[Kotak] India Daily, July 25, 2017 - Kotak Securities

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

Contents

Daily Alerts

Results

HDFC Bank: Not one of the best quarters

Ambuja Cements: A balanced performance

United Spirits: Of temporary dislocations, long-term risk/reward and misconceptions

Ashok Leyland: Weak quarter; management ups the ante

Mahindra & Mahindra Financial: High provisions dent earnings; undercurrents improve

IIFL Holdings: In a sweet spot

Info Edge: Some hits, some misses

IRB Infrastructure: Less to cheer in FY2018

Sector alerts

Consumer Products: Month in review - June 2017: GST-led price cuts getting rolled out

INDIA DAILY July 25, 2017 India 24-Jul 1-day 1-mo 3-mo

Sensex 32,246 0.7 3.6 7.7

Nifty 9,966 0.5 4.1 7.1

Global/Regional indices

Dow Jones 21,513 (0.3) 0.6 2.5

Nasdaq Composite 6,411 0.4 2.3 6.4

FTSE 7,378 (1.0) (0.6) 1.4

Nikkei 19,995 0.1 (0.7) 4.8

Hang Seng 26,847 0.5 4.6 9.8

KOSPI 2,453 0.1 3.1 11.7

Value traded – India

Cash (NSE+BSE) 304 288 292

Derivatives (NSE) 5,488 5,213 5,660

Deri. open interest 3,756 3,604 3,460

Forex/money market

Change, basis points

24-Jul 1-day 1-mo 3-mo

Rs/US$ 64.4 (1) (5) 10

10yr govt bond, % 6.9 (3) (3) (42)

Net investment (US$ mn)

21-Jul MTD CYTD

FIIs (16) 222 8,728

MFs 15 775 6,494

Top movers

Change, %

Best performers 24-Jul 1-day 1-mo 3-mo

JPA IN Equity 27.7 4.1 47.7 113.1

UT IN Equity 8.7 2.4 71.3 47.9

UNSP IN Equity 2641.7 (2.3) 17.5 37.5

HUVR IN Equity 1159.4 0.1 5.6 25.5

FB IN Equity 117.0 (0.4) 1.7 24.5

Worst performers

RCOM IN Equity 24.8 2.1 16.7 (28.2)

GNP IN Equity 689.8 (0.9) 10.0 (23.3)

POWF IN Equity 127.7 (0.9) 4.3 (20.7)

IDBI IN Equity 60.7 2.6 7.9 (18.1)

BHEL IN Equity 146.3 0.9 8.3 (17.8)

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

Not a business-as-usual quarter; provisions high on account of loan waiver

Earnings growth for HDFC Bank was healthy at 20% yoy as strong revenue growth (22% yoy)

coupled with lower cost growth (13% yoy) led to 29% yoy PPoP growth. However, there were

a few one-off performances: (1) provisions was higher at ~80% yoy due to the impact of

slippages on account of loan waiver and coverage ratio still slipped to 65% from ~69% in the

previous quarter, (2) non-interest income growth was strong at 25% yoy on the back of high

fee income of 30%, which included a few one-off income on fees from oil marketing

companies, and (3) operating expenses growth was at the slowest in recent quarters at 13%

yoy. Loan growth was strong at 22% yoy, led by 17% yoy retail growth and 30% yoy non-

retail growth. CASA flows remained strong at ~30 yoy. NIM improved 10 bps qoq to 4.4%.

Risk on book increasing; going deeper into rural India does expose to such risks as seen today

As highlighted in the past few quarters, we are still of the opinion that the riskiness of the book

has only been on the rise and it is not fully reflected as the underlying margins are moving in a

relatively tight band despite the (1) share of unsecured loans being closer to peak levels that we

last saw in FY2008, (2) rise in relatively higher-yielding business banking portfolio, and (3) CASA

ratio is at levels last seen in FY2012. The bank reported high NPLs in its agriculture loan portfolio;

while loan waiver has been the primary cause, it does raise an important question on the nature

of the business today as compared to what it was a decade ago. The high slippage in the

current quarter probably shows that it is getting harder to pick and choose loans as size of the

balance sheet is becoming an issue. The bank is getting exposed to the vagaries in the economy

with a lot more consistency.

Maintain REDUCE with TP of `1,575 (from `1,450 earlier)

We maintain our REDUCE rating post changes to earnings. We value the bank at ₹1,575 (from

`1,450 earlier), which implies 3.3X book and 19X 1QFY20E EPS delivering 18% earnings CAGR

for FY2018-20E and RoEs in the range of 18%. Valuation remains our key concern as our broad

thesis remains intact, as we see the bank compounding remains unaffected. HDFC Bank will

remain a frontrunner in capturing the fast-growing retail opportunity given its strong execution

track-record of building a strong retail network underpinned by a stable liability profile, which

provides comfort on growth and profitability.

HDFC Bank (HDFCB) Banks

Not one of the best quarters. HDFC Bank reported 20% yoy earnings growth on the

back of 30% yoy PPoP growth. However, one-off non-interest income and operating

leverage offset the high provisions on account of lagged impact of loan waiver. Share

of unsecured loans continues to rise and is closer to peak levels. High market share in

select products and low growth for the industry resulting in high competition in retail

remain the key risk. Maintain REDUCE with TP at `1,575 (from `1,450 earlier).

REDUCE

JULY 25, 2017

RESULT

Coverage view: Attractive

Price (`): 1,735

Target price (`): 1,575

BSE-30: 32,246

QUICK NUMBERS

NII grew 20%;

earnings grew 20%

Loans grew 23%

yoy; gross NPLs

increased 23% qoq

to 1.2% of loans

Maintain REDUCE

with TP at `1,575

(from `1,450 earlier)

M B Mahesh CFA

Nischint Chawathe

Abhijeet Sakhare

HDFC Bank

Stock data Forecasts/Valuations 2017 2018E 2019E

52-week range (Rs) (high,low) EPS (Rs) 56.8 68.2 80.5

Market Cap. (Rs bn) EPS growth (%) 16.7 20.1 18.0

Shareholding pattern (%) P/E (X) 30.6 25.4 21.6

Promoters 21.2 NII (Rs bn) 331.4 395.0 443.8

FIIs 52.8 Net profits (Rs bn) 145.5 174.7 206.2

MFs 8.0 BVPS 344.4 398.5 460.4

Price performance (%) 1M 3M 12M P/B (X) 5.0 4.4 3.8

Absolute 3.4 13.2 41.0 ROE (%) 17.9 18.2 18.6

Rel. to BSE-30 (0.2) 4.1 21.6 Div. Yield (%) 0.6 0.8 0.9

Company data and valuation summary

1,748-1,158

4,465.9

HDFC Bank Banks

KOTAK INSTITUTIONAL EQUITIES RESEARCH 3

Exhibit 1: HDFC Bank – quarterly performance March fiscal year-ends, 1QFY17-1QFY18 (` mn)

Source: Company, Kotak Institutional Equities estimates

Exhibit 2: Revenue growth is lower than loan growth Revenue and earnings growth, March fiscal year-ends, 2010-1QFY18 (%)

Source: Company, Kotak Institutional Equities

1QFY18 1QFY18E 1QFY17 4QFY17 1QFY18E 1QFY17 4QFY17 2017 2016 2018E

Interest income 186,687 185,988 165,160 181,144 0.4 13.0 3.1 693,136 602,063 15.1 790,396

Interest on advances 144,861 142,062 124,708 135,075 2.0 16.2 7.2 520,553 448,279 16.1 602,314

Interest on investments 38,930 41,576 38,092 42,677 (6.4) 2.2 (8.8) 159,520 141,049 13.1 171,246

Other interest 2,897 2,350 2,360 3,393 23.3 22.8 (14.6) 13,064 12,736 2.6 16,835

Interest expense 92,980 92,878 87,346 90,593 0.1 6.5 2.6 361,667 326,299 10.8 395,364

Net interest income 93,707 93,110 77,814 90,551 0.6 20.4 3.5 331,469 275,763 20.2 395,032

Non interest income 35,167 31,236 28,066 34,463 12.6 25.3 2.0 122,965 107,517 14.4 144,001

- fee income 25,781 22,152 19,779 25,230 16.4 30.3 2.2 88,116 77,590 13.6 104,174

- exchange income 2,968 3,491 3,145 3,567 (15.0) (5.6) (16.8) 12,634 12,277 2.9 14,150

- sale of invts. 3,314 2,889 2,769 1,804 14.7 19.7 83.7 11,380 7,317 55.5 13,000

Non treasury income 31,853 28,347 25,297 32,659 12.4 25.9 (2.5) 111,585 100,200 11.4 131,001

Total income 128,874 124,346 105,881 125,014 3.6 21.7 3.1 454,434 383,281 18.6 539,033

Op. expenses 53,675 54,831 47,689 52,220 (2.1) 12.6 2.8 197,033 169,797 16.0 224,175

Employee cost 16,575 17,855 15,852 15,527 (7.2) 4.6 6.8 64,837 57,022 13.7 71,087

Other cost 37,100 36,975 31,837 36,693 0.3 16.5 1.1 132,197 112,775 17.2 153,087

Operating profit 75,199 69,515 58,192 72,794 8.2 29.2 3.3 257,400 213,484 20.6 314,858

Provisions and cont. 15,588 11,356 8,667 12,618 37.3 79.8 23.5 36,009 27,104 32.9 54,944

PBT 59,612 58,159 49,525 60,176 2.5 20.4 (0.9) 221,391 186,379 18.8 259,913

Tax 20,673 19,646 17,136 20,275 5.2 20.6 2.0 75,894 63,417 19.7 85,201

Net profit 38,938 38,512 32,389 39,901 1.1 20.2 (2.4) 145,496 122,962 18.3 174,712

Tax rate (%) 34.7 33.8 34.6 33.7 34.3 34.0 32.8

Op.profit excl treasury gains 71,885 66,626 55,423 70,990 7.9 29.7 1.3 246,020 206,167 19.3 301,858

EPS (Rs) 15 13 16 18.4 (2.8) 57 49 68

Key balance sheet items (Rs bn)

Total deposits 6,714 5,738 6,436 17.0 4.3

Savings deposits 1,931 1,527 1,936 26.5 (0.2)

Current deposits 1,020 761 1,156 34.1 (11.7)

Term deposits 3,762 3,450 3,345 9.1 12.5

CASA ratio (%) 44.0 39.9 48.0

Loans 5,810 4,706 5,546 23.4 4.8

Corporate and others 2,781 2,376 2,709 17.1 2.7

Retail credit 3,029 2,331 2,837 30.0 6.8

Housing loans 388 336 384 15.5 1.1

Car loans 660 522 621 26.5 6.4

Loan against sec 14 12 15 20.0 (1.0)

Personal loans 555 405 501 37.2 10.9

Two wheeler 65 55 63 17.7 3.8

Credit cards 291 213 260 36.9 11.9

Commercial vehicles 197 153 192 28.6 2.5

Business Banking 404 256 362 58.0 11.6

(% chg.)

(% chg.)

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 1QFY18

Net interest income 45.7 40.9 42.0 13.0 25.7 22.2 22.7 16.9 21.2 23.2 20.1 20.4

Non interest income 35.0 50.4 44.2 15.7 13.9 33.4 18.5 15.6 13.6 19.5 14.4 25.3

Total revenue 42.4 43.7 42.6 13.8 22.0 25.5 21.4 16.5 18.9 22.1 18.5 21.7

Total operating expenses 43.2 54.7 47.7 4.2 24.1 29.7 21.1 7.2 16.2 21.4 16.0 12.6

Loans 33.9 35.1 55.9 27.3 27.1 22.2 22.7 26.4 20.6 27.1 19.4 23.4

Balance sheet 24.1 46.0 37.6 21.4 24.7 21.8 18.5 22.8 20.1 25.5 16.6 18.6

Earnings growth 31.1 39.3 41.2 31.4 33.2 31.6 30.2 26.0 20.5 20.4 18.3 20.2

Banks HDFC Bank

4 KOTAK INSTITUTIONAL EQUITIES RESEARCH

Exhibit 3: HDFC Bank trading at 3.8X one-year forward book One-year forward PER and PBR, 2010-Jun 2017 (X)

Source: Company, Bloomberg, Kotak Institutional Equities estimates

Exhibit 4: Valuation premium to ICICI Bank has increased HDFC Bank PBR to ICICI Bank and Axis Bank PBR, 2010-Jun 2017 (X)


Strong comeback on retail loan growth

HDFC Bank reported 23% yoy loan growth, driven by 17% yoy retail loan growth and 30%

yoy non-retail loan growth as per RBI classification and 29% yoy in retail and 13% yoy in

corporate loans as per internal classification. Retail loan growth was better than the 4QFY17

quarter, which had the spillover impact of demonetization. Share of retail loan increased

~100 bps qoq to 52% driven primarily by growth in business banking at 58% yoy, personal

loans at 37% yoy and credit cards at 37% yoy. The qoq non-retail growth slowed down to

2.7%.

Unsecured loan growth remains high, contributing to 28% of retail loans

In line with trends over few quarters, unsecured loans remained the mainstay of retail loan

growth. Personal loan and credit card loans together grew 37% yoy and 11% qoq, with

growth equally split between personal loan (37% yoy, 11% qoq) and credit cards (37% yoy,

12% qoq). Contribution of unsecured retail loans has grown to ~28% from ~22% in FY2014.

With strong support from low cost funding and yield pressure emerging in the system

elsewhere, the bank has been aggressive in growing the unsecured book, thus providing

support to the overall margins. Given the strength of the retail balance sheets at the

moment, the current level of strong growth does not raise any red-flags at the moment.

Home loan growth slowed down to 16% (vs 21% in 4QFY17). Car loan growth increased

further to to 27% (24% in 4QFY17), CV/CE dropped marginally to 29% (vs 31% yoy in

4QFY17) and business banking loans further jumped to 58% yoy (43% in 4QFY17) while

two-wheeler growth was stable at 18% (17% in 4QFY17).

HDFC Bank has grown at ~20% yoy in the past four quarters, well above the industry loan

growth of below 5-7%. The bank has indicated in the past that that they intend to grow at

3-6 percent points above the system loan growth and the excess growth over this alpha may

taper down. The bank does not explicitly target any share for retail, but the relative

slowdown in corporate have led to increase in share of retail loans.

We are not too sure if the bank would be able to improve loan growth >25% in the

medium term considering that the underlying business environment continues to remain

challenging which implies near term loan growth would be subdued for the industry and the

bank is expected to grow at a premium to industry average.

1.5

2.1

2.7

3.3

3.9

4.5

10

14

18

22

26

30

Jun-1

0

Jun-1

1

Jun-1

2

Jun-1

3

Jun-1

4

Jun-1

5

Jun-1

6

Jun-1

7

Rolling PER (X) (LHS) Rolling PBR (X) (RHS)

1.0

1.5

2.0

2.5

3.0

3.5

Jun-1

0

Jun-1

1

Jun-1

2

Jun-1

3

Jun-1

4

Jun-1

5

Jun-1

6

Jun-1

7

ICICI Bank Axis Bank

HDFC Bank Banks


Exhibit 5: Proportion of retail loans inched up in 1QFY18; share of unsecured loans have increased over the past few years Break-up of loan book, March fiscal year-ends, 2005-1QFY18 (%)


Asset quality shows weakness; coverage ratio declines qoq to 65%

Gross NPL and net NPL ratios showed an increase qoq at 1.2% and 0.4% of loans

respectively. Absolute qoq growth in GNPL and NNPL was steep at 23% and 37%

respectively. Despite the bank making higher provisions, the provision coverage was lower

~360 bps qoq to 65%. Credit cost in the quarter was higher qoq as the bank had made

higher provisions on account of higher impairment in the agriculture loan portfolio, which

was impacted due to demonetization. The management highlighted that the rest of the

portfolio is not showing any signs of higher levels of deterioration. The unsecured loan

portfolio is showing lower delinquency than that of the secured portfolio. We forecast

1.1%-1.2% gross NPL ratio over next two years with credit costs of ~70-90 bps.

Exhibit 6: Provision coverage stable qoq at 70% Break-up of provisions made during a year, March fiscal year-ends, 2010-17 (` mn)

Notes: (a) Comparison with earlier years will be incorrect as FY2013 has seen a change in reporting where income from written-off loans have been shifted to non-interest income from the earlier practice of netting with provisions. FY2012 numbers restated as per the change in accounting policy.


Calculated NIM flat qoq at 4.5%; growth in unsecured loans could not offset

drop in yield on investment

Calculated NIM remained flat qoq at 4.5% on the back of higher CD ratio (up ~30 bps qoq

to 87%). Yield on loans declined ~10 bps qoq to 10.2% with investment yields dropping

significantly ~60 bps qoq to 6.7%. The base rate was cut by 25 bps from 9.25% to 9% in

April 2017 accompanied by cut in MCLR rates since January 2017. Margins are probably

stable and on the higher side because of the sharp drop in lending yields accompanied by a

rise in the share of low cost deposits.

We would be cautious at the bank’s NIM as we believe that we are currently at peak lending

spreads in the business and the high competition and shift to corporate loans would make it

challenging to expand NIM from current levels. We expect NII CAGR of ~13% in FY2018-

20E and expect it to lag ~16% loan CAGR. We forecast NIM (calculated) to decline by ~35

bps over FY2018-20E.

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 1QFY18

Retail 57.1 60.6 60.3 61.9 61.8 50.2 50.1 54.8 56.9 48.0 47.3 48.2 51.2 52.1

Housing loans — — 4.4 3.0 5.1 6.9 7.2 7.3 7.0 6.3 6.6 6.9 6.9 6.7

Auto loans 30.6 33.1 29.4 26.9 25.7 20.4 20.2 21.5 20.9 16.5 15.7 15.1 15.8 15.9

Commercial vehicles 11.1 14.0 10.2 9.4 8.1 4.8 5.1 6.7 6.7 4.3 3.5 3.2 3.5 3.4

Car loans 13.8 13.7 14.9 15.1 15.7 14.3 13.8 13.5 12.9 11.1 11.1 10.8 11.2 11.4

Two wheelers 5.7 5.4 4.3 2.4 1.9 1.3 1.2 1.3 1.3 1.1 1.1 1.2 1.1 1.1

Unsecured 11.5 13.4 13.6 15.5 12.8 10.0 9.5 10.7 11.5 11.1 11.5 12.4 13.7 14.6

Personal loans 9.4 9.4 10.5 8.9 6.9 6.4 7.1 7.3 6.9 7.1 8.0 9.0 9.6

Credit cards 4.0 4.3 5.0 3.9 3.1 3.0 3.6 4.2 4.3 4.4 4.4 4.7 5.0

Business loans 5.6 6.8 11.1 13.5 12.8 8.7 9.4 9.5 10.2 7.1 5.2 5.4 6.5 7.0

Others 9.5 7.2 6.2 6.1 10.4 11.1 11.0 13.1 14.3 13.2 14.9 15.2 15.1 14.7

Corporate loans/others 42.9 39.4 39.7 38.1 38.2 49.8 49.9 45.2 43.1 52.0 52.7 51.8 48.8 47.9

2010 2011 2012 2013 2014 2015 2016 2017

NPAs 19,389 7,630 10,918 12,342 16,326 17,236 21,336 31,453

Standard assets — — 1,505 1,237 2,213 2,963 4,400 3,922

Investment depreciation — — 934 522 (41) (38) 152 (76)

Floating 500 6,700 7,000 4,000 300 — 1,150 250

Securitized assets (0) 26 98 59 (262) 46 (29) 26

Restructured assets 150 (44) (41) (64) (9) 179 (126) (25)

Contingencies 1,361 4,749 (1,645) (1,332) (2,654) 365 373 383

Oustanding provisions 21,400 19,061 18,769 16,764 15,873 20,750 27,256 35,933

Banks HDFC Bank


Core fee growth of 30% yoy

Non-interest income growth of 25% yoy was lower than fee income growth of 30% yoy on

due to muted growth in treasury income at 20% yoy compared to 56% yoy in 4QFY17. The

bank had seen one off income from fees on prior items relating oil marketing companies.

The impact on growth would be 400-500bps on account of the same. Also, higher

distribution of third party products has resulted in strong growth as well. Notably, bank has

tied up with two more life insurance companies (apart from HDFC Life) and one general

insurance company. We see this as an opportunity for the bank to earn higher fees on sale

of third-party products.

Cost growth at 14% yoy, ~50 bps improvement in cost-income ratio

Cost-income ratio improved marginally by 12 bps qoq to 42% as operating costs growth

was controlled at 13% yoy, lower than 22% revenue growth. Ongoing staff efficiency

program led to savings with staff strength stable qoq for the bank, leading to 5% yoy

growth in staff costs. Bank has seen headcount reduction of nearly 10,000 staff in 3QFY17,

4QFY17 and flattish for the current quarter. This has resulted from the bank’s initiatives on

digital over the past few years giving an opportunity to rebalance staff levels as well as

improve productivity levels.

Non-staff cost growth was higher at 17% due to high loan growth as well as branch

additions – 195 in FY2017 of which 160 had happened in 4QFY17.

CASA ratio drops to 44%; growth of 29% yoy and 4.5% decrease qoq

Overall deposit growth was 17% yoy with CASA balances growing by 29% yoy but

dropping 4.5% qoq attributed to 12% qoq drop in current accounts and flat savings

account. Yoy drop in term deposit during 4QFY17 reflecting redemption of US$3 bn FCNR

deposits leading to slow growth of 8% yoy in term deposits, jumped back to 9% yoy

growth and 13% qoq growth.

Others key highlights

Tier-1 ratio stands comfortable at 13.6% with overall CAR at 15.6% as per Basel-3

guidelines.

Exhibit 7: Network expansion was slower in 1QFY18 March fiscal year-ends, 2007-1QFY18 (#)


2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 1QFY18

Branches 684 761 1,412 1,725 1,986 2,544 3,062 3,403 4,014 4,520 4,715 4,727

ATMs 1,605 1,977 3,295 4,232 5,471 8,913 10,743 11,176 12,000 12,000 12,260 12,220

HDFC Bank Banks


Exhibit 8: HDFC Bank has one of the highest opex to asset ratios among private sector banks Operating expenses to total assets, March fiscal year-ends, 2013-20E (%)

Notes: (a) 2015 figures are estimates for Axis Bank and ICICI Bank. (b) Opex to total assets not comparable for FY2009-10 as the bank has changed its policy with recognition of origination costs in retail loans.

Source: Companies, Kotak Institutional Equities estimates

Exhibit 9: Earnings growth requires a strong and consistent improvement in cost-income ratio Cost-income ratio, March fiscal year-ends, 2012-20E (%)

Source: Companies, Kotak Institutional Equities estimates

Exhibit 10: Earnings growth higher than revenue growth in

1QFY18 Earnings and revenue growth, March fiscal year-ends, 1QFY15-1QFY18 (%)

Notes: (a) Revenues not strictly comparable as the bank has changed its accounting for certain expenses and income.


Exhibit 11: Earning growth was lower than loan growth Earnings and loan growth, March fiscal year-ends, 1QY15-1QFY18 (%)


Opex to total assets Employee costs to total assets

2014 2015 2016 2017E 2018E 2019E 2020E 2015 2015 2016 2017E 2018E 2019E 2020E

Axis Bank 2.2 2.2 1.8 2.2 2.2 2.2 2.2 0.7 0.7 0.7 0.7 0.7 0.6 0.6

HDFC Bank 2.6 2.6 2.6 2.5 2.4 2.3 2.2 0.9 0.9 0.9 0.8 0.8 0.7 0.7

ICICI Bank 1.9 1.9 1.9 2.1 2.1 2.0 2.0 0.8 0.8 0.7 0.8 0.8 0.8 0.8

IndusInd Bank 2.9 2.9 2.9 3.0 3.0 2.9 2.8 1.0 1.0 1.0 0.9 0.9 0.8 0.8

Yes Bank 1.7 1.9 2.0 2.2 2.2 2.2 2.2 0.8 0.8 0.9 0.9 1.0 0.9 0.9

2012 2013 2014 2015 2016 2017E 2018E 2019E 2020E

Axis Bank 44.7 42.6 40.8 40.7 38.5 41.0 45.8 47.9 48.4

HDFC Bank 49.7 49.6 44.6 44.6 44.3 43.4 41.6 41.8 40.7

ICICI Bank 43.0 40.6 36.8 36.8 34.7 35.8 41.9 42.6 41.4

IndusInd Bank 49.4 48.8 48.1 48.1 47.0 46.7 49.2 49.4 48.7

Yes Bank 37.7 38.4 39.4 41.3 40.9 41.2 44.5 47.3 46.6

0

7

14

21

28

1Q

FY15

2Q

FY15

3Q

FY15

4Q

FY15

1Q

FY16

2Q

FY16

3Q

FY16

4Q

FY16

1Q

FY17

2Q

FY17

3Q

FY17

4Q

FY17

1Q

FY18

Revenue growth (LHS) Earnings growth (RHS)

0

8

16

24

32

1Q

FY15

2Q

FY15

3Q

FY15

4Q

FY15

1Q

FY16

2Q

FY16

3Q

FY16

4Q

FY16

1Q

FY17

2Q

FY17

3Q

FY17

4Q

FY17

1Q

FY18

Loan growth (LHS) Earnings growth (RHS)

Banks HDFC Bank


Exhibit 12: HDFC Bank—key parameters and balance sheet March fiscal year-ends, 1QFY17-1QFY18


1QFY17 2QFY17 3QFY17 4QFY17 1QFY18

Yield management measures (%)

NIM 4.4 4.2 4.1 4.3 4.4

Asset quality details

Gross NPL(Rs mn) 49,209 50,690 52,323 58,857 72,429

Gross NPL (%) 1.0 1.0 1.1 1.1 1.2

Net NPLs (Rs mn) 14,934 14,889 15,643 18,440 25,282

Net NPL (%) 0.3 0.3 0.3 0.3 0.4

Capital adequacy ratios (%)

CAR 15.5 15.4 15.9 14.6 15.6

Tier I 13.3 13.3 13.8 12.8 13.6

Tier II 2.2 2.1 2.1 1.8 2.0

Other key details

Branches 4,541 4,548 4,555 4,715 4,727

ATM network 12,013 12,016 12,087 12,260 12,220

Balance sheet snapshot (Rs bn)

Capital and liabilities

Capital 5 5 5 5 5

Reserves and surplus 8,323 6,407 7,037 12,582 15,495

Deposits 5,738 5,917 6,347 6,436 6,714

Borrowings 689 770 721 740 860

Other liabilities and provisions 361 395 362 567 440

Total 7,551 7,888 8,280 8,638 8,957

Assets

Cash and balances with RBI 284 286 500 379 362

Balances with banks, money at call and short notice 119 179 41 111 208

Investments 2,063 2,067 2,361 2,145 2,161

Advances 4,706 4,944 4,950 5,546 5,810

Fixed assets 35 35 35 36 36

Other assets 344 377 393 422 380

Total 7,551 7,888 8,280 8,638 8,957

HDFC Bank Banks


Exhibit 13: HDFC Bank—estimate changes March fiscal year-ends, 2018-20E (` bn)


Exhibit 14: We expect HDFC Bank to deliver RoEs of 18-19% in the medium term RoE breakup, March fiscal year-ends, 2012-20E (%)

Notes: (a) Net interest income includes income from mutual fund reported under income from investments.


New estimates Old estimates % change

2018E 2019E 2020E 2018E 2019E 2020E 2018E 2019E 2020E

Net loan growth (%) 18.2 16.5 16.0 16.0 16.5 16.0

Total assets 10,117 11,849 13,877 10,035 11,634 13,462 0.8 1.8 3.1

Total income 539 604 684 518 581 650 4.0 4.1 5.2

Net interest income 395 444 505 379 419 463 4.1 5.9 9.1

NIM (%) 4.4 4.2 4.1 4.3 4.0 3.8

Other income 144 161 179 139 161 187 3.5 (0.5) (4.5)

Fee income 104 117 130 98 116 137 5.8 0.4 (4.7)

Expenses 224 252 278 218 245 269 2.9 2.9 3.5

Employee cost 71 81 92 74 83 93 (3.7) (3.4) (1.6)

Other cost 153 172 187 144 162 176 6.3 6.2 6.1

Loan loss provisions 54 50 58 42 45 53 29.9 9.7 9.7

PBT 260 302 348 258 290 329 0.7 4.2 5.9

PAT 175 206 241 173 198 227 0.7 4.2 5.9

PBT-treasury+provisions 302 338 392 287 322 368 5.0 5.2 6.6

EPS (Rs) 68 80 94 68 77 89 0.7 4.2 5.9

2012 2013 2014 2015 2016 2017 2018E 2019E 2020E

Net interest income 4.2 4.3 4.1 4.1 4.1 4.1 4.2 4.0 3.9

Other income 1.9 1.9 1.7 1.7 1.6 1.5 1.5 1.5 1.4

Treasury (0.1) 0.0 0.1 0.1 0.1 0.1 0.1 0.1 0.1

Others 1.9 1.8 1.6 1.6 1.5 0.4 1.4 1.3 1.3

Total income 6.0 6.1 5.8 5.8 5.8 5.7 5.7 5.5 5.3

Operating expenses 3.0 3.0 2.6 2.6 2.6 2.5 2.4 2.3 2.2

Employees 1.1 1.1 0.9 0.9 0.9 0.8 0.8 0.7 0.7

Others 1.9 1.9 1.7 1.7 1.7 1.7 1.6 1.6 1.5

Pre provision income 3.1 3.1 3.2 3.2 3.2 3.2 3.4 3.2 3.2

Loan loss provisions 0.6 0.5 0.4 0.4 0.4 0.4 0.6 0.5 0.4

Pre -tax pre extraordinary income 2.4 2.6 2.8 2.8 2.8 2.8 2.8 2.8 2.7

RoA pre-tax/prov/treasury/extr. 3.1 3.1 3.1 3.1 3.1 3.1 3.2 3.1 3.0

(1- tax rate) 68.8 69.0 66.6 66.6 66.0 65.7 67.2 68.2 69.2

RoA 1.7 1.8 1.9 1.9 1.8 1.8 1.9 1.9 1.9

Avg assets/avg equity 11.1 11.2 10.3 10.3 9.9 9.9 9.7 9.9 10.0

RoE 18.7 20.3 19.4 19.4 18.3 17.9 18.2 18.6 18.8

Banks HDFC Bank


Exhibit 15: HDFC Bank growth rates and key ratios March fiscal year-ends, 2015-20E (%)


2015 2016 2017 2018E 2019E 2020E

Growth rates (%)

Net loan 20.6 27.1 19.4 18.2 16.5 16.0

Customer assets growth 19.7 28.3 23.1 17.4 15.9 15.5

Retail loans to Customer assets 47.6 47.6 48.9 48.7 48.7 48.6

Net fixed assets 0.1 (20.3) 54.5 (6.0) (7.7) (9.7)

Cash and bank balance (8.2) 7.1 25.8 28.7 28.4 30.3

Total Asset 20.1 25.5 16.6 17.1 17.1 17.1

Deposits 22.7 21.2 17.8 18.2 17.6 17.1

Current 19.6 20.2 30.7 2.0 17.6 17.1

Savings 24.5 22.9 7.9 24.3 18.1 17.6

Fixed 21.1 18.4 30.9 17.2 16.6 16.1

Net interest income 21.2 23.2 20.1 19.2 12.4 13.9

Loan loss provisions 8.5 30.9 33.3 52.8 (8.8) 16.3

Total other income 13.6 19.5 14.4 17.1 11.5 11.3

Net fee income 14.8 17.8 13.6 18.2 11.8 11.9

Net capital gains 426.6 25.8 55.5 14.2 3.8 —

Net exchange gains (26.6) 19.4 2.9 12.0 15.0 15.0

Operating expenses 16.2 21.4 16.0 13.8 12.6 10.3

Employee expenses 13.7 20.0 13.7 9.6 13.3 13.9

Key ratios (%)

Yield on average earning assets 9.5 9.6 9.1 8.9 8.5 8.2

Yield on average loans 11.1 10.8 10.2 10.0 9.6 9.2

Yield on average investments 7.2 8.1 7.8 7.4 7.3 7.2

Average cost of funds 5.7 5.7 5.3 5.0 4.9 4.8

Interest on deposits 5.7 5.9 5.3 5.0 5.0 4.8

Difference 3.8 3.9 3.9 3.9 3.6 3.4

Net interest income/earning assets 4.4 4.4 4.4 4.4 4.2 4.1

New provisions/average net loans 0.6 0.6 0.7 0.9 0.7 0.7

Interest income/total income 71.3 72.0 72.9 73.3 73.4 73.9

Fee income to total income 21.0 20.2 19.4 19.3 19.3 19.1

Fees income to PBT 43.0 41.6 39.8 40.1 38.5 37.5

Net trading income to PBT 3.8 3.8 5.2 5.0 4.5 3.9

Exchange inc./PBT 6.7 6.6 5.7 5.4 5.4 5.4

Operating expenses/total income 44.6 44.3 43.4 41.6 41.8 40.7

Operating expenses/assets 2.6 2.6 2.5 2.4 2.3 2.2

Operating profit /AWF 2.9 2.9 2.8 2.8 2.8 2.7

Tax rate 33.4 34.0 34.3 32.8 31.8 30.8

Dividend payout ratio 19.6 19.5 19.4 19.4 19.4 19.4

Share of deposits

Current 16.3 16.2 18.0 15.5 15.5 15.5

Fixed 56.0 56.8 52.0 54.7 54.9 55.2

Savings 27.7 27.1 30.1 29.8 29.6 29.3

Loans-to-deposit ratio 81.1 85.0 86.2 86.2 85.4 84.6

Equity/assets (EoY) 10.5 9.8 10.4 10.2 10.0 9.9

Asset quality trends (%)

Gross NPL 0.9 0.9 1.1 1.1 1.2 1.2

Net NPL 0.2 0.3 0.3 0.2 0.2 0.2

Slippages 1.6 1.6 1.5 1.5 1.6 1.6

Provision coverage (ex writeoff) 73.9 69.9 68.7 81.1 84.0 87.0

Dupont analysis (%)


Loan loss provisions 0.4 0.4 0.4 0.6 0.5 0.4

Net other income 1.7 1.6 1.5 1.5 1.5 1.4


(1- tax rate) 66.6 66.0 65.7 67.2 68.2 69.2

ROA 1.9 1.8 1.8 1.9 1.9 1.9

Average assets/average equity 10.3 9.9 9.9 9.7 9.9 10.0

ROE 19.4 18.3 17.9 18.2 18.6 18.8

HDFC Bank Banks


Exhibit 16: HDFC Bank P&L and balance sheet March fiscal year-ends, 2015-20E (` mn)


2015 2016 2017 2018E 2019E 2020E

Income statement

Total interest income 484,699 602,214 693,060 790,342 897,365 1,017,182

Loans 371,808 448,279 520,553 602,314 677,631 759,342

Investments 98,585 141,200 159,443 171,193 197,711 231,595

Cash and deposits 14,306 12,736 13,064 16,835 22,023 26,245

Total interest expense 260,742 326,299 361,667 395,364 453,596 511,930

Deposits from customers 235,138 291,783 313,315 351,295 410,885 470,521

Net interest income 223,957 275,915 331,392 394,978 443,768 505,253

Loan loss provisions 20,424 26,732 35,626 54,444 49,663 57,744

Net interest income (after prov.) 203,533 249,184 295,766 340,534 394,105 447,509

Other income 89,964 107,517 122,965 144,001 160,608 178,761

Net fee income 65,842 77,590 88,116 104,174 116,501 130,307

Net capital gains 5,816 7,317 11,380 13,000 13,500 13,500

Net exchange gains 10,280 12,277 12,634 14,150 16,272 18,713

Operating expenses 139,875 169,797 197,033 224,175 252,480 278,363

Employee expenses 47,510 57,022 64,837 71,087 80,560 91,770

Other Provisions 365 373 383 500 — —

Pretax income 153,295 186,379 221,391 259,913 302,270 347,934

Tax provisions 51,136 63,417 75,894 85,201 96,064 107,097

Net Profit 102,159 122,962 145,496 174,712 206,207 240,838

% growth 20.5 20.4 18.3 20.1 18.0 16.8

Operating profit 168,267 206,167 246,020 301,858 338,433 392,178

% growth 18.1 22.5 19.3 22.7 12.1 15.9

Balance sheet

Assets

Cash and bank balance 363,315 389,188 489,521 629,895 808,807 1,054,254

Cash 53,215 55,695 42,636 63,954 95,931 143,896

Balance with RBI 221,890 244,889 336,333 400,112 464,134 537,244

Balance with banks 23,443 9,205 11,795 17,692 26,538 39,807

Net value of investments 1,518,201 1,968,322 2,144,633 2,469,701 2,932,208 3,483,152

Govt. and other securities 1,203,903 1,576,611 1,624,187 1,960,435 2,422,941 2,973,886

Shares 1,284 739 1,114 1,114 1,114 1,114

Debentures and bonds 11,255 48,874 194,698 194,698 194,698 194,698

Net loans and advances 3,654,950 4,645,940 5,545,682 6,553,079 7,636,439 8,861,725

Fixed assets 29,434 23,472 36,267 34,092 31,462 28,405

Net Owned assets 29,434 23,472 36,267 34,092 31,462 28,405

Other assets 339,131 381,038 422,298 430,608 439,748 449,803

Total assets 5,905,031 7,407,961 8,638,402 10,117,375 11,848,665 13,877,338

Liabilities

Deposits 4,507,956 5,464,242 6,436,397 7,605,596 8,944,271 10,474,625

Borrowings and bills payable 512,989 923,475 906,960 935,684 969,704 1,010,076

Other liabilities 263,991 293,466 400,422 546,359 745,484 1,017,181

Total liabilities 5,284,937 6,681,183 7,743,778 9,087,638 10,659,459 12,501,881

Paid-up capital 5,013 5,056 5,125 5,125 5,125 5,125

Reserves & surplus 615,081 721,721 889,498 1,024,612 1,184,081 1,370,332

Total shareholders' equity 620,094 726,778 894,624 1,029,737 1,189,206 1,375,457


Higher volumes and improved realizations aid strong earnings for the quarter

Ambuja Cements’ earnings were higher than our estimate—the company reported standalone

revenues of `28 bn (12% yoy, 11% qoq), EBITDA of `6 bn (6% yoy, 68% qoq) and net income

of `3.9 bn (-13% yoy, 59% qoq), against our estimate of `27 bn, `5.4 bn and `3.5 bn,

respectively. Higher-than-expected volumes of 6.1 mn tons (5% yoy, flat qoq) and 11% qoq

increase in realizations to `4,670/ton (6% yoy, KIE: `4,590/ton) aided earnings outperformance.

EBITDA/ton increased to `1,013/ton (1% yoy, 67% qoq) as cost increases were contained to

1% qoq to `3,650/ton (8% yoy). ACEM’s fuel costs increased by 4% qoq to `933/ton (15%

yoy) due to increase in pet-coke prices—note that pet-coke usage is high in the fuel mix for

ACEM (62% in CY2016). Cost increases were contained led by a decline in other costs such as

freight (-1% qoq to `1,220/ton). The 13% yoy decline in net income (`3.9 bn, 59% qoq)

reflects higher other income in 2QCY16 as the company accounted for dividend received from

ACC last year.

Sharp increase in realizations reflect price increases by companies since April 2017

ACEM’s realizations increased by `460/ton qoq to `4,670/ton—the highest among peers

(~`30/bag qoq). We believe the sharp increase in the company’s realizations is due to its higher

sales in the West region (~40%). As per our channel checks, all-India prices increased by

`28/bag qoq, but in the West it was the highest (`42/bag qoq). Prices in the North and East

regions increased by `23-26/bag qoq. However, the partial roll-back of prices in July 2017

(-`4/bag qoq on all-India basis) may yield a less promising performance in 3QCY17.

Maintain REDUCE with revised TP of `250 noting full valuations

At 11X EV/EBITDA (attributable) on June 2019 earnings, even after factoring in EBITDA growth

of 26% CAGR (10% growth in CY2016) and 1% in EBITDA in 1HCY17, we retain our REDUCE

rating with a revised target price of `250/share (from `230 previously) based on 10X EBITDA—

increase in TP is led by rollover to June 2019E financials (from March 2019E). We raise our

earnings estimate by 1-5% for CY2017-19E. We estimate EPS of `7.8, `11.4 and `14.5 for

CY2017E, CY2018E and CY2019E. The stock trades at 35X/24X CY2017/18E earnings.

Ambuja Cements (ACEM) Cement

A balanced performance. Ambuja Cement’s standalone EBITDA increased 6% yoy to

`6 bn (68% qoq), 14% ahead of our estimate. Strong volumes (5% yoy to 6.1 mn tons)

and 6% yoy increase in blended realizations aided earnings—the company reported the

highest sequential increase in realization among peers due to its large presence in West

and North regions. ACEM remains relatively better positioned, though valuation at 11X

EV/EBITDA offers no upside. Maintain REDUCE rating with revised target price of

`250/share (from `230/share previously).

REDUCE

JULY 25, 2017

RESULT

Coverage view: Cautious

Price (`): 268

Target price (`): 250

BSE-30: 32,246

Murtuza Arsiwalla

Abhishek Poddar

Samrat Verma

Ambuja Cements





Promoters 63.1 Sales (Rs bn) 203.4 229.7 260.5


MFs 2.0 EBITDA (Rs bn) 31.2 39.9 53.2

Price performance (%) 1M 3M 12M EV/EBITDA (X) 15.7 12.0 8.5

Absolute 10.2 8.7 1.2 ROE (%) 7.7 7.7 10.7

Rel. to BSE-30 6.4 (0.1) (12.8) Div. Yield (%) 1.0 1.1 1.1


282-191

532.4

Ambuja Cements Cement


Exhibit 1: Ambuja reported strong earnings led by higher volumes (+5% yoy) and realizations (+6% yoy) Quarterly results for Ambuja Cements (Standalone), December year-ends (Rs mn)


Changes in our estimates

Exhibit 5 highlights key changes in our estimates.

Ambuja standalone. We raise our volume estimate by 1-2% to 22.6 mn tons, 24.3 mn

tons and 26.1 mn tons for CY2017E, CY2018E and CY2019E. We cut our realization

assumption by 2% and tweak our cost assumptions—our EBITDA/ton changes marginally

by (1)-1% for CY2017-19E. Our consolidated EBITDA increased by 1-2% to `20.6 bn,

`27.5 bn and `31.3 bn for CY2017E, CY2018E and CY2019E. We also tweak our interest

and depreciation estimates. We estimate standalone EPS of `6.3, `8.8 and `10.6 for

CY2017E, CY2018E and CY2019E.

Ambuja consolidated. The above revision combined with our earlier change in ACC’s

numbers results in 0-1% change in Ambuja’s consolidated EBITDA estimate for CY2017-

19E. We estimate consolidated EBITDA of `37 bn, `49.8 bn and `60.8 bn for CY2017E,

CY2018E and CY2019E. We estimate consolidated EPS of `7.8, `11.4 and `14.5 for

CY2017E, CY2018E and CY2019E.

Key highlights from 2QCY17 results

Volumes—ACEM’s cement volumes increased by 5% yoy to 6.05 mn tons in 2QCY17

and compares less favorably to 10% yoy volume growth reported by ACC, though it was

better than 1% yoy decline for Ultratech. On a consolidated basis volumes increased 8%

yoy to 12.8 mn tons.

Realizations—ACEM’s standalone realizations increased by 11% qoq (+`30/bag) to

`4,670/ton (6% yoy), 2% ahead of our estimates. The company has large exposure to

north and west markets and the recent price increases in these markets (by `26-42/bag

qoq in 2QCY17) aided earnings.

(% chg.)

2QCY17 2QCY17E 2QCY16 1QCY17 2QCY17E 2QCY16 1QCY17 1HCY17 1HCY16 (% chg) CY2017E

Sales 28,233 27,090 25,281 25,334 4 12 11 53,567 49,341 9 103,973

Operating costs

Raw material costs (2,289) (2,244) (2,035) (2,354) (4,643) (3,574) (8,400)

Employee costs (1,697) (1,691) (1,569) (1,677) (3,374) (3,041) (6,733)

Freight costs (7,375) (7,203) (6,605) (7,412) (14,786) (13,572) (27,119)

Power & fuel costs (5,647) (5,654) (4,675) (5,388) (11,035) (9,793) (20,774)

Other costs (5,096) (4,920) (4,616) (4,853) (9,948) (9,323) (20,304)

Total operating costs (22,102) (21,712) (19,500) (21,684) (43,786) (39,304) (83,330)

EBITDA 6,131 5,378 5,782 3,651 14 6 68 9,781 10,037 (3) 20,643

EBITDA margin (%) 22 20 23 14 18 20 20

Other income 940 1,323 1,900 1,310 2,249 3,413 6,159

Interest (165) (381) (212) (377) (542) (400) (786)

Depreciation (1,439) (1,474) (1,507) (1,460) (2,899) (5,337) (8,630)

PBT 5,466 4,845 5,963 3,124 13 (8) 75 8,590 7,714 11 17,386

Current tax (expense)/income (1,544) (1,332) (1,444) (658) (2,202) (2,659) (4,781)

Net income 3,922 3,513 4,519 2,465 12 (13) 59 6,388 5,054 26 12,605

Extraordinaries (net of taxes) — — — — — — —

Reported net income 3,922 3,513 4,519 2,465 12 (13) 59 6,388 5,054 26 12,605

EPS (Rs) 2.0 1.8 2.3 1.2 3.2 2.5 26 6.3

Per ton analysis

Despatches, '000 tons 6,050 5,904 5,760 6,020 2 5 0 12,070 11,620 4 22,250

Realization (Rs/ton) 4,667 4,588 4,389 4,208 2 6 11 4,438 4,246 5 4,673

Operating cost (Rs/ton) 3,653 3,677 3,385 3,602 3,628 3,382 3,745

Raw materials 378 380 353 391 385 308 378

Employee costs 280 286 272 279 280 262 303

Freight costs 1,219 1,220 1,147 1,231 1,225 1,168 1,219

Power & fuel costs 933 958 812 895 914 843 934

Other costs 842 833 801 806 824 802 913

Profitability (Rs/ton) 1,013 911 1,004 606 11 1 67 810 864 (6) 928

Cement Ambuja Cements


Profitability and costs—ACEM’s EBITDA/ton increased 1% yoy at `1,013/ton (67%

qoq) in 2QCY17 aided by higher realizations and contained costs. Operating cost per ton

increased 1% qoq to `3,650/ton (8% yoy) due to higher pet-coke costs while freight and

raw material costs declined (on per ton basis). The company has targeted 65-70% of fuel

mix from pet-coke/domestic coal, 20-25% from captive coal block (Gare Palma) and the

balance from alternative fuels.

Consolidated earnings—Ambuja’s consolidated EBITDA increased 11% yoy to `11.4 bn

(56% qoq) aided by strong volume performance (12.8 mn tons, 8% yoy) at subsidiary

ACC as well as parent entity. The consolidated EBITDA/ton increased 54% qoq to

`889/ton (3% yoy) aided by 8% qoq increase in blended realizations to `4,809/ton (7%

yoy). The consolidated net income increased 7% yoy to `5.5 bn (90% qoq).

The company declared interim dividend of `1.60/share.

Exhibit 2: Ambuja's consolidated EBITDA increased 11% yoy aided by improved realizations, higher volumes Quarterly results for Ambuja Cements (Consolidated), December year-ends (Rs mn)


(% chg.)

2QCY17 2QCY16 1QCY17 2QCY16 1QCY17 1HCY17 1HCY16 (% chg) CY2017E

Sales 61,453 53,587 56,319 15 9 117,772 106,306 11 226,814

Operating costs

Raw material costs (6,282) (6,739) (6,977) (13,259) (12,609) (26,843)

Employee costs (3,951) (3,488) (3,702) (7,653) (6,830) (15,279)

Freight costs (16,083) (13,106) (15,680) (31,763) (27,399) (57,516)

Power & fuel costs (12,503) (9,912) (11,876) (24,379) (20,716) (45,676)

Other costs (11,274) (10,132) (10,811) (22,085) (20,304) (44,502)

Total operating costs (50,094) (43,377) (49,045) (99,138) (87,857) (189,816)

EBITDA 11,360 10,210 7,274 11 56 18,634 18,449 1 36,998

EBITDA margin (%) 18 19 13 16 17 16

Other income 2,354 1,805 1,562 3,916 4,188 8,257

Interest (381) (411) (619) (1,000) (778) (1,704)

Depreciation (3,076) (2,935) (3,126) (6,202) (8,215) (15,273)

PBT 10,257 8,670 5,090 18 101 15,347 13,644 12 28,278

Current tax (expense)/income (3,104) (2,274) (1,147) (4,251) (4,415) (8,515)

Net income 7,153 6,396 3,943 12 81 11,097 9,229 20 19,764

Extraordinaries (net of taxes) 29 25 27 56 68 —

Minority interest 1,630 1,228 1,055 2,684 2,387 4,347

Reported net income 5,553 5,193 2,915 7 90 8,468 6,910 23 15,417

EPS (Rs) 3.5 3.5 1.5 4.3 3.5 7.8

Per ton analysis

Despatches, '000 tons 12,780 11,880 12,620 8 1 25,400 24,100 5 46,964

Realization (Rs/ton) 4,809 4,511 4,463 7 8 4,637 4,411 5 4,829

Operating cost (Rs/ton) 3,920 3,651 3,886 3,903 3,646 4,042

Raw materials 492 567 553 522 523 572

Employee costs 309 294 293 301 283 325

Freight costs 1,258 1,103 1,242 1,251 1,137 1,225

Power & fuel costs 978 834 941 960 860 973

Other costs 882 853 857 869 842 948

Profitability (Rs/ton) 889 859 576 3 54 734 766 (4) 788



Exhibit 3: ACC's volumes improved 10% yoy in 2QCY17; EBITDA/ton increased to Rs711/ton Quarterly results for ACC Limited (Standalone), December year-ends (Rs mn)


Exhibit 4: Ambuja's volumes (standalone) increased 5% yoy to 6.1 mn tons in 2QCY17 Volume (mn tons) and raw material cost (Rs/ton), December year-ends


(% chg.)

2QCY17 2QCY17E 2QCY16 1QCY17 2QCY17E 2QCY16 1QCY17 1HCY17 1HCY16 (% chg) CY2017E

Sales 33,125 32,490 28,698 30,997 2 15 7 64,122 57,972 11 122,870

Operating costs

Raw material costs (4,016) (4,413) (4,738) (4,647) (8,663) (9,185) (16,171)

Employee costs (2,182) (1,948) (1,874) (1,952) (4,134) (3,765) (8,294)

Freight costs (8,753) (7,943) (6,539) (8,304) (17,058) (13,871) (30,553)

Power costs (6,847) (6,712) (5,222) (6,477) (13,323) (10,894) (24,827)

Purchased cement (3) (242) (233) (2) (5) (446) (1,590)

Other expenditure (6,374) (6,205) (6,001) (6,197) (12,571) (12,023) (26,070)

Total operating costs (28,175) (27,462) (24,607) (27,579) (55,753) (50,184) (107,506)

EBITDA 4,951 5,028 4,092 3,418 (2) 21 45 8,369 7,788 7 15,364

EBITDA margin (%) 14.9 15.5 14.3 11.0 13.1 13.4 12.5

Other income 1,663 857 686 1,101 2,764 1,808 4,601

Interest (225) (255) (183) (252) (477) (347) (956)

Depreciation (1,621) (1,672) (1,410) (1,650) (3,271) (2,844) (6,564)

PBT 4,768 3,958 3,185 2,617 20 50 82 7,384 6,405 15 12,445

Current tax (1,550) (989) (806) (502) (2,052) (1,705) (4,107)

Deferred tax — — — — 373

Net income 3,218 2,968 2,378 2,115 8 35 52 5,332 4,700 13 8,712

Extraordinaries (net of tax) — — — — — — —

Reported net income 3,218 2,968 2,378 2,115 8 35 52 5,332 4,700 8,712

EPS - adjusted (Rs) 17.1 15.8 12.7 11.3 28.4 25.0 46.2

Sales (mn tons) 6.7 6.3 6.1 6.6 7 10 2 13.3 12.5 7 24.5

Realization (Rs/ton) 4,597 4,708 4,341 4,348 (2) 6 6 4,472 4,293 4 4,679

Operating costs (Rs/ton) 4,180 4,357 4,021 4,179 4,179 4,274 4,388

Raw materials 596 700 774 704 650 670 660

Employee costs 324 309 306 296 310 344 339

Freight costs 1,299 1,260 1,068 1,258 1,278 1,198 1,247

Power & fuel costs 1,016 1,065 853 981 999 977 1,013

Purchased cement — 38 38 0 — — 65

Other expenditure 946 984 980 939 942 1,084 1,064

Profitability (Rs/ton) 711 798 662 483 (11) 7 47 597 606 (1) 627

400

600

800

1,000

1,200

3.0

3.5

4.0

4.5

5.0

5.5

6.0

6.5

1Q

CY13

2Q

CY13

3Q

CY13

4Q

CY13

1Q

CY14

2Q

CY14

3Q

CY14

4Q

CY14

1Q

CY15

2Q

CY15

3Q

CY15

4Q

CY15

1Q

CY16

2Q

CY16

3Q

CY16

4Q

CY16

1Q

CY17

2Q

CY17

Volumes- mn tons (LHS) Profitability- Rs/ton (RHS)

Cement Ambuja Cements


Exhibit 5: Ambuja Cements, Change in estimates, 2017-2019E (mn tons, Rs mn)

Source: Kotak Institutional Equities estimates

Exhibit 6: Our earnings assumptions factor in 5-8% yoy growth in volumes and improved realizations Key assumptions in the profit model for Ambuja Cement, December year-ends, 2016-19E (Rs mn)


Revised estimates Previous estimates Change (%)

2017E 2018E 2019E 2017E 2018E 2019E 2017E 2018E 2019E

Ambuja Cement (Consolidated)

Volume and realizations (mn tons, Rs/ton)

Volumes (mn tons) 47.1 50.0 52.8 47.0 49.7 52.3 0 1 1

Realizations (Rs/ton) 4,814 5,145 5,367 4,862 5,194 5,419 (1) (1) (1)

EBITDA (Rs/ton) 785 997 1,152 779 999 1,157 1 (0) (0)

Earnings estimates (Rs mn)

Revenue (Rs mn) 226,814 257,086 283,257 228,361 257,918 283,448 (1) (0) (0)

EBITDA (Rs mn) 36,998 49,834 60,825 36,594 49,611 60,521 1 0 1

PAT (Rs mn) 15,417 22,541 28,789 15,220 22,145 27,527 1 2 5

EPS (Rs/share) 7.8 11.4 14.5 7.7 11.2 13.9 1 2 5

Ambuja Cement (Standalone)

Volume and realizations (mn tons, Rs/ton)

Volumes (mn tons) 22.6 24.3 26.1 22.5 24.0 25.6 1 1 2

Realizations (Rs/ton) 4,597 4,947 5,047 4,697 5,045 5,148 (2) (2) (2)

EBITDA (Rs/ton) 913 1,133 1,202 901 1,138 1,213 1 (0) (1)

Earnings estimates (Rs mn)

Revenue (Rs mn) 103,973 120,144 131,626 105,520 120,977 131,818 (1) (1) (0)

EBITDA (Rs mn) 20,643 27,521 31,353 20,238 27,298 31,048 2 1 1

PAT (Rs mn) 12,605 17,521 20,953 12,197 16,913 19,480 3 4 8

EPS (Rs/share) 6.3 8.8 10.6 6.1 8.5 9.8 3 4 8

2016 2017E 2018E 2019E 2015 2016 2017E 2018E 2019E

Ambuja—standalone (Rs mn)

Revenue 91,604 103,973 120,144 131,626 (5) (2) 14 16 10

EBITDA 15,753 20,643 27,521 31,353 (23) 10 31 33 14

PAT 9,701 12,605 17,521 20,953 (35) 12 30 39 20

Key operating metrics

Volumes (mn tons) 21.1 22.2 23.9 25.7 (0) (2) 5 8 8

Realization (Rs/ton) 4,267 4,597 4,947 5,047 (5) (2) 8 8 2

Operating cost (Rs/ton) 3,520 3,669 3,796 3,827 (1) (4) 4 3 1

Profitability (Rs/ton) 747 928 1,151 1,219 (23) 12 24 24 6

ACC—standalone (Rs mn)

Revenue 109,364 122,870 136,970 151,659 (0) (4) 12 11 11

EBITDA 11,949 15,364 21,322 28,481 (6) 4 29 39 34

PAT 6,451 8,712 13,120 18,739 (13) (13) 35 51 43

Key operating metrics

Volumes (mn tons) 23.0 24.5 25.7 26.7 (2) (3) 7 5 4

Realization (Rs/ton) 4,281 4,600 4,880 5,180 1 (3) 7 6 6

Operating cost (Rs/ton) 3,787 3,997 4,075 4,139 2 (4) 6 2 2

Profitability (Rs/ton) 494 603 805 1,041 (6) 6 22 34 29

Consolidated

Revenue 200,940 226,814 257,086 283,257 (5) 114 13 13 10

EBITDA 28,693 36,998 49,834 60,825 (23) 99 29 35 22

PAT 11,509 15,417 22,541 28,789 (35) 33 34 46 28

Growth (%)



Exhibit 7: Our fair value of Rs245/share is based on June 2019E financials


Exhibit 8: Profit model, balance sheet, cash model of Ambuja Cement (consolidated), December year-ends, 2014-19E (Rs mn)


June-2019E

Attributable EBITDA (Rs mn) 41,888

EV/EBITDA (X) 10

Attributable EV (Rs mn) 420,971

Attributable net cash (Rs mn) 75,365

Equity value (Rs mn) 496,335

No. of shares 1,986

Target price 250

2014 2015 2016 2017E 2018E 2019E

Profit model (Rs mn)

Net sales 99,107 93,880 200,940 226,814 257,086 283,257

EBITDA 18,610 14,489 28,693 36,998 49,834 60,825

Other income 4,964 4,466 7,680 8,257 9,617 11,828

Interest (645) (925) (1,405) (1,704) (1,460) (1,230)

Depreciation (5,095) (6,298) (14,632) (15,273) (15,771) (16,272)

Pretax profits 17,834 11,733 20,336 28,278 42,219 55,150

Tax (4,627) (3,654) (5,760) (8,515) (13,132) (17,011)

Net profits before minority 13,207 8,079 14,576 19,764 29,088 38,139

Minority interest — — (3,067) (4,347) (6,547) (9,351)

Net profit 13,207 8,079 11,509 15,417 22,541 28,789

Earnings per share (Rs) 8.5 5.2 5.8 7.8 11.4 14.5

Balance sheet (Rs mn)

Total equity 101,033 102,715 195,455 203,699 219,068 240,684

Total borrowings 292 236 239 368 368 368

Minority interest — 7 43,778 45,880 50,182 57,288

Deferred tax liability 5,890 5,656 10,534 9,204 7,891 6,190

Currrent liabilities 31,793 32,714 77,325 81,527 94,166 105,115

Total liabilities and equity 139,009 141,328 327,330 340,677 371,675 409,645

Cash 24,581 28,532 16,962 21,412 44,428 70,572

Current assets 23,527 25,442 62,562 67,734 74,486 80,584

Total fixed assets 69,173 65,388 140,758 139,485 135,713 131,441

Goodwill — 478 79,097 79,097 79,097 79,097

Investments 21,727 21,488 27,951 32,951 37,951 47,951

Total assets 139,009 141,328 327,330 340,677 371,675 409,645

Free cash flow (Rs mn)

Operating cash flow, excl. working capital 16,605 15,391 25,637 32,493 41,612 50,114

Working capital change 148 175 2,513 (970) 5,887 4,851

Capital expenditure (8,202) (6,192) (8,853) (14,000) (12,000) (12,000)

Free cash flow 8,551 9,374 19,298 17,523 35,499 42,965

Ratios

Book value (Rs/share) 65 66 98 103 110 121

RoAE (%) 13.5 8.5 7.7 7.7 10.7 12.5

RoACE (%) 13.0 8.4 5.9 6.2 9.0 10.8

CRoCI (%) 14.6 11.2 14.6 12.8 15.9 18.4


Highway ban, GST impact on margins, Street’s misconception on royalty income upside

We present our quick thoughts on some of the key aspects of UNSP’s investment thesis:

Highway ban – implemented from April 1, 2017 in select states, this has already impacted

volumes and revenues in 1QFY18. More states implement this from July 1, 2017 even as de-

notification of highways within city limits should lead to some moderation in impact going

ahead. Overall, we see this as a temporary dislocation the impact of which should start

receding in a couple of quarters. Impact receding does not mean upside though, to be clear,

unless one had assumed this to be a structural headwind; we had not.

GST impact on margins – without quantifying the impact of increase in input taxation and

the ‘stranded tax’ nature of the same given alcohol’s non-inclusion in GST, the company

suggested that it might take 2-3 years to completely recoup GST’s negative impact on

margins. More importantly, the company also indicated that this margin recovery

would need price increases in addition to internal efficiency drive. The nub of this

management commentary is not in the mathematics of it. It is in what it says about the

structural nature of the business – assuming price increases as a source of margin expansion

is risky. Price increase demands from the industry are generally cost-push (tax increase/ input

cost inflation) based and to that extent, assuming that the price increases would deliver net

retention beyond covering for cost push is risky.

Royalty income as a source of massive future EBITDA upside – a big misconception.

Of late, we have seen a section of the Street call out royalty income as a source of massive

incremental EBITDA for UNSP. We note that UNSP franchised out annualized popular

segment volumes of 10 mn cases recently; management indicated total royalty income to be

in the range of Rs1.4-1.6 bn in FY2018E. Most importantly, our discussions with the

company suggest that royalty arrangements are largely fixed fee ones with marginal annual

escalation (1-6%); this structure is locked for five years. UNSP would not participate in any

sales/profitability upside from the franchised portfolio, in other words, even if the franchisee

is able to deliver a meaningful turnaround on the franchised portfolio’s economics.

United Spirits (UNSP) Consumer Products

Of temporary dislocations, long-term risk/reward and misconceptions. Volume

impact of highway ban that impacted 1QFY18 earnings print can be seen as a

temporary dislocation. Mitigation of GST’s impact on margins will need price increases

and highlights the futility of assuming price increases as a source of margin expansion.

Execution-led margin expansion and sustained mix improvement are the only two long-

term positives we see; these can be played at the right entry price; CMP is not. Lastly,

we would advise guarding against the misconceived notions (of a section of the Street)

on royalty income being a source of massive upside; it is not. REDUCE.

REDUCE

JULY 25, 2017

RESULT


Price (`): 2,641


BSE-30: 32,246

Rohit Chordia

Anand Shah

United Spirits







MFs 5.3 EBITDA (Rs bn) 9.7 10.4 14.0


Absolute 17.4 36.7 9.9 ROE (%) 21.8 20.7 22.4

Rel. to BSE-30 13.4 25.8 (5.3) Div. Yield (%) 0.0 0.0 0.0


2,774-1,773

383.7

United Spirits Consumer Products


Key changes to our earnings model

We have cut our EPS estimates for FY2018-20 by 8-15% (higher in FY2018) as we bake in

lower-than-expected franchise income and GST impact (this could change as clarity emerges,

for now we bake in 100 bps impact on GM level). Our target price stays at Rs2,400 however

as valuation rollover by a quarter to June 2019 mitigates the impact of earnings cuts. REDUCE.

Exhibit 1: Key changes to standalone earnings model, UNSP, March fiscal year-ends, FY2018-20E (Rs mn)


Discussion on quarterly performance and highlights from concall

1QFY18 results print – weak, as expected. Gross revenues down 1% yoy to Rs58.2 bn

(4% above our estimates), net operating revenues down 13% yoy to Rs17.8 bn (in line

with our estimates), EBITDA down 26% yoy to Rs1.57 bn (15% below our estimates) and

recurring PAT down 23% yoy to Rs637 mn (9% above our estimates). Net operating

revenue was dragged by destocking impact due to highway liquor ban, one-off operating

model changes (franchising model) and 420 bps yoy jump in excise (as % of gross

revenues); excluding one-off operating model changes net sales declined 7% yoy (lower

at 3-4% adjusted further for destocking impact). Lower-than-expected depreciation

(down 23% qoq), sharp fall in interest costs (down 32% yoy), robust growth in other

income (up 28% yoy) and lower-than-expected ETR aided modest beat in recurring PAT

despite a miss at EBITDA level.

EBITDA margin contracted 160 bps yoy to 8.8%, despite robust 265 bps yoy expansion to

46%, dragged by weak operating leverage – we note staff costs included one-off impact

of Rs130 mn – adjusted for same underlying EBITDA declined 20% yoy. Aggressive cost

rationalization kept absolute cost under control – staff costs was down 8% yoy, A&SP

was down 3% yoy and other expenditure increased 3% yoy. GM improvement was

driven by price hikes, productivity improvement and operating model changes – we note

underlying GM improvement was 116 bps yoy (adjusted for optical gain from operating

model changes).

Reported volumes down 19% yoy (underlying volumes down 10% yoy). Overall

volumes declined 19% yoy (marginally better versus our estimate of 22% yoy decline);

we note the reported quarterly volume performance was dragged by – (1) lower

consumption and destocking impact due to implementation of highway liquor ban

effective April 1, 2017 and (2) one-off impact of operating model changes (franchising

model in popular segment) – adjusted for operating model changes volumes declined

10% yoy. P&A segment volume were down 10% yoy and popular segment volume

declined 26% yoy (partly dragged by company franchising out its popular segment

brands in several markets).

2018E 2019E 2020E 2018E 2019E 2020E 2018E 2019E 2020E

Revenues (Rs mn) 83,215 94,454 104,521 86,096 95,609 105,492 (3.3) (1.2) (0.9)

EBITDA (Rs mn) 10,357 14,049 17,255 12,134 15,542 18,752 (14.6) (9.6) (8.0)

EBITDA (%) 12.4 14.9 16.5 14.1 16.3 17.8

Recurring PAT (Rs mn) 5,053 8,056 10,502 5,972 8,757 11,411 (15.4) (8.0) (8.0)

Adj. EPS (Rs/share) 34.8 55.4 72.3 41.1 60.3 78.5 (15.4) (8.0) (8.0)

Revised Earlier Change (%)

Consumer Products United Spirits


Segment-wise takeaways. Prestige segment posted 8% yoy decline in revenues

(dragged by ~10% volume decline and 2% price/mix-led growth) and now represents

61% of the overall business in terms of sales and 47% in terms of volumes. Within P&A

brands – (1) McDowell’s No1 whisky variant (excluding Platinum) declined net sales by

1% yoy, (2) Royal Challenge net sales declined 11%, (3) Signature continued to show

positive momentum and grew net sales by 14%, (4) scotch portfolio in the premium and

luxury segment net sales declined 24% yoy. The popular segment posted 20% yoy

decline in revenues (dragged by 26% yoy volume decline and 6% price/mix-led growth)

and now represents 36% of total net sales and 53% of total volumes. Popular segment

was largely dragged by operating model changes – underlying net sales declined 8% yoy

(dragged by 12% volume decline). Priority states posted 7% yoy decline in sales.

Other takeaways. (1) The management highlighted that it expects the impact of

highway ban to continue in 2QFY18 and 3QFY18, however to a lesser extent. With recent

SC ruling allowing states to denotify particular stretches of highways within city limits, it

is seeing early signs of recovery and (2) on GST, the management highlighted that it will

result into additional taxes on input materials and services which will impact margins. The

company is still working with state governments to seek clarity on certain state

specific taxes and is also approaching them for price hikes. Overall, it expects to mitigate

GST impact fully over next 2-3 years.

Exhibit 2: Interim standalone results of United Spirits (as per Ind-AS), March fiscal year-ends (Rs mn)


1QFY18 1QFY18E 1QFY17 4QFY17 KIE Est yoy qoq FY2017 FY2016 % chng FY2018

Gross revenues 58,168 56,176 58,531 64,852 4 (1) (10) 253,988 234,442 8 271,093

Less: excise duty (40,350) (38,385) (38,126) (44,602) 5 6 (10) (168,512) (151,960) 11 (187,878)

Net operating income 17,818 17,790 20,405 20,250 0 (13) (12) 85,476 82,482 4 83,215

Cost of materials (9,619) (9,729) (11,557) (11,306) (1) (17) (15) (48,844) (48,406) 1 (45,177)

Gross profit 8,199 8,061 8,848 8,944 2 (7) (8) 36,632 34,076 8 38,038

Gross margin (%) 46.0 45.3 43.4 44.2 70 bps 265 bps 184 bps 42.9 41.3 154 bps 45.7

Staff cost (1,658) (1,577) (1,802) (1,210) 5 (8) 37 (6,674) (6,427) 4 (6,807)

Advertising and promotion (1,627) (1,506) (1,673) (1,645) 8 (3) (1) (6,667) (6,138) 9 (7,116)

Other expenditure (3,340) (3,116) (3,239) (3,480) 7 3 (4) (13,581) (12,647) 7 (13,758)

Total other expenditure (6,625) (6,199) (6,714) (6,335) 7 (1) 5 (26,922) (25,212) 7 (27,682)

EBITDA 1,574 1,862 2,134 2,609 (15) (26) (40) 9,710 8,864 10 10,357

EBITDA margin (%) 8.8 10.5 10.5 12.9 -164 bps -163 bps -406 bps 11.4 10.7 61 bps 12.4

Depreciation (321) (410) (261) (418) (22) 23 (23) (1,323) (1,017) 30 (1,455)

Interest (703) (825) (1,030) (853) (15) (32) (18) (3,690) (4,469) (17) (2,877)

Other income 309 235 241 185 32 28 67 1,111 1,057 5 1,298

Pretax profits 859 862 1,084 1,523 (0) (21) (44) 5,808 4,435 31 7,323

Tax (222) (276) (253) (646) (20) (12) (66) (1,836) (1,936) (5) (2,270)

Recurring PAT 637 586 831 877 9 (23) (27) 3,972 2,499 59 5,053

Extraordinary (8) — (393) (1,919) (2,273) (1,280) 5,000

Reported PAT 629 586 438 (1,042) 7 43 (160) 1,699 1,219 39 10,053

Recurring EPS 4.4 4.0 5.7 6.0 9 (23) (27) 27.3 17.2 59 34.8

Excise as % of gross revenues 69.4 68.5 65.1 68.8 86 bps 423 bps 59 bps 66.3 64.8 69.3

Income tax rate (%) 25.8 32.0 23.3 42.4 -616 bps 251 bps -1656 bps 31.6 43.7 NM 31.0

Cost as a % of sales

Cost of materials 54.0 54.7 56.6 55.8 -71 bps -266 bps -185 bps 57.1 58.7 -155 bps 54.3

Staff cost 9.3 8.9 8.8 6.0 44 bps 47 bps 332 bps 7.8 7.8 1 bps 8.2

Advertising and promotion 9.1 8.5 8.2 8.1 66 bps 93 bps 100 bps 7.8 7.4 35 bps 8.6

Other expenditure 18.7 17.5 15.9 17.2 122 bps 287 bps 155 bps 15.9 15.3 55 bps 16.5

(% change)

United Spirits Consumer Products


Exhibit 3: United Spirits - quarterly volume trends

Source: Company

Exhibit 4: Standalone profit model, balance sheet, cash model of United Spirits (based on Ind-AS), March fiscal year-ends, 2016-2020E


1QFY16 2QFY16 3QFY16 4QFY16 1QFY17 2QFY17 3QFY17 4QFY17 1QFY18 FY2016 FY2017

Volumes (mn cases)

Prestige and above segments 8.4 8.0 9.7 8.1 9.3 8.8 10.2 8.5 8.4 34.2 36.8

Regular and below segments 13.8 13.8 16.1 15.2 12.9 13.2 14.3 12.9 9.6 58.9 53.3

Total 22.2 21.8 25.8 23.3 22.2 22.0 24.5 21.4 18.0 93.1 90.1

Yoy growth (%)

Prestige and above segments 15.1 1.3 15.5 9.5 10.7 10.0 5.2 4.9 (9.7) 10.3 7.6

Regular and below segments (1.4) (11.0) (4.2) (10.1) (6.5) (4.3) (11.2) (15.1) (25.6) (6.8) (9.5)

Total 4.2 (6.8) 2.4 (4.1) — 0.9 (5.0) (8.2) (18.9) (1.2) (3.2)

% of total volumes

Prestige and above segments 37.8 36.7 37.6 34.8 41.9 40.0 41.6 39.7 46.7 36.7 40.8

Regular and below segments 62.2 63.3 62.4 65.2 58.1 60.0 58.4 60.3 53.3 63.3 59.2

Total 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0

Notes:

(a) Volume analysis above excludes royalty and franchise volumes.

2016 2017E 2018E 2019E 2020E

Profit model

Net revenues 82,482 85,476 83,215 94,454 104,521

EBITDA 8,864 9,710 10,357 14,049 17,255

Other income 1,057 1,111 1,298 1,648 2,164

Interest expense (4,469) (3,690) (2,877) (2,229) (1,732)

Depreciation (1,017) (1,323) (1,455) (1,621) (1,775)

Pretax profits 4,435 5,808 7,323 11,847 15,912

Extraordinaries (1,280) (2,273) 5,000 5,000 5,000

Tax (1,936) (1,836) (2,270) (3,791) (5,410)

Reported PAT 1,219 1,699 10,053 13,056 15,502

Adj. PAT 2,499 3,972 5,053 8,056 10,502

Adj. earnings per share (Rs) 17.2 27.3 34.8 55.4 72.3

Balance sheet

Total shareholder equity 17,140 19,378 29,431 42,487 56,239

Total borrowings 42,040 40,710 31,210 25,210 19,210

Deferred tax liability (1,539) (1,241) (1,241) (1,241) (1,241)

Total liabilities and equity 57,641 58,847 59,400 66,456 74,208

Net fixed assets 13,211 12,723 14,268 15,397 16,122

Total investments 9,924 9,354 9,354 9,354 9,354

Cash 127 523 4,279 6,730 10,890

Net current assets 34,379 36,247 31,499 34,975 37,842

Total assets 57,641 58,847 59,400 66,456 74,208

Free cash flow

Operating cash flow, excl. working capital 8,026 6,433 8,087 10,258 11,845

Working capital changes (6,073) (1,868) 4,748 (3,476) (2,867)

Capital expenditure (2,456) (835) (3,000) (2,750) (2,500)

Free cash flow (502) 3,730 9,835 4,032 6,478

Ratios

Gross revenue growth (%) 9.8 7.0 15.0 11.9

Net operating revenue growth (%) 3.6 (2.6) 13.5 10.7

EBITDA growth (%) 47.8 9.5 6.7 35.7 22.8

Recurring PAT growth (%) 774.0 59.0 27.2 59.4 30.4

Gross margin (%) 41.3 42.9 45.7 46.7 47.6

EBITDA margin(%) 10.7 11.4 12.4 14.9 16.5

RoAE (%) 13.7 21.8 20.7 22.4 21.3

RoACE (%) 12.1 14.4 15.1 19.7 22.0


Sharp jump in other expenses and decline in volumes impact profitability

Ashok Leyland reported 1QFY18 EBITDA of `3.1 bn (-35% yoy), which was 15% below our

estimates due to higher-than-expected other expenses. Revenues were flat yoy despite 9% yoy

decline in volume growth offset by 9% yoy increase in net realizations. The company reported

EBITDA margin of 7.2% (KIE: 8.7%). Gross margin declined by 60 bps yoy (KIE down 120 bps

yoy) due to higher commodity prices. Other expenses increased by 12% yoy despite flat yoy

growth in revenues led by higher marketing costs and costs related to global conference. PBT

came in at `1.76 bn (-52% yoy), which was 19% lower than our estimates. The company also

reported exceptional expenses of `152 mn related to mark-to-market impact on interest and

currency swaps and impairment loss on the loans of subsidiaries.

Tough FY2018 for MHCV industry but AL likely to regain market share

We expect 1HFY18 to be a challenging year for the MHCV industry with possible recovery in

2HFY18 (which will also depend on effect of GST implementation in the economy). But we are

quite impressed with AL’s strategy to focus on growing each segment of its business – domestic

MHCV, LCV, defense, exports and spare parts business. The company plans to increase exports

to 33% of its revenues from only 10% currently. The company has also shown good progress

in focusing on the spare part business. Spare part revenues were up 34% yoy in 1QFY18

despite decline in volumes, which shows management commitment to increase share of its

business in the aftermarket segment. The company has also increased warranty period by 2.7X

to give a strong communication to its customers about the quality of its products.

We maintain ADD rating on the stock with a revised target price of `110 (from ` 100 earlier) as

we raise our FY2019/20E EBITDA estimates by 1-5% (we have cut our FY2018E EPS estimates

by 8% on lower EBITDA margin assumptions due to lower volume estimates) and increase our

multiple to 17X on June 2019E EPS from 16X on March 2019E EPS earlier.

Ashok Leyland (AL) Automobiles

Weak quarter; management ups the ante. Ashok Leyland reported a weak quarter

with PBT declining by 52% yoy in 1QFY18 led by decline in volumes due to weak

industry demand and pressure on margins. The company has increased warranty period

on its engines with i-EGR technology to 48 months from 18 months, which is a strong

signal to the customers about the confidence management has on i-EGR technology.

Maintain ADD rating with revised target price of `110 (from `100 earlier).

ADD

JULY 25, 2017

RESULT


Price (`): 104


BSE-30: 32,246

Hitesh Goel

Nishit Jalan

Ashok Leyland



Market Cap. (Rs bn) EPS growth (%) 46.7 (14.2) 32.4




MFs 3.7 EBITDA (Rs bn) 22.0 24.1 30.5


Absolute 12.6 19.2 7.5 ROE (%) 25.3 19.2 22.2

Rel. to BSE-30 8.7 9.6 (7.3) Div. Yield (%) 1.4 1.3 1.7


110-74

304.4

Ashok Leyland Automobiles


Key takeaways from the conference call

Company expects domestic MHCV industry to grow by 10-15% yoy in FY2018 while we

expect a flat yoy growth. 1HFY18 will be very challenging as economy and truck

operators figure out the GST puzzle, which will require changes in the way they operate.

Dealer inventory level is comfortable at ~10 days. Factory level inventory is ~9,000 units.

Company has gained 360 bps yoy market share in 1QFY18 in domestic MHCV industry.

Company indicated that they have gained market share across segments and across

regions. I-EGR technology has been well-received by customers and company has

increased the warranty period from 18 months to 48 months to show its faith in i-EGR

technology. Company has also done 1,500 sessions across India to educate customers

about i-EGR technology.

Company will increase prices by 1% in August to offset increase in input costs. Discounts

reduced sequentially in 1QFY18.

Export volumes grew by 55% yoy in 1QFY18 as company penetrated into new markets in

Ukraine, Ivory Coast. Company expects export volumes to grow by 25% yoy in FY2018.

Spare part revenues grew by 34% yoy in 1QFY18. Power engine genset revenues were

flat yoy in 1QFY18.

Company has aggressive new launch pipeline in the LCV segment and expects to gain

market share with these launches. Gross margin for the LCV business is around 25-27%

but expenses are higher currently due to lower volumes and presence of multiple entities.

Over the medium term, the company expects profitability of LCV business to be in line or

better than MHCV business.

Company also indicated that Hinduja Leyland foundry, which was merged in Ashok

Leyland, had a slight negative EBITDA in 1QFY18. Hinduja Leyland finance is also doing

well with loan book growth of 40% yoy in FY2018. Hinduja Leyland finance book size is

`140 bn at end of March 2017; around 50% of this is financing for Ashok Leyland’s

vehicles while rest are disbursements to other auto segments and housing sector.

Company has won 19 defense contracts in the defense vehicle program. The defense

business could scale up multifold from current `5 bn revenue over the next five years but

the scale-up is difficult to predict given uncertainties surrounding defense orders.

Exports is a key focus area for the company and company is launching several products

like Falcon, Oyster bus, Boss, Partner, LCVs and setting up assembly plants in Kenya,

Bangladesh, Ivory Coast, which will help them expand their addressable base.

Management indicated that the size of export markets they are present in is 500,000-

600,000 units annually while they sell only 12,000 units currently. Company expects

exports to become 33% of its overall revenues by FY2020 while we build in exports to

form 12% of company’s revenues by FY2020.

The company maintained its capex plus investment guidance of `5 bn in FY2018.

Automobiles Ashok Leyland


Exhibit 1: 1QFY17 results were weaker than our estimates Interim results, March fiscal year-ends (` mn)


Exhibit 2: Ashok Leyland gained 370 bps yoy market share in the MHCV segment in 1QFY18 Domestic MHCV segmental market share, March fiscal year-ends, 2012-17 (%)

Source: SIAM data, Kotak Institutional Equities

(% chg.)

1QFY18 1QFY18E 1QFY17 4QFY17 1QFY18E 1QFY17 4QFY17 FY2018E

LCV total 8,618 8,618 7,138 8,978 20.7 (4.0) 35,075

Domestic bus 3,134 3,134 4,286 4,952 (26.9) (36.7) 15,953

MHCV (<16 ton) 3,819 3,819 5,866 7,904 (34.9) (51.7) 28,050

MHCV (>16 ton) 9,864 9,864 11,909 22,914 (17.2) (57.0) 59,641

MHCV exports 3,056 3,056 1,966 2,873 55.4 6.4 13,724

Volumes (units) 28,491 28,491 31,165 47,621 (8.6) (40.2) 152,442

Net realization (Rs) 1,487,410 1,445,287 1,366,546 1,389,699 2.9 8.8 7.0 1,519,227

Net sales 42,378 41,178 42,588 66,179 2.9 (0.5) (36.0) 231,594

Increase/decrease in stock — — 1,548 508 10,132

Raw materials (29,425) (28,824) (30,853) (48,111) 2.1 (4.6) (38.8) (171,311)

Staff costs (4,376) (4,100) (3,581) (4,118) 6.7 22.2 6.3 (18,637)

Other expenses (5,516) (4,653) (4,939) (7,158) 18.6 11.7 (22.9) (27,722)

Total expenses (39,317) (37,577) (37,826) (58,880) 4.6 3.9 (33.2) (207,538)

EBITDA 3,061 3,601 4,763 7,299 (15.0) (35.7) (58.1) 24,056

Other income 384 400 443 404 (4.0) (13.3) (4.8) 562

Interest expense (366) (430) (338) (423) (14.8) 8.3 (13.4) (1,255)

Depreciation expense (1,321) (1,400) (1,210) (1,395) (5.6) 9.2 (5.3) (5,497)

Profit before tax before exceptional 1,757 2,171 3,658 5,885 (19.0) (52.0) (70.1) 17,866

Exceptional income/(expense) (152) — 497 (3,280) —

Pretax profits 1,605 2,171 4,154 2,605 17,866

Tax expense (492) (586) (1,246) 2,157 (5,360)

Profit after tax 1,113 1,584 2,908 4,762 12,506

Adjusted PAT 1,219 1,584 2,560 3,808 (23.1) (52.4) (68.0) 12,506

EPS (Rs) 0.4 0.6 0.9 1.3 4.4

Raw material cost as % of net sales 69.4 70.0 68.8 71.9 0.6 69.6

Staff cost as % of net sales 10.3 10.0 8.4 6.2 8.0

Other expenses as % of net sales 13.0 11.3 11.6 10.8 12.0

EBITDA margin (%) 7.2 8.7 11.2 11.0 10.4

No. of shares 2,848 2,848 2,848 2,848 2,848

Tax rate (%) 30.7 27.0 30.0 30.0

1QFY16 2QFY16 3QFY16 4QFY16 1QFY17 2QFY17 3QFY17 4QFY17 1QFY18 2012 2013 2014 2015 2016 2017

Passenger carriers

7.5-12 MT 15.2 26.4 23.2 22.2 19.2 25.3 29.0 23.6 29.9 16.0 17.3 20.9 17.0 20.8 23.2

12-16.2 MT 59.4 65.7 62.3 66.0 58.9 46.8 43.8 46.0 49.9 53.5 54.7 53.4 54.8 63.9 48.1

Goods carriers

7.5-12 MT 13.9 18.3 14.3 18.1 18.4 19.9 20.1 21.7 25.1 6.2 11.3 12.3 13.9 16.3 20.1

12-16.2 MT 31.1 38.2 32.9 37.7 36.3 37.9 37.2 39.5 32.4 28.1 32.6 31.4 31.2 35.3 37.8

16.2-25 MT 23.5 29.2 28.3 31.8 30.3 32.0 32.1 35.4 32.4 21.7 24.5 21.5 24.5 28.7 32.7

>25 MT 34.5 33.9 28.5 30.1 27.1 29.8 23.8 28.7 22.9 23.9 26.7 26.1 32.8 31.6 27.5

Tractor trailers

26.4-35.2 MT 44.8 30.6 28.4 37.1 27.6 28.4 52.0 46.9 44.4 26.2 32.6 37.4 36.3 34.3 42.5

>35.2 MT 43.5 47.4 37.3 39.8 39.1 45.0 49.4 54.3 55.1 22.0 22.3 27.1 35.3 41.7 47.6

Overall market share 30.0 35.6 30.1 34.0 31.0 33.2 33.7 36.3 34.7 23.3 26.3 25.8 28.5 32.7 33.8

AnnualQuarterly



Exhibit 3: Export volume mix increased significantly in 1QFY18 MHCV volume mix of Ashok Leyland across segments, March fiscal year-ends, 2012-17 (%)


Exhibit 4: We estimate AL will increase market share by 290 bps in domestic MHCV industry in next three years Domestic MHCV industry volume trend, Mach fiscal year-ends, 2010-20E (units)


1QFY16 2QFY16 3QFY16 4QFY16 1QFY17 2QFY17 3QFY17 4QFY17 1QFY18 2012 2013 2014 2015 2016 2017

Passenger carriers

7.5-12 MT 4.9 3.7 2.9 3.5 5.5 4.0 3.5 3.8 8.8 2.5 3.9 6.1 4.1 3.7 4.2

12-16.2 MT 13.2 15.3 12.2 15.0 12.3 14.7 11.4 9.0 7.0 19.6 19.7 18.7 12.9 14.1 11.6

Goods carriers

7.5-12 MT 5.7 6.5 7.1 6.8 8.0 8.5 8.3 7.0 9.6 4.5 8.2 8.4 6.7 6.6 7.9

12-16.2 MT 13.5 14.8 13.8 14.6 16.4 16.2 15.1 13.5 9.6 18.3 19.9 16.8 13.2 14.3 15.2

16.2-25 MT 13.0 14.3 15.9 16.7 17.9 17.8 18.5 18.1 12.0 18.2 17.0 15.4 15.7 15.1 18.2

>25 MT 19.1 18.9 17.7 16.7 13.4 11.3 9.6 14.3 9.5 16.6 14.1 13.5 20.1 18.0 12.5

Tractor trailers

26.4-35.2 MT 2.8 2.8 2.2 2.8 2.3 2.7 7.0 8.7 7.1 3.1 3.0 2.9 2.5 2.7 5.7

>35.2 MT 14.5 15.7 16.8 15.2 16.0 12.2 14.9 18.1 21.1 4.1 3.5 4.1 10.4 15.5 15.7

Total domestic 86.6 92.0 88.6 91.4 91.8 87.4 88.4 92.6 84.6 87.0 89.3 85.9 85.5 90.0 91.1

Exports 13.4 8.0 11.4 8.6 8.2 12.6 11.6 7.4 15.4 13.0 10.7 14.1 14.5 10.0 8.9

Total 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0

AnnualQuarterly

2010 2011 2012 2013 2014 2015 2016 2017 2018E 2019E 2020E

Volumes

Tata Motors 154,123 192,127 207,014 143,381 110,187 127,011 156,961 148,901 144,434 151,656 166,821

Ashok Leyland 57,096 83,104 81,091 70,552 51,827 66,442 98,809 102,313 103,643 115,840 133,217

Eicher 21,230 30,185 37,406 35,051 24,391 24,971 31,363 34,584 36,313 39,218 43,924

Swaraj Mazda 5,778 7,810 7,961 7,719 5,496 5,914 6,167 7,258 7,403 7,773 8,162

M&M — 843 3,820 3,806 3,243 4,397 6,983 8,188 8,352 8,769 9,208

Others 5,858 8,660 11,414 7,750 5,483 4,005 2,090 1,219 1,219 1,280 1,408

Total 244,085 322,729 348,706 268,259 200,627 232,740 302,373 302,463 301,364 324,537 362,740

Yoy growth (%)

Tata Motors 35.8 24.7 7.7 (30.7) (23.2) 15.3 23.6 (5.1) (3.0) 5.0 10.0

Ashok Leyland 21.2 45.6 (2.4) (13.0) (26.5) 28.2 48.7 3.5 1.3 11.8 15.0

Eicher 61.5 42.2 23.9 (6.3) (30.4) 2.4 25.6 10.3 5.0 8.0 12.0

Swaraj Mazda 46.8 35.2 1.9 (3.0) (28.8) 7.6 4.3 17.7 2.0 5.0 5.0

M&M 353.1 (0.4) (14.8) 35.6 58.8 17.3 2.0 5.0 5.0

Others 34.6 47.8 31.8 (32.1) (29.3) (27.0) (47.8) (41.7) — 5.0 10.0

Total 34.1 32.2 8.0 (23.1) (25.2) 16.0 29.9 0.0 (0.4) 7.7 11.8

Market share

Tata Motors 63.1 59.5 59.4 53.4 54.9 54.6 51.9 49.2 47.9 46.7 46.0

Ashok Leyland 23.4 25.8 23.3 26.3 25.8 28.5 32.7 33.8 34.4 35.7 36.7

Eicher 8.7 9.4 10.7 13.1 12.2 10.7 10.4 11.4 12.0 12.1 12.1

Swaraj Mazda 2.4 2.4 2.3 2.9 2.7 2.5 2.0 2.4 2.5 2.4 2.3

M&M — 0.3 1.1 1.4 1.6 1.9 2.3 2.7 2.8 2.7 2.5

Others 2.4 2.7 3.3 2.9 2.7 1.7 0.7 0.4 0.4 0.4 0.4

Total 100 100 100 100 100 100 100 100 100 100 100

Automobiles Ashok Leyland


Exhibit 5: We cut our FY2018E EPS estimates by 8% due to lower volume assumptions Earrings revision table, March fiscal year-ends, 2018-20E (` mn, %)


Exhibit 6: We estimate 11% yoy volume CAGR over FY2017-20E Ashok Leyland volume assumptions, March fiscal year-ends, 2011-20E (units)


2018E 2019E 2020E 2018E 2019E 2020E 2018E 2019E 2020E

LCV volumes 35,075 38,685 38,685 34,046 37,451 41,196 3.0 3.3 (6.1)

MHCV volumes 117,367 132,309 157,353 124,400 138,475 160,748 (5.7) (4.5) (2.1)

Volumes (units) 152,442 170,994 196,038 158,446 175,926 201,944 (3.8) (2.8) (2.9)

Net sales (Rs mn) 231,594 265,518 310,371 227,101 259,191 303,601 2.0 2.4 2.2

EBITDA (Rs mn) 24,056 30,544 39,386 24,889 30,292 37,538 (3.3) 0.8 4.9

EBITDA margin (%) 10.4 11.5 12.7 11.0 11.7 12.4

Net profit (Rs mn) 12,506 16,554 22,853 13,660 17,449 22,648 (8.4) (5.1) 0.9

EPS (Rs) 4.4 5.8 8.0 4.8 6.1 8.0 (8.4) (5.1) 0.9

% change yoyOld estimatesNew estimates

2012 2013 2014 2015 2016 2017 2018E 2019E 2020E

Buses 20,638 18,643 14,951 13,151 19,586 17,725 15,953 17,548 18,952

Trucks 61,252 51,909 36,876 53,291 79,223 84,588 87,691 98,293 114,648

LCV 398 360 — — — — — — —

Dost 7,383 34,794 27,283 25,117 28,512 30,951 34,046 37,451 41,196

Domestic volumes 89,671 105,706 79,110 91,559 127,321 133,264 137,689 153,291 174,795

Buses 5,207 4,857 4,377 7,571 6,135 4,877 6,096 7,316 8,779

Trucks 6,944 3,594 4,100 3,670 4,811 6,102 7,628 9,153 10,984

LCV 774 425 75 1,330 2,091 823 1,029 1,235 1,481

Export volumes 12,925 8,876 8,552 12,571 13,037 11,802 14,753 17,703 21,244

Buses 25,845 23,500 19,328 20,722 25,721 22,602 22,049 24,863 27,730

Trucks 68,196 55,503 40,976 56,961 84,034 90,690 95,318 107,446 125,631

LCV 1,172 785 75 1,330 2,091 823 1,029 1,235 1,481

Dost 7,383 34,794 27,283 25,117 28,512 30,951 34,046 37,451 41,196

Total volumes 102,596 114,582 87,662 104,130 140,358 145,066 152,442 170,994 196,038

Growth (% yoy)

Buses 1.0 (9.7) (19.8) (12.0) 48.9 (9.5) (10.0) 10.0 8.0

Trucks (2.5) (15.3) (29.0) 44.5 48.7 6.8 3.7 12.1 16.6

LCV (43.2) (9.5) — — — — — — —

Dost — — (21.6) (7.9) 13.5 8.6 10.0 10.0 10.0

Domestic volumes 6.8 17.9 (25.2) 15.7 39.1 4.7 3.3 11.3 14.0

Buses 8.3 (6.7) (9.9) 73.0 (19.0) (20.5) 25.0 20.0 20.0

Trucks 31.4 (48.2) 14.1 (10.5) 31.1 26.8 25.0 20.0 20.0

LCV 372.0 (45.1) (82.4) 1,673.3 57.2 (60.6) 25.0 20.0 20.0

Export volumes 26.0 (31.3) (3.7) 47.0 3.7 (9.5) 25.0 20.0 20.0

Buses 2.4 (9.1) (17.8) 7.2 24.1 (12.1) (2.4) 12.8 11.5

Trucks 0.1 (18.6) (26.2) 39.0 47.5 7.9 5.1 12.7 16.9

LCV 35.5 (33.0) (90.4) 1,673.3 57.2 (60.6) 25.0 20.0 20.0

Dost — — (21.6) (7.9) 13.5 8.6 10.0 10.0 10.0

Total volumes 8.9 11.7 (23.5) 18.8 34.8 3.4 5.1 12.2 14.6



Exhibit 7: We estimate Ashok Leyland to deliver 16% EPS CAGR over FY2017-20E Profit and loss, balance sheet and cash flow statement, March fiscal year-ends, 2011-20E (` mn)


2012 2013 2014 2015 2016 2017 2018E 2019E 2020E

Profit model

Volumes 102,596 114,582 87,662 104,130 140,358 145,066 152,442 170,994 196,038

Net sales 128,318 124,812 99,434 135,622 189,373 200,186 231,594 265,518 310,371

EBITDA 12,561 8,765 1,666 10,266 22,546 22,026 24,056 30,544 39,386

Other income 266 291 492 982 1,176 1,363 562 679 1,267

Interest (2,415) (3,436) (4,356) (3,673) (2,476) (1,554) (1,255) (1,425) (1,000)

Depreciation (3,528) (3,808) (3,770) (4,163) (4,879) (5,179) (5,497) (6,150) (7,005)

Prior period items/ extraordinary items 16 2,896 5,057 1,009 (8,102) (3,354) — — —

Profit before tax 6,900 4,707 (912) 4,422 8,266 13,301 17,866 23,649 32,648

Current tax (775) — — (39) (4,220) (3,137) (5,360) (7,095) (9,794)

Deferred tax (465) (370) 1,206 (1,035) (149) 2,067 — — —

Net profit 5,660 4,337 294 3,348 4,045 10,164 12,506 16,554 22,853

Adjusted profit 5,644 1,442 (4,763) 2,584 9,938 14,579 12,506 16,554 22,853

Earnings per share (Rs) 2.1 0.5 (1.8) 0.9 3.5 5.1 4.4 5.8 8.0

Balance sheet

Equity 42,123 44,551 44,479 51,187 54,071 61,261 69,249 79,824 94,423

Deferred tax liability 4,904 5,274 4,068 5,103 3,291 1,269 1,269 1,269 1,269

Total Borrowings 30,979 43,554 46,903 33,497 24,150 21,448 21,922 18,791 9,791

Current liabilities 41,152 37,588 32,630 43,328 46,225 54,016 61,188 66,819 76,483

Total liabilities 119,157 130,967 128,080 133,115 127,737 137,994 153,629 166,703 181,966

Net fixed assets 54,617 59,708 58,414 53,757 48,678 51,767 51,269 54,620 57,115

Investments 15,345 23,376 27,897 26,488 19,804 28,789 28,789 28,789 28,789

Cash 326 139 117 7,513 15,627 8,686 80 2,935 4,738

Other current assets 47,962 46,861 39,612 42,080 29,280 34,080 58,819 65,688 76,652

Miscellaneous expenditure 908 882 2,040 3,277 14,347 14,672 14,672 14,672 14,672

Total assets 119,157 130,967 128,080 133,115 127,737 137,994 153,629 166,703 181,966

Free cash flow

Operating cash flow (including working

capital changes)11,473 7,283 5,564 13,759 16,830 21,548 1,131 22,211 28,292

Capital expenditure (6,906) (6,438) (2,071) (2,059) (1,659) (3,660) (5,000) (9,500) (9,500)

Investments (3,031) (5,136) 391 2,158 3,700 (10,702) — — —

Free cash flow 1,535 (4,291) 3,884 13,858 18,870 7,186 (3,869) 12,711 18,792

Ratios

EBITDA margin (%) 9.8 7.0 1.7 7.6 11.9 11.0 10.4 11.5 12.7

PAT margin (%) 4.4 3.5 0.3 2.5 2.1 6.1 5.4 6.2 7.4

Debt/equity (X) 0.7 0.9 1.0 0.6 0.6 0.4 0.4 0.3 0.1

Net debt/equity (X) 0.3 0.9 1.0 0.5 0.2 0.3 0.4 0.2 0.1

BVPS, excl. revaluation reserve 12.4 13.5 13.1 15.0 15.1 16.8 19.6 23.3 28.5

RoAE (%) 17.7 12.6 0.8 8.6 9.1 26.9 24.1 27.1 31.0

RoACE (%) 10.4 8.3 4.1 6.5 7.4 20.1 18.2 21.5 26.8


Weak earnings, directionally on the right track

MMFS reported PAT of ₹474 mn, down 46% yoy. This was largely due to high provisions—the

company chose to make extra provisions of ₹847 mn during the quarter. PBT before provisions

was up 36% yoy. Even after excluding the aforesaid extra provisions, PBT was up 10% yoy.

With these provisions, MMFS has effectively reversed its recently revised provisioning policy on

aged NPLs.

Provisions tightened again

In 1QFY17, MMFS had revised its provisioning policy to consider the estimated value of the

underlying security to determine 100% provisioning cover for NPLs over 24 months. This

resulted in reduction in provisions of ₹1.92 bn in 9MFY17. However, the company made extra

provisions of ₹1.05 bn in 4QFY17 and ₹840 mn in the current quarter. With this, MMFS has

effectively reversed the policy change made in 1QFY17. This may be likely prompted by lower

recoveries during the stress period of demonetization.

GNPL rise slows down

MMFS’s underlying business trends seem to be improving likely due to better cash flows since

Feb-March 2017 and expectations of a normal monsoon that is sentimentally positive. Current

progress of monsoon seems to be broadly on track. Seasonal trends suggest that GNPLs

increase qoq between 4Q and 1Q. During 1QFY18, GNPLs were up 20% qoq; this was notably

the lowest qoq rise in 1Q since FY2011.

Operating trends stable

MMFS maintained its growth trajectory. Value of asset financed was up 16% as compared to

19% in FY2017; loans under management were up 14% yoy to ₹476 bn. The broad business

mix has remained stable qoq and yoy—28% of loans were UVs (M&M business), 21% were

tractors and 21% were cars.

Lower reversals led to better NIM; calculated NIM were 8% as compared to 7.3% in 1QFY17

and 10.5% in 4QFY17; this was also supported by reduction in borrowing costs; calculated

borrowing costs were 8.2% versus 8.9% in 1QFY17.

Mahindra & Mahindra Financial (MMFS) NBFCs

High provisions dent earnings; undercurrents improve. Mahindra Finance (MMFS)

reported 10% yoy growth in PBT before extraordinary provisions driven by 14% loan

growth, marginal NIM expansion, largely on the back of control over qoq GNPL rise.

Despite a normal monsoon, likely better farm cash flows and a positive commentary,

MMFS made extra provisions to reverse the impact of provisioning policy change in

FY2017. We will revisit our estimates and target price post Tuesday’s conference call.

SELL

JULY 25, 2017

RESULT

Coverage view: Neutral

Price (`): 363


BSE-30: 32,246

QUICK NUMBERS

PBT before

extraordinary

provisions up

10% yoy

Loans under

management

up 14%

GNPLs up 20% qoq

Nischint Chawathe

M B Mahesh CFA

Abhijeet Sakhare

Mahindra & Mahindra Financial



Market Cap. (Rs bn) EPS growth (%) (40.5) 95.7 29.4




MFs 9.4 BVPS 105.4 113.5 123.4


Absolute 9.9 6.0 14.8 ROE (%) 6.4 11.7 14.0

Rel. to BSE-30 6.1 (2.5) (1.0) Div. Yield (%) 0.7 1.3 1.7


405-244

206.7

Mahindra & Mahindra Financial NBFCs


Exhibit 1: MMFS – quarterly results summary March fiscal year-ends, 1QFY17-1QFY18 (Rs mn)


(% chg.)

1QFY18 1QFY18E 1QFY17 4QFY17 1QFY18E 1QFY17 4QFY17 FY2018E FY2017 (% chg.) FY2019E

Total interest income 15,924 — 13,664 18,255 17 (13) 71,684 62,342 15 85,168

Total interest expense 7,327 — 6,910 7,137 6 3 32,526 28,574 14 39,144

Net interest income 8,597 8,659 6,754 11,117 (1) 27 (23) 39,158 33,767 16 46,024

Provisions and write/off 4,258 2,700 2,245 3,614 58 90 18 10,720 13,091 (18) 11,386

Net interest income (after prov.) 4,339 5,959 4,509 7,503 (27) (4) (42) 28,438 20,676 38 34,638

Other income 107 200 93 173 (46) 16 (38) — 34 —

Total income pre provisions 8,704 8,859 6,847 11,290 (2) 27 (23) 39,158 33,801 16 46,024

Operating expenses 3,810 3,925 3,260 4,037 (3) 17 (6) 16,679 14,509 15 19,451

Employee expenses 1,980 1,800 1,675 1,797 10 18 10 7,838 6,809 15 9,126

Depreciation 111 125 106 135 (12) 4 (18) 495 460 8 369

Other expenses 1,720 2,000 1,479 2,105 (14) 16 (18) 8,346 7,240 15 9,957

Pretax income 636 2,234 1,341 3,638 (72) (53) (83) 11,759 6,201 90 15,187

Tax provisions 162 804 472 1,298 (80) (66) (88) 3,927 2,198 79 5,050

Net Profit 474 1,430 870 2,341 (67) (46) (80) 7,832 4,003 96 10,136

Tax rate (%) 25 36 35 36 33 35 33

PBT before provisions 4,894 4,934 3,587 7,252 (1) 36 (33) 22,479 19,292 17 26,573

PBT before one-offs (1) 1,476 2,234 1,341 4,698 (34) 10 (69) 11,759 6,201 90 15,187

EPS (Rs) 0.8 2.5 1.5 4.2 (46) (80) 14 7 96 18

Other operational details

Value of asset financed (Rs bn) 76 66 84 16 (9)

Outstanding assets (Rs bn) 470 405 460 16 2

Managed loan assets (Rs bn) 476 417 468 14 2

NIMs - KS calculations (%) 8.0 8.1 7.3 10.5

Cost to income (%) 43.8 47.6 35.8

Exp/ ave assets (%) 3.4 3.4 3.5

Total income/ average assets (%) 14.5 14.3 15.2

Interest / average assets (%) 6.6 7.2 7.0

Difference (%) 7.9 7.1 8.2

Credit costs/ AUMs (%) 3.6 2.2 3.1 66 15

Gross NPLs (Rs mn) 50,142 44,146 41,827 14 20

Gross NPL ratio (%) 10.5 10.7 9.0

Net NPLs (Rs mn) 19,810 21,060 15,997 (6) 24

Net NPL ratio (%) 4.4 5.7 3.6

CAR (%) 17.4 19.5 17.6

Tier I (%) 12.9 14.3 13.2

Segment-wise disbursements (%)

Auto/ utility vehicles 28 29 28

Tractors 21 17 17

Cars 21 22 22

Commercial vehcles 11 13 12

Refinance and others 19 19 21

Segment-wise AUMs (%)

Auto/ utility vehicles 30 31 30

Tractors 17 17 17

Cars 23 24 23

Commercial vehcles/CEs 13 13 13

Refinance and others 17 15 17

Funding Mix, excluding assignments (%)

Banks 40 40 46

Insurance 13 22 8

Mutual funds 25 19 21

Others 22 20 25

NBFCs Mahindra & Mahindra Financial


Exhibit 2: Mahindra Finance – key assumptions, ratios and growth rates March fiscal year-ends, 2015-20E (%)


2015 2016 2017 2018E 2019E 2020E

Growth in key parameters (%)

Total interest income 12 7 7 15 19 19

Total interest expense 14 6 8 14 20 19

Net interest income 10 8 6 17 18 19

Loan loss provisions 64 27 25 (18) 6 19

Total income 12 6 4 16 18 18

Operating expenses 10 17 23 15 17 17

Employee expenses 54 22 22 15 16 16

Net loans 11 11 16 19 19 19

Total assets 11 13 16 18 18 18

Total Borrowings 7 17 15 23 20 19

Shareholders fund 11 7 6 7 9 10

Asset management measures (%)

Yield on average earning assets 15.9 15.3 14.4 14.1 14.1 14.1

Average cost of funds 9.8 9.2 8.6 8.2 8.2 8.1

Difference 6.0 6.0 5.8 5.8 5.9 5.9

Net interest income/earning assets 7.4 7.2 6.6 6.6 6.6 6.6

Spreads on lending business 6.0 6.0 5.8 5.8 5.9 5.9

Net interest income/EA (after prov) 5 4 4 5 5 5

Tax rate 34 35 35 33 33 33

Dividend payout ratio 28 34 34 34 34 34

Profitability measures (%)

Interest income/total income 80 82 84 84 85 85

Other income / total income 20 18 16 16 15 15

Operating expenses/total income 33 36 43 43 42 42

Payout ratio 28 34 34 34 34 34

Equity/assets (EoY) 16 15 14 13 12 11

ROA decomposition - % of avg. assets


Loan loss provisions 2.5 2.8 3.1 2.1 1.9 1.9

Net other income 1.9 1.6 1.3 1.2 1.2 1.2

Gains on securitization — — — — — —


(1- tax rate) 66.3 64.8 64.5 66.6 66.7 66.8

ROA 2.5 1.8 0.9 1.6 1.7 1.7

Average assets/average equity (X) 6.2 6.3 6.8 7.5 8.2 8.8

ROE 15.5 11.4 6.4 11.7 14.0 15.3

Mahindra & Mahindra Financial NBFCs


Exhibit 3: Mahindra Finance – income statement & balance sheet March fiscal year-ends, 2015-20E (` mn)


2015 2016 2017 2018E 2019E 2020E

Income statement

Total interest income 49,576 53,072 56,921 65,584 78,153 92,916

Total interest expense 24,967 26,393 28,574 32,526 39,144 46,480


Provisions and write/off 8,275 10,495 13,091 10,720 11,386 13,540

Other income 6,270 5,978 5,454 6,100 7,015 8,067


Pretax income 12,536 10,381 6,201 11,759 15,187 18,203

Tax provisions 4,219 3,656 2,198 3,927 5,050 6,052

Net Profit 8,317 6,725 4,003 7,832 10,136 12,151

PBT - securitization income + provisioning expense 20,811 20,876 19,292 22,479 26,573 31,743

EPS (Rs) 15 12 7 14 18 22

BPS (Rs) 101 108 115 123 134 147

ABVPS (Rs) 96 101 105 114 123 133

Balance sheet

Net loans 329,260 366,580 425,230 506,919 603,907 717,074

Total Investments 8,536 14,833 18,895 19,840 20,832 21,873

Cash & deposits 4,794 5,890 5,780 6,416 7,122 7,905

Loans and advances and other assets 2,898 1,467 1,510 1,510 1,510 1,510

Deferred tax assets 4,153 5,890 7,317 7,683 8,067 8,470

Net fixed assets 768 753 688 833 644 530

Capital work in progress 332 382 432 482 532 582

Total assets 350,741 395,795 459,852 543,682 642,613 757,945

Liabilities

Total loans and bonds 254,680 301,383 348,542 436,086 521,277 620,128

Total Borrowings 262,538 308,460 354,907 436,086 521,277 620,128

Current liabilities 31,509 26,454 31,745 38,094 45,713 54,855

Total liabilities 294,047 334,914 395,080 474,180 566,989 674,983

Share capital 1,128 1,129 1,130 1,130 1,130 1,130

Reserves 55,566 59,752 63,642 68,372 74,494 81,832

Shareholders fund 56,694 60,881 64,772 69,502 75,624 82,962


A combination of higher capital, strong quarter for capital markets and high agency growth

IIFL Holdings had a strong 1QFY18. The company benefitted from strong momentum in

capital markets leading to 35-55% growth in market volumes and bunching of investment

banking fees for the current and previous quarters, leading to massive (about 5X growth) in

capital market-related earnings, though on a low base (5% of segmental PBT in 1QFY17;

17% in 1QFY18).

IIFL Finance continues to make a migration to lower-ticket loans in affordable housing and

inch up the microfinance business, which we believe will boost medium-term profitability,

while consciously slowing down developer loans and LAP. Loan growth momentum (26%

yoy though up just 5% qoq) even as higher NIM post reduction in borrowing cost and recent

capital infusion boosted earnings.

Wealth business reported 41% growth in fees, on the back of high secular growth in the

business but also partially explained high AIF mobilization during the period and was

supplemented by increase in funded income (post recent capital issuance).

Strong medium-term momentum priced in

We continue to expect IIFL Holdings to deliver strong medium-term business momentum by a

combination of (1) growth in new lending segments like affordable housing and microfinance,

(2) secular growth in wealth management as IIFL invests in adding capacities and (3) good times

for capital markets. This will likely translate into 20-21% earnings CAGR (about 18% post

minority interest) and RoE 22-23% over the next three years.

IIFL Holdings has outperformed the market by 100% in last one year. While buoyancy around

capital markets may be a key reason, we would like to highlight that, unlike 2007-08, the

lending business currently drives 50% of its value and has no linkages with capital markets.

We would juxtapose this stock with other NBFCs on price-to-book versus RoE matrix rather than

valuing the business on a PE basis. At our SoTP-based target price (September 2019, rolled over

from March 2019) of ₹510, IIFL will trade at 2.7X book.

Volatility in capital markets and rise in NPLs in low-cost housing pose key risks.

IIFL Holdings (IIFL) NBFCs

In a sweet spot. A strong quarter for the broking business, large income in investment

banking, high wealth management income and moderate loan growth have driven

60% PBT growth for IIFL Holdings, in line with estimates. With steady growth trajectory

in the NBFC business, wealth income and good times for capital markets, we expect IIFL

to deliver 22-23% medium-term RoE and 18% earnings CAGR during FY2017-19,

though fully priced in at 3.3X FY2019E book. Retain REDUCE; TP ₹510 (from ₹450).

REDUCE

JULY 25, 2017

RESULT

Coverage view: Neutral

Price (`): 595


BSE-30: 32,246

QUICK NUMBERS

PBT up 60% yoy

Post-minority PAT

up 44% yoy

Loans under

management (IIFL

Finance and Wealth

Finance) up 35% yoy

Nischint Chawathe

M B Mahesh CFA

Abhijeet Sakhare

India Infoline







MFs 1.9 BVPS 137.8 157.0 179.4


Absolute 1.3 29.6 133.8 ROE (%) 22.6 22.0 23.1

Rel. to BSE-30 (2.2) 19.2 101.6 Div. Yield (%) 0.8 0.9 1.1


630-229

189.1

IIFL Holdings NBFCs


Exhibit1: IFL Holdings – quarterly financial statements March fiscal year-ends, 1QFY17-1QFY18 (` mn)


Profit and loss statement (consol.) 1QFY17 2QFY17 3QFY17 4QFY17 1QFY18 YoY (%) 1QFY18E

Act vs KIE

(%)

Total income 10,306 12,161 12,737 14,044 14,785 43 14,537 2

Income from operations 10,266 12,142 12,705 14,009 14,732 43 14,497 2

Find based activities 7,577 9,088 9,438 10,190 10,421 38 11,000 (5)

Financial products distribution (a) 1,534 1,652 1,662 2,309 2,582 68 1,857 39

Capital market activities 1,156 1,402 1,605 1,510 1,729 50 1,640 5

Other income 39 19 31 35 53 35 40 32

Interest 4,539 5,493 5,279 5,611 5,715 26 6,000 (5)

NII from operations 3,038 3,595 4,159 4,580 4,706 55 5,000 (6)

Operating expenses 3,285 3,563 4,039 4,658 5,162 57 4,602 12

Direct expenses 719 795 953 1,314 1,955 172 1,500 30

Employees expenses 1,791 1,815 1,974 2,275 2,246 25 2,202 2

Administration expneses 775 954 1,112 1,068 961 24 900 7

Depreciation 135 131 129 144 149 10 160 (7)

EBITA 6,885 8,467 8,568 9,243 9,474 38 9,774 (3)

PBT 2,346 2,973 3,290 3,633 3,759 60 3,774 (0)

Taxation 765 902 1,067 1,286 1,233 61 1,336 (8)

PAT bef. minority interest 1,582 2,072 2,223 2,347 2,519 59 2,438 3

Minority interest 206 241 432 482 538 161 600 (10)

PAT 1,375 1,831 1,791 1,865 1,981 44 1,838 8

PBT 2,346 2,973 3,290 3,633 3,753 60

Equity broking 111 236 345 433 649 482

Finance and investment 1,599 1,946 2,304 2,480 2,378 49

Distribution and marketing 628 791 632 723 727 16

IIFL Finance (NBFC)

Net interest income 2,657 2,951 3,126 3,455 3,460 30

Other income 241 378 381 586 607 152

Provisions 292 416 433 618 709 143

Operating expenses 1,238 1,352 1,364 1,571 1,588 28

PAT 890 1,020 1,117 1,205 1,163 31

Key ratios (%)

NIM 6.1 6.3 6.4 6.8 6.6

GNPL 2.0 1.9 1.8 1.8 2.0

AUM break-up (Rs mn) 185,312 — 210,890 222,810 233,300

Home Loans 32,703 — 46,460 53,360 59,520

Loans Against Property 50,514 — 53,110 56,270 55,060

Construction & Real Estate 27,453 — 29,820 30,670 35,140

Gold 29,642 — 29,860 29,100 28,160

Commercial Vehicle 25,178 — 27,900 29,740 29,710

Capital Market 9,730 — 14,320 11,040 11,870

Micro-finance — — — 2,390 2,840

MSME & Others 10,092 — 9,420 10,240 11,000

IIFL Wealth (Wealth management + NBFC)

Fee income 1,266 1,450 1,270 1,748 1,781 41

Net interest income 340 403 724 616 659 94

Total income 1,606 1,904 2,151 2,364 2,440 52

PAT before minority interest 527 572 652 753 864 64

AUM break-up (Rs bn) 1,081 1,269

Distribution 649 749

AMC/Discretionary 97 114

Advisory 108 140

FPI (offshore) 130 140

Discretionary (offshore) 108 127

Key metrics

No. of RMs (#) 211 220 220 226 253

Notes:

(a) Financial products distribution includes Insurance Distribution and Wealth Management divisions.

(b) IIFL Wealth has modified the AUM disclosures. Hence, the historical data is limited.

NBFCs IIFL Holdings


IIFL Wealth: Continues to deliver strong growth

Strong agency business performance. IIFL Wealth reported PAT of `864 mn, up 64%

yoy. Reported income from distribution (i.e. non-fund based) was up ~40% yoy to ₹1.8

bn. Sequentially, income growth was 2% qoq, compared to ~20% growth in ex-custody

assets under management.

AUM growth of 17% qoq. IIFL has reclassified the AUM disclosures, resulting in lower

comparable AUMs. AUM growth remains strong with `1.3 tn in 1QFY187 from `1.1 tn in

4QFY17 and `740 bn in 4QFY16; the company has partnership with more than 10,000

HNI families. Large share of AUM comes from investment distribution and investment

management.

Distribution has driven 54% of IIFL Wealth’s income. In FY2017, IIFL Wealth reported

net operational income (net of interest expenses) of ₹7.8 bn (Exhibit 5). Net interest

income was the largest avenue at 27% of total revenues. Income from distribution of

mutual funds comprised 20% of total income while income from distribution of other

products at 33% of total income.

Investing for growth. Operating costs increased 42% yoy, with ~50% yoy increase in

staff costs. Company continues to add staff – number of bankers increased to 253 from

195 at FY2016 and 139 at FY2015. Period-end AUM per RM has increased to ~`5 bn

from `4.8 bn qoq and `3.8 bn at FY2016. Non-staff expense growth was lower at 29%

yoy.

IIFL Wealth Finance. IIFL Wealth is 100% subsidiary of IIFL Wealth. Wealth’s target

segments are loan against shares/property to HNIs, already served by the IIFL Wealth

network. Loan book stands at ₹36 bn (+19% qoq) with calculated yield of ~17%. There

will be volatility in quarterly performance due to market volatility and IPO pipeline.

Exhibit 2: IIFL Wealth – strong earnings performance continues, driven by franchise growth and ramp-up of NBFC business Quarterly P&L summary, March fiscal year-end, 1QFY15-1QFY18 (Rs mn)


1QFY15 2QFY15 3QFY15 4QFY15 1QFY16 2QFY16 3QFY16 4QFY16 1QFY17 2QFY17 3QFY17 4QFY17 1QFY18 YoY (%)

Income statement

Income from operations 728 1,043 1,195 1,558 1,021 1,379 1,468 1,741 1,721 2,496 2,668 3,454 3,448 100

Agency 731 1,060 1,190 1,544 1,021 1,379 1,468 1,741 1,266 1,450 1,270 1,748 1,781 41

Interest income — — — — — — — — 455 1,046 1,398 1,706 1,667 266

Other income 4 17 13 16 37 123 130 10 — 51 157 — — —

Total income 732 1,060 1,208 1,574 1,058 1,502 1,598 1,751 1,721 2,547 2,825 3,454 3,448 100

Total expenses 524 620 666 1,010 447 860 980 1,117 810 1,053 1,195 1,219 1,153 42

Employee expenses 270 301 302 402 273 455 448 595 542 641 698 789 808 49

Other expenses 254 319 364 608 174 405 532 522 268 412 497 430 345 29

EBITDA 208 440 542 564 611 642 618 634 911 1,494 1,630 2,235 2,295 152

Interest 5 26 33 34 59 69 43 37 115 643 674 1,090 1,008 777

Depreciation 2 2 3 6 7 8 8 11 53 19 21 26 47 (11)

PBT 201 412 506 524 545 565 567 586 743 832 935 1,119 1,240 67

Tax 58 146 161 161 173 154 118 125 216 260 283 366 376 74

PAT before minority interest 143 266 343 363 372 411 449 461 527 572 652 753 864 64

Assets under advice (Rs bn) 660 740 675 709 755 776 867 794 858 1,004 1,070 1,201 1,269 48

Cost-income ratio (%) 27 39 42 33 52 38 35 33 43 33 33 32 36

PAT margin (%) 72 59 56 65 44 62 67 64 47 42 45 35 33

IIFL Holdings NBFCs


Exhibit 3: IIFL Wealth earns net commission of 69 bps Wealth assets and commission yields, March fiscal-year ends, 2014-1QFY18


Exhibit 4: Wealth management – summary financials March fiscal year-ends, 2014-17 (Rs mn)

Source: Company, AMFI, Kotak Institutional Equities

Exhibit 5: High income from distribution for IIFL Wealth Mapping of income across business lines of IIFL Wealth, March fiscal year-end, 2017 (Rs mn)


2014 2015 2016 2017 1QFY18

Wealth assets (Rs bn) 562 680 740 1,081 1,269

(% of total)

Distribution 42 53 56 60 59

AMC/Discretionary 6 7 10 9 9

Advisory - 1 2 10 11

FPI (offshore) 37 17 16 12 11

Discretionary (offshore) 15 22 16 10 10

Retention yield ex-FPI assets (bps) 86 98 94

Net commission/fees 78 72 69

Fund based activities 8 26 25

Income statement 2014 2015 2016 2017 YoY (%)

Income from operations 2,411 4,524 5,609 7,817 39

MF commissions 1,300 2,940 1,435 1,574 10

Other fee income 1,111 1,584 4,174 4,160 (0)

NBFC - NII 2,083

Other income 10 50 300 208 (31)

Total expenses 1,681 2,931 3,646 4,396 21

Employee expenses 810 1,275 1,771 2,670 51

Other expenses 809 1,545 1,633 1,607 (2)

PBT 740 1,643 2,263 3,629 60

Tax 232 526 570 1,125 97

PAT before minority interest 508 1,115 1,693 2,504 48

Assets under advice (Rs bn) 562 680 740 1,081 46

PBT margin (%) 30.7 36.3 40.3 46.4

AmountShare in

revenues

(Rs mn) (%) Comments

Fund management revenues 1,525 20 Revenue on IIFL Asset Management and IIFL Asset Management (Mauritius)

Investment AUM (Rs bn) 205 AMC/discretionary and offshore discretionary AUM

NBFC- NII 2,083 27

Loan book (Rs bn) 36

NIM (%) 5.0

Distribution 4,209 54

MF commissions 1,574 20 Third party commission on mutual fund sales earned by IIFL Wealth

Other commissions 2,635 34 Balance revenues for IIFL Wealth

Distribution AUM (Rs bn) 649

Advisory AUM (Rs bn) 97

FPI (offshore, Rs bn) 130

Total 7,817

NBFCs IIFL Holdings


Exhibit 6: IIFL's market share in MF commissions continued to decline in FY2017 Income from mutual fund distribution, March fiscal year-ends, 2013-17 (Rs mn)

Source: AMFI, Kotak Institutional Equities

IIFL Finance: Lower cost of funds supporting retail push

~2.3-2.4% RoA in the medium term. We project ~22% AUM CAGR over FY2018-20E,

adjusted for transfer of capital market book to wealth subsidiary. As cost of fund

declines, IIFL will further shift focus to lower yielding retail home loans. Over the medium-

to-long term NIM will trend down due to decline in loan yields due to greater

competition. We expect IIFL Finance to deliver 2.3-2.4% RoA and ~15-16% RoE over

FY2018-20E.

Cost reduction offers maximum delta to improve RoAs. The current business mix has

resulted in cost-asset ratio of 2.8% as of FY2017 and shift towards greater share of retail

will lead to cost savings that will offset decline in NIM. We expect cost-assets ratio to

decline to 1.9-1.7% by FY2019-20E from 2.8% in FY2017.

26% adjusted AUM growth in 1QFY18. IIFL Finance reported AUM of `233 bn, up

~26% yoy and 5% qoq after excluding the capital market loan shifted to IIFL Wealth.

Growth is driven by home loans, construction finance, capital markets and CVs.

Focused on affordable segment. Retail home loan being the focus area going forward,

grew by 82% yoy and 12% qoq. IIFL is positioned at the lower end of the ticket size with

average ticket size of Rs2.2 mn. IIFL’s retail home loan dovetails into its construction

finance business, generating leads for retail home loans.

Slower growth in LAP. LAP grew slower at 9% yoy and -2% qoq due to higher focus

on home loans. Target segment is smaller ticket LAP in the range of `5 mn or micro LAP

of `1 mn tickets, largely spread across the country with yield of ~9.5-10%. We expect

~30% loan CAGR over FY2018-20, leading to ~70% share of total loans.

Higher GNPLs due to shift to 90-dpd and slippages in CV book. Total gross NPL was

up ~20 bps qoq at 2.0% and net NPL up ~35 bps at 0.9%. Higher NPL is on account of

shift to 90-dpd recognition policy and slippages in CV loan book.

2013 2014 2015 2016 2017 YoY (%)

IIFL group 753 1,356 3,036 1,712 1,819 6

Industry 23,886 26,027 47,293 36,476 49,867 37

Market share 3.2 5.2 6.4 4.7 3.6

IIFL Holdings NBFCs


Exhibit 7: IIFL Finance - quarterly data March fiscal year-ends, 1QFY17-1QFY18 (` mn)


Exhibit 8: Performance metrics of IIFL Finance Product portfolio break-up, 1QFY18


1QFY17 2QFY17 3QFY17 4QFY17 1QFY18 YoY (%)

Income statement (Rs mn)

Interest income 6,951 7,608 7,592 7,913 8,004 15

Interest expenses 4,294 4,657 4,466 4,458 4,544 6

Net interest income 2,657 2,951 3,126 3,455 3,460 30

Other income 241 378 381 586 607 152

Provisions 292 416 433 618 709 143

Operating expenses 1,238 1,352 1,364 1,571 1,588 28

PBT 1,368 1,561 1,710 1,852 1,770 29

Tax 478 541 593 647 607 27

PAT 890 1,020 1,117 1,205 1,163 31

Outstanding loan book (Rs bn) 169 185 189 193 204 21

Loans outside balance sheet (Rs bn) 17 20 21 30 29 74

Loans under management (Rs bn) 186 205 211 223 233 26

Home Loans 33 46 53 60

Loans Against Property 51 53 56 55

Construction & Real Estate 27 30 31 35

Gold 30 30 29 28

Commercial Vehicle 25 28 30 30

Capital Market 10 14 11 12

Micro-finance - - 2 3

MSME & Others 10 9 10 11

Key ratios (%)

NIM - KS Estimate 6.1 6.7 6.7 7.2 7.0

CAR 17.8 19.7 20.5 18.1 20.6

Asset quality

Gross NPL (%) 2.0 1.9 1.8 1.8 2.0

Net NPL (%) 0.9 0.8 0.7 0.6 0.9

Portfolio share Net NPL Yield

Average

ticket LTV

(%) (%) (%) (Rs mn) (%)

Home loan 26 0.30 9.7 2.2 68

Loan against property 24 1.10 12.9 9.2 54

Construction finance 15 0.20 16,6 82.8 35

Commercial vehicle finance 13 4.20 15.7 1.0 76

Gold loan 12 0.20 22.3 0.1 65

Capital market finance 5 0.00 11.2 5.6 55

MSME loan 5 2.30 14.1 3.0 56

Microfinance 1 0.00 23.0 0.0 —

Total 100 0.90 14.3 — —

NBFCs IIFL Holdings


Capital market segment revenues increase 50% yoy

IIFL’s capital market revenues (broking and investment banking) revenues were up ~50%

yoy due to strong IB income and buoyant capital markets. Cash equity market volume

growth was strong at ~46% yoy, with average daily turnover at IIFL in the cash segment up

34% yoy to `11 bn in 1QFY18. F&O volumes were up 56% yoy to ADV of `100 bn.

Calculated commission yield increased to 2.5 bps from 2.2 bps in 4QFY17.

IIFL will continue to benefit from bouncy in capital market volumes. In FY2017, IIFL’s

institutional equities business reported 27% yoy volume growth in the cash segment and

13% in F&O. We expect IIFL’s overall broking income to deliver 19% CAGR in FY2018-19E.

Exhibit 9: Cash equity market volume increased 48% yoy in 1QFY18 Average daily volumes on BSE and NSE, March fiscal year-ends, 2008-1QFY18 (` bn)

Source: BSE, NSE, Kotak Institutional Equities

Exhibit 10: Equity market volumes have been volatile over last 2 decades Volumes on BSE and NSE, March fiscal year-ends, 1996-1QFY18 (` bn)

Source: BSE, NSE, Kotak Institutional Equities

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

1QFY16 26 177 203 (10) 2,700 45 2,903 39

2QFY16 28 177 205 (5) 2,602 9 2,807 8

3QFY16 27 163 189 (4) 2,236 (5) 2,425 (5)

4QFY16 28 173 201 (12) 3,012 12 3,212 10

1QFY17 26 174 200 (2) 2,983 10 3,183 10

2QFY17 34 216 249 21 3,762 45 4,011 43

3QFY17 29 195 224 18 4,036 80 4,259 76

4QFY17 65 232 298 48 4,469 48 4,767 48

1QFY18 41 254 295 48 5,367 80 5,662 78

Volumes in cash market

(100)

-

100

200

300

400

500

-

880

1,760

2,640

3,520

4,400

5,280

6,160

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

1Q

FY17

2Q

FY17

3Q

FY17

4Q

FY17

1Q

FY18

Volumes (CM) (LHS) Volumes (F&O) (LHS)

Volume growth (CM) (RHS) Volume growth (F&O) (RHS)

IIFL Holdings NBFCs


Exhibit 11: IIFL Holdings: NBFC drives highest value SOTP-based valuation, March fiscal year-ends, September 2019E


Exhibit 12: IIFL Holdings is currently trading at 2X one-year forward EPS IIFL Holdings - Rolling PER (X)


Valuation

(Rs mn) (Rs/ share) Comments

NBFC (85% stake) 79,937 251 2X PBR

Broking 27,907 88 20X PER

Wealth management (53% stake) 51,913 163 20X PER

Insurance distribution 2,632 8 15X PER

Total 162,389 511

-

5

10

15

20

25

Jul-11

Nov-

11

Mar-

12

Jul-12

Nov-

12

Mar-

13

Jul-13

Nov-

13

Mar-

14

Jul-14

Nov-

14

Mar-

15

Jul-15

Nov-

15

Mar-

16

Jul-16

Nov-

16

Mar-

17

Jul-17

NBFCs IIFL Holdings


Exhibit 13: IIFL Holdings – summary of estimate changes March fiscal year-end, 2018E-20E (Rs mn)


New estimates Old estimates New vs old (%)

2018E 2019E 2020E 2018E 2019E 2020E 2018E 2019E 2020E

Income (inclduing NII) 34,078 40,297 47,042 31,908 37,699 44,445 7 7 6

Broking and related income 6,689 7,486 8,461 6,351 7,244 8,276 5 3 2

Insurance and wealth management 8,988 11,125 13,782 9,106 11,277 13,988 (1) (1) (1)

Net interest income 18,262 21,526 24,638 16,311 19,018 22,021 12 13 12

Other income 140 160 160 140 160 160 — — —

Operating expenses 18,422 21,616 25,264 17,007 20,231 23,659 8 7 7

Brokerage/ direct expenses 4,251 4,889 5,769 3,783 4,539 5,447 12 8 6

Employee expenses 9,408 11,102 13,211 8,860 10,631 12,758 6 4 4

Others expenses 4,762 5,625 6,284 4,364 5,060 5,454 9 11 15

PBT 15,656 18,681 21,778 14,901 17,469 20,786 5 7 5

Tax 5,323 6,352 7,404 5,066 5,939 7,067 5 7 5

PAT 10,333 12,329 14,373 9,835 11,529 13,719 5 7 5

Minority interest 2,197 2,849 3,326 1,695 2,125 2,480

PAT (after minority interest) 8,137 9,480 11,047 8,139 9,404 11,239 (0) 1 (2)

EPS (Rs/ share) 25.6 29.8 34.7 25.6 29.6 35.4 (0) 1 (2)

Loan book (Rs bn) 229 270 323 239 285 (4) (5)

PBT/ total income (%) 46 46 46 43 42

Cost/ income (%) 54 54 54 57 58

IIFL Holdings NBFCs


Exhibit 14: IIFL Finance – key ratios, growth rates and financial statements March fiscal year-ends, 2015-20E


2015 2016 2017 2018E 2019E 2020E

Key ratios (%)

Interest yield (%) 18.1 16.6 16.1 14.6 14.1 13.8

Interest cost (%) 12.3 11.5 10.7 9.6 9.4 9.2

Spread (%) 5.8 5.1 5.4 5.0 4.7 4.6

NIM (%) 7.6 6.1 6.6 5.9 5.8 5.7

Loan growth (%) 34.7 21.2 8.5 16.1 16.4 19.0

Income on investments (%) 2.0 2.0 2.0 2.0 2.0 2.0

Opex/ loans (%) 4.5 3.0 2.8 2.5 2.1 1.8

Credit cost/ loans (%) 0.8 0.7 1.0 0.7 0.7 0.6

PAT / average loans (%) 2.4 2.1 2.3 2.5 2.7 2.9

Du Pont Analysis (% of total assets)

NII/ assets 7.1 5.9 6.1 5.3 5.3 5.2

Other income/ assets 1.1 0.8 0.8 1.1 1.1 1.1

Provisions/ assets 0.8 0.6 0.9 0.6 0.6 0.6

Opex/ assets 4.1 2.9 2.8 2.3 1.9 1.7

PBT/ assets 3.3 3.1 3.3 3.5 3.9 4.1

(1-tax rate) 0.7 0.7 0.7 0.7 0.7 0.7

PAT/ assets 2.2 2.0 2.1 2.3 2.5 2.7

Average assets/ average equity (X) 7.7 8.2 7.1 6.2 6.1 6.1

PAT/ average equity 16.8 16.6 15.1 14.1 15.3 16.3

2015 2016 2017 2018E 2019E 2020E

Profit and loss statement (Rs mn)

Interest income 23,623 25,947 30,064 30,514 34,120 39,356

Interest expenses 13,856 16,091 17,875 18,205 20,148 23,213


Other income 1,515 1,377 1,587 2,436 2,973 3,370

Other interest income 570 120 169 882 1,367 1,709

Provisions 1,049 1,087 1,760 1,458 1,695 1,711


Employee expenses 1,918 2,690 3,010 2,837 2,771 2,798

Other opex 3,450 1,987 2,255 2,125 2,075 2,095

Depreciation 350 260 260 245 239 242

PBT 4,515 5,209 6,491 8,079 10,166 12,667

Tax 1,503 1,822 2,260 2,813 3,539 4,410

PAT 3,012 3,387 4,231 5,266 6,626 8,257

Balance sheet (Rs mn)

Fixed assets 1,800 655 1,241 1,551 1,939 2,424

Investments 3,000 2,475 14,365 3,000 3,000 3,000

Loan book 146,670 177,695 192,798 223,790 260,510 309,970

Total assets 155,700 179,358 218,934 242,180 282,026 335,256

Borrowings 127,541 153,127 181,044 198,226 230,448 274,175


Networth 19,456 21,391 34,699 39,965 46,592 54,848

NBFCs IIFL Holdings


Exhibit 15: IIFL Holdings – key ratios and growth rates March fiscal year-ends, 2015-20E (%)


2015 2016 2017 2018E 2019E 2020E

Key parameters

Volume in equity markets (Rs bn) 607,904 697,301 1,003,893 1,204,672 1,409,466 1,620,886

IIFL's volumes (Rs bn) 17,750 16,818 22,066 26,479 30,959 36,198

Per day (Rs bn) 77 74 96 115 135 157

Market share (%) 2.9 2.4 2.2 2.2 2.2 2.2

Commission yield (bps) 2.36 2.37 2.27 2.28 2.30 2.24

Key ratios

Yield on loans (%) 18.1 16.6 16.1 14.7 13.8 13.5

Cost of borrowings (%) 11.4 11.0 11.0 9.8 9.3 9.3

Spread (%) 6.7 5.6 5.1 5.0 4.5 4.2

Total operating costs/ total income (%) 60.2 58.0 48.1 47.6 47.0 47.8

PBT margins (%) 19.7 20.5 24.9 28.4 30.4 30.1

YoY growth (%)

Total revenues 29 12 20 12 12 18

Brokerage commission 53 (5) 26 21 18 14

Life insurance distribution fees (30) (9) (8) 9 15 15

Media income 29 (16) (37) 22 15 15

Operating costs 20 5 (3) 19 17 19

EBIT 37 17 32 10 9 18

Interest and finance charges 24 17 25 0 1 20

Profit before tax 73 16 46 28 19 17

Net profit 61 14 34 19 17 17

Dividend 6 41 8 20 17 17

EPS 54 12 34 19 17 17

Growth in balance sheet line items

Total assets 33 18 48 1 15 19

Shareholders equity 17 14 50 14 14 15

Contribution to total revenues(%)

Commission on equity broking 11.4 9.7 10.2 11.0 11.6 11.2

Brokerage in commodities 0.2 0.1 0.1 0.1 0.1 0.1

Fees earned on distribution (MF) 0.5 0.3 0.2 0.3 0.3 0.3

Life insurance commissions 1.8 1.5 1.1 1.1 1.1 1.1

Other mortgage and loan distribution 12.3 13.7 12.7 14.2 15.9 16.9

Interest earned on margin trading/ finance income 71.5 72.5 73.7 71.3 69.5 69.0

Merchant banking income 0.1 0.5 1.0 1.1 0.5 0.4

Media and other income 1.7 1.3 0.7 0.7 0.8 0.7

Du pont analysis (% of average assets)

Net brokerage revenue 0.2 0.2 0.5 0.5 0.6 0.6

Income from distribution 3.2 3.0 2.5 2.5 2.9 3.1

Other income 15.9 14.5 13.2 11.9 11.9 11.9

Operating costs 15.0 13.7 11.8 10.3 10.3 10.4

(1-tax rate) 65.8 65.8 67.2 66.0 66.0 66.0

RoA (%) 2.8 2.6 2.9 3.0 3.4 3.3

Average assets/ average equity (X) 7.1 7.7 7.8 7.2 6.9 7.0

RoE (%) 20.1 20.2 22.6 22.0 23.1 23.5

IIFL Holdings NBFCs


Exhibit 16: IIFL Holdings – income statement and balance sheet March fiscal year-ends, 2015-20E (` mn)


2015 2016 2017 2018E 2019E 2020E

Consolidated income statement

Total revenues 36,661 41,016 49,248 55,044 61,454 72,384

Commission on equity broking 4,184 3,987 5,013 6,041 7,128 8,092

Brokerage in commodities 90 60 40 48 58 69

Fees earned on distribution (MF) 190 140 120 144 173 207

Life insurance commissions 677 613 564 612 703 810

Wealth management/ distribution 4,525 5,610 6,264 7,829 9,787 12,233

Interest income 26,223 29,754 36,294 39,228 42,684 49,981

Media income 626 526 330 402 463 532

Merchant banking income 20 210 500 600 300 300

Other income 126 116 124 140 160 160

Operating costs 13,438 14,045 13,627 16,236 18,954 22,477

Brokerage/ direct expenses 3,953 3,583 3,603 4,251 4,889 5,769

Business promotion and marketing 247 284 299 352 405 478

Staff expenses 6,048 7,045 7,840 9,408 11,102 13,211

Administrative expenses 3,190 3,133 1,885 2,225 2,558 3,019

Provisions 1,055 1,087 1,896 1,592 2,009 2,068

EBITDA 22,168 25,884 33,725 37,216 40,492 47,839

Depreciation/Amortization 591 661 540 594 653 718

EBIT 21,577 25,223 33,185 36,622 39,839 47,120

Interest and finance charges 14,337 16,800 20,922 20,966 21,158 25,343

Profit before tax 7,240 8,423 12,263 15,656 18,681 21,778

Taxation 2,474 2,878 4,018 5,323 6,352 7,404

Net profit 4,766 5,545 8,222 10,333 12,329 14,373

Minority interest in loss/profit 290 433 1,361 2,197 2,849 3,326

Net profit for appropriation 4,476 5,112 6,861 8,137 9,480 11,047

Dividend 957 1,345 1,449 1,737 2,027 2,362

Adjusted number of shares 310 317 318 318 318 318

EPS (Rs) 14.4 16.1 21.6 25.6 29.8 34.7

EPS -fully diluted (Rs) 13.2 14.8 19.8 23.5 27.4 31.9

DPS (Rs) 3.1 4.3 4.6 5.5 6.4 7.4

DPS -fully diluted (Rs) 2.8 3.9 4.2 5.0 5.9 6.8

Dividend payout ratio(%) 25 25 25 25 25 25

BVPS (Rs) 82.5 92.2 137.8 157.0 179.4 205.5

BVPS -fully diluted (Rs) 75.6 84.7 126.6 144.2 164.7 188.7

Consoidated balance sheet (Rs mn)

Goodwill (on consolidation) 383 578 637 — — —

Net owned assets 4,716 4,805 3,158 3,414 3,611 3,743

Current Assets 32,629 25,607 99,508 76,162 77,237 85,005

Cash and bank balance 18,287 16,288 38,461 9,010 3,370 3,752

Loans and advances 146,670 177,695 192,798 261,979 311,935 377,543

Total assets 193,661 228,765 337,627 341,554 392,783 466,291

Borrowings 146,393 159,476 220,074 210,000 245,000 300,000

Current liabilities & prov. 19,048 28,332 61,185 66,884 73,153 80,049


Shareholders equity 25,576 29,200 43,816 49,922 57,032 65,317

Paid-up capital 620 633 636 636 636 636

Reserves and surplus 24,956 28,566 43,180 49,286 56,396 64,681


Recruitment segment – some recovery, but not enough

Recruitment segment’s revenues increased by 11% yoy, led by 8% increase in unique

customers and 3% increase in realizations (in Ind-AS). Realization improvement is a positive,

especially after the -1.1%/0% change seen in 3Q/4QFY17, post the change in sales incentive

policy. However, overall revenue growth is still lackluster, meaningfully below the 19-20%

growth rates in FY2015-16. EBITDA margins for the segment continue to improve – they were

at 55% in 1QFY18 compared to 51% in 1QFY17. Overall, revenues from other segments

propped up the revenue growth; lower losses from 99acres led to 7% EBITDA outperformance.

Naukri – management remains confident of beating competition

Naukri’s traffic share has declined to 60%, from 70%+ earlier, on account of Indeed. While

Indeed has been present in India for the past 5-6 years, it has begun advertising recently, and

has hence taken away traffic share. Management mentioned that Indeed does not pose a major

competitive threat as it is primarily an aggregator and will find it difficult to ramp up in India

where a large competitor (Naukri) is already present. Further, Naukri is improving its products

such as Referral Hiring and Career Site Manager to make its products more useful to clients.

99acres – RERA implementation poses near-term growth challenges

99acres revenue growth at 13% yoy was better than expected, though the business continues

to face headwinds from RERA-related advertising uncertainty and lack of new launches.

Management mentioned that RERA impacted business mid-May onwards, and hence the full

impact may be felt in subsequent quarters.

Revise target price to ₹1,015; retain ADD

We cut FY2018-20E EPS estimates by 2-3% as we: (1) tone down Naukri’s revenue growth

from 13-14% earlier to 12-13%, and (2) project EBITDA loss for Jeevansathi in FY2018 versus a

small profit earlier to capture current operational trends. This results in a revision in our SoTP-

based target price to ₹1,015 (from ₹1,030). Retain ADD – while near-term headwinds persist,

we believe INFOE’s internet properties are well-positioned to capture future business uptick.

Info Edge (INFOE) Internet

Some hits, some misses. INFOE’s 1QFY18 revenues beat our estimate by 2.3% primarily

on account of better performance of 99acres and other verticals, even as Naukri revenues

marginally missed estimates. While Naukri realization growth at 2.9% yoy showed some

recovery after relatively subdued performance in 2HFY17, overall recruitment segment

growth at 11% yoy was muted due to weaker hiring trends. We revise our TP to ₹1,015

(from ₹1,030) as we bake in marginally weaker growth for Naukri.

ADD

JULY 25, 2017

RESULT


Price (`): 984


BSE-30: 32,246

Kawaljeet Saluja

Garima Mishra

Info Edge







MFs 13.0 EBITDA (Rs bn) 2.3 3.3 3.9


Absolute (0.2) 19.2 13.5 ROE (%) 10.8 12.7 14.0

Rel. to BSE-30 (3.7) 9.6 (2.1) Div. Yield (%) 0.3 0.6 0.7


1,128-752

119.4

Info Edge Internet


Exhibit 1: Standalone quarterly financials of Info Edge, March fiscal year-ends (Rs mn)


Exhibit 2: Segmental revenue and EBITDA snapshot of INFOE, March fiscal year-ends


Change

1QFY18 1QFY18E 1QFY17 4QFY17 KIE yoy qoq FY2018 FY2017 (%)

Total operating income 2,225 2,175 1,976 2,084 2.3 12.6 6.7 9,031 8,021 12.6

Employee expenses (991) (963) (936) 2.9 5.9 (3,618) (3,752) (3.6)

Network, Internet and other direct charges (34) (62) (30) (44.8) 12.1 (194) (173) 12.6

Administration and other expenses (242) (216) (269) 12.3 (10.1) (1,042) (941) 10.7

Advertising and promotion cost (254) (258) (217) (1.5) 17.1 (903) (881) 2.6

Operating expenses (1,521) (1,518) (1,498) (1,452) 1.5 4.7 (5,757) (5,746) 0.2

EBITDA 703 657 478 632 7.1 47.2 11.3 3,273 2,275 43.9

Depreciation (54) (67) (60) (56) (18.4) (9.0) (3.2) (267) (241) 10.9

EBIT 649 590 418 576 10.0 55.2 12.7 3,007 2,034 47.8

Other income 264 211 243 113 25.4 8.5 133 935 625 49.6

Financial charges (0) — (0) (0) — (32.0) (19.0) — (1)

Pre-tax profit 913 801 661 689 14.0 38.1 32.5 3,942 2,659 48.3

Taxation (270) (272) (217) (320) (0.7) 24.4 (15.6) (1,301) (575) 126.3

PAT (recurring) 642 528 444 369 21.5 44.8 74.3 2,641 2,084 26.7

Exceptional items — — — (40) NA NA NA — (40)

Reported PAT 642 528 444 329 21.5 44.8 95.4 2,641 2,044 29.2

Key ratios (%)

Direct cost of sales 46.1 51.9 46.4 42.2 48.9 (71.7)

Fixed cost of sales 22.3 24.0 23.3 21.5 22.7 (105.1)

EBITDA margin 31.6 30.2 24.2 30.3 36.2 28.4 348.7

PAT margin 28.9 24.3 22.4 17.7 29.2 26.0 212.4

Tax rate 29.6 34.0 32.9 46.5 33.0 21.6 (261.7)

Segmental break-up

Revenues

Recruitment Solutions 1,598 1,612 1,440 1,555 (0.9) 11.0 2.8 6,727 5,953 13.0

99acres 314 287 279 275 9.3 12.6 14.1 1,190 1,122 6.0

Other Verticals 313 276 258 254 13.6 21.5 23.1 1,114 945 17.8

Total 2,225 2,175 1,976 2,084 2.3 12.6 6.7 9,031 8,021 12.6

PBT

Recruitment Solutions 853 708 844 20.4 1.1 3,112

99acres (112) (213) (130) (47.4) (13.9) (663)

Others (30) (20) (45) 49.5 (34.3) (151)

Total 712 476 669 49.5 6.3 2,297

Less unallocable expenses (63) (58) (94) na na (264)

Add unallocable income 264 243 113 na na 625

Exceptional items — — (40) (40)

Profit before tax 913 661 649 na na 2,619

Change (%)

Yoy growth

1QFY17 1QFY18 (%)

Revenues

Recruitment Solutions 1,440 1,598 11

99acres 279 314 13

Jeevansathi 142 175 23

Shiksha 115 138 20

Total 1,976 2,224 13

Operating EBITDA

Recruitment Solutions 734 879 20

99acres (189) (96)

Jeevansathi 1 (41)

Shiksha (10) 20

Unallocated expenses (58) (60)

Total 478 702 47

Internet Info Edge


We note that Naukri’s deferred revenue growth is trending down, from 17% in 1QFY17 to

14% in 1QFY18, signifying weakening IT recruitment market.

Exhibit 3: Overall deferred revenue growth at 18% in 1QFY18 Segmental deferred revenue trends, March fiscal year-ends


Recruitment segment – growth jitters

Management reiterated their focus on addition of new tools to help enterprise customers

in the CSM (Career Site Manager) and referral hiring products. This should help Naukri to

up-sell products, and also keep competition at bay.

There seems to be definite demand slowdown from IT companies, which is being

reflected in the weak revenue trajectory. Management mentioned that while the impact

of sales incentive change policy, which led to some deferral in revenues, is largely behind,

however, GST implementation and the associated uncertainty/paperwork for clients also

impacted growth.

Indeed has taken away traffic share from Naukri due to their focus on advertising over

the past few months. However, given Indeed is only a job aggregator, their model may

not meet success in India, as it did in the US, which was a large and fragmented market a

few years back. INFOE believes that Indeed’s Indian experience may be similar to

Australia, where the presence of a large incumbent (Seek) made it difficult for Indeed to

make sizeable impact.

Recruitment segment EBITDA margins remain buoyant at 55%. INFOE has begun

disclosing margins in Ind-AS terms, and hence we do not have a complete time-series of

the same.

Yoy growth

1QFY16 2QFY16 3QFY16 4QFY16 1QFY17 2QFY17 3QFY17 4QFY17 1QFY18 (%)

IGAAP

Recruitment Solutions 1,599 1,447 1,446 1,702 1,895 1,726 1,680 1,998 2,182 15.1

99acres 131 138 134 177 159 184 150 207 216 35.8

Other Verticals 146 140 156 185 148 145 171 218 184 24.3

Total 1,876 1,725 1,736 2,064 2,202 2,055 2,001 2,423 2,582 17.3

IndAS

Recruitment Solutions 2,068 1,910 1,888 2,210 2,425 2,150 2,168 2,556 2,762 13.9

99acres 273 289 279 359 358 398 384 501 485 35.5

Other Verticals 193 187 205 244 211 199 238 310 290 37.4

Total 2,534 2,386 2,372 2,813 2,994 2,747 2,790 3,367 3,537 18.1

Info Edge Internet


Exhibit 4: Recruitment sales growth trajectory remains weak Recruitment sales trajectory for Info Edge, March fiscal year-ends, 1QFY12-1QFY18

Notes: (a) Revenues in IGAAP for comparative analysis.


x

Exhibit 5: Recruitment EBITDA margin has been fairly consistent Recruitment EBITDA trajectory for Info Edge, March fiscal year-ends

Notes: (a) EBITDA in IGAAP till 4QFY17, in Ind-AS 1QFY18 onwards.


x

28 27

20

27

19

12 10

4 8 8

11 14 16

19 19

25 20 20 19 19 17

13 13 9 11

(20)

0

20

40

60

0

200

400

600

800

1,000

1,200

1,400

1Q

FY1

2

3Q

FY1

2

1Q

FY1

3

3Q

FY1

3

1Q

FY1

4

3Q

FY1

4

1Q

FY1

5

3Q

FY1

5

1Q

FY1

6

3Q

FY1

6

1Q

FY1

7

3Q

FY1

7

1Q

FY1

8

(%)(Rs mn) Recruitment sales (LHS) Yoy growth (%) (RHS)

49 49 51

55

50 50

47 49

50 51 49

52 52 51 49

54 53

55

52

55 56

55 55 55 55

30

40

50

60

0

100

200

300

400

500

600

700

800

900

1Q

FY1

2

3Q

FY1

2

1Q

FY1

3

3Q

FY1

3

1Q

FY1

4

3Q

FY1

4

1Q

FY1

5

3Q

FY1

5

1Q

FY1

6

3Q

FY1

6

1Q

FY1

7

3Q

FY1

7

1Q

FY1

8

(%)(Rs mn) Recruitment EBITDA (LHS) Margin (%) (RHS)

Internet Info Edge


Exhibit 6: Number of unique paying customers increased 8% yoy Unique paying customers in recruitment business, March fiscal year-ends

Notes: (a) Data per Ind-AS.


Exhibit 7: Average realization has improved after a weak

2HFY17 performance Average realization per customer, March fiscal year-ends

Notes: (a) Data per Ind-AS.


99acres – macro environment remains tepid

99acres revenue growth at 13% yoy was better than expected, particularly in view of the

headwinds faced by the real estate sector. EBITDA loss declined from ₹170 mn in 1QFY17 to

₹71 mn in 1QFY18.

Management mentioned that revenue growth was decent as business momentum was

stable till mid-May. However, the second half of the month came under pressure as RERA

implementation began.

Overall, real estate market remains sluggish, primarily on account of RERA and the

accompanied uncertainty on advertising. Notably, Maharashtra was one of the first states

to pass RERA, post which revenues from the state have been hit. RERA has impacted:

(1) new project launches, as builders seek approvals, and (2) real estate advertising as

new rules on when a builder is allowed to advertise are not clear.

As RERA is passed by more states, it may impact 99acres, and hence revenue trajectory

for the business may remain volatile.

Overall losses for the business have declined primarily due to improved revenue

momentum, and reduced advertising spend due to lower competitive intensity.

5

7

9

11

36

38

40

42

44

46

48

1Q

FY1

6

2Q

FY1

6

3Q

FY1

6

4Q

FY1

6

1Q

FY1

7

2Q

FY1

7

3Q

FY1

7

4Q

FY1

7

1Q

FY1

8

(%)('000) Unique customers (#, LHS)

Yoy growth (%, RHS)

30

31

32

33

34

35

36

1Q

FY1

6

2Q

FY1

6

3Q

FY1

6

4Q

FY1

6

1Q

FY1

7

2Q

FY1

7

3Q

FY1

7

4Q

FY1

7

1Q

FY1

8

(Rs 000) Average realization (Rs 000)

Info Edge Internet


Exhibit 8: 99acres revenue showed some recovery in 1QFY18 99cres sales growth profile, March fiscal year-ends


Exhibit 9: Paid listings growth momentum remains weak 99acres paid listings growth trend, March fiscal year-ends


Other takeaways

Shiksha’s business momentum is strong, and the business reported EBITDA of ₹20 mn in

1QFY18, versus loss of ₹38 mn in FY2017. Shiksha’s new products are driving upgrades

and renewals; although the business may take some time to turn profitable for a

sustained amount of time.

Jeevansathi growth momentum remains strong with 23% yoy revenue growth and

increase in rate of profile addition. However, due to higher investments in the business, it

reported an EBITDA loss in 1QFY18 versus a profit in 1QFY17 (details in Exhibit 2).

271 268 264 280 279 308 261

275

314

-5

-2

1

4

7

10

13

16

-

40

80

120

160

200

240

280

320

360

1Q

FY1

6

2Q

FY1

6

3Q

FY1

6

4Q

FY1

6

1Q

FY1

7

2Q

FY1

7

3Q

FY1

7

4Q

FY1

7

1Q

FY1

8

(%)(Rs mn) 99acres Sales [LHS] Yoy growth [RHS]

(20)

0

20

40

60

80

100

0

100

200

300

400

500

600

700

800

900

1Q

FY1

2

3Q

FY1

2

1Q

FY1

3

3Q

FY1

3

1Q

FY1

4

3Q

FY1

4

1Q

FY1

5

3Q

FY1

5

1Q

FY1

6

3Q

FY1

6

1Q

FY1

7

3Q

FY1

7

1Q

FY1

8

('000) Paid listings (LHS) Yoy growth (%) (RHS) (%)

Internet Info Edge


Exhibit 10: Key changes to estimates for Info Edge, March fiscal year-ends, 2018-20E (Rs mn)


Exhibit 11: SoTP valuation of Info Edge on a June 2019E basis


x

2018E 2019E 2020E 2018E 2019E 2020E 2018E 2019E 2020E

Total

Sales 9,031 10,149 11,491 9,088 10,284 11,723 (0.6) (1.3) (2.0)

Sales growth (%) 12.6 12.4 13.2 13.3 13.2 14.0

EBITDA 3,273 3,939 4,672 3,405 4,023 4,834 (3.9) (2.1) (3.3)

EBITDA margin (%) 36.2 38.8 40.7 37.5 39.1 41.2

EPS (Rs) 21.8 26.4 31.5 22.6 26.9 32.5 (3.3) (1.9) (3.0)

EPS growth (%) 26.7 20.9 19.5 31.0 19.1 20.9

Recruitment

Sales 6,727 7,523 8,452 6,784 7,658 8,685 (0.8) (1.8) (2.7)

Growth (%) 13.0 11.8 12.4 14.0 12.9 13.4

EBITDA 3,767 4,213 4,733 3,799 4,289 4,863 (0.8) (1.8) (2.7)

EBTDA margin (%) 56.0 56.0 56.0 56.0 56.0 56.0

Jeevansaathi

Sales 712 859 1,038 712 859 1,038 — — —

Growth (%) 22.7 20.8 20.8 22.7 20.8 20.8

EBITDA (85) 26 52 14 34 83 NA (25.0) (37.5)

EBTDA margin (%) (12.0) 3.0 5.0 2.0 4.0 8.0

99 acres

Sales 1,190 1,324 1,515 1,190 1,324 1,515 — — —

Growth (%) 6.0 11.3 14.4 6.0 11.3 14.4

EBITDA (417) (331) (151) (417) (331) (151) NA NA NA

EBTDA margin (%) (35.0) (25.0) (10.0) (35.0) (25.0) (10.0)

Others

Sales 402 442 486 402 442 486 — — —

Sales growth (%) 10 10 10 10 10 10

EBITDA 8 31 39 8 31 39 — — —

EBITDA margin (%) 2.0 7.0 8.0 2.0 7.0 8.0

New estimates Old estimates % revision

Value Multiple Valuation Stake Valuation of stake Per share value

Parameter (Rs mn) (X) Valuation basis (Rs mn) (%) (Rs mn) (Rs)

Standalone business ex-

99 acres

June 2019E earnings (ex

interest income)2,806 26.0 P/E 72,944 100 72,944 602

99acres 7X sales 9,603 100 9,603 79

ZomatoAscribing a valuation of

US$600 mn39,600 46 18,216 150

Other investments Current invested book 1,993 1.0 P/B 1,993 0 1,993 16

Cash Cash+financial investments 19,844 1.0 1X cash 19,844 100 19,844 164

Total 1,013

Info Edge Internet


Exhibit 12: Details of Info Edge’s investments Investment details and operating metrics of Info Edge's investee companies, March fiscal year-ends


Exhibit 13: Summary financials for Info Edge (standalone), March fiscal year-ends, 2009-20E (Rs mn)


Investee company website Business 2015 2016 2017 2015 2016 2017 2015 2016 2017 2015 2016 2017

Partly owned subsidiaries

Zomato Media www.zomato.com Restaurants 3,283 50 967 (1,360)

Applect Learning Systems www.meritnation.com Education 718 968 1,205 56 59 59 216 287 363 (227) (414) (240)

Canvera Digital Technologies www.canvera.com Lifestyle 901 1,074 49 57 560 490 (320) (220)

Associates

Zomato Media www.zomato.com Restaurants 4,838 4,838 46 46 1,839 3,323 (4,410) (1,519)

Etechaces Marketing and Consulting www.policybazaar.com Insurance 325 325 325 23 10 10

Kinobeo Software www.mydala.com Deals 270 270 270 45 42 42

Canvera Digital Technologies www.canvera.com Lifestyle 671 32

Happily Unmarried Marketing www.happilyunmarried.com Lifestyle 94 163 223 27 44 48

Mint Bird Technologies www.vacationlabs.com Software 60 60 26 26

Green Leaves Consumer Services www.bigstylist.com Lifestyle 64 124 25 39

Rare Media Company www.bluedolph.com 74 74 35 35

VCare Technologies 40 15

Unnati Online 40 29

Ideaclicks Infolabs 24 28

Total 5,361 7,663 8,297 3,301 4,747 6,643 (2,332) (6,634) (2,190)

Wholly owned subsidiary

Allcheckdeals India www.allcheckdeals.com NA NA

Grand total 5,361 7,663 8,297 (2,332) (6,634) (2,190)

(211)

(Rs mn) (%) (Rs mn) (Rs mn)

2,467 (745) (1,490)2,118 2,061

Investment Shareholding Sales Operating EBITDA

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018E 2019E 2020E

Profit model

Total operating income 2,452 2,322 2,936 3,771 4,373 5,059 6,116 7,176 8,021 9,031 10,149 11,491

Operating expenses (1,782) (1,637) (1,938) (2,328) (2,875) (3,391) (4,293) (5,821) (5,746) (5,757) (6,210) (6,818)

EBITDA 669 685 998 1,443 1,498 1,668 1,822 1,355 2,275 3,273 3,939 4,672

Other income 286 320 283 395 465 433 764 785 625 935 1,098 1,288

PBDIT 956 1,005 1,280 1,837 1,963 2,100 2,586 2,140 2,900 4,209 5,036 5,960

Financial charges (17) (19) (22) (20) (25) (25) (30) (1) (1) — — —

Depreciation (71) (61) (71) (77) (94) (174) (173) (210) (241) (267) (273) (266)

Pre-tax profit 867 925 1,188 1,740 1,843 1,902 2,383 1,930 2,659 3,942 4,764 5,695

Taxation (270) (317) (400) (511) (528) (591) (736) (564) (575) (1,301) (1,572) (1,879)

Recurring PAT 597 607 788 1,230 1,315 1,311 1,647 1,366 2,084 2,641 3,192 3,815

Recurring EPS 5.5 5.6 7.2 11.3 12.0 12.0 13.7 11.3 17.2 21.8 26.4 31.5

Balance sheet

Equity share capital 273 273 546 546 1,092 1,092 1,202 1,207 1,211 1,211 1,211 1,211

Reserves & surplus 2,995 3,547 4,084 5,198 5,563 6,530 15,422 16,742 18,620 20,466 22,697 25,365

Shareholders funds 3,267 3,820 4,630 5,744 6,654 7,622 16,624 17,950 19,831 21,677 23,908 26,575

Total source of funds 3,270 3,826 4,636 5,747 6,659 7,626 16,627 17,953 19,835 21,677 23,908 26,575

Net fixed assets 384 357 693 626 1,006 952 935 1,020 602 536 463 397

Investments 195 1,276 2,969 3,814 4,247 6,152 14,383 16,246 18,120 18,120 18,120 18,120

Cash balances 3,218 2,777 2,037 2,662 2,801 2,311 3,007 1,493 2,908 5,177 8,340 11,510

Net current assets excluding cash (546) (618) (1,103) (1,396) (1,440) (1,852) (1,762) (1,298) (2,091) (2,451) (3,310) (3,748)

Total application of funds 3,270 3,826 4,636 5,747 6,659 7,626 16,627 17,953 19,835 21,677 23,908 26,575

Cash flow statement

Operating profit before working capital changes 685 688 881 1,327 1,434 1,509 1,850 1,478 2,271 2,908 3,464 4,081

Change in working capital/ other adjustments (299) 72 485 293 43 412 (90) 401 630 359 859 438

Cash flow from operating activites 387 759 1,366 1,620 1,477 1,922 1,760 1,879 2,901 3,267 4,324 4,519

Fixed assets (74) (34) (407) (9) (475) (119) (157) (293) (84) (200) (200) (200)

Investments (20) (162) (164) (979) (1,307) (878) (1,878) (1,578) (347) — — —

Cash (used)/ realised in investing activities (94) (196) (571) (988) (1,782) (997) (2,035) (1,871) (431) (200) (200) (200)

Free cash flow 292 564 794 631 (305) 925 (275) 8 2,470 3,067 4,124 4,319

Dividend paid (24) (24) (48) (127) (127) (319) (435) (725) (437) (795) (961) (1,148)

Interest charges (17) (19) (22) (20) (25) (25) (30) (1) (1) — — —

Cash (used)/realised in financing activities (30) (33) (51) (136) (135) (343) 7,032 (662) (419) (798) (961) (1,148)

Cash generated/ utilised 255 478 789 491 (735) 537 7,049 (654) 2,051 2,269 3,163 3,170

Cash at beginning of year 3,118 3,373 3,851 4,639 5,130 4,394 4,932 12,222 11,568 13,620 15,888 19,052

Cash at end of year 3,373 3,851 4,639 5,130 4,395 4,931 11,981 11,568 13,620 15,888 19,052 22,222

Internet Info Edge


Exhibit 14: Summary financials for Info Edge (consolidated), March fiscal year-ends, 2009-20E (Rs mn)


2009 2010 2011 2012 2013 2014 2015 2016 2017 2018E 2019E 2020E

Profit model

Total operating income 2,458 2,371 3,224 3,920 4,723 5,672 7,332 7,475 8,876 9,972 11,184 12,629

Operating expenses (1,796) (1,745) (2,390) (2,736) (3,513) (4,706) (7,116) (6,553) (7,104) (7,251) (7,779) (8,513)

EBITDA 662 626 834 1,183 1,210 966 216 922 1,772 2,720 3,405 4,117

Other income 279 307 274 395 475 502 942 4,407 828 1,159 1,344 1,558

PBDIT 941 932 1,108 1,578 1,685 1,468 1,158 5,328 2,600 3,879 4,749 5,675

Financial charges (17) (20) (23) (22) (28) (30) (38) (1) (2) (3) (3) (3)

Depreciation (71) (65) (80) (83) (118) (212) (469) (238) (328) (276) (284) (278)

Pre-tax profit 853 848 1,005 1,473 1,540 1,227 651 5,089 2,270 3,600 4,462 5,394

Taxation (270) (318) (400) (529) (528) (591) (740) (573) (478) (1,215) (1,497) (1,804)

Recurring PAT 570 559 581 1,043 1,153 923 296 1,501 (103) 1,876 2,806 3,534

Recurring EPS 5.2 5.1 5.3 9.5 10.6 8.4 2.5 12.4 (0.9) 15.5 23.2 29.2

Balance sheet

Equity share capital 273 273 546 546 1,092 1,092 1,202 1,207 1,211 1,211 1,211 1,211

Reserves & surplus 2,980 3,474 3,805 4,726 4,993 5,628 12,949 14,278 14,154 15,743 17,748 20,189

Minority interest — — 16 (25) 105 1,392 4,188 (236) 406 406 406 406

Shareholders funds 3,252 3,746 4,367 5,247 6,189 8,112 18,339 15,249 15,771 17,360 19,364 21,806

Total source of funds 3,256 3,753 4,374 5,250 6,194 8,116 18,342 15,253 15,850 17,360 19,364 21,806

Net fixed assets 385 363 741 643 1,620 1,588 5,878 824 1,291 1,315 1,331 1,353

Investments 183 1,141 2,628 3,152 2,614 5,380 11,745 15,825 14,886 14,886 14,886 14,886

Cash balances 3,221 2,791 2,076 2,855 3,466 3,072 3,582 1,541 3,032 3,906 6,838 9,789

Net current assets excluding cash (552) (577) (1,130) (1,441) (1,551) (1,987) (2,927) (3,450) (3,703) (3,041) (3,986) (4,518)

Total application of funds 3,256 3,753 4,374 5,250 6,194 8,116 18,342 15,253 15,850 17,360 19,364 21,806

Cash flow statement

Operating profit before working capital changes 671 615 708 1,049 1,157 877 418 4,755 2,122 2,663 3,252 3,871

Change in working capital/ other adjustments (295) 24 553 311 110 436 940 523 253 (662) 945 532

Cash flow from operating activites 375 639 1,261 1,361 1,267 1,313 1,358 5,278 2,375 2,002 4,196 4,402

Fixed assets (75) (43) (457) 14 (1,095) (180) (4,759) 4,816 (794) (300) (300) (300)

Investments 2,471 (959) (1,486) (525) 538 (2,766) (6,365) (4,080) 939 — — —

Cash (used)/ realised in investing activities 2,396 (1,001) (1,944) (510) (557) (2,946) (11,124) 736 145 (300) (300) (300)

Free cash flow 2,771 (362) (683) 850 710 (1,633) (9,767) 6,015 2,520 1,702 3,896 4,102

Dividend paid (24) (24) (48) (127) (127) (319) (435) (725) (437) (795) (961) (1,148)

Interest charges (17) (20) (23) (22) (28) (30) (38) (1) (2) (3) (3) (3)

Cash (used)/realised in financing activities (17) (44) (34) (180) — 996 9,947 (4,269) 946 (802) (964) (1,151)

Cash generated/ utilised 2,735 (430) (714) 779 611 (395) 510 (2,041) 1,491 873 2,933 2,951

Cash at beginning of year 486 3,221 2,791 2,076 2,855 3,466 3,072 3,582 1,541 3,032 3,906 6,838

Cash at end of year 3,221 2,791 2,076 2,855 3,467 3,072 3,582 1,541 3,032 3,906 6,838 9,789


Construction – downhill post strong 1QFY18; uptick in ordering from FY2019

IRB reported a strong yoy uptick in construction revenues as four of the five projects leveraged

the S-curve of execution. EBITDA margin was also strong adjusted for the InvIT-related

expenses. IRB expects moderation on both these counts. While backlog provides good visibility,

it is skewed towards projects yet to start construction (~20% share)/get financial closure (~40%

share). GST-led increase in input charges would also take some sheen off IRB’s margin.

BOT: Modest traffic growth continues; weak links not turning around

IRB reported a sluggish 3-4% growth in traffic volumes for its yoy comparable projects. The key

laggard remained Ahmedabad-Vadodara (flat yoy over low base on loss of growth volumes to a

parallel upgraded state highway). IRB has put a ₹1.68 bn claim to NHAI on this count over Dec

2015-June 2017 or a material 30% of revenues booked over this period. Putting the severity of

traffic diversion differentially, the project debt increased by ₹8 bn qoq primary on shortfall

funding, in spite of its premium payments having been deferred. Traffic growth for the portfolio

would weaken in 2QFY18 (GST-led trade disruption) before growing on low base in 3QFY18.

InvIT has prepared IRB for a bout in ordering that may take time

With an improved debt to equity of 2:1 post the InvIT proceeds, board approval to sell the

Amritsar-Pathankot project and limited ₹13 bn or so of pending equity requirement, IRB is well-

placed to add to its BOT portfolio. Its focus on pure BOT projects, the pipeline of which is weak

in FY2018, has made IRB tone down its expectations to 300-400 kms of order wins in FY2018,

much lower than the 500-600 km made possible by the InvIT.

Marginally revise SoTP on weakness in traffic volumes

IRB reported a 33%/27%/38%/PAT yoy increase in consolidated revenues/EBITDA/PAT in

1QFY18 on strong construction revenues. We maintain our operational estimates and bake in

investments coming from InvIT. SoTP reduces on weak toll revenues in Agra-Etawah and

Ahmedabad-Vadodara projects.

IRB Infrastructure (IRB) Infrastructure

Less to cheer in FY2018. Beyond a strong construction print in 1QFY18, we find

limited triggers in FY2018 for IRB. Composition of backlog and weak BOT prospects

would weaken execution through 9MFY18. GST may take some sheen off margin.

Traffic growth has started on a weak note and July/August would also be weak. The

potential transfer of Amritsar-Pathankot to InvIT would happen at terms similar to the

earlier transfer. We marginally revise down our TP to ₹255 from ₹260 on weak toll

revenues for Ahmedabad-Vadodara and Agra-Etawah.

BUY

JULY 25, 2017

RESULT


Price (`): 217


BSE-30: 32,246

Aditya Mongia

Ajinkya Bhat

IRB Infrastructure







MFs 6.9 EBITDA (Rs bn) 30.5 27.3 32.1


Absolute 0.9 (12.1) 0.2 ROE (%) 14.2 17.2 15.7

Rel. to BSE-30 (2.5) (19.2) (13.6) Div. Yield (%) 0.0 0.0 0.0


273-177

76.2

Infrastructure IRB Infrastructure


1QFY18 earnings call takeaways

Work on existing projects in full swing, new order pipeline of 300-400 km.

IRB reported a strong 44% jump in construction revenues in the quarter led by

accelerated execution on the five under-construction projects. Out of these, the

company expects to start tolling on Kaithal-Rajasthan-Haryana border project in a

month’s time and an ahead-of-schedule completion of Solapur-Yadeshi in 1-1.5

months. Agra-Etawah project is a six-laning project and has started tolling for the

existing 4 lanes at 75% rate of the 6-lane tariff. The remaining two projects, namely

Yadeshi-Aurangabad and Karwar-Kundapur projects are expected to be completed by

March 2019.

The company is also pressing ahead with financials closures for three new projects it

recently won in Rajasthan. The management has visibility on additional pipeline of

300-400 km of BOT projects to be tendered by NHAI and the company is prepared to

bid for them once they are put to bidding. The company has been evaluating HAM

projects as well and may bid for those when appropriate.

Resolution awaited for claims filed with NHAI. The company has filed compensation

claims with NHAI on key issues of tolling suspension during demonetization and

competing road for Ahmedabad-Vadodara expressway. On the first issue, the company

has not received an update from NHAI whether the compensation would be provided in

cash or by way of extension of tolling. On the second issue, the dispute will have to be

resolved between IRB, NHAI and Gujarat government as the upgradation of competing

road by the state government has hampered traffic flow on Ahmedabad-Vadodara

expressway. The company has suggested the government to start tolling on the

competing road at a premium to its own concession project, as an effective way of

regulating the flow. The company has filed claims of ₹1.7 bn with NHAI on this count.

Guidance remains unchanged, large equity commitments required.

Despite a strong growth in the construction segment in 1QFY18, the management

maintained the full-year segmental guidance at 10-15% topline growth. This indicates

an expectation of slowdown in execution in the coming 3 quarters (especially during

the monsoon season). The management expects margins to decline by 100-200 bps as

the firm anticipates increase in raw material prices on account of GST.

BOT projects are also likely to witness ~4-5% traffic growth and 3-4% tariff growth

(barring Mumbai-Pune that received 18% tariff revision as per the concession

agreement). The company will also have to contribute ~₹13 bn of equity over the next

3-4 years for the new projects (Agra-Etawah: ₹4 bn, Udaipur-Gujarat border: ₹3.5 bn,

Gulabpura-Chittorgarh: ₹3.1 bn and Kishangarh-Gulabpura: ₹2 bn).

InvIT expansion on the cards. The management has proposed to transfer Amritsar-

Pathankot project to the IRB InvIT that will be value accretive for the trust (if funded by

debt) as well as would help the company monetize existing asset and receive cash for

further investments. If approved by the board of InvIT by end-July, the transaction can be

completed in 3-4 months.

IRB Infrastructure Infrastructure


Other takeaways.

The cash flow distribution from InvIT will be recognized by the company with the lag

of a quarter. Accrual accounting is inappropriate for InvIT as unlike debt securities,

InvIT units do not provide fixed claim every quarter.

The full impact of InvIT will be visible in ‘other income’ from next quarter as it will

include (1) the quarterly distribution from InvIT to the unit holders (12% yield) and

(2) yield generated on the large cash quantum received from InvIT on transfer of IRB’s

six operational assets to the trust.

Exhibit 1: Strong growth in construction segment revenues, modest growth in BOT when adjusted for projects transferred to InvIT IRB (consolidated) - 1QFY18 - key numbers, March fiscal year-ends (Rs mn)

Notes:

(a) We have not shown growth comparisons for qoq as well as FY2018E-FY2017 periods as these numbers need to be restated by the company for

like-for-like comparison in light of transfer of six assets to InvIT in May-2017.

(b) 1QFY17 InvIT-adjusted numbers are our pro-forma estimates based on toll details of the InvIT-transferred projects and margin assumptions.


InvIT-adj.

1QFY18 1QFY18E 1QFY17 1QFY17 4QFY17 vs est. yoy (adj.) FY2018E FY2017

Net Sales 18,169 15,337 15,173 13,658 16,271 18.5 33.0 56,411 58,459

Construction 13,088 10,445 9,085 9,085 10,330 25.3 44.1 39,262 34,675

BOT 5,081 4,892 6,089 4,573 5,942 3.9 11.1 17,150 23,784

Total Expenses (9,991) (7,433) (8,053) (29,156) (27,976)

Direct expenses (8,467) (6,291) (6,648) (22,867)

Employees cost (572) (639) (814) (2,726)

Other expenditure (952) (504) (591) (2,383)

EBITDA 8,178 7,285 7,740 6,456 8,218 12.3 26.7 27,255 30,483

Other income 535 331 308 289 2,396 1,232

PBDIT 8,713 7,617 8,047 8,507 29,651 31,715

Depreciation (1,816) (1,656) (2,207) (2,264) 9.7 (4,888) (8,548)

EBIT 6,898 5,961 5,840 6,244 24,762 23,167

Interest (2,854) (3,090) (3,282) (3,260) (7.6) (11,131) (13,327)

PBT 4,044 2,871 2,558 2,441 2,983 40.8 65.7 13,632 9,840

Tax Expense (1,665) (741) (740) (723) (911) 124.7 (3,656) (2,685)

Net Profit 2,379 2,130 1,818 1,718 2,072 11.7 38.4 9,976 7,155

Minority interest — — 0 0 — 1

Other comprehensive income (467) — 1 (10) — (10)

Reported PAT 1,911 2,130 1,819 1,718 2,063 (10.3) 11.2 9,976 7,145

Key ratios (%)

Direct expenses/sales 46.6 — 41.5 40.9 — 39.1

Employees cost/sales 3.1 — 4.2 5.0 — 4.7

Other expenditure/sales 5.2 — 3.3 3.6 — 4.1

EBITDA margin 45.0 47.5 51.0 47.3 50.5 48.3 52.1

PBDIT margin 48.0 49.7 53.0 52.3 52.6 54.3

PBT margin 22.3 18.7 16.9 17.9 18.3 24.2 16.8

PAT margin 13.1 13.9 12.0 12.6 12.7 17.7 12.2

Effective tax rate 41.2 25.8 28.9 29.6 30.5 26.8 27.3

EPS (Rs) 5.4 6.1 5.2 4.9 5.9 28.4 20.3

%change



Exhibit 2: IRB – key segmental numbers – 1QFY18, March fiscal year-ends (Rs mn)


Exhibit 3: Majority of backlog comprises projects that are yet to commence

Break-up of the order backlog of IRB at end of 1QFY18, March fiscal year-ends


InvIT-adj.

1QFY18 1QFY18E 1QFY17 1QFY17 4QFY17 vs est. yoy - adj) FY2018E FY2017

Revenues 18,169 15,337 15,173 13,658 16,271 18.5 33.0 56,411 58,459

Construction 13,088 10,445 9,085 9,085 10,330 25.3 44.1 39,262 34,675

BOT 5,081 4,892 6,089 4,573 5,942 3.9 11.1 17,150 23,784

EBITDA 8,178 7,285 7,740 6,456 8,218 12.3 26.7 27,255 30,483

Construction 3,813 3,029 2,583 2,583 3,064 25.9 47.6 11,386 10,135

BOT 4,365 4,256 5,157 3,873 5,154 2.6 12.7 15,869 20,348

Margins (%) 45.0 47.5 51.0 47.3 50.5 48.3 52.1

Construction 29.1 29.0 28.4 28.4 29.7 29.0 29.2

BOT 85.9 87.0 84.7 84.7 86.8 92.5 85.6

PBT 4,044 2,558 2,441 2,983 65.7 13,632 9,839

Construction 3,187 1,956 1,956 2,189 62.9 7,177 6,957

BOT 857 602 485 795 76.7 6,454 2,883

PAT 2,379 1,818 1,718 2,072 38.4 9,976 7,155

Construction 2,117 1,305 1,305 1,312 62.2 4,747 4,602

BOT 261 513 413 760 (36.8) 2,097 2,553

%change

Ongoing BOT

projects31%

BOT projects in

O&M phase8%

BOT projects -

construction yet to commence

61%

Order backlog: Rs89 bn



Exhibit 4: 18% tariff revision in Mumbai-Pune project led to double-digit toll revenue growth IRB - project-wise toll collection, March fiscal year-ends (Rs mn)

Notes:

(a) Total toll collection number excludes Agra-Etawah from the sum to ensure like-for-like comparison.


Exhibit 5: InvIT proceeds led to a sharp decline in net-debt; however the company plans to repay

debt only as per the repayment schedule in order to avoid pre-payment penalties Consolidated net debt of IRB, March fiscal year-ends, 1QFY13-1QFY18 (Rs bn)


1QFY18 1QFY17 4QFY17 yoy qoq FY2017 FY2016 % change

Total toll collection 3,741 3,272 3,239 14.3 15.5 13,307 10,620 25.3

Pune - Solapur 64 63 61 1.6 4.9 243 236 3.0

Pune - Nashik 79 70 76 12.9 3.9 302 269 12.5

Thane - Ghodbunder 84 90 82 (6.7) 2.4 339 340 (0.2)

Pathankot Amritsar 320 294 271 8.8 18.1 1,164 1,008 15.5

Ahemdabad Vadodara 916 875 917 4.7 (0.1) 3,534 2,205 60.2

Mumbai - Pune 2,278 1,880 1,832 21.2 24.3 7,725 6,563 17.7

Agra Etawah 247 — 261 (5.4) 675 —

% Change

59 62 6673

8087 92 96

102 106112 110

116123

129 134

149 146 148 151

112

(10)

10

30

50

70

90

110

130

150

170

1Q

FY1

3

2Q

FY1

3

3Q

FY1

3

4Q

FY1

3

1Q

FY1

4

2Q

FY1

4

3Q

FY1

4

4Q

FY1

4

1Q

FY1

5

2Q

FY1

5

3Q

FY1

5

4Q

FY1

5

1Q

FY1

6

2Q

FY1

6

3Q

FY1

6

4Q

FY1

6

1Q

FY1

7

2Q

FY1

7

3Q

FY1

7

4Q

FY1

7

1Q

FY1

8

(Rs bn) Consolidated net debt



Exhibit 6: External debt has peaked out/is declining for all operational projects; although increased at some SPVs due to internal debt

(L&A extended by intra-group companies) Details of debt for IRB, March fiscal year-ends, 2015-1QFY18 (Rs mn)


Exhibit 7: We value IRB at Rs255/share based on SoTP Sum-of-the-parts analysis of IRB


2015 1QFY16 2QFY16 3QFY16 4QFY16 1QFY17 2QFY17 3QFY17 4QFY17 1QFY18 Comment

Road projects

Thane-Bhiwandi bypass 910 831 713 595 437 328 109 — — Paid off

Mumbai-Pune Expressway 5,886 5,385 4,929 4,503 4,061 3,635 3,163 2,592 2,027 1,459 Declining

Pune-Solapur 553 523 513 513 513 513 513 513 513 513 Flat

Pune-Nashik 838 796 755 753 753 737 737 753 753 738 Flat

Thane-Ghodbunder 1,414 1,350 1,341 1,324 1,320 1,180 1,104 1,028 952 791 Declining

Integrated Road Dev. in Kolhapur 2,451 3,892 3,865 3,935 4,001 3,585 3,541 3,497 3,451 3,928 Increased again

Pathankot-Amritsar 9,336 9,153 9,104 9,060 8,998 8,979 8,911 8,894 8,792 9,434 Increased again

Ahmedabad-Vadodara Expressway 26,420 27,988 29,242 30,992 31,578 31,578 31,550 31,548 31,486 39,879 Increased again

Goa Kundapur 6,002 8,151 8,709 8,709 9,339 11,093 12,004 13,091 13,092 13,093 Peaking out

Solapur Yedeshi 1,890 2,842 3,057 5,459 6,710 7,479 8,322 8,322 8,322 8,322 Flat

Yedeshi Aurangabad 1,692 2,190 3,412 6,326 8,893 10,328 11,671 13,356 15,140 15,988 Increasing

Kaithal Rajanthan 2,533 4,215 7,710 8,566 10,009 11,678 12,731 13,716 Increasing

Agra Etawah 1,643 2,053 3,768 5,813 Increasing

Subtotal - Road projects 57,392 63,101 68,173 76,384 84,313 88,001 93,277 97,325 101,027 113,674

Value Stake

Value of

IRB's stake Per share

(Rs mn) (%) (Rs mn) (Rs) Comment

BOT FCFE 45,569 45,569 130 FCFE

4 BOT projects 151 100.0 151 0 Jun-19 FCFE

Kharpada Bridge (200) 100.0 (200) (1) Jun-19 FCFE

Nagar - Karmala - Tembhurni (151) 100.0 (151) (0) Jun-19 FCFE

Pune - Solapur 251 100.0 251 1 Jun-19 FCFE

Pune - Nashik 861 100.0 861 2 Jun-19 FCFE

Mumbai - Pune 15,739 100.0 15,739 45 Jun-19 FCFE

Thane - Ghodbunder 12 100.0 12 0 Jun-19 FCFE

Bharuch - Surat — 100.0 — — Jun-19 FCFE

Surat-Dahisar — 100.0 — — Jun-19 FCFE

Amritsar to Pathankot 5,066 100.0 5,066 14 Jun-19 FCFE

Jaipur - Tonk - Deoli — 100.0 — — Jun-19 FCFE

Talegaon to Amravati — 100.0 — — Jun-19 FCFE

Tumkur-Chitradurg — 100.0 — — Jun-19 FCFE

Ahmedabad Vadodara (9,654) 100.0 (9,654) (27) Jun-19 FCFE

Omallur-Salem-Namakkal — 74.0 — — Jun-19 FCFE

Solapur-Yedeshi 4,133 100.0 4,133 12 Jun-19 FCFE

Yedeshi-Aurangabad 8,651 100.0 8,651 25 Jun-19 FCFE

Goa-Kundapur 8,636 100.0 8,636 25 Jun-19 FCFE

Rajasthan Kaithal 4,165 100.0 4,165 12 Jun-19 FCFE

Agra Etawah (2,136) 100.0 (2,136) (6) Jun-19 FCFE

Kolhapur urban road project 3,300 100.0 3,300 9 2X investment

Panaji to Goa Karnataka Border 3,307 100.0 3,307 9 Based on 75% payment made

Real Estate 3,438 100.0 3,438 10 1X investment

Net cash (including Rs9 bn of investments) 6,591 100 6,591 19

Construction 36,768 100 36,768 105 3XJun-19E EBITDA

Total 88,928 88,928 253 SOTP of existing business



Exhibit 8: Change in estimates for IRB Infrastructure Developers, March fiscal year-ends, 2016-20E (Rs mn)


2016 2017 2018E 2019E 2020E 2018E 2019E 2020E 2018E 2019E 2020E

Income statement

Total operating income 51,279 58,459 56,411 62,583 62,217 56,158 62,155 61,856 0.5 0.7 0.6

Construction 30,049 34,675 39,262 41,733 43,850 38,686 41,310 43,534 1.5 1.0 0.7

Toll collection BOT 21,231 23,784 17,150 20,849 18,367 17,472 20,845 18,323 (1.8) 0.0 0.2

Total operating costs (24,676) (27,976) (29,156) (30,489) (32,050) (28,749) (30,222) (31,641) 1.4 0.9 1.3

Construction expenses (21,694) (24,540) (27,876) (29,631) (31,133) (27,080) (28,917) (30,473)

BOT expenses (2,983) (3,436) (1,281) (858) (916) (1,669) (1,305) (1,168)

EBITDA 26,603 30,483 27,255 32,094 30,167 27,409 31,933 30,215 (0.6) 0.5 (0.2)

Other income 1,271 1,232 2,396 2,682 2,999 1,491 1,602 1,919 60.7 67.4 56.3

PBDIT 27,874 31,715 29,651 34,775 33,166 28,900 33,534 32,134 2.6 3.7 3.2

Financial charges (10,639) (13,327) (11,131) (13,114) (13,324) (11,433) (13,114) (13,324) (2.6) — —

Depreciation (8,533) (8,548) (4,888) (5,586) (5,339) (4,967) (5,599) (5,338) (1.6) (0.2) 0.0

Pre-tax profit 8,702 9,840 13,632 16,075 14,504 12,501 14,821 13,472 9.0 8.5 7.7

Taxation (2,306) (2,685) (3,656) (5,277) (4,641) (3,226) (4,975) (4,485) 13.3 6.1 3.5

Adjusted PAT 6,396 7,155 9,976 10,798 9,863 9,275 9,846 8,987 7.6 9.7 9.7

EPS (Rs) 18.2 20.4 28.4 30.7 28.1 26.4 28.0 25.6 7.6 9.7 9.7

Key ratios (%)

EBITDA margin 51.9 52.1 48.3 51.3 48.5 48.8 51.4 48.8

PAT margin 12.5 12.2 17.7 17.3 15.9 16.5 15.8 14.5

RoE 13.9 14.2 17.2 15.7 12.4 16.1 14.5 11.6

Yoy growth (%)

Revenues 33.3 14.0 (3.5) 10.9 (0.6) (3.9) 10.7 (0.5)

EBITDA 20.3 14.6 (10.6) 17.8 (6.0) (10.1) 16.5 (5.4)

PAT 17.9 11.8 39.4 8.2 (8.7) 29.6 6.2 (8.7)

New estimates Old estimates % revision



Exhibit 9: Consolidated financials of IRB Infrastructure Developers, March fiscal year-ends, 2011-20E (Rs mn)


2011 2012 2013 2014 2015 2016 2017 2018E 2019E 2020E

Income statement

Total operating income 24,381 31,330 36,872 37,319 38,475 51,279 58,459 56,411 62,583 62,217

Construction 16,234 22,002 25,988 25,364 20,029 30,049 34,675 39,262 41,733 43,850

Toll collection BOT 8,147 9,328 10,884 11,955 18,356 21,231 23,784 17,150 20,849 18,367

Total operating costs (13,442) (17,637) (20,540) (19,782) (16,358) (24,676) (27,976) (29,156) (30,489) (32,050)

Construction expenses (12,349) (16,131) (19,126) (18,189) (13,871) (21,694) (24,540) (27,876) (29,631) (31,133)

BOT expenses (1,093) (1,506) (1,414) (1,593) (2,487) (2,983) (3,436) (1,281) (858) (916)

EBITDA 10,939 13,694 16,333 17,537 22,117 26,603 30,483 27,255 32,094 30,167

Other income 645 1,252 1,301 1,214 1,130 1,271 1,232 2,396 2,682 2,999

Financial charges (3,572) (5,464) (6,153) (7,561) (9,312) (10,639) (13,327) (11,131) (13,114) (13,324)

Depreciation (2,254) (2,970) (4,415) (4,770) (7,071) (8,533) (8,548) (4,888) (5,586) (5,339)

Pre-tax profit 5,759 6,512 7,066 6,419 6,865 8,702 9,840 13,632 16,075 14,504

Taxation (1,117) (1,501) (1,530) (1,823) (1,441) (2,306) (2,685) (3,656) (5,277) (4,641)

Adjusted PAT 4,641 5,011 5,536 4,596 5,424 6,396 7,155 9,976 10,798 9,863

EPS (Rs) 13.6 15.1 16.7 13.8 15.4 18.2 20.4 28.4 30.7 28.1

Balance sheet

Share holder's funds 24,326 28,566 32,556 35,607 43,609 48,363 52,716 63,514 74,313 84,176

Minority interest 896 1,123 1,092 356 351 355 — — — —

Loan funds 46,255 70,722 87,761 110,841 125,762 144,727 130,205 142,172 147,469 146,560

Total sources of funds 71,709 100,670 121,667 146,947 385,391 412,856 452,995 373,702 389,797 398,751

Net block 58,707 79,995 104,248 130,411 365,991 390,566 310,826 330,160 330,930 325,243

Investments 551 139 620 145 88 1,483 2,574 11,574 11,574 11,574

Cash & bank balances 12,000 18,208 14,710 15,012 15,798 15,008 13,077 32,285 51,042 66,865

Net current assets (ecl. cash) 443 2,328 2,089 1,379 3,515 5,799 (318) (318) (3,749) (4,931)

Total application of funds 71,709 100,670 121,667 146,947 385,391 412,856 452,995 373,702 389,797 398,751

Key ratios (%)

EBITDA margin 44.9 43.7 44.3 47.0 57.5 51.9 52.1 48.3 51.3 48.5

PAT margin 19.0 16.0 15.0 12.3 14.1 12.5 12.2 17.7 17.3 15.9

Net debt: Equity (X) 1.4 1.8 2.2 2.7 2.5 2.7 2.2 1.7 1.3 0.9

RoE 20.2 18.9 18.2 13.5 13.7 13.9 14.2 17.2 15.7 12.4

RoCE 12.1 10.7 9.3 7.5 4.8 3.6 3.9 4.4 5.1 4.8

Yoy growth (%)

Revenues 43.0 28.5 17.7 1.2 3.1 33.3 14.0 (3.5) 10.9 (0.6)

EBITDA 38.4 25.2 19.3 7.4 26.1 20.3 14.6 (10.6) 17.8 (6.0)

PAT 20.0 10.8 11.1 (17.5) 18.2 17.9 11.8 39.4 8.2 (8.7)


Pricing/promotions – little action in June; GST-led price cuts in several categories in July

Refer to Exhibits 3 and 4 for pricing and promotional activity respectively. Refer to Exhibit 5 for

GST-led price changes in July (not yet fully visible in stores).

Soaps/detergents. We saw little incremental activity in S&D in June barring 6% hike in

Godrej No1 soaps and promotional offer on Surf Excel Quickwash 500 gm SKU (free

detergent bar). However, post GST rollout several companies have cut price of soaps and

detergent bars due to reduction in effective tax rate (stocks aren’t yet visible in stores) –

(1) HUVR has cut prices of Pears and Dove by 25% (through extra grammage), Lifebuoy and

Lux by 13% (direct price reduction), (2) ITC has cut prices across its soap brands by 20-30%

and (3) HUVR has reduced prices of Rin and Surf Excel detergent bar (select SKUs) by 10-

14%.

Personal care items. (1) Hair oils – no incremental activity, promotional offer on Bajaj

ADHO and Dabur Almond/Vatika continue while Marico has withdrawn all promotional

offers on all its hair oils; post GST Emami has cut prices of 7 oils in 1 by 8% while we haven’t

yet noticed pricing activity from other players, (2) toothpaste – again no incremental offers;

however, post GST Colgate has cut price of CDC by 12% (more price hikes still rolling out in

the market and hence not yet visible).

Food/beverage items. (1) Biscuits – we did see incremental promotional activity from both

Britannia and Parle in select brands, (2) edible oils – promotional offers (extra grammage)

continue on select brands like Fortune (offering 1L free on 5L pack) and Riso (offering 2L free

on 5L pack); Marico isn’t running any promotional offer on Saffola, (3) dairy – Nestle has

hiked prices of its entire baby foods portfolio by 2-3% and (4) others – ITC is running

promotional offers on Aashirvaad whole wheat atta (offering freebies) and HUVR has cut

prices of Kissan Ketchup by 15% (in July, post GST implementation).

RM trends –agri-inputs mixed, oil-based inputs deflationary while paint inputs inch up

Refer to Exhibit 5 for detailed RM inflation impact.

Agri-inputs. Agri-inputs exhibited another month of mixed trends – select inputs like tea

(both domestic and Kenyan) inched up 3-4% mom, coffee Robusta inched up 3% mom and

milk powder witnessed 2% mom inflation; however, other key inputs like coffee Arabica

(down 5% mom), barley (down 5% mom) and sugar (down 2% mom) posted deflationary

trend. We note inflation in several key agri-inputs like wheat, barley and sugar has

come down materially over past six months (wheat and barley are down 15-20% and

sugar is up only 3% over past six months).

Oil commodities basket. Oil basket posted another month of broad-based deflationary

trend with most key inputs like crude oil (down 8% mom), palm oil (down 3% mom),

mentha oil (down 2% mom), several vegetable oils (down 3-8% mom) and LLP (down 3%

mom) witnessing drop in prices.

Consumer Products India

Month in review – June 2017: GST-led price cuts getting rolled out. KIE consumer

universe underperformed the broader markets over the past month delivering flattish

returns. RM trends have remained deflationary (similar trend over past few months)

across most inputs (barring tea and paint inputs). We saw little incremental activity in

June due to impending GST rollout; however, in July we have seen price cuts across

several categories including soaps, detergent bars, toothpaste and select hair oils (more

in pipeline, not yet visible in stores). Sector valuations remain rich at 35X FY2019E

earnings (38X, ex-ITC). We retain our ‘tread selectively’ stance. Preferred picks – ITC,

GSK-CH, BJCOR, BRIT and CLGT.

CAUTIOUS

JULY 25, 2017

UPDATE

BSE-30: 32,246

Rohit Chordia

Anand Shah

India Consumer Products


Other commodities. Among other commodities, several paint inputs continued to

witness inflation including formaldehyde (up 5% mom) and styrene (up 28% mom) while

inputs like LAB (down 3 % mom) and VAM (down 5% mom) witnessed deflationary

trend.

Who benefits? (1) fall in crude oil prices will help all FMCG companies as it will bring

down packaging costs (with a lag), (2) deflation in wheat, barley and sugar prices will give

some respite to food companies like Britannia, Nestle and GSK-CH, (3) fall in palm

oil/PFAD is likely to help soap companies like HUVR, GCPL and JYL, (4) fall in rice bran oil

is likely to benefit Marico, (5) fall in mentha oil will benefit Emami and (6) fall in LLP will

benefit all hair oil companies, while fall in copra will benefit Marico.

Who gets impacted? (1) Inflation in several paint inputs is likely to hurt paint companies;

however, we note INR appreciation and recent price hike of 3% effective May should

help limit inflation impact and (2) higher tea prices will hurt companies like TGBL and

HUVR.

Sector (KIE consumer universe) underperforms broader markets

Our overall consumer coverage underperformed the broader markets delivering flattish

return (3% ex-ITC) versus 4% absolute return for broader markets. Despite

underperformance, several stocks delivered double-digit return during the period with key

outperformers being JUBI (up 36% mom), UNSP (up 17%), BJCOR (up 16%) and TGBL (up

12%). Key underperformers were ITC (down 6%), CLGT (down 4%), Pidilite (down 2%) and

Varun Beverages (down 2%).

On a 12-month basis, sector performance was in line with the broader markets posting 16%

absolute return (16% ex-ITC) similar to broader markets. We retain our ‘tread selectively’

stance; preferred picks – ITC, GSK-CH, BJCOR, BRIT and CLGT.

New launches/relaunches

Hindustan Unilever has launched Citra skin care brand in India – it’s a specialist naturals

brand of Unilever and enjoys market leadership in the key markets of Indonesia and

Thailand. Citra offers skin care products with far-Eastern ingredients such as Japanese

Green tea, Sakura and Thai Lotus. HUL has launched 12 products under Citra brand.

Hindustan Unilever has launched a new soap variant under Dove brand – Dove

Almond Cream. It is priced at ₹49 for 75 gm SKU – at similar price to base variant.

Parle has consolidated its premium biscuits range under new division Parle Platina – it

includes products like Hide & Seek, Milano, Mexitos and Simply Good Health range of

products. It has relaunched most of these brands with new packaging and Parle Platina

logo displayed prominently on its packs. Pricing has remained unchanged.

PepsiCo has launched a new RTD dairy beverage Quaker Oats + Milk in two variants –

Mango and Almond. It is priced at ₹30 for 180 ml Tetrapak SKU.

Bread-maker Modern Food Enterprises has re-launched its brand with eight new variants

along with new packaging and advertising. The company is introducing healthy breads

including ‘Multigrain Superseed’, made from various seeds, whole wheat, ‘Atta Shakti’,

and ‘Hi-Fibre Brown’ along with a ‘Milk Plus’ bread aimed at school-going children. The

new bread variants will first be introduced in the Greater Mumbai region including

Mumbai, Thane and other adjoining areas. The company has already launched the

variants in the South and in Kolkata.



Exhibit 1: Key new launches in June 2017


CEO Speak

Amit Jatia, Vice Chairman — Westlife Development

Comment on speculation that you are first preference for national operations for

McDonald’s? Can’t comment on this or what is happening with north and east

franchise – currently only focused on south and west.

Is McDonald’s going to remain a mass market brand? McDonald’s stores in India are

changing –there is big focus on bringing premium coffee to mass market. Overall, 180-

200 mn consumers come to McDonald’s in west and south. Another big change has

happened in January 2017 – have opened experience-of-the-future stores at Nariman

Point, Mumbai – it has a very premium feel including self-ordering kiosks, burger

customizations, table service, salad options, soups, whole-wheat wraps and breakfast.

New stores will be rolled out largely in this format. Also, a lot of work has been done on

the menu over last three years.

Specific growth areas under consideration? While McCafe is giving us results today,

experience-of-the-future stores will give us results tomorrow. Also, breakfast will emerge

as a big growth driver – want to be first QSR to own the breakfast space. Focus is on

essentially increasing the frequency of eating out – when Happy Price menu was

launched in Mumbai, frequency of eating jumped up 8-9X and SSSG almost doubled.

McCafe is another growth driver – currently there are 111 McCafe; volumes have gone

up 70-75% without advertising. Beverages remain a high margin business. Due to local

sourcing advantage, pricing in McCafe is 30% lower – this is driving frequency of eating.



Key competitive edge? Westlife is making bold moves into the future – to put

things in perspective Westlife is the only brand in QSR that has given positive

SSSG over last eight quarters. Focus is on retaining and building customer base.

Unlike other players of the industry which focused on building promotion,

Westlife focused on improving unit economics. In 2014, the company launched a

restaurant operating platform to bring cost structures back to what made

business sense.

Other newsflow

The FMCG industry witnessed a jump of 5.37% in overall sales volume in the first week

of July just after the implementation of the GST, compared to the week before June 15

this year, as per a research survey by market research firm Brickworks. The survey

captures both modern as well as general trade sales volume and was conducted among

2,262 retailers across Delhi, Mumbai, Kolkata, Chennai, Pune, Bangalore and

Ahmedabad. The top two growth categories were cereals and pulses which grew 9.2%,

and tea and coffee which reported higher sales of 5.7%. Both milk and milk-based

products and edible oils grew 3.7%, while chips and snacks grew 2.8%. However,

categories which declined were personal care products which showed volume sales

decline of 7.9% and soft drinks which had lower volumes of 7.8%, according to the

study. However many retailers offered huge discounts on the pre GST stock to liquidity

sales, the study added.

The noodles market has breached its pre-Maggi crisis level after a two-year hiatus, helped

by a slew of new launches and increased advertising push that mainly reiterated product

safety. The segment clocked Rs9.9 bn sales for the quarter ended June, a sharp recovery

from the Rs1.9 bn recorded in the corresponding quarter of 2015, as per media reports

citing data from market research firm Nielsen. Before the Maggi fiasco, the category had

quarterly sales of Rs9 bn. The market took two years, but has successfully touched its pre-

crisis level at around Rs40 bn. In terms of market share, Indo Nissin Foods holds 10%

market share through its brands Top Ramen and Cup Noodles while ITC’s market share

has grown to 22.5% from 15% two years ago. In certain markets, like south and Odisha,

YiPPee! enjoys a higher market share (37-38%).

Britannia has gone to court against its distributors in Kerala, accusing them of resorting to

unfair trade practices to extract higher margins in the first such instance post the GST

rollout. Kerala is among the top 10 markets for Britannia, especially in categories such as

cookies and creams. The All Kerala Distributors Association (AKDA) claimed an increase in

their cost of business after the implementation of GST for demanding a higher margin.

Britannia has filed multiple legal caveat petitions in nine district courts in Kerala. Business

has been disrupted by close to 70% distributors in the state, as per media reports citing

interaction with the company. As per the reports, the distributors under their association

unilaterally decided on up-charging (increasing their selling price to retailers) as a

condition to resume billing. They are demanding more than 1% increase in margins. The

distributors had stopped buying stocks from Britannia during June 20-30, ahead of the

GST rollout on July 1. The biscuits maker, on its part, has now stopped supplies to these

70% of distributors who were seeking higher margins.

Godrej Consumer Products (GCPL) has forayed into the Rs12 bn professional hair care

segment and aims to capture at least 10% of market share in the next two and a half

years. The company plans to roll out to the top 10 cities and will extend this next year to

the tier I and some tier II cities. By the end of the next year, it will be reaching around

15,000-16,000 salons in India. The hair care segment contributes around 13-14% of the

company's revenues in India and with the entry in the professional space, the company

expects it to account for 20% in the next three years. The company has 40 SKUs (stock

keeping units) in its professional hair care portfolio brand Godrej Professional, including

21 shades in hair color, color lock shampoos and conditioners and high-end serums.



GCPL is a strong player in the hair colour market in the non-professional segment with

brands like Expert, BBlunt, Nupur and Renew.

Coca-Cola has developed a new value-based proposition for price-conscious consumers in

aerated beverages. Targeted at the bottom segment of the market to compete with local

brands, the beverages will be among the cheapest for Coca-Cola across markets. It is

calling the product Kinley Flavors. The upcoming range of aerated drinks, called Kinley

Flavors, will be priced 35-40% cheaper than Coke, Sprite and Fanta and will be rolled out

in popular localized flavours such as lemon, jeera and orange. More than 200 so-called B

brands distributed in small geographic areas have flooded these markets at prices that are

almost half that charged by the MNCs. They now have a consolidated share of over 12%

of the Rs 220 bn packaged aerated drinks category, according to industry estimates. They

range from Bovonto in Tamil Nadu to Alwar-based Jayanti Cola, to Gujarat's Hajoori &

Sons, which sells Sosyo, Ginlim and Lemee. A slew of smaller names include Xalta cola

made by a Delhi-based company, City Cola by Rahul Beverages, and Campa Cola, a

brand that never quite died out. These new launches will be available in 250ml PET packs

at attractive price points. The company is doing pilots in select markets and will expand

over time. At the entry level, global soft drink brands in 200ml glass bottles are priced at

Rs12, while 250ml cans are priced at Rs25. Both Coca-Cola and PepsiCo have set up

specialized teams last year to monitor regional brands.

India’s largest private dairy player, Hatsun Agro, has tied up with Germany-based GEA to

set up a 0.65 mn litre capacity plant at Dharapuram in Tamil Nadu at an investment of

Rs1.2 bn. GEA is a leading supplier of equipments to dairy and food processing industry

and has helped companies like Amul to set up their largest processing plants in India. It is

currently working with the Karnataka Milk federation to set up a milk powder plant. The

plant is designed to handle 0.65 mn liters of milk per day to produce 0.3 mn litres per day

market milk in pouches and 0.15 mn liters per day of curd. It is expected to be the fourth

largest plant and their sixteenth manufacturing unit. The plant is expected to be fully

operational by early 2018. Hatsun had earlier announced an investment of Rs8.5 bn till

2018 in boosting capacities and other business segments. The plant is fully automated

for processing and packaging of liquid milk and curd. MIS reports can be generated to

capture data regarding process parameters, production and packaging making it highly

responsive and efficient.

In a big blow to McDonald's in its fight with its estranged joint venture partner, the

National Company Law Tribunal has recently reinstated Vikram Bakshi as MD of

Connaught Plaza Restaurants (CPRL), the 50:50 local JV between Bakshi and McDonald's

that operates the fast food chain in north and east India. Bakshi has been fighting a legal

battle with his American partner of 22 years since August 2013 when McDonald's

announced that his term had ended and alleged financial irregularities. Soon after, Bakshi

moved Company Law Board (CLB) against the move, and McDonald's moved the London

Court of International Arbitration in response. Late last month, CPRL shut down 43 out of

55 restaurants in Delhi as it failed to get the mandatory regulatory health licenses

renewed because of the infighting between Bakshi and McDonald's. CPRL operates 168

restaurants in north and east India. Bakshi's re-election as MD at CPRL will be subject to

the company board meeting under the supervision of NCLT-appointed administrator,

former Supreme Court judge G S Singhvi. Singhvi, tasked to help break the impasse, will

have equal voting power as any other board member. The existing board is represented

by two members from McDonald's — Bakshi and his wife. The NCLT order also said

McDonald's Corporation should not "interfere with smooth functioning" of CPRL and its

McDonald's outlets.



Exhibit 2: KIE Consumer Pricing monitor

Source: Kotak Institutional Equities

MRP (Rs)

Category/Brand/SKU Jun-17 Norm Wt Jul-16 Aug-16 Sep-16 Oct-16 Nov-16 Dec-16 Jan-17 Feb-17 Mar-17 Apr-17 May-17 Jun-17 1M 3M 6M 1Y

Soaps

Dove Moisturising Cream 3*100gm 182 100g 58 61 61 61 61 61 61 61 61 61 61 61 — — — 5

Dove Moisturising Cream 75gm 49 100g 61 64 64 64 64 64 61 61 64 65 65 65 — 2 2 7

Breeze Lemon Splash (3+1)*75gm 30 100g 10 10 10 10 10 10 10 10 10 10 10 10 — — — —

Hamam 100gm 32 100g 27 28 28 30 30 30 30 30 30 32 32 32 — 7 7 19

Lifebuoy Clini Care 10 Complete125gm 44 100g 35 35 35 35 35 35 35 35 35 35 35 35 — — — —

Lifebuoy Total 125gm 29 100g 19 21 21 21 21 22 22 22 22 23 23 23 — 7 7 21

Lifebuoy Total 3*100gm 60 100g 19 19 19 19 19 20 20 20 20 20 20 20 — — — 3

Liril 2000 Soft Aloevera Lemon 125gm 52 100g 40 40 40 40 40 40 40 40 40 42 42 42 — 4 4 4

Lux Creamy White 125gm 50 100g 38 40 40 40 40 40 40 40 40 40 40 40 — — — 4

Lux Sandal & Cream 150gm 40 100g 25 25 25 25 25 25 25 25 25 27 27 27 — 5 5 5

Pears Pure Gentle 3*125gm 174 100g 45 45 45 46 46 46 46 46 46 46 46 46 — — — 4

V ivel Satin Soft 3*100gm 72 100g 23 23 23 23 23 24 24 24 24 24 24 24 — — — 3

V ivel s Luxury Olive Butter 4*100gm 100 100g 25 25 25 25 25 25 25 25 25 25 25 25 — — — —

F iama Di Wills Clear Spring 125gm 62 100g 48 48 48 50 50 50 50 50 50 50 50 50 — — — 3

F iama Di Wills Soft Green 3*100gm 186 100g 60 60 60 62 62 62 62 62 62 62 62 62 — — — 3

F iama Di Wills Mild Dew (3+1)*115gm 186 100g 39 39 39 40 40 40 40 40 40 40 40 40 — — — 3

Cinthol Original 100gm 35 100g 33 33 33 33 33 34 34 34 34 35 35 35 — 3 3 6

Cinthol Original 4*100gm 135 100g 32 32 32 32 32 33 33 33 33 34 34 34 — 3 3 6

Godrej No 1 Lime & Aloevera (3+1) *75gm 40 100g 13 13 13 13 13 13 13 13 13 13 13 13 — — — —

Godrej No 1 Saffron & Milk Cream (3+1) *100gm 76 100g 17 17 17 17 17 17 18 18 18 18 18 19 6 6 12 12

Shower Gels/Facewash/Handwash/Bodywash

Facewashes

Pears Pure & Gentle Cleansing 60gm 110 100g 158 158 183 183 183 183 183 183 183 183 183 183 — — — 16

Lakme Strawberry 50ml 99 100ml 198 198 198 198 198 198 198 198 198 198 198 198 — — — —

Dove Beauty Moisture 50gm 105 100g 210 210 210 210 210 210 210 210 210 210 210 210 — — — —

Ponds Daily Act Cleansing System 50gm 70 100g 140 140 140 140 140 140 140 140 140 140 140 140 — — — —

Fair & Lovely Multiv itamin 50gm 55 100g 110 110 110 110 110 110 110 110 110 110 110 110 — — — —

Olay Cleanser Total Effect Foaming 100gm 260 100g 260 260 260 260 260 260 260 260 260 260 260 260 — — — —

F iama Di Wills Aqua Pluse Men 100gm 150 100g 100 100 100 100 100 100 100 100 100 100 100 100 — — — —

Handwash

Lifebuoy Total 215ml 82 100ml 32 35 35 35 35 35 35 35 35 38 38 38 — 9 9 19

Lifebuoy Activfresh Pouch 185ml 46 100ml 23 24 24 24 24 25 25 25 25 25 25 25 — — — 10

Lifebuoy Colour Changing Pump 200ml 95 100ml 48 48 48 48 48 48 48 48 48 48 48 48 — — — —

Bodywash/ Shower Gels

F iama Di Wills Shower Gel Clear Spring 200ml 160 100ml 80 80 80 80 80 80 80 80 80 80 80 80 — — — —

Lux Bodywash Soft Luxury Strawberry & Cream 240ml 145 100ml 60 60 60 60 60 60 60 60 60 60 60 60 — — — —

Cinthol Shower Gel Energy Deodorize 200ml 150 100ml 60 60 60 60 60 60 60 60 60 60 60 60 — — — —

Detergents

Detergent Bars

Wheel Active Blue 140gm 5 100g 4 4 4 4 4 4 4 4 4 4 4 4 — — — —

Rin Advance 85gm 5 100g 6 6 6 6 6 6 6 6 6 6 6 6 — — — —

Rin Advance 150gm 10 100g 6 6 6 6 6 6 6 6 6 6 6 6 — — — —

Rin Advance 240gm 17 100g 7 7 7 7 7 7 7 7 7 7 7 7 — — — 4

Surf Excel Bar 100gm 10 100g 10 10 10 10 10 10 10 10 10 10 10 10 — — — —

Surf Excel 250gm 27 100g 11 11 11 11 11 11 11 11 11 11 11 11 — — — —

Surf Excel 4*200gm 92 100g 11 11 11 11 11 11 11 11 12 12 12 12 — — 5 5

Tide 135gm 10 100g 8 8 8 8 8 8 8 8 8 8 8 8 — — — —

Tide 85gm 6 100g 9 9 9 9 9 9 9 9 9 9 9 9 — — — —

Tide 4*250gm 78 100g 8 8 8 8 8 8 8 8 8 8 8 8 — — — —

Normalised price in Rs (adjusted for grammage changes) Change (%)



Exhibit 2: KIE Consumer Pricing monitor (continued)


MRP (Rs)


Detergent Powders

Wheel Active Lemon & Jasmine 1kg 52 100g 5 5 5 5 5 5 5 5 5 5 5 5 — 4 6 8

Rin Advance 1kg 78 100g 7 7 7 7 7 7 7 7 7 8 8 8 — 7 11 11

Rin Matic 1kg 115 100g 12 12 12 12 12 12 12 12 12 12 12 12 — — — —

Surf Excel Easy Wash 1.5kg 187 100g 12 12 12 12 12 12 12 12 12 12 12 12 — — — —

Surf Excel Matic 1kg 185 100g 19 19 19 19 19 19 19 19 19 19 19 19 — — — —

Surf Excel Matic Front Load 1kg 242 100g 24 24 24 24 24 24 24 24 24 24 24 24 — 3 3 3

Surf Excel Quickwash 1kg 199 100g 19 19 19 19 19 20 20 20 20 20 20 20 — — — 4

Ariel Complete Pp 1kg 199 100g 19 19 19 20 20 20 20 20 20 20 20 20 — — — 8

Ariel 24Hour Fresh Complete 1kg 210 100g 21 21 21 21 21 21 21 21 21 21 21 21 — — — 2

Ariel Matic Complete Box 1kg 242 100g 24 24 24 24 24 24 24 24 24 24 24 24 — — — 3

Tide Natural Lemon & Chandan 150gm 10 100g 7 7 7 7 7 7 7 7 7 7 7 7 — — — —

Tide Plus 1kg 96 100g 9 9 9 9 9 9 9 9 9 9 10 10 — 4 4 7

Henko 1kg 138 100g 13 13 13 13 13 13 13 13 13 13 13 13 — — — —

Fabric Conditioners/ Dishwash/ Floor Cleaners

Fabric Conditioners/Liquids

Rin Liquid Fabric Blue Perfect Shine 250ml 49 100ml 20 20 20 20 20 20 20 20 20 20 20 20 — — — —

Comfort Fabric Conditioner Anti Bacterial 200ml 53 100ml 25 27 27 27 27 27 27 27 27 27 27 27 — — — 6

Ezee Detergent Liquid 500gm 90 100g 18 18 18 18 18 18 18 18 18 18 18 18 — — — —

Dishwashing Bar/Gels/Powder

Vim Drop Dishwash Active Gel Green Lime 250ml 65 100g 24 26 26 26 26 26 26 26 26 26 26 26 — — — 8

V im Drop Dw Active Gel Green Lime 500ml 120 100g 22 23 23 23 23 24 24 24 24 24 24 24 — — — 9

V im Utensil Bar 130gm 10 100g 7 7 7 7 7 7 7 7 7 7 7 7 — — — —

V im Utensil Bar 200gm 18 100g 9 9 9 9 9 9 9 9 9 9 9 9 — — — 6

Floor Cleaners/Other Cleaners

Cif All Puprose Cleaner White 120ml 29 100ml 24 24 24 24 24 24 24 24 24 24 24 24 — — — —

Domex F loor Cleaner Thick 500ml 74 100ml 14 15 15 15 15 15 15 15 15 15 15 15 — — — 6

Sanifresh Toilet Cleaner Shine 1L 114 100ml 11 11 11 11 11 11 11 11 11 11 11 11 — — — —

Oral Care

Toothpaste

Colgate Cdc 150gm 67 100g 41 41 41 43 43 43 45 45 45 45 45 45 — — 5 8

Colgate Cibaca 175gm 50 100g 27 27 27 27 27 27 27 29 29 29 29 29 — — 4 6

Colgate Active Salt 100gm 55 100g 50 50 50 52 52 52 55 55 55 55 55 55 — — 6 10

Colgate Maxfresh Blue 150gm 95 100g 60 60 60 60 60 60 60 60 63 63 63 63 — — 6 6

Colgate Sensitive Pro Relief 70gm 115 100g 157 164 164 164 164 164 164 164 164 164 164 164 — — — 5

Colgate Sensitive 80gm 110 100g 125 131 131 131 131 131 131 131 138 138 138 138 — — 5 10

Colgate Total Adv Health 140gm 105 100g 75 75 75 75 75 75 75 75 75 75 75 75 — — — —

Pepsodent 2 In 1 150gm 94 100g 60 60 61 61 61 61 61 61 63 63 63 63 — — 2 4

Pepsodent Centre Fresh 150gm 90 100g 59 59 59 60 60 60 60 60 60 60 60 60 — — — 2

Pepsodent Whitening 150gm 91 100g 59 59 59 59 59 59 59 59 61 61 61 61 — — 2 3

Pepsodent Exp Prot Complete 150gm 114 100g 73 73 73 73 73 73 75 75 76 76 76 76 — — 4 4

Pepsodent Expert Prot Sensitive 80gm 80 100g 100 100 100 100 100 100 100 100 100 100 100 100 — — — —

Pepsodent Expert Prot Pro Sensitive 80gm 99 100g 124 124 124 124 124 124 124 124 124 124 124 124 — — — —

Close Up F ire Freeze 150gm 102 100g 67 68 68 68 68 68 68 68 68 68 68 68 — — — 2

Close Up Red 150gm 87 100g 55 56 56 56 56 58 58 58 58 58 58 58 — — — 6

Babool 180gm 42 100g 23 23 23 23 23 23 23 23 23 23 23 23 — — — —

Dabur Red 200gm 92 100g 44 44 44 44 44 44 44 44 45 46 46 46 — 2 5 5

Meswak 200gm 95 100g 45 45 45 45 45 45 45 46 46 46 48 48 — 3 6 6

Sensodyne Fresh Gel 70gm 100 100g 125 125 125 125 125 125 125 125 143 143 143 143 — — 14 14

Toothpowders

Colgate 200gm 70 100g 34 35 35 35 35 35 35 35 35 35 35 35 — — — 4

Dabur Lal Dant Manjan 100gm 38 100g 38 38 38 38 38 38 38 38 38 38 38 38 — — — —

Mouthwashes

Colgate Plax Complete Care 250ml 99 100ml 40 40 40 40 40 40 40 40 40 40 40 40 — — — —

Colgate Plax Freshmint 250ml 99 100ml 40 40 40 40 40 40 40 40 40 40 40 40 — — — —






MRP (Rs)


Shampoo bottles

Clear Active Care Antidandruff 80ml 59 100ml 74 74 74 74 74 74 74 74 74 74 74 74 — — — —

Clinic Plus Anti Dandruff 80ml 47 100ml 50 50 50 50 50 58 58 58 58 59 59 59 — 2 2 18

Dove Dandruff Care 80ml 58 100ml 70 70 70 70 70 73 73 73 73 73 73 73 — — — 4

Sunsilk Anti Dandruff 80ml 48 100ml 59 59 59 59 59 60 60 60 60 60 60 60 — — — 2

Tresemme Hair Fall Defense 100ml 56 100ml 62 62 62 62 62 62 62 62 62 62 62 62 — — — —

Head & Shoulders Anti Hair Fall 170ml 135 100ml 79 79 79 79 79 79 79 79 79 79 79 79 — — — —

Pantene Hair Fall Control 180ml 110 100ml 61 61 61 61 61 61 61 61 61 61 61 61 — — — —

Dove Daily Shine 80ml 60 100ml 70 70 70 70 70 75 75 75 75 75 75 75 — — — 7

Sunsilk Black Shine 80ml 48 100ml 59 59 59 59 59 60 60 60 60 60 60 60 — — — 2

Head & Shoulders Smooth & Silky 170ml 135 100ml 79 79 79 79 79 79 79 79 79 79 79 79 — — — —

Pantene Long Black 180ml 110 100ml 61 61 61 61 61 61 61 61 61 61 61 61 — — — —

Skin Creams/Lotions/Talcs

Face Creams/Fairness Creams/Facial Cleansers

Fair & Lovely Skin Cream Multi V itamin 50gm 93 100g 178 182 182 182 182 182 182 182 186 186 186 186 — — 2 4

Fair And Lovely Foreever Glow 25gm 59 100g 236 236 236 236 236 236 236 236 236 236 236 236 — — — —

Ponds Face Cream Oil Control Skn Mattify ing 100gm 130 100g 130 130 130 130 130 130 130 130 130 130 130 130 — — — —

Olay Cleanser Total Effect Foaming 100gm 260 100g 260 260 260 260 260 260 260 260 260 260 260 260 — — — —

Anti-Ageing/Special Creams

Ponds Skin Cream White Beauty Naturals 50gm 249 100g 498 498 498 498 498 498 498 498 498 498 498 498 — — — —

Ponds Skin Cream Age Miracle Daily 50ml 575 100ml 1,150 1,150 1,150 1,150 1,150 1,150 1,150 1,150 1,150 1,150 1,150 1,150 — — — —

Olay Age Protect Anti Ageing Cream 40gm 290 100g 725 725 725 725 725 725 725 725 725 725 725 725 — — — —

Olay Skin Cream Total Effect Normal 50gm 799 100g 1,598 1,598 1,598 1,598 1,598 1,598 1,598 1,598 1,598 1,598 1,598 1,598 — — — —

Body Lotions

Dove Go Fresh Normal Skin 400ml 350 100ml 88 88 88 88 88 88 88 88 88 88 88 88 — — — —

Ponds Drm Flower 100ml 73 100ml 68 73 73 73 73 73 73 73 73 73 73 73 — — — 7

Vaseline Healthy White 100ml 95 100ml 95 95 95 95 95 95 95 95 95 95 95 95 — — — —

Parachute Normal 100ml 59 100ml 59 59 59 59 59 59 59 59 59 59 59 59 — — — —

Talcs

Ponds Talc Dream Flower Pink 100gm 69 100g 65 69 69 69 69 69 69 69 69 69 69 69 — — — 6

Cinthol Talc Original 100gm 45 100g 45 45 45 45 45 45 45 45 45 45 45 45 — — — —

Deodorants

Deodorants

Axe Dark Temptation 150ml 195 100ml 130 130 130 130 130 130 130 130 130 130 130 130 — — — —

Dove Original Anti Perspirant 169ml 185 100ml 109 109 109 109 109 109 109 109 109 109 109 109 — — — —

Cinthol Spray Dive 150ml 185 100ml 117 123 123 123 123 123 123 123 123 123 123 123 — — — 6

Zatak Avenger 150ml 150 100ml 100 100 100 100 100 100 100 100 100 100 100 100 — — — —

Set Wet Rave 150ml 180 100ml 120 120 120 120 120 120 120 120 120 120 120 120 — — — —

Home Insecticides

Coils/Machine/Mats

Good Knight Mosquto Coil Low Smoke 12Hr 32 32 32 32 32 32 32 32 32 32 32 32 32 — — — —

Goodknight Coil Maha Jumbo 10P 31 31 31 31 31 31 31 31 31 31 31 31 31 — — — —

Goodknight Machine Activ Combi 99 99 99 99 99 99 99 99 99 99 99 99 99 — — — —

Hair Oils

Coconut Oils

Parachute coconut oil 100ml 32 100ml 28 30 30 30 30 30 30 30 32 32 32 32 — — 7 7

Parachute coconut oil 250ml 83 100ml 26 26 26 26 26 26 26 26 28 28 28 28 — — 8 15

Dabur Vatika hair oil 75ml 33 100ml 44 44 44 44 44 44 44 44 44 44 44 44 — — — —

Perfmued Hair Oils

Parachute Advansed hot oil 190ml 110 100ml 58 58 58 58 58 58 58 58 58 58 58 58 — — — —

Parachute Advansed 80ml 45 100ml 60 60 60 60 60 60 60 60 60 60 60 60 — — — —

Parachute Jasmine 200ml 85 100ml 38 38 38 38 38 38 38 38 38 38 43 43 — 13 13 13

Hair & Care 100ml 50 100ml 50 50 50 50 50 50 50 50 50 50 50 50 — — — —

Shanti Badam Amla 175ml 49 100ml 28 23 28 28 28 28 28 28 28 28 28 28 — — — —

Dabur Amla hair oil 100ml 42 100ml 42 42 42 42 42 42 42 42 42 42 42 42 — — — —

Dabur Hair Oil Almond Damage Free100ml 60 100ml 60 60 60 60 60 60 60 60 60 60 60 60 — — — —

Dabur Vatika Enriched Almond hair oil 100ml 60 100ml 60 60 60 60 60 60 60 60 60 60 60 60 — — — —

Bajaj Almond hair oil 100ml 60 100ml 60 60 60 60 60 60 60 60 60 60 60 60 — — — —

Navratna Cooling oil 100ml 67 100ml 65 65 65 65 65 65 65 65 65 65 67 67 — 3 3 3






MRP (Rs)


Edible Oils

Saffola Kardi Oil - 1L 195 100ml 19 19 19 19 19 19 19 19 19 20 20 20 — 3 3 5

Saffola Gold - 1L 155 100ml 15 15 15 15 15 15 15 15 15 15 16 16 — 3 3 3

Saffola Active - 1L 135 100ml 13 13 13 13 13 13 13 13 13 13 14 14 — 4 4 4

Sundrop Heart - 1L 210 100ml 21 21 21 21 21 21 21 21 21 21 21 21 — 2 2 2

Sundrop Nutrilite - 1L 135 100ml 14 14 14 14 14 14 14 14 14 14 14 14 — — — —

Sundrop Superlite Advanced -1L 195 100ml 16 16 16 16 16 16 16 16 16 16 16 16 — — — —

Tea/ Coffee

Tea

Red Label Ctc 1kg 410 100g 39 40 40 40 40 41 41 41 41 41 41 41 — — — 5

Red Label Ctc Pp 500gm 205 100g 39 40 40 40 41 41 41 41 41 41 41 41 — — — 5

Red Label Natural Care Box 500gm 240 100g 47 47 47 47 47 47 47 47 47 48 48 48 — 1 1 3

Taaza Ctc 1kg 285 100g 29 29 29 29 29 29 29 29 29 29 29 29 — — — —

Tajmahal Ctc Box 250gm 132 100g 51 51 51 51 52 53 53 53 53 53 53 53 — — — 3

Agni Ctc Leaves 1kg 232 100g 23 23 23 23 23 23 23 23 23 23 23 23 — — — —

Tata Ctc Gold 1kg 420 100g 420 420 420 420 420 420 420 420 420 420 420 420 — — — —

Coffee

Bru Gold Jar 100gm 265 100g 245 245 245 255 255 255 255 255 255 265 265 265 — 4 4 8

Bru Instant Jar 100gm 170 100g 150 150 150 170 170 170 170 170 170 170 170 170 — — — 13

Nescafe Classic Box 200gm 475 100g 213 220 220 225 225 225 225 225 225 225 238 238 — 6 6 12

Nescafe Classic 50gm 145 100g 240 260 260 260 260 270 270 270 270 270 290 290 — 7 7 21

Sunrise Premium Jar 50gm 100 100g 200 200 200 200 200 200 200 200 200 200 200 200 — — — —

Dairy

Milk/Condensed Milk/ Milk Powder

Nestle Milk Slim 1L 80 100ml 7 8 8 8 8 8 8 8 8 8 8 8 — — — 14

Nestle Milk Toned A+ 1L 75 100ml 7 7 7 7 7 7 7 7 8 8 8 8 — — 9 15

Britannia Milk 1L 75 100ml 8 8 8 8 8 8 8 8 8 8 8 8 — — — —

Britannia Milk Slimz 1L 69 100ml 7 7 7 7 7 7 7 7 7 7 7 7 — — — —

Amul Taaza 1L 60 100ml 6 6 6 6 6 6 6 6 6 6 6 6 — — — 3

Amul Gold 1L 64 100ml 6 6 6 6 6 6 6 6 6 6 6 6 — — — 3

Amul Lite 1L 58 100ml 6 6 6 6 6 6 6 6 6 6 6 6 — — — —

Everyday Milkpow Dairy Whitner Pouch 400gm 178 100g 44 44 44 44 44 44 44 44 45 45 45 45 — — 2 2

Butter/Cheese

Britannia Cheese Spread Classic 180gm 81 100g 45 45 45 45 45 45 45 45 45 45 45 45 — — — —

Britannia Processed Cream Cheese 180gm 199 100g 111 111 111 111 111 111 111 111 111 111 111 111 — — — —

Amul Butter 500gm 215 100g 39 39 41 41 41 43 43 43 43 43 43 43 — — — 10

Health Drinks/ Juices/ Health Supplements/ OTCs

Health Drinks

Horlicks Chocolate Jar 500gm 235 100g 46 46 46 46 46 46 46 46 46 47 47 47 — 2 2 2

Horlicks Junior Jar 500gm 280 100g 53 55 55 55 55 55 55 55 55 56 56 56 — 2 2 6

Horlicks Standard Jar 500gm 240 100g 46 46 46 46 46 46 48 48 48 48 48 48 — — 5 5

Horlicks Lite Malt Jar 500gm 290 100g 56 56 56 56 56 56 58 58 58 58 58 58 — — 4 4

Horlicks Womens Chocolate Jar 330gm 299 100g 89 89 89 89 89 89 91 91 91 91 91 91 — — 1 1

Boost Jar 500gm 240 100g 45 46 46 46 46 46 48 48 48 48 48 48 — — 3 7

Actilife Malt Jar 250gm 160 100g 64 64 64 64 64 64 64 64 64 64 64 64 — — — —

Juices

Real Juice Active Orange 1L 105 100ml 11 11 11 11 11 11 11 11 11 11 11 11 — — — —

Real Juice Orange 1L 99 100ml 10 10 10 10 10 10 10 10 10 10 10 10 — — — —

Real Juice Apple 1L 99 100ml 10 10 10 10 10 10 10 10 10 10 10 10 — — — —

Health Supplements/OTCs

Dabur Chyawanprash 1kg 295 100g 30 30 30 30 30 30 30 30 30 30 30 30 — — — —

Dabur Digestive Hajmola Regular 120 P 28 28 28 28 28 28 28 28 28 28 28 28 28 — — — —

Dabur Glucose-D Jar 1kg 170 100g 16 16 16 16 16 16 16 16 16 17 17 17 — 6 6 6

Dabur Honey 500gm 199 100g 40 40 40 40 40 40 40 40 40 40 40 40 — — — —






MRP (Rs)


Biscuits/Atta

CreamBiscuits

Sunfeast Dark Fantasy Chocolate 100gm 25 100g 25 25 25 25 25 25 25 25 25 25 25 25 — — — —

Britannia Cream J im Jam 150gm 30 100g 17 20 20 20 20 20 20 20 20 20 20 20 — — — 20

Britannia Cream Treat Bourbon 150gm 25 100g 17 18 17 17 17 17 17 17 17 17 17 17 — — — (4)

Sunfeast Cream Bourbon 150gm 25 100g 17 17 17 17 17 17 17 17 17 17 17 17 — — — —

Parle Cream Hide & Seek Bourbon 150gm 25 100g 17 17 17 17 17 17 17 17 17 17 17 17 — — — —

Cookies/Healthy biscuits

Sunfeast Cookie Butter 100gm 10 100g 10 10 10 10 10 10 10 10 10 10 10 10 — — — —

Britannia Good Day Butter 150gm 20 100g 13 13 13 13 13 13 13 13 13 13 13 13 — — — —

Britannia Cookies Good Day Cashew 100gm 15 100g 15 15 15 15 15 15 15 15 15 15 15 15 — — — —

Britannia NutriChoice Digestive 75gm 12 100g 16 16 16 16 16 16 16 16 16 16 16 16 — — — —

Britannia Cookies NutriChoice Oats 150gm 60 100g 40 40 40 40 40 40 40 40 40 40 40 40 — — — —

Marie/Glucose/Salted/Nice Biscuits

Sunfeast Marie Light 100gm 10 100g 9 9 9 9 9 9 9 9 9 9 9 9 — — — —

Britannia V ita Marie Gold 150gm 20 100g 13 13 13 13 13 13 13 13 13 13 13 13 — — — —

Parle Digestive Marie 100gm 10 100g 10 10 10 10 10 10 10 10 10 10 10 10 — — — —

Sunfeast Bisccuits Glucose 80gm 5 100g 6 6 6 6 6 6 6 6 6 6 6 6 — — — —

Britannia Tiger 133gm 10 100g 8 8 8 8 8 8 8 8 8 8 8 8 — — — —

Parle Glucose 144gm 10 100g 7 7 7 7 7 7 7 7 7 7 7 7 — — — —

Horlicks 100gm 10 100g 11 11 11 11 11 11 11 11 11 11 11 11 — — — —

Sunfeast Snacky Salted 80gm 10 100g 16 16 16 16 16 16 16 16 16 16 16 16 — — — —

Parle Salted Krackjack 80gm 10 100g 13 13 13 13 13 13 13 13 13 13 13 13 — — — —

Parle Salted Monaco Classic 80gm 10 100g 13 13 13 13 13 13 13 13 13 13 13 13 — — — —

Sunfeast Plain Nice 150gm 20 100g 13 13 13 13 13 13 13 13 13 13 13 13 — — — —

Britannia Nice Time 150gm 22 100g 15 15 15 15 15 15 15 15 15 15 15 15 — — — —

Atta

Aashirvaad Atta Multigrain 5kg 265 100g 5 5 5 5 5 5 5 5 5 5 5 5 — 4 4 4

Aashirvaad Atta Whole Wheat 5kg 220 100g 4 4 4 4 4 4 4 4 4 4 4 4 — — — —

Soups/Sauces/Spreads

Ketchup/Sauces/Spreads

Maggi Ketchup Tomato 1kg 150 100g 14 14 15 15 15 15 15 15 15 15 15 15 — 3 3 7

Kissan Ketchup Fresh Tomato Bt 1kg 147 100g 14 15 15 15 15 15 15 15 15 15 15 15 — 1 1 5

Kissan Jam Mixed Fruit 200gm 60 100g 26 28 28 28 28 28 30 30 30 30 30 30 — — 9 15

Soups

Maggi Rich Tomato 54gm 45 100g 83 83 83 83 83 83 83 83 83 83 83 83 — — — —

Knorr Classic Thick Tomato 55gm 55 100g 91 100 100 100 100 100 100 100 100 100 100 100 — — — 10

Maggi Sweet Corn Vegetable 36gm 45 100g 125 125 125 125 125 125 125 125 125 125 125 125 — — — —

Knorr Sweet Corn Vegetable 47gm 55 100g 106 117 117 117 117 117 117 117 117 117 117 117 — — — 10

Chocolate bars

Nestle Kit Kat 90gm 75 100g 83 83 83 83 83 83 83 83 83 83 83 83 — — — —

Nestle Munch Home Pk 69gm 38 100g 55 55 55 55 55 55 55 55 55 55 55 55 — — — —

Nestle Milk 18gm 10 100g 56 56 56 56 56 56 56 56 56 56 56 56 — — — —

Nestle Bar One 26gm 10 100g 36 36 36 36 36 36 36 36 36 36 36 36 — — — —

Nestle Alpino Bar 22gm 30 100g 136 136 136 136 136 136 136 136 136 136 136 136 — — — —

Noodles

Maggi Masala 70gm 12 100g 17 17 17 17 17 17 17 17 17 17 17 17 — — — —

Maggi Masala 140gm 23 100g 16 16 16 16 16 16 16 16 16 16 16 16 — — — —

Maggi Masala 280gm 45 100g 16 16 16 16 16 16 16 16 16 16 16 16 — — — —

Maggi Masala 560gm 89 100g 16 16 16 16 16 16 16 16 16 16 16 16 — — — —

Maggi Chicken 304gm 60 100g 21 21 21 21 21 21 21 21 21 21 21 21 — — — —

Maggi Veg Atta 320gm 78 100g 24 24 24 24 24 24 24 24 24 24 24 24 — — — —

Sunfeast Yippee Magic Masala 75gm 10 100g 13 13 13 13 13 13 13 13 13 13 13 13 — — — —

Sunfeast Yippe Chinese Masala Pp 75gm 15 100g 20 20 20 20 20 20 20 20 20 20 20 20 — — — —

Knorr Soupy Mast Masala Pp 70gm 15 100g 21 21 21 21 21 21 21 21 21 21 21 21 — — — —

Horlicks Foodle Multigrain Ala Masala 320gm 78 100g 24 24 24 24 24 24 24 24 24 24 24 24 — — — —

Baby Food

Cerelac Babycereal Rice S1 300gm 171 100g 54 54 54 54 54 54 54 54 56 56 56 57 2 2 6 7

Cerelac Babycereal Wheat S1 300gm 167 100g 53 53 53 53 53 53 53 53 54 54 54 56 2 2 5 6

Cerelac Babycereal Multigrain Dal Veg 300gm 226 100g 71 71 71 71 71 71 71 71 73 73 73 75 3 3 7 8

Lactogen Babycereal Nan 1 Frml 400gm 540 100g 129 129 129 129 129 129 129 129 133 133 133 135 2 2 5 5

Nestum Babycereal Rice Dal S2 300gm 130 100g 43 43 43 43 43 43 43 43 43 43 43 43 — — — —




Exhibit 3: Ongoing promotional activity across FMCG categories (Home and Personal care) for June, 2017


SKU Original Offer Eff change (%) Promotional offer

Soaps

Lifebuoy Total 10 soap 56gm 10 10 (13.8) Free 15% extra

Lifebuoy Clini-care 125gm 52 44 (15.4) Price off of Rs8

Lifebuoy Clini-care 10 (3 x 125gm pack) 375gm 145 120 (17.2) Price off of Rs25

Detergents/Dishwash

Surf Excel Quickwash detergent powder 500gm 100 100 Free Surf Excel detergent bar worth Rs10

Rin detergent bar 150gm 10 10 (3.2) Free 5gm extra

Rin detergent bar 4x250gm 68 65 (4.4) Price off of Rs3

Surf Excel detergent bar 90gm 10 10 (10.0) Free 10gm extra

Surf Excel detergent bar 250gm 29 27 (6.9) Price off of Rs2

Surf Excel Easywash detergent powder 500gm 68 56 (17.6) Price off of Rs12

Surf Excel Easywash detergent powder 700gm 96 77 (19.8) Price off of Rs19

Surf Excel Easywash detergent powder 1.5Kg 207 187 (9.7) Price off of Rs20

Surf Excel Easywash detergent powder 4Kg 544 479 (11.9) Price off of Rs65

Ariel Matic Front Load detergent powder 1Kg 242 242 Free container worth Rs120

Ariel detergent powder 500gm 102 92 (9.8) Price off of Rs10

Tide Plus detergent powder 1Kg 102 96 (5.9) Price off of Rs6 and Free Rs30 Cash on Paytm

Tide Plus detergent powder 500gm 52 49 (5.8) Price off of Rs3 and Free Rs15 Cash on Paytm

Henko Matic Front Load detergent powder 1Kg 235 235 Free Pril 225ml

V im dishwash bar 125gm 10 10 (16.7) Free 25gm extra

Pril dishwash liquid 225ml 55 55 Free Henko detergent worth Rs10

Pril dishwash liquid 425ml 90 90 Free Pril dishwash 200 gm bar

Other home & personal care items

Dabur Amla 180ml 88 88 Free Dabur Meswak toothpaste

Bajaj Almond hair oil 100ml 60 60 Free Bajaj Almond drops moisturizing soap free

Emami 7 oils in 1 200ml 115 115 Free Kesh King shampoo worth Rs50

Dabur Vatika Enriched Coconut hair oil 300ml 167 167 Free Vatika hair oil 75 ml

Dabur Almond hair oil 100ml 60 60 Free Dabur Almond 50 ml

Notes:

(1) Highlighted offers are new promotions launched in June.

MRP (Rs)



Exhibit 4: Ongoing promotional activity across FMCG categories (Foods and Beverages) for June, 2017 (continued)


Exhibit 5: GST-led price changes/promotional offers rolled out in July, 2017


SKU Original Offer Eff change (%) Promotional offer

Biscuits/Cakes

Britannia Good Day Chocochip cookies 44gm 10 10 (21.4) Free 27% extra

Britannia Mathri Masti 50gm 10 10 Free Good Day biscuit worth Rs5

Parle Monaco 200gm 25 25 (20.0) Free 50gm extra

Parle Krackjack 75gm 10 10 (20.0) Free 50gm extra

Britannia Nutrichoice Oats 75gm 20 20 (25.0) Free 33% extra

Britannia Good Day Butter cookies 75gm 20 20 (25.0) Free 33% extra

Britannia Nutrichoice Digestives 100gm 20 20 (16.7) Free 20% extra

Britannia Tiger Glucose 124gm 10 10 (8.8) Free 9% extra

Sunfeast Mom's Magic Rich Butter 66gm 10 10 (20.1) Free 25% extra

Sunfeast Mom's Magic Cashew & Almond 100gm 20 20 (16.7) Free 20gm extra

Sunfeast Bounce 34gm 5 5 (17.1) Free 20% extra

Sunfeast Marie Light 85gm 10 10 (15.0) Free 17% extra

Other foods (including dairy)

Aashirvaad whole wheat atta 10Kg 400 400 Free Aashirvaad Select Atta 500gm

Aashirvaad whole wheat atta 5Kg 220 220 Free Sunfeast Marie Light worth Rs22

Fortune V ivo 5L 725 725 (16.7) Get 1 Litre free

Riso Ricebran oil 5L 700 700 (28.6) Get 2 Litres free

Sundrop peanut butter 924gm 500 300 (40.0) Price off of Rs200

Sundrop peanut butter 462gm 250 250 (9.1) Free 10% extra

Pediasure 400gm 500 500 Free Paytm cash worth Rs50

Dabur Honey 250gm 122 122 Free 100gm Meswak toothpaste worth Rs49

Dabur Honey 1Kg 380 380 (20.0) Free 250gm Dabur honey

Dabur Chyawanprash 1Kg 295 295 Free Dabur Red toothpaste 75gm worth Rs37

Beverages

Nestle a+ slim milk 1L 80 80 Free Quaker oats worth Rs10

Bru Gold coffee 50gm 135 125 (7.4) Price off of Rs10

Cadbury Bournvita 500gm 200 200 (13.0) Free Cadbury Bournvita 75gm worth Rs30

Notes:

(1) Highlighted offers are new promotions launched in June.

MRP (Rs)

SKU Original Offer Eff change (%) Change/offer

Pears soap 75gm 39 39 (25.0) Free 33% extra

Dove soap 3x75gm 115 115 (25.0) But 3 Get 1 free offer

Lifebuoy soap 4x125gm 108 94 (13.0) Price cut

Lux soap 4x100gm 108 94 (13.0) Price cut

F iama soap 5x125gm 310 248 (20.0) Price cut

V ivel soap 5x100gm 145 100 (31.0) Price cut

Superia soap 4x55gm 40 30 (25.0) Price cut

Savlon soap 4x75gm 120 90 (25.0) Price cut

F iama shower gel 100ml 90 55 (38.9) Price cut

Surf Excel detergent bar 250gm 29 25 (13.8) Price off of Rs4

Surf Excel detergent bar 95gm 10 10 (9.5) Hiked grammage to 105gm

Rin detergent bar 250gm 17 15 (11.8) Price off of Rs2

Kissan Ketchup 1Kg 147 125 (15.0) Price cut

Emami 7 oil in 1 hair oil 100ml 60 55 (8.3) Price cut

Colgate CDC toothpaste 100gm 52 46 (11.5) Price cut

MRP (Rs)



Exhibit 6: Monthly raw material trends for June, 2017

Source: Bloomberg, Kotak Institutional Equities

Inflationary = +3%

Deflationary = -3%

No Commodity Unit Current MoM 3M 6M YoY MoM 3M 6M YoY Companies impacted

Agri Commodities

1 Tea - India Avg. Rs/Kg 136 4 21 2 (5) 4 21 2 (5) HUL, TGBL

2 Tea - World Avg. USD/MT 3,190 0 11 9 20 0 7 4 16 HUL, TGBL

3 Tea - Mombassa/Kenya USD/Kg 4 3 7 13 42 2 3 8 36 HUL, TGBL

4 Coffee Arabica - Intl. US cents/Pound 144 (5) (10) (11) (13) (5) (13) (16) (16) HUL, Nestle, TGBL

5 Coffee Robusta - Intl. US cents/Pound 105 3 (5) 1 13 3 (8) (4) 9 HUL, Nestle, TGBL

6 Sugar - domestic Rs/Quintal 3,891 (2) (0) 3 4 (2) (0) 3 4 HUL, Nestle, GSKCHL, ITC, Dabur, Britannia

7 Wheat Rs/Quintal 1,740 0 (7) (15) (3) 0 (7) (15) (3) ITC, Nestle, GSKCHL, Britannia

8 Barley Rs/Quintal 1,438 (5) (12) (20) (12) (5) (12) (20) (12) GSKCHL

9 Maize (corn) USD/MT 158 (0) (1) 3 (12) (1) (4) (2) (15) Colgate, HUL, Dabur (Sorbitol)

10 Liquid Milk - domestic Rs/Ltr 45 — 5 15 18 — 5 15 18 Nestle, GSKCHL, Jubilant Foodworks, Britannia

11 Milk Powder - domestic Rs/Kg 293 2 4 9 12 2 4 9 12 Nestle, GSKCHL, Britannia

12 Cocoa Bean USD/MT 2,238 1 (3) (13) (35) 1 (7) (17) (38) Nestle

Oil Commodities

13 Crude Oil - Brent USD/Barrel 47 (8) (10) (13) (3) (8) (13) (17) (7) HUL, GCPL, J yothy Labs, Asian Paints, Pidilite

14 Palm oil MYR/Ton 2,676 (5) (9) (17) 5 (3) (10) (20) (5) HUL, GCPL, J yothy Labs

15 PFAD USD/MT 614 (1) (10) (11) 9 (1) (14) (15) 4 HUL, GCPL, J yothy Labs

16 Light liquid paraffin (LLP) Rs/Ltr 41 (3) (5) 11 18 (3) (5) 11 18 Marico, Dabur, Bajaj Corp

17 Copra Rs/Quintal 8,526 (0) 3 18 60 (0) 3 18 60 Marico, Dabur

18 Coconut oil Rs/Quintal 12,675 0 3 18 63 0 3 18 63 Marico, Dabur

19 Rice Bran oil Rs/10Kg 532 (3) (13) (12) (10) (3) (13) (12) (10) Marico

20 Kardi oil/ Safflower oil Rs/MT 1,050 4 (3) (3) 4 4 (3) (3) 4 Marico

21 Sunflower oil Rs/MT 58,900 (0) (4) (12) (11) (0) (4) (12) (11) Marico

22 Groundnut oil Rs/MT 93,095 (8) (6) (5) (26) (8) (6) (5) (26) Marico, Dabur

23 Linseed oil Rs/MT 77,833 (1) (10) (22) (37) (1) (10) (22) (37) Marico, Dabur, Bajaj Corp, Asian Paints

24 Castor oil Rs/MT 95,052 (3) 2 19 41 (3) 2 19 41 Marico, Dabur, Bajaj Corp, Asian Paints

25 Mentha oil Rs/Kg 1,000 (2) (10) (1) (1) (2) (10) (1) (1) Emami, Colgate, HUL, Dabur

Chemicals/Paints/Other Commodities

26 Caustic soda Rs/ 50Kg 2,519 — 12 30 33 — 12 30 33 HUL, GCPL, J yothy Labs

27 Soda ash Rs/ 50Kg 1,265 (2) (1) 3 4 (2) (1) 3 4 HUL, GCPL, J yothy Labs

28 LAB Rs/Kg 96 (3) (6) 7 4 (3) (6) 7 4 HUL, J yothy Labs

29 HDPE - domestic Rs/Kg 102 0 — 2 (2) 0 — 2 (2) All companies

30 PAN Rs/Kg 90 — 3 23 23 — 3 23 23 Asian Paints

31 PENTA Rs/Kg 115 — — — (8) — — — (8) Asian Paints

32 Tio2 Anatese Rs/Kg 175 — 21 30 30 — 21 30 30 Asian Paints

33 Tio2 Rutile Rs/Kg 215 — 2 19 38 — 2 19 38 Asian Paints

34 Tio2 Dupont Rs/Kg 281 1 16 25 29 1 16 25 29 Asian Paints

35 Turpentine oil Rs/Ltr 78 (1) (3) (3) (6) (1) (3) (3) (6) Asian Paints

36 Formaldehyde Rs/Kg 23 5 5 10 10 5 5 10 10 Asian Paints

37 Acry lic acid Rs/Kg 105 — (1) 27 44 — (1) 27 44 Asian Paints

38 Vinyl Acetate - Domestic Rs/Kg 91 21 54 57 40 21 54 57 40 Asian Paints

39 Vinyl Acetate - China US$/MT 857 (5) (4) (0) (6) (5) (8) (5) (10) Pidilite, Asian Paints

40 Styrene - domestic Rs/Kg 120 28 10 32 50 28 10 32 50 Asian Paints

41 Gold Rs/10gm 28,824 1 0 4 (3) 1 0 4 (3) Titan, Jewellery companies

42 Diamond price index USD/Carrat 117 (0) (0) (0) (4) (1) (4) (5) (7) Titan, Jewellery companies

% chg - local currency % chg - currency Adj.



Exhibit 7: KIE Consumer universe valuation summary

Source: Bloomberg, Company, Kotak Institutional Equities estimates

TP 24-Jul-17 EPS Sales

Company Rating (Rs) Price (Rs) (Rs bn) (US$ m) 2017 2018E 2019E 2017 2018E 2019E 2017 2018E 2019E

Consumer Products

Asian Paints REDUCE 1,000 1,156 (13) 1,109 17,188 20.2 24.0 27.7 7.9 18.5 15.8 57.2 48.2 41.7 17.1 17.7

Bajaj Corp ADD 460 435 6 64 995 15.8 16.9 19.4 (0.5) 7.1 14.5 27.6 25.7 22.5 10.7 12.8

Britannia Industries ADD 3,700 3,829 (3) 460 7,125 73.7 87.9 108.9 7.3 19.2 24.0 52.0 43.6 35.2 21.6 14.7

Coffee day Enterprises ADD 280 250 12 51 797 2.2 6.0 10.2 NM 166.9 69.8 111.3 41.7 24.6 112.9 13.0

Colgate-Palmolive (India) ADD 1,075 1,070 1 291 4,511 20.6 25.0 30.8 (3.5) 21.2 23.1 51.8 42.8 34.8 22.1 13.3

Dabur India REDUCE 290 306 (5) 539 8,351 7.3 7.8 9.0 3.8 7.5 14.6 42.0 39.1 34.1 11.0 10.5

GlaxoSmithKline Consumer ADD 5,900 5,533 7 233 3,608 156.1 170.4 190.1 (4.5) 9.2 11.6 35.4 32.5 29.1 10.4 11.7

Godrej Consumer Products SELL 800 990 (19) 674 10,455 19.1 23.0 26.3 12.3 20.2 14.1 51.7 43.0 37.7 17.1 12.4

Hindustan Unilever REDUCE 1,100 1,159 (5) 2,509 38,900 19.6 23.1 26.7 3.2 17.8 15.4 59.1 50.2 43.4 16.6 9.4

ITC ADD 325 293 11 3,584 55,571 8.3 9.1 10.1 7.6 10.1 10.8 35.5 32.2 29.1 10.5 9.2

Jubilant Foodworks SELL 900 1,252 (28) 83 1,280 10.0 16.2 25.7 (37.2) 62.0 58.9 125.5 77.5 48.7 60.5 11.8

J yothy Laboratories NR — 378 — 69 1,064 6.5 11.4 11.8 25.2 74.5 4.0 57.9 33.2 31.9 34.7 13.1

Manpasand Beverages REDUCE 700 781 (10) 45 693 12.7 18.2 24.8 25.8 43.6 35.9 61.5 42.8 31.5 39.7 38.6

Marico REDUCE 285 330 (14) 426 6,603 6.2 7.1 8.1 12.2 14.2 15.0 53.3 46.7 40.6 14.6 13.6

Nestle India SELL 5,700 6,830 (17) 659 10,210 99.3 125.4 149.6 7.1 26.4 19.2 68.8 54.4 45.7 22.7 11.9

Page Industries REDUCE 14,100 16,711 (16) 186 2,890 238.7 296.9 360.0 15.0 24.4 21.2 70.0 56.3 46.4 22.8 20.2

PC Jeweller REDUCE 230 255 (10) 91 1,415 11.8 12.4 14.5 5.7 5.7 16.5 21.7 20.5 17.6 11.0 14.7

Pidilite Industries ADD 775 812 (5) 416 6,455 16.8 19.7 22.8 7.1 17.6 15.6 48.4 41.2 35.6 16.6 14.7

S H Kelkar SELL 270 276 (2) 40 619 7.2 8.4 9.8 37.3 16.5 15.6 38.1 32.7 28.3 16.0 11.8

Tata Global Beverages ADD 160 170 (6) 107 1,663 6.1 7.0 8.4 17.3 15.0 20.0 27.9 24.3 20.2 17.5 8.5

Titan Co. SELL 430 538 (20) 478 7,407 8.6 12.4 14.4 11.1 43.2 16.3 62.4 43.6 37.4 29.1 18.3

United Breweries SELL 650 815 (20) 216 3,341 8.7 11.9 16.1 (23.0) 37.5 34.7 93.9 68.3 50.7 36.1 11.2

United Spirits REDUCE 2,400 2,641 (9) 384 5,949 27.3 34.8 55.4 59.0 27.2 59.4 96.6 75.9 47.6 42.4 5.1

Varun Beverages BUY 550 502 10 91 1,418 8.6 12.0 15.6 66.3 40.0 29.6 58.3 41.6 32.1 34.7 13.1

KIE universe 12,712 197,090 8.1 16.5 15.8 47.7 40.9 35.3 16.1 12.1

KIE universe (ex-ITC) 9,128 141,519 7.9 20.3 54.5 45.3 38.3 19.4 12.8

Bajaj Auto 1-mo 3-mo 6-mo 1-yr 2017 2018E 2019E 2017 2018E 2019E 2017 2018E 2019E 2018E 2019E

Asian Paints 0 8 19 11 36.2 30.4 25.9 7.1 6.0 5.2 0.8 1.0 1.7 1.0 1.2

Bajaj Corp 16 9 11 8 23.3 22.3 18.7 7.7 7.0 6.0 2.9 2.9 2.9 3.0 3.3

Britannia Industries 5 13 22 34 35.8 29.3 23.6 5.1 4.4 3.8 0.9 1.6 2.2 0.7 0.8

Coffee day 1 (2) 26 (1) 14.5 12.5 11.0 2.5 2.2 2.0 (2.2) 2.9 1.3 — —

Colgate-Palmolive (India) (4) 3 19 12 30.5 25.3 20.9 7.2 6.4 5.5 1.0 2.1 2.5 1.2 1.5

Dabur India 6 4 10 (1) 36.0 33.4 29.1 7.0 6.4 5.6 1.7 2.3 2.4 1.0 1.2

GlaxoSmithKline Consumer 3 6 10 (15) 24.2 22.1 19.3 5.1 4.5 3.9 0.6 2.3 2.2 1.4 1.6

Godrej Consumer Products 3 20 29 20 37.5 31.4 27.3 7.7 6.7 5.9 1.6 3.2 2.5 0.8 0.8

Hindustan Unilever 6 28 35 28 40.6 34.2 29.7 7.7 7.1 6.4 1.5 1.8 2.2 1.6 1.8

ITC (6) 6 13 17 24.5 22.2 19.9 8.7 8.0 7.3 2.1 2.3 2.6 2.0 2.3

Jubilant Foodworks 36 19 49 8 33.7 24.1 18.9 3.1 2.8 2.5 (0.2) 0.1 2.2 0.4 0.7

J yothy Laboratories 3 (4) 7 31 28.4 24.6 21.7 4.3 3.8 3.3 2.7 2.8 2.8 1.6 1.9

Manpasand Beverages (0) 10 26 11 28.9 21.2 14.8 5.8 4.2 3.0 (4.5) (3.0) 2.2 0.1 0.2

Marico 6 9 28 19 36.9 33.5 29.0 7.1 6.2 5.4 1.5 1.8 2.2 1.2 1.3

Page Industries 2 20 17 23 35.5 30.2 25.7 7.0 6.2 5.4 2.0 2.5 3.0 1.2 1.5

Nestle India 3 9 15 (4) 35.5 30.2 29.7 7.0 6.2 5.4 2.0 2.5 3.0 0.7 0.9

PC Jeweller 1 21 28 28 11.4 9.2 7.8 1.0 0.9 0.7 6.5 2.4 2.4 0.3 0.5

Pidilite Industries (2) 13 24 11 31.9 27.6 23.5 7.2 6.2 5.3 1.3 1.8 1.9 0.7 0.9

S H Kelkar 2 (14) (13) 13 23.8 20.2 17.3 4.0 3.6 3.2 1.6 1.3 1.9 0.8 1.0

Tata Global Beverages 12 12 32 29 13.6 12.2 10.4 1.6 1.5 1.3 3.7 4.0 4.0 1.5 1.8

Titan Co. 5 12 48 31 40.1 29.1 24.6 3.6 2.9 2.5 3.7 1.1 1.5 0.7 0.8

United Breweries 4 7 (0) 5 34.2 28.4 23.7 4.6 4.2 3.6 1.2 1.2 1.5 0.2 0.3

United Spirits 17 37 20 10 43.7 39.7 28.6 5.0 4.9 4.3 0.9 2.4 1.0 — —

Varun Beverages (2) 7 24 — 14.2 12.8 11.1 2.9 2.6 2.2 (2.2) 0.4 2.8 — —

KIE FMCG universe 0 12 20 16 30.8 26.8 23.1 6.4 5.7 5.0 1.6 2.0 2.3 1.0 1.1

KIE universe (ex-ITC) 3 15 23 16 34.2 29.0 24.6 5.8 5.1 4.5 1.4 1.9 2.1 0.9 1.2

Sensex 4 9 18 16

Dividend yield (%)

CAGR - (2017-19E), %

Mkt cap. EPS Growth, % PER (X)

EV/Sales (X) FCF yield (%)Price performance (%)

Upside /

(downside)

(%)

EPS (Rs)

EV/EBITDA (X)



Exhibit 8: Consumer sector P/E rich at ~37X One year forward P/ E based on consensus estimates (X)

Source: Bloomberg, Company, Kotak Institutional Equities

Exhibit 9: Consumer sector (ex-ITC) is trading at ~44X One year forward P/E based on consensus estimates (X)


Exhibit 10: P/E multiples are fairly high for the earnings profile One year forward PE (based on consensus estimates)


Exhibit 11: P/E multiples are fairly high for the earnings profile One year forward PE (based on consensus estimates)


5

10

15

20

25

30

35

40

Jun-9

6Ju

n-9

7Ju

n-9

8Ju

n-9

9Ju

n-0

0Ju

n-0

1Ju

n-0

2Ju

n-0

3Ju

n-0

4Ju

n-0

5Ju

n-0

6Ju

n-0

7Ju

n-0

8Ju

n-0

9Ju

n-1

0Ju

n-1

1Ju

n-1

2Ju

n-1

3Ju

n-1

4Ju

n-1

5Ju

n-1

6Ju

n-1

7

5

10

15

20

25

30

35

40

45

50

Jun-9

7

Jun-9

8

Jun-9

9

Jun-0

0

Jun-0

1

Jun-0

2

Jun-0

3

Jun-0

4

Jun-0

5

Jun-0

6

Jun-0

7

Jun-0

8

Jun-0

9

Jun-1

0

Jun-1

1

Jun-1

2

Jun-1

3

Jun-1

4

Jun-1

5

Jun-1

6

Jun-1

7

10

20

30

40

50

60

70

80

Jun-0

6

Jun-0

7

Jun-0

8

Jun-0

9

Jun-1

0

Jun-1

1

Jun-1

2

Jun-1

3

Jun-1

4

Jun-1

5

Jun-1

6

Jun-1

7

Nestle Dabur Asian Paints

ITC HUL GCPL

-

10

20

30

40

50

60

Jun-0

6

Jun-0

7

Jun-0

8

Jun-0

9

Jun-1

0

Jun-1

1

Jun-1

2

Jun-1

3

Jun-1

4

Jun-1

5

Jun-1

6

Jun-1

7

Marico TitanColgate GSK Consumer



Exhibit 12: Most FMCG stocks are trading at par or marginal premium to their 5-year historical average barring GSK-CH and TGBL One year forward PE based on consensus estimates (X)


Exhibit 13: Relative valuation (to Sensex) One year forward Premium to Sensex based on consensus estimates (X)


HUL ITC Nestle Colgate GSKCHL APNT GCPL Marico Dabur Titan TGBL Britannia Pidilite Sector

Average P/E (X)

3-Yr 39.9 28.2 59.2 42.7 35.7 43.9 35.0 37.0 36.7 42.3 23.3 35.8 36.4 34.1

5-Yr 37.2 28.5 52.4 39.6 34.3 40.1 34.3 33.1 33.3 37.3 24.7 29.1 32.8 32.5

10-Yr 31.0 25.3 42.2 31.2 27.0 31.6 28.1 27.8 28.8 31.2 21.5 27.5 27.0 27.8

Current P/E 46.2 30.6 50.6 42.5 30.1 46.6 40.6 42.9 34.8 43.5 19.3 39.9 42.0 36.5

Current Prem/Disct to Avg (%)

Prem/Disc to 3-Yr Avg 16 8 (15) (0) (16) 6 16 16 (5) 3 (17) 11 15 7

Prem/Disc to 5-Yr Avg 24 8 (3) 7 (12) 16 18 29 4 17 (22) 37 28 12

Prem/Disc to 10-Yr Avg 49 21 20 36 12 47 45 54 21 39 (10) 45 56 31

5-year P/E variables (X)

Median 36.9 28.5 50.6 40.2 34.3 39.7 34.1 32.2 34.0 39.1 25.5 29.8 33.4 32.7

Average 37.2 28.5 52.4 39.6 34.3 40.1 34.3 33.1 33.3 37.3 24.7 29.1 32.8 32.5

STD 4.6 1.8 10.5 4.9 4.1 5.7 2.9 6.2 4.8 7.6 4.2 9.7 5.3 2.5

Max 47.1 32.9 75.5 48.2 43.1 53.9 40.6 45.1 41.5 53.1 30.6 45.2 42.0 38.3

+1 STD 41.8 30.3 62.9 44.5 38.4 45.9 37.2 39.3 38.1 44.8 28.9 38.8 38.2 35.0

Min 27.7 24.7 39.4 31.8 24.5 30.9 28.4 23.3 25.4 24.6 16.8 15.6 19.9 27.4

-1 STD 32.6 26.6 41.9 34.8 30.2 34.4 31.4 26.9 28.6 29.7 20.5 19.4 27.5 30.0

Difference versus current P/E (%)

Median 25 7 0 6 (12) 17 19 33 2 11 (24) 34 26 12

Average P/E 24 8 (3) 7 (12) 16 18 29 4 17 (22) 37 28 12

Max (2) (7) (33) (12) (30) (14) - (5) (16) (18) (37) (12) - (5)

+1 STD 11 1 (20) (4) (21) 2 9 9 (9) (3) (33) 3 10 4

Min 67 24 29 34 23 51 43 84 37 77 15 156 111 33

-1 STD 42 15 21 22 (0) 35 29 59 22 46 (6) 106 53 22

HUL ITC Nestle Colgate GSKCHL APNT GCPL Marico Dabur Titan TGBL Britannia Pidilite Sector

Average Relative P/E (X)

3-Yr 2.0 1.4 3.0 2.2 1.8 2.2 1.8 1.9 1.9 2.1 1.2 1.8 1.9 1.7

5-Yr 2.1 1.6 2.9 2.2 1.9 2.2 1.9 1.9 1.9 2.1 1.4 1.6 1.8 1.8

10-Yr 1.8 1.5 2.4 1.8 1.6 1.8 1.6 1.6 1.7 1.8 1.3 1.6 1.5 1.6

Current Relative P/E 2.4 1.6 2.6 2.2 1.5 2.4 2.1 2.2 1.8 2.2 1.0 2.0 2.2 1.9

Current Prem/Disct to Avg (%)

Prem/Disc to 3-Yr Avg 17 10 (13) 1 (15) 7 17 16 (4) 4 (16) 12 16 8

Prem/Disc to 5-Yr Avg 14 (3) (11) (2) (20) 7 7 19 (4) 8 (29) 28 18 3

Prem/Disc to 10-Yr Avg 31 6 7 21 (1) 31 28 36 7 25 (21) 29 40 16

5-year relative P/E variable (X)

Median 2.0 1.5 2.9 2.2 1.9 2.2 1.9 1.9 1.8 2.1 1.4 1.4 1.8 1.8

Average 2.1 1.6 2.9 2.2 1.9 2.2 1.9 1.9 1.9 2.1 1.4 1.6 1.8 1.8

STD 0.2 0.3 0.3 0.2 0.3 0.2 0.3 0.3 0.1 0.2 0.3 0.4 0.2 0.2

Max 2.6 2.2 3.5 2.7 3.0 2.8 2.6 2.3 2.2 2.4 2.0 2.2 2.2 2.2

+1 STD 2.3 1.9 3.2 2.4 2.2 2.5 2.2 2.1 2.0 2.3 1.7 2.0 2.0 2.0

Min 1.8 1.3 2.2 1.8 1.5 1.8 1.4 1.3 1.6 1.5 0.9 1.0 1.4 1.6

-1 STD 1.9 1.4 2.6 2.0 1.6 2.0 1.6 1.6 1.7 1.8 1.1 1.2 1.6 1.7

Difference versus current relative P/E (%)

Median 17 6 (10) (1) (17) 7 7 17 (3) 6 (27) 42 18 5

Average P/E 14 (3) (11) (2) (20) 7 7 19 (4) 8 (29) 28 18 3

Max (8) (28) (26) (20) (48) (13) (19) (5) (19) (7) (50) (9) (1) (16)

+1 STD 5 (16) (19) (10) (30) (3) (7) 3 (11) (2) (42) 2 7 (6)

Min 33 25 19 20 0 30 46 66 13 44 5 107 53 19

-1 STD 25 15 (0) 9 (6) 19 27 41 4 21 (8) 74 32 13

Ind

ia D

aily

Su

mm

ary

- July

25, 2

01

7

77

K

OTA

K IN

STIT

UTIO

NA

L EQ

UIT

IES R

ESEA

RC

H

June 2017: Results calendar

Source: NES, Kotak Institutional Equities

Mon Tue Wed Thu Fri Sat Sun

24-Jul 25-Jul 26-Jul 27-Jul 28-Jul 29-Jul 30-Jul

Ambuja Cem. Asian Paints Bharat Financial Aditya Bir. Fas. Equitas Holdings Balkrishna Inds

Bharti Infra. Axis Bank Federal Bank Biocon India Cements Central Bank

HDFC Bank Bharti Airtel H D F C Blue Dart Exp. Karur Vysya Bank NTPC

Indiabulls Hous. Fag Bearings L&T Fin.Holdings Cholaman.Inv.&Fn Larsen & Toubro

Info Edg.(India) Glaxosmit Pharma MphasiS Crompton Greaves Consumer LIC Housing Fin.

IRB Infra.Devl. Hero Motocorp Orient Cement Dr Reddy's Labs Oberoi Realty

Just Dial ICICI Prudential Life PVR Exide Inds. SKF

L&T Infotech Pidilite Inds. Glenmark Pharma.

M & M Fin. Serv. Vedanta HCL Technologies

Tata Comm I D F C

Zee Entertainmen ICICI Bank

Idea Cellular

IDFC Bank

ITC

Maruti Suzuki

O N G C

Reliance Capital

Supreme Inds.

Tata Elxsi

WABCO India

31-Jul 1-Aug 2-Aug 3-Aug 4-Aug 5-Aug 6-Aug

Bharat Electron JSW Steel Bata India Colgate-Palm. Apollo Tyres

Carborundum Universal PC Jew eller Emami Cummins India Berger Paints

Container Corpn. Piramal Enterp. Godrej Properties I O C L Dabur India

Godrej Consumer Pow er Grid Corpn Lupin JK Lakshmi Cement H P C L

Hexaw are Technologies Shri.City Union. Voltas Jyothy Laboratories M & M

Interglobe Aviat Torrent Pow er Wockhardt PNB Housing MRF

Reliance Pow er The Ramco Cement Sobha

Shree Cement Titan Company

Shriram Trans. Ujjivan Financial Services

Siemens

Tech Mahindra

Torrent Pharma.

UPL

Vakrangee

7-Aug 8-Aug 9-Aug 10-Aug 11-Aug 12-Aug 13-Aug

Amara Raja Batt. Century Textiles Guj Pipavav Port Bosch J K Cement

Britannia Inds. GlaxoSmith C H L Motherson Sumi Cadila Health. P I Inds.

Dr Lal Pathlabs Timken Page Industries Cipla

Godrej Inds.

Hindalco Inds.

Rural Elec.Corp.

S A I L

TVS Motor Co.

14-Aug 15-Aug 16-Aug 17-Aug 18-Aug 19-Aug 20-Aug

Apollo Hospitals Dish TV

KO

TA

K IN

STIT

UTIO

NA

L EQ

UIT

IES R

ESEA

RC

H

78

Ind

ia D

aily

Su

mm

ary

- July

25, 2

01

7

Ind

ia D

aily

Su

mm

ary

- July

25, 2

01

7

Kotak Institutional Equities: Valuation summary of KIE Universe stocks


Target O/S

Price (Rs) price Upside Mkt cap. shares EPS (Rs) EPS growth (%) PER (X) EV/EBITDA (X) ADVT-3mo

Company Rating 24-Jul-17 (Rs) (%) (Rs mn) (US$ mn) (mn) 2017 2018E 2019E 2017 2018E 2019E 2017 2018E 2019E 2017 2018E 2019E 2017 2018E 2019E 2017 2018E 2019E 2017 2018E 2019E (US$ mn)

Automobiles

Amara Raja Batteries SELL 843 760 (9.9) 144,038 2,238 171 28.0 33.4 37.9 (2.6) 19.0 13.6 30.1 25.3 22.3 16.8 14.4 12.7 5.6 4.7 4.0 0.5 0.6 0.7 20.3 20.2 19.5 5.2

Apollo Tyres BUY 254 360 41.8 129,190 2,007 509 21.6 19.2 26.1 4.1 (11.3) 36.3 11.8 13.2 9.7 8.5 8.4 6.2 1.8 1.6 1.4 1.2 1.2 1.2 15.8 12.7 15.4 16.2

Ashok Leyland ADD 104 110 5.8 304,360 4,729 2,846 5.1 4.4 5.8 46.7 (14.2) 32.4 20.3 23.7 17.9 14.4 13.6 10.5 4.8 4.3 3.7 1.4 1.3 1.7 25.3 19.2 22.2 19.6

Bajaj Auto REDUCE 2,827 2,525 (10.7) 817,968 12,708 289 132.3 130.5 150.2 (2.6) (1.4) 15.1 21.4 21.7 18.8 15.7 15.4 13.0 4.8 4.3 3.8 1.9 1.8 2.1 25.3 21.0 21.6 12.5

Balkrishna Industries ADD 1,615 1,760 9.0 156,089 2,425 97 74.8 88.6 106.3 19.7 18.5 20.0 21.6 18.2 15.2 12.4 10.4 8.4 4.4 3.6 3.0 0.5 0.5 0.6 22.9 21.9 21.6 4.0

Bharat Forge SELL 1,130 925 (18.2) 263,162 4,089 233 29.4 34.8 43.1 9.8 18.3 24.1 38.4 32.5 26.2 23.3 17.4 14.7 6.4 5.6 4.8 0.6 0.7 0.9 18.2 18.4 19.8 13.4

CEAT ADD 1,843 2,000 8.5 74,558 1,158 40 91.8 87.0 125.1 (16.6) (5.2) 43.9 20.1 21.2 14.7 12.7 11.2 8.5 3.1 2.7 2.4 0.6 0.6 0.8 16.6 13.7 17.2 30.1

Eicher Motors SELL 28,844 19,700 (31.7) 785,186 12,199 27 613.8 789.5 913.5 30.5 28.6 15.7 47.0 36.5 31.6 34.7 26.1 22.1 19.1 13.6 10.2 0.1 0.1 0.1 44.0 43.5 37.0 22.0

Exide Industries SELL 215 200 (7.0) 182,793 2,840 850 8.2 9.0 9.8 11.1 10.6 8.3 26.4 23.8 22.0 17.0 15.0 13.7 3.7 3.4 3.1 1.1 1.4 1.4 14.6 14.8 14.6 6.1

FAG Bearings ADD 4,617 5,100 10.5 76,722 1,192 17 117.0 149.1 184.7 (1.5) 27.4 23.9 39.5 31.0 25.0 23.8 18.8 15.1 5.3 4.7 4.2 0.3 0.6 1.2 14.2 16.0 17.7 0.3

Hero Motocorp REDUCE 3,692 3,200 (13.3) 737,341 11,456 200 169.1 186.4 203.0 9.5 10.2 8.9 21.8 19.8 18.2 14.6 13.1 11.9 7.3 6.4 5.6 2.3 2.5 2.7 35.7 34.3 32.7 20.2

Mahindra CIE Automotive ADD 250 275 10.1 94,416 1,467 378 4.6 9.6 12.3 14.2 106.7 28.5 53.8 26.0 20.3 20.1 12.4 10.1 2.9 2.6 2.3 — — — 6.7 10.5 12.1 0.8

Mahindra & Mahindra BUY 1,389 1,650 18.8 862,666 13,403 569 65.8 74.5 85.9 12.1 13.2 15.3 21.1 18.7 16.2 15.2 13.0 11.2 3.0 2.7 2.4 0.9 1.1 1.2 15.1 15.1 15.5 28.5

Maruti Suzuki ADD 7,555 7,700 1.9 2,282,079 35,455 302 238.9 275.5 344.7 34.6 15.3 25.1 31.6 27.4 21.9 19.8 16.3 12.9 6.3 5.4 4.6 1.0 0.9 1.1 21.9 21.3 22.8 54.5

Motherson Sumi Systems SELL 325 225 (30.8) 684,074 10,628 2,105 7.7 9.9 12.0 18.4 28.4 21.5 42.2 32.8 27.0 17.2 13.2 11.2 8.3 7.1 6.1 0.6 0.9 1.1 25.6 23.3 24.2 14.2

MRF ADD 68,909 77,000 11.7 292,252 4,541 4 3,505 3,531 4,382 (40.8) 0.7 24.1 19.7 19.5 15.7 10.7 10.1 8.0 3.4 2.9 2.5 0.1 0.1 0.1 18.7 16.0 16.9 18.3

SKF REDUCE 1,542 1,480 (4.0) 81,308 1,263 53 46.3 56.3 66.0 (4.7) 21.6 17.3 33.3 27.4 23.3 22.1 18.3 15.3 4.5 4.1 3.7 1.0 1.1 1.3 13.5 14.8 15.6 0.3

Suprajit Engineering SELL 288 215 (25.2) 37,766 587 131 8.5 9.8 11.7 54.9 15.5 19.6 33.9 29.3 24.5 20.2 16.7 14.3 7.1 5.9 4.9 0.4 0.5 0.6 22.7 21.9 21.9 0.9

Tata Motors BUY 464 560 20.7 1,575,744 22,974 3,396 27.7 34.8 51.9 (32.8) 25.5 49.1 16.7 13.3 8.9 6.6 5.8 4.5 2.7 2.3 1.8 — — — 13.7 18.5 22.4 54.7

Timken REDUCE 718 650 (9.5) 48,821 758 68 14.3 19.6 24.8 3.7 37.2 26.5 50.2 36.6 28.9 30.3 21.3 16.8 7.9 6.6 5.8 0.1 0.3 1.0 16.9 19.7 21.4 0.8

TVS Motor SELL 577 290 (49.8) 274,268 4,261 475 10.8 13.4 16.8 20.1 24.9 25.0 53.7 43.0 34.4 32.9 24.1 20.0 12.3 10.4 8.8 0.4 0.7 0.9 25.3 26.3 27.7 10.3

WABCO India ADD 5,376 6,100 13.5 101,975 1,584 19 112.5 145.0 178.7 5.0 28.9 23.2 47.8 37.1 30.1 29.5 23.3 18.5 8.1 6.7 5.6 0.1 0.2 0.3 18.3 19.8 20.3 0.6

Automobiles Cautious 10,006,777 153,962 (3.9) 14.8 27.6 25.4 22.1 17.3 13.0 11.1 8.9 4.7 4.1 3.4 0.8 0.9 1.0 18.7 18.4 19.9 333.3

Banks

Axis Bank REDUCE 535 525 (1.8) 1,282,010 19,918 2,395 15.4 24.2 34.9 (55.5) 57.6 44.2 34.8 22.1 15.3 — — — 2.5 2.4 2.1 0.9 0.7 1.0 6.8 10.0 13.1 61.4

Bank of Baroda ADD 164 210 27.9 378,343 5,878 2,310 6.0 15.9 22.3 125.6 165.7 40.3 27.4 10.3 7.4 — — — 1.5 1.4 1.3 0.7 1.9 2.7 3.8 9.6 12.4 27.5

Bank of India ADD 160 170 6.4 171,283 2,661 1,055 (14.8) 1.8 26.5 80.2 112.3 1,362.3 (10.8) 88.2 6.0 — — — 1.6 1.1 0.8 3.1 0.2 3.3 (6.6) 0.7 10.0 16.5

Canara Bank REDUCE 353 350 (0.8) 210,843 3,276 597 18.8 17.4 55.3 136.3 (7.2) 217.2 18.8 20.3 6.4 — — — 1.5 1.6 1.2 — 0.3 0.8 3.4 3.1 9.2 21.5

City Union Bank REDUCE 159 160 0.8 104,928 1,630 601 8.4 8.7 10.7 12.5 4.2 22.5 19.0 18.2 14.9 — — — 2.8 2.6 2.2 0.9 0.9 1.1 15.2 13.8 15.1 1.8

DCB Bank REDUCE 196 200 2.1 60,232 936 308 7.0 7.0 9.4 2.3 0.5 33.1 28.0 27.9 20.9 — — — 3.0 2.5 2.2 — — — 10.8 9.6 10.6 8.4

Equitas Holdings ADD 168 180 7.4 56,706 881 338 4.7 1.0 5.0 (23.8) (78.3) 392.1 35.5 163.6 33.2 — — — 2.6 2.6 2.4 — — — 9.3 1.5 7.2 5.4

HDFC Bank REDUCE 1,735 1,575 (9.2) 4,465,945 69,385 2,563 56.8 68.2 80.5 16.7 20.1 18.0 30.6 25.4 21.6 — — — 5.0 4.4 3.8 0.6 0.8 0.9 17.9 18.2 18.6 34.4

ICICI Bank BUY 303 335 10.5 1,943,447 30,194 6,408 15.3 13.7 21.9 1.2 (10.1) 59.5 19.8 22.0 13.8 — — — 2.5 2.2 1.9 0.8 0.9 1.4 11.0 8.6 12.5 90.8

IDFC Bank ADD 60 70 15.8 205,590 3,194 3,399 3.0 3.0 3.7 149.7 (1.5) 26.0 20.1 20.5 16.2 — — — 1.4 1.3 1.3 1.2 1.0 1.2 7.2 6.7 7.9 13.8

IndusInd Bank ADD 1,555 1,620 4.2 930,449 14,456 598 47.9 58.8 69.4 24.8 22.6 18.0 32.4 26.4 22.4 — — — 4.7 4.0 3.4 — — — 15.7 16.2 16.0 22.3

J&K Bank BUY 90 100 10.6 50,340 782 521 (31.3) 10.5 14.8 (464.8) 133.6 41.3 (2.9) 8.6 6.1 — — — 1.2 1.0 0.9 — 2.4 3.4 (27.0) 9.3 12.1 1.0

Karur Vysya Bank ADD 141 130 (7.7) 85,087 1,322 709 10.0 10.1 13.2 7.5 0.9 31.1 14.1 13.9 10.6 — — — 2.0 1.8 1.6 1.8 1.8 2.4 12.7 12.7 14.2 3.2

Punjab National Bank ADD 161 165 2.3 343,241 5,333 2,128 6.2 16.1 25.0 125.2 159.2 55.1 25.9 10.0 6.4 — — — 2.2 1.5 1.1 — 2.2 3.4 3.6 8.7 12.3 29.2

RBL Bank SELL 524 390 (25.6) 197,443 3,068 408 11.9 14.7 18.7 32.0 23.5 27.6 44.1 35.7 28.0 — — — 4.7 3.4 3.1 0.3 0.4 0.5 12.2 11.0 11.2 15.7

State Bank of India BUY 295 350 18.8 2,542,571 39,502 8,632 13.1 15.2 27.7 2.6 15.3 82.7 22.4 19.4 10.6 — — — 2.3 1.8 1.5 0.9 1.0 1.0 6.3 6.2 9.7 70.1

Ujjivan Financial Services BUY 336 410 22.0 40,206 625 119 17.3 4.7 16.8 (1.2) (72.9) 258.3 19.4 71.6 20.0 — — — 2.3 2.3 2.1 0.4 0.1 0.5 14.0 3.1 10.6 10.4

Union Bank ADD 157 165 4.9 108,134 1,680 1,228 4.5 6.4 16.7 (77.0) 41.4 161.0 34.8 24.6 9.4 — — — 2.1 1.9 1.3 — — — 2.7 3.6 8.7 13.0

YES Bank SELL 1,593 1,400 (12.1) 728,560 11,319 456 73.0 74.2 78.9 20.8 1.8 6.3 21.8 21.5 20.2 — — — 3.4 3.0 2.7 0.6 0.8 0.8 18.6 14.5 13.7 60.8

Banks Attractive 14,132,596 219,570 64.3 33.6 50.4 28.3 21.2 14.1 2.0 1.8 1.6 0.8 0.8 1.1 7.2 8.4 11.5 530.0

NBFCs

Bajaj Finserv ADD 4,950 4,700 (5.0) 787,693 12,238 159 153.2 184.2 220.6 24.8 20.2 19.8 32.3 26.9 22.4 — — — 5.0 3.8 3.3 0.3 0.3 0.3 16.7 16.1 15.7 11.4

Bharat Financial Inclusion SELL 785 670 (14.6) 108,332 1,683 138 21.0 37.2 50.2 (11.6) 76.9 34.9 37.3 21.1 15.6 — — — 4.7 3.7 3.0 — — — 15.1 19.0 20.9 38.6

Cholamandalam ADD 1,130 1,200 6.2 176,532 2,743 156 46.0 55.9 67.0 26.9 21.6 19.8 24.6 20.2 16.9 — — — 4.5 3.8 3.2 0.5 0.6 0.7 18.0 18.7 19.0 4.6

HDFC ADD 1,632 1,675 2.6 2,600,001 40,395 1,589 49.6 56.4 64.4 4.8 13.9 14.2 32.9 28.9 25.3 — — — 6.2 5.5 4.4 1.1 1.2 1.4 20.4 20.0 19.5 71.2

ICICI Prudential Life ADD 469 410 (12.5) 672,652 10,451 1,432 11.7 11.6 12.7 1.9 (0.9) 9.2 39.9 40.3 36.9 — — — 11.2 10.1 9.1 — — — 29.7 26.3 25.9 6.4

IIFL Holdings REDUCE 595 510 (14.2) 189,104 2,938 318 21.6 25.6 29.8 33.6 18.6 16.5 27.6 23.2 19.9 — — — 4.3 3.8 3.3 0.8 0.9 1.1 22.6 22.0 23.1 3.3

L&T Finance Holdings ADD 154 140 (9.1) 280,467 4,357 1,895 5.5 6.5 8.9 13.0 18.4 36.7 28.0 23.6 17.3 — — — 3.6 3.3 2.9 0.5 1.2 1.4 13.7 14.6 17.8 9.3

LIC Housing Finance ADD 743 750 0.9 375,116 5,828 505 42.3 45.9 55.8 16.5 8.4 21.8 17.6 16.2 13.3 — — — 3.1 2.6 2.2 0.8 0.9 1.1 19.1 19.2 19.9 17.5

Mahindra & Mahindra Financial SELL 363 260 (28.4) 206,661 3,211 565 7.1 13.9 17.9 (40.5) 95.7 29.4 51.3 26.2 20.3 — — — 3.4 3.2 2.9 0.7 1.3 1.7 6.4 11.7 14.0 13.3

Max Financial Services NR 599 — — 160,079 2,487 267 5.8 5.7 (4.0) 33.6 (0.5) (168.9) 103.9 104.4 (151.5) — — — — — — 0.3 0.4 (0.3) 8.8 8.2 (5.4) 14.6

Muthoot Finance ADD 462 440 (4.7) 184,466 2,866 400 29.5 32.5 36.9 45.5 10.0 13.6 15.6 14.2 12.5 — — — 2.8 2.5 2.1 1.1 1.4 1.6 19.4 18.5 18.3 5.4

PFC REDUCE 128 145 13.7 336,742 5,232 2,640 8.1 17.0 23.3 (65.2) 111.2 36.6 15.8 7.5 5.5 — — — 1.0 1.4 1.1 3.9 4.0 5.5 5.7 11.9 14.8 15.9

PNB Housing Finance SELL 1,472 1,100 (25.3) 245,240 3,810 168 31.5 42.3 52.3 22.2 34.0 23.7 46.7 34.8 28.1 — — — 4.4 4.1 3.8 0.4 0.6 0.8 13.6 12.1 13.8 7.5

Rural Electrification Corp. REDUCE 181 180 (0.7) 357,855 5,560 1,975 38.9 24.2 23.4 36.4 (37.7) (3.7) 4.7 7.5 7.8 — — — 1.2 1.3 1.0 5.3 2.9 2.8 20.2 13.6 11.1 28.1

Shriram City Union Finance SELL 2,307 1,850 (19.8) 152,139 2,364 66 84.2 122.1 145.8 5.1 44.9 19.5 27.4 18.9 15.8 — — — 3.1 2.8 2.4 0.4 0.6 0.8 11.6 15.0 15.7 1.2

Shriram Transport REDUCE 964 1,050 8.9 218,749 3,399 227 55.4 65.8 81.8 6.7 18.7 24.3 17.4 14.7 11.8 — — — 2.0 1.9 1.7 1.0 1.0 1.2 11.7 12.5 13.9 14.0

NBFCs Neutral 7,051,828 109,560 1.4 10.4 18.0 22.4 20.3 17.2 3.6 3.2 2.7 1.1 1.1 1.3 15.9 15.5 15.7 530.0

Dividend yield (%) RoE (%)Price/BV (X)

In

dia

Da

ily S

um

ma

ry - Ju

ly 2

5, 2

01

7

79

K

OTA

K IN

STIT

UTIO

NA

L EQ

UIT

IES R

ESEA

RC

H



Target O/S



Cement

ACC SELL 1,725 1,500 (13.0) 323,905 5,032 188 34.3 46.4 69.8 (13.3) 35.0 50.6 50.3 37.2 24.7 25.6 19.8 13.8 3.7 3.5 3.2 1.0 1.0 1.0 7.5 9.8 13.6 12.3

Ambuja Cements REDUCE 268 250 (6.8) 532,352 8,271 1,986 5.8 7.8 11.4 11.4 33.9 46.2 46.3 34.5 23.6 15.7 12.0 8.5 2.7 2.6 2.4 1.0 1.1 1.1 7.7 7.7 10.7 13.5

Dalmia Bharat ADD 2,622 2,700 3.0 233,268 3,624 89 38.8 109.3 154.2 80.7 181.6 41.0 67.5 24.0 17.0 15.0 10.3 7.9 4.7 3.6 3.0 0.1 0.1 0.1 7.8 16.9 19.1 11.6

Grasim Industries ADD 1,053 1,250 18.7 692,304 10,756 467 67.8 85.6 100.5 23.5 26.2 17.3 15.5 12.3 10.5 9.1 7.5 5.9 1.6 1.4 1.2 0.5 0.5 0.5 10.8 12.0 12.6 31.5

India Cements SELL 209 155 (25.8) 64,404 1,001 308 5.7 9.1 12.7 17.0 60.9 38.6 NM 22.9 16.5 10.8 9.0 7.5 1.3 1.2 1.1 0.5 0.5 0.5 3.5 5.4 7.1 19.0

J K Cement REDUCE 982 1,100 12.1 68,617 1,066 70 34.6 67.9 96.1 304.7 96.5 41.5 28.4 14.5 10.2 14.1 9.6 7.5 3.9 3.2 2.5 0.8 0.8 0.8 14.3 24.2 27.2 0.8

JK Lakshmi Cement ADD 466 550 17.9 54,887 853 118 6.9 25.3 44.1 251.8 263.4 74.5 67.1 18.5 10.6 20.1 9.0 6.3 3.9 3.3 2.5 0.4 0.4 0.4 5.9 19.4 27.1 1.0

Orient Cement ADD 159 180 13.0 32,636 507 205 (1.6) 10.6 14.3 (151.6) 774.4 35.6 (101.6) 15.1 11.1 25.1 8.5 6.9 3.3 2.8 2.3 0.3 1.1 1.1 (3.2) 20.2 22.8 0.8

Shree Cement SELL 17,696 14,000 (20.9) 616,478 9,578 35 384.4 580.6 724.1 233.2 51.1 24.7 46.0 30.5 24.4 24.8 16.2 12.9 8.0 6.4 5.1 0.6 0.1 0.1 19.3 23.4 23.3 5.0

UltraTech Cement SELL 4,198 3,100 (26.1) 1,152,314 17,903 275 96.2 130.8 162.7 11.4 36.0 24.3 43.6 32.1 25.8 22.8 18.0 14.7 4.8 4.2 3.7 0.2 0.2 0.2 11.8 14.0 15.3 17.0

Cement Cautious 3,771,164 58,590 32.3 46.3 29.6 38.7 26.4 20.4 16.4 12.4 9.7 3.6 3.2 2.8 0.5 0.4 0.4 9.3 12.1 13.7 112.4

Consumer products

Asian Paints REDUCE 1,156 1,000 (13.5) 1,108,593 17,224 959 20.3 24.0 27.7 8.3 18.0 15.8 56.9 48.2 41.7 36.2 30.4 25.9 14.6 13.0 11.5 0.9 1.0 1.2 27.6 28.5 29.3 17.3

Bajaj Corp. ADD 435 460 5.7 64,192 997 148 15.8 16.9 19.4 (0.5) 7.1 14.5 27.6 25.7 22.5 23.3 22.3 18.7 13.0 12.5 11.9 2.6 3.0 3.3 47.8 49.5 54.2 0.5

Britannia Industries ADD 3,829 3,700 (3.4) 459,760 7,143 120 73.7 87.9 108.9 7.3 19.2 24.0 52.0 43.6 35.2 35.8 29.3 23.6 17.0 13.7 10.9 0.6 0.7 0.8 37.0 34.8 34.6 7.9

Coffee Day Enterprises ADD 250 280 12.2 51,408 799 206 2.2 6.0 10.2 208.8 166.9 69.8 111.3 41.7 24.6 14.5 12.5 11.0 2.3 2.2 2.0 — — — 2.1 5.4 8.5 0.5

Colgate-Palmolive (India) ADD 1,070 1,075 0.5 290,916 4,520 272 20.6 25.0 30.8 (3.5) 21.2 23.1 51.8 42.8 34.8 30.5 25.3 20.9 22.8 19.0 15.8 0.9 1.2 1.5 48.9 48.6 49.7 6.4

Dabur India REDUCE 306 290 (5.2) 538,673 8,369 1,762 7.2 7.8 9.0 3.6 9.1 14.6 42.7 39.1 34.1 35.5 32.8 28.7 11.1 9.7 8.5 0.7 1.0 1.2 28.0 26.5 26.5 9.1

GlaxoSmithKline Consumer ADD 5,533 5,900 6.6 232,691 3,615 42 156.1 170.4 190.1 0.9 9.2 11.6 35.4 32.5 29.1 24.2 22.1 19.3 7.5 6.8 6.2 1.3 1.4 1.6 23.6 21.9 22.2 1.0

Godrej Consumer Products SELL 990 800 (19.2) 674,321 10,477 681 38.3 23.0 26.3 11.3 (39.9) 14.1 25.9 43.0 37.7 36.5 30.5 26.6 6.4 10.9 9.2 1.5 0.8 0.8 25.1 27.3 26.4 10.2

Hindustan Unilever REDUCE 1,159 1,100 (5.1) 2,509,372 38,987 2,160 19.6 23.2 26.7 3.2 18.0 15.4 59.1 50.1 43.4 40.7 34.2 29.7 38.7 36.6 34.7 1.5 1.6 1.8 66.5 75.0 82.2 26.6

ITC ADD 293 325 10.8 3,566,453 55,410 12,235 8.3 9.1 10.1 9.9 10.2 10.8 35.5 32.2 29.1 23.6 21.4 19.2 7.9 7.5 7.1 1.6 1.9 2.3 20.5 22.0 23.8 74.3

Jubilant Foodworks SELL 1,252 900 (28.1) 82,623 1,284 66 10.5 16.2 25.7 (33.9) 53.9 58.9 119.2 77.5 48.7 33.7 24.1 18.6 10.3 9.5 8.6 0.2 0.4 0.7 9.0 12.8 18.5 14.8

Jyothy Laboratories NR 378 — — 68,640 1,066 182 6.5 11.4 11.8 25.2 74.5 4.0 57.9 33.2 31.9 28.2 24.5 21.6 6.3 5.9 5.6 1.6 1.6 1.9 12.2 18.3 18.0 1.0

Manpasand Beverages REDUCE 781 700 (10.3) 44,674 694 57 12.7 18.2 24.8 25.8 43.6 35.9 61.5 42.8 31.5 28.9 21.7 14.7 3.9 3.6 3.2 0.1 0.1 0.2 8.3 8.7 10.8 1.5

Marico REDUCE 330 285 (13.6) 425,855 6,616 1,291 6.2 7.1 8.1 10.8 14.2 15.0 53.3 46.7 40.6 36.3 33.0 28.6 18.3 16.1 14.1 1.0 1.2 1.3 36.1 36.7 37.0 5.9

Nestle India SELL 6,830 5,700 (16.5) 658,519 10,231 96 99.3 125.4 149.6 7.1 26.4 19.2 68.8 54.4 45.7 35.5 30.2 25.7 21.9 20.3 19.0 0.9 1.2 1.5 32.8 38.7 43.1 5.0

Page Industries REDUCE 16,711 14,100 (15.6) 186,394 2,896 11 234.7 296.9 360.0 13.1 26.5 21.2 71.2 56.3 46.4 45.1 36.3 29.7 28.0 22.4 18.1 0.6 0.7 0.9 43.8 44.3 43.2 4.6

PC Jeweller REDUCE 255 230 (9.7) 91,291 1,418 394 11.8 12.4 14.5 5.7 5.7 16.5 21.7 20.5 17.6 11.4 9.2 7.9 2.7 2.4 2.1 0.2 0.3 0.5 14.6 12.9 12.7 7.7

Pidilite Industries ADD 812 775 (4.6) 416,350 6,469 513 16.8 19.7 22.8 7.1 17.6 15.6 48.4 41.2 35.6 31.9 27.6 23.5 12.0 10.1 8.6 0.6 0.7 0.9 28.2 26.7 26.1 6.0

S H Kelkar and Company SELL 276 270 (2.1) 39,901 620 145 7.2 8.4 9.8 37.3 16.5 15.6 38.1 32.7 28.3 23.8 20.2 17.3 4.9 4.5 4.0 0.6 0.8 1.0 13.3 14.3 15.0 1.8

Tata Global Beverages ADD 170 160 (5.9) 107,292 1,667 631 6.1 7.0 8.4 17.3 15.0 20.0 27.9 24.3 20.2 13.6 12.2 10.4 1.7 1.6 1.6 1.4 1.5 1.8 6.1 6.9 8.0 7.8

Titan Company SELL 538 430 (20.1) 477,762 7,423 888 8.9 12.4 14.4 14.2 38.4 16.3 60.3 43.6 37.4 40.1 29.1 24.6 11.2 9.6 8.3 0.5 0.7 0.8 20.4 23.8 23.8 17.3

United Breweries SELL 815 650 (20.3) 215,530 3,349 264 8.7 11.9 16.1 (23.0) 37.3 34.7 93.7 68.3 50.7 34.2 28.4 23.7 9.2 8.3 7.3 0.1 0.2 0.3 10.3 12.8 15.3 3.6

United Spirits REDUCE 2,641 2,400 (9.1) 383,738 5,962 145 27.3 34.8 55.4 59.7 27.2 59.4 96.6 75.9 47.6 43.7 39.7 28.6 19.8 13.0 9.0 — — — 21.8 20.7 22.4 26.2

Varun Beverages BUY 502 550 9.6 91,556 1,422 182 8.6 12.0 15.6 66.3 39.9 29.5 58.3 41.7 32.2 14.3 12.8 11.1 4.7 4.3 3.8 — — — 11.8 11.0 12.6 1.3

Consumer products Cautious 12,786,505 198,656 8.7 16.5 15.8 47.6 40.9 35.3 30.4 26.4 22.8 11.3 10.2 9.3 1.1 1.3 1.5 23.8 25.1 26.3 258.4

Energy

BPCL SELL 466 435 (6.7) 1,011,306 15,712 1,967 40.9 34.3 39.1 8.2 (16.1) 14.2 11.4 13.6 11.9 9.7 9.9 8.5 3.1 2.7 2.4 4.6 2.2 2.5 28.3 21.2 21.1 27.0

Castrol India ADD 410 480 17.2 202,597 3,148 495 13.5 14.8 16.1 12.3 9.5 8.6 30.3 27.7 25.5 19.3 18.2 16.6 34.0 33.0 32.0 2.7 2.9 3.2 114.1 121.1 127.4 5.4

GAIL (India) ADD 377 435 15.4 637,621 9,906 1,691 22.4 27.0 28.8 66.2 21.0 6.5 16.9 13.9 13.1 10.3 8.9 8.5 1.7 1.6 1.4 2.4 2.3 2.4 11.0 11.6 11.5 18.4

GSPL ADD 181 180 (0.3) 101,747 1,581 564 8.8 11.2 11.8 11.7 26.9 5.7 20.5 16.1 15.3 10.3 8.2 7.5 2.3 2.0 1.9 0.8 1.2 1.6 11.7 13.3 12.8 1.9

HPCL REDUCE 369 380 2.9 562,976 8,747 1,524 43.1 29.0 30.4 70.2 (32.7) 4.9 8.6 12.7 12.1 7.0 9.4 9.2 2.8 2.4 2.2 5.4 2.4 2.5 33.9 20.3 18.8 25.5

Indraprastha Gas SELL 1,136 970 (14.6) 159,026 2,471 140 43.3 50.0 54.9 30.6 15.4 10.0 26.2 22.7 20.7 15.9 13.9 12.5 5.4 4.7 4.2 0.7 1.0 1.3 22.7 22.2 21.4 5.8

IOCL REDUCE 378 435 15.0 1,836,261 28,529 4,739 53.5 38.4 41.1 173.9 (28.2) 7.1 7.1 9.8 9.2 4.7 5.4 5.1 1.8 1.7 1.5 5.0 4.8 5.1 29.2 17.6 17.4 34.5

Mahanagar Gas SELL 984 775 (21.3) 97,217 1,510 99 39.8 43.3 45.6 27.4 8.8 5.4 24.7 22.7 21.6 14.9 13.4 12.7 5.3 4.8 4.4 1.9 2.1 2.3 23.4 22.2 21.4 2.5

ONGC ADD 163 190 16.4 2,095,026 32,549 12,833 16.8 15.3 19.8 24.7 (9.4) 30.0 9.7 10.7 8.2 4.7 4.6 3.8 0.9 0.9 0.8 3.7 3.1 4.0 10.6 8.6 10.5 21.1

Oil India SELL 281 285 1.3 212,870 3,307 757 30.2 24.3 29.8 (2.0) (19.6) 22.5 9.3 11.6 9.4 6.2 7.1 5.9 0.8 0.7 0.7 5.1 3.9 4.8 9.4 6.4 7.8 2.1

Petronet LNG ADD 202 235 16.1 303,675 4,718 1,500 11.4 13.2 15.2 102.7 16.3 15.0 17.8 15.3 13.3 11.7 9.4 8.1 4.0 3.4 2.9 1.2 1.7 2.2 24.4 23.9 23.5 26.1

Reliance Industries REDUCE 1,616 1,500 (7.2) 4,782,040 74,296 2,959 101.1 81.6 92.7 17.8 (19.2) 13.5 16.0 19.8 17.4 15.2 13.3 9.6 1.8 1.7 1.6 0.7 0.8 1.0 11.2 8.3 8.8 101.4

Energy Attractive 12,002,362 186,473 43.3 (17.3) 15.3 11.8 14.3 12.4 8.4 8.3 6.9 1.7 1.6 1.4 2.6 2.2 2.5 14.1 10.9 11.6 271.5


K

OTA

K IN

STIT

UTIO

NA

L EQ

UIT

IES R

ESEA

RC

H

80

In

dia

Da

ily S

um

ma

ry - Ju

ly 2

5, 2

01

7

Ind

ia D

aily

Su

mm

ary

- July

25, 2

01

7



Target O/S



Industrials

ABB SELL 1,451 1,160 (20.0) 307,426 4,776 212 17.7 23.3 32.9 24.9 32.0 41.2 82.1 62.2 44.1 43.4 34.8 26.8 9.4 8.5 7.5 0.3 0.5 0.6 11.9 14.4 18.2 3.8

BHEL SELL 146 100 (31.6) 357,962 5,561 2,448 2.0 2.5 6.5 169.9 21.8 163.0 72.2 59.3 22.5 23.1 23.2 9.2 1.1 1.1 1.1 0.3 0.4 1.1 1.5 1.9 4.8 13.4

Carborundum Universal REDUCE 357 265 (25.7) 67,269 1,045 189 9.3 12.5 15.4 21.7 34.8 23.4 38.5 28.5 23.1 20.2 15.8 13.0 4.9 4.4 3.9 0.5 1.1 1.3 13.6 16.2 17.8 0.8

CG Power and Industrial REDUCE 85 78 (8.4) 53,367 829 627 2.9 3.7 5.4 (45.6) 25.3 47.0 29.0 23.1 15.7 12.3 10.2 7.0 1.3 1.4 1.5 — 0.9 1.3 4.2 5.9 9.4 4.1

Crompton Greaves Consumer SELL 206 210 2.0 129,047 2,005 627 4.7 5.6 6.6 21.1 19.1 19.3 44.0 37.0 31.0 26.9 22.8 19.2 23.8 15.2 10.5 0.5 0.7 1.0 76.1 50.3 40.3 3.5

Cummins India SELL 1,028 840 (18.3) 284,962 4,427 277 26.3 29.4 33.6 1.4 11.9 14.2 39.1 35.0 30.6 34.5 31.8 27.2 7.6 7.1 6.5 1.4 1.5 1.7 21.1 20.9 22.1 6.1

Havells India SELL 461 410 (11.0) 287,912 4,473 625 9.5 9.9 13.1 35.9 4.0 33.1 48.5 46.6 35.0 32.7 27.6 21.0 8.8 8.0 7.2 0.7 0.9 1.3 18.8 18.0 21.7 9.5

Kalpataru Power Transmission BUY 345 400 15.9 52,944 823 153 14.2 16.8 25.1 85.5 18.5 49.2 24.3 20.5 13.7 8.8 7.5 6.1 2.2 2.0 1.8 0.6 0.6 0.6 9.2 10.3 13.9 0.6

KEC International ADD 288 270 (6.4) 74,157 1,152 257 11.9 14.9 19.2 59.2 25.5 28.8 24.3 19.4 15.1 11.3 9.5 7.9 4.7 3.9 3.2 0.6 0.7 0.9 19.7 21.9 23.3 3.8

L&T REDUCE 1,178 1,230 4.4 1,649,547 25,628 1,399 42.3 52.8 62.5 43.0 24.7 18.5 27.8 22.3 18.8 22.9 18.7 16.2 3.5 3.2 2.9 1.8 1.6 1.9 13.5 15.1 16.4 54.1

Siemens SELL 1,376 1,020 (25.9) 489,986 7,613 356 23.0 30.1 38.5 35.2 30.9 28.0 59.8 45.7 35.7 36.2 27.8 21.6 7.1 6.7 6.2 0.8 1.1 1.4 12.1 15.0 18.0 3.9

Thermax REDUCE 917 920 0.4 109,231 1,697 113 21.4 32.7 37.6 (14.7) 52.8 15.1 42.9 28.0 24.4 25.0 20.4 17.8 4.1 3.7 3.3 0.7 0.8 0.9 9.7 13.8 14.3 0.8

Voltas SELL 502 415 (17.4) 166,203 2,582 331 15.4 16.5 18.2 41.8 7.6 10.4 32.7 30.4 27.5 31.8 27.1 22.0 5.0 4.5 4.0 0.7 0.8 0.9 17.8 15.6 15.5 13.7

Industrials Cautious 4,030,012 62,612 51.5 23.0 28.1 37.1 30.2 23.5 24.3 20.2 16.3 3.6 3.4 3.1 1.1 1.1 1.4 9.7 11.2 13.3 118.0

Infrastructure

Adani Port and SEZ ADD 388 410 5.5 804,461 12,498 2,071 18.1 15.1 17.2 30.6 (16.5) 14.2 21.5 25.7 22.5 18.3 15.7 14.4 4.6 4.0 3.5 0.3 0.5 0.6 24.4 16.6 16.4 23.4

Ashoka Buildcon BUY 185 250 35.3 34,585 537 188 (0.5) 13.7 19.2 86.9 2,760.9 40.5 (359.6) 13.5 9.6 9.0 13.0 10.5 2.1 1.8 1.6 0.9 1.0 1.1 (0.6) 14.4 17.6 0.6

Container Corporation REDUCE 1,175 1,020 (13.2) 286,429 4,450 244 32.6 31.4 38.5 1.4 (3.7) 22.7 36.1 37.5 30.5 21.2 19.0 15.3 3.2 3.1 2.9 1.2 1.5 1.9 9.2 8.4 9.9 5.7

Gateway Distriparks BUY 268 275 2.6 29,134 453 109 6.8 8.8 12.7 (32.4) 28.9 44.2 39.3 30.5 21.1 31.1 27.7 22.3 2.9 2.7 2.5 2.6 1.0 1.4 6.6 9.1 12.3 1.1

Gujarat Pipavav Port BUY 146 155 6.1 70,606 1,097 483 5.2 5.3 7.1 50.4 3.3 32.7 28.3 27.4 20.6 16.0 14.4 11.9 3.6 3.5 3.3 2.6 2.7 3.6 12.8 12.9 16.5 2.0

IRB Infrastructure BUY 217 255 17.6 76,194 1,184 351 20.4 28.4 30.7 11.8 39.4 8.2 10.6 7.6 7.1 6.3 6.8 5.4 1.4 1.2 1.0 — — — 14.2 17.2 15.7 9.6

Sadbhav Engineering ADD 281 340 21.1 48,177 748 172 11.0 12.9 14.4 40.1 17.8 11.3 25.6 21.8 19.6 17.8 13.9 11.6 2.9 2.6 2.3 — — — 12.0 12.6 12.5 0.5

Infrastructure Attractive 1,349,587 20,968 24.4 (0.6) 16.7 23.4 23.6 20.2 14.7 13.9 12.0 3.6 3.2 2.8 0.7 0.8 1.0 15.2 13.4 13.9 43.0

Internet

Info Edge ADD 984 1,015 3.2 119,364 1,854 121 16.9 21.8 26.4 62.9 29.2 20.9 58.3 45.1 37.3 46.5 31.6 25.5 6.0 5.5 5.0 0.3 0.6 0.7 10.8 12.7 14.0 1.5

Just Dial SELL 379 380 0.3 26,364 410 70 17.4 15.3 17.8 (15.1) (12.6) 16.6 21.7 24.9 21.3 14.7 12.5 9.7 2.9 2.6 2.4 — 0.4 0.5 14.8 11.1 11.7 11.5

Internet Attractive 145,728 2,264 21.6 13.6 19.6 44.7 39.4 32.9 36.1 26.5 21.3 5.0 4.6 4.2 0.2 0.5 0.6 11.3 11.7 12.7 13.0

Media

DB Corp. REDUCE 371 390 5.0 68,293 1,061 184 20.5 23.1 28.3 27.1 12.5 22.7 18.1 16.1 13.1 10.3 8.9 7.2 4.3 3.9 3.5 1.1 3.5 4.3 25.6 25.4 28.4 1.2

DishTV ADD 80 95 19.0 85,117 1,322 1,066 1.0 1.7 2.4 (84.2) 63.5 40.6 NM 47.6 33.9 9.4 8.1 7.1 17.3 12.7 9.2 — — — 25.1 30.8 31.6 7.3

Jagran Prakashan REDUCE 174 200 15.0 56,850 883 311 10.6 13.3 15.3 2.3 25.4 14.9 16.4 13.0 11.3 8.1 7.1 6.2 2.6 2.7 2.5 — 4.6 4.9 18.6 20.1 23.3 0.3

Ortel Communications BUY 66 130 97.1 2,010 31 30 0.5 1.9 7.1 (87.6) 281.7 283.7 135.8 35.6 9.3 7.2 5.7 4.2 1.4 1.4 1.2 — — — 1.1 3.9 13.7 0.0

PVR REDUCE 1,369 1,400 2.2 64,004 994 47 21.4 36.8 43.7 (20.8) 71.8 19.0 64.0 37.3 31.3 20.1 15.3 13.4 6.6 5.7 4.9 0.1 0.3 0.3 10.9 16.5 16.9 5.3

Sun TV Network ADD 811 920 13.5 319,445 4,963 394 26.2 30.0 36.8 14.3 14.9 22.4 31.0 27.0 22.0 21.5 18.3 14.8 8.3 7.6 6.7 1.9 2.1 2.3 28.0 29.4 32.2 19.0

Zee Entertainment Enterprises BUY 552 570 3.3 530,072 8,235 960 13.9 16.7 19.7 27.7 19.7 18.2 39.6 33.1 28.0 25.4 22.2 18.4 8.0 6.7 5.7 0.4 0.6 0.8 20.8 22.0 22.1 16.6

Media Attractive 1,125,790 17,491 (3.3) 20.5 21.0 34.1 28.3 23.4 18.0 15.5 13.0 7.1 6.3 5.5 0.8 1.3 1.6 20.8 22.4 23.5 49.7

Metals & Mining

Coal India ADD 262 280 7.1 1,623,548 25,224 6,207 14.9 22.7 26.3 (34.2) 51.9 16.0 17.5 11.5 9.9 11.6 8.4 7.2 6.6 6.0 5.4 7.6 6.1 7.0 30.1 54.5 57.2 12.6

Hindalco Industries BUY 214 250 16.6 481,002 7,473 2,227 8.6 19.3 24.3 561.5 125.1 26.1 25.0 11.1 8.8 7.7 6.5 5.5 1.0 0.9 0.8 0.5 0.5 0.5 4.4 8.7 9.9 37.8

Hindustan Zinc REDUCE 278 265 (4.6) 1,174,216 18,243 4,225 19.7 22.8 24.9 1.4 16.0 9.0 14.1 12.2 11.2 10.4 7.9 6.6 3.8 3.1 2.6 10.6 1.8 1.8 24.4 28.1 25.1 10.3

Jindal Steel and Power BUY 138 165 19.2 126,685 1,968 915 (20.9) (7.4) 7.0 30.1 64.3 194.0 (6.6) (18.6) 19.8 12.6 8.9 6.7 0.4 0.4 0.4 — — — (6.1) (2.3) 2.2 19.9

JSW Steel ADD 214 225 5.1 517,285 8,037 2,417 14.6 19.1 20.6 1,484.3 31.3 7.6 14.7 11.2 10.4 7.7 7.0 6.8 2.2 1.9 1.6 1.1 1.1 1.1 16.3 18.2 16.9 19.9

National Aluminium Co. ADD 70 76 8.9 134,918 2,096 1,933 3.7 5.8 6.3 25.7 57.4 8.9 19.0 12.1 11.1 9.2 5.0 4.3 1.3 1.2 1.1 5.1 1.4 1.4 6.1 10.5 10.5 3.3

NMDC SELL 122 105 (14.2) 387,260 6,017 3,164 8.2 9.3 9.6 14.4 13.8 2.6 15.0 13.1 12.8 9.3 8.5 8.4 1.7 1.7 1.6 4.2 4.5 4.5 10.0 12.8 12.7 5.2

Tata Steel ADD 549 525 (4.3) 532,712 8,276 971 41.4 51.3 60.9 306.4 24.0 18.7 13.3 11 9.0 7.5 7.2 6.6 1.5 1.5 1.3 1.8 1.8 1.8 10.4 14.1 15.8 55.9

Vedanta BUY 265 330 24.7 983,570 15,281 3,717 19.7 30.2 38.5 157.9 53.3 27.5 13.4 8.8 6.9 7.8 6.0 5.0 1.6 1.5 1.3 3.8 3.4 4.4 14.0 17.6 20.2 49.2

Metals & Mining Attractive 5,961,196 92,615 47.2 46.1 19.3 16.7 11.4 9.6 8.8 7.2 6.2 2.1 1.9 1.7 5.5 3.2 3.6 12.6 16.8 18.0 214.0

Pharmaceutical

Apollo Hospitals REDUCE 1,292 1,250 (3.3) 179,757 2,793 139 15.9 30.2 38.4 0.2 90.1 27.1 81.3 42.8 33.7 27.9 21.8 18.5 4.9 4.5 4.1 0.5 0.6 0.7 6.3 11.0 12.8 9.2

Aurobindo Pharma ADD 745 760 2.0 436,629 6,784 584 39.4 45.8 52.2 16.1 16.2 14.2 18.9 16.3 14.3 13.4 11.2 9.4 4.6 3.7 2.9 0.3 0.3 0.4 27.9 25.1 22.9 38.4

Biocon SELL 399 230 (42.4) 239,400 3,719 601 10.2 7.9 8.9 52.8 (22.2) 12.9 39.1 50.3 44.6 25.9 22.8 19.0 4.6 4.3 4.0 — 0.7 0.8 12.9 8.8 9.3 23.9

Cipla BUY 570 650 14.1 458,463 7,123 805 12.5 23.9 33.5 (25.5) 91.2 40.4 45.6 23.9 17.0 19.6 14.5 10.6 3.5 3.2 2.8 0.8 0.9 1.2 8.1 14.0 17.4 11.5

Dr Lal Pathlabs REDUCE 840 920 9.5 69,991 1,087 83 19.1 21.3 24.4 20.2 11.2 15.0 43.9 39.5 34.4 28.1 23.9 20.6 10.6 8.7 7.2 0.4 0.4 0.4 27.4 24.2 22.9 2.3

Dr Reddy's Laboratories SELL 2,696 2,500 (7.3) 446,949 6,944 166 72.5 85.2 131.4 (47.9) 17.6 54.2 37.2 31.6 20.5 19.8 15.1 10.1 3.6 3.3 2.9 0.8 0.5 0.7 9.5 10.9 15.0 14.2

HCG BUY 272 280 3.0 23,305 362 85 2.6 2.5 4.5 1,629.0 (3.1) 78.1 104.3 107.7 60.5 25.5 21.1 16.3 5.3 5.1 4.7 — — — 5.2 4.8 8.1 0.6

Laurus Labs REDUCE 597 610 2.2 63,105 980 106 18.0 19.9 30.9 32.8 10.7 55.2 33.1 29.9 19.3 17.3 15.5 11.5 4.7 4.1 3.4 — — — 17.4 14.7 19.2 1.7

Lupin ADD 1,142 1,270 11.3 515,643 8,011 450 56.8 61.4 70.0 12.6 8.0 14.0 20.1 18.6 16.3 12.1 11.4 9.3 3.8 3.3 2.8 0.7 0.8 0.9 20.8 18.9 18.4 33.9

Sun Pharmaceuticals REDUCE 571 530 (7.1) 1,369,490 21,277 2,406 28.9 24.5 29.6 30.7 (15.2) 20.7 19.7 23.3 19.3 12.2 13.0 10.0 3.7 3.3 2.8 1.0 0.9 1.0 20.4 15.0 15.8 46.9

Torrent Pharmaceuticals REDUCE 1,267 1,080 (14.8) 214,457 3,332 169 55.2 53.3 60.5 (46.1) (3.4) 13.4 23.0 23.8 21.0 15.7 14.3 12.6 4.9 4.2 3.7 2.0 1.0 1.1 24.1 19.2 17.5 3.4

Pharmaceuticals Cautious 4,017,188 62,413 1.5 4.5 23.6 24.9 23.8 19.3 15.1 13.8 10.8 4.0 3.5 3.0 0.8 0.7 0.9 16.1 14.7 15.7 186.0


In

dia

Da

ily S

um

ma

ry - Ju

ly 2

5, 2

01

7

81

K

OTA

K IN

STIT

UTIO

NA

L EQ

UIT

IES R

ESEA

RC

H



Target O/S

Price (Rs) price Upside Mkt cap. shares EPS (Rs) EPS growth (%) PER (X) EV/EBITDA (X) Price/BV (X) Dividend yield (%) RoE (%) ADVT-3mo


Real Estate

Brigade Enterprises BUY 271 320 18.0 36,786 572 136 13.5 11.1 11.4 23.2 (17.4) 2.1 20.1 24.4 23.9 10.7 11.0 11.5 1.8 1.6 1.5 — 0.9 0.9 9.7 7.5 6.5 0.8

DLF REDUCE 194 170 (12.4) 346,189 5,379 1,784 3.9 1.6 1.8 109.1 (59.8) 16.6 49.9 124.1 106.4 16.6 19.3 17.7 1.4 1.4 1.4 — 1.0 1.0 2.9 1.1 1.3 38.7

Godrej Properties REDUCE 513 330 (35.7) 111,082 1,726 216 9.6 6.1 4.3 29.4 (36.0) (29.7) 53.7 83.8 119.2 53.5 350.9 198.7 4.8 4.6 4.6 — 0.5 0.5 9.2 5.6 3.9 4.6

Oberoi Realty REDUCE 381 390 2.3 129,507 2,012 339 11.2 27.4 46.0 (11.1) 145.7 67.9 34.2 13.9 8.3 23.2 8.7 7.9 2.3 2.0 1.6 0.5 0.5 0.5 6.9 15.4 21.7 1.8

Prestige Estates Projects BUY 251 260 3.6 94,125 1,462 375 10.1 8.3 10.1 (42.0) (17.7) 21.9 24.9 30.2 24.8 16.0 14.6 13.9 2.1 2.0 1.9 0.6 0.6 0.6 8.8 6.8 7.8 1.8

Sobha ADD 399 440 10.3 38,411 597 96 15.1 17.5 18.0 10.0 15.9 3.0 26.5 22.8 22.2 14.0 13.7 13.2 1.5 1.4 1.4 1.8 1.8 1.8 5.6 6.3 6.2 2.1

Sunteck Realty REDUCE 473 430 (9.1) 29,792 463 60 36.0 55.1 47.7 691.1 52.9 (13.4) 13.1 8.6 9.9 10.9 8.2 9.3 1.6 1.3 — 0.3 0.4 12.7 16.9 12.7 1.3

Real Estate Attractive 785,893 12,210 17.1 6.0 29.1 36.2 34.1 26.4 17.5 16.7 15.7 1.8 1.7 1.7 0.3 0.8 0.8 5.0 5.1 6.3 51.3

Technology

HCL Technologies REDUCE 903 840 (7.0) 1,288,641 20,021 1,397 59.2 60.9 65.4 50.2 3.0 7.4 15.3 14.8 13.8 11.3 10.3 9.3 3.8 3.3 3.0 2.7 0.8 3.6 27.2 23.6 22.9 24.5

Hexaware Technologies REDUCE 242 230 (5.1) 73,280 1,139 304 13.7 14.5 16.5 5.9 6.1 13.3 17.7 16.7 14.7 12.0 10.6 9.1 4.3 4.0 3.6 2.3 3.3 3.3 26.5 24.8 25.5 4.7

Infosys ADD 991 1,070 7.9 2,276,732 35,372 2,175 62.7 64.0 69.8 6.3 1.9 9.2 15.8 15.5 14.2 11.0 11.3 10.0 3.3 3.5 3.2 2.7 3.3 3.6 22.6 21.6 23.6 52.9

L&T Infotech BUY 765 800 4.6 130,431 2,026 174 55.8 59.7 65.2 13.3 7.0 9.2 13.7 12.8 11.7 9.5 8.4 7.2 4.2 3.6 3.2 1.2 3.1 3.7 37.6 30.5 28.7 0.8

Mindtree NR 484 — — 81,296 1,263 164 25.1 29.3 33.4 (30.1) 16.7 14.3 19.3 16.5 14.5 10.3 10.0 7.8 3.2 3.0 2.6 1.4 1.6 1.9 17.0 18.4 19.5 5.9

Mphasis SELL 580 435 (24.9) 121,937 1,894 193 38.3 38.1 39.6 11.3 (0.7) 4.1 15.1 15.2 14.6 9.7 10.8 10.1 2.0 2.1 2.0 2.9 3.5 3.5 13.0 12.8 14.0 0.9

TCS REDUCE 2,533 2,350 (7.2) 4,990,404 77,533 1,914 133.4 133.1 143.3 8.6 (0.3) 7.7 19.0 19.0 17.7 14.0 13.9 12.6 5.7 6.2 5.7 2.1 3.3 3.5 32.6 30.5 33.4 49.4

Tech Mahindra ADD 399 450 12.8 347,892 5,405 872 32.3 31.1 36.5 (9.8) (3.7) 17.5 12.4 12.8 10.9 7.4 6.9 5.5 2.1 1.9 1.7 3.1 2.3 2.3 18.3 15.6 16.5 17.1

Wipro REDUCE 292 250 (14.3) 1,418,800 22,043 4,507 17.5 17.5 19.1 (3.0) 0.3 9.2 16.7 16.6 15.2 10.2 10.7 9.4 2.7 2.7 2.3 0.3 0.3 0.5 17.2 16.3 16.4 15.5

Technology Cautious 10,729,412 166,696 9.0 (2.1) 7.9 17.0 17.4 16.1 11.9 11.8 10.5 3.9 4.2 3.7 2.1 2.5 3.0 23.0 23.9 23.2 171.6

Telecom

Bharti Airtel ADD 420 400 (4.8) 1,679,108 26,087 3,997 9.5 3.2 9.1 (3.0) (66.6) 188.9 44.4 132.9 46.0 7.7 8.7 7.3 2.5 2.5 2.4 0.2 0.1 0.4 5.6 1.9 5.3 25.8

Bharti Infratel REDUCE 409 335 (18.1) 756,305 11,750 1,850 14.9 16.1 17.7 18.3 8.1 10.0 27.5 25.5 23.2 12.9 11.7 10.8 4.9 4.8 4.7 4.0 3.1 3.4 16.2 19.0 20.5 14.6

Tata Communications ADD 647 730 12.9 184,295 2,863 285 10.5 16.6 22.9 540.1 57.9 38.1 61.6 39.0 28.2 10.8 9.7 8.4 11.6 9.0 6.9 1.0 1.0 1.0 51.0 26.0 27.6 8.6

Telecom Cautious 2,950,746 45,844 (31.7) (78.1) 257.5 45.9 209.2 58.5 8.4 9.5 8.0 2.7 2.8 2.8 1.2 0.8 1.1 5.9 1.3 4.7 65.3

Utilities

Adani Power SELL 33 26 (21.3) 127,472 1,980 3,857 (5.4) 3.4 3.4 (471.2) 163.4 (1.3) (6.1) 9.6 9.7 10.3 6.1 5.8 4.2 2.9 2.3 — — — (40.4) 36.3 26.3 5.0

CESC ADD 898 890 (0.9) 119,083 1,850 133 52.1 77.7 99.7 86.6 49.0 28.4 17.2 11.6 9.0 8.1 7.6 6.7 0.8 0.8 0.7 1.4 1.4 1.5 5.9 7.0 8.5 11.8

JSW Energy ADD 66 67 1.8 107,916 1,677 1,640 3.8 6.6 6.9 (50.0) 72.6 5.2 17.3 10.0 9.5 6.5 5.7 5.2 1.0 1.0 0.9 3.0 3.0 3.0 6.6 10.0 9.9 9.4

NHPC ADD 31 32 4.6 313,935 4,877 10,259 3.0 3.8 4.0 24.4 27.7 6.9 10.4 8.1 7.6 9.4 7.6 6.6 1.1 1.0 1.0 5.1 6.9 7.3 10.0 13.0 13.3 2.6

NTPC BUY 164 180 9.7 1,352,668 21,016 8,245 12.3 13.8 15.9 7.2 12.1 15.1 13.3 11.9 10.3 10.9 10.2 8.3 1.4 1.3 1.2 2.7 2.5 2.9 11.0 11.4 12.2 10.8

Power Grid BUY 217 250 15.3 1,133,947 17,617 5,232 14.4 16.5 19.0 26.1 14.6 15.2 15.1 13.2 11.4 9.8 8.4 7.5 2.3 2.0 1.8 1.3 1.5 1.8 16.3 16.2 16.5 16.4

Reliance Power SELL 44 34 (22.8) 123,566 1,920 2,805 4.2 4.4 4.6 (14.3) 5.9 4.5 10.6 10.0 9.6 9.2 8.3 8.1 0.6 0.5 0.5 — — — 5.5 5.6 5.6 2.6

Tata Power REDUCE 83 80 (3.9) 225,172 3,498 2,800 6.4 4.9 7.0 15.7 (22.5) 42.1 13.1 16.9 11.9 13.6 10.4 10.6 2.0 1.8 1.6 1.4 1.4 1.4 13.3 11.2 14.5 5.0

Utilities Attractive 3,503,759 54,436 (0.9) 30.8 14.2 15.3 11.7 10.2 10.2 8.6 7.6 1.5 1.4 1.3 2.2 2.3 2.6 9.7 11.7 12.2 63.5

Others

Astral Poly Technik SELL 637 450 (29.4) 76,291 1,185 120 12.1 14.6 18.7 43.7 21.3 27.6 52.8 43.5 34.1 29.5 23.0 18.5 9.0 7.5 6.2 0.1 0.1 0.1 17.8 18.8 19.9 1.0

Avenue Supermarts SELL 917 685 (25.3) 572,005 8,887 624 8.5 12.7 16.2 49.1 49.8 27.2 107.8 72.0 56.6 57.9 42.4 33.1 13.4 12.3 10.1 — — — 17.9 18.7 19.7 —

Bayer Cropscience ADD 4,679 4,900 4.7 165,409 2,570 34 82.3 112.9 135.6 (7.7) 37.2 20.0 56.8 41.4 34.5 37.8 28.8 23.4 8.0 8.7 7.3 — 0.5 0.6 14.9 19.9 23.1 1.5

Cera Sanitaryware REDUCE 3,021 2,620 (13.3) 39,284 610 13 76.3 91.2 109.1 18.9 19.6 19.6 39.6 33.1 27.7 22.6 19.4 16.4 7.7 6.3 5.1 0.3 0.3 0.3 21.2 20.8 20.4 0.3

Dhanuka Agritech REDUCE 810 800 (1.3) 40,523 630 50 23.9 26.6 33.3 11.3 11.3 25.4 33.9 30.5 24.3 23.8 21.0 16.7 8.1 6.8 5.7 2.0 0.8 1.0 24.1 24.2 25.5 0.4

Godrej Industries RS 680 — — 228,798 3,555 336 13.7 14.6 15.9 42.1 6.8 8.9 49.8 46.7 42.9 46.0 40.6 34.3 7.2 6.3 5.6 0.3 0.3 0.3 14.8 14.4 13.9 5.4

HSIL ADD 393 360 (8.4) 28,402 441 72 14.2 16.3 21.1 (5.2) 14.7 29.3 27.6 24.1 18.6 12.2 9.7 8.3 2.0 1.9 1.7 1.0 1.0 1.0 7.3 7.9 9.6 0.7

InterGlobe Aviation ADD 1,233 1,300 5.4 445,979 6,929 360 46.0 70.3 90.5 (18.9) 52.6 28.8 26.8 17.5 13.6 18.5 10.9 7.8 12.7 7.4 4.8 2.8 4.2 5.4 62.3 53.2 42.6 10.4

Kaveri Seed SELL 650 525 (19.2) 44,851 697 66 28.5 33.9 41.2 9.0 19.2 21.3 22.8 19.1 15.8 28.2 16.4 13.1 4.4 4.6 4.0 — 1.6 2.2 19.9 23.5 27.1 7.5

PI Industries ADD 752 910 21.1 103,417 1,607 136 33.5 32.4 37.8 44.9 (3.3) 16.7 22.4 23.2 19.9 18.6 16.9 13.8 6.6 5.3 4.3 0.5 0.5 0.6 33.4 25.2 23.8 2.3

Rallis India ADD 237 260 9.8 46,060 716 194 9.7 11.3 14.6 32.1 15.9 29.2 24.4 21.0 16.3 16.8 12.9 9.9 4.1 3.6 3.1 1.3 1.4 1.5 18.6 18.3 20.7 1.1

SRF BUY 1,501 1,840 22.6 86,182 1,339 57 88.5 88.1 105.4 20.2 (0.4) 19.6 17.0 17.0 14.2 10.8 9.9 8.3 2.8 2.4 2.1 0.7 0.8 0.9 17.6 15.3 16.0 3.8

Tata Chemicals ADD 618 650 5.2 157,350 2,445 255 33.5 44.8 48.8 9.5 33.5 9.0 18.4 13.8 12.7 9.5 7.8 6.8 2.3 1.8 1.6 1.8 1.8 1.8 13.1 14.7 13.5 5.6

TeamLease Services REDUCE 1,360 1,350 (0.7) 23,245 361 17 38.8 43.9 51.9 143.7 13.0 18.3 35.0 31.0 26.2 48.9 32.0 24.3 6.1 5.1 4.3 — — — 19.2 17.9 17.7 0.3

UPL ADD 868 860 (0.9) 440,895 6,850 507 35.7 43.0 53.6 12.2 20.5 24.7 24.3 20.2 16.2 14.4 12.2 10.2 5.4 4.4 3.6 0.6 0.8 1.0 23.8 23.9 24.6 18.5

Vardhman Textiles ADD 1,177 1,350 14.7 67,538 1,049 55 114.0 101.8 122.8 23.2 (10.7) 20.7 10.3 11.6 9.6 6.9 7.5 6.1 1.7 1.4 1.2 1.2 1.7 1.7 16.9 12.4 13.6 0.6

Whirlpool SELL 1,151 1,020 (11.4) 146,029 2,269 127 25.2 30.9 38.0 28.8 22.6 22.8 45.6 37.2 30.3 27.7 23.0 19.0 10.1 8.4 6.9 — 0.5 0.7 24.6 24.7 25.0 1.1

Others 2,644,573 41,087 13.8 24.8 22.4 32.3 25.8 21.1 19.9 16.0 13.1 6.3 5.2 4.3 0.9 1.2 1.5 19.6 20.1 20.3 59.5

KIE universe 97,062,801 1,506,499 20.3 9.3 23.1 22.4 20.5 16.6 12.3 11.2 9.4 2.9 2.7 2.4 1.6 1.5 1.7 13.1 13.2 14.6

KIE universe (ex-energy) 85,060,439 1,320,025 14.7 17.5 24.8 25.6 21.8 17.4 13.6 12.1 10.2 3.3 3.0 2.7 1.4 1.4 1.6 12.9 13.8 15.4

Notes:

(a) We have used adjusted book values for banking companies.

(b) 2017 means calendar year 2016, similarly for 2018 and 2019 for these particular companies.

(c) Exchange rate (Rs/US$)= 64.37

Disclo

sure

s

Disclosures

Ratings and other definitions/identifiers

Definitions of ratings

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

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

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

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

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

Other definitions

Coverage view. The coverage view represents each analyst’s overall fundamental outlook on the Sector. The coverage view will consist of one of the following

designations: Attractive, Neutral, Cautious.

Other ratings/identifiers

NR = Not Rated. The investment rating and target price, if any, have been suspended temporarily. Such suspension is in compliance with applicable regulation(s)

and/or Kotak Securities policies in circumstances when Kotak Securities or its affiliates is acting in an advisory capacity in a merger or strategic transaction

involving this company and in certain other circumstances.

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

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

RS = Rating Suspended. Kotak Securities Research has suspended the investment rating and price target, if any, for this stock, because there is not a sufficient

fundamental basis for determining an investment rating or target. The previous investment rating and price target, if any, are no longer in effect for this stock

and should not be relied upon.

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

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

Kotak Institutional Equities Research coverage universe

Distribution of ratings/investment banking relationships

Source: Kotak Institutional Equities As of June 30, 2017

Percentage of companies covered by Kotak Institutional

Equities, within the specified category.

* The above categories are defined as follows: Buy = We

expect this stock to deliver more than 15% returns over

the next 12 months; Add = We expect this stock to

deliver 5-15% returns over the next 12 months; Reduce

= We expect this stock to deliver -5-+5% returns over

the next 12 months; Sell = We expect this stock to deliver

less than -5% returns over the next 12 months. Our

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

These ratings are used illustratively to comply with

applicable regulations. As of 30/06/2017 Kotak

Institutional Equities Investment Research had

investment ratings on 196 equity securities.

Percentage of companies within each category for

which Kotak Institutional Equities and or its affiliates has

provided investment banking services within the

previous 12 months.

13.3%

36.2%

27.6%

23.0%

1.5% 2.6% 3.6% 3.1%

0%

10%

20%

30%

40%

50%

60%

70%

BUY ADD REDUCE SELL

Corporate Office Overseas Affiliates

Kotak Securities Ltd.

27 BKC, Plot No. C-27, “G Block”

Bandra Kurla Complex, Bandra (E)

Mumbai 400 051, India

Tel: +91-22-43360000

Kotak Mahindra (UK) Ltd

8th Floor, Portsoken House

155-157 Minories

London EC3N 1LS

Tel: +44-20-7977-6900

Kotak Mahindra Inc

369 Lexington Avenue

28th Floor, New York

NY 10017, USA

Tel:+1 212 600 8856

Copyright 2017 Kotak Institutional Equities (Kotak Securities Limited). All rights reserved.

1. Note that the research analysts contributing to this report may not be registered/qualified as research analysts with FINRA; and

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

3. Any U.S. recipients of the research who wish to effect transactions in any security covered by the report should do so with or through Kotak Mahindra Inc and (ii) any transactions in the securities covered by the research by U.S. recipients must be effected only through Kotak Mahindra Inc at [email protected].

This report is distributed in Singapore by Kotak Mahindra (UK) Limited (Singapore Branch) to institutional investors, accredited investors or expert investors only as defined under the Securities and Futures Act. Recipients of this analysis / report are to contact Kotak Mahindra (UK) Limited (Singapore Branch) (16 Raffles Quay, #35-02/03, Hong Leong Building, Singapore 048581) in respect of any matters arising from, or in connection with, this analysis / report. Kotak Mahindra (UK) Limited (Singapore Branch) is regulated by the Monetary Authority of Singapore.

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

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

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

Kotak Securities Limited established in 1994, is a subsidiary of Kotak Mahindra Bank Limited. Kotak Securities is one of India's largest brokerage and distribution house.

Kotak Securities Limited is a corporate trading and clearing member of BSE Limited (BSE), National Stock Exchange of India Limited (NSE), MSEI and United Stock Exchange of India Limited (USEIL). Our businesses include stock broking, services rendered in connection with distribution of primary market issues and financial products like mutual funds and fixed deposits, depository services and Portfolio Management.

Kotak Securities Limited is also a depository participant with National Securities Depository Limited (NSDL) and Central Depository Services (India) Limited (CDSL). Kotak Securities Limited is also registered with Insurance Regulatory and Development Authority as Corporate Agent for Kotak Mahindra Old Mutual Life Insurance Limited and is also a Mutual Fund Advisor registered with Association of Mutual Funds in India (AMFI). Kotak Securities Limited is registered as a Research Analyst under SEBI (Research Analyst) Regulations, 2014.

We hereby declare that our activities were neither suspended nor we have defaulted with any stock exchange authority with whom we are registered in last five years. However SEBI, Exchanges and Depositories have conducted the routine inspection and based on their observations have issued advise letters or levied minor penalty on KSL for certain operational deviations. We have not been debarred from doing business by any Stock Exchange / SEBI or any other authorities; nor has our certificate of registration been cancelled by SEBI at any point of time.

We offer our research services to primarily institutional investors and their employees, directors, fund managers, advisors who are registered with us

Details of Associates are available on our website i.e. www.kotak.com

Research Analyst has served as an officer, director or employee of subject company(ies): No

We or our associates may have received compensation from the subject company(ies) in the past 12 months.

We or our associates have managed or co-managed public offering of securities for the subject company(ies) in the past 12 months. YES

We or our associates may have received compensation for investment banking or merchant banking or brokerage services from the subject company(ies) in the past 12 months. We or our associates may have received any compensation for products or services other than investment banking or merchant banking or brokerage services from the subject company(ies) in the past 12 months. We or our associates may have received compensation or other benefits from the subject company(ies) or third party in connection with the research report.

Our associates may have financial interest in the subject company(ies).

Research Analyst or his/her relative's financial interest in the subject company(ies): No

Kotak Securities Limited has financial interest in the subject company(ies) at the end of the month immediately preceding the date of publication of Research Report: YES

Our associates may have actual/beneficial ownership of 1% or more securities of the subject company(ies) at the end of the month immediately preceding the date of publication of Research Report.

Research Analyst or his/her relatives has actual/beneficial ownership of 1% or more securities of the subject company(ies) at the end of the month immediately preceding the date of publication of Research Report: No

Kotak Securities Limited has actual/beneficial ownership of 1% or more securities of the subject company(ies) at the end of the month immediately preceding the date of publication of Research Report: No

Subject company(ies) may have been client during twelve months preceding the date of distribution of the research report.

A graph of daily closing prices of securities is available at www.nseindia.com and http://economictimes.indiatimes.com/markets/stocks/stock-quotes. (Choose a company from the list on the browser and select the"three years" icon in the price chart).

Kotak Securities Limited. Registered Office: 27 BKC, C 27, G Block, Bandra Kurla Complex, Bandra (E), Mumbai 400051. CIN: U99999MH1994PLC134051, Telephone No.: +91-22 43360 000, Fax No.: +91-22- 6713 2430. Website: www.kotak.com. SEBI Registration No: NSE INB/INF/INE 230808130, BSE INB 010808153/INF 011133230, MSEI INE 260808130/INB 260808135/INF 260808135, Research Analyst INH000000586, AMFI ARN 0164 and PMS INP000000258. NSDL: IN-DP-NSDL-23-97. CDSL: IN-DP-CDSL-158-2001.

Compliance Officer Details: Mr. Manoj Agarwal. Call: +91-22-4285 6825, or Email: [email protected].

In case you require any clarification or have any concern, kindly write to us at below email ids:

Level 1: For Trading related queries, contact our customer service at '[email protected]' and for demat account related queries contact us at [email protected] or call us on: Online Customers - 30305757 (by using your city STD code as a prefix) or Toll free numbers 18002099191 / 1800222299, Offline Customers - 18002099292

Level 2: If you do not receive a satisfactory response at Level 1 within 3 working days, you may write to us at [email protected] or call us on +91-22-4285 8445 and if you feel you are still unheard, write to our customer service HOD at [email protected] or call us on +91-22-4285 8208.

Level 3: If you still have not received a satisfactory response at Level 2 within 3 working days, you may contact our Compliance Officer (Name: Manoj Agarwal) at [email protected] or call on +91-22-4285 6825.

Level 4: If you have not received a satisfactory response at Level 3 within 7 working days, you may also approach CEO (Mr. Kamlesh Rao) at [email protected] or call on +91-22-6652 9160.

First Cut notes published on this site are for information purposes only. They represent early notations and responses by analysts to recent events. Data in the notes may not have been verified by us and investors should not act upon any data or views in these notes. Most First Cut notes, but not necessarily all, will be followed by final research reports on the subject. There could be variance between the First cut note and the final research note on any subject, in which case the contents of the final research note would prevail. We accept no liability for the contents of the First Cut Notes.

[Kotak] India Daily, July 25, 2017 - Kotak Securities

Documents

Transcript of [Kotak] India Daily, July 25, 2017 - Kotak Securities