INDIA DAILY

August 25, 2016 India 24-Aug 1-day 1-mo 3-mo Sensex 28,060 0.2 (0.1) 8.4 Nifty 8,650 0.2 0.2 9.0 Contents Global/Regional indices Dow Jones 18,481 (0.4) (0.1) 3.5 Daily Alerts Nasdaq Composite 5,218 (0.8) 2.4 6.6 Company alerts FTSE 6,836 (0.5) 1.9 9.1 HCL Technologies: Clear bets, pragmatic approach; execution holds the key Nikkei 16,552 (0.3) (0.4) (1.2) Hang Seng 22,779 (0.2) 3.6 11.8  COO addressed broader concerns on cloud disruption and detailed growth KOSPI 2,041 (0.1) 1.4 4.1 strategy Value traded – India  Undisputed leadership in IMS and ERD Cash (NSE+BSE) 212 251 228  Look for a better price point. Maintain REDUCE Derivatives (NSE) 4,807 3,145 3,700 Deri. open interest 3,173 2,836 2,582 Britannia Industries: Pace of innovation to step up

 Multiple efficiencies from large-scale plant Forex/money market

 State-of-the-art R&D setup to help step up innovation pace Change, basis points

24-Aug 1-day 1-mo 3-mo  Several new launches underway; dairy and adjacency plans also under work Rs/US$ 67.1 5 (26) (14)

10yr govt bond, % 7.3 (1) (15) (48)

Net investment (US$ mn)

23-Aug MTD CYTD

FIIs 1 1,190 5,835

MFs 20 52 1,380

Top movers

Change, %

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

JPA IN Equity 11.6 0.4 (6.8) 93.3

VEDL IN Equity 176.0 1.1 2.2 77.2

HNDL IN Equity 157.0 0.9 16.1 76.9

PNB IN Equity 126.4 (0.4) (3.0) 70.7

RECL IN Equity 233.1 0.5 7.8 50.2

Worst performers

INFO IN Equity 1057.4 1.7 (2.2) (12.5)

TECHM IN Equity 467.1 0.3 (7.0) (10.6)

IDEA IN Equity 98.4 (2.6) (8.4) (10.2)

AL IN Equity 88.6 0.8 (7.9) (8.9)

UNSP IN Equity 2308.6 0.4 (6.0) (7.6)

Kotak Institutional Equities Research [email protected] . Mumbai: +91-22-4336-0000

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

REDUCE HCL Technologies (HCLT) Technology AUGUST 25, 2016 UPDATE Coverage view: Attractive

Clear bets, pragmatic approach; execution holds the key. HCLT’s bets on growth Price (`): 790 were visibly clear at its analysts’ day. The company’s leadership in IMS and ERD space is Target price (`): 810 undisputed. We found the automation strategy pragmatic with sensible leverage of BSE-30: 28,060 partner ecosystem where better capability is available and in-house development in case of gaps in the market. HCLT is attempting to be a disruptive player in applications though it does have well-entrenched competitors to deal with. The stock has underperformed and will surely become interesting at a lower price; current price does not leave much upside. REDUCE stays.

Company data and valuation summary HCL Technologies Stock data Forecasts/Valuations 2016 2017E 2018E 52-week range (Rs) (high,low) 990-706 EPS (Rs) 39.2 58.7 60.0 Market Cap. (Rs bn) 1,115.0 EPS growth (%) (23.5) 49.5 2.3 Shareholding pattern (%) P/E (X) 20.1 13.5 13.2 Promoters 60.4 Sales (Rs bn) 311.4 478.4 521.9 FIIs 25.7 Net profits (Rs bn) 55.4 83.0 85.1 MFs 5.1 EBITDA (Rs bn) 66.9 102.7 107.1 Price performance (%) 1M 3M 12M EV/EBITDA (X) 15.0 9.5 8.9 Absolute 8.4 6.9 (14.8) ROE (%) 21.3 27.3 24.4 Rel. to BSE-30 7.4 (3.6) (21.9) Div. Yield (%) 2.2 3.1 3.6

COO addressed broader concerns on cloud disruption and detailed growth strategy

The impact of public cloud on IMS business is a common concern. COO of HCLT, C Vijaya Kumar, highlighted that impact on IMS of public cloud migration will be modest at best. This view is based on negligible exposure to disrupted parts of IMS i.e. assets and hosting in data center. HCLT derives 40% of IMS revenues from data center ops most of which is focused on G-2000 clients. It believes that public cloud adoption will be 20-30% by them in which data center ops revenues will be 50% lower. In effect only 6% of IMS revenues are at risk which can be offset by surround services such as security, service integration and management etc. HCLT’s growth strategy hinges on three modes—using agile, lean and service-oriented delivery model for existing services offerings laced with DryICE autonomics, experience centric and outcome oriented approach to next gen services and opportunistic goals in product, IPs and platforms

Undisputed leadership in IMS and ERD

IMS will power growth led by breadth of capabilities, portfolio of IPs and solid partnership ecosystem. The management highlighted a combination of rebids (US$22.5 bn annually) and first time outsourcers driving growth (51% of G-2000 yet to outsource). Cross-selling to existing ERD and IMS clients can be a large opportunity, per management. HCLT is the largest player in ERD (and among the top 5 globally) with focus on a few vertical segments. It is well positioned to capture opportunities in the changing business and technology landscape. Large deals will be critical to growth: HCLT is pursuing legacy product carve outs, vendor consolidation under risk reward, managed services, partnership of mature products and rebadging of workforce. Near term growth rate will be modest from this service offering. Kawaljeet Saluja [email protected] Look for a better price point. Maintain REDUCE Mumbai: +91-22-4336-0860

Jaykumar Doshi HCLT stock rerating will hinge on its success in broad-basing of growth from current [email protected] concentration towards IMS. The company’s bet on being a disruptive player in applications has Mumbai: +91-22-4336-0863 merits but faces competition from well entrenched players; we do not expect any near term acceleration in growth. Concentration carries higher risks and consequently requires higher margin of safety from an investment standpoint. The stock has underperformed and will surely become interesting at a lower price. REDUCE stays with unchanged estimates and TP.

Kotak Institutional Equities Research [email protected] Mumbai: +91-22-4336-0000

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

A pragmatic automation strategy

Automation is led by DRYiCE, HCL’s autonomics and orchestration platform. DRYiCE is a framework that brings together autonomics (AI powered automation) and orchestration to drive lean and agile. DRYiCE comprises five layers and 40 modules which can be used on a standalone basis or combined to create a multiplier effect.

HCLT’s automation effort started in 2006 through managed tools a service (MTaaS) which moved to data center automation, event automation and creating dashboards for unified visibility and reporting solution. This capability evolved towards proactive and rationalized infrastructure process through hybrid cloud lifecycle management, service management and SIAM blueprint on SaaS and Runbook automation with automation and orchestration of complex multisystem tasks. HCL's automation efforts are moving towards dynamic and predictive infrastructure process with self-heal technologies, software defined infrastructure, machine learning based robotic process automation, cognitive engagement advisory, machine learning based predictive analytics, cognitive expert assistance and XaaS service integration and consumption.

A few facts and thoughts on HCLT’s automation strategy

 Smart use of ecosystem. HCLT is sensibly leveraging assets available in the market and in-house development in case of gaps in the market. For example it is using multiple AI platforms such as Watson (for deep knowledge), Google’s neural network TensorFlow, bots of Facebook etc depending on the area of engagement. For robotic process automation, HCLT is using BluePrism and Automation Anywhere products as the underpinning and brings it its own middleware (or controller). Effectively, HCLT’s approach is to use the leverage of the best products available in the market rather than duplicate effort. HCLT believes that its DryICE framework offers significant source of competitive advantage

 Conscious of monetization. HCLT has been conscious of monetizing automation effort. For example, DryICE has a separate internal catalog price list. The use of any of its components adds up the bid value quoted by deals team.

 Wide adoption. HCLT highlighted a few interesting data points – (1) DRYiCE influenced 90% of new wins, (2) 54% of existing customers have used DRYiCE and (3) core development and engineering for this platform is 500+ engineers

Applications—attempting a disruptive strategy but growth challenges could remain

EAS accounts for 25% of applications segment but is shrinking by 10% annually

HCLT’s applications practice comprises of US$2.5 bn of revenues and 40K+ employees. The company derives 25% of revenues from enterprise applications (EAS), 60% from application development and 15% from application management (AM). HCLT expects close to double digital decline in EAS due to continued decline in market for large ERP implementation. This segment will drive down applications segment growth by 2.5% and 1% at the consolidated level

A three-fold growth strategy

HCLT’s growth strategy in applications is three-fold—(1) BeyondDigital—a broad-based digital transformation unit with 15K employees and 100+ customers. This unit leverages design thinking, analytics, UI/ UX management and digital platforms (driving application modernization and transformation), (2) growing in SAP cloud offerings and Microsoft Dynamics capability to overcome shrinkage in traditional ERP offerings and (3) disrupting the incumbents (both India and global heritage vendors) using DRYiCE framework and driving extreme automation

KOTAK INSTITUTIONAL EQUITIES RESEARCH 3 Technology HCL Technologies

Challenges to growth especially in AM

We like HCLT’s tenacity and the focus to grow this segment. However HCLT faces the following challenges—(1) clients are consolidating vendors in AM. HCLT’s smaller size exposes it to consolidation risks, (2) vertical domain understanding is equally important. HCLT’s relatively modest size means that it has to pick vertical and segments carefully and (3) unlike IMS disruption created by HCLT, applications has growth hungry India service providers who will not miss out on any opportunity to protect their shares

The company does have an opportunity to grow the application development piece courtesy seeming investments in digital. However the other two segments EAS and AM could drag

Other points

 HCLT’s analytics practice is US$425 mn in size and has more than 5,000 employees. Within analytics space, it has a strong presence in the areas of Big Data led applied analytics and self-service visualization. HCLT’s key differentiator in analytics is its unique IP and strong vendor partnerships. Its key partners for Big Data are Microsoft HDInsight and Hortonworks whereas that for integration and visualization are Microsoft, EMC, Informatica and Oracle.

 HCLT has established and strengthened footprint in Nordics, Australia, Canada and South Africa over the past five years. The management indicated that Australia, New Zealand, Canada and South Africa offer significant growth opportunities and will be key focus markets (emerging markets) for next 2-3 years.

 Acquisition of Volvo’s external IT business has helped HCLT gain capabilities in (1) mainframes, (2) shared services, and (3) automotive space. Additionally, it also helped the company acquire 40 clients, strengthening its footprint in Europe.

Exhibit 1 : HCLT: Size in terms of revenues or headcount of select practices

Revenues Practice (US$ mn) Employees Customers Comments Application services 2,500 40,000+ Digital transformation unit NA 15,000+ 100+ SAP practice NA 15,000+ 350+ Microsoft Dynamics NA 235+ 1,384 Financial services (Domain expertise) NA 1,500+ 40+ Domain consultants Manufacturing and Hi-Tech (Domain expertise) NA 300+ 400+ Domain consultants Engineering and R&D services 1,184 NA 300+ 54 of the top 100 R&D spenders are customers Won 23 new customers in 12 months Infrastructure management services 2,350 34,000+ 240+ 45% win rate and 48% deals won against global competition Cloud services NA 450+ NA 450+ cloud consultants and 30+ completed projects

Source: Company

4 KOTAK INSTITUTIONAL EQUITIES RESEARCH HCL Technologies Technology

Exhibit 2: HCLT's growth strategy

HCL 21CE Business Type Highlights

Application Services Existing Core Services with strong market momentum

Mode 1 Infrastructure Services Large underserviced market opportunities DryICE Agile & Lean Autonomics + Service Oriented Engineering & RnD Services Continue to Increase participation & w in rates

Business Process Offers opportunity at the current grow th rates or higher for next

Businesses @ Infection points , right timing to step up the game Cloud Services Mode 2 High Acceleration / High growth opportunities business Security Services DryICE Experience-centric Orchestratio & Outcome Fragmented market with no clear leaders BEYONDigital n Oriented Continue to build strong organic & inorganic capabilities IoT WorKS Offers Opportunity to grow 20 to 30% YoY for next several years.

Innovative IP Partnership opportunities Mode 3 Products & Platforms Eco-System Driven Create Market permissions for Product & Platform businesses

Modest goals driven by strategic opportunities

Source: Company

KOTAK INSTITUTIONAL EQUITIES RESEARCH 5 Technology HCL Technologies

Exhibit 3: DRYiCE is powered by an ecosystem of partners

Source: Company

6 KOTAK INSTITUTIONAL EQUITIES RESEARCH HCL Technologies Technology

Exhibit 4: IMS and ER&D services contributed ~75% to HCLT's revenue growth over past 4 years HCLT: Revenue and growth composition, March fiscal year-ends

2013 2014 2015 2016 Revenues (US$ mn) Application services 2,282 2,364 2,495 2,519 Engineering and R&D services 809 866 1,028 1,172 Infrastructure services 1,248 1,721 2,007 2,214 BPO services 200 229 292 330 Total 4,538 5,180 5,822 6,236 Incremental revenues 506 642 642 414 Revenues mix (%) Application services 50 46 43 40 Engineering and R&D services 18 17 18 19 Infrastructure services 27 33 34 36 BPO services 4 4 5 5 Total 100 100 100 100 Growth (%) Application services 7 4 6 1 Engineering and R&D services 9 7 19 14 Infrastructure services 28 38 17 10 BPO services 6 15 28 13 Total 13 14 12 7 Contribution to incremental revenues (%) Application services 31 13 20 6 Engineering and R&D services 13 9 25 35 Infrastructure services 54 74 45 50 BPO services 2 5 10 9 Total 100 100 100 100

Source: Company, Kotak Institutional Equities

KOTAK INSTITUTIONAL EQUITIES RESEARCH 7 Technology HCL Technologies

Exhibit 5: HCLT's market share in incremental IMS revenues has declined over the past two years Infrastructure management services, March fiscal year-ends

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 IMS revenues (US$ mn) Infosys 136 205 294 346 381 420 510 586 697 772 TCS 249 457 481 533 770 1,027 1,330 1,599 2,133 2,474 Wipro 261 583 847 926 1,112 1,302 1,467 1,588 1,918 2,076 HCL Tech 170 267 325 513 755 973 1,248 1,721 2,007 2,216 Cumulative 816 1,511 1,947 2,318 3,018 3,722 4,556 5,495 6,755 7,537 Incremental revenues 696 436 370 700 705 834 939 1,260 782 Growth (%) Infosys 51 44 18 10 10 22 15 19 11 TCS 84 5 11 44 33 30 20 33 16 Wipro 124 45 9 20 17 13 8 21 8 HCL Tech 56 22 58 47 29 28 38 17 10 Cumulative 85 29 19 30 23 22 21 23 12 Relative market share (%) Infosys 16.7 13.5 15.1 14.9 12.6 11.3 11.2 10.7 10.3 10.2 TCS 30.5 30.3 24.7 23.0 25.5 27.6 29.2 29.1 31.6 32.8 Wipro 32.0 38.6 43.5 40.0 36.9 35.0 32.2 28.9 28.4 27.5 HCL Tech 20.9 17.6 16.7 22.1 25.0 26.1 27.4 31.3 29.7 29.4 Cumulative 100 100 100 100 100 100 100 100 100 100 Market share in incremental IMS revenues (%) Infosys 9.9 20.5 14.0 5.0 5.5 10.9 8.0 8.8 9.6 TCS 30.0 5.5 13.9 33.9 36.6 36.4 28.7 42.3 43.6 Wipro 46.3 60.6 21.3 26.5 27.0 19.8 12.9 26.2 20.2 HCL Tech 13.8 13.4 50.8 34.6 30.9 33.0 50.4 22.7 26.6

Cumulative - 100 100 100 100 100 100 100 100 100

Source: Company, Kotak Institutional Equities

Exhibit 6: Sharp rise in IMS growth in June 2016 was led by Volvo external IT acquisition and internal IT deal

IMS growth (yoy %) 50

40

30 24

20

10

0

Jun-13 Jun-15 Jun-16 Jun-12 Jun-14

Sep-11 Sep-13 Sep-14 Sep-12 Sep-15

Dec-11 Dec-12 Dec-13 Dec-14 Dec-15

Mar-12 Mar-13 Mar-15 Mar-16 Mar-14

Source: Company, Kotak Institutional Equities

8 KOTAK INSTITUTIONAL EQUITIES RESEARCH HCL Technologies Technology

Exhibit 7: Engineering and R&D services growth has tapered partly due to offshoring

ERD growth (yoy %) ERD growth (yoy %) 30

20

10

4

0

Jun-12 Jun-14 Jun-16 Jun-13 Jun-15

Sep-12 Sep-14 Sep-13 Sep-15

Dec-12 Dec-14 Dec-15 Dec-13

Mar-12 Mar-13 Mar-14 Mar-16 Mar-15

Source: Company, Kotak Institutional Equities

Exhibit 8: Application services business remains a drag on growth

Application services growth (yoy %) 15

12

9

6 3 3

0

Jun-12 Jun-13 Jun-14 Jun-15 Jun-16

Sep-12 Sep-13 Sep-14 Sep-15

Dec-12 Dec-13 Dec-14 Dec-15

Mar-12 Mar-13 Mar-14 Mar-15 Mar-16

Source: Company, Kotak Institutional Equities

KOTAK INSTITUTIONAL EQUITIES RESEARCH 9 Technology HCL Technologies

Exhibit 9: Trends in segmental EBIT margins (%)

IMS Software services BPO 30 25 25 26 26 23 24 25 23 22 26 26 21 21 21 25 25 21 24 24 21 20 22 22 21 20 20 20 19 19 15 18

10 12 13 13 11 9 5 8 8

6 6 6 5

Jun-13 Jun-14 Jun-15 Jun-16

Sep-14 Sep-15 Sep-13

Dec-15 Dec-13 Dec-14

Mar-14 Mar-16 Mar-15

Source: Company, Kotak Institutional Equities

Exhibit 10: Trend in EBIT margin (%)

EBIT margins (%) 25 24 24 25 24 24 24 21 21 21 20 20 21 19 19 19 20 19 20

15 15 15 14 15 14 12

10

5

Jun-11 Jun-12 Jun-13 Jun-14 Jun-15 Jun-16

Sep-11 Sep-12 Sep-13 Sep-14 Sep-15

Dec-11 Dec-12 Dec-13 Dec-14 Dec-15 Dec-10

Mar-12 Mar-13 Mar-14 Mar-15 Mar-16 Mar-11

Source: Company, Kotak Institutional Equities

10 KOTAK INSTITUTIONAL EQUITIES RESEARCH HCL Technologies Technology

Exhibit 11: HCLT: quarterly metrics

Mar-14 Jun-14 Sep-14 Dec-14 Mar-15 Jun-15 Sep-15 Dec-15 Mar-16 Jun-16 Revenues (US$ mn) 1,361 1,407 1,434 1,491 1,491 1,538 1,545 1,566 1,587 1,691 Revenues (Rs mn) 83,490 84,240 87,350 92,830 92,670 97,770 100,970 103,410 106,980 113,360 Exchange rate 61.3 59.9 60.9 62.3 62.2 63.6 65.4 66.0 67.4 67.0 Geographical mix US 55.4 54.3 56.3 57.4 57.5 58.6 58.7 61.0 62.5 59.9 Europe 31.8 33.0 32.3 31.7 31.0 30.4 31.7 29.9 28.4 31.4 Asia Pacific 12.8 12.7 11.4 10.9 11.5 11.0 9.6 9.1 9.1 8.7 Revenues by service offering -Enterprise application services 17.2 16.8 15.7 15.4 14.2 14.4 - Custom application (Industry solutions) 27.7 27.4 27.7 27.0 27.3 26.5 Application services 44.9 44.2 43.4 42.4 41.5 40.9 40.4 40.4 39.9 38.3 Engineering and R&D services 16.1 16.2 17.1 18.3 18.9 18.7 19.2 18.6 18.7 17.7 Infrastructure services 34.4 34.5 34.5 34.4 34.5 35.3 35.1 35.5 36.2 39.8 BPO services 4.5 5.1 5.0 4.9 5.1 5.2 5.3 5.5 5.2 4.1 Revenue by contract type Time and Material 44.3 43.5 43.7 44.2 43.7 43.9 43.8 43.0 43.2 39.1 Fixed price 55.7 56.5 56.3 55.8 56.3 56.1 56.2 57.0 56.8 60.9 Revenue by vertical (new classification) Financial services 26.9 28.4 28.2 26.6 26.1 26.0 26.1 25.9 25.0 23.6 Manufacturing 33.3 31.6 32.3 32.9 33.4 32.7 32.5 31.5 31.4 33.2 Retail & CPG 8.5 8.5 9.5 9.7 8.4 8.8 8.8 9.5 9.2 10.0 Telecom, media, publishing, entertainment 8.4 8.9 8.7 8.4 9.0 9.5 9.6 9.7 9.9 9.1 Life sciences 10.4 10.2 9.8 11.1 11.2 12.0 12.4 12.2 12.8 11.9 Energy-utilities-public sector 10.1 10.1 9.3 9.5 10.4 9.7 10.0 10.6 11.1 11.7 Others 2.3 2.3 2.2 1.8 1.5 1.3 0.6 0.6 0.5 0.5 Number of million dollar clients (LTM) 50 Million dollar + 14 15 15 16 17 17 18 19 19 20 10 Million dollar + 109 114 115 121 122 124 133 140 144 146 5 Million dollar + 183 187 193 205 206 211 224 227 233 237 1 Million dollar + 432 429 428 450 468 476 486 494 482 482 Client contrubution to revenue Top 5 clients 15.0 14.7 14.4 14.0 13.5 13.2 13.6 13.6 13.6 13.9 Top 10 clients 24.1 23.7 23.1 22.3 21.8 21.7 21.9 21.7 21.8 21.8 Top 20 clients 34.2 33.7 33.0 32.4 32.2 32.4 32.4 32.4 32.2 31.7 Utilization (consol) Blended utilization 84.2 84.5 82.7 82.9 81.9 83.5 83.6 84.7 85.6 85.8 Manpower details Consolidated manpower 90,190 91,691 95,522 100,240 104,184 106,107 105,571 103,696 104,896 107,968 Total gross addition 8,291 8,442 11,631 11,734 11,041 9,448 7,889 6,234 9,280 10,515 Total net addition 1,858 1,501 3,831 4,718 3,944 1,923 (536) (1,875) 1,200 3,072 Attrition - IT services (%) 16.9 16.9 16.6 16.4 16.2 16.5 16.3 16.7 17.3 17.8 Attrition - consol quarterly annualized (%) 28.8 30.5 33.3 28.7 27.8 28.6 31.8 31.0 31.0 28.0

Source: Company, Kotak Institutional Equities

KOTAK INSTITUTIONAL EQUITIES RESEARCH 11 Technology HCL Technologies

Exhibit 12: Condensed consolidated financials for HCL Technologies, June/March fiscal year-ends, 2014-2019E (Rs mn)

2014 2015 2016 2017E 2018E 2019E Profit model Revenues 329,180 370,620 311,360 478,366 521,915 570,506 EBITDA 86,667 86,947 66,900 102,732 107,084 113,874 Depreciation (incl amortization of intangibles) (7,329) (4,505) (4,650) (8,040) (8,450) (9,150) Other income (168) 9,114 7,978 11,073 11,496 13,074 Pretax profits 79,169 91,556 70,228 105,765 110,130 117,798 Tax (15,482) (19,074) (14,786) (22,735) (25,055) (27,682) Profit after tax 63,688 72,483 55,442 83,030 85,076 90,115 Diluted earnings per share (Rs) 45.1 51.3 39.2 58.7 60.0 63.5 Balance sheet Total equity 204,918 242,116 278,180 329,313 366,662 402,108 Deferred taxation liability 1,132 784 1,061 1,097 1,097 1,097 Total borrow ings 7,662 4,584 9,734 10,060 10,061 10,061 Minority interest 5 6 2,115 2,185 2,186 2,186 Other non-current liabilities 14,206 11,783 11,576 13,466 14,467 15,559 Current liabilities 83,215 90,058 95,106 118,218 113,848 121,369 Total liabilities and equity 311,138 349,329 397,773 474,340 508,320 552,379 Cash 95,826 107,805 113,184 144,621 161,935 186,704 Other current assets 100,337 115,661 131,361 146,886 160,361 175,291 Goodw ill and intangible assets 52,544 50,905 64,206 65,804 65,264 64,716 Tangible fixed assets 32,108 37,363 43,239 67,625 69,050 71,426 Investments 6,382 7,604 6,985 7,219 7,219 7,219 Other non-current assets 23,941 29,992 38,796 42,185 44,491 47,022 Total assets 311,138 349,329 397,773 474,340 508,320 552,379 Free cash flow Operating cash flow , excl. w orking capital 71,049 67,092 53,975 79,690 82,029 86,192 Working capital changes (3,446) (10,661) (14,689) 8,210 (19,143) (8,848) Capital expenditure (4,861) (12,111) (7,311) (30,432) (9,319) (10,979) Acquisition — — — — — — Other income (168) 9,114 7,978 11,073 11,496 13,074 Free cash flow 62,574 53,435 39,952 68,541 65,064 79,438 Key assumption and ratios (%) US$ revenue growth (b) 14.4 11.1 6.4 11.9 9.2 9.3 EBITDA margin 26.3 23.5 21.5 21.5 20.5 20.0 EBIT margin 24.1 22.2 20.0 19.8 18.9 18.4

Notes: (a) Financial year changed to March-end from June-end in FY2016. (b) Grow th rate on like-to-like basis adjusted for change in financial year. (c) Geometric acquisition (largely EPS neutral) not built in our estimates yet.

Source: Company, Kotak Institutional Equities estimates

12 KOTAK INSTITUTIONAL EQUITIES RESEARCH

ADD Britannia Industries (BRIT) Consumer Products AUGUST 25, 2016 UPDATE Coverage view: Cautious

Pace of innovation to step up. We came enthused from our visit to BRIT’s state-of- Price (`): 3,433 the-art setup (large plant and R&D center) at Bidadi (near Bengaluru). Its strategic intent Target price (`): 3,650 to move manufacturing in-house with large scale setups and investment in R&D are BSE-30: 28,060 clear cost efficiency enablers. However, what impressed us more was its readiness and desire to leapfrog innovation to a new level. Raise EPS estimates by 2-3% over FY2018-19 as we model in higher innovation-led volume growth. Retain ADD with revised TP of `3,650 (from `3,350) based on target P/E multiple of 35X.

Company data and valuation summary Britannia Industries Stock data Forecasts/Valuations 2016 2017E 2018E 52-week range (Rs) (high,low) 3,393-2,505 EPS (Rs) 68.0 79.5 99.3 Market Cap. (Rs bn) 403.3 EPS growth (%) 50.4 16.9 24.9 Shareholding pattern (%) P/E (X) 49.4 42.3 33.8 Promoters 50.7 Sales (Rs bn) 86.8 97.3 112.8 FIIs 18.1 Net profits (Rs bn) 8.2 9.5 11.9 MFs 6.1 EBITDA (Rs bn) 12.3 14.1 17.4 Price performance (%) 1M 3M 12M EV/EBITDA (X) 32.6 28.1 22.4 Absolute 17.9 25.3 5.1 ROE (%) 54.1 46.2 43.4 Rel. to BSE-30 17.1 13.0 2.7 Div. Yield (%) 0.6 0.7 0.9

Multiple efficiencies from large-scale plant

BRIT’s plant at Bidadi (near Bengaluru) was set up at a cost of `1.44 bn and began commercial operations in January 2016. It’s spread over 11.4 acres, has four lines (two operational currently, other two to commence operations over the next 3-6 months) with total capacity of 58,800 TPA (~6.5% of total biscuits capacity) and enjoys fiscal benefits (`1.5 bn VAT benefits available).

We see multiple efficiencies from BRIT’s large-scale plant – (1) the plant’s large scale of operations (very few factories of BRIT have four lines installed) has helped reduce cost per ton of production as they have bigger lines, (2) the plant is largely automated reducing labor intensity, (3) it has large ovens, which have helped in cutting down baking times and are more energy efficient and (4) storage and warehouse are within the factory. State-of-the-art R&D setup to help step up innovation pace

BRIT’s R&D center has state-of-the-art facilities and a diverse talent pool headed by Sudhir Nema (over 24 years of experience in R&D; worked with Unilever/PepsiCo in previous stints).

We see multiple benefits from BRIT’s strengthened R&D capabilities – (1) proximity of R&D center to a plant, well-equipped pilot facilities and ability to make model keys (moulds) in-house (has reduced time to generate keys from 45 days to just 2 days) will help the company reduce time-to-market for an innovation significantly, (2) ~25-30% of cost savings are generated Anand Shah through R&D; e.g. Good Day was restaged with superior product quality with significant cost [email protected] Mumbai: +91-22-4336-0882 reduction (largely via tweaking recipe) and (3) R&D center also works on technology platforms for biscuit manufacturing. Rohit Chordia [email protected] Several new launches underway; dairy and adjacency plans also under work Mumbai: +91-22-4336-0885

While BRIT’s ~70% bakery portfolio has been relaunched (new recipe/packaging), we expect Abhas Gupta [email protected] new launch activity (entirely new products) to pick up as the R&D center operations scale up Mumbai: +91-22-4336-0881 (commenced only six months ago). We note it has started piloting 100% Atta Kulcha (type of bread) in Delhi/NCR and will soon launch chocolate croissant. It is also exploring adjacencies (breakfast cereals, value-added salted snacks) and NPDs in dairy; the R&D center has dedicated team and pilot facilities for both these segments.

Kotak Institutional Equities Research [email protected] Mumbai: +91-22-4336-0000

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

Other takeaways

 BRIT’s national biscuit manufacturing currently stands at 900,000 TPA and it produces ~30 mn packs a day.

 As pack sizes have become smaller over the years and ovens are generating higher number of biscuits (due to higher efficiencies and larger sizes), number of packing machines has gone up significantly in a plant; this is the biggest challenge BRIT faces on the manufacturing side and can become a constraining factor.

 With Bidadi factory, BRIT has already increased its in-house manufacturing to 56% (from 50% earlier) and it plans to increase this to 2/3rd by 2017-end. The company highlighted multiple strategic reasons to move higher proportion of manufacturing in-house including – (1) cost efficiencies via scale, (2) inability to manage food standards with co-packers at such a large scale, (3) need to invest behind innovation, (4) constraint to manage labor/technology investments at co-packers’ end and (5) poaching of co-packers by competition.

Exhibit 1: Key changes to estimates, Britannia Industries, FY2017-19E

Revised Earlier Change (%) 2017E 2018E 2019E 2017E 2018E 2019E 2017E 2018E 2019E Net operating revenues (Rs mn) 97,323 112,804 129,785 97,323 112,235 128,059 — 0.5 1.3 EBITDA (Rs mn) 14,109 17,447 20,505 14,109 17,115 19,851 — 1.9 3.3 EBITDA margin (%) 14.5 15.5 15.8 14.5 15.2 15.5 0 bps 21 bps 29 bps Net income (Rs mn) 9,542 11,919 14,232 9,542 11,697 13,792 — 1.9 3.2 EPS (Rs/share) 79.5 99.3 118.6 79.5 97.5 114.9 — 1.9 3.2 Other assumptions Gross margin (%) 41.7 42.2 42.4 41.7 42.0 42.1 0 bps 20 bps 27 bps Volume growth - Biscuits (%) 8.0 10.5 10.0 8.0 10.0 9.0 0 bps 49 bps 100 bps Realisation growth - Biscuts (%) 4.0 5.0 4.5 4.0 5.0 4.5 0 bps 0 bps 0 bps

Source: Company, Kotak Institutional Equities estimates

Exhibit 2: Bidadi plant capacity details

Type of Product Brands manufactured Capacity (TPA) Oven size Short Dough Good Day Butter & Cashew 24,000 1.5 Mtr x 300 ft Short Dough Tray NutriChoice 5 Grain, Good Chocohip and Choconut 10,200 1.5 Mtr x 150 ft Hard Dough Marie Gold 14,400 1.5 Mtr x 300 ft Creams Bourbon, Milk Bikis and Mil Cream 10,200 1.5 Mtr x 175 ft Total capacity (TPA) 58,800

Source: Company, Kotak Institutional Equities

14 KOTAK INSTITUTIONAL EQUITIES RESEARCH Britannia Industries Consumer Products

Exhibit 3: BRIT has started piloting 100% Atta Kulcha (bread) in Delhi/NCR

Source: Company, Kotak Institutional Equities

KOTAK INSTITUTIONAL EQUITIES RESEARCH 15 Consumer Products Britannia Industries

Exhibit 4: Key revenue growth assumptions (as per IGAAP), March fiscal year-ends, 2013-19E (Rs mn)

2013 2014 2015 2016 2017E 2018E 2019E Standalone Revenue breakup Product-wise revenue (Rs mn) Biscuits and high protein food 46,758 53,145 60,520 67,122 75,391 87,472 100,550 Bread 6,018 6,774 7,637 8,567 9,848 11,350 12,997 Cake and rusk 3,108 3,043 4,022 4,757 5,743 7,079 8,643 Others 613 517 515 533 551 571 591 Total gross revenue 56,497 63,479 72,693 80,978 91,534 106,473 122,781 Growth yoy (%) Biscuits and high protein food 11.5 13.7 13.9 10.9 12.3 16.0 15.0 Bread 21.5 12.6 12.7 12.2 15.0 15.3 14.5 Cake and rusk 14.5 (2.1) 32.2 18.3 20.8 23.3 22.1 Others 31.4 (15.8) (0.4) 3.5 3.5 3.5 3.5 Total gross revenue 12.9 12.4 14.5 11.4 13.0 16.3 15.3 Product-wise volumes (MT) Biscuits and high protein food 628,617 653,762 709,331 787,358 850,347 939,633 1,033,596 Bread 145,661 151,487 162,091 176,680 194,348 214,754 236,229 Cake and rusk 26,034 24,732 29,678 34,130 39,250 46,118 53,728 Total product volumes 800,311 829,981 901,101 998,168 1,083,944 1,200,505 1,323,553 Growth yoy (%) Biscuits and high protein food 5.0 4.0 8.5 11.0 8.0 10.5 10.0 Bread 9.0 4.0 7.0 9.0 10.0 10.5 10.0 Cake and rusk 12.0 (5.0) 20.0 15.0 15.0 17.5 16.5 Total product volumes 5.9 3.7 8.6 10.8 8.6 10.8 10.2 Product-wise realisation (Rs/MT) Biscuits and high protein food 74,382 81,291 85,319 85,249 88,659 93,092 97,281 Bread 41,312 44,719 47,115 48,491 50,673 52,852 55,019 Cake and rusk 119,376 123,031 135,506 139,364 146,332 153,502 160,870 Total realisation 69,827 75,860 80,100 80,593 83,937 88,214 92,320 Growth yoy (%) Biscuits and high protein food 6.2 9.3 5.0 (0.1) 4.0 5.0 4.5 Bread 11.5 8.2 5.4 2.9 4.5 4.3 4.1 Cake and rusk 2.3 3.1 10.1 2.8 5.0 4.9 4.8 Total realisation 6.4 8.6 5.6 0.6 4.1 5.1 4.7 Subsidiary revenue breakup (Rs mn) Britannia Dairy 3,095 3,043 3,334 3,223 3,604 4,078 4,558 Daily Bread 233 201 158 99 84 80 76 Strategic Food International 2,323 2,722 3,379 4,306 4,177 4,595 5,146 Al Sallan (65%) 1,254 1,356 1,637 2,088 2,025 2,228 2,495 Total subsidiary revenue 6,904 7,323 8,508 9,716 9,891 10,980 12,275 Less: Intersegmental (1,182) (1,346) (1,759) (2,334) (2,376) (2,638) (2,949) Consolidated gross revenues (Rs mn) 62,218 69,455 79,442 88,360 99,049 114,815 132,107 Growth yoy (%) Britannia Dairy 5.4 (1.7) 9.5 (3.3) 11.8 13.1 11.8 Daily Bread (3.3) (13.8) (21.2) (37.6) (15.0) (5.0) (5.0) Strategic Food International 23.3 17.2 24.1 27.4 (3.0) 10.0 12.0 Al Sallan (65%) 16.8 8.2 20.7 27.5 (3.0) 10.0 12.0 Total subsidiary revenue 12.6 6.1 16.2 14.2 1.8 11.0 11.8 Consolidated revenues 12.7 11.6 14.4 11.2 12.1 15.9 15.1

Source: Company, Kotak Institutional Equities estimates

16 KOTAK INSTITUTIONAL EQUITIES RESEARCH Britannia Industries Consumer Products

Exhibit 5: Britannia: Consolidated P&L, balance sheet, and cash flow statement (as per IGAAP), March fiscal year-ends, 2013-19E (Rs mn)

2013 2014 2015 2016E 2017E 2018E 2019E Profit model (Rs mn) Net sales 61,359 68,293 77,751 86,071 96,461 111,805 128,636 Other operating income 495 834 833 718 861 999 1,149 Net operating income 61,854 69,127 78,584 86,789 97,323 112,804 129,785 EBITDA 4,206 6,272 8,639 12,264 14,109 17,447 20,505 Other income 522 336 880 1,000 1,262 1,616 2,140 Interest (413) (83) (39) (49) (42) (37) (31) Depreciation (732) (832) (1,445) (1,134) (1,324) (1,522) (1,707) Pretax profits 3,584 5,693 8,035 12,081 14,005 17,505 20,906 Tax (986) (1,736) (2,611) (3,920) (4,465) (5,588) (6,676) Minority Interest/share of net loss of associated (4) (4) 2 2 2 2 2 Extraordinary items — — 1,461 (103) — — — Net income 2,595 3,953 6,886 8,060 9,542 11,919 14,232 Recurring net income 2,595 3,953 5,426 8,163 9,542 11,919 14,232 Earnings per share (Rs) 21.7 33.0 45.2 68.0 79.5 99.3 118.6 Balance sheet (Rs mn) Total shareholder's equity 5,579 7,981 12,451 17,693 23,625 31,211 40,388 Total borrowings 3,799 1,497 1,402 1,270 1,120 970 820 Deferred tax liability 128 89 (234) (277) (277) (277) (277) Minority interest 23 24 24 25 23 21 19 Total liabilities and equity 9,528 9,590 13,644 18,711 24,490 31,925 40,950 Net fixed assets 7,849 8,477 7,818 9,244 12,056 13,509 14,977 Goodwill 992 1,070 1,107 1,159 1,159 1,159 1,159 Investments 1,082 1,979 5,179 7,529 7,529 7,529 7,529 Cash 1,029 1,091 2,263 877 3,743 9,598 16,891 Net Current assets (1,425) (3,026) (2,723) (98) 4 130 395 Total assets 9,528 9,590 13,644 18,711 24,490 31,925 40,950 Free cash flow (Rs mn) Operating cash flow, excl. working capital 3,359 4,453 5,591 8,258 10,168 12,425 14,442 Working capital (161) 2,262 253 1,356 (102) (126) (265) Capital expenditure (2,154) (995) 463 (2,494) (4,135) (2,975) (3,175) Free cash flow 1,044 5,720 6,308 7,120 5,931 9,324 11,002 Growth Revenue growth 12.8 11.8 13.7 10.4 12.1 15.9 15.1 EBITDA growth 35.3 49.1 37.7 42.0 15.0 23.7 17.5 EPS growth 30.0 52.4 37.2 50.5 16.9 24.9 19.4 Ratios (%) Gross margin (%) 37.6 39.7 40.3 42.4 41.7 42.2 42.4 EBITDA margin (%) 6.8 9.1 11.0 14.1 14.5 15.5 15.8 Net profit margin (%) 4.2 5.7 6.9 9.4 9.8 10.6 11.0 ROE (%) 53.7 58.3 53.1 54.2 46.2 43.5 39.8 ROCE (%) 30.5 51.9 60.7 67.7 58.4 55.8 51.0 Key assumptions (%) Biscuits Volume growth (%) 5.0 4.0 8.5 11.0 8.0 10.5 10.0 Biscuits Realisation growth (%) 6.2 9.3 5.0 (0.1) 4.0 5.0 4.5

Source: Company, Kotak Institutional Equities estimates

KOTAK INSTITUTIONAL EQUITIES RESEARCH 17

June 2016: Results calendar India Daily Summary Daily Summary India Mon Tue Wed Thu Fri Sat Sun

KOTAK INSTITUTIONAL EQUITIES RESEAR EQUITIES INSTITUTIONAL KOTAK 22-Aug 23-Aug 24-Aug 25-Aug 26-Aug 27-Aug 28-Aug H P C L Aurobindo Pharma PNC Infratech P & G Hygiene Vakrangee Indraprastha Gas Engineers India Tata Motors 29-Aug 30-Aug 31-Aug 1-Sep 2-Sep 3-Sep 4-Sep Ashoka Buildcon Crompton Greaves Aditya Bir. Fas. Apollo Hospitals Inox Wind Jubilant Food. DLF Whirlpool India B P C L

I O C L Sadbhav Engg. 5-Sep 6-Sep 7-Sep 8-Sep 9-Sep 10-Sep 11-Sep

Petronet LNG B H E L S A I L

-

Source: NSE, Kotak Institutional Equities August2016 25,

CH

India Daily Summary Daily Summary India

-

August 25, August25, 2016

18

Kotak Institutional Equities: Valuation summary of KIE Universe stocks

19 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

Company Rating 24-Aug-16 (Rs) (%) (Rs mn) (US$ mn) (mn) 2016 2017E 2018E 2016 2017E 2018E 2016 2017E 2018E 2016 2017E 2018E 2016 2017E 2018E 2016 2017E 2018E 2016 2017E 2018E (US$ mn) Automobiles Amara Raja Batteries SELL 893 800 (10.4) 152,536 2,272 171 28.7 34.0 38.6 19.1 18.8 13.3 31.2 26.2 23.1 18.6 15.1 13.5 7.3 6.0 5.0 0.5 0.8 0.9 25.8 25.0 23.6 4.3 Apollo Tyres BUY 174 230 32.1 88,647 1,320 509 19.9 21.4 23.2 (7.6) 7.2 8.3 8.7 8.1 7.5 4.8 5.4 5.0 1.5 1.3 1.1 1.1 1.2 1.3 18.4 16.8 15.7 6.0 Ashok Leyland SELL 89 85 (4.0) 252,002 3,753 2,846 3.5 4.8 5.7 284.6 38.1 19.0 25.4 18.4 15.4 12.1 10.1 8.8 4.6 3.9 3.4 1.1 1.6 1.9 18.7 23.1 23.6 22.1 Bajaj Auto REDUCE 2,870 2,850 (0.7) 830,397 12,368 289 126.2 141.2 160.1 15.8 11.9 13.4 22.7 20.3 17.9 15.5 14.5 12.5 6.8 5.7 4.9 1.9 2.0 2.2 31.8 30.5 29.5 11.9 Balkrishna Industries BUY 750 820 9.3 72,504 1,080 97 59.6 52.4 65.4 21.2 (12.1) 24.8 12.6 14.3 11.5 9.2 8.6 6.8 2.6 2.2 1.9 0.7 0.8 0.9 22.7 16.8 18.0 0.6 Bharat Forge ADD 856 840 (1.9) 199,249 2,968 237 27.4 26.5 37.1 (14.9) (3.0) 39.7 31.3 32.3 23.1 15.8 16.1 12.4 5.7 5.0 4.3 0.9 0.7 1.0 18.5 16.5 20.2 11.5 Eicher Motors SELL 22,132 14,500 (34.5) 601,138 8,954 27 470.5 646.6 736.0 107.2 37.4 13.8 47.0 34.2 30.1 23.7 26.9 23.4 17.4 16.8 11.6 0.5 0.1 0.1 42.7 49.8 45.5 12.2 Exide Industries SELL 175 155 (11.4) 148,708 2,215 850 7.3 7.8 8.5 14.1 6.5 8.5 23.9 22.4 20.7 14.7 13.4 12.4 3.4 3.1 2.8 1.4 1.4 1.7 14.7 14.3 14.2 8.1 Hero Motocorp SELL 3,311 2,950 (10.9) 661,105 9,847 200 156.6 183.8 194.3 23.1 17.3 5.7 21.1 18.0 17.0 13.9 11.9 11.2 8.3 7.0 6.0 2.2 2.8 2.9 43.0 42.1 38.0 19.6 Mahindra CIE Automotive REDUCE 185 175 (5.1) 59,699 889 323 4.4 7.8 9.3 (41.1) 77.2 19.8 42.1 23.7 19.8 18.3 10.8 9.3 3.0 2.6 2.3 — — — 7.3 11.8 12.5 0.6 Mahindra & Mahindra REDUCE 1,435 1,370 (4.5) 891,174 13,273 569 58.0 65.2 74.2 6.8 12.5 13.8 24.8 22.0 19.3 16.7 14.8 13.1 3.6 3.3 2.9 0.8 1.1 1.3 15.6 15.6 15.9 24.5 Maruti Suzuki BUY 4,949 5,800 17.2 1,494,858 22,265 302 151.3 232.4 292.5 23.2 53.6 25.9 32.7 21.3 16.9 14.5 11.9 9.3 5.5 4.7 3.9 0.7 1.2 1.5 18.0 23.8 25.2 47.7 Minda Corp. REDUCE 117 110 (5.8) 24,437 364 209 4.6 5.5 6.9 10.6 19.6 24.9 25.2 21.1 16.9 13.0 10.5 8.6 4.3 3.6 3.1 0.4 0.5 0.5 18.8 18.8 19.7 0.2 Motherson Sumi Systems SELL 325 260 (20.0) 429,958 6,404 1,323 9.7 11.8 14.6 29.6 21.8 23.8 33.6 27.6 22.3 12.7 11.0 9.0 10.1 8.2 6.6 1.5 1.1 1.3 33.8 32.8 32.8 17.3 Suprajit Engineering REDUCE 189 190 0.3 24,882 371 131 5.5 7.6 9.1 30.7 39.5 18.9 34.6 24.8 20.9 17.7 13.9 12.0 5.6 4.7 4.0 0.6 0.7 0.9 20.9 20.6 20.8 0.3 Tata Motors BUY 498 520 4.3 1,603,025 23,876 3,396 38.7 42.8 52.8 (7.3) 10.5 23.5 12.9 11.7 9.4 4.9 4.5 3.8 2.1 1.8 1.5 — — — 19.2 16.5 17.2 73.9 TVS Motor SELL 306 235 (23.3) 145,567 2,168 475 7.7 11.6 14.3 27.3 50.7 24.1 39.9 26.5 21.4 20.3 15.3 12.6 9.2 7.4 6.0 1.2 1.0 1.2 25.1 31.0 31.0 8.3 WABCO India BUY 6,195 7,200 16.2 117,504 1,750 19 107.9 158.1 182.2 69.6 46.5 15.2 57.4 39.2 34.0 38.6 25.3 21.5 11.1 8.9 7.2 0.1 0.2 0.2 21.3 25.2 23.3 0.7 Automobiles Attractive 7,797,389 116,136 9.1 19.4 19.4 21.9 18.4 15.4 10.1 9.0 7.6 4.1 3.5 3.0 0.9 1.0 1.2 18.9 19.3 19.6 269.8 Banks Axis Bank REDUCE 583 520 (10.9) 1,392,435 20,739 2,383 34.5 32.0 38.0 11.2 (7.2) 18.4 16.9 18.2 15.4 — — — 2.7 2.5 2.3 0.9 0.9 1.0 16.8 13.6 14.3 67.1 Bank of Baroda REDUCE 163 150 (8.1) 375,924 5,599 2,310 (23.4) 6.7 18.4 (252.4) 128.7 174.0 (7.0) 24.3 8.9 — — — 1.6 1.7 1.6 — 0.8 2.3 (14.4) 4.2 10.9 23.4 Bank of India ADD 114 120 4.9 106,854 1,592 817 (74.5) (8.4) 32.3 (390.2) 88.8 486.9 (1.5) (13.7) 3.5 — — — 1.2 1.0 0.7 — (1.5) 5.7 (22.5) (2.6) 9.9 10.3 Canara Bank REDUCE 271 220 (18.8) 147,178 2,192 543 (51.8) 17.5 56.2 (191.1) 133.8 221.4 (5.2) 15.5 4.8 — — — 1.2 1.3 1.2 — — — (8.9) 3.0 9.4 18.3 City Union Bank ADD 130 135 4.2 77,526 1,155 598 7.4 8.7 10.2 12.3 17.5 16.7 17.4 14.8 12.7 — — — 2.7 2.4 2.0 0.9 1.1 1.3 15.5 16.0 16.4 0.9 DCB Bank ADD 115 115 0.0 32,719 487 284 6.8 6.3 7.9 0.9 (8.0) 26.1 16.8 18.3 14.5 — — — 1.9 1.8 1.6 — — — 11.9 9.8 11.1 2.2 Federal Bank BUY 68 75 10.7 116,407 1,734 1,719 2.8 5.1 6.7 (52.8) 85.5 31.3 24.5 13.2 10.0 — — — 1.6 1.5 1.3 1.0 1.9 2.5 6.0 10.5 12.7 7.8 HDFC Bank ADD 1,262 1,300 3.0 3,194,551 47,580 2,528 48.6 58.9 69.7 19.3 21.1 18.3 25.9 21.4 18.1 — — — 4.4 3.8 3.3 0.8 0.9 1.1 18.3 19.0 19.4 26.3 ICICI Bank BUY 248 335 34.8 1,445,214 21,525 5,849 16.6 17.5 23.5 (14.6) 5.3 34.1 14.9 14.2 10.6 — — — 1.9 1.8 1.6 2.0 2.1 2.8 11.4 11.0 13.6 57.4 IDFC Bank BUY 54 70 30.5 182,134 2,713 3,389 1.5 2.7 4.0 - 85.4 47.7 36.6 19.7 13.4 — — — 1.3 1.3 1.2 0.5 1.0 1.5 6.7 6.2 9.1 4.7 IndusInd Bank ADD 1,183 1,250 5.7 704,714 10,496 595 38.4 48.9 56.7 13.4 27.3 15.9 30.8 24.2 20.9 — — — 4.1 3.6 3.2 0.4 0.5 0.6 17.1 15.9 15.9 20.3 J&K Bank BUY 70 80 14.2 33,959 506 485 8.6 4.9 13.0 (18.2) (42.9) 166.3 8.2 14.3 5.4 — — — 0.7 0.8 0.6 2.5 1.4 3.8 6.6 3.6 9.2 2.0 Karur Vysya Bank BUY 507 600 18.3 61,314 913 122 46.6 52.2 56.3 24.3 12.0 8.0 10.9 9.7 9.0 — — — 1.4 1.3 1.2 2.8 2.6 2.8 12.9 13.3 13.0 1.3 Oriental Bank of Commerce ADD 120 120 (0.1) 41,592 619 321 4.9 12.8 27.1 (70.7) 163.6 111.9 24.7 9.4 4.4 — — — 0.5 1.1 0.9 0.6 2.1 4.5 1.1 2.7 5.6 8.8

Punjab National Bank REDUCE 126 115 (9.0) 248,101 3,695 1,964 (20.2) 3.8 23.2 (222.6) 118.8 509.6 (6.2) 33.1 5.4 — — — 2.2 1.8 1.1 — 0.6 3.7 (10.9) 2.1 11.9 30.6 Daily Summary India State Bank of India BUY 254 280 10.1 1,974,851 29,414 7,763 12.8 15.1 28.8 (27.0) 18.0 90.1 19.8 16.8 8.8 — — — 2.1 1.9 1.6 1.0 1.1 1.2 7.3 7.9 13.7 91.1 Union Bank ADD 136 145 6.5 93,629 1,395 687 19.7 22.0 37.6 (29.8) 11.8 71.2 6.9 6.2 3.6 — — — 0.8 0.8 0.6 1.4 1.6 2.7 7.0 7.2 11.2 12.1 YES Bank REDUCE 1,338 1,200 (10.3) 563,232 8,389 421 60.4 64.8 77.2 25.8 7.3 19.1 22.2 20.7 17.3 — — — 4.1 3.6 3.1 0.7 0.8 1.0 19.9 18.3 18.8 47.2 Banks Attractive 10,792,333 160,744 (49.8) 88.0 58.6 35.0 18.6 11.7 1.8 1.6 1.5 0.9 1.0 1.5 5.1 8.9 12.7 432.1 NBFCs Bajaj Finserv REDUCE 2,711 2,440 (10.0) 431,469 6,426 159 122.4 144.4 169.4 19.3 18.0 17.3 22.2 18.8 16.0 — — — 3.2 3.0 2.6 0.5 0.5 0.5 16.0 16.5 17.3 7.6 Bharat Financial Inclusion REDUCE 756 670 (11.4) 96,286 1,434 127 23.8 51.3 49.7 59.3 115.6 (3.0) 31.8 14.7 15.2 — — — 6.9 4.7 3.6 — — — 24.9 38.1 26.9 23.4 Cholamandalam REDUCE 1,079 1,010 (6.4) 168,535 2,510 156 36.2 47.5 58.2 20.0 31.3 22.5 29.8 22.7 18.5 — — — 4.9 4.2 3.5 0.4 0.5 0.7 17.9 18.7 19.4 3.5 Dewan Housing Finance BUY 282 250 (11.3) 82,287 1,226 291 27.6 32.1 37.4 (42.0) 16.4 16.3 10.2 8.8 7.5 — — — 1.7 1.5 1.3 2.8 1.2 1.4 16.3 17.0 17.6 7.9 HDFC ADD 1,383 1,430 3.4 2,186,238 32,562 1,580 47.3 52.3 58.0 17.2 10.7 10.8 29.2 26.4 23.9 — — — 6.2 5.4 4.8 1.2 1.3 1.5 22.3 21.9 21.2 52.9 IDFC BUY 58 65 12.7 92,006 1,370 1,594 (5.9) 4.5 6.2 (154.7) 176.1 39.2 (9.8) 12.9 9.3 — — — 0.9 0.8 0.7 (3.8) 0.5 0.6 (4.5) 10.1 13.6 5.3 IIFL Holdings ADD 276 310 12.5 87,300 1,300 317 16.1 19.2 23.3 11.8 18.9 21.3 17.1 14.4 11.8 — — — 3.0 2.0 1.8 1.5 0.9 1.1 20.2 20.2 19.1 1.2

KOTAK INSTITUTIONAL EQUITIES RESEARCH EQUITIES INSTITUTIONAL KOTAK L&T Finance Holdings ADD 95 90 (5.2) 166,398 2,478 1,754 4.9 5.2 6.4 (1.7) 6.0 24.6 19.5 18.4 14.8 — — — 2.3 2.1 1.8 1.4 0.5 0.8 12.6 11.9 13.0 7.9 LIC Housing Finance ADD 555 590 6.3 280,138 4,172 505 36.3 42.8 49.8 20.8 18.0 16.3 15.3 13.0 11.1 — — — 2.8 2.4 2.0 1.0 1.2 1.4 19.6 19.7 21.4 18.5 Magma Fincorp ADD 100 125 24.7 23,744 354 235 9.0 10.0 12.1 2.5 10.6 21.5 11.1 10.1 8.3 — — — 1.1 1.0 0.9 0.8 1.5 1.8 10.6 10.7 11.4 0.9

Mahindra & Mahindra Financial REDUCE 332 325 (2.0) 188,688 2,810 565 11.9 13.7 16.9 (19.2) 14.9 23.3 27.8 24.2 19.7 — — — 3.3 3.0 2.7 1.2 1.1 1.3 11.4 12.2 13.7 9.9 -

Max Financial Services NR 524 — — 139,800 2,082 267 4.3 7.0 7.1 (70.6) 62.8 1.5 121.3 74.5 73.4 — — — 0.3 0.5 0.5 4.5 10.9 10.5 10.2 Muthoot Finance ADD 337 370 9.9 134,304 2,000 399 20.3 28.1 30.4 20.2 38.6 8.2 16.6 12.0 11.1 — — — 2.4 2.1 1.9 1.8 2.5 2.7 15.1 18.8 18.0 6.5 August2016 25, PFC REDUCE 242 200 (17.3) 319,054 4,752 1,320 46.3 31.8 40.2 2.5 (31.3) 26.3 5.2 7.6 6.0 — — — 1.0 1.4 1.2 5.8 2.7 3.4 18.0 11.2 12.9 8.3 Rural Electrification Corp. ADD 233 260 11.5 230,177 3,428 987 57.0 48.1 35.8 7.0 (15.6) (25.7) 4.1 4.8 6.5 — — — 0.9 0.8 1.1 7.3 4.4 3.3 21.0 15.6 10.5 15.8 Shriram City Union Finance REDUCE 2,175 1,900 (12.7) 143,421 2,136 66 80.1 94.1 127.1 (5.4) 17.4 35.0 27.1 23.1 17.1 — — — 3.2 2.9 2.7 0.4 0.5 0.7 12.1 12.8 15.3 2.9 Shriram Transport ADD 1,265 1,385 9.5 286,961 4,274 223 52.8 75.1 93.8 (4.8) 42.2 25.0 24.0 16.8 13.5 — — — 2.9 2.6 2.4 0.6 0.8 1.0 12.2 15.4 16.8 12.8 NBFCs Neutral 5,056,804 75,317 0.5 8.0 12.1 17.2 15.9 14.2 2.8 2.5 2.2 1.5 1.3 1.4 16.1 15.5 15.5 432.1

Source: Company, Bloomberg, Kotak Institutional Equities estimates

Kotak Institutional Equities: Valuation summary of KIE Universe stocks India Daily Summary Daily Summary India 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

KOTAK INSTITUTIONAL EQUITIES RESEAR EQUITIES INSTITUTIONAL KOTAK Company Rating 24-Aug-16 (Rs) (%) (Rs mn) (US$ mn) (mn) 2016 2017E 2018E 2016 2017E 2018E 2016 2017E 2018E 2016 2017E 2018E 2016 2017E 2018E 2016 2017E 2018E 2016 2017E 2018E (US$ mn) Cement ACC SELL 1,647 1,400 (15.0) 309,361 4,608 188 39.6 51.1 74.4 (13.3) 29.0 45.6 41.6 32.2 22.1 25.7 17.5 12.2 3.7 3.4 3.1 1.0 1.0 1.0 8.9 11.0 14.7 8.5 Ambuja Cements SELL 267 210 (21.4) 530,366 7,899 1,550 5.6 8.1 10.5 (34.6) 44.6 30.9 48.0 33.2 25.3 33.4 24.5 18.9 3.8 3.7 3.4 1.6 1.6 1.9 8.0 11.3 13.9 10.9 Dalmia Bharat ADD 1,517 1,600 5.5 134,700 2,006 89 21.5 57.1 91.9 1,802.5 165.8 60.9 70.6 26.6 16.5 13.0 9.3 7.4 3.5 3.1 2.6 0.1 0.1 0.1 5.5 12.4 17.2 1.1 Grasim Industries RS 4,573 - (100.0) 426,892 6,358 93 274.6 396.4 473.8 43.9 44.3 19.5 16.7 11.5 9.7 8.0 5.4 4.1 1.7 1.5 1.3 0.5 0.5 0.5 10.5 13.4 14.1 11.3 India Cements REDUCE 145 92 (36.4) 44,464 662 307 4.6 6.6 9.0 378.8 43.7 36.3 NM 21.9 16.1 9.6 8.4 7.3 1.2 1.2 1.1 0.7 1.5 1.5 3.9 5.5 7.1 10.5 J K Cement BUY 784 850 8.4 54,823 817 70 8.5 40.0 74.9 (52.8) 368.4 87.2 91.8 19.6 10.5 16.2 9.5 6.7 3.4 2.9 2.3 0.5 0.5 0.5 3.7 16.0 24.7 0.5 JK Lakshmi Cement ADD 452 480 6.1 53,216 793 118 2.0 20.2 33.4 (86.6) 921.6 65.3 229.0 22.4 13.6 27.0 11.2 7.4 3.9 3.4 2.8 0.4 0.4 0.4 1.7 16.3 22.6 1.0 Orient Cement BUY 173 175 1.2 35,442 528 205 3.0 6.8 16.6 (68.0) 124.3 143.9 56.9 25.4 10.4 27.3 11.9 6.9 3.5 3.2 2.5 0.6 1.0 1.0 6.2 13.1 27.0 0.4

Shree Cement SELL 17,019 12,000 (29.5) 592,884 8,831 35 115.4 515.0 580.9 (13.0) 346.4 12.8 147.5 33.0 29.3 43.4 18.6 15.1 9.6 7.5 6.1 0.1 0.1 0.1 7.0 25.5 22.9 3.3 UltraTech Cement SELL 3,812 2,825 (25.9) 1,046,239 15,583 274 79.2 124.0 159.1 7.9 56.4 28.4 48.1 30.8 24.0 24.3 16.8 13.5 5.0 4.4 3.8 0.2 0.2 0.2 11.0 15.3 16.9 13.3 Cement Cautious 3,228,388 48,084 4.1 72.6 29.9 44.7 25.9 19.9 19.0 12.6 9.9 3.9 3.4 3.0 0.5 0.5 0.6 8.6 13.3 15.0 60.8 Consumer products

Asian Paints REDUCE 1,119 950 (15.1) 1,073,198 15,984 959 18.7 21.5 25.4 26.3 14.9 18.1 59.7 52.0 44.0 38.2 32.9 27.7 19.1 16.2 13.8 0.7 0.8 1.0 34.7 33.7 33.8 16.8 -

Bajaj Corp. BUY 397 465 17.0 58,617 873 148 15.9 17.5 19.5 11.3 10.4 11.5 25.1 22.7 20.4 20.4 18.4 15.8 12.2 11.7 11.2 2.9 3.1 3.8 48.3 52.5 56.1 0.5 August2016 25, Britannia Industries ADD 3,433 3,650 6.3 411,871 6,135 120 68.0 79.5 99.3 50.4 16.9 24.9 50.5 43.2 34.6 33.3 28.7 22.9 23.3 17.4 13.2 0.6 0.7 0.9 54.1 46.2 43.4 11.4 Coffee Day Enterprises ADD 252 290 14.9 51,995 774 206 (0.4) 3.6 7.2 92.8 1,090.5 98.8 (690.6) 69.7 35.1 15.5 13.3 11.5 2.4 2.3 2.2 — — — (0.6) 3.4 6.4 0.5

CH Colgate-Palmolive (India) ADD 950 1,060 11.6 258,359 3,848 272 21.2 23.6 27.9 3.2 11.2 18.4 44.8 40.3 34.0 27.4 24.1 20.4 25.3 20.1 15.8 1.1 1.2 1.3 64.5 55.7 52.0 4.8 Dabur India REDUCE 294 305 3.8 517,012 7,701 1,759 7.0 7.8 8.9 17.3 10.9 14.6 41.9 37.8 33.0 34.0 30.9 26.3 12.4 10.5 8.9 0.8 0.9 1.1 32.8 30.1 29.2 7.1 GlaxoSmithKline Consumer ADD 6,262 6,650 6.2 263,352 3,922 42 154.6 171.5 195.3 11.4 10.9 13.9 40.5 36.5 32.1 28.3 24.5 21.3 10.8 9.5 8.5 1.1 1.3 1.5 28.5 27.7 28.0 1.4 Godrej Consumer Products SELL 1,536 1,375 (10.5) 522,941 7,789 341 35.2 40.5 46.6 33.8 15.2 14.9 43.6 37.9 33.0 32.4 27.4 23.3 10.3 8.8 7.3 0.4 0.4 0.4 25.5 25.1 24.2 5.6 Hindustan Unilever REDUCE 919 885 (3.7) 1,989,807 29,637 2,164 19.3 21.0 23.3 10.8 8.8 11.1 47.7 43.8 39.5 33.7 30.2 26.6 31.7 32.3 33.0 1.7 2.0 2.2 83.4 73.0 82.7 19.7 ITC ADD 250 270 7.9 3,020,720 44,991 12,104 7.7 8.6 9.7 (2.9) 11.0 13.1 32.4 29.2 25.8 21.1 19.0 16.7 9.2 8.5 7.9 2.3 2.1 2.5 27.3 27.3 29.9 42.0 Jubilant Foodworks REDUCE 1,233 1,000 (18.9) 81,172 1,209 66 15.9 23.3 31.5 (5.7) 46.4 35.3 77.5 53.0 39.1 28.8 21.3 16.5 11.1 9.5 8.1 0.2 0.3 0.5 15.2 19.4 22.4 13.0 Jyothy Laboratories NR 295 — — 53,430 796 181 7.3 9.9 11.1 26.2 36.0 11.9 40.6 29.9 26.7 24.2 21.2 18.1 6.3 6.7 6.1 1.7 1.7 2.0 21.6 27.1 24.0 1.1 Manpasand Beverages REDUCE 717 630 (12.1) 35,884 534 50 10.1 15.3 20.4 26.7 51.8 33.2 71.0 46.8 35.1 31.7 22.2 17.2 6.0 5.4 4.7 0.1 0.2 0.3 12.8 12.1 14.3 1.7

Marico REDUCE 291 270 (7.3) 375,827 5,598 1,290 5.7 6.8 7.9 27.6 19.9 15.2 51.2 42.7 37.1 35.1 29.2 25.3 17.9 15.0 12.6 1.2 1.0 1.2 37.4 38.2 36.9 4.8

Nestle India SELL 6,818 5,650 (17.1) 657,382 9,791 96 92.7 121.3 149.8 (24.1) 30.9 23.5 73.6 56.2 45.5 40.3 31.3 26.2 23.3 20.5 17.9 0.7 1.0 1.2 31.6 38.9 42.1 3.7 Page Industries SELL 14,260 11,500 (19.4) 159,054 2,369 11 208.6 251.5 309.7 18.7 20.6 23.2 68.4 56.7 46.0 42.4 35.6 29.1 31.5 24.2 18.4 0.6 0.7 0.7 52.2 48.2 45.4 2.2 PC Jeweller ADD 435 450 3.5 77,846 1,159 179 21.5 26.2 30.7 1.5 22.0 17.3 20.3 16.6 14.2 11.6 8.7 7.0 3.3 2.6 2.2 0.8 0.9 1.1 17.8 17.7 17.6 1.4 Pidilite Industries REDUCE 696 690 (0.9) 356,976 5,317 513 14.7 17.6 20.1 46.0 19.4 14.1 47.2 39.6 34.7 29.9 25.7 22.3 12.8 10.5 8.8 0.6 0.7 0.9 29.9 29.2 27.6 6.3 S H Kelkar and Company REDUCE 296 260 (12.0) 42,735 637 145 5.8 8.8 10.1 8.8 51.2 15.6 51.0 33.7 29.2 27.4 21.5 18.7 5.4 5.0 4.5 0.5 0.8 0.9 12.6 15.7 16.3 0.7 Speciality Restaurants SELL 84 75 (10.3) 3,928 59 47 0.1 (0.3) 0.8 (97.2) (642.3) 373.3 1,510.4 (278.5) 101.9 18.4 19.3 11.3 1.3 1.3 1.3 — — — 0.1 (0.5) 1.2 0.1 Tata Global Beverages ADD 140 150 7.0 88,516 1,318 631 5.0 6.1 7.0 (8.5) 22.3 14.6 28.2 23.0 20.1 14.1 11.8 10.4 1.5 1.5 1.4 1.6 1.6 1.8 5.6 6.6 7.3 4.3 Titan Company REDUCE 404 380 (6.0) 358,799 5,344 888 8.0 10.0 12.3 (14.2) 25.6 23.0 50.7 40.4 32.8 37.6 26.9 21.5 10.3 9.0 7.7 0.5 0.8 0.9 21.5 23.8 25.3 8.9 United Breweries SELL 803 730 (9.1) 212,317 3,162 264 11.2 13.5 17.3 13.5 20.4 28.3 71.9 59.7 46.5 30.2 26.7 22.5 10.1 8.8 7.7 0.1 0.3 0.3 14.9 15.8 17.6 5.0 United Spirits ADD 2,309 2,800 21.3 335,496 4,997 145 12.3 34.4 53.8 210.0 180.9 56.4 NM 67.1 42.9 38.7 29.6 22.2 18.8 11.0 7.3 — — — 14.5 20.7 20.6 13.0 Consumer products Cautious 11,007,234 163,945 8.2 15.5 16.2 44.2 38.2 32.9 28.4 24.6 21.0 12.4 11.0 9.7 1.3 1.4 1.6 28.1 28.8 29.5 176.0 Energy BPCL REDUCE 582 580 (0.3) 841,309 12,531 1,446 51.4 50.9 54.5 46.2 (1.0) 7.0 11.3 11.4 10.7 7.7 7.1 6.1 3.1 2.6 2.3 2.7 2.6 2.8 30.0 24.9 22.9 26.7 Cairn India RS 206 — — 385,284 5,739 1,875 11.4 8.9 11.3 (67.2) (22.1) 26.9 18.0 23.0 18.2 9.3 8.2 6.6 0.8 0.8 0.8 1.5 1.2 2.2 4.0 3.4 4.2 9.9 Castrol India ADD 426 450 5.7 210,510 3,135 495 12.0 14.3 15.4 25.4 19.1 7.7 35.4 29.7 27.6 22.7 19.5 18.1 36.6 33.3 30.8 2.1 2.6 2.8 111.0 117.4 116.2 6.6 GAIL (India) ADD 366 420 14.9 463,692 6,906 1,268 17.9 25.0 33.3 (31.5) 39.6 33.2 20.4 14.6 11.0 12.7 9.6 7.4 1.5 1.4 1.3 1.5 2.1 2.7 7.6 10.0 12.4 9.6 GSPL ADD 149 150 0.5 84,112 1,253 563 7.9 9.5 10.8 22.2 20.5 13.6 18.9 15.7 13.8 9.4 7.8 6.9 2.1 1.9 1.8 1.0 1.7 2.2 11.7 12.9 13.4 0.9 HPCL REDUCE 1,171 1,200 2.5 396,634 5,908 339 113.9 124.1 124.9 41.3 8.9 0.6 10.3 9.4 9.4 7.7 6.9 7.0 2.2 1.9 1.7 2.9 3.2 3.2 22.5 21.4 18.9 27.6 Indraprastha Gas ADD 758 760 0.3 106,064 1,580 140 33.2 43.4 46.8 6.0 30.9 7.9 22.9 17.5 16.2 13.2 10.0 9.1 4.4 3.8 3.4 0.8 1.6 1.9 20.6 23.5 22.3 7.5 IOCL ADD 564 595 5.5 1,369,729 20,401 2,428 39.1 57.2 61.2 127.4 46.3 6.9 14.4 9.9 9.2 8.2 5.8 5.4 1.9 1.7 1.5 2.5 3.1 3.3 13.4 17.7 17.0 19.4 Mahanagar Gas ADD 596 600 0.7 58,862 877 99 31.3 36.2 37.8 2.6 15.8 4.5 19.1 16.5 15.8 11.2 9.6 9.0 3.9 3.5 3.2 2.9 2.9 3.0 21.0 22.2 21.1 - ONGC SELL 241 185 (23.2) 2,061,873 30,710 8,556 20.3 15.8 18.2 (8.5) (21.8) 14.9 11.9 15.2 13.2 4.5 5.5 5.0 1.1 1.1 1.0 3.5 2.9 2.9 9.4 7.1 7.9 16.2 Oil India SELL 386 320 (17.2) 232,219 3,459 601 38.8 Daily Summary India 31.1 31.2 (7.2) (19.9) 0.4 10.0 12.4 12.4 5.7 7.0 7.0 1.0 1.0 1.0 4.1 3.2 3.2 10.6 8.2 7.9 2.1 Petronet LNG ADD 339 325 (4.2) 254,550 3,791 750 11.2 15.6 23.0 13.2 39.7 47.7 30.4 21.8 14.8 16.8 13.4 9.1 4.0 3.5 3.1 0.7 1.2 1.9 15.2 17.2 22.3 4.6 Reliance Industries ADD 1,021 1,120 9.8 3,004,810 44,754 3,240 84.6 87.2 97.8 20.5 3.0 12.2 12.1 11.7 10.4 10.0 10.1 7.8 1.4 1.3 1.1 0.9 1.2 1.3 12.0 11.2 11.4 43.9 Energy Attractive 9,482,584 141,236 8.8 3.2 12.0 12.6 12.2 10.9 7.7 7.5 6.5 1.4 1.3 1.2 2.1 2.2 2.4 11.2 10.7 11.1 180.2

Source: Company, Bloomberg, Kotak Institutional Equities estimates

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August 25, August25, 2016

20

Kotak Institutional Equities: Valuation summary of KIE Universe stocks

21 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

Company Rating 24-Aug-16 (Rs) (%) (Rs mn) (US$ mn) (mn) 2016 2017E 2018E 2016 2017E 2018E 2016 2017E 2018E 2016 2017E 2018E 2016 2017E 2018E 2016 2017E 2018E 2016 2017E 2018E (US$ mn) Industrials ABB SELL 1,160 950 (18.1) 245,846 3,662 212 14.2 18.4 27.6 31.2 29.7 50.3 82.0 63.2 42.1 34.5 30.4 23.1 8.2 7.5 6.7 0.3 0.4 0.6 10.3 12.4 16.8 1.2 BHEL SELL 137 100 (26.9) 334,832 4,987 2,448 (3.7) 1.7 6.6 (164.4) 145.1 294.9 (36.7) 81.3 20.6 (12.0) 66.4 8.6 1.0 1.0 1.0 0.7 0.3 1.0 (2.7) 1.2 4.8 14.8 Carborundum Universal REDUCE 276 250 (9.5) 52,059 775 188 7.6 10.4 13.6 8.1 36.7 30.5 36.3 26.6 20.3 17.9 14.2 11.3 4.4 4.0 3.5 0.5 1.1 1.5 12.6 15.7 18.3 2.2 Crompton Greaves NR 86 — — 54,151 807 627 (3.2) (0.4) 3.1 (208.6) 87.3 854.1 (27.1) (212.5) 28.2 18.6 14.0 14.9 1.4 1.2 1.1 1.5 0.4 0.4 (5.2) (0.6) 4.0 5.8 Cummins India REDUCE 902 850 (5.8) 250,076 3,725 277 26.4 28.5 32.6 (3.9) 7.7 14.4 34.1 31.7 27.7 32.4 29.5 25.4 7.9 7.2 6.5 1.6 1.6 1.8 24.2 23.7 24.6 5.6 Havells India REDUCE 411 355 (13.6) 256,878 3,826 624 7.8 10.8 12.4 25.8 39.2 14.3 52.9 38.0 33.3 30.1 25.7 22.0 9.0 8.0 7.1 1.5 1.0 1.2 20.8 22.3 22.6 10.5 Kalpataru Power Transmission BUY 258 300 16.3 39,577 589 153 7.7 12.7 14.1 (2.3) 65.5 11.3 33.7 20.3 18.3 8.5 7.4 6.8 1.7 1.6 1.5 0.6 0.6 0.6 5.2 8.1 8.4 0.4 KEC International ADD 136 160 17.5 35,003 521 257 7.4 9.4 13.1 19.0 26.5 38.6 18.3 14.4 10.4 8.7 6.9 5.9 2.3 2.0 1.8 0.7 0.9 1.3 13.5 15.0 18.1 0.9 L&T REDUCE 1,474 1,500 1.8 1,373,314 20,454 930 50.9 48.6 64.9 45.0 (4.5) 33.5 28.9 30.3 22.7 18.8 20.2 17.2 3.7 3.5 3.2 1.2 1.3 1.3 12.9 11.8 14.5 46.5 Siemens SELL 1,286 900 (30.0) 457,899 6,820 356 18.3 26.6 32.3 62.5 45.2 21.8 70.3 48.4 39.8 39.7 30.2 24.7 6.9 6.5 6.1 3.0 1.0 1.3 11.1 13.8 15.8 5.2 Thermax REDUCE 836 770 (7.9) 99,650 1,484 119 23.1 25.8 28.4 6.2 11.7 9.9 36.2 32.4 29.5 22.8 21.1 18.9 4.2 3.9 3.5 0.7 0.7 0.7 12.2 12.5 12.5 1.0 Voltas ADD 388 360 (7.3) 128,449 1,913 331 10.4 12.6 15.7 2.0 21.0 24.6 37.2 30.7 24.7 29.5 24.5 19.0 5.4 4.8 4.3 0.7 1.0 1.4 15.3 16.5 18.4 8.3 Industrials Cautious 3,327,734 49,564 (10.4) 32.1 42.7 48.5 36.7 25.7 25.1 21.5 16.9 3.3 3.2 2.9 1.4 1.0 1.2 6.9 8.6 11.4 102.4 Infrastructure Adani Port and SEZ ADD 270 255 (5.6) 559,364 8,331 2,085 13.8 14.7 13.0 135.0 6.9 (11.3) 19.6 18.4 20.7 16.6 15.0 13.3 4.3 3.5 3.1 0.4 0.5 0.8 23.9 21.0 16.0 18.9 Ashoka Buildcon BUY 153 220 43.4 28,718 428 188 3.1 7.6 6.9 (39.4) 143.0 (8.5) 49.3 20.3 22.2 8.8 8.7 7.6 1.5 1.5 1.4 1.0 1.1 1.5 3.6 7.4 6.5 0.5 Container Corporation REDUCE 1,362 1,350 (0.9) 265,574 3,956 195 40.4 42.7 50.0 (24.8) 5.8 17.0 33.7 31.9 27.3 22.4 20.3 16.7 3.3 3.1 2.9 1.0 1.0 1.2 10.0 10.0 11.0 4.3 Gateway Distriparks ADD 283 305 7.7 30,792 459 109 10.1 10.8 12.3 (41.6) 7.2 13.7 28.1 26.2 23.0 12.4 11.8 9.1 2.5 2.3 2.2 2.5 1.1 1.3 8.9 9.2 9.9 0.6 Gujarat Pipavav Port ADD 172 185 7.8 82,958 1,236 483 3.4 5.3 6.5 (61.5) 54.2 22.0 49.9 32.4 26.5 21.3 18.1 14.3 4.3 4.2 4.0 1.1 1.8 2.2 9.0 13.1 15.3 1.8 IRB Infrastructure BUY 236 285 20.9 82,872 1,234 351 18.1 17.3 14.6 17.2 (4.5) (15.3) 13.0 13.6 16.1 8.1 7.4 7.5 1.7 1.4 1.3 1.6 1.6 1.6 13.9 11.3 8.3 4.4 Sadbhav Engineering ADD 283 325 14.8 48,561 723 172 8.0 8.7 13.8 13.4 8.3 58.8 35.2 32.5 20.5 18.6 16.8 12.5 3.3 3.0 2.7 — — — 9.8 9.7 13.9 0.7 Infrastructure Attractive 1,098,840 16,366 31.5 8.5 (2.9) 23.1 21.3 21.9 14.5 13.1 11.6 3.4 2.9 2.7 0.7 0.8 1.1 14.6 13.8 12.2 31.1 Internet Info Edge ADD 850 960 12.9 102,779 1,531 121 11.7 16.2 21.3 (27.4) 38.3 31.3 72.6 52.5 40.0 57.9 38.8 27.5 5.8 5.4 4.9 0.4 0.5 0.6 8.3 10.7 12.9 1.2 Just Dial REDUCE 467 460 (1.6) 32,466 484 69 20.4 18.4 20.8 3.6 (9.7) 12.7 22.9 25.3 22.5 14.7 17.1 12.5 4.8 4.1 3.6 — 0.4 0.4 21.1 17.6 17.0 17.0 Internet Attractive 135,244 2,014 (14.8) 14.3 24.0 47.7 41.8 33.7 35.5 30.6 22.1 5.6 5.0 4.5 0.3 0.5 0.6 11.6 12.1 13.4 18.2 Media DB Corp. REDUCE 406 365 (10.1) 74,644 1,112 184 16.1 21.8 26.0 (6.3) 35.1 19.1 25.2 18.6 15.6 13.9 10.1 8.5 5.5 4.9 4.4 2.7 2.7 3.4 22.5 28.0 29.8 0.4 DishTV BUY 98 115 17.6 104,185 1,552 1,066 6.5 2.5 3.6 21,951.6 (61.9) 45.4 NM 39.5 27.2 10.8 9.4 8.0 6.2 6.2 6.2 — — — 41.5 15.8 23.0 9.3 Jagran Prakashan REDUCE 186 195 4.7 60,871 907 327 10.4 12.6 14.1 30.0 21.0 11.7 17.9 14.8 13.2 10.6 8.7 7.4 3.8 3.5 3.1 — 3.2 3.8 25.0 24.7 24.9 0.4 PVR BUY 1,181 1,175 (0.5) 55,156 822 47 26.9 26.3 35.0 647.0 (2.2) 33.4 44.0 45.0 33.7 17.7 15.7 13.0 6.3 5.6 4.9 0.2 0.2 0.3 19.6 13.3 15.6 3.6 Sun TV Network ADD 464 500 7.8 182,737 2,722 394 23.4 27.0 29.9 18.0 15.3 10.6 19.8 17.2 15.5 12.5 10.7 9.3 5.2 4.7 4.3 3.3 3.2 3.7 26.8 28.7 29.0 10.2 Zee Entertainment Enterprises BUY 522 510 (2.3) 501,162 7,464 960 9.4 12.5 16.1 8.4 32.9 29.1 55.5 41.8 32.4 31.9 24.8 19.7 8.0 7.0 6.4 0.4 0.5 0.7 15.3 17.9 20.6 11.4 Media Attractive 978,755 14,578 48.9 5.6 21.6 29.8 28.3 23.3 17.9 14.7 12.3 6.4 5.8 5.3 1.1 1.3 1.5 21.5 20.4 22.7 35.3

Metals & Mining Daily Summary India Coal India REDUCE 334 320 (4.2) 2,109,350 31,417 6,316 22.7 23.0 26.6 4.3 1.5 15.5 14.7 14.5 12.6 9.6 9.0 8.1 6.2 5.8 5.3 8.2 4.8 5.6 37.1 41.2 44.1 18.0 Hindalco Industries REDUCE 157 105 (33.1) 324,203 4,829 2,065 2.4 8.5 11.0 (76.1) 254.6 29.7 65.9 18.6 14.3 10.0 7.9 7.2 0.8 0.8 0.8 0.6 0.6 0.6 1.3 4.4 5.5 26.8 Hindustan Zinc REDUCE 228 200 (12.4) 964,218 14,361 4,225 19.4 18.8 20.1 0.2 (3.0) 6.6 11.8 12.1 11.4 9.2 8.2 7.0 2.6 2.2 2.0 12.2 1.9 1.9 20.3 19.8 18.3 5.6 Jindal Steel and Power RS 88 — — 80,054 1,192 915 (18.2) (14.5) 1.4 (363.0) 20.1 109.4 (4.8) (6.0) 63.8 16.0 10.2 7.9 0.4 0.5 0.5 — — — (8.4) (7.4) 0.7 16.6 JSW Steel ADD 1,760 2,015 14.5 425,346 6,335 242 (10.5) 150.6 170.9 (113.9) 1,530.8 13.4 (167.1) 11.7 10.3 13.3 6.7 6.1 2.0 1.9 1.6 0.5 0.5 0.5 (1.1) 16.6 17.2 16.5 National Aluminium Co. SELL 48 36 (24.4) 122,677 1,827 2,577 2.7 2.2 2.9 (43.2) (20.1) 33.6 17.6 22.1 16.5 7.9 8.0 5.6 1.0 0.9 0.9 4.2 2.1 2.1 5.4 4.3 5.6 0.8 NMDC SELL 109 75 (30.9) 430,370 6,410 3,965 8.0 7.2 7.6 (51.8) (9.5) 5.5 13.7 15.1 14.3 9.3 10.1 9.1 1.4 1.4 1.4 10.1 5.5 5.5 10.1 9.5 10.0 3.9 Tata Steel ADD 380 445 17.1 369,013 5,496 971 (23.4) 27.3 49.2 (72,377.0) 216.3 80.5 (16.2) 14 7.7 15.0 7.3 6.1 1.3 1.2 1.1 2.1 2.1 2.1 (7.6) 9.0 14.9 41.2 Vedanta REDUCE 176 170 (3.4) 521,786 7,772 2,965 7.9 15.4 19.3 (54.0) 95.8 25.2 22.4 11.4 9.1 8.3 6.4 5.4 1.2 1.1 1.0 2.0 1.6 1.6 4.7 10.9 11.3 36.6 Metals & Mining Cautious 5,347,017 79,640 (36.4) 53.3 23.9 21.4 14.0 11.3 10.5 7.8 6.8 2.0 1.8 1.7 6.8 3.2 3.4 9.4 13.1 14.9 166.2 Pharmaceutical Apollo Hospitals REDUCE 1,358 1,320 (2.8) 188,925 2,814 139 21.7 28.3 35.1 (13.8) 30.6 23.9 62.6 47.9 38.7 27.0 22.4 19.4 5.5 5.1 4.6 0.4 0.5 0.6 9.1 11.0 12.5 4.0

KOTAK INSTITUTIONAL EQUITIES RESEARCH EQUITIES INSTITUTIONAL KOTAK Biocon SELL 882 515 (41.6) 176,460 2,628 200 20.0 26.0 27.6 2.0 30.4 5.9 44.2 33.9 32.0 24.3 18.3 14.8 4.0 3.7 3.4 1.4 1.0 1.1 10.2 11.4 11.1 16.9 Cipla BUY 567 590 4.0 455,784 6,789 805 16.8 21.2 28.7 14.4 26.5 35.2 33.8 26.7 19.8 19.9 17.2 12.5 3.8 3.4 3.0 0.6 0.8 1.1 11.7 13.4 16.1 15.6 Dr Lal Pathlabs REDUCE 932 925 (0.8) 77,150 1,149 83 15.9 19.0 22.4 19.9 19.2 18.0 58.6 49.2 41.7 35.4 29.7 24.9 15.4 12.2 9.8 0.3 0.3 0.4 31.3 27.7 26.1 0.8 Dr Reddy's Laboratories SELL 3,040 2,500 (17.8) 518,408 7,721 171 139.3 85.3 117.4 2.7 (38.8) 37.6 21.8 35.6 25.9 13.1 17.8 13.4 4.1 4.1 3.6 0.8 0.4 0.6 19.9 11.2 14.7 22.8

Lupin REDUCE 1,522 1,600 5.1 686,042 10,218 450 50.5 63.6 73.2 (5.5) 26.0 15.2 30.2 23.9 20.8 19.5 15.0 12.7 6.2 5.1 4.2 0.6 0.6 0.7 22.8 23.4 22.2 33.6 -

Sun Pharmaceuticals SELL 770 715 (7.1) 1,852,432 27,591 2,406 22.1 29.7 33.0 11.1 34.2 11.2 34.8 25.9 23.3 22.2 17.0 13.1 5.9 4.8 4.1 0.5 0.8 0.9 18.4 20.5 19.0 47.1 August2016 25, Torrent Pharmaceuticals REDUCE 1,701 1,260 (25.9) 287,835 4,287 169 102.4 60.1 67.3 130.8 (41.3) 12.0 16.6 28.3 25.3 10.7 18.1 16.2 8.5 6.9 5.7 2.4 0.8 0.9 58.9 26.9 24.7 3.5 Pharmaceuticals Cautious 4,243,037 63,197 13.1 9.5 17.4 30.5 27.9 23.8 19.0 17.2 13.6 5.4 4.7 4.0 0.7 0.7 0.8 17.6 16.7 16.8 144.4

Source: Company, Bloomberg, Kotak Institutional Equities estimates

Kotak Institutional Equities: Valuation summary of KIE Universe stocks India Daily Summary Daily Summary India 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

KOTAK INSTITUTIONAL EQUITIES RESEAR EQUITIES INSTITUTIONAL KOTAK Company Rating 24-Aug-16 (Rs) (%) (Rs mn) (US$ mn) (mn) 2016 2017E 2018E 2016 2017E 2018E 2016 2017E 2018E 2016 2017E 2018E 2016 2017E 2018E 2016 2017E 2018E 2016 2017E 2018E (US$ mn) Real Estate DLF BUY 164 180 9.6 292,892 4,362 1,801 3.1 2.7 2.9 1.4 (13.1) 10.3 53.8 61.8 56.0 13.0 16.2 15.3 1.0 1.0 1.0 1.2 1.2 1.2 1.9 1.6 1.8 21.3 Godrej Properties REDUCE 365 280 (23.3) 78,924 1,176 216 10.7 10.8 13.1 13.4 1.2 21.0 34.2 33.7 27.9 30.0 27.9 24.7 3.6 3.3 3.1 — 0.4 0.7 11.5 10.3 11.5 1.1 Oberoi Realty BUY 306 350 14.4 103,827 1,546 339 12.6 9.6 29.4 29.9 (23.3) 205.3 24.4 31.8 10.4 15.9 20.1 6.2 2.0 1.9 1.6 0.7 0.7 0.7 8.6 6.0 16.6 1.3 Prestige Estates Projects BUY 185 250 35.2 69,319 1,032 375 9.4 7.0 10.6 5.7 (24.8) 50.7 19.7 26.2 17.4 12.2 12.7 10.9 1.7 1.6 1.5 0.8 0.8 0.8 8.8 6.2 8.8 0.6 Sobha BUY 289 440 52.1 28,360 422 98 15.6 16.7 20.3 (35.6) 6.5 21.7 18.5 17.4 14.3 9.6 10.9 10.0 1.1 1.1 1.0 0.7 2.4 2.4 6.1 6.3 7.4 0.4 Sunteck Realty BUY 233 360 54.6 14,662 218 60 27.1 82.0 53.3 138.8 201.9 (34.9) 8.6 2.8 4.4 10.4 2.1 0.1 0.9 0.7 0.6 0.9 0.9 0.9 10.5 26.2 14.1 0.8 Real Estate Attractive 587,984 8,758 11.6 4.4 39.2 31.4 30.0 21.6 13.7 14.5 12.0 1.3 1.3 1.2 0.9 1.0 1.0 4.2 4.3 5.7 25.6 Technology

HCL Technologies REDUCE 790 810 2.5 1,114,991 16,607 1,413 39.2 58.7 60.0 (23.5) 49.5 2.3 20.1 13.5 13.2 15.0 9.5 8.9 4.0 3.4 3.1 2.2 3.1 3.6 21.3 27.3 24.4 29.7 Hexaware Technologies ADD 217 240 10.4 65,613 977 304 12.9 13.8 16.3 19.4 6.3 18.8 16.8 15.8 13.3 11.4 10.7 8.6 4.6 4.3 3.9 4.0 4.0 4.0 28.9 28.2 30.6 3.8 Infosys ADD 1,057 1,250 18.2 2,428,789 36,175 2,286 59.0 63.9 72.2 9.4 8.3 12.8 17.9 16.5 14.7 12.3 10.6 9.1 4.2 3.7 3.3 2.1 2.6 2.8 24.9 23.8 23.8 69.6 Mindtree REDUCE 569 570 0.2 95,429 1,421 168 35.9 33.0 40.2 12.5 (8.1) 22.0 15.9 17.3 14.1 11.0 10.1 8.2 4.0 3.5 3.0 1.8 1.6 1.9 27.4 21.5 22.6 5.1

Mphasis SELL 531 460 (13.3) 111,582 1,662 210 34.5 38.1 40.0 6.8 10.7 4.9 15.4 13.9 13.3 9.6 8.4 7.7 1.8 1.7 1.6 — 3.6 3.8 12.3 12.4 12.4 1.5 -

TCS REDUCE 2,572 2,475 (3.8) 5,068,039 75,485 1,970 122.9 135.1 148.1 22.5 9.9 9.6 20.9 19.0 17.4 15.4 13.6 12.1 6.9 5.8 5.0 1.7 2.1 2.3 37.1 33.2 30.8 44.9 August2016 25, Tech Mahindra BUY 467 560 19.9 453,415 6,753 872 35.8 37.5 43.1 19.0 4.9 14.9 13.1 12.5 10.8 9.5 8.5 6.9 2.8 2.5 2.1 1.3 2.6 1.3 23.4 21.3 20.9 13.9 Wipro REDUCE 520 490 (5.7) 1,283,906 19,123 2,467 36.0 35.2 39.1 2.8 (2.5) 11.2 14.4 14.8 13.3 9.8 9.2 8.0 2.8 2.5 2.2 1.2 1.0 1.0 20.3 17.5 17.4 13.6

CH Technology Attractive 10,621,765 158,203 9.5 10.8 9.8 18.6 16.8 15.3 13.3 11.3 10.0 4.6 4.0 3.5 1.7 2.2 2.4 24.8 24.0 23.1 182.1

Telecom Bharti Airtel BUY 353 415 17.7 1,409,483 20,993 3,997 10.1 11.5 16.7 (33.2) 14.3 45.0 34.9 30.6 21.1 6.6 6.4 5.8 2.1 2.0 2.0 0.4 0.8 1.4 6.3 6.9 9.5 17.3 Bharti Infratel ADD 347 400 15.4 641,167 9,550 1,897 12.6 15.7 17.0 19.4 25.2 8.3 27.6 22.1 20.4 11.3 10.5 9.6 3.6 3.8 3.7 0.9 3.1 3.4 13.5 16.5 18.4 13.7 IDEA BUY 98 155 57.6 354,139 5,275 3,601 8.6 2.9 3.3 (2.8) (65.7) 12.0 11.5 33.6 30.0 5.7 6.5 5.8 1.4 1.4 1.4 0.6 1.6 2.1 12.6 4.2 4.7 18.8 Reliance Communications SELL 52 40 (23.1) 129,427 1,928 2,488 2.7 2.2 3.2 (4.4) (20.0) 47.6 19.0 23.7 16.1 7.8 7.5 7.0 0.4 0.4 0.4 — — — 2.1 1.7 2.5 17.5 Tata Communications ADD 504 515 2.2 143,597 2,139 285 1.6 11.2 17.3 (56.1) 584.3 54.4 307.1 44.9 29.1 8.4 7.4 6.6 (34.3) (76.1) 46.8 1.1 1.3 1.3 (96.7) (105.4) 838 5.0 Telecom Cautious 2,677,813 39,884 (14.9) (7.7) 30.5 26.2 28.4 21.7 7.1 6.9 6.3 1.9 1.9 1.8 0.6 1.4 1.8 7.3 6.7 8.3 72.4 Utilities Adani Power SELL 28 26 (7.3) 93,517 1,393 3,334 1.5 2.8 4.7 132.8 93.8 64.2 19.1 9.9 6.0 7.2 6.5 5.7 1.3 1.1 0.9 — — — 7.5 12.1 17.1 3.0 CESC ADD 650 685 5.3 86,162 1,283 133 27.9 54.4 70.8 86.6 94.9 30.0 23.3 11.9 9.2 8.6 7.3 6.8 1.0 0.9 0.9 1.5 1.6 1.7 4.3 7.9 9.7 3.3 JSW Energy ADD 79 80 1.3 129,564 1,930 1,640 7.6 7.4 8.7 (10.0) (2.4) 17.5 10.4 10.7 9.1 6.9 6.0 5.4 1.5 1.4 1.2 2.5 2.5 2.5 15.5 13.6 14.4 4.7 NHPC REDUCE 28 24 (12.9) 304,997 4,543 11,071 2.7 2.8 3.4 17.2 4.1 22.1 10.4 10.0 8.2 7.6 7.9 6.4 1.0 0.9 0.9 5.4 5.7 7.0 9.5 9.6 11.3 2.3 NTPC BUY 161 180 11.6 1,329,993 19,809 8,245 11.5 11.5 14.3 (2.6) (0.2) 24.7 14.0 14.0 11.3 13.1 11.5 9.5 1.5 1.4 1.3 2.2 2.1 2.7 11.1 10.3 12.0 11.3 Power Grid BUY 182 210 15.2 953,719 14,205 5,232 11.4 14.2 15.7 18.6 24.4 10.8 16.0 12.9 11.6 11.0 9.2 8.1 — — — 1.3 1.6 1.7 14.7 16.3 15.9 12.3 Reliance Power SELL 53 36 (32.3) 149,092 2,221 2,805 4.9 4.5 4.5 32.4 (6.8) 0.4 10.9 11.8 11.7 9.3 9.0 8.7 — — — (1.9) — — 6.6 5.9 5.6 3.1 Tata Power ADD 76 80 4.6 206,769 3,080 2,800 5.5 5.5 6.2 965.8 0.9 12.1 13.9 13.8 12.3 8.4 9.0 8.4 — — — 1.7 1.6 1.6 10.5 10.0 10.4 6.2 Utilities Attractive 3,253,814 48,463 24.8 9.7 19.7 13.9 12.7 10.6 10.0 9.1 8.0 1.5 1.3 1.2 2.0 2.1 2.5 10.5 10.6 11.7 #N/A Others Astral Poly Technik REDUCE 498 425 (14.7) 59,672 889 120 8.4 11.1 14.8 31.0 31.7 34.2 59.3 45.0 33.6 29.5 22.6 17.8 7.6 6.6 5.5 0.1 0.1 0.1 14.4 15.7 17.9 0.4 Cera Sanitaryware REDUCE 2,400 2,050 (14.6) 31,214 465 13 64.2 73.7 93.2 23.4 14.9 26.4 37.4 32.6 25.8 21.6 19.0 15.1 7.4 6.2 5.1 0.4 0.4 0.4 21.6 20.8 21.8 0.3 Dhanuka Agritech BUY 706 780 10.5 35,316 526 50 21.3 26.2 32.5 0.6 22.6 24.3 33.1 27.0 21.7 24.6 19.5 15.7 7.4 6.2 5.2 0.9 0.9 1.2 23.9 24.9 25.9 0.3 Godrej Industries REDUCE 420 390 (7.2) 141,234 2,104 336 14.4 17.6 20.6 21.1 22.4 17.0 29.2 23.8 20.4 31.5 18.6 16.6 4.1 3.5 3.1 0.4 0.4 0.4 14.4 15.8 16.1 2.8 HSIL ADD 364 345 (5.1) 26,291 392 72 12.3 14.6 19.1 4.2 18.9 30.6 29.5 24.8 19.0 9.9 10.1 8.3 1.9 1.8 1.7 1.1 1.1 1.1 6.6 7.5 9.2 0.6 InterGlobe Aviation ADD 879 1,020 16.1 316,717 4,717 351 56.7 53.2 73.9 50.5 (6.2) 38.8 15.5 16.5 11.9 10.2 10.7 7.6 18.2 12.8 8.9 5.4 3.0 4.2 188.2 92.0 88.4 8.0 Kaveri Seed BUY 377 520 37.9 26,037 388 69 25.1 37.5 45.3 (42.7) 49.2 20.8 15.0 10.1 8.3 11.1 7.5 5.9 2.8 2.4 2.0 0.0 3.0 3.6 20.5 25.5 26.1 3.4 PI Industries ADD 802 840 4.8 109,907 1,637 136 22.6 28.6 33.4 35.3 26.5 16.9 35.5 28.0 24.0 26.0 20.4 16.9 9.5 7.4 5.9 0.4 0.5 0.6 30.1 29.6 27.3 1.7 Rallis India ADD 229 240 4.6 44,601 664 194 7.4 10.2 12.8 (9.0) 38.7 25.8 31.2 22.5 17.9 19.7 14.5 11.3 5.0 4.3 3.7 1.1 1.3 1.4 16.7 20.6 22.4 1.1 Tata Chemicals ADD 556 560 0.8 141,581 2,109 255 30.6 40.9 54.3 6.1 33.5 32.9 18.1 13.6 10.2 9.8 8.1 6.7 2.4 2.1 1.6 1.8 1.8 1.8 13.5 16.3 17.8 5.6 TeamLease Services ADD 1,125 1,175 4.4 19,234 286 16 15.9 22.2 29.3 (20.7) 39.2 32.2 70.7 50.8 38.4 65.3 38.1 25.6 5.6 5.5 4.8 — — — 10.8 11.5 13.4 0.7 UPL ADD 644 660 2.5 276,107 4,112 429 31.8 36.2 43.5 18.3 13.9 20.1 20.3 17.8 14.8 11.3 9.4 7.9 4.1 3.4 2.8 0.8 0.7 0.8 21.5 22.4 20.7 17.3 Whirlpool ADD 914 820 (10.2) 115,904 1,726 127 19.6 23.6 28.0 17.8 20.7 18.8 46.7 38.7 32.6 28.2 23.7 20.1 10.0 8.3 7.0 — 0.5 0.6 23.9 23.4 23.3 0.4

Others 1,286,311 19,159 Daily Summary India 21.9 19.6 27.4 22.5 18.8 14.8 14.1 11.9 9.7 5.4 4.3 3.5 1.8 1.4 1.7 24.1 23.0 23.6 41.7 KIE universe 80,980,550 1,206,145 (5.7) 20.9 22.6 22.8 18.8 15.4 12.0 10.5 9.1 2.7 2.5 2.2 1.7 1.5 1.8 11.9 13.2 14.6 KIE universe (ex-energy) 71,497,966 1,064,909 (9.0) 25.6 24.9 25.5 20.3 16.3 13.3 11.4 9.8 3.1 2.8 2.5 1.6 1.5 1.7 12.1 13.9 15.5

Notes: (a) We have used adjusted book values for banking companies. (b) 2016 means calendar year 2015, similarly for 2017 and 2018 for these particular companies. (c) Exchange rate (Rs/US$)= 67.14 Source: Company, Bloomberg, Kotak Institutional Equities estimates

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August 25, August25, 2016

22

Economy India

"Each of the analysts named below hereby certifies that, with respect to each subject company and its securities for which the analyst is responsible in this report, (1) all of the views expressed in this report accurately reflect his or her personal views about the subject companies and securities, and (2) no part of his or her compensation was, is, or will be, directly or indirectly, related to the specific recommendations or views expressed in this report: Kawaljeet Saluja, Anand Shah."

Kotak Institutional Equities Research coverage universe Distribution of ratings/investment banking relationships Percentage of companies covered by Kotak Institutional 70% Equities, within the specified category.

60% Percentage of companies within each category for which Kotak Institutional Equities and or its affiliates has 50% provided investment banking services within the previous 12 months. 40% 35.0% * The above categories are defined as follows: Buy = We expect this stock to deliver more than 15% returns over 30.0% 30% the next 12 months; Add = We expect this stock to 22.2% deliver 5-15% returns over the next 12 months; Reduce = We expect this stock to deliver -5-+5% returns over 20% the next 12 months; Sell = We expect this stock to deliver 12.8% less than -5% returns over the next 12 months. Our 10% target prices are also on a 12-month horizon basis. 2.2% 3.3% 2.2% These ratings are used illustratively to comply with 0.0% applicable regulations. As of 30/06/2016 Kotak 0% Institutional Equities Investment Research had BUY ADD REDUCE SELL investment ratings on 180 equity securities. Source: Kotak Institutional Equities As of June 30, 2016

India Daily Summary Daily Summary India 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.

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August 25, August25, 2016 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.

23 KOTAK INSTITUTIONAL EQUITIES RESEARCH

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