India Daily

INDIA DAILY
August 2, 2018 India 1-Aug 1-day 1-mo 3-mo

Sensex 37,522 (0.2) 6.4 6.7
Nifty 11,346 (0.1) 6.5 5.9
Contents Global/Regional indices

Dow Jones 25,334 (0.3) 4.2 5.9
Daily Alerts Nasdaq Composite 7,707 0.5 1.8 8.5
Results FTSE 7,653 (1.2) 1.4 1.5

Nikkei 22,724 (0.1) 4.2 1.1
Dabur India: Decisively positive management outlook but priced in
Hang Seng 28,341 (0.8) (2.1) (7.8)
Exide Industries: Revenue growth surprises positively KOSPI 2,306 (0.1) 1.5 (8.0)
IIFL Holdings: Wealth and NBFC strong; broking yields down Value traded – India
Cash (NSE+BSE) 370 337 331
Astral Poly Technik: Results miss expectations; valuations remain expensive Derivatives (NSE) 9,153 4,366 4,400
Orient Cement: A good quarter Deri. open interest 3,653 3,022 3,569
Results, Change in Reco

Forex/money market
Castrol India: Not worth the wait
Change, basis points
Company alerts 1-Aug 1-day 1-mo 3-mo
Rs/US$ 68.3 4 (33) 154

NTPC: Emphasizing efficient growth
10yr govt bond, % 8.1 - (7) 13
Tata Steel: Management meeting notes Net investment (US$ mn)
31-Jul MTD CYTD
Sector alerts FIIs 132 - (414)
Automobiles: Auto demand remains healthy MFs (29) - 11,353
Top movers
Economy alerts Change, %
Best performers 1-Aug 1-day 1-mo 3-mo

Economy: GST: Revenues far from satisfactory
RIL IN Equity 1,192 0.5 24.1 22.6
Economy: RBI: Signaling a brief pause SBIN IN Equity 295 0.5 14.0 22.4
GCPL IN Equity 1,320 0.2 6.8 17.9
HUVR IN Equity 1,734 0.2 5.5 17.8
DABUR IN Equity 432 2.5 14.1 17.8
Worst performers
HDIL IN Equity 24 (1.2) 18.7 (28.4)
UT IN Equity 4 (1.2) 1.2 (27.0)
AL IN Equity 119 5.4 (6.6) (26.4)
JPA IN Equity 15 0.7 (4.5) (24.4)
TTMT/A IN Equity 144 (0.2) (9.5) (24.1)
Kotak Institutional Equities Research

kotak.research@kotak.com . Mumbai: +91-22-4336-0000
For Private Circulation Only. FOR IMPORTANT INFORMATION ABOUT KOTAK SECURITIES’ RATING SYSTEM AND OTHER DISCLOSURES.
REFER TO THE END OF THIS MATERIAL.
REDUCE
Dabur India (DABUR)
Consumer Products AUGUST 02, 2018
RESULT
Coverage view: Cautious
Decisively positive management outlook but priced in. Better-than-expected Price (`): 432
volume growth print for 1QFY19 and the management’s decisively positive volume Target price (`): 390
outlook drive a 1-4% increase in our already-bullish FY2019-21E EPS forecasts for
BSE-30: 37,522
Dabur. Risk to consensus EPS estimates is on the downside in our view. Dabur now
trades at a modest premium to HUVR on an EV/EBITDA basis, unsustainable and
unjustifiable. Lofty valuations leave little room for disappointment in our view. Reiterate
REDUCE with a revised fair value target of `390/share (from `350).
C o mpan y d ata an d valuatio n summary

Dabur India
Stock data Forecasts/Valuations 2018 2019E 2020E
52-week range (Rs) (high,low) 439-293 EPS (Rs) 7.8 9.1 10.3
Market Cap. (Rs bn) 763.5 EPS growth (%) 7.2 17.3 12.9
Shareholding pattern (%) P/E (X) 55.6 47.4 42.0
Promoters 68.1 Sales (Rs bn) 77.5 88.5 100.2
FIIs 17.2 Net profits (Rs bn) 13.7 16.1 18.1
MFs 4.3 EBITDA (Rs bn) 16.2 19.2 22.1
Price performance (%) 1M 3M 12M EV/EBITDA (X) 47.2 39.7 34.3
Absolute 11.9 18.6 45.2 ROE (%) 25.9 28.1 29.6
Rel. to BSE-30 5.6 11.1 26.0 Div. Yield (%) 1.7 0.9 1.0
1QFY19 earnings print – healthy headline comps but 2-year CAGRs just about fine
Dabur reported consolidated revenue, EBITDA and PAT growth of 16%, 25% and 20%,
respectively off a low base. Revenues were in line with our estimate while EBITDA and PAT
missed our forecast by 11% each. Two-year CAGR stood at 3.2% on revenues, 5.1% on
EBITDA and 6% on recurring PAT. Two-year CAGR comps are important to filter out the noise
in yoy comps created by the low pre-GST 1QFY18 base.
Standalone performance was healthier with net revenues up 19% yoy (just under 24% like-on-
like), EBITDA up 35% and recurring PAT up 29%. Standalone revenue growth was volume-led
with a strong 21% domestic FMCG volume growth print, higher than our expected 15%. Two-
year CAGR on revenues was 6.5% (8-8.5% like-on-like), 7.3% on EBITDA and 7.8% on
recurring PAT. Decent numbers but not blockbuster by any means.
Aggregate subsidiary performance improved from recent soft trends but remained much
weaker than standalone performance. Aggregate revenues, EBITDA and PAT for subsidiaries
grew 9% yoy (-3.6% 2-year CAGR), 9% yoy (+1.2% 2-year CAGR) and 4% yoy (+2.2% 2-year
CAGR), respectively.
Domestic FMCG segments – good growth across the board
Strong yoy growth in domestic FMCG business was broad-based with all categories growing in Rohit Chordia
rohit.chordia@kotak.com
the 17-28% yoy band. Foods (+27%; led by Real), skin care (+27%; led by Gulabari and Fem), Mumbai: +91-22-4336-0885
health supplements (+28%; led by honey and Chyawanprash), digestives (+22%; led by
Jaykumar Doshi
Hajmola tablets), and hair care (+20.5%; led by CNO and shampoos) led growth. Oral care jaykumar.doshi@kotak.com
growth at 17.3% yoy was healthy as well even as the low-price-brand Babool dragged Mumbai: +91-22-4336-0882
performance a tad. On a 2-year CAGR basis, digestives, skin, and home care were the
Aniket Sethi
categories that saw double-digit growth. aniket.sethi@kotak.com
Mumbai: +91-22-4336-0881
The narrative is in the numbers and multiples are rich. REDUCE
We questioned ourselves hard (to see if we are missing the narrative), we struggled (to raise
estimates materially) and we gave up (on the temptation to be creative). Remain cautious.

kotak.research@kotak.com
Mumbai: +91-22-4336-0000
For Private Circulation Only. FOR IMPORTANT INFORMATION ABOUT KOTAK SECURITIES’ RATING SYSTEM AND OTHER DISCLOSURES, REFER TO THE END OF THIS MATERIAL.
Dabur India Consumer Products
Exhibit 1: Interim consolidated results of Dabur (as per Ind-AS), March fiscal year-ends (Rs mn)
(% chg.)
1QFY19 1QFY19E 1QFY18 4QFY18 KIE Est yoy qoq 1QFY17 2-Yr CAGR (%)
Revenues 20,752 20,909 17,845 20,236 (1) 16 3 19,477 3.2
Material cost (incl excise) (10,486) (10,437) (9,145) (10,024) 0 15 5 (9,613)
Gross profit 10,472 10,472 8,700 10,212 0 20 3 9,864 3.0
Gross margin (%) 50.5 50.1 48.8 50.5 37 bps 171 bps -1 bps 50.6
Employee cost (2,241) (2,102) (2,035) (1,807) 7 10 24 (2,115) 2.9
Advertising and promotion (1,990) (1,714) (1,500) (1,256) 16 33 58 (1,965) 0.6
Other expenditure (2,229) (2,392) (2,131) (2,390) (7) 5 (7) (2,340) (2.4)
Total expenditure (16,946) (16,645) (14,812) (15,477) 2 14 9 (16,034) 2.8
EBITDA 3,806 4,264 3,034 4,758 (11) 25 (20) 3,443 5.1
OPM (%) 18.3 20.4 17.0 23.5 -206 bps 134 bps -518 bps 17.7
Other operating income 55 55 55 94 0 (1) (41) 45
Other income 737 825 813 732 (11) (9) 1 610
Interest (149) (125) (133) (132) 19 12 12 (118)
Depreciation (427) (450) (391) (426) (5) 9 0 (343)
Pretax profits 4,022 4,569 3,378 5,026 (12) 19 (20) 3,637 5.2
Tax (724) (872) (638) (1,052) (17) 13 (31) (701)
Minority Interest (6) (10) (3) (12) (44) 107 (52) (8)
Recurring PAT (after MI) 3,292 3,687 2,737 3,962 (11) 20 (17) 2,928 6.0
Extraordinary items — — (96) — —
Net profit (reported) 3,292 3,687 2,641 3,962 (11) 25 (17) 2,928 6.0
EPS (Rs) 1.9 2.1 1.6 2.2 (11) 20 (17) 1.7 5.7
Income tax rate (%) 18.0 19.1 18.9 20.9 -109 bps -90 bps -294 bps 19.3
Costs as a % of sales
Material cost 50.5 49.9 51.2 49.5 61 bps -72 bps 99 bps 49.4
Employee cost 10.8 10.1 11.4 8.9 74 bps -61 bps 186 bps 10.9
Advertising and promotion 9.6 8.2 8.4 6.2 139 bps 118 bps 338 bps 10.1
Other expenditure 10.7 11.4 11.9 11.8 -70 bps -121 bps -107 bps 12.0
Segment results of Dabur

Revenues
Consumer care 16,561 14,251 16,774 16 (1)
Foods 3,635 3,108 2,934 17 24
Retail 304 278 279 9 9
Others 230 208 248 10 (8)
Total segment revenue 20,729 17,845 20,236 16 2
Segment PBIT
Consumer care 3,789 3,202 4,287 18 (12)
Foods 519 325 554 60 (6)
Retail 13 5 4 166 198
Others 20 (15) 17 (234) 14
Total segment EBIT 4,341 3,517 4,862 23 (11)
Segment PBIT margins, %
Consumer care 22.9 22.5 25.6 41 bps -268 bps
Foods 14.3 10.5 18.9 382 bps -459 bps
Retail 4.1 1.7 1.5 242 bps 261 bps
Others 8.5 (7.0) 6.9 1552 bps 161 bps
Capital employed
Consumer care 22,529 21,441 21,566 5 4
Foods 3,231 4,577 3,559 (29) (9)
Retail 296 271 289 10 3
Others 287 311 278 (8) 3
Unallocated corporate 34,416 22,122 27,857 56 24
Total capital employed 60,759 48,722 53,548 25 13
Source: Company, Kotak Institutional Equities
KOTAK INSTITUTIONAL EQUITIES RESEARCH 3

Consumer Products Dabur India
Exhibit 2: Interim standalone results of Dabur (as per Ind-AS), March fiscal year-ends (Rs mn)
(% chg.)
1QFY19 1QFY19E 1QFY18 4QFY18 KIE Est yoy qoq 1QFY17 2-Yr CAGR (%)
Revenues 14,701 14,160 12,313 15,034 4 19 (2) 12,968 6.5
Material cost (incl excise) (7,825) (7,434) (6,735) (7,742) 5 16 1 (6,907)
Gross profit 6,876 6,726 5,578 7,293 2 23 (6) 6,061 6.5
Gross margin (%) 46.8 47.5 45.3 48.5 -73 bps 147 bps -174 bps 46.7
Employee cost (1,380) (1,150) (1,192) (1,018) 20 16 36 (1,131)
Advertising and promotion (1,556) (1,353) (1,187) (817) 15 31 90 (1,236)
Other expenditure (1,405) (1,500) (1,327) (1,414) (6) 6 (1) (1,491)
Total expenditure (12,166) (11,437) (10,441) (10,991) 6 17 11 (10,765) 6.3
EBITDA 2,535 2,723 1,872 4,043 (7) 35 (37) 2,203 7.3
OPM (%) 17.2 19.2 15.2 26.9 -199 bps 204 bps -966 bps 17.0
Other operating income 30 30 25 62 0 22 (52) 28
Other income 686 750 756 708 (9) (9) (3) 547
Interest (59) (40) (58) (59) 46 1 (1) (24)
Depreciation (260) (270) (245) (263) (4) 6 (1) (174)
Pretax profits 2,932 3,193 2,349 4,491 (8) 25 (35) 2,579 6.6
Tax (626) (734) (557) (956) (15) 12 (34) (595)
PAT 2,306 2,459 1,792 3,536 (6) 29 (35) 1,984 7.8
Extraordinary items — — (96) — —
Net profit (reported) 2,306 2,459 1,696 3,536 (6) 36 (35) 1,984 7.8
EPS (Rs) 1.3 1.4 1.0 2.0 (6) 29 (35) 1.1 7.7
Income tax rate (%) 21.4 23.0 23.7 21.3 -164 bps -236 bps 8 bps 23.1
Costs as a % of sales
Material cost 53.2 52.5 54.7 51.5 72 bps -148 bps 173 bps 53.3
Employee cost 9.4 8.1 9.7 6.8 126 bps -30 bps 261 bps 8.7
Advertising and promotion 10.6 9.6 9.6 5.4 102 bps 94 bps 515 bps 9.5
Other expenditure 9.6 10.6 10.8 9.4 -104 bps -122 bps 15 bps 11.5
Segment results of Dabur
Revenues
Consumer care 11,384 9,533 12,249 19 (7)
Foods 3,065 2,573 2,536 19 21
Others 230 208 248 10 (8)
Total segment revenue 14,678 12,313 15,034 19 (2)
Segment EBIT
Consumer care 2,825 2,304 3,831 23 (26)
Foods 294 108 381 172 (23)
Others 20 (15) 17 (234) 14
Total segment EBIT 3,138 2,398 4,229 31 (26)
Segment EBIT margins, %
Consumer care 24.8 24.2 31.3 64 bps -646 bps
Foods 9.6 4.2 15.0 537 bps -546 bps
Others 8.5 (7.0) 6.9 1552 bps 161 bps
Capital employed
Consumer care 8,850 10,543 9,184 (16) (4)
Foods (116) 2,283 415 (105) (128)
Others 172 204 163 (16) 5
Unallocated corporate 35,610 23,549 29,208 51 22
Total capital employed 44,516 36,579 38,969 22 14
4 KOTAK INSTITUTIONAL EQUITIES RESEARCH

Exhibit 3: Key changes to earnings model (consolidated), as per Ind-AS - Dabur India, March fiscal-year ends, 2019-21E
Revised Earlier Change (%)

2019E 2020E 2021E 2019E 2020E 2021E 2019E 2020E 2021E
Net revenues (Rs mn) 87,211 98,766 111,585 88,122 98,578 109,768 (1.0) 0.2 1.7
EBITDA (Rs mn) 17,952 20,606 23,555 18,453 20,851 23,455 (2.7) (1.2) 0.4
EBIT (Rs mn) 16,181 18,691 21,470 16,739 19,006 21,474 (3.3) (1.7) (0.0)
EBITDA margin (%) 20.6 20.9 21.1 20.9 21.2 21.4
Net profit (pre-exceptionals, Rs mn) 16,056 18,132 20,596 15,895 17,751 19,851 1.0 2.1 3.8
EPS (Rs/share) 9.1 10.3 11.7 9.0 10.1 11.3 1.0 2.1 3.8
Effective tax rate (%) 19.8 20.8 21.7 20.4 21.0 21.8
Source: Company, Kotak Institutional Equities estimates
Key category-wise highlights
 Hair care (23% of domestic sales). Within hair care business – (1) hair oils category
posted 18.8% yoy growth on the back of strong growth in Anmol Coconut Oil, Amla
Hair Oil, Brahmi Amla Hair Oil and Dabur Almond Hair Oil; management highlighted that
they have gained market share in hair oil (+70 bps). They now plan to accelerate spends
on Dabur Amla and gain back the lost market share and (2) shampoos posted strong
31.3% yoy growth driven by focused marketing initiatives. Management highlighted that
the growth was driven by expansion of rural distribution. They are currently looking to
premiumize their portfolio for the urban consumer. They believe that the growth
potential is enormous given that a lot of other herbal brands are currently suffering in this
segment.
 Oral care (17% of domestic sales). Oral care posted strong growth of 17% yoy with
toothpaste registering a 16.8% yoy growth. Management highlighted that the Red
franchise grew at 30%+ and the company continues to gain market share. Its recent
offering Red Gel is also doing reasonably well. However, its discount brand – Babool – is
seeing high competitive pressures, particularly in the `10 price point. They have chalked
out some plans for Babool as well and expect a revival in the next couple of quarters.
Performance of Toothpowder was also robust – growing 21.6% yoy.
 OTC & Ethicals (7% of domestic sales). OTC & Ethicals category grew by 13.3% yoy led
by good growth in Honitus, Madhuvaani, Lal Tail and Mahabhringraj Hair Oil.
 Health supplements (12% of domestic sales) posted 27.5% yoy growth aided by
strong growth in both Chyawanprash and Honey. Management highlighted that its
market share is back to its highest level in both value and volume. They continue to
benefit from the strong brand franchise in the category and expect strong growth to
continue.
 Home care (7% of domestic sales). Home care category posted strong growth of
17.4% yoy. Management attributed this to strong performance of Odonil and Sanifresh.
 Skin care (5% of domestic sales) posted 27.1% yoy growth aided by strong growth in
Gulabari, Fem bleaches and facial kits.

 Foods (22% of domestic sales). Beverages (bulk of the food business) grew 26.8% on
the back of double-digit growth in Real and Active. Culinary business – which forms
~10% of overall foods revenues – grew 10.2% yoy led by strong growth in Hommade
Coconut Milk and Nature’s Best. In juices, company has launched three new variants –
Masala Guava, Masala Pomegranate and Alphonso Mango. Despite facing high
competitive pressures in the recent times, company has taken several efforts including
higher media spends as well as tactical promotions. NPDs contributed 3.8% growth in the
segment for Dabur. One of its new launches Activ Coconut water has also registered
good offtake. Company believes that they are well placed to capture trend of increasing
awareness of high sugar content in several fruit-based drinks in the market. Dabur has
also been able to enhance its margin profile in the segment on the back of lower import
prices of fruit pulp and increasing production from Pantnagar plant leading to freight
savings.
 International business (30% of consolidated sales). International business posted a

strong 10.5% c/c growth. Among the international markets – (1) GCC markets
performed well delivering 17% c/c growth led by Saudi Arabia (up 54% yoy), (2) Egypt
posted strong 31% yoy growth, (3) US business of Namaste reported 1% yoy growth in
c/c revenues reversing the decline trend seen in recent years. Management sounded
bullish on Namaste business in the US on profitability and in sub-Saharan Africa on
growth. They have put a new team in place for the same and have also made subtle
changes to the business model. Management is positive about the strong potential of the
naturals portfolio and believe that the top-line growth should accelerate to 5-10% along
with strong margins expansion – already seen in 1QFY19.
Other takeaways from earnings concall
 Volume growth outlook. Management expects double-digit volume growth for

the full year (FY2019E) given the pickup in underlying consumption trends and
weakening of several headwinds.
 Margins. Management expects scope for expansion in gross margins to be limited

given inflationary pressures in the broader RM basket. Focus remains on driving
accelerate volume growth and let operating leverage take care of margin
expansion. The company also indicated that it intends to keep media spending
high for the rest of the fiscal.
Exhibit 4: Volumes rose 21% yoy - 2-year CAGR at ~7.5%

Dabur’s domestic volume growth trends (%)
25
21.0
20
15 13.0
8.7 8.1 8.1

10 7.4 7.0 7.2
5.0 4.1 4.5 7.7
5 2.4
- (2.5)
(5.2) (4.4)
(5)
(10)
2QFY15
3QFY15
4QFY15
1QFY16
2QFY16
3QFY16
4QFY16
1QFY17
2QFY17
3QFY17
4QFY17
1QFY18
2QFY18
3QFY18
4QFY18
1QFY19

Exhibit 5: Category growth trends for Dabur

Growth rate, yoy (%)
1QFY17 2QFY17 3QFY17 4QFY17 1QFY18 2QFY18 3QFY18 4QFY18 1QFY19 2Yr-CAGR - 1QFY19
Hair Care (2.0) (4.5) (20.0) (4.0) (11.0) 0.5 22.6 12.2 20.5 3.6
Health Supplements 0.0 (10.0) (14.0) 5.0 (7.0) 3.0 19.5 14.0 27.5 8.9
Oral Care 11.6 0.0 (5.0) 9.0 1.5 22.8 23.0 11.0 17.3 9.1
Digestives (1.0) 5.0 (10.0) (5.0) 4.0 11.7 19.3 7.2 21.6 12.5
Skin Care (1.0) 7.0 (11.0) 0.0 4.0 15.8 14.5 8.5 27.1 15.0
Home Care 2.0 20.0 (5.0) (6.5) 6.2 10.1 36.0 0.0 17.4 11.7
OTC & Ethicals (1.0) 3.0 (11.0) (4.0) (6.6) 2.5 8.7 9.1 18.4 5.1
Foods 4.3 15.2 52.0 10.0 (8.3) 11.7 0.0 2.0 26.8 7.8
Notes:
(1) Growth numbers for 3QFY18 are like-for-like, adjusted for GST.
Exhibit 6: Key revenue assumptions for Dabur, March fiscal year-ends, 2017-21E (Rs mn)
2017 2018 2019E 2020E 2021E

Gross revenue breakup (Rs mn)
Domestic Business 51,997 53,884 61,949 70,857 80,803
Consumer Care 40,382 43,183 49,086 55,732 63,088
Hair Care 10,858 11,050 12,100 13,431 14,834
Oral Care 7,953 9,147 10,793 12,736 14,971
Health Supplements 8,448 9,061 10,239 11,468 12,810
Digestives 2,782 2,962 3,347 3,715 4,113
Skin Care 2,645 2,773 3,189 3,699 4,276
Home Care 3,277 3,544 4,075 4,646 5,280
OTC & Ethicals 4,418 4,647 5,344 6,038 6,804
Foods 10,084 9,553 11,559 13,755 16,277
Misc 1,531 1,148 1,304 1,369 1,438
IBD 24,804 22,919 25,262 27,910 30,782
Total Gross revenue 76,801 76,803 87,211 98,766 111,585
yoy growth (%)
Domestic Business (0.1) 3.6 15.0 14.4 14.0
Consumer Care (3.1) 6.9 13.7 13.5 13.2
Hair Care (6.7) 1.8 9.5 11.0 10.5
Oral Care 6.5 15.0 18.0 18.0 17.6
Health Supplements (3.6) 7.3 13.0 12.0 11.7
Digestives (12.3) 6.5 13.0 11.0 10.7
Skin Care 4.3 4.8 15.0 16.0 15.6
Home Care 3.6 8.1 15.0 14.0 13.7
OTC & Ethicals (10.5) 5.2 15.0 13.0 12.7
Foods 12.4 (5.3) 21.0 19.0 18.3
Misc 7.9 (25.0) 13.6 5.0 5.0
IBD (6.2) (7.6) 10.2 10.5 10.3
Total Gross revenue (2.2) 0.0 13.6 13.2 13.0
% of total gross revenue
Domestic Business 68 70 71 72 72
Consumer Care 53 56 56 56 57
Hair Care 14 14 14 14 13
Oral Care 10 12 12 13 13
Health Supplements 11 12 12 12 11
Digestives 4 4 4 4 4
Skin Care 3 4 4 4 4
Home Care 4 5 5 5 5
OTC & Ethicals 6 6 6 6 6
Foods 13 12 13 14 15
Misc 2 1 1 1 1
IBD 32 30 29 28 28

Exhibit 7: Dabur: Consolidated profit model, balance sheet, cash flow model, March fiscal year-ends, 2016-2021E (Rs mn)
2016 2017 2018 2019E 2020E 2021E

Profit model (Rs mn)
Net revenues 78,507 76,801 76,803 87,211 98,766 111,585
EBITDA 15,002 14,876 15,494 17,952 20,606 23,555
Other income 2,353 3,197 3,732 4,480 4,877 5,477
Interest expense (485) (540) (531) (606) (624) (594)
Depreciation (1,332) (1,429) (1,622) (1,770) (1,915) (2,085)
Pretax profits 15,538 16,104 17,074 20,055 22,944 26,353
Tax (2,999) (3,303) (3,354) (3,965) (4,775) (5,716)
Minority Interest (28) (31) (31) (34) (38) (41)
Net Income 12,512 12,769 13,689 16,056 18,132 20,596
Extraordinary items — — (145) — — —
Reported Net Income 12,512 12,769 13,544 16,056 18,132 20,596
Earnings per share (Rs) 7.1 7.2 7.8 9.1 10.3 11.7
Balance sheet (Rs mn)
Total shareholder's equity 41,706 48,474 57,065 57,034 65,625 74,560
Total borrowings 8,102 9,786 9,375 10,788 10,288 9,788
Deferred tax liability 882 1,080 1,091 1,091 1,091 1,091
Minority Interest 217 248 265 300 337 379
Total liabilities and equity 50,907 59,588 67,796 69,213 77,341 85,818
Net fixed assets incl CWIP 17,728 20,005 20,696 21,032 21,869 22,754
Investments 26,301 32,402 38,052 38,052 38,052 38,052
Cash 2,198 3,048 3,061 3,564 10,251 17,212
Net current assets 4,680 4,134 5,987 6,565 7,170 7,800
Total assets 50,907 59,588 67,796 69,213 77,341 85,818
Free cash flow (Rs mn)
Operating cash flow (excl working capital) 12,486 11,397 13,465 15,985 18,055 20,312
Working capital (752) 872 (2,575) (578) (605) (630)
Capital expenditure (1,892) (4,858) (2,003) (2,106) (2,752) (2,970)
Free cash flow 9,843 7,411 8,887 13,300 14,699 16,712
Key ratios (%)
Sales growth 0.6 (2.2) 0.0 13.6 13.2 13.0
EBITDA growth 15.8 (0.8) 4.2 15.9 14.8 14.3
EPS growth 17.2 1.9 7.2 17.3 12.9 13.6
EBITDA margin 19.1 19.4 20.2 20.6 20.9 21.1
Gross margin 51.0 50.0 49.9 50.0 50.1 50.2
A&SP % of sales 9.8 8.4 7.9 8.5 8.4 8.4

SELL
Exide Industries (EXID)
Automobiles AUGUST 02, 2018
RESULT
Coverage view: Neutral
Revenue growth surprises positively. Exide reported strong 1QFY19 results with 21% Price (`): 270
yoy EBITDA growth, which was 4% above our estimates. Revenues increased by 32% yoy Target price (`): 235
led by (1) strong double-digit volume growth in the auto segment, (2) benefit of price
BSE-30: 37,522
hikes, (3) market share gains in the telecom segment and (4) increased presence in newer
segments such as e-rickshaw and solar. Exide’s execution has definitely improved over the
past few quarters but valuations are expensive given concerns over long-term
sustainability of growth in key industrial segments (35% of revenues). SELL stays.
C ompany data and valuation summary
Exide Industries
MFs 14.3 EBITDA (Rs bn) 12.4 15.3 17.0
Absolute 4.7 8.9 20.8 ROE (%) 13.5 15.4 15.5
Rel. to BSE-30 (1.2) 2.0 4.9 Div. Yield (%) 0.9 1.1 1.3
1QFY19 EBITDA 4% above estimates
Exide reported 1QFY19 EBITDA of `3.9 bn (+21% yoy), which was 4% above our estimates.
However, net profit grew by only 11% yoy to `2.1 bn (5% below our estimates) due to lower
other income, higher depreciation expenses and tax rate. We note that capex intensity has gone
up significantly over the past two years due to need to modernize existing plants (will likely
remain higher in FY2019-20E as well), which has led to negative FCF over FY2016-18.
 Revenues increased by 32% yoy to `27.7 bn (KIE: 20%); growth was strong even on two-
year basis (+17% CAGR). Revenue growth was possibly driven by (1) 24-26% yoy growth in
the auto segment due to strong growth in industry production, double-digit volume growth
in replacement segment on low base and benefit of price increases and (2) 40% revenue
growth in the industrial segment aided by market share gains in the telecom segment
(leading to additional 13-15% of growth) at the expense of profitability, increased presence
in e-rickshaw segment and healthy double digit in core industrial segments (inverter and
UPS).
 EBITDA margin came in at 14.1% (down 130 bps yoy), which was 80 bps below our
estimates due to lower-than expected gross margin. Gross margin declined by 120 bps qoq
despite 3.7% sequential reduction in LME lead prices, which was surprising. We expect some
improvement going ahead given further decline in lead prices over the past two to three
months (refer to Exhibit 3 below). Employee cost and other expenses grew by 13-21% yoy
leading to operating leverage benefit.
Nishit Jalan
nishit.jalan@kotak.com
Fine-tune earnings estimates; maintain SELL, revise TP to `235 Mumbai: +91-22-4336-0877
We have increased our FY2019-21E earnings estimates by 1-2% on slightly higher revenue and Hitesh Goel
hitesh.goel@kotak.com
EBITDA margin assumptions as we factor in recent weakness in lead prices. We maintain our
Mumbai: +91-22-4336-0878
SELL rating on the stock; we believe that current valuation multiples don’t factor in structural
issues in major industrial segments such as home and commercial UPS (accounts for more than
35% of company’s overall revenues) due to improving power situation in India. SoTP-based TP
revised to `235 (from `225), value the core business at 17X FY2020E EPS (from 16X earlier).

Mumbai: +91-22-4336-0000
Automobiles Exide Industries
Exhibit 1: 1QFY19 EBITDA was 4% above our estimates on stronger revenue growth; PAT was 5% below our estimates
Interim results, March fiscal year-ends (₹ mn)
change (%)
1QFY19 1QFY19E 1QFY18 4QFY18 1QFY19E 1QFY18 4QFY18 FY2019E FY2018 Yoy (%)
Net sales 27,725 25,156 21,029 24,594 10.2 31.8 12.7 105,155 91,863 14.5
Raw materials (18,419) (16,075) (13,232) (16,032) 14.6 39.2 14.9 (68,864) (60,104) 14.6
Staff costs (1,620) (1,599) (1,430) (1,538) 1.3 13.2 5.3 (6,569) (5,972) 10.0
Other expenses (3,777) (3,729) (3,124) (3,644) 1.3 20.9 3.6 (14,401) (13,380) 7.6
Total expenses (23,815) (21,403) (17,786) (21,214) 11.3 33.9 12.3 (89,834) (79,456) 13.1
EBITDA 3,909 3,753 3,243 3,380 4.1 20.6 15.6 15,321 12,408 23.5
Depreciation (719) (680) (563) (674) 5.7 27.7 6.6 (2,916) (2,459)
EBIT 3,190 3,073 2,680 2,706 3.8 19.1 17.9 12,405 9,948 24.7
Other income 42 170 132 203 (75.3) (68.2) (79.3) 500 584
Interest expense (11) (5) (16) (6) (50) (52)
Profit before tax 3,221 3,238 2,796 2,903 (0.5) 15.2 11.0 12,855 10,480 22.7
Tax expense (1,122) (1,020) (906) (1,007) 10.0 23.8 11.4 (4,114) (3,378)
Exceptional expenses — — — - (418)
Profit after tax 2,099 2,218 1,890 1,896 (5.4) 11.1 10.7 8,742 6,683 30.8
Adjusted net profit 2,099 2,218 1,890 1,896 (5.4) 11.1 10.7 8,742 6,976 25.3
No. of shares 850 850 850 850 850 850
EPS (Rs/share) 2.5 2.6 2.2 2.2 (5.4) 11.1 10.7 10.3 8.2 25.3
Tax rate (%) 34.8 31.5 32.4 34.7 32.0 32.2
As % of net revenues
Raw material 66.4 63.9 62.9 65.2 65.5 65.4
Staff costs 5.8 6.4 6.8 6.3 6.2 6.5
Other expenses 13.6 14.8 14.9 14.8 13.7 14.6
EBITDA margin 14.1 14.9 15.4 13.7 14.6 13.5
EBIT margin 11.5 12.2 12.7 11.0 11.8 10.8
Exhibit 2: Exide has outperformed Amara Raja on revenue growth over the past three quarters
Comparison of revenue growth, gross margin and EBITDA margin of Amara Raja and Exide, March fiscal year-ends, 1QFY16-1QFY19 (%)
1QFY16 2QFY16 3QFY16 4QFY16 1QFY17 2QFY17 3QFY17 4QFY17 1QFY18 2QFY18 3QFY18 4QFY18 1QFY19
Amara Raja
Revenue growth (%) 9.9 8.0 14.4 7.3 16.8 15.8 9.5 17.4 13.4 7.1 17.1 17.6 NA
Gross margin (%) 35.1 35.6 38.2 37.7 33.8 36.1 35.0 32.0 30.0 34.0 33.1 31.3 NA
EBITDA margin (%) 17.7 17.4 19.0 16.8 17.2 17.2 15.4 13.7 12.9 16.7 15.6 13.3 NA
Exide
Revenue growth (%) (5.3) (1.0) (1.4) 7.2 11.1 10.3 11.6 11.6 4.6 22.4 32.7 24.5 31.8
Gross margin (%) 35.8 37.8 40.3 39.2 37.6 38.8 39.5 37.4 37.1 32.6 34.5 34.8 33.6
EBITDA margin (%) 14.7 14.6 15.6 15.0 15.7 15.0 13.3 13.3 15.4 12.6 12.4 13.7 14.1
Source: Companies, Kotak Institutional Equities

Exide Industries Automobiles
Exhibit 3: LME lead prices have come off over the past 3-4 months
Quarterly LME lead prices (assuming 1.5 quarter lag), March fiscal-year ends, 1QFY14-1QFY19
LME lead LME lead Qoq increase

(US$/ton) USD:INR rate (Rs/ton) (%)
1QFY14 2,113 54.4 114,899
2QFY14 2,084 58.9 122,738 6.8
3QFY14 2,119 63.0 133,505 8.8
4QFY14 2,120 62.1 131,660 (1.4)
1QFY15 2,083 60.7 126,487 (3.9)
2QFY15 2,158 59.9 129,282 2.2
3QFY15 2,092 61.1 127,837 (1.1)
4QFY15 1,902 62.3 118,562 (7.3)
1QFY16 1,901 62.7 119,247 0.6
2QFY16 1,806 63.8 115,228 (3.4)
3QFY16 1,690 65.7 111,084 (3.6)
4QFY16 1,687 67.0 113,049 1.8
1QFY17 1,758 67.0 117,759 4.2
2QFY17 1,762 67.1 118,276 0.4
3QFY17 1,984 66.8 132,542 12.1
4QFY17 2,244 67.9 152,368 15.0
1QFY18 2,243 65.3 146,468 (3.9)
2QFY18 2,200 64.4 141,680 (3.3)
3QFY18 2,428 64.7 157,092 10.9
4QFY18 2,539 64.1 162,750 3.6
1QFY19 2,388 65.6 156,653 (3.7)
July 2018 average 2,210 68.7 151,827 (3.1)
Source: Bloomberg, Kotak Institutional Equities
Exhibit 4: We expect 11% CAGR in automotive volumes over FY2018-21E

Automotive sales volume breakdown of Exide Industries by segments, March fiscal year-ends, 2011-21E (mn units, %)
2011 2012 2013 2014 2015 2016 2017 2018 2019E 2020E 2021E
Four-wheeler volumes (mn units)
OEM 3.8 4.0 3.9 3.8 3.8 3.8 3.9 4.2 4.7 5.2 5.9
Yoy change (%) 22.6 5.3 (2.0) (4.0) 0.7 (0.3) 2.4 8.0 12.0 10.0 10.0
Replacement 3.8 3.7 4.3 4.5 5.2 5.7 6.2 6.7 7.4 8.1 8.8
Yoy change (%) 7.7 (1.3) 15.9 5.0 15.0 10.0 9.0 8.0 10.0 9.0 9.0
Total four-wheeler volumes 7.6 7.7 8.2 8.3 9.0 9.5 10.1 10.9 12.1 13.3 14.7
Yoy change (%) 14.7 2.0 6.6 0.7 8.5 5.7 6.4 8.0 10.8 10.2 10.2
Replacement/OEM mix (X) 1.0 0.9 1.1 1.2 1.4 1.5 1.6 1.6 1.6 1.5 1.5
Two-wheeler volumes (mn units)
OEM 7.2 10.1 11.4 12.2 13.2 13.6 14.3 15.4 16.8 18.0 19.2
Yoy change (%) 30.9 39.4 13.5 7.0 8.0 3.0 5.0 8.0 9.0 7.0 7.0
Replacement 3.0 3.7 5.0 5.2 6.2 7.1 8.2 9.6 11.4 13.1 15.0
Yoy change (%) (7.3) 23.6 35.2 5.0 19.7 14.0 15.0 18.0 18.0 15.0 15.0
Total two-wheeler volumes 10.9 13.7 16.4 17.4 19.4 20.7 22.4 25.0 28.1 31.0 34.2
Yoy change (%) 25.3 25.8 19.3 6.4 11.5 6.5 8.4 11.6 12.5 10.2 10.4
Replacement/OEM mix (X) 0.4 0.4 0.4 0.4 0.5 0.5 0.6 0.6 0.7 0.7 0.8
Automotive volumes (mn units)
Total OEM volumes 11.0 14.1 15.3 16.0 17.0 17.4 18.1 19.6 21.5 23.2 25.1
Total replacement volumes 6.7 7.4 9.3 9.7 11.4 12.8 14.4 16.4 18.8 21.1 23.8
Total auto volumes 18.5 21.4 24.6 25.7 28.4 30.2 32.5 35.9 40.2 44.3 48.9
Yoy change (%) 20.7 16.0 14.7 4.5 10.5 6.3 7.8 10.5 11.9 10.2 10.3

Exhibit 5: The company has gained presence in the telecom segment in FY2018E
Revenue breakdown of Exide Industries by segments, March fiscal year-ends, 2014-21E (` mn, %)
2014 2015 2016 2017 2018 2019E 2020E 2021E
Revenue (Rs mn)
Four-wheeler OEM 6,538 6,978 6,612 7,040 8,363 9,554 10,701 11,985
Four-wheeler replacement 15,157 17,207 18,928 21,456 25,490 29,441 32,091 34,979
Two-wheeler OEM 5,513 5,629 5,508 6,014 7,145 7,944 8,500 9,095
Two-wheeler replacement 3,242 3,688 4,204 5,028 6,527 7,856 9,034 10,389
Auto revenue 30,450 33,501 35,251 39,539 47,525 54,795 60,325 66,448
Inverter battery 17,632 21,933 20,377 21,997 23,584 25,942 27,499 29,149
Inverter 960 1,122 962 1,077 1,185 1,303 1,434 1,577
UPS 8,855 8,588 8,588 9,103 10,469 12,039 13,483 15,101
Telecom 584 705 705 846 4,500 5,400 5,940 6,534
Submarine and others (such as E-rickshaw) 432 432 432 600 1,100 1,650 2,475 3,713
Exports 730 2,461 2,324 2,672 3,501 4,026 4,630 5,324
Industrial revenue 29,192 35,241 33,387 36,296 44,338 50,360 55,461 61,398
Total revenues 59,642 68,742 68,537 75,835 91,863 105,155 115,786 127,846
Revenue breakup (%)
Four-wheeler OEM 11.0 10.2 9.6 9.3 9.1 9.1 9.2 9.4
Four-wheeler replacement 25.4 25.0 27.6 28.3 27.7 28.0 27.7 27.4
Two-wheeler OEM 9.2 8.2 8.0 7.9 7.8 7.6 7.3 7.1
Two-wheeler replacement 5.4 5.4 6.1 6.6 7.1 7.5 7.8 8.1
Auto revenue 51.1 48.7 51.4 52.1 51.7 52.1 52.1 52.0
Inverter battery 29.6 31.9 29.7 29.0 25.7 24.7 23.7 22.8
Inverter 1.6 1.6 1.4 1.4 1.3 1.2 1.2 1.2
UPS 14.8 12.5 12.5 12.0 11.4 11.4 11.6 11.8
Telecom 1.0 1.0 1.0 1.1 4.9 5.1 5.1 5.1
Submarine and others (such as E-rickshaw) 0.7 0.6 0.6 0.8 1.2 1.6 2.1 2.9
Exports 1.2 3.6 3.4 3.5 3.8 3.8 4.0 4.2
Industrial revenue 48.9 51.3 48.7 47.9 48.3 47.9 47.9 48.0
Total 100.0 100.0 100.1 100.0 100.0 100.0 100.0 100.0
Exhibit 6: We have fine-tuned our FY2019-21E earnings estimates

Earnings revision table, March fiscal year-ends, 2019-20 (` mn, %)
New estimates Old estimates % change

2019E 2020E 2021E 2019E 2020E 2021E 2019E 2020E 2021E
Net sales 105,155 115,786 127,846 102,594 113,009 124,832 2.5 2.5 2.4
EBITDA 15,321 17,036 18,880 14,777 16,448 18,244 3.7 3.6 3.5
Margin (%) 14.6 14.7 14.8 14.4 14.6 14.6
Net Profit 8,742 9,707 10,831 8,631 9,573 10,606 1.3 1.4 2.1
Standalone EPS 10.3 11.4 12.7 10.2 11.3 12.5 1.3 1.4 2.1
Source: Kotak Institutional Equities estimates
Life insurance business adds `42/share to our target price

We value Exide Life Insurance at `42/share (`45/share earlier), i.e. 1.4X FY2018E (refer to
Exhibit 8 for SoTP valuation). Exide Life reported EV of `20.4 bn in September 2018 with
only 5% yoy growth. We are building in 9% EV CAGR between March 2018 and March
2020 in our forecasts. We note that a detailed EV walk (contribution of investment and
economic assumption changes in EV growth) constrains our ability to value the business.

Exide Industries Automobiles
Exhibit 7: We value Exide Industries at `235/share

SoTP of Exide Industries (`)
EPS Multiple Value per share

(Rs) (X) (Rs) Comments
March 2020E EPS 11.4 17 194
We build in 9% CAGR in Embedded Value (EV) over
ING Vysya (100% stake value) 42
FY2018-20E and assign 1.4X multiple to March 2020E EV
SOTP based value 236
Price target 235
Exhibit 8: Exide Life insurance adds `42/share to our target price

EV and RoEV, March fiscal year-ends, 2HFY16-2HFY20E
2HFY16 1HFY17 2HFY17 1HFY18 2HFY18 1HFY19E 2HFY19E 1HFY20E 2HFY20E

Embedded Value (Rs bn) 18.6 19.4 20.5 20.4 21.4 21.8 23.3 23.8 25.5
RoEV (%) 10 4 9 9
Multiple to EV (X) 1.4
Valuation (Rs bn) 36
Value per share of Exide (Rs/share) 41.9
Exhibit 9: APE of Exide Life Insurance grew by only 2% yoy in FY2018 as against industry growth of 16% yoy
Adjusted premium equivalent of life insurance players, March fiscal year-ends, 2011-2018 (Rs bn)
APE (Rs bn) YoY (%) Market share (%)
2011 2012 2013 2014 2015 2016 2017 2018 2012 2013 2014 2015 2016 2017 2018 2012 2013 2014 2015 2016 2017 2018
Bajaj Allianz Life 20 14 14 11 9 9 12 17 (29) (2) (17) (18) (2) 34 34 3 3 2 2 2 2 2
Birla Sunlife 16 12 11 9 9 8 11 12 (24) (11) (17) (7) (3) 30 11 2 2 2 2 2 2 2
DHFL Pramerica 0.7 0.9 1.3 1.1 1.8 2.0 2.5 4.0 35 43 (17) 63 11 21 62 0 0 0 0 0 0 1
Exide 6.4 6.1 5.2 5.0 4.4 4.9 6.2 6.3 (5) (15) (3) (12) 10 27 2 1 1 1 1 1 1 1
HDFC Life 30 28 32 25 32 36 41 53 (7) 16 (22) 26 14 13 29 5 6 5 7 7 6 7
ICICI Prudential Life 39 30 34 33 46 51 65 75 (23) 14 (5) 41 10 27 15 6 7 6 10 10 10 10
Max Life 17 15 15 18 20 21 27 32 (12) 0 17 10 8 26 21 3 3 3 4 4 4 4
Reliance Life 20 11 10 12 13 10 7 7 (44) (12) 19 8 (26) (24) 2 2 2 2 3 2 1 1
SBI Life 33 24 26 30 33 45 63 80 (27) 8 14 10 36 40 27 5 5 6 7 9 10 11
Private players 239 186 189 182 211 242 306 373 (22) 2 (3) 16 15 26 22 35 37 36 45 47 49 51
Private (ex. SBI, ICICI) 167 131 128 119 132 146 178 218 (21) (3) (7) 10 11 21 23 25 25 23 28 28 28 30
LIC 308 343 326 331 253 279 324 360 12 (5) 1 (23) 10 16 11 65 63 64 55 53 51 49
Total industry 547 529 515 513 464 521 630 733 (3) (3) (0) (9) 12 21 16

Exhibit 10: We expect EPS to grow at 16% CAGR during FY2018-21E

Financial summary of Exide Industries, March fiscal year-ends, 2011-21E (` mn)
2011 2012 2013 2014 2015 2016 2017 2018 2019E 2020E 2021E
Net sales 45,536 51,070 60,714 59,642 68,742 68,537 75,835 91,863 105,155 115,786 127,846
EBITDA 8,633 6,839 7,841 8,145 9,077 10,161 10,825 12,408 15,321 17,036 18,880
Other income 1,038 668 753 353 320 517 1,039 584 500 565 742
Interest (57) (48) (36) (12) (17) (17) (43) (52) (50) (40) (40)
Depreciation (835) (1,007) (1,135) (1,256) (1,395) (1,579) (2,063) (2,459) (2,916) (3,286) (3,653)
Profit before tax 8,780 6,452 7,423 7,231 7,985 9,082 9,757 10,480 12,855 14,275 15,928
Tax expense (2,740) (1,840) (2,195) (2,360) (2,526) (2,837) (2,821) (3,378) (4,114) (4,568) (5,097)
Adjusted net profit 6,180 4,612 5,228 4,871 5,459 6,245 6,936 6,976 8,742 9,707 10,831
Adjusted earnings per share (Rs) 7.3 5.4 6.2 5.7 6.4 7.3 8.2 8.2 10.3 11.4 12.7
Equity 27,425 30,573 34,236 37,315 40,546 45,114 49,636 53,893 59,575 65,712 72,463
Total borrowings 22 — — — — 1,025 1,702 — — — —
Deferred Tax Liability 675 825 977 1,051 1,259 1,270 1,552 1,405 1,405 1,405 1,405
Current liabilities 7,964 9,546 10,271 11,201 12,046 13,975 14,866 18,671 20,148 22,175 24,446
Total liabilities 36,085 40,944 45,484 49,566 53,851 61,384 67,756 73,969 81,128 89,292 98,313
Net fixed assets 9,018 9,932 10,532 10,490 11,728 14,512 16,874 21,918 25,002 27,716 30,063
Investments 13,780 15,546 16,401 19,670 18,957 26,978 26,739 19,690 19,690 19,690 19,690
Cash 148 577 748 1,200 298 738 196 872 571 2,417 4,951
Other current assets 13,140 14,889 17,803 18,207 22,868 19,155 23,947 31,489 35,865 39,469 43,609
Total assets 36,085 40,944 45,484 49,566 53,851 61,384 67,756 73,969 81,128 89,292 98,313
Operating cash flow 6,959 5,769 6,514 6,201 7,062 7,615 8,150 8,732 11,658 12,993 14,484
Working capital changes (2,015) (168) (2,188) 526 (3,804) 5,783 (3,840) (3,563) (2,899) (1,577) (1,870)
Capital expenditure (2,708) (1,921) (1,735) (1,214) (2,633) (3,948) (4,158) (7,714) (6,000) (6,000) (6,000)
Free cash flow 2,237 3,680 2,591 5,513 626 9,450 152 (2,545) 2,759 5,416 6,615
Ratios
Gross margin (%) 39.7 34.9 35.7 36.5 36.0 38.1 37.8 34.6 34.5 34.6 34.4
EBITDA margin (%) 19.0 13.4 12.9 13.7 13.2 14.8 14.3 13.5 14.6 14.7 14.8
PAT margin (%) 13.6 9.0 8.6 8.2 7.9 9.1 9.1 7.6 8.3 8.4 8.5
Book Value (Rs/share) 32.3 36.0 40.3 43.9 47.7 53.1 58.4 63.4 70.1 77.3 85.3
RoAE (%) 24.9 15.9 16.1 13.6 14.0 14.6 14.6 13.5 15.4 15.5 15.7

SELL
IIFL Holdings (IIFL)
NBFCs AUGUST 02, 2018
RESULT
Coverage view: Neutral
Wealth and NBFC strong; broking yields down. IIFL Holdings reported 36% growth Price (`): 684
in PAT before minority interest (Ind-AS) at `3.45 bn. Capital market-related income Target price (`): 625
(broking) business was subdued at 2% yoy growth. IIFL Finance reported 30% growth
BSE-30: 37,522
in IGAAP PAT on the back of 44% loan growth. 25% growth in wealth assets has
driven 25% earnings growth for the wealth management business. We revise
estimates; retain SELL with TP of `625 (unchanged).
India Infoline
Market Cap. (Rs bn) 218.4 EPS growth (%) 32.4 31.5 18.6 QUICK NUMBERS
Promoters 29.0 NII (Rs bn) 21.9 30.7 36.8  Consolidated PAT
MFs 2.5 BVPS 158.8 210.4 243.8
up 36% yoy in
Price performance (%) 1M 3M 12M P/B (X) 4.3 3.3 2.8 1QFY19
Absolute 2.1 (10.9) 16.6 ROE (%) 19.0 20.5 20.0
Rel. to BSE-30 (3.6) (16.5) 1.2 Div. Yield (%) 0.9 1.2 1.4  AUM increased 31%
yoy in 1QFY19 for
Wealth most attractive post demerger IIFL Finance
 Post the demerger of IIFL Holdings, we believe that IIFL Wealth will emerge as the most  Wealth AUM up
attractive stock given its strong franchise in a niche segment, increasing and innovative 25% yoy in 1QFY19
bouquet of products, investments in business by consistently adding new RMs and buoyancy
in financial savings in general. High growth and improving operating and financial leverage
will drive earnings even as agency realizations trend down over time. We expect IIFL Wealth
to deliver 28% earnings CAGR during FY2018-21E and 20% RoE on the back of 25% CAGR
in AUMs. At our target price, the business will trade at 20X PER and 3.5X book FY2020E.
 We expect IIFL Finance to deliver 16-17% medium-term RoE on the back of 25% loan book
CAGR, translating into 20% CAGR in earnings. It delivered 31% earnings growth in FY2018
(30% IGAAP PAT growth in 1QFY19) on the back of about 40% loan book growth
translating into 2.2% RoA and 15% RoE in FY2018. While multiple growth drivers help
maintain momentum, absence of identifiable niche will likely put pressure on valuation
multiples.
 The capital market-linked business is relatively small and exposed to the volatility in capital
markets. Falling commission yields and questionable prospects of a standalone broking
business will put pressure on its valuations.
Mixed trends in various businesses; await better entry point; SELL Nischint Chawathe
nischint.chawathe@kotak.com
Mumbai: +91-22-4336-0887
We are revising up our earnings estimates by 8-10% on the back of higher income in the
wealth business and align the NBFC with the new accounting norms. We expect the company M B Mahesh CFA
mb.mahesh@kotak.com
to deliver 22% medium-term RoE and 22% EPS CAGR during FY2018-21E. A strong and
Mumbai: +91-22-4336-0886
growing franchise of the wealth business drives its valuations while concerns on long-term
prospects of the broking business will put pressure on the broking business multiples; high loan Dipanjan Ghosh
dipanjan.ghosh@kotak.com
book growth will support near-term valuations of IIFL Finance even as long-term concerns on its Mumbai: +91-22-4336-0888
differentiators remain. We retain our March 2020E-based TP for IIFL Holdings at `625 to reflect
(1) 2.1X book to IIFL Finance (down from 2.25X), (2) 20X earnings for the wealth business (51% Shrey Singh
shrey.singh@kotak.com
stake post recent capital issuance) and (3) 10X earnings for the broking business (down from +91-22-4336-0895
12X).

Mumbai: +91-22-4336-0000
NBFCs IIFL Holdings
Exhibit 1: IFL Holdings – quarterly financial statements

March fiscal year-ends, 1QFY18-1QFY19 (` mn)
Ind-AS IGAAP Ind-AS IGAAP Ind-AS IGAAP Ind-AS
(% chg.)
1QFY19 1QFY19E 1QFY18 4QFY18 1QFY19E 1QFY18 4QFY18 2019E 2018 (% chg.) 2020E (% chg.)
Q uarterly financials
Total income 18,064 17,385 14,346 17,636 4 26 2 84,181 64,591 30 104,864 62
Broking and related income 2,078 2,098 2,045 1,886 (1) 2 10 7,132 7,197 (1) 8,286 15
Equity brokerage 2,048 1,914 2,015 1,856 7 2 10 6,784 6,417 6 7,928 24
Distribution/wealth 2,453 2,365 1,923 2,741 4 28 (11) 10,235 9,533 7 12,136 27
Financing income 12,978 12,861 9,994 13,298 1 30 (2) 66,654 47,861 39 84,282 76
O ther income 555 61 384 (290) 803 44 NM 160 (0) NM 160 NM
O perating expenses 5,155 6,282 4,379 6,229 (18) 18 (17) 25,354 21,290 19 29,970 41
Direct expenses 301 2,151 644 771 (86) (53) (61) 6,052 5,764 5 7,687 33
Employees expenses 3,107 3,130 2,206 3,099 (1) 41 0 12,199 10,608 15 13,663 29
Administration expneses 1,747 1,000 1,529 2,359 75 14 (26) 7,102 4,918 44 8,620 75
EBDITA 12,908 11,103 9,967 11,407 16 30 13 58,827 43,301 36 74,893 73
Depreciation 195 113 150 191 72 30 2 738 671 10 812 21
EBITA 12,714 10,990 9,817 11,216 16 30 13 58,089 42,630 36 74,081 74
Interest 7,573 6,280 6,052 6,730 21 25 13 35,933 25,954 38 47,470 83
PBT 5,141 4,710 3,766 4,486 9 37 15 22,156 16,676 33 26,611 60
Taxation 1,681 1,492 1,221 1,306 13 38 29 6,647 5,056 31 7,983 58
PAT bef. minority interest 3,446 3,224 2,528 3,180 7 36 8 15,509 11,620 33 18,628 60
Minority interest 783 626 552 697 25 42 12 3,524 2,508 40 4,407 76
PAT 2,663 2,598 1,976 2,483 3 35 7 11,985 9,112 32 14,221 56
Tax rate (%) 32.7 31.7 32.4 29.1 102 bps 28 bps 359 bps 30.0 30.3 -32 bps 30.0 -32 bps
Average daily volumes and market share
IIFL - F&O (Rs bn) 155 100 159 55 (3)
Market - F&O (Rs bn) 8,373 5,367 8,249 56 1
Market share - F&O (%) 1.8 1.9 1.9 -1 bps -8 bps
IIFL - cash (Rs bn) 12.1 11.1 15.6 9 (22)
Market - cash (Rs bn) 336 295 386 14 (13)
Market share - cash (%) 3.6 3.8 4.0 -17 bps -44 bps
O verall margins (%) 2.0 2.9 1.7 -95 bps 27 bps
Loan under management (Rs bn) 392.6 276.2 378.4 42 4
Segmental results (Rs mn)
PBT 5,127 3,749 4,486 37 14 10,113 8,392 (17) 11,959 42
Broking and related income 704 634 365 11 93
Finance 3,419 2,385 3,312 43 3
Distribution and marketing 899 710 804 27 12
Exhibit 2: IIFL Holdings: NBFC and Wealth drive value

SoTP-based valuation, March fiscal year-end, March 2020E
Valuation
(Rs mn) (Rs/ share) Comments
Broking 23,200 73 10X PER
NBFC (85% stake) 107,256 336 2.1X PBR
Wealth management (51% stake) 67,081 210 20X PER
Total 197,538 619

IIFL Holdings NBFCs
Exhibit 3: Reconciliation of profits under Ind-AS and IGAAP
Particulars 1QFY18 1QFY19 Remarks

Net profit after tax as per IGAAP 2,519 2,971
Add/(less)
Fair valuation of investments 264 28 MTM gain on investments.
Effective interest rate on financial assets 51 (23) Amortisation of upfront fees, acquisition cost.
Effective interest rate on financial liabilities (22) (2) Amortisation of cost incurred on borrowings.
Expected credit loss (336) 441 Release in Q1FY19 is due to resolution of old cases.
Interest strip amortization 14 358 Recognition of interest spread on NPV basis for large loan sell down in 1QFY19.
Reclassification of actuarial gains/losses on employment benefits 11 (46) Gain/(loss) on actuarial valuation of retiral benefits to employees.
Incremental cost on fair valuation of ESOP (23) NA
Others (33) (19) Includes goodwill, interest expense on preference shares, ESOP compensation etc.
Deferred tax impact on above adjustments 20 (263)
Net profit after tax as per Ind-AS 2,527 3,445
Other comprehensive income (net of tax) (7) 32 Gain/(loss) on actuarial valuation of retiral benefits to employees.
Total comprehensive income as per Ind-AS 2,520 3,477
Source: Company
IIFL Wealth: Agency income strong; pressure on lending business
 PBT growth of 21% yoy. IIFL Wealth delivered 21% PBT growth in 1QFY19 on the back
of 34% growth in agency income and 25% growth in wealth AUMs under Ind-AS. 27%
yoy decline in NII and higher cost-to-income ratio (35% versus 33% in 1QFY19) partially
offset high growth in agency income.
 Fee income growth of 34% yoy; yields inch up in 1QFY19; may moderate over
time. Agency fee income growth was 34% yoy on the back of 25% growth in AUMs
and marginal improvement in agency yield to 70 bps from 69 bps yoy. We expect agency
realizations to moderate to 64 bps by FY2020E from 71 bps in FY2018 as margins across
financial distribution businesses reduce over time.
 Net new money down in 1QFY19. Net new money (NNM) in 1QFY19 was down 54%
yoy. The company had large issuance last year. Slowdown in overseas mobilization due to
change in regulations for NRIs to invest through the AIF route and general slowdown in
market were the key reasons for low inflows in 1QFY19. The company is awaiting
regulatory clarity on the new policy for NRI investments in AIF; we hence believe that AIF
mobilizations will remain subdued in the near term.
 AUM growth of 25%; we expect 22% CAGR during FY2018-21E. IIFL reported 25%
growth in AUMs to `1.4 tn during the quarter. Post regrouping of some of its mutual
funds (direct) assets with mutual funds distribution assets, this segment was up 30% yoy
(on like to like basis). Discretionary assets were up 53% in line with its policy to shift
focus to this segment. Offshore discretionary assets were down qoq and will likely remain
muted in the near term as discussed above.
 Pressure in NBFC over the medium term. Wealth NBFC loan book grew 56% yoy but
down 16% qoq to `56 bn. NII from this business was down 27% yoy. According to the
management, the company had booked one-off income of `150 mn in 1QFY18 leading
to a high base; excluding the one-off, NII decline would be about 6%. Rise in borrowing
rates and competition on the asset side has put pressure on NIM, prompting the company
to go slow in the current quarter. In terms of pricing, the company targets RoE of 18-
20%, including agency and NBFC income. It has maintained its guidance that lending
book would be 5-6% of total wealth AUM from 4% currently; we forecast wealth NBFC
loan book at 4.75-5.1% of AUMs with pressure on calculated spreads continuing at 1.8-
2% from 3% in FY2018.

NBFCs IIFL Holdings
 Growth capital of `7.4 bn; leverage of 3-4X over the medium term. IIFL Wealth has
raised capital of `7.45 bn in 1QFY19 to support growth in its NBFC and seed investments
in various funds (currently at `3 bn; total investments of `10 bn in 4QFY18). This
transaction values the business at `146 bn. On a post-money basis, we forecast its
leverage (asset/equity) at 3.0-3.9X and RoE of 19-21%.
 Expense growth remains high in 1QFY19; we expect operating leverage to play

out. Operating costs increased 22% yoy, compared with ~25% growth in 1QFY19; cost
to income ratio (as a consequence of low NII) inched up to 49% from 47% in 1QFY18.
Staff expense grew 26% yoy. The company continues to add relationship managers (RM)
– number of RMs increased to 348 from 330 in 4QFY18, 226 at FY2017 and 195 at
FY2016; total employees including the investment team are about 700. Agency fees/RM
was `6.8 mn in 1QFY18, up from `6.37 mn in 4QFY18 but marginally lower than `7 mn
in 1QFY18. Non-staff expense growth was 11% yoy, driving some operating leverage.
We continue to build in improvement in cost-to-income ratio to 44% from 52% in
FY2018 as balance sheet growth and RM productivity matures – this is key sensitivity to
earnings as agency realizations reduce over time.
Exhibit 4: IIFL Wealth – AUA up 25% yoy

Quarterly P&L summary, March fiscal year-end, 1QFY17-1QFY19 (` mn)
IGAAP IGAAP IGAAP IGAAP Ind-AS IGAAP IGAAP IGAAP Ind-AS
1QFY17 2QFY17 3QFY17 4QFY17 1QFY18 2QFY18 3QFY18 4QFY18 1QFY19 YoY (%) QoQ (%)
Income statement
Income from operations 1,721 2,435 2,668 3,454 3,494 4,034 4,552 4,300 4,119 18 (4)
Agency 1,266 1,292 1,270 1,748 1,781 2,105 2,025 2,103 2,388 34 14
Interest income 455 1,143 1,398 1,706 1,713 1,929 2,527 2,197 1,731 1 (21)
O ther income - - 157 - - - - - -
Total income 1,721 2,435 2,825 3,454 3,494 4,034 4,552 4,300 4,119 18 (4)
Total expenses 810 925 1,195 1,219 1,168 1,409 1,499 1,580 1,424 22 (10)
Employee expenses 542 641 698 789 823 968 1,056 1,094 1,041 26 (5)
O ther expenses 268 284 497 430 345 441 443 486 383 11 (21)
EBITDA 911 1,510 1,630 2,235 2,326 2,625 3,053 2,720 2,695 16 (1)
Interest 115 653 674 1,090 1,027 1,422 1,724 1,431 1,228 20 (14)
Provisions 53 25 21 26 47 23 41 38 (44) (194) (216)
PBT 743 832 935 1,119 1,252 1,180 1,288 1,251 1,511 21 21
Tax 216 260 283 366 378 225 287 219 415 10 89
PAT before minority interest 527 572 652 753 874 955 1,001 1,032 1,096 25 6
Assets under advice (Rs bn) 654 764 812 949 1,126 1,175 1,282 1,318 1,409 25 7
Cost-income ratio (%) 47 38 45 35 33 35 33 37 35 114 bps -217 bps
PAT margin (%) 33 32 30 32 35 37 35 36 38 248 bps 194 bps
No. of RMs 211 176 220 226 253 283 317 330 348 38 5
Exhibit 5: IIFL Wealth earned net commission of 70 bps in 1QFY19

Wealth assets and commission yields, March fiscal-year ends, 1QFY17-1QFY19
IGAAP IGAAP IGAAP IGAAP Ind-AS IGAAP IGAAP IGAAP Ind-AS

1QFY17 2QFY17 3QFY17 4QFY17 1QFY18 2QFY18 3QFY18 4QFY18 1QFY19
Wealth assets (Rs bn) 654 764 812 949 1,126 1,175 1,282 1,318 1,409
(% of total)
Distribution 69 67 65 68 78 68 63 65 81
AMC/Discretionary 10 10 11 10 9 9 11 10 11
Advisory 3 8 11 11 2 13 16 17 3
Discretionary (offshore) 18 16 13 11 11 10 10 8 5
Retention yield ex-FPI assets- KS (%)
Net commission/fees 0.79 0.73 0.64 0.79 0.69 0.73 0.66 0.65 0.70
Including fund based activities 0.25 1.01 1.01 1.07 0.95 0.91 0.92 0.88 0.85

IIFL Holdings NBFCs
Exhibit 6: IIFL Wealth Management – key ratios and growth rates

March fiscal year-ends, 2017-2021E (%)
IGAAP IGAAP Ind-AS Ind-AS Ind-AS

2017 2018 2019E 2020E 2021E
YoY (%)
Agency income (1) 44 28 19 17
Total income 83 59 21 18 16
PBT 60 37 35 28 23
PAT 48 54 34 28 23
AUA 53 39 25 23 19
Investments 96 (44) 10 10 10
Loan book 85 25 15 15
Key ratios (%)
Agency income/AAUA 0.7 0.7 0.7 0.7 0.6
Agency and capital income/AAUA 1.0 0.9 0.9 0.9 0.9
Cost-income ratio 40.4 34.5 31.4 31.5 31.5
PBT margin 45.9 46.1 51.2 53.0 54.6
PAT margin 24.0 23.6 26.0 28.1 29.9
Yield on loans/investments 14.2 12.5 11.0 11.0 11.0
Cost of funds 9.2 9.0 9.2 9.2 9.0
Spread 5.0 3.5 1.8 1.8 2.0
NIM 5.2 3.5 2.9 3.5 3.9
RoA 6.1 4.9 5.2 5.8 6.3
RoE 18.2 22.6 20.4 18.9 19.2

NBFCs IIFL Holdings
Exhibit 7: IIFL Wealth management – income statement and balance sheet

March fiscal year-ends, 2017-2021E (` mn)
IGAAP IGAAP Ind-AS Ind-AS Ind-AS
2017 2018 2019E 2020E 2021E
AUA break-up (Rs bn)
Total 949 1,318 1,649 2,029 2,414
Distribution 645 856 1,310 1,612 1,902
AMC/Discretionary 95 132 198 253 316
Advisory 104 224 67 97 136
Discretionary (offshore) 104 105 74 66 60
Income statement (Rs mn)

Income from operations 10,278 16,334 19,770 23,408 27,112
Agency 5,576 8,014 10,235 12,136 14,217
Interest income 4,702 8,320 9,536 11,272 12,895
O ther income 157 — — — —
Total income 10,435 16,334 19,770 23,408 27,112
Total expenses 4,149 5,641 6,202 7,367 8,528
Employee expenses 2,670 3,926 4,230 5,000 5,688
O ther expenses 1,479 1,715 1,972 2,367 2,840
EBITDA 6,286 10,693 13,568 16,042 18,584
Interest 2,532 5,585 6,717 7,308 7,834
Provisions 125 149 168 193 222
PBT 3,629 4,959 6,684 8,541 10,529
Tax 1,125 1,107 1,537 1,964 2,422
PAT 2,504 3,852 5,146 6,577 8,107

Fixed assets 565 806 1,048 1,257 1,446
Investments 19,343 10,761 11,837 13,021 14,323
Net Loans 36,166 67,011 83,764 96,328 110,778
Net Current Assets 12,969 10,594 10,594 10,594 10,594
Total assets 69,043 89,172 107,243 121,200 137,140
Share capital 156 160 169 169 169

Reserves and Surplus 15,086 18,736 31,330 37,907 46,015
Net worth 15,242 18,896 31,499 38,076 46,183
Minority Interest — — — — —
Borrowings 53,801 70,276 75,743 83,124 90,957
Total liabilities and net worth 69,043 89,172 107,243 121,200 137,140

IIFL Holdings NBFCs
IIFL Finance: Strong growth in AUM at 44% yoy
 AUM growth maintains momentum. IIFL Finance reported AUM of `337 bn, up 44%
yoy and 8% qoq. Excluding the capital market loans, AUM growth was marginally higher
at 46% yoy in 1QFY19. Growth is driven by MFI, MSME and CV loans; up 2.9X, 1.4X and
45% yoy, respectively. CV loans have grown at a steep pace in the past few quarters on
the back of rapid rise CV sales – we believe that growth in this segment will moderate in
the near term. Gold loans which revived momentum in 4QFY18 increased at a sharp pace
(up 60% yoy) – we are not sure if this growth will sustain. Home loans and construction
finance loans witnessed robust growth at 57% and 37% yoy in 1QFY19. LAP and capital
market loan book continued to remain muted at 4% and 10% yoy, respectively.
 Ind-AS earnings growth at 66% yoy. Strong growth in earnings was led by robust NII
growth at 50% yoy and drop in provisions by 41% yoy. NII growth was driven by up-
front recognition of income on assigned loans worth `358 mn in 1QFY19 compared to
`14 mn in 1QFY18 – adjusting for this, NII growth would be 40% yoy. Credit cost
witnessed 41% yoy drop to 0.4% (down 60 bps yoy) on the back of improved asset
quality across most segments. Other income growth was robust at 31% yoy. There was
marginal drag on the cost side with operating expenses recording 56% yoy growth in
1QFY19. Investment in infrastructure and focus on increasing penetration are driving
spike in operating expenses.
 Focus on affordable housing drive home loans. Home loans growth was robust at
57% yoy in 1QFY19; a trend observed over the past three quarters. IIFL is positioned at
the lower end of the ticket size with average ticket size of `2.1 mn (down from `2.6 mn
in FY2017). The company continues to focus on the salaried segment. IIFL has recently
increased lending towards affordable housing segment. These loans accounted for 21%
of home loan disbursements in 1FY19 and AUM stood at 13% of home loan book. Under
the PMJDY scheme, the company has extended subsidies to ~14,000 customers with
total disbursals accounting to ~`3.2 bn. Going ahead, increase in penetration to smaller
cities and tier-II towns will drive volume growth in this space. The number of home loan,
gold and microfinance business branches increased to 1,547 in 1QFY19.
 MSME and micro-finance loans continue to ramp up. MFI loans increased by 2.9X
yoy on a low base to `11 bn in 1QFY19. MSME loans increased 1.4X yoy to `25.3 bn by
1QFY19. With gradual stabilization of the economy post demonetization and increased
penetration of IIFL’s branches, this segment has seen strong growth since 2HFY18. In the
MSME space, the company if focusing on lower ticket size segments (`0.4-0.5 mn) where
yields are high.
 CV loans gain traction. CV loan market has seen strong upsurge in demand in the past
few quarters driven by pickup in infrastructure and e-commerce activities. AUM growth
picked pace in 1QFY19 at 45% yoy; up 46% and 34% yoy in 4QFY18 and 3QFY18. We
expect some moderation in this segment in the near term.
 Going slow on LAP. LAP growth was muted at 4% yoy and flat qoq. Target segment is
smaller-ticket LAP in the range of `6-7 mn largely spread across the country with average
portfolio yield of ~12-13%. The company is gradually de-focusing this book owing to
asset quality pressure faced in FY2018 post demonetization – net NPL increased to 1.9%
by 2QFY18 from 0.9% in 4QFY17. Notably, many NBFCs that went slow in this segment
post demonetization are slowly scaling up again but IIFL maintains a cautious stance.

NBFCs IIFL Holdings
 Asset quality stable yoy; up 30 bps qoq to 2%. GNPL ratio was flat yoy at 2% (up 30
bps qoq). NNPL increased in CV, MSME and home loan segments qoq in 1QFY19. The
company moved to ECL-based provisioning norms starting 1QFY19. The coverage on
stage-3 loans stands at 57%. We provision coverage ratio on stage 1 and 2 loans at
1.4% from 0.4% earlier.
 AUM growth to remain strong going ahead. We project ~25% AUM CAGR over
FY2018-21E driven by CV, MSME/ MFI and gold loans. The share of unsecured loans,
currently at ~90% of AUM is expected to increase at a sharp pace.
 Focus on high-yield loans augurs well for NIM. IIFL Finance reported strong NII
growth in 1QFY19 due to recognition of `358 mn of up-front income on assigned loans
(as per Ind-AS accounting). We have however not factored any one-off gains going
ahead. It would be inaccurate to compare FY2019E and FY2018 due to migration to Ind-
AS. Despite building in rise in funding costs, we expect yields and spreads to expand in
FY2020-21E due to increasing shift to high-yielding retail products like MSME/MFI loans.
Recent rise in home loan rates (20-30 bps) will also provide a boost.

IIFL Holdings NBFCs
Exhibit 8: IIFL Finance - quarterly data

March fiscal year-ends, 1QFY18-1QFY19 (` mn)
Ind-AS IGAAP IGAAP IGAAP Ind-AS
1QFY18 2QFY18 3QFY18 4QFY18 1QFY19 YoY (%) QoQ (%)
Income statement (Rs mn)
Interest income 8,281 8,861 9,186 9,634 11,247 36 17
Interest expenses 4,850 4,848 5,087 5,159 6,103 26 18
Net interest income 3,431 4,013 4,099 4,475 5,144 50 15
O ther income 523 653 887 738 683 31 (7)
Provisions 583 958 898 563 345 (41) (39)
O perating expenses 1,587 1,671 1,898 2,254 2,481 56 10
PBT 1,784 2,037 2,190 2,396 3,001 68 25
Tax 612 715 734 794 1,052 72 32
PAT 1,172 1,322 1,456 1,602 1,949 66 22
O utstanding loan book (Rs bn) 204 230 236 276 284 39 3
Loans outside balance sheet (Rs bn) 29 30 37 35 53 79 50
Loans under management (Rs bn) 233 260 273 311 337 44 8
Home Loans 60 67 75 86 93 57 9
Loans Against Property 55 55 56 57 57 4 (0)
Construction & Real Estate 35 35 38 43 48 37 11
Gold 28 31 34 40 45 60 11
Commercial Vehicle 30 32 36 41 43 45 6
Capital Market 12 22 10 11 14 10 27
Micro-finance 3 4 6 8 11 291 32
MSME & O thers 11 15 19 25 25 139 2
Key ratios (%)
NIM - KS Estimate 6.9 7.4 7.0 7.0 7.4
CAR 20.6 18.4 18.2 16.2 19.0
Asset quality
Gross NPL (%) 2.0 2.0 2.1 1.7 2.0
Net NPL (%) 0.8 1.1 1.2 0.8 0.9
Exhibit 9: Share of terms loans continues to trend down

Borrowings mix, March fiscal year-ends, 2012-1QFY19 (%)
Term loan NCD CP

100
23 19 18 21
29 34 34
80 41
34 34
60 20 33 39
20
28
29
40
51 46 47 48
20 45 40 38
30
0
2012 2013 2014 2015 2016 2017 2018 1QFY19

NBFCs IIFL Holdings
Exhibit 10: Key highlights of various products

Product portfolio break-up, March fiscal year-ends, 1QFY19
Average
Portfolio share Net NPL Yield ticket LTV
(%) (%) (%) (Rs mn) (%)
Home loan 28 0.6 9.8 2.1 69
Loan against property 17 0.6 12.3 6.9 49
Construction finance 14 0.8 14.9 11.1 48
Commercial vehicle finance 13 3.0 15.7 1.4 75
Gold loan 13 - 20.1 0.1 69
Capital market finance 4 - 11.2 6.4 42
MSME loan 8 2.4 23.2 0.7 55
Microfinance 3 - 25.1
Total 100 0.9 14.5
Exhibit 11: Mixed trends in NPLs

Product-wise net NPL ratios, March fiscal year-ends, 1QFY18-1QFY19 (%)
IGAAP IGAAP IGAAP IGAAP Ind-AS

1QFY18 2QFY18 3QFY18 4QFY18 1QFY19
Home loan 0.3 0.3 0.3 0.3 0.6
Loan against property 1.1 1.9 1.7 1.0 0.6
Construction finance 0.2 1.4 2.3 1.4 0.8
Commercial vehicle finance 4.2 3.2 2.3 1.5 3.0
Gold loan 0.2 0.2 0.2 0.1 -
Capital market finance - - - - -
MSME loan 2.3 1.2 1.3 1.4 2.4
Microfinance - 0.5 - - -
Total 0.9 1.1 1.2 0.8 0.9

IIFL Holdings NBFCs
Exhibit 12: IIFL Finance – key ratios, growth rates and financial statements
March fiscal year-ends, 2016-2021E
IGAAP IGAAP IGAAP Ind-AS Ind-AS Ind-AS
2016 2017 2018 2019E 2020E 2021E
Key ratios (%)
Interest yield (%) 16.0 16.2 15.3 14.8 15.1 15.1
Interest cost (%) 11.5 10.7 9.1 9.4 9.3 9.3
Spread (%) 4.5 5.5 6.2 5.4 5.8 5.8
NIM (%) 6.1 6.6 7.0 7.0 6.6 6.5
Loan growth (%) 21.2 8.5 43.2 49.7 22.3 20.8
Income on investments (%) 2.0 2.0 2.0 2.0 2.0 2.0
O pex/ loans (%) 3.0 3.0 3.2 3.7 3.5 3.5
Credit cost/ loans (%) 0.7 1.0 1.3 1.3 1.2 1.2
PAT / average loans (%) 2.1 2.3 2.4 1.8 1.7 1.7
Du Pont Analysis (% of total assets)
NII/ assets 5.9 6.1 6.4 6.7 6.4 6.4
O ther income/ assets 0.8 0.8 1.0 0.8 0.7 0.7
Provisions/ assets 0.6 0.9 1.2 1.2 1.1 1.2
O pex/ assets 2.9 2.8 2.9 3.5 3.4 3.4
PBT/ assets 3.1 3.3 3.3 2.8 2.5 2.5
(1-tax rate) 0.7 0.7 0.7 0.7 0.7 0.7
PAT/ assets 2.0 2.1 2.2 1.9 1.7 1.6
Average assets/ average equity (X) 8.2 7.1 6.9 8.6 10.1 10.8
PAT/ average equity 16.6 15.1 15.0 16.0 16.8 17.7
Profit and loss statement (Rs mn)
Interest income 25,947 30,064 35,952 53,641 69,395 84,466
Interest expenses 16,091 17,875 19,637 29,516 39,278 47,949
Net interest income 9,856 12,189 16,315 24,124 30,117 36,517
O ther income 1,377 1,587 2,618 2,886 3,355 3,917
O ther interest income 120 169 598 718 862 1,034
Provisions 1,087 1,760 3,130 4,311 5,424 6,701
O perating expenses 4,937 5,525 7,411 12,587 16,089 19,545
Employee expenses 2,690 3,010 4,038 6,858 8,766 10,649
O ther opex 1,987 2,255 3,024 5,136 6,565 7,976
Depreciation 260 260 349 592 757 920
PBT 5,209 6,491 8,392 10,113 11,959 14,188
Tax 1,822 2,260 2,849 3,433 4,060 4,817
PAT 3,387 4,231 5,543 6,679 7,899 9,372
Fixed assets 655 1,241 919 1,149 1,436 1,795
Investments 2,475 14,365 10,898 7,629 7,629 7,629
Loan book 177,695 192,798 276,155 413,540 505,820 611,035
Total assets 179,358 218,934 290,943 426,181 519,677 626,272
Borrowings 153,127 181,044 249,059 378,949 465,731 565,432
Total liabilities 157,967 184,235 251,657 382,197 469,790 570,506
Networth 21,391 34,699 39,286 43,984 49,886 55,767
Broking yields compress

Equity broking revenues grew 2% yoy compared to 9% yoy growth in cash equities ADV
and 55% yoy growth in derivatives ADV for IIFL largely due to drop in commission yields (1.7
bps from 2.5 bps in 1QFY18); this is in line with trends in previous quarters. Share in the
cash market dropped 30 bps qoq to 3.7% (NSE) and 10 bps qoq to 1.9% in derivatives.

NBFCs IIFL Holdings
Exhibit 13: Cash equity market volume increased 13% yoy in 1QFY19
Average daily volumes on BSE and NSE, March fiscal year-ends, 2008-1QFY19 (` bn)
Volumes in cash market
BSE NSE Total YoY F&O- NSE YoY Total vol. YoY
Period (Rs bn) (Rs bn) (Rs bn) (%) (Rs bn) (%) (Rs bn) (%)
2008 62 144 205 78 530 77 735 77
2009 45 113 158 (23) 453 (15) 611 (17)
2010 56 168 224 41 717 58 941 54
2011 44 141 184 (18) 1,148 60 1,332 42
2012 26 113 139 (25) 1,269 11 1,408 6
2013 32 127 158 (15) 1,306 56 1,465 43
2014 21 112 133 2 1,530 21 1,663 19
2015 36 181 217 63 2,327 52 2,544 53
1Q FY16 26 177 203 (10) 2,700 45 2,903 39
2Q FY16 28 177 205 (5) 2,602 9 2,807 8
3Q FY16 27 163 189 (4) 2,236 (5) 2,425 (5)
4Q FY16 28 173 201 (12) 3,012 12 3,212 10
1Q FY17 26 174 200 (2) 2,983 10 3,183 10
2Q FY17 34 216 249 21 3,762 45 4,011 43
3Q FY17 29 195 224 18 4,036 80 4,259 76
4Q FY17 65 232 298 48 4,469 48 4,767 48
1Q FY18 41 254 295 48 5,367 80 5,662 78
2Q FY18 38 270 308 23 6,259 66 6,567 64
3Q FY18 46 312 358 60 6,806 69 7,164 68
4Q FY18 45 342 386 30 8,249 85 8,635 81
1Q FY19 33 301 334 13 8,362 56 8,696 54
Source: BSE, NSE, Kotak Institutional Equities
Exhibit 14: Equity market volumes were muted in 1QFY19

Volumes on BSE and NSE, March fiscal year-ends, 1996-1QFY19 (` bn)
Volumes (CM) (LHS) Volumes (F&O) (LHS)
Volume growth (CM) (RHS) Volume growth (F&O) (RHS)
9,000 600
7,200 450
5,400 300
3,600 150
1,800 -
- (150)
1997
1998
2000
2001
2003
2004
2006
2007
2009
2010
2012
2013
2015
2016
1996
1999
2002
2005
2008
2011
2014
3QFY17
4QFY17
2QFY18
3QFY18
1QFY19
1QFY17
2QFY17
1QFY18
4QFY18
Source: BSE, NSE, Kotak Institutional Equities

IIFL Holdings NBFCs
Exhibit 15: IIFL Holdings is currently trading at 19.4X one-year forward EPS
IIFL Holdings - Rolling PER, July 2012-July 2018 (X)
25
20
15
10
-
Jul-12
Jan-13
Jul-13
Jan-14
Jul-14
Jan-15
Jul-15
Jan-16
Jul-16
Jan-17
Jul-17
Jan-18
Jul-18
Source: Company, Bloomberg, Kotak Institutional Equities estimates
Exhibit 16: IIFL Holdings – summary of estimate changes

March fiscal year-end, 2019E-2021E (` mn)
Ind-AS IGAAP
New estimates Old estimates New vs old (%)
2019E 2020E 2021E 2019E 2020E 2021E 2019E 2020E 2021E
Income (inclduing NII) 48,248 57,394 67,345 44,194 50,657 57,408 9 13 17
Broking and related income 7,132 8,286 9,637 7,885 9,164 10,660 (10) (10) (10)
Insurance and wealth management 10,235 12,136 14,217 10,582 11,853 13,433 (3) 2 6
Net interest income 30,721 36,812 43,331 25,566 29,480 33,156 20 25 31
O ther income 160 160 160 160 160 160 - - -
O perating expenses 26,092 30,782 36,097 24,566 26,859 29,610 6 15 22
Brokerage/ direct expenses 6,052 7,687 9,762 6,052 6,355 6,673 - 21 46
Employee expenses 12,199 13,663 15,029 12,199 13,663 15,029 - - -
O thers expenses 7,840 9,432 11,305 6,314 6,841 7,908 24 38 43
PBT 22,156 26,611 31,248 19,628 23,798 27,798 13 12 12
Tax 6,647 7,983 9,374 5,888 7,139 8,339 13 12 12
PAT 15,509 18,628 21,874 13,740 16,658 19,459 13 12 12
Minority interest 3,524 4,407 5,378 3,052 3,683 4,353 15 20 24
PAT (after minority interest) 11,985 14,221 16,495 10,688 12,976 15,106 12 10 9
EPS (Rs/ share) 37.6 44.6 51.7 33.5 40.7 47.4 12 10 9
Loan book (Rs bn) 402 493 597
PBT/ total income (%) 46 46 46 44 47 48
Cost/ income (%) 54 54 54 56 53 52

NBFCs IIFL Holdings
Exhibit 17: IIFL Holdings – key ratios and growth rates

March fiscal year-ends, 2016-2021E (%)
2016 2017 2018 2019E 2020E 2021E
Key parameters
Volume in equity markets (Rs bn) 697,301 1,003,893 1,722,217 1,980,549 2,277,632 2,619,277
IIFL's volumes (Rs bn) 16,818 22,066 34,645 40,071 47,014 55,164
Per day (Rs bn) 74 96 163 189 223 262
Market share (%) 2.4 2.2 2.0 2.0 2.1 2.1
Commission yield (bps) 2.37 2.27 1.85 1.69 1.69 1.68
Key ratios
Yield on loans (%) 16.0 16.2 15.3 14.8 15.1 15.1
Cost of borrowings (%) 11.0 10.4 9.1 9.1 9.4 9.6
Spread (%) 5.0 5.8 6.3 5.7 5.7 5.5
Total operating costs/ total income (%) 58.0 48.1 46.6 41.7 40.9 40.5
PBT margins (%) 20.5 24.9 25.8 26.3 25.4 24.9
YoY growth (%)
Total revenues 12 20 31 30 25 20
Brokerage commission (5) 26 28 6 17 17
O perating costs 5 (3) 32 12 17 16
EBIT 17 32 28 36 28 21
Interest and finance charges 17 25 24 38 32 22
Profit before tax 16 46 36 33 20 17
Net profit 14 34 33 32 19 16
Dividend 41 8 34 32 19 16
EPS 12 34 32 32 19 16
Growth in balance sheet line items
Total assets 18 31 32 38 19 20
Shareholders equity 14 50 16 32 16 16
Contribution to total revenues(%)
Commission on equity broking 9.7 10.2 9.9 8.1 7.6 7.4
Brokerage in commodities 0.1 0.1 0.1 0.1 0.1 0.1
Fees earned on distribution (MF) 0.3 0.2 0.1 0.0 0.0 0.0
Life insurance commissions 1.5 1.1 1.7 0.0 0.0 0.0
O ther mortgage and loan distribution 13.7 12.7 12.4 12.2 11.6 11.3
Interest earned on margin trading/ finance income 72.5 73.7 74.1 79.2 80.4 80.9
Merchant banking income 0.5 1.0 1.1 0.4 0.3 0.2
Media and other income 1.3 0.7 0.6 0.0 0.0 0.0
Du pont analysis (% of average assets)
Net brokerage revenue 0.2 0.5 0.2 0.2 0.1 (0.1)
Income from distribution 3.0 2.6 2.6 2.2 2.0 2.0
O ther income 14.5 14.1 14.1 14.3 14.2 14.3
O perating costs 13.7 12.6 12.1 11.9 11.8 11.8
(1-tax rate) 65.8 67.2 69.7 70.0 70.0 70.0
RoA (%) 2.6 3.1 3.3 3.3 3.1 3.1
Average assets/ average equity (X) 6.1 5.4 5.7 6.2 6.4 6.5
RoE (%) 16.0 16.9 19.0 20.5 20.0 20.0

IIFL Holdings NBFCs
Exhibit 18: IIFL Holdings – income statement and balance sheet

March fiscal year-ends, 2016-2021E (` mn)
2016 2017 2018 2019E 2020E 2021E
Consolidated income statement
Total revenues 41,016 49,248 64,591 84,181 104,864 125,425
Commission on equity broking 3,987 5,013 6,417 6,784 7,928 9,267
Brokerage in commodities 60 40 40 48 58 69
Fees earned on distribution (MF) 140 120 40 - - -
Life insurance commissions 613 564 1,095 - - -
Wealth management/ distribution 5,610 6,264 8,037 10,235 12,136 14,217
Interest income 29,754 36,294 47,861 66,654 84,282 101,411
Media income 526 330 402 - - -
Merchant banking income 210 500 700 300 300 300
O ther income 116 124 (0) 160 160 160
O perating costs 14,045 13,627 18,013 20,101 23,483 27,260
Brokerage/ direct expenses 3,583 3,603 5,764 6,052 7,687 9,762
Business promotion and marketing 284 299 388 446 562 709
Staff expenses 7,045 7,840 10,608 12,199 13,663 15,029
Administrative expenses 3,133 1,885 1,253 1,403 1,571 1,760
Provisions 1,087 1,896 3,277 5,253 6,487 7,944
EBITDA 25,884 33,725 43,301 58,827 74,893 90,221
Depreciation/Amortization 661 540 671 738 812 893
EBIT 25,223 33,185 42,630 58,089 74,081 89,328
Interest and finance charges 16,800 20,922 25,954 35,933 47,470 58,080
Profit before tax 8,423 12,263 16,676 22,156 26,611 31,248
Taxation 2,878 4,018 5,056 6,647 7,983 9,374
Net profit 5,545 8,222 11,620 15,509 18,628 21,874
Minority interest in loss/profit 433 1,361 2,508 3,524 4,407 5,378
Net profit for appropriation 5,112 6,861 9,112 11,985 14,221 16,495
Dividend 1,345 1,449 1,945 2,563 3,041 3,528
Adjusted number of shares 317 318 319 319 319 319
EPS (Rs) 16.1 21.6 28.6 37.6 44.6 51.7
EPS -fully diluted (Rs) 14.8 19.8 26.2 34.5 40.9 47.5
DPS (Rs) 4.3 4.6 6.1 8.0 9.5 11.1
DPS -fully diluted (Rs) 3.9 4.2 5.6 7.4 8.8 10.2
Dividend payout ratio(%) 25 25 25 25 25 25
BVPS (Rs) 92.2 137.8 158.8 210.4 243.8 282.6
BVPS -fully diluted (Rs) 84.7 126.6 145.9 193.2 223.9 259.6
Consoidated balance sheet (Rs mn)
Goodwill (on consolidation) 578 637 — — — —
Net owned assets 4,805 6,766 7,899 3,648 4,087 4,643
Current Assets 25,607 27,446 21,815 18,787 14,693 17,754
Cash and bank balance 16,288 17,195 10,540 6,384 1,050 2,747
Loans and advances 177,695 228,962 343,167 497,304 602,148 721,813
Total assets 228,765 299,672 395,398 545,634 650,707 778,457
Borrowings 159,476 243,304 329,734 460,000 550,000 660,000

Current liabilities & prov. 28,332 — — — — —
Total liabilities 187,808 243,304 329,734 460,000 550,000 660,000
Shareholders equity 29,200 43,816 50,661 67,107 77,773 90,144
Paid-up capital 633 636 638 638 638 638
Reserves and surplus 28,566 43,180 50,023 66,469 77,135 89,506

SELL
Astral Poly Technik (ASTRA)
Others AUGUST 02, 2018
RESULT
Coverage view:
Results miss expectations; valuations remain expensive. Astral reported EBITDA 8%
below expectations, driven by modest 8% two-year CAGR in pipes volume and sharper- Price (`): 1,097
than-expected moderation in adhesives margins. We reiterate SELL with a revised TP of Target price (`): 640
`640 (`625 previously), as valuations remain expensive at 45X FY2020E EPS, higher BSE-30: 37,522
than branded players in adhesives/paints/consumer sectors, while ignoring that ~70%
of Astral’s profits comes from relatively low-margin and low-return pipes business.
Company data and valuation summary
Astra Poly Technik
52-week range (Rs) (high,low) 1,169-606 EPS (Rs) 14.7 19.1 24.6
MFs 6.4 EBITDA (Rs bn) 3.2 4.3 5.4
Absolute 8.9 15.5 76.3 ROE (%) 18.8 19.8 20.5
Rel. to BSE-30 2.8 8.2 53.0 Div. Yield (%) 0.1 0.1 0.1
Volume growth slows down in pipes business, although margins remain healthy
Astral’s consolidated revenues were 9% below our expectations at `4.77 bn, driven by lower-
than-expected growth in the pipes business. Reported EBITDA and net income were 8% below
our estimates at `779 mn and `376 mn (EPS of `3.1), respectively led by sharper-than-expected
sequential moderation in margins for adhesives business.
 15% growth in pipes volumes; 2-year CAGR of 8%. Pipes revenues grew by 15% yoy
reflecting similar increase in volumes to 22.5 ktons from a low base of 1QFY18, which was
impacted due to channel destocking before GST. Standalone pipes business EBITDA
increased by 49% yoy to `577 mn and net income jumped 43% yoy to `247 mn.
 25% growth in adhesives revenues. Adhesives revenues grew by 25% yoy to `1.4 bn in
1QFY19 indicating pickup in volumes. Adhesive margins expanded by 480 bps yoy to 14.4%,
a tad lower than our expectations.
Management optimistic on new projects and acquisition of Rex
Gehlot and Hosur on track and should start delivering in FY2019. Gehlot plant is
operational and started ramping up on new product lines. Hosur warehouse is already
operational and facility should be commissioned soon. The company expects to gain significant
logistics cost savings from these new units.
Plumbing market remains strong despite industry headwinds. The company expects the
plumbing volumes to keep growing at 15% over the medium term backed by replacement
market, gaining market share and better competitiveness of CPVC products. According to the
management, new construction activity remains weak and keeps a cap on market growth rate.
Optimistic on acquisition on Rex. The management was optimistic on acquisition of Rex
Polyextrusion, which will add portfolio of corrugated pipes business. Astral acquired 51% stake
in Rex for `752 mn cash and the remaining 49% in a share swap deal. Astral acquired Rex at an
Tarun Lakhotia
attractive valuation of 1X EV/sales where the company reported `1.69 bn revenue and `273 mn tarun.lakhotia@kotak.com
EBITDA in FY2018. Mumbai: +91-22-4336-0875
Retain SELL with a revised TP of `640 Akshay Bhor

akshay.bhor@kotak.com
We revise our EPS estimates to `19.1 (+1.7%) in FY2019 and `24.6 (+6.5%) in FY2020, as we Mumbai: +91-22-4336-0876
factor in (1) strong pipe volume growth from Rex acquisition and 15% volume CAGR in the
plumbing pipes business, (2) 110 bps margin expansion in the next three years led by adhesives
business and (3) other minor changes. Our target price stands at `640, based on 22X P/E
multiple for pipes profits and 40X multiple for adhesives profits on March 2020 estimates.

Mumbai: +91-22-4336-0000
Astral Poly Technik Others
Exhibit 1: Consolidated quarterly results (Rs mn)
(% chg.) yoy
1QFY19 1QFY19E 1QFY18 4QFY18 1QFY19E 1QFY18 4QFY18 FY2019E FY2018 (% chg.) FY2019E
Net sales 4,770 5,218 4,046 6,388 (8.6) 17.9 (25.3) 27,768 20,729 34.0 27,768
Total expenditure (3,991) (4,367) (3,561) (5,205) (8.6) 12.1 (23.3) (23,462) (17,561) 33.6 (23,462)
Raw materials (2,947) (3,335) (2,616) (4,149) (11.7) 12.6 (29.0) (17,689) (13,380) 32.2 (17,689)
Purchases of stock (48) 0 (52) (45) (8.2) 7.1 (634) (454) 39.8 (634)
Employee expenses (305) (298) (249) (292) 2.3 22.8 4.4 (1,225) (1,065) 15.0 (1,225)
O ther expenses (691) (733) (644) (719) (5.7) 7.3 (3.9) (3,914) (2,663) 47.0 (3,914)
EBITDA 779 851 485 1,183 (8.4) 60.7 (34.2) 4,306 3,168 35.9 4,306
O ther income 39 25 28 23 142 127 142
Interest (39) (42) (40) (42) (6.9) (3.2) (6.9) (188) (166) 13.8 (188)
Depreciation (161) (162) (136) (152) (0.9) 17.8 5.7 (736) (571) 28.8 (736)
Exchange fluctuation loss (78) (75) (9) (49) (50) (50) (50)
Pre-tax profits 541 597 328 963 (9.4) 65.0 (43.9) 3,474 2,508 38.5 3,474
Income tax (157) (179) (74) (300) (1,077) (725) (1,077)
Net profits 384 418 254 664 (8.1) 51.1 (42.1) 2,397 1,783 34.4 2,397
Share of loss from JVs 8 8 6 10 97 27 97
Net profits after minority 376 410 248 653 (8.2) 51.5 (42.4) 2,300 1,757 30.9 2,300
EPS (Rs) 3.1 3.4 2.1 5.5 (8.2) 51.5 (42.4) 19.2 14.7 30.9 19.2
O ther comprehensive income (12) 0 16 0 68
Total comprehensive income 364 249 669 2,300 1,825
Effective tax rate (%) 29.0 30.0 22.5 31.1 31.0 28.9 31.0
Operational details
Gross margins (%) 37.2 36.1 34.0 34.4 34.0 33.3 34.0
EBITDA margin (%) 16.3 16.3 12.0 18.5 15.5 15.3 15.5
Segment details
Segment revenue
Plastic 3,299 3,113 4,865 NA (32.2) 21,511 15,727 36.8 21,511
Adhesives 1,472 1,289 1,641 NA (10.3) 6,257 5,662 10.5 6,257
Less: excise duty — 329 — — 329
Net sales 4,770 4,073 6,506 17.1 (26.7) 27,768 21,060 31.9 27,768
Segment EBIT
Plastic 389 246 647 58.2 (40.0) 1,669
Adhesives 247 109 390 125.7 (36.8) 955
Total 635 355 1,038 79.0 (38.8) 2,624
Segment EBIT (%)
Plastic 11.8 7.9 13.3 49.3 (11.5) 10.6
Adhesives 16.8 8.5 23.8 97.8 (29.6) 16.9
Total 13.3 8.7 15.9 52.8 (16.5) 12.5
Pipes sales volume (tons) 22,476 19,539 31,618 15.0 (28.9) 129,590 103,991 24.6
Capital employed
Plastic 7,472 6,794 7,373 7,373
Adhesives 5,350 4,479 5,097 5,097
Unallocated (2,136) (2,431) (543) (543)
Total 10,687 8,842 11,927 11,927
Exhibit 2: Robust performance of adhesives and sealants business during 4QFY18

Financial performance of adhesives and sealants business, March fiscal year-ends, 2014-18 (Rs mn)
FY2014 FY2015 FY2016 FY2017 1QFY18 2QFY18 3QFY18 4QFY18 FY2018 1QFY19
Sales 3,283 3,847 4,103 4,545 1,134 1,273 1,338 1,562 5,319 1,413
EBITDA 247 350 420 586 109 186 200 320 816 204
EBITDA margin (%) 7.5 9.1 10.2 12.9 9.6 14.6 14.9 20.5 15.3 14.4

Others Astral Poly Technik
Exhibit 3: We expect Astral's EBITDA to grow at 25% CAGR over the next three years
Segment-wise revenues and profitability, March fiscal year-ends, 2016-21E (Rs mn)
2016 2017 2018 2019E 2020E 2021E

Revenues
Pipes and fittings 13,180 14,748 16,097 21,949 26,132 29,922
Adhesives and sealants 3,940 4,545 5,319 6,257 7,322 8,485
O thers/adjustments (342) (404) (356) (438) (513) (594)
Consolidated revenues 16,778 18,888 21,060 27,768 32,942 37,814
EBITDA
Pipes and fittings 1,658 2,070 2,366 3,292 4,113 4,740
Adhesives and sealants 421 586 816 1,032 1,262 1,496
O thers/adjustments (3) (18) (14) (17) (20) (24)
Consolidated EBITDA 2,076 2,638 3,168 4,306 5,355 6,211
Exhibit 4: 12-month forward P/E for Astral (X)
(X)
70
12-month forward P/E for Astral (X)
60
50
40
30
20
10
-
Apr-07
Apr-08
Apr-10
Apr-11
Apr-12
Apr-14
Apr-15
Apr-16
Apr-18
Apr-09
Apr-13
Apr-17
Oct-09
Oct-10
Oct-13
Oct-17
Oct-07
Oct-08
Oct-11
Oct-12
Oct-14
Oct-15
Oct-16
Source: Bloomberg, Kotak Institutional Equities estimates

Astral Poly Technik Others
Exhibit 5: Astral’s valuation is expensive at 44.6X FY2020E EPS, when compared to peers in
consumers and building products
Comparable valuation for building products companies, March fiscal year-ends, 2018-20E
Price Market cap. P/E (X) EPS growth (%)
(Rs) (Rs bn) 2018 2019E 2020E 2018 2019E 2020E
Astral 1,097 131 74.8 57.5 44.6 20.8 30.2 28.8
Adhesives/consumer electricals/paints
Asian Paints 1,437 763 55.6 47.9 42.9 7.2 16.1 11.7
Pidilite Industries 1,130 275 39.2 34.6 30.9 6.6 13.3 11.9
Havells India 631 899 61.8 52.0 45.8 11.5 18.8 13.7
Kansai Nerolac 476 257 47.5 41.8 35.3 13.1 13.3 18.6
Berger Paints 319 310 65.6 56.0 46.4 8.4 17.8 20.4
Crompton Greaves Consumer 243 184 95.9 55.2 40.2 191.7 73.6 37.5
Median 58.7 50.0 41.5 10.0 17.0 16.1
Mean 60.9 47.9 40.2 39.8 25.5 19.0
Building products
Supreme Industries 1,201 153 38.4 30.1 25.2 (5.1) 28.1 18.0
Finolex Industries 577 72 25.0 20.2 16.9 (17.9) 24.4 20.0
Century Plyboards 244 54 30.8 24.9 19.0 2.2 24.1 31.4
Cera Sanitaryware 2,766 36 34.3 28.3 22.8 (2.1) 22.1 24.1
Greenply 211 26 18.6 20.5 17.4 5.6 (9.0) 18.0
HSIL 327 24 26.1 23.1 15.5 (15.7) 12.2 49.3
Median 28.4 24.0 18.2 (3.6) 23.1 22.0
Mean 28.9 24.5 19.5 (5.5) 17.0 26.8
Source: Bloomberg, Kotak Institutional Equities estimates

Others Astral Poly Technik
Exhibit 6: Consolidated profit model, balance sheet, cash flow, March fiscal year-ends, 2014-21E (Rs mn)
2014 2015 2016 2017 2018E 2019E 2020E 2021E

Net sales 10,796 14,294 16,778 18,888 21,060 27,768 32,942 37,814
EBITDA 1,551 1,678 2,076 2,638 3,168 4,306 5,355 6,211
O ther income 24 36 23 91 127 142 157 172
Finance charges (311) (255) (302) (184) (216) (239) (209) (141)
Depreciation (219) (364) (418) (502) (571) (736) (873) (949)
Pre-tax profits 1,045 1,095 1,379 2,043 2,508 3,474 4,429 5,292
Income tax (252) (313) (296) (562) (725) (1,077) (1,440) (1,826)
Minority interest (4) (23) (65) (25) (27) (97) (27) (27)
Net profits 789 759 1,018 1,457 1,757 2,300 2,963 3,440
Earnings per share (Rs) 7.0 6.4 8.5 12.1 14.7 19.1 24.6 28.5

Total equity 3,160 6,353 7,216 8,591 10,318 13,308 16,132 19,405
Deferred tax liability 118 177 241 344 331 331 331 331
Total borrowings 1,420 2,026 1,306 1,569 2,159 2,274 1,474 674
O ther liabilities 2,245 3,097 4,274 4,112 3,944 5,077 5,905 6,706
Total liabilities and equity 6,944 11,653 13,038 14,616 16,751 20,989 23,841 27,115
Cash 10 115 499 166 437 643 1,409 2,741
Current assets 3,959 5,701 5,961 6,809 7,158 8,651 10,110 11,501
Total fixed assets 2,975 3,693 4,440 5,320 6,809 9,348 9,975 10,526
Goodwill — 2,144 2,137 2,321 2,347 2,347 2,347 2,347
Total assets 6,944 11,653 13,038 14,616 16,751 20,989 23,841 27,115

O perating cash flow, excl. working capital 1,028 1,222 1,525 2,018 2,447 2,991 3,706 4,244
Working capital (665) (306) 428 (1,064) 161 (360) (631) (591)
Capital expenditure (920) (854) (1,355) (1,602) (1,839) (2,552) (1,500) (1,500)
Investments 9 (2,588) (688) 9 (21) — — —
Free cash flow (548) (2,527) (90) (639) 748 79 1,575 2,153
Ratios (%)
Gross margins 28.4 26.6 28.4 31.0 34.3 34.0 34.4 34.5
EBITDA margins 14.4 11.7 12.4 14.0 15.0 15.5 16.3 16.4
Debt/equity 43.4 31.8 17.8 17.8 20.5 17.0 9.1 3.5
Net debt/equity 43.1 30.0 11.0 15.9 16.4 12.2 0.4 (10.6)
RoAE 27.4 15.8 14.8 18.0 18.2 19.2 20.0 19.3
Adjusted RoACE 25.3 14.3 15.6 16.7 16.3 17.8 19.0 20.2

ADD
Orient Cement (ORCMNT)
Cement AUGUST 02, 2018
RESULT
Coverage view: Cautious
A good quarter. Orient’s earnings were higher than our estimate aided by volume Price (`): 120
growth of 15% yoy and improved realizations—the company reported EBITDA of Rs854 Target price (`): 145
mn (-27% yoy, +15% qoq). Cement prices in the company’s key markets in
BSE-30: 37,522
Maharashtra have increased by Rs20/bag over the last six months—low prices in this
and adjoining regions had led to weak earnings performance over the last three years.
Valuations are inexpensive at 8X/6X FY2019-2020E EBITDA. Maintain ADD and revise
TP to Rs145 (from Rs165 earlier).

Orient Cement
MFs 22.3 EBITDA (Rs bn) 3.1 4.2 5.1
Absolute 8.8 (15.7) (22.1) ROE (%) 4.4 12.9 18.2
Rel. to BSE-30 2.7 (21.0) (32.4) Div. Yield (%) 0.6 1.3 1.7
Strong volume growth of 15% yoy aided a good quarter

Orient Cement’s earnings were higher than our estimates— the company reported revenues of
Rs6.4 bn (+13% yoy, +3% qoq), EBITDA of Rs854 mn (-27% yoy, +15% qoq) and net-income
of Rs160 mn (-59% yoy), against our estimate of Rs5.6 bn, Rs581 mn and Rs11 mn,
respectively. Earnings were aided by volume growth of 15% yoy to 1.6 m tons as the company
operated at 80% capacity utilization. Reported realization improved 8% qoq to Rs3,990/ton
(-2% yoy)—realizations appear optically higher due to higher sales on FoR basis (positive impact
on realization of Rs85/ton yoy). We highlight that cement prices in the company’s key markets
in Maharashtra, Karnataka and adjoining states were up 0 to 6% qoq (Exhibit 2).
Orient’s EBITDA/ton improved 20% qoq to Rs533 (-36% yoy) led by higher realization. Cost/ton
increased to Rs3,460 (+7% yoy, +6% yoy) due to (1) increase in fuel costs to Rs1,080/ton
(+12% yoy), and (2) higher freight costs of Rs1,130/ton (+16% yoy). The increase in freight cost
reflects higher diesel costs (+Rs71/ton) and FoR mix change (+Rs85/ton).
Cement prices in Maharashtra have improved after a weak 2HFY18
Orient has high concentration of sales in the West (mostly Maharashtra) and South where
cement prices were weak in 2HFY18. The company’s FY2018 sales were 46% in West markets,
39% in South and 15% in other regions—the sales are mostly in the states of Maharashtra,
Telangana, Karnataka and Andhra Pradesh, and nearby its plants as the company continues to
have the lowest lead distance among peers of less than 300 kms.
Abhishek Poddar
Prices in Maharashtra recovered over January to June 2018 by close to Rs20/bag; similarly prices abhishek.poddar@kotak.com
in AP/Telangana increased by Rs10/bag to Rs315-320/bag over this period. Orient reported very Mumbai: +91-22-4336-0861
weak EBITDA/ton in FY2016-2017 and 2HFY18 due to low prices in the West—we expect price
Murtuza Arsiwalla
improvement in these markets to continue to aid earnings. murtuza.arsiwalla@kotak.com
Mumbai: +91-22-4336-0870
We maintain ADD rating and revise TP to Rs145 (Rs165 earlier)
Samrat Verma
Orient’s valuations are less demanding relative to peers, even as continued earnings samrat.verma@kotak.com
disappointment for the sector has weighed on stock performance. The company is cost efficient Mumbai: +91-22-4336-0869
and running at 80% plant utilization but weak pricing in key markets has resulted in it
reporting EBITDA/ton in the lowest quartile among Indian cement names—we expect an
improvement here. The stock trades at 8X/6X FY2019/2020E EV/EBITDA and EV/ton of US$76
on FY2019E financials. We maintain ADD rating and revise target price to Rs145 (Rs165 earlier).

Mumbai: +91-22-4336-0000
Cement Orient Cement
Exhibit 1: Orient reported 15% yoy increase in volumes in 1QFY19; EBITDA/ton improved 20% qoq on better-than-expected realizations
Quarterly results for Orient Cement, March fiscal year-ends, 2017-2019E (Rs mn)
Change (%)
1QFY19 1QFY19E 1QFY18 4QFY18 KIE yoy qoq FY2019E FY2018 (% chg)
Net sales 6,399 5,608 5,682 6,197 14 13 3 25,601 22,223 15
Raw materials (661) (697) (618) (790) (3,051) (2,615)
Employee costs (400) (360) (350) (343) (1,523) (1,385)
Power costs (1,778) (1,522) (1,376) (1,692) (6,474) (5,807)
Freight costs (1,867) (1,564) (1,393) (1,769) (6,601) (5,937)
Other costs (839) (883) (777) (857) (3,709) (3,427)
EBITDA 854 581 1,169 746 47 (27) 15 4,244 3,052 39
EBITDA (%) 13.3 10.4 20.6 12.0 16.6 13.7
Other income 33 34 63 34 166 202
Interest (294) (285) (333) (284) (1,165) (1,292)
Depreciation (324) (315) (310) (314) (1,297) (1,262)
PBT 269 15 589 182 1,949 700
Tax (109) (5) (199) (54) (565) (258)
PAT 160 11 389 128 NM (59) 25 1,384 442 213
Extraordinaries — — — — — —
Reported PAT 160 11 389 128 1,384 442
EPS (Rs/share) 0.8 0.1 1.9 0.6 NM (59) 25 6.8 2.2 213
Sales (mn tons) 1.60 1.47 1.40 1.68 9 15 (4) 6.3 5.7 9
Realization (Rs/ton) 3,992 3,821 4,065 3,696 4 (2) 8 4,088 3,868 6
Cost (Rs/ton) (3,459) (3,425) (3,229) (3,251) 1 7 6 (3,410) (3,337) 2
Raw materials (412) (475) (442) (471) (487) (455)
Employee costs (249) (245) (250) (204) (243) (241)
Power & fuel costs (1,109) (1,037) (984) (1,009) (1,034) (1,011)
Freight costs (1,165) (1,066) (996) (1,055) (1,054) (1,033)
Other costs (523) (601) (556) (511) (592) (596)
Profitability (Rs/ton) 533 396 836 445 35 (36) 20 678 531 28
Tax rate (%) 41 30 34 30 29 37
Changes in our estimates

Exhibit 4 highlights key changes in our estimates.
We cut our realization assumption by 1-2% resulting in 3-9% cut in our EBITDA/ton
estimate to Rs680, Rs760 and Rs835 for FY2019E, FY2020E and FY2021E. Our EBITDA
estimate is cut by 3-5% to Rs4.2 bn, Rs5.1 bn and Rs6 bn for FY2019E, FY2020E and
FY2021E.
As a result of lower EBITDA, our EPS estimate is cut by 4-14%. We estimate EPS of Rs6.8,
Rs10.7 and Rs15.2 for FY2019E, FY2020E and FY2021E. Our target price is revised to
Rs145/share (Rs165/share earlier) based on 7X FY2020E EBITDA.
Key highlights of the 1QFY19 results
 Realization improves by 8% qoq. Orient’s realization improved by 8% qoq to

Rs3,990/ton (-2% yoy) led by (1) higher prices in the company’s key markets (Exhibit 2),
and (2) as well as the impact of higher FoR sales (+Rs85/ton yoy). Higher FoR sales has
also pushed up the company’s freight costs.
 Volumes increase by 15% yoy. The company’s volumes increased by 15% yoy to 1.6
mn tons (1.68 mn tons in 4QFY18) as it operated its plants at 80% utilization for the
quarter. The sales mix was largely unchanged with 66% in PPC---as per the company, this
has remained steady despite growth in demand from the non-trade/OPC segment.
 Increase in fuel costs. The company’s fuel costs increased to Rs1,077/ton (Rs964/ton in
1QFY18) due to an increase in pet-coke prices. The company also highlighted challenges
around availability of domestic coal which impacted these costs. The company expects
domestic coal availability to improve.

Orient Cement Cement
Exhibit 2: Higher prices in company’s key markets aided realizations in 1QFY19

Quarterly retail cement price trend in Orient's key markets (Rs/bag)
1QFY17 2QFY17 3QFY17 4QFY17 1QFY18 2QFY18 3QFY18 4QFY18 1QFY19 2QFY19E
Maharashtra 291 28 7 324 308 347 322 307 309 326 327
Andhra Pradesh 269 317 331 313 348 332 302 303 320 313
Karnataka 377 367 38 0 375 403 375 363 360 357 340
Change qoq (Rs/bag)
Maharashtra 16 (3) 37 (17) 39 (24) (15) 2 17 0
Andhra Pradesh (23) 48 14 (18 ) 36 (17) (30) 1 18 (8 )
Karnataka (2) (10) 13 (5) 28 (28 ) (12) (3) (3) (17)
Source: Industry, Kotak Institutional Equities estimates
Exhibit 3: Orient's realizations have been fairly volatile over the last few quarters affecting profitability
Quarterly realizations and EBITDA/ton for Orient Cement, 1QFY17-1QFY19 (Rs/ton)
Realization (Rs/ton) Minimum Maximum

EBITDA (Rs/ton) Minimum Maximum
4,200
1,000
4,000
800
3,800
600
3,600
400
3,400
3,200 200
3,000 -
1QFY17
2QFY17
3QFY17
4QFY17
1QFY18
2QFY18
3QFY18
4QFY18
1QFY19
1QFY17
2QFY17
3QFY17
4QFY17
1QFY18
2QFY18
3QFY18
4QFY18
1QFY19
Source: Quarterly realizations and EBITDA/ton for Orient Cement, 1QFY17-1QFY19 (Rs/ton)
Exhibit 4: Orient Cement, changes in estimates, March fiscal year ends, FY2019-2021E
Revised estimate Previous estimate Change (%)

2019E 2020E 2021E 2019E 2020E 2021E 2019E 2020E 2021E
Volume and realizations (mn tons, Rs/ton)
Cement sales (mn tons) 6.3 6.7 7.2 6.3 6.7 7.2 0 0 0
Realization (Rs/ton) 4,088 4,250 4,400 4,125 4,325 4,425 (1) (2) (1)
EBITDA (Rs/ton) 678 761 834 715 836 859 (5) (9) (3)
Earnings estimates (Rs mn)
Revenues 25,601 28,479 31,843 25,835 28,984 32,027 (1) (2) (1)
EBITDA 4,244 5,099 6,034 4,478 5,604 6,217 (5) (9) (3)
PAT 1,384 2,196 3,103 1,551 2,556 3,234 (11) (14) (4)
EPS 6.8 10.7 15.2 7.6 12.5 15.8 (11) (14) (4)

Cement Orient Cement
Exhibit 5: Orient Cement, Assumptions, March fiscal year ends, 2016-2021E (Rs mn)
2016 2017 2018 2019E 2020E 2021E CAGR (%)

Capacity (mn tons) 8.0 8.0 8.0 8.0 8.0 8.0 0
Utilization (%) 68 69 72 78 84 90
Volumes (mn tons) 4.4 5.6 5.7 6.3 6.7 7.2 8
Growth (%) 9 26 3 9 7 8
Realization (Rs/ton) 3,399 3,377 3,868 4,088 4,250 4,400 4
Growth (%) (9.9) (0.6) 14.5 5.7 4.0 3.5
EBITDA (Rs/ton) 398 321 531 678 761 834 16
Growth (%) (45.0) (19.5) 65.6 27.6 12.3 9.6
Revenues (Rs mn) 15,018 18,751 22,223 25,601 28,479 31,843 13
EBITDA (Rs mn) 1,760 1,781 3,052 4,244 5,099 6,034 26
PAT (Rs mn) 622 (321) 442 1,384 2,196 3,103 91
Net debt (Rs mn) 12,520 12,059 12,297 10,096 7,547 4,241 (30)
Exhibit 6: Our fair value of Rs145/share is based on 7X FY2020E EBITDA

Orient Cement, Valuation details, March 2020E financials
EBITDA Multiple EV
(Rs mn) (X) (Rs mn) (Rs/share)
Valuation
EBITDA (Rs mn) 5,099 7 37,174 182
Net debt (Rs mn) (7,547) (37)
Equity value (Rs mn) 29,626 145
Target price (Rs/share) 145

Orient Cement Cement
Exhibit 7: Orient Cement, Financial summary, March fiscal year-ends, 2016-2021E, (Rs mn)
2016 2017 2018 2019E 2020E 2021E

Net sales 15,018 18,751 22,223 25,601 28,479 31,843
EBITDA 1,760 1,781 3,052 4,244 5,099 6,034
Other income 149 123 202 166 179 248
Interest (544) (1,353) (1,292) (1,165) (848) (532)
Depreciation (763) (1,215) (1,262) (1,297) (1,338) (1,379)
Pretax profits 602 (665) 700 1,949 3,093 4,371
Tax 20 344 (258) (565) (897) (1,268)
Net profits 622 (321) 442 1,384 2,196 3,103
Adjusted Net Profit 622 (321) 442 1,384 2,196 3,103
Earnings per share (Rs) 3.0 (1.6) 2.2 6.8 10.7 15.2
Equity 205 205 205 205 205 205
Reserves and surplus 9,958 9,667 10,016 11,030 12,733 15,343
Borrowings 12,898 12,885 12,628 10,253 7,187 4,120
Deferred tax liability 1,228 750 854 1,030 1,308 1,701
Currrent liabilities 4,345 5,337 5,705 5,967 6,550 6,887
Total liabilities and equity 28,634 28,843 29,410 28,484 27,983 28,257
Net fixed assets 21,497 22,956 22,507 22,398 22,060 21,682
Capital work in progress 2,392 981 1,582 981 981 981
Cash 378 825 331 157 (361) (121)
Current assets 4,367 4,080 4,988 4,949 5,302 5,716
Total assets 28,634 28,843 29,409 28,485 27,983 28,257
Operating cash flow, excl. working capital 1,228 569 1,901 2,856 3,812 4,875
Working capital 824 1,279 (540) 301 230 (76)
Capital expenditure (3,697) (1,264) (1,413) (587) (1,000) (1,000)
Free cash flow (1,645) 584 (53) 2,571 3,042 3,799
Ratios
Net debt/equity (X) 1.2 1.2 1.2 0.9 0.6 0.3
Book value per share 50 48 50 55 63 76
Net debt/EBITDA (X) 7.1 6.8 4.0 2.4 1.5 0.7
RoAE (%) 6.2 (3.2) 4.4 12.9 18.2 21.8
RoACE (%) 4.7 1.2 5.0 9.4 12.8 16.6
CRoCI (%) 9.7 5.4 8.3 12.3 14.2 16.1

SELL
Castrol India (CSTRL)
Energy AUGUST 02, 2018
RESULT, CHANGE IN RECO.
Coverage view: Attractive
Not worth the wait. Castrol’s results were disappointing led by muted two-year CAGR Price (`): 168
of 0.4% in volumes and sharp qoq decline in margins. We expect near-term recovery in Target price (`): 155
margins and pickup in volume growth post 2HCY18. However, our optimism on future
BSE-30: 37,522
growth reduces given the company’s evident inability to manage volume/margin
equation in their attempts to gain volume market share amid a challenging business
environment. We cut EPS by 9-10% and downgrade the stock to SELL from ADD with a
revised TP of `155 (`215 earlier). A lower base oil price is a key risk to our stance.
Castrol India
MFs 5.5 EBITDA (Rs bn) 10.3 10.5 11.6
Absolute 2.4 (14.0) (16.2) ROE (%) 67.9 67.1 71.5
Rel. to BSE-30 (3.3) (19.4) (27.2) Div. Yield (%) 2.8 3.3 3.7
Modest 0.4% two-year CAGR in volumes; sharp 480 bps qoq decline in margins
Castrol’s EBITDA was 13% below our estimate at `2.5 bn, driven by sharp decline in margins to
24.7%, lowest in past 12 quarters excluding pre-GST quarter of 2QCY17. Reported net income
was 14% below our estimate at `1.64 bn. The company has reported 11% yoy increase in EBITDA
to `5.26 bn and 9% yoy increase in EPS to `3.5 in 1HCY18 led by 7% growth in volumes from a
low base and stable margins at 27%. We expect 2HCY18 to be challenging given higher base of
volumes during 2HCY17 due to post-GST restocking and elevated raw material costs.
 Modest 0.4% 2-year CAGR in volumes. Castrol’s volumes grew 12% yoy to 57 mn liters
from a low base of 2QCY17, which was impacted by pre-GST destocking; 2-year CAGR in
volumes was negligible 0.4%. The management indicated that personal mobility and CVO
segments have grown at double-digits in 1HCY18, while industrial segment declined sharply.
 Margins slump to 24.7%. Castrol’s realizations declined 1% qoq to `178.5/liter despite 3-
4% price hikes undertaken in February, reflecting deterioration in mix due to higher growth
in CVO volumes as compared to personal mobility. Unit raw material cost jumped 9% qoq to
`90.8/liter. Gross margins declined ~450 bps qoq to 49.1% and EBITDA margins declined
~480 bps qoq to 24.7%. The company has raised prices further by 3-4% in July.
Cut CY2018-20E EPS by 9-10% factoring in slower growth in volumes and lower margins
In the conference call, Castrol management remained upbeat on strong yoy growth from a pre-
GST impacted quarter and their persisting focus on volume growth, without providing any comfort
on their strategy to manage volume/margins equation. We cut CY2018-20E EPS by 9-10%,
factoring in (1) slower 3-4% growth in volumes given continued disappointment, (2) lower EBITDA
margins of 27-28% to reflect higher base oil prices and a weaker rupee and (3) other changes.
Downgrade to SELL with revised target price of `155 Tarun Lakhotia
tarun.lakhotia@kotak.com
We downgrade the stock to SELL from ADD rating reducing target price to `155 from `215, Mumbai: +91-22-4336-0875
valuing the company at 20X CY2019E EPS instead of 25X ascribed earlier, given (1) uninspiring Akshay Bhor
performance on volumes/margins combination and (2) our expectations of a muted growth in akshay.bhor@kotak.com
Mumbai: +91-22-4336-0876
earnings going forward. Castrol’s earnings growth remains cyclical and has shown evident signs of
moderation amid rising crude/base oil prices post the two-year CAGR of 18% in CY2014-16 led by
step-jump in margins during a sharp fall in raw material cost; we expect EPS to grow at 7.5%
CAGR in CY2017-20E amid elevated crude/base oil prices. A sharp fall in crude/base oil prices may
drive earnings upgrade and is a key risk to our negative stance on the stock.
Mumbai: +91-22-4336-0000
Castrol India Energy
Exhibit 1: Interim results of Castrol, calendar year-ends (Rs mn)
(% chg.) yoy
2QCY18 2QCY18E 2QCY17 1QCY18 2QCY18E 2QCY17 1QCY18 1HCY18 1HCY17 (% chg.) CY2018E
Net sales 10,172 10,281 8,704 9,271 (1.1) 16.9 9.7 19,443 17,526 10.9 38,562
Raw materials 5,173 4,952 4,294 4,294 4.5 20.5 20.5 9,467 8,336 13.6 18,822
Employees 525 513 489 469 2.2 7.4 11.9 994 987 0.7 2,035
O thers 1,957 1,917 1,826 1,765 2.1 7.2 10.9 3,722 3,475 7.1 7,183
Total expenditure 7,655 7,383 6,609 6,528 3.7 15.8 17.3 14,183 12,798 10.8 28,040
EBITDA 2,517 2,898 2,095 2,743 (13.1) 20.1 (8.2) 5,260 4,728 11.3 10,521
O ther income 173 185 155 228 (6.5) 11.6 (24.1) 401 340 17.9 713
Interest 3 7 1 7 10 4 16
Depreciation 132 140 118 143 (6.0) 11.9 (7.7) 275 241 14.1 523
Pre-tax profits 2,555 2,936 2,131 2,821 (13.0) 19.9 (9.4) 5,376 4,823 11.5 10,695
Extraordinaries — — — — — — —
Current tax 932 1,027 733 1,020 (9.3) 27.1 (8.6) 1,952 1,650 18.3 3,796
Deferred tax (19) — 19 (17) (36) 4 (95)
Net income 1,642 1,908 1,379 1,818 (13.9) 19.1 (9.7) 3,460 3,169 9.2 6,994
Adjusted net income 1,642 1,908 1,379 1,818 (13.9) 19.1 (9.7) 3,460 3,169 9.2 6,994
Effective tax rate (%) 35.7 35.0 35.3 35.6 35.6 34.3 34.6
Adjusted EPS (Rs) 1.7 1.9 1.4 1.8 (13.9) 19.1 (9.7) 3.5 3.2 9.2 7.1
Other details
Sales volumes (mn liters) 57.0 56.0 50.9 51.5 1.8 12.0 10.7 108.5 101.1 7.3 210.2
Gross realization (Rs/liter) 178.5 183.6 171.0 180.0 (2.8) 4.4 (0.9) 179.2 173.4 3.4 183.5
Raw material (Rs/liter) 90.8 88.4 84.4 83.4 2.6 7.6 8.8 87.3 82.5 5.8 89.6
Contribution (Rs/liter) 87.7 95.2 86.6 96.6 (7.8) 1.2 (9.2) 91.9 90.9 1.1 93.9
EBITDA (Rs/liter) 44.2 51.8 41.2 53.3 (14.7) 7.3 (17.1) 48.5 46.8 3.7 50.1
Gross margin (%) 49.1 51.8 50.7 53.7 (269)bps (152)bps (454)bps 51.3 52.4 (113)bps 51.2
EBITDA margins (%) 24.7 28.2 24.1 29.6 (344)bps 68 bps (484)bps 27.1 27.0 8 bps 27.3
Exhibit 2: Two-year CAGR of volumes at negligible 0.4% in 2QCY18

Quarterly volumes, calendar year-ends, 2008-18YTD (mn liters)
1Q 2Q 3Q 4Q
Sales volumes (mn liters)
2008 54.3 63.9 50.6 46.0
2009 45.2 56.0 50.7 53.7
2010 54.6 60.2 50.4 53.8
2011 55.9 54.1 46.0 51.8
2012 52.6 56.7 46.1 48.5
2013 50.1 54.1 44.8 47.8
2014 48.8 53.3 45.6 48.2
2015 46.0 53.7 45.3 46.1
2016 50.1 56.5 45.7 47.0
2017 50.2 50.9 49.1 54.4
2018 51.5 57.0
Growth (% yoy)
2008 5.6 2.7 1.2 (17.3)
2009 (16.8) (12.4) 0.2 16.7
2010 20.8 7.5 (0.6) 0.2
2011 2.4 (10.1) (8.7) (3.7)
2012 (5.9) 4.8 0.2 (6.4)
2013 (4.8) (4.6) (2.8) (1.4)
2014 (2.6) (1.5) 1.8 0.8
2015 (5.7) 0.7 (0.6) (4.4)
2016 9.0 5.3 0.8 2.0
2017 0.1 (9.9) 7.4 15.7
2018 2.6 12.0

Energy Castrol India
Exhibit 3: Base oil prices have increased in the recent months

Singapore base oil price (US$/ton)
(US$/ton)
1,400
Bright Stock SN 500
1,200
1,000
800
600
400
200
-
Mar-15
Mar-16
Mar-17
Mar-18
May-15
May-16
May-17
May-18
Sep-16
Sep-17
Sep-15
Nov-16
Nov-17
Jan-15
Nov-15
Jan-16
Jan-17
Jan-18
Jul-15
Jul-16
Jul-17
Jul-18
Source: ICIS, Kotak Institutional Equities
Exhibit 4: We expect 3-4% growth in volumes and 27-28% EBITDA margins going forward
Key assumptions, calendar year-ends, 2012-20E
2012 2013 2014 2015 2016 2017 2018E 2019E 2020E
Macro assumptions
Exchange rate (Rs/US$) 53.2 58.0 61.0 64.1 67.2 65.1 67.5 69.5 70.5
Global base oil (US$/ton) 1,152 1,032 1,029 705 565 667 747 737 722
Domestic base oil (Rs/liter) 64.5 62.9 66.0 47.5 39.9 45.6 53.0 53.8 53.5
Change (%) 4.3 (2.4) 4.8 (28.0) (15.9) 17.9 12.0 (1.3) (2.0)
Realization (Rs/liter)
Gross realization [A] 153.1 161.5 173.1 172.6 169.0 175.2 183.5 192.0 198.5
Change (%) 7.1 5.5 7.2 (0.3) (2.1) 3.7 4.7 4.7 3.4
Raw material cost [B] 89.6 93.0 98.1 82.6 77.6 81.7 89.6 92.5 94.3
Change (%) 9.5 3.8 5.5 (15.9) (6.1) 5.3 9.6 3.3 1.9
Gross contribution [A] - [B] 63.4 68.6 75.0 90.0 91.5 93.5 93.9 99.5 104.2
Gross margins (%) 41.5 42.4 43.3 52.2 54.1 53.4 51.2 51.8 52.5
EBITDA 30.5 34.9 36.6 46.8 50.1 50.5 50.1 53.1 56.4
EBITDA margin (%) 19.9 21.6 21.1 27.1 29.7 28.8 27.3 27.7 28.4
Volume (Kilo liters)
Non-automotive grades 27,487 26,718 27,974 26,015 27,706 27,249 25,887 26,405 26,933
Automotive grades 170,069 163,947 161,816 159,065 165,427 171,052 177,894 185,899 193,335
Traded items 6,345 6,155 6,140 6,035 6,277 6,277 6,402 6,658 6,924
Total 203,902 196,820 195,929 191,115 199,410 204,578 210,183 218,962 227,192
Growth (%) (2.3) (3.5) (0.5) (2.5) 4.3 2.6 2.7 4.2 3.8

Castrol India Energy
Exhibit 5: Castrol has high leverage to exchange rate and raw material prices
Sensitivity of Castrol's earnings to key variables
CY2019E CY2019E
Downside Base case Upside Downside Base case Upside
Exchange rate
Exchange rate (Rs/US$) 71 70 69 72 71 70
Net profits (Rs mn) 7,612 7,702 7,793 8,355 8,446 8,538
EPS (Rs) 7.7 7.8 7.9 8.4 8.5 8.6
% upside/(downside) (1.2) 1.2 (1.1) 1.1
Raw material price

Raw material price (US$/ton) 762 737 712 747 722 697
Net profits (Rs mn) 7,489 7,702 7,915 8,222 8,446 8,671
EPS (Rs) 7.6 7.8 8.0 8.3 8.5 8.8
% upside/(downside) (2.8) 2.8 (2.7) 2.7
Exhibit 6: Castrol stock is trading at 22X forward EPS

12-month forward P/E for Castrol India (X)
50
CSTRL 12-month forward P/E
45
40
35
30
25
20
15
10
-
Jan-12
Jan-13
Jan-15
Jan-10
Jan-11
Jan-14
Jan-16
Jan-17
Jan-18
Jul-10
Jul-13
Jul-17
Jul-11
Jul-12
Jul-14
Jul-15
Jul-16
Jul-18
Source: Bloomberg, Company, Kotak Institutional Equities estimates

Energy Castrol India
Exhibit 7: Profit model, balance sheet, cash model, calendar year-ends, 2012-20E (Rs mn)
2012 2013 2014 2015 2016 2017 2018E 2019E 2020E

Net sales 31,209 31,796 33,923 32,980 33,703 35,843 38,562 42,047 45,096
EBITDA 6,226 6,875 7,167 8,949 9,994 10,331 10,521 11,634 12,812
O ther income 722 836 481 646 681 651 713 749 775
Interest (18) (17) (24) (8) (15) (12) (16) (20) (24)
Depreciation (266) (305) (361) (390) (450) (455) (523) (585) (646)
Pretax profits 6,663 7,390 7,263 9,197 10,210 10,515 10,695 11,779 12,917
Extraordinaries — 228 — 313 193 186 — — —
Current tax (2,278) (2,411) (2,606) (3,238) (3,880) (3,651) (3,796) (4,184) (4,591)
Deferred tax 89 (121) 89 (119) 181 (131) 95 107 121
Adjusted net profits 4,474 4,933 4,746 5,950 6,579 6,798 6,994 7,702 8,446
Earnings per share (Rs) 4.5 5.0 4.8 6.0 6.7 6.9 7.1 7.8 8.5

Total equity 6,492 7,514 4,968 5,756 9,815 10,202 10,647 10,909 11,320
Deferred taxation liability (651) (530) (618) (499) (672) 188 93 (15) (136)
Total borrowings — — — — — — — — —
Currrent liabilities 8,303 8,636 9,951 10,860 9,740 9,380 11,261 11,859 12,330
Total liabilities and equity 14,145 15,621 14,300 16,117 18,883 19,770 22,001 22,754 23,515
Cash 5,746 5,942 4,315 6,965 8,219 7,842 9,158 9,433 9,870
Current assets 6,828 7,925 8,108 7,300 8,822 9,965 10,979 11,615 12,161
Total fixed assets 1,571 1,753 1,877 1,853 1,842 1,962 1,864 1,705 1,483
Investments — — — — — — — — —
Total assets 14,145 15,621 14,300 16,117 18,883 19,770 22,002 22,753 23,515

O perating cash flow, excl. working capital 4,428 4,704 4,873 6,262 6,372 6,727 6,709 7,431 8,197
Working capital 223 (756) 580 1,128 252 (645) 867 (39) (74)
Capital expenditure (348) (260) (504) (370) (358) (563) (425) (425) (425)
Free cash flow 4,303 3,688 4,950 7,020 6,266 5,519 7,151 6,967 7,698
Investments — — — — (492) 1,633 — — —
O ther income 356 559 366 392 520 444 713 749 775
Ratios (%)
RoAE 79.0 79.3 83.7 128.1 93.1 70.8 66.2 71.2 76.5
RoACE 79.3 77.1 84.0 124.0 91.5 69.7 66.3 71.3 76.7
Assumptions
Volume (mn liters) 203.9 196.8 195.9 191.1 199.4 204.6 210.2 219.0 227.2
Gross realization (Rs/liter) 153.1 161.5 173.1 172.6 169.0 175.2 183.5 192.0 198.5
Gross contribution (Rs/liter) 63.4 68.6 75.0 90.0 91.5 93.5 93.9 99.5 104.2
EBITDA margins (%) 19.9 21.6 21.1 27.1 29.7 28.8 27.3 27.7 28.4

BUY
NTPC (NTPC)
Utilities AUGUST 02, 2018
UPDATE
Emphasizing efficient growth. NTPC’s annual analyst meet emphasized delivering Price (`): 155
low-cost power that could hold NTPC in good stead under a potential ‘National Merit Target price (`): 190
Order’ system and drive sustainable growth for the company. Discussions also focused on
BSE-30: 37,522
(1) settling the GCV-related fuel issues, (2) under-recovery of fixed cost and (3) organic
as well as inorganic growth opportunities. Maintain BUY rating with target price of
`190/share.
NTPC
Market Cap. (Rs bn) 1,280.9 EPS growth (%) (7.6) 30.9 4.4
Promoters 62.3 Sales (Rs bn) 834.5 1,011.6 1,121.5
MFs 8.7 EBITDA (Rs bn) 216.7 277.1 304.3
Absolute (2.7) (9.8) (6.0) ROE (%) 9.5 11.6 11.3
Emphasis on delivery of low-cost power as a tool to address under-recoveries and drive growth
 NTPC remains committed to growth and has 21 GW of capacity currently under construction
(14 GW at standalone level). NTPC highlighted that they will likely commercialize
5 GW/annum over the next two years, though may slow down to coal-based capacity addition
of 2 GW/annum thereafter. However, the company remains committed to supplementing
capacity addition with increased emphasis on renewable assets. NTPC expects to increase
regulated equity from `509 bn as of March 2018 to `850 bn by FY2022 (14% CAGR).
 NTPC clarified that there is no official communication received by them from the government
or NHPC regarding potential acquisition of the latter. Management highlighted that they did
consider acquisition of the government’s stake in SJVN. NTPC has already concluded
purchase of minority stake of Bihar government in the JV assets, while pursuing acquisitions
of Barauni and Chabbra from the respective state governments.
 NTPC stated that they have to be very careful while evaluating acquisition of stressed power
assets due to absence of PPAs or non-remunerative PPAs. The company is happy for states or
banks to acquire the assets that NTPC will run on their behalf for a fee. NTPC highlighted
that of the 24 GW of stressed power assets, half of them are of inferior quality while the
other half are good assets with bad PPAs.
 NTPC highlighted that they had `14.8 bn of under-recovery on capacity charge in FY2018
due to low plant availability in the absence of fuel availability. Management attributed the
low PAF to (1) unanticipated spurt in demand and (2) poor domestic fuel supplies.
Murtuza Arsiwalla
Management highlighted that introduction of a ‘National Merit Order’ dispatch system could murtuza.arsiwalla@kotak.com
help address concerns of coal, as only low-cost projects (typically pit-head) would be fully Mumbai: +91-22-4336-0870
absorbed before necessitating the transport of coal to distant plants. NTPC highlighted that Samrat Verma
their total tariff of `3.23 with a fuel cost of `1.95/kwh is among the most competitive and samrat.verma@kotak.com
Mumbai: +91-22-4336-0869
largely unchanged over the past five years.
 NTPC acknowledged that loss of GCV between ‘as received’ and ‘as fired’ cost them as much
as `10 bn/annum. However, representation from CEA as well as acknowledgment of loss of
GCV in the CERC consultation paper makes the management confident that the issue of fuel
cost under-recovery will be addressed in due course.
Mumbai: +91-22-4336-0000
Utilities NTPC
 NTPC also represented that they are going ahead with implementation of pollution
control equipment, so as to be compliant with the new environmental norms by FY2022.
NTPC believes that only 2.4 GW of capacities will have to be de-commissioned, while the
remaining will install the requisite pollution control equipment at a cost of `4-5 mn/MW.
CERC has already acknowledged the incremental investment under the change of law
clause of the PPA, and accordingly investment in pollution control equipment will further
aid build-up of regulated equity, though will make the cost of power dearer by `0.3/kwh.
Maintain BUY rating and target price of `190/share

At 10X P/E and 1X P/B, NTPC trades at reasonable valuations, with a strong growth pipeline
that will likely help the company near-double its asset base over the next 4-5 years.
Regulatory review does pose a risk to earnings, though better capital allocation through
increased acquisitions could help improve return profile. Maintain BUY rating with target
price of `190/share.
Exhibit 1: Reported PAT for 1Q2019 missed estimates on account of a substantial drop in other income
Interim results for NTPC (Standalone), March fiscal year-ends (Rs bn)
(% Chg.)
1QFY19 1QFY19E 1QFY18 4QFY18 KIE yoy qoq FY2018 FY2017 (% Chg.) FY2019E
Net sales 227 220 199 231 3.3 14.2 (1.7) 835 783 6.6 1,012
Operating costs
Cost of fuel (138) (130) (121) (131) 6.4 14.3 5.4 (496) (476) (618)
Personnel costs (12) (14) (11) (14) (9.9) 15.9 (9.2) (45) (36) (46)
Other expenses (17) (18) (17) (27) (3.3) 1.0 (37.3) (77) (59) (71)
Total expenses (167) (161) (148) (172) 4.0 12.9 (2.6) (618) (570) (734)
EBITDA 60 59 50 59 1.4 18.1 0.8 217 213 1.8 277
EBITDA margin (%) 26.2 26.7 25.4 25.6 26.0 27.2 27.4
Other income 3 9 9 8 23 14 23
Interest & finance charges (12) (11) (9) (11) (40) (36) (51)
Depreciation (19) (20) (16) (19) (71) (59) (86)
PBT 32 37 35 37 (13.4) (8.5) (14.0) 129 132 (2.1) 163
Provision for tax (net) (6) (9) (8) (12) (35) (30) (40)
Net profit 26 27 26 25 (5.8) (1.1) 2.0 94 102 (7.6) 123
Extraordinary — — — 4 10 1 —
EPS 3.1 3.3 3.2 3.1 11 12 15
EBITDA margin (%) 26.2 26.7 25.4 25.6 26.0 27.2 27.4
Tax rate (%) 18.4 25.0 24.4 31.2 27.2 22.8 24.7
Exhibit 2: PAF of coal plants remained low at 86% and would have resulted in some under-recovery
of capacity charge
Operational performance of NTPC, March fiscal year-ends
(% Chg.)
1QFY19 1QFY18 4QFY18 yoy qoq FY2018 FY2017 (% Chg.)
Generation (BU) 69.2 64.4 68.6 7.5 1.0 265.8 250.3 6.2
Commercial generation (BU) 69.1 64.1 68.5 7.8 0.9 265.0 250.1 6.0
Energy Sent Out (BU) 64.6 59.8 64.2 7.9 0.5 247.9 233.6 6.1
Coal (mn tons)
Domestic (mn tons) 43.1 38.3 45.8 12.3 (5.9) 168.2 159.4 5.6
Imported (mn tons) 0.1 0.1 0.1 (35.7) (10.0) 0.3 1.0 (68.9)
(Chg. bps)
Availability (%)
Coal 85.9 89.0 86.6 (306.0) (73.0) 86.0 91.6 (560.0)
Gas 83.9 88.2 96.9 (434.0) (1,300.0) 92.6 93.5 (89.0)
Hydro 103.8 103.6 93.8 16.0 1,001.0 99.9 106.4 (652.0)
PLF (%)
Coal 78.0 79.1 79.0 (107.0) (105.0) 77.9 78.6 (69.0)
Gas 23.1 24.4 20.2 (129.0) 289.0 25.1 24.4 63.0
Hydro 38.9 65.2 13.1 (2,626.0) 2,582.0 47.3 46.0 126.0
AuX (%) 6.6 6.7 6.3 (11.6) 34.8 6.5 6.6 (13.3)

NTPC Utilities
Exhibit 3: Adjusted PAT for 1QFY19 saw a marked improvement from 4QFY18
Adjustments to reported earnings of NTPC, March fiscal year-ends (Rs bn)
1QFY17 2QFY17 3QFY17 4QFY17 2017 1QFY18 2QFY18 3QFY18 4QFY18 2018 1QFY19
Reported PAT 23,695 24,960 24,687 29,699 93,853 26,182 24,386 23,608 29,256 103,432 25,881
Other income (Post-tax) (2,274) (2,741) (2,667) (6,658) (11,237) (7,127) (3,317) (2,033) (6,538) (18,466) (2,372)
Prior period sales (Post-tax) 281 (1,064) (2,992) (4,192) (7,967) (352) 538 (95) (143) (52) 684
Income tax recoverable — — — — — — — 1,056 1,047 2,103 —
Deferred tax (123) (123) (123) (91) (460) (175) (175) (175) (145) (670) (209)
Tax for prior periods — — (1,076) 968 (108) — — (5,630) (3,883) (9,513) (1,059)
Wage provisions — — — 2,082 2,082 475 2,765 3,575 729 7,544 630
Adjusted PAT 21,579 21,031 17,829 21,808 76,163 19,003 24,196 20,306 20,324 84,380 23,556
RoE (%) 21 20 17 21 18 17 22 16 16 18 19
Exhibit 4: No new capacity was commercialized in 1QFY19

Details of installed and commercial capacity, March fiscal year-ends (MW)
Change (%) Change (GW)

1QFY19 1QFY18 4QFY18 yoy qoq yoy qoq
Commercial capacity
Standalone 44,500 40,522 44,500 9.8 — 4.0 —
Others 6,891 6,771 6,891 1.8 — 0.1 —
Consolidated 51,391 47,293 51,391 8.7 — 4.1 —
Installed capacity
Standalone 46,100 44,419 46,100 3.8 — 1.7 —
Others 7,551 7,216 6,551 4.6 15.3 0.3 1.0
Consolidated 53,651 51,635 52,651 3.9 1.9 2.0 1.0
Exhibit 5: Current CWIP is 38% of regulated equity, that will propel growth up to FY2019
Composition of book value of NTPC, March fiscal year-ends, 2015-2021E (Rs/share)
Regulated equity CWIP Subsidiaries / JVs Cash and equivalents Others

180
160 3
140 3 31
4 25
120 22 11
23 11
20 23
100 18 5 11
7 4 23
6 10 11
80 18 10 26
9 24
29
60 24
21
95
40 82
62 70
45 50 53
20
0
2015 2016 2017 2018 2019E 2020E 2021E

Utilities NTPC
Exhibit 6: Key assumptions behind NTPC estimates, March fiscal year-ends, 2015-21E
2015 2016 2017 2018 2019E 2020E 2021E

Assumptions
Capacity addition (MW) 660 1,960 910 3,845 3,239 4,159 4,824
Commercial capacity (MW) 37,032 38,992 39,902 43,747 46,986 51,145 55,969
Regulated equity (Rs mn) 369,163 414,204 440,489 509,207 578,520 673,616 779,284
PLF-Coal (%) 80 79 79 80 85 85 85
PLF-Gas (%) 33 25 24 24 24 24 24
Average tariff (Rs/kwh) 3.11 2.92 3.27 3.38 3.78 3.57 3.73
Average fuel cost (Rs/kwh) 2.05 1.83 1.93 1.86 1.97 2.04 2.11
Exhibit 7:NTPC: Profit model, balance sheet, cash model, 2015-21E, March fiscal year-ends (Rs mn)
2016 2017 2018 2019E 2020E 2021E

Net sales 705,068 782,734 834,528 1,011,567 1,121,510 1,279,435
EBITDA 175,130 212,843 216,674 277,077 304,336 352,936
Other income 12,014 14,046 23,083 22,681 22,806 29,336
Interest (32,304) (35,972) (39,843) (50,517) (59,806) (71,552)
Depreciation (54,253) (59,208) (70,989) (85,972) (95,601) (110,355)
Pretax profits 100,587 131,709 128,925 163,269 171,734 200,364
Tax (39,629) (30,027) (35,006) (40,372) (43,479) (50,925)
Net profits 60,958 101,681 93,919 122,897 128,255 149,439
Extraordinary items 41,471 (7,828) 9,513 — — —
Earnings per share (Rs) 7.4 12.3 11.4 14.9 15.6 18.1
Total equity 887,820 962,312 1,017,778 1,097,538 1,180,775 1,277,761
Deferred taxation liability 30,974 36,060 44,945 55,075 68,327 83,320
Total borrowings 930,979 1,003,398 1,151,979 1,281,581 1,341,582 1,333,105
Currrent liabilities 296,405 359,177 387,233 374,341 384,636 401,785
Total liabilities and equity 2,146,178 2,360,948 2,601,936 2,808,534 2,975,322 3,095,971
Cash 44,064 29,305 39,784 184,692 203,897 259,338
Current assets 438,563 441,191 473,323 486,386 507,281 537,304
Total fixed assets 1,580,635 1,800,928 1,988,354 2,050,407 2,177,096 2,212,280
Investments 82,917 89,524 100,475 87,049 87,049 87,049
Total assets 2,146,178 2,360,948 2,601,936 2,808,534 2,975,322 3,095,971
Operating cash flow, excl. NWC 156,682 153,061 174,421 208,869 223,856 259,794
Working capital (14,434) 60,144 (4,075) (25,956) (10,599) (12,875)
Investments 7,405 (6,607) (10,951) 13,426 — —
Free cash flow (133,367) (72,904) (99,020) 48,314 (9,032) 101,380
Key ratios
Net debt/equity (%) 100 101 109 100 96 84
RoE (%) 7.2 11.0 9.5 11.6 11.3 12.2
RoCE (%) 4.5 6.7 5.8 6.9 6.9 7.7
Book value per share (Rs) 111 121 129 140 151 165

ADD
Tata Steel (TATA)
Metals & Mining AUGUST 02, 2018
UPDATE
Management meeting notes. Takeaways from our meeting with Tata Steel Price (`): 556
management: (1) the company expects the European JV to close by this year as it will Target price (`): 700
apply for antitrust approval by September 2018, (2) large captive iron-ore mine reserves
BSE-30: 37,522
will continue to aid new capacities, subject to regulatory approvals; it has 3-4 mtpa
excess ore, which it may be able to use for new assets and (3) the acquisition strategy
for stressed assets located in the eastern region reflects potential fits with existing
operations, as TATA also eyes Bhushan Power & Steel given its long product portfolio.
Tata Steel
Promoters 33.2 Sales (Rs bn) 1,317.0 1,542.4 1,017.6
MFs 13.7 EBITDA (Rs bn) 218.9 267.9 225.5
Absolute (2.1) (6.6) 3.0 ROE (%) 17.2 13.1 13.9
Key takeaways from meeting with senior management of Tata Steel

We highlight the following key takeaways:
 European JV—expects approval this year, likely to have strong earnings profile.
Antitrust approval from the European Commission (EC) remains a key step towards closing of
the TATA-ThyssenKrupp (TK) joint venture. TATA & TK will be filing the application with EC
by September 2018—the approval or remedy has to be notified within 45 days. TATA
expects to close the JV between December 2018 and March 2019.
 The management expects a strong earnings profile for the JV, which can earn EBITDA of
close to EUR2 to 2.2 bn aided by cost synergies of EUR400-500 mn, which can accrue within
2-2.5 years. The JV will be profitable and have strong cash flows assuming capex of close to
EUR800 mn and interest payment on outstanding debt of EUR2.5 bn. By size, this JV will be
the second-largest steelmaker in Europe.
 Iron-ore benefit for the new capacities, acquired assets. TATA has iron-ore of close to 3-
4 mtpa in excess of its current requirement, which it may be able to use for Bhushan Steel,
subject to regulatory approvals. Over the longer term, the management stated that at its
existing mines, it has large iron-ore reserves, which can be used for new capacities including
KPO-II project. The company will continue to work towards obtaining regulatory approvals
for the added mine capacity based on incremental requirements.
 Strategic fit of acquired assets and potential acquisitions. The management highlighted
a few key points in their acquisition strategy for stressed assets.
 Going east. The location in the eastern region of Bhushan Steel and Bhushan Power &
Steel were good fits with the company’s existing operations, including potential to use
captive iron-ore. The company did not bid for Essar Steel in western India. Abhishek Poddar
abhishek.poddar@kotak.com
 Bhushan Power & Steel (BPSL). The company’s recent acquisition of Bhushan Steel as
Mumbai: +91-22-4336-0861
well as Greenfield expansion at Kalinganagar, Odisha have all been in the flat product
segment. These capacity additions will result in close to 20 mtpa of TATA’s India capacity
concentrated in the flat product segment and only 3 mtpa in the longs. The company
believes the long products business can do very well in India from pickup in infrastructure
demand and as there are limited new supplies. BPSL’s product portfolio includes close to 1
mtpa of long products, which complements well with TATA’s existing product portfolio. Kotak Institutional Equities Research
Mumbai: +91-22-4336-0000
Metals & Mining Tata Steel
BPSL at present is operating at close to 1.5 mtpa volumes and with incremental capex,
it can reach full potential of 3 mtpa steelmaking capacity.
 Bhushan Steel. The plant is operating at close to 3.5 mtpa levels and will not require
much investment to reach 5 mtpa operating level. These assets have potential to
deliver EBITDA/ton comparable to other large steel converters in India. The availability
of iron-ore from TATA’s mines can further improve profitability for the group from
these assets. While these assets may carry tax losses, tax efficiencies can only accrue on
merger with TATA. The management highlighted TATA India operations will also be in
MAT, so benefit will likely through higher MAT credits for future offsets.
 Capex at KPO II—much efficient if we segregate spends on downstream facilities.

TATA highlighted that KPO II is extremely efficient in terms of capital cost—while the
total capex is planned at `235 bn for the 5 mtpa complex, it includes cost for
downstream facility including a cold-rolling mill as well. The capital cost at only the Hot
Strip Mill level (until HRC stage) will work out to close to `160 bn or US$470-480/ton.
This is possible as a lot of enabling capex was done in phase 1 (we believe it refers to civil
works as well as other infrastructure including railway sidings etc.).
 Internal improvement projects will continue to drive cost efficiencies. The

management highlighted many of the internal improvement projects will continue to
drive cost efficiencies. The company has successfully managed a decline in the coke rate
by more than 100 kgs over the past few years. There are other internal projects such as
Project Marvel, which enables usage of advanced analytics in areas such as mining etc.
 The earnings are also aided by consistent improvement in product mix with rising share
of automotive products to 20% of sales, higher downstream color-coated products as
well as increase in branded products and retail solutions to 30% of the sales.
 Leverage and the steel cycle. TATA expects to de-lever on steady state volumes with
the stabilization of the new capacities. The China steel markets are in much better state
now with exports not exceeding monthly rate of 6 to 7 mn tons.
 The closure of induction furnaces in China (150 mtpa capacity) has led to creation of
more demand for the mainstream steelmakers—the reported demand has increased by
13% in CY2017 and 8% in CY2018 YTD mainly due to this. It is possible that even in
India, close to 8 to 10 mtpa of such demand-supply go unreported. The increase in
Chinese environmental monitoring for Blue-skies has led to significant disruption in the
China steel supply chain as many of the steel companies are asked to shift to coast from
hinterland.
 Also, the new capacity set-up in China are through the EAF route only, which they want
to increase from 5% at present to 30 to 40% due to lower carbon emissions but the cost
is US$70 to 80/ton higher. The increasing environmental compliance costs have already
added US$20 to 40/ton to the cost of steel companies in China.

Tata Steel Metals & Mining
Exhibit 1: Thyssenkrupp & Tata Steel financials indicate pro-forma EBITDA of EUR1.7 bn for FY2018E
Pro-forma and historical financials of European steel business of Tata Steel and ThyssenKrupp, (EUR mn)
June year ending March
(€ mn) 2014 2015 2016 2017 2018 FY2018
ThyssenKrupp Steel Europe JV : Pro-forma
Revenues 8,857 8,697 7,633 8,915 9,204 16,732
EBITDA 620 899 715 957 1,199 1,701
Depreciation 413 409 401 410 413 631
EBIT 216 492 315 547 786 1,071
Capital expenditures 404 457 393 566 NA 980
Shipments (mn tons) 11.4 11.7 11.2 11.4 11.3 21.3
EBITDA/ton 54 77 64 84 106 80
March year ending

(€ mn) 2014 2015 2016 2017 2018
Tata Steel Europe
Revenues 10,144 10,015 7,456 7,067 7,528
EBITDA 283 366 (212) 642 502
Depreciation 491 463 332 231 218
EBIT (207) (97) (543) 411 285
Capital expenditures 398 392 421 441 413
Shipments (mn tons) 13.9 13.7 11.0 9.9 10.0
EBITDA/ton 20 27 (19) 65 50
Exhibit 2: We estimate JV's net-income at ~US$700 mn in FY2020E assuming 50% accrual of synergies
Earnings forecast for ThyssenKrupp-Tata Steel BV Joint venture, March fiscal year-ends (EUR mn, US$ mn)
March year ending

2018 2019E 2020E 2021E
(€ mn)
JV-- ThyssenKrupp Tata Steel B V
Revenues 16,732 17,104 17,123 17,162
EBITDA 1,701 1,667 1,685 1,684
Assumed synergy benefits — — 200 280
Adjusted EBITDA 1,701 1,667 1,885 1,964
Depreciation 628 634 636 638
EBIT 1,074 1,033 1,249 1,326
Interest cost 230 229 230 225
Profit before tax 844 804 1,019 1,101
Tax 236 225 285 308
Profit after tax 607 579 734 793
Shipments (mn tons) 21.3 21.7 21.7 21.7
EBITDA/ton 80 77 87 91
Debt, pension liabilities 6,500 6,487 6,505 6,416
(US$ mn)
JV-- ThyssenKrupp Tata Steel B V
Revenues 19,590 19,669 19,692 19,736
EBITDA 1,992 1,917 2,168 2,259
PAT 711 666 844 912
Share of profit: Tata Steel — — 422 456
EBITDA/ton 93 89 100 104
Debt, pension liabilities 7,610 7,460 7,481 7,378

Metals & Mining Tata Steel
Exhibit 3: Tata Steel's leverage ratio will improve in FY2020E led by transfer of EUR2.5 bn debt to JV
Tata Steel consolidated leverage details, March fiscal year ends (Rs mn), FY2016-21E (X)
2016 2017 2018 2019E 2020E 2021E

Existing
EBITDA (Rs mn) 79,683 170,078 218,905 267,893 225,501 232,394
Net debt (Rs mn) 731,855 744,767 714,900 1,003,919 769,875 736,428
Net debt/ EBITDA (X) 9.2 4.4 3.3 3.7 3.4 3.2
Exhibit 4: Tata Steel, key assumptions, March fiscal-year ends, 2016-21E (Rs mn)
2016 2017 2018 2019E 2020E 2021E

Tata Steel (India)
Average HRC Price (US$/ton) 307 435 540 540 500 500
Crude Steel capacity (mn tons) 9.7 12.7 12.7 12.7 12.9 13.1
Volume (mn tons) 9.5 11.0 12.2 12.5 12.8 13.1
EBITDA margin (%) 19.9 24.7 26.7 29.1 27.0 26.8
EBITDA/ton (Rs/ton) 7,976 10,823 12,987 14,490 13,106 13,109
Europe
Average HRC Price (US$/ton) 751 781 882 880 — —
Premium over HRC Price (US$/ton) 352 267 263 261 — —
Crude Steel capacity (mn tons) 12.1 12.1 12.1 12.1 — —
Volume (mn tons) 11.0 9.9 10.0 10.1 — —
EBITDA margin (%) (2.8) 9.1 6.7 8.9 — —
EBITDA/ton (US$/ton) (21) 71 59 78 — —
Bhushan Steel
Volume (mn tons) 2.9 3.3 3.6 4.0 5.0 5.2
EBITDA margin (%) 17.5 21.3 13.0 17.1 21.7 21.5
EBITDA/ton (Rs/ton) 7,181 8,855 6,200 7,985 10,104 10,180
JV : ThyssenKrupp Tata Steel
Volumes (mn tons) — — — — 21.7 21.7
Net sales (US$ mn) — — — — 19,692 19,736
EBITDA (US$ mn) — — — — 2,168 2,259
EBITDA/ton (US$) — — — — 100 104
PAT (US$ mn) — — — — 844 912
Tata Steel: share of profit (US$ mn) — — — — 422 456
Exhibit 5: Tata Steel, valuation, March fiscal year-ends, March 2020E basis (Rs mn)
EBITDA Multiple Enterprise value EV

(Rs mn) (X) (Rs mn) (Rs/share)
FY2020E EBITDA 223,661 6.5 1,442,613 1,198
Total Enterprise Value 223,661 1,442,613 1,198
Consolidated net-debt 769,875
Total borrowings 769,875 639
Arrived market capitalization 672,738 559
Add: Value of investments 4,028 3
Add: Equity value in European JV 169,127 140
Arrived market capitalization 845,893 702
Target price (Rs) 700

Tata Steel Metals & Mining
Exhibit 6: Tata Steel (consolidated), profit model, balance sheet and cash flow model, March fiscal year-ends, 2016-21E (Rs mn)
2016 2017 2018 2019E 2020E 2021E

Net sales 1,019,647 1,122,994 1,317,003 1,542,394 1,017,648 1,053,717
EBITDA 79,683 170,078 218,905 267,893 225,501 232,394
Other income 4,122 5,275 9,095 11,522 11,570 14,223
Interest (42,214) (50,722) (55,018) (78,638) (70,530) (66,905)
Depreciation (53,064) (56,729) (59,617) (75,681) (62,465) (63,751)
Profit before tax (11,472) 67,902 113,365 125,096 104,076 115,961
Extraordinaries 39,904 (43,242) 95,991 — — —
Taxes (6,900) (27,780) (34,054) (42,533) (33,304) (37,108)
Profit after tax 21,532 (3,120) 175,303 82,564 70,772 78,854
Minority interest 1,143 (722) (43,285) (500) (500) (500)
Share in profit/(loss) of associates (1,104) 77 1,741 1,500 28,688 31,453
Reported net income 21,571 (3,766) 133,759 83,564 98,960 109,807
Adjusted net income (19,480) 40,200 81,052 83,564 98,960 109,807
Fully diluted EPS (Rs) (20.1) 41.4 67.3 69.4 82.2 91.2
Equity 414,576 355,443 585,956 691,464 730,433 825,744
Deferred tax liability 87,934 91,442 95,341 129,096 124,781 121,398
Total Borrowings 840,354 850,709 937,783 1,269,783 1,024,283 994,283
Current liabilities 418,167 410,863 458,776 608,609 438,724 449,166
Minority interest 7,809 16,017 9,365 9,865 10,365 10,865
Total liabilities 1,768,840 1,724,475 2,087,222 2,708,817 2,328,587 2,401,456
Net fixed assets 681,322 885,118 921,079 1,346,166 1,117,133 1,087,745
Capital work in progress 359,961 157,841 166,144 230,076 278,007 348,475
Goodwill 40,676 34,947 40,995 40,995 — —
Investments 108,227 125,367 178,995 184,194 199,866 217,050
Cash 61,863 49,211 79,379 122,359 110,903 114,350
Other current assets 516,791 471,989 700,631 785,027 622,677 633,836
Total assets 1,768,840 1,724,475 2,087,222 2,708,817 2,328,586 2,401,455
Operating cash flow excl. working capital 473 112,319 52,124 156,261 141,937 153,491
Working capital changes 61,656 (48,907) 11,606 20,623 (7,534) (718)
Free cash flow (37,199) (10,858) (10,270) 70,452 53,040 47,943
Ratios
EBITDA margin (%) 7.8 15.1 16.6 17.4 22.2 22.1
EBIT margin (%) 2.6 10.1 12.1 12.5 16.0 16.0
Debt/equity (X) 2.0 2.4 1.6 1.8 1.4 1.2
Net debt/equity (X) 1.8 2.1 1.2 1.5 1.1 0.9
Net debt/EBITDA (X) 9.2 4.4 3.3 3.7 3.4 3.2
P/B (X) 1.3 1.5 1.2 1.0 0.9 0.8
RoAE (%) (5.4) 10.4 17.2 13.1 13.9 14.1
RoACE (%) 2.4 7.1 8.3 7.9 6.3 6.7
Net debt 731,855 744,767 714,900 1,003,919 769,875 736,428

NEUTRAL
Automobiles
India AUGUST 02, 2018
UPDATE
BSE-30: 37,522
Auto demand remains healthy. The domestic automotive industry continues to be on

a strong footing as July 2018 was another strong month for the industry with robust
volume growth across segments except the passenger vehicle segment. While demand
is relatively broad-based across markets, rural India appears to be doing particularly
well, which is reflected in strong growth in the two-wheeler and tractor industry. All
major OEMs have reported strong double-digit yoy volume growth in July 2018 except
Maruti and Eicher Motors.
Passenger vehicle industry volume growth muted due to high base effect
Maruti’s overall volumes declined by 1% yoy to 164,369 units due to high base effect led by
(1) flat yoy growth in domestic volumes and (2) 10% yoy decline in exports. In the domestic
market, volume growth was driven by (1) launch of new Swift and (2) continued strong
demand for Dzire, Baleno and Brezza models. Entry-segment volumes declined by only 11%.
In terms of other OEMs, Hyundai’s domestic volumes increased by 1.1% yoy. Tata Motors’
passenger vehicle segment volumes grew by 14% yoy led by the success of new launches –
Nexon and Tiago (volumes were impacted by transport operator strike).
M&M’s overall volumes grew 15% yoy in July 2018
Mahindra reported 15% yoy overall volume growth led by (1) 13% yoy growth in the auto
segment aided by 28% yoy growth in LCV/pickup volumes and 47% yoy growth in three-
wheeler volumes and (2) 20% yoy growth in tractor volumes. The underlying demand in the
tractor segment remains strong. In the recent earnings concall, Escorts raised domestic tractor
industry volume growth outlook to 12-15% yoy in FY2019 (versus 9-11% earlier).
Strong growth in MHCV industry albeit partly due to low base of last year
We reckon that domestic MHCV industry volumes grew by around 25% yoy in July 2018
despite CV industry outlook impacted by new axle load norms. Our channel checks suggest
near-term volume growth of heavy trucks will get impacted due to the new norms but growth
should normalize once clarity on this subject emerges. In terms of OEMs, (1) Tata reported 25%
yoy growth in domestic CV volumes led by strong growth in both MHCV and LCV segments,
(2) Ashok Leyland reported 22% yoy growth in overall MHCV volumes and (3) VECV’s domestic
MHCV volumes increased by 33% yoy in July 2018.
Strong double-digit growth in two-wheeler industry volumes in July 2018
In the two-wheeler segment, Hero reported 9% yoy volume growth in July 2018 driven by
positive consumer sentiment and good monsoon, as per the company. Bajaj Auto’s overall
volumes increased by 30% yoy (volumes were down 7% yoy in July 2017) led by (1) 22% yoy
growth in domestic motorcycle volumes, (2) 67% yoy growth in domestic three-wheeler Hitesh Goel
volumes and (3) 34% yoy growth in exports. TVS reported 18% yoy volume growth. In terms of hitesh.goel@kotak.com
Mumbai: +91-22-4336-0878
segments, scooter and bike volumes grew by 29% and 11% yoy, respectively while moped
volumes were up 10% yoy. Eicher reported 5% yoy volume growth to 69,063 units, which was Nishit Jalan
below our estimate of 75,000 units due to transport operators’ strike. nishit.jalan@kotak.com
Mumbai: +91-22-4336-0877

Mumbai: +91-22-4336-0000
Automobiles India
Exhibit 1: Maruti Suzuki reported 0.6% yoy decline in volumes in July 2018 due to high base effect
Maruti Suzuki monthly sales volume, March fiscal year-ends (units)
YTD
Jul-17 Aug-17 Sep-17 Oct-17 Nov-17 Dec-17 Jan-18 Feb-18 Mar-18 Apr-18 May-18 Jun-18 Jul-18 2018 2019
Sales volume (units)
M800, Alto, A-Star, Wagon R 42,310 35,428 38,479 32,490 38,204 32,146 33,316 33,789 37,511 37,794 37,864 29,381 37,710 145,820 142,749
Swift, Baleno, Ritz, Celerio, Dzire 63,116 74,012 72,804 62,480 65,447 53,336 67,868 65,213 68,885 83,834 77,263 71,570 74,373 218,430 307,040
Gypsy, Ertiga, S-Cross, Brezza 25,781 21,442 19,900 23,382 23,072 19,276 20,693 20,324 22,764 20,804 25,629 19,321 24,505 82,906 90,259
Omni and Eeco 15,714 13,931 13,735 12,669 13,565 11,420 12,250 12,425 13,689 15,886 16,717 12,185 15,791 51,453 60,579
Ciaz 6,377 6,457 5,603 4,107 4,009 2,382 5,062 4,897 4,321 5,116 4,024 1,579 48 22,075 10,767
Light commercial vehicle 703 730 879 872 1,003 726 1,411 1,252 1,412 1,544 1,703 1,626 1,723 1,748 6,596
Total domestic 154,001 152,000 151,400 136,000 145,300 119,286 140,600 137,900 148,582 164,978 163,200 135,662 154,150 522,432 617,990
Exports 11,345 11,701 11,671 10,446 9,300 10,780 10,751 11,924 12,016 8,008 9,312 9,319 10,219 37,485 36,858
Total volumes 165,346 163,701 163,071 146,446 154,600 130,066 151,351 149,824 160,598 172,986 172,512 144,981 164,369 559,917 654,848
Yoy change (%)
M800, Alto, A-Star, Wagonr 20.7 (0.2) (13.3) (4.2) (1.8) 2.0 (12.2) 2.1 21.1 (2.8) (3.1) 15.1 (10.9) (2.1)
Swift, Baleno, Ritz, Celerio, Dzire 18.1 52.4 34.1 18.8 24.8 16.3 15.4 31.5 11.3 31.8 50.8 76.7 17.8 40.6
Gypsy, Ertiga, S-Cross, Brezza 48.3 27.6 8.0 29.8 34.0 19.9 26.8 13.8 24.3 0.8 13.4 39.2 (4.9) 8.9
Omni and Eeco 6.6 8.6 0.9 (0.9) 10.8 23.8 (13.6) (12.5) 17.7 14.0 32.7 32.3 0.5 17.7
Ciaz 23.5 3.9 (14.4) (35.4) (26.2) (35.8) (22.5) (16.8) (12.1) (27.2) (14.8) (60.0) (99.2) (51.2)
Total domestic 22.4 26.7 10.3 9.9 15.0 12.1 5.0 14.2 16.1 14.2 24.9 45.5 0.1 18.3
Exports 0.1 (4.7) (1.3) 4.2 0.8 (6.2) 2.8 24.9 2.1 19.1 48.1 (29.0) (9.9) (1.7)
Total volumes 20.6 23.8 9.3 9.5 14.1 10.3 4.8 15.0 14.9 14.4 26.0 36.3 (0.6) 17.0
Exhibit 2: Mahindra & Mahindra: Overall volumes increased by 15% yoy in July 2018
Mahindra & Mahindra monthly sales volume, March fiscal year-ends (units)
YTD
Passenger UVs (incl. Verito) 20,962 19,325 25,327 23,903 16,030 15,543 23,686 22,389 26,555 21,927 20,715 18,137 19,781 76,813 80,560
Commercial Vehicles 15,023 16,303 19,201 19,284 15,554 17,542 21,002 20,946 25,496 18,963 18,748 19,229 19,284 61,469 76,224
3-wheelers 3,777 3,906 5,928 6,126 4,455 3,894 4,744 5,138 6,602 4,327 4,355 4,323 5,540 13,832 18,545
Exports (Auto sector) 1,983 2,582 3,207 2,343 2,531 2,221 2,626 2,654 3,424 2,880 3,031 3,466 2,594 6,659 11,971
Auto division 41,745 42,116 53,663 51,656 38,570 39,200 52,058 51,127 62,077 48,097 46,849 45,155 47,199 158,773 187,300
Tractors (Dom + Exp) 18,832 16,516 45,563 40,262 22,754 18,288 21,875 20,483 28,277 30,925 29,330 40,529 22,679 103,515 123,463
Total 60,577 58,632 99,226 91,918 61,324 57,488 73,933 71,610 90,354 79,022 76,179 85,684 69,878 262,288 310,763
Yoy change (%)
Passenger Uvs (incl. Verito) 20.8 5.9 23.3 (3.4) 17.6 (6.9) 17.9 8.7 4.7 13.1 2.1 12.2 (5.6) 4.9
Commercial vehicles 14.1 16.5 19.4 6.8 22.3 23.9 51.2 27.9 11.3 25.9 15.3 27.1 28.4 24.0
3-wheelers (21.0) (17.0) 0.0 3.3 12.7 12.6 55.2 50.0 30.4 25.9 7.3 68.9 46.7 34.1
Exports (Auto sector) (52.3) (29.2) (10.5) (28.5) (9.5) 8.2 16.1 15.4 26.4 88.5 134.4 86.8 30.8 79.8
Auto division 5.8 3.8 16.3 (0.7) 16.5 7.8 32.5 19.7 10.8 22.0 11.8 26.4 13.1 18.0
Tractors (Dom + Exp) 7.3 22.0 49.1 (10.9) 31.8 30.2 37.5 36.5 46.2 18.3 14.6 23.1 20.4 19.3
Total 6.3 8.3 29.4 (5.4) 21.8 14.0 33.9 24.1 19.9 20.5 12.9 24.8 15.4 18.5

India Automobiles
Exhibit 3: Tata Motors reported 23% yoy volume growth in July 2018; domestic MHCV truck volumes increased by 25% yoy
Tata Motors monthly sales volume, March fiscal year-ends (units)
YTD
MHCVs 12,796 14,977 17,007 15,508 17,621 21,851 18,431 20,706 24,321 18,271 17,565 17,456
LCVs 18,337 19,573 23,559 21,085 22,386 24,640 25,855 24,970 31,296 20,915 22,861 26,147
Total CVs 31,133 34,550 40,566 36,593 40,007 46,491 44,286 45,676 55,617 39,186 40,426 43,603 39,617 105,653 162,832
UVs 2,837 2,883 5,218 5,201 5,676 6,177 6,854 6,393 7,908 6,659 6,043 6,044
Cars 12,246 11,555 12,333 11,403 11,708 8,252 13,484 11,692 12,628 10,676 11,525 12,372
Total PVs 15,083 14,438 17,551 16,604 17,384 14,429 20,338 18,085 20,536 17,335 17,568 18,416 17,250 50,254 70,569
Total sales 46,216 48,988 58,117 53,197 57,391 60,920 64,624 63,761 76,153 56,521 57,994 62,019 56,867 155,907 233,401
Yoy change (%)
MHCVs 2.7 22.6 15.9 (0.8) 53.2 57.6 11.7 19.1 20.1 208.9 70.8 59.4
LCVs 8.9 15.1 24.0 3.2 56.3 54.6 55.1 40.6 47.9 72.4 33.4 44.4
Total CVs 6.3 18.3 20.5 1.5 54.9 56.0 33.5 30.0 34.3 117.1 47.4 50.1 27.3 54.1
UVs 93.7 51.3 206.9 159.5 335.9 371.5 179.2 174.3 223.3 309.3 447.4 406.6
Cars (1.2) (3.2) (7.1) (22.7) (0.5) (16.0) 25.7 15.8 (5.1) (5.5) 17.1 22.4
Total PVs 8.8 4.3 17.2 (0.9) 33.0 29.5 54.3 45.5 30.4 34.1 60.5 62.9 14.4 40.4
Total sales 7.1 13.8 19.5 0.7 47.5 48.8 39.4 34.0 33.3 82.5 51.2 53.7 23.0 49.7
Exhibit 4: Ashok Leyland reported 27% yoy volume growth in July 2018; MHCV volumes up 22% yoy
Ashok Leyland monthly sales volume, March fiscal year-ends (units)
YTD
LCV 2,955 3,067 3,566 3,804 3,819 3,303 4,458 4,455 5,396 3,709 3,238 4,534 4,203 11,573 15,684
MHCV 9,026 10,567 11,802 9,107 10,641 15,950 13,643 13,726 17,057 8,968 10,421 11,257 10,996 28,940 41,642
Total CVs 11,981 13,634 15,370 12,911 14,460 19,253 18,101 18,181 22,453 12,677 13,659 15,791 15,199 40,513 57,326
Yoy change (%)
LCV 27.9 13.8 15.3 28.6 44.3 69.5 58.3 62.7 57.6 45.0 10.4 44.9 42.2 35.5
MHCV 10.3 28.9 31.7 (4.8) 53.6 81.6 13.2 21.2 11.8 97.9 69.8 21.8 21.8 43.9
Total CVs 14.2 25.1 27.5 3.0 51.0 79.4 21.7 29.2 20.2 78.8 50.6 27.6 26.9 41.5
Exhibit 5: VECV reported 37% yoy volume growth in July 2018; domestic MHCV volumes increased by 33% yoy
VECV monthly sales volume, March fiscal year-ends (units)
YTD
Domestic sales
LCV 1,144 976 1,252 1,228 1,018 1,410 1,664 1,499 2,193 1,124 1,864 1,857 1,731
MHCV 2,570 2,842 3,832 3,235 3,044 3,635 4,346 4,284 5,787 2,265 3,404 3,639 3,427
Total 3,714 3,818 5,084 4,463 4,062 5,045 6,010 5,783 7,980 3,389 5,268 5,496 5,158 13,627 19,311
Export sales
LCV 234 247 162 166 65 111 154 329 404 168 115 233 223
MHCV 368 456 688 537 600 799 548 684 861 382 491 586 535
Total 602 703 850 703 665 910 702 1,013 1,265 550 606 819 758 2,190 2,733
Total sales 4,316 4,521 5,934 5,166 4,727 5,955 6,712 6,796 9,245 3,939 5,874 6,315 5,916 15,817 22,044
Yoy change (%)
LCV 4.1 (9.3) 10.4 9.5 59.8 65.1 59.8 9.9 20.1 (8.6) 9.1 56.6 51.3
MHCV 0.2 19.7 27.1 18.4 71.9 50.5 57.7 23.7 26.2 68.0 51.6 65.7 33.3
Total domestic 1.4 10.7 22.6 15.8 68.7 54.3 58.3 19.8 24.5 31.5 33.3 62.5 38.9 41.7
Export sales
LCV (22.0) 22.9 (7.4) (19.8) (75.0) 63.2 (29.4) 213.3 101.0 0.0 (19.6) 26.6 (4.7)
MHCV 4.8 1.6 67.4 38.4 50.4 26.4 26.0 53.4 80.5 15.4 10.8 83.7 45.4
Total exports (7.5) 8.2 45.1 18.2 0.9 30.0 7.5 83.8 86.6 10.2 3.4 62.8 25.9 24.8
Total sales 0.0 10.3 25.3 16.1 54.1 50.0 50.9 26.3 30.4 28.0 29.4 62.5 37.1 39.4

Automobiles India
Exhibit 6: Escorts reported 4% yoy volume growth in July 2018

Escorts monthly sales volume, March fiscal year-ends (units)
YTD
Escorts 5,430 4,575 10,353 10,205 5,119 3,606 5,316 6,462 11,790 6,186 8,325 9,983 5,626 22,991 30,120
Domestic 5,275 4,398 10,144 10,001 4,941 3,476 5,160 6,295 11,557 6,094 8,087 9,758 5,483 22,474 29,422
Exports 155 177 209 204 178 130 156 167 233 92 238 225 143 517 698
Yoy change (%)
Escorts 34.5 22.9 34.0 13.8 6.5 13.1 45.6 52.2 66.5 26.3 20.9 72.8 3.6 31.0
Domestic 33.4 19.9 32.4 12.9 5.2 14.2 47.1 53.4 64.8 28.0 19.5 72.1 3.9 30.9
Exports 86.7 221.8 242.6 83.8 64.8 (9.7) 7.6 16.8 258.5 (33.8) 105.2 110.3 (7.7) 35.0
Exhibit 7: Bajaj reported 30% yoy volume growth in July 2018; strong growth across segments
Bajaj monthly sales volume, March fiscal year-ends (units)
YTD
Domestic motorcycles 164,915 171,664 247,418 211,553 141,948 112,930 163,111 175,489 158,987 200,742 192,543 200,949 201,433 591,477 795,667
Export motorcycles 100,267 112,197 122,260 114,225 122,022 115,832 125,825 122,025 110,952 148,875 150,052 136,803 131,247 449,419 566,977
Total motorcycles 265,182 283,861 369,678 325,778 263,970 228,762 288,936 297,514 269,939 349,617 342,595 337,752 332,680 1,040,896 1,362,644
Domestic three-wheelers 21,582 28,995 34,361 35,657 37,887 36,579 39,082 38,534 44,613 28,722 32,082 33,627 36,078 73,929 130,509
Exports three-wheelers 20,963 22,175 24,713 21,029 24,601 27,206 25,129 21,835 19,796 36,829 32,367 33,050 31,585 81,336 133,831
Total three-wheelers 42,545 51,170 59,074 56,686 62,488 63,785 64,211 60,369 64,409 65,551 64,449 66,677 67,663 155,265 264,340
Total sales 307,727 335,031 428,752 382,464 326,458 292,547 353,147 357,883 334,348 415,168 407,044 404,429 400,343 1,196,161 1,626,984
Yoy change (%)
Domestic motorcycles (5.4) (1.7) 7.3 (0.7) 1.6 5.9 36.1 23.2 5.0 24.0 23.0 85.9 22.1 34.5
Exports motorcycles (9.8) 6.7 20.5 20.4 24.5 19.9 36.7 18.9 19.6 12.8 24.4 41.7 30.9 26.2
Total motorcycles (7.1) 1.4 11.4 5.8 11.0 12.5 36.4 21.4 10.5 18.9 23.6 65.0 25.5 30.9
Domestic three-wheelers (8.9) 13.3 37.0 38.3 156.7 180.1 154.0 129.1 150.2 80.0 83.1 78.2 67.2 76.5
Exports three-wheelers 1.7 11.8 25.5 (6.5) 41.1 197.1 70.9 86.1 95.4 85.0 69.3 54.8 50.7 64.5
Total three-wheelers (4.0) 12.6 31.9 17.4 94.1 187.1 113.4 111.4 130.3 82.8 75.9 65.8 59.0 70.3
Total sales (6.7) 3.0 13.8 7.4 20.9 29.7 46.0 30.8 22.8 25.9 29.7 65.2 30.1 36.0
Exhibit 8: Hero reported 9% yoy volume growth in July 2018

Hero MotoCorp monthly sales volume, March fiscal year-ends (units)
YTD
Total sales 623,269 678,797 720,739 631,105 605,270 472,731 641,501 629,597 730,473 694,022 706,365 704,562 679,862 2,472,644 2,784,811
Yoy change (%) 17.1 10.1 6.8 (4.8) 26.1 43.2 31.7 20.0 19.8 17.4 11.4 12.9 9.1 12.6
Exhibit 9: Royal Enfield reported 5% yoy volume growth in July 2018 due to transport operator strike
Royal Enfield monthly sales volume, March fiscal year-ends (units)
YTD
Royal Enfield 65,761 67,977 70,431 69,492 70,126 66,968 77,878 73,077 76,087 76,187 74,697 74,477 69,063 249,759 294,424
Domestic 64,459 66,872 69,393 68,014 67,776 65,367 76,205 71,327 74,209 74,627 72,510 72,588 67,001 243,341 286,726
Exports 1,302 1,105 1,038 1,478 2,350 1,601 1,673 1,750 1,878 1,560 2,187 1,889 2,062 6,418 7,698
Yoy change (%)
Royal Enfield 23.2 22.0 21.8 17.5 22.4 16.7 30.5 25.0 26.6 26.7 23.1 17.9 5.0 17.9
Domestic 23.7 22.2 21.8 16.5 21.4 16.1 31.1 25.7 26.7 27.4 23.6 17.7 3.9 17.8
Exports 4.2 12.1 17.4 97.6 59.9 48.0 8.4 2.8 20.1 (1.1) 6.7 26.9 58.4 19.9

India Automobiles
Exhibit 10: TVS Motor’s volumes increased by 18% yoy in July 2018
TVS Motors monthly sales volume, March fiscal year-ends (units)
YTD
Motorcycles 109,427 111,927 143,923 125,409 93,202 95,281 98,649 113,296 134,412 131,704 126,711 128,825 121,434 439,477 508,674
Scooters 92,378 114,354 121,601 106,910 78,397 83,640 85,521 93,573 100,972 89,245 95,879 102,763 118,996 349,950 406,883
Mopeds 61,531 82,865 85,330 76,045 71,724 68,709 78,825 74,073 80,381 72,469 75,545 69,613 67,426 258,980 285,053
Three-wheelers 7,835 8,417 8,996 9,047 8,642 9,279 8,806 9,731 10,894 11,377 11,730 12,413 13,323 24,872 48,843
Total sales 271,171 317,563 359,850 317,411 251,965 256,909 271,801 290,673 326,659 304,795 309,865 313,614 321,179 1,073,279 1,249,453
Yoy change (%)
Total motorcycles 15.1 (2.0) 17.2 3.2 37.3 63.7 63.7 92.0 40.5 31.8 7.4 14.9 11.0 15.7
Scooters 35.8 49.3 43.3 15.7 7.2 50.6 22.1 35.6 20.0 9.6 11.9 13.6 28.8 16.3
Mopeds (20.0) 7.8 6.9 (15.4) (8.1) 4.4 9.7 (5.3) 13.0 21.4 5.3 5.4 9.6 10.1
Total three-wheelers (1.6) 26.9 54.9 88.3 46.9 72.1 81.6 86.3 103.2 114.5 78.2 140.9 70.0 96.4
Total sales 9.3 15.8 22.7 2.8 12.0 38.9 31.3 37.5 27.4 23.7 9.9 14.5 18.4 16.4
Exhibit 11: Residual volume growth run rate remains muted for auto companies as per our estimates
Summary table of OEM volumes
Residual volume
Residual monthly run rate (Yoy
OEM Jul-18 Yoy chg (%) Mom chg (%) YTDFY18 Yoy chg (%) volume run rate growth)
Ashok Leyland 15,199 26.9 (3.7) 57,326 41.5 17,648 5.2
Bajaj Auto 400,343 30.1 (1.0) 1,626,984 36.0 380,199 8.2
Eicher Motor (RE) 69,063 5.0 (7.3) 294,424 17.9 81,089 13.7
Eicher Motor (VECV) 5,916 37.1 (6.3) 22,044 39.4 6,223 1.5
Escorts 5,626 3.6 (43.6) 30,120 31.0 7,879 9.8
Hero Motocorp 679,862 9.1 (3.5) 2,784,811 12.6 700,705 9.6
Maruti Suzuki 164,369 (0.6) 13.4 654,848 17.0 172,222 13.0
Mahindra and Mahindra 69,878 15.4 (18.4) 310,763 18.5 83,691 10.8
Tata Motors (standalone) 56,867 23.0 (8.3) 233,401 49.7 62,069 2.7
TVS Motors 321,179 18.4 2.4 1,249,453 16.4 328,445 9.8
Source: Kotak Institutional Equities estimates, Company

INDIA
Economy
Public Finance AUGUST 02, 2018
UPDATE
BSE-30: 37,522
GST: Revenues far from satisfactory. Even as the monthly GST collections have been
closer to comfort, the actual revenues (accounting for refunds) are far from satisfactory.
Combining the CGA releases (cash-accounting based) and monthly PIB releases, the
current run-rate until now is around `920 bn, implying a required run-rate of `1.1 tn
for the rest of FY2019. It will be difficult for the government to meet the FY2019BE
GFD/GDP of 3.3% in the absence of expenditure adjustments, higher-than-budgeted
non-GST revenues, and tweaks in IGST settlements. We maintain our FY2019 GFD/GDP
estimate at 3.5% with risk of higher borrowings in 2HFY19.
QUICK NUMBERS
Not much upside visible from intra-state e-way bill
Based on the monthly PIB release, total GST collections stood at `965 bn in June compared to  June GST collections
`956 bn in May. CGST collection amounted to `159 bn (May: `160 bn), SGST stood at `223 bn at `965 bn
(`220 bn), IGST at `500 bn (`495 bn), and compensation cess was at `84 bn (`81 bn) (Exhibit
1). We had noted in our last GST report (GST: Higher compliance, not-so-higher revenues, July  4MFY19 run-rate at
2) that CGST and SGST collections for the months of June/July would provide a better sense if `920 bn; required
intra-state e-way bill led to better compliance. However, the CGST/SGST revenues do not rate at `1.1 tn for
indicate much compliance improvement due to intra-state e-way bill. We had also noted that rest of FY2019
the positive effect of inter-state e-way bill was visible in the IGST collections increase.
 Maintain our
Current run-rate strongly indicates revenue shortfall in FY2019 GFD/GDP estimate
at 3.5%
Combining the CGA accounts (collections for Mar-May) and PIB release for collections for June
imply a run-rate of `920 bn for 4MFY19 (the difference between PIB releases and CGA-derived
numbers can be attributed to refunds from IGST and CGST). This is lower than the required run
rate of `1.04 tn as per central and states’ budget estimates (required rate of `1.1 tn for rest of
FY2019). As of now, run-rate of `593 bn for center’s GST collection (CGST+IGST) is required for
the rest of FY2019 to meet the union budget estimate of `6.5 tn. For 4MFY19, the current run-
rate is at around `450 bn (Exhibit 2). The SGST run-rate is further lower at `389 bn against a
required run-rate of `440 bn for the rest of FY2019. Even if we build in an optimistic 8-10%
qoq growth in the overall run-rate, there is likely to be a shortfall of around `300 bn (translates
to around 15 bps slippage in GFD/GDP). If current run-rate is maintained, the shortfall could be
around `1 tn (40 bps in GFD/GDP) assuming no IGST/cess or revenue/expenditure adjustments.
Lower IGST transfer to states and higher compensation cess to bridge center’s GST gap?
In a scenario where union GST revenues (CGST+IGST) are short of budget estimates, it will be
interesting to see how the IGST transfers are treated in FY2019. If a repeat of FY2018 is on the
cards, we could possibly see lower IGST transfer to states, balanced out by higher compensation
cess transfers to keep revenues balanced for the states. We note that the center cannot transfer
the cess collections to the Consolidated Fund of India for its own use. However, the unallocated
IGST has been used as part of the center’s revenues in FY2018. We note that the center had Suvodeep Rakshit
suvodeep.rakshit@kotak.com
released around `411 bn to the states through compensation cess. With around `210 bn of
Mumbai: +91-22-4336-0898
FY2018 compensation cess collections in the Public Account of India, it would be interesting to
see how the government offsets in case of any lower settlement to states from IGST. Upasna Bhardwaj
upasna.bhardwaj@kotak.com
Mumbai: +91-22-6166-0531
Kotak Economic Research

Mumbai: +91-22-4336-0000
For Private Circulation Only.

India Economy
Exhibit 1: CGST and SGST stable in June; IGST maintains buoyancy seen in April
Breakup of monthly GST collection (Rs bn)
Jul-17 Aug-17 Sep-17 Oct-17 Nov-17 Dec-17 Jan-18 Feb-18 Mar-18 Apr-18 May-18 Jun-18
CGST 151 148 145 157 136 145 145 157 187 159 160 159
SGST 230 216 219 230 193 205 204 214 257 217 220 223
IGST 481 486 505 448 428 453 447 445 505 491 495 500
IGST (imports) 213 238 247 223 218 231 229 232 212 244 245 249
Compensation cess 73 80 82 79 81 86 85 77 86 73 81 84
Total GST 936 930 951 913 837 889 880 893 1,035 940 956 965
Total filings (mn) 5.9 5.9 5.7 5.0 5.3 5.6 5.8 6.0 6.0 6.2 6.5 6.6
Source: PIB, Kotak Economics Research estimates
Exhibit 2: CGST and SGST run-rates significantly behind their budgeted run-rates
Summary of GST collections, March fiscal year-ends (Rs bn)
Mar-18 Apr-18 May-18 Jun-18

Monthly collections (PIB press releases)
Center 325 288 316 409
Center GST (CGST) 187 159 160 159
Centre's share of IGST (C-IGST) 138 129 157 250
States 403 340 367 473
States' GST (SGST) 257 217 220 223
States' share of IGST (S-IGST) 146 123 147 250
Unallocated IGST 222 239 192 (0)
Compensation cess 86 73 81 84
Total 1,035 940 956 965
FYTD collections (incl. CGA adjustments for CGST, SGST, IGST)
Centre 521 971 1,383 1,797
- CGST 321 602 911 1,313
- Unallocated IGST 200 369 471 484
State 399 732 1,092 1,558
Total 1,004 1,860 2,712 3,675
FY2019BE
Centre 6,539
- Unallocated IGST 500
State 5,078
Compensation cess 900
Total 12,517
FY2019E required run rate
Centre 545
- Unallocated IGST 42
State 423
Compensation cess 75
Total 1,043
FYTD run rate
Centre 521 486 461 449
- Unallocated IGST 200 185 157 121
State 399 366 364 389
Total 1,004 930 904 919
Notes:
(a) Monthly collections are inclusiv e of monthly IGST transfers.
(b) F YTD collections for J un-18 is based on our estimates of refunds and IGST settlements.
Source: PIB, CGA, Kotak Economics Research estimates
60 KOTAK ECONOMIC RESEARCH

INDIA
Economy
Monetary Policy AUGUST 02, 2018
UPDATE
BSE-30: 37,522
RBI: Signaling a brief pause. RBI MPC’s decision to hike repo rate by 25 bps while
retaining the neutral stance reiterates our view of a shallow rate-hike cycle amid
increasing uncertainties. We expect the MPC to maintain a status quo through the rest
of FY2019 while assessing the impact of the cumulative 50 bps of repo rate hikes.
However, it remains crucial to watch how the RBI’s inflation estimates pan through
1QFY20. The materialization of risks and the persistence of inflation above 5% (100 bps
higher than RBI’s 4% target) could be suggestive of further rate hike after a brief pause.
RBI MPC delivers second rate hike in a row QUICK NUMBERS

The RBI MPC expectedly hiked repo rate by 25 bps to 6.5% and retained the neutral stance.
 Repo rate hiked by
Five members voted for the hike while one member (Dr Dholakia) voted for a pause. The
25 bps at 6.5%
decision to hike rate by another 25 bps in a row stems from the inflation trajectory expected to
sustain above RBI’s target of 4% for a prolonged period, with upside risks rising from the  2QFY19 inflation
closure of the output gap. Significant increase in the recent RBI inflation expectations surveys
estimates lowered
also lent support to the hike (Exhibit 1).
to 4.6% and
Uncertainties around inflation prompt MPC to retain neutral stance 2HFY19 revised up
to 4.8%
Even as the tone of the policy shifted to more balanced, the RBI continued to highlight some of
the uncertainties to the inflation trajectory. The MPC noted risks to inflation emanating from (1)  We expect a pause
volatile crude oil prices, (2) volatility in global financial markets, (3) increase in households’ in policy rates in
inflation expectations, (4) hardening of input prices for manufacturing companies in 2QFY19, rest of FY2019
(5) uneven spatial distribution, (6) adverse implications from fiscal slippage, (7) uncertainty
around the price support mechanism of MSP and the consequent pass through, and (8)
staggered impact of HRA increases by states and its second round impact. Thus, the RBI revised
up its 2HFY19 inflation forecast marginally by 10 bps to 4.8% and projects 5% in 1QFY20, with
risks evenly balanced. We expect inflation to range 4.3-4.8% in 2HFY19, averaging around
4.6% for FY2019 (Exhibit 2).
MPC retains its optimism on growth
The MPC noted that domestic economic activity momentum has sustained and output gap has
virtually closed. The MPC retained its GDP forecast of 7.4% in FY2019, with optimism arising
from (1) robust rural demand on the back of sharp increase in MSPs and normal monsoons, (2)
robust corporate earnings, and (3) firm investment activity. The MPC, however, acknowledged
the risks to growth rising from trade tensions. We expect FY2019 GDP growth at 7.3%.
RBI to pause for now
We expect RBI to remain on hold through rest of FY2019 as moderation in the growth
momentum in 2HFY19 on the back of tighter financial conditions and adverse global growth Upasna Bhardwaj
will begin to drag core inflation lower even as high input prices are passed through. upasna.bhardwaj@kotak.com
Additionally, stable crude oil prices and partial pass-through of MSP on inflation (25-30 bps) Mumbai: +91-22-6166-0531
seem less of a concern in FY2019. While, we remain cautious on food inflation given the Suvodeep Rakshit
suboptimal monsoon and sowing pattern, the improvement in reservoir levels should keep a lid suvodeep.rakshit@kotak.com
Mumbai: +91-22-4336-0898
on food prices. While the growth-inflation dynamics and the assessment of monetary policy
transmission may keep the MPC on hold through rest of FY2019, we remain watchful on how
RBI’s inflation trajectory estimates pan out through 1QFY20. The materialization of risks and the
persistence of inflation above 5% (100 bps higher than RBI’s 4% target) could be suggestive of
further rate hike after a brief pause.
Kotak Economic Research

Mumbai: +91-22-4336-0000
For Private Circulation Only.

India Economy
Exhibit 1: Inflation expectations edged up in the latest quarter

RBI's inflation expectation survey based on mean for one year-ahead (%)
Inflation expectations: One year ahead

16
13 13 14 14 13 14
14 13 13 13 13 13 13 13 13 13 12 13
12 12 12
12 11 11 11 11
9 10 10 10 9 9 10
10 9 9 9 9
8
6
4
2
0
Dec-09
Dec-10
Dec-11
Dec-12
Dec-13
Dec-14
Dec-15
Dec-16
Dec-17
Mar-10
Mar-11
Mar-12
Mar-13
Mar-15
Mar-17
Mar-18
Mar-14
Mar-16
Jun-10
Jun-12
Jun-14
Jun-15
Jun-16
Jun-17
Jun-11
Jun-13
Jun-18
Sep-11
Sep-13
Sep-14
Sep-16
Sep-10
Sep-12
Sep-15
Sep-17
Source: CEIC, RBI, Kotak Economics Research
Exhibit 2: Upside risks to inflation from crude price, INR weakness, and higher-than-usual MSP hikes
Headline and core CPI inflation (%)
CPI inflation Core CPI inflation

10
6
Mar-19: 5.1
4
Mar-19: 4.8
0
Apr-14
Apr-15
Apr-16
Apr-17
Apr-18
Jul-14
Jul-15
Jul-16
Jul-17
Jul-18
Jan-14
Jan-15
Jan-16
Jan-17
Jan-18
Jan-19
Oct-14
Oct-15
Oct-16
Oct-17
Oct-18
Source: CEIC, Kotak Economics Research estimates

June 2018: Results calendar
Mon Tue Wed Thu Fri Sat Sun
63
30-Jul 31-Jul 1-Aug 2-Aug 3-Aug 4-Aug 5-Aug

Avenue Supermarts Ajanta Pharma Aditya Birla Fashion Godrej Properties Berger Paints Divi's Laboratories P I Industries
Axis Bank Astral Poly Technik Apollo Tyres Indiabulls Housing Carborundum Universal
Central Bank of India Bank of India Emami JK Lakshmi Cement CG Pow er and Industrial
Century Textile Bharat Electronics Exide Industries Mahindra Logistics KEC International
Escorts Castrol India Gatew ay Distriparks Manpasand Beverages Laurus Labs
GIC Dabur India Orient Cement Marico SAIL
Godrej Consumer Products IIFL Holdings Pidilite Industries Narayana Hrudayalaya Titan Company
GSPL Jagran Prakashan Reliance Infrastructure ONGC
HDFC Mahanagar Gas Tata Global Beverages The Ramco Cement
Idea Pow er Grid Torrent Pow er Torrent Pharmaceuticals
6-Aug 7-Aug 8-Aug 9-Aug 10-Aug 11-Aug 12-Aug
Adani Port and SEZ Adani Transmission BPCL 3M India Alkem Laboratories Amara Raja Batteries
Adani Pow er AU Small Finance Cipla AIA Engineering Apollo Hospitals Coal India
Arvind Edelw eiss Financial Services City Union Bank Aurobindo Pharma Bosch India Cements
Britannia Industries GlaxoSmithkline Consumer HPCL Bharat Forge Dhanuka Agritech IOCL
Gatew ay Distriparks Kalpataru Pow er Transmission Indian Bank Coffee Day Enterprises Dr Lal Pathlabs MRPL
Max Financial Services Mahindra & Mahindra Lupin Cummins India Endurance Technologies NBCC
Punjab National Bank Motherson Sumi Systems Natco Pharma Eicher Motors GAIL (India)
Ujjivan Financial Services Mphasis National Aluminium Co. Engineers India Glenmark Pharmaceuticals
Sobha NMDC Godrej Agrovet Hindalco Industries
SRF PNB Housing Finance Gujarat Pipavav Port Indraprastha Gas
TVS Motor Siemens HCG NHPC
Thermax Jindal Steel and Pow er PC Jew eller
Kaveri Seed State Bank of India
MRF Sun TV Netw ork
Page Industries Timken
S H Kelkar and Company Union Bank
Tata Communications United Brew eries
Varun Beverages Voltas
Whirlpool
Cadila Healthcare Grasim Industries
Dew an Housing Finance Rajesh Exports
India Daily Summary - August 2, 2018

Godrej Industries Sun Pharmaceuticals
Tata Chemicals
P&G Hygiene Gillette India
Source: NSE, Kotak Institutional Equities

KOTAK INSTITUTIONAL EQUITIES RESEARCH
KOTAK ECONOMIC RESEARCH 63

Kotak Institutional Equities: Valuation summary of KIE Universe stocks

Target O/S ADVT
Price (Rs) price Upside Mkt cap. shares EPS (Rs) EPS growth (%) P/E (X) EV/EBITDA (X) P/B (X) RoE (%) Dividend yield (%) 3mo
Company Rating 1-Aug-18 (Rs) (%) (Rs bn) (US$ bn) (mn) 2018 2019E 2020E 2018 2019E 2020E 2018 2019E 2020E 2018 2019E 2020E 2018 2019E 2020E 2018 2019E 2020E 2018 2019E 2020E (US$ mn)
Automobiles
Amara Raja Batteries REDUCE 823 780 (5.2) 141 2.1 171 28 33 39 (1.6) 21.2 15.5 29.8 24.6 21.3 15.9 13.1 11.2 4.8 4.1 3.6 17.0 18.0 18.0 0.5 0.6 0.7 6.0
Apollo Tyres BUY 292 340 16.6 167 2.4 541 13 20 25 (38.0) 48.3 25.0 21.8 14.7 11.8 12.0 8.6 7.2 1.6 1.6 1.4 8.5 11.1 12.5 1.0 1.0 1.0 10.4
Ashok Leyland BUY 119 160 34.6 349 5.1 2,926 5.4 6.2 8.9 8.0 15.3 43.2 22.1 19.2 13.4 12.7 9.7 7.0 4.9 4.2 3.5 23.7 23.4 28.4 2.0 1.6 2.2 44.9
Bajaj Auto SELL 2,681 2,500 (6.7) 776 11.3 289 140 148 161 6.0 5.4 9.0 19.1 18.1 16.6 12.9 12.5 11.0 4.1 3.6 3.3 22.9 21.2 20.7 2.2 2.2 2.4 31.2
Balkrishna Industries REDUCE 1,190 1,260 5.9 230 3.4 193 37 50 63 4.8 34.8 25.0 31.8 23.6 18.9 16.9 13.0 10.3 5.6 4.7 3.8 19.0 21.6 22.2 0.4 0.5 0.5 8.2
Bharat Forge SELL 644 600 (6.9) 300 4.4 466 16 23 27 10.1 43.0 16.8 39.8 27.8 23.8 19.1 15.7 13.6 6.5 5.5 4.7 17.3 21.5 21.4 0.7 0.8 0.9 10.6
CEAT ADD 1,403 1,500 6.9 57 0.8 40 65 99 108 (29.5) 53.7 8.3 21.7 14.1 13.0 10.5 8.9 7.7 2.2 1.9 1.7 10.4 14.4 13.8 0.8 0.7 0.7 14.5
Eicher Motors SELL 27,299 26,000 (4.8) 744 10.9 27 792 995 1,200 29.3 25.5 20.6 34.4 27.4 22.7 24.8 19.9 16.2 13.8 10.0 7.4 46.4 42.3 37.5 0.1 0.1 0.1 18.9
Escorts BUY 904 1,200 32.7 77 1.6 89 39 59 71 71.3 52.3 19.9 23.3 15.3 12.8 13.3 9.3 7.6 3.2 2.7 2.3 13.5 17.6 18.0 0.4 1.0 1.2 16.9
Exide Industries SELL 270 235 (13.1) 230 3.4 850 8 10 11 0.6 25.3 11.0 32.9 26.3 23.7 18.5 15.0 13.3 4.3 3.9 3.5 13.5 15.4 15.5 0.9 1.1 1.3 8.5
Hero Motocorp SELL 3,280 3,000 (8.5) 655 9.6 200 185 183 204 9.5 (0.9) 11.4 17.7 17.9 16.0 10.9 10.7 9.4 5.6 5.0 4.4 33.8 29.3 29.1 2.6 2.8 3.1 22.6
Mahindra CIE Automotive ADD 255 290 13.7 97 1.4 378 10 14 16 107.0 45.0 12.7 26.6 18.3 16.3 13.0 9.2 8.1 2.6 2.3 2.0 10.4 13.2 13.1 — — — 3.2
Mahindra & Mahindra BUY 928 1,015 9.4 1,153 16.8 1,138 38 44 50 22.0 15.6 14.8 24.4 21.1 18.4 16.1 13.7 11.8 3.5 3.1 2.7 15.1 15.4 15.7 0.8 0.9 1.1 31.8
Maruti Suzuki ADD 9,340 10,000 7.1 2,822 41.2 302 256 323 393 5.1 26.4 21.8 36.5 28.9 23.7 20.5 16.7 13.2 6.8 5.8 5.0 19.8 21.6 22.5 0.9 0.9 1.1 63.8
Motherson Sumi Systems SELL 315 265 (15.8) 662 9.7 2,105 8 11 14 6.1 37.7 21.7 38.5 27.9 23.0 14.4 11.1 9.2 6.7 5.7 4.9 19.0 22.1 22.9 0.7 0.9 1.0 13.8
MRF REDUCE 79,579 76,000 (4.5) 338 4.9 4 2,669 3,896 4,447 (23.9) 46.0 14.1 29.8 20.4 17.9 13.6 10.0 8.6 3.5 3.0 2.6 12.3 15.7 15.4 0.1 0.1 0.1 7.2
Schaeffler India BUY 5,293 6,000 13.4 88 1.3 17 143 156 199 22.0 9.0 27.3 37.0 33.9 26.6 21.7 20.6 15.7 5.2 4.6 4.1 15.0 14.5 16.4 0.3 0.6 0.8 0.6
SKF ADD 1,687 1,800 6.7 87 1.3 51 58 69 82 24.6 19.7 18.5 29.3 24.4 20.6 18.1 15.6 12.8 4.7 4.1 3.5 16.1 16.7 17.1 0.6 0.7 0.8 0.4
Tata Motors BUY 265 425 60.3 900 12.2 3,396 20 22 36 (28.0) 10.7 62.7 13.3 12.0 7.4 3.9 3.6 3.0 0.9 0.9 0.8 8.8 7.6 11.2 — — — 57.2
Timken SELL 754 660 (12.5) 51 0.7 68 14 19 25 (5.3) 42.3 27.5 55.7 39.2 30.7 31.1 21.7 17.3 7.3 6.2 5.2 13.9 17.1 18.5 0.1 0.1 0.1 0.3
TVS Motor SELL 512 410 (20.0) 243 3.6 475 14 18 22 18.7 26.8 21.8 36.7 29.0 23.8 22.5 16.9 14.1 8.5 7.1 6.0 25.1 26.7 27.3 0.6 1.0 1.3 11.9
WABCO India SELL 6,630 6,350 (4.2) 126 1.8 19 144 169 222 27.8 17.8 31.3 46.1 39.1 29.8 29.9 25.4 19.2 8.2 6.9 5.7 19.5 19.2 20.9 0.1 0.2 0.2 0.5
Automobiles Neutral 10,292 150 (0.9) 19.7 25.7 26.3 22.0 17.5 11.7 9.8 8.1 3.7 3.3 2.9 14.2 15.1 16.6 0.9 0.9 1.1 383.3
Banks
Axis Bank ADD 545 600 10.1 1,400 20.4 2,567 1 18 40 (92.6) 1,577.6 122.3 507.5 30.3 13.6 — — — 2.6 2.3 2.0 0.5 7.1 14.1 0.9 0.5 1.1 55.8
Bank of Baroda NR 151 — — 399 5.8 2,652 (9) 21 26 (253.2) 323.7 26.4 (16.4) 7.3 5.8 — — — 1.6 1.3 1.0 (5.8) 12.7 14.0 — — — 33.4
Canara Bank ADD 285 300 5.3 209 3.1 733 (58) (5) 51 (406.6) 91.6 1,147.0 (4.9) (58.8) 5.6 — — — 1.8 1.7 1.0 (12.2) (1.0) 10.1 — — — 28.8
City Union Bank ADD 174 190 9.1 127 1.9 665 9 10 12 6.4 16.2 13.0 19.6 16.8 14.9 — — — 3.0 2.6 2.3 15.3 15.5 15.5 0.2 1.1 1.2 1.9
DCB Bank ADD 166 205 23.5 51 0.7 308 8 10 12 13.8 28.2 21.0 20.9 16.3 13.4 — — — 2.1 1.9 1.7 10.9 11.7 12.7 — 0.6 0.7 4.5
Equitas Holdings BUY 141 190 34.9 48 0.7 340 0.9 4.4 8.4 (80.3) 378.4 89.9 151.8 31.7 16.7 — — — 2.2 2.0 1.8 1.4 6.4 11.2 — — — 5.2
Federal Bank BUY 88 130 48.4 173 2.5 1,972 4.4 5.7 7.9 (9.3) 29.5 39.5 20.0 15.5 11.1 — — — 1.5 1.4 1.3 8.2 8.8 11.4 1.1 1.5 2.1 20.6
HDFC Bank REDUCE 2,159 2,000 (7.4) 5,622 82.1 2,595 67 77 93 18.7 14.1 21.1 32.0 28.1 23.2 — — — 5.4 4.1 3.6 17.9 16.5 16.2 0.6 0.7 0.8 85.1
ICICI Bank BUY 299 400 33.6 1,925 28.1 6,429 11 8 26 (31.1) (19.6) 209.1 28.4 35.3 11.4 — — — 2.3 2.0 1.7 6.6 5.1 14.5 0.5 0.6 1.8 92.1
IDFC Bank NR 40 — — 135 2.0 3,404 2.5 1.2 2.9 (16.0) (52.7) 146.7 15.7 33.1 13.4 — — — 0.9 0.9 0.8 5.7 2.6 6.3 1.3 0.6 1.5 9.3
IndusInd Bank REDUCE 2,001 1,900 (5.1) 1,202 17.6 600 60 71 87 25.3 17.5 23.6 33.3 28.3 22.9 — — — 5.2 4.2 3.7 17.1 17.6 16.8 — 0.4 0.5 31.4
J&K Bank BUY 57 100 75.3 32 0.5 557 4 7 11 111.6 82.4 63.8 15.7 8.6 5.2 — — — 0.7 0.7 0.6 3.4 5.9 9.1 — 2.3 3.8 0.4
Karur Vysya Bank ADD 107 110 2.9 78 1.1 727 5 3 13 (52.2) (32.3) 306.7 22.5 33.2 8.2 — — — 1.5 1.5 1.3 6.1 3.7 14.1 0.6 0.8 3.1 1.9
Punjab National Bank ADD 88 90 2.7 242 3.5 2,761 (44) (39) 9 (814.7) 13.4 124.1 (2.0) (2.3) 9.4 — — — 5.2 (4.0) (14.9) (32.4) (31.3) 8.2 — (9.5) 2.3 32.8
RBL Bank SELL 569 475 (16.5) 241 3.5 420 15 22 29 27.3 48.1 31.5 37.6 25.4 19.3 — — — 3.7 3.3 3.0 11.5 13.3 15.5 0.4 0.6 0.8 12.9
State Bank of India BUY 295 370 25.4 2,634 38.5 8,925 (7) 18 37 (155.8) NM 106.1 NM 16.4 7.9 — — — 2.3 1.8 1.3 (3.2) 7.1 13.2 — 0.1 0.1 80.1
Ujjivan Financial Services REDUCE 373 420 12.5 45 0.7 121 1 22 29 (96.5) 3,564.0 30.0 618.4 16.9 13.0 — — — 2.7 2.3 2.0 0.4 14.2 16.1 0.0 0.6 0.8 6.8
Union Bank ADD 88 130 48.1 103 1.5 1,169 (45) 1 24 (655.5) 101.4 3,896.2 (2.0) 143.4 3.6 — — — 1.5 1.3 0.8 (23.6) 0.3 11.8 — 0.1 4.2 9.7
YES Bank SELL 366 335 (8.4) 844 12.3 2,303 18 20 22 25.7 8.1 9.5 19.9 18.4 16.8 — — — 3.4 3.0 2.6 17.7 16.6 15.9 0.7 0.9 1.0 59.7
Banks Attractive 15,674 229 (101.3) 8,855.5 125.0 (2,510.4) 28.7 12.7 2.0 1.8 1.6 (0.1) 6.3 12.7 0.4 0.4 0.9 584.5

64
Target O/S ADVT
65
NBFCs
Bajaj Finance SELL 2,723 2,000 (26.5) 1,573 23.0 575 43 68 90 29.2 56.6 31.9 62.7 40.1 30.4 — — — 9.9 8.2 6.6 19.7 22.4 24.0 0.1 0.2 0.3 55.7
Bajaj Finserv REDUCE 6,990 6,100 (12.7) 1,112 16.2 159 176 245 307 10.3 39.7 25.2 39.8 28.5 22.8 — — — 5.6 4.5 3.8 15.6 17.5 18.1 0.2 0.2 0.2 18.4
Bharat Financial Inclusion NA 1,213 — — 169 2.5 139 33 43 54 55.5 31.1 27.2 37.1 28.3 22.3 — — — 5.6 4.6 3.7 16.7 17.9 18.5 — — — 10.0
Cholamandalam REDUCE 1,462 1,500 2.6 229 3.3 156 62 90 110 35.5 44.8 22.1 23.5 16.2 13.3 — — — 4.7 3.8 3.1 20.6 24.5 24.3 0.4 0.7 0.9 7.7
HDFC ADD 1,970 2,075 5.3 3,330 48.6 1,676 75 56 67 52.1 (25.8) 19.0 26.1 35.2 29.6 — — — 5.2 4.5 4.1 23.9 13.8 14.5 1.0 1.1 1.3 71.9
HDFC Standard Life Insurance SELL 496 405 (18.3) 998 14.6 2,007 6 6 7 24.4 14.8 10.9 89.6 78.1 70.4 — — — 23.2 20.7 18.5 27.3 28.0 27.7 0.3 0.3 0.4 11.9
ICICI Lombard SELL 770 620 (19.5) 350 5.1 454 19 26 32 22.0 37.1 21.5 40.6 29.6 24.4 — — — 7.7 6.5 5.4 20.8 23.8 24.2 0.5 0.8 0.9 2.3
ICICI Prudential Life BUY 420 500 19.0 603 8.8 1,436 11 12 13 (3.7) 10.1 7.0 37.2 33.8 31.6 — — — 9.2 7.5 6.3 25.0 24.5 21.8 1.3 0.5 0.5 10.9
IIFL Holdings SELL 684 625 (8.7) 218 3.2 319 29 38 45 32.4 31.5 18.6 24.0 18.2 15.4 — — — 4.3 3.3 2.8 19.0 20.5 20.0 0.9 1.2 1.4 1.4
L&T Finance Holdings ADD 176 190 7.9 352 5.1 1,996 7 13 14 23.7 70.9 12.3 24.0 14.0 12.5 — — — 2.8 2.5 2.2 14.2 18.9 18.8 1.0 1.1 1.4 12.6
LIC Housing Finance BUY 521 610 17.2 263 3.8 505 44 50 58 3.2 13.8 17.5 11.9 10.5 8.9 — — — 2.0 1.7 1.4 14.5 14.3 14.4 1.3 1.5 1.7 12.2
Magma Fincorp BUY 148 200 35.3 40 0.6 237 10 12 15 1,014.5 24.6 25.8 15.2 12.2 9.7 — — — 1.5 1.5 1.3 10.2 12.9 14.1 0.5 1.2 1.5 1.6
Mahindra & Mahindra Financial REDUCE 506 500 (1.1) 312 4.6 614 15 23 28 105.0 58.4 23.2 34.8 22.0 17.9 — — — 3.6 3.2 2.9 11.3 14.3 15.8 0.8 1.3 1.5 10.8
Max Financial Services BUY 506 650 28.4 136 2.0 268 5 6 6 (20.4) 36.9 1.8 110.4 80.7 79.2 — — — — — — 6.5 8.3 8.0 — 0.4 0.4 4.6
Muthoot Finance ADD 401 480 19.8 160 2.3 400 43 38 40 45.6 (10.8) 4.0 9.3 10.4 10.0 — — — 2.1 1.8 1.6 24.1 18.4 16.9 2.5 2.2 2.3 4.8
PNB Housing Finance REDUCE 1,285 1,375 7.0 215 3.1 167 50 61 77 57.8 23.0 25.3 25.8 21.0 16.8 — — — 3.4 3.1 2.7 14.0 15.2 16.8 0.7 0.3 0.3 10.2
SBI Life Insurance ADD 695 785 12.9 695 10.2 1,000 12 15 18 20.8 26.0 22.9 60.3 47.8 38.9 — — — 10.8 9.1 7.6 19.4 20.6 21.3 0.3 0.3 0.4 4.1
Shriram City Union Finance ADD 1,918 2,250 17.3 127 1.8 66 101 141 174 19.6 40.4 22.7 19.0 13.6 11.0 — — — 2.4 2.2 1.9 12.5 15.8 16.9 0.9 0.9 1.1 0.6
Shriram Transport ADD 1,395 1,550 11.1 316 4.6 227 69 114 130 24.7 64.4 14.3 20.2 12.3 10.7 — — — 2.7 2.2 1.9 13.1 18.3 17.5 0.8 1.1 1.3 30.6
NBFCs Neutral 11,198 164 36.9 14.8 19.6 32.7 28.5 23.8 5.5 4.6 4.0 16.8 16.1 16.8 0.6 0.7 0.8 584.5
Cement
ACC SELL 1,531 1,270 (17.1) 288 4.2 188 49 62 70 32.7 27.0 13.8 31.4 24.8 21.7 16.8 13.7 11.8 3.1 2.8 2.6 10.1 11.9 12.5 1.1 1.1 1.1 15.2
Ambuja Cements REDUCE 234 210 (10.1) 464 6.8 1,986 8 9 11 29.7 14.5 23.2 31.1 27.1 22.0 10.4 9.2 7.6 2.2 2.2 2.0 7.4 8.1 9.5 1.5 1.5 1.5 11.6
Dalmia Bharat ADD 2,663 2,900 8.9 237 3.5 89 60 98 128 55.4 62.6 30.3 44.1 27.1 20.8 13.6 10.4 8.5 3.9 3.4 2.9 9.7 13.4 15.2 0.1 0.1 0.1 5.2
Grasim Industries BUY 1,030 1,275 23.7 678 9.9 657 47 52 69 (30.1) 9.1 32.8 21.7 19.9 15.0 12.3 7.5 6.9 1.2 1.1 1.0 7.0 5.8 7.2 0.5 0.5 0.5 14.5
India Cements REDUCE 116 135 16.4 36 0.5 308 3 5 9 (42.5) 56.2 84.4 35.5 22.7 12.3 9.7 8.4 6.6 0.7 0.7 0.6 2.0 3.0 5.3 0.9 0.9 0.9 7.7
J K Cement ADD 770 890 15.6 54 0.8 70 43 45 79 59.3 3.7 75.4 17.8 17.2 9.8 9.8 10.2 8.4 2.7 2.4 2.0 16.2 15.0 22.3 1.0 1.0 1.0 0.7
JK Lakshmi Cement ADD 339 425 25.5 40 0.6 118 4 18 33 (35.7) 311.2 79.6 75.7 18.4 10.3 13.8 8.3 5.9 2.8 2.4 2.0 3.7 14.1 21.5 0.6 0.6 0.6 0.4
Orient Cement ADD 120 145 21.1 25 0.4 205 2 7 11 237.8 212.9 58.7 55.4 17.7 11.2 12.1 8.2 6.3 2.4 2.2 1.9 4.4 12.9 18.2 0.6 1.3 1.7 0.2
Shree Cement SELL 17,260 12,500 (27.6) 601 8.8 35 397 421 630 3.4 6.0 49.7 43.4 41.0 27.4 23.4 19.1 14.3 6.8 5.9 5.0 16.7 15.4 19.7 0.3 0.3 0.3 5.5
UltraTech Cement SELL 4,193 2,950 (29.6) 1,152 16.8 275 88 126 162 (7.8) 42.7 28.9 47.6 33.3 25.9 23.4 17.4 14.4 4.4 4.0 3.5 9.7 12.6 14.3 0.2 0.2 0.2 19.3
Cement Cautious 3,573 52 6.5 24.4 33.3 34.5 27.7 20.8 15.4 10.9 9.3 2.6 2.4 2.2 7.5 8.7 10.5 0.6 0.6 0.6 80.2



Target O/S ADVT
Consumer products
Asian Paints REDUCE 1,437 1,325 (7.8) 1,379 20.1 959 21 27 33 2.9 32.1 20.3 70.0 53.0 44.1 42.8 33.2 27.5 16.4 14.3 12.5 24.6 28.8 30.3 0.6 0.8 1.0 21.7
Bajaj Corp. ADD 416 470 13.1 61 0.9 148 14 15 17 (9.4) 7.8 10.3 29.0 27.0 24.4 22.9 21.6 18.4 12.5 12.5 12.5 42.8 46.3 51.2 2.9 3.1 3.4 0.4
Britannia Industries ADD 6,490 6,000 (7.5) 779 11.4 120 84 104 126 13.5 24.4 21.5 77.6 62.4 51.3 51.3 40.3 33.2 22.9 18.1 14.7 32.9 32.4 31.6 0.4 0.5 0.7 9.9
Coffee Day Enterprises REDUCE 266 340 27.7 56 0.8 211 3 8 13 49.1 149.7 59.4 79.6 31.9 20.0 13.5 — — 2.4 2.2 2.0 3.1 7.2 10.4 — — — 1.0
Colgate-Palmolive (India) ADD 1,123 1,250 11.3 305 4.5 272 24 27 32 15.2 14.7 15.6 47.2 41.2 35.6 27.0 23.7 20.6 20.0 20.2 17.2 46.2 48.8 52.2 2.1 1.4 1.7 8.3
Dabur India REDUCE 432 390 (9.8) 763 11.2 1,762 8 9 10 7.2 17.3 12.9 55.6 47.4 42.0 47.2 39.7 34.3 13.3 13.4 11.6 25.9 28.1 29.6 1.7 0.9 1.0 12.3
GlaxoSmithKline Consumer ADD 6,532 6,750 3.3 275 4.0 42 166 189 211 6.6 13.3 11.9 39.2 34.6 30.9 27.0 23.2 20.0 7.9 7.2 6.6 21.2 21.7 22.2 1.1 1.4 1.6 2.1
Godrej Consumer Products SELL 1,320 1,100 (16.6) 899 13.1 681 21 25 29 11.5 18.8 13.7 61.8 52.0 45.8 43.8 36.9 32.1 14.4 12.2 10.6 25.2 25.4 24.8 0.5 0.6 0.7 9.8
Hindustan Unilever REDUCE 1,734 1,570 (9.5) 3,754 54.8 2,160 25 29 33 25.0 19.5 13.2 70.7 59.2 52.3 50.7 41.0 36.0 52.9 46.3 39.3 78.1 83.5 81.4 1.2 1.2 1.4 35.2
ITC ADD 302 330 9.4 3,685 53.8 12,275 9 10 11 7.8 8.2 12.3 33.8 31.3 27.8 22.2 20.2 17.8 7.2 6.8 6.4 19.4 20.4 22.2 1.7 1.9 2.2 48.6
Jubilant Foodworks BUY 1,396 1,650 18.2 184 2.7 132 15 25 35 191.7 73.6 37.5 95.9 55.2 40.2 41.0 27.6 20.8 19.0 13.7 10.4 21.7 28.9 29.5 0.1 0.1 0.2 40.2
Jyothy Laboratories ADD 223 240 7.6 81 1.2 364 4 6 7 (26.4) 27.6 16.7 50.6 39.7 34.0 31.1 26.5 22.5 7.1 6.1 5.3 14.4 16.6 16.8 0.2 0.4 0.7 1.6
Marico ADD 369 345 (6.4) 476 6.9 1,291 6 7 8 7.4 16.7 13.7 58.8 50.4 44.3 41.5 34.9 30.4 18.7 17.3 16.0 33.2 35.7 37.5 1.1 1.3 1.5 9.8
Nestle India ADD 10,837 9,500 (12.3) 1,045 15.3 96 127 168 191 21.1 32.5 13.4 85.3 64.4 56.8 47.0 36.6 32.2 30.5 28.1 25.8 36.6 45.5 47.3 0.8 1.1 1.2 8.3
Page Industries SELL 29,900 21,000 (29.8) 334 4.9 11 311 392 482 32.5 26.1 22.9 96.1 76.2 62.0 61.2 48.4 39.8 39.4 30.8 24.6 45.9 45.3 44.0 0.4 0.6 0.7 7.9
Pidilite Industries REDUCE 1,130 1,050 (7.1) 574 8.4 508 18 22 26 7.5 20.4 20.4 62.7 52.1 43.2 41.9 34.9 28.8 16.1 13.5 11.3 26.0 28.2 28.5 0.5 0.6 0.7 13.5
S H Kelkar and Company BUY 199 315 58.7 29 0.4 145 7 8 11 2.1 11.8 28.4 26.8 24.0 18.7 18.7 15.7 12.2 3.3 3.0 2.7 12.8 13.3 15.3 0.9 0.9 1.0 0.3
Tata Global Beverages REDUCE 236 285 20.9 149 2.2 631 7 10 11 20.7 29.4 19.1 32.1 24.8 20.8 16.8 14.1 12.1 2.1 2.0 1.9 7.0 8.3 9.4 1.1 1.3 1.5 13.1
Titan Company SELL 917 800 (12.8) 814 11.9 888 13 16 20 43.3 26.7 20.6 71.7 56.6 47.0 49.2 37.5 30.1 16.0 13.5 11.3 24.3 25.8 26.2 0.4 0.5 0.6 35.9
United Breweries SELL 1,117 1,000 (10.5) 295 4.3 264 15 19 24 71.6 29.7 23.4 74.8 57.7 46.8 33.0 27.4 23.7 11.0 9.4 8.0 15.7 17.6 18.6 0.2 0.3 0.3 10.5
United Spirits REDUCE 593 590 (0.5) 431 6.3 727 8 10 13 39.1 34.7 30.9 77.9 57.9 44.2 44.9 33.6 27.2 17.2 11.8 8.7 24.9 24.2 22.7 — — 0.3 18.8
Varun Beverages ADD 745 750 0.6 136 2.0 183 12 17 22 377.8 45.4 29.8 64.7 44.5 34.3 19.7 15.9 13.6 7.7 6.6 5.6 12.1 16.0 17.7 — — 0.1 1.7
Consumer products Cautious 16,519 241 14.6 18.2 15.7 54.5 46.1 39.9 35.6 29.7 25.5 13.3 12.0 10.7 24.5 26.1 26.9 1.0 1.1 1.3 314.6
Energy
BPCL REDUCE 396 390 (1.5) 859 12.5 1,967 40 39 41 (1.5) (3.6) 5.3 9.8 10.2 9.7 8.0 7.5 6.9 2.3 2.0 1.8 24.8 21.1 20.0 5.3 3.9 4.1 31.8
Castrol India SELL 168 155 (7.5) 166 2.4 989 7 7 8 3.3 2.9 10.1 24.4 23.7 21.5 15.3 14.9 13.4 16.3 15.6 15.2 67.9 67.1 71.5 2.8 3.3 3.7 4.3
GAIL (India) BUY 375 410 9.2 846 12.4 2,255 20 25 27 21.8 23.2 8.3 18.4 14.9 13.8 11.5 9.5 8.8 2.1 1.9 1.8 11.7 13.5 13.5 1.9 2.3 2.4 22.5
GSPL SELL 198 175 (11.8) 112 1.6 564 12 11 11 34.5 (6.5) (0.5) 16.7 17.9 18.0 8.6 6.8 6.8 2.2 2.0 1.8 14.0 11.7 10.7 0.9 0.8 0.8 1.6
HPCL REDUCE 289 320 10.8 440 6.4 1,524 42 32 33 (3.2) (23.4) 3.4 6.9 9.0 8.7 6.0 7.8 7.9 1.8 1.7 1.5 28.7 19.3 18.2 5.9 4.5 4.7 29.4
Indraprastha Gas SELL 314 240 (23.5) 219 3.2 700 10 12 13 19.0 16.5 12.0 30.4 26.1 23.3 19.2 16.7 14.8 6.2 5.4 4.7 22.4 22.2 21.5 0.6 0.8 1.0 11.4
IOCL REDUCE 168 160 (4.8) 1,632 23.8 9,479 21 17 18 (24.8) (17.9) 7.4 8.2 10.0 9.3 4.8 5.5 5.1 1.4 1.3 1.3 18.5 14.0 14.0 6.8 4.0 4.3 25.5
Mahanagar Gas ADD 947 965 1.9 94 1.4 99 48 56 60 21.5 16.0 7.6 19.6 16.9 15.7 11.9 9.8 9.0 4.5 3.9 3.5 24.3 24.8 23.5 2.0 2.3 2.6 4.5
ONGC ADD 167 200 19.6 2,146 31.3 12,833 17 21 21 3.1 19.6 (1.3) 9.6 8.0 8.1 5.1 4.0 3.9 0.9 0.9 0.8 9.9 11.5 10.7 3.9 4.2 4.2 18.3
Oil India SELL 213 220 3.1 242 3.5 1,135 25 24 24 22.6 (1.3) (0.7) 8.6 8.8 8.8 6.7 6.1 6.0 0.9 0.8 0.8 9.8 9.7 9.2 4.8 5.1 5.1 3.1
Petronet LNG BUY 234 280 19.6 351 5.1 1,500 14 16 18 22.1 16.7 13.1 16.9 14.4 12.8 11.2 9.7 8.2 3.6 3.2 2.8 23.3 23.3 23.2 1.9 2.4 3.1 12.5
Reliance Industries SELL 1,192 985 (17.4) 7,056 103.1 5,922 59 69 78 16.9 17.6 12.4 20.2 17.2 15.3 14.7 11.7 10.0 2.4 2.1 1.9 11.6 12.2 12.1 0.5 0.5 0.6 119.8
Energy Attractive 14,163 207 1.0 6.6 6.8 13.7 12.9 12.1 8.9 7.9 7.2 1.8 1.7 1.5 13.3 12.9 12.6 2.4 2.1 2.2 284.7

66
Target O/S ADVT
67
Industrials
ABB SELL 1,210 1,020 (15.7) 256 3.7 212 20 26 29 12.1 30.1 14.2 61.1 46.9 41.1 33.6 27.4 24.6 7.1 6.5 5.9 12.2 14.5 15.1 0.3 0.7 0.7 1.3
BHEL REDUCE 74 78 6.1 270 3.9 3,671 2.2 2.6 5.0 62.7 16.5 95.3 33.5 28.7 14.7 8.2 7.7 4.1 0.8 0.8 0.8 2.5 2.9 5.6 2.5 2.9 5.6 10.2
Carborundum Universal SELL 377 310 (17.8) 71 1.0 189 11 14 17 22.8 25.4 20.2 33.1 26.4 21.9 17.9 13.2 11.4 4.6 4.1 3.7 14.6 16.4 17.6 0.6 1.1 1.4 0.3
CG Power and Industrial BUY 63 65 2.8 40 0.6 627 0.8 3.1 4.3 (72.2) 275.7 40.5 77.5 20.6 14.7 11.3 8.5 7.0 1.5 1.6 1.5 1.5 7.3 10.4 — — — 7.4
Crompton Greaves Consumer SELL 243 215 (11.3) 152 2.2 627 5.2 6.2 7.5 13.3 19.5 20.7 46.9 39.3 32.5 28.8 24.4 20.7 19.3 13.4 10.3 49.5 40.4 35.8 0.6 0.8 1.0 2.8
Cummins India REDUCE 668 680 1.8 185 2.7 277 24 28 32 (7.8) 16.1 13.9 27.6 23.8 20.8 24.3 20.8 17.3 4.6 4.3 4.0 17.4 18.9 20.1 2.2 2.2 2.5 3.6
Havells India SELL 631 485 (23.1) 395 5.8 625 11 14 17 16.6 26.6 20.5 57.0 45.0 37.3 36.4 28.8 23.4 10.6 9.3 8.1 19.8 22.0 23.2 0.6 0.8 0.9 13.1
Kalpataru Power Transmission BUY 386 530 37.5 59 0.9 153 19 24 34 36.5 24.3 39.8 19.9 16.0 11.4 8.4 7.0 5.6 2.2 2.0 1.7 11.7 13.1 16.1 0.6 0.6 0.6 0.6
KEC International BUY 330 430 30.4 85 1.2 257 18 22 29 51.1 22.0 34.4 18.4 15.1 11.2 10.0 8.3 6.6 4.2 3.4 2.7 25.7 25.2 27.1 0.7 0.9 1.2 2.9
L&T BUY 1,298 1,600 23.3 1,819 26.6 1,401 52 63 70 22.4 21.7 10.9 25.1 20.6 18.6 20.7 16.4 15.8 3.6 3.3 3.0 15.0 16.8 16.8 1.2 1.8 1.9 44.5
Siemens SELL 1,004 975 (2.8) 357 5.2 356 24 30 37 22.5 23.0 23.2 41.5 33.7 27.4 23.5 18.8 15.1 4.4 4.1 3.8 10.9 12.6 14.5 1.0 1.2 1.5 3.5
Thermax REDUCE 1,199 1,065 (11.2) 143 2.1 113 21 30 42 (3.6) 44.2 42.8 58.2 40.3 28.2 35.4 25.2 18.0 5.0 4.6 4.1 8.8 11.8 15.3 0.5 0.7 0.8 0.7
Voltas SELL 569 525 (7.8) 188 2.8 331 17 19 22 12.6 8.3 15.6 32.9 30.4 26.3 27.4 23.3 19.3 4.8 4.3 3.9 15.9 15.0 15.5 0.7 0.8 0.9 14.0
Industrials Neutral 4,021 59 19.8 22.7 20.7 31.3 25.5 21.1 20.5 16.6 14.4 3.4 3.2 2.9 10.8 12.4 13.8 1.1 1.5 1.8 105.0
Infrastructure
Adani Ports and SEZ BUY 399 470 17.8 826 12.1 2,071 20 20 23 6.1 (0.2) 14.7 19.9 19.9 17.4 14.0 13.6 12.0 3.9 3.4 2.9 21.5 18.1 17.9 0.5 0.6 0.8 24.4
Ashoka Buildcon BUY 146 210 43.7 41 0.6 282 8 8 9 34.6 0.5 5.2 17.4 17.3 16.4 14.0 11.9 10.5 2.1 1.8 1.7 13.0 11.4 10.7 0.7 1.1 0.8 0.7
Container Corp. SELL 662 635 (4.1) 323 4.7 487 18 21 25 7.1 17.4 20.9 37.5 32.0 26.4 24.9 19.7 15.6 3.4 3.2 2.9 9.4 10.3 11.6 2.6 1.3 1.6 8.5
Dilip Buildcon BUY 792 1,220 54.1 108 1.6 137 46 54 69 76.5 16.1 28.0 17.0 14.7 11.5 9.6 6.9 5.7 4.4 3.3 2.6 29.5 25.9 25.4 — — — 8.3
Gateway Distriparks BUY 177 250 41.2 19 0.3 109 8 8 9 12.1 (1.2) 17.5 23.1 23.4 19.9 22.1 10.8 9.1 1.9 3.7 3.3 8.2 10.8 17.6 4.0 — 1.7 0.8
Gujarat Pipavav Port BUY 113 170 50.5 55 0.8 483 4.1 5.9 7.2 (20.6) 43.7 22.5 27.5 19.1 15.6 13.4 11.1 8.8 2.7 2.7 2.6 9.8 14.0 16.8 3.0 4.3 5.2 0.8
IRB Infrastructure BUY 196 320 63.6 69 1.0 351 23 31 33 10.8 36.8 7.1 8.7 6.3 5.9 6.9 6.6 7.1 1.2 1.0 0.9 14.5 17.6 16.3 1.2 1.6 2.0 8.0
Mahindra Logistics BUY 582 540 (7.2) 41 0.6 71 10 14 18 16.2 42.8 31.2 59.3 41.5 31.6 34.2 22.9 17.4 9.9 8.2 6.8 18.2 21.6 23.5 — — — 0.8
Sadbhav Engineering BUY 273 440 61.1 47 0.7 172 13 18 18 17.4 38.4 2.2 21.2 15.3 15.0 14.8 11.8 9.2 2.5 2.2 1.9 12.5 15.2 13.7 — — — 0.9
Infrastructure Attractive 1,529 22 10.9 10.2 15.4 21.1 19.1 16.6 13.4 11.9 10.4 3.3 2.9 2.6 15.8 15.3 15.5 1.1 0.9 1.1 53.1
Internet
Info Edge ADD 1,374 1,425 3.7 167 2.4 122 23 26 33 33.3 14.9 27.5 61.0 53.1 41.7 51.1 39.9 30.2 7.9 6.3 5.7 13.4 13.2 14.3 0.4 0.6 0.6 2.5
Just Dial ADD 559 610 9.1 38 0.6 67 21 26 30 21.7 23.0 15.0 26.3 21.4 18.6 15.5 11.9 9.7 3.8 3.3 2.9 15.2 16.7 16.6 — 0.5 0.5 51.1
Internet Cautious 205 3 28.0 17.6 23.0 49.2 41.8 34.0 38.4 30.3 23.8 6.6 5.4 4.8 13.5 12.9 14.2 0.3 0.6 0.6 53.5
Media
DB Corp. REDUCE 237 270 13.9 44 0.6 184 18 20 23 (14.1) 14.9 12.3 13.5 11.7 10.4 7.1 6.3 5.6 2.6 2.4 2.3 19.9 20.7 22.3 5.5 7.1 8.9 0.6
DishTV ADD 66 90 37.0 121 1.8 1,925 (0.4) 1.8 3.4 (143.0) 514.6 88.2 NM 35.9 19.1 10.9 5.7 4.5 1.9 1.8 1.6 (2.3) 5.1 8.9 — — — 7.8
Jagran Prakashan REDUCE 123 168 36.8 38 0.6 311 10 12 14 (6.0) 21.7 15.3 12.3 10.1 8.8 5.5 4.9 4.2 1.9 1.9 1.8 14.8 18.1 20.9 2.4 4.1 7.3 0.5
PVR ADD 1,116 1,210 8.4 52 0.8 47 27 33 42 25.5 21.5 27.7 41.6 34.2 26.8 14.3 12.7 10.9 4.8 4.3 3.8 12.3 13.3 15.0 0.2 0.3 0.4 9.3

Sun TV Network REDUCE 793 925 16.7 312 4.6 394 29 35 39 10.2 20.7 10.9 27.5 22.8 20.6 18.4 15.5 13.5 6.8 6.1 5.5 26.3 28.1 27.9 1.3 2.2 2.5 21.8
Zee Entertainment Enterprises ADD 525 600 14.3 504 7.4 960 15 17 20 7.8 11.3 17.0 34.9 31.4 26.8 22.7 19.5 16.5 6.7 5.9 5.2 20.3 19.9 20.6 0.5 0.9 1.0 18.3
Media Attractive 1,072 16 (1.5) 28.9 20.8 32.9 25.5 21.1 15.9 12.2 10.4 4.5 4.2 3.8 13.7 16.3 17.8 0.9 1.5 1.8 58.2



Target O/S ADVT
Metals & Mining

Coal India ADD 271 326 20.5 1,680 24.5 6,207 11 27 28 (24.2) 138.2 3.0 23.9 10.0 9.8 17.8 6.4 6.1 6.9 6.4 6.6 26.7 66.1 66.4 6.1 7.4 9.2 13.8
Hindalco Industries BUY 208 305 46.6 467 6.8 2,229 22 27 31 155.4 23.9 13.6 9.5 7.7 6.8 6.2 5.2 4.5 0.8 0.8 0.7 9.7 10.5 10.7 0.6 0.6 0.6 34.5
Hindustan Zinc ADD 278 290 4.4 1,173 17.1 4,225 22 22 26 9.3 3.7 14.7 12.9 12.5 10.9 7.9 7.2 5.9 3.3 2.8 2.4 27.2 24.4 24.2 2.9 2.9 2.9 8.4
Jindal Steel and Power REDUCE 202 255 26.4 195 2.9 968 (8) 8 18 59.3 194.2 129.1 (23.8) 25.2 11.0 9.5 6.8 5.8 0.6 0.6 0.6 (2.7) 2.6 5.7 — — — 30.1
JSW Steel ADD 328 350 6.9 792 11.6 2,417 27 30 27 83.9 10.2 (8.7) 12.2 11.1 12.1 7.9 6.9 7.6 2.8 2.3 2.0 24.8 22.4 17.3 1.0 1.0 1.0 20.4
National Aluminium Co. ADD 62 85 37.0 120 1.8 1,933 4 7 7 12.7 63.0 11.1 15.0 9.2 8.3 6.1 4.1 3.7 1.1 1.1 1.1 7.7 12.4 13.6 9.2 8.9 8.9 9.5
NMDC REDUCE 107 125 17.0 338 4.9 3,164 12 10 10 43.3 (16.5) 3.6 9.1 10.9 10.5 5.0 6.7 6.4 1.4 1.3 1.3 15.8 12.5 12.4 5.1 5.1 5.1 3.6
Tata Steel ADD 556 700 25.9 636 9.3 1,205 67 69 82 62.6 3.1 18.4 8.3 8 6.8 6.2 6.1 6.2 1.1 1.0 0.9 17.2 13.1 13.9 1.7 1.8 1.8 70.0
Vedanta BUY 218 370 69.6 811 11.8 3,717 22 32 39 9.6 49.1 19.7 10.1 6.8 5.7 5.6 4.6 3.7 1.3 1.2 1.0 12.9 18.0 19.4 3.7 4.4 5.3 52.4
Metals & Mining Attractive 6,212 91 32.3 37.2 11.2 13.1 9.6 8.6 7.4 5.9 5.5 1.9 1.7 1.5 14.3 17.6 17.9 3.5 3.9 4.5 242.7
Pharmaceutical
Apollo Hospitals ADD 953 1,090 14.4 133 1.9 139 8 19 26 (46.9) 124.3 38.0 112.9 50.3 36.5 20.7 17.6 14.8 4.1 3.9 3.6 3.4 7.9 10.2 0.2 0.5 0.7 7.4
Aster DM Healthcare BUY 169 240 42.1 85 1.2 505 3 5 7 163.1 64.2 59.2 61.3 37.3 23.5 17.0 12.6 10.1 3.0 2.8 2.5 5.9 7.8 11.4 - - - 0.4
Aurobindo Pharma ADD 600 640 6.7 351 5.1 584 42 45 51 6.0 7.0 13.5 14.4 13.4 11.8 10.0 9.4 8.0 3.0 2.5 2.1 23.2 20.3 17.9 0.7 0.9 1.0 20.3
Biocon SELL 583 330 (43.4) 350 5.1 601 6 8 15 (39.2) 35.9 75.7 94.1 69.3 39.4 42.2 30.2 20.2 6.2 5.8 5.2 6.9 8.7 13.9 0.2 0.5 0.9 23.3
Cipla BUY 639 650 1.7 515 7.5 805 18 24 32 40.2 36.3 35.1 36.5 26.8 19.8 18.9 14.8 11.6 3.5 3.2 2.8 10.2 12.5 15.2 0.5 0.8 1.1 23.7
Dr Lal Pathlabs REDUCE 938 865 (7.7) 78 1.1 83 20 25 29 7.0 20.8 18.5 45.8 37.9 32.0 27.9 23.4 19.6 9.9 8.2 6.9 23.5 23.7 23.4 0.5 0.5 0.6 1.5
Dr Reddy's Laboratories REDUCE 2,176 2,150 (1.2) 361 5.3 166 59 89 118 (18.5) 50.2 32.8 36.8 24.5 18.5 17.1 12.4 8.8 2.9 2.6 2.3 7.8 11.1 12.6 1.1 0.6 0.8 35.3
HCG REDUCE 278 305 9.8 24 0.4 85 2 3 5 (40.0) 120.9 57.3 177.6 80.4 51.1 23.4 18.3 15.5 4.6 4.3 4.0 2.8 5.5 8.1 — — — 0.2
Laurus Labs ADD 458 540 17.8 49 0.7 106 16 22 34 (11.9) 37.3 54.4 28.9 21.1 13.6 14.1 11.5 8.5 3.3 2.8 2.3 11.9 14.4 18.8 — — — 0.4
Lupin REDUCE 844 800 (5.2) 382 5.6 450 38 36 48 (32.9) (5.1) 33.7 22.1 23.3 17.5 13.6 11.8 9.3 2.8 2.5 2.3 12.6 11.4 13.7 1.1 0.6 0.9 34.9
Narayana Hrudayalaya ADD 260 275 5.8 53 0.8 204 3 4 7 (38.1) 52.2 76.9 103.4 67.9 38.4 28.3 21.4 15.7 5.1 4.8 4.2 5.1 7.3 11.7 — — — 0.4
Sun Pharmaceuticals REDUCE 575 500 (13.0) 1,379 20.1 2,406 15 17 24 (47.5) 12.0 42.0 37.9 33.8 23.8 22.4 18.4 13.6 3.6 3.3 3.0 9.8 10.2 13.1 0.3 0.6 0.8 52.9
Torrent Pharmaceuticals NR 1,523 — — 258 3.8 169 40 46 62 (27.4) 16.0 33.3 38.0 32.8 24.6 21.2 15.1 12.5 5.6 4.9 4.3 15.1 15.0 17.4 1.0 0.7 0.9 5.1
Pharmaceuticals Neutral 4,018 59 (25.8) 18.0 34.9 33.7 28.6 21.2 18.5 15.0 11.6 3.6 3.3 2.9 10.7 11.4 13.7 0.6 0.6 0.8 206.0
Real Estate
Brigade Enterprises BUY 197 340 72.9 27 0.4 136 11 9 9 (17.7) (15.1) (1.6) 17.8 20.9 21.3 10.9 11.1 10.9 1.2 1.1 1.1 7.6 5.5 5.2 1.3 1.3 1.3 0.2
DLF RS 193 — — 344 5.0 1,784 19.6 6.5 3.9 403.9 (66.9) (39.6) 9.8 29.8 49.3 29.2 12.7 12.5 1.0 1.0 0.9 11.7 3.2 1.9 1.0 1.0 1.0 16.4
Godrej Properties SELL 743 400 (46.2) 170 2.5 216 11.6 16.8 19.2 21.9 43.9 14.9 63.8 44.4 38.6 158.7 113.0 80.1 7.1 6.1 5.3 11.8 14.9 14.7 — — — 2.7
Oberoi Realty BUY 488 560 14.7 177 2.6 340 13 62 44 14.0 385.4 (28.0) 38.4 7.9 11.0 28.7 10.9 13.7 2.7 1.8 1.6 7.3 27.4 15.2 0.4 0.4 0.4 2.7
Prestige Estates Projects ADD 260 315 21.2 98 1.4 375 13 10 10 24.3 (24.2) 8.4 20.7 27.3 25.2 14.5 15.1 15.2 2.1 1.9 1.8 10.3 7.3 7.5 0.6 0.6 0.6 1.1
Sobha REDUCE 473 510 7.8 45 0.7 95 22 20 23 30.9 (7.5) 14.8 21.7 23.4 20.4 13.1 13.3 12.5 1.6 1.6 1.5 7.6 6.8 7.4 1.5 1.5 1.5 1.5
Sunteck Realty REDUCE 412 330 (19.8) 60 0.9 140 15 18 20 4.8 20.2 6.9 27.0 22.4 21.0 17.3 18.9 17.5 2.2 2.0 1.8 9.7 9.4 9.2 0.3 0.2 0.2 1.7
Real Estate Neutral 922 13 140.1 (12.6) (20.2) 17.6 20.2 25.3 24.5 14.9 15.3 1.6 1.5 1.4 9.3 7.5 5.7 0.7 0.6 0.6 26.2

68
Target O/S ADVT
69
Technology
HCL Technologies REDUCE 979 1,025 4.7 1,363 19.9 1,409 62 70 74 5.3 12.8 5.0 15.7 13.9 13.3 11.1 9.1 8.3 3.8 3.1 2.7 24.8 24.2 21.8 0.8 0.8 3.2 35.1
Hexaware Technologies SELL 466 435 (6.7) 138 2.0 302 17 20 23 20.2 18.4 18.0 28.2 23.8 20.2 20.3 17.7 14.1 7.0 6.1 5.2 26.6 27.4 27.8 0.9 1.7 1.7 15.3
Infosys ADD 1,354 1,400 3.4 2,957 43.2 2,175 65 71 78 3.0 9.7 10.4 21.0 19.1 17.3 14.5 13.1 11.7 4.5 4.3 3.9 21.8 23.0 23.5 2.0 3.2 2.9 79.8
L&T Infotech ADD 1,810 2,000 10.5 313 4.6 175 64 83 94 13.9 30.5 13.0 28.5 21.8 19.3 25.1 16.7 14.1 8.2 6.6 5.4 31.8 33.5 30.7 0.9 1.3 1.4 4.3
Mindtree ADD 954 1,115 16.9 156 2.3 165 35 43 53 37.8 24.9 23.6 27.6 22.1 17.9 20.0 13.8 11.1 5.7 4.9 4.2 21.4 23.9 25.2 1.2 1.4 1.7 26.3
Mphasis SELL 1,207 760 (37.0) 233 3.4 193 44 52 56 14.4 18.3 8.2 27.5 23.3 21.5 20.0 16.2 14.5 4.3 3.9 3.5 14.6 17.4 17.1 1.7 1.7 1.7 11.5
TCS REDUCE 1,977 1,790 (9.4) 7,567 110.5 3,829 67 82 89 1.1 21.2 8.8 29.3 24.2 22.2 21.8 17.7 16.3 8.7 7.6 7.5 29.4 33.4 33.8 1.3 2.1 3.6 100.3
Tech Mahindra ADD 680 785 15.5 600 8.8 891 43 46 55 33.1 8.3 18.2 15.9 14.7 12.5 11.7 8.8 7.1 3.2 2.8 2.4 21.5 20.2 20.5 2.1 1.4 1.5 36.0
Wipro REDUCE 277 295 6.4 1,255 18.3 4,507 17 19 22 (3.1) 11.8 14.6 16.4 14.6 12.8 10.4 9.2 8.0 2.6 2.2 2.1 16.0 16.4 16.8 0.4 0.5 3.6 12.8
Technology Cautious 14,583 213 1.6 13.1 9.7 22.8 20.1 18.4 16.6 13.8 12.5 5.4 4.8 4.4 23.7 23.8 24.1 1.3 2.0 3.2 321.4
Telecom
Bharti Airtel ADD 385 445 15.7 1,537 22.4 3,997 5 (6) (4) (42.9) (221.5) 28.8 81.2 (66.9) (94.0) 8.5 9.9 8.3 2.2 2.3 2.4 2.8 (3.4) (2.5) 1.4 0.3 (0.2) 31.6
Bharti Infratel REDUCE 293 285 (2.8) 542 7.9 1,850 14 13 12 (7.4) (4.8) (8.5) 21.3 22.4 24.5 7.7 8.3 8.8 3.2 3.3 3.4 15.7 14.6 13.7 4.9 3.6 3.3 13.0
IDEA REDUCE 54 45 (16.0) 233 3.4 4,359 (10) (17) (17) (656.8) (75.6) (2.4) (5.6) (3.2) (3.1) 12.2 35.0 29.6 0.9 1.1 1.6 (16.0) (29.7) (41.1) — — — 17.5
Tata Communications ADD 590 725 22.8 168 2.5 285 2 4 8 (84.3) 121.9 117.7 359 161.6 74.2 10.8 9.6 8.4 33.7 27.2 19.7 4.5 18.6 30.7 1.1 1.1 1.3 4.6
Telecom Cautious 2,481 36 (94.7) (2,354.7) 5.7 788.9 (35.0) (37.1) 9.0 11.1 9.7 2.2 2.4 2.6 0.3 (6.8) (7.0) 1.9 0.9 0.6 66.7
Utilities
CESC BUY 936 1,180 26.0 124 1.8 133 87 115 128 67.1 31.7 11.6 10.7 8.2 7.3 7.7 5.7 5.1 0.8 0.8 0.7 7.9 10.0 10.4 1.3 1.4 1.4 6.0
JSW Energy REDUCE 66 70 6.8 108 1.6 1,640 3.1 5.1 6.5 (19.2) 65.9 26.8 21.4 12.9 10.2 6.8 5.6 4.6 1.0 0.9 0.8 4.7 7.2 8.5 - - - 1.8
NHPC ADD 24 30 27.4 242 3.5 10,260 2.4 3.1 3.2 (17.3) 26.9 1.8 9.6 7.6 7.5 9.0 7.1 6.9 0.8 0.8 0.7 8.5 10.4 10.2 5.9 7.4 7.5 2.1
NTPC BUY 155 190 22.3 1,281 18.7 8,245 11 15 16 (7.6) 30.9 4.4 13.6 10.4 10.0 11.0 8.6 7.9 1.3 1.2 1.1 9.5 11.6 11.3 3.6 2.9 3.0 14.2
Power Grid BUY 185 250 35.4 966 14.1 5,232 16 19 21 9.6 19.3 13.6 11.7 9.8 8.6 8.4 7.1 6.6 1.8 1.6 1.4 15.8 17.1 17.5 2.8 3.4 3.9 31.1
Reliance Power SELL 32 43 33.1 91 1.3 2,805 3.5 5.1 5.2 (16.4) 45.6 2.7 9.3 6.4 6.2 7.8 6.7 6.5 0.4 0.4 0.4 4.5 6.1 5.9 — — — 4.2
Tata Power BUY 73 90 23.1 198 2.9 2,705 5.3 6.0 7.0 (9.6) 12.7 15.6 13.7 12.1 10.5 10.3 10.7 10.2 1.3 1.2 1.1 10.7 10.1 10.6 — — — 5.4
Utilities Attractive 3,009 44 (2.4) 26.8 8.6 12.4 9.8 9.0 9.3 7.7 7.1 1.2 1.1 1.0 9.7 11.4 11.4 3.0 3.0 3.2 64.7



Target O/S ADVT
Others
Astral Poly Technik SELL 1,097 640 (41.7) 131 1.9 120 15 19 25 20.8 30.2 28.8 74.8 57.5 44.6 42.0 30.9 24.6 12.9 10.1 8.3 18.8 19.8 20.5 0.1 0.1 0.1 1.1
Avenue Supermarts SELL 1,668 860 (48.4) 1,041 15.2 624 13 16 20 47.9 28.6 26.4 132.7 103.2 81.6 77.8 59.5 46.7 22.4 18.4 15.0 18.5 19.6 20.3 — — — —
Bayer Cropscience REDUCE 4,450 4,100 (7.9) 176 2.6 34 88 106 130 6.4 20.5 23.1 50.8 42.2 34.3 41.9 31.0 25.2 8.6 7.4 6.4 15.7 18.9 20.0 0.4 0.5 0.6 0.5
Dhanuka Agritech ADD 556 690 24.0 27 0.4 49 26 28 32 7.7 8.9 15.4 21.6 19.9 17.2 15.8 13.7 11.4 4.3 3.7 3.2 21.9 20.1 20.0 1.0 1.1 1.2 0.2
Godrej Agrovet ADD 631 650 3.0 121 1.8 189 12 16 20 6.9 39.8 24.6 54.8 39.2 31.5 28.2 21.7 17.6 7.1 6.1 5.2 14.7 16.9 17.9 0.3 0.4 0.5 1.5
Godrej Industries RS 645 — — 217 3.2 336 15 16 20 6.8 8.9 24.2 44.2 40.6 32.7 38.9 32.9 35.8 6.0 5.3 4.6 14.4 13.9 15.1 0.3 0.3 0.3 4.8
InterGlobe Aviation BUY 926 1,220 31.7 356 5.2 383 61 50 83 32.1 (17.9) 65.3 15.2 18.5 11.2 8.3 10.1 5.7 5.0 4.0 3.1 42.9 24.1 31.1 0.6 0.5 0.9 25.8
Kaveri Seed SELL 619 470 (24.0) 41 0.6 66 32 31 33 18.4 (3.7) 6.1 19.3 20.1 18.9 16.5 17.1 15.5 5.3 4.5 3.9 23.6 24.0 21.9 1.0 1.3 1.6 5.1
PI Industries BUY 810 900 11.1 112 1.6 138 27 33 41 (20.0) 25.0 23.2 30.5 24.4 19.8 22.5 17.7 14.1 5.8 4.8 4.0 20.7 21.7 22.1 0.4 0.5 0.6 1.4
Rallis India ADD 200 220 10.1 39 0.6 195 9 10 12 (1.5) 17.2 19.4 23.2 19.8 16.6 14.4 13.0 11.0 3.3 3.0 2.7 14.6 15.8 17.1 1.7 1.8 2.0 0.8
SIS REDUCE 1,059 1,130 6.7 78 1.1 73 22 33 40 43.3 48.5 21.1 47.2 31.8 26.2 25.4 19.9 16.7 7.5 6.3 5.2 20.1 21.8 21.7 0.2 0.3 0.3 0.8
SRF BUY 1,729 2,110 22.0 99 1.5 57 80 92 123 (10.4) 14.4 33.6 21.5 18.8 14.1 13.1 10.4 8.4 2.8 2.5 2.2 13.7 14.0 16.4 0.7 0.8 0.8 11.3
Tata Chemicals ADD 685 760 10.9 175 2.5 255 51 46 52 6.5 (11.2) 13.6 13.3 15.0 13.2 7.3 6.3 5.3 1.6 1.4 1.3 13.8 10.0 10.5 3.2 2.2 2.5 8.4
TeamLease Services SELL 2,709 1,785 (34.1) 46 0.7 17 43 58 75 28.0 34.2 29.0 62.8 46.8 36.3 65.4 47.5 36.1 10.5 8.6 6.9 18.2 20.1 21.1 — — — 1.7
UPL ADD 642 660 2.8 327 4.8 507 43 49 55 20.9 14.0 12.1 15.0 13.1 11.7 10.3 8.9 7.5 3.5 2.9 2.4 26.4 24.6 22.9 1.3 1.5 1.7 22.7
Vardhman Textiles ADD 1,214 1,400 15.3 70 1.0 56 103 130 140 (8.0) 26.4 7.4 11.8 9.3 8.7 9.9 7.4 6.6 1.4 1.3 1.1 12.7 14.3 13.8 1.2 1.6 2.5 1.0
Whirlpool SELL 1,743 1,240 (28.9) 221 3.2 127 28 37 45 13.0 33.9 22.5 63.1 47.1 38.4 37.6 29.0 23.4 12.3 10.2 8.5 21.4 23.7 24.1 0.2 0.4 0.5 1.1
Others 3,277 48 16.1 7.7 26.4 31.8 29.5 23.4 20.6 18.1 14.4 5.8 5.0 4.2 18.3 16.9 18.1 0.5 0.5 0.7 87.9
KIE universe 112,747 1,646 (6.1) 28.5 26.1 27.9 21.8 17.3 12.9 10.9 9.7 3.1 2.8 2.5 11.0 12.8 14.6 1.3 1.3 1.7
KIE universe (ex-energy) 98,584 1,440 (8.4) 36.0 31.3 32.8 24.1 18.4 14.3 12.0 10.5 3.4 3.1 2.8 10.4 12.7 15.1 1.1 1.2 1.6
Notes:
(a) We have used adjusted book values for banking companies.
(b) 2018 means calendar year 2017, similarly for 2019 and 2020 for these particular companies.
(c) Exchange rate (Rs/US$)= 68.47

70
Disclosures
"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: Rohit Chordia, Hitesh Goel, Murtuza Arsiwalla, Nischint Chawathe, Tarun Lakhotia, Abhishek Poddar,
Suvodeep Rakshit, Nishit Jalan."
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
50%
provided investment banking services within the
previous 12 months.
40% * The above categories are defined as follows: Buy = We
31.3% expect this stock to deliver more than 15% returns over
30% the next 12 months; Add = We expect this stock to
25.4%
deliver 5-15% returns over the next 12 months; Reduce
21.4% 21.9%
= We expect this stock to deliver -5-+5% returns over
20% the next 12 months; Sell = We expect this stock to deliver
less than -5% returns over the next 12 months. O ur
10% target prices are also on a 12-month horizon basis.
5.0% 4.5%
2.0% These ratings are used illustratively to comply with
0.5%
applicable regulations. As of 31/03/2018 Kotak
0%
Institutional Equities Investment Research had
BUY ADD REDUCE SELL
investment ratings on 207 equity securities.
Source: Kotak Institutional Equities As of June 30, 2018
Ratings and other definitions/identifiers

Definitions of ratings
BUY. We expect this stock to deliver more than 15% returns over the next 12 months.
ADD. We expect this stock to deliver 5-15% returns over the next 12 months.
REDUCE. We expect this stock to deliver -5-+5% returns over the next 12 months.
SELL. We expect this stock to deliver <-5% returns over the next 12 months.
Our target prices are also on a 12-month horizon basis.
Other definitions
Coverage view. The coverage view represents each analyst’s overall fundamental outlook on the Sector. The coverage view will consist of one of the following
designations: Attractive, Neutral, Cautious.
Other ratings/identifiers
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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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INDIA DAILY

August 2, 2018 India 1-Aug 1-day 1-mo 3-mo

Contents Global/Regional indices

Results FTSE 7,653 (1.2) 1.4 1.5

Results, Change in Reco

Company alerts 1-Aug 1-day 1-mo 3-mo

Rs/US$ 68.3 4 (33) 154

Tata Steel: Management meeting notes Net investment (US$ mn)

31-Jul MTD CYTD

Sector alerts FIIs 132 - (414)

Automobiles: Auto demand remains healthy MFs (29) - 11,353

Economy alerts Change, %

Best performers 1-Aug 1-day 1-mo 3-mo

GCPL IN Equity 1,320 0.2 6.8 17.9

HUVR IN Equity 1,734 0.2 5.5 17.8

DABUR IN Equity 432 2.5 14.1 17.8

HDIL IN Equity 24 (1.2) 18.7 (28.4)

UT IN Equity 4 (1.2) 1.2 (27.0)

AL IN Equity 119 5.4 (6.6) (26.4)

JPA IN Equity 15 0.7 (4.5) (24.4)

TTMT/A IN Equity 144 (0.2) (9.5) (24.1)

Kotak Institutional Equities Research

C o mpan y d ata an d valuatio n summary

Domestic FMCG segments – good growth across the board

Kotak Institutional Equities Research

Segment results of Dabur

Source: Company, Kotak Institutional Equities

KOTAK INSTITUTIONAL EQUITIES RESEARCH 3

Source: Company, Kotak Institutional Equities

4 KOTAK INSTITUTIONAL EQUITIES RESEARCH

Revised Earlier Change (%)

Source: Company, Kotak Institutional Equities estimates

Key category-wise highlights

KOTAK INSTITUTIONAL EQUITIES RESEARCH 5

 International business (30% of consolidated sales). International business posted a

Other takeaways from earnings concall

 Volume growth outlook. Management expects double-digit volume growth for

 Margins. Management expects scope for expansion in gross margins to be limited

Exhibit 4: Volumes rose 21% yoy - 2-year CAGR at ~7.5%

8.7 8.1 8.1

Source: Company, Kotak Institutional Equities

6 KOTAK INSTITUTIONAL EQUITIES RESEARCH

Exhibit 5: Category growth trends for Dabur

Source: Company, Kotak Institutional Equities

2017 2018 2019E 2020E 2021E

Source: Company, Kotak Institutional Equities estimates

KOTAK INSTITUTIONAL EQUITIES RESEARCH 7

2016 2017 2018 2019E 2020E 2021E

Source: Company, Kotak Institutional Equities estimates

8 KOTAK INSTITUTIONAL EQUITIES RESEARCH

1QFY19 EBITDA 4% above estimates

Kotak Institutional Equities Research

Source: Company, Kotak Institutional Equities estimates

Source: Companies, Kotak Institutional Equities

10 KOTAK INSTITUTIONAL EQUITIES RESEARCH

LME lead LME lead Qoq increase

Source: Bloomberg, Kotak Institutional Equities

Exhibit 4: We expect 11% CAGR in automotive volumes over FY2018-21E

Source: Company, Kotak Institutional Equities estimates

KOTAK INSTITUTIONAL EQUITIES RESEARCH 11

Source: Company, Kotak Institutional Equities estimates

Exhibit 6: We have fine-tuned our FY2019-21E earnings estimates

New estimates Old estimates % change

Source: Kotak Institutional Equities estimates