INDIA DAILY

September 6, 2011 India 5-Sep 1-day1-mo 3-mo Sensex 16,713 (0.6) (3.4) (9.3)

Nifty 5,017 (0.5) (3.7) (9.3)

Contents Global/Regional indices Special Reports Dow Jones 11,240 (2.2) (1.8) (7.5) Nasdaq Composite 2,480 (2.6) (2.1) (9.2)

Strategy FTSE 5,103 (3.6) (2.8) (13.0) Strategy: Absolute rating system to provide more clarity, focus and purpose Nikkie 8,681 (1.2) (6.7) (7.5) Daily Alerts Hang Seng 19,488 (0.7) (7.0) (15.1) KOSPI 1,774 (0.7) (8.7) (16.1)

Company Value traded – India NTPC: Earnings growth remains wanting of execution Cash (NSE+BSE) 138 138 135 Jindal Steel and Power: Still not attractive enough Derivatives (NSE) 821 2,038 947 Deri. open interest 1,194 1,245 1,203 Mahindra & Mahindra: Market share gains likely to support volume growth

IRB Infrastructure: Retain ADD as large opportunity is offset by competition, low toll collection Forex/money market Bajaj Hindustan: Maintain REDUCE Change, basis points Sector 5-Sep 1-day 1-mo 3-mo Rs/US$ 46.0 0 103 124 Pharmaceuticals: Hits and misses in 1QFY12, realign target prices 10yr govt bond, % 8.3 (6) (3) 2 Net investment (US$mn) 2-Sep MTD CYTD News Round-up FIIs 257 - 54 MFs (58) - (282) ` The cabinet approved the draft Land Acquisition, Relief and Rehabilitation Bill with changes that take away some of the farmer-friendly features it boasted of and some Top movers -3mo basis of the teeth industry was concerned about. The Bill will be tabled in Parliament on Change, % Wednesday. (BSTD) Best performers 5-Sep 1-day 1-mo 3-mo IDEA IN Equity 100.9 0.6 5.1 45.0 ` RBI raises vigil on lenders with high exposure to core sectors, with signs of impending BJAUT IN Equity 1667.0 2.4 19.2 22.4 slowdown, fear deterioration in asset quality. (THBL) MM IN Equity 769.1 0.5 17.7 17.1 UTCEM IN Equity 1104.2 0.4 10.4 8.9 ` Reliance Infrastructure (RELI IN) companies BSES Rajdhani and BSES Yamuna have BPCL IN Equity 664.9 (2.6) (5.3) 8.6 decided to pay the USD 17 mn of dues to NTPC (NTPC IN),saving Delhi from a power Worst performers cut. (BSTD) EDSL IN Equity 201.0 2.0 (33.5) (55.3) IVRC IN Equity 37.9 6.0 (24.4) (44.7) ` Tata Motors (TTMT IN) has launched the new Tata Indigo e-CS VX, which boasts of CRG IN Equity 149.8 (0.3) (5.1) (43.4) the best in class fuel efficiency of 25 km per litre. (BSTD) HDIL IN Equity 107.8 2.0 (13.1) (36.3) POWF IN Equity 146.1 (0.9) (16.6) (28.0) ` The Hero Group of automobile markets announced its foray into the hospitality

sector. Its first property is expected to come up in Gurgaon by the end of 2012. (BSTD)

` Maruti's (MSIL IN) 3rd plant at Manesar to be delayed due to labour & sales woes. Final decision on commissioning the plant would be taken at the end of third quarter. (FNLE)

` M&M (MM IN) raised prices by up to 2% for its entire range of products last month to offset the impact of high raw material rates. (FNLE)

` Mahindra & Mahindra (MM IN) plans to make acquisitions in Britain & Europe to bolster its software & outsourcing business. (THBL)

` Tata Sons Ltd raised its stake in Tata Motors (TTMT IN) & Tata Steel (TATA IN) by buying some shares held by Tata Chemicals (TTCH IN) in the two companies. (THBL)

Source: ECNT= Economic Times, BSTD = Business Standard, FNLE = Financial Express, THBL = Business Line.

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

Strategy.dot INDIA Strategy

India SEPTEMBER 5, 2011 NEW RELEASE

BSE-30: 16,713

Absolute rating system to provide more clarity, focus and purpose. We have moved to an absolute rating system from the earlier relative rating system (with BSE-30 Index as the benchmark). We believe the new rating system, in conjunction with 12- month target prices, will unambiguously communicate our investment views on stocks. We will continue to use the BSE-30 Index as the benchmark for measuring the performance of our Model Portfolio.

Absolute rating system replaces previous relative rating system

We believe our new rating system will result in three improvements; the target prices of the stocks under our coverage are unchanged and thus, will provide continuity to our investment theses. (1) It will provide unambiguous communication to investors about stocks. Historically, we have seen examples of stocks with downside or limited upside and BUY/ADD ratings given limited upside to the BSE-30 Index; this was the case in January 2008 and December 2010. On the other hand, we currently see large absolute upside in several stocks in our coverage with REDUCE/SELL ratings under our previous rating system given 20% potential upside to our benchmark. (2) It will compel our analysts to focus on ratings and target prices even more rigorously without the umbrella of a relative rating system. This will sharpen our focus on bottom-up valuations based on first principles rather than on flaky market targets. (3) It will help investors in times of extreme investment sentiment in the market; equity is just another asset class and a relative rating system does not help much when investors lose money. We also intend to use cash also more aggressively in our Model Portfolio henceforth rather than having a 100%-invested portfolio at all times.

Description of the new system; 17.5% upside means BUY, downside means SELL

Under our new rating system, we rate stocks with 17.5% upside to their target prices on a 12- month basis as BUY, >7.5%-<17.5% upside as ADD, 0%-7.5% upside as REDUCE and <0% as SELL. We use this methodology directly for stocks that are valued on a 12-month basis (12-month DCF valuation for example). However, we make adjustments for stocks that are valued on FY2013E estimates (FY2013E EPS, EBITDA or BV) and raise the required returns accordingly. In future, we propose to value all stocks simply on a 12-month basis (adjust for time value of money using a cost of equity of 12.5%, if required or compute weighted-average price of two periods). This will also remove some degree of anomaly currently in our rating system and avoid lumpy movements in target prices arising from roll-forwards to the following year.

Not too many changes

Exhibit 1 gives the new and old ratings of the stocks under our coverage and also their respective target prices.

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

KIE ratings post adoption of new system Comparison of new and old ratings under the new and old rating systems

Target price Old New Company Sector (Rs) Relative rating Absolute rating Ashok Leyland Automobiles 26 SELL SELL Bajaj Auto Automobiles 1,590 SELL SELL Bharat Forge Automobiles 320 ADD ADD Exide Industries Automobiles 160 REDUCE REDUCE Hero Honda Automobiles 1,795 SELL SELL Mahindra & Mahindra Automobiles 900 ADD ADD Maruti Suzuki Automobiles 1,475 BUY BUY Tata Motors Automobiles 885 ADD ADD Andhra Bank Banking 190 BUY BUY Axis Bank Banking 1,700 BUY BUY Bank of Baroda Banking 1,250 BUY BUY Bank of India Banking 470 ADD BUY Canara Bank Banking 600 ADD BUY Corporation Bank Banking 630 ADD BUY Federal Bank Banking 500 BUY BUY HDFC Banking 730 REDUCE REDUCE HDFC Bank Banking 560 ADD ADD ICICI Bank Banking 1,100 BUY BUY IDFC Banking 150 BUY BUY India Infoline Banking 70 SELL SELL Indian Bank Banking 300 BUY BUY Indian Overseas Bank Banking 190 BUY BUY IndusInd Bank Banking 325 BUY BUY J&K Bank Banking 950 ADD ADD LIC Housing Finance Banking 260 ADD ADD Mahindra & Mahindra Financial Banking 825 BUY BUY Muthoot Finance Banking 220 BUY ADD Oriental Bank of Commerce Banking 430 BUY BUY PFC Banking 225 BUY BUY Punjab National Bank Banking 1,500 BUY BUY Reliance Capital Banking 470 REDUCE REDUCE Rural Electrification Corp. Banking 240 BUY BUY Shriram Transport Banking 700 REDUCE REDUCE State Bank of India Banking 2,750 BUY BUY Union Bank Banking 425 BUY BUY Yes Bank Banking 420 BUY BUY ACC Cement 980 REDUCE SELL Ambuja Cements Cement 135 SELL SELL Grasim Industries Cement 2,900 BUY BUY India Cements Cement 82 ADD ADD Shree Cement Cement 1,730 REDUCE REDUCE UltraTech Cement Cement 1,220 BUY ADD IVRCL Construction 75 BUY BUY Nagarjuna Construction Co. Construction 100 BUY BUY Punj Lloyd Construction 65 REDUCE REDUCE Sadbhav Engineering Construction 180 BUY BUY Asian Paints Consumer Products 2,900 SELL SELL Colgate-Palmolive (India) Consumer Products 900 SELL SELL Dabur India Consumer Products 110 SELL SELL GlaxoSmithkline Consumer (a) Consumer Products 2,700 ADD ADD Godrej Consumer Products Consumer Products 510 ADD ADD Hindustan Unilever Consumer Products 370 ADD ADD ITC Consumer Products 230 ADD ADD Jubilant Foodworks Consumer Products 750 SELL SELL Jyothy Laboratories Consumer Products 220 ADD ADD Marico Consumer Products 185 ADD ADD Nestle India (a) Consumer Products 3,500 SELL SELL Tata Global Beverages Consumer Products 120 ADD ADD Titan Industries Consumer Products 240 ADD ADD United Spirits Consumer Products 1,100 ADD ADD Aban Offshore Energy 700 BUY BUY Bharat Petroleum Energy 800 ADD ADD Cairn india Energy 295 REDUCE REDUCE Castrol India (a) Energy 425 SELL SELL GAIL (India) Energy 560 BUY BUY GSPL Energy 92 REDUCE SELL Hindustan Petroleum Energy 460 ADD ADD Indian Oil Corporation Energy 420 ADD BUY Oil & Natural Gas Corporation Energy 380 BUY BUY Oil India Energy 1,750 BUY BUY Petronet LNG Energy 125 SELL SELL Reliance Industries Energy 1,045 BUY BUY ABB Industrials 700 SELL SELL BGR Energy Systems Industrials 315 REDUCE SELL Bharat Electronics Industrials 1,850 ADD ADD Bharat Heavy Electricals Industrials 1,875 REDUCE REDUCE Crompton Greaves Industrials 210 BUY BUY Larsen & Toubro Industrials 1,800 REDUCE REDUCE Maharashtra Seamless Industrials 460 BUY BUY Siemens Industrials 830 SELL SELL

Source: Kotak Institutional Equities estimates

KOTAK INSTITUTIONAL EQUITIES RESEARCH 3 India Strategy

KIE ratings post adoption of new system Comparison of new and old ratings under the new and old rating systems

Target price Old New Company Sector (Rs) Relative rating Absolute rating Suzlon Energy Industrials 40 REDUCE SELL Tecpro Systems Industrials 300 ADD ADD Thermax Industrials 550 REDUCE REDUCE Voltas Industrials 150 BUY ADD Container Corporation Infrastructure 1,150 ADD ADD Gujarat Pipavav Port Infrastructure 78 ADD BUY IRB Infrastructure Infrastructure 185 ADD ADD Mundra Port and SEZ Infrastructure 175 BUY ADD DB Corp Media 350 BUY BUY DishTV Media 100 ADD ADD Eros International Media 250 BUY ADD Hindustan Media Ventures Media 220 BUY BUY HT Media Media 190 ADD ADD Jagran Prakashan Media 160 BUY BUY Sun TV Network Media 440 ADD BUY Zee Entertainment Enterprises Media 160 BUY BUY Coal India Metals & Mining 470 BUY ADD Hindalco Industries Metals & Mining 175 ADD ADD Hindustan Zinc Metals & Mining 160 BUY BUY Jindal Steel and Power Metals & Mining 590 REDUCE REDUCE JSW Steel Metals & Mining 660 REDUCE SELL National Aluminium Co. Metals & Mining 65 SELL SELL Sesa Goa Metals & Mining 230 REDUCE SELL Sterlite Industries Metals & Mining 185 BUY BUY Tata Steel Metals & Mining 625 BUY BUY Carborundum Universal Others 290 REDUCE SELL Havells India Others 370 REDUCE REDUCE Jaiprakash Associates Others 115 BUY BUY Jet Airways Others 650 BUY BUY SpiceJet Others 65 BUY BUY Tata Chemicals Others 365 REDUCE REDUCE United Phosphorus Others 220 BUY BUY Apollo Hospitals Pharmaceuticals 650 BUY ADD Biocon Pharmaceuticals 445 BUY BUY Cadila Healthcare Pharmaceuticals 1,045 ADD ADD Cipla Pharmaceuticals 310 REDUCE REDUCE Dishman Pharma & chemicals Pharmaceuticals 70 SELL REDUCE Divi's Laboratories Pharmaceuticals 830 BUY ADD GlaxoSmithkline Pharmaceuticals (a) Pharmaceuticals 2,220 REDUCE REDUCE Glenmark Pharmaceuticals Pharmaceuticals 395 ADD ADD Jubilant Life Sciences Pharmaceuticals 205 REDUCE REDUCE Lupin Pharmaceuticals 530 ADD ADD Ranbaxy Laboratories Pharmaceuticals 435 SELL SELL Sun Pharmaceuticals Pharmaceuticals 560 ADD ADD DLF Property 270 BUY BUY Housing Development & Infrastructure Property 150 BUY BUY Mahindra Life Space Developer Property 450 BUY BUY Oberoi Realty Property 315 BUY BUY Phoenix Mills Property 300 BUY BUY Puravankara Projects Property 80 ADD ADD Sobha Developers Property 370 BUY BUY Bajaj Hindustan Sugar 60 REDUCE REDUCE Balrampur Chini Mills Sugar 80 BUY BUY Shree Renuka Sugars Sugar 75 BUY BUY HCL Technologies Technology 375 REDUCE SELL Hexaware Technologies Technology 80 ADD ADD Infosys Technologies Technology 2,900 BUY BUY Mahindra Satyam Technology 70 REDUCE SELL Mindtree Technology 375 ADD ADD Mphasis BFL Technology 300 SELL SELL Patni Computer Systems Technology 300 ADD ADD Polaris Software Lab Technology 130 SELL REDUCE TCS Technology 1,160 BUY ADD Tech Mahindra Technology 600 REDUCE SELL Wipro Technology 370 ADD ADD Bharti Airtel Telecom 460 ADD ADD IDEA Telecom 115 ADD ADD MTNL Telecom 35 SELL SELL Reliance Communications Telecom 80 SELL SELL Tata Communications Telecom 205 REDUCE REDUCE Adani Power Utilities 100 REDUCE REDUCE CESC Utilities 440 BUY BUY JSW Energy Utilities 60 REDUCE REDUCE Lanco Infratech Utilities 45 BUY BUY NHPC Utilities 30 BUY ADD NTPC Utilities 180 REDUCE REDUCE Reliance Infrastructure Utilities 920 BUY BUY Reliance Power Utilities 88 SELL SELL Tata Power Utilities 1,350 BUY BUY

Source: Kotak Institutional Equities estimates

4 KOTAK INSTITUTIONAL EQUITIES RESEARCH Strategy India

We have moved to an absolute rating system Comparison of our new and old rating system

Absolute rating system (new) Rating 12-m rolling target price End-FY2013E target price Relative rating system (old) We expect this stock to outperform the BSE Sensex by 10% BUY Stocks with >17.5% upside Stocks with >28% upside over the next 12 months We expect this stock to outperform the BSE Sensex by 0-10% ADD Stocks with 7.5%-17.5% upside Stocks with 12%-28% upside over the next 12 months We expect this stock to underperform the BSE Sensex by 0- REDUCE Stocks with 0-7.5% upside Stocks with 4-12% upside 10% over the next 12 months We expect this stock to underperform the BSE Sensex by more SELL Stocks with <0% return Stocks with <4% return than 10% over the next 12 months

Source: Kotak Institutional Equities estimates

KOTAK INSTITUTIONAL EQUITIES RESEARCH 5

REDUCE NTPC (NTPC)

Utilities SEPTEMBER 05, 2011 UPDATE Coverage view: Cautious

Earnings growth remains wanting of execution. We continue to maintain our Price (Rs): 164 cautious stance on NTPC, as slippages in capex and capacity addition suggest modest Target price (Rs): 180 earning growth over the next two years. In our view, at 1.8X FY2013E book value and BSE-30: 16,713 14X FY2013E EPS (against historical band of 1.8-2.5X P/B and 14-18X P/E) NTPC is fairly valued and we see limited upside from current levels. We maintain our REDUCE rating with a revised target price of Rs180 (previously Rs200).

Company data and valuation summary NTPC Stock data Forecasts/Valuations 2011 2012E 2013E 52-week range (Rs) (high,low)222-163 EPS (Rs) 11.0 11.2 12.0 Market Cap. (Rs bn) 1,349.8 EPS growth (%) 5.3 1.4 6.8 Shareholding pattern (%) P/E (X) 14.8 14.6 13.7 Promoters 84.5 Sales (Rs bn) 548.7 608.5 673.7 FIIs 3.5 Net profits (Rs bn) 91.0 92.3 98.6 MFs 1.4 EBITDA (Rs bn) 143.9 156.1 183.1 Price performance (%) 1M 3M 12M EV/EBITDA (X) 10.6 11.5 10.7 Absolute (4.5) (5.9) (16.5) ROE (%) 13.7 12.8 12.6 Rel. to BSE-30 (1.1) 3.4 (9.0) Div. Yield (%) 2.3 2.1 2.2

Valuations less demanding, though earning growth continues to remain modest

We maintain our REDUCE rating on NTPC despite the stock correcting by 17% over the past 12 months. NTPC is currently trading at 1.8X FY2013E book value and 14X FY2013E EPS which is at the lower end of the historical band for NTPC (see Exhibits 1 and 2), though earnings growth for FY2012E and FY2013E remains modest at 1% and 7%, respectively. We highlight that NTPC has disappointed with a 6% CAGR in earnings over the past four years, leading to a continued de- rating of the trading multiples. We note that the recent underperformance is further reflective of the overall concerns on project execution and fuel security.

Project execution remains disappointing, slippages and delays likely to continue

We continue to be disappointed by NTPC’s sluggish pace of project execution and capacity addition. As we have been highlighting, NTPC continues to significantly miss on its capex guidance with FY2011 capex of Rs123 bn (at standalone level) falling significantly short of the original guidance of Rs223 bn. We note that NTPC has commissioned just one unit at Sipat (660 MW) in FY2012, while both Simhadri and Jhajjar units which were slated to commission in 1QFY12, have slipped further. NTPC has guided for a capacity addition of 4,320 MW in FY2012E though we remain skeptical and accordingly factor a capacity addition of 2,820 MW (installed) in FY2012E.

Limited upside from current levels, maintain REDUCE

We maintain our REDUCE rating on NTPC with a revised target price of Rs180/share (previously Rs200/share) as we adjust for commissioning delays. In our view, at 1.8X FY2013E book value and 14X FY2013E EPS (against historical band of 2-2.5X P/B and 14-18X P/E) NTPC is fairly valued and we see limited upside from current levels.

NTPC’s earnings growth is contingent upon commissioning of new capacities and heightened earnings risk coupled with overall macro concerns on fuel availibility and financial health of SEBs will likely keep stock performance muted in the near term. We have revised our earning estimates to Rs11.2/share for FY2012E (previously Rs11.9/share) and Rs12/share for FY2013E (previously Rs12.7/share) factoring further delays in commissioning of capacities.

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

NTPC Utilities

Cancellation of coal blocks could potentially derail fuel security plans

Recent decision by Ministry of Coal (MoC) to cancel five captive blocks allocated to NTPC could derail NTPC’s fuel security plans. NTPC plans to attain a peak production of 47 mtpa by FY2017E from its captive blocks (~20% of its total coal requirement in FY2017E) and the cancellation of five out of eight blocks comes as a further setback to NTPC’s fuel security.

While sale of power on a cost-plus basis mitigates the fuel-pricing risk for NTPC, absence of captive blocks increases the fuel-availibility risk which might force NTPC to resort to higher imports or compromise on utilization levels due to Coal India’s inability to ramp up production to meet requirements of coal-based generation. We, however, note that management has expressed confidence in a potential reconsideration by MoC on account of project activity being already undertaken at these blocks.

Exhibit 1: NTPC is currently trading in its historical band Exhibit 2: NTPC is currently trading in its historical band Historical P/B multiple for NTPC (X) Historical P/E multiple for NTPC (X)

4.0 28 26 3.5 24 22 3.0 20 18 2.5 16

2.0 14 12 1.5 10 Feb-07 Feb-08 Feb-09 Feb-10 Feb-11 Feb-07 Feb-08 Feb-09 Feb-10 Feb-11 Aug-06 Aug-07 Aug-08 Aug-09 Aug-10 Aug-11 Aug-06 Aug-07 Aug-08 Aug-09 Aug-10 Aug-11

Source: Company, Kotak Institutional Equities estimates Source: Company, Kotak Institutional Equities estimates

Exhibit 3: NTPC incurred a capex of Rs128 bn in FY2011 against a plan of Rs223 bn Planned and actual capital expenditure for NTPC, March fiscal year-ends, FY2007-12E (Rs bn)

300 Actual Planned

250

200

150

100

50

- FY2007 FY2008 FY2009 FY2010 FY2011 FY2012E

Source: Company, Kotak Institutional Equities

KOTAK INSTITUTIONAL EQUITIES RESEARCH 7 Utilities NTPC

Exhibit 4: MoC cancelled allocation of five coal blocks of NTPC Status of captive blocks allocated to NTPC

Reserves Coal block (mn tons) Status Pakri Barwadih 1,436 Management has guided for commencement of operatons in FY2012E Kerandari 229 Cancelled Chatti Bariatu 243 Cancelled Dulanga 260 Talaipalli 965 Chhati Bariatu South 354 Cancelled Brahmini 1,900 Cancelled Chichro Patsimal 356 Cancelled Total cancelled 3,082 Balance 2,661

Note: Brahmini and Chindro Pastimal are held in a JV with Coal India Ltd

Source: Company, Kotak Institutional Equities

Exhibit 5: Slippages in execution remains a key risk to our earnings estimates Status of NTPC’s projects under construction

Capex (Rs bn) CapacityCOD Cost Up to March Up to March Projects/Units (MW) CEA (Rs bn)2010 FY20112011 (%) Remarks Projects commissioned in FY2011 Jhajjar, Unit 1 500 78.9 Korba Stage III, Unit 7 500 24.5 NCTPP Stage II, Unit 6 490 51.4 Simhadri, Stage II, Unit 3 500 50.4 Farakka, Stage III, Unit 6 500 25.7 Total FY2011 2,490 Projects likely to commission in FY2012 Sipat Stage I, Unit 1 660 Jun-11 83.2 67.5 3.4 70.9 85.2 Unit I commissioned in June 2011 Sipat Stage I, Unit 2 660 Sep-11 83.2 67.5 3.4 70.9 85.2 TG Box up expected by July 2011 Jhajjar, Unit 2 500 Nov-11 78.9 46.4 0.9 47.3 59.9 Box up completed in April 2011 Simhadri, Stage II, Unit 4 500 Dec-11 50.4 29.8 8.9 38.7 76.8 TG Box up expected by Sep 2011 Vallur TPP Stage I, Phase I 1,000 Feb-12 55.5 35.2 13.7 48.9 88.1 TG erection started for both units Total FY2012 3,320 Projects likely to commission in FY2013 Jhajjar, Unit 3 500 Apr-12 78.9 46.4 0.9 47.3 59.9 Slow progress on TG erection Sipat Stage I, Unit 3 660 Apr-12 83.2 67.5 3.4 70.9 85.2 TG box up expected by Aug 2011 Bongaigaon TPP Unit 1 250 Aug-12 43.8 10.8 9.6 20.4 46.7 Slow progress on civil front Mauda TPP 1,000 Nov-12 54.6 10.5 13.4 23.9 43.8 Boiler erection started for both the units. Vallur TPP Stage I, Phase II 500 Dec-12 30.9 2.1 1.8 3.9 12.7 Boiler erection commenced Vindhyanachal STPP 1,000 Jan-13 59.2 7.5 11.3 18.8 31.7 Boiler erection commenced for both units Rihand STPP 1,000 Jan-13 62.3 6.0 11.3 17.3 27.7 TG erection commenced for both units Total FY2013 4,910 Other projects under construction Bongaigaon TPP Unit 2 250 Jul-13 43.8 10.8 9.6 20.4 46.7 TG Erection expected to start by Sep 2011 Bongaigaon TPP Unit 3 250 Nov-13 43.8 10.8 9.6 20.4 46.7 Boiler erection expected to start by Aug 2011 Barh STPP Stage II 1,320 Sep-13 73.4 9.6 Boiler erection commenced for both the units

Barh STPP 1,980 Dec-13 86.9 46.6 Boiler erection started fro unit 3, still to be finalized for unit 1

Nabinagar TPP 1,000 Feb-14 53.5 Land acquisition in progress. Muzaffarpur-II 390 FY2015 Koldam (Hydro) 800 FY2016 Tapovan (Hydro) 520 FY2016 Total 6,510 Grand total under construction 14,080

Notes: (a) Project cost and capex mentioned are for the entire project and not the individual units (b) Commissioning shown is as per CEA's project montioring report as of July 2011

Source: Company, Kotak Institutional Equities estimates

8 KOTAK INSTITUTIONAL EQUITIES RESEARCH NTPC Utilities

Exhibit 6: Profit model, balance sheet, cash model of NTPC 2008-13E, March fiscal year-ends (Rs mn)

2008 2009 2010 2011 2012E 2013E Profit model (Rs mn) Net sales 370,910 419,752 463,777 548,740 608,491 673,718 EBITDA 108,176 98,989 117,076 123,105 149,933 174,527 Other income 29,203 30,607 28,562 43,738 22,738 15,716 Interest (10,678) (13,396) (11,080) (21,491) (22,464) (25,075) Depreciation (21,385) (23,645) (26,501) (24,857) (30,672) (36,697) Pretax profits 105,316 92,555 108,057 120,496 119,535 128,471 Tax (28,401) (11,582) (21,573) (29,470) (27,217) (29,919) Net profits 76,915 80,973 86,484 91,026 92,318 98,551 Extraordinary items (2,752) 1,040 798 — — — Earnings per share (Rs) 9.3 9.8 10.5 11.0 11.2 12.0

Balance sheet (Rs mn) Total equity 526,386 573,701 624,375 678,923 738,840 802,803 Deferred taxation liability 13,735 15,704 14,347 10,947 10,947 11,007 Total borrowings 274,460 346,223 378,581 431,882 553,975 685,747 Currrent liabilities 79,299 106,886 107,581 130,729 141,479 153,629 Total liabilities and equity 893,880 1,042,514 1,124,884 1,252,482 1,445,241 1,653,186 Cash 149,332 162,716 144,595 161,853 16,191 3,487 Current assets 106,156 146,537 163,562 192,115 203,886 218,128 Total fixed assets 485,720 593,426 668,656 775,066 1,088,170 1,318,577 Investments 152,672 139,835 148,071 123,448 136,994 112,994 Total assets 893,880 1,042,514 1,124,884 1,252,482 1,445,241 1,653,186

Free cash flow (Rs mn) Operating cash flow, excl. working capital 95,555 105,734 113,764 115,883 122,990 135,248 Working capital (8,439) (12,776) (16,299) (5,840) (101) (2,577) Capital expenditure (82,232) (131,351) (101,731) (131,267) (343,776) (267,104) Investments 8,271 12,837 (8,236) 24,623 (13,546) 24,000 Free cash flow 13,155 (25,556) (12,502) 3,398 (234,433) (110,433)

Source: Company, Kotak Institutional Equities estimates

KOTAK INSTITUTIONAL EQUITIES RESEARCH 9

REDUCE Jindal Steel and Power (JSP)

Metals & Mining SEPTEMBER 05, 2011 UPDATE Coverage view: Attractive

Still not attractive enough. We maintain our long-standing REDUCE rating despite Price (Rs): 534 recent 16% correction in the stock price. Slow pace of execution in expansion projects Target price (Rs): 595 in the steel and power segment will likely lead to downgrade in consensus earnings BSE-30: 16,713 expectations. We lower our FY2013E and FY2014E EBITDA by 3.3% and 3.5%, respectively. We lower end-FY2013E fair value to Rs595 from Rs650 earlier; cut is evenly distributed between power and steel segment.

Company data and valuation summary Jindal Steel and Power Stock data Forecasts/Valuations 2011 2012E 2013E 52-week range (Rs) (high,low)756-450 EPS (Rs) 40.2 43.5 52.9 Market Cap. (Rs bn) 499.0 EPS growth (%) 5.1 8.2 21.6 Shareholding pattern (%) P/E (X) 13.3 12.3 10.1 Promoters 58.4 Sales (Rs bn) 131.1 182.4 201.4 FIIs 23.0 Net profits (Rs bn) 37.5 40.6 49.4 MFs 2.0 EBITDA (Rs bn) 63.9 71.8 84.9 Price performance (%) 1M 3M 12M EV/EBITDA (X) 9.9 9.2 7.9 Absolute (1.1) (16.5) (21.9) ROE (%) 30.9 25.5 24.4 Rel. to BSE-30 2.4 (8.2) (14.8) Div. Yield (%) 0.3 0.3 0.3

Near-term growth to be constrained by slow pace of execution

JSPL has a strong pipeline of projects that can drive growth for the next few years. However, execution hiccups will likely lead to lower earnings growth from captive power capacities in the near tem. Lack of open access (for external sale) and interim operations based on raw coal (instead of middlings) for CPPs in Angul could further hurt earnings. Even in the steel segment, the company has delayed commissioning of gas-based DRI plant in Angul by 3-6 months; it is unreasonable to expect any contribution from the Angul steel plant in FY2013E. We expect modest earnings growth over the next two years; growth will be primarily driven by (1) higher pellet sales and (2) growth from Shadeed project in Oman.

Limited visibility on Tamnar expansion and other coal-based projects

Progress on JPL’s planned projects including Tamnar expansion of 2,400 MW has been muted. Although the project has now obtained formal environmental clearance (though only for 1,200 MW), the construction at site is yet to gain traction. Management guidance for commissioning of first unit by March 2013 appears aggressive. Further, on account of limited visibility on fuel availability for second phase of 1,200 MW and no environmental clearance, we have excluded the second phase from our fair value estimate of JSPL’s power business. Further, we do not see any traction on the 1,980 MW of additional capacities (and their associated captive blocks) planned to be built in Jharkhand, across two locations—Gudda and Dumka (see Exhibit 3).

Retain REDUCE rating, target price cut to Rs595

Our long-standing REDUCE rating was based on (1) execution risks to expansion projects and (2) expensive valuations. While the recent stock price correction largely addresses the valuation concern, delays in project execution still does not appear priced in. We cut FY2012/13E earnings estimate by 3.7%/4.2% to Rs43.5/52.9. Cut in estimate is on the back of (1) delay in commissioning of CPPs of JSPL and (2) marginal adjustments after updation of FY2011 annual report. We cut end-FY2013E-based fair value to Rs595 from Rs650 earlier. We value steel business at Rs292, Jindal Power at Rs236 and CPP at Rs67.

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

Jindal Steel and Power Metals & Mining

Further details on earnings revision and valuation

We value JSPL’s power business at Rs304/share (Rs282 bn) based on March 2013 SOTP. Our valuation comprises (1) Rs191/share (Rs178 bn) for the 1,000 MW merchant power plant (Tamnar I), (2) Rs45/share (Rs42 bn) as value from the proposed 1,200 MW merchant power plant at Raigarh (only the first phase) and (3) Rs67/share (Rs62 bn) for the 1,350 MW captive power plant being built in Angul and Raigarh—we assume that power generated from eight of these units will be sold entirely on a merchant basis (while two units will be used for captive consumption). Our valuation implies a P/E of 16.6X FY2012E EPS and 13.6X on FY2013E EPS.

We value steel business at Rs292, valuing the business at 6.25X FY2013E EBITDA. We adjust CWIP from steel business expansion in Orissa to arrive at the adjusted debt number for valuing steel business.

Exhibit 1: Jindal Steel and Power (consolidated), Change in estimates, March fiscal year-ends, 2012E-14E (Rs mn)

Revised estimates Old estimates % change 2012E 2013E 2014E 2012E 2013E 2014E 2012E 2013E 2014E Consolidated Net sales 182,360 201,372 247,386 170,086 193,950 235,260 7.2 3.8 5.2 EBITDA 71,774 84,923 103,731 71,811 87,816 107,449 (0.1) (3.3) (3.5) EPS (Rs) 43.5 52.9 58.8 45.2 55.2 59.9 (3.7) (4.2) (1.9)

Source: Kotak Institutional Equities estimates

Exhibit 2: Jindal Steel and Power, SOTP-based valuation, March 2012E (Rs mn)

EBITDA Multiple Enterprise value (Rs mn) (X) (Rs mn) (Rs/share) Steel business 272,732 292 Steel business (extant business) 52,374 6.25 327,334 350 Less: Net debt of steel business 54,602 58 Power business 282,630 304 Jindal Power (100% subsidiary) -1000 MW 191 Incremental 2,400 MW 45 Sale of surplus power from 1,350 MW under construction at Raigarh and Angul 67 Arrived market capitalization 595 Target price (Rs/share) 595

Source: Kotak Institutional Equities estimates

KOTAK INSTITUTIONAL EQUITIES RESEARCH 11 Metals & Mining Jindal Steel and Power

Exhibit 3: Project profile of JPL

Gross Estimated capacity cost Amount deployed Environmental Fuel Financial Projects Type (MW) Estimated CoD (Rs bn) (Rs bn) (%) Landclearance arrangement closure Comment Tamnar I Thermal 1,000 Operational 43.4 99 9 9Already operational Tamnar II (Phase I) Thermal 1,200 Sep-2013 67.1 15.1 22.5 WIP 9 WIP WIP Fuel linkage available for first 1,200 MW Tamnar II (Phase II) Thermal 1,200 2015 67.1 0.0 0.0 WIP X WIP WIP Fuel linkage available for first 1,200 MW Dumka Thermal 1,320 2015 72.2 2.9 4.0 WIP X WIP X Captive coal block Godda Thermal 660 2015 36.7 0.0 0.0 WIP X WIP X Captive coal block Etalin Hydro 4,000 2020 218.2 2.5 1.1 XX NA X Under planning Attunli Hydro 500 2020 41.7 0.2 0.4 XX NA X Under planning Subansiri Hydro 1,600 2018 112.0 0.8 0.7 XX NA X Under planning Total 11,480 658.3 21.4

Note: Projects highlighted has not been included in our fair vale estimate

Source: Kotak Institutional Equities estimates

Exhibit 4: Jindal Steel and Power, Key assumptions, March fiscal year-ends, 2008-13E

2009 2010 2011 2012E 2013E 2014E Production volume (tonnes) Sponge iron 1,248,511 1,309,408 1,619,840 2,767,600 2,767,600 4,167,600 Mild Steel 1,578,790 1,964,032 2,274,870 2,465,000 2,668,000 3,773,000 Hot metal/pig iron 1,262,261 1,508,502 1,652,592 1,666,500 1,683,000 1,666,500 Parallel flange/beam 345,408 369,367 372,581 412,500 487,500 525,000 Plate 558,040 736,600 735,596 800,000 1,000,000 1,250,000 Sales volume (tonnes) Sponge iron 385,583 343,369 263,895 1,648,650 1,435,760 1,570,610 Mild Steel 569,919 670,315 668,087 804,600 713,780 1,487,080 Hot metal/pig iron 280,419 245,193 201,688 16,135 1,291 103 Parallel flange/beam 379,770 334,804 379,570 412,500 487,500 525,000 Plate 565,740 693,526 681,221 800,000 1,000,000 1,250,000 Sales realization (Rs/tonne) Sponge iron 16,538 13,171 20,677 21,806 21,677 20,600 Mild Steel 35,265 27,976 34,634 35,353 35,131 33,763 Hot metal/pig iron 25,026 19,337 23,693 26,850 26,463 25,094 Parallel flange/beam 43,888 34,118 37,571 42,065 41,975 40,606 Plate 38,676 31,391 36,779 39,828 39,694 38,325

Source: Company, Kotak Institutional Equities estimates

12 KOTAK INSTITUTIONAL EQUITIES RESEARCH Jindal Steel and Power Metals & Mining

Exhibit 5: Jindal Steel & Power (consolidated), Profit model, balance sheet and cash flow model, March fiscal year-ends, 2008-2013E (Rs mn)

2009 2010 2011 2012E 2013E 2014E Profit model (Rs mn) Net sales 108,510 110,915 131,116 182,360 201,372 247,386 EBITDA 51,695 58,477 63,926 71,774 84,923 103,731 Other income 624 603 820 1,321 2,530 4,150 Interest (4,567) (3,576) (3,356) (4,953) (7,419) (14,755) Depreciaiton (9,641) (9,970) (11,510) (13,647) (14,854) (19,322) Profit before tax 38,111 45,405 49,880 54,495 65,180 73,803 Taxes (8,040) (9,189) (11,840) (13,274) (15,219) (18,102) Net profit 30,072 36,216 38,040 41,221 49,962 55,701 Share in profit/(loss) of associates 396 139 158 — — — Minority interest (10) (755) (659) (594) (576) (745) Profit after tax and minority interest 30,457 35,600 37,539 40,627 49,386 54,956 Earnings per share (Rs) 32.8 38.2 40.2 43.5 52.9 58.8

Balance sheet (Rs mn) Equity 70,515 104,168 141,103 180,090 227,837 281,153 Deferred tax liability 7,170 8,455 10,055 11,055 11,715 14,520 Total Borrowings 81,133 86,043 139,766 167,631 195,003 193,366 Current liabilities 34,194 50,900 67,649 63,823 63,576 67,274 Minority interest 45 1,659 2,335 2,928 3,504 4,249 Total liabilities 193,057 251,224 360,907 425,527 501,633 560,562 Net fixed assets 126,863 178,444 248,844 313,781 369,340 393,070 Goodwill 363 1,007 1,018 1,018 1,018 1,018 Investments 5,139 3,185 2,979 9,156 25,192 25,192 Cash 6,694 1,128 4,802 723 5,173 33,645 Other current assets 53,967 67,383 103,061 100,646 100,707 107,434 Miscellaneous expenditure 31 78 204 204 204 204 Total assets 193,057 251,224 360,907 425,527 501,633 560,562

Free cash flow (Rs mn) Operating cash flow excl. working capital 47,939 51,737 53,621 55,867 65,476 77,829 Working capital changes (9,152) 4,010 (13,300) (1,411) (309) (3,028) Capital expenditure (37,176) (62,419) (81,069) (78,584) (70,413) (43,052) Free cash flow 1,611 (6,672) (40,748) (24,128) (5,246) 31,748

Ratios Debt/equity 1.2 0.9 1.0 1.0 0.9 0.7 Net debt/equity 1.0 0.8 0.9 0.9 0.7 0.5 RoAE (%) 56.7 41.1 30.9 25.5 24.4 21.7 RoACE (%) 26.3 22.5 17.0 14.1 14.2 14.6

Source: Company, Kotak Institutional Equities estimates

KOTAK INSTITUTIONAL EQUITIES RESEARCH 13

ADD Mahindra & Mahindra (MM)

Automobiles SEPTEMBER 05, 2011 UPDATE Coverage view: Cautious

Market share gains likely to support volume growth. We believe M&M is likely to Price (Rs): 769 increase its market share in both utility vehicle and tractor segments in FY2012E. Bolero Target price (Rs): 900 and Scorpio volumes have grown by >30% yoy between April and August 2011 which BSE-30: 16,713 has led to a 7.4% increase in market share for M&M. M&M has also increased its tractor market share by 2.2% in 1QFY12, which we believe is sustainable. We maintain our ADD rating and increase our target price to Rs900 (from Rs830 earlier).

Company data and valuation summary Mahindra & Mahindra Stock data Forecasts/Valuations 2011 2012E 2013E 52-week range (Rs) (high,low)826-584 EPS (Rs) 41.7 46.9 52.2 Market Cap. (Rs bn) 472.2 EPS growth (%) 22.7 12.5 11.2 Shareholding pattern (%) P/E (X) 18.4 16.4 14.7 Promoters 24.9 Sales (Rs bn) 234.9 290.5 336.4 FIIs 30.0 Net profits (Rs bn) 25.6 28.8 32.0 MFs 4.3 EBITDA (Rs bn) 34.7 40.7 45.3 Price performance (%) 1M 3M 12M EV/EBITDA (X) 14.1 12.0 10.5 Absolute 17.7 15.1 22.1 ROE (%) 27.3 24.5 22.6 Rel. to BSE-30 21.9 26.6 33.1 Div. Yield (%) 1.5 1.2 1.2

Strong volume growth likely to aid in robust expansion in earnings

Between April and August in FY2012, M&M’s utility vehicle volumes have grown by 17% yoy gaining 7.4% market share driven by strong performance from Bolero and Scorpio models. We estimate 11% yoy growth in volumes for the domestic utility vehicle segment over September 2011-March 2012 due to stiff base effect in 2HFY12E. We believe M&M will be able to retain its market share in 2HFY12E due to refreshed versions of Xylo, Scorpio and the global SUV.

We estimate domestic tractor industry volume growth of 13% yoy in FY2012E and believe M&M will gain 150 bps market share in FY2012E. We estimate a 17% yoy increase in M&M’s domestic tractor volume estimates for FY2012E. Mahindra & Mahindra has gained 220 bps market share yoy in 1QFY12 driven by strong growth in West and South India where M&M has close to 48-54% market share, higher than its overall market share of 43%. South and West regions have grown by 38% and 25% yoy, respectively, in 1QFY12.

We revise our target price to Rs900 (from Rs830 earlier)

We have increased our earnings estimates by 4% in FY2013E factoring in 2-3% increase in our volume estimates, primarily reflecting increase in our utility vehicle volume estimates by 2%. We have increased our target price to Rs900 (from Rs830 earlier) based on sum of the parts valuation methodology. We value the standalone business at Rs698/share (at 14X FY2013E parent earnings less dividend from subsidiaries) and subsidiaries at Rs201/share.

Key risks to our call include: (1) Increase in tax on passenger diesel vehicles by the government, (2) rising agricultural NPAs which could pose a threat to the tractor volume growth and (3) sharp rise in commodity costs.

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

Mahindra & Mahindra Automobiles

Maintain our ADD rating; raise target price to Rs900 (from Rs830 earlier)

We maintain our ADD rating on the stock and increase our target price to Rs900 (from Rs830 earlier) based on 4% increase in our earnings estimates over FY2012-13E. Our target price is based on the sum of the parts valuation methodology. We value the standalone business at Rs698/share (at 14X FY2013E parent earnings less dividend from subsidiaries) and subsidiaries at Rs201/share. We have increased our PE multiple from 13X to 14X for the same business due to improved visibility in the market share gains in the utility vehicle segment.

We have increased our earnings estimates by 4% in FY2013E factoring in 2-3% increase in our volume estimates, primarily reflecting increase in our utility vehicle volume estimates by 2%. Between April and August in FY2012, M&M’s utility vehicle volumes have grown by 17% yoy gaining 7.4% market share driven by strong performance from Bolero and Scorpio models. We estimate 11% yoy growth in volumes for the domestic utility vehicle segment over September 2011-March 2012 due to stiff base effect in 2HFY12E. We believe M&M will be able to retain its market share in 2HFY12E due to refreshed versions of Xylo, Scorpio and the global SUV.

We estimate domestic tractor industry volume growth of 13% yoy in FY2012E and believe M&M will gain 150 bps market share in FY2012E. We estimate a 17% yoy increase in M&M’s domestic tractor volume estimates for FY2012E. Mahindra & Mahindra has gained 220 bps market share yoy in 1QFY12 driven by strong growth in West and South India where M&M has close to 48-54% market share, higher than its overall market share of 43%. South and West regions have grown by 38% and 25% yoy, respectively, in 1QFY12 while North region has grown at a muted 1.1% yoy and East region has seen a decline of 2.5% yoy in 1QFY12. Tamil Nadu, Karnataka and Andhra Pradesh have grown in the range of 35- 60% yoy in 1QFY12 while Gujarat has grown by 79% yoy in 1QFY12. M&M has a dominant market share in these regions which has led to an increase in its market share in 1QFY12. Escorts has lost market share to TAFE and M&M.

We revise our earnings upwards by 4% in FY2013E due to upward revision in volume estimates Earnings revision table, March fiscal year-ends, 2012-2013E

NewOld % change 2012E 2013E 2012E 2013E 2012E 2013E Volumes (units) 670,823 761,910 661,197 741,659 1.5 2.7 Net sales 290,544 336,466 287,580 328,359 1.0 2.5 EBITDA 40,670 45,328 40,545 43,877 0.3 3.3 EBITDA margin (%) 14.0 13.5 14.1 13.4 Profit after tax 28,813 32,032 28,719 30,944 0.3 3.5 EPS FD 46.9 52.2 46.8 50.4 0.3 3.5 EPS FD (ex subs dividends) 44.9 49.9 44.7 48.1 0.4 3.7

Source: Kotak Institutional Equities estimates

KOTAK INSTITUTIONAL EQUITIES RESEARCH 15 Automobiles Mahindra & Mahindra

Strong growth in Bolero and Scorpio models driving market share gains in utility vehicle segment Mahindra utility vehicle segment performance, March fiscal year-ends, April-August 2012 (units)

Model Apr-Aug12 Apr-Aug11 yoy growth (%) Bolero 30,910 23,554 31.2 Scorpio 16,054 12,084 32.9 Xylo 9,893 10,624 (6.9) Hard and Soft Tops (Commander, Marshall, Maxx) 2,694 4,673 (42.3) M&M 59,551 50,935 16.9

Toyota Innova 15,906 17,859 (10.9) GM Tavera 7,108 5,915 20.2 Tata Sumo 6,264 8,838 (29.1) Tata Safari 4,464 4,063 9.9 Total utility vehicles 103,382 101,350 2.0 M&M mkt shr (%) 57.6 50.3

Source: Crisil estimates

We value M&M at Rs900 based on sum-of-the-parts valuation methodology M&M sum-of-the-parts valuation methodology

Value per EPS Multiple share (Rs/share) (X) (Rs) Comment M&M standalone business 49.9 14.0 698 Based on 14X FY2013E EPS less dividend income from subs Subsidiaries 201 Tech Mahindra 47 Based on KIE target price of Rs 600/share Mahindra Holidays 32 Based on current price of Rs350/share M&M Financial Services Ltd 63 Based on KIE target price of Rs825/share Mahindra Lifespace Developers Ltd 12 Based on KIE target price of Rs450/share Mahindra Forgings 4 Based on current price of Rs66/share Mahindra Navistar Automotive 5 Based on FY2011 book value at 51% stake Mahindra two wheelers 2 Based on FY2011 book value Ssangyong Motors 34 Based on investment made by M&M in the firm of 463 mn dollars SOTP-based value 899 Target price 900

Source: Kotak Institutional Equities estimates

We expect a 16% CAGR in volumes over FY2011-2013E Volume mix, March fiscal year-ends, 2009-2014E (units)

2009 2010 2011 2012E 2013E 2014E Utility Vehicles - domestic 153,655 214,128 230,110 262,325 301,674 346,925 Utility Vehicles - exports 8,500 10,567 19,042 27,611 33,133 38,103 Utility vehicles 162,155 224,695 249,152 289,936 334,807 385,028 Maxximo + Gio 12,639 44,683 62,556 71,940 82,731 3-wheelers 44,533 44,785 62,142 68,356 75,192 81,207 Auto division 206,688 282,119 355,977 420,849 481,939 548,966 Tractors 95,348 174,634 213,653 249,974 279,971 302,369 Total vehicles 302,036 456,753 569,630 670,823 761,910 851,335 Growth (yoy %) Utility Vehicles - domestic 3.3 39.4 7.5 14.0 15.0 15.0 Utility Vehicles - exports (31.2) 24.3 80.2 45.0 20.0 15.0 Utility vehicles 0.6 38.6 10.9 16.4 15.5 15.0 Maxximo + Gio 253.5 40.0 15.0 15.0 3-wheelers 31.3 0.6 38.8 10.0 10.0 8.0 Auto division 6.0 36.5 26.2 18.2 14.5 13.9 Tractors (3.4) 83.2 22.3 17.0 12.0 8.0 Total vehicles 2.8 51.2 24.7 17.8 13.6 11.7

Source: Company, Kotak Institutional Equities estimates

16 KOTAK INSTITUTIONAL EQUITIES RESEARCH Mahindra & Mahindra Automobiles

We forecast a 12% CAGR in earnings over FY2011-2013E Mahindra and Mahindra, profit and loss, balance sheet and cash flow model, March fiscal year-ends, 2009-2014E (Rs mn)

2009 2010 2011 2012E 2013E 2014E Profit model (Rs mn) Net sales 130,937 186,021 234,937 290,544 336,446 384,347 EBITDA 10,926 29,552 34,655 40,670 45,328 50,055 Other income 2,703 1,994 3,095 1,792 1,942 2,092 Interest (453) (278) 503 530 737 1,326 Depreciation (2,915) (3,708) (4,139) (4,575) (5,298) (6,024) Profit before tax 10,262 27,560 34,114 38,417 42,709 47,449 Current tax (585) (7,493) (7,617) (9,604) (10,677) (11,862) Deferred tax (1,412) (97) (958) — — — Net profit 8,368 20,878 26,714 28,813 32,032 35,587 Adjusted net profit 8,368 20,878 25,619 28,813 32,032 35,587 Adjusted earnings per share (Rs) 14.0 33.9 41.7 46.9 52.2 58.0 Adjusted earnings per share ex subs dividends (Rs) 11.8 32.5 39.7 44.9 49.9 55.4 Balance sheet (Rs mn) Equity 52,621 80,671 106,678 128,860 154,261 183,217 Total Borrowings 40,528 28,802 24,053 18,293 18,293 18,293 Current liabilities 47,978 52,000 67,676 79,262 89,210 99,727 Total liabilities 141,126 161,473 198,406 226,415 261,764 301,237 Net fixed assets 32,143 37,027 43,719 52,144 59,846 64,821 Investments 57,864 63,980 93,253 100,753 108,253 115,753 Cash 15,744 17,432 6,146 3,380 12,340 27,595 Other current assets 35,249 42,992 55,288 70,139 81,326 93,068 Miscellaneous expenditure 126 41 — — — — Total assets 141,126 161,473 198,406 226,415 261,764 301,237 Free cash flow (Rs mn) Operating cash flow excl. working capital 10,395 23,409 27,724 31,065 34,650 38,192 Working capital changes 5,918 (45) 2,074 (1,868) (1,240) (1,225) Capital expenditure (9,152) (9,607) (12,070) (13,000) (13,000) (11,000) Free cash flow 7,161 13,758 17,728 16,197 20,411 25,968 Ratios EBITDA margin (%) 8.3 15.9 14.8 14.0 13.5 13.0 PAT margin (%) 6.4 11.2 11.4 9.9 9.5 9.3 Debt/equity (X) 0.8 0.4 0.2 0.1 0.1 0.1 Net debt/equity (X) 0.5 0.1 0.2 0.1 0.0 (0.1) Book Value (Rs/share) 89.1 135.4 173.7 209.9 251.2 298.4 RoAE (%) 17.1 30.0 27.3 24.5 22.6 21.1 RoACE (%) 10.6 19.9 21.0 20.5 19.7 18.5

Source: Company, Kotak Institutional Equities estimates

KOTAK INSTITUTIONAL EQUITIES RESEARCH 17

ADD IRB Infrastructure (IRB)

Infrastructure SEPTEMBER 06, 2011 UPDATE Coverage view: Cautious

Retain ADD as large opportunity is offset by competition, low toll collection. We Price (Rs): 159 revise our target price on IRB to Rs185 (from Rs220) based on a higher-cost-of-capital Target price (Rs): 185 assumption (to reflect various risks in the environment) and shift to Sept-12E based BSE-30: 16,713 valuation (from March-13E based related to change in rating system). We retain our ADD rating on the company despite reasonable valuation (1.8X FY2012E P/B) as the large sector opportunity is offset by increasing competition and higher traffic risks.

Company data and valuation summary IRB Infrastructure Stock data Forecasts/Valuations 2011 2012E 2013E 52-week range (Rs) (high,low)296-132 EPS (Rs) 13.6 10.6 13.8 Market Cap. (Rs bn) 52.9 EPS growth (%) 17.4 (22.3) 30.2 Shareholding pattern (%) P/E (X) 11.7 15.1 11.6 Promoters 74.8 Sales (Rs bn) 24.4 34.5 45.2 FIIs 13.4 Net profits (Rs bn) 4.5 3.5 4.6 MFs 3.1 EBITDA (Rs bn) 10.9 13.5 16.7 Price performance (%) 1M 3M 12M EV/EBITDA (X) 7.9 8.0 6.8 Absolute (2.7) 2.4 (43.6) ROE (%) 19.3 11.7 11.8 Rel. to BSE-30 0.7 12.6 (38.5) Div. Yield (%) 0.9 0.0 0.0

Revise target price to Rs185 on higher discount rate and Sept-based FCFE

We have revised our target price to Rs185/share from Rs220/share based on an increase in the discount rate for road projects to 13.5% from 12.5% earlier and shift to Sept-12-based valuation (earlier Mar-13E based) - related to a change in the rating system (on a one-year forward DCF valuation). We have increased our cost of capital assumption to reflect (1) higher risk on base-case traffic growth estimates, (2) lower-than-expected base-year toll collections in new projects, (3) aggressive bidding in recent projects and (4) higher interest rate environment

Retain ADD as competition affords low returns in incremental projects with risks

We retain our ADD rating despite large sectoral opportunity as increased competition and higher traffic risks afford low returns in incremental projects despite the company’s strengths in terms of balance sheet and execution capability. Key business risks include (1) low margin of safety on several key variables (such as traffic growth) affecting project viability and (2) narrow spread and back-ended returns on a large capital investment. IRB (at Rs160/share) is presently trading at a reasonable valuation of about 1.8X FY2012E P/B and 1.6X FY2013E P/B.

Intense competition in the sector - demonstrated by recent aggressive bids for NHAI projects

Competition in road project bids remains very stiff with several projects going on relatively high premium. For instance, L&T’s bid for the Beawar-Pali-Pindwara project (won at a premium of Rs3.1 bn), IRB’s bid for Ahmedabad-Vaddodara project and GMR’s Kishangarh-Udaipur-Ahmedabad road project (won at a significant premium of Rs6.36 bn). Recent project awards have resulted in net revenue gain of about Rs64 bn NPV to the government.

Likely to remain equity surplus though high dependence on Mumbai-Pune project continues

Even including the equity requirement of the recent project, cash flows from the operational projects and construction arm are likely to be more than sufficient. However, new projects do not meaningfully contribute to FCFE even till FY2018E, leading to over-dependence on Mumbai-Pune. Toll collections (adjusted for hike in tariff rates) remains below par in key projects (Mumbai-Pune, Surat-Dahisar and Bharuch-Surat).

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

IRB Infrastructure Infrastructure

Revise target price to Rs185 on higher discount rate and Sept-based FCFE

We have revised our target price to Rs185/share from Rs220/share based on (1) increase in discount rate for road projects to 13.5% from 12.5% earlier to reflect higher risk on traffic growth estimates, lower-than-expected base-year toll collections in new projects, aggressive bidding in recent projects and higher interest rate environment and (2) shift to Sept-12- based valuation (from Mar-13E based earlier) - related to change in rating system (on a one- year forward DCF valuation).

Our SOTP-based target price of Rs185/share comprises (1) Sept-12 based FCFE of projects – Rs129/share, (2) construction value – Rs48/share based on NPV of cash flows till FY2015E, and (3) Rs9 from real estate and net cash on standalone balance sheet (at end-FY2011).

We value IRB at Rs185/share based on SOTP SOTP-based valuation of IRB Infrastructure

Net asset IRB's Value of Contribution Per share Value stake IRB's stake to value of IRB contribution (Rs mn) (%) (Rs mn) (%) (Rs) Asset valuation methodology Roads 42,001 41,965 69.1 126 FCFE 4 BOT projects 3,839 100 3,839 6.3 12 FCFE based on Sept-FY12E Kharpada Bridge 165 100 165 0.3 0 FCFE based on Sept-FY12E Nagar - Karmala - Tembhurni 784 100 784 1.3 2 FCFE based on Sept-FY12E Pune - Solapur 797 100 797 1.3 2 FCFE based on Sept-FY12E Pune - Nashik 1,713 100 1,713 2.8 5 FCFE based on Sept-FY12E Mumbai - Pune 14,435 100 14,435 23.8 43 FCFE based on Sept-FY12E Thane - Ghodbunder 2,057 100 2,057 3.4 6 FCFE based on Sept-FY12E Bharuch - Surat 521 100 521 0.9 2 FCFE based on Sept-FY12E Surat-Dahisar 363 90 327 0.5 1.0 FCFE based on Sept-FY12E Kolhapur urban road project 2,849 100 2,849 4.7 9 FCFE based on Sept-FY12E Panaji to Goa Karnataka Border 1,661 100 1,661 2.7 5 FCFE based on Sept-FY12E Amritsar to Pathankot 3,946 100 3,946 6.5 12 FCFE based on Sept-FY12E Jaipur - Tonk - Deoli 4,376 100 4,376 7.2 13 FCFE based on Sept-FY12E Talegaon to Amravati 2,873 100 2,873 4.7 9 FCFE based on Sept-FY12E Tumkur-Chitradurg 1,622 100 1,622 2.7 5 FCFE based on Sept-FY12E Construction 15,788 100 15,788 26.0 48 EV/EBITDA of 6X Mar-FY12E Real Estate 880 880 1.4 3 Book value of investment Net std. cash adj for advances to subs 2,084 100 2,084 3.4 6 Est. balance at end-FY2011E Grand total 60,753 60,717 100.0 183 SOTP Target price 185

Source: Company, Kotak Institutional Equities estimates

Retain ADD as competition affords low returns in incremental projects with risks

We retain our ADD rating on the company as increased competition and higher traffic risks affords low returns in incremental projects despite the company’s strengths in terms of balance sheet and execution capability.

` Margin of safety low on several key variables effecting project viability. We believe narrow spreads provide a low margin of safety on variables such as (1) base traffic, (2) traffic growth (7% growth till FY2020E and 6% thereafter) – several projects have reported lower growth recently, (3) traffic shift – higher toll on NH8 can drive a more- than-expected shift, (4) inflation related toll increase, (5) debt funding (assumed at 10.5%) and associated costs.

` Narrow spread and very back ended returns on a large capital investment. Intense competition in recent project wins implies that returns provide narrow spreads and are likely to be back-ended (Recent Ahmedabad-Vadodara project win at narrow spread of 13% and FCFE break-even in FY2030E). We believe the company would be able to earn the benchmark 16-18% IRR from a project only including in-house construction, returns.

KOTAK INSTITUTIONAL EQUITIES RESEARCH 19 Infrastructure IRB Infrastructure

Valuation appears reasonable at about 1.8X FY2012E P/B

IRB (at Rs152/share) trades at reasonable valuation at about 1.8X FY2012E P/B and 1.6X FY2013E P/B. This is versus our target price implied valuation of 2.1X FY2012E P/B and 1.9X FY2013E P/B.

Lower-than-expected traffic growth and base traffic is a key risk

Lower-than-expected traffic growth and base-year traffic assumption remains a key risk to the value of BOT projects. A 1% lower traffic growth assumption for the full period of the concession period results in 27% lower value for road projects versus our target value and a 15% impact on our target price.

Sensitivity of IRB's BOT valuation and target price to traffic growth and return on equity assumptions

Sensitivity of equity valuation of BOT assets Traffic growth rate (%) 4.0 5.0 6.0 7.0 8.0 Assumed rate -2 27,849 39,411 53,803 70,194 88,861 Expected return on Assumed rate -1 24,119 34,536 47,441 62,072 78,660 equity (base case Assumed rate 20,943 30,374 42,001 55,124 69,937 12.5%) Assumed rate +1 18,227 26,806 37,330 49,155 62,447 Assumed rate +2 15,898 23,737 33,304 44,008 55,990

Sensitivity of SOTP target price based on traffic growth and expected equity returns Traffic growth rate (%) 4.0 5.0 6.0 7.0 8.0 Assumed rate -2 140 175 218 268 324 Expected return on Assumed rate -1 129 160 199 243 293 equity (base case Assumed rate 119 148 183 222 267 12.5%) Assumed rate +1 111 137 169 204 244 Assumed rate +2 104 128 157 189 225

Source: Company, Kotak Institutional Equities estimates

Equity surplus even including recent project; however over-dependence on Mumbai-Pune remains significant

IRB would now have a total project portfolio of 16 road project (including the Ahmedabad- Vadodara project) of which nine are operational and seven are under construction/ development. The under construction/development projects are likely to have a total equity requirement of Rs35 bn over FY2011-18E. We believe this would be more than met by the cash flows from the operational projects (FY2011-18E cumulative FCFE of Rs22 bn) and the construction arm (FY2011-15E cumulative FCFE of Rs19 bn) of the company. A majority of the cash flows from the operational projects is derived from the Mumbai-Pune project (Rs15 bn). The new projects do not meaningfully contribute to the cash flows of the company till FY2018E, leading to continued over-dependence on the Mumbai-Pune project.

20 KOTAK INSTITUTIONAL EQUITIES RESEARCH IRB Infrastructure Infrastructure

New road projects do not contribute meaningfully to FCFE till FY2018E, so over-dependence on Mumbai-Pune remains significant Equity requirement for BOT projects in IRB's portfolio, March fiscal year-ends, 2011-18E (Rs mn)

2011E 2012E 2013E 2014E 2015E 2016E 2017E 2018E Total We have not modelled FCF from construction 2,267 2,908 3,550 4,574 5,495 18,795 construction business post FCF-operational projects (163) 2,066 2,249 2,243 3,249 3,153 4,309 5,094 22,201 FY2015E, that is why this 4 BOT projects 503 513 544 576 488 518 549 69 3,760 row does not carry any cash Kharpada Bridge 32 13 45 48 50 (11) — — 177 flow post FY2015E Nagar - Karmala - Tembhurni 111 95 163 173 183 232 108 — 1,064 Pune - Solapur 82 108 53 121 155 164 172 83 939 Free cash flows from Pune - Nashik 182 166 126 210 250 265 313 178 1,689 operational projects post Mumbai - Pune 193 1,110 1,430 1,638 2,239 1,501 2,867 3,828 14,806 respective debt service Thane - Ghodbunder (437) 257 271 353 374 274 505 534 2,130 requirements. This scales up based on toll & traffic growth Bharuch - Surat 1 (222) 2 (267) (263) 137 (361) (224) (1,196) Surat-Dahisar (830) 25 (385) (609) (226) 73 157 628 (1,167) FCF-under construction projects (3,303) (5,379) (8,174) (4,808) (5,053) (2,884) (3,811) (1,597) (35,008) Kolhapur urban road project (354) (83) 33 84 (274) 11 (99) (92) (774) Panaji to Goa Karnataka Border (489) (1,340) (1,117) 113 145 194 238 343 (1,912) Seven new projects not Amritsar to Pathankot (800) (1,195) (1,508) 110 (176) (48) (677) 439 (3,856) generating significant positive Jaipur - Tonk - Deoli (952) (1,485) (1,854) 222 327 12 (815) 472 (4,072) FCFE cash flows till FY2018E is Talegaon to Amravati (349) (555) (691) 75 145 158 140 (223) (1,300) a concern Tumkur-Chitradurg (360) (720) (720) (892) (769) (622) (457) (932) (5,472) Ahmedabad-Vadodara — — (2,317) (4,521) (4,451) (2,589) (2,141) (1,603) (17,622) Total of cash surplus/ (deficit) (1,198) (405) (2,374) 2,009 3,690 269 498 3,498 5,988 Cash balance at end-FY2010 2,084

Cumulative equity surplus/(deficit) - adj. for cash 8,072

Source: Company, Kotak Institutional Equities estimates

Competition remains stiff with several recent projects won at high premiums

Competition in the road project bids remains very stiff with several projects going on relatively high premium basis. Several smaller, local players have also started bidding, especially for small-sized projects. Intense competition was demonstrated by recent aggressive bids for NHAI projects. For instance, L&T’s bid for the Beawar-Pali-Pindwara project (won at a premium of Rs3.1 bn), IRB’s bid for Ahmedabad-Vaddodara project and GMR’s Kishangarh-Udaipur-Ahmedabad road project (won at a significant premium of Rs6.36 bn).

NHAI management itself surprised by aggressive bids; IRB’s Ahmedabad-Vaddodara project premium is highest ever received by NHAI

NHAI management had indicated that they themselves were a bit surprised by the recent aggressive bids placed by several players. For the recent Ahmedabad-Vaddodara project win by IRB, NHAI had expected the project to be awarded at a premium of about Rs1.75-2 bn versus IRB’s bid of a premium of Rs3 bn. NHAI indicated that recent project awards have resulted in a net revenue gain of about Rs64 bn NPV to the government

KOTAK INSTITUTIONAL EQUITIES RESEARCH 21 Infrastructure IRB Infrastructure

Intense competition demonstrated by recent aggressive bids for NHAI projects Recent winning bids for NHAI projects versus originally estimated by NHAI

Grant/premium Annual premium for Gain in NPV (12% LengthDate of bids TPC (appraised) avg. 20 yrs discount) Project (km)received (Rs mn) (Rs mn) (Rs mn) (Rs mn) Kota-Jhalawar 88 22-Mar-11 5,300 (2,280) 35 2,520 Nagpur-Wainganga 44 18-Apr-11 4,842 (1,060) 274 3,220 Barwa Adda-Panagarh 123 8-Mar-11 16,650 55 (Premium) 1,060 8,040 Dhankuni-Kharagpur 111 25-Feb-11 13,962 339 (Premium) 1,261 7,216 Beawar-Pali-Pindwara 244 18-Mar-11 21,254 240 (Premium) 2,510 18,161 Ahmedabad-Vaddodara 102 22-Mar-11 21,254 55 (Premium) 3,096 24,328 Total 2,650 8,235 63,485

Source: NHAI

Traffic growth at key projects still remains below par

While Bharuch-Surat toll collections picked up in 1QFY12 (though boosted only by toll rate hike), toll collections across the other two key stretches viz. Mumbai-Pune (adjusted for 18% tariff hike) and Surat-Dahisar still remains below par. Toll collections for key stretches were as follows:

` Mumbai-Pune: Toll collections at Mumbai-Pune increased by 23% yoy. Adjusting for the 18% toll rate hike (from April 1, 2011), this implies that traffic growth for the project remained stuck around the 5% mark (in fact reaching sub-5% range) at about 4.2%

` Surat-Dahisar: This project reported toll collections of Rs942 mn, up 6.8% yoy. This implies an average per day toll collection of Rs10.4 mn versus about Rs9.7 mn in 1QFY11. Surat-Dahisar project received a 3.84% toll rate hike in September 2010. Adjusted for this, the toll collections imply a traffic growth of just 2.9% yoy in 1QFY12. The management has stated that this project has received a 10% toll rate hike in Sept-2012 - which would reflect in the toll collections of 3QFY12-onwards.

` Bharuch-Surat: This project recorded a pick up in toll collections, up 12.8% yoy to Rs336 mn in 1QFY12, implying daily collections of Rs3.7 mn/day versus Rs3.3 mn/day in 1QFY11. This is broadly in line with our base-case expectation of inflation + traffic growth of at least 12-13% in NHAI projects. However, adjusted for the 9% hike in toll rates received in Sept 2012, this project saw an implied traffic growth of only about 3.4% - below our base-case assumption of 6% traffic growth.

22 KOTAK INSTITUTIONAL EQUITIES RESEARCH IRB Infrastructure Infrastructure

Toll collection - reported, adjusted for traffic growth, March fiscal year-ends, 2010-1QFY12 (Rs mn)

Toll collection revenues Toll collection (adjusted for tariff hike) Increase in FY2011 FY2010 Growth (%) 1QFY12 1QFY11 Growth (%) 1QFY12 1QFY11 Traffic growth (%) tariff rate (%) Toll collection 9,654 8,425 14.6 2,783 2,345 18.7 2,570 2,345 9.6 4 BOT projects 544 506 7.5 156 133 17.3 156 133 17.3 Kharpada Bridge 74 67 10.4 23 19 21.1 23 19 21.1 Nagar-Tembhurni 146 135 8.1 37 38 (2.6) 37 38 (2.6) Pune - Solapur 144 133 8.3 43 36 19.4 43 36 19.4 Pune - Nashik 212 181 17.1 56 48 16.7 56 48 16.7 Thane - Ghodbunder 294 277 6.1 70 72 (2.8) 70 72 (2.8) MMK 76 63 20.6 20 17 17.6 20 17 17.6 Tumkur-Chitradurga — — NA 114 — NA 114 — NA Mumbai - Pune 3,215 3,063 5.0 986 802 22.9 836 802 4.2 18.0 Surat Dahisar 3,647 3,337 9.3 942 882 6.8 907 882 2.9 3.8 Bharuch-Surat 1,302 663 96.4 336 298 12.8 308 298 3.4 9.0

Source: Company, Kotak Institutional Equities estimates

KOTAK INSTITUTIONAL EQUITIES RESEARCH 23 Infrastructure IRB Infrastructure

Consolidated financials of IRB Infrastructure, March fiscal year-ends, 2007-13E (Rs mn)

2007 2008 2009 2010 2011 2012E 2013E Income statement Total operating income 5,251 7,327 9,919 17,049 24,381 34,531 45,245 Construction 2,373 3,631 5,439 9,835 15,237 23,493 30,718 Toll collection BOT 2,840 3,696 4,480 7,214 9,144 9,916 12,728 Total operating costs (2,449) (3,208) (5,545) (9,058) (13,442) (21,001) (28,577) Construction expenses (1,960) (2,892) (4,988) (8,454) (12,421) (18,794) (25,189) BOT expenses (454) (316) (557) (604) (1,126) (1,302) (1,954) EBITDA 2,802 4,119 4,374 7,991 10,939 13,530 16,668 Other income 229 520 296 490 645 535 1,026 Financial charges (1,387) (1,958) (1,377) (2,494) (3,572) (4,830) (6,361) Depreciation (862) (1,016) (1,144) (1,819) (2,254) (4,156) (4,846) Pre-tax profit 782 1,666 2,149 4,167 5,759 5,078 6,487 Taxation (261) (400) (378) (133) (1,117) (1,588) (1,919) Adjusted PAT 521 1,266 1,772 4,034 4,641 3,490 4,568 EPS (Rs) 1.43.45.311.613.610.613.8 Balance sheet Share holder's funds 3,595 16,191 17,467 20,399 24,326 28,958 33,534 Grant received —————5,1528,432 Minority interest 1,118 281 599 779 896 359 350 Loan funds 25,180 20,213 24,859 29,152 46,255 61,854 73,504 Secured loans 22,404 20,110 24,741 29,035 41,139 61,854 73,504 Unsecured loans 2,776 103 117 117 5,116 — — Total sources of funds 29,886 36,711 43,106 50,597 71,709 96,759 116,247 Net block 24,420 27,737 34,707 43,477 58,707 86,713 101,677 Investments 414 1,985 1,108 451 551 (2,765) (2,765) Cash & bank balances 3,703 5,222 4,147 5,102 12,000 9,485 15,983 Net current assets (ecl. cash) 1,349 1,768 3,135 1,559 443 3,326 1,352 Total application of funds 29,886 36,711 43,106 50,597 71,709 96,759 116,247

Key ratios (%) EBITDA margin 53.4 56.2 44.1 46.9 44.9 39.2 36.8 PAT margin 9.9 17.3 17.9 23.7 19.0 10.1 10.1 Net debt: Equity (X) 6.0 0.9 1.2 1.2 1.4 1.8 1.7 RoE 19.6 11.5 10.4 20.4 20.2 13.2 14.6 RoCE 6.1 7.9 7.2 13.4 12.1 8.1 8.5

Yoy growth (%) Revenues 19.5 39.5 35.4 71.9 43.0 41.6 31.0 EBITDA 54.7 47.0 6.2 82.7 36.9 23.7 23.2 PAT (8.7) 237.3 54.3 119.2 17.4 (22.3) 30.2

Source: Company, Kotak Institutional Equities estimates

24 KOTAK INSTITUTIONAL EQUITIES RESEARCH

REDUCE Bajaj Hindustan (BJH)

Sugar SEPTEMBER 05, 2011 UPDATE Coverage view: Cautious

Maintain REDUCE. BJH has had a meaningful correction but according to us, it is still Price (Rs): 56 too early to take a positive view on account of: (1) Sugar production estimates for the Target price (Rs): 60 next sugar year (October 2011 to September 2012) point to a surplus of ~3 mn tons BSE-30: 16,713 which would lead to subdued prices even in the next year. In our view, government will continue with its policy of allowing exports in small tranches which has been insufficient to shore up domestic prices, and (2) high debt on the balance sheet is a worry keeping in mind that the down-cycle in the commodity may persist. We maintain REDUCE rating with a revised target price of Rs60 at 5.2X March 2013E EBITDA (5.5X earlier).

Company data and valuation summary Bajaj Hindustan Stock data Forecasts/Valuations 2011 2012E 2013E 52-week range (Rs) (high,low)144-50 EPS (Rs) 1.9 3.7 1.6 Market Cap. (Rs bn) 12.8 EPS growth (%) (28.7) 90.5 (57.3) Shareholding pattern (%) P/E (X) 29.2 15.3 35.8 Promoters 35.0 Sales (Rs bn) 32.0 52.4 50.5 FIIs 14.4 Net profits (Rs bn) 0.4 0.8 0.4 MFs 0.1 EBITDA (Rs bn) 4.1 8.8 8.0 Price performance (%) 1M 3M 12M EV/EBITDA (X) 17.8 6.0 5.9 Absolute (7.6) (15.7) (52.7) ROE (%) 1.7 2.7 1.1 Rel. to BSE-30 (4.4) (7.3) (48.4) Div. Yield (%) 1.0 1.0 1.0

Stock has corrected – still too early to change our negative stance

In our view, it is still too early to change our negative stance on BJH despite the stock having corrected by ~50% YTD on account of the following reasons: Sugar production estimates for the next sugar year (October 2011 to September 2012) point to a surplus of ~3 mn tons which would lead to subdued prices even in the next year. Also, the fact that monsoons have been normal (all India area weighted rainfall at 716 mm versus normal rainfall level of 713 mm) means the probability of actual production numbers being very high. A surplus production of ~3 mn tons of sugar will mean subdued prices in the next year (October 2011 to September 2012) which would be a repeat of the current year.

Government policy on exports – more focused on reducing inflation

The government policy of allowing exports in small tranches (0.5 mn tons each) has failed to shore up the domestic price of sugar to remunerative levels. In our view, the aim of the policy is to provide just enough slack to the sugar companies so that the cane arrears (due to the farmers) are minimized and the price of sugar also remains in check. In our view, the government policy would remain the same even in the next year as the focus won’t shift from controlling inflation in basic commodities.

We maintain our REDUCE rating

We are maintaining our REDUCE rating on the company as in our opinion it is not advisable to play the upturn in the cycle by taking exposure to a highly leveraged company in the sector when the turnaround itself could take a long time. We have revised our target price to Rs60 (Rs65 earlier) based on 5.2X March 2013E EBITDA (5.5X earlier).

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

Sugar Bajaj Hindustan

Valuation

We value BJH at Rs60 per share Valuation table for BJH, March 2013E basis (Rs mn)

March-2013E EBITDA 7,980 EV/EBITDA (X) 5.2 EV 41,498 Net Debt 32,059 Equity value 9,439 Fully diluted shares (mn) 228 Treasury shares (mn) 31 Effective no. of shares 197 Value per share (sugar business) (Rs) (a) 48 Power business valued at book value (b) 1500 Valueper share (power business) (Rs) (c) 7.6 Total value per share (a)+(c) 56 Notes: (b) We have assumed 26% stake of BJH in the power business.

Source: Kotak Institutional Equities

Summary financials: Bajaj Hindustan Profit and loss statement, Balance sheet and cash flow model for BJH, September fiscal year-ends (Rs mn)

2007 2008 2009 2010E 2011E 2012E 2013E Profit model Total income 17,805 20,701 20,259 32,014 52,425 50,500 46,517 EBITDA 1,907 2,308 4,214 4,100 8,829 7,986 7,975 Interest (expense)/income (915) (2,071) (2,781) (3,681) (5,241) (4,660) (3,843) Depreciation (1,611) (2,799) (3,457) (3,440) (3,391) (3,424) (3,454) Other income 323 (370) 3,076 1,393 642 633 476 Reported PBT (295) (2,932) 1,051 (1,629) 840 535 1,154 Tax 201 980 (456) 92 — (177) (381) Profit after tax (94) (1,951) 595 (1,537) 840 359 773 Adjusted PAT 20 (1,779) 618 441 840 359 773 Diluted earnings per share (Rs) 0.1 (7.8) 2.7 1.9 3.7 1.6 3.4 Balance sheet Total equity 14,060 12,014 21,135 28,838 31,157 31,360 31,976 Deferred taxation liability 1,045 39 486 839 839 839 839 Minority interest 226 673 651 2,030 230 230 230 Total borrowings 35,934 43,351 40,563 63,498 47,114 39,637 36,637 Current liabilities 10,129 11,693 10,997 19,423 14,012 11,886 11,033 Total liabilities and equity 61,395 67,770 73,832 114,627 93,351 83,951 80,715 Cash 2,674 1,740 1,273 5,258 6,795 5,750 6,406 Other current assets 17,875 24,181 28,657 35,554 22,744 17,119 15,983 Net fixed assets 40,846 41,848 43,901 66,876 55,473 52,742 49,987 Investments 1 1 1 6,939 8,339 8,339 8,339 Total assets 61,395 67,770 73,832 114,627 93,351 83,951 80,715 Free cash flow Operating cash flow, excl. working capital 1,472 1,025 2,142 469 3,588 3,149 3,751 Working capital changes (1,379) (4,474) (4,208) (12,334) 7,399 3,499 284 Capital expenditure (16,969) (3,082) (1,604) (10,090) (687) (694) (700) Investment changes (3,497) (560) (461) (449) — — — Other income 3 8 817 832 642 633 476 Free cash flow (20,369) (7,083) (3,315) (21,572) 10,942 6,588 3,811 Ratios (%) EBITDA margin 10.7 11.1 20.8 12.8 16.8 15.8 17.1 Net debt/equity 220.2 345.2 181.7 196.2 126.0 105.2 92.1 Net debt/EBITDA 17.4 18.0 9.3 14.2 4.6 4.2 3.8 RoAE 0.1 (13.1) 3.7 1.7 2.7 1.1 2.4 RoACE 1.0 (0.8) 2.3 4.2 7.0 4.6 4.7 CRoCI 3.3 4.0 5.1 4.2 11.2 8.5 8.5

Source: Company, Kotak Institutional Equities

26 KOTAK INSTITUTIONAL EQUITIES RESEARCH

CAUTIOUS Pharmaceuticals

India SEPTEMBER 05, 2011 UPDATE

BSE-30: 16,713 Hits and misses in 1QFY12, realign target prices. 1QFY12 results were marked by more misses than hits with only three companies within our coverage meeting our estimates on operational front. Three broad trends emerged—(1) sales growth dips in India for most companies, (2) EBITDA margin under pressure on account of huge staff cost increases although gross margin is steady yoy, and (3) no increase in tax rate to MAT rate post EOU benefit expiry/SEZ attracting MAT rate, except for Divis and Cipla. We realign our TPs to the new system with all preferences remaining same. Our sector preferences post (1) 1QFY12 results and (2) switch to the new rating system, remain unchanged—SUN, Cadila among generics and Divis, Biocon among CRAMS.

More misses than hits in 1QFY12 QUICK NUMBERS

Only three companies within our coverage universe either met or beat our operational estimates— • More misses than Glenmark and Jubilant exceeded our estimates while Apollo met our estimates. All other hits in 1QFY12 companies missed our estimates at EBITDA level—(1) generic companies such as Lupin, Cadila, GSK, DRL, Cipla missed both our sales and margin estimates, (2) Sun and Biocon missed our • We realign our TPs estimates due to lower sales although EBITDA margin was in line with Sun reporting higher margin to the new system. than estimated at 33.5%, and (3) Ranbaxy reported poor margin, despite presence of high-margin No major changes exclusivity sales. in ratings

Three broad trends emerge in 1QFY12—sales growth in India dips and remains a key concern • Our sector Three trends that emerged during 1QFY12 results: (1) Sales growth dips in India, even for preferences remain established players such as SUN which reported adjusted growth of 18% in 1QFY12, lower than unchanged—SUN, 23% reported in FY2011. Glenmark was the only company to report higher sales growth yoy at Cadila among 20%, higher than 17% growth in FY2011 (adjusted for VAT) (see Exhibit 1). We believe lowering generics and Divis, of India sales growth remains a key concern and in case the market growth does not pick up in Biocon among 9MFY12, it could lead to earnings downgrades across companies. (2) Except for Glenmark and CRAMS Jubilant (see Exhibit 2), all companies reported yoy drop in EBITDA margin on account of increases in staff cost and other expenses while gross margin held steady yoy across most companies except Ranbaxy which had exclusivity sales last year and Dishman, Divis due to adverse product mix. (3) Except for Cipla and Divis (see Exhibit 3) which saw tax zooming to 20% in 1QFY12, there was no substantial increase in tax rate across all other companies post EOU benefit expiry/SEZ attracting MAT rate.

We realign our TPs to new system

We realign our TPs to the new system. Our sector preferences remain unchanged post (1) 1QFY12 results and (2) switch to the new rating system. We prefer SUN, Cadila among generics—and Divis, Biocon among CRAMS. We cut our FY2012-13E EPS estimates for Cadila by 4% due to lower India growth rate at 13% in FY2012E (16% earlier) and 15% in FY2013E (16% earlier); all other assumptions remain unchanged. According to the company, it has registered low primary growth of 9-10% in the domestic market in July 2011, however, remains hopeful of a pick-up in growth rate in the coming months (conditional upon market growth picking up). We, therefore, reduce our domestic market growth rate assumption to 13% in FY2012E (16% earlier) and 15% in FY2013E (16% earlier); all other assumptions remain unchanged. We believe Cadila’s international business remains in good shape (US FDA resolution likely in first half 2012 if there are no further concerns and according to the company their position on no further approvals in US is conservative) and possible earnings upsides could emerge in FY2013E from—(1) Nesher Pharma acquisition, we factor in US$30 mn in FY2013E, and (2) Abbott supplies, we factor in US$20 mn in FY2013E.

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

India Pharmaceuticals

India sales growth dips

1QFY11 2QFY11 3QFY11 4QFY11 1QFY12 Cadila 12.7 14.7 12.0 17.7 8.9 Cipla 3.6 19.8 11.3 14.7 10.1 DRL 16.1 25.4 14.5 7.0 5.7 Glaxo 8.9 13.7 10.4 11.4 12.8 Glenmark 13.2 21.5 29.7 -11.2 20.0 Lupin 23.2 15.6 16.2 20.0 17.1 Ranbaxy (13.6) 18.0 (20.1) 9.1 0.0 SUN (adj.) 17.0 26.6 20.2 20.2 18.0

Source: Kotak Institutional Equities estimates, Company

EBITDA margin drops yoy

1QFY11 2QFY11 3QFY11 4QFY11 1QFY12 Hospitals Apollo 16.9 17.0 15.7 15.2 16.5 Pharma-generics Cadila 20.7 21.2 19.7 20.1 19.6 Cipla 21.0 22.2 17.7 15.4 21.2 DRL* 21.4 22.6 23.4 24.3 21.0 Glaxo 38.4 37.1 32.1 36.1 35.5 Glenmark 23.6 23.5 22.2 3.4 24.5 Lupin 20.3 19.2 18.5 17.8 17.5 Ranbaxy** 17.5 4.7 9.1 17.0 7.0 SUN 45.1 34.1 27.5 30.3 33.5 Pharma-CRAMS Biocon (adj.) 20.9 20.8 22.5 20.0 29.6 Divis 38.0 33.8 39.7 41.2 36.7 Dishman 22.0 17.4 10.9 16.1 18.4 Jubilant 17.2 18.5 15.0 14.4 19.3

*For DRL, EBITDA is adding back depreciation , amortization, non-recurring charges to reported EBIT ** Ranbaxy EBITDA margin excludes other income from operations

Source: Kotak Institutional Equities estimates, Company

No substantial increase in tax rate except for Cipla and Divis 1QFY11 2QFY11 3QFY11 4QFY11 1QFY12 Hospitals Apollo 34.4 33.7 32.8 29.3 32.4 Pharma-generics Cadila 14.2 12.6 17.8 5.3 10.9 Cipla 17.6 17.6 15.6 14.7 20.8 DRL 14.5 10.2 5.3 14.5 4.4 Glaxo 32.7 33.3 32.9 29.6 32.3 Glenmark 6.4 20.3 19.4 (184.1) 13.2 Lupin 14.7 10.9 9.4 12.0 11.8 Ranbaxy (0.1) 12.5 69.0 20.4 7.0 SUN 1.7 3.3 13.0 0.4 2.5 Pharma-CRAMS Biocon 17.0 14.6 22.3 9.8 14.5 Divis 8.3 9.5 13.0 7.0 21.0 Dishman 11.2 4.6 (67.8) 22.6 10.4 Jubilant 7.6 4.5 19.3 (9.6) 15.7

Source: Kotak Institutional Equities estimates, Company

28 KOTAK INSTITUTIONAL EQUITIES RESEARCH Pharmaceuticals India

Changes to ratings and TP

PriceTP (Rs) Upside Rating Target FY2013E PE (Rs) Previous Now (%) Previous Now Previous Now Comment Hospitals We expect performance to improve in coming quarters due to (1) maturity of newly opened hospital beds, (2) Apollo 510 565 650 27 Buy Add 12 14 improving profitability in SAP and JV/Subsidiary hospitals. Apollo trades at 13X FY2012E EBITDA. We value Apollo at 14X FY2013E (earlier 12X) EBITDA Pharma-generics We cut our FY2012-13E EPS by 4% due to lower India growth rate at 13% in FY2012E (16% earlier) and FY2013E at 15% (16% earlier); all other assumptions Cadila 832 1,090 1,045 26 Add Add 22 22 remain unchanged. We believe Cadila dererves premium valuations versus other large-cap due to superior return ratios >30% (1) Lack of visibility on inhaler launches, (2) high capex and (3) poor asset turnover lead to Cipla having below- peer ROE at 16-17% in FY2012-13E. Return ratios Cipla 275 325 310 13 Reduce Reduce 18 17 improving is contingent on rapid utilization of its facilities likely post a potential supply deal with a big pharma. Given the lack of visibility on these drivers, we lower multiple to 17X Glaxo 2,130 2,220 2,220 4 Reduce Reduce 25 25 No change Glenmark 323 395 395 22 Add Add 16 16 No change Increase FY2012-13E EPS by 3-7% due to (1) limited competition position in Ultram ER approval, (2) higher margin assumption due to Ziprasidone, Femcon Lupin 472 500 530 12 Add Add 20 20 exclusivity position in FY2013E. Although FY2012E EPS growth is muted, partly due to higher tax rate, growth is intact in FY2013E with various launches in US Ranbaxy 479 435 435 (9) Sell Sell 17 17 No change SUN 503 560 560 11 Add Add 23 23 No change Pharma-CRAMS Biocon 338 445 445 32 Buy Buy 18 18 No change No change in multiples, removal of interest income from Divis 736 880 830 13 Buy Add 18 18 EPS for TP calculation Due to lack of evidence of a pick-up in base business of CRAMS from India and Carbogen Amcis in Switzerland and lack of visibility on firm orders from (1) China facility, Dishman 67 95 70 4 Sell Reduce 10 8 (2) high potency unit 9, we retain REDUCE rating despite recent underperformance and await visible sings of turnaround We believe (1) lifescience ingredients (65% of sales) still continue to face headwinds of declining volume growth Jubilant 194 225 205 6 Reduce Reduce 10 8 and (2) EBITDA margin in services business is not sustainable as it's likely to have been boosted by receipt of milestone fees this quarter

Source: Kotak Institutional Equities estimates, Company

KOTAK INSTITUTIONAL EQUITIES RESEARCH 29 India Pharmaceuticals

1QFY12 results wrap

Change (%) Jun-10 Mar-11 Jun-11 Jun-11E yoy qoq Reason for miss/hit Apollo Net sales 5,233 6,214 6,410 6,570 22.5 3.2 Operational estimates in line despite muted performance at Chennai (30% of EBITDA 883 948 1,059 1,069 19.9 11.8 consl sales) due to elections. Adjusted for the impact at Chennai which is an EBITDA,% 17 15 17 16 (0.4) 1.3 established high-margin cluster, reported EBITDA margin of 16.5% in 1QFY12 PAT-reported 393 471 513 502 30.5 8.9 would have been at least 50 bps higher Biocon Net sales 6,622 7,016 4,417 5,411 (33.3) (37.0) EBITDA 1,313 1,435 1,204 1,659 (8.3) (16.1) Sales excluding licensing grew 13% yoy, flat qoq and was the main reason for EBITDA,% 20 20 27 31 7.4 6.8 disappointment. Adjusted margin at 30% in line with our est. PAT-reported 799 1,021 700 1,067 (12.4) (31.4) Cadila Net sales 10,552 11,687 11,735 13,387 11.2 0.4 Operational PAT (adjusted for Abbott income) at Rs1.95 bn, was up 19% yoy EBITDA 2,188 1,836 2,302 2,868 5.2 25.4 although 11% lower than our est. due to (1) poor sales growth at 11% across all EBITDA,% 21 16 20 21 (1.1) 3.9 geographies except Europe, JV sales due to high base effect in 4QFY11 and (2) PAT-reported 1,993 1,789 2,298 2,180 15.3 28.5 lower EBITDA margin at 19.6%, 180 bps lower than our estimate Cipla Net sales 15,799 16,152 15,503 16,968 (1.9) (4.0) EBITDA 3,511 2,482 3,285 3,852 (6.4) 32.3 PAT 17% lower than our est., due to poor sales growth in India and exports and EBITDA,% 22 15 21 23 (1.0) 5.8 lower margin, which was flat yoy although up qoq due to lower ARV exports PAT-reported 2,630 2,141 2,533 3,063 (3.7) 18.4 Divis Net sales 2,694 4,786 3,648 4,116 35.4 (23.8) EBITDA 1,041 1,913 1,340 1,671 28.7 (30.0) PAT missed our estimate of due to lower margin and higher tax at 21% EBITDA,% 39 40 37 41 (1.9) (3.2) PAT-reported 863 1,752 1,026 1,375 18.9 (41.4) Dishman Net sales 2,019 3,444 2,372 2,694 17.5 (31.1) EBITDA 445 555 437 507 (1.7) (21.3) Despite lower tax rate, PAT missed our estimate due to lower sales in CRAMS and EBITDA,% 22 16 18 19 (3.6) 2.3 MM segment PAT-reported 271 230 151 183 (44.3) (34.3) DRL Net sales 16,832 20,173 19,784 20,086 17.5 (1.9) PAT missed our estimate mainly due to lower margin. Adjusted for pencillin EBITDA 3,599 4,906 4,022 4,756 11.8 (18.0) facility expenses, EBITDA margin was at 22.5%, lower than our estimate of EBITDA,% 21 24 20 24 (1.1) (4.0) 23.5% PAT-reported 2,097 3,346 2,627 3,035 25.3 (21.5) GSK Pharma Net sales 4,979 6,029 5,615 5,758 12.8 (6.9) EBITDA 1,913 2,179 1,993 2,147 4.2 (8.5) PAT was 6% below our estimate marked by (1) poor sales growth of 13% on low EBITDA,% 38 36 35 37 (2.9) (0.6) base (9% growth in 2Q2011) and (2) lower margin, down yoy and qoq to 35.5% PAT-reported 1,290 5 1,475 1,609 14.4 NM Glenmark Net sales 5,923 7,922 7,570 7,885 27.8 (4.4) EBITDA 1,397 266 1,854 1,520 32.7 596.1 PAT was 7% higher than our estimate due to EBITDA margin surprise at 24.5%, EBITDA,% 24 3 24 19 0.9 21.1 versus our estimate of 20% PAT-reported 1,705 661 2,101 1,964 23.2 NM Jubilant Net sales 8,176 8,903 9,443 9,331 15.5 6.1 EBITDA 1,405 1,283 1,820 1,584 29.5 41.9 PAT was 15% higher than our estimate due to in line sales, however, margin EBITDA,% 17 14 19 17 2.1 4.9 surprised at 20% vs our est. of 17.5% PAT-reported 504 617 771 671 52.9 25.0 Lupin Net sales 13,121 15,115 15,432 15,937 17.6 2.1 PBT miss was mainly on account of poor margin. EBITDA margin at 17.5%, was EBITDA 2,622 2,687 2,698 3,067 2.9 0.4 180 bps lower than our est and down 280 bps yoy due to (1) lower proportion of EBITDA,% 20 18 17 19 (2.5) (0.3) US sales (2) >20% yoy growth in other expenses and staff cost, (3) lower gross PAT-reported 1,963 2,272 2,101 2,166 7.0 (7.5) margin, down 170 bps yoy Ranbaxy Net sales 20,912 21,430 20,545 20,797 (1.8) (4.1) PAT excluding forex gain was 7% below estimate despite Aricept in the quarter. EBITDA 4,168 4,032 1,817 2,771 (56.4) (54.9) Despite presence of Aricept, EBITDA (including operating income) at Rs1.8 bn EBITDA,% 20 19 9 13 (11.1) (10.0) remains poor with margin at 9%. Excluding margin on exclusivity , we believe PAT-reported 3,257 3,045 2,432 1,511 (25.3) (20.1) EBITDA margin was 7% flat qoq and down yoy Sun Net sales 13,651 14,633 16,357 18,299 19.8 11.8 PAT miss of 5% mainly due to lower sales although EBITDA margin at 33.5% was EBITDA 6,160 4,436 5,474 5,843 (11.1) 23.4 higher than our estimate of 32%, up 300 bps qoq. Sales were up 20% yoy on a EBITDA,% 45 30 33 32 (11.7) 3.1 reported basis, however, excluding Taro and exclusivity sales of last year were up PAT-reported 5,643 4,428 5,010 5,261 (11.2) 13.1 26% yoy in 1QFY12

Source: Kotak Institutional Equities estimates, Company

30 KOTAK INSTITUTIONAL EQUITIES RESEARCH 31 31 India India DailySummary - September 6,2011 Kotak Institutional Equities: Valuation summary of key Indian companies

O/S Target 5-Sep-11 Mkt cap. shares EPS (Rs) EPS growth (%) PER (X) EV/EBITDA (X) Price/BV (X) Dividend yield (%) RoE (%) price Upside ADVT-3mo Company Price (Rs) Rating (Rs mn) (US$ mn) (mn) 2011E 2012E 2013E 2011E 2012E 2013E 2011E 2012E 2013E 2011E 2012E 2013E 2011E 2012E 2013E 2011E 2012E2013E 2011E 2012E 2013E (Rs) (%) (US$ mn) Automobiles Ashok Leyland 26 SELL 68,779 1,495 2,661 2.4 2.1 2.4 68.1 (11.9) 12.8 10.9 12.4 11.0 7.6 8.0 7.2 1.5 1.5 1.4 3.9 3.9 3.9 21.8 17.4 18.2 26 0.6 4.5 Bajaj Auto 1,667 SELL 482,430 10,488 289 90.4 102.5 113.5 43.9 13.5 10.7 18.4 16.3 14.7 14.0 12.7 11.8 9.8 7.4 5.7 2.4 2.4 2.4 84.9 51.6 43.7 1,590 (4.6) 13.4 Bharat Forge 289 ADD 68,580 1,491 237 12.5 16.4 20.3 1,402.1 30.8 23.5 23.0 17.6 14.3 10.8 8.7 7.4 3.1 2.6 2.2 1.2 — — 8.2 14.1 15.2 320 10.7 3.1 Exide Industries 144 REDUCE 122,698 2,667 850 7.5 8.1 10.0 18.0 9.2 22.9 19.4 17.7 14.4 13.9 12.9 10.6 4.5 3.7 3.0 1.0 0.9 0.9 25.5 22.9 23.2 160 10.8 5.7 Hero Honda 2,183 SELL 436,015 9,479 200 99.3 111.3 128.2 (11.1) 12.1 15.1 22.0 19.6 17.0 15.7 14.6 11.9 9.4 9.6 9.2 4.8 3.2 3.2 56.5 63.6 60.2 1,795 (17.8) 19.8 Mahindra & Mahindra 769 ADD 472,197 10,266 614 41.7 46.9 52.2 22.7 12.5 11.2 18.4 16.4 14.7 14.1 12.0 10.5 4.4 3.7 3.1 1.5 1.2 1.2 27.3 24.5 22.6 900 17.0 29.3 Maruti Suzuki 1,086 BUY 313,601 6,818 289 79.2 79.9 100.3 (8.4) 0.9 25.5 13.7 13.6 10.8 8.4 8.0 6.0 2.2 2.0 1.7 0.7 0.7 0.7 17.6 15.4 16.7 1,475 35.9 11.6 Tata Motors 753 ADD 500,878 10,889 665 136.0 115.5 119.6 737.9 (15.0) 3.6 5.5 6.5 6.3 4.3 4.9 4.6 2.6 1.9 1.5 2.5 1.9 1.9 66.1 34.2 27.3 885 17.5 57.3 Automobiles Cautious 2,465,176 53,593 88.4 (1.8) 11.0 12.3 12.5 11.3 8.2 8.3 7.4 3.9 3.2 2.7 2.4 1.9 1.9 31.7 25.7 23.7 Banks/Financial Institutions Andhra Bank 131 BUY 73,081 1,589 560 22.6 24.2 27.5 5.0 6.9 13.5 5.8 5.4 4.8 ———1.1 1.0 0.9 4.2 4.5 5.1 23.2 19.4 19.2 190 45.5 2.0 Axis Bank 1,114 BUY 457,533 9,947 411 82.5 98.9 119.7 33.0 19.8 21.1 13.5 11.3 9.3 ———2.4 2.1 1.7 1.3 1.5 1.8 19.3 19.7 20.3 1,700 52.5 48.1 Bank of Baroda 738 BUY 290,029 6,305 393 108.0 109.5 129.1 29.1 1.4 17.9 6.8 6.7 5.7 ———1.5 1.3 1.1 2.6 2.6 3.1 25.9 20.4 20.5 1,250 69.3 7.3 Bank of India 321 BUY 175,521 3,816 547 45.5 54.0 70.7 37.4 18.7 30.9 7.1 5.9 4.5 ———1.1 1.0 0.8 2.5 3.0 3.9 17.3 17.2 19.5 470 46.5 6.7 Canara Bank 426 BUY 188,829 4,105 443 90.9 86.3 108.7 23.3 (5.0) 25.9 4.7 4.9 3.9 ———1.1 0.9 0.7 2.6 2.8 2.8 23.2 17.7 19.0 600 40.8 8.3 Corporation Bank 440 BUY 65,214 1,418 148 95.4 93.4 114.1 16.3 (2.1) 22.2 4.6 4.7 3.9 ———0.9 0.8 0.7 4.5 4.4 5.4 21.9 18.1 19.2 630 43.1 0.9 Federal Bank 385 BUY 65,887 1,432 171 34.3 44.5 56.2 26.3 29.8 26.1 11.2 8.6 6.9 ———1.3 1.2 1.1 2.2 2.9 3.6 12.0 14.2 16.0 500 29.8 5.1 HDFC 650 REDUCE 953,558 20,730 1,467 24.1 27.8 31.9 22.4 15.6 14.6 27.0 23.3 20.4 ———5.5 4.9 3.7 1.4 1.6 1.9 21.7 22.1 21.5 730 12.3 40.2 HDFC Bank 470 ADD 1,093,862 23,781 2,326 16.9 21.9 27.6 31.0 29.5 26.5 27.9 21.5 17.0 ———4.3 3.7 3.2 0.7 0.9 1.1 16.7 18.6 20.2 560 19.1 35.6 ICICI Bank 883 BUY 1,017,287 22,116 1,152 44.7 58.0 63.1 23.9 29.7 8.8 19.7 15.2 14.0 ———1.8 1.7 1.6 1.6 2.0 2.1 9.7 11.7 11.8 1,100 24.5 81.0 IDFC 111 BUY 167,161 3,634 1,509 8.8 9.9 12.0 4.6 12.8 21.6 12.6 11.2 9.2 ———1.6 1.3 1.2 1.9 1.8 2.2 14.7 13.1 13.9 150 35.4 26.9 India Infoline 75 SELL 24,387 530 327 7.4 4.8 6.5 (9.3) (34.5) 33.8 10.1 15.5 11.5 ———1.5 1.2 1.1 4.1 1.3 1.9 12.9 8.7 10.3 70 (6.2) 1.6 Indian Bank 214 BUY 91,756 1,995 430 38.8 42.0 50.9 10.5 8.2 21.2 5.5 5.1 4.2 ———1.2 1.0 0.8 3.5 3.7 4.5 22.3 20.4 21.0 300 40.5 1.8 Indian Overseas Bank 108 BUY 67,072 1,458 619 17.3 21.1 30.8 33.6 22.0 45.4 6.3 5.1 3.5 ———0.8 0.7 0.6 4.6 3.9 4.3 12.7 13.3 17.0 190 75.3 1.5 IndusInd Bank 254 BUY 118,449 2,575 466 12.4 15.2 18.2 45.2 22.6 19.9 20.5 16.7 14.0 ———3.2 2.8 2.5 0.8 1.0 1.2 20.8 17.7 17.9 325 27.9 3.9 J&K Bank 804 ADD 38,983 847 48 126.9 141.8 152.8 20.1 11.8 7.7 6.3 5.7 5.3 ———1.1 1.0 0.9 3.2 3.6 3.9 19.0 18.4 17.3 950 18.2 0.7 LIC Housing Finance 218 ADD 103,610 2,252 475 20.5 22.9 27.5 47.2 11.4 20.4 10.6 9.5 7.9 ———2.6 2.2 1.8 2.0 2.3 2.7 25.8 23.7 23.9 260 19.2 23.5 Mahindra & Mahindra Financial 641 BUY 65,677 1,428 102 45.2 56.4 69.2 26.1 24.8 22.7 14.2 11.4 9.3 ———2.7 2.3 2.0 1.6 1.9 2.4 22.0 21.4 22.3 825 28.7 1.4 Muthoot Finance 182 ADD 67,541 1,468 371 15.7 19.0 24.5 108.4 20.5 29.0 11.5 9.6 7.4 ———5.1 2.3 1.8 — — — 51.5 33.0 26.8 220 21.0 — Oriental Bank of Commerce 308 BUY 89,833 1,953 292 51.5 55.6 65.4 13.7 8.0 17.6 6.0 5.5 4.7 ———0.9 0.8 0.7 3.4 3.6 4.3 15.5 13.9 14.7 430 39.7 3.8 PFC 146 BUY 192,843 4,192 1,320 22.8 23.4 28.3 11.1 2.4 21.3 6.4 6.3 5.2 ———1.3 1.0 0.8 2.7 3.2 3.9 18.4 17.0 16.7 225 54.0 16.9 Punjab National Bank 930 BUY 294,572 6,404 317 140.0 163.0 201.5 13.0 16.5 23.6 6.6 5.7 4.6 ———1.5 1.2 1.0 2.4 3.6 4.4 24.4 23.5 24.2 1,500 61.3 6.5 Reliance Capital 430 REDUCE 105,738 2,299 246 9.3 16.5 24.8 (25.3) 77.0 50.4 46.2 26.1 17.3 ———1.5 1.5 1.4 0.9 1.5 2.3 3.3 5.7 8.3 470 9.4 19.3 Rural Electrification Corp. 169 BUY 166,820 3,627 987 26.0 29.0 32.5 28.1 11.5 12.3 6.5 5.8 5.2 ———1.3 1.1 1.0 4.4 4.9 5.5 21.5 20.8 20.4 240 42.1 12.8 Shriram Transport 674 REDUCE 150,430 3,270 223 55.1 65.6 75.3 40.8 19.0 14.8 12.2 10.3 9.0 ———3.1 2.6 2.2 1.0 1.9 2.2 28.1 26.8 25.2 700 3.8 9.6 State Bank of India 2,007 BUY 1,274,157 27,700 635 130.2 195.6 256.1 (9.9) 50.3 30.9 15.4 10.3 7.8 ———2.0 1.7 1.4 1.7 1.8 1.9 12.6 17.8 20.0 2,750 37.1 107.7 Union Bank 234 BUY 122,930 2,673 524 39.5 50.2 60.4 (3.9) 27.1 20.5 5.9 4.7 3.9 ———1.1 0.9 0.8 4.0 5.0 6.1 20.9 21.9 22.5 425 81.3 4.7 Yes Bank 283 BUY 98,138 2,134 347 21.5 26.2 32.3 43.2 22.1 23.3 13.2 10.8 8.7 ———2.6 2.1 1.8 0.9 1.1 1.3 21.7 21.7 22.2 420 48.6 16.7 Banks/Financial Institutions Attractive 7,636,989 166,029 20.1 19.8 23.0 12.5 10.4 8.5 ——— 2.0 1.7 1.5 1.8 2.1 2.4 16.0 16.6 17.5 Cement ACC 1,002 SELL 188,275 4,093 188 55.6 60.1 72.7 (33.2) 8.2 20.9 18.0 16.7 13.8 11.0 9.2 7.2 2.8 2.5 2.2 3.5 2.3 2.3 17.5 17.3 18.1 980 (2.2) 5.4 Ambuja Cements 133 SELL 201,867 4,389 1,522 7.9 7.8 9.8 (1.5) (0.5) 25.5 16.8 16.9 13.5 10.1 9.2 7.1 2.6 2.4 2.1 1.5 1.7 1.8 16.6 14.8 16.9 135 1.8 5.9 Grasim Industries 2,196 BUY 201,382 4,378 92 233.3 259.5 289.3 (22.5) 11.2 11.5 9.4 8.5 7.6 6.0 5.1 4.3 1.4 1.2 1.1 1.6 1.6 1.6 15.8 15.3 15.0 2,900 32.1 3.4 India Cements 67 ADD 20,443 444 307 1.9 8.3 9.2 (81.2) 339.0 10.4 35.2 8.0 7.3 13.7 5.5 4.9 0.5 0.5 0.4 2.4 4.8 4.8 1.4 6.2 6.5 82 23.2 1.3 Shree Cement 1,652 REDUCE 57,537 1,251 35 57.2 83.1 132.9 (72.5) 45.5 59.8 28.9 19.9 12.4 6.4 6.1 4.2 3.0 2.8 2.4 0.6 0.6 0.6 10.7 14.5 20.7 1,730 4.7 1.1 UltraTech Cement 1,104 ADD 302,595 6,578 274 44.9 73.1 85.9 (49.2) 63.0 17.5 24.6 15.1 12.9 12.0 8.0 6.7 2.4 2.1 1.8 0.5 0.5 0.5 16.7 17.3 17.3 1,220 10.5 3.5 Cement Neutral 972,099 21,133 (23.5) 23.6 18.8 16.6 13.4 11.3 8.9 7.0 5.7 2.0 1.8 1.6 1.6 1.4 1.5 12.3 13.5 14.2

KOTAK INSTITUTIONAL EQUITIES RESEARCH

Source: Company, Bloomberg, Kotak Institutional Equities estimates

KOTAK INSTITUTIONAL EQUITIES RESEARCH Kotak Institutional Equities: Valuation summary of key Indian companies India Daily Summary - September 6, 2011 Daily 6, India Summary- September

O/S Target 5-Sep-11 Mkt cap. shares EPS (Rs) EPS growth (%) PER (X) EV/EBITDA (X) Price/BV (X)Dividend yield (%) RoE (%) price Upside ADVT-3mo Company Price (Rs) Rating (Rs mn) (US$ mn) (mn) 2011E 2012E 2013E 2011E 2012E 2013E 2011E 2012E 2013E 2011E 2012E 2013E 2011E 2012E 2013E 2011E 2012E2013E 2011E 2012E 2013E (Rs) (%) (US$ mn) Consumer products Asian Paints 3,272 SELL 313,806 6,822 96 80.8 94.6 111.4 13.0 17.1 17.7 40.5 34.6 29.4 27.0 22.0 18.1 15.3 11.8 9.5 1.0 0.9 1.1 43.9 40.0 36.8 2,900 (11.4) 5.9 Colgate-Palmolive (India) 1,004 SELL 136,557 2,969 136 29.6 34.1 38.8 (4.9) 15.0 14.1 33.9 29.5 25.9 29.5 25.8 21.6 35.6 36.2 28.9 2.2 2.9 2.7 113.4 121.6 124.2 900 (10.4) 2.2 Dabur India 108 SELL 187,613 4,079 1,740 3.3 3.7 4.4 12.8 14.1 18.8 33.0 28.9 24.3 26.6 21.9 18.4 14.3 11.1 8.7 1.1 1.2 1.4 51.2 43.8 40.6 110 2.0 3.0 GlaxoSmithkline Consumer (a) 2,375 ADD 99,880 2,171 42 71.3 82.6 101.9 28.8 15.8 23.4 33.3 28.8 23.3 23.9 20.5 17.1 10.7 8.7 7.1 2.1 1.1 1.4 32.2 32.5 32.8 2,700 13.7 0.7 Godrej Consumer Products 428 ADD 138,351 3,008 324 14.9 18.4 22.7 31.3 23.4 23.8 28.7 23.3 18.8 24.4 17.1 13.1 8.0 5.7 4.6 1.2 0.7 0.7 35.9 28.7 27.0 510 19.3 2.9 Hindustan Unilever 320 ADD 690,696 15,016 2,159 9.9 11.3 13.3 4.8 14.1 17.7 32.4 28.4 24.1 27.4 24.0 19.6 26.2 22.7 19.6 2.4 2.9 3.5 66.3 85.9 87.5 370 15.7 17.8 ITC 203 ADD 1,557,257 33,855 7,681 6.4 8.0 9.1 20.7 24.9 13.1 31.6 25.3 22.4 21.0 17.1 14.9 9.3 8.0 6.9 2.2 1.8 2.2 33.2 35.5 34.4 230 13.4 34.7

JubilantDaily India Summary -September Foodworks 1,008 SELL 65,975 1,434 65 11.2 16.6 24.1 99.6 48.6 45.1 90.0 60.6 41.8 54.9 33.6 23.6 34.4 22.0 14.4 ———46.6 44.2 41.6 750 (25.6) 30.9 Jyothy Laboratories 176 ADD 14,171 308 81 10.5 9.4 11.8 (5.0) (10.1) 25.2 16.8 18.7 14.9 14.2 12.8 10.6 2.1 2.0 1.9 3.3 2.7 3.3 12.3 11.1 12.9 220 25.2 0.5 Marico 156 ADD 95,495 2,076 612 4.2 5.4 7.1 10.9 27.3 32.6 37.0 29.1 21.9 24.6 19.9 15.1 10.2 8.0 6.2 0.5 0.6 0.8 32.8 31.3 32.2 185 18.5 1.3 Nestle India (a) 4,457 SELL 429,677 9,341 96 86.8 103.6 123.2 16.7 19.3 18.9 51.3 43.0 36.2 34.2 28.0 23.1 50.2 36.5 27.5 1.1 1.3 1.6 116.5 98.3 86.8 3,500 (21.5) 2.3 Tata Global Beverages 92 ADD 56,645 1,231 618 4.0 6.0 7.1 (34.6) 52.6 17.6 23.1 15.2 12.9 9.0 7.6 6.4 1.1 1.1 1.1 2.2 3.3 3.9 6.5 9.6 10.8 120 31.0 5.0 Titan Industries 220 ADD 195,047 4,240 888 4.9 7.4 8.8 71.7 51.5 17.8 44.7 29.5 25.0 32.7 20.5 16.9 17.9 12.8 9.7 0.6 1.0 1.4 47.8 50.5 44.0 240 9.2 30.6 United Spirits 893 ADD 112,174 2,439 126 29.5 39.2 50.6 8.3 32.8 29.0 30.2 22.8 17.6 15.7 12.0 10.3 2.6 2.3 2.1 0.4 0.3 0.4 9.1 10.7 12.5 1,100 23.2 5.7 Consumer products Cautious 4,093,343 88,990 16.3 21.8 17.1 34.2 28.1 24.0 23.9 19.3 16.3 10.5 8.9 7.7 1.7 1.7 2.1 30.8 31.8 32.0 Constructions IVRCL 38 BUY 10,120 220 267 5.9 5.7 6.6 (25.2) (4.1) 15.6 6.4 6.7 5.8 5.8 5.5 5.4 0.5 0.5 0.4 1.1 1.1 1.1 8.2 7.3 7.9 75 97.9 5.2 Nagarjuna Construction Co. 61 BUY 15,677 341 257 6.4 5.9 7.7 (29.7) (7.8) 30.8 9.6 10.4 7.9 8.0 7.6 7.0 0.7 0.6 0.6 3.3 3.3 3.3 7.1 6.3 7.8 100 63.7 1.3 Punj Lloyd 61 REDUCE 20,681 450 340 (1.5) 5.5 7.4 (56.6) (467.8) 34.9 (41.0) 11.2 8.3 13.1 5.9 5.2 0.7 0.7 0.6 (0.1) 0.8 1.1 (1.7) 6.1 7.7 65 6.7 10.6 Sadbhav Engineering 135 BUY 20,183 439 150 8.0 9.8 10.9 55.1 23.5 10.4 16.9 13.7 12.4 10.3 8.6 7.6 3.1 2.6 2.2 0.4 0.4 0.4 18.6 19.0 17.5 180 33.8 0.3 Construction Attractive 66,660 1,449 (0.3) 62.7 23.6 17.1 10.5 8.5 8.9 6.5 6.0 0.8 0.8 0.7 1.0 1.3 1.4 4.9 7.5 8.6 Energy Aban Offshore 403 BUY 17,543 381 44 116.2 95.3 107.2 9.0 (18.0) 12.4 3.5 4.2 3.8 6.7 6.7 6.4 0.8 0.8 0.7 0.9 1.0 1.1 29.2 19.4 18.0 700 73.6 9.8 Bharat Petroleum 665 ADD 240,388 5,226 362 45.7 58.9 58.9 (20.7) 28.9 0.1 14.6 11.3 11.3 10.1 6.9 6.7 1.6 1.5 1.4 2.1 2.9 2.9 10.8 12.8 11.8 800 20.3 8.2 Cairn india 275 REDUCE 523,408 11,379 1,902 33.3 45.8 49.7 501.1 37.4 8.6 8.3 6.0 5.5 6.0 4.3 3.4 1.3 1.1 1.0 — 1.8 5.5 16.9 19.8 19.2 295 7.2 13.9 Castrol India (a) 510 SELL 126,002 2,739 247 19.8 21.9 22.3 28.5 10.8 1.6 25.7 23.2 22.9 16.5 15.5 15.1 24.4 22.2 21.1 2.9 3.3 3.5 100.2 100.2 94.7 425 (16.6) 2.0 GAIL (India) 418 BUY 529,844 11,519 1,268 28.2 34.3 36.0 13.8 21.8 4.9 14.8 12.2 11.6 9.4 8.9 8.0 2.5 2.2 1.9 1.8 2.2 2.4 17.5 18.4 16.5 560 34.1 9.6 GSPL 105 SELL 58,818 1,279 563 9.0 8.5 8.4 23.1 (6.1) (0.1) 11.6 12.4 12.4 7.4 7.2 7.0 2.6 2.2 1.9 1.0 1.6 2.4 25.5 19.1 16.4 92 (12.0) 5.4 Hindustan Petroleum 383 ADD 129,943 2,825 339 45.7 26.3 39.3 (11.4) (42.4) 49.5 8.4 14.6 9.7 3.3 4.0 3.3 0.8 0.8 0.7 3.7 2.1 3.2 10.1 5.3 7.4 460 20.0 8.5 Indian Oil Corporation 316 BUY 767,111 16,677 2,428 31.8 33.1 35.7 (35.4) 4.4 7.6 9.9 9.5 8.9 7.9 7.0 5.8 1.3 1.2 1.1 3.0 3.2 3.4 12.9 12.5 12.4 420 32.9 4.7 Oil India 1,287 BUY 309,411 6,727 240 120.0 171.7 190.1 4.2 43.1 10.7 10.7 7.5 6.8 5.3 3.0 2.4 1.8 1.6 1.4 2.9 4.3 4.7 16.2 20.1 19.4 1,750 36.0 1.8 Oil & Natural Gas Corporation 257 BUY 2,198,340 47,792 8,556 24.7 37.2 40.8 7.4 50.8 9.7 10.4 6.9 6.3 3.9 2.9 2.3 1.5 1.3 1.2 3.4 4.7 5.4 14.3 19.1 18.3 380 47.9 27.1 Petronet LNG 175 SELL 131,475 2,858 750 8.1 11.5 11.4 50.3 41.3 (0.7) 21.6 15.3 15.4 12.4 9.9 10.1 4.3 3.6 3.0 1.1 1.7 1.7 20.9 24.6 20.2 125 (28.7) 10.8 Reliance Industries 789 BUY 2,351,562 51,123 2,981 62.0 67.4 74.9 24.8 8.8 11.0 12.7 11.7 10.5 7.0 6.2 5.3 1.4 1.3 1.1 1.0 1.1 1.3 13.0 12.7 12.6 1,045 32.5 87.2 Energy Neutral 7,383,844 160,525 11.8 25.6 9.5 11.0 8.7 8.0 6.0 4.8 4.1 1.5 1.3 1.2 2.1 2.8 3.4 13.8 15.4 15.1 Industrials ABB 858 SELL 181,807 3,952 212 3.0 21.1 27.3 (82.2) 606.1 29.6 287.5 40.7 31.4 209.8 27.5 20.6 7.5 6.5 5.5 0.2 0.4 0.4 2.6 17.1 19.1 700 (18.4) 1.6 BGR Energy Systems 332 SELL 23,973 521 72 44.8 40.4 39.0 60.0 (9.7) (3.5) 7.4 8.2 8.5 5.0 4.5 4.2 2.5 2.0 1.7 3.0 2.4 2.4 39.0 27.4 21.9 315 (5.2) 4.3 Bharat Electronics 1,609 ADD 128,704 2,798 80 102.9 120.8 133.9 7.0 17.4 10.8 15.6 13.3 12.0 9.4 6.9 5.9 2.5 2.2 1.9 1.6 1.6 1.6 17.2 17.7 17.2 1,850 15.0 1.5 Bharat Heavy Electricals 1,712 REDUCE 837,960 18,217 490 122.8 126.6 137.4 39.7 3.0 8.5 13.9 13.5 12.5 9.3 8.6 7.8 4.2 3.4 2.8 1.8 1.6 1.7 33.3 27.6 24.6 1,875 9.5 32.4 Crompton Greaves 150 BUY 96,065 2,088 642 14.3 10.6 13.5 11.5 (25.8) 26.7 10.5 14.1 11.1 6.8 7.8 5.9 2.9 2.5 2.1 1.6 1.1 1.2 31.7 19.1 20.5 210 40.2 17.8 Larsen & Toubro 1,625 REDUCE 989,533 21,513 609 67.7 79.6 98.2 18.1 17.5 23.4 24.0 20.4 16.6 16.7 12.6 10.8 3.8 3.1 2.6 0.9 0.9 0.9 17.0 16.6 17.2 1,800 10.8 58.4 Maharashtra Seamless 358 BUY 25,214 548 71 46.1 41.6 46.7 19.3 (9.7) 12.3 7.8 8.6 7.7 4.1 4.1 3.4 1.0 0.9 0.8 2.3 2.3 2.6 13.3 11.1 11.5 460 28.7 0.1 Siemens 868 SELL 292,705 6,363 337 22.4 28.9 32.5 39.5 28.8 12.3 38.7 30.0 26.7 22.9 19.3 16.8 9.0 7.3 6.1 0.6 0.7 0.8 25.2 26.9 24.8 830 (4.4) 3.2 Suzlon Energy 40 SELL 69,647 1,514 1,746 (5.4) 0.7 2.6 (14.7) (112.5) 290.1 (7.4) 59.5 15.3 26.3 8.5 6.9 1.0 1.0 1.0 0.5 0.5 0.5 (14.0) 1.7 6.6 40 0.3 20.5 Tecpro Systems 242 ADD 12,212 265 50 27.0 29.4 32.7 24.2 8.9 11.4 9.0 8.2 7.4 5.6 5.7 5.0 1.8 1.6 1.3 — — — 26.8 20.5 19.6 300 24.0 0.3 Thermax 489 REDUCE 58,318 1,268 119 31.6 33.0 35.1 44.3 4.4 6.3 15.5 14.8 13.9 10.3 9.3 8.6 4.4 3.7 3.1 1.8 2.0 2.1 31.5 27.2 24.3 550 12.4 1.9 Voltas 121 ADD 39,855 866 331 9.8 9.7 10.5 (14.3) (1.1) 8.8 12.3 12.5 11.5 7.4 7.2 6.0 2.9 2.5 2.1 1.7 2.5 (0.0) 26.1 21.6 19.9 150 24.5 3.9 Industrials Cautious 2,755,994 59,916 26.2 18.4 16.8 20.8 17.6 15.1 13.4 10.8 9.4 3.7 3.1 2.7 1.2 1.1 1.2 17.8 17.8 17.8 Infrastructure Container Corporation 936 ADD 121,655 2,645 130 63.5 70.0 77.9 4.9 10.3 11.2 14.7 13.4 12.0 9.6 8.4 7.3 2.4 2.1 1.9 1.6 1.7 1.9 17.6 16.9 16.6 1,150 22.9 0.7 GMR Infrastructure 28 RS 101,954 2,216 3,667 (0.0) (0.4) 0.5 (102.0) 3,980.8 (243.5) (3,207.3) (78.6) 54.8 12.8 11.1 8.9 0.9 0.9 0.9 — — — (0.0) (2.0) 2.8 — — 2.4 Gujarat Pipavav Port 66 BUY 27,891 606 424 (1.2) 1.2 2.6 (65.8) (201.6) 115.2 (54.8) 53.9 25.1 28.2 16.6 11.2 3.8 3.5 3.1 — — — (9.1) 9.4 13.6 78 18.5 0.6 GVK Power & Infrastructure 17 RS 27,320 594 1,579 1.0 1.0 0.3 (0.6) 1.6 (73.4) 17.6 17.4 65.2 18.2 16.7 19.7 0.8 0.8 0.8 — 1.7 2.0 4.7 4.6 1.2 — — 3.5 IRB Infrastructure 159 ADD 52,929 1,151 332 13.6 10.1 10.9 17.4 (26.0) 8.1 11.7 15.8 14.6 7.9 8.0 6.8 2.1 1.5 1.3 1— — — 19.3 11.2 9.5 185 16.2 6.6 Mundra Port and SEZ 157 ADD 63,449 1,379 403 4.6 6.8 10.5 36.3 50.3 53.2 34.6 23.0 15.0 8.2 4.6 3.1 1.5 1.2 0.9 — — — 23.2 28.0 33.5 175 11.3 5.7 Infrastructure Cautious 395,198 8,592 12.1 17.8 41.6 17.2 14.6 10.3 11.0 9.0 7.3 1.5 1.3 1.2 0.6 0.7 0.7 8.5 9.1 11.6

Source: Company, Bloomberg, Kotak Institutional Equities estimates 32

33 33 India India DailySummary - September 6,2011 Kotak Institutional Equities: Valuation summary of key Indian companies

O/S Target 5-Sep-11 Mkt cap. shares EPS (Rs) EPS growth (%) PER (X) EV/EBITDA (X) Price/BV (X)Dividend yield (%) RoE (%) price Upside ADVT-3mo Company Price (Rs) Rating (Rs mn) (US$ mn) (mn) 2011E 2012E 2013E 2011E 2012E 2013E 2011E 2012E 2013E 2011E 2012E 2013E 2011E 2012E 2013E 2011E 2012E 2013E 2011E 2012E 2013E (Rs) (%) (US$ mn) Media DB Corp 227 BUY 41,632 905 183 14.1 14.2 17.1 32.7 0.6 20.3 16.1 16.0 13.3 10.4 9.4 7.9 5.0 4.3 3.9 1.8 2.6 4.4 35.0 29.1 31.0 350 54.1 0.9 DishTV 78 ADD 83,109 1,807 1,062 (1.8) 0.0 1.3 (27.5) (101.9) 3,944.0 (43.7) 2,362.5 58.4 38.7 17.8 12.0 39.5 38.9 23.3 — — — (62.3) 1.7 49.9 100 27.8 8.8 Eros International 224 ADD 21,729 472 97 11.8 15.8 19.9 19.0 34.0 25.9 19.0 14.2 11.3 13.2 10.0 7.3 3.2 2.6 2.1 — — — 24.9 20.2 20.5 250 11.5 2.1 Hindustan Media Ventures 149 BUY 10,901 237 73 7.3 9.0 12.1 198.7 22.8 35.0 20.3 16.5 12.2 10.0 8.7 6.3 2.7 2.3 2.0 — — 2.0 22.3 15.1 17.7 220 48.1 0.2 HT Media 148 ADD 34,768 756 235 7.7 8.9 11.0 26.3 15.3 23.6 19.2 16.6 13.5 9.1 7.6 5.9 2.5 2.3 2.2 1.4 2.7 4.1 15.0 14.4 16.6 190 28.4 0.5 Jagran Prakashan 109 BUY 34,572 752 316 6.8 7.0 8.4 17.2 1.7 20.5 16.0 15.7 13.0 9.6 8.9 7.4 5.0 4.5 4.1 3.0 3.7 4.6 31.5 30.0 32.7 160 46.4 0.5 Sun TV Network 303 BUY 119,406 2,596 394 19.6 21.6 25.4 48.6 10.0 17.9 15.5 14.0 11.9 9.2 8.2 7.0 4.9 4.4 4.0 2.9 4.0 5.3 36.6 34.7 36.6 440 45.2 19.9 Zee Entertainment Enterprises 115 BUY 112,756 2,451 978 5.8 6.2 7.7 10.0 6.4 23.3 19.7 18.5 15.0 13.1 12.1 9.6 2.7 2.6 2.5 1.2 1.1 1.4 14.2 14.3 16.9 160 38.8 6.5 Media Neutral 458,874 9,976 50.5 20.4 27.1 23.3 19.4 15.2 12.4 10.5 8.3 4.2 3.9 3.5 1.5 2.0 2.8 18.1 20.0 23.1 Metals & Mining Coal India 381 ADD 2,406,851 52,325 6,316 17.3 25.5 29.4 13.6 47.6 15.1 22.0 14.9 13.0 13.2 9.3 7.9 6.9 5.3 4.2 1.4 2.0 2.3 35.1 40.3 36.4 470 23.3 33.3 Hindalco Industries 154 ADD 293,937 6,390 1,915 12.8 18.3 17.6 (36.0) 43.3 (4.0) 12.0 8.4 8.7 6.3 6.1 6.4 1.0 0.9 0.8 1.0 1.0 1.0 9.7 11.4 10.0 175 14.0 28.9 Hindustan Zinc 127 BUY 536,575 11,665 4,225 11.6 13.1 14.7 21.8 12.7 11.8 10.9 9.7 8.6 7.0 5.4 4.0 2.4 1.9 1.6 0.8 0.8 0.8 24.3 22.2 20.4 160 26.0 3.0 Jindal Steel and Power 534 REDUCE 498,963 10,847 934 40.2 43.5 52.9 5.1 8.2 21.6 13.3 12.3 10.1 9.9 9.2 7.9 3.5 2.8 2.2 0.3 0.3 0.3 30.9 25.5 24.4 595 11.4 18.4 JSW Steel 728 SELL 164,415 3,574 226 78.6 70.2 107.5 (2.2) (10.7) 53.1 9.3 10.4 6.8 6.2 6.0 5.1 1.0 0.9 0.8 1.7 1.7 1.7 13.6 9.3 12.9 660 (9.3) 32.8 National Aluminium Co. 66 SELL 170,355 3,704 2,577 4.1 5.0 4.8 36.3 20.5 (4.1) 15.9 13.2 13.8 7.5 5.9 5.7 1.5 1.4 1.3 2.3 2.3 2.3 9.9 11.1 10.0 65 (1.7) 0.5 Sesa Goa 232 SELL 207,973 4,521 895 47.0 40.1 41.6 59.8 (14.6) 3.7 5.0 5.8 5.6 4.1 4.3 3.5 1.6 1.3 1.0 1.7 1.7 1.8 36.8 22.1 17.9 230 (1.1) 16.0 Sterlite Industries 131 BUY 441,494 9,598 3,361 15.2 17.0 19.0 26.2 12.0 11.5 8.7 7.7 6.9 5.4 4.1 3.4 1.1 0.9 0.8 0.9 0.9 0.9 13.0 13.0 12.8 185 40.8 17.4 Tata Steel 495 BUY 480,557 10,447 971 75.3 68.7 76.9 (2,258.1) (8.8) 12.0 6.6 7.2 6.4 6.1 6.3 5.4 1.4 1.1 0.9 2.4 1.6 1.6 24.7 15.5 15.7 625 26.3 50.4 Metals & Mining Attractive 5,201,119 113,073 39.1 16.1 12.9 12.6 10.8 9.6 7.8 6.8 5.8 2.4 2.0 1.7 1.3 1.5 1.7 19.0 18.5 17.8 Pharmaceutical Apollo Hospitals 510 ADD 70,773 1,539 139 13.2 17.8 21.4 21.0 34.5 19.9 38.5 28.6 23.9 17.6 13.3 11.0 3.7 2.8 2.4 — — — 9.8 10.7 10.5 650 27.6 1.1 Biocon 338 BUY 67,660 1,471 200 18.4 19.4 21.4 23.9 5.6 10.3 18.4 17.4 15.8 10.6 10.1 9.1 3.3 2.9 2.6 — — — 19.4 17.9 17.4 445 31.5 3.5 Cipla 275 REDUCE 220,402 4,792 803 12.3 14.5 16.5 (10.0) 17.5 13.7 22.3 18.9 16.7 19.3 13.7 11.3 3.3 2.9 2.6 1.0 1.1 1.3 15.4 16.0 — 310 12.9 8.9 Cadila Healthcare 833 ADD 170,535 3,707 205 34.7 39.4 47.7 40.6 13.4 21.0 24.0 21.1 17.5 20.7 17.3 13.4 7.9 6.1 4.8 0.8 0.9 1.1 37.5 32.5 30.9 1,045 25.5 2.7 Dishman Pharma & chemicals 67 REDUCE 5,413 118 81 9.8 8.0 8.7 (31.8) (18.3) 8.0 6.8 8.3 7.7 8.4 6.4 5.9 0.6 0.6 0.5 — — — 9.6 7.2 7.3 70 5.2 0.3 Divi's Laboratories 736 ADD 97,623 2,122 133 32.4 36.7 45.0 25.7 13.5 22.4 22.7 20.0 16.4 18.8 14.4 11.8 5.4 4.7 4.0 — — — 25.9 25.0 26.2 830 12.8 3.2 GlaxoSmithkline Pharmaceuticals (a) 2,130 REDUCE 180,409 3,922 85 68.3 78.2 88.6 15.5 14.6 13.3 31.2 27.2 24.0 20.8 18.4 15.8 9.2 8.5 7.8 1.9 2.3 2.7 30.9 32.6 33.9 2,220 4.2 1.5 Glenmark Pharmaceuticals 323 ADD 87,223 1,896 270 17.0 26.2 23.5 33.6 54.5 (10.3) 19.0 12.3 13.7 21.1 14.1 12.0 4.3 3.2 2.6 — — — 20.6 29.8 21.2 395 22.5 4.8 Jubilant Life Sciences 194 REDUCE 30,848 671 159 14.4 16.5 22.7 (45.6) 14.5 37.6 13.4 11.7 8.5 10.9 8.7 7.3 1.4 1.3 1.1 1.0 1.0 1.5 12.3 11.7 14.2 205 5.9 1.1 Lupin 472 ADD 211,524 4,599 448 19.2 20.6 26.3 25.6 7.2 27.5 24.5 22.9 17.9 20.5 17.8 13.1 6.3 5.2 4.2 0.6 0.7 0.9 29.5 25.3 26.2 530 12.3 9.9 Ranbaxy Laboratories 479 SELL 202,586 4,404 423 40.6 16.9 20.8 475.0 (58.3) 22.7 11.8 28.3 23.0 14.5 24.5 19.0 3.6 3.1 2.8 — — — 34.5 11.9 12.8 435 (9.1) 7.6 Sun Pharmaceuticals 503 ADD 520,959 11,326 1,036 17.5 20.1 24.3 34.4 14.8 20.8 28.7 25.0 20.7 24.4 19.6 15.9 5.0 4.3 3.6 0.7 0.8 1.0 21.0 20.2 20.7 560 11.3 10.8 Pharmaceuticals Cautious 2,192,647 47,668 26.0 7.0 3.3 23.6 22.1 21.3 17.9 14.8 14.0 3.7 3.1 3.0 0.7 0.8 0.8 15.5 14.3 13.9 Property DLF 208 BUY 356,288 7,746 1,715 9.1 11.9 15.7 (14.5) 31.3 31.8 22.9 17.4 13.2 15.5 12.3 9.3 1.4 1.3 1.2 1.0 1.2 1.4 5.4 7.5 9.2 270 29.9 37.5 Housing Development & Infrastructure 108 BUY 47,971 1,043 445 19.8 28.7 34.3 24.0 44.8 19.7 5.4 3.8 3.1 5.4 3.8 3.2 0.5 0.4 0.4 — 0.9 1.4 10.0 12.3 12.7 150 39.1 21.0 Indiabulls Real Estate 84 RS 33,587 730 402 4.0 8.5 15.4 (1,095.5) 114.1 81.5 21.0 9.8 5.4 14.4 11.6 5.1 0.3 0.3 0.3 — 0.6 0.8 1.4 2.9 5.0 — — 8.8 Mahindra Life Space Developer 317 BUY 12,945 281 41 24.9 30.8 37.5 30.2 23.7 21.6 12.7 10.3 8.5 9.7 7.0 5.2 1.3 1.1 1.0 1.6 1.4 1.6 10.4 11.6 12.7 450 41.9 0.3 Oberoi Realty 222 BUY 73,303 1,594 330 15.7 20.0 28.0 14.8 27.6 39.7 14.2 11.1 7.9 10.3 7.1 4.4 2.2 1.9 1.5 0.4 0.7 1.1 19.9 18.2 21.3 315 41.7 0.3 Phoenix Mills 221 BUY 32,018 696 145 6.3 7.4 10.7 53.0 17.2 44.1 34.9 29.8 20.7 25.8 21.6 16.1 2.0 1.9 1.8 0.8 0.9 0.9 5.8 6.6 8.9 300 35.7 0.3 Puravankara Projects 68 ADD 14,577 317 213 5.5 9.0 10.9 (18.9) 62.8 21.5 12.4 7.6 6.2 17.3 9.5 8.0 1.0 0.9 0.8 1.5 2.2 2.9 8.0 12.0 13.1 80 17.1 0.1 Sobha Developers 235 BUY 23,016 500 98 18.8 20.6 27.2 33.8 9.2 32.2 12.5 11.4 8.6 11.1 10.0 7.1 1.2 1.1 1.0 1.3 1.5 1.7 10.2 10.3 12.4 370 57.6 0.9 Unitech 27 RS 70,117 1,524 2,616 2.3 2.6 2.7 (23.4) 12.8 4.9 11.5 10.2 9.8 13.4 10.9 8.9 0.6 0.6 0.5 — 0.7 1.1 5.4 5.7 5.4 — — 17.9 Property Cautious 694,876 15,107 5.3 44.3 29.6 16.2 11.2 8.7 13.0 9.3 7.0 1.0 0.9 0.8 0.8 1.1 1.4 6.1 8.1 9.5

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

KOTAK INSTITUTIONAL EQUITIES RESEARCH Kotak Institutional Equities: Valuation summary of key Indian companies India Daily Summary - September 6, 2011 Daily 6, India Summary- September

O/S Target 5-Sep-11 Mkt cap. shares EPS (Rs) EPS growth (%) PER (X) EV/EBITDA (X) Price/BV (X)Dividend yield (%) RoE (%) price Upside ADVT-3mo Company Price (Rs) Rating (Rs mn) (US$ mn) (mn) 2011E 2012E 2013E 2011E 2012E 2013E 2011E 2012E 2013E 2011E 2012E 2013E 2011E 2012E 2013E 2011E 2012E 2013E 2011E 2012E 2013E (Rs) (%) (US$ mn) Sugar Bajaj Hindustan 56 REDUCE 12,848 279 228 1.9 3.7 1.6 (28.7) 90.5 (57.3) 29.2 15.3 35.8 17.8 6.0 5.9 0.4 0.4 0.4 1.0 1.0 1.0 1.7 2.7 1.1 60 6.7 1.5 Balrampur Chini Mills 55 BUY 13,532 294 247 6.7 4.0 7.7 111.0 (40.5) 94.0 8.2 13.8 7.1 11.2 8.9 6.0 0.9 0.9 0.8 1.4 1.4 1.4 11.6 6.5 11.9 80 46.0 1.6 Shree Renuka Sugars 59 BUY 39,686 863 670 10.5 6.4 5.0 214.7 (39.4) (21.0) 5.6 9.3 11.8 8.4 6.6 5.4 1.6 1.4 1.3 1.7 1.7 1.7 34.4 16.1 11.4 75 26.7 9.7 Sugar Cautious 66,066 1,436 122.4 (24.7) (7.4) 8.2 10.9 11.7 10.9 6.7 5.6 0.9 0.9 0.8 1.5 1.5 1.5 11.6 8.1 7.0 Technology HCL Technologies 384 SELL 270,755 5,886 705 22.9 29.5 32.8 30.4 28.9 11.3 16.8 13.0 11.7 10.2 7.8 7.0 3.2 2.7 2.3 1.9 2.1 2.1 21.0 22.6 21.7 375 (2.4) 9.7 Hexaware Technologies 74 ADD 21,519 468 290 3.0 7.5 7.3 (36.8) 154.4 (3.4) 25.1 9.9 10.2 18.4 8.4 7.1 2.2 2.0 1.8 2.0 4.0 4.4 9.3 21.3 18.6 80 8.0 3.0

InfosysDaily India Summary -September Technologies 2,265 BUY 1,300,167 28,266 574 119.7 134.3 160.3 10.5 12.1 19.4 18.9 16.9 14.1 12.6 11.1 9.1 5.0 4.2 3.5 2.6 1.9 2.2 28.0 27.1 27.2 2,900 28.0 77.1 Mahindra Satyam 76 SELL 89,494 1,946 1,176 4.2 6.7 7.0 68.9 58.4 4.7 18.1 11.4 10.9 13.7 7.0 5.5 5.2 3.6 2.7 — — — 27.6 37.1 28.2 70 (8.0) 11.9 Mindtree 342 ADD 14,071 306 41 24.7 35.2 37.2 (52.7) 42.4 5.8 13.8 9.7 9.2 7.7 5.9 4.7 1.8 1.6 1.4 0.7 1.0 3.3 14.4 17.2 16.1 375 9.7 2.3 Mphasis BFL 357 SELL 75,312 1,637 211 51.8 38.6 30.0 18.8 (25.5) (22.2) 6.9 9.3 11.9 5.8 7.0 7.5 2.3 1.9 1.7 1.1 1.3 1.4 38.6 22.3 14.8 300 (16.1) 3.8 Patni Computer Systems 276 ADD 36,730 799 133 42.6 25.9 27.2 16.5 (39.3) 5.2 6.5 10.7 10.1 3.3 3.5 2.4 1.2 1.1 1.0 23.9 1.9 2.0 18.4 8.2 10.2 300 8.8 1.6 Polaris Software Lab 119 REDUCE 11,819 257 100 19.3 18.8 19.0 25.7 (2.6) 0.7 6.1 6.3 6.3 3.1 2.4 2.0 1.1 1.0 0.9 3.1 3.3 3.5 20.2 16.8 14.8 130 9.7 2.2 TCS 1,028 ADD 2,011,414 43,728 1,957 44.5 52.8 61.1 26.8 18.6 15.6 23.1 19.5 16.8 17.4 14.2 11.9 8.0 6.5 5.4 1.7 2.1 2.4 37.8 36.9 35.2 1,160 12.9 46.3 Tech Mahindra 678 SELL 85,466 1,858 126 48.8 72.1 75.5 (25.2) 47.8 4.7 13.9 9.4 9.0 9.5 9.5 8.4 2.6 2.2 1.9 0.6 0.6 1.5 20.5 26.0 23.8 600 (11.5) 3.7 Wipro 322 ADD 789,575 17,165 2,454 21.6 22.4 24.5 14.5 3.9 9.1 14.9 14.3 13.1 10.9 9.6 8.5 3.3 2.8 2.4 1.3 1.5 1.7 24.3 21.1 19.7 370 15.0 11.6 Technology Attractive 4,706,323 102,316 17.1 13.1 13.0 18.3 16.2 14.3 13.1 11.2 9.5 4.8 4.0 3.4 2.0 1.8 2.1 26.2 24.9 23.8 Telecom Bharti Airtel 406 ADD 1,540,117 33,482 3,798 15.9 18.2 28.0 (32.6) 14.5 53.7 25.5 22.3 14.5 10.8 8.3 6.3 3.2 2.8 2.3 — — — 13.3 13.3 17.4 460 13.4 50.8 IDEA 101 ADD 333,138 7,242 3,303 2.7 2.7 5.1 (0.5) (1.4) 89.2 37.1 37.6 19.9 11.7 8.8 6.7 2.7 2.5 2.2 — — — 7.6 7.0 12.0 115 14.0 19.3 MTNL 37 SELL 23,121 503 630 (10.4) (9.1) (8.4) (33.7) (11.9) (8.1) (3.5) (4.0) (4.4) 0.4 0.6 0.7 0.2 0.2 0.2 — — — (6.1) (5.7) (5.5) 35 (4.6) 0.8 Reliance Communications 88 SELL 187,662 4,080 2,133 6.3 2.6 5.2 (71.1) (59.4) 103.2 13.9 34.4 16.9 6.2 6.8 5.8 0.5 0.5 0.4 — — — 3.2 1.3 2.7 80 (9.1) 17.7 Tata Communications 202 REDUCE 57,556 1,251 285 15.2 15.7 15.9 8.2 3.5 1.5 13.3 12.9 12.7 6.2 5.8 5.5 0.8 0.8 0.7 3.7 4.2 4.5 5.5 5.5 5.4 205 1.5 1.5 Telecom Cautious 2,141,593 46,558 (42.4) 2.1 62.3 26.6 26.0 16.0 9.8 8.1 6.3 1.8 1.7 1.5 0.1 0.1 0.1 6.8 6.5 9.5 Utilities Adani Power 89 REDUCE 213,593 4,644 2,393 2.4 11.0 15.0 200.7 368.5 35.8 37.9 8.1 6.0 37.0 7.7 5.0 3.4 2.2 1.6 — — — 8.5 33.5 31.8 100 12.0 3.9 CESC 299 BUY 37,325 811 125 37.7 42.5 51.3 9.1 12.7 20.8 7.9 7.0 5.8 5.6 6.0 5.7 0.8 0.7 0.6 1.6 1.8 2.0 10.5 10.7 11.5 440 47.3 2.1 JSW Energy 55 REDUCE 89,954 1,956 1,640 5.1 4.8 4.7 12.9 (6.2) (1.8) 10.7 11.4 11.6 11.8 7.9 6.1 1.6 1.4 1.2 (1.8) — — 16.1 13.0 11.3 60 9.4 1.7 Lanco Infratech 17 BUY 37,346 812 2,223 2.0 3.0 3.4 (5.8) 47.2 16.6 8.4 5.7 4.9 8.5 7.9 7.4 0.9 0.8 0.7 — — — 12.2 15.0 14.6 45 167.9 9.3 NHPC 24 ADD 295,833 6,431 12,301 1.3 1.8 2.1 (27.2) 36.0 16.3 17.8 13.1 11.3 13.1 10.0 8.0 1.1 1.0 1.0 1.7 2.0 2.4 6.3 8.0 8.8 30 24.7 2.4 NTPC 164 REDUCE 1,349,783 29,344 8,245 11.0 11.2 12.0 5.3 1.4 6.8 14.8 14.6 13.7 12.3 12.0 11.2 2.0 1.8 1.7 2.3 2.1 2.2 13.7 12.8 12.6 180 10.0 10.1 Reliance Infrastructure 476 BUY 126,298 2,746 265 58.0 64.1 76.3 (6.5) 10.5 19.0 8.2 7.4 6.2 8.1 4.3 3.2 0.5 0.5 0.5 2.0 2.2 2.4 6.4 11.2 12.2 920 93.2 16.2 Reliance Power 85 SELL 238,572 5,187 2,805 2.7 2.9 2.9 (5.0) 7.6 (0.5) 31.4 29.2 29.3 166.2 70.9 14.8 1.5 1.4 1.3 — — — 4.9 4.9 4.7 88 3.5 5.8 Tata Power 1,012 BUY 249,698 5,428 247 76.5 75.9 87.6 21.5 (0.7) 15.4 13.2 13.3 11.5 10.6 8.8 8.2 1.7 1.6 1.4 1.4 1.5 1.7 13.8 12.3 12.9 1,350 33.5 7.4 Utilities Cautious 2,638,401 57,359 5.1 18.9 13.4 15.3 12.9 11.3 13.9 10.5 8.6 1.5 1.4 1.3 1.6 1.5 1.7 10.1 10.9 11.3 Others Carborundum Universal 298 SELL 27,850 605 93 18.3 18.9 21.0 67.7 3.7 10.6 16.3 15.7 14.2 11.8 10.0 8.8 3.3 2.8 2.4 1.3 1.3 1.5 20.7 18.4 17.8 290 (2.7) 0.2 Havells India 337 REDUCE 41,993 913 125 24.5 25.8 28.8 334.1 5.1 11.5 13.7 13.0 11.7 9.2 8.5 7.4 5.9 4.2 3.2 0.7 0.8 0.9 53.9 37.6 30.9 370 9.9 4.3 Jaiprakash Associates 65 BUY 137,369 2,986 2,126 6.0 6.3 7.2 230.2 3.9 15.6 10.7 10.3 8.9 11.5 9.9 9.5 1.3 1.2 1.0 — — — 13.3 11.7 12.3 115 78.0 19.9 Jet Airways 283 BUY 24,470 532 86 (10.1) (43.4) 16.9 (91.0) 331 (139.0) (28.2) (6.5) 16.8 9.5 10.0 7.1 1.5 1.9 1.7 — — — (5.0) (11.7) 10.9 650 129.3 12.0 SpiceJet 26 BUY 10,599 230 403 2.2 2.1 4.3 (12.4) (4.3) 101.0 11.8 12.4 6.1 10.3 13.9 7.8 3.5 2.7 1.9 — — — (466) 24.8 36.2 65 147.1 2.9 Tata Chemicals 332 REDUCE 84,617 1,840 255 26.2 32.9 38.8 (0.7) 25.4 17.9 12.7 10.1 8.6 7.6 5.3 4.5 1.6 1.4 1.2 3.0 3.6 4.5 16.9 18.6 19.5 365 9.9 2.7 United Phosphorus 144 BUY 66,384 1,443 462 12.3 15.9 19.8 3.9 28.8 24.3 11.6 9.0 7.3 7.1 4.9 4.1 1.8 1.5 1.3 1.4 2.1 2.4 18.0 18.5 19.8 220 53.0 4.0 Others 393,282 8,550 232.5 10.1 38.5 13.9 12.6 9.1 9.9 8.5 7.5 1.7 1.5 1.3 1.1 1.3 1.6 12.0 12.0 14.5 KS universe (b) 44,262,483 962,270 18.1 17.9 16.3 15.1 12.8 11.0 9.7 8.1 6.9 2.3 2.0 1.8 1.6 1.8 2.0 15.4 15.9 16.3 KS universe (b) ex-Energy 36,878,640 801,744 20.2 15.6 18.6 16.3 14.1 11.9 11.5 9.6 8.1 2.6 2.3 2.0 1.5 1.5 1.7 16.0 16.1 16.7 KS universe (d) ex-Energy & ex-Commodities 30,705,422 667,538 18.6 15.2 19.9 17.1 14.9 12.4 12.8 10.7 9.0 2.7 2.3 2.0 1.5 1.6 1.8 15.5 15.7 16.5

Notes: (a) For banks we have used adjusted book values. (b) 2010 means calendar year 2009, similarly for 2011 and 2012 for these particular companies. (c) EV/Sales & EV/EBITDA for KS universe excludes Banking Sector. (d) Rupee-US Dollar exchange rate (Rs/US$)= 46.00

Source: Company, Bloomberg, Kotak Institutional Equities estimates 34

Disclosures

Kotak Institutional Equities Research coverage universe (IMP: Our ratings definitions have changed as of September 6, 2011) Distribution of ratings/investment banking relationships Percentage of companies covered by Kotak Institutional Equities, 70% within the specified category.

60% Percentage of companies within each category for which Kotak Institutional Equities and or its affiliates has provided investment 50% banking services within the previous 12 months.

40% * The above categories are defined as follows: Buy = We expect 34.3% this stock to outperform the BSE Sensex by 10% over the next 12 30% 27.1% 27.1% months; Add = We expect this stock to outperform the BSE Sensex by 0-10% over the next 12 months; Reduce = We expect this stock to underperform the BSE Sensex by 0-10% over the 20% next 12 months; Sell = We expect this stock to underperform the 11.4% BSE Sensex by more then 10% over the next 12 months. These 10% ratings are used illustratively to comply with applicable 4.8% 3.6% 1.8% regulations. As of 30/06/2011 Kotak Institutional Equities 0.0% 0% Investment Research had investment ratings on 166 equity securities. BUY ADD REDUCE SELL

Source: Kotak Institutional Equities As of June 30, 2011

Ratings and other definitions/identifiers

Definitions of ratings

BUY. We expect this stock to deliver more than 17.5% returns over the next 12 months.

ADD. We expect this stock to deliver 7.5-17.5% returns over the next 12 months.

REDUCE. We expect this stock to deliver 0-7.5% returns over the next 12 months.

SELL. We expect this stock to deliver less than 0% returns over the next 12 months.

Our target price are also on 12-month horizon basis.

Other definitions

Coverage view. The coverage view represents each analyst’s overall fundamental outlook on the Sector. The coverage view will consist of one of the following designations: Attractive, Neutral, Cautious.

Other ratings/identifiers

NR = Not Rated. The investment rating and target price, if any, have been suspended temporarily. Such suspension is in compliance with applicable regulation(s) and/or Kotak Securities policies in circumstances when Kotak Securities or its affiliates is acting in an advisory capacity in a merger or strategic transaction involving this company and in certain other circumstances.

CS = Coverage Suspended. Kotak Securities has suspended coverage of this company.

NC = Not Covered. Kotak Securities does not cover this company.

RS = Rating Suspended. Kotak Securities Research has suspended the investment rating and price target, if any, for this stock, because there is not a sufficient fundamental basis for determining an investment rating or target. The previous investment rating and price target, if any, are no longer in effect for this stock and should not be relied upon.

NA = Not Available or Not Applicable. The information is not available for display or is not applicable.

NM = Not Meaningful. The information is not meaningful and is therefore excluded.

KOTAK INSTITUTIONAL EQUITIES RESEARCH 36

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