011 2012 2013
The T&D equipment space had a market size of about `640 bn in FY2012 (which declined to
about `590 bn in FY2013) primarily comprising the transformers (19%), transmission lines
and conductors (23%), switchgear and control equipment (15%) and cables (28%)
segments.

India Industrials
Exhibit 4: Market share of T&D equipment, FY2012
Capacitors
Energy Meters 1%
4%
Rotating Machines Transformers
10% 19%
Cables
28% Transmission Line
& Conductors
23%
Switchgear &
Controlgear
15%
Overcapacity, sluggish demand led to sharp margin contraction

IEEMA data suggests installed transformer manufacturing capacity of about 400,000 MVA
(at the end of FY2012) in India against total production of 280,000-290,000 MVA (implying
70-72% utilization levels).
Exhibit 5: T&D equipment capacity and actual production in 2011-12
Equipment Unit Est. Production Capacity Actual Production Utilization (%)

HT Switchgear Nos. 100,000 84,908 84.9
Cables kms 550,000 306,400 55.7
Capacitors MVAR 70,000 55,110 78.7
Transformers MVA 400,000 286,755 71.7
Transmission Line Towers MT 1,800,000 1,300,000 72.2
Motors MW 32,000 21,210 66.3
AC Generators MVA 16,000 10,958 68.5
Conductors MT 700,000 430,000 61.4
Energy Meters '000 Nos 30,000 24,280 80.9
We note that most of the leading transformer manufacturers have overcapacity with
utilization levels of 55-65%.

Industrials India
Exhibit 6: Installed manufacturing capacity and production levels of key transformer companies in India, March fiscal year-ends, 2009-12
(MVA)
Capacity Production Utilization (%)

2012 2011 2010 2009 2012 2011 2010 2009 2012 2011 2010 2009
Siemens 15,000 15,000 15,000 15,000 9,345 4,905 2,140 1,306 62.3 32.7 14.3 8.7
ABB 20,410 20,410 18,375 16,875 17,450 12,356 16,231 15,151 85.5 60.5 88.3 89.8
BHEL 45,000 45,000 35,500 20,500 23,456 26,202 18,802 21,704 52.1 58.2 53.0 105.9
Crompton NA 39,700 31,608 24,670 NA 35,810 30,002 23,405 NA 90.2 94.9 94.9
Alstom 36,075 30,075 30,075 15,000 NA 28,917 14,642 14,635 NA 96.1 48.7 97.6
TRIL 23,200 23,200 23,200 7,200 13,206 13,527 12,128 7,248 56.9 58.3 52.3 100.7
Voltamp 13,000 13,000 13,000 9,000 8,991 8,973 10,010 9,541 69.2 69.0 77.0 106.0
EMCO 20,000 20,000 20,000 20,000 11,887 9,906 13,692 10,947 59.4 49.5 68.5 54.7
Total 172,685 206,385 186,758 128,245 84,335 140,596 117,647 103,937 61.7 68.1 63.0 81.0
Source: Company, Kotak Institutional Equities
Overcapacity and sluggish demand led to a sharp decline in segment margins over the past
few years.
Exhibit 7: We note a sharp decline in transformer company margins over the past few years
EBIT margin trend of domestic transformer companies, March fiscal year-ends, 2008-1QFY14
(%) Sector EBIT margin CRG SA EBIT margin

20.0
16.0
12.0
8.0
4.0
-
2008
2009
2010
2011
2012
1QFY13
2QFY13
3QFY13
4QFY13
2013
1QFY14
Note:
Companies included in computing the sector EBIT margin include Crompton's standalone power, Alstom
T&D, Voltamp Transformers and TRIL
PGCIL ordering activity listless

PGCIL ordering activity remained relatively low in 1HFY14 after slow ordering in FY2013.
PGCIL announced `48.5 bn of awards in 1HFY14, significantly lower than `92 bn in 1HFY13.
Even adjusted for the large `25 bn HVDC order in 1HFY13, this is about 27% lower yoy.
Note that PGCIL had announced `161 bn of awards in FY2013, significantly lower than
`219 bn awarded in FY2012, despite ordering being supported by an `25 bn HVDC order to
Alstom Grid in 1QFY13.

India Industrials
Exhibit 8: PGCIL ordering activity remains relatively slow

Total orders placed by PGCIL (half-yearly basis), March fiscal year-ends, 2009- 1HFY14
(Rs bn)
200 182
Rs53 bn HVDC order
153
160
Rs25 bn HVDC order
120 102
93 92
80 69
49
42 37
40 30 28
-
1HFY09
2HFY09
1HFY10
2HFY10
1HFY11
2HFY11
1HFY12
2HFY12
1HFY13
2HFY13
1HFY14
Source: PGCIL, Kotak Institutional Equities
Ordering declines across most key segments
The overall 27% decline (adjusted for a large substation order) in 1HFY14 ordering was led
by (1) a sharp decline in tower and transmission line ordering (by over 38% yoy), (2) a dip in
substation ordering (by 22% yoy) after strong ordering in FY2013 and (3) continuing weak
equipment ordering (down 15% yoy despite a low base in FY2013).
Segment-wise ordering acticity from PGCIL, March fiscal year-ends, 2009-1HFY14
(Rs bn) FY2009 FY2010 FY2011 Rs25 bn HVDC

100 98
FY2012 FY2013 1HFY14 order to Alstom
Grid UK
80 70 69
63 Rs53 bn HVDC
60 54 order 55
47 48
37
40 32 33
28 25 22 27
18 15 17 16
20 12 14 14
6 8
-
Tower Conductor Equipment Substation
Foreign share lower, but still meaningful
We note some moderation in competitive intensity from international players especially in

the equipment space. Even companies such as Alstom T&D and ABB cited selective bidding
interest for transformer orders from Chinese companies (restricted to the 765 kV segment)
while Koreans have almost exited after suffering losses on prior orders.

Industrials India
However international players still have a meaningful market share with about 28% of
PGCIL equipment orders being placed on international players in 1HFY14 (versus an average
of about 54% in FY2013). Further, international players continue to dominate the substation
segment, winning about 61% of PGCILs substation orders in 1HFY14 (about 68% in
FY2013).
Exhibit 9: PGCIL equipment and substation ordering on domestic and international players, March fiscal year ends, 2009-1HFY14
2009 2010 2011 2012 1Q13 2Q13 3Q13 4Q13 2013 1Q14 2Q14 1HFY14
Equipment (transformer, reactor and insulator) ordering
Domestic 11,056 20,116 9,577 12,307 1,389 726 1,349 1,142 4,606 1,067 2,614 3,681
Chinese/Korean 6,060 12,012 4,677 15,724 3,310 1,920 2,307 13 7,550 472 932 1,404
Others 32 73 0 0 0 0
JV 4,526 1,444 339 1,027 1,123 3,934 2,670 0 2,670
Total 17,116 32,127 14,286 32,629 6,143 2,986 4,683 2,278 16,090 4,210 3,546 7,756
Foreign share 35% 37% 33% 53% 61% 68% 56% 15% 54% 30% 26% 28%
Substation ordering
Domestic 25,315 19,300 37,882 23,846 2,517 4,013 5,403 5,530 17,463 2,712 2,621 5,333
China/Korean 3,027 556 2,209 7,496 687 1,427 9,610 7,233 944 8,177
Europe (ABB/Alstom T&D) 30,746 24,952 1,022 65 26,039 0 0 0
Others 748 748 0 0 0
JV 1,133 0 0 0 0
Total 25,315 22,327 69,184 27,188 35,714 5,035 6,155 6,957 53,861 9,945 3,565 13,510
Foreign share 0% 14% 45% 9% 93% 20% 12% 21% 68% 73% 26% 61%
Total equipment and substation ordering
Domestic 36,371 39,416 47,459 36,153 3,906 4,740 6,752 6,672 22,069 3,779 5,235 9,014
JV 0 0 0 5,659 1,444 339 1,027 1,123 3,934 2,670 0 2,670
Overseas 6,060 15,039 36,011 18,006 36,506 2,942 3,059 1,440 43,947 7,705 1,876 9,581
Total 42,430 54,454 83,470 59,818 41,856 8,021 10,838 9,235 69,950 14,155 7,111 21,266
Foreign Share 14% 28% 43% 33% 88% 38% 31% 19% 65% 60% 26% 49%

India Industrials
Exhibit 10: Market share break-up for equipment and substation PGCIL orders, March fiscal year-ends, 2010-1HFY14
Transformer, reactor and insulator orders

1HFY14- Rs7.75 bn FY2013 - Rs16 bn FY2012 - Rs33 bn
Others BHEL SiemensOthers
Aditya BirlaGoldstone 7% 2% 3% 4% TBEA
Others 4% 3% TBEA 19%
BHEL Areva
26% 23%
25% ABB 2%
Alstom
7% 3%
Baoding
Crompton+JVs 12%
Siemens 15%
7%
ABB-ABB
Nanjing
Sweden JV
TBEA 7%
BHEL 12% TRIL/TRIL-ZTR JV
12% Hyundai Heavy
7% 10%
Industries
Zhejiang Alsom India
13% Zigong 1%
Crompton Crompton Sichuan6% 2%
37% 8% 5%
Others - Foreign Sichuan
Baoding Shandong
3% 4% 3%
8%
Substation orders
FY2012 - Rs27 bn
1HFY14- Rs13.5 bn FY2013 - Rs55 bn
Alstom Others Others
7% Pinggao 7% KEC EMC BHEL
Techno Electric 7%
3% 2% 2% 15%
15% BHEL ABB
8% Shyama 2% Hyosung
3% 4%
TBEA Alstom JV
11% Siemens 4%
Crompton 4%
7% L&T
Crompton 14%
Crompton 5%
4% Alstrom Grid
UK ABB
50% 7%
LT
12% Jyoti
Areva 12%
Hyosung 8%
25%
Pinggao Hyosung
New Northeast
25% Siemens
Kalptaru 6% Electric 8% Techno Electric
2% 9% 12%
Competitive intensity remained relatively limited in the tower/transmission line space (as
seen in 2HFY13, as well).

Industrials India
Exhibit 11: Market share break-up for equipment and substation PGCIL orders, March fiscal year-ends, 2010-1HFY14
FY2013 - ` 70 bn NCC - FY2012 - ` 98 bn

1HFY14- ` 18.5 bn BSTRANSCOMM ShyamaOthers
Others Others JV Bajaj 1% 6%
2% Kalptaru Aster-Deepak 9% 2% 1% Aster Tata Projects
17% 1%
4% KEC 16%
Ranjit JV
NCC JV 25% 5%
5%
KEC
Tata Projects Isolux 6%
36% 5% Gammon
KEC
13%
17%
EMCO Deepak
6% Kalptaru 10%
Bajaj Electricals 18% LT
7% 11%
Gammon Jyoti
Shyama 7% LT 9% Kalptaru
Larsen EMC 10%
7% 21% 14% 9%

CAUTIOUS
Infrastructure
UPDATE
BSE-30: 19,782
Premium restructuring may not be enough; cancel and rebid may be the only
option. NHAI is exploring options to mobilize the otherwise inactive road sector with
several projects stuck/delayed. However, we believe premium restructuring (deferring of
premium payments) and substitution route may be ineffective due to several challenges
and ambiguities. Cancellation and re-bidding of projects may be the only way out
(industry expects several projects to come up for re-bidding in December). We note that
almost all (except nine out of 48) projects awarded by NHAI in FY2012 have made
little/no progress (even in case of relatively large players).
Restructuring may not be enough in changed circumstances

NHAI is exploring options to revive construction of road projects awarded (we note little progress
in projects awarded in FY2012) including premium restructuring, substitution of original bidder
and cancellation and re-bidding of stuck projects.
NHAI is looking to restructure premium payments on certain projects with an aim to improve
project viability and ease cash flows for developers (defer premium). However, we believe this
move may not be sufficient as it may not materially improve the viability of projects. Our exercise
on the potential impact of premium restructuring (for one of the largest road projects) on the net
value of the project revealed that even after restructuring the project had a large (albeit slightly
lower) negative NPV (exercise builds no premium payments for the first three years; deferred
premium paid over the remaining project life at a discount of 10%). Our base case model resulted
in negative NPV of over Rs20 bn, which came down to about Rs15 bn on restructuring.
There still remains a lot of ambiguity regarding potential terms and conditions of premium
restructuring and difference of opinions from various ministries, as per unauthenticated media
reports.
Replacement of original bidder through substitution route has not made a difference
The recent exit policy provided by NHAI to developers (concessionaires can sell equity stake in a
project irrespective of the stage of construction) has also failed to make a significant impact in
mobilizing the road sector as (1) it calls for formation of a new SPV instead of simply allowing
direct stake sale in the existing SPVwould involve additional cost, (2) it is unclear on whether tax
benefits would pass on to the new SPV and (3) there is reluctance from lenders to give approval.
Besides, developers opting for substitution are likely to exit at a loss, especially where the delays
are attributable to the concessionaire (aggressive bidding, incorrect project assumptions etc.).
Re-bidding perhaps the only way out; industry expects some projects to be re-bid by December
We believe cancellation and re-bidding of the delayed/stressed projects may perhaps be the only
way out (as (premium restructuring and substitution have several challenges and may be
ineffective). The industry still expects some projects to come up for re-bidding in 3Q/4Q FY2014
(feedback from companies such as IRB and Sadbhav suggest this). Good value-accretive contracts
with slightly lower competition may be positive for the industry and help to nurse itself back to Lokesh Garg
lokesh.garg@kotak.com
health.
Mumbai: +91-22-6634-1496
Little progress in most of FY2012 awards, even for large developers; awards sedate in FY2013 Supriya Subramanian
supriya.subramanian@kotak.com
Our analysis of NHAI data suggests that about a fifth of the projects awarded in FY2011 and most Mumbai: +44-20-79776918
projects awarded in FY2012 have made little or no physical progress. Out of 11 projects awarded
in FY2013 only two have been given a start date by NHAI. We note that even projects of several Aditya Mongia
aditya.mongia@kotak.com
leading developers (L&T and ITNL) have made no significant progress. NHAI awarded only about Mumbai: +91-22-6634-1453
1,100 kms in FY2013 against an initial target of about 7,500 kms.

Mumbai: +91-22-6634-1100
Infrastructure India
NHAI explores options to resurrect road industry

NHAI is exploring various options to revive progress in construction of road projects awarded
(we note little progress in projects awarded in FY2012) including
` Premium restructuring. NHAI is exploring potential restructuring of premium payments

by developers with potential deferment of premium payments in the initial few years of a
project, as far as the NPV of the total premium payments remains the same.
` Cancellation and rebidding of projects. NHAI is looking to potentially cancel projects

that made little or no progress and put them up for re-bidding. This could be with or
without a penalty to the original concessionaire, depending on whether the project delay
was due to developer defaulting or NHAI not fulfilling its obligations in a timely manner
(such as land acquisition and other obligations).
` Substitution of original bidder. CCEA has recently given road developers the option to
exit from projects irrespective of the stage of completion (even during the construction
period) on approval from senior lenders and NHAI. Weaker developers can use this exit
option to sell their stakes in projects and use the resulting equity in other projects/fresh
bids.
NHAI is studying about 35 highway projects that have made little/no progress, out of which
23 are premium-based (with total premium payments of nearly Rs1 tn) and the rest are
based on viability grant funding. The projects are broadly categorized into four categories
(1) projects wherein the developers are prepared to make progress based on the original
bidding parameters as long as NHAI fulfills its obligations, (2) projects that need to be
terminated with a penalty in cases where the concessionaire has defaulted, (3) projects that
would be terminated and re-bid but without a penalty in cases where the concessionaire has
defaulted and NHAI has failed to meet its obligations and (4) projects in which
concessionaires may be willing to make progress with some changes to bidding conditions
(such as premium restructuring).
Premium restructuring may not be enough in changed circumstances

NHAI is looking at restructuring premium payments for certain projects with an aim to
improve project viability and ease cash flows of already strained developer balance sheets.
The restructuring would be such that the net NPV of the premium payments (over the period
of the concession agreement) would still remain the same as per the original bid terms. The
deferred premium payments would help the concessionaires to use cash flows from the
initial few years for equity commitments for the project.
However, we believe this move may not be sufficient as it may not materially improve the
viability of projects (very aggressive premium bids). We have aimed to study the impact of
the premium restructuring of one of the largest road projects (which is stalled) on the net
value of the project. Based on the original bid terms and our traffic/tariff growth
assumptions we believe the project would have had a large negative equity value of over
Rs20 bn (equity value of +Rs8.7 bn based on the company traffic and tariff assumptions).
In our exercise, we assume no premium payments to NHAI for the first three years of the
project (during the construction period) and the deferred premium would be paid over the
remaining life of the project (discount rate of 10%). Our exercise reveals that even post this
restructuring the project is likely to have large (albeit slightly lower) negative value of Rs15
bn.

India Infrastructure
Exhibit 1: Projects may remain unviable even after premium restructuring

Case study of potential impact of premium restructuring on the value of a large six-laning project
Base case With deferred premium Developer's assumptions

2015E 2016E 2017E 2015E 2016E 2017E 2015E 2016E 2017E
Revenues 3,525 3,924 4,367 3,525 3,924 4,367 3,845 4,433 5,087
Premium paid to NHAI (6,360) (6,678) (7,012) - - - (6,360) (6,678) (7,012)
Operational costs (353) (392) (437) (353) (392) (437) (385) (443) (509)
EBITDA (3,187) (3,147) (3,081) 3,173 3,531 3,931 (2,899) (2,688) (2,433)
PAT (3,187) (3,147) (3,081) 2,538 2,825 3,144 (2,899) (2,688) (2,433)
Net value (20,170) (15,649) 8,685
Key assumptions KIE estimates Company estimates

Average traffic growth over the life of the project 6.0 7.1
Average tariff growth over the life of the project 5.0 6.3
Source: NHAI, Company, Kotak Institutional Equities estimates
Difference of opinion between ministries on premium restructuring per

unauthenticated media reports
We also note that there remains ambiguity and difference of opinion related to the potential
terms of the premium restructuring. The proposal to restructure the premium of GMRs
Kishangarh-Udaipur road projects has resulted in difference of opinion between various
Government ministries. Some of these (as indicated in recent news flows) include:
` Road ministry suggested (1) penalty of 0.5% of project cost on the developer, (2) increase
in discount rate from 10% to 12% and (3) developers should submit a bank guarantee
for the deferred premium amount. NHAI has objected to these terms as it would again
make the project unviable and strain the balance sheets of the developers and hence
would not help to resolve the issue.
` Planning Commission insists on the cancellation and re-bidding route for GMRs project
versus NHAIs suggestion of premium restructuring.
` Law ministry was earlier (in May 2013) against the idea of premium restructuring, saying
it would not be legally or constitutionally feasible; though the ministry has since gone
back on its stance and said that the matter should be resolved between the finance
ministry, road ministry and NHAI.
Replacement of original bidder through substitution route has not made a

difference
The recent exit policy provided by NHAI to developers (concessionaire can sell equity stake in
project irrespective of stage of construction) has also failed to make a significant impact on
mobilizing the road sector. Key issues include the following: (1) the policy requires
formation of a new SPV instead of simply allowing direct stake sale in the existing SPV this
would involve additional costs (stamp duty which itself is 2.5% of the transaction value) and
time, (2) ambiguities related to whether the tax benefits would pass on to the new SPV
created and (3) reluctance of banks/lenders to approve equity substitution.
Besides, developers opting for substitution are likely to exit at a loss, especially where the
delays are attributable to the concessionaire (aggressive bidding, incorrect project
assumptions). In such cases the new SPV would have to account for the likely penalty
payable on delayed completion (as per the original schedule) and lower toll collections.

Substitution: Provide exit irrespective of stage of construction
CCEA recently provided an option to project developers to present their case for exit from
projects to lenders and NHAI, which would take the final decision. This substitution
agreement (which was always a part of the model concession agreement) now makes the
process more liberal. Current concession agreement provides for the senior lenders (with the
approval of the NHAI) to substitute the existing concessionaire. Such a substitution could
have been involved in case of (1) financial default (delays of three months in servicing debt),
(2) concessionaire default (lender gets 270 days to substitute concessionaire) and (3) other
cases of breach of provisions of MCA.
The option given to developers to seek approvals for existing projects would help to
(1) create more liquidity for developers (can bid for new road projects), (2) give confidence
to lenders to finance new projects).
Cancellation and re-bidding may be the only way out

Premium restructuring and substitution have several challenges and ambiguities that may
render both the options relatively ineffective. Hence we believe cancellation and re-bidding
of the delayed/stressed projects may perhaps be the only way out.
Industry expects rebids in 3Q/4Q FY2014; value accretive contracts with slightly lower
competition may help to revive the industry
The industry still expects some projects to come up for re-bidding in 3Q/4Q FY2014 (based
on feedback from several companies such as IRB and, Sadbhav Engineering).
The IRB management said several projects awarded by NHAI in 2012 were stuck on account
of clearances and unwilling developers (majority are stuck on the second count). With about
30 projects stuck which have not achieved financial closures, the management believes that
about 2,000 kms of projects could potentially come up for re-bidding in 3QFY14. Also, the
company expects 1,000-2,000 kms of fresh projects from NHAI hence expects 3,000-
5,000 kms to be bid out in 3Q/4Q FY2014.
Good value accretive contracts with slightly lower competition may be positive for the
industry and help it to nurse itself back to health.
Little/no progress in majority of FY2012 project awards, even with large developers
Even after more than a year of being won, projects awarded in FY2012 are yet to show
significant physical progress with only nine out of 48 projects having started construction
(data based on start date/completion by NHAI). We believe about half of the remaining 39
projects may be financially unviable and the remaining may be stuck for want of project
clearances. Our analysis of NHAI data also suggests that about a fifth of the projects
awarded in FY2011 and most of the projects awarded in FY2012 have made little or no
physical progress. Out of all the projects awarded in FY2013 (about 11 projects) only two
have been given a start date by NHAI.

Exhibit 2: Significant share of 2011 awards and almost all FY2012 awards remain inactive
Quantum of active NHAI projects, March fiscal year ends, 2009-13 (km)
(km)
7000
6,343 km
6000 1,078
5000 4,934 km
4000 3,301 km Progressing awards

LoA cancelled
3000 3,855
Inactive/little progress
2000 1,116 km
2,961
643 km
1000 147
643
0
2009 2010 2011 2012 2013
Source: NHAI, Kotak Institutional Equities estimates
We note that even projects of several leading developers (L&T, ITNL etc.) have failed to make
any significant progress. The table below gives a list of all the projects awarded in FY2012
(highlighted rows indicate projects that received a start date from NHAI).

Exhibit 3: 8 out of 48 projects awarded have started construction

List of NHAI projects awarded in FY2012 and start dates as on July 31, 2013
Length Project cost

S.No. Project name (km (Rs mn) Start Contractor
1 4 laning Beawar-Pali-Pindwara 244 23,880 Dec-11 L&T
2 4 laning MH/ KNT Border Sangareddy 145 12,666 L&T
3 JALGAON - GUJARAT/ MAHARASHTRA BORDER 209 19,684 L&T
4 Amaravati-Jalgaon 275 25,378 L&T
5 Four Laning of Kiratpur-Ner Chowk Section 84 19,168 ITNL
6 Six-laning of Barwa Adda-Panagarh 123 16,650 ITNL
7 Ahmedabad to Vadodara Section 102 21,252 Jan-13 IRB
8 Six Laninig of Kishangarh Udaipur-Ahmedabad 556 53,873 GMR
9 Four laning of Shivpuri-Dewas 330 28,150 GVK
10 6-laning Solapur-Maharashtra/Karnataka Border-Bijapur 110 11,025 Sadbhav Engg
11 4 Laning of Gomti Chauraha - Udaipur 79 9,140 Sadbhav Engg
12 2-Laning of Krishnagiri-Tindivanam 177 6,240 Apr-12 Transstroy-OJSC
13 4 laning KNT/Kerala Border to Kanuur 17 Section 127 11,571 Transstroy-OJSC
14 4 Laning of Obedullaganj-Betul Section 125 9,120 Transstroy-OJSC
15 Anandpuram-Vishakhapatnam-Ankapalli 59 8,390 Transstroy-OJSC
16 4-Laning of Hoskote-Dobbaspet 80 7,207 Transstroy-OJSC
17 4 laning Patna - Buxar 125 11,291 Gammon Infra
18 4 laningYamunanagar-Saha-Barwala- Panchkula section 107 9,349 Gammon Infra
19 Vijayawada-Gundugolanu Section 104 16,840 Gammon Infra
20 Birmitrapur-Rehab, Upgradation to Birmitrapur to Barkote 126 7,782 Gammon Infra
21 Four laning of Jabalpur-Katni-Rewa Section 226 18,950 Soma
22 2- Laning of Jowai -Meghalaya/Assam Border 102 3,900 Simplex Infra
23 4-Laning of Mahulia to Behragora to Kharagpur 127 9,400 Simplex Infra
24 Lucknow - Sultanpur 126 10,435 Essar
25 4-Laning of Cuttak - Angul 112 11,237 Ashoka Buildcon
26 4-Laning of Angul - Sambalpur 153 12,203 Abhijit Roads
27 4-laning of Orissa/Chattisgarh Boarder - Aurang section 150 12,320 Feb-13 BSCPL Infra
28 Four laning of Meerut Bulandshahar 66 5,085 C&C Constructions
29 4-Laning of Solapur - Maharashtra/Karnatka Section 100 9,230 Coastal-SREI
30 4 laningRampur - Kathgodam 93 7,900 Era-OJSC
31 4 laning Lucknow - Raebareli 70 6,359 Jul-12 Essel Infra
32 Four laning of Gwalior-Shivpuri 125 10,550 Essel Infra
33 Jabalpur to Lakhanadone 81 7,768 Gannon Dunkerley
34 4-Laning of Raipur - Bilaspur 127 12,160 IVRCL
35 Six-Laning of Gundugolanu Rajamundry 121 16,170 IVRCL
36 4 laning Nagpur-Wainganga Bridge 45 4,840 Apr-12 JMC
37 4 Laning of Mulbagal - Karnataka / AP border 22 1,410 May-13 JSR Construction
38 4 laning Kota - Jhalawar 88 5,300 Keti Constructions
39 Six-Laning of Aurangabad-Barwa Adda 221 23,400 KMC
40 2-Laning with paved sholder of Muzaffarpur - Barauni 108 3,564 Jul-12 KNR
41 4/6 laningVijayawada-Machhlipatnam 65 6,060 Madhucon Projects
42 4 Laning of Khagaria-Bakhtiarpur 113 16,353 Navayuga Engg
43 Etawah -Chakeri (Kanpur) 160 15,730 Mar-13 Oriental Structural Engineers
44 4-Laning of Hospet-Bellary-Karnataka/AP Border 95 9,100 PNC Infratech
45 4 laning Hospet - Chitradurga 120 10,340 Ramkey Infrastructure
46 Agra-Etawah Bypass 125 12,070 Ramkey Infrastructure
47 4 laning Punjab/Haryana Border Jind Section 68 4,388 Unity Infra
48 4 laning Rohtak-Jind (Approved Length 45 Km) 49 2,833 Vijay Infrastructure
Source: NHAI, Kotak Institutional Equities
Sedate award activity in FY2013

NHAI awarded only about 1,100 kms in FY2013 against an initial target of about 7,500 kms
(PMOs directive of 9,500 kms includes 1,700 kms of state awards).

Exhibit 4: Award activity declined sharply in FY2013

Project awards by NHAI, March fiscal year ends, 2007-13 (km)
NHAI ordering activity

(km)
10000 Achievement Target
9,000
7,957
8000 7,000 7,300 7,464
6000 5,083
4000 3,597 3,360

2,885
1,740
2000 1,234 1,116
817 643
0
2007
2008
2009
2010
2011
2012
2013
Exhibit 5: List of NHAI projects awarded in FY2013
S.No. Project Length (kms) Cost (Rs bn) Start Contractor

1 Vadodara-Surat section 7 4.7 HCC Concessions Ltd
2 Walajapet-Poonamalee 93 12.9 Jun-13 Essel Infra Projects Ltd
3 4 laning of Coimbatore-Mettupalayam 54 5.9 Transstroy-OJSC Consortium
4 2-laning of Raebareli-Jaunpur 166 5.7 PNC Infratech Ltd
5 4-laning of Goa/Karnataka border-Kundapur 187 16.6 IRB Infrastructure Developers
6 4-laning of Walayar-Vadakkancherry 54 6.8 May-13 KNR Constructions
7 4-laning of Kashipur-Sitarganj 77 6.1 Galfar Engg & Contracting SAOG
8 2-laning of Rajasthan border-Fatehpur-Salasar 154 5.3 Galfar Engg & Contracting SAOG
9 4-laning of Rajsamand-Gangapur-Bhilwara 87 6.8 Sadbhav Engg Ltd
10 4-laning of Rohtak-Hissar 99 9.6 Sadbhav Engg Ltd
11 4-laning of Khed-Sinnar 138 13.5 IL&FS Transportation Networks
Total 1,116 93.8
Even in terms of construction, NHAI has likely done only about 2,600 kms in FY2013 versus
an initial target of 3,000 kms.

Exhibit 6: NHAIs construction activity declined yoy in 2HFY13

NHAI construction activity (km), March fiscal year-ends, 2006-2013 (km)
(km)
3500
3000 2693 2580

2500 2205 2240
1882 1780
2000 1632 1578
1500
948
1000 753 662
635
500
0
2006
2007
2008
2009
2010
2011
2012
2013
1H12
1H13
2H12
2H13
NHDP project status
Exhibit 7: Phase-wise status of NHDP Phases III to VII (as of July 31, 2013)
L ength (Km s )
Under
Phas e Total C om plete im plem entation To be awarded
I Golden Quadilateral: 4-laning roads c onnec ting Mumbai-Delhi-Kolkata-Chennai 5,846 5,846 0
II NS EW Corridor - 4-L aning raods c onnec ting S ilc har-Porbandar and Kas hmir 7,142 6,159 611 372
III C onnec ting im portant touris t & religious plac es with urban c entres 12,109 5,611 4,813 1,685
IV 2-laning of les s important national highw ay s 14,799 285 4,130 10,384
V 6-laning of high dens ity c orridors in GQ, NSEW 6,500 1,584 2,496 2420
V I New ex pres s w ay c ons truc tion 1,000 1,000
V II Urban areas - ring roads etc . 700 21 20 659
S ARDP -NE 388 69 43 276
Total 48,484 19,575 12,113 16,796
Awarded during
Apr-13 - Apr-12- Apr-11 - May-10- Dec 09-
J ul-13 Mar-13 Mar-12 Mar-11 Apr10
I Golden Quadilateral: 4-laning roads c onnec ting Mumbai-Delhi-Kolkata-Chennai
II NS EW Corridor - 4-L aning raods c onnec ting S ilc har-Porbandar and Kas hmir 48 1 (26) 129
III C onnec ting im portant touris t & religious plac es with urban c entres 155 2,258 2,077 1,574
IV 2-laning of les s important national highw ay s 287 810 2,553 765 -
V 6-laning of high dens ity c orridors in GQ, NSEW 99 1,569 729 649
VI New ex pres s w ay c ons truc tion
V II Urban areas - ring roads etc . (2) 24
S ARDP-NE 112
Total 287 1,112 6,381 3,655 2,357

CAUTIOUS
NBFCs
UPDATE
BSE-30: 19,782
Normal monsoon positive, margins and NPLs are key monitorable. We continue
to see near-term challenges for auto finance NBFCs even as long-term prospects remain
intact. A strong monsoon will support auto sales (and consumption in general) in rural
India. However, sharp rise in interest rates and unmatched ALM profile will provide
downside risks to NIM. NPLs, though under control, have been higher than expected
and remain another monitorable. We retain ADD rating on Shriram Transport Finance
with a lower target price of `670 (from `760) and REDUCE rating on Mahindra Finance
with target price of `240 (unchanged); we await better entry points and clarity on asset
quality performance to get more assertive on Mahindra Finance.
Normal monsoon a boost for interior India
In our recent meetings with Shriram Transport Finance and Mahindra Finance, the managements
highlighted their comfort on their growth target on the back of a normal monsoon. While auto
sales struggle to deliver growth, rural India will likely continue to drive superior performance.
Downside risks to margins in the current environment
We find downside risks to our NIM estimates (i.e. compression to near-term NIM will likely be
higher than expected) if liquidity remains under stressNBFCs remain apprehensive to pass on
rate hikes to their customers and/or banks increase base rate, thereby repricing the outstanding
bank borrowings of NBFCs. We model 20 bps decline in calculated NIM (excluding the benefit of
recent capital issuance) for MMFS in FY2014E and another 15 bps decline in FY2015E. We are
modeling average (calculated) NIM of 7.4% for STFC for the next few quarters, down from 7.9%
in FY2013.
STFC: Retain ADD with lower TP; MMFS: Retain REDUCE
We continue to believe that Mahindra Finance (MMFS) and Shriram Transport (STFC) are well-
placed to deliver 20%+ RoE over the medium term.
Await better entry points and clarity on NPL in MMFS. On the back of its diversified portfolio,
lower base and superior earnings in rural India, MMFS will likely deliver superior growth (18-20%
PAT CAGR, 23% CAGR in pre-tax profit before provisions) and higher profitability (~22% RoE) in
the medium term. While high near-term business growth (over 25%) differentiates MMFS from
other NBFCs and banks, we would monitor trends in NPLs and margins. At current valuations
(2.9X and 2.5X PBR FY2014E and FY2015E respectively), the stock is likely ignoring these risks. We
retain REDUCE rating on the stock with target price of `240. We will revisit our rating after getting
more comfort on the asset quality trends.
STFC: ADD on inexpensive valuations. We expect STFC to deliver 20% ROE and 15% PAT
growth (18% in pre-tax profit before provisions) over the next three years. While the high RoE
phase (25-30%) may be behind us, the turnaround in the CV cycle will likely boost ROEs to 22- Nischint Chawathe
23% on factoring normalization in credit costs. Current downturn in the CV cycle remains the key nischint.chawathe@kotak.com
concern on the stock. Besides, sharp rise in diesel prices and shift to a more stringent (90 dpd) Mumbai: +91-22-6634-1545
NPLs recognition norm remain an overhang. We reduce our target price to `670 (from `760) on M.B. Mahesh, CFA
assuming higher cost of equity (14.5% from 13.5%). At our target price, the stock will trade at mb.mahesh@kotak.com
Mumbai: +91-22-6634-1231
1.6X PBR 1-year forward.
Geetika Gupta
geetika.gupta@kotak.com
Mumbai: +91-22-6634-1160

Mumbai: +91-22-6634-1100
NBFCs India
MMFS and STFC: Content about normal monsoon

MMFS is a direct beneficiary of normal monsoon. The company has reported strong
(38%) loan growth in June 2013 on the back of 30% growth in disbursements, largely from
UVs, tractors and used vehicle finance (each segment up >40%). We are modeling 25%
loan growth in FY2014E and 20%+ over the next two years. With strong momentum in
tractors (M&M tractors were up 20% YTD and 9% in August 2013), we expect the tractor
finance business to remain buoyant over the next few months. Refinance business typically
tends to be countercyclical and will likely be another growth driver over the next few
months. Management has highlighted that while they remain confident on the growth
opportunity, the focus will now be on improving recoveries; growth rates will hence likely be
moderate in FY2014E.
STFC is positive as well. A normal monsoon and likely bumper crop are expected to lead
to a higher movement of agriculture commodities, thereby improving prospects for LCVs
funded by Shriram Transport Finance. In light of challenges in the CV transportation, STFC
had envisaged a slow recovery at the beginning of the year. A normal monsoon implies that
steady improvement will be on track. The company has recently raised lending rates by 25-
50 bps. We expect loan growth to moderate to 19% yoy in March 2014 from 25% in June
2013. We expect STFC to deliver 17-18% loan growth over the medium term; improvement
in the CV cycle will provide upside to our estimates.
Exhibit 1: MMFS' NPLs have been high in years of large deficit in monsoon
Monthly deficit in monsoon and GNPL of MMFS in the following financial year-end, 2002-14
June-Sept Gross NPLs

June July August September (cumulative) of MMFS
Year (%) (%) (%) (%) (%) (%)
2002 36 (5) (20) (36) (8) 7.4
2003 9 (54) (2) (13) (19) 7.8
2004 10 7 (5) (2) 2 8.1
2005 (1) (20) (4) (30) (14) 6.8
2006 (10) 15 (28) 20 (1) 4.9
2007 (13) (2) 7 2 (0) 5.5
2008 19 (2) (2) 18 6 7.6
2009 24 (17) 1 (6) (2) 9.6
2010 (47) (4) (27) (20) (22) 7.0
2011 (16) 3 5 12 2 4.2
2012 10 (14) 5 11 9 3.1
2013 (29) (22) (2) 17 (10) 3.1
2014 32 7 (2) 5
Notes:
(a) Cumulative data for FY2014 is YTD.
Source: Meteorological Department of India
Risk to NIM: Higher marginal cost; rise in base rates is a risk

Marginal cost rises sharply, not fully passed on. Marginal borrowings cost of AA-rated
NBFCs has increased by 200 bps qoq between 1QFY14 and 2QFY14 (see Exhibit 4) on the
back of sharp spike in short-term interest rates in the system. MMFS and SHTF have
increased lending rates by 25-50 bps and will need to raise lending rates if their borrowing
costs remain high. Notably, most NBFCs have been very reluctant in taking large rate hikes
on expectations of reversal in the liquidity-tightening measures by the regulator. While
private banks have raised base rates, most public banks have kept base rates stable and
increased spread over base rates for lending to NBFCs and corporate sector.

India NBFCs
Rise in bank base rates is significant risk. We believe that rise in base rates by public
banks will put considerable pressure on NIM, and NBFCs will need to take considerable rate
hikes to maintain NIM. All outstanding loan assets of MMFS and STFC carry a fixed rate.
However, bank loans will get repriced immediately on rise in base rates. Long-term bank
loans comprise about 37% of Mahindra Finances borrowings as of March 2013 (as
compared to 17% for Shriram Transport). Thus, any rise in base rates will increase the
outstanding borrowing costs for 37% and 17% of MMFS and STFCs borrowings
respectively, thereby putting a higher pressure on NIM.
Exhibit 2: Bank loans comprise about 37% of MMFS' borrowings

Break-up of borrowings of Mahindra Finance, March fiscal year-ends, 2012-13 (` mn)
2012 2013
Borrowings 143,692 193,537
Short term borrowings 14,491 13,012
Current Maturities of long term borrowings 36,005 50,372
Other long-term borrowings 92,907 130,153
NCDs 24,782 31,474
Banks 51,403 70,819
Deposits 10,641 19,205
Tier II 5,101 5,941
Others 980 2,714
Borrowings due in next 1 year/ total borrowings (%) 35 33

Bank loans (long-term)/ total borrowings (%) 36 37
Source: Company
Exhibit 3: Bank loans comprise about 17% of STFC's borrowings

Break-up of borrowings of Shriram Transport, March fiscal year-ends, 2012-13 (` mn)
2012 2013
Borrowings 231,274 310,024
Short term borrowings 30,402 41,468
Current Maturities of long term borrowings 54,002 78,024
Other long-term borrowings 146,868 190,530
NCDs 70,990 95,114
Banks 34,857 51,860
Deposits 10,038 6,822
Tier II 30,437 31,283
Others 500 5,450
Borrowings due in next 1 year/ total borrowings (%) 36 39

Bank loans (long-term)/ total borrowings (%) 15 17
Source: Company

NBFCs India
Exhibit 4: Borrowing costs increased by ~200 bps in past few months

Yield of corporate bonds and G-Secs in India, September 2012-September 2013 (%)
5-Year AAA 5-Year AA 10-Year G Sec

11.50
10.60
9.70
8.80
7.90
7.00
Sep-12
Nov-12
Dec-12
Oct-12
Jan-13
Feb-13
Mar-13
Apr-13
Jul-13
May-13
Jun-13
Aug-13
Sep-13
Source: Bloomberg, Kotak Institutional Equities
NPLs: Rising though not alarming yet

MMFS and STFC have reported rise in NPLs/write-offs over the past two years. While
NPL/credit cost ratio is still not alarming, the steady increase is a cause for concern.
High slippage in 1Q is a concern. MMFS reported 51% qoq rise in gross NPLs to 4.2% of
gross advances, compared to 3.0% in 4QFY13. While rise in NPLs during 1Q is a seasonal
trend, the qoq rise during 1QFY14 is the highest in past 7-8 years. This is more worrying in
light of a strong monsoon in CY2013 as compared to delay in monsoon in CY2012.
Management has highlighted that the focus this year will be on recoveries over high growth
and collections are expected to improve in 2HFY14. Some part of the losses is driven by the
CV portfolio, a segment in which the company is anyway slowing down. We model credit
costs at 1.7-1.8% of average assets from 1.4% in FY2013 and 1% in FY2012.
High write-offs at STFC. STFCs gross NPLs increased to 3.1% of loans in June 2013 from
2.7% in FY2011. Moreover, the write-offs over the past two years (FY2012 and FY2013)
were equal to gross NPLs (`11 bn). Consequently, the ratio of credit cost to average loans
increased to 2% of loans from 1.4-1.6% between FY2008 and FY2011. We continue to
model credit cost of 1.9% in our medium-term estimates. While the mining ban has driven
the rise in write-offs in FY2012, the ratio remains high even as the management has
highlighted that the impact of the episodic issues (mining portfolio) is fully factored inthis
remains a cause for concern. Turnaround in the CV cycle will reduce our provision estimates.

India NBFCs
Exhibit 5: Mahindra Finance 1-year forward PER and PBR (X) Exhibit 6: Shriram Transport 1-year forward PER and PBR (X)
September 2007-September 2013 September 2007-September 2013
Rolling PER (X) (LHS) 20.0 Rolling PER (X) (LHS) 5.0
16.0 3.5
Rolling PBR (X) (RHS) Rolling PBR (X) (RHS)
16.0 4.0
13.6 2.9
11.2 2.3 12.0 3.0
8.8 1.7 8.0 2.0
6.4 1.1 4.0 1.0
4.0 0.5 - -
Sep-07
Mar-08
Sep-08
Mar-09
Sep-09
Mar-10
Sep-10
Mar-11
Sep-11
Mar-12
Sep-12
Mar-13
Sep-13
Sep-07
Mar-08
Sep-08
Mar-09
Sep-09
Mar-10
Sep-10
Mar-11
Sep-11
Mar-12
Sep-12
Mar-13
Sep-13
Source: Company, Bloomberg, Kotak Institutional Equities Source: Company, Bloomberg, Kotak Institutional Equities

NBFCs India
Exhibit 7: Mahindra Finance, key assumptions and ratios

March fiscal year-ends, 2010-16E (%)
2010 2011 2012 2013 2014E 2015E 2016E

Growth in key parameters (%)
Total interest income 13 34 42 41 31 21 20
Total interest expense (2) 32 70 44 30 24 19
Net interest income 22 35 28 39 32 19 21
Loan loss provisions (22) (29) 0 103 48 34 20
Total income 22 27 24 40 28 19 21
Operating expenses 22 52 20 25 18 24 25
Employee expenses 9 18 32 12 17 18 18
Net loans 22 49 40 37 25 22 19
Total assets 22 51 35 37 24 21 18
Total Borrowings 24 50 49 35 26 22 18
Shareholders fund 18 44 19 51 18 17 17
Asset management measures (%)
Yield on average earning assets 18.9 18.5 18.2 18.6 18.7 18.4 18.4
Average cost of funds 8.6 8.2 9.3 9.6 9.7 9.7 9.7
Difference 10.3 10.3 8.9 9.0 9.0 8.7 8.7
Net interest income/earning assets 11.4 11.1 10.0 10.2 10.4 10.1 10.2
Spreads on lending business 10.3 10.3 8.9 9.0 9.0 8.7 8.7
Net interest income/EA (after prov) 9 10 9 9 9 8 9
Tax rate 34 34 33 31 34 34 34
Dividend payout ratio 21 22 23 23 23 23 23
Profitability measures (%)
Interest income/total income 88 93 96 96 99 99 99
Other income / total income 12 7 4 4 1 1 1
Operating expenses/total income 30 36 35 32 29 30 32
Payout ratio 21 22 23 23 23 23 23
Equity/assets (EoY) 19 18 16 17 17 16 16
ROA decomposition - % of avg. assets
Net interest income 11.3 11.0 10.0 10.2 10.3 10.1 10.2
Loan loss provisions 2.7 1.4 1.0 1.4 1.7 1.8 1.8
Net other income 1.6 0.8 0.4 0.5 0.1 0.1 0.1
Gains on securitization 1.3 0.5 0.0 0.3 0.1 0.1 0.1
Operating expenses 3.9 4.3 3.7 3.4 3.1 3.1 3.3
(1- tax rate) 66.1 65.9 67.0 69.0 66.0 66.5 66.5
ROA 4.2 4.1 3.8 4.0 3.8 3.5 3.5
Average assets/average equity 5.2 5.4 5.9 5.9 5.9 6.1 6.3
ROE 21.5 22.0 22.8 23.8 22.4 21.6 21.8

India NBFCs
Exhibit 8: Mahindra Finance, income statement & balance sheet

March fiscal year-ends, 2010-16E (` mn)
2010 2011 2012 2013 2014E 2015E 2016E

Income statement
Total interest income 14,366 19,223 27,296 38,567 50,627 61,411 73,722
Total interest expense 5,017 6,602 11,203 16,188 21,110 26,264 31,321
Net interest income 9,349 12,621 16,093 22,379 29,517 35,146 42,401
Provisions and write/off 2,215 1,566 1,570 3,191 4,739 6,343 7,609
Other income 1,321 902 650 1,023 400 500 600
Gains on securitisation of loans/ other gains 1,110 516 - 643 400 500 600
Operating expenses 3,250 4,932 5,919 7,419 8,747 10,872 13,609
Pretax income 5,205 7,026 9,254 12,792 16,431 18,431 21,783
Tax provisions 1,762 2,393 3,051 3,965 5,587 6,174 7,297
Net Profit 3,443 4,633 6,202 8,827 10,845 12,257 14,486
PBT - securitization income + provisioning expense 6,310 8,076 10,823 15,340 20,770 24,274 28,792
EPS (Rs) 7 9 12 16 19 22 25
BPS (Rs) 36 49 57 78 92 108 126
ABVPS (Rs) 35 48 57 77 89 104 123
Balance sheet
Net loans 83,510 124,649 174,984 240,384 301,174 366,527 434,470
Total Investments 2,159 6,746 5,025 5,610 5,891 6,185 6,494
Cash & deposits 2,420 2,976 2,552 3,450 3,829 4,250 4,718
Loans and advances and other assets 335 183 75 2,030 2,030 2,030 2,030
Deferred tax assets 2,069 2,167 2,012 2,382 2,501 2,626 2,757
Net fixed assets 408 718 786 836 309 243 204
Capital work in progress 68 100 182 232 282 332 382
Total assets 90,969 137,539 185,616 254,924 316,017 382,194 451,056
Liabilities
Total loans and bonds 59,784 88,412 132,912 183,835 234,651 288,766 343,054
Total Borrowings 64,577 96,749 143,692 193,537 243,383 296,625 350,126
Current liabilities 9,087 15,889 12,407 16,841 20,209 24,251 29,101
Total liabilities 73,664 112,638 156,099 210,378 263,592 320,876 379,227
Share capital 960 1,025 1,027 1,136 1,136 1,136 1,136
Reserves 16,326 23,875 28,483 43,420 51,288 60,182 70,692
Shareholders fund 17,286 24,900 29,510 44,556 52,425 61,318 71,828

NBFCs India
Exhibit 9: Shriram Transport Finance- key ratios

March fiscal year-ends, 2011-16E (%)
2011 2012 2013 2014E 2015E 2016E

Growth in key parameters (%)
Loans under management 23.8 11.2 23.8 19.4 16.7 15.8
Total assets 17.2 13.2 25.3 19.8 17.3 16.1
Borrowings 7.7 16.3 34.1 14.0 20.8 14.2
Net interest income 37.9 14.1 0.7 15.1 20.3 18.9
Operating expenses 65.5 4.4 (13.3) 15.0 32.1 21.1
Key ratios(%)
NII/ AUMs(%) 9.4 9.2 7.9 7.4 7.6 7.8
Operating expenses/total income 27.8 26.4 22.4 22.3 24.6 25.1
Tax rate 33.5 33.1 32.5 32.5 32.5 32.5
Dividend payout ratio 13.9 13.6 13.6 14.0 14.0 14.0
Debt/ equity (X) 4.05 3.86 4.31 4.18 4.29 4.17
Du Pont Analysis
(% of average AUMs)
Net interest income 9.4 9.2 7.9 7.4 7.6 7.8
Loan loss provisions 1.6 2.0 1.9 2.0 1.9 1.9
Net other income 0.7 0.3 0.4 0.4 0.3 0.3
Operating expenses 2.8 2.5 1.8 1.7 2.0 2.0
(1- tax rate) 66.5 66.9 67.5 67.5 67.5 67.5
ROA 3.8 3.3 3.0 2.8 2.8 2.8
Average AUMs/average equity (X) 7.5 7.0 6.8 7.0 7.0 6.9
ROE 28.1 23.1 20.6 19.3 19.4 19.2

India NBFCs
Exhibit 10: Shriram Transport Finance - income statement and balance sheet
March fiscal year-ends, 2011-16E (` mn)
2011 2012 2013 2014E 2015E 2016E

Income statement
Total interest income 51,848 57,923 63,955 75,725 90,154 106,490
Total interest expense 21,164 22,919 28,703 35,164 41,352 48,449
Net interest income 30,684 35,004 35,251 40,562 48,801 58,041
Provisions and write/off 5,235 7,683 8,508 10,637 11,935 14,432
Net interest income (after prov.) 25,449 27,321 26,743 29,925 36,867 43,609
Other income 2,162 1,015 1,680 2,000 2,200 2,420
Operating expenses 9,121 9,524 8,262 9,502 12,555 15,202
Employee expenses 3,582 3,701 3,848 4,595 6,539 7,758
Depreciation 108 135 183 176 149 161
Advt and commission/brokerage 109 241 236 259 285 314
Sourcing and collection commission - 25 30 30 30 30
Other expenses 5,322 5,423 3,965 4,441 5,552 6,939
Pretax income 18,490 18,812 20,161 22,423 26,512 30,826
Tax provisions 6,190 6,234 6,556 7,288 8,616 10,019
Net Profit 12,300 12,578 13,606 15,136 17,895 20,808
% growth 41 2 8 11 18 16
EPS (Rs) 55 56 61 68 80 93
% growth 41 2 8 11 18 16
BPS (Rs) 220 269 322 379 446 524
ABVPS (Rs) 216 264 312 361 421 494
Balance sheet
Total Loans 197,690 220,821 311,227 397,907 486,141 582,891
Investments 80 80 80 80 80 80
Cash & deposits 36,251 53,812 63,193 62,623 63,500 64,529
Loans and advances 1,590 8,753 32,311 35,542 39,097 43,006
Net fixed assets 384 377 600 (85) (108) (233)
Other current assets 42,125 32,247 2,473 2,473 2,473 2,473
Total assets 316,084 357,721 448,332 536,988 629,629 731,193
Total Borrowings 198,817 231,274 310,024 353,439 426,795 487,344
Current liabilities 55,720 51,052 48,405 75,602 72,921 87,434
Provisions 12,503 15,527 17,955 23,342 30,344 39,448
Total liabilities 267,040 297,852 376,384 452,384 530,061 614,225
Share capital 2,231 2,231 2,231 2,231 2,231 2,231
Reserves 46,782 57,659 69,679 82,335 97,300 114,699
Shareholders fund 49,044 59,922 71,947 84,604 99,568 116,968
Truck AUM 360,860 401,280 496,760 592,908 691,799 801,055

Economy.dot
INDIA
Economy
SEPTEMBER 13, 2013
UPDATE
BSE-30: 19,782
India: Lumpy industrial production and sticky inflation. July IIP growth surprised on
the upside with the internals indicating a clear lumpiness in the capital goods data.
August CPI inflation, as expected, continued to be high and sticky and almost
unchanged from July levels. With the RBIs focus firmly on the macroeconomic stability
front, we see little reason for the RBI to focus much on the IIP release. Though the
general perception is that the RBI needs to lower interest rates to support growth, we
maintain that upside risks to inflation, uncertainty arising out of Feds move and
domestic election phase preclude any predetermined bias on lower interest rates.
Capital goods growth spikes sharplydata quality likely to be questioned again

QUICK NUMBERS
IIP grew at 2.6% in July after an upward revised (-) 1.8% in June. Capital goods growth spiked
sharply to 15.6% after three months of contraction. Data quality is likely to be questioned again IIP growth at 2.6%;
with items like cables; insulated, rubber showing a growth rate of 336%. Similar concerns could manufacturing
be raised on electrical machinery and apparatus sub-sector in manufacturing sector, which
growth at 3.0%
increased by 83.6% compared to April-July growth of 30.3%. Manufacturing sector registered a
growth of 3% with positive growth in 50% of the 22 sub-sectors. Rupee depreciation-led Capital goods
implication on the export side is visible for sectors such as wearing apparel (growth of 44%) and growth at 15.6%;
leather products (16.5%), though a sustained improvement would need global growth consumer durables
conditions to improve further.
contract 9.3%
Consumer durables continued with its secular decline, contracting for the eighth consecutive
month, at (-)9.3%. This is a clear indication of contracting discretionary spending as inflation fails CPI inflation at
to come off and interest rates stay sticky, even evident with the auto sales trend of (-)8.3% in July. 9.52%
CPI inflation remains high due to food inflation
CPI inflation at 9.52% remained close to July 2013 levels of 9.64%. As expected, there has not
been any significant abatement in food prices which has led to inflation remaining high and sticky.
Vegetable price inflation was at 26.5% compared to 16.1% in July 2013 and 20.8% in August
2012. We note that inflation in other items such as services sector components has also failed to
soften. Core inflation remained at 8.2%, in line with July levels.
Continue to watch the CAD dynamics
Though markets have been cheering the drop in trade deficit, we will continue to be cautious on
dropping the concerns on CAD. Most of the improvement in the trade deficit has been due to
lower gold imports. We believe that lower gold import has been due to adjustment to higher
imports in April and May and some impact due to the RBIs import restriction. Exports growth has
picked up even as we would wait to see a sustained pick-up in exports volume given (1) global
growth improvement is yet to prove its sustainability and (2) exports likely showing a lagged
impact from the depreciation in Rupee. While the indications are for lower CAD in FY2014, we
expect it to be close to US$75 bn (or CAD/GDP at 4%).
Indranil Pan
RBI does not have room for lower rates indranil.pan@kotak.com
Mumbai: +91-22-6659-6354
For the RBI the key data release today would be the retail inflation as it is expected to continue to
focus on macro and exchange rate stability. Growth is unlikely to attain any priority from the RBI Suvodeep Rakshit
suvodeep.rakshit@kotak.com
soon with the perception that the North Block should undertake proper measures to enhance the Mumbai: +91-22-6634-1409
growth potential of the economy. Keeping in view the risks of (1) Fed tapering, (2) election-related
Madhavi Arora
uncertainty and (3) upside pressures on inflation, the RBI is unlikely to let go of its hawkish stance. madhavi.arora@kotak.com
Mumbai: +91-22-6783-6116
Kotak Economic Research

Mumbai: +91-22-6634-1100
For Private Circulation Only.

India Economy
Exhibit 1: Industrial activity ticks up in July

Trend in growth in IIP and components (%)
Mining (%) Manufacturing (%) Electricity (%) General (%)
2012 2013 2014 2012 2013 2014 2012 2013 2014 2012 2013 2014
Weights (%) 14.2 75.5 10.3 100.0
April 1.6 (2.8) (3.4) 5.7 (1.8) 1.8 6.5 4.6 4.2 5.3 (1.3) 1.5
May 1.8 (0.7) (5.9) 6.3 2.6 (3.6) 10.3 5.9 6.2 6.2 2.5 (2.8)
June (1.4) (1.1) (4.3) 11.2 (3.2) (1.7) 7.9 8.8 - 9.5 (2.0) (1.8)
July 0.6 (3.5) (2.3) 3.1 - 3.0 13.1 2.8 5.2 3.7 (0.1) 2.6
August (5.5) (0.3) 3.9 2.4 9.5 1.9 3.4 2.0
September (7.6) 2.2 3.1 (1.6) 9.0 3.9 2.5 (0.7)
October (5.9) (0.2) (6.0) 9.9 5.6 5.5 (5.0) 8.4
November (3.5) (5.5) 6.6 (0.8) 14.6 2.4 6.0 (1.0)
December (3.3) (3.1) 2.8 (0.8) 9.1 5.2 2.7 (0.6)
January (2.1) (1.8) 1.1 2.7 3.2 6.4 1.0 2.5
February 2.3 (7.7) 4.1 2.1 8.0 (3.2) 4.3 0.6
March (1.1) (2.1) (3.6) 4.3 2.7 3.5 (2.8) 3.5
April-March (FYTD) (2.0) (2.3) 3.0 1.3 8.2 4.0 2.9 1.1
Source: CEIC, Kotak Economic Research
Exhibit 2: CPI trajectory depicts sticky months ahead

Trends growth in headline CPI (% yoy) and CPI ex food and energy (% yoy)
11 Headline CPI CPI Ex Food and Energy
10
6
Jan-12
Feb-12
Mar-12
Apr-12
May-12
Jun-12
Jul-12
Sep-12
Nov-12
Dec-12
Nov-13
Dec-13
Aug-12
Oct-12
Jan-13
Feb-13
Mar-13
Apr-13
May-13
Jun-13
Jul-13
Aug-13
Sep-13
Oct-13
Jan-14
Feb-14
Mar-14
Source: CEIC, Kotak Economic Research estimates
46 KOTAK ECONOMIC RESEARCH

Economy
Exhibit 3: Export growth buoyancy needs to be watched

Trend growth in India exports (%yoy, 3mma, 3m lag, LHS) and US ISM export orders (%yoy, 3mma, RHS)
80 India Exports (LHS) ISM export orders (RHS) 75
60
65
40
55
20
45
0
35
(20)
(40) 25
Aug-00
Aug-01
Aug-02
Aug-03
Aug-04
Aug-05
Aug-06
Aug-07
Aug-08
Aug-09
Aug-10
Aug-11
Aug-12
Aug-13
Exhibit 4: Exports appear to be a good leading indicator of the IIP

Trend growth in Indias IIP (%, 3MMA, LHS) and exports (%, 3MMA, RHS)
IIP (3MMA, LHS) Exports (3MMA, RHS)

21 60
18
15 40
12
9 20
6
3 0
0
(3) (20)
(6)
(9) (40)
Aug-07
Feb-08
Aug-08
Feb-09
Aug-09
Feb-10
Aug-10
Feb-11
Aug-11
Feb-12
Aug-12
Feb-13
Aug-13
KOTAK ECONOMIC RESEARCH 47

Kotak Institutional Equities: Valuation summary of KIE Universe stocks
India Daily Summary - September 13, 2013

O/S Target ADVT-
12-Sep-13 Mkt cap. shares EPS (Rs) EPS growth (%) PER (X) EV/EBITDA (X) Price/BV (X) Dividend yield (%) RoE (%) price Upside 3mo
Company Price (Rs) Rating (Rs mn) (US$ mn) (mn) 2013 2014E 2015E 2013 2014E 2015E 2013 2014E 2015E 2013 2014E 2015E 2013 2014E 2015E 2013 2014E 2015E 2013 2014E 2015E (Rs) (%) (US$ mn)
KOTAK INSTITUTIONAL EQUITIES RESEARCH
Automobiles
Amara Raja Batteries 302 ADD 51,500 809 171 16.8 19.5 21.4 33.3 16.4 9.3 18.0 15.4 14.1 10.7 9.3 8.0 4.9 3.9 3.2 0.8 1.3 1.4 30.4 28.1 25.1 310 2.8 1.2
Apollo Tyres 64 REDUCE 32,287 507 504 12.2 16.6 16.0 49.5 36.5 (3.5) 5.3 3.9 4.0 3.8 2.9 2.4 0.8 0.7 0.6 0.8 1.1 1.0 19.7 22.0 17.6 64 (0.1) 8.9
Ashok Leyland 14 ADD 36,185 568 2,661 0.5 (0.9) 1.1 (74.5) (265.0) 224.5 25.1 (15.2) 12.2 9.0 14.7 6.9 0.7 0.7 0.7 4.4 (3.3) 3.7 12.6 (6.7) 8.2 18 32.4 1.8
Bajaj Auto 1,979 BUY 572,636 8,994 289 105.2 117.9 137.8 1.3 12.1 16.9 18.8 16.8 14.4 13.9 12.9 11.2 7.1 5.8 4.8 2.3 2.4 2.8 43.2 38.2 36.6 2,100 6.1 13.3
Bharat Forge 258 SELL 61,235 962 237 11.3 14.1 16.6 (35.2) 25.1 17.8 22.9 18.3 15.6 10.3 9.0 7.9 2.4 2.2 2.0 1.3 1.1 1.3 13.5 11.3 12.5 220 (14.7) 1.9
Exide Industries 128 ADD 108,375 1,702 850 6.2 7.6 8.6 13.4 23.0 14.1 20.7 16.9 14.8 13.7 11.5 10.3 3.2 2.8 2.5 1.3 1.5 1.7 16.1 17.6 17.8 135 5.9 2.2
Hero Motocorp 2,010 ADD 401,417 6,305 200 106.1 115.8 145.6 (10.9) 9.2 25.7 19.0 17.4 13.8 15.1 12.2 9.3 7.4 5.8 4.6 3.0 1.7 2.5 44.0 39.3 38.8 2,000 (0.5) 13.4
Mahindra & Mahindra 813 BUY 456,903 7,176 562 58.0 56.8 65.1 17.7 (2.1) 14.5 14.0 14.3 12.5 10.2 10.2 8.8 3.0 2.6 2.3 1.7 2.1 2.4 24.4 20.3 20.4 1,000 23.0 22.2
Maruti Suzuki 1,321 SELL 399,018 6,267 302 79.2 91.7 102.8 39.9 15.8 12.2 16.7 14.4 12.8 9.7 8.0 6.4 2.1 1.9 1.7 0.6 0.8 0.9 13.9 13.7 13.7 1,360 3.0 15.6
Motherson Sumi Systems 216 BUY 126,920 1,993 588 7.6 12.7 17.6 71.2 67.9 38.5 28.6 17.0 12.3 9.5 7.1 5.2 5.5 4.2 3.1 0.9 1.8 2.4 26.8 33.5 29.4 250 15.8 1.4
Tata Motors 333 ADD 1,072,991 16,852 3,218 30.7 43.5 49.7 (31.1) 41.4 14.4 10.8 7.7 6.7 5.7 4.3 3.8 2.7 2.0 1.5 0.6 27.5 30.1 25.7 375 12.5 44.6
Automobiles Neutral 3,319,467 52,135 (11.0) 26.0 12.1 14.1 11.2 10.0 8.1 6.6 5.6 3.2 2.5 2.1 1.4 1.1 1.5 22.4 22.7 21.0
Banks/Financial Institutions
Andhra Bank 53 ADD 29,854 469 560 23.0 16.9 20.9 (4.1) (26.7) 24.1 2.3 3.2 2.5 0.4 0.5 0.4 9.4 6.9 8.5 16.2 10.7 12.2 60 12.5 1.9
Axis Bank 1,020 ADD 477,290 7,496 468 110.7 113.0 130.2 7.8 2.1 15.2 9.2 9.0 7.8 1.5 1.3 1.2 1.8 1.8 2.1 18.5 15.0 15.3 1,200 17.7 63.2
Bajaj Finserv 574 BUY 91,351 1,435 159 103.4 76.4 90.6 9.1 (26.1) 18.5 5.6 7.5 6.3 1.2 1.0 0.9 2.4 2.4 2.4 25.7 14.6 15.2 825 43.7 0.7
Bank of Baroda 521 REDUCE 219,941 3,454 423 106.0 84.8 104.9 (12.7) (20.0) 23.7 4.9 6.1 5.0 0.8 0.8 0.7 4.1 3.3 4.1 15.6 11.1 12.5 600 15.3 15.3
Bank of India 166 ADD 98,893 1,553 597 46.1 47.1 57.0 (1.1) 2.2 21.1 3.6 3.5 2.9 0.5 0.5 0.5 6.0 6.2 7.5 12.9 11.8 13.0 180 8.6 5.7
Canara Bank 225 REDUCE 99,520 1,563 443 64.8 38.5 68.9 (12.5) (40.6) 78.9 3.5 5.8 3.3 0.5 0.5 0.4 5.8 5.3 5.3 12.1 6.7 11.3 250 11.3 7.4
City Union Bank 42 BUY 22,878 359 539 6.0 6.4 7.1 (13.0) 7.4 10.7 7.1 6.6 6.0 1.4 1.1 1.0 2.1 2.2 2.5 22.3 18.7 17.3 60 41.3 0.2
Corporation Bank 270 BUY 41,309 649 153 93.8 81.4 104.7 (7.7) (13.2) 28.5 2.9 3.3 2.6 0.5 0.5 0.4 7.4 6.4 8.3 16.1 12.4 14.4 300 11.0 0.3
Development Credit Bank 45 BUY 11,218 176 250 4.1 5.5 6.2 78.3 33.7 13.6 11.0 8.2 7.2 1.2 1.1 0.9 11.6 13.4 13.3 55 22.6 1.1
Federal Bank 297 BUY 50,736 797 171 49.0 37.7 54.9 7.9 (23.0) 45.6 6.1 7.9 5.4 0.8 0.8 0.7 3.0 2.3 3.4 13.9 9.7 13.0 400 34.9 3.2
HDFC 814 ADD 1,259,425 19,781 1,546 31.4 36.4 41.4 12.3 16.1 13.8 26.0 22.4 19.7 5.0 4.5 4.0 1.5 1.8 2.0 22.0 21.2 21.5 800 (1.8) 55.5
HDFC Bank 634 REDUCE 1,508,433 23,691 2,379 28.3 35.4 44.7 28.4 25.4 26.2 22.4 17.9 14.2 4.2 3.6 3.0 0.9 1.1 1.4 20.3 21.4 22.7 625 (1.4) 45.5
ICICI Bank 951 BUY 1,097,339 17,235 1,154 72.2 74.3 79.4 28.7 3.0 6.9 13.2 12.8 12.0 1.7 1.6 1.5 2.1 2.3 2.5 13.1 12.3 12.2 1,110 16.7 79.5
IDFC 95 BUY 143,447 2,253 1,512 12.1 13.5 15.0 18.1 10.9 11.6 7.8 7.0 6.3 1.0 0.9 0.8 2.7 2.8 3.1 14.2 14.1 14.1 150 58.1 22.4
India Infoline 49 ADD 14,951 235 304 9.2 9.8 11.2 102.9 5.7 14.9 5.3 5.0 4.4 0.8 0.7 0.6 6.2 3.4 3.9 15.1 14.8 14.8 60 22.1 0.2
IndusInd Bank 397 BUY 207,632 3,261 523 20.3 23.0 28.4 18.3 13.3 23.4 19.6 17.3 14.0 2.8 2.5 2.2 0.8 0.9 1.1 18.3 15.4 16.4 430 8.3 19.3
ING Vysya Bank 494 ADD 91,345 1,435 185 39.6 33.6 44.0 30.2 (15.0) 30.9 12.5 14.7 11.2 2.0 1.3 1.2 0.9 0.9 1.2 14.6 10.9 11.3 600 21.4 0.8
J&K Bank 1,176 REDUCE 57,019 896 48 217.6 216.9 194.7 31.4 (0.3) (10.2) 5.4 5.4 6.0 1.2 1.0 0.9 4.3 4.2 3.8 23.6 20.0 15.8 1,180 0.4 1.4
Karur Vysya Bank 325 ADD 34,839 547 107 51.3 48.1 62.6 9.7 (6.4) 30.2 6.3 6.8 5.2 1.2 1.1 1.0 4.3 3.7 4.8 19.0 15.8 18.2 380 16.9 0.6
LIC Housing Finance 181 BUY 91,396 1,435 505 20.3 23.9 28.3 11.9 17.9 18.5 8.9 7.6 6.4 1.5 1.3 1.1 2.2 2.6 3.1 16.8 17.4 18.0 240 32.6 14.1
L&T Finance Holdings 67 SELL 115,661 1,817 1,715 4.3 4.5 5.1 60.3 5.3 14.9 15.9 15.1 13.1 2.1 1.8 1.6 14.1 12.8 13.0 60 (11.0) 2.2
Magma Fincorp 72 BUY 13,737 216 190 6.5 10.2 12.3 100.6 55.6 21.0 11.1 7.1 5.9 1.0 0.9 0.8 1.5 2.2 2.7 10.1 12.7 14.0 125 72.9 0.1
Mahindra & Mahindra Financial 268 REDUCE 152,145 2,390 568 15.5 19.1 21.6 28.6 22.9 13.0 17.2 14.0 12.4 3.5 3.0 2.6 1.4 1.7 1.9 23.8 22.4 21.6 230 (14.1) 9.3
Muthoot Finance 117 NR 46,456 730 397 28.2 29.9 34.9 17.3 6.1 16.7 4.2 3.9 3.4 1.2 0.9 0.7 3.4 3.8 4.5 31.2 26.2 23.7
Oriental Bank of Commerce 163 ADD 57,016 895 350 45.5 26.7 43.2 16.3 (41.3) 61.8 3.6 6.1 3.8 0.6 0.5 0.5 4.7 3.3 5.4 10.7 6.9 10.2 170 4.4 3.9
PFC 125 BUY 164,323 2,581 1,319 33.5 33.6 38.2 45.6 0.3 13.7 3.7 3.7 3.3 0.7 0.7 0.6 5.6 5.6 6.4 19.8 17.2 17.2 185 48.5 9.4
Punjab National Bank 494 REDUCE 174,687 2,744 353 134.3 114.1 140.0 (6.7) (15.0) 22.6 3.7 4.3 3.5 0.7 0.6 0.5 5.5 4.6 5.7 16.5 12.3 13.7 600 21.4 12.4
Reliance Capital 338 ADD 83,288 1,308 246 26.9 23.4 28.5 27.5 (13.0) 21.7 12.6 14.5 11.9 0.7 0.7 0.7 2.4 2.1 2.5 5.9 4.9 5.8 505 49.3 29.9
Rural Electrification Corp. 191 ADD 188,740 2,964 987 38.7 44.3 47.6 35.3 14.6 7.5 4.9 4.3 4.0 1.1 1.0 0.9 4.3 4.2 4.9 23.7 22.8 20.7 270 41.3 6.0
Shriram City Union Finance 920 NR 53,611 842 58 80.2 98.3 118.7 22.6 22.6 20.7 11.5 9.4 7.8 2.4 1.9 1.6 1.1 1.4 1.7 22.3 22.5 22.0 0.5
Shriram Transport 551 ADD 122,861 1,930 223 61.0 67.8 80.2 8.2 11.2 18.2 9.0 8.1 6.9 1.8 1.5 1.3 1.3 1.7 2.0 20.6 19.3 19.4 760 38.0 5.1
State Bank of India 1,658 ADD 1,134,395 17,817 684 206.2 173.0 206.4 18.2 (16.1) 19.3 8.0 9.6 8.0 1.5 1.4 1.2 2.8 2.6 2.7 15.4 11.5 12.5 1,975 19.1 78.2
Union Bank 119 ADD 71,078 1,116 597 36.0 29.6 36.4 11.5 (17.6) 22.9 3.3 4.0 3.3 0.5 0.5 0.5 6.7 5.5 6.8 15.0 10.8 12.2 150 25.9 6.9
India Daily Summary - September 1
Yes Bank 281 REDUCE 100,845 1,584 359 36.3 31.3 38.8 31.0 (13.7) 23.9 7.8 9.0 7.2 1.7 1.5 1.3 2.1 1.8 2.3 24.8 18.5 19.1 300 6.7 54.1
Banks/Financial Institutions Cautious 8,127,658 127,653 17.3 (3.0) 19.2 9.6 9.9 8.3 1.6 1.5 1.3 2.3 2.3 2.6 16.7 14.9 15.9
Cement
ACC 1,027 REDUCE 193,019 3,032 188 73.7 55.4 63.4 29.1 (24.9) 14.5 13.9 18.6 16.2 8.4 10.0 7.9 2.4 2.3 2.1 3.4 2.3 2.3 19.5 13.5 14.2 1,140 11.0 6.6
Ambuja Cements 181 SELL 275,322 4,324 1,522 10.3 8.0 10.0 32.8 (22.4) 24.8 17.5 22.5 18.1 9.8 13.0 11.0 2.9 2.8 2.7 1.5 1.5 2.4 17.8 12.8 15.0 155 (14.3) 9.5
Grasim Industries 2,505 ADD 229,895 3,611 92 272.4 280.3 314.3 (5.6) 2.9 12.2 9.2 8.9 8.0 7.1 5.3 4.5 1.2 1.1 0.9 0.9 1.4 1.4 13.6 12.4 12.5 3,000 19.8 3.2
India Cements 49 ADD 15,021 236 307 6.8 5.3 8.4 (24.4) (21.4) 58.5 7.2 9.2 5.8 4.1 4.2 3.2 0.3 0.3 0.3 4.4 5.4 5.5 5.2 4.0 6.0 70 43.1 1.1
Shree Cement 3,887 SELL 135,423 2,127 35 307.0 311.6 324.1 92.3 1.5 4.0 12.7 12.5 12.0 8.3 7.2 7.0 3.6 2.9 2.4 0.5 0.5 0.5 33.3 25.8 22.0 3,950 1.6 1.1
UltraTech Cement 1,759 REDUCE 482,241 7,574 274 101.3 88.6 111.0 13.4 (12.5) 25.3 17.4 19.9 15.8 10.7 10.6 8.5 2.8 2.5 2.1 0.6 0.6 0.6 18.9 14.9 16.2 1,650 (6.2) 6.6
Cement Cautious 1,330,920 20,903 16.2 (10.5) 17.8 14.0 15.6 13.3 8.5 8.2 6.9 2.1 1.9 1.7 1.3 1.2 1.4 15.3 12.4 13.0

48
O/S Target ADVT-
49
Consumer products
Asian Paints 439 SELL 420,609 6,606 959 11.6 12.1 14.0 12.7 4.1 16.1 37.8 36.3 31.2 23.9 21.3 18.4 11.9 10.1 8.6 1.0 1.2 1.4 36.3 31.5 31.4 380 (13.3) 8.5
Bajaj Corp. 263 BUY 38,734 608 148 11.3 13.7 16.3 39.4 20.4 19.1 23.1 19.2 16.1 21.5 17.1 13.7 8.0 7.1 6.3 2.5 3.1 3.8 26.4 32.7 34.9 320 21.9 0.6
Colgate-Palmolive (India) 1,219 SELL 165,762 2,603 136 36.5 39.4 45.7 11.3 7.9 16.0 33.4 30.9 26.7 24.6 22.2 19.0 35.5 28.4 25.9 2.3 2.5 2.9 107.4 97.8 97.9 1,275 4.6 2.6
Dabur India 170 ADD 295,857 4,647 1,743 4.4 5.4 6.4 19.0 21.8 18.4 38.5 31.6 26.7 30.3 24.7 20.8 13.9 11.2 9.0 0.9 1.2 1.4 40.0 39.2 37.4 180 6.0 5.0
GlaxoSmithkline Consumer 4,762 SELL 200,289 3,146 42 103.8 122.7 145.3 20.7 18.1 18.4 45.9 38.8 32.8 39.9 34.7 29.2 14.7 12.5 10.8 0.9 1.2 1.5 34.9 34.9 35.4 3,900 (18.1) 2.0
Godrej Consumer Products 848 REDUCE 288,676 4,534 340 20.3 23.6 29.5 20.4 16.2 25.1 41.9 36.0 28.8 31.5 25.7 20.1 8.2 6.9 5.8 0.6 0.7 0.8 22.6 22.3 23.7 760 (10.4) 4.5
Hindustan Unilever 626 SELL 1,354,374 21,272 2,163 15.4 15.9 17.4 28.1 3.3 9.6 40.7 39.4 35.9 33.4 30.1 25.8 54.8 40.4 32.9 3.0 1.7 1.9 103.1 110.4 95.7 530 (15.4) 36.6
ITC 337 ADD 2,679,146 42,079 7,962 9.3 10.9 12.9 19.0 16.9 18.0 36.1 30.8 26.1 25.6 21.5 18.2 11.4 10.2 9.1 1.5 1.9 2.3 36.1 36.7 38.5 375 11.4 45.9
Jubilant Foodworks 1,067 SELL 70,693 1,110 66 19.9 24.1 33.0 21.7 21.1 36.8 53.5 44.2 32.3 29.1 22.7 16.8 16.4 12.6 9.7 925 (13.3) 5.7
Jyothy Laboratories 144 ADD 23,841 374 166 1.2 5.0 8.3 (55.9) 307.9 67.5 117.8 28.9 17.2 23.2 14.5 11.2 3.7 3.4 3.0 1.7 0.9 1.6 200 39.3 0.5
Marico 214 REDUCE 138,186 2,170 645 5.6 7.4 8.6 8.0 31.1 16.2 38.1 29.1 25.0 23.6 19.5 16.4 6.9 5.8 4.9 0.2 0.7 1.0 18.3 20.3 20.2 215 0.3 1.3
Nestle India 4,986 SELL 480,774 7,551 96 110.8 124.1 145.6 11.1 12.0 17.3 45.0 40.2 34.2 26.6 22.4 19.4 24.5 19.2 15.4 1.0 1.2 1.4 71.6 60.2 54.9 4,200 (15.8) 1.8
Speciality Restaurants 124 BUY 5,807 91 47 5.0 5.5 6.8 1.8 10.2 24.3 24.8 22.5 18.1 15.5 14.0 10.9 2.0 1.9 1.7 11.6 8.5 9.7 160 29.3 0.0
Tata Global Beverages 151 ADD 93,224 1,464 618 6.3 7.6 8.6 14.8 20.1 13.4 23.8 19.8 17.5 14.0 11.5 10.0 1.6 1.5 1.5 1.4 1.8 2.2 8.4 9.5 10.2 165 9.5 6.2
Titan Industries 232 REDUCE 205,522 3,228 888 8.2 9.0 10.2 20.9 10.1 13.5 28.3 25.7 22.7 19.2 17.9 14.7 10.4 8.2 6.7 0.9 1.1 1.3 42.3 35.7 32.5 250 8.0 16.5
United Breweries 815 SELL 215,451 3,384 264 6.5 9.3 14.0 36.2 42.3 51.1 124.8 87.7 58.0 47.5 34.2 25.7 15.1 13.4 11.3 0.2 0.2 0.3 12.0 15.7 20.5 700 (14.1) 6.3
United Spirits 2,562 BUY 372,344 5,848 145 9.4 53.3 75.5 (30.8) 465.3 41.7 271.7 48.1 33.9 32.1 24.8 19.2 6.1 4.2 3.8 0.3 0.2 0.3 8.3 10.4 11.8 2,800 9.3 55.0
Consumer products Cautious 7,049,288 110,716 17.2 20.9 18.4 41.2 34.1 28.8 27.5 23.3 19.5 12.2 10.2 9.0 1.5 1.5 1.8 29.5 30.0 31.1
Constructions
NCC 19 ADD 4,991 78 257 2.4 2.2 2.4 74.2 (11.0) 12.2 8.0 8.9 8.0 5.6 6.3 6.0 0.2 0.2 0.2 3.1 5.1 5.1 2.6 2.2 2.5 45 131.4 0.5
Sadbhav Engineering 57 BUY 9,712 153 171 4.9 5.4 9.2 (47.3) 9.4 71.0 11.5 10.6 6.2 10.4 5.5 4.1 1.1 0.8 0.7 0.9 1.1 1.1 8.6 7.9 12.0 160 182.4 0.4
Construction Cautious 23,176 364 (62.7) 74.1 93.0 21.5 12.4 6.4 6.2 5.6 5.0 0.4 0.4 0.3 1.0 1.7 2.1 1.8 2.9 5.3
Energy
Aban Offshore 228 RS 9,942 156 44 38.6 81.1 97.4 (43.5) 110.2 20.0 5.9 2.8 2.3 7.4 6.8 6.0 0.3 0.4 0.3 1.6 2.2 2.2 6.4 15.1 14.8 0.9
Bharat Petroleum 304 BUY 219,672 3,450 723 36.6 32.1 35.6 99.2 (12.2) 10.8 8.3 9.5 8.5 6.3 6.4 6.1 1.2 1.1 1.0 3.6 3.2 3.5 14.5 11.6 11.8 440 44.8 7.6
Cairn india 319 ADD 609,940 9,580 1,910 63.1 61.9 60.1 51.7 (1.9) (2.9) 5.1 5.2 5.3 4.1 3.8 3.7 1.3 1.1 0.9 3.6 3.8 3.8 24.8 22.4 18.6 370 15.9 11.0
Castrol India 319 SELL 157,666 2,476 495 9.0 9.8 10.3 (4.4) 7.9 5.8 35.2 32.7 30.9 24.4 22.2 20.7 27.0 25.7 41.4 2.2 2.5 2.7 79.0 80.6 102.8 230 (27.9) 0.6
GAIL (India) 309 ADD 392,087 6,158 1,268 35.5 30.0 31.9 16.5 (15.6) 6.4 8.7 10.3 9.7 5.9 6.5 5.9 1.5 1.3 1.2 3.1 2.9 3.2 17.2 12.9 12.4 380 22.9 6.4
GSPL 50 ADD 28,135 442 563 9.6 9.5 8.1 2.6 (0.8) (14.9) 5.2 5.3 6.2 3.4 3.3 3.4 0.8 0.7 0.7 2.0 2.0 3.2 17.6 14.9 11.2 75 50.0 0.4
Hindustan Petroleum 183 ADD 62,124 976 339 24.8 12.2 21.6 (7.6) (50.8) 77.4 7.4 15.0 8.5 8.0 10.0 7.7 0.4 0.4 0.3 4.6 2.1 3.8 4.7 2.2 3.9 240 31.0 4.0
Indian Oil Corporation 229 ADD 554,908 8,715 2,428 16.8 12.8 27.8 (48.8) (23.8) 116.7 13.6 17.8 8.2 10.0 9.1 5.4 0.9 0.9 0.8 2.7 3.3 6.5 6.2 4.4 9.5 250 9.4 2.0
Oil India 448 BUY 269,371 4,231 601 59.7 53.9 63.1 4.1 (9.6) 17.0 7.5 8.3 7.1 3.0 3.0 2.4 1.3 1.2 1.1 6.7 6.1 7.1 15.9 13.5 14.7 650 45.1 3.7

Oil & Natural Gas Corporation 279 BUY 2,386,562 37,483 8,556 29.9 29.5 37.4 (8.9) (1.3) 26.8 9.3 9.5 7.5 3.8 3.4 2.6 1.3 1.2 1.0 3.4 3.4 4.3 13.5 12.2 14.0 380 36.2 22.3
Petronet LNG 119 BUY 89,138 1,400 750 15.3 12.1 13.6 8.7 (21.0) 12.0 7.8 9.8 8.8 5.7 6.9 5.4 1.8 1.6 1.3 2.1 2.1 2.5 25.6 16.6 15.8 170 43.0 1.9
Reliance Industries 875 BUY 2,570,174 40,367 2,936 65.0 70.8 77.9 6.2 8.9 9.9 13.5 12.4 11.2 8.8 8.4 7.0 1.3 1.2 1.1 1.0 1.0 1.1 11.3 11.3 11.3 980 11.9 55.5
Energy Attractive 7,349,718 115,435 0.6 (1.7) 18.3 9.6 9.8 8.3 6.0 5.7 4.5 1.3 1.1 1.0 2.6 2.6 3.3 13.1 11.7 12.6
Industrials
ABB 549 SELL 116,391 1,828 212 6.7 14.1 19.6 (23.6) 111.6 39.3 82.6 39.0 28.0 48.5 22.8 17.0 4.5 4.1 3.7 0.6 0.6 0.6 5.5 11.0 13.9 400 (27.2) 0.7
Bharat Electronics 1,181 REDUCE 94,500 1,484 80 113.6 103.6 114.6 6.8 (8.8) 10.6 10.4 11.4 10.3 7.7 6.5 6.0 1.4 1.3 1.2 2.5 2.5 2.5 14.5 12.0 12.2 1,200 1.6 0.4
Bharat Heavy Electricals 135 SELL 330,181 5,186 2,448 27.1 15.0 11.7 (6.0) (44.6) (22.0) 5.0 9.0 11.5 3.0 5.9 7.3 1.1 1.0 0.9 4.3 2.4 1.9 23.7 11.5 8.3 100 (25.9) 16.5
Crompton Greaves 88 ADD 56,580 889 642 1.3 5.6 8.0 (77.2) 328.1 42.2 67.5 15.8 11.1 16.5 8.1 6.6 1.6 1.5 1.3 1.4 1.4 1.6 2.3 9.7 12.6 105 19.0 4.0
Cummins India 402 REDUCE 111,504 1,751 277 28.3 22.3 24.9 28.3 (21.2) 11.8 14.2 18.0 16.1 13.8 16.1 14.0 4.7 4.2 3.8 3.2 2.5 2.7 34.5 23.5 23.1 400 (0.6) 2.2
Kalpataru Power Transmission 63 BUY 9,622 151 153 8.8 13.2 15.6 (34.1) 51.1 17.9 7.2 4.7 4.0 5.5 4.7 4.4 0.5 0.4 0.4 2.4 2.4 2.4 6.4 8.8 9.5 120 91.4 0.1
KEC International 26 BUY 6,723 106 257 2.5 6.0 9.2 (63.1) 136.3 54.2 10.3 4.4 2.8 5.7 4.5 3.6 0.6 0.5 0.4 1.9 3.4 5.3 5.5 12.1 16.6 70 167.7 0.1
Larsen & Toubro 815 ADD 752,280 11,815 923 52.4 46.4 56.3 4.4 (11.4) 21.3 15.6 17.6 14.5 13.6 13.9 12.7 2.2 2.0 1.8 1.5 1.4 1.5 15.2 11.9 12.9 910 11.7 41.3
Siemens 471 REDUCE 165,898 2,606 352 4.9 17.6 22.3 (64.4) 260.6 27.0 96.6 26.8 21.1 30.7 12.1 9.8 4.3 4.0 3.6 0.5 1.1 1.2 4.4 15.4 18.0 400 (15.1) 2.8
Thermax 576 REDUCE 68,660 1,078 119 25.5 29.4 33.6 (22.5) 15.1 14.4 22.6 19.6 17.2 15.1 12.8 10.9 3.7 3.3 2.9 1.2 1.5 1.7 17.4 17.7 18.0 540 (6.3) 0.8
Voltas 72 BUY 23,827 374 331 5.9 6.2 8.1 (39.7) 5.7 30.1 12.2 11.6 8.9 7.9 6.4 4.4 1.5 1.3 1.2 2.6 2.6 3.4 12.5 12.1 14.4 100 38.8 1.6
Industrials Cautious 1,736,166 27,268 (6.6) (18.8) 7.9 12.2 15.0 13.9 9.9 11.2 10.7 1.9 1.7 1.6 2.1 1.7 1.7 15.7 11.6 11.4


O/S Target ADVT-
Infrastructure
Adani Port and SEZ 129 BUY 260,554 4,092 2,017 8.0 9.7 12.7 47.3 20.9 30.1 16.1 13.3 10.2 15.8 9.8 7.7 4.0 3.0 2.4 0.9 1.3 1.6 28.2 25.7 26.0 180 39.4 4.1
Container Corporation 688 ADD 134,166 2,107 195 72.3 52.9 60.0 7.1 (26.9) 13.4 9.5 13.0 11.5 10.0 9.1 7.6 2.1 1.9 1.7 1.7 1.8 2.0 15.8 15.5 15.7 780 13.4 0.7
GMR Infrastructure 18 RS 69,479 1,091 3,892 (1.8) (0.6) (0.7) (56.2) 67.2 (19.6) (10.1) (30.7) (25.7) 17.6 9.2 6.0 0.8 0.8 0.8 (9.3) (3.2) (3.9) 2.3
Gujarat Pipavav Port 45 BUY 21,634 340 483 1.5 3.0 3.1 29.7 96.3 2.6 29.3 14.9 14.5 12.3 10.5 9.2 1.8 1.6 1.4 7.6 13.5 11.0 60 34.1 0.2
IRB Infrastructure 74 BUY 24,562 386 332 16.7 16.7 16.4 11.1 (0.4) (1.8) 4.4 4.4 4.5 5.9 6.4 6.1 0.7 0.6 0.5 5.4 5.4 5.4 17.4 14.2 11.9 140 89.4 4.2
Infrastructure Cautious 510,394 8,016 19.5 38.4 19.6 20.4 14.7 12.3 13.4 8.9 6.8 1.9 1.7 1.5 1.2 1.4 1.6 9.5 11.5 12.4
Media
DB Corp 251 BUY 46,072 724 183 11.9 14.8 17.7 7.9 24.6 19.3 21.1 16.9 14.2 11.9 9.6 8.0 4.5 4.0 3.6 2.2 2.8 3.6 22.3 24.9 26.6 300 19.4 0.4
DishTV 45 ADD 48,181 757 1,064 (1.4) (0.2) 0.9 (33.9) 82.1 457.2 (33.4) (186.0) 52.1 10.0 9.0 7.4 (29.8) (25.7) (31) 1.1 113.0 14.8 (54) 65 43.5 4.1
Eros International 137 ADD 12,596 198 92 16.7 20.4 23.8 1.5 22.0 16.5 8.2 6.7 5.8 5.7 4.7 4.0 1.3 1.1 0.9 16.7 17.2 16.7 150 9.2 0.5
Jagran Prakashan 83 BUY 26,265 413 316 4.5 5.9 7.7 (20.2) 31.0 30.8 18.4 14.1 10.8 9.4 7.7 6.2 3.2 3.0 2.8 4.2 4.8 5.4 18.0 21.9 26.7 130 56.5 0.2
Sun TV Network 390 REDUCE 153,711 2,414 394 18.0 21.0 24.6 2.3 16.9 17.1 21.7 18.5 15.8 13.5 11.4 9.7 5.3 4.8 4.5 2.6 3.1 4.1 26.5 28.1 30.2 440 12.8 7.0
Zee Entertainment Enterprises 224 REDUCE 212,753 3,341 950 7.6 8.9 10.7 25.6 17.3 21.0 29.6 25.2 20.8 20.6 16.8 13.7 4.3 4.0 3.9 0.8 1.0 1.1 15.3 16.8 19.2 230 2.7 10.0
Media Neutral 528,828 8,306 6.5 26.5 25.1 25.9 20.4 16.3 13.0 10.8 8.9 4.2 3.8 3.5 1.6 2.0 2.7 16.1 18.7 21.7
Metals & Mining
Coal India 285 BUY 1,799,848 28,268 6,316 27.5 28.6 32.0 18.1 4.3 11.6 10.4 9.9 8.9 6.0 4.9 3.9 3.5 3.1 2.7 4.9 5.1 5.7 37.2 33.2 32.3 370 29.8 12.1
Hindalco Industries 111 REDUCE 212,959 3,345 1,915 15.8 12.0 14.0 (10.9) (24.0) 16.6 7.0 9.3 7.9 8.8 8.5 6.9 0.6 0.6 0.5 1.3 1.3 1.3 9.0 6.3 7.0 105 (5.6) 14.7
Hindustan Zinc 130 ADD 549,250 8,627 4,225 16.4 15.5 16.6 24.2 (5.0) 6.5 7.9 8.4 7.8 5.2 4.4 3.5 1.7 1.5 1.3 2.4 2.4 2.4 23.5 18.9 17.5 160 23.1 2.3
Jindal Steel and Power 239 ADD 223,090 3,504 935 31.1 26.7 28.1 (26.6) (14.1) 5.2 7.7 8.9 8.5 7.0 8.3 6.7 1.0 0.9 0.9 0.8 0.8 0.8 14.9 11.2 10.7 275 15.2 16.1
JSW Steel 624 SELL 150,820 2,369 242 32.9 74.3 76.6 (46.2) 126.1 3.0 19.0 8.4 8.1 5.7 5.6 5.2 0.7 0.7 0.6 1.5 1.5 1.5 4.2 8.3 8.1 550 (11.9) 12.9
National Aluminium Co. 33 REDUCE 84,533 1,328 2,577 2.3 2.1 3.0 (31.2) (9.9) 43.2 14.3 15.8 11.1 4.0 5.3 4.6 0.7 0.7 0.7 3.8 3.8 3.8 5.0 4.4 6.2 31 (5.5) 0.2
NMDC 124 BUY 490,235 7,700 3,965 16.0 14.7 15.5 (13.3) (8.1) 5.2 7.7 8.4 8.0 3.8 4.2 3.8 1.8 1.6 1.5 5.7 5.7 5.7 24.4 20.2 19.4 150 21.3 5.7
Sesa Goa 183 ADD 159,437 2,504 869 26.2 25.8 22.4 (15.4) (1.8) (13.2) 7.0 7.1 8.2 43.9 36.4 40.5 0.9 0.8 0.7 0.1 0.1 0.1 3.3 (0.7) (0.8) 165 (10.1) 14.7
Tata Steel 303 ADD 294,094 4,619 971 3.4 23.1 27.7 (86.9) 574.5 20.2 88.5 13.1 10.9 7.2 6.2 6.4 0.9 0.8 0.8 2.6 2.6 2.6 0.9 6.4 7.4 290 (4.2) 32.1
Metals & Mining Neutral 3,964,266 62,263 (3.1) 2.3 9.0 9.6 9.4 8.6 6.5 6.1 5.4 1.6 1.4 1.3 3.7 3.8 4.1 16.3 15.3 15.1
Pharmaceutical
Apollo Hospitals 868 SELL 120,799 1,897 139 21.4 27.6 33.4 35.7 28.7 21.2 40.5 31.5 26.0 20.8 16.9 13.8 4.4 4.0 3.6 0.6 0.8 1.0 11.3 13.3 14.6 850 (2.1) 3.7
Biocon 339 ADD 66,891 1,051 198 15.5 19.6 24.2 (9.2) 26.5 23.1 21.8 17.2 14.0 12.0 9.5 8.2 2.5 2.3 2.1 2.2 2.2 2.2 20.5 13.9 15.6 335 (1.0) 3.2
Cipla 438 ADD 351,800 5,525 803 17.8 18.4 21.9 27.1 3.4 19.3 24.6 23.8 20.0 16.4 15.3 12.2 3.9 3.4 2.9 0.5 0.5 0.5 15.6 15.5 15.7 450 2.7 9.6
Cadila Healthcare 663 ADD 135,678 2,131 205 32.0 34.1 45.7 0.4 6.5 34.0 20.7 19.4 14.5 16.8 14.9 11.3 4.5 3.8 3.2 1.1 1.2 1.6 23.3 21.2 24.1 800 20.7 1.4
Divi's Laboratories 995 ADD 131,963 2,073 133 45.4 51.9 59.9 12.9 14.5 15.4 21.9 19.2 16.6 15.9 13.8 11.3 5.3 4.5 3.8 1.5 1.7 1.9 26.0 25.4 25.0 1,040 4.6 3.0
Dr Reddy's Laboratories 2,247 BUY 381,571 5,993 170 96.3 111.3 133.1 14.6 15.6 19.6 23.3 20.2 16.9 15.7 13.3 11.2 5.2 4.3 3.6 0.7 0.7 0.9 24.0 23.5 23.3 2,450 9.0 12.7
GlaxoSmithkline Pharmaceuticals 2,402 SELL 203,619 3,198 85 81.4 84.5 97.5 9.7 3.8 15.5 29.5 28.4 24.6 22.6 21.6 18.1 10.1 9.3 8.4 2.1 2.3 2.5 28.5 34.2 36.0 1,820 (24.2) 0.8
Glenmark Pharmaceuticals 543 ADD 147,061 2,310 271 22.7 27.5 33.7 3.7 21.1 22.7 23.9 19.8 16.1 17.2 13.6 11.6 5.3 4.6 3.7 0.4 0.4 0.4 23.8 25.1 25.9 570 5.0 3.6
Lupin 866 ADD 387,214 6,082 447 29.5 35.3 41.8 52.3 19.4 18.7 29.3 24.6 20.7 18.3 15.4 12.6 7.4 5.9 4.8 0.5 0.7 0.8 28.6 27.0 25.9 850 (1.9) 16.9
Ranbaxy Laboratories 457 BUY 193,102 3,033 423 21.8 (2.5) 18.3 217.7 (111.5) 824.9 20.9 (181.2) 25.0 11.3 24.2 14.9 4.7 4.9 2.7 26.5 (2.6) 13.8 350 (23.3) 20.6
Sun Pharmaceuticals 557 SELL 1,153,317 18,114 2,071 14.5 23.3 22.5 16.3 60.7 (3.4) 38.3 23.9 24.7 21.3 16.1 15.9 6.9 6.4 5.3 0.9 1.1 1.3 20.1 27.8 23.5 450 (19.2) 18.9
Pharmaceuticals Attractive 3,273,014 51,406 40.4 15.6 18.6 28.5 24.6 20.8 17.8 15.6 13.4 5.6 5.0 4.1 0.8 0.9 1.1 19.8 20.2 19.7
Real Estate
DLF 149 ADD 265,626 4,172 1,780 4.3 4.2 9.7 (40.5) (2.9) 132.7 34.8 35.8 15.4 18.9 13.8 10.8 1.0 0.9 0.9 1.3 0.7 0.7 2.7 2.6 5.7 255 70.9 24.6
HDIL 43 NR 17,891 281 419 1.7 11.0 14.3 (91.0) 528.0 30.4 24.4 3.9 3.0 8.4 7.3 6.3 0.2 0.2 0.2 0.7 4.3 5.4 9.3
Oberoi Realty 172 BUY 56,374 885 328 14.5 20.0 25.8 9.2 37.5 29.2 11.8 8.6 6.7 7.8 5.4 3.5 1.4 1.2 1.0 1.2 1.2 1.2 12.1 14.7 16.3 290 68.9 0.5
Prestige Estates Projects 126 BUY 44,170 694 350 8.2 13.1 17.1 224.5 60.9 30.1 15.4 9.6 7.4 10.9 7.0 5.7 1.6 1.4 1.2 11.7 15.6 17.4 200 58.5 0.7
Sobha Developers 272 BUY 26,639 418 98 22.1 23.2 36.5 5.4 4.7 57.5 12.3 11.7 7.4 7.2 7.2 5.4 1.2 1.2 1.0 2.6 1.8 1.8 10.5 10.2 14.6 500 84.1 0.8
Sunteck Realty 310 BUY 18,566 292 60 0.7 76.5 25.4 29.1 11,307 (66.8) 461.5 4.0 12.2 428.4 3.1 5.3 3.8 2.0 1.7 0.6 0.6 0.7 64.3 15.2 560 80.9 0.1
Real Estate Cautious 459,494 7,217 (34.4) 79.5 43.9 24.4 13.6 9.4 14.5 9.3 7.4 0.9 0.9 0.8 1.1 0.7 0.7 3.8 6.3 8.4
India Daily Summary - September 1

50
O/S Target ADVT-
51
Technology
HCL Technologies 1,074 REDUCE 762,789 11,980 710 56.9 75.7 81.0 64.7 33.0 7.0 18.9 14.2 13.3 12.6 9.4 8.4 5.8 4.0 3.2 1.1 1.3 1.5 33.7 31.6 26.8 960 (10.6) 19.0
Hexaware Technologies 126 REDUCE 36,978 581 293 11.2 12.9 12.9 22.8 15.4 0.3 11.3 9.8 9.7 8.6 6.4 5.9 3.1 2.7 2.4 4.8 5.1 5.1 29.5 29.5 26.4 125 (0.8) 6.6
Infosys 3,066 ADD 1,751,827 27,514 571 164.9 178.7 212.0 13.3 8.4 18.6 18.6 17.2 14.5 13.3 11.6 9.3 4.6 3.9 3.3 1.5 2.1 2.5 27.2 24.6 24.8 3,400 10.9 54.6
Mindtree 1,060 ADD 44,526 699 42 81.7 103.5 116.8 53.2 26.8 12.8 13.0 10.2 9.1 9.0 7.5 6.2 3.4 2.7 2.1 1.1 1.5 1.7 29.8 29.1 26.2 1,150 8.5 0.9
Mphasis 439 SELL 92,497 1,453 211 37.6 36.2 40.1 (3.7) (3.6) 10.6 11.7 12.1 11.0 8.7 8.8 7.7 2.1 2.0 1.8 3.9 4.1 4.6 19.1 16.7 17.2 400 (8.9) 0.7
Polaris Financial Technology 116 REDUCE 11,555 181 100 20.1 18.8 19.4 (3.0) (6.6) 3.3 5.8 6.2 6.0 2.9 2.8 2.4 0.9 0.8 0.7 3.5 3.7 3.9 15.5 13.3 12.5 115 (0.8) 1.3
TCS 1,968 ADD 3,851,574 60,493 1,957 71.2 91.7 105.5 31.1 28.7 15.1 27.6 21.5 18.7 20.7 15.4 13.2 9.4 7.6 6.2 1.1 1.9 2.1 37.9 39.2 36.8 2,100 6.7 42.1
Tech Mahindra 1,311 ADD 306,331 4,811 234 101.9 125.0 136.3 16.7 22.6 9.0 12.9 10.5 9.6 9.2 7.2 6.4 4.5 3.3 2.5 0.4 0.4 0.4 36.3 32.4 26.7 1,500 14.4 23.5
Wipro 472 REDUCE 1,162,290 18,255 2,463 24.9 30.1 33.8 9.9 20.8 12.3 18.9 15.7 14.0 13.2 10.6 9.0 4.1 3.4 2.9 1.5 1.7 1.9 21.6 23.8 22.6 470 (0.4) 17.0
Technology Attractive 8,020,366 125,968 23.2 21.6 13.9 21.5 17.7 15.5 15.4 12.2 10.4 5.9 4.8 4.0 1.3 1.8 2.1 27.5 27.2 25.8
Telecom
Bharti Airtel 329 ADD 1,313,569 20,631 3,997 6.0 10.5 18.2 (46.6) 75.4 73.2 54.8 31.3 18.0 8.1 6.7 5.6 2.6 2.2 2.0 0.3 0.3 1.1 4.5 7.6 11.6 375 14.1 26.3
Bharti Infratel 155 ADD 292,482 4,594 1,889 5.3 7.9 8.9 23.3 48.8 12.4 29.2 19.6 17.5 7.4 6.1 5.4 1.7 1.6 1.6 2.5 2.2 2.7 6.3 8.5 9.2 170 9.8
IDEA 164 BUY 540,090 8,483 3,303 3.1 6.8 9.9 39.8 121.0 46.7 53.4 24.2 16.5 11.2 7.5 6.0 3.8 3.3 2.8 0.4 7.4 14.6 18.4 195 19.3 16.6
Reliance Communications 141 SELL 291,643 4,581 2,064 3.3 7.9 7.3 (27.5) 143.5 (8.2) 43.4 17.8 19.4 10.3 7.8 7.7 1.0 1.0 0.9 0.4 5.5 4.8 80 (43.4) 43.7
Tata Communications 179 BUY 51,129 803 285 (29.4) (7.0) 5.0 (5.5) 76.3 171.5 (6.1) (25.7) 36.0 7.8 5.8 5.1 3.6 3.5 3.2 (45.0) (13.8) 9.3 220 22.6 1.9
Telecom Attractive 2,488,913 39,091 (39.1) 162.1 48.2 69.6 26.6 17.9 8.8 6.9 5.9 2.2 2.0 1.8 0.5 0.5 1.0 3.2 7.4 10.1
Utilities
Adani Power 35 SELL 100,230 1,574 2,872 (9.0) (9.4) (1.3) (2,023.1) (4.0) 86.6 (3.9) (3.7) (27.9) 45.4 19.9 10.1 2.3 2.4 2.6 (41.7) (63.7) (9.1) 30 (14.0) 2.6
CESC 320 REDUCE 39,917 627 125 34.3 34.5 38.1 57.6 0.7 10.5 9.3 9.3 8.4 10.6 9.4 7.8 0.6 0.6 0.5 2.2 2.1 2.4 6.7 6.3 6.6 340 6.4 1.3
JSW Energy 42 ADD 68,552 1,077 1,640 6.7 7.6 6.6 232.1 13.6 (12.8) 6.2 5.5 6.3 6.0 4.4 4.4 1.1 0.9 0.8 18.5 18.3 13.6 50 19.6 1.7
Lanco Infratech 6 RS 13,560 213 2,223 (4.7) (6.0) 4.5 (790.4) (28.6) 174.6 (1.3) (1.0) 1.4 14.7 13.4 5.9 0.4 0.5 0.4 (24.2) (41.9) 33.3 0.5
NHPC 18 ADD 217,723 3,420 12,301 1.9 2.0 2.2 (22.4) 2.7 12.1 9.2 8.9 8.0 9.5 8.6 6.5 0.7 0.7 0.6 3.9 3.0 3.4 7.9 7.5 8.0 23 29.9 1.4
NTPC 139 BUY 1,149,830 18,059 8,245 13.0 13.5 14.2 20.8 3.6 5.4 10.7 10.3 9.8 9.9 8.8 8.1 1.4 1.3 1.2 4.8 2.9 3.1 14.0 13.3 12.8 160 14.7 9.7
Power Grid 99 BUY 458,343 7,199 4,630 9.1 9.6 11.0 28.7 5.8 13.9 10.9 10.3 9.0 10.8 9.9 8.4 1.7 1.6 1.4 2.8 3.0 3.4 16.9 16.1 16.5 135 36.4 7.4
Reliance Infrastructure 374 BUY 98,321 1,544 263 70.9 62.1 65.3 17.5 (12.4) 5.2 5.3 6.0 5.7 9.2 7.0 7.1 0.4 0.4 0.3 2.0 3.0 3.0 11.0 9.8 8.7 710 89.9 21.6
Reliance Power 68 SELL 190,047 2,985 2,805 3.6 3.9 3.8 16.7 8.8 (3.4) 18.8 17.3 17.9 23.9 32.4 22.2 1.0 1.0 0.9 5.6 5.8 5.3 75 10.7 13.8
Tata Power 77 BUY 189,322 2,973 2,468 4.0 5.3 5.8 (12.9) 33.1 8.6 19.1 14.4 13.2 9.0 6.8 6.3 1.4 1.3 1.2 1.5 1.6 1.6 7.4 9.5 9.6 92 19.9 4.9
Utilities Attractive 2,525,846 39,671 1.7 1.0 31.5 12.9 12.8 9.7 11.2 9.8 8.1 1.2 1.1 1.0 3.3 2.4 2.6 9.0 8.5 10.3
Others
Carborundum Universal 106 BUY 19,901 313 187 5.7 8.8 13.7 (50.7) 53.7 56.3 18.6 12.1 7.7 9.3 6.5 4.5 1.7 1.5 1.3 0.9 1.4 2.2 10.3 14.4 19.2 180 69.5 0.0
Coromandel International 223 SELL 63,207 993 283 15.3 14.9 17.6 (32.5) (2.1) 17.4 14.6 14.9 12.7 13.0 9.3 8.4 2.9 2.5 2.2 2.0 2.1 2.1 17.8 17.1 17.8 150 (32.8) 0.3
Havells India 623 REDUCE 77,710 1,221 125 33.4 36.8 41.0 6.0 10.4 11.5 18.7 16.9 15.2 12.3 10.3 9.3 5.2 4.2 3.5 1.2 1.3 1.4 33.3 27.6 25.2 625 0.4 4.1

Jaiprakash Associates 38 BUY 85,102 1,337 2,219 2.0 3.9 10.3 (32.9) 97.8 164.7 19.6 9.9 3.7 11.0 8.5 6.1 0.7 0.6 0.6 3.6 6.7 16.1 57 48.6 28.8
MCX India 481 ADD 24,413 383 51 58.6 33.9 34.8 (1.5) (42) 2.6 8.2 14.2 13.8 3.2 7.2 7.0 2.1 2.1 2.0 5.0 5.0 5.0 27.7 14.7 14.7 400 (16.8) 3.8
Rallis India 153 BUY 29,667 466 194 6.1 8.5 10.2 20.0 38 20.6 24.9 18.0 15.0 14.5 10.6 9.2 4.8 4.0 3.4 1.5 1.4 1.4 18.9 24.0 24.6 165 8.2 0.6
Tata Chemicals 240 BUY 61,182 961 255 15.7 29.0 34.6 (52.2) 84.3 19.3 15.3 8.3 6.9 5.7 4.9 4.4 0.8 0.8 0.7 4.2 4.2 4.2 5.1 9.1 10.0 300 24.9 1.4
United Phosphorus 134 REDUCE 59,176 929 443 17.5 18.3 19.1 39.4 4.4 4.8 7.6 7.3 7.0 4.5 4.5 4.1 1.3 1.1 1.0 1.9 1.9 1.9 18.0 16.6 15.2 135 1.0 5.9
Others 420,358 6,602 (18.6) 27.1 49.0 14.1 11.1 7.4 9.2 7.5 5.9 1.3 1.2 1.1 1.8 1.9 1.9 9.6 11.1 14.6
KIE universe 51,127,872 803,014 5.6 6.6 18.2 14.7 13.8 11.6 10.0 8.8 7.4 2.2 2.0 1.8 1.9 1.9 2.3 15.1 14.5 15.3
KIE universe ex-energy 43,778,154 687,579 7.1 8.9 18.2 16.1 14.8 12.5 11.6 9.9 8.4 2.5 2.3 2.0 1.8 1.8 2.1 15.8 15.4 16.2
KIE universe ex-energy & ex-commodities 38,482,967 604,413 8.9 10.9 19.8 17.4 15.7 13.1 13.0 10.8 9.2 2.7 2.4 2.2 1.6 1.7 1.9 15.7 15.5 16.5
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$)= 63.67

"Each of the analysts named below hereby certifies that, with respect to each subject company and its securities for which the analyst is
responsible in this report, (1) all of the views expressed in this report accurately reflect his or her personal views about the subject companies
and securities, and (2) no part of his or her compensation was, is, or will be, directly or indirectly, related to the specific recommendations or
views expressed in this report: Sanjeev Prasad, Kawaljeet Saluja, Indranil Pan, Lokesh Garg, Nischint Chawathe, Tarun Lakhotia, Samar
Sarda."
Kotak Institutional Equities Research coverage universe

Distribution of ratings/investment banking relationships
Percentage of companies covered by Kotak Institutional
70%
Equities, within the specified category.
60%
Percentage of companies within each category for which
Kotak Institutional Equities and or its affiliates has provided
50%
investment banking services within the previous 12 months.
40% 36.6% * The above categories are defined as follows: Buy = We

expect this stock to deliver more than 15% returns over the
30% next 12 months; Add = We expect this stock to deliver
26.7%
5-15% returns over the next 12 months; Reduce = We
22.1%
expect this stock to deliver -5-+5% returns over the next
20% 12 months; Sell = We expect this stock to deliver less than -
14.5%
5% returns over the next 12 months. Our target prices are
10% 5.8% also on a 12-month horizon basis. These ratings are used
3.5% illustratively to comply with applicable regulations. As of
0.6% 1.2%
30/06/2013 Kotak Institutional Equities Investment Research
0%
had investment ratings on 172 equity securities.
BUY ADD REDUCE SELL
Source: Kotak Institutional Equities As of June 30, 2013
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 analysts 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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13 September 2013

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INDIA DAILY

September 13, 2013 India 12-Sep 1-day1-mo 3-mo

Sensex 19,782 (1.1) 2.9 5.1

Nifty 5,851 (1.1) 2.7 2.7

Dow Jones 15,301 (0.2) (1.0) 0.8

Strategy: Trade secrets Nikkei 14,382 (0.0) 3.7 15.6

Company Value traded India

Cash (NSE+BSE) 154 150 134

may be the only option Rs/US$ 63.7 8 223 585

Kotak Institutional Equities Research

Indias trade deficit

No room for complacency on CAD and BOP

Kotak Institutional Equities Research

Exhibit 1: India's trade deficit narrowed to US$10.9 bn in August

Imports Exports Trade deficit

KOTAK INSTITUTIONAL EQUITIES RESEARCH 3

Source: RBI, Kotak Institutional Equities estimates

4 KOTAK INSTITUTIONAL EQUITIES RESEARCH

Source: Ministry of Finance, Kotak Institutional Equities

FY2014 FY2013 Apr-Jun Chg.

Source: Ministry of Finance, Kotak Institutional Equities

Exhibit 5: Gold imports have declined in the past few months

Source: Ministry of Finance, Kotak Institutional Equities

KOTAK INSTITUTIONAL EQUITIES RESEARCH 5

Source: RBI, Kotak Institutional Equities

6 KOTAK INSTITUTIONAL EQUITIES RESEARCH

Company data and valuation summary

Confident of bettering industry growth; reiterates US$5 bn revenue ambition by 2015

Wider offerings, deeper engagements one-stop shop for telcos

Kotak Institutional Equities Research

Manufacturing, BFSI critical to achieve scale

Other key highlights from the analyst meet

` Comviva reported revenues of US$88 mn in FY2013 and continues to invest in developing

` Engineering services will focus on five main verticalsaviation, automobiles, hi-tech,

8 KOTAK INSTITUTIONAL EQUITIES RESEARCH

2013 2014E 2015E 2016E

Source: Company, Kotak Institutional Equities estimates

KOTAK INSTITUTIONAL EQUITIES RESEARCH 9

Company data and valuation summary

Cut our estimates by 3-5% to factor in weaker Rupee assumptions

Kotak Institutional Equities Research

12-Sep-13 Mkt cap. EPS growth (%) P/E (X)

Source: Company, Bloomberg, Kotak Institutional Equities estimates

KOTAK INSTITUTIONAL EQUITIES RESEARCH 11

Exhibit 3: Castrol: Key assumptions, calendar year-ends, 2009-15E

2009 2010 2011 2012 2013E 2014E 2015E

Source: Company, Kotak Institutional Equities estimates

` LOBS prices. We assume LOBS prices to decline by US$105/ton in CY2013E, US$25/ton

` Net realization. We estimate Castrols net realization to increase to `70.4/liter in

12 KOTAK INSTITUTIONAL EQUITIES RESEARCH

CY2013E CY2014E CY2015E

Raw material price

Source: Kotak Institutional Equities estimates

2009 2010 2011 2012 2013E 2014E 2015E

Balance sheet (Rs mn)

Free cash flow (Rs mn)

Source: Company, Kotak Institutional Equities estimates

KOTAK INSTITUTIONAL EQUITIES RESEARCH 13

Company data and valuation summary

Cash flows exhibit smart money management

Balance sheet: Restructuring to result in increased medium-term payments

Management discussion and analysis, chairmans message: Focus now on construction

Key risks: Low sales, slow construction, FSI delay