India Daily, March 10, 2011

INDIA DAILY

March 10, 2011 India 9-Mar 1-day1-mo 3-mo Sensex 18,470 0.2 5.0 (4.0)

Nifty 5,531 0.2 5.3 (4.1)

Contents Global/Regional indices New releases Dow Jones 12,213 (0.0) (0.2) 7.4 Eros Media: Strong storyline. BUY Nasdaq Composite 2,752 (0.5) (1.3) 5.2 FTSE 5,937 (0.6) (1.9) 2.2 Strategy: Tread cautiously but do tread/trade Nikkie 10,460 (1.2) (1.4) 2.4 Update Hang Seng 23,702 (0.5) 4.4 2.3

Bharti Airtel: Takeaways from MTN CY2010 annual results KOSPI 1,988 (0.7) (1.0) 0.1

Value traded – India

Cash (NSE+BSE) 147 162 123 News Round-up Derivatives (NSE) 1,090 1,459 1,434

` Exit load redefinition by SEBI raises hopes of more flexible commission regime in Deri. open interest 1,309 1,410 1,452

coming days. (ECNT)

` Reliance Industries Ltd (RIL IN) is expected to increase gas output from its KG D6 block by over 30% to 67 million standard cubic metres per day from April. (BSTD) Forex/money market Change, basis points ` Tata Power Company Ltd (TPWR IN) is likely to have a little over 1300 MW capacity 9-Mar 1-day 1-mo 3-mo ready for generation in the next two months. (THBL) Rs/US$ 45.0 (8) (48) (21) ` Tata Motors (TTMT IN) set to roll out new buses early next fiscal, New launches 10yr govt bond, % 7.9 (4) (24) (20) include Interceptor van and Divo inter-city coach. (THBL) Net investment (US$mn) 8-Mar MTD CYTD ` Satyam Computer Services Ltd (SCS IN) is in talks with the US Securities and Exchange FIIs 82 387 (1,826) Commission to shorten the time frame for which the company would need to re- MFs 15 63 (282) state its earnings under US accounting standard. (THBL) Top movers -3mo basis ` Infosys (INFO IN) is searching for acquisitions to add companies that specialize in Change, % providing healthcare and government services. (BSTD) Best performers 9-Mar 1-day 1-mo 3-mo NACL IN Equity 460.3 1.7 14.5 28.1 ` Dr Reddy's Laboratories Ltd (DRRD IN) to issue USD 116 mn debentures. (BSTD) WLCO IN Equity 189.9 3.9 10.2 21.9 ` PFC (POWF IN) is in the process of creating a wholly-owned subsidiary for the SIEM IN Equity 857.1 (0.0) 1.2 12.2 BOI IN Equity 470.2 2.1 13.7 9.7 renewable energy sector, in a couple of weeks, to be called PFC Green Energy Ltd. LICHF IN Equity 201.7 2.4 20.2 9.2 (BSTD) Worst performers ` PFC (POWF IN) has sanctioned USD 1.57 bn to fund a thermal power project to be set UT IN Equity 37.6 3.7 4.3 (40.5) up by Raichur Power Corporation in Karnataka. (FNLE) IVRC IN Equity 76.7 4.3 20.0 (38.6) AL IN Equity 52.3 0.2 0.3 (25.9) ` HDFC (HDFC IN) is planning to monetise some of its non-core investments over the RCAPT IN Equity 503.3 3.8 19.6 (23.6) next 6-12 months to garner a windfall gain of as much as USD 889 mn. (BSTD) RCOM IN Equity 99.4 9.6 2.8 (21.2)

` Anil Ambani group firm Reliance Comm. (RCOM IN) has completed the procedure for obtaining an USD 1.93bn loan from China Development Bank to part-finance the cost of 3G spectrum & equipment purchase. (ECNT)

` Realty developer Kalpataru close to buying Bayer Cropscience's (BYRCS IN) 108 acres land parcel in Thane for USD 311.11mn. (ECNT)

` Hero Honda's (HH IN) promoters Hero Investments has raised USD 200mn by pledging shares to Axis Trustee Services. (ECNT)

` M&M Financial Services (MMFS IN) plans to sell as much as 5% new shares to investors that may include some private funds as it prepares to meet higher capital norms & raise lending in the economy, where agriculture is growing at 4%. (ECNT)

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.

BUY Eros International (EROS)

Media MARCH 09, 2011 INITIATING COVERAGE Coverage view: Neutral

Strong storyline. BUY. Eros International Media (EROS) is a leading Indian film studio Price (Rs): 140 with promising prospects arising out of (1) rising market share in the Hindi film industry Target price (Rs): 200 post the economic downturn, (2) expansion into emerging but lucrative regional film BSE-30: 18,470 markets, (3) strengthening theatrical and digital distribution network, (4) increasing competition on C&S TV for film content and (5) large and expanding film catalog/library. We initiate coverage with a BUY rating and 12-month forward fair value of Rs200, based on 8.5X FY2012E EV/EBIT.

Company data and valuation summary Eros International Stock data Forecasts/Valuations 2011 2012E 2013E QUICK NUMBERS 52-week range (Rs) (high,low)218-128 EPS (Rs) 12.6 16.6 20.9 Market Cap. (Rs bn) 13.0 EPS growth (%) 30.1 32.5 25.3 Shareholding pattern (%) P/E (X) 11.1 8.4 6.7 • Attractive Promoters 78.1 Sales (Rs bn) 7.0 8.9 11.2 valuations given FIIs 8.2 Net profits (Rs bn) 1.2 1.5 1.9 rising market share MFs 2.0 EBITDA (Rs bn) 1.6 2.1 2.8 and margins Price performance (%) 1M 3M 12M EV/EBITDA (X) 7.7 6.1 4.5 Absolute (8.4) (10.1) 0.0 ROE (%) 24.7 19.8 20.1 • Evolution of EROS Rel. to BSE-30 (12.7) (6.4) 0.0 Div. Yield (%) 0.0 0.0 0.0 studio model in India with content 12-month forward fair value of Rs200 offers 40% potential upside focus We initiate coverage on EROS with a BUY rating at 12-month forward fair value of Rs200, based on 8.5X FY2012E EV/EBIT, ~30% discount to regional print and ~35% discount to broadcasting in • EROS library and India. Our relative valuation comparables capture the early stage of development of the Indian rising TV licensing media industry coupled with strong growth (emerging ancillary revenue streams including C&S TV market key drivers licensing); the discount captures film business dynamics.

EROS: Leading Indian film ‘studio’ with increasing focus on content

Eros group is the leading Hindi film studio in overseas markets with the widest distribution network and strongest movie library (>2,000 films). Eros International Media (EROS) is the Indian subsidiary of the Eros Group, transforming into one of the leading Indian films studios within the last decade, establishing an extensive domestic theatrical and ancillary distribution network. EROS aims to (1) strengthen the content focus of the group, (2) increase its market share in Hindi film market and (3) expand in emerging regional film markets. EROS’ large, diverse and expanding film library is the key differentiator.

Financials: Larger new release film slate, expanding catalog key drivers

We model strong 32% CAGR in EBIT between FY2011E and FY2013E led by 27% CAGR in revenues driven by (1) larger new film release slate (rising market share), (2) transformation of Indian film industry (multiplexes, emerging ancillary revenue streams) and (3) expanding catalog of films. (1) Decline in cost of film production (profit share with talent) and (2) reduced print costs (digitization of box office) are likely to be key margin drivers.

Key risks: Execution, costs, Hollywood, piracy, capital, Eros Group dependence

Key risks to the Indian film industry include (1) ‘hit or miss’ nature of business, (2) limited availability of quality talent, (3) slowdown in theatre expansion, (4) rising clout of Hollywood and

(5) continued problem of extensive piracy. The key risks to EROS include (1) hard-to-predict TV licensing income, (2) dependence on Eros Group, (3) sustained capital requirement given ‘long-tail’ of revenues and (4) execution risks in new business initiatives.

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

Eros International Media

Financial summary of EROS, March fiscal year-ends, 2008-13E (Rs mn)

2008 2009 2010 2011E 2012E 2013E Profit model (Rs mn) Net sales 4,747 6,265 6,409 7,011 8,927 11,234 EBIT 551 1,298 1,110 1,608 2,138 2,799 Other income 6 13 26 115 156 166 Interest expense (28) (61) (90) (87) (87) (87) D&A expenses (18) (50) (44) (41) (52) (52) Pretax profits 511 1,200 1,002 1,595 2,155 2,826 Extraordinaries 149 (160) 121 — — — Tax incidence (233) (291) (295) (403) (570) (774) Minority interest (16) (14) (5) (28) (42) (118) Reported PAT 411 734 823 1,165 1,544 1,934 Adjusted PAT 330 856 738 1,165 1,544 1,934 EPS (Rs/share) 4.5 11.8 10.1 14.1 16.7 20.9

Balance sheet (Rs mn) Total equity 814 1,580 2,375 6,938 8,481 10,416 Deferred Tax 88 280 498 718 1,010 1,393 Minority interest 22 40 42 70 112 230 Total borrowings 1,239 2,118 2,175 2,175 2,175 2,175 Currrent liabilities 5,887 7,189 4,962 4,267 4,777 5,667 Total capital 8,050 11,207 10,052 14,168 16,555 19,881 Cash and equivalents 1,182 361 1,072 2,686 1,944 2,486 Loans and advances 3,060 5,148 3,709 4,675 6,028 6,950 Other current assets 2,329 3,423 2,469 2,930 3,755 4,369 Total fixed assets 1,419 2,195 2,723 3,797 4,749 5,996 Investments 60 80 80 80 80 80 Total assets 8,050 11,207 10,052 14,168 16,555 19,881

Free cash flow (Rs mn) Operating cash flow, excl. WC 2,619 3,027 3,082 3,829 4,875 6,173 Working capital 579 (1,844) 218 (2,123) (1,667) (646) Capital expenditure (2,736) (2,702) (2,554) (3,118) (3,970) (5,013) Free cash flow 463 (1,519) 746 (1,413) (761) 513 Adjusted FCF (117) 326 528 711 905 1,160

Source: Company data, Kotak Institutional Equities estimates

Indian regional print and broadcasting valuation comparables

Price Market cap EV Sales EV/EBITDA (X) P/E (X) Valuation Discount 9-Mar (Rs bn) (Rs bn) (Rs bn) 2011E 2012E 2013E 2011E 2012E 2013E TP (Rs) EV/E (X) (%) Eros International 140 13 12 7 7.8 5.8 4.5 9.9 8.4 6.7 196 8.5 Regional print Jagran Prakashan 117 35 33 11 9.6 8.7 7.2 16.8 14.8 12.5 150 11.2 24 DB Corp Limited 238 43 43 13 11.1 10.1 8.3 18.8 17.0 14.0 310 13.2 36 Average 10.4 9.4 7.8 17.8 15.9 13.2 12.2 30 Broadcasting Zee Entertainment 126 123 112 29 17.0 12.7 9.9 26.3 20.4 16.1 130 13.0 35 Sun TV Network 427 168 164 20 15.4 12.2 9.9 23.4 18.8 15.7 460 13.2 36 Average 16.2 12.4 9.9 24.8 19.6 15.9 13.1 35

Notes: (a) For Eros International and Sun TV Network, EBITDA corresponds to EBIT as they account for film costs under amortization.

Source: Kotak Institutional Equities estimates

KOTAK INSTITUTIONAL EQUITIES RESEARCH 3 Media Eros International

Operating and financial performance of EROS, March fiscal year-ends, 2008-11E

2008 2009 2010 2011E New releases Blockbuster/Success Om Shanti Om Yuvraaj Love Aaj Kal Golmaal-3 Heyy Baby De Dana Dan Housefull Partner Kambakht Ishq Cheeni Kum Mee Shivaji Raje… Average Provoked U Me Aur Hum Aladin Anjaana Anjaani Dus Kahaniyaan Billu Karthi Calling Karthik Paathshaala Sunday Heroes Tera Mera Ki Rishta No Problem One Two Three Hashar… A Love Story Heer Ranjha… Haapus Shikshancha Aicha Gho Ideachi Kalpana Failure Journey Bombay to Goa Drona Veer Toonpur Kaa Superhero Gandhi My Father Mr Black Mr White Vaada Raha… Akrosh Buddha Mar Gaya Dhoom Dhadakka Milenge Milenge Pankh Nanhe Jaisalmer Money Hai Toh Honey Hai Meri Life Main Uski Wife The Great Indian Butterfly No Smoking Hi Jack London Calling Tere Ishq Nachiya Bombay to Bangkok Haal-E-Dil Chintuji Black & White God Tussi Great Ho Shree Siddhivinayak Aa Dekhen Zara Mitti Overseas Bhool Bhulaiyaan Sarkaar Raaj Wanted Dabangg Aur Papu Pass Ho Gaya Krazzy 4 Khatta Meetha Jai Jagannath Bhootnath Benny and Babloo Kaisey Kahein Mehbooba A Flat Darling Ek Vivaah Aisa Bhi Khuda Kasam Dahek K Kompany Speed Kaash Mere Hote Digital prints (#) Hey Baby 340 Yuvraaj 640 Kambakht Ishq 651 Housefull 878 Love Aaj Kal 489 Anjaana Anjaani 654 Financial performance (Rs mn) Revenues 4,747 6,265 6,409 7,011 Catalog share (%) 8 9 8 8 Gross profit 1,086 2,045 1,940 2,566 Gross margin (%) 23 33 30 37 EBIT 551 1,298 1,110 1,608 Operating margin (%) 12 21 17 23

Source: Company data, Kotak Institutional Equities estimates

Key features and dependences of a studio model

Film portfolio Distribution network Features Features Not dependent on success of one film Maximize revenues with wide release, windowing Large market share, bargaining power Long-standing relationships with retailers Dependence Dependence Distribution - effective, efficient monetization Portfolio - bargaining power over retailers Capitalization - large working capital requirement Library - bundled, tailor-made content

Capitalization Film library Features Features 'Long-tail' of film revenues/windowing Sunk cost, high-margin steady revenue stream Comfort to content/distribution partners Continous monetization on new formats/platforms Dependence Dependence Portfolio - reduced risk, low cost of capital Portfolio - new films enhance value of portfolio Library - assets with proven track record Distribution - effective, efficient monetization

Source: Kotak Institutional Equities

4 KOTAK INSTITUTIONAL EQUITIES RESEARCH Eros International Media

Eros India’s principal operating activities

Operating activities

Sourcing content Exploitation / (Hindi/Regional) Distribution

Existing New India International content content

Eros India 1) Theatrical distribution 1) Arrangement with Library 2) Television licensing parent Eros Group for 3) Home entertainment international rights 4) Music / music publishing Acquisition Co-production Production EyeQube 5) Digital / new media

Source: Company data, Kotak Institutional Equities

Impact of income-sharing agreements on studio profitability

Blockbuster Success Average Failure Comments Pre-income sharing agreements Cost of talent (Rs mn) 200 200 200 200 Cost of production (Rs mn) (a) 600 600 600 600 Cost of distribution (Rs mn) (b) 100 100 100 100 15-20% of production cost Total cost of film (Rs mn) 700 700 700 700 (a) + (b) Net movie revenues (Rs mn) 1,500 1,000 700 400 Net movie income (Rs mn) 800 300 — (300) Studio income (Rs mn) 800 300 — (300) Movie income Talent income (Rs mn) 200 200 200 200 Upfront income Studio revenue/investment (X) 1.1 0.4 — (0.4) Working capital inefficient Post-income sharing aggrements Talent income share (%) 50 50 50 50 50% of profits go to talent Cost of talent (Rs mn) 100 100 100 100 Reduction of Rs100mn Cost of production (Rs mn) (a) 500 500 500 500 Cost of distribution (Rs mn) (b) 100 100 100 100 15-20% of production cost Total cost of film (Rs mn) 600 600 600 600 (a) + (b) Net movie revenues (Rs mn) 1,500 1,000 700 400 Studio commission (Rs mn) 300 200 140 80 20% of revenues Net movie income (Rs mn) 600 200 (40) (280) Studio income (Rs mn) 600 300 100 (200) Commission and 50% of profits Talent income (Rs mn) 400 200 100 100 Upfront and 50% of profits Studio revenue/investment (X) 1.0 0.5 0.2 (0.3) Working capital efficient

Source: Kotak Institutional Equities estimates

KOTAK INSTITUTIONAL EQUITIES RESEARCH 5 Media Eros International

Indicative list of new releases for EROS in 2010

Movie Talent Production RA.One Shahrukh Khan, Kareena Kapoor Red Chillies Entertainment Rana Rajnikanth, Deepika Padukone Ocher Studios Desi Boyz Akshay Kumar, Deepika Padukone Rohit Dhawan Rockstar Ranbir Kapoor Imtiaz Ali Zindagi Na Milegi Dobara Hrithik Roshan, Katrina Kaif Excel Entertainment Mausam Shahid Kapoor, Sonam Kapoor Pankaj Kapur Agent Vinod Saif Ali Khan, Kareena Kapoor Illuminati Films Chalo Dilli Lara Dutta, Vinay Pathak Prashant Shah Always Kabhi Kabhi Zoa Morani Roshan Abbas Untitiled Saif Ali Khan Illuminati Films Untitled NA Prabhu Deva

Source: Company data, Kotak Institutional Equities

Population per screen across key markets, 2008 ('000)

120

0 India India (a) USA UK Germany

Notes: (a) We assume multiplex/digital screens catering to urban population in India.

Source: Industry data, Kotak Institutional Equities estimates

Revised studios’ share of total multiplex NBOCs (%)

Week1 Week2 Week3 Previous formula High-budget movie 48.0 40.0 35.0 Normal-budget movie 45.0 40.0 35.0 Revised formula Successful movie 52.5 45.0 37.5 Average movie 50.0 42.5 37.5 Increase in share (%) Successful big-budget movie 9.4 12.5 7.1 Average big-budget movie 4.2 6.3 7.1

Source: Industry data, Kotak Institutional Equities estimates

6 KOTAK INSTITUTIONAL EQUITIES RESEARCH Eros International Media

Payback period for D-cinema and E-cinema technologies (yrs)

D-cinema E-cinema Comments Analogue print copy cost (Rs) 60,000 60,000 Average stay of movie per screen (weeks) 2.0 2.0 Analogue print copy re-use across acreens 2.0 2.0 Re-use of prints in Tier-I towns, after screening in metros Analogue print cost per screen (Rs mn/yr) 0.78 0.78 Digitization cost per screen (Rs mn) 4.5 1.8 US$100,000 for D-cinema, US$40,000 mn for E-cinema Digital print copy cost (Rs) (a) 6,000 6,000 Includes cost of digitalization and distribution of the movie Average movie stay per screen (weeks) 2.0 2.0 Digital print cost per screen (Rs mn/yr) 0.16 0.16 Savings on print costs (Rs mn/yr) 0.62 0.62 Simple payback period (yrs) 7.2 2.9

Notes: (a) We assume cost of digitalization of the movie is distributed across 500 digital copies.

Source: Industry data, Kotak Institutional Equities estimates

Advertising revenues across media platforms, calendar year-ends (Rs bn)

500 C&S TV Print Outdoor Internet Radio 400

300

200

100 172 199 121 141 90 100 55 66 78 - 2006 2007 2008 2009 2010E 2011E 2012E 2013E 2014E

Source: FICCI-KPMG 2009, Kotak Institutional Equities

Cable (analog/digital) and DTH HHs in India, calendar year-ends (mn)

Analog cable HHs (mn) Direct-to-Home (DTH) HHs (mn) Digital cable HHs (mn) 160

120

49 52 19 30 38 44 12 80 2 6

- 2007 2008 2009E 2010E 2011E 2012E 2013E 2014E 2015E

Source: Media Partners Asia, Kotak Institutional Equities

KOTAK INSTITUTIONAL EQUITIES RESEARCH 7 Media Eros International

Income statement of EROS, March fiscal year-ends, 2008-13E (Rs mn)

` 2008 2009 2010 2011E 2012E 2013E Total revenues 4,747 6,265 6,409 7,011 8,927 11,234 Total expenditure (4,196) (4,967) (5,299) (5,403) (6,789) (8,435) Operating expenses (3,662) (4,220) (4,468) (4,445) (5,567) (6,959) --Amortization of film rights (2,099) (2,051) (1,940) (2,403) (3,015) (3,765) --Purchase of film rights (1,135) (1,592) (2,068) (1,447) (1,806) (2,287) --Other operating expenses (428) (577) (461) (595) (747) (907) Personal expenses (85) (155) (197) (250) (300) (345) SG&A expenditure (449) (592) (633) (709) (922) (1,131) EBIT 551 1,298 1,110 1,608 2,138 2,799 Other income 6 13 26 115 156 166 Interest expense (28) (61) (90) (87) (87) (87) D&A expenses (18) (50) (44) (41) (52) (52) Pretax profits 511 1,200 1,002 1,595 2,155 2,826 Extraordinaries 149 (160) 121 — — — Tax-current (130) (99) (77) (182) (279) (391) Tax-deferred (103) (193) (218) (220) (291) (383) Minority interest (16) (14) (5) (28) (42) (118) Reported net income 411 734 823 1,165 1,544 1,934 Adjusted net income 330 856 738 1,165 1,544 1,934 EPS (Rs/share) Year-end 4.5 11.8 10.1 12.6 16.7 20.9 Primary 4.5 11.8 10.1 14.1 16.7 20.9 Growth (%) Net income 159 (14) 58 33 25 Primary EPS 159 (14) 39 18 25 Ratios (%) EBIT margin 11.6 20.7 17.3 22.9 24.0 24.9 Tax rate-current 25.4 8.2 7.7 11.4 12.9 13.8 Tax rate-effective 45.5 24.3 29.4 25.2 26.4 27.4

Source: Company data, Kotak Institutional Equities estimates

8 KOTAK INSTITUTIONAL EQUITIES RESEARCH Strategy.dot

INDIA Strategy

AlphaBet MARCH 09, 2011 NEW RELEASE BSE-30: 18,470

Tread cautiously but do tread/trade. We initiate a few long-short trades to take advantage of mispricing between stocks within sectors. Uncertainty about (1) crude oil prices and (2) ongoing corruption cases precludes a strong view of the Indian market either way; hence, we avoid inter-sector trades.

Trade #1: Switch to Crompton Greaves (CRG) from Siemens (SIEM)

We expect CRG to outperform Siemens given (1) limited upside for Siemens even on successful completion of the ongoing open offer, (2) SIEM’s expensive valuations and (3) weak outlook for SIEM’s mainstay industrials segment. On the other hand, CRG’s diversified business model, its strong balance sheet and solid FY2012E guidance offer a better risk-reward balance.

Trade #2: Long PNB; Short Bank of India (BOI); similar valuations, different upsides

We recommend a Long PNB, Short BOI trade due to (1) higher potential upside to our 12-month fair valuation in the case of PNB versus BOI’s despite their similar valuations, (2) PNB’s stronger loan growth, better asset quality and higher NIMs, and (3) PNB’s higher CASA ratio in a rising interest rate scenario.

Trade #3: Long HDFC Bank; Short HDFC; liability franchise over wholesale borrowing

We expect HDFCB to outperform HDFC for the following reasons—(1) HDFC’s expensive valuations even as spreads between lending and G-Sec rates converge and competition eats into its mortgage market share and (2) HDFCB’s strong liability franchise that will help protect its NIMs even as HDFC’s margins may face pressure from higher wholesale borrowing costs.

Trade #4: Long ONGC; Short GAIL; subsidy sharing will favor ONGC relative to GAIL

We recommend increasing exposure to ONGC while reducing exposure to GAIL given (1) ONGC’s relatively cheaper valuations and (2) ONGC’s better positioning versus GAIL’s in a high crude oil price scenario under the current subsidy-sharing arrangement. We see potential negative triggers for GAIL on account of (1) slower-than-expected ramp-up in gas transmission volumes arising from lower-than-expected gas supply in India and (2) unfavorable share of subsidies for GAIL among the government-owned upstream companies.

Trade #5: Long Ultratech; Short ACC; it’s all cement

We recommend a Long Ultratech Cement, Short ACC trade to benefit from (1) Ultratech’s cheaper valuations versus ACC’s, (2) likely pan-India price hikes in the near term, which will benefit Ultratech more than ACC and (3) relative underperformance of Ultratech compared to ACC in the past three months.

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

KIE Alpha Bet trades Statistics of trades, current price, initiation price, expected return

Current price Initiation price Return Stock (Rs) (Rs) (%) Trade 1 Buy Crompton Greaves 260 Sell Siemens 857 Starting ratio (X) 0.3 Expected return (%) 10.0 Trade 2 Buy Punjab National Bank 1,070 Sell Bank of India 470 Starting ratio (X) 2.3 Expected return (%) 10.0 Trade 3 Buy HDFC Bank 2,206 Sell HDFC 673 Starting ratio (X) 3.3 Expected return (%) 8.0 Trade 4 Buy Oil & Natural Gas Corporation 271 Sell GAIL (India) 442 Starting ratio (X) 0.6 Expected return (%) 10.0 Trade 5 Buy Ultratech Cement 1,020 Sell ACC 1,004 Starting ratio (X) 1.0 Expected return (%) 8.0

Source: Kotak Institutional Equities estimates

10 KOTAK INSTITUTIONAL EQUITIES RESEARCH

REDUCE Bharti Airtel (BHARTI)

Telecom MARCH 09, 2011 UPDATE Coverage view: Cautious

Takeaways from MTN CY2010 annual results. Early days, but MTN’s 2HCY10 Price (Rs): 333 performance in Nigeria and Ghana (two key markets where MTN is Bharti’s largest Target price (Rs): 305 competitor) showed little impact of Bharti’s entry. Also note that (1) while BSE-30: 18,470 acknowledging increased competitive intensity in some markets, MTN management showed no signs of concern, and (2) MTN’s capex guidance for Nigeria and Ghana sums up to US$1.35 bn for CY2011E, much higher than Bharti’s 16-country capex guidance of US$800 mn for FY2012E.

Company data and valuation summary Bharti Airtel Stock data Forecasts/Valuations 2011 2012E 2013E 52-week range (Rs) (high,low)377-252 EPS (Rs) 17.1 21.3 24.9 Market Cap. (Rs bn) 1,262.7 EPS growth (%) (27.7) 24.6 16.7 Shareholding pattern (%) P/E (X) 19.5 15.6 13.4 Promoters 68.2 Sales (Rs bn) 596.9 727.9 823.8 FIIs 17.3 Net profits (Rs bn) 64.9 80.9 94.4 MFs 3.6 EBITDA (Rs bn) 202.0 254.7 298.2 Price performance (%) 1M 3M 12M EV/EBITDA (X) 9.4 7.4 6.2 Absolute 0.1 (1.8) 14.1 ROE (%) 14.3 15.3 15.4 Rel. to BSE-30 (4.6) 2.4 5.4 Div. Yield (%) 0.0 0.0 0.0

Bottomline – MTN is a formidable competitor in 5 of Bharti’s 16 African markets

Bharti competes with MTN in 5 of its 16 African markets – Nigeria, Ghana, Uganda, Zambia, and Congo B. These markets contribute around 50% of Bharti’s Africa revenues and EBITDA. More importantly, these markets, especially Nigeria, are equally important in MTN’s portfolio as well – Nigeria contributed 42% to MTN’s EBITDA in CY2010. MTN is the #1 player in 4 out of these 5 markets.

It is also important to appreciate (1) the financial strength of MTN. It has an annual revenue base of >US$15 bn, EBITDA base of ~US$7 bn, and an unleveraged balance sheet (net cash of US$123 mn at end-Dec 2010) and (2) MTN’s network leadership in these markets, especially Nigeria where the company now has 9,000+ base stations as compared to ~4,000 for Bharti.

Bharti’s Africa capex guidance continues to perplex us

MTN spent a total of US$1.07 bn in capex in Nigeria and Ghana in CY2010 and has guided for a capex of US$1.35 bn in these two countries in CY2011E (US$1.1 bn in Nigeria alone). Interestingly, 54% (or US$600 mn) of planned Nigeria capex is earmarked for 2G access network alone. Even as MTN clearly stated that its capex plans for Nigeria are geared towards increasing the company’s network leadership in the wake of increased competitive intensity in the market, Bharti’s US$800 mn capex guidance for all 16 countries appears low to us. Looking at it differently, MTN’s consolidated capex guidance for CY2011E (assuming a 10% revenue growth yoy) translated into a capex/sales of 17.5% on a revenue base of US$16 bn+, while Bharti’s guidance implies a capex/sales of ~20% on a revenue base of ~US$4 bn.

Other highlights from MTN results

Sharp EBITDA margin improvement in both Nigeria and Ghana – Nigeria OPM was 64.5% in 2HCY10 versus 61.3% in 1H, while’s Ghana’s was 47% in 2HCY10 versus 42% in 1H. Revenue growth was strong in both these markets – 16% yoy in local currency terms in Nigeria and 14% in Ghana in CY2010.

Please see our report ‘Not so fast’ dated Jan 6, 2011 that details our thoughts on Bharti Africa.

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

Telecom Bharti Airtel

Exhibit 1: Condensed consolidated financial statements for MTN

CY2007 CY2008 CY2009 CY2010 1HCY2010 2HCY2010 Profit and Loss statement Revenues 10,375 12,397 13,311 15,667 7,435 8,232 EBITDA 4,517 5,220 5,477 6,494 3,220 3,274 Depreciation & ammortisation (1,273) (1,543) (1,721) (2,104) (975) (1,129) Net finance costs (450) (232) (691) (559) (292) (267) Share of associates 1 - (1) 7 8 (1) Profit before tax 2,795 3,445 3,065 3,838 1,961 1,877 Income tax expense (1,105) (1,373) (1,024) (1,539) (721) (818) Profit after tax 1,690 2,072 2,041 2,299 1,240 1,058 Minority interest (186) (220) (299) 345 (165) 510 Profit after tax after minority 1,505 1,852 1,742 2,644 1,075 1,569 Balance sheet statement Property plant and equipment 5,598 7,762 8,031 8,656 9,125 8,656 Goodwill, intangible assets and others 5,503 5,536 4,462 4,313 4,836 4,313 Other non-current assets 543 646 612 655 960 655 Cash and cash equivalents 2,497 3,475 2,942 4,950 4,082 4,950 Other current assets 2,254 3,150 2,531 2,572 2,187 2,572 Total assets 16,395 20,569 18,578 21,146 21,190 21,146 Non-current borrowings 3,263 3,519 2,505 3,396 3,126 3,396 Deferred tax and other non-current liabilities 866 710 875 1,248 1,202 1,248 Non-interest bearing liabilities 3,450 5,091 4,649 4,952 4,988 4,952 Interest bearing liabilities 1,511 1,510 1,885 1,430 1,651 1,430 Total liabilities 9,090 10,830 9,913 11,026 10,967 11,026 Equity 6,711 9,237 8,325 10,119 10,222 10,119 Minority interest 594 503 339 - - - Total liabilities and equity 16,395 20,569 18,578 21,146 21,190 21,146 Key ratios EBITDA margin (%) 43.5 42.1 41.1 41.5 43.3 39.8 RoAE (%) 24.2 23.2 19.8 28.7 RoACE (%) 24.3 23.7 23.0 27.6 Net debt / EBITDA (X) 0.50 0.30 0.26 (0.02) 0.22 (0.02) Debt / equity (X) 0.71 0.54 0.53 0.48 0.47 0.48

Source: Company, Kotak Institutional Equities

Exhibit 2: Key markets where Bharti and MTN are competitors in Africa

Dec-08 Mar-09 Jun-09 Sep-09 Dec-09 Mar-10 Jun-10 Sep-10 Dec-10 Nigeria MTN market share (%) 36.9 40.5 41.2 41.7 42.2 42.8 43.3 43.9 44.3 Bharti market share (%) 27.5 23.6 22.1 21.6 20.2 19.4 18.7 18.1 17.8 Ghana MTN market share (%) 54.8 54.1 53.5 53.4 54.1 53.0 53.1 52.5 51.4 Bharti market share (%) 3.8 5.6 7.9 8.7 8.7 8.4 8.4 9.3 10.3 Zambia MTN market share (%) 19.6 21.2 22.3 23.4 26.4 27.6 28.9 31.1 34.4 Bharti market share (%) 75.4 74.1 73.5 72.3 69.1 67.7 66.1 63.7 60.1 Uganda MTN market share (%) 41.6 41.7 42.4 43.9 44.0 45.5 46.4 46.6 47.2 Bharti market share (%) 24.6 24.2 23.0 20.3 19.4 19.1 18.8 19.1 19.6 Congo B MTN market share (%) 35.4 37.0 39.7 41.1 42.8 45.2 46.9 47.2 47.7 Bharti market share (%) 56.7 54.1 50.9 48.7 48.4 48.0 46.3 45.8 45.1

Source: Telegeography, Kotak Institutional Equities

12 KOTAK INSTITUTIONAL EQUITIES RESEARCH 13 IndiaDailySummary-March10,2011 Kotak Institutional Equities: Valuation summary of key Indian companies

O/S Target 9-Mar-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) 2010 2011E 2012E 2010 2011E 2012E 2010 2011E 2012E 2010 2011E 2012E 2010 2011E 2012E 2010 2011E 2012E010 2 2011E 2012E (Rs) (%) (US$ mn) Automobiles Ashok Leyland 52 SELL 69,508 1,544 1,330 2.8 4.3 4.7 84.5 53.5 8.1 18.5 12.1 11.2 11.3 8.2 7.8 1.7 1.5 1.4 2.9 1.9 1.9 10.9 13.6 13.4 56 7.2 8.3 Bajaj Auto 1,417 ADD 410,094 9,112 289 62.8 90.3 100.0 128.2 43.8 10.8 22.6 15.7 14.2 19.4 15.0 14.1 14.0 8.9 6.2 1.4 1.8 1.8 70.9 68.5 50.6 1,500 5.9 24.5 Bharat Forge 320 ADD 76,390 1,697 239 0.7 12.4 19.7 (92.0) 1,705 59.1 464.8 25.7 16.2 27.5 12.2 8.1 4.9 3.6 3.0 — — — 6.1 8.5 16.4 405 26.8 3.9 Hero Honda 1,538 REDUCE 307,079 6,823 200 111.8 97.8 109.8 73.9 (12.5) 12.3 13.8 15.7 14.0 9.0 10.8 9.2 8.5 6.4 4.9 2.0 2.0 2.0 59.0 45.0 39.5 1,485 (3.4) 34.7 Mahindra & Mahindra 669 BUY 411,537 9,144 615 35.1 42.8 47.7 133.6 22.1 11.6 19.1 15.6 14.0 14.3 12.0 10.6 5.1 3.8 3.1 1.3 1.4 1.5 30.0 27.6 24.5 800 19.6 37.5 Maruti Suzuki 1,266 BUY 365,760 8,127 289 86.4 78.4 91.8 105.0 (9.3) 17.0 14.6 16.1 13.8 8.9 10.6 8.7 3.1 2.6 2.2 0.5 0.4 0.5 23.3 17.4 17.3 1,460 15.3 10.3 Tata Motors 1,163 ADD 773,025 17,176 665 18.5 129.9 133.6 (141.1) 603.4 2.9 63.0 9.0 8.7 12.8 6.2 5.8 9.2 3.6 2.6 1.1 0.5 0.5 15.3 58.6 34.9 1,305 12.2 103.1 Automobiles Cautious 2,529,290 56,200 301.8 83.9 9.1 23.8 12.9 11.9 12.7 8.9 8.0 5.9 3.9 3.0 1.2 1.0 1.1 24.8 30.0 25.6 Banks/Financial Institutions Andhra Bank 139 BUY 73,115 1,625 526 21.6 24.1 26.4 60.1 12.0 9.5 6.4 5.8 5.3 — — — 1.7 1.2 1.0 3.3 4.0 4.4 26.0 24.4 21.4 180 29.5 3.8 Axis Bank 1,301 BUY 527,111 11,712 405 62.1 81.7 99.9 22.7 31.6 22.3 21.0 15.9 13.0 — — — 3.3 2.8 2.4 0.9 1.2 1.5 19.2 19.1 20.1 1,600 23.0 54.0 Bank of Baroda 910 BUY 332,594 7,390 366 83.7 108.0 120.5 37.3 29.1 11.6 10.9 8.4 7.6 — — — 2.4 2.0 1.6 1.6 2.1 2.4 24.4 25.8 23.7 1,200 31.9 9.1 Bank of India 470 ADD 257,325 5,718 547 33.1 49.7 62.7 (42.1) 50.1 26.1 14.2 9.5 7.5 — — — 2.0 1.6 1.4 1.4 2.2 2.8 14.2 19.0 20.0 560 19.1 10.6 Canara Bank 621 ADD 254,692 5,659 410 73.7 98.7 102.0 45.8 34.0 3.3 8.4 6.3 6.1 — — — 2.0 1.6 1.3 1.6 1.6 1.9 22.5 24.6 20.9 700 12.7 14.1 Corporation Bank 562 ADD 83,274 1,850 148 82.0 86.9 95.8 31.8 5.9 10.3 6.9 6.5 5.9 — — — 1.4 1.2 1.0 2.8 3.1 3.4 22.0 20.0 18.6 700 24.5 1.0 Federal Bank 380 BUY 65,018 1,445 171 27.2 34.3 44.5 (7.1) 26.3 29.7 14.0 11.1 8.5 — — — 1.4 1.3 1.2 1.3 1.7 2.2 10.3 11.9 14.0 450 18.4 5.2 HDFC 673 REDUCE 965,694 21,457 1,436 19.7 24.1 27.1 22.7 22.2 12.6 34.2 28.0 24.8 — — — 6.4 5.6 4.9 1.1 1.3 1.4 20.0 21.3 21.2 690 2.6 46.5 HDFC Bank 2,206 ADD 1,009,805 22,438 458 64.4 86.2 111.8 22.1 33.8 29.8 34.2 25.6 19.7 — — — 4.7 4.1 3.5 0.5 0.7 0.9 16.1 17.1 19.2 2,400 8.8 49.3 ICICI Bank 1,035 ADD 1,191,458 26,474 1,151 36.1 45.8 58.0 6.9 26.7 26.8 28.7 22.6 17.8 — — — 2.3 2.2 2.0 1.1 1.3 1.7 8.0 9.9 11.6 1,200 15.9 112.8 IDFC 145 ADD 211,388 4,697 1,458 8.4 9.1 10.9 44.9 8.3 19.5 17.3 16.0 13.4 — — — 3.0 2.0 1.7 0.9 1.1 1.5 16.6 15.0 13.9 175 20.7 28.8 India Infoline 72 BUY 21,484 477 299 8.1 7.4 8.0 59.2 (9.0) 8.1 8.8 9.7 9.0 — — — 1.3 1.2 1.0 4.6 4.4 2.6 14.7 13.2 13.8 100 39.1 3.4 Indian Bank 229 BUY 98,482 2,188 430 35.1 37.9 43.5 25.5 8.1 14.6 6.5 6.0 5.3 — — — 1.5 1.2 1.0 2.8 3.0 3.4 24.1 21.7 21.0 320 39.6 2.3 Indian Overseas Bank 146 BUY 90,562 2,012 619 13.0 15.8 21.9 (46.7) 21.6 38.9 11.3 9.3 6.7 — — — 1.4 1.1 1.0 2.1 2.6 2.9 9.6 11.6 13.8 180 23.1 3.1 J&K Bank 790 ADD 38,318 851 48 105.7 123.5 136.6 25.0 16.9 10.6 7.5 6.4 5.8 — — — 1.3 1.1 1.0 2.8 3.3 3.6 18.2 18.5 17.8 850 7.6 0.7 LIC Housing Finance 202 ADD 95,774 2,128 475 13.9 19.3 21.4 11.5 38.5 10.9 14.5 10.4 9.4 — — — 3.0 2.4 2.0 1.5 2.1 2.3 23.6 24.6 22.8 206 2.2 49.0 Oriental Bank of Commerce 365 ADD 106,507 2,367 292 45.3 52.0 58.7 25.3 14.9 12.7 8.1 7.0 6.2 — — — 1.5 1.0 0.9 2.1 2.9 3.2 14.5 15.7 14.6 450 23.3 6.6 PFC 254 REDUCE 291,993 6,488 1,148 20.5 24.1 28.2 54.0 17.5 17.0 12.4 10.5 9.0 — — — 2.3 1.9 1.7 1.8 1.9 2.2 19.0 19.3 19.5 300 17.9 3.9 Punjab National Bank 1,076 BUY 340,938 7,576 317 123.9 137.6 165.6 26.4 11.1 20.3 8.7 7.8 6.5 — — — 2.1 1.7 1.4 2.0 2.6 3.1 26.2 23.8 23.8 1,500 39.4 7.5 Reliance Capital 503 ADD 123,892 2,753 246 13.1 6.6 17.0 (66.7) (49.8) 159.7 38.5 76.7 29.5 — — — 1.8 1.8 1.7 1.3 0.5 1.4 5.0 2.3 5.9 600 19.2 31.7 Rural Electrification Corp. 242 REDUCE 238,603 5,302 987 20.3 25.5 29.2 23.2 25.9 14.5 11.9 9.5 8.3 — — — 2.2 1.9 1.6 2.7 3.2 3.6 22.0 21.2 21.2 275 13.8 21.8 Shriram Transport 782 ADD 174,384 3,875 223 39.2 56.1 66.8 30.1 43.2 19.1 20.0 13.9 11.7 — — — 4.7 3.8 3.1 0.8 1.4 1.7 28.4 28.9 27.7 800 2.4 6.5 SKS Microfinance 603 REDUCE 44,420 987 74 26.9 24.2 36.5 61.1 (10.3) 50.9 22.4 24.9 16.5 — — — 4.7 2.4 2.0 — — — 21.7 12.6 13.5 700 16.1 10.1 State Bank of India 2,627 BUY 1,668,059 37,064 635 144.4 175.2 225.2 0.5 21.3 28.6 18.2 15.0 11.7 — — — 2.5 2.2 1.9 1.1 1.2 1.3 14.8 15.8 17.7 3,300 25.6 189.9 Union Bank 332 BUY 177,816 3,951 536 41.1 39.0 51.3 20.2 (5.1) 31.6 8.1 8.5 6.5 — — — 2.0 1.5 1.3 1.6 1.6 2.1 26.2 20.5 21.5 420 26.6 4.8 Yes Bank 275 BUY 93,561 2,079 340 15.0 21.4 26.4 46.7 42.4 23.5 18.4 12.9 10.4 — — — 3.0 2.5 2.1 0.5 0.8 1.0 20.3 21.3 21.7 370 34.3 21.7 Banks/Financial Institutions Attractive 8,653,764 192,284 15.0 24.4 21.2 17.1 13.8 11.4 ——— 2.7 2.3 2.0 1.3 1.5 1.8 15.5 16.4 17.2 Cement ACC 1,004 SELL 188,716 4,193 188 83.2 51.7 54.5 47.9 (37.9) 5.4 12.1 19.4 18.4 7.3 11.2 8.8 3.0 2.8 2.5 2.7 2.3 2.3 29.3 16.4 15.8 920 (8.4) 10.6 Ambuja Cements 128 SELL 195,169 4,337 1,522 8.0 7.9 7.9 11.4 (0.7) (0.1) 16.0 16.1 16.2 10.8 9.8 8.7 2.8 2.5 2.3 1.5 1.6 1.7 19.3 16.8 15.0 108 (15.8) 5.1 Grasim Industries 2,312 ADD 212,029 4,711 92 301.0 224.3 261.1 26.1 (25.5) 16.4 7.7 10.3 8.9 5.0 6.1 4.6 1.7 1.5 1.3 1.4 1.5 1.5 22.9 15.4 15.7 2,600 12.4 3.3 India Cements 93 SELL 28,705 638 307 10.0 3.0 6.8 (43.5) (70.5) 130.5 9.3 31.6 13.7 5.8 12.0 7.7 0.7 0.7 0.7 2.3 3.4 3.4 8.2 2.3 5.3 85 (9.0) 2.3 Shree Cement 1,747 REDUCE 60,852 1,352 35 208.0 84.0 161.7 19.0 (59.6) 92.6 8.4 20.8 10.8 4.1 7.1 4.0 3.3 3.0 2.5 0.6 0.6 0.6 48.0 15.2 25.0 1,680 (3.8) 0.5 UltraTech Cement 1,020 REDUCE 279,504 6,211 274 88.2 42.3 79.7 12.0 (52.1) 88.6 11.6 24.1 12.8 14.3 11.8 6.9 5.1 2.3 2.0 0.3 0.4 0.4 25.9 11.9 19.3 1,030 1.0 3.1 Cement Neutral 964,974 21,441 19.3 (24.7) 31.2 12.6 16.7 12.7 7.3 8.8 6.3 2.6 2.0 1.8 1.3 1.4 1.4 20.6 12.3 14.2

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

KOTAK INSTITUTIONAL EQUITIES RESEARCH EQUITIES INSTITUTIONAL KOTAK Kotak Institutional Equities: Valuation summary of key Indian companies India DailySummary-March10,2011

IndiaDaily Summary-March1 Jubilant Foodworks 550 SELL 35,108 780 64 5.6 11.5 14.5 347.1 104.4 26.3 97.9 47.9 37.9 52.7 28.8 19.8 29.9 18.4 12.4 — — — 47.3 47.6 39.1 450 (18.2) 12.3 Jyothy Laboratories 235 ADD 18,005 400 77 11.0 11.4 13.7 99.6 3.8 19.4 21.3 20.5 17.2 17.7 14.0 10.7 4.4 2.6 2.3 1.9 1.6 2.1 14.8 12.8 14.6 270 14.9 0.5 Marico 131 ADD 80,114 1,780 612 4.4 5.0 5.6 32.9 12.2 12.8 29.5 26.3 23.3 20.5 19.3 16.0 12.0 8.8 6.8 0.5 0.7 0.8 48.9 39.2 33.3 140 6.9 2.7 Nestle India (a) 3,965 REDUCE 382,255 8,494 96 74.4 87.0 104.1 27.0 17.0 19.6 53.3 45.5 38.1 36.1 30.4 24.9 65.8 53.5 42.7 1.2 1.5 1.8 136.0 129.6 124.8 3,100 (21.8) 2.7 Tata Global Beverages 96 ADD 59,583 1,324 618 6.1 5.2 5.9 14.5 (14.0) 14.2 15.9 18.5 16.2 8.3 9.1 8.2 1.2 1.2 1.1 2.1 1.8 2.0 10.2 8.4 9.1 110 14.2 2.7 Titan Industries 3,493 ADD 155,050 3,445 44 57.3 107.1 125.9 29.3 87.1 17.5 61.0 32.6 27.7 38.8 23.7 19.6 21.0 13.4 9.4 0.4 0.3 0.4 38.7 50.3 39.8 4,100 17.4 34.2 United Spirits 1,084 ADD 136,106 3,024 126 27.3 33.1 47.0 49.9 21.5 41.9 39.7 32.7 23.0 16.7 15.9 13.0 3.6 3.3 2.9 0.2 0.2 0.3 9.8 10.5 13.3 1,550 43.0 9.4 Consumer products Cautious 3,521,688 78,251 24.8 17.3 19.1 34.1 29.1 24.4 22.7 20.0 16.6 10.6 8.8 7.6 2.0 1.7 2.0 31.0 30.2 31.2 Constructions IVRCL 77 BUY 20,480 455 267 7.9 7.0 8.9 (6.6) (11.7) 28.1 9.7 11.0 8.6 6.6 7.3 6.2 1.1 1.0 0.9 1.1 0.5 0.5 11.5 9.6 11.2 125 63.0 8.3 Nagarjuna Construction Co. 101 BUY 25,825 574 257 7.1 7.2 9.7 6.1 1.2 34.3 14.1 13.9 10.4 8.1 9.1 7.6 1.2 1.1 1.0 1.3 2.0 2.0 9.3 8.0 10.1 160 59.0 3.4 Punj Lloyd 63 REDUCE 21,530 478 340 (3.4) 1.3 8.5 (52.6) (137.2) 567.0 (18.5) 49.7 7.5 16.5 7.9 5.7 0.7 0.7 0.6 0.2 0.1 1.2 (4.2) 1.4 9.0 90 42.0 11.3 Sadbhav Engineering 110 BUY 16,478 366 150 5.1 6.2 8.7 0.5 20.2 41.0 21.4 17.8 12.6 14.8 9.8 8.1 4.1 3.2 3.0 0.3 5.5 5.5 15.8 17.8 23.9 175 59.3 0.4 Construction Attractive 84,312 1,873 56.2 48.4 78.7 24.6 16.6 9.3 10.2 8.3 6.5 1.1 1.1 1.0 0.8 1.8 2.1 4.5 6.4 10.4 Energy Aban Offshore 617 BUY 26,861 597 44 106.6 104.6 107.6 10.0 (1.9) 2.9 5.8 5.9 5.7 7.9 6.6 6.5 1.2 1.2 1.1 0.6 0.6 0.6 24.3 26.1 20.4 815 32.0 18.1 Bharat Petroleum 552 ADD 199,389 4,430 362 57.6 51.9 46.5 224.5 (9.9) (10.4) 9.6 10.6 11.9 9.7 8.5 9.1 1.4 1.3 1.2 2.5 2.9 2.8 14.6 12.2 10.1 655 18.8 10.5 Cairn india 342 RS 649,429 14,430 1,897 5.5 30.9 57.0 29.0 457.4 84.7 61.8 11.1 6.0 68.6 8.4 4.6 1.9 1.7 1.4 — — 4.4 3.1 15.9 25.5 — — 19.3 Castrol India (a) 410 SELL 101,397 2,253 247 15.4 19.8 20.5 44.6 28.7 3.2 26.6 20.7 20.0 16.7 13.0 12.8 22.0 19.7 18.2 3.0 3.7 3.9 83.8 100.5 94.4 370 (9.8) 0.7 GAIL (India) 441 ADD 559,590 12,434 1,268 24.8 29.3 34.7 11.7 18.5 18.4 17.8 15.0 12.7 11.1 9.6 9.3 3.1 2.7 2.3 1.7 1.9 2.3 17.4 18.1 18.6 510 15.6 13.7 GSPL 95 REDUCE 53,545 1,190 562 7.3 8.5 8.6 232.7 16.8 0.9 13.0 11.1 11.1 6.9 7.0 6.5 3.1 2.5 2.2 1.1 2.2 3.6 27.1 24.9 21.1 90 (5.5) 3.6 Hindustan Petroleum 320 BUY 108,365 2,408 339 51.6 46.5 35.0 204.2 (9.9) (24.8) 6.2 6.9 9.1 3.3 2.8 3.0 0.8 0.7 0.7 3.7 4.6 3.4 13.1 10.6 7.4 420 31.4 9.6 Indian Oil Corporation 308 BUY 747,323 16,605 2,428 49.1 35.1 33.2 399.0 (28.5) (5.4) 6.3 8.8 9.3 7.2 6.8 6.7 1.4 1.3 1.2 4.2 3.4 3.3 22.4 14.2 12.4 390 26.7 7.3 Oil India 1,230 BUY 295,771 6,572 240 115.2 140.9 151.2 13.9 22.3 7.3 10.7 8.7 8.1 5.9 3.8 3.3 2.0 1.7 1.5 2.8 3.7 4.1 16.8 18.9 17.9 1,550 26.0 2.1 Oil & Natural Gas Corporation 271 BUY 2,321,120 51,575 8,556 23.0 28.6 34.9 0.9 24.5 22.3 11.8 9.5 7.8 4.7 3.8 3.2 1.8 1.6 1.4 3.0 5.2 4.4 14.8 16.5 18.5 360 32.7 31.7 Petronet LNG 116 SELL 87,038 1,934 750 5.4 8.1 8.9 (22.0) 49.3 10.9 21.5 14.4 13.0 12.2 8.8 8.3 3.4 2.9 2.5 1.5 2.2 2.6 15.9 20.4 19.3 100 (13.8) 5.9 Reliance Industries 994 REDUCE 2,957,698 65,719 2,976 49.6 62.7 66.3 (1.8) 26.3 5.8 20.0 15.8 15.0 11.0 8.5 7.2 2.0 1.8 1.6 0.7 0.9 1.1 11.4 13.2 12.6 1,000 0.6 128.4 Energy Neutral 8,107,525 180,147 34.7 19.7 16.1 13.5 11.3 9.7 8.0 6.2 5.2 1.9 1.7 1.5 1.9 2.6 2.8 13.8 15.0 15.6 Industrials ABB 726 REDUCE 153,888 3,419 212 16.7 9.8 26.0 (35.2) (41.6) 165.6 43.4 74.2 28.0 28.2 51.2 18.2 6.3 6.0 5.1 0.3 0.4 0.5 15.6 8.3 19.7 660 (9.1) 2.4 BGR Energy Systems 463 REDUCE 33,350 741 72 28.0 40.9 46.4 74.6 46.3 13.4 16.5 11.3 10.0 9.3 7.1 6.1 4.7 3.6 2.8 1.5 1.8 2.0 31.8 36.0 31.6 600 29.5 5.1 Bharat Electronics 1,655 REDUCE 132,424 2,942 80 96.1 101.3 124.9 (7.4) 5.4 23.2 17.2 16.3 13.3 11.5 9.0 6.7 3.0 2.6 2.3 1.2 1.5 1.5 17.5 17.0 18.3 1,875 13.3 0.9 Bharat Heavy Electricals 2,042 REDUCE 999,722 22,214 490 87.9 115.5 140.1 37.7 31.4 21.3 23.2 17.7 14.6 16.6 12.1 9.5 6.3 5.0 4.0 0.9 1.2 1.5 29.8 31.3 30.2 2,400 17.5 31.8 Crompton Greaves 260 BUY 166,758 3,705 642 12.8 14.4 16.2 46.5 12.0 12.5 20.2 18.1 16.1 12.5 11.1 9.3 6.6 5.1 4.0 0.5 0.7 0.8 37.9 31.9 27.8 310 19.3 6.3 Larsen & Toubro 1,570 REDUCE 950,436 21,118 605 57.9 73.0 82.0 15.6 26.0 12.3 27.1 21.5 19.2 17.4 13.1 11.2 4.3 3.5 3.0 0.8 0.8 0.9 18.6 17.9 17.0 1,775 13.0 73.7 Maharashtra Seamless 335 ADD 23,606 525 71 38.6 44.2 39.3 7.7 14.3 (10.9) 8.7 7.6 8.5 4.4 3.4 3.6 1.0 0.9 0.9 1.7 2.4 2.3 14.8 12.8 10.5 418 24.9 0.5 Siemens 857 REDUCE 288,980 6,421 337 22.4 27.4 33.2 39.5 21.9 21.3 38.2 31.3 25.8 22.6 20.3 16.3 8.9 7.3 6.0 0.6 0.6 0.8 25.2 25.6 25.5 735 (14.2) 10.0 Suzlon Energy 48 REDUCE 75,861 1,686 1,594 (6.2) (3.7) 3.5 (185.4) (40.3) (196.0) (7.7) (12.9) 13.5 16.6 17.8 7.7 1.1 1.1 1.0 — — 0.4 (11.4) (8.6) 7.9 45 (5.5) 26.5 Thermax 607 BUY 72,366 1,608 119 21.9 32.3 36.0 (9.6) 47.2 11.6 27.7 18.8 16.9 20.4 12.3 10.7 6.7 5.4 4.5 0.8 1.5 1.7 25.2 31.9 29.0 760 25.1 1.5 Voltas 158 REDUCE 52,174 1,159 331 10.9 10.6 12.1 57.4 (2.1) 13.9 14.5 14.8 13.0 9.7 8.8 7.3 4.7 3.9 3.3 1.3 2.0 2.3 37.8 29.0 27.5 200 26.8 4.2 Industrials Cautious 2,949,566 65,539 0.9 29.5 28.0 27.9 21.5 16.8 16.6 13.1 10.3 4.7 3.9 3.3 0.8 1.0 1.1 16.8 18.2 19.7 Infrastructure Container Corporation 1,186 REDUCE 154,124 3,425 130 60.5 66.9 78.1 (0.6) 10.6 16.6 19.6 17.7 15.2 14.0 11.9 10.0 3.6 3.1 2.7 1.2 1.3 1.5 19.4 18.7 19.0 1,300 9.6 1.2 GMR Infrastructure 41 ADD 148,530 3,300 3,667 0.4 (0.0) (0.1) (43.7) (102.0) 1,494.0 93.8 ###### (293.1) 21.5 15.8 12.9 1.8 1.4 1.4 — — — 2.4 (0.0) (0.8) 45 11.1 4.4 Gujarat Pipavav Port 61 BUY 25,731 572 424 (3.7) (1.3) 1.1 28.6 (64.8) (186.1) (16.4) (46.6) 54.2 70.3 27.9 16.4 8.3 3.4 3.2 — — — (75.1) (9.7) 8.5 68 11.9 0.5 GVK Power & Infrastructure 27 BUY 41,928 932 1,579 1.0 1.3 1.5 29.4 27.3 18.1 26.9 21.1 17.9 19.4 13.6 13.4 1.3 1.3 1.2 — 1.1 1.1 5.7 6.1 6.9 42 58.2 5.2 IRB Infrastructure 189 BUY 62,767 1,395 332 11.6 13.5 12.3 119.2 16.3 (8.8) 16.3 14.0 15.4 10.8 8.7 7.9 2.9 2.2 1.8 1.0 — — 19.4 18.1 12.9 270 43.0 6.8 Mundra Port and SEZ 131 BUY 264,387 5,875 2,017 3.3 4.3 6.8 55.7 28.0 58.7 39.3 30.7 19.3 30.9 22.3 15.8 7.5 6.3 4.9 0.6 — — 20.8 22.2 28.5 160 22.1 3.9 Infrastructure Cautious 697,466 15,498 20.1 13.6 30.3 34.1 30.1 23.1 20.4 15.1 12.3 3.2 2.6 2.3 0.6 0.4 0.4 9.3 8.6 10.1

Source: Company, Bloomberg, Kotak Institutional Equities estimates 14

15 IndiaDailySummary-March10,2011 Kotak Institutional Equities: Valuation summary of key Indian companies

O/S Target 9-Mar-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) 2010 2011E 2012E 2010 2011E 2012E 2010 2011E 2012E 2010 2011E 2012E 2010 2011E 2012E 2010 2011E 2012E 2010 2011E 2012E (Rs) (%) (US$ mn) Media DB Corp 239 BUY 43,360 963 182 10.6 12.6 14.0 286.5 18.8 10.8 22.4 18.9 17.1 13.4 11.1 10.1 6.7 5.5 4.7 0.8 1.7 2.5 40.3 31.8 29.7 325 36.2 0.3 DishTV 62 ADD 66,010 1,467 1,062 (2.5) (1.6) 0.2 (63.1) (33.2) (109.5) (25.2) (37.7) 398.3 72.7 30.1 14.5 16.5 29.3 27.3 — — — 234.3 (56.0) 7.1 66 6.2 4.3 Hindustan Media Ventures 151 ADD 11,073 246 73 2.5 7.9 10.0 NM 220.4 27.5 61.6 19.2 15.1 19.1 13.9 11.3 3.1 2.6 2.2 5.0 5.0 6.6 17.9 23.7 16.4 200 32.5 0.0 HT Media 136 ADD 32,007 711 235 6.1 7.0 8.5 623.3 15.4 21.0 22.3 19.3 16.0 11.5 8.6 6.9 3.2 2.3 2.2 0.3 1.5 2.9 15.3 13.8 13.9 170 24.8 0.2 Jagran Prakashan 117 BUY 35,159 781 301 5.8 7.0 7.9 92.0 19.2 13.4 20.0 16.8 14.8 12.0 9.7 8.7 5.7 5.2 4.7 3.0 3.4 4.3 30.0 32.4 33.4 155 32.8 0.6 Sun TV Network 427 REDUCE 168,213 3,738 394 13.1 18.3 22.7 44.0 39.7 24.1 32.6 23.4 18.8 19.1 13.9 11.3 8.7 7.3 6.1 1.8 1.8 2.3 28.3 34.2 35.5 450 5.4 7.2 Zee Entertainment Enterprises 126 ADD 123,372 2,741 978 5.3 4.8 6.2 26.3 (9.7) 28.4 23.6 26.2 20.4 19.5 16.6 12.7 3.1 3.0 2.9 0.9 1.0 1.2 12.7 11.8 14.7 130 3.1 7.6 Media Cautious 492,178 10,936 157.4 37.7 35.7 37.8 27.4 20.2 18.9 14.0 10.9 5.5 4.6 4.2 1.1 1.3 1.8 14.6 16.8 20.8 Metals & Mining Coal India 340 BUY 2,144,722 47,655 6,316 15.2 17.0 24.0 363.0 11.7 41.0 22.3 20.0 14.2 15.4 12.4 9.0 7.9 6.3 4.9 1.0 1.5 2.1 40.4 35.1 39.0 390 14.9 32.5 Hindalco Industries 213 ADD 407,682 9,059 1,914 20.0 16.2 16.9 25.0 (18.8) 4.3 10.7 13.1 12.6 6.3 7.6 7.9 1.9 1.7 1.5 0.6 0.6 0.6 20.4 13.6 12.7 250 17.4 52.6 Hindustan Zinc 134 BUY 566,573 12,589 4,225 9.6 10.4 12.5 48.2 8.4 21.0 14.0 12.9 10.7 9.6 8.0 5.3 3.0 2.5 2.0 0.4 0.4 0.4 25.1 21.7 21.5 153 14.1 5.7 Jindal Steel and Power 666 REDUCE 620,109 13,779 931 38.2 41.0 48.0 16.9 7.1 17.3 17.4 16.3 13.9 12.0 11.0 9.1 5.5 4.1 3.2 0.2 0.4 0.4 37.7 29.2 26.0 640 (3.9) 21.5 JSW Steel 967 REDUCE 240,031 5,333 248 80.4 67.1 99.2 481.1 (16.5) 47.9 12.0 14.4 9.7 9.6 8.5 5.7 2.2 1.3 1.0 0.7 0.9 1.0 16.0 11.6 12.1 1,000 3.4 45.0 National Aluminium Co. 460 SELL 296,576 6,590 644 12.2 18.3 20.5 (37.2) 50.5 12.0 37.8 25.1 22.4 24.1 14.6 12.6 2.9 2.6 2.4 0.5 1.1 1.1 7.8 10.9 11.3 300 (34.8) 1.1 Sesa Goa 280 REDUCE 249,517 5,544 890 29.6 53.2 60.6 23.5 79.9 13.9 9.5 5.3 4.6 7.8 3.1 5.4 3.1 1.8 1.3 1.3 1.3 1.3 35.8 36.4 34.0 275 (1.9) 25.7 Sterlite Industries 167 BUY 560,388 12,452 3,362 12.0 13.0 19.4 2.8 8.0 49.4 13.9 12.8 8.6 8.9 7.3 4.5 1.5 1.4 1.2 0.6 0.6 0.6 12.9 11.2 14.8 200 20.0 26.1 Tata Steel 613 BUY 621,092 13,801 1,013 (3.3) 64.4 69.7 (103.6) (2,051.8) 8.2 (185.7) 9.5 8.8 13.6 6.9 6.0 2.7 1.8 1.5 1.1 1.3 — (1.5) 22.4 18.4 710 15.8 105.7 Metals & Mining Attractive 5,706,688 126,801 9.4 36.0 25.7 19.2 14.1 11.2 11.2 8.6 6.9 3.4 2.7 2.2 0.8 1.0 1.1 17.7 18.8 19.5 Pharmaceutical Apollo Hospitals 464 BUY 59,749 1,328 129 10.9 14.0 19.0 28.8 28.2 35.7 42.4 33.1 24.4 20.5 14.6 11.5 3.6 3.3 2.9 — — — 8.3 10.4 12.1 565 21.8 1.7 Biocon 320 ADD 64,030 1,423 200 14.8 18.3 22.7 216.4 23.4 24.2 21.6 17.5 14.1 13.5 10.0 8.5 3.6 3.1 2.6 — — — 17.9 19.3 20.5 445 39.0 4.9 Cipla 302 REDUCE 242,081 5,379 803 13.7 12.1 16.0 38.1 (11.9) 32.3 22.0 25.0 18.9 21.2 19.9 14.6 4.1 3.6 3.1 0.7 0.8 0.8 21.1 15.4 17.9 300 (0.5) 11.6 Cadila Healthcare 750 ADD 153,531 3,411 205 24.7 33.3 38.2 66.9 34.9 14.7 30.4 22.5 19.6 23.2 18.3 14.6 9.4 7.0 5.5 0.7 0.9 1.0 36.0 35.9 31.6 880 17.4 1.5 Dishman Pharma & chemicals 102 SELL 8,308 185 81 14.4 8.8 8.2 (19.7) (39.2) (6.4) 7.1 11.6 12.4 7.6 10.4 7.9 1.0 1.0 0.9 — — — 15.5 8.7 7.6 85 (16.8) 0.6 Divi's Laboratories 623 REDUCE 82,600 1,835 133 25.8 26.8 37.1 (19.2) 3.9 38.6 24.2 23.3 16.8 18.9 18.2 12.2 5.4 4.7 4.0 — — — 24.7 21.7 25.6 700 12.4 2.2 Dr Reddy's Laboratories 1,619 REDUCE 275,079 6,112 170 48.0 68.4 72.2 48.1 42.6 5.5 33.7 23.7 22.4 20.0 14.2 13.2 7.3 5.7 4.7 0.7 0.5 0.6 22.2 27.0 22.9 1,150 (29.0) 14.2 GlaxoSmithkline Pharmaceuticals (a) 2,183 REDUCE 184,886 4,108 85 59.1 68.3 79.5 8.1 15.5 16.4 36.9 32.0 27.5 24.4 21.6 18.3 10.4 9.5 8.7 — — — 29.8 31.0 33.0 2,000 (8.4) 1.4 Glenmark Pharmaceuticals 279 REDUCE 78,228 1,738 280 12.7 17.6 20.6 14.3 38.3 17.3 22.0 15.9 13.6 16.0 14.3 11.4 3.3 2.8 2.4 — — — 16.4 18.4 18.2 330 18.1 5.4 Jubilant Life Sciences 164 REDUCE 26,165 581 159 26.5 14.6 16.9 49.0 (45.1) 15.9 6.2 11.3 9.7 6.3 9.7 7.8 1.2 1.2 1.1 1.1 1.2 1.5 26.3 11.9 12.1 220 33.9 1.0 Lupin 395 ADD 175,456 3,899 445 15.3 17.6 22.4 27.3 15.0 26.9 25.7 22.4 17.6 21.6 18.5 14.4 6.8 5.5 4.4 0.7 0.9 1.1 34.1 27.3 28.0 465 17.9 9.8 Ranbaxy Laboratories 453 SELL 194,087 4,313 428 7.1 23.4 20.3 (128.4) 231.8 (13.3) 64.1 19.3 22.3 47.7 14.2 14.8 4.9 3.5 3.0 — — — 6.9 19.5 13.9 365 (19.4) 10.1 Sun Pharmaceuticals 416 ADD 430,344 9,562 1,036 13.0 17.4 19.7 (25.7) 33.4 13.1 31.9 23.9 21.1 29.6 19.9 16.3 5.4 4.5 3.7 0.7 0.6 0.6 18.2 21.0 19.9 480 15.5 11.3 Pharmaceuticals Cautious 2,071,703 46,033 45.2 18.7 15.7 28.1 23.7 20.5 21.1 16.0 13.2 5.2 3.5 3.0 0.5 0.5 0.5 18.6 14.7 14.6 Property DLF 225 ADD 386,509 8,588 1,714 10.6 10.0 13.8 (60.1) (5.5) 37.3 21.2 22.5 16.4 16.9 14.4 11.9 1.3 1.2 1.2 0.9 1.3 2.2 6.6 5.5 7.3 265 17.5 40.5 Housing Development & Infrastructure 165 ADD 68,351 1,519 415 15.9 23.0 28.4 (24.4) 44.0 23.9 10.3 7.2 5.8 8.0 8.0 4.9 1.0 0.7 0.6 — — — 10.0 11.8 12.5 180 9.3 26.9 Indiabulls Real Estate 113 RS 45,494 1,011 402 (0.4) 3.1 8.5 (134.9) (865.5) 178.9 (284.0) 37.1 13.3 (45.1) 51.6 15.3 0.4 0.4 0.4 — — — (0.2) 1.0 2.9 — — 15.4 Mahindra Life Space Developer 360 BUY 14,699 327 41 19.2 21.0 29.7 69.7 9.8 41.1 18.8 17.1 12.1 16.9 14.5 8.5 1.5 1.4 1.3 1.0 1.1 1.2 8.6 8.8 11.4 435 20.8 0.4 Oberoi Realty 240 BUY 79,188 1,760 330 13.7 18.7 24.9 57.1 36.9 32.7 17.6 12.8 9.7 16.2 8.8 5.8 4.2 2.3 1.9 0.1 0.4 0.6 27.7 23.3 21.5 305 27.0 0.6 Phoenix Mills 170 BUY 24,653 548 145 4.1 6.1 7.6 (16.7) 48.6 24.2 41.2 27.7 22.3 34.7 21.0 16.0 1.6 1.5 1.5 0.7 0.9 1.2 3.9 5.7 6.7 300 76.3 0.4 Puravankara Projects 105 REDUCE 22,442 499 213 6.8 7.3 8.8 0.6 7.6 19.9 15.4 14.3 12.0 18.0 16.3 11.7 1.6 1.5 1.3 1.9 1.9 1.9 10.5 10.5 11.6 100 (4.9) 0.1 Sobha Developers 267 BUY 26,213 582 98 14.1 18.8 24.0 (7.1) 33.4 27.9 19.0 14.2 11.1 15.2 11.4 8.8 1.5 1.4 1.2 0.4 0.4 0.6 9.7 10.1 11.7 380 42.2 1.8 Unitech 38 RS 100,120 2,225 2,666 3.0 2.4 3.9 (58.8) (21.3) 62.1 12.4 15.7 9.7 15.1 17.0 9.5 1.0 0.8 0.8 0.9 — — 9.0 5.6 8.3 — — 37.2 Property Cautious 767,669 17,057 (44.6) 15.2 42.0 19.5 16.9 11.9 16.1 13.7 9.7 1.1 1.0 1.0 0.7 0.8 1.3 5.9 6.1 8.1

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

KOTAK INSTITUTIONAL EQUITIES RESEARCH EQUITIES INSTITUTIONAL KOTAK Kotak Institutional Equities: Valuation summary of key Indian companies India DailySummary-March10,2011

IndiaDaily Summary-March1 Infosys Technologies 3,096 BUY 1,776,817 39,480 574 108.3 120.0 155.2 5.7 10.8 29.3 28.6 25.8 19.9 21.0 17.9 13.8 7.7 6.9 5.6 0.8 1.9 1.5 30.1 28.1 30.9 3,700 19.5 78.7 Mahindra Satyam 65 REDUCE 76,793 1,706 1,176 2.5 3.1 4.3 (190.7) 24.7 37.4 26.3 21.1 15.3 12.1 12.1 7.3 4.1 3.7 3.4 — — — 58.5 18.5 23.2 70 7.2 13.5 Mindtree 373 REDUCE 15,359 341 41 52.2 27.1 41.5 294.3 (48.1) 53.1 7.1 13.8 9.0 6.1 7.2 4.5 2.3 2.0 1.6 0.5 0.7 1.1 35.2 15.4 19.9 500 34.0 0.9 Mphasis BFL 468 SELL 97,469 2,166 208 43.6 51.8 37.3 207.6 18.8 (28.0) 10.7 9.0 12.5 8.5 7.6 9.1 4.2 3.0 2.5 0.7 0.9 1.0 48.1 38.6 21.6 420 (10.2) 10.2 Polaris Software Lab 189 SELL 18,823 418 100 15.4 19.5 19.5 16.9 26.8 0.3 12.3 9.7 9.7 6.2 7.8 6.5 2.2 1.8 1.6 1.9 2.0 2.1 18.6 20.5 17.7 175 (7.3) 5.1 TCS 1,127 BUY 2,205,177 48,998 1,957 35.1 44.4 54.0 32.8 26.4 21.6 32.1 25.4 20.9 24.5 18.8 14.6 10.5 8.6 7.1 1.8 1.6 1.9 37.6 37.4 37.2 1,350 19.8 46.1 Tech Mahindra 734 REDUCE 90,936 2,021 124 65.1 65.1 65.9 (9.6) (0.1) 1.3 11.3 11.3 11.1 9.0 9.9 9.2 3.2 2.5 2.1 0.5 0.3 0.3 34.5 26.3 22.1 720 (1.9) 4.2 Wipro 451 ADD 1,103,324 24,516 2,447 18.9 21.7 25.6 22.1 15.2 17.7 23.9 20.8 17.6 18.1 15.2 12.4 5.6 4.6 3.8 0.8 1.0 1.2 26.5 24.4 23.7 525 16.4 18.2 Technology Attractive 5,801,971 128,918 24.6 17.5 20.1 26.3 22.4 18.6 19.0 16.1 12.8 6.9 5.9 4.9 1.2 1.7 1.6 26.1 26.3 26.2 Telecom Bharti Airtel 333 REDUCE 1,262,702 28,057 3,798 23.6 17.1 21.3 5.8 (27.7) 24.6 14.1 19.5 15.6 8.0 9.4 7.4 3.0 2.6 2.2 — — — 24.4 14.3 15.3 305 (8.3) 31.7 IDEA 62 REDUCE 204,093 4,535 3,300 2.7 2.4 1.2 (5.8) (11.2) (48.9) 22.6 25.5 49.8 7.9 9.0 7.8 1.8 1.7 1.6 — — — 7.2 6.9 3.5 55 (11.1) 6.8 MTNL 42 SELL 26,681 593 630 (15.6) (10.4) (9.1) (750.8) (33.7) (11.9) (2.7) (4.1) (4.6) 1.1 1.4 1.8 0.2 0.3 0.3 — — — (8.5) (6.1) (5.7) 35 (17.4) 1.1 Reliance Communications 99 SELL 211,866 4,708 2,133 19.7 6.9 7.9 (30.9) (65.2) 15.0 5.0 14.5 12.6 6.4 8.2 7.3 0.5 0.5 0.5 0.8 — — 11.0 3.3 3.7 90 (9.4) 27.6 Tata Communications 215 REDUCE 61,161 1,359 285 14.0 15.2 15.7 3.2 8.2 3.5 15.3 14.2 13.7 7.2 6.6 6.2 0.9 0.8 0.8 3.0 3.5 4.0 5.2 5.5 5.5 225 4.8 0.9 Telecom Cautious 1,766,502 39,251 (12.4) (38.9) 17.9 12.6 20.7 17.5 7.8 9.2 7.5 1.5 1.4 1.3 0.2 0.1 0.1 12.1 6.9 7.6 Utilities Adani Power 112 ADD 243,833 5,418 2,180 0.8 2.8 16.5 NM 252.0 500.1 142.8 40.6 6.8 138.6 34.7 6.5 4.2 3.8 2.4 — — — 4.2 9.9 44.1 140 25.2 3.8 CESC 326 BUY 40,773 906 125 34.6 36.6 42.7 8.5 5.8 16.8 9.4 8.9 7.6 6.5 5.6 6.4 1.0 0.9 0.8 1.3 1.4 1.6 10.8 10.2 10.8 459 40.6 1.1 JSW Energy 74 REDUCE 121,524 2,700 1,640 4.5 5.2 10.3 (10.2) 14.2 97.6 16.3 14.3 7.2 15.0 12.6 5.3 2.5 2.2 1.7 — — — 23.8 16.3 26.0 82 10.7 2.5 Lanco Infratech 39 BUY 93,074 2,068 2,405 2.1 3.6 4.9 46.6 67.4 36.6 18.2 10.8 7.9 12.0 8.4 6.5 2.8 2.2 1.7 — — — 17.4 21.0 22.5 80 106.7 8.8 NHPC 23 REDUCE 288,452 6,409 12,301 1.9 1.5 1.7 74.9 (19.4) 15.6 12.7 15.7 13.6 10.2 12.0 9.4 1.1 1.1 1.0 2.3 1.7 2.0 9.7 7.1 7.8 28 19.4 3.8 NTPC 178 REDUCE 1,465,631 32,566 8,245 10.5 10.1 11.9 6.8 (3.2) 17.6 16.9 17.5 14.9 13.5 16.1 12.4 2.3 2.1 2.0 2.1 2.0 2.3 14.1 12.6 13.7 195 9.7 9.6 Reliance Infrastructure 620 BUY 165,872 3,686 267 62.0 60.8 70.8 (1.0) (1.9) 16.3 10.0 10.2 8.8 13.2 7.7 5.8 0.8 0.7 0.7 1.0 1.5 1.7 6.5 9.1 10.7 1,030 66.1 44.4 Reliance Power 125 SELL 349,512 7,766 2,805 2.9 2.9 4.0 179.7 0.1 38.4 43.7 43.6 31.5 (345.3) 240.0 51.7 2.4 2.1 2.0 — — — 4.8 5.2 6.6 115 (7.7) 12.8 Tata Power 1,232 ADD 304,038 6,756 247 63.5 70.7 84.4 26.7 11.3 19.4 19.4 17.4 14.6 12.2 12.4 11.6 2.4 2.2 1.9 1.0 1.1 1.2 13.8 13.0 14.0 1,415 14.9 7.9 Utilities Cautious 3,072,709 68,275 25.7 4.0 40.3 18.7 18.0 12.8 15.3 16.2 10.8 2.0 1.8 1.6 1.4 1.3 1.5 10.6 10.0 12.7 Others Havells India 346 ADD 43,178 959 125 6.1 23.2 28.9 141.3 278.2 24.5 56.3 14.9 12.0 16.0 10.1 8.0 10.1 6.3 4.2 0.5 0.7 0.8 14.3 52.1 42.4 425 22.8 1.6 Jaiprakash Associates 85 BUY 188,994 4,199 2,214 1.7 5.1 5.6 (12.7) 188.8 11.6 48.8 16.9 15.1 21.7 12.6 11.0 2.2 1.9 1.7 — — — 5.1 12.2 12.1 135 58.2 31.0 Jet Airways 455 BUY 39,310 873 86 (69.8) 15.7 38.7 (71.7) (122.5) 146.7 (6.5) 29.0 11.8 12.2 8.0 7.1 2.3 2.1 1.8 — — — — 7.5 16.4 650 42.7 18.3 Sintex 150 SELL 40,705 904 272 12.1 14.4 15.6 (49.6) 19.1 8.5 12.4 10.4 9.6 11.1 8.7 7.6 1.9 1.6 1.4 0.8 0.9 0.9 15.5 15.6 14.6 150 0.2 7.6 SpiceJet 39 BUY 15,898 353 403 2.5 4.3 4.6 (117.4) 69.4 7.0 15.5 9.2 8.6 50.2 5.8 9.1 (4.6) 4.1 2.8 — — — (15.9) 766.4 38.6 65 64.8 4.4 Tata Chemicals 328 REDUCE 79,885 1,775 243 26.4 26.8 35.4 (27.1) 1.5 31.9 12.4 12.2 9.3 6.8 6.0 4.6 1.7 1.5 1.3 2.7 2.9 2.9 16.0 16.9 19.3 370 12.7 3.5 United Phosphorus 136 BUY 62,690 1,393 462 11.9 12.9 17.6 18.1 8.3 37.3 11.4 10.5 7.7 7.7 5.4 4.3 2.1 1.6 1.4 1.4 1.4 1.5 19.1 17.5 19.4 220 62.3 6.1 Others 470,661 10,458 (539.8) 132.3 26.1 32.6 14.0 11.1 13.5 9.4 8.2 2.3 1.9 1.7 0.8 0.8 0.8 7.2 13.8 15.0 KS universe (b) 47,739,363 1,060,757 21.4 20.4 21.6 19.2 15.9 13.1 12.5 10.4 8.5 2.9 2.5 2.2 1.2 1.5 1.6 15.3 15.7 16.7 KS universe (b) ex-Energy 39,631,838 880,610 17.7 20.6 23.3 21.0 17.4 14.1 14.6 12.5 9.9 3.3 2.8 2.4 1.1 1.2 1.4 15.8 15.9 17.0 KS universe (d) ex-Energy & ex-Commodities 32,960,176 732,367 19.4 19.9 22.5 21.8 18.2 14.8 16.2 13.9 11.0 3.3 2.8 2.5 1.2 1.3 1.4 15.3 15.6 16.6

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$)= 0.00 Source: Company, Bloomberg, Kotak Institutional Equities estimates 16

Disclosures

Kotak Institutional Equities Research coverage universe 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 32.1% 33.3% this stock to outperform the BSE Sensex by 10% over the next 12 30% months; Add = We expect this stock to outperform the BSE 23.1% 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 11.5% BSE Sensex by more then 10% over the next 12 months. These 10% 5.1% 5.1% ratings are used illustratively to comply with applicable 3.2% 0.6% regulations. As of 30/09/2010 Kotak Institutional Equities 0% Investment Research had investment ratings on 156 equity securities. BUY ADD REDUCE SELL

Source: Kotak Institutional Equities As of September 30, 2010

Ratings and other definitions/identifiers

Definitions of ratings

BUY. We expect this stock to outperform the BSE Sensex by 10% over the next 12 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 next 12 months.

SELL. We expect this stock to underperform the BSE Sensex by more than 10% 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.

17 KOTAK INSTITUTIONAL EQUITIES RESEARCH

Corporate Office Overseas Offices

Kotak Securities Ltd. Kotak Mahindra (UK) Ltd Kotak Mahindra Inc Bakhtawar, 1st Floor 6th Floor, Portsoken House 50 Main Street, Suite No.310 229, Nariman Point 155-157 The Minories Westchester Financial Centre Mumbai 400 021, India London EC 3N 1 LS White Plains, New York 10606 Tel: +91-22-6634-1100 Tel: +44-20-7977-6900 / 6940 Tel:+1-914-997-6120

1. Note that the research analysts contributing to this report may not be registered/qualified as research analysts with FINRA; and

2. Such research analysts may not be associated persons of Kotak Mahindra Inc and therefore, may not be subject to NASD Rule 2711 restrictions on communications with a subject company, public appearances and trading securities held by a research analyst account.

Kotak Securities Limited and its affiliates are a full-service, integrated investment banking, investment management, brokerage and financing group. We along with our affiliates are leading underwriter of securities and participants in virtually all securities trading markets in India. We and our affiliates have investment banking and other business relationships with a significant percentage of the companies covered by our Investment Research Department. Our research professionals provide important input into our investment banking and other business selection processes. Investors should assume that Kotak Securities Limited and/or its affiliates are seeking or will seek investment banking or other business from the company or companies that are the subject of this material and that the research professionals who were involved in preparing this material may participate in the solicitation of such business. Our research professionals are paid in part based on the profitability of Kotak Securities Limited, which include earnings from investment banking and other business. Kotak Securities Limited generally prohibits its analysts, persons reporting to analysts, and members of their households from maintaining a financial interest in the securities or derivatives of any companies that the analysts cover. Additionally, Kotak Securities Limited generally prohibits its analysts and persons reporting to analysts from serving as an officer, director, or advisory board member of any companies that the analysts cover. Our salespeople, traders, and other professionals may provide oral or written market commentary or trading strategies to our clients that reflect opinions that are contrary to the opinions expressed herein, and our proprietary trading and investing businesses may make investment decisions that are inconsistent with the recommendations expressed herein. In reviewing these materials, you should be aware that any or all of the foregoing, among other things, may give rise to real or potential conflicts of interest. Additionally, other important information regarding our relationships with the company or companies that are the subject of this material is provided herein.

This material should not be construed as an offer to sell or the solicitation of an offer to buy any security in any jurisdiction where such an offer or solicitation would be illegal. We are not soliciting any action based on this material. It is for the general information of clients of Kotak Securities Limited. It does not constitute a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual clients. Before acting on any advice or recommendation in this material, clients should consider whether it is suitable for their particular circumstances and, if necessary, seek professional advice. The price and value of the investments referred to in this material and the income from them may go down as well as up, and investors may realize losses on any investments. Past performance is not a guide for future performance, future returns are not guaranteed and a loss of original capital may occur. Kotak Securities Limited does not provide tax advise to its clients, and all investors are strongly advised to consult with their tax advisers regarding any potential investment.

Certain transactions -including those involving futures, options, and other derivatives as well as non-investment-grade securities - give rise to substantial risk and are not suitable for all investors. The material is based on information that we consider reliable, but we do not represent that it is accurate or complete, and it should not be relied on as such. Opinions expressed are our current opinions as of the date appearing on this material only. We endeavor to update on a reasonable basis the information discussed in this material, but regulatory, compliance, or other reasons may prevent us from doing so. We and our affiliates, officers, directors, and employees, including persons involved in the preparation or issuance of this material, may from time to time have “long” or “short” positions in, act as principal in, and buy or sell the securities or derivatives thereof of companies mentioned herein. For the purpose of calculating whether Kotak Securities Limited and its affiliates holds beneficially owns or controls, including the right to vote for directors, 1% of more of the equity shares of the subject issuer of a research report, the holdings does not include accounts managed by Kotak Mahindra Mutual Fund. Kotak Securities Limited and its non US affiliates may, to the extent permissible under applicable laws, have acted on or used this research to the extent that it relates to non US issuers, prior to or immediately following its publication. Foreign currency denominated securities are subject to fluctuations in exchange rates that could have an adverse effect on the value or price of or income derived from the investment. In addition, investors in securities such as ADRs, the value of which are influenced by foreign currencies affectively assume currency risk. In addition options involve risks and are not suitable for all investors. Please ensure that you have read and understood the current derivatives risk disclosure document before entering into any derivative transactions.

This report has not been prepared by Kotak Mahindra Inc. (KMInc). However KMInc has reviewed the report and, in so far as it includes current or historical information, it is believed to be reliable, although its accuracy and completeness cannot be guaranteed. Any reference to Kotak Securities Limited shall also be deemed to mean and include Kotak Mahindra Inc.