INDIA DAILY

November 29, 2018 India 28-Nov 1-day 1-mo 3-mo Sensex 35,717 0.6 4.8 (7.8) Nifty 10,729 0.4 4.7 (8.2) Contents Global/Regional indices Dow Jones 25,366 2.5 3.8 (2.9) Daily Alerts Nasdaq Composite 7,292 2.9 3.4 (10.1) Company alerts FTSE 7,005 (0.2) (0.3) (7.4) Tata Steel: Analyst meeting takeaways Nikkei 22,392 1.0 5.9 (2.0) Hang Seng 26,683 1.3 7.5 (6.1)  Analyst meeting takeaways - growth, cost leadership and value-addition KOSPI 2,125 0.8 6.4 (8.0) key focus areas Value traded – India  We cut our steel price assumption by 2-4% and fair value to Rs610 (Rs670 Cash (NSE+BSE) 359 331 378 earlier) Derivatives (NSE) 9,812 5,072 9,939

Deri. open interest 3,710 2,772 4,450 Biocon: UK follows the Nordic

 Price erosion in UK in line with Nordic countries Forex/money market  Fulphila launch highlights commercial risks in the US Change, basis points

 Risk-reward unfavorable - SELL 28-Nov 1-day 1-mo 3-mo

Rs/US$ 70.4 3 (320) (19)

Sector alerts 10yr govt bond, % 7.8 (5) (25) (35) Internet Software & Services: Indian e-commerce: cash burn on the rise Net investment (US$ mn) 27-Nov MTD CYTD  Competitive intensity on the rise among e-tailers FIIs 95 559 (5,200)

 Local and hyper-local service companies also spending aggressively MFs 129 281 17,651

 Classifieds: monetization models still to settle Top movers Change, %

 Have funding, will spend Best performers 28-Nov 1-day 1-mo 3-mo

DIVI IN Equity 1,480 (2.8) 2.8 15.9

ARBP IN Equity 790 0.3 2.2 14.4

UPLL IN Equity 772 0.4 22.2 13.5

POWF IN Equity 92 (9.3) 0.7 9.1

DRRD IN Equity 2,572 (0.6) 1.6 7.9

Worst performers

YES IN Equity 162 (11.3) (10.6) (55.6)

RCAPT IN Equity 238 1.3 1.0 (47.2)

UT IN Equity 2 0.0 (2.3) (45.5)

JPA IN Equity 7 (3.0) 7.4 (41.0)

HDIL IN Equity 20 (3.5) 5.7 (35.2)

For Private Circulation Only. FOR IMPORTANT INFORMATION ABOUT KOTAK SECURITIES’ RATING SYSTEM AND OTHER DISCLOSURES. REFER TO THE END OF THIS MATERIAL. ADD Tata Steel (TATA) Metals & Mining NOVEMBER 29, 2018 UPDATE Coverage view: Attractive

Analyst meeting takeaways. Key focus areas are (1) India capacity expansion to 30 Price (`): 524 mtpa (from 18.6 mtpa) by 2025, (2) growth in India and European JV can aid RoIC by Target price (`): 610 300 bps, (3) cost improvements in all three India assets—synergies at Bhushan can be BSE-30: 35,717 close to Rs15 bn (beside captive iron-ore) while Jamshedpur/KPO will see improved productivity. Leverage will decline from JV as well as internal cash flows. We maintain ADD and revise fair value to Rs610 (Rs670 earlier). We cut our steel price assumption by 2-4% on expectations of weaker demand in China due to its real-estate slowdown.

Company data and valuation summary Tata Steel Stock data Forecasts/Valuations 2019E 2020E 2021E 52-week range (Rs) (high,low) 748-493 EPS (Rs) 90.1 80.9 93.4 Market Cap. (Rs bn) 598.0 EPS growth (%) 33.9 (10.2) 15.4 Shareholding pattern (%) P/E (X) 5.8 6.5 5.6 Promoters 33.1 Sales (Rs bn) 1,604.7 1,031.3 1,065.8 FIIs 16.9 Net profits (Rs bn) 108.5 97.4 112.4 MFs 16.2 EBITDA (Rs bn) 297.8 227.3 234.0 Price performance (%) 1M 3M 12M EV/EBITDA (X) 5.4 6.1 5.8 Absolute (5.0) (11.2) (21.0) ROE (%) 17.3 14.2 14.9 Rel. to BSE-30 (11.3) (3.3) (25.6) Div. Yield (%) 1.9 1.9 1.9 Analyst meeting takeaways—growth, cost leadership and value-addition key focus areas The key takeaways from Tata Steel’s analyst meeting are:  India steel capacity to scale up to 30 mtpa by 2025. Tata Steel is targeting a 30 mtpa capacity in India by 2025 (from 18.6 mtpa)—new capacities will be in India. The growth will include (1) 1 mtpa on acquisition of Usha Martin, (2) 5 mtpa from KPO Phase II, and (3) potential opportunities of 5.4 mtpa through organic or inorganic routes—all three sites in India can support brownfield expansion. The management highlighted that it will not raise its offer for Bhushan Power & Steel as the case is being heard in NCLAT.  Cost leadership—expect further improvements. Management highlighted that the company is among the lowest cost producers for HRC globally with benchmark KPIs (in India) including low coke rates. Cost is expected to further improve led by (1) improvement in manpower productivity in Jamshedpur to 1,200 tons of steel/employee from 800 tons/employee now (and compared to 2,000 tons/employee at KPO). This will be led by lower replacement hires over 5-6 years, (2) KPO cost will improve as it achieves 8 mtpa capacity (from 3 mtpa at present). This is because the plant was designed for full 8 mtpa operations and there will be gains from operating leverage, improved energy balance as new capacity is commissioned.  Downstream production—target to achieve 30% of volumes. Tata Steel is targeting to achieve 30% of volumes from downstream products (from 20% now). Management highlighted that steel prices are more resilient in downstream segments especially in branded products as well as services and solutions—the company is targeting 20% of revenues from this segment.  Bhushan Steel—expected synergies of Rs15 bn. Tata Steel expects to achieve output at designed capacity of 5.4 mtpa in 20 months. Bhushan can aid earnings from meaningful cost Abhishek Poddar synergies (Rs15 bn) from centralized procurement, marketing and logistics efficiencies. We cut our steel price assumption by 2-4% and fair value to Rs610 (Rs670 earlier) Prayatn Mahajan We cut steel price assumption by 2-4% for FY2019-21E on expectations of weaker demand in China due to its real-estate slowdown—we cut our EBITDA estimate by 1-4%. We reduce our fair value to Rs610/share (from Rs670/share). The closure of its JV in Europe by FY2020E will help deleverage and reduce cash burn (aided by synergies). The high earnings contribution from growth in Indian capacities is positive given the relatively superior business case for Indian steel markets.

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

 European JV closure. Management highlighted that the investigation by the European Commission on JV with ThyssenKrupp in Europe concerns reduced competition in automotive steel, packaging and electrical steel. Tata is already divesting its electrical steel units and will engage with EC for other businesses. Note that EC has 90 days, until March 19, 2019 to take a decision. Tata Steel’s management remains hopeful of timely closure of this JV.

 Bhushan Steel—captive iron-ore can aid earnings. Beside expected synergies of Rs15 bn, captive iron-ore from Tata Steel’s mines will also aid the company’s earnings. The company has applied for approval from Odisha government for captive iron usage—it can use ~2 mn tons iron-ore initially from captive mines. Management also expects Rs15 bn of synergies to accrue at Bhushan Steel led by (1) combined procurement of key raw-materials such as coking coal, (2) logistical efficiencies such as usage of larger vessels for raw-material transportation, (3) marketing efficiencies such as higher sales in the domestic markets (and less exports), usage of common brands, usage of Tata Steel’s distribution channel, etc.

 KPO-II will aid in operating efficiencies. Tata Steel highlighted that KPO II commissioning will aid costs as the entire complex was designed to be 8 mtpa capacity (versus 3 mtpa operating now). The savings will be aided by (1) increase in manpower productivity to 1,950 tons/employee from 986 tons/employee in phase I, (2) other operating leverage gains as 3 mtpa capacity encompasses many of the modules for phase II as well (hence incurs high cost now), (3) reduction in energy costs, and (4) improvement in product mix aided by commissioning of cold rolling mill.

Changes in our estimates

Exhibit 2 highlights key changes in our estimates.

We cut our China HRC price assumption by 2-4% to US$560/ton, US$520/ton and US$520/ton for FY2019E, FY2020E and FY2021E. The lower steel prices assume slowdown in China steel demand in CY2019 due to its real-estate slowdown. This results in a cut in our India EBITDA/ton estimate by 2% to Rs16,300/ton, Rs13,150/ton and Rs13,180/ton for FY2019E, FY2020E and FY2021E. We cut our consolidated EBITDA estimate by 1-4% to Rs298 bn, Rs227 bn and Rs234 bn for FY2019E, FY2020E and FY2021E. Note that our FY2020-21E EBITDA excludes European operations as we assume the formation of the JV— but the same is captured in earnings through share of income from JV/associates.

We estimate EPS of Rs90.1, Rs80.9 and Rs93.4 for FY2019E, FY2020E and FY2021E. The fall in FY2020E EPS reflects lower operating margins due to a decline in China steel prices.

Exhibit 1: We estimate TATA's leverage ratio at 3.5X/3.2X in FY2020/21E without acquisitions Tata Steel consolidated leverage details, March fiscal year ends (Rs mn), FY2016-21E (X)

2016 2017 2018 2019E 2020E 2021E Existing EBITDA (Rs mn) 79,683 170,078 218,905 297,764 227,252 233,968 Net debt (Rs mn) 731,855 744,767 714,900 1,022,067 794,434 760,097 Net debt/ EBITDA (X) 9.2 4.4 3.3 3.4 3.5 3.2

Source: Company, Kotak Institutional Equities estimates

KOTAK INSTITUTIONAL EQUITIES RESEARCH 3 Metals & Mining Tata Steel

Exhibit 2: Tata Steel, changes in estimates, March fiscal year ends, FY2019-21E

Revised estimates Old estimates Change (%) 2019E 2020E 2021E 2019E 2020E 2021E 2019E 2020E 2021E Earnings (consolidated) Net sales 1,604,707 1,031,251 1,065,823 1,606,290 1,047,211 1,080,928 (0) (2) (1) EBITDA 297,764 227,252 233,968 302,243 235,720 244,134 (1) (4) (4) Adj. PAT 108,496 97,405 112,448 111,452 105,994 120,597 (3) (8) (7) EPS (Rs) 90.1 80.9 93.4 92.5 88.0 100.1 (3) (8) (7) Volumes India (mn tons) 12.5 12.8 13.1 12.5 12.8 13.1 — — — Pricing HRC prices - China (US$/ton) 560 520 520 580 540 530 (3) (4) (2) Re/US$ rate 69.9 72.0 72.0 69.9 72.0 72.0 — — — Tata Steel India Net sales 653,054 626,825 646,980 656,554 638,113 656,275 (1) (2) (1) EBITDA 203,738 168,254 172,587 207,237 171,936 176,708 (2) (2) (2) EBITDA/ton 16,299 13,145 13,175 16,579 13,433 13,489 (2) (2) (2) Re/US$ rate 69.9 72.0 72.0 69.9 72.0 72.0 — — — Tata Steel Europe Net sales 618,297 — — 621,830 — — (1) — — EBITDA 51,601 — — 55,134 — — (6) — — EBITDA/ton 73 — — 78 — — (6) — — JV --- thyssenkrupp Tata Steel BV Volumes (mn tons) — 21.7 21.7 — 21.7 21.7 — — — Net sales (US$ mn) — 19,581 19,737 — 19,693 19,737 — (1) — EBITDA (US$ mn) — 2,060 2,224 — 2,168 2,259 — (5) (2) EBITDA/ton (US$) — 95 103 — 100 104 — (5) (2) PAT (US$ mn) — 765 885 — 844 912 — (9) (3) Share of profit (US$ mn) — 383 442 — 422 456 — (9) (3)

Source: Kotak Institutional Equities estimates

Exhibit 3: Tata Steel, Key assumptions, March fiscal-year ends, FY2016 - 2021E (Rs mn)

2016 2017 2018 2019E 2020E 2021E Tata Steel (India) Average HRC Price (US$/ton) 307 435 540 560 520 520 Crude Steel capacity (mn tons) 9.7 12.7 12.7 12.7 12.9 13.1 Volume (mn tons) 9.5 11.0 12.2 12.5 12.8 13.1 EBITDA margin (%) 19.9 24.7 26.7 31.2 26.8 26.7 EBITDA/ton (Rs/ton) 7,976 10,823 12,987 16,299 13,145 13,175 Europe JV Average HRC Price (US$/ton) 751 781 882 875 876 883 Volume (mn tons) 11.0 9.9 10.0 10.1 21.7 21.7 EBITDA/ton (US$/ton) (21) 71 59 73 95 103

Source: Company, Kotak Institutional Equities estimates

Exhibit 4: Tata Steel, valuation, March fiscal year-ends, March 2020E basis (Rs mn)

EBITDA Multiple Enterprise value EV (Rs mn) (X) (Rs mn) (Rs/share) FY2020E EBITDA 225,412 6 1,368,248 1,136 Total Enterprise Value 225,412 1,368,248 1,136 Consolidated net-debt 794,434 Total borrowings 794,434 660 Arrived market capitalization 573,814 476 Add: Value of investments 4,028 3 Add: Equity value in European JV 157,552 131 Arrived market capitalization 735,395 610 Target price (Rs) 610

Source: Kotak Institutional Equities estimates

4 KOTAK INSTITUTIONAL EQUITIES RESEARCH Tata Steel Metals & Mining

Exhibit 5: Tata Steel (consolidated), Profit model, balance sheet and cash flow model, March fiscal year-ends, 2016-2021E (Rs mn)

2016 2017 2018 2019E 2020E 2021E Profit model (Rs mn) Net sales 1,019,647 1,122,994 1,317,003 1,604,707 1,031,251 1,065,823 EBITDA 79,683 170,078 218,905 297,764 227,252 233,968 Other income 4,122 5,275 9,095 14,172 10,908 10,152 Interest (42,214) (50,722) (55,018) (81,070) (74,302) (63,219) Depreciation (53,064) (56,729) (59,617) (76,327) (62,608) (63,858) Profit before tax (11,472) 67,902 113,365 154,539 101,249 117,043 Extraordinaries 39,904 (43,242) 95,991 (1,798) — — Taxes (6,900) (27,780) (34,054) (51,932) (32,400) (37,454) Profit after tax 21,532 (3,120) 175,303 100,809 68,850 79,589 Minority interest 1,143 (722) (43,285) 5,000 1,000 1,000 Share in profit/(loss) of associates (1,104) 77 1,741 1,500 27,556 31,859 Reported net income 21,571 (3,766) 133,759 107,309 97,405 112,448 Adjusted net income (19,480) 40,200 81,052 108,496 97,405 112,448 Fully diluted EPS (Rs) (20.1) 41.4 67.3 90.1 80.9 93.4 Balance sheet (Rs mn) Equity 414,576 355,443 585,956 669,210 706,624 804,576 Deferred tax liability 87,934 91,442 95,341 130,399 123,745 120,183 Total Borrowings 840,354 850,709 937,783 1,315,783 1,070,283 1,040,283 Current liabilities 418,167 410,863 458,776 626,146 442,412 452,433 Minority interest 7,809 16,017 9,365 4,365 3,365 2,365 Total liabilities 1,768,840 1,724,475 2,087,222 2,745,903 2,346,429 2,419,840 Net fixed assets 681,322 885,118 921,079 1,345,520 1,116,344 1,086,849 Capital work in progress 359,961 157,841 166,144 220,676 271,607 342,075 Goodwill 40,676 34,947 40,995 40,995 — — Investments 108,227 125,367 178,995 184,194 199,248 216,653 Cash 61,863 49,211 79,379 150,212 132,344 136,681 Other current assets 516,791 471,989 700,631 804,306 626,885 637,581 Total assets 1,768,840 1,724,475 2,087,222 2,745,903 2,346,429 2,419,840 Free cash flow (Rs mn) Operating cash flow excl. working capital 473 112,319 52,124 176,456 137,305 154,339 Working capital changes 61,656 (48,907) 11,606 18,881 (6,314) (675) Capital expenditure (99,328) (74,269) (74,000) (97,032) (84,362) (104,831) Free cash flow (37,199) (10,858) (10,270) 98,304 46,629 48,833 Ratios EBITDA margin (%) 7.8 15.1 16.6 18.6 22.0 22.0 EBIT margin (%) 2.6 10.1 12.1 13.8 16.0 16.0 Debt/equity (X) 2.0 2.4 1.6 2.0 1.5 1.3 Net debt/equity (X) 1.8 2.1 1.2 1.5 1.1 0.9 Net debt/EBITDA (X) 9.2 4.4 3.3 3.4 3.5 3.2 P/B (X) 1.2 1.5 1.1 1.0 0.9 0.8 RoAE (%) (5.4) 10.4 17.2 17.3 14.2 14.9 RoACE (%) 2.4 7.1 8.3 8.9 6.4 6.6

Source: Company, Kotak Institutional Equities estimates

KOTAK INSTITUTIONAL EQUITIES RESEARCH 5 SELL Biocon (BIOS) Pharmaceuticals NOVEMBER 28, 2018 UPDATE Coverage view: Neutral

UK follows the Nordic. Recent data from the UK NHS suggests 75% price erosion for Price (`): 599 Humira (adalimumab) biosimilars, materially higher than initial NHS estimates of ~37% Target price (`): 345 erosion, and almost in line with the ~80% price erosion seen in Nordic tenders. While BSE-30: 35,717 an equal allocation for biosimilars is positive, we expect price erosion and volume shares to further deteriorate in CY2020 given more entrants. Similarly, we expect Herceptin biosimilar pricing to worsen in 1HCY19 given upcoming tenders across the EU. SELL.

Company data and valuation summary Biocon Stock data Forecasts/Valuations 2019E 2020E 2021E 52-week range (Rs) (high,low) 718-415 EPS (Rs) 9.5 15.3 18.5 Market Cap. (Rs bn) 359.7 EPS growth (%) 53.4 61.0 21.1 Shareholding pattern (%) P/E (X) 63.1 39.2 32.3 Promoters 60.7 Sales (Rs bn) 49.7 62.2 71.2 FIIs 16.4 Net profits (Rs bn) 5.7 9.2 11.1 MFs 3.1 EBITDA (Rs bn) 11.9 18.0 21.4 Price performance (%) 1M 3M 12M EV/EBITDA (X) 30.5 20.4 17.4 Absolute (0.8) (2.6) 38.7 ROE (%) 9.6 13.9 14.3 Rel. to BSE-30 (7.3) 6.1 30.6 Div. Yield (%) 0.6 0.9 1.1

Price erosion in UK in line with Nordic countries

As per a UK NHS communique, it has negotiated tender-based allocations for Humira (adalimumab) biosimilars for CY2019, indicating annual savings of GBP300 mn, up from initial expectations of GBP150 mn. Given a market size of GBP400 mn, this translates into price discounting of 75%, as compared to the agency’s initial estimates of ~37%. Price erosion in the UK is now in line with the Nordic countries, which operate on a tender system and which have seen ~80% price erosion already for adalimumab. We expect the pricing environment to further deteriorate in CY2020 given anticipated launches by Fresenius as well as Boehringer Ingelheim. However, on the positive side, market share is likely to be equally split among the four biosimilars plus Abbvie, thereby ensuring 20% market share for Mylan/Fujifilm/Biocon. Similarly, we expect Herceptin price erosion to worsen in 1HCY19 with the anticipated tenders in several countries, most prominent being Germany and the UK. The EU market for Lantus is also no longer attractive in terms of pricing with Lilly, despite its strengths in diabetes, still struggling to gain double-digit share in Germany. Fulphila launch highlights commercial risks in the US MYL/BIOS launched Fulphila earlier in July, with our estimates suggesting a >40% discount on net prices, as aggressive rebating by Amgen has further slowed the biosimilar penetration with MYL struggling with ~8% market share of the vial formulation, which now accounts for only ~37% of Neulasta sales, given ~63% switch by the innovator to OnPro device. MYL has only a short exclusive window as Coherus has scheduled its own launch in Jan 2019, though it has indicated similar pricing to Mylan to begin with. We also expect potentially Amneal and Apotex to launch in CY2019 with Sandoz and Fresenius likely in CY2020. We believe the US biosimilars market remains challenging with innovators competing aggressively to retain share through rebating and/or volume discounts, resulting in meaningful price erosion as seen with Neupogen (60% price erosion) and Remicade (~40% erosion). Similarly, we expect the landscape for Chirag Talati, CFA Herceptin to deteriorate in the US, with the US likely to be a five player market at the time of BIOS’ launch. BIOS’s success in US glargine market is contingent on its ability to get an AP rating, failing which, we believe share gains will be very slow, unless MYL opts for aggressive Kumar Gaurav pricing, which will restrict the opportunity to ~US$200 mn. Risk-reward unfavorable – SELL We now expect the focus to shift on earnings, where we believe consensus expectations remain elevated, with the market ignoring the commercial risks. SELL with a target price of `345/share.

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

Exhibit 1: SoTP target price at `345/share rNPV Product Status Probability Launch (FY) US$ mn Rs mn Rs/share Biocon base business 1,808 121,139 202 Insulin franchise US/EU Various Various ≥2021 253 16,955 28 Biosimilar Herceptin US/EU Approved 100% 2019 282 18,913 31 Neulasta US/EU Launched 100% 2019 225 15,078 25 Avastin US Phase III 50% 2021 84 5,595 9 Humira US / EU Phase III / launched Various Various 84 5,655 9 Sandoz and other pipeline products Early-stage Various ≥2023 340 22,780 38 Pipeline products 1,268 84,976 141

Technology valuation 3,076 206,115 343 FY2018 net (debt)/cash 23 1,498 2 SOTP value 3,099 207,614 345

Source: Company, Kotak Institutional Equities estimates

Exhibit 2: Profit model, balance sheet, cash model of Biocon March fiscal year-ends, 2013-21E (Rs mn)

2013 2014 2015 2016 2017 2018E 2019E 2020E 2021E Net revenues 24,277 28,673 30,898 33,370 39,216 41,297 49,694 62,229 71,184 Gross Profit 12,404 15,189 16,570 18,570 23,107 23,046 29,142 38,561 44,557 Staff costs (3,584) (4,663) (5,334) (5,580) (6,872) (8,459) (9,787) (11,172) (13,063) R&D expenses (1,640) (1,310) (1,688) (2,740) (2,662) (2,158) (2,655) (3,876) (3,616) Other expenses (2,326) (2,445) (2,590) (3,050) (3,778) (4,138) (4,800) (5,540) (6,444) EBITDA 4,854 6,271 6,958 7,200 9,795 8,291 11,900 17,973 21,433 Depreciation & amortisation (1,793) (2,036) (2,210) (2,490) (2,772) (3,851) (4,469) (5,127) (5,712) EBIT 3,061 4,235 4,748 4,710 7,023 4,440 7,431 12,846 15,722 Net Interest (81) (17) (89) (250) (260) (615) (672) (665) (658) Other income 1,103 559 531 1,230 1,571 2,062 2,000 1,435 1,653 Profit before tax 4,083 4,777 5,190 5,690 8,334 5,887 8,759 13,616 16,716 Tax & Deferred Tax (975) (1,069) (957) (1,340) (1,616) (1,569) (2,277) (3,404) (4,346) Less: minority interest (39) (170) (310) (350) (597) (594) (769) (1,018) (1,220) Net Income (adjusted) 3,069 3,538 3,923 4,000 6,121 3,724 5,713 9,194 11,150 EPS adjusted (Rs) 5.1 5.9 6.5 6.7 10.2 6.2 9.5 15.3 18.5 Balance sheet Equity 27,599 31,090 34,428 42,996 52,138 56,485 62,674 69,668 78,136 Total borrowings 2,488 8,497 10,306 24,673 22,054 19,201 19,001 18,801 18,601 Deferred tax liability 412 528 417 965 964 891 891 891 891 Other liabilities 13,662 17,391 18,603 15,947 18,786 23,320 22,042 23,788 25,561 Total liabilities 44,161 57,506 63,754 84,581 93,942 99,897 104,608 113,148 123,188 Net fixed assets 18,229 27,308 33,065 39,878 44,643 50,042 55,573 58,446 59,734 Investments 5,866 7,649 2,303 9,859 13,827 6,752 6,752 6,752 6,752 Cash 6,729 8,044 9,375 15,386 10,443 13,228 14,385 17,494 23,632 Other current assets 13,337 14,505 19,011 19,458 25,029 29,875 26,191 28,750 31,362 Total assets 44,161 57,506 63,754 84,581 93,942 99,897 102,901 111,441 121,481 Cashflow statement Operating profit before working capital 7,575 6,717 6,981 6,511 9,084 9,657 13,228 18,742 22,428 Tax paid (940) (1,487) (1,334) (1,043) (414) (1,971) (2,277) (3,404) (4,346) Change in working capital (1,923) 377 (3,540) (1,762) (2,270) (1,065) 2,406 (812) (840) Capital expenditure (3,586) (7,885) (8,381) (6,180) (6,084) (7,382) (8,000) (6,000) (5,000) Free cash flow 1,126 (2,278) (6,274) (2,474) 316 (761) 5,357 8,526 12,241 Margins and ratios Gross profit margin (%) 51.1 53.0 53.6 55.6 58.9 55.8 58.6 62.0 62.6 EBITDA margin (%) 20.0 21.9 22.5 21.6 25.0 20.1 23.9 28.9 30.1 Tax rate (%) 23.9 22.4 18.4 23.6 24.0 27.0 26.0 25.0 26.0 RoAE (%) 20.2 11.4 15.2 14.2 12.9 6.9 12.5 13.9 15.1 RoACE (%) 9.0 9.7 9.8 6.8 9.0 5.6 8.9 14.1 15.8

Source: Company, Kotak Institutional Equities estimates

KOTAK INSTITUTIONAL EQUITIES RESEARCH 7 ATTRACTIVE Internet Software & Services India NOVEMBER 28, 2018 UPDATE BSE-30: 35,717 Indian e-commerce: cash burn on the rise. An analysis of FY2017 and FY2018 performance of e-commerce companies indicates that well-funded companies are investing aggressively into growing the market, and profitability is still some time away. An aggregate of revenues and losses posted by these companies shows that revenue growth is slowing, though losses are holding steady. Customer acquisition costs for these companies remain high as they seek to increase the size of their target market and gain share within it.

Competitive intensity on the rise among e-tailers

FY2017-18 financials reported by e-tailers indicate that cash burn is on the rise. Losses of the Flipkart group have averaged at `42 bn annually over FY2016-17, and seem to be trending higher in FY2018. Losses posted by Amazon India have increased materially from `37 bn in FY2016 to `67 bn in FY2018. Paytm had spun off a separate e-commerce entity in FY2017, which posted a hefty loss of `18 bn in FY2018. Snapdeal was the outlier, with both revenues and losses declining materially in FY2018. Walmart and Amazon have both stated their intent to continue to invest in their Indian entities. Alibaba’s steady funds infusion into Paytm mirrors a similar belief, in our view. Overall, losses may remain at elevated levels in FY2019 also as investments into category expansion, customer acquisition and infrastructure continue.

Local and hyper-local service companies also spending aggressively

Like e-tailers, cab aggregators also continue to invest substantially in their business. Ola posted a loss of `38 bn in FY2018, 21% higher than the `31.5 bn loss posted in FY2017. While Uber India’s financials are not separately available, we believe its losses may not be materially different from those posted by Ola. A surge of capital raise by food delivery and grocery delivery companies has materially altered the narrative of these companies – from a focus on unit economics (evidenced in lowering of losses by Zomato in FY2018), these have started spending heavily on customer acquisition once again.

Classifieds: monetization models still to settle

Olx India, the local classifieds portal seems to have turned around operations, and posted profits in both FY2017 and FY2018. Others such as Practo and Quikr story is still work in progress; both these companies posted sizeable losses in FY2017 (FY2018 financials are not available). Interestingly, Indeed, which has gained user traffic in the recruitment space, posted revenues of `750 mn in FY2018, which were only 11% of revenues posted by Naukri.

Have funding, will spend

Data pertaining to funds raised by e-commerce companies indicates that PE/VC funding is fairly robust (until October 2018). The last couple of years have also witnessed a change in the nature of fund providers – from a PE/VC-led funding environment, India has seen enhanced funding Kawaljeet Saluja from (1) global companies, which are investing in India with a long-term strategic intent (Amazon, Walmart, Alibaba), and (2) Softbank, which is deploying its vision fund into promising companies. We believe both these will keep the funding tap open for at least some time to Garima Mishra come, though overfunded business segments may see eventual consolidation (e-tail, food delivery, etc.).

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

We collated data on financial performance of 30 companies (some of which are part of the same group) in the e-commerce space over the FY2015-18 period. This data indicates that while revenue growth is trending downwards (partly on account of base effect), losses for this set of companies are stagnant. Combined losses of `191 bn in FY2017 were similar to FY2016 levels. There are a few companies in this set, which have not reported FY2018 financials – once we account for these we believe aggregate losses in FY2018 would be similar to FY2017.

Exhibit 1: E-tailers account for the largest chunk of losses posted by major Indian e-commerce companies Category-wise revenue and losses posted by e-commerce companies, March fiscal year-ends, 2015-18 (Rs mn)

2015 2016 2017 2018 E-tail Revenue 135,744 245,525 378,343 519,879 PBT (58,031) (115,505) (110,474) (128,636) Cab aggregators Revenue 575 8,753 15,885 — PBT (7,960) (31,195) (37,726) — Food kitchen + delivery Revenue 1,014 2,745 5,977 9,084 PBT (1,856) (8,047) (4,933) (5,036) Grocery delivery Revenue 3,537 10,987 22,804 — PBT (686) (6,129) (7,788) — Classifieds Revenue 891 2,562 4,023 — PBT (4,545) (6,008) (4,753) — Payment systems Revenue 4,450 10,416 9,584 30,581 PBT (4,588) (18,347) (14,982) (16,010) Travel bookings Revenue 26,783 33,071 42,920 58,929 PBT (2,389) (12,352) (13,101) (18,091) Total Revenue 172,994 314,060 479,536 618,473 PBT (80,056) (197,583) (193,756) (167,774) Yoy growth (%) Revenue 82 53 PBT 147 (2) Notes: (a) FY2018 loss aggregate figure may change later as some companies in the consideration set are yet to report financials. (b) Paytm E-commerce is included in e-tailers. It is a subsidiary of One97 Communications, which is included in payment systems category and hence there is a double-counting of revenues and losses.

Source: MCA, Tofler, Companies, Bloomberg, Kotak Institutional Equities

E-tail: high competitive intensity and customer acquisition costs

Of the `193 bn aggregate losses posted by e-commerce companies in our sample set in FY2017, e-tail accounted for `110 bn of losses. Despite the sharp reduction in losses posted by Snapdeal, and Flipkart Group’s losses holding steady over FY2016-17, the aggregate losses posted by the segment declined only marginally. This was on account of aggressive expansion by Amazon in India, and a consequent increase in losses incurred by its entities. Once we get details on losses of all companies, we reckon FY2018 losses for e-tailers would be comfortably higher than FY2017 – not only will Flipkart and Amazon’s losses be higher, but Paytm has emerged as a new competitor, having racked up losses of `18 bn in its very first full year of operation. For both Flipkart and Amazon, their respective payment platforms (PhonePe and Amazon Pay) saw sharply higher losses in FY2018 compared to FY2017.

KOTAK INSTITUTIONAL EQUITIES RESEARCH 9 India Internet Software & Services

Exhibit 2: Amazon, Flipkart losses on the rise, Paytm spending also up in a bid to gain market share Details of financial performance of key e-tailers and their group companies, March fiscal year-ends, 2015-18

2015 2016 2017 2018 E-tail Flipkart group Flipkart Internet Revenues 6,594 16,351 18,824 27,902 PBT (10,616) (23,057) (16,393) (11,594) Flipkart India Revenues 90,322 128,180 152,644 214,387 PBT (8,267) (5,446) (2,447) (20,648) Myntra Revenues 7,460 10,318 20,001 — PBT (7,403) (8,165) (6,291) — Ekart Revenues — 3,040 7,327 — PBT — (8,102) (15,321) — PhonePe Revenues — — 30 428 PBT — — (1,291) (7,910) Flipkart Group total Revenues 104,376 157,889 198,826 242,716 PBT (26,286) (44,770) (41,744) (40,153) Amazon India Amazon Seller Services Revenues 9,771 22,179 31,287 49,284 PBT (17,237) (36,799) (48,306) (62,872) Cloudtail Revenues 11,391 45,870 56,888 71,490 PBT (311) (302) (267) (410) Amazon Wholesale Revenues — 26 70,473 122,240 PBT — (232) 109 na Amazon Transport Revenues 1,770 6,193 9,919 15,742 PBT 9 28 (140) (248) Amazon Pay Revenues — — 41 3,891 PBT — — (1,779) (3,342) Amazon India total Revenues 22,931 74,268 168,608 262,647 PBT (17,539) (37,306) (50,383) (66,872) Paytm E-commerce Revenues — — 72 7,442 PBT — — (136) (18,056) Shopclues Revenues 773 1,780 1,800 2,713 PBT (1,014) (3,830) (3,471) (2,081) Snapdeal Revenues 7,664 11,589 9,038 4,361 PBT (13,192) (29,600) (14,740) (1,474) E-tail total Revenues 135,744 245,525 378,343 519,879 PBT (58,031) (115,505) (110,474) (128,636)

Notes: (a) Total revenues of various companies are not comparable given varying proportions of B2B sales. (b) FY2018 revenue and loss for Flipkart group and E-tail total are subject to change given some companies in the sample set have not reported FY2018 financials yet. These companies have other smaller sized arms, which we have excluded for the purpose of our analysis.

Source: MCA, Tofler, Companies, Kotak Institutional Equities

10 KOTAK INSTITUTIONAL EQUITIES RESEARCH Internet Software & Services India

Overall revenue comparison between any two companies, say Flipkart and Amazon, is difficult given different proportions of wholesale buy and sell activity carried out by their B2B arms as well as double counting of revenues of subsidiaries such as Ekart and Amazon Transport, which serve the marketplace entity.

Exhibit 3: Summary of financial performance of e-tailers and their group companies, March fiscal year-ends, 2015-18

2015 2016 2017 2018 E-tail Flipkart group Revenues 104,376 157,889 198,826 242,716 PBT (26,286) (44,770) (41,744) (40,153) Amazon India Revenues 22,931 74,268 168,608 262,647 PBT (17,539) (37,306) (50,383) (66,872) Paytm E-commerce Revenues — — 72 7,442 PBT — — (136) (18,056) Shopclues Revenues 773 1,780 1,800 2,713 PBT (1,014) (3,830) (3,471) (2,081) Snapdeal Revenues 7,664 11,589 9,038 4,361 PBT (13,192) (29,600) (14,740) (1,474) E-tail total Revenues 135,744 245,525 378,343 519,879 PBT (58,031) (115,505) (110,474) (128,636) Yoy growth (%) Revenue 81 54 PBT 99 (4) Notes: (a) Total revenues of various companies are not comparable given varying proportions of B2B sales. (b) FY2018 revenue and loss for Flipkart group and E-tail total are subject to change given some companies in the sample set have not reported FY2018 financials yet. These companies have other smaller sized arms, which we have excluded for the purpose of our analysis.

Source: MCA, Tofler, Companies, Kotak Institutional Equities

Hyper-local services: unit economics to take time to stabilize

We club cab service providers such as Ola, Uber, grocery delivery companies such as BigBasket, Grofers and food delivery companies such as Zomato and Swiggy in this category. Unit economics for cab aggregators is still to stabilize as these companies continue to invest in customer acquisition, particularly in new cities.

Zomato’s FY2018 performance was encouraging – it managed to grow revenues by 40% yoy, while EBITDA losses shrunk meaningfully to `838 mn.

Food delivery companies such as Zomato and Swiggy will possibly see higher losses in FY2019 compared to FY2018 as they seek to scale their delivery business manifold. Grocery companies continue to grapple with thin margins and high last-mile delivery cost. This necessitated a shift in Grofers’ business model from aggregator to inventory-led.

KOTAK INSTITUTIONAL EQUITIES RESEARCH 11 India Internet Software & Services

Exhibit 4: Local service providers remain aggressive capital spenders Summary of financial performance of hyper-local cab and delivery companies, March fiscal year-ends, 2015-18

2015 2016 2017 2018 Cab aggregators Ola Revenues 575 5,005 11,778 — PBT (7,960) (31,483) (38,028) — Food kitchen + delivery Zomato Media Revenues 967 1,850 3,323 4,664 PBT (1,476) (4,923) (2,014) (1,063) Swiggy Revenues 1 201 1,331 4,420 PBT (21) (1,372) (2,052) (3,973) Foodpanda Revenues 46 377 614 — PBT (358) (1,415) (444) — Freshmenu Revenues — 317 709 — PBT — (338) (423) — Food kitchen + delivery total Revenues 1,014 2,745 5,977 9,084 PBT (1,856) (8,047) (4,933) (5,036) Grocery delivery BigBasket Revenues 3,537 10,907 22,672 — PBT (686) (3,878) (5,105) — Grofers Revenues — 80 132 — PBT — (2,251) (2,683) — Grocery delivery total Revenues 3,537 10,987 22,804 — PBT (686) (6,129) (7,788) — Yoy growth (%) Revenue 211 108 PBT 794 27

Notes: (a) Zomato’s FY2015 and FY2016 financials are as reported by INFOE. FY2017 and FY2018 have been collated from MCA. FY2017 financials exclude one-time impairment charge.

Source: MCA, Tofler, Companies, Kotak Institutional Equities

Classifieds: monetization models not clear yet

Monetization models for some classified companies such as Quikr are still work-in-progress, demonstrated by low absolute revenues but large losses. Olx India has been a stand-out, having posted rapid revenue growth and turning profitable in FY2017. We note that Indeed, Naukri’s competitor, is scaling up, though in FY2018 it still garnered only 11% of Naukri’s revenues.

12 KOTAK INSTITUTIONAL EQUITIES RESEARCH Internet Software & Services India

Exhibit 5: Varied financial performance across different classifieds companies Summary of financial performance of classifieds, March fiscal year-ends, 2015-18

2015 2016 2017 2018 Classifieds Practo Revenues 254 1,566 2,023 — PBT (129) (646) (1,907) — Olx India Revenues 390 584 922 1,783 PBT 47 (21) 123 241 Quikr Revenues 248 412 638 — PBT (4,464) (5,341) (3,012) — Indeed Revenues — — 440 748 PBT — — 43 90 Classifieds total Revenues 891 2,562 4,023 PBT (4,545) (6,008) (4,753) Yoy growth (%) Revenue 187 57 PBT 32 (21)

Source: MCA, Tofler, Companies, Kotak Institutional Equities

Payment systems – Paytm continues to invest aggressively

Paytm has clearly emerged as the largest wallet company, and is significantly ahead of PayU and Mobikwik in revenue terms. We note that FY2018 financials for One97 include the wallet business as well as revenues from e-commerce, which scaled materially in FY2018.

Exhibit 6: Paytm is gaining share in the wallet market Summary of financial performance of payment systems, March fiscal year-ends, 2015-18

2015 2016 2017 2018 Payment systems One97 Communciations Revenues 3,075 8,300 6,146 30,581 PBT (3,607) (15,492) (12,086) (16,010) Mobikwik Revenues 134 271 369 — PBT (412) (1,145) (1,329) — PayU India Revenues 1,240 1,845 3,068 — PBT (570) (1,710) (1,567) — Payment systems total Revenues 4,450 10,416 9,584 30,581 PBT (4,588) (18,347) (14,982) (16,010) Yoy growth (%) Revenue 134 (8) PBT 300 (18) Notes: (a) One97 Communications’ reported financials are consolidated for Paytm E-commerce, which scaled materially in FY2018.

Source: MCA, Tofler, Companies, Kotak Institutional Equities

KOTAK INSTITUTIONAL EQUITIES RESEARCH 13 India Internet Software & Services

Travel portals – focus on hotel aggregation leads to substantial losses across players

All leading portals are investing aggressively in hotel bookings. MMYT is expanding its network, while Oyo is investing in partner hotels as well as own properties. Adequate funds availability with these companies may keep competition in the hotels category high in the near term.

Exhibit 7: Hotel aggregation drives up losses for travel portals Summary of financial performance of travel portals, March fiscal year-ends, 2015-18

2015 2016 2017 2018 Travel bookings (tickets + hotels) Makemytrip Revenues 18,309 21,978 30,035 43,554 PBT (1,105) (5,598) (7,274) (14,036) Cleartrip Revenues 1,921 2,572 2,655 3,127 PBT (293) (646) (634) (624) Yatra Revenues 6,528 8,345 9,357 12,249 PBT (991) (1,234) (1,884) (3,432) Oyo Rooms Revenues 24 175 873 — PBT — (4,875) (3,310) — Travel bookings total Revenues 26,783 33,071 42,920 58,929 PBT (2,389) (12,352) (13,101) (18,091) Yoy growth (%) Revenue 23 30 PBT 417 6

Notes: (a) Makemytrip financials are from Bloomberg, and translated into INR using year-average INR-US$ exchange rate. (b) Yatra financials are from its annual report. PBT excludes the impact of fair valuation of warrants. FY2017 financials also exclude the impact of one-time listing and related expenses.

Source: MCA, Tofler, Companies, Bloomberg, Kotak Institutional Equities

Sustained funding required over the next 2-3 years to sustain operations

An analysis of total losses incurred by the abovementioned companies indicates that companies have used up ~10-70% of total funds raised to date. We note this calculation is not comprehensive as (1) it is based on reported PBT, and while we have adjusted for large impacts on fair valuation of financial assets, we have not adjusted for other non-cash charges such as ESOP costs due to lack of availability of data, and (2) we have not accounted for cash capex incurred by these companies.

Some of these companies in our consideration set have raised relatively large-sized rounds of funding in the recent past, and hence may be well-capitalized for some time. However, the trend of losses not coming down leads us to believe that these companies will continue to need large-sized funding rounds. Reliance on funding providers thus remains large, and any pullback in funding may lead to some sort of consolidation in the space.

Current funding environment remains benign, though funding is limited to larger companies within each vertical. However, we note that the absolute funds inflow into e-commerce would be higher than that suggested by our data as we have not included direct investments by Amazon and Walmart into Amazon India and Flipkart, respectively.

14 KOTAK INSTITUTIONAL EQUITIES RESEARCH Internet Software & Services India

Exhibit 8: Most e-commerce companies have used up 20-40% of total funds raised to date Details of aggregate funds raised and losses incurred by select e-commerce companies, March fiscal year-ends

Funds raised Aggregate Losses: funds till date FY2015-18 loss raised (US$ mn) (US$ mn) (X) E-tail Flipkart group 6,650 2,359 0.35 Amazon India 5,000 2,645 0.53 Paytm E-commerce 645 282 0.44 Shopclues 223 159 0.71 Snapdeal 1,921 911 0.47 Cab aggregators Ola 1,976 1,178 0.60 Food kitchen + delivery Zomato Media 617 146 0.24 Swiggy 466 113 0.24 Foodpanda na 34 na Freshmenu 22 11 0.52 Grocery delivery BigBasket 495 147 0.30 Grofers 166 74 0.45 Classifieds Practo 180 40 0.22 Olx India na (6) na Quikr 410 200 0.49 Payment systems One97 Communciations 2,159 724 0.34 Mobikwik 115 44 0.38 PayU India na 59 na Travel bookings Makemytrip 743 430 0.58 Cleartrip na 34 na Yatra 205 116 0.57

Oyo Rooms 1,132 124 0.11 Notes: (a) Flipkart groups’ funds raised do not include any recent funds infusion that Walmart may have made. (b) Amazon’s funds raised are approximate, and are in line with Amazon Inc’s stated intent of investing US$5 bn in India.

Source: MCA, Tofler, Companies, Bloomberg, Media reports, Kotak Institutional Equities

xx

KOTAK INSTITUTIONAL EQUITIES RESEARCH 15 India Internet Software & Services

Exhibit 9: PE/VC fund raising has been consistent in FY2019TD Monthly PE/VC funding to e-commerce companies (US$ mn)

3-month moving average of internet and e-commerce funding deals (US$ mn) 2018 average funding 2017 average funding 1,400

1,200

1,000

800

600

400

200

0

Jun-14 Jun-15 Jun-16 Jun-17 Jun-18

Oct-14 Feb-16 Feb-17 Feb-18 Oct-18 Feb-15 Oct-15 Oct-16 Oct-17

Apr-14 Apr-15 Apr-16 Apr-17 Apr-18

Dec-16 Dec-17 Dec-14 Dec-15

Aug-14 Aug-15 Aug-16 Aug-17 Aug-18

Source: Venture Intelligence, Kotak Institutional Equities

16 KOTAK INSTITUTIONAL EQUITIES RESEARCH Kotak Institutional Equities: Valuation summary of KIE Universe stocks 17 Target O/S ADVT

Price (Rs) price Upside Mkt cap. shares EPS (Rs) EPS growth (%) P/E (X) EV/EBITDA (X) P/B (X) RoE (%) Dividend yield (%) 3mo Company Rating 28-Nov-18 (Rs) (%) (Rs bn) (US$ bn) (mn) 2019E 2020E 2021E 2019E 2020E 2021E 2019E 2020E 2021E 2019E 2020E 2021E 2019E 2020E 2021E 2019E 2020E 2021E 2019E 2020E 2021E (US$ mn) Automobiles & Components Amara Raja Batteries REDUCE 731 780 6.7 125 1.8 171 32 37 43 17 16 14 23 20 17 12.0 10.3 8.9 3.7 3.2 2.8 17.4 17.5 17.4 0.7 0.8 0.9 6.0 Apollo Tyres BUY 236 315 33.3 135 1.9 541 17 22 26 25 33 18 14 11 9 8.2 6.8 5.6 1.3 1.2 1.1 9.4 11.5 12.3 1.3 1.3 1.3 11.9 Ashok Leyland BUY 108 170 56.9 318 4.5 2,926 6.8 9.6 10.1 26 42 5.1 16 11 11 8.1 5.9 5.7 3.8 3.1 2.6 25.6 30.4 26.6 1.9 2.7 2.8 37.6 Bajaj Auto REDUCE 2,604 2,500 (4.0) 753 10.7 289 149 169 178 6.0 14 5.0 18 15 15 11.9 10.0 9.2 3.5 3.2 2.8 21.3 21.6 20.4 2.3 2.6 2.7 19.6 Balkrishna Industries BUY 958 1,030 7.5 185 2.6 193 44 54 60 18 22 12 22 18 16 11.6 9.9 8.5 3.8 3.2 2.7 19.1 19.6 18.6 0.5 0.6 0.7 17.4 Bharat Forge SELL 566 600 6.1 263 3.7 466 23 27 29 40 18 7.4 25 21 20 14.2 12.2 11.2 4.9 4.1 3.6 20.9 21.0 19.4 0.9 1.0 1.1 11.8 CEAT ADD 1,209 1,280 5.9 49 0.7 40 79 97 101 23 22 4.3 15 12 12 8.9 7.9 7.2 1.7 1.5 1.4 11.7 12.8 12.0 0.7 0.8 0.8 10.9 Eicher Motors SELL 23,111 20,000 (13.5) 630 8.9 27 899 1,057 1,184 13 17 12 26 22 20 18.4 15.4 13.1 8.8 6.8 5.3 39.1 35.0 30.6 0.1 0.1 — 36.8 Escorts BUY 682 1,050 54.0 58 1.2 89 58 67 74 50 15 11 12 10 9 6.8 5.8 4.8 2.0 1.8 1.5 17.4 17.2 16.5 1.3 1.5 1.6 17.3 Exide Industries SELL 259 235 (9.4) 220 3.1 850 10 11 13 25 11 12 25 23 20 14.3 12.8 11.4 3.7 3.4 3.0 15.4 15.5 15.7 1.2 1.3 1.5 7.4 Hero Motocorp SELL 2,999 2,600 (13.3) 599 8.5 200 173 181 195 (6.4) 4.7 7.5 17 17 15 10.2 9.5 8.7 4.6 4.1 3.7 27.8 26.1 25.4 2.9 3.0 3.3 21.6 Mahindra CIE Automotive ADD 258 280 8.7 98 1.4 378 14 16 17 44 12 9.0 19 17 15 9.4 8.4 7.5 2.3 2.0 1.8 13.2 13.0 12.4 ——— 2.1 Mahindra & Mahindra BUY 748 1,050 40.3 930 13.2 1,138 45 54 57 18 20 5.5 17 14 13 11.1 9.2 8.4 2.5 2.2 1.9 15.7 16.7 15.6 1.2 1.4 1.5 38.6 Maruti Suzuki BUY 7,574 8,200 8.3 2,288 32.5 302 281 349 392 9.8 24 12 27 22 19 14.7 11.5 9.8 4.8 4.2 3.6 19.0 20.5 20.0 0.9 1.2 1.3 104.2 Motherson Sumi Systems SELL 159 150 (5.8) 503 7.1 3,158 7 8 9 21 21 15 24 20 17 9.9 8.2 7.0 4.4 3.8 3.3 19.7 20.6 20.5 1.1 1.2 1.3 19.6 MRF REDUCE 68,792 62,000 (9.9) 292 4.1 4 3,048 3,702 4,089 14 21 10 23 19 17 10.0 8.5 7.4 2.7 2.3 2.1 12.5 13.3 13.0 0.1 0.1 0.1 7.1 Schaeffler India BUY 5,478 5,700 4.0 91 1.3 17 148 192 237 3.6 30 23 37 28 23 10.6 7.9 6.2 6.2 5.2 4.3 20.9 19.9 20.3 0.2 0.2 0.2 0.7 SKF ADD 1,863 1,900 2.0 96 1.4 51 68 82 97 18 20 18 27 23 19 17.4 14.4 11.9 4.5 3.9 3.4 16.5 17.2 17.5 0.6 0.8 0.9 0.4 Tata Motors BUY 174 300 72.0 592 7.8 3,396 1 21 31 (95) 1,935 47 168 8 6 4.0 3.0 2.5 0.6 0.6 0.5 0.4 7.2 9.7 ——— 53.9 Timken SELL 517 570 10.2 39 0.6 68 19 24 28 42 25 18 27 22 18 16.4 13.2 11.0 4.2 3.5 2.9 16.9 17.5 17.2 0.2 0.2 0.2 0.3 TVS Motor SELL 535 350 (34.6) 254 3.6 475 15 17 20 6.2 15 15 36 31 27 18.2 15.9 14.1 7.6 6.6 5.7 22.7 22.6 22.4 0.8 1.0 1.1 12.2 Varroc Engineering BUY 704 1,050 49.1 95 1.3 135 37 46 69 9.5 26 51 19 15 10 9.9 7.8 5.6 2.8 2.4 1.9 14.8 15.7 19.1 ———— WABCO India SELL 6,789 6,100 (10.1) 129 1.8 19 183 222 230 27 22 4 37 31 29 25.7 20.5 19.3 7.0 5.8 4.9 20.5 20.6 17.9 0.2 0.2 0.2 0.4 Automobiles & Components Neutral 8,743 124 (4.7) 38 15 23 16.8 14.6 9.5 7.5 6.5 2.9 2.5 2.2 12.4 15.1 15.4 1.0 1.2 1.3 437.7 Banks Axis Bank REDUCE 628 635 1.1 1,614 22.9 2,567 18 42 47 1,579 130 12 35 15 13 ——— 2.6 2.2 1.9 7.1 14.6 14.5 0.4 1.0 1.1 110.6 Bank of Baroda ADD 105 130 — 277 3.9 2,652 17 26 29 289 49 11 6.0 4.1 3.7 ——— 0.9 0.7 0.5 10.8 14.2 13.7 ——— 44.6 Canara Bank ADD 262 280 6.8 192 2.7 733 1 54 68 102 3,946 26 196 4.8 3.8 ——— 1.3 0.9 0.7 0.3 10.6 11.9 ——— 28.2

City Union Bank ADD 177 185 4.6 129 1.8 732 9 11 12 6 12 16 19 17 14 ——— 2.9 2.6 2.3 15.5 15.3 15.7 0.9 1.1 1.2 2.1 Daily Summary India DCB Bank BUY 154 185 19.8 48 0.7 308 10 12 17 25 23 39 15 13 9.0 ——— 1.8 1.6 1.4 11.4 12.6 15.4 0.6 0.8 1.0 4.0 Equitas Holdings BUY 108 160 48.8 37 0.5 340 4.4 8.4 11.4 378 90 36 24 13 9.4 ——— 1.6 1.4 1.2 6.4 11.2 13.4 ——— 8.4 Federal Bank BUY 82 105 28.6 162 2.3 1,972 6.0 8.0 9.7 35 32 22 14 10.2 8.4 ——— 1.4 1.2 1.1 9.4 11.5 12.8 1.7 2.2 2.7 15.0 HDFC Bank ADD 2,089 2,100 0.5 5,679 80.6 2,595 78 96 113 16 24 18 27 22 18 ——— 3.9 3.5 3.0 16.7 16.7 17.2 0.7 0.9 1.0 102.8 ICICI Bank BUY 359 410 14.2 2,311 32.8 7,072 8 27 32 (14) 223 20 44 13 11 ——— 2.4 2.0 1.8 4.9 14.8 15.8 0.5 1.5 1.8 111.1 IDFC Bank NR 39 —— 132 1.9 3,404 0.9 2.9 4.2 (64) 215 45 42 13 9.2 ——— 0.9 0.8 0.8 2.0 6.2 8.5 0.5 1.5 2.2 6.5 IndusInd Bank BUY 1,613 1,750 8.5 971 13.8 600 47 84 100 (22) 80 19 35 19 16 ——— 3.6 3.1 2.7 12.0 16.9 17.3 — 0.6 0.7 64.2 J&K Bank BUY 37 90 142.3 21 0.3 557 5 8 16 49 41 109 6.9 4.9 2.3 ——— 0.4 0.4 0.4 4.8 6.5 12.6 2.9 4.1 8.6 0.4 Karur Vysya Bank ADD 79 110 39.9 63 0.9 799 3 13 14 (33) 318 7.0 25 5.9 5.5 ——— 1.2 1.0 0.9 3.7 14.4 13.9 1.0 4.3 4.7 1.8 Punjab National Bank ADD 70 85 22.1 258 3.7 2,761 (18) 13 14 59 170 8.8 (4) 5.4 5.0 ——— 1.6 0.9 0.7 (17.7) 11.4 11.0 ——— 31.5 RBL Bank SELL 543 500 (8.0) 231 3.3 420 21 29 34 40 34 20 26 19 16 ——— 3.2 2.9 2.5 12.7 15.1 16.0 0.6 0.8 0.9 15.4 State Bank of India BUY 285 380 33.5 2,539 36.1 8,925 8 39 52 202 424 33 38 7.2 5.4 ——— 1.8 1.3 1.1 3.0 14.5 16.5 — 0.1 0.2 107.5 Ujjivan Financial Services BUY 218 350 60.3 26 0.4 121 16 25 31 2,648 54 24 13 8.6 7.0 ——— 1.4 1.2 1.1 10.7 14.7 16.0 0.7 1.2 1.6 7.0

KOTAK INSTITUTIONAL EQUITIES EQUITIES INSTITUTIONAL KOTAK Union Bank ADD 79 90 13.4 93 1.3 1,169 8 31 43 118 294 39 10 2.5 1.8 ——— 1.1 0.7 0.4 4.0 14.4 17.5 1.5 5.9 8.2 12.7 YES Bank SELL 162 190 17.2 375 5.3 2,303 18 19 24 (2.8) 6.5 25 9 8.5 6.8 ——— 1.3 1.2 1.0 15.0 14.2 15.7 1.8 1.9 2.4 196.8 -

Banks Attractive 15,159 215 790 160 23 31 12 9.8 1.8 1.6 1.4 5.9 13.4 14.4 0.5 0.9 1.1 870.6 November 29, November 2018

Source: Company, Bloomberg, Kotak Institutional Equities estimates RESEARCH

KOTAK INSTITUTIONAL EQUITIES RESEARCH 17

Kotak Institutional Equities: Valuation summary of KIE Universe stocks India Daily Summa India Target O/S ADVT Price (Rs) price Upside Mkt cap. shares EPS (Rs) EPS growth (%) P/E (X) EV/EBITDA (X) P/B (X) RoE (%) Dividend yield (%) 3mo

KOTAK INSTITUTIONAL EQUITIES RESEARCH EQUITIES INSTITUTIONAL KOTAK Company Rating 28-Nov-18 (Rs) (%) (Rs bn) (US$ bn) (mn) 2019E 2020E 2021E 2019E 2020E 2021E 2019E 2020E 2021E 2019E 2020E 2021E 2019E 2020E 2021E 2019E 2020E 2021E 2019E 2020E 2021E (US$ mn) Building Products Astral Poly Technik SELL 1,071 640 (40.2) 128 1.8 120 18 22 26 20 25 17 61 49 42 32 26 22 10.0 8.4 7.0 18.3 18.7 18.3 0.1 0.1 0.1 1.1 Building Products Cautious 128 2 20 25 17 61 48 42 32 26 22 9.9 8.3 7.0 16.4 17.2 16.9 0.1 0.1 0.1 1.1 Capital goods ABB SELL 1,399 1,040 (25.7) 296 4.2 212 28 31 38 39 13 22 51 45 37 30 27 23 7.5 6.7 6.0 15.4 15.7 17.0 0.6 0.6 0.6 6.6 Ashoka Buildcon BUY 127 215 69.2 36 0.5 282 10 11 10 15 9.6 (1.6) 13 12 12 8.8 7.8 7.3 1.6 1.4 1.3 13.0 12.5 11.1 1.4 1.1 1.0 0.6 BHEL REDUCE 67 — — 246 3.5 3,482 3 5 7 28 70 34 23 13 9.9 11 6.6 4.8 0.7 0.7 0.7 3.2 5.6 7.3 2.7 4.6 6.2 11.9 Carborundum Universal SELL 357 315 (11.6) 67 1.0 189 14 17 20 26 21 14 25 21 18 14 11 9.6 3.9 3.5 3.1 16.4 17.8 18.2 1.2 1.5 1.7 0.4 CG Power and Industrial BUY 38 67 77.2 24 0.3 627 3 5 7 273 59 45 12 7.8 5.3 5.7 4.0 3.0 0.9 0.8 0.7 7.1 11.1 14.8 — — — 3.0 Cummins India REDUCE 791 700 (11.5) 219 3.1 277 27 33 37 12 21 14 29 24 21 24 20 17 5.2 4.8 4.5 18.3 20.7 22.0 1.9 2.3 2.6 6.4

Dilip Buildcon BUY 450 1,040 131.2 62 0.9 137 52 59 71 13 12 21 8.6 7.6 6.3 5.1 4.4 3.8 1.9 1.5 1.2 25.4 22.4 21.8 0.3 0.3 0.3 3.1 ry IRB Infrastructure BUY 153 260 70.4 54 0.8 351 30 32 20 32 6.8 (36) 5.1 4.8 7.5 6.3 6.9 8.4 0.8 0.7 0.7 17.0 15.7 9.1 2.0 2.5 2.7 5.3

Kalpataru Power Transmission BUY 356 540 51.9 55 0.8 153 30 36 42 55 18 19 12 10 8.4 6.5 5.3 4.5 1.8 1.5 1.3 16.0 16.3 16.7 0.5 0.5 0.5 0.6 -

KEC International BUY 280 380 35.6 72 1.0 257 20 26 32 14 28 23 14 11 8.7 8.1 6.7 5.5 2.9 2.4 1.9 23.5 24.4 24.2 0.8 1.0 1.2 2.2 29, November 2018 L&T BUY 1,403 1,530 9.0 1,967 27.9 1,401 69 69 79 33 0.6 14 20 20 18 18 17 15 3.5 3.2 2.9 18.2 16.5 16.9 1.6 1.6 1.9 49.0 Sadbhav Engineering BUY 203 340 67.8 35 0.5 172 15 18 19 14 26 3 14 11 11 10.4 8.1 7.0 1.7 1.5 1.3 12.7 14.1 12.8 — — — 1.3

Siemens SELL 909 920 1.2 324 4.6 356 28 33 39 13 17 18 32 27 23 19 16 13 3.6 3.3 3.0 11.7 12.6 13.7 0.9 1.0 1.2 6.2 Thermax REDUCE 1,024 970 (5.3) 122 1.7 113 28 38 43 38 33 14 36 27 24 25 19 17 25.4 19.2 16.9 11.3 13.9 14.3 0.8 1.0 1.1 0.8 Capital goods Neutral 3,578 51 30 11 14 21 19 16 2.7 2.5 2.3 13.0 13.3 13.8 1.4 1.6 1.9 870.6 Commercial & Professional Services SIS REDUCE 812 855 5.3 60 0.8 73 28 34 41 26 21 19 29 24 20 17 14 12 5.0 4.2 3.5 18.8 19.2 19.3 0.3 0.4 0.5 0.3 TeamLease Services SELL 2,799 1,925 (31.2) 48 0.7 17 59 76 99 37 29 30 48 37 28 48 37 28 8.8 7.1 5.7 20.5 21.4 22.3 — — — 0.5 Commercial & Professional Services Cautious 107 2 32 24 23 34 28 23 24 19 16 6.1 5.1 4.2 17.7 18.2 18.5 0.2 0.2 0.3 0.8 Commodity Chemicals Asian Paints REDUCE 1,324 1,140 (13.9) 1,270 18.0 959 24 30 35 17 24 18 55 44 38 35 28 23 13.4 11.8 10.4 25.7 28.2 29.3 0.8 1.0 1.3 26.8 Tata Chemicals ADD 693 760 9.7 176 2.5 255 42 50 57 (19) 19 13 16 14 12 7.2 5.8 5.0 1.5 1.4 1.3 9.3 10.3 10.9 2.2 2.5 2.5 6.2 Commodity Chemicals Neutral 1,447 21 2 23 16 43 35 30 24 20 17 6.7 6.1 5.6 15.6 17.5 18.5 1.0 1.2 1.4 33.0 Conglomerate Godrej Industries RS 520 — NA 175 2.5 336 16 20 — 8.9 24.2 33 26 28 30 4.3 3.7 13.9 15.1 0.3 0.3 4.0 Conglomerate Neutral 175 2 8.9 24.2 33 26 28 30 4.3 3.7 13.1 14.2 0.3 0.3 4.0 Construction Materials ACC SELL 1,437 1,250 (13.0) 270 3.8 188 58 67 78 19 16 16 25 21 18 13 11 9.4 2.7 2.5 2.2 11.2 12.0 12.7 1.2 1.2 1.2 16.4 Ambuja Cements REDUCE 215 195 (9.1) 426 6.0 1,986 8 10 11 1.8 26 17 28 22 19 9.0 7.3 6.1 2.0 1.9 1.8 7.2 8.8 9.7 1.7 1.7 1.7 14.2 Dalmia Bharat ADD 2,373 2,335 (1.6) 212 3.0 192 15 36 48 0.8 140 33 159 66 50 12 9.7 8.7 4.3 4.1 3.8 2.7 6.3 7.9 0.1 0.1 0.1 4.1 Grasim Industries ADD 841 1,030 22.5 553 7.9 657 77 85 96 63 9.9 13 11 10 8.8 6.9 6.6 6.0 0.9 0.8 0.8 8.7 8.9 9.3 0.7 0.7 0.7 18.8 India Cements REDUCE 89 102 14.5 28 0.4 308 4 7 9 16 85 29 24 13 9.8 7.9 6.6 5.9 0.5 0.5 0.5 2.2 4.0 5.0 1.1 1.1 1.1 8.9 J K Cement ADD 701 800 14.1 49 0.7 70 45 70 69 4.1 55 (1.0) 16 10 10.2 9.5 8.6 7.0 2.2 1.9 1.6 15.0 20.0 16.9 1.1 1.1 1.1 0.4 JK Lakshmi Cement ADD 264 320 21.1 31 0.4 118 5 23 31 3.5 386 39 57 12 8.5 10 6.2 5.0 2.1 1.8 1.5 3.7 16.7 19.6 0.8 0.8 0.8 0.4 Orient Cement ADD 82 110 34.9 17 0.2 205 2 8 12 (7.8) 283 53 41 11 7.0 9.7 5.9 4.4 1.6 1.5 1.3 4.0 14.5 19.5 1.8 2.5 2.5 0.2 Shree Cement SELL 15,999 11,750 (26.6) 557 7.9 35 331 515 645 (17) 56 25 48 31 25 20 14 11 5.8 5.0 4.2 12.4 17.1 18.3 0.3 0.3 0.3 6.8 UltraTech Cement SELL 4,004 2,760 (31.1) 1,100 15.6 275 103 148 187 17 43 27 39 27 21 18 14 12 3.9 3.4 3.0 10.4 13.4 14.9 0.2 0.2 0.2 19.2 Construction Materials Cautious 3,242 46 23.5 31.6 20 26.0 19.7 16 11 9.2 8 2.2 2.0 1.8 8.3 10.0 10.9 0.6 0.6 0.6 89.5

Source: Company, Bloomberg, Kotak Institutional Equities estimates

18 KOTAK INSTITUTIONAL EQUITIES RESEARCH 18

Kotak Institutional Equities: Valuation summary of KIE Universe stocks

19 Target O/S ADVT Price (Rs) price Upside Mkt cap. shares EPS (Rs) EPS growth (%) P/E (X) EV/EBITDA (X) P/B (X) RoE (%) Dividend yield (%) 3mo

Company Rating 28-Nov-18 (Rs) (%) (Rs bn) (US$ bn) (mn) 2019E 2020E 2021E 2019E 2020E 2021E 2019E 2020E 2021E 2019E 2020E 2021E 2019E 2020E 2021E 2019E 2020E 2021E 2019E 2020E 2021E (US$ mn) Consumer Durables & Apparel Crompton Greaves Consumer SELL 210 190 (9.7) 132 1.9 627 6 7 8 16 21 17 35 29 25 22 18 16 11.7 9.1 7.0 39.3 35.3 32.0 1.0 1.2 — 2.6 Havells India SELL 669 490 (26.7) 418 5.9 625 13 17 19 20 25 18 50 40 34 32 26 22 9.9 8.7 7.6 20.9 22.9 23.6 0.7 0.9 1.0 13.3 Page Industries SELL 26,085 22,300 (14.5) 291 4.1 11 410 501 599 32 22 20 64 52 44 41 34 28 26.5 21.1 17.0 47.1 45.1 43.2 0.7 0.8 1.0 20.7 TCNS Clothing Co. BUY 681 740 8.7 42 0.6 64 20 22 27 31 11 20 34 31 26 21 16 13 7.4 5.8 4.6 25.4 21.4 20.2 — — — — Vardhman Textiles ADD 1,068 1,300 21.7 61 0.9 56 119 130 141 16 9.1 8.5 9 8 8 7 6 6 1.1 1.0 0.9 12.9 12.8 12.6 1.9 2.8 2.8 0.5 Voltas SELL 536 490 (8.7) 178 2.5 331 17 19 22 (3.7) 12 20 32 29 24 25 21 17 4.1 3.7 3.3 13.4 13.5 14.5 0.6 0.7 0.8 11.2 Whirlpool SELL 1,378 1,220 (11.5) 175 2.5 127 35 41 49 26 19 17 39 33 28 25 20 17 8.1 6.8 5.9 22.4 22.3 22.4 0.4 0.6 1.1 1.5 Consumer Durables & Apparel Cautious 1,296 18 17 18 37 32 24 20 6.8 5.9 18.2 18.7 0.7 0.9 49.8 Consumer Staples Bajaj Corp. ADD 352 405 15.1 52 0.7 148 15 17 18 6.3 9.7 9.7 23 21 19 18 16 14 11 11 11 45.9 50.8 55.6 3.7 4.0 4.3 0.4 Britannia Industries ADD 5,962 6,125 2.7 716 10.2 120 101 125 150 21 24 20 59 48 40 39 31 26 17 14 11 31.7 31.5 30.8 0.6 0.8 0.9 16.0 Colgate-Palmolive (India) ADD 1,228 1,185 (3.5) 334 4.7 272 27 32 37 16 15 16 45 39 33 26 22 19 20 17 15 46.3 46.9 47.4 1.3 1.5 1.9 8.0 Dabur India REDUCE 415 345 (16.8) 733 10.4 1,762 9 10 11 12 15 15 48 41 36 40 34 30 13 11 10 27.0 29.2 29.5 0.9 1.1 1.3 21.0 GlaxoSmithKline Consumer REDUCE 7,192 6,800 (5.5) 302 4.3 42 212 235 260 27 11 10 34 31 28 24 21 18 7.7 6.9 6.2 24.1 23.8 23.7 1.3 1.5 1.7 2.4 Godrej Consumer Products REDUCE 746 645 (13.5) 762 10.8 1,022 16 18 21 11 15 15 47 41 36 33 29 25 9.9 8.7 7.6 23.2 22.6 22.8 0.8 0.8 1.0 14.4 Hindustan Unilever REDUCE 1,732 1,430 (17.4) 3,750 53.2 2,160 29 34 38 19 16 13 59 51 45 42 36 32 46 39 33 83.2 82.6 78.6 1.2 1.4 1.6 37.5 ITC ADD 282 330 16.9 3,455 49.1 12,275 10 11 12 9.9 13 13 29 26 23 19 16 14 6.3 5.9 5.6 20.5 22.4 24.5 2.0 2.4 2.7 51.1 Jyothy Laboratories ADD 185 210 13.6 68 1.0 364 6 6 7 27 14 16 33 29 25 23 20 17 5.1 4.4 3.9 16.5 16.4 16.7 0.5 0.8 1.1 0.8 Marico ADD 360 350 (2.6) 464 6.6 1,291 7 9 10 12 24 17 51 41 35 36 29 24 17 16 14 34.4 39.5 41.7 1.3 1.5 1.7 10.3 Nestle India ADD 10,699 10,600 (0.9) 1,032 14.6 96 171 200 230 35 17 15 63 54 47 36 31 27 28 25 23 46.2 49.4 51.9 1.1 1.3 1.5 12.4 Tata Global Beverages ADD 216 230 6.5 136 1.9 631 8 9 10 4.7 17 13 28 24 21 16 14 12 1.9 1.8 1.7 6.8 7.6 8.3 1.4 1.6 1.9 8.6 United Breweries REDUCE 1,243 1,260 1.4 329 4.7 264 22 29 36 51 29 24 55 43 35 28 23 19 10 8 7 20.1 21.6 22.2 0.3 0.4 0.6 13.9 United Spirits REDUCE 635 540 (15.0) 462 6.6 727 11 14 17 43 28 25 58 46 36 35 28 24 13 9 6 26.5 23.9 20.8 — 0.3 0.4 13.8 Varun Beverages ADD 765 700 (8.5) 140 2.0 183 15 20 25 29 32 25 51 39 31 17 15 13 7.1 6.1 5.2 14.5 16.7 18.0 0.3 0.1 0.3 0.9 Consumer Staples Cautious 12,734 181 16 16 14 43 37 33 29 25 21 11.5 10.4 9.3 26.7 27.7 28.4 1.3 1.5 1.7 211.5 Diversified Financials Bajaj Finance REDUCE 2,413 1,950 (19.2) 1,394 19.8 575 66 88 114 52 33 29 37 27 21 — — — 7.2 5.9 4.7 21.6 23.6 24.6 0.3 0.4 0.5 106.7 Bajaj Finserv ADD 5,818 5,650 (2.9) 926 13.1 159 240 303 375 37 26 24 24 19 16 — — — 3.8 3.2 2.7 17.4 18.0 18.7 0.2 0.2 0.2 23.7 Bharat Financial Inclusion NA 1,001 - - 140 2.0 139 53 63 77 63 19 22 19 16 13 — — — 3.7 2.9 2.4 21.8 20.5 20.1 — — — 16.3

Cholamandalam ADD 1,294 1,425 10.1 202 2.9 156 75 91 114 28 21 25 17 14 11 — — — 3.5 2.9 2.4 21.0 21.2 22.0 0.7 0.8 1.1 7.3 Daily Summary India HDFC ADD 1,928 1,980 2.7 3,312 47.0 1,676 53 62 73 (30) 17 19 36 31 26 — — — 4.4 4.1 3.7 13.1 13.6 14.8 1.0 1.2 1.4 94.1 IIFL Holdings REDUCE 474 470 (0.8) 151 2.1 319 30 34 39 4.3 13 17 16 14 12 — — — 2.3 2.1 1.8 16.8 16.1 16.6 1.3 1.5 1.8 2.6 L&T Finance Holdings ADD 139 145 4.3 278 3.9 1,996 12 14 15 63 13 14 12 10.2 9.0 — — — 2.0 1.8 1.5 18.1 18.4 18.0 1.4 1.8 1.7 24.1 LIC Housing Finance BUY 465 560 20.4 235 3.3 505 42 52 66 (3.5) 23 27 11 9.0 7.1 — — — 1.6 1.4 1.2 15.0 15.6 17.3 1.4 1.7 2.2 17.5 Magma Fincorp BUY 110 145 31.5 30 0.4 237 12 17 20 25 39 20 9.1 6.5 5.4 — — — 1.1 1.0 0.8 13.0 15.7 16.4 1.7 2.3 2.8 0.5 Mahindra & Mahindra Financial ADD 420 450 7.0 260 3.7 614 24 27 33 36 14 20 18 16 13 — — — 2.6 2.4 2.1 14.7 14.9 16.0 1.3 1.5 1.8 13.9 Muthoot Finance ADD 452 480 6.1 181 2.6 400 40 42 48 (7.8) 6.0 15 11 11 9.4 — — — 2.0 1.8 1.6 19.0 17.6 17.8 2.0 2.1 2.5 8.6 PNB Housing Finance REDUCE 970 900 (7.2) 162 2.3 167 58 68 81 16 17 20 17 14 12 — — — 2.3 2.0 1.8 14.2 14.4 15.4 0.4 0.4 0.4 5.9 Shriram City Union Finance ADD 1,573 1,875 19.2 104 1.5 66 142 158 189 41 12 19 11 9.9 8.3 — — — 1.8 1.6 1.4 15.8 15.6 16.2 1.1 1.3 1.5 0.5 Shriram Transport BUY 1,133 1,450 28.0 257 3.7 227 107 124 143 55 16 16 11 9.1 7.9 — — — 1.8 1.5 1.3 16.7 16.8 16.9 1.3 1.5 1.9 25.0 Diversified Financials Neutral 7,632 108 7.7 19 21 24 20 17 3.5 3.1 2.7 14.7 15.5 16.3 0.8 1.0 1.2 346.6

KOTAK INSTITUTIONAL EQUITIES EQUITIES INSTITUTIONAL KOTAK Source: Company, Bloomberg, Kotak Institutional Equities estimates -

November 29, November 2018 RESEARCH

KOTAK INSTITUTIONAL EQUITIES RESEARCH 19

Kotak Institutional Equities: Valuation summary of KIE Universe stocks India Daily Summa India Target O/S ADVT Price (Rs) price Upside Mkt cap. shares EPS (Rs) EPS growth (%) P/E (X) EV/EBITDA (X) P/B (X) RoE (%) Dividend yield (%) 3mo

KOTAK INSTITUTIONAL EQUITIES RESEARCH EQUITIES INSTITUTIONAL KOTAK Company Rating 28-Nov-18 (Rs) (%) (Rs bn) (US$ bn) (mn) 2019E 2020E 2021E 2019E 2020E 2021E 2019E 2020E 2021E 2019E 2020E 2021E 2019E 2020E 2021E 2019E 2020E 2021E 2019E 2020E 2021E (US$ mn) Electric Utilities CESC BUY 696 790 13.6 92 1.3 133 89 106 114 1.6 19.3 8.4 7.9 6.6 6.1 6.8 6.0 5.5 0.7 0.7 0.6 8.6 10.7 10.7 1.9 1.8 1.9 10.7 JSW Energy REDUCE 68 66 (2.2) 111 1.6 1,640 4.8 5.8 6.6 57.8 20.0 13.4 14.0 11.6 10.3 5.8 4.9 4.2 0.9 0.9 0.8 6.9 7.7 8.1 — — — 1.2 NHPC ADD 26 30 15.4 267 3.8 10,260 3 3 4 15.7 4.3 25.6 9.2 8.8 7.0 7.8 7.6 6.6 0.9 0.8 0.8 9.5 9.6 11.5 6.1 5.8 7.5 1.6 NTPC BUY 143 190 32.5 1,183 16.8 8,245 14.3 16.0 18.6 14.1 12.1 15.7 10.0 8.9 7.7 8.9 7.8 6.5 1.1 1.0 0.9 11.2 11.6 12.4 3.0 3.4 3.9 15.4 Power Grid BUY 184 250 35.6 964 13.7 5,232 19 22 25 21.7 15.7 11.0 9.6 8.3 7.5 7.2 6.6 6.1 1.6 1.4 1.3 17.5 18.1 18.0 3.5 4.0 4.5 12.4 Tata Power BUY 74 90 21.0 201 2.9 2,705 6.3 6.9 9.7 17.0 10.6 39.7 11.9 10.8 7.7 9.7 9.8 9.2 1.2 1.1 0.9 10.5 10.5 13.0 — — — 8.0 Electric Utilities Attractive 2,818 40 17.4 13.0 16.0 9.9 8.8 7.6 1.2 1.1 1.0 11.7 12.2 13.0 3.1 3.4 3.9 49.3 Fertilizers & Agricultural Chemicals Bayer Cropscience SELL 4,084 3,550 (13.1) 140 2.0 34 94 114 135 7.4 21.0 18.8 43.4 35.9 30.2 26.4 22.0 18.3 6.9 6.0 5.2 17.0 18.0 18.6 0.5 0.6 0.7 0.5

Dhanuka Agritech ADD 430 500 16.3 21 0.3 49 25.5 27.8 30.7 (0.9) 9.1 10.5 16.9 15.5 14.0 12.3 10.5 9.1 2.9 2.5 2.2 18.4 17.6 17.1 1.3 1.4 1.5 0.1 ry Godrej Agrovet ADD 501 580 15.8 96 1.4 189 13 18 22 12.9 34.7 — 38.5 28.6 23.0 20.9 15.8 12.8 5.0 4.3 — 13.9 16.3 17.4 0.4 0.5 0.7 0.8 -

Kaveri Seed SELL 523 515 (1.5) 35 0.5 66 34.3 34.4 37.2 7.3 0.1 8.3 15.2 15.2 14.0 12.4 11.7 10.4 3.7 3.2 2.8 26.4 22.4 21.0 1.5 1.9 1.9 4.5 PI Industries BUY 827 850 2.8 114 1.6 138 30 38 46 11.5 29.9 19.2 27.9 21.5 18.0 19.9 15.3 12.5 5.1 4.2 3.6 19.6 21.5 21.5 0.5 0.7 0.8 2.0 29, November 2018 Rallis India ADD 166 220 32.6 32 0.5 195 10.0 12.1 13.2 16.6 20.0 9.7 16.5 13.8 12.5 10.9 9.1 8.1 2.5 2.2 2.0 15.7 17.1 16.9 2.2 2.4 2.6 0.6 UPL ADD 772 650 (15.8) 393 5.6 507 47 54 60 9.5 14.7 11.4 16.4 14.3 12.9 10.8 9.2 8.0 3.6 3.0 2.5 23.9 22.9 21.5 1.2 1.4 1.6 26.3

Fertilizers & Agricultural Chemicals Attractive 831 12 9.7 17.3 13.6 21.2 18.0 15.9 13.8 11.5 9.9 4.1 3.5 3.0 19.6 19.5 18.9 0.9 1.1 1.3 34.9 Gas Utilities GAIL (India) BUY 339 455 34.2 765 10.9 2,255 32 33 35 54.9 3.5 8.0 10.7 10.4 9.6 6.8 6.5 5.9 1.7 1.6 1.4 16.8 15.8 15.6 3.2 3.4 3.7 31.2 Indraprastha Gas SELL 268 240 (10.3) 187 2.7 700 12 14 15 16.4 14.0 11.5 22.3 19.6 17.5 13.9 12.1 10.6 4.6 4.1 3.6 22.2 22.1 21.8 1.0 1.4 1.8 8.6 Mahanagar Gas ADD 820 930 13.4 81 1.2 99 56 60 64 15.7 7.7 5.4 14.6 13.6 12.9 8.4 7.6 7.0 3.4 3.1 2.8 24.7 23.7 22.6 2.7 3.3 3.9 5.3 Petronet LNG BUY 216 280 29.7 324 4.6 1,500 16 18 21 15.1 14.3 12.9 13.5 11.8 10.5 8.9 7.6 6.5 3.0 2.8 2.5 23.4 24.4 25.2 3.7 4.2 5.3 10.1 Gas Utilities Attractive 1,357 19 38.4 7.0 9.3 12.4 11.6 10.6 7.9 7.2 6.5 2.2 2.0 1.8 17.7 17.2 17.2 3.0 3.3 3.8 55.1 Health Care Services Apollo Hospitals ADD 1,231 1,230 (0.1) 171 2.4 139 24 29 35 190.2 16.7 23.1 50.3 43.1 35.0 19.7 17.7 15.3 4.9 4.5 4.2 10.1 10.9 12.4 0.5 0.6 0.7 13.1 Aster DM Healthcare BUY 142 240 69.4 72 1.0 505 5 8 12 77.3 63.1 48.8 29.0 17.8 11.9 11.6 8.6 6.7 2.3 2.1 1.8 8.4 12.5 16.3 — — — 0.2 Dr Lal Pathlabs REDUCE 875 910 4.0 73 1.0 83 24 28 34 17.0 17.7 21.9 36.5 31.0 25.5 22.0 18.5 14.9 7.7 6.5 5.4 23.0 22.8 23.2 0.5 0.6 0.8 0.9

HCG BUY 233 270 15.9 20 0.3 85 (1) 1 4 (178.5) 178.8 280.5 (189.9) 241.0 63.3 19.0 15.4 12.5 3.9 3.9 3.6 (2.0) 1.6 5.9 — — — 0.1 Narayana Hrudayalaya ADD 223 265 18.8 46 0.6 204 3 6 9 7.1 119.0 44.2 82.8 37.8 26.2 21.1 14.9 11.9 4.2 3.8 3.3 5.2 10.5 13.4 — — — 0.1 Health Care Services Attractive 382 5 69.1 39.9 35.7 45.9 32.8 24.2 17.5 14.2 11.6 4.2 3.8 3.4 9.2 11.6 13.9 0.3 0.4 0.5 14.4 Hotels & Restaurants Coffee Day Enterprises NR 265 - - 56 0.8 211 8 10 13 126.6 33.6 23.5 35.0 26.2 21.2 11.7 10.2 9.4 2.2 2.0 — 6.5 8.1 9.2 — — — 1.3 Jubilant Foodworks BUY 1,245 1,370 10.1 164 2.3 132 24.3 33.3 43.4 67.2 36.9 30.2 NM 37.4 28.7 25.5 19.4 14.9 12.3 9.5 7.3 28.0 28.7 28.7 — — — 30.0 Lemon Tree Hotels ADD 71 76 7— 56 0.8 786 0 1 2 147.2 174.0 66.8 159.6 58.2 34.9 35.6 21.7 16.1 6.6 5.9 5.5 4.2 10.7 16.3 — — 1.3 — Hotels & Restaurants Attractive 220 3 83.6 36.2 28.3 45.7 33.5 26.1 18.0 14.5 12.2 5.7 4.9 4.2 12.5 14.6 15.9 0.1 0.2 0.2 31.3 Insurance HDFC Standard Life Insurance ADD 395 380 (3.7) 796 11.3 2,007 7 8 10 18.3 23.8 21.0 60.4 48.7 40.3 — — — 15.0 13.3 11.8 26.2 29.0 31.1 0.4 0.5 0.6 7.7 ICICI Lombard SELL 795 650 (18.2) 361 5.1 454 25.6 31.4 36.5 34.9 22.7 16.4 31.1 25.3 21.8 — — — 6.7 5.6 4.7 23.4 24.1 23.6 0.7 0.9 1.1 6.3 ICICI Prudential Life BUY 322 475 47.7 462 6.6 1,436 9 10 12 (21.0) 15.6 19.8 36.1 31.2 26.0 — — — 6.1 5.3 4.5 18.1 18.1 18.7 0.5 0.5 0.6 7.0 Max Financial Services BUY 430 510 18.6 115 1.6 268 6.3 6.4 6.5 36.9 1.8 1.8 68.5 67.3 66.2 — — — 8.3 8.0 7.8 0.5 0.5 0.5 6.1 SBI Life Insurance BUY 569 715 25.7 569 8.1 1,000 13 14 16 10.8 12.4 12.1 44.6 39.7 35.4 — — — 7.5 6.5 5.6 18.0 17.5 17.0 0.4 0.4 0.5 3.9 Insurance Attractive 2,303 33 6.9 18.1 17.1 44.3 37.5 32.1 8.2 7.2 6.2 18.6 19.1 19.4 0.3 0.4 0.5 31.0 Source: Company, Bloomberg, Kotak Institutional Equities estimates

20 KOTAK INSTITUTIONAL EQUITIES RESEARCH 20

Kotak Institutional Equities: Valuation summary of KIE Universe stocks

21 Target O/S ADVT Price (Rs) price Upside Mkt cap. shares EPS (Rs) EPS growth (%) P/E (X) EV/EBITDA (X) P/B (X) RoE (%) Dividend yield (%) 3mo

Company Rating 28-Nov-18 (Rs) (%) (Rs bn) (US$ bn) (mn) 2019E 2020E 2021E 2019E 2020E 2021E 2019E 2020E 2021E 2019E 2020E 2021E 2019E 2020E 2021E 2019E 2020E 2021E 2019E 2020E 2021E (US$ mn) Internet Software & Services Info Edge ADD 1,489 1,660 11.5 182 2.6 122 26 33 40 16.3 27.7 20.9 56.9 44.5 36.8 43.1 32.5 26.3 6.8 6.2 5.5 13.4 14.5 15.8 0.6 0.6 0.7 4.0 Just Dial ADD 493 610 23.7 33 0.5 67 28 30 32 33.2 5.1 8.2 17.4 16.6 15.3 10.0 8.8 7.5 3.5 2.9 2.5 19.3 19.1 17.6 0.6 0.6 0.7 19.1 Internet Software & Services Attractive 215 3 20.2 19.5 16.8 42.9 35.9 30.7 31.2 25.2 21.2 6.0 5.3 4.7 14.0 14.9 15.3 0.6 0.6 0.7 23.1 IT Services HCL Technologies ADD 1,043 1,100 5.5 1,453 20.6 1,409 74 78 81 18.1 5.6 4.5 14.2 13.4 12.8 9.3 8.5 7.8 3.2 2.8 2.5 25.1 22.1 20.5 0.8 3.0 3.2 33.9 Hexaware Technologies REDUCE 312 360 15.6 93 1.3 302 20 23 25 20.3 13.6 12.3 15.6 13.8 12.3 11.6 9.1 7.9 4.1 3.5 3.0 27.8 27.1 26.3 2.6 2.6 3.2 11.8 Infosys ADD 666 780 17.0 2,911 41.3 4,350 37 41 45 13.5 12.3 10.4 18.2 16.2 14.7 12.5 10.9 9.7 4.1 3.7 3.3 23.5 24.1 23.9 3.3 2.9 3.2 90.0 L&T Infotech ADD 1,632 2,000 22.5 283 4.0 175 83 95 110 30.5 14.0 16.0 19.7 17.3 14.9 14.3 11.9 10.0 6.0 4.9 4.0 33.9 31.3 29.6 1.5 1.6 1.8 10.0 Mindtree ADD 875 1,080 23.5 144 2.0 165 45 55 63 30.2 23.1 14.0 19.4 15.8 13.9 12.4 9.7 8.4 4.5 3.8 3.2 24.8 26.0 25.2 1.5 1.9 2.2 23.0 Mphasis SELL 956 900 (5.8) 185 2.6 193 55 63 65 26.4 13.4 2.7 17.2 15.2 14.8 11.9 10.8 10.0 3.0 3.1 2.8 18.5 19.8 20.1 2.1 2.6 3.1 8.2 TCS REDUCE 1,984 1,950 (1.7) 7,444 105.7 3,829 85 95 103 25.6 11.6 8.9 23.4 21.0 19.3 16.7 14.9 13.8 7.3 6.9 6.5 33.8 33.7 34.8 1.7 3.3 3.6 82.0 Tech Mahindra ADD 698 865 24.0 616 8.7 891 48 56 64 11.9 18.0 14.1 14.6 12.4 10.9 8.6 6.9 5.8 2.8 2.4 2.0 20.8 21.0 20.3 1.3 1.5 1.6 37.7 Wipro REDUCE 310 325 4.7 1,404 19.9 4,507 19 23 25 11.7 21.2 7.9 16.4 13.5 12.5 10.4 8.7 7.9 2.5 2.3 2.1 16.4 17.7 17.6 0.5 3.2 3.5 24.0 IT Services Cautious 14,531 206 16.8 12.1 9.0 19.4 17.3 15.9 13.3 11.7 10.6 4.7 4.2 3.9 24.0 24.5 24.3 1.8 3.1 3.3 320.6 Media DB Corp. ADD 178 210 18.0 33 0.5 184 16 20 23 (6.4) 23.8 14.9 10.8 8.7 7.6 5.9 4.7 4.1 1.7 1.6 1.5 15.5 19.1 20.4 2.2 5.6 7.0 0.3 DishTV ADD 38 51 35.1 70 1.0 1,925 1 2 3 329.2 139.8 31.6 37.4 15.6 11.8 3.8 3.1 2.5 13.6 10.2 7.2 40.2 75.0 71.2 — — — 4.5 Jagran Prakashan REDUCE 115 110 (4.4) 34 0.5 311 10 11 13 3.5 10.8 15.0 11.5 10.4 9.0 5.0 4.5 3.9 1.8 1.8 1.7 15.0 17.2 19.3 4.3 7.8 7.8 0.2 PVR BUY 1,462 1,500 2.6 68 1.0 47 37 51 65 38.5 37.2 27.6 39.3 28.7 22.5 14.7 11.4 9.7 5.7 4.9 4.1 15.5 18.3 19.8 0.3 0.3 0.4 7.3 Sun TV Network REDUCE 611 670 9.7 241 3.4 394 35 37 41 21.5 6.8 10.5 17.4 16.3 14.8 11.6 10.8 9.3 4.8 4.4 4.1 28.6 28.1 28.7 3.3 3.7 4.1 16.5 Zee Entertainment Enterprises REDUCE 477 430 (9.9) 459 6.5 960 17 20 22 11.4 17.1 12.6 28.5 24.4 21.6 16.8 14.8 13.0 5.4 4.7 4.2 19.9 20.6 20.5 0.9 1.2 1.5 23.1 Media Attractive 904 13 21.6 20.5 14.9 22.9 19.0 16.5 10.4 9.2 8.1 4.7 4.3 3.8 20.7 22.4 23.1 1.6 2.1 2.4 51.8 Metals & Mining Hindalco Industries BUY 216 330 52.7 485 6.9 2,229 29 32 34 33.3 10.4 6.8 7.4 6.7 6.3 5.0 4.4 3.9 0.8 0.7 0.6 11.2 11.1 10.7 0.6 0.6 0.6 35.4 Hindustan Zinc REDUCE 261 265 1.5 1,103 15.7 4,225 20 21 24 (6.5) 4.6 13.3 13.0 12.4 11.0 7.8 7.0 5.9 3.2 2.9 2.6 24.2 24.7 25.3 7.7 4.0 4.6 5.6 Jindal Steel and Power REDUCE 152 190 25.1 147 2.1 968 7.4 9.9 17.8 186.7 34.4 80.2 20.6 15.4 8.5 6.2 6.0 5.1 0.5 0.5 0.4 2.4 3.1 5.4 — — — 35.3 JSW Steel SELL 309 325 5.2 747 10.6 2,406 34 25 30 27.7 (25.9) 17.0 9.0 12.1 10.4 6.3 7.6 6.8 2.2 1.9 1.7 27.0 17.0 17.2 1.1 1.1 1.1 40.0 National Aluminium Co. BUY 65 87 34.5 125 1.8 1,933 10 8 9 233.2 (14.5) 3.6 6.7 7.8 7.6 3.0 3.5 3.4 1.1 1.1 1.1 17.3 14.3 14.5 9.3 9.3 9.3 10.6 NMDC REDUCE 94 115 22.4 297 4.2 3,164 12 10 11 5.2 (18.5) 5.1 7.6 9.3 8.9 4.6 5.6 5.2 1.1 1.1 — 15.5 11.9 12.0 5.9 5.9 5.9 6.3

Tata Steel ADD 524 610 16.4 598 8.5 1,205 90 81 93 33.9 (10.2) 15.4 5.8 6.5 5.6 5.4 6.1 5.8 0.9 0.9 0.8 17.3 14.2 14.9 1.9 1.9 1.9 72.1 Daily Summary India Vedanta BUY 193 330 71.0 717 10.2 3,717 23 33 34 4.3 47.1 3.9 8.6 5.8 5.6 5.1 4.0 3.6 1.1 1.0 0.9 12.9 17.5 16.5 4.1 5.1 5.3 55.1 Metals & Mining Attractive 4,219 60 22.4 2.1 11.4 8.6 8.4 7.6 5.6 5.5 5.0 1.3 1.2 1.1 14.8 13.9 14.0 3.9 3.1 3.3 29.6 Source: Company, Bloomberg, Kotak Institutional Equities estimates

KOTAK INSTITUTIONAL EQUITIES EQUITIES INSTITUTIONAL KOTAK -

November 29, November 2018 RESEARCH

KOTAK INSTITUTIONAL EQUITIES RESEARCH 21

Kotak Institutional Equities: Valuation summary of KIE Universe stocks India Daily Summa India Target O/S ADVT Price (Rs) price Upside Mkt cap. shares EPS (Rs) EPS growth (%) P/E (X) EV/EBITDA (X) P/B (X) RoE (%) Dividend yield (%) 3mo

KOTAK INSTITUTIONAL EQUITIES RESEARCH EQUITIES INSTITUTIONAL KOTAK Company Rating 28-Nov-18 (Rs) (%) (Rs bn) (US$ bn) (mn) 2019E 2020E 2021E 2019E 2020E 2021E 2019E 2020E 2021E 2019E 2020E 2021E 2019E 2020E 2021E 2019E 2020E 2021E 2019E 2020E 2021E (US$ mn) Oil, Gas & Consumable Fuels BPCL REDUCE 320 275 (14.1) 694 9.9 1,967 30 33 36 (25.0) 10.0 8.1 10.6 9.6 8.9 7.8 7.0 6.4 1.7 1.6 1.4 16.6 16.8 16.6 3.8 4.1 4.5 36.2 Coal India ADD 248 320 29.1 1,539 21.8 6,207 26 26 27 129.1 2.0 2.2 9.6 9.4 9.2 6.9 6.2 5.8 6.0 6.4 6.8 64.4 65.9 71.9 8.1 10.1 10.1 19.2 GSPL SELL 188 180 (4.3) 106 1.5 564 17 14 14 39.4 (12.9) (5.7) 11.4 13.1 13.9 5.0 5.2 5.1 1.8 1.6 1.5 17.1 13.2 11.2 1.3 1.1 1.1 1.6 HPCL SELL 239 185 (22.6) 364 5.2 1,524 28 27 29 (32.8) (3.7) 7.6 8.5 8.9 8.2 7.7 8.2 8.0 1.4 1.3 1.2 17.1 15.1 15.1 4.8 4.6 5.0 36.0 IOCL SELL 134 120 (10.5) 1,302 18.5 9,479 15 15 17 (25.0) (2.1) 12.8 8.7 8.9 7.9 5.2 5.0 4.5 1.1 1.0 1.0 12.8 11.8 12.5 4.6 4.5 5.1 25.0 Oil India SELL 198 190 (4.0) 225 3.2 1,135 22 25 26 (9.2) 10.6 4.9 8.8 8.0 7.6 5.7 5.2 5.0 0.8 0.7 0.7 8.9 9.4 9.4 4.5 5.0 5.3 3.0 ONGC ADD 143 185 29.6 1,833 26.0 3,752 21 21 20 21.4 (1.2) (3.1) 6.8 6.8 7.1 3.5 3.4 3.3 0.8 0.7 0.7 11.6 10.8 9.9 4.7 4.9 4.9 19.9 Reliance Industries SELL 1,153 1,070 (7.2) 6,821 96.9 5,922 67 78 88 13.9 16.5 12.7 17.1 14.7 13.0 11.6 9.7 8.2 2.1 1.8 1.6 11.8 12.3 12.3 0.5 0.6 0.6 184.6 Oil, Gas & Consumable Fuels Attractive 12,884 183 9.6 6.2 6.9 11.6 10.9 10.2 7.3 6.7 6.1 1.6 1.5 1.3 13.7 13.4 13.2 2.8 3.1 3.2 325.5

Pharmaceuticals ry Aurobindo Pharma ADD 790 785 (0.6) 463 6.6 584 41 59 67 (0.8) 43.2 12.6 19.1 13.3 11.8 12.7 9.0 7.9 3.3 2.7 2.3 19.0 20.5 19.2 0.7 0.8 0.9 46.0 -

Biocon SELL 598 345 (42.3) 359 5.1 601 10 15 19 53.4 61.0 21.1 62.9 39.0 32.2 30.4 20.3 17.3 5.7 5.2 4.6 9.6 13.9 14.3 0.6 0.9 1.1 26.3 November 29, November 2018 Cipla BUY 515 600 16.4 415 5.9 805 20 26 35 14.7 28.3 37.2 25.7 20.0 14.6 14.4 11.4 8.5 2.6 2.4 2.1 10.6 12.5 14.5 0.8 1.0 1.4 25.6 Dr Reddy's Laboratories REDUCE 2,572 2,400 (6.7) 427 6.1 166 109 134 160 85.3 22.5 19.6 23.5 19.2 16.0 13.5 9.5 7.7 3.0 2.7 2.3 13.5 13.9 14.5 0.7 0.8 1.0 38.0 Laurus Labs BUY 375 460 22.6 40 0.6 106 15 28 33 (6.1) 85.1 21.0 25.2 13.6 11.3 12.4 8.0 6.9 2.5 2.1 1.8 10.1 16.5 15.6 — — — 0.6

Lupin REDUCE 867 830 (4.2) 392 5.6 450 27 37 48 (30.4) 38.5 30.0 32.7 23.6 18.1 16.3 11.2 8.8 2.7 2.4 2.2 8.5 10.8 12.0 0.5 0.6 0.8 36.0 Sun Pharmaceuticals SELL 486 520 7.0 1,166 16.6 2,406 16 23 27 2.8 44.6 22.0 31.2 21.6 17.7 16.7 11.9 9.9 2.9 2.6 2.4 9.5 12.6 13.3 0.4 0.9 1.1 63.3 Torrent Pharmaceuticals NR 1,694 — 287 4.1 169 46 61 78 14.3 32.3 28.5 37.0 27.9 21.7 15.5 13.2 11.3 5.5 4.9 4.2 15.0 17.4 19.3 0.8 1.0 1.3 6.4 Pharmaceuticals Neutral 3,548 50 7.8 38.8 22.7 28.8 20.8 16.9 15.7 11.3 9.4 3.2 2.8 2.5 10.9 13.5 14.7 0.6 0.9 1.1 242.2 Real Estate Brigade Enterprises BUY 193 290 50.3 26 0.4 136 22 27 34 99.0 24.7 24.3 8.8 7.0 5.6 8.4 6.8 5.2 1.0 0.9 0.8 12.4 13.8 15.0 1.3 1.3 1.3 0.2 DLF RS 176 — (100.0) 314 4.5 1,784 7.0 6.3 13.6 (72.3) (10.0) 117.6 25.3 28.1 12.9 22.0 26.4 12.6 0.9 0.9 0.8 3.5 3.1 6.4 1.1 1.1 1.1 21.2 Godrej Properties SELL 641 400 (37.6) 147 2.1 216 7 23 24 (34.6) 230.7 4.2 90.4 27.3 26.2 152.7 25.2 24.8 4.3 3.7 3.3 5.8 14.6 13.3 — — — 1.7 Oberoi Realty BUY 415 460 10.9 151 2.1 340 46.4 34.1 56.7 264.9 (26.6) 66.3 8.9 12.2 7.3 9.9 14.8 5.1 1.6 1.4 1.2 21.4 12.5 18.0 — — — 3.1 Prestige Estates Projects ADD 183 270 47.4 69 1.0 375 6 7 8 (35.1) 16.6 7.5 28.5 24.4 22.7 10.0 10.5 10.6 1.4 1.3 1.3 5.0 5.6 5.8 0.8 0.8 0.8 0.6 Sobha REDUCE 462 474 2.5 44 0.6 95 23.5 35.6 24.0 2.4 51.7 (32.6) 19.7 13.0 19.3 11.2 8.5 10.6 2.0 1.8 1.7 9.0 14.8 9.1 1.5 1.5 1.5 1.2

Sunteck Realty REDUCE 346 360 4.0 51 0.7 140 17 17 38 8.9 3.6 122.5 20.8 20.1 9.0 15.9 14.8 5.9 1.7 1.6 1.4 8.5 8.2 16.2 0.3 0.3 0.3 1.5 Real Estate Neutral 858 12 (34.2) 3.2 59.6 21.3 20.7 12.9 16.6 16.3 10.1 1.4 1.3 1.2 6.5 6.4 9.3 0.7 0.7 0.8 29.6 Retailing Aditya Birla Fashion and Retail BUY 187 230 23.2 144 2.0 773 2 4 6 50.6 59.1 53.5 81.3 51.1 33.3 23.9 18.6 15.1 11.4 9.3 7.3 15.0 20.0 24.5 — — — 3.1 Avenue Supermarts SELL 1,444 890 (38.4) 901 12.8 624 16 20 26 29.8 27.3 27.9 89.7 70.5 55.1 52.0 40.4 31.7 15.9 13.0 10.5 19.4 20.2 21.0 — — — — Titan Company REDUCE 923 800 (13.3) 819 11.6 888 16 20 25 27.7 25.3 20.0 56.5 45.1 37.6 37.3 29.3 23.8 13.5 11.2 9.4 26.0 27.2 27.2 0.5 0.6 0.8 42.7 Retailing Cautious 1,864 26 29.9 28.3 25.8 70.9 55.2 43.9 40.9 32.0 25.6 14.3 11.8 9.7 20.2 21.4 22.0 0.2 0.3 0.3 45.9 Speciality Chemicals Castrol India SELL 156 140 (10.3) 154 2.2 989 7 7 8 0.6 7.3 8.9 22.6 21.0 19.3 14.1 13.0 11.9 14.7 14.9 14.9 66.1 70.3 77.1 3.5 4.0 4.3 3.0 Pidilite Industries REDUCE 1,160 915 (21.1) 589 8.4 508 20 24 28 6.2 22.1 18.3 59.3 48.6 41.1 38.4 32.4 27.4 14.2 12.1 10.3 25.7 27.0 27.1 0.6 0.7 0.8 8.7 S H Kelkar and Company BUY 186 240 29.0 27 0.4 145 7 9 11 (3.4) 32.4 20.4 26.0 19.6 16.3 18.9 13.7 12.0 2.9 2.6 2.3 11.6 14.0 15.1 0.9 1.1 1.5 0.4 SRF BUY 2,111 2,200 4.2 121 1.7 57 100 132 150 23.8 32.2 14.1 21.2 16.0 14.1 12.1 9.7 8.2 3.0 2.6 2.2 15.0 17.3 17.0 0.6 0.7 0.8 11.3 Speciality Chemicals Neutral 892 13 7.7 20.7 14.8 37.9 31.4 27.3 22.9 19.3 16.7 8.8 7.7 6.7 23.1 24.4 24.4 1.1 1.3 1.4 23.5 Source: Company, Bloomberg, Kotak Institutional Equities estimates

22 KOTAK INSTITUTIONAL EQUITIES RESEARCH 22

Kotak Institutional Equities: Valuation summary of KIE Universe stocks

23 Target O/S ADVT Price (Rs) price Upside Mkt cap. shares EPS (Rs) EPS growth (%) P/E (X) EV/EBITDA (X) P/B (X) RoE (%) Dividend yield (%) 3mo

Company Rating 28-Nov-18 (Rs) (%) (Rs bn) (US$ bn) (mn) 2019E 2020E 2021E 2019E 2020E 2021E 2019E 2020E 2021E 2019E 2020E 2021E 2019E 2020E 2021E 2019E 2020E 2021E 2019E 2020E 2021E (US$ mn) Telecommunication Services Bharti Airtel ADD 314 360 14.6 1,256 17.8 3,997 (8) (9) (4) (278.8) (8.6) 54.5 (37.1) (34.2) (75.1) 9.6 8.6 7.2 2.1 2.4 2.6 (5.2) (6.5) (3.3) 1.9 1.9 1.9 32.8 Bharti Infratel REDUCE 260 270 4.0 480 6.8 1,850 13 13 14 (4.1) (2.7) 11.6 19.7 20.2 18.1 7.4 7.5 6.8 3.0 2.9 2.9 14.7 14.6 16.0 4.1 4.0 4.5 10.1 Vodafone Idea REDUCE 38 37 (2.1) 330 4.7 4,359 (11) (2) (7) (12.3) 78.0 (192.9) (3.5) (16.0) (5.5) 33.6 12.1 10.5 0.5 0.7 0.8 (29.1) (15.2) (13.3) — — — 16.7 Tata Communications ADD 523 580 11.0 149 2.1 285 (4) 3 5 (330.8) 176.1 73.8 (137.6) 180.9 104.1 10.0 9.0 8.4 (69.2) (111.8) 945.2 (76.2) (47.3) (243.7) 1.2 1.4 1.4 3.1 Telecommunication Services Cautious 2,215 31 (4,796.1) 12.1 23.9 (15.0) (17.1) (22.4) 12.2 9.3 8.0 1.5 1.4 1.6 (10.3) (8.2) (7.0) 2.0 2.0 2.1 62.7 Transportation Adani Ports and SEZ BUY 365 390 6.7 757 10.7 2,071 20 23 29 9.3 11.5 27.6 18.1 16.2 12.7 13.4 11.2 9.9 3.2 2.7 2.3 18.6 18.0 19.5 0.3 0.5 0.5 20.7 Container Corp. SELL 665 630 (5.3) 324 4.6 487 22 27 31 18.3 24.5 15.3 30.9 24.8 21.5 18.3 14.6 12.4 3.2 3.0 2.8 10.8 12.4 13.3 1.6 2.0 1.8 7.2 Gateway Distriparks BUY 147 230 56.1 16 0.2 109 5 8 11 (29.4) 46.7 39.1 27.4 18.7 13.4 19.9 8.3 6.8 2.9 2.5 2.1 7.4 14.3 17.1 — 2.0 2.0 0.3 Gujarat Pipavav Port BUY 97 140 44.1 47 0.7 483 5 7 8 28.9 23.7 18.7 18.4 14.8 12.5 9.6 7.8 6.5 2.3 2.2 2.2 12.6 15.3 17.7 4.6 5.6 6.5 0.5 InterGlobe Aviation BUY 1,037 950 (8.4) 399 5.7 383 (42) 40 73 (171.5) 194.3 84.7 (24.7) 26.2 14.2 (18.3) 12.9 6.7 7.1 5.6 4.1 (25.4) 23.9 33.3 (0.2) — 0.4 22.1 Mahindra Logistics REDUCE 521 510 (2.0) 37 0.5 71 13 19 24 32.8 45.0 29.6 40.0 27.6 21.3 22.3 15.5 11.8 7.5 6.1 4.9 20.2 24.4 25.7 — — — 0.4 Transportation Attractive 1,580 22 (44.7) 98.6 36.2 39.1 19.7 14.5 22.0 11.9 9.2 3.7 3.2 2.7 9.4 16.3 18.8 0.6 0.8 0.9 51.3 KIE universe 105,862 1,503 18.1 30.2 16.0 21.8 16.8 14.5 10.8 9.5 8.4 2.6 2.4 2.2 12.1 14.2 14.9 1.4 1.8 2.0 KIE universe (ex-Oil, Gas & Consumable Fuels) 92,978 1,320 20.9 37.3 18.1 24.9 18.1 15.4 12.1 10.5 9.2 2.9 2.6 2.3 11.7 14.4 15.3 1.3 1.6 1.8

Notes: (a) We have used adjusted book values for banking companies. (b) 2019 means calendar year 2018, similarly for 2020 and 2021 for these particular companies. (c) Exchange rate (Rs/US$)= 70.42 Source: Company, Bloomberg, Kotak Institutional Equities estimates India Daily Summary Daily Summary India KOTAK INSTITUTIONAL EQUITIES EQUITIES INSTITUTIONAL KOTAK -

November 29, November 2018 RESEARCH

KOTAK INSTITUTIONAL EQUITIES RESEARCH 23 Disclosures sufficient of of the following strategic transaction

y, no longer are in effect for this stock n a merger or Asof September 30, 2018

Percentageof companies covered by Kotak Equities,Institutional within the specified category. Percentageof companies within each category whichfor Kotak Institutional Equities and or its affiliates hasprovided investment banking services within previousthe months. 12 The * above categories are defined as expectfollows: this = Buy We stock to deliver more than 15% returns theover next months; 12 Add = expectWe this stock to deliver 5-15% returns over the next months; 12 Reduce =expectWe this stock to deliver -5-+5% returns over the next months; 12 =Sell expectWe this stock to deliver less than -5% returns over the next months. 12 targetOur prices are also on a 12-month horizon Thesebasis. ratings are used illustratively to comply with applicableregulations. As of 30/06/2018 Kotak InstitutionalEquities Investment Research had investmentratings on 201 equity securities.

months. SELL 0.0% 19.2%

3.4% 22.2% target target price, any, if have been suspended temporarily. Such suspension is in compliance with applicable regulation(s) +5% returns over the next 12 months. REDUCE

- 5 - 15% returns over the next 12 5% returns over the next months.12 The information is not available for display is not or applicable. - -

month horizon basis. -

ADD 31.0% 5.4% Kotak SecuritiesKotak has suspended coverage of this company. tak Securities Research has suspended the investment and rating price target, if any,for this stock,because there is not a

Ko

The information is not meaningful and is therefore excluded.

Kotak SecuritiesKotak does not cover this company.

The investment and rating

The coverage view represents each analyst’s fundamental overall outlook on the Sector.The coverage viewwill consist of one

Attractive, Neutral, Cautious. BUY 2.5% 27.6% We expect this stock to deliver

We this expect stock to deliver5 We expect this to stock deliver < We expect this to stock deliver more than 15% returns over the next months.12

0% 20% 10% 60% 50% 40% 30% 70% Source:Kotak Institutional Equities Kotak Institutional Equities Research Equities KotakInstitutional coverage universe Distributionof ratings/investment banking relationships NA = NA AvailableNot or Applicable.Not = NM Meaningful.Not CS = Coverage Suspended. = NC Covered.Not = RatingRS Suspended. fundamental basis for determining an investment rating or target. The previous investment and rating price target,if an and shouldnot be relied upon. Coverage view. designations: ratings/identifiers Other NR = Rated.Not and/or Kotak Securities policies in circumstances when Securities Kotak or its affiliates is acting in an advisory capacity i involving this company and in certain other circumstances. REDUCE. SELL. Our target prices are also on a 12 definitions Other Ratings other and definitions/identifiers ratings of Definitions BUY. ADD. Disclosures

Corporate Office Overseas Affiliates

Kotak Securities Ltd. Kotak Mahindra (UK) Ltd Kotak Mahindra Inc 27 BKC, Plot No. C-27, “G Block” 8th Floor, Portsoken House 369 Lexington Avenue Bandra Kurla Complex, Bandra (E) 155-157 Minories 28th Floor, New York Mumbai 400 051, India London EC3N 1LS NY 10017, USA Tel: +91-22-43360000 Tel: +44-20-7977-6900 Tel:+1 212 600 8856 Copyright 2018 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. 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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. 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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 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. Visit our website for more details 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. 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CIN: U99999MH1994PLC134051, Telephone No.: +22 43360000, Fax No.: +22 67132430. Website: www.kotak.com / www.kotaksecurities.com. Correspondence Address: Infinity IT Park, Bldg. No 21, Opp. Film City Road, A K Vaidya Marg, Malad (East), Mumbai 400097. Telephone No: 42856825. SEBI Registration No: INZ000200137(Member of NSE, BSE & MSE) AMFI ARN 0164, PMS INP000000258 and Research Analyst INH000000586. NSDL/CDSL: IN-DP-NSDL-23-97. Compliance Officer Details: Mr. Manoj Agarwal. Call: 022 - 4285 8484, or Email: [email protected]. Investments in securities market are subject to market risks, read all the related documents carefully before investing. 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