INDIA DAILY

March 24, 2020 India 23-Mar 1-day 1-mo 3-mo Sensex 25,981 (13.2) (35.6) (37.3) Nifty 7,610 (13.0) (35.7) (37.7) Contents Global/Regional indices Dow Jones 18,592 (3.0) (33.5) (34.8) Daily Alerts Nasdaq Composite 6,861 (0.3) (25.6) (23.4) Change in Reco FTSE 4,994 (3.8) (30.2) (34.6) HDFC Bank: Fresh opportunity into an attractive franchise Nikkei 17,661 4.6 (24.5) (25.8) Hang Seng 21,696 (4.9) (19.1) (22.1)  Tailwind of a decade low valuation leading to an upgrade KOSPI 1,557 5.0 (25.1) (29.1)  Timing of upgrade is risky along with the multiple assigned; but franchise is Value traded – India strong, in our view Cash (NSE+BSE) 369 513 406  Earnings risks comes from three sources: revenue, costs and provisions Derivatives (NSE) 6,778 33,194 7,387 Deri. open interest 2,688 5,090 3,548 Company alerts Tata Power: Sliver of hope Forex/money market  Legal advisory allows individual amendment of PPAs, could bring an end to Change, basis points Mundra troubles 23-Mar 1-day 1-mo 3-mo

 Targeting asset monetization of Rs50 bn in FY2021 to address leverage Rs/US$ 76.4 (2) 436 513

concerns 10yr govt bond, % 6.9 (7) 21 (12)  Maintain BUY rating with revised fair value estimate of Rs60/share Net investment (US$ mn) 20-Mar MTD CYTD Sector alerts (6,698 FIIs (460) (4,911) ) Media: Box office trends: Rs1 bn - the new normal? MFs 157 2,845 4,500  Box office drivers of 2019: Bollywood movies #6-25 and Hollywood Top movers Change, %

Best performers 23-Mar 1-day 1-mo 3-mo

CDH IN Equity 280 (0.7) 2.0 8.5

DIVI IN Equity 1,852 (7.2) (14.3) 1.9

HUVR IN Equity 1,870 (8.9) (15.6) (3.9)

DRRD IN Equity 2,768 (4.4) (12.8) (4.4)

DMART IN Equity 1,820 (5.0) (23.8) (4.6)

Worst performers

IIB IN Equity 336 (23.6) (71.2) (77.9)

IHFL IN Equity 96 6.0 (70.9) (69.0)

EDEL IN Equity 37 (10.0) (60.1) (66.9)

MSS IN Equity 53 (19.9) (53.4) (63.5)

TTMT IN Equity 66 (14.4) (56.1) (62.3)

[email protected] Contact: +91 22 6218 6427

For Private Circulation Only. FOR IMPORTANT INFORMATION ABOUT KOTAK SECURITIES’ RATING SYSTEM AND OTHER DISCLOSURES. REFER TO THE END OF THIS MATERIAL. BUY HDFC Bank (HDFCB) Banks MARCH 24, 2020 CHANGE IN RECO. Sector view: Attractive

Fresh opportunity into an attractive franchise. We upgrade HDFC Bank to BUY CMP (`): 772 from ADD as the recent correction, which has erased three years of performance, is Fair Value (`): 1,050 available at a far more attractive valuation. A slowdown in the consumer space remains BSE-30: 25,981 an area of risk on growth, costs and provisions in the near term. We cut our earnings estimates to reflect this risk and reduce our fair value to Rs1,050 from Rs1,350 earlier. However, the franchise has demonstrated that its strength in underwriting is better than its peers in the past and its ability to overcome a slowdown, if any, should be better.

HDFC Bank Stock data Forecasts/valuations 2020E 2021E 2022E 52-week range (Rs) (high,low) 1,306-760 EPS (Rs) 48.2 50.2 55.5 Mcap (bn) (Rs/US$) 4,231/55.4 EPS growth (%) 24.5 4.3 10.5 QUICK NUMBERS ADTV-3M (mn) (Rs/US$) 11,622/152 P/E (X) 16.0 15.4 13.9 Shareholding pattern (%) P/B (X) 2.5 2.2 2.0  Building 6% Promoters 21.3 BVPS (Rs) 307.2 343.0 385.1 earnings CAGR for FIIs 49.6 RoE (%) 16.5 15.2 14.9 FY2021-22. MFs/BFIs 11.7/2.5 Div. yield (%) 1.2 1.3 1.4 Price performance (%) 1M 3M 12M NII (Rs bn) 555 625 692 Absolute (36) (40) (32) PPOP (Rs bn) 478 527 588  LLP increased to Rel. to BSE-30 (1) (4) (0) Net profits (Rs bn) 262 274 302 1.5% from 1% currently for Tailwind of a decade low valuation leading to an upgrade FY2021-22.

We upgrade HDFC Bank to BUY from ADD with a revised FV of Rs1,050 (from Rs1,350 earlier).  Upgrade to BUY On our revised FV, we are valuing the bank at 2.8X book and 19X FY2022 EPS for RoEs moving from ADD with FV to ~15% levels. We cut our estimates by 11% and 17% respectively for FY2021-22 building in of Rs1,050 (from lower loan growth and higher loan-loss provisions to reflect the long standing risks that we Rs1,350 earlier) have articulated consistently in the past. From a purely technical perspective, we are closer to -2 standard deviation to its two decade average price/book history. Valuation has moved closer to FY2008 levels (October 2008-April 2009) and FY2002 levels (October 2002 –2004).

Timing of upgrade is risky along with the multiple assigned; but franchise is strong, in our view

We note that the upgrade has risks especially on a few factors: (a) we are uncertain of the slowdown both from a timing or depth perspective. (b) Depending on the nature of slowdown, the credit costs are likely to have a significant impact on earnings. We are also uncertain on the policy actions that could result in delay in asset classification. This would make it challenging to provide comfort on reported earnings leading to a lower multiple to business. (c) Management M B Mahesh, CFA change has been dominating discussion but we see lower risk to business performance in the medium term. The long term execution of the bank is driving the change in the current view. Nischint Chawathe

Earnings risks comes from three sources: revenue, costs and provisions Dipanjan Ghosh

We are building 6% CAGR in earnings which would lead to RoEs slipping to 15% levels for FY2021-22. While there would be discussion on the credit costs or asset impairment, we see Venkat Madasu two additional risks as well: (a) Revenue growth would slow down led by slower loan growth, change to less risky loan book which can be NIM dilutive unless the bank is able to improve Ashlesh Sonje lending spreads from other segments. Fee income growth, especially asset side fees, would be weaker consequent to lower disbursements from high margin business. A slowdown in consumption can weaken spends in the coming quarters and this would have a direct bearing on earnings. We are building 12% revenue growth on the back of 12% NII growth (b) Cost ratio could weaken (not built in our estimates currently) as the investments for collections would [email protected] significantly rise but be partly offset by lower origination costs. (c) We are building 30% CAGR Contact: +91 22 6218 6427 in provisions which would result in LLP moving to 1.5% of loans as compared to 1% currently.

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

A longer term view needed to be positive at current stage of business We note that our upgrade to BUY is probably fraught with a lot of risk and investors need to build a long term view to build a positive thesis on the bank as history has shown that HDFC Bank has been one of the best banks in India. There is a fair amount of uncertainty on (1) earnings or revenue growth given that HDFC Bank has been consistently delivering solid print and is well ahead of its peers, (2) the current economic conditions show a fair amount of impact on the consumption or the retail parts of the business where the growth for the bank has been fairly strong in recent years which could result in higher credit costs, (3) management succession process has begun and probably has been slower than what we would have anticipated. A line of argument that we have always positioned ourselves is that ICICI Bank was a higher conviction idea given that the bank was offering superior liability profile, less risky loan portfolio (housing), lower aggression in lending with greater emphasis in establishing strong underwriting practices and was gradually coming out of the previous corporate credit cycle. Finally, we were of the assumption that if retail credit cycle were to reverse, there is always a likelihood that HDFC Bank’s credit costs could be higher than ICICI Bank’s purely on the basis of asset mix and ignoring the relative strengths in underwriting within each product segments. As ICICI Bank was available at a lower multiple, our argument was that with the passage of time and steady execution in business strategy, one could build a thesis that the discount to HDFC Bank should gradually decline from current levels. However, the sharp reduction in stock price of banks with less differentiation to the above arguments has given an opportunity to build a stronger conviction on HDFC Bank on an absolute basis. We are uncertain if the bank can enjoy the high premium-to-its-peers that it has enjoyed in the past, especially with changes in the senior management which can potentially see changes in execution strategy. On our revised FV, we are valuing the bank at 2.8X book and 19X FY2022 EPS for RoEs moving to ~15% levels. The multiple assigned to the business is an important one. We are still giving the bank a superior multiple largely as a reflection of the business opportunity to grow at a faster rate than the industry both from an asset as well as a liability perspective. Segments like business banking are likely to be a strong source of growth in the medium to long term as the bank shifts focus towards the non-salaried segment over a period in time. India is still low on credit penetration and we believe that players like HDFC Bank should be well positioned to capture this opportunity. However, the multiple could always move lower and gradually as the market share shift, especially in liabilities, is much slower than before. This is likely as competition from the other frontline banks has been increasing. Finally, given its size, growth is likely to be much slower than before.

Valuation: A technical and historical perspective: 2 instances of the current scenario in over a two decade journey The long term price band of a stock is one of the few technical charts that the analyst looks at; essentially to seek comfort on the attractiveness of a stock. The key assumption to this is that the fundamentals of the business or the attractiveness of the industry has largely remained intact and hence, the price action reflects overt pessimism or exuberance. Exhibit 1 below shows the 20 year price band of the 12 month forward book multiple of HDFC Bank. The bank is now to its 2 standard deviations below its two decade average price to book multiple. We have seen this twice for the bank: (a) FY2003-04 and (b) FY2009-10 immediately post the global financial crisis. Barring a few one-off events in this period, there is not too much specific that impacted the bank. In 2003-04, the entire banking system moved towards a 90 DPD asset classification norm while in FY2009-10, there was a higher risk coming from the structure of the loan portfolio as well as the after effects of the acquisition of Centurion Bank of Punjab (CBoP). CBoP had a relatively risky portfolio resulting in a higher charge-off for HDFC Bank post acquisition.

KOTAK INSTITUTIONAL EQUITIES RESEARCH 3 Banks HDFC Bank

As we get clarity on the current economic conditions, we should expect an improvement in valuation multiples for the bank.

Exhibit 1: HDFC Bank’s valuation is moving closer to 2 standard deviation below its normal Price to book multiple and trading bands, March fiscal year-ends, 2001-2020 (X)

P/B Average Avg + 2 STDev Avg + 1 STDev Avg - STDev Avg - 2 STDev 5.5

4.4

3.3

2.2

1.1

- Mar-01 Mar-02 Mar-03 Mar-04 Mar-05 Mar-06 Mar-07 Mar-08 Mar-09 Mar-10 Mar-11 Mar-12 Mar-13 Mar-14 Mar-15 Mar-16 Mar-17 Mar-18 Mar-19 Mar-20

Source: Company, Kotak Institutional Equities

We do agree with investors that this journey has a lot of risks. However, it is important to point that these risks were there in FY2004, FY2008 and FY2013 (taper tantrum and slowdown in commercial vehicles) as well. Some of the risks that we have been highlighting have the potential to materialize over the next few quarters.

The length and depth of this slowdown, if any, is still an unknown

To take a constructive view on the bank given the uncertainties prevalent today, we probably need a few areas of comfort (a) valuation comfort as the current steep sell off cannot fully be explained by the sharp and unexpected slowdown in business conditions and (b) ability of the bank to handle a stress is well established. We face the challenge that the length or the depth of this slowdown is still not well established. This can result in the multiple hovering at these levels or lower as it raises concerns on growth and profitability. HDFC Bank multiple factors a higher confidence on execution capabilities as compared to most of its peers.

Multiple contraction, earnings or some combination of the two is at risk A sharp slowdown such as what we are seeing today is likely to result in two kinds of risks for the bank. (a) Earnings risk and/or (b) Multiple risk. The earnings risk is likely to be a function of slower loan growth, NIM contraction, slower fee income growth, negative operating leverage and/or high credit costs. Of the above, the key challenge in banks is always the credit costs as the others are most likely to be less impactful. The ‘multiple’ risk emerges from a few factors: (a) Asset quality discount. Any large scale and long term dispensation given to borrowers would result in an inability to understand the core credit cost of the business. Hence, till we establish confidence in earnings (for example, after the moratorium expires in case it is provided), investors are likely to capture this risk through a lower multiple. The recovery of the multiple can be much longer as banks need to give comfort that the stress is firmly behind the bank and is looking at growth with lower distractions of the past. (b) The growth uncertainty. HDFC Bank has a sizeable market share in the businesses that it is operating though its market share in the overall loans is still ~10%. The bank is highly dependent on the growth in the underlying product segment as market share gains are less likely or can be riskier at the margin.

4 KOTAK INSTITUTIONAL EQUITIES RESEARCH HDFC Bank Banks

Key risks: Possibility of RoE to remain lower than estimates

We are building 15% RoEs in FY2021-22 for HDFC Bank. This is lower than its long term average but is primarily a reflection of an unexpected change in the underlying economy giving far less time for the various businesses to adjust to this change. We are building in a lower NIM and higher loan-loss provisions to factor this risk.

Exhibit 2: We are building a decline in RoEs to 15% as a matter of prudence rather than it being driven by a specific view RoE de-composition of HDFC Bank, 2003-22 (%)

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020E 2021E 2022E Net interest income 3.0 3.6 3.7 4.1 4.5 4.7 4.7 4.1 4.2 4.2 4.3 4.1 4.1 4.1 4.1 4.2 4.2 4.1 4.0 3.8 Other income 1.7 1.4 1.5 1.8 1.8 2.0 2.1 1.9 1.7 1.9 1.9 1.7 1.7 1.6 1.5 1.6 1.5 1.7 1.5 1.5 Treasury 0.5 0.1 (0.1) (0.1) (0.1) 0.2 0.2 0.2 (0.0) (0.1) 0.0 0.1 0.1 0.1 0.1 0.1 0.0 0.1 0.1 0.1 Others 1.2 1.3 1.7 1.9 1.9 1.8 1.8 1.7 1.8 1.9 1.8 1.6 1.6 1.5 1.4 1.5 1.5 1.6 1.5 1.4 Total income 4.7 4.7 4.8 5.5 6.1 6.7 6.8 6.0 6.0 6.0 6.1 5.8 5.8 5.8 5.7 5.7 5.7 5.8 5.5 5.2 Operating expenses 2.1 2.3 2.3 2.7 3.0 3.6 3.6 2.9 3.1 3.0 3.0 2.6 2.6 2.6 2.5 2.4 2.3 2.3 2.2 2.1 Employees 0.6 0.6 0.6 0.8 0.9 1.2 1.4 1.1 1.1 1.1 1.1 0.9 0.9 0.9 0.8 0.7 0.7 0.7 0.7 0.7 Others 1.6 1.7 1.7 1.9 2.1 2.4 2.2 1.8 1.9 1.9 1.9 1.7 1.7 1.7 1.7 1.7 1.6 1.6 1.5 1.4 Pre provision income 2.6 2.5 2.5 2.8 3.0 3.1 3.2 3.1 2.9 3.1 3.1 3.2 3.2 3.2 3.2 3.3 3.4 3.5 3.3 3.2 Loan loss provisions 0.3 0.5 0.4 0.8 1.0 1.1 1.1 1.0 0.6 0.6 0.5 0.4 0.4 0.4 0.4 0.6 0.6 0.8 1.0 1.0 PBT 2.1 2.0 2.1 2.0 2.0 2.0 2.1 2.1 2.3 2.4 2.6 2.8 2.8 2.8 2.8 2.8 2.8 2.7 2.3 2.2 (1- tax rate) 67.8 70.8 67.9 69.5 69.6 69.7 68.0 68.7 67.5 68.8 69.0 66.6 66.6 66.0 65.7 65.5 65.5 71.6 74.4 74.4 RoA 1.4 1.4 1.4 1.4 1.4 1.4 1.4 1.5 1.6 1.7 1.8 1.9 1.9 1.8 1.8 1.8 1.8 1.9 1.7 1.6 Avg assets/avg equity 12.9 14.7 13.0 12.7 14.0 12.5 11.9 11.1 10.7 11.1 11.2 10.3 10.3 9.9 9.9 9.8 9.0 8.5 8.7 9.1 RoE 18.5 20.6 18.5 17.7 19.5 17.7 16.9 16.1 16.7 18.7 20.3 19.4 19.4 18.3 17.9 17.9 16.5 16.5 15.2 14.9

Source: Company, Kotak Institutional Equities

Exhibit 3: RoE to move lower to ~15% levels Exhibit 4: PAT growth to decelerate to ~<10% for FY2021-22 RoE and RoA of HDFC Bank, March fiscal year-ends, 2005-22E (%) PAT and growth of HDFC Bank, March fiscal year-ends, 2005-22E (%)

ROE (LHS) ROA (RHS) PAT (Rs bn) (LHS) Yoy growth (%) (RHS) 25 2.5 350 45 41 39 20 2.2 280 36 33 32 31 31 31 31 30 15 1.9 210 26 27 24 20 20 20 21 10 1.6 140 18 18

10 5 1.3 70 9 4 - 1.0 - - 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020E 2021E 2022E 2020E 2021E 2022E

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

KOTAK INSTITUTIONAL EQUITIES RESEARCH 5 Banks HDFC Bank

Exhibit 5: HDFC Bank—estimate changes March fiscal year-ends, 2020E-2022E (Rs mn)

New estimates Old estimates % change 2020E 2021E 2022E 2020E 2021E 2022E 2020E 2021E 2022E Net loan growth (%) 16.5 14.9 14.5 17.5 19.2 18.8 -107 bps -427 bps -429 bps Total assets 14,541,174 16,957,140 19,756,515 14,541,961 16,983,753 19,830,679 (0.0) (0.2) (0.4) Total income 781,123 869,037 961,425 783,004 886,747 999,441 (0.2) (2.0) (3.8) Net interest income 555,038 625,494 692,484 556,919 643,204 730,501 (0.3) (2.8) (5.2) NIM (%) 4.3 4.1 3.9 4.3 4.2 4.1 -4 bps -9 bps -21 bps Other income 226,084 243,543 268,940 226,084 243,543 268,940 0.0 (0.0) 0.0 Fee income 164,766 181,553 200,073 164,766 181,553 200,073 0.0 0.0 0.0 Expenses 303,163 342,300 373,607 303,163 342,300 373,607 (0.0) 0.0 (0.0) Employee cost 94,460 110,575 128,969 94,460 110,575 128,969 0.0 0.0 0.0 Other cost 208,702 231,725 244,638 208,702 231,725 244,638 0.0 (0.0) (0.0) Loan loss provisions 106,428 153,849 176,478 106,954 126,669 131,841 (0.5) 21.5 33.9 PBT 366,499 367,864 406,324 367,854 412,755 488,977 (0.4) (10.9) (16.9) PAT 262,353 273,691 302,305 263,370 307,090 363,799 (0.4) (10.9) (16.9) PBT-treasury+provisions 462,927 514,213 575,302 464,808 531,924 613,318 (0.4) (3.3) (6.2) EPS (Rs) 48 50 56 48 56 67 0.4 (10.3) (17.2)

Source: Company, Kotak Institutional Equities estimates

Note that the earnings are likely to see significant revisions in the medium term largely as we have greater clarity on the impact of the current event on the bank’s business. The impact of these changes may extend beyond a year as well. We are less certain on many of these assumptions but would probably look at the event as a good long term opportunity to build a position in a franchise that has historically demonstrated better underwriting standards and focused on building a granular portfolio. The retail business is the most profitable business for the bank. Hence, the current event impacts this portfolio to the most.

The contribution of the unsecured business of HDFC Bank is likely to be high.

As we have discussed in our previous reports, we have tried to look at the profitability and contribution of the unsecured business. HDFC Bank has grown its credit card and unsecured loan portfolio quite meaningfully in the previous few years. The share of these loans is at an all-time high at ~17% of loans. As we have seen with a listed player in the credit card business, the profitability of this business is quite high. The management articulated that the performance on these portfolios continues to remain quite solid. The credit card business has seen a reasonably strong growth in volumes and spends but is marginally offset by lower revolve rates. Card acceptance is gaining ground across all segments of population (salaried and non-salaried), age as well as in semi-urban, urban and metropolitan areas. The bank is building a reasonably well diversified portfolio to reduce the underlying risk. The contribution between new-to-credit customers appears to be quite healthy. At this point, there are no signs of worry.

We looked at the contribution of these two portfolios in this report. Note that these are our internal estimates and not been shared by the management. We have based our assumption looking at the financials of SBI Cards and Payment Services, which is the credit card subsidiary of SBI. We have made further adjustments to various metrics to account for relative strengths of each company. Our study suggests that though the contribution of these two loans was ~17% of the overall loans, the contribution towards PBT could be between 25% of the overall bank. The credit card business which is 6% of loans is probably contributing to ~13% of PBT while the personal loans, 11% of loans, could be ~10% of PBT. The share of profits from the credit card business has probably moved to ~15% of PBT in FY2019 from 10% a few years back. The card business probably generates ~65% of its income from net interest income (revolving customers) and the balance through interchange fees, foreign exchange and other cross sell/late fees etc.

6 KOTAK INSTITUTIONAL EQUITIES RESEARCH HDFC Bank Banks

The main challenge that we see currently is that these business can turn towards low profitability or losses in extreme scenarios quite quickly. This would result in the bank immediately lowering its exposure to these segments resulting in slower loan growth which would put higher pressure on revenue growth as NIM are quite high along with fee income opportunities. Further, the bank would need to strengthen its collection team resulting in higher operating expenses while it would also have to make for higher provisions for bad loans. In many ways, the cyclicality of this business appears to be less comforting, in our view.

Exhibit 6: Retail earnings growth decelerated in FY2019 while wholesale witnessed robust growth Break-up of segmental business, March fiscal year-ends, 2008-19 (Rs bn)

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Retail banking Revenue 56 85 101 128 147 184 214 258 323 383 467 538 Growth yoy (%) 43.7 52.6 18.6 26.3 15.1 25.3 16.1 20.4 25.3 18.4 22.2 15.0 Operating costs 35 55 60 70 86 106 117 132 168 188 210 231 Growth yoy (%) 55.0 56.5 9.3 18.2 22.2 22.5 10.4 13.6 26.8 11.8 12.1 9.7 Loan loss provisions 14 18 17 6 6 11 15 12 19 31 53 64 Growth yoy (%) 62.2 34.3 (9.3) (66.3) 15.4 72.3 34.5 (17.3) 54.6 64.1 67.8 21.8 PBT 7 13 25 52 55 68 83 113 136 164 205 243 Growth yoy (%) (7.1) 67.5 100.0 106.9 5.3 24.2 22.0 36.9 20.4 20.0 25.0 18.8 Average loans 362 580 615 799 1,095 1,499 1,885 2,345 3,024 3,641 4,629 5,655 Growth yoy (%) 44.2 60.3 6.1 29.8 37.1 37.0 25.7 24.4 28.9 20.4 27.1 22.2 NIM (%) 7.5 6.9 7.6 6.2 5.5 5.6 5.3 5.2 5.2 5.8 5.4 5.4 Impaired loans (%) 1.7 2.4 1.8 1.1 0.8 0.8 1.0 0.9 1.1 1.3 1.5 1.6 Wholesale banking Revenue 18 17 16 25 30 34 42 50 51 70 84 120 Growth yoy (%) 52.5 (3.0) (8.9) 60.1 21.0 10.5 24.1 19.8 1.4 37.8 20.7 42.1 Operating costs 7 8 8 11 8 10 6 12 13 15 20 23 Growth yoy (%) 71.4 13.2 1.6 35.4 (24.9) 20.3 (35.2) 81.7 13.9 16.8 28.9 14.9 Loan loss provisions (0) 2 2 4 1 2 2 5 2 7 7 8 Growth yoy (%) 74.8 (986.7) (24.1) 151.1 (65.5) 13.6 57.2 86.9 (47.7) 172.2 3.2 20.6 PBT 11 7 6 10 21 22 33 34 35 48 58 89 Growth yoy (%) 43.0 (34.4) (15.9) 68.6 103.4 6.4 47.8 2.8 3.9 36.4 20.4 54.0 Average loans 280 412 491 709 760 829 955 1,063 1,255 1,515 1,878 2,358 Growth yoy (%) 29.1 47.4 19.2 44.4 7.1 9.1 15.2 11.3 18.0 20.8 24.0 25.5 NIM (%) 2.1 1.2 1.0 1.5 1.7 1.6 1.9 1.8 1.4 1.8 1.7 2.0 Impaired loans (%) 0.5 1.2 1.1 1.4 1.1 0.8 0.8 1.1 1.0 1.6 1.5 1.3 Treasury Revenue 1 4 7 2 1 4 7 8 15 9 16 10 Growth yoy (%) 8.8 168.8 77.4 (68.9) (39.2) 217.7 79.8 7.3 90.9 (37.4) 67.5 (38.2) Operating costs 0 1 1 1 3 2 1 1 1 1 1 2 Growth yoy (%) (50.4) 64.6 9.3 37.0 186.3 (25.0) (40.2) (17.8) 6.1 6.1 (4.5) 59.3 PBT 1 3 6 1 (2) 2 6 7 14 8 15 8 Growth yoy (%) 123.1 213.6 92.7 (82.4) (264.2) (204.3) 229.9 13.1 104.9 (41.1) 78.6 (46.2) NIM (%) 4.4 3.3 (0.2) 1.2 1.9 0.4 1.5 2.2 3.5 0.8 0.7 1.1 Total Revenue 75 106 124 155 179 222 263 316 389 462 568 668 Growth yoy (%) 44.8 41.6 16.3 25.3 15.3 24.2 18.5 20.0 23.2 18.7 22.9 17.6 Operating costs 42 63 68 82 97 118 124 145 182 204 231 255 Growth yoy (%) 54.1 49.4 8.3 20.4 18.1 20.8 5.6 16.7 25.6 12.2 13.2 10.4 Loan loss provisions 13 20 18 10 8 13 17 17 22 38 59 72 Growth yoy (%) 62.0 52.6 (10.8) (47.1) (18.5) 61.9 37.4 (2.5) 26.7 76.3 56.5 21.7 PBT 20 23 37 63 74 92 122 154 186 220 277 340 Growth yoy (%) 20.4 17.3 62.3 69.8 16.8 24.6 32.4 26.5 20.5 18.5 26.0 22.7

Source: Company 20 F filings, Kotak Institutional Equities

KOTAK INSTITUTIONAL EQUITIES RESEARCH 7 Banks HDFC Bank

Exhibit 7: Credit card and personal loans business probably contributes to ~25% or revenues and PBT for the bank Credit card and personal loan business contribution to the overall business, March fiscal year-ends, 2019 (Rs mn)

Bank Credit card Contribution Personal loans Contribution Total Contribution (Rs mn) (Rs mn) (%) (Rs mn) (%) (Rs mn) (%) (% of loans) 5.6 11.2 16.8 Average loans 7,649,598 426,155 5.6 857,688 11.2 1,283,843 16.8 Revenues 658,691 105,848 16.1 70,070 10.6 175,917 26.7 Interest income 989,721 92,907 9.4 118,371 12.0 211,278 21.3 Interest on loans 775,442 80,969 10.4 94,346 12.2 175,315 22.6 Interest on investments 199,975 11,140 5.6 22,422 11.2 33,562 16.8 Others 14,304 797 5.6 1,604 11.2 2,401 16.8 Interest expenses 507,288 28,261 5.6 56,878 11.2 85,139 16.8 Net interest income 482,432 64,646 13.4 61,493 12.7 126,139 26.1 Non-interest income 176,259 41,201 23.4 8,577 4.9 49,778 28.2 Operating expenses 261,194 52,973 20.3 21,442 8.2 74,416 28.5 PPOP 397,497 52,874 13.3 48,628 12.2 101,502 25.5 Provisions 20,788 11,157 53.7 15,438 74.3 26,595 127.9 PBT 321,997 41,717 13.0 33,189 10.3 74,906 23.3 Average number of cards (mn) 11.8 Receivables/card (Rs) 36,200 Spends/card (Rs/year) 143,730 Transactions/card (#/year) 45 Revenue/card (Rs) 9,000 NII/card 5,500 Non-interest income/card 3,500 Opex/card (Rs) 4,500 Notes: (a) This is a hypothetical exercise based on external available information (SBI Cards) which has been fine tuned to HDFC Bank. (b) The yield on loans has been assumed at 18% for cards and ~11% for personal loans (c) Opex to loans has been assumed at 2.5%, non-interest income at 1% and provisions at 1.25% for personal loans (d) Transfer pricing has not been considered for this exercise but we have loaded the SLR costs to the business

Source: Company, Kotak Institutional Equities estimates

8 KOTAK INSTITUTIONAL EQUITIES RESEARCH HDFC Bank Banks

Exhibit 8: Contribution from the credit card business to profitability has been rising over the years Credit card and personal loan business contribution to the overall business, March fiscal year-ends, 2019 (Rs mn)

Credit card business Bank 2013 2014 2015 2016 2017 2018 2019 2013 2014 2015 2016 2017 2018 2019 (% of loans) 3.9 4.0 4.3 4.4 4.6 5.2 5.6 Average loans (D) 91,053 113,508 146,985 187,685 230,648 324,173 426,155 2,315,502 2,817,371 3,379,912 4,253,774 5,036,630 6,188,469 7,649,598 Revenues 22,343 25,427 31,695 41,225 53,271 75,640 101,586 226,637 264,023 313,920 383,432 454,357 553,152 658,691 Interest income 19,631 24,238 31,367 40,575 49,416 67,560 88,645 350,649 411,355 484,699 602,214 693,060 802,414 989,721 Interest on loans 16,389 20,431 26,457 33,783 41,517 58,351 76,708 268,224 316,869 371,808 448,279 520,553 626,618 775,442 Interest on investments 3,075 3,641 4,287 6,230 7,302 8,498 11,140 78,203 90,368 98,585 141,200 159,443 162,224 199,975 Others 166 166 622 562 598 711 797 4,222 4,118 14,306 12,736 13,064 13,572 14,304 Interest expenses 7,571 9,127 11,339 14,397 16,562 21,030 28,261 192,538 226,529 260,742 326,299 361,667 401,465 507,288 Net interest income 12,059 15,112 20,028 26,178 32,854 46,530 60,384 158,111 184,826 223,957 275,915 331,392 400,949 482,432 Non-interest income 10,283 10,315 11,667 15,047 20,417 29,110 41,201 68,526 79,196 89,964 107,517 122,965 152,203 176,259 Operating expenses 15,365 15,170 17,076 22,118 30,372 39,696 52,973 112,361 120,422 139,875 169,797 197,033 226,904 261,194 PPOP 6,977 10,257 14,619 19,107 22,899 35,944 48,613 114,276 143,601 174,045 213,635 257,324 326,248 397,497 Provisions 4,278 4,032 4,332 5,356 7,020 8,759 11,157 34,493 21,400 19,061 17,840 16,242 15,914 20,788 PBT 2,699 6,226 10,287 13,751 15,878 27,186 37,456 97,512 127,728 153,295 186,379 221,391 266,973 321,997 Contribution to PBT of bank 3 5 7 7 7 10 12 Avg. number of cards (mn) A 6.0 5.4 5.6 6.5 8.2 9.7 11.8 Spends/card (Rs mn) B 352,558 451,167 569,455 733,902 964,813 1,312,987 1,691,970 Spends/card (Rs/year) (B/A) 58,283 83,102 102,498 112,180 118,139 135,311 143,730 Growth in spends/card (%) 42.6 23.3 9.4 5.3 14.5 6.2 Transactions/card (Rs mn) C 107 160 197 250 331 402 484 Transactions/card (#/year) (C/A) 18 29 35 38 41 41 41 Growth in transactions/card (%) 67.1 20.3 7.8 6.2 2.4 (0.8) Loans/card (D/A) 15,052 20,907 26,456 28,689 28,242 33,408 36,201 Revenue/card (Rs) 3,694 4,683 5,705 6,301 6,523 7,795 8,630 NII/card 1,994 2,783 3,605 4,001 4,023 4,795 5,130 Non-interest income/card 1,700 1,900 2,100 2,300 2,500 3,000 3,500 Opex/card (Rs) 2,540 2,794 3,074 3,381 3,719 4,091 4,500 Notes: (a) We have assumed a growth of ~10% in opex/card and non-interest income/card

Source: Company, Kotak Institutional Equities estimates

Risk #1: Revenue growth slowdown could be higher than anticipated

We are building ~11% CAGR for FY2020-22E (see Exhibit 7). We are broadly maintaining an unchanged mix between interest and non-interest income (see Exhibit 8). We are building a 12% CAGR in interest income and 9% CAGR in non-interest income. We have lowered our loan growth forecast to 15% CAGR though we still believe that there are further risks to the downside if the underlying environment persists longer. There are a few legs of this revenue growth slowdown that need to be discussed.

KOTAK INSTITUTIONAL EQUITIES RESEARCH 9 Banks HDFC Bank

Exhibit 9: We expect revenue growth to slow down to 11% Exhibit 10: We expect a relatively unchanged mix between CAGR to reflect the current economic stress interest and non-interest income Revenue growth, March fiscal year-ends, 2003-22 (%) Revenue contribution, March fiscal year-ends, 2003-22E (%)

60 NII Non-interest income 100

48 80

36 60

24 40

12 20 11 11 0 0 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020E 2021E 2022E 2020E 2021E 2022E

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

 Loan growth slowdown. We are building loan growth to decelerate to ~15% levels (see Exhibit 9) from ~20% levels that they have reported in 3QFY20. The risk is still more to a downside given that the bank has a relatively higher share of low duration loans in its portfolio. As repayment of principal accelerates in EMI products, the bank needs a very sharp recovery in disbursements to keep its loan portfolio at ~15% levels.

Exhibit 11: We are building loan growth to decelerate to ~15% levels given its size and market share Loan growth for HDFC Bank, March fiscal year-ends, 2003-22 (%)

75

60

45

30

15 15 15 0 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020E 2021E 2022E

Source: Company, Kotak Institutional Equities

10 KOTAK INSTITUTIONAL EQUITIES RESEARCH HDFC Bank Banks

Exhibit 12: Share of unsecured loans has increased to 18%; non-retail loans at 49% Break-up of loan book, March fiscal year-ends, 2008-3QFY20 (%)

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 3QFY20 Retail 61.9 61.8 50.2 50.1 54.8 56.9 48.0 47.3 48.2 51.2 55.1 52.6 51.3 Housing loans 3.0 5.1 6.9 7.2 7.3 7.0 6.3 6.6 6.9 6.9 5.5 6.3 6.6 Auto loans 26.9 25.7 20.4 20.2 21.5 20.9 16.5 15.7 15.1 15.8 16.5 14.6 13.0 Commercial vehicles 9.4 8.1 4.8 5.1 6.7 6.7 4.3 3.5 3.2 3.5 3.6 3.5 3.0 Car loans 15.1 15.7 14.3 13.8 13.5 12.9 11.1 11.1 10.8 11.2 11.6 9.8 8.9 Two wheelers 2.4 1.9 1.3 1.2 1.3 1.3 1.1 1.1 1.2 1.1 1.3 1.2 1.1 Unsecured 15.5 12.8 10.0 9.5 10.7 11.5 11.1 11.5 12.4 13.7 16.4 17.0 17.9 Personal loans 10.5 8.9 6.9 6.4 7.1 7.3 6.9 7.1 8.0 9.0 10.9 11.3 11.7 Credit cards 5.0 3.9 3.1 3.0 3.6 4.2 4.3 4.4 4.4 4.7 5.5 5.7 6.2 Business loans 13.5 12.8 8.7 9.4 9.5 10.2 7.1 5.2 5.4 6.5 8.2 7.0 6.8 Others 3.1 5.3 4.2 3.9 5.8 7.3 7.0 8.3 8.4 8.2 8.4 7.8 7.1 Corporate loans/others 38.1 38.2 49.8 49.9 45.2 43.1 52.0 52.7 51.8 48.8 44.9 47.4 48.7

Source: Company, Kotak Institutional Equities

Exhibit 13: Retail loan growth moderated in 3QFY20 but has witnessed strong growth in the past decade Growth across product segments, March fiscal year-ends, 2008-3QFY20 (%)

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 3QFY20 Loan growth (%) 35.1 55.9 27.3 27.1 22.2 22.7 30.2 17.1 27.1 19.4 18.7 24.5 19.9 Retail 38.6 55.8 3.3 26.8 33.7 27.3 9.8 15.4 29.7 26.6 27.8 19.0 14.1 Housing loans (7.3) 166.8 71.5 32.1 24.1 17.7 16.6 23.3 32.0 20.5 (5.5) 41.7 19.2 Auto loans 23.6 49.3 0.7 26.0 30.0 19.2 3.0 11.5 22.3 24.6 23.9 10.1 1.3 Commercial vehicles 24.0 34.5 (24.7) 35.7 59.6 23.4 (17.3) (4.0) 14.8 30.9 21.7 22.8 3.5 Car loans 37.1 62.0 15.5 23.2 19.3 17.2 12.4 16.5 23.9 23.6 23.2 5.6 0.7 Two wheelers (25.0) 27.1 (13.5) 20.8 27.4 18.6 14.1 21.1 29.4 16.9 37.9 15.9 0.5 Unsecured 29.4 (0.8) 20.4 37.6 32.4 25.8 20.9 37.5 31.8 42.0 29.3 25.1 Personal loans 51.1 32.1 (0.6) 17.7 35.2 26.0 22.6 20.3 44.1 34.6 43.6 29.4 23.3 Credit cards 57.5 23.8 (1.4) 26.7 42.8 45.3 31.2 21.7 27.0 26.7 38.9 29.1 28.6 Business loans 64.4 48.5 (13.5) 36.6 24.3 31.5 (9.2) (15.4) 34.3 43.3 49.4 5.4 13.6 Others 123.6 167.4 0.4 17.3 84.5 52.9 24.6 40.3 28.1 16.5 22.4 14.9 11.3 Corporate loans/others 29.8 56.1 66.1 27.4 10.5 17.0 57.1 18.7 24.8 12.7 9.2 31.2 26.6

Source: Company, Kotak Institutional Equities

 Loan mix shift towards lower NIM products. We are building NIM to decline ~30bps over FY2020-22 (see Exhibit 2) as the incremental mix of the loan book is likely to shift towards a less aggressive portfolio mix that what it is currently (see Exhibits 10 and 11) till there is greater clarity of the borrowers’ financial profile. A prolonged slowdown could result in a higher preference of better rated corporate portfolio or more collateralized based lending. It is quite likely that the bank also focuses on improving its NIM through a greater focus on liabilities as compared to assets that we have witnessed in recent years.

 Fee income contribution could be weaker. It is quite likely that we would have to build a lower fee income if various categories undergo a change in mix than what we are seeing today. Cards business is an important driver to this line of activity (see Exhibit 12) and its contribution extends not only in lending but also on fee income. Retail fees contribute to ~90% of the overall fees, an unchanged trend in the past three years. The fee growth from cards business has grown ~35% CAGR and contributes to ~35% of the overall fees, deposit, lending and deposit related fees is at ~20-22% of the fees while third party is at ~15% of fees. We believe that the fee income business could slow given the expected weakness in disbursements in retail, fee adjustments in select third party products. Card fees would continue to remain strong, albeit slower from current levels.

KOTAK INSTITUTIONAL EQUITIES RESEARCH 11 Banks HDFC Bank

Exhibit 14: Fee income has seen a greater contribution from the cards business Break-up of fee income, March fiscal year-ends, 2017-19 (%)

2017 2018 2019

Others Deposit Others Deposit Others Deposit 8% related 9% related 7% related 22% 19% 19% Paymen Paymen t and t and Paymen cards cards t and related related cards 27% 29% related Lendin Lendin 35% g Third Third Third g related party Lendin party related party 23% distribu g distribu 26% distribu tion related tion tion 15% 28% 17% 16%

Source: Company 20F filings, Kotak Institutional Equities

Risk #2: Cost ratio could have an adverse impact if conditions remain weak

We are building a largely unchanged cost ratio for the bank (see Exhibits 13 and 14). We should expect cost growth to move closer to income growth though the possibility of deterioration in the medium term is quite high if asset quality ratios remain negative or sticky for a long period of time.

Exhibit 15: We are building an unchanged cost-structure Exhibit 16: We are building ~2% cost-assets in our assumptions Cost-income ratio, March fiscal year-ends, 2003-22 (%) Cost-assets ratio, March fiscal year-ends, 2003-22 (%)

54 4.0

3.2 48

2.4 42 2 1.6 2

39 39 36 0.8

30 0.0 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020E 2021E 2022E 2020E 2021E 2022E

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

In the previous weak asset quality cycle, immediately post the global financial crisis, we saw a sharp increase in collection costs (see Exhibit 13). This ratio increased to 11% of the overall operating costs as compared to ~4% when the bank is in a relatively strong position. It is quite likely that we are looking at something similar to repeat over the next few years as well. On the other hand, the origination costs is likely to decline if the focus shifts towards long duration assets in retail (housing) and flattish disbursements in the unsecured loan portfolio with greater origination from internal customers.

12 KOTAK INSTITUTIONAL EQUITIES RESEARCH HDFC Bank Banks

Exhibit 17: Collection and recovery costs rises in a weaker asset quality environment Collection and recovery costs to overall operating expenses, March fiscal year-ends, 2006-11 (%)

12.0

11.3 9.6

8.9 7.2 7.4 6.9 6.5 4.8

4.0 2.4

- 2006 2007 2008 2009 2010 2011

Source: Company, Kotak Institutional Equities

Risk #3: Asset quality risks can linger for a much longer period but HDFC Bank should be able to weather the storm In our view, there is likely to be a period of prolonged uncertainty (immediately after the crisis lifts and the economy moves back to normalcy) where the first few quarters or years (depending on the nature of forbearance offered and the aggression with which banks have used these tools to its borrowers) would largely see a lower impact on earnings but the risk is reflected through a lower multiple to the franchise. As the various measures start to lift, there is greater confidence in the earnings (even if there is a higher impact) as it closely reflects the risk of the past underwriting, the multiple is likely to expand. At this point, we are uncertain on the duration or the depth of this slowdown. We are also not sure on the approach taken by the regulators, the lenders or borrower behavior. Underwriting standards usually tends to be aggressive when organizations have long period of lower credit costs as the bank could deliberately target customer segments that is lot more riskier if the economy where to suddenly change course, as we see today. Given that a large part of the portfolio is focused on the salaried segment, the impact of this slowdown should be lower. We have seen that HDFC Bank has demonstrated that it has one of the best banking franchises amongst private banks and usually tends to use the regulatory forbearances sparingly. This was seen especially when the restructuring window was allowed for borrowers in the previous cycle. It is this comfort which allows us to be a bit more comfortable to build a positive view on the bank despite having a less favorable outlook to medium term business of the bank. Note that the portfolio is far more diversified by customer segment and geography than it was a decade back. We are building in gross NPLs to rise to ~2% and net NPLs at 0.5% of loans. The gross NPL ratio has been rising in recent years largely led by increase in pressure from agriculture and steadily rising NPLs in the retail loan portfolio. In recent months, we have seen the pressure in the commercial vehicle space as well. We would have to additionally watch the portfolio in the other segments of retail and business banking as well. The extremely quick slowdown in the economy caused by the current event would have given very limited time for the management to act on their respective portfolios. One is quite concerned on the unsecured loan portfolio (18% of loans), including that within the business banking book (~20% of loans, KIE estimates) where the collateral may be less than adequate to offset this slowdown. This portfolio can undergo the maximum stress.

KOTAK INSTITUTIONAL EQUITIES RESEARCH 13 Banks HDFC Bank

Moving credit costs to 1.5% of loans but regulatory forbearances likely We are building loan-loss provisions of 1.5% of loans for FY2021-22. Note that this is still not yet fully closer to ~2% levels that we witnessed during the 2007-10. The 2009-11 also included a fair amount of provisions that is related to the acquisition of CBoP (Centurion Bank of Punjab). We shall work through the earnings impact as we have greater clarity on the current slowdown. Allowing borrowers with any kind of regulatory forbearance (moratorium or restructuring of loans) implies that the ability to have comfort on the underlying book of the lender is less than before. Investors would prefer to build a more cautious approach when viewing the financials of the bank as the true test of the lenders book will see only once we pass a few quarters after these forbearances are lifted.

Exhibit 18: Gross NPLs are likely to move to 2% of loans but there is likely to be a higher provisions Gross and net NPL ratios, March

Gross NPL (LHS) Net NPL (LHS) Provision coverage (RHS) 2.5 90

1.9 1.9 2.0 1.8 84

1.4 1.4 1.4 1.5 1.3 1.4 1.4 78 1.0 1.0 1.1 1.0 1.0 0.9 0.9 1.0 72 0.6 0.5 0.5 0.4 0.5 0.4 0.4 0.4 0.5 0.3 0.3 0.3 0.3 66 0.2 0.2 0.2 0.2

- 60 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020E 2021E 2022E Notes: (1) FY2009 is higher on account of the merger with CBOP.

Source: Company, Kotak Institutional Equities

Exhibit 19: We are building slippages of >2% and LLP of ~1.5% of loans for FY2021-22 Slippages and loan-loss provisions, March fiscal year-ends, 2007-22 (%)

Slippages Loan loss provisions 6.0 5.4

4.8

3.6 2.6 2.6 2.2 2.3 2.2 2.3 2.3 2.4 1.9 2.0 1.6 1.6 1.5 2.2 2.1 2.1 1.1 1.7 1.0 1.0 1.2 1.5 1.5 1.2 1.0 1.1 0.8 0.7 0.6 0.6 0.7 0.9 1.0 - 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020E 2021E 2022E Notes: (1) FY2009 is higher on account of the merger with CBOP and is calculated on opening loans (ex CBoP).

Source: Company, Kotak Institutional Equities

14 KOTAK INSTITUTIONAL EQUITIES RESEARCH HDFC Bank Banks

Exhibit 20: Few segments like agriculture, road, auto has seen higher stress in FY2020 Gross NPL ratio across sectors. March fiscal year-ends, 2018-3QFY20 (%)

2018 2019 3QFY20 Agriculture - Allied 3.8 3.5 3.7 Agriculture Produce - Trade 1.6 2.4 3.1 Agriculture Production - Food 3.9 4.9 8.1 Agriculture Production - Non food 2.1 2.9 3.4 Automobile & Auto Ancillary 0.9 1.2 1.6 Banks and Financial Institutions 0.0 0.0 0.0 Business Services 1.0 1.3 1.3 Capital Market Intermediaries 0.0 0.0 1.1 Cement & Products 0.2 0.1 0.1 Chemical and Products 0.4 0.2 0.2 Coal & Petroleum Products 0.3 0.2 0.3 Consumer Durables 0.4 0.5 0.7 Consumer Loans 0.7 0.9 0.7 Consumer Services 0.9 1.1 1.6 Drugs and Pharmaceuticals 0.8 0.6 0.6 Engineering 0.6 1.1 1.0 Fertilisers & Pesticides 0.0 0.0 0.0 FMCG & Personal Care 0.4 0.8 1.0 Food and Beverage 3.0 3.8 3.1 Gems and Jewellery 1.5 1.1 0.4 Housing Finance Companies 0.0 0.0 2.5 Information Technology 1.4 1.9 1.9 Infrastructure Development 3.2 2.9 2.5 Iron and Steel 1.9 0.7 0.6 Mining and Minerals 0.6 1.8 3.8 NBFC / Financial Intermediaries 0.0 0.0 0.2 Non-ferrous Metals 0.3 0.3 1.1 Paper, Printing and Stationery 4.3 4.6 1.6 Plastic & Products 0.4 0.4 4.5 Power 0.1 0.0 0.0 Real Estate & Property Services 1.7 1.6 1.9 Retail Trade 1.7 1.7 1.8 Road Transportation 1.1 1.5 4.1 Telecom 0.4 0.2 0.0 Textiles & Garments 1.3 1.4 1.4 Wholesale Trade - Industrial 2.1 1.9 1.8 Wholesale Trade - Non Industrial 1.6 1.9 1.7 Other Industries 1.4 1.4 1.3 Overall 1.2 1.3 1.5

Source: Company, Kotak Institutional Equities

KOTAK INSTITUTIONAL EQUITIES RESEARCH 15 Banks HDFC Bank

Exhibit 21: HDFC Bank growth rates and key ratios March fiscal year-ends, 2017-2022E (%)

2017 2018 2019 2020E 2021E 2022E Growth rates (%) Net loan 19.4 18.7 24.5 16.5 14.9 14.5 Customer assets growth 23.1 21.3 21.8 15.8 14.4 14.0 Retail loans to Customer assets 48.9 51.5 50.4 51.8 53.6 55.6 Net fixed assets 54.5 (0.5) 11.7 (5.6) (7.1) (8.8) Cash and bank balance 25.8 151.1 (33.8) 34.2 35.7 37.6 Total Asset 16.6 23.2 17.0 16.8 16.6 16.5 Deposits 17.8 22.5 17.0 18.6 18.1 17.7 Current 30.7 3.2 19.5 15.3 18.1 17.7 Savings 7.9 33.2 19.4 20.5 19.1 18.7 Fixed 30.9 15.6 11.1 16.4 15.9 15.4 Net interest income 20.1 21.0 20.3 15.1 12.7 10.7 Loan loss provisions 33.3 54.6 27.9 51.1 44.6 14.7 Total other income 14.4 23.8 15.8 28.3 7.7 10.4 Net fee income 13.6 29.3 21.2 19.3 10.2 10.2 Net capital gains 55.5 (18.8) (57.5) 281.4 (16.7) - Net exchange gains 2.9 20.6 12.9 22.0 14.0 14.0 Operating expenses 16.0 15.2 15.1 16.1 12.9 9.1 Employee expenses 13.7 5.0 14.0 21.7 17.1 16.6 Key ratios (%) Yield on average earning assets 9.1 8.7 8.9 8.9 8.4 8.1 Yield on average loans 10.2 10.3 10.5 10.3 9.7 9.5 Yield on average investments 7.8 7.1 7.5 6.8 7.1 7.0 Average cost of funds 5.3 4.9 5.2 5.2 4.9 4.9 Interest on deposits 5.3 4.6 4.8 5.0 4.7 4.7 Difference 3.9 3.9 3.8 3.6 3.5 3.2 Net interest income/earning assets 4.4 4.4 4.4 4.3 4.1 3.9 New provisions/average net loans 0.7 0.9 1.0 1.2 1.5 1.5 Interest income/total income 72.9 72.5 73.2 71.1 72.0 72.0 Fee income to total income 19.4 20.6 21.0 21.1 20.9 20.8 Fees income to PBT 39.8 42.7 42.9 45.0 49.4 49.2 Net trading income to PBT 5.2 3.3 1.2 4.1 3.4 3.1 Exchange inc./PBT 5.7 5.7 5.3 5.7 6.5 6.7 Operating expenses/total income 43.4 41.0 39.7 38.8 39.4 38.9 Operating expenses/assets 2.5 2.4 2.3 2.2 2.2 2.0 Operating profit /AWF 2.8 2.8 2.9 2.7 2.3 2.2 Tax rate 34.3 34.5 34.5 28.4 25.6 25.6 Dividend payout ratio 19.4 19.3 19.4 19.4 19.4 19.4 Share of deposits Current 18.0 15.1 15.4 15.0 15.0 15.0 Fixed 52.0 56.5 57.6 58.6 59.1 59.6 Savings 30.1 28.4 26.9 26.4 25.9 25.4 Loans-to-deposit ratio 86.2 83.5 88.8 87.2 84.8 82.5 Equity/assets (EoY) 10.4 10.0 12.0 11.7 11.2 10.8 Asset quality trends (%) Gross NPL 1.1 1.3 1.4 1.4 1.8 1.9 Net NPL 0.3 0.4 0.4 0.4 0.5 0.5 Slippages 1.5 2.3 2.2 2.0 2.3 2.3 Provision coverage (ex writeoff) 68.7 69.8 71.4 74.6 70.4 74.0 Dupont analysis (%) Net interest income 4.1 4.2 4.2 4.1 4.0 3.8 Loan loss provisions 0.4 0.6 0.6 0.8 1.0 1.0 Net other income 1.5 1.6 1.5 1.7 1.5 1.5 Operating expenses 2.5 2.4 2.3 2.3 2.2 2.1 (1- tax rate) 65.7 65.5 65.5 71.6 74.4 74.4 ROA 1.8 1.8 1.8 1.9 1.7 1.6 Average assets/average equity 9.9 9.8 9.0 8.5 8.7 9.1 ROE 17.9 17.9 16.5 16.5 15.2 14.9

Source: Company, Kotak Institutional Equities estimates

16 KOTAK INSTITUTIONAL EQUITIES RESEARCH HDFC Bank Banks

Exhibit 22: HDFC Bank P&L and balance sheet March fiscal year-ends, 2017-2022E (Rs mn)

2017 2018 2019 2020E 2021E 2022E Income statement Total interest income 693,060 802,414 989,721 1,148,751 1,277,790 1,450,279 Loans 520,553 626,618 775,442 915,748 990,729 1,116,499 Investments 159,443 162,224 199,975 213,348 260,020 299,420 Cash and deposits 13,064 13,572 14,304 19,656 27,041 34,360 Total interest expense 361,667 401,465 507,288 593,713 652,296 757,795 Deposits from customers 313,315 327,713 410,519 501,945 557,361 659,106 Net interest income 331,392 400,949 482,432 555,038 625,494 692,484 Loan loss provisions 35,626 55,079 70,425 106,428 153,849 176,478 Net interest income (after prov.) 295,766 345,870 412,007 448,610 471,645 516,006 Other income 122,965 152,203 176,259 226,084 243,543 268,940 Net fee income 88,116 113,939 138,055 164,766 181,553 200,073 Net capital gains 11,380 9,243 3,933 15,000 12,500 12,500 Net exchange gains 12,634 15,235 17,204 20,989 23,927 27,277 Operating expenses 197,033 226,904 261,194 303,163 342,300 373,607 Employee expenses 64,837 68,057 77,618 94,460 110,575 128,969 Other Provisions 383 3,892 5,029 5,000 5,000 5,000 Pretax income 221,391 266,973 321,997 366,499 367,864 406,324 Tax provisions 75,894 92,106 111,215 104,146 94,173 104,019 Net Profit 145,496 174,867 210,782 262,353 273,691 302,305 % growth 18.3 20.2 20.5 24.5 4.3 10.5 Operating profit 246,020 316,700 393,518 462,927 514,213 575,302 % growth 19.3 28.7 24.3 17.6 11.1 11.9 Balance sheet Assets Cash and bank balance 489,521 1,229,151 813,476 1,091,341 1,480,969 2,038,548 Cash 42,636 75,323 73,915 110,872 166,309 249,463 Balance with RBI 336,333 971,381 393,721 461,708 536,520 621,874 Balance with banks 11,795 9,539 3,412 5,117 7,676 11,514 Net value of investments 2,144,633 2,422,002 2,905,879 3,364,160 3,955,060 4,593,585 Govt. and other securities 1,624,187 1,883,648 2,396,593 2,869,926 3,460,826 4,099,351 Shares 1,114 1,198 3,981 3,981 3,981 3,981 Debentures and bonds 194,698 347,873 286,970 286,970 286,970 286,970 Net loans and advances 5,545,682 6,583,331 8,194,012 9,544,057 10,969,172 12,561,224 Fixed assets 36,267 36,072 40,300 38,046 35,354 32,258 Net Owned assets 36,267 36,072 40,300 38,046 35,354 32,258 Other assets 422,298 368,787 491,740 503,571 516,585 530,901 Total assets 8,638,402 10,639,343 12,445,407 14,541,174 16,957,140 19,756,515 Liabilities Deposits 6,436,397 7,887,706 9,231,409 10,949,667 12,934,242 15,222,931 Borrowings and bills payable 906,960 1,313,268 1,241,255 1,281,122 1,328,316 1,384,296 Other liabilities 400,422 375,419 480,679 615,451 788,011 1,008,952 Total liabilities 7,743,778 9,576,393 10,953,343 12,846,240 15,050,568 17,616,179 Paid-up capital 5,125 5,190 5,447 5,447 5,447 5,447 Reserves & surplus 889,498 1,057,760 1,486,617 1,689,487 1,901,125 2,134,889 Total shareholders' equity 894,624 1,062,950 1,492,064 1,694,934 1,906,572 2,140,336

Source: Company, Kotak Institutional Equities estimates

KOTAK INSTITUTIONAL EQUITIES RESEARCH 17 BUY Tata Power (TPWR) Electric Utilities MARCH 24, 2020 UPDATE Sector view: Attractive

Sliver of hope. Tata Power hosted an earnings call to update investors on the ever CMP (`): 33 continuing negotiations on the loss making Mundra power plant—as new legal advisory Fair Value (`): 60 has suggested that the company need not have a buy-in from all five procurers to BSE-30: 25,981 amend the power purchase agreement, and the company remains optimistic as three procurers accounting for 80% of the capacity are aligned to accept a modified PPA as per the recommendations of the high-powered committee.

Tata Power Stock data Forecasts/valuations 2020E 2021E 2022E 52-week range (Rs) (high,low) 77-31 EPS (Rs) 3.6 4.8 6.7 Mcap (bn) (Rs/US$) 89/1.2 EPS growth (%) 71.3 31.9 40.7 ADTV-3M (mn) (Rs/US$) 496/7 P/E (X) 9.1 6.9 4.9 Shareholding pattern (%) P/B (X) 0.5 0.5 0.4 Promoters 36.2 EV/EBITDA (X) 6.9 6.5 5.8 FIIs 21.1 RoE (%) 5.7 7.0 9.1 MFs/BFIs 12.7/13.3 Div. yield (%) 0.0 0.0 0.0 Price performance (%) 1M 3M 12M Sales (Rs bn) 287 310 326 Absolute (36) (41) (55) EBITDA (Rs bn) 76 80 83 Rel. to BSE-30 1 (5) (33) Net profits (Rs bn) 10 13 18

Legal advisory allows individual amendment of PPAs, could bring an end to Mundra troubles

In the continuing dialogue between Tata Power and the five procuring states, to resolve the under-recovery for Mundra---a new legal opinion that allows for each procuring state to individually amend their PPAs may help end the imbroglio. Tata Power management on a call stated that three states accounting for 3.2 GW (80%) viz. Gujarat, Maharashtra and Punjab are already in favor of signing an amended PPA, while two other states Rajasthan and Haryana will come back in due course. Given the low fuel cost of Mundra, extant states are likely willing to procure the balance 800 MW that may be released by Rajasthan and Haryana for which the latter will be compensated with 20% of capacity charges (Rs0.2/kwh).

We note that lowered fuel cost makes the current timing most suited to sign-off on amended PPAs, a process that will likely have to wait for the current lock-down situation (due to Covid- 19) to be behind us. We note that Mundra had average fuel cost under-recovery of Rs0.5/kwh in 9MFY20 that would likely yield a compensation of Rs0.15/kwh (adjusting for base loss of Rs0.35/kwh to be borne by lenders and project owners) and help reduce losses by Rs3.7 bn (Rs1.38/share) for FY2020E. We note that in FY2019 the fuel cost under-recovery was Rs0.8/kwh and would have yielded compensations of Rs0.5/kwh or Rs12 bn (Rs4.4/share).

Targeting asset monetization of Rs50 bn in FY2021 to address leverage concerns

Tata Power is targeting asset monetization of Rs50 bn in FY2021E itself—on the back of continued payments for sale of Arutmin (Rs5bn), potential sale of smaller coal mines in Indonesia, shipping business (Rs28 bn), wind assets in South Africa (Rs8 bn) and hydro plants in Zambia. Management highlighted that monetization of Tata Projects has been more time Murtuza Arsiwalla consuming and will likely be pushed back to FY2022E.

Maintain BUY rating with revised fair value estimate of Rs60/share Samrat Verma

We maintain our BUY rating on Tata Power with a revised fair value of Rs60/share (from Rs72/share). The revision in our fair value estimate is primarily driven by lower value for Tata Power’s investment in Tata Sons as the value of various listed entities has come off significantly in recent times. We note that approval of compensatory tariff for Mundra could add as much as

Rs20/share to our fair value estimate. [email protected] Contact: +91 22 6218 6427

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

We have revised our earnings estimates downwards by 0.5% for FY2020E and 11% for FY2021E. Our earnings and fair value revision also comes from lower coal prices (US$60/ton from US$65/ton) as well as depreciation in currency.

Other takeaways from the call

 Management highlighted lowered manpower presence at various power plants, though highlighted that generation or fuel supply has not been disrupted in any location.

 Further, disruption of fuel supplied due to Covid-19 has been notified as a force majeure event, and accordingly re-imbursement of capacity charges will likely continue.

 Coal mines in Indonesia also continue to operate at full capacity, as the country has not yet been put under a lock-down.

 The only disruption so far, has been a mandated 14-day journey from the port of departure for coal supplies. So if the journey from Indonesia has been completed in eight days, the ship has to maintain quarantine for another six days.

 Management has so far not experienced delays in implementation of renewable projects, do not foresee delays beyond a few months if the current lock-down situation persists.

 Application for renewal of the coal license in Indonesia will be made, and an approval should likely be available in six months.

 Earnings from coal business could benefit from lower cost of production on reduced coal prices, if the current prices sustain for a few more months.

Exhibit 1: Under-recovery at Mundra plant went below compensatory Under-recovery at Mundra plant of Tata Power, March fiscal year-ends, 1QFY16-2022E (Rs/kwh)

Under-recovery (Rs/kwh) (LHS) Base loss (Rs 0.35/kwh) (RHS) 1.0 1.0 0.9 0.9 0.8 0.8 0.7 0.7 0.6 0.6 0.5 0.5 0.4 0.4 0.3 0.3 0.2 0.2 0.1 0.1 0.0 0.0 2021E 2022E 1QFY16 2QFY16 3QFY16 4QFY16 1QFY17 2QFY17 3QFY17 4QFY17 1QFY18 2QFY18 3QFY18 4QFY18 1QFY19 2QFY19 3QFY19 4QFY19 1QFY20 2QFY20 3QFY20

Source: Company, Kotak Institutional Equities estimates

KOTAK INSTITUTIONAL EQUITIES RESEARCH 19 Electric Utilities Tata Power

Exhibit 2: Prices of imported coal have declined considerably in March 2020 Imported coal prices (US$/ton) and currency (Rs/US$), March fiscal year-ends

Coal (US$/ton) (LHS) USD:INR (Rs) (RHS) 120 81

76 100

71 80 66

60 61

40 56 Jul-16 Jul-17 Jul-18 Jul-19 Jan-17 Jan-18 Jan-19 Jan-20 Sep-16 Sep-17 Sep-18 Sep-19 Nov-16 Nov-17 Nov-18 Nov-19 Mar-16 Mar-17 Mar-18 Mar-19 Mar-20 May-16 May-17 May-18 May-19

Source: Bloomberg, Kotak Institutional Equities

Exhibit 3: Decline in international coal prices is likely to affect coal earnings from Indonesia Key financial data for coal business of Tata Power, March fiscal year-ends, 3QFY16-2022E

Net realization (US$/ton) Cost(US$/ton) Gross profit (US$/ton) (RHS) 70 30

60 25

50 20 40 15 30 10 20

10 5

- - 2021E 2022E 3QFY16 4QFY16 1QFY17 2QFY17 3QFY17 4QFY17 1QFY18 2QFY18 3QFY18 4QFY18 1QFY19 2QFY19 3QFY19 4QFY19 1QFY20 2QFY20 3QFY20

Source: Company, Kotak Institutional Equities estimates

20 KOTAK INSTITUTIONAL EQUITIES RESEARCH Tata Power Electric Utilities

Exhibit 4: Earnings for coal business and Mundra maintain a natural hedge Financial performance of coal business and CGPL, March fiscal year-ends, 1QFY16-3QFY20 ( Rs mn)

Coal mines gross profit (Rs mn) Mundra losses (Rs mn) Net PAT (Coal + Mundra) 6,000

4,000

2,000

-

(2,000)

(4,000)

(6,000)

1QFY16

2QFY16

3QFY16

4QFY16

1QFY17

2QFY17

3QFY17

4QFY17

1QFY18

2QFY18

3QFY18

4QFY18

1QFY19

2QFY19

3QFY19

4QFY19

1QFY20 2QFY20 3QFY20

Source: Kotak Institutional Equities estimates

Exhibit 5: For every US$5/ton in coal price, fair value can change by Rs9/share Sensitivity of TPWR’s fair value to change in coal prices and margins in coal business

- 45 55 60 65 75 9.0 72 57 49 40 23 10.0 76 61 52 43 26 Margin (US$/ton) 12.5 84 69 60 51 34 15.0 92 77 68 59 42 18.0 102 87 78 69 52

Source: Kotak Institutional Equities estimates

KOTAK INSTITUTIONAL EQUITIES RESEARCH 21 Electric Utilities Tata Power

Exhibit 6: Tata Power sum-of-the-parts valuation based on March 2022 valuations

Multiple Ownership Value Methodology (X) (%) (Rs mn) (Rs/share) Mumbai Distribution P/B 1.5 100 65,036 24 Delhi Distribution P/B 1.5 51 13,074 5 Tala Transmission DCF 51 1,564 1 Mundra Generation DCF 100 (95,748) (35) Maithon Generation DCF 74 17,165 6 IEL Generation DCF 74 9,521 4 Renewable Generation EV/EBITDA 8 100 8,646 3 Coal Coal EV/EBITDA 6 30 83,263 31 Solar Equipment EV/EBITDA 7 100 5,906 2 Investments 54,037 20 Total 162,463 60

Source: Kotak Institutional Equities estimates

Exhibit 7: Change in estimates for Tata Power, March fiscal year-ends, 2020-22E (Rs mn)

Revised estimates Old estimates Change (%) 2020E 2021E 2022E 2020E 2021E 2022E 2020E 2021E 2022E Revenues 286,552 309,859 326,054 287,596 308,983 325,039 (0.4) 0.3 0.3 EBITDA 76,417 80,377 83,235 76,823 79,154 81,874 (0.5) 1.5 1.7 Net profit 9,778 12,900 18,144 9,826 14,573 19,434 (0.5) (11.5) (6.6)

Source: Company, Kotak Institutional Equities estimates

Exhibit 8: Subsidiary-wise break up of key business of Tata Power, March fiscal year ends, 2016-2022E

2016 2017 2018 2019 2020E 2021E 2022E Standalone Revenue 83,155 72,821 73,006 76,881 72,393 76,403 78,281 EBIDTA 25,796 21,736 23,581 23,751 23,373 26,972 27,658 PAT 13,550 15,864 (31,505) 17,086 5,907 8,968 10,080 Mundra Revenue 59,783 60,549 63,568 70,643 70,705 70,477 70,776 EBIDTA 12,964 5,403 (987) (2,661) 8,204 2,470 2,659 PAT (9,984) (8,497) (14,104) (16,537) (8,425) (13,580) (13,233) Net generation (MU) 23,679 24,502 24,599 24,752 24,883 24,883 24,883 Maithon Revenue 23,115 24,046 22,704 27,761 27,047 27,899 28,557 EBIDTA 7,871 8,023 6,451 7,368 8,838 8,558 8,701 PAT 1,898 2,558 1,817 2,729 3,422 3,817 4,148 Net generation (MU) 6,745 6,939 6,987 6,858 6,249 6,509 6,509 Coal Volumes (mn tons) 57 59 57 57 58 59 60 Realization (US$/ton) 45 47 60 54 49 45 47 Revenue 78,500 78,620 86,410 88,730 80,435 77,833 83,813 EBIDTA 10,170 19,580 28,890 23,560 17,584 18,277 21,717 Tala Transmission Revenue 2,218 1,494 1,612 1,461 1,469 1,631 1,594 EBIDTA 2,031 1,357 1,430 1,285 1,283 1,444 1,408 PAT 895 1,958 1,248 1,126 1,048 1,299 1,121

Source: Company, Kotak Institutional Equities estimates

22 KOTAK INSTITUTIONAL EQUITIES RESEARCH Tata Power Electric Utilities

Exhibit 9: Tata Power: Profit model, balance sheet, cash model (consolidated), March fiscal year-ends, 2017-22E (Rs mn)

2017 2018 2019 2020E 2021E 2022E Profit model (Rs mn) Net sales 272,883 289,214 294,927 286,552 309,859 326,054 EBITDA 52,372 59,471 63,568 76,417 80,377 83,235 Other income 2,022 4,327 3,958 6,086 5,588 7,580 Interest (31,140) (37,230) (41,700) (45,859) (45,391) (44,581) Depreciation (19,886) (23,981) (23,932) (25,718) (27,792) (29,346) Pretax profits 3,369 2,587 1,894 10,926 12,782 16,888 Tax 458 (1,643) (6,561) (6,837) (7,696) (7,914) Minority interest & profit from associates 12,173 13,514 10,376 5,689 7,814 9,170 Net profits 16,000 14,458 5,709 9,778 12,900 18,144 Extraordinary items (6,515) 10,308 16,200 — — — Earnings per share (Rs) 5.9 5.3 2.1 3.6 4.8 6.7

Balance sheet (Rs mn) Total equity 117,795 152,602 167,212 176,990 189,889 208,033 Deferred taxation liability 24,158 5,166 10,568 10,568 10,568 10,568 Total borrowings 503,154 426,836 465,146 467,056 478,350 469,318 Currrent liabilities 157,567 232,616 177,028 171,155 192,036 200,709 Capital contribution from Consumers Minority interest 18,690 20,153 21,667 24,211 26,807 29,454 Total liabilities and equity 821,364 837,373 841,620 849,980 897,650 918,083 Cash 9,543 11,858 7,875 28,285 47,554 71,753 Current assets 114,888 102,131 114,827 97,945 109,211 113,372 Total fixed assets 511,634 535,217 530,262 526,859 533,585 513,841 Investments 119,570 124,289 130,181 138,414 148,824 160,641 Deferred expenditure 65,729 63,878 58,476 58,476 58,476 58,476 Total assets 821,364 837,373 841,620 849,980 897,650 918,083 Key ratios Net debt / equity (X) 3.6 2.4 2.4 2.2 2.0 1.7 ROE (%) 13.7 10.7 3.6 5.7 7.0 9.1

Source: Company, Kotak Institutional Equities estimates

KOTAK INSTITUTIONAL EQUITIES RESEARCH 23 NEUTRAL Media India MARCH 24, 2020 UPDATE BSE-30: 25,981

Box office trends: Rs1 bn—the new normal? CY2019 was the second consecutive year of good box office (BO) performance. Key highlights (1) Bollywood BO growth was broad-based partly led by the rise of young stars. Bollywood churned out 17 Rs1 bn+ grossers, nearly doubling the count over CY2017-19, (2) Hollywood BO continues to gain traction, (3) regional BO had a slow year but continues to be promising, (4) impact of OTT on BO collections is not yet discernible. Overall, several encouraging trends that can potentially sustain. Covid-19-led uncertainty is an opportunity to BUY PVR (fair value Rs1,800) at a good price.

Box office drivers of 2019: Bollywood movies #6-25 and Hollywood

 Bollywood BO belly expands, pumped by young blood. The key highlight of CY2019 Hindi film industry’s (Bollywood) net box office collections (NBOC) was the hefty contribution of the ‘belly’ (movies #6-25)—top 25 movies grew 21% driven by 33% growth of movies #6- 25 (Exhibit 2). Recent Bollywood BO print reveals two trends— . Impressive progress of movies into Rs1 bn+ and Rs2 bn+ clubs. The number of films crossing Rs1 bn/Rs2 bn NBOC has doubled to 17/7 over CY2017-19. This is attributable to (1) proliferation of multiplexes, (2) rise of young stars and associated increase in supply of good content, (3) broad-based demand across weekends, a gradual move away from quarterly seasonality and high dependence on long weekends (Exhibit 3 and 7). . Relatively muted growth of the top 5 movies. Over the past few years, the top 5 movies (5-yr CAGR at 4%) have dragged Bollywood NBOC growth. This trend is due to (1) fading BO performance of the big stars (the three Khans); the new crop of stars are yet to deliver blockbuster hits >Rs2.5-3 bn NBOC, (2) inability of multiplexes to expand footfall base given a weak macro and modest growth in per capita income/purchasing power, (3) limited crossover films such as Bahubali that cut across regions.  Young stars continue to rise— The steady improvement in performance of the new crop of stars (Ranveer Singh, Ranbir Kapoor, Shahid Kapoor, Tiger Shroff, Ayushman Khurana, Kartik Aaryan, Rajkummar Rao and Alia Bhatt) and some heavy-lifting by Akshay Kumar have more than compensated for falling contribution of the three Khans’ NBOC (Exhibit 4).  No visible impact of OTT on BO. The past two years’ NBOC should allay investor concerns around impact of OTT on BO collections. Several movies that score low on visual effects/ production value have garnered Rs1 bn+ NBOC. Ideally, OTT should have impacted BO collection of such movies if we assume that consumers prefer to watch movies with good visual effects in cinemas and low-to-mid budget films on small screens. Even as OTT risk can’t be written off, the trend so far is encouraging and supports thesis that well-made films with good scripts would continue to draw audience to theaters. Lack of outdoor entertainment options in India also works in favor of theaters.  Hollywood tracking well; Avengers IV breaks records. Hollywood’s contribution to PVR’s ticket sales increased to 19% in CY2019 from 16-17% earlier. It is worth noting that Avengers IV surpassed the #1 Hindi movie of CY2019 in terms of India NBOC. Further, it was the only movie to have round-the-clock shows on the release weekend. Lastly, Avengers IV (CY2019) grew 67% over Avengers III (CY2018) in India versus 37% growth worldwide. Jaykumar Doshi Such is the following of Marvel superhero movies in India and it is growing rapidly. Exhibits 5-6 show the popularity of a few Hollywood sequels in India and untapped opportunities.  A soft year for regional BO. CY2019 was one of the weakest years for regional BO, especially South. PVR’s SPI cinemas’ occupancy dropped to 51% in CY2019 from about 57% [email protected] in CY2018. A pick-up in regional BO led by multiplex penetration is a trend that should play Contact: +91 22 6218 6427 out in the foreseeable future.

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

Covid-19-led uncertainty offers an opportunity to buy PVR We expect a complete/partial lockdown of cinemas for a couple of months in view of Covid- 19 outbreak. During this period, PVR would incur cash loss of about Rs550-600 mn per month. The company has adequate liquidity to navigate a complete lockdown of about five months and would be able to borrow more, if need be. We expect a strong bounce back in demand post Covid-19 led by (1) pent-up demand, and (2) packed line-up of movies (4QFY20/1QFY21 releases deferred would be scheduled over 2Q-4QFY21) and (3) we believe that PVR’s performance is largely linked to content quality and likely weakness in macro aftermath Covid-19 would have modest impact on PVR’s operating performance.

We recommend buying PVR on dips. We have a BUY rating with a fair value of Rs1,800, implies 11X FY2022E EV/EBITDA.

Exhibit 1: Balanced growth across the two buckets (top 5 and top 6-25 movies) during CY2008-13 Domestic Net Box Office collections (NBOC) of the top 25 Bollywood movies, calendar year-ends, 2008-13 (Rs mn)

2008 2009 2010 2011 2012 2013 2008-13 Movie NBOC Movie NBOC Movie NBOC Movie NBOC Movie NBOC NBOC CAGR (%) Top-5 movies (Rs mn) (Rs mn) (Rs mn) (Rs mn) (Rs mn) (Rs mn) 1 Ghajini 1,141 3 Idiots 2,030 Dabangg 1,388 Bodyguard 1,489 Ek Tha Tiger 1,850 Dhoom 3 2,615 18.0 2 Rab Ne Bana Di Jodi 847 Love Aaj Kal 670 Golmaal 3 1,063 Ready 1,198 Dabangg 2 1,508 Chennai Express 2,184 3 Singh Is King 679 Wanted 603 Raajneeti 937 Don 2 1,067 Rowdy Rathore 1,330 Krrish 3 1,985 4 Race 608 Ajab Prem Ki Ghazab Kahani 630 My Name Is Khan 825 Ra.One 1,143 Agneepath 1,226 Yeh Jawaani Hai Deewani 1,850 5 Jodhaa Akbar 560 De Dana Dan 480 Housefull 756 Singham 1,003 Jab Tak Hai Jaan 1,215 Bhaag Milkha Bhaag 1,080 Total top-5 movies 3,836 4,413 4,969 5,900 7,129 9,714 20.4 Top 6-25 movies 6 Jaane Tu... Ya Jaane Na 556 Kambakkht Ishq 475 Tees Maar Khan 609 Zindagi Na Milegi Dobara 903 Housefull 2 1,090 Ram-Leela 1,054 7 Golmaal Returns 511 New York 460 Once Upon A Time In Mumbai555 The Dirty Picture 800 Barfi 1,060 Grand Masti 938 8 Dostana 444 Kaminey 419 Kites 493 Rockstar 620 Son Of Sardaar 1,051 Aashiqui 2 780 9 Bachna Ae Haseeno 362 All The Best 418 I Hate Luv Storys 432 Mere Brother Ki Dulhan 587 Bol Bachchan 1,002 Special 26 668 10 Sarkar Raj 343 Blue 385 Atithi Tum Kab Jaoge? 411 Yamla Pagla Deewana 553 Talaash 907 Race 2 963 11 Jannat 301 Paa 313 Anjaana Anjaani 403 Delhi Belly 520 Oh My God! 820 Satyagraha 620 12 Tashan 294 Delhi 6 307 Khatta Meetha 386 Murder 2 479 Cocktail 760 Raanjhanaa 589 13 Fashion 265 Chandni Chowk To China 295 Badmaash Company 354 Thank You 466 Raaz 3 711 R... Rajkumar 581 14 Rock On 253 Wake Up Sid 280 Peepli [Live] 304 Double Dhamal 439 Khiladi 786 700 Once Upon A Time In Mumbaai556 Dobaara! 15 Bhootnath 239 London Dreams 257 Guzaarish 293 Desi Boyz 424 Student Of The Yr 690 Besharam 540 16 Kismat Konnection 228 Raaz 255 Raavan 292 Aarakshan 400 Kahaani 536 Boss 530 17 Mere Baap Pehle Aap 227 Kurbaan 233 Action Replayy 291 Tanu Weds Manu 368 Kya Super Cool Hain Hum 451 Kai Po Che 484 18 Thoda Pyaar Thoda Magic 217 Dil Bole Hadippa 233 Ishqiya 286 Ladies Vs Ricky Bahl 330 Jannat 2 441 Himmatwala 474 19 U Me Aur Hum 210 Billu 229 Prince 285 Rascals 326 Ishaqzaade 441 Shuddh Desi Romance 468 20 Kidnap 205 Luck 210 No Problem 280 Dum Maaro Dum 317 Agent Vinod 433 Madras Café 417 21 Sunday 203 Life Partner 207 Karthik Calling Karthik 269 Patiala House 312 Ek Main Aur Ekk Tu 397 Chashme Baddoor 417 22 Krazzy 4 196 Rocket Singh 201 Robot 238 Mausam 298 Vicky Donor 371 Matru Ki Bijlee Ka Mandola 381 23 One Two Three 171 Do Knot Disturb 169 Lafangey Parindey 218 Dil Toh Baccha Hai Ji 289 Heroine 364 Bullett Raja 370 24 Yuuvraj 169 8 X 10 Tasveer 153 We Are Family 216 Force 273 English Vinglish 350 Phata Poster Nikhla Hero 365 25 Halla Bol 127 Dev D 153 Paathshaala 216 Haunted - 3D 256 Jism 2 306 ABCD – Any Body Can Dance 351 Total top 6-25 movies 5,521 5,653 6,831 8,959 12,882 11,546 15.9

Total top 25 movies 9,357 10,066 11,800 14,859 20,011 21,260 17.8

Source: Box office data, Kotak Institutional Equities estimates

KOTAK INSTITUTIONAL EQUITIES RESEARCH 25 India Media

Exhibit 2: Top 6-25 movies grew at 38% CAGR over the past two years whereas NBOC of the top 5 movies was broadly flat Domestic Net Box Office collections (NBOC) of the top 25 Bollywood movies, Calendar year-ends, 2014-19 (Rs mn)

2014 2015 2016 2017 2018 2019 2014-19 2019/2018 Movie NBOC Movie NBOC Movie NBOC Movie NBOC Movie NBOC Movie NBOC CAGR (%) YoY % Top-5 movies (Rs mn) (Rs mn) (Rs mn) (Rs mn) (Rs mn) (Rs mn) 1 PK 3,244 Bajrangi Bhaijaan 3,165 Dangal 3,730 Baahubali 2 5,064 Sanju 3,412 War 3,180 2 Kick 2,150 Prem Ratan Dhan Payo 1,880 Sultan 3,001 Tiger Zinda Hain 3,280 Padmaavat 3,003 Kabir Singh 2,782 3 Happy New Year 1,900 Bajirao Mastani 1,710 Rustom 1,220 Golmaal Again 2,045 Simmba 2,402 Uri 2,440 4 Bang Bang 1,485 Tanu Weds Manu Returns 1,510 Airlift 1,210 Toilet: Ek Prem Katha 1,350 2.0 (Hindi version) 1,880 Bharat 2,094 5 Singham Returns 1,400 Dilwale 1,439 MS Dhoni 1,202 Judwaa 2 1,333 Race 3 1,690 Housefull 4 2,056 Total top-5 movies 10,179 9,704 10,363 13,072 12,387 12,552 4.3 1.3 Top 6-25 movies 6 Holiday - A Soldier Is Never Off1,100 Duty Bahubali 1 (Hindi) 1,103 Ae Dil Hai Mushkil 1,115 Raees 1,311 Baaghi 2 1,650 Good Newwz 2,011 7 Jai Ho 1,080 ABCD 2 1,043 Housefull 3 1,071 Tubelight 1,170 Thugs of Hindostan 1,453 Mission Mangal 2,002 8 2 States 1,018 Welcome Back 940 Shivaay 1,003 Badrinath Ki Dulhania 1,135 Badhai Ho 1,368 Total Dhamaal 1,543 9 Ek Villain 978 Baby 790 Fan 835 Jolly LLB 2 1,069 Stree 1,297 Kesari 1,530 10 Humpty Sharma Ki Dulhaniya 751 Brothers 788 Baaghi 745 Kaabil 926 Raazi 1,232 Chhichhore 1,504 11 Gunday 729 Gabbar Is Back 787 Kapoor & Sons 711 Fukrey returns 746 Sonu Ke Titu Ki Sweety 1,087 Dabangg 3 1,500 12 Entertainment 630 Piku 777 Neerja 699 Baadshaho 665 Gold 1,074 Saaho (Hindi) 1,490 13 Action Jackson 577 Drishyam 765 Dear Zindagi 672 Hindi Medium 634 Raid 1,015 Super 30 1,461 14 Queen 570 Dil Dhadakne Do 758 Dishoom 646 Secret Superstar 596 Zero 975 Dream Girl 1,397 15 Mary Kom 560 Singh Is Bliing 742 Pink 638 Jab Harry Met Sejal 577 Satyameva Jayate 891 Gully Boy 1,394 16 Humshakals 555 Tamasha 672 Udta Punjab 591 Half Girlfriend 557 Veere Di Wedding 830 Bala 1,164 17 Haider 500 Phantom 500 Befikre 578 Mubarakan 531 Sui Dhaaga 790 De De Pyaar De 1,024 18 Ragini Mms 2 459 Hate Story 3 442 Mohenjo Daro 537 Jagga Jasoos 506 Padman 790 Batla House 972 19 Yaariyan 369 Kis Kisko Pyaar Karoon 432 Ki & Ka 508 Shubh Mangal Saavdhan 419 Andhadhun 725 Manikarnika 949 20 Bhootnath Returns 355 Roy 406 Wazir 377 Sachin: A Billion Dreams 408 Dhadak 719 Luka Chuppi 942 21 Hasee Toh Phasee 352 Shaandaar 377 A Flying Jatt 354 Tumhari Sulu 342 Parmanu - The Story Of Pokhran654 Badla 880 22 Mardaani 350 Tevar 372 Ghayal Once Again 353 Bareilly Ki Barfi 340 Kedarnath 620 Pati Patni Aur Who 868 23 Finding Fanny 276 Hamari Adhuri Kahani 323 Azhar 325 Naam Shabana 340 102 Not Out 518 Kalank 810 24 Khoobsurat 247 Talvar 300 Kahaani 2 313 Mom 337 Hichki 462 Student Of The Year 2 707 25 Raja Natwarlal 234 NH10 292 Force 2 313 Munna Michael 310 October 454 Article 15 631 Total top 6-25 movies 11,690 12,610 12,384 12,920 18,602 24,777 16.2 33.2

Total top 25 movies 21,869 22,314 22,747 25,992 30,989 37,329 11.3 20.5

Notes: (1) NBOC data upto 2017 is from boxofficeindia.co.in whereas that starting 2018 is from koimoi.com. Per our estimate, change in source could have boosted CY2018 growth by about 3-5% as Koimoi's NBOC estimates tend to be 3-5% higher than boxofficeindia.co.in.

Source: Boxofficeindia.co.in, koimoi.com, Kotak Institutional Equities estimates

Exhibit 3: A good pick up in Rs1 bn+ and Rs2 bn+ movies over the past two years Count of Hindi movies with NBOC of Rs1 bn+, Rs2 bn+, Rs3 bn+ and Rs5 bn+, Calendar year-ends

20 Rs1 bn+ Rs2 bn+ Rs3 bn+ Rs5 bn+ 17

16 13

12 9 9 9 8 8 7 7 7 5

4 3 2 2 2 2 2 1 1 1 1 1 1

0 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Source: Box office data, Kotak Institutional Equities

26 KOTAK INSTITUTIONAL EQUITIES RESEARCH Media India

Exhibit 4: Contribution of the big-3 Bollywood stars (Salman Khan, Aamir Khan and Shahrukh Khan) dropped to 10% of top-25 movies’ NBOC from 30-35% earlier.

NBOC of top-25 bollywood films (LHS, Rs mn) 40 Big-3 bollywood actors' contribution to the top 25 NBOC (RHS, %) 45 38 35 36 37.3 40 33 35 30 29 31.0 27 27 27 30 25 25 20 22.3 22.7 26.0 21.3 21.9 20.0 20 15 13 15 14.9 10 10 10

5 5

0 - 2011 2012 2013 2014 2015 2016 2017 2018 2019

Source: Box Office data, Kotak Institutional Equities

KOTAK INSTITUTIONAL EQUITIES RESEARCH 27 India Media

Exhibit 5: About 50% of Hollywood's top 20 movies in any year do not receive much traction in India; it presents an opportunity (especially animation genre is yet to gain traction in India) Box office performance of top 20 Hollywood movies in India, Calendar year-ends, 2014-19

2014 2015 2016 Movie W. GBOC India Movie W. GBOC India Movie W. GBOC India Top 20 movies (US$ mn) (US$ mn) (US$ mn) 1 Transformers: Age of Extinction 1,104  Star Wars: The Force Awakens 2,068  Captain America: Civil War 1,153  2 The Hobbit: The Battle of the Five Armies956 O Jurassic World 1,672  Rogue One: A Star Wars Story 1,056 O 3 Guardians of the Galaxy 773  Fast & Furious 7 1,516  Finding Dory 1,029  4 Maleficent 759 O Avengers: Age of Ultron 1,405  Zootopia 1,024 O 5 The Hunger Games: Mockingjay - Part755 1 O Minions 1,159  The Jungle Book (2016) 967  6 X-Men: Days of Future Past 748  Spectre 881  The Secret Life of Pets 876 O 7 Captain America: The Winter Soldier714  Inside Out 858 O Batman v Superman: Dawn of Justice873  8 Dawn of the Planet of the Apes 711  Mission: Impossible - Rogue Nation 683  Fantastic Beasts and Where To Find Them814 O 9 The Amazing Spider-Man 2 709  The Hunger Games: Mockingjay - Part653 2 O Deadpool 783  10 Interstellar 675  The Martian 630  Suicide Squad 746 O 11 Big Hero 6 658 O Fifty Shades of Grey 571 O Doctor Strange 678  12 How to Train Your Dragon 2 622  Cinderella (2015) 544 O Moana 643 O 13 American Sniper 547 O The Revenant 533 O Sing 632 O 14 Godzilla (2014) 529  Ant-Man 519 O The Mermaid (Mei ren yu) 554 O 15 Rio 2 500 O San Andreas 474  X-Men: Apocalypse 544  16 Teenage Mutant Ninja Turtles (2014)493 O Hotel Transylvania 2 473 O Kung Fu Panda 3 521 O 17 The LEGO Movie 469 O Terminator: Genisys 441  La La Land 446 O 18 Lucy 463 O Kingsman: The Secret Service 414 O Warcraft 434 O 19 Penguins of Madagascar 373 O Home (2015) 386 O Jason Bourne 416 O 20 Edge of Tomorrow 371 O Mad Max: Fury Road 378 O Ice Age: Collision Course 409 O

2017 2018 2019 Movie W. GBOC India Movie W. GBOC India Movie W. GBOC India Top 20 movies (US$ mn) (US$ mn) 1 Star est Wars: The Last Jedi 1,333 O Avengers: Infinity War 2,049  Avengers: Endgame 2,798  2 Beauty and the Beast 1,263  Black Panther 1,347  The Lion King 1,657  3 Fast & Furious 8 1,239  Jurassic World: Fallen Kingdom 1,309  Frozen II 1,449  4 Despicable Me 3 1,001  Incredibles 2 1,243  Spider-Man: Far from Home 1,132  5 Jumanji: Welcome to the Jungle 957  Aquaman 1,148  Captain Marvel 1,128  6 Spider-Man: Homecoming 880  Venom 856  Joker 1,074  7 Wolf Warrior 2 870 O Mission Impossible: Fallout 791  Star Wars: IX 1,073 O 8 Guardians of the Galaxy 2 863  Deadpool 2 743  Toy Story 4 1,073 O 9 Thor: Ragnarok 854  Bohemian Rhapsody 716 O Aladdin 1,051  10 Wonder Woman 821  Fantastic Beasts: The Crimes of Grindelwald630  Jumanji: The Next Level 792  11 Coco 798 O Ant-Man and the Wasp 623  Fast & Furious: Hobbs & Shaw 759  12 Pirates of the Caribbean: Dead Men793 Tell No Tales Ready Player One 583  Ne Zha 726 O 13 It 700 O The Meg 530 O The Wandering Earth 700 O 14 Justice league 658  Hotel Transylvania 3: Summer Vacation527 O How to Train Your Dragon: The Hidden522 World  15 Logan 619  Dr. Seuss' The Grinch 477 O Maleficent: Mistress of Evil 492 O 16 Transformers: The Last Knight 605  Rampage 428  It Chapter Two 473  17 Kong: Skull Island 567 O Mamma Mia! Here We Go Again 395 O My People, My Country 450 O 18 The Boss Baby 528 O Solo: A Star Wars Story 392 O Pokémon Detective Pikachu 433  19 Dunkirk 525 O A Star is Born 390 O The Secret Life of Pets 2 430 O 20 War for the Planet of the Apes 490  Fifty Shades Freed 372 O The Captain 417 O

Notes: O NBOC of less than Rs100 mn in India  NBOC of Rs100-300 mn in India  NBOC of Rs300-500 mn in India  NBOC of Rs500-750 mn in India  NBOC of Rs750-1,000 mn in India  NBOC of Rs1 bn+ in India

Source: Box office data, Kotak Institutional Equities

28 KOTAK INSTITUTIONAL EQUITIES RESEARCH Media India

Exhibit 6: Box office collections of key Hollywood titles in India

Movie name Release date NBOC (Rs mn) Mission Impossible: Ghost Protocol Dec-11 315 The Avengers Apr-12 365 The Amazing Spider-Man Jul-12 498 The Dark Knight Rises Jul-12 403 Iron Man 3 May-13 450 Fast & Furious 6 May-13 425 Superman: Man Of Steel Jun-13 241 The Wolverine Jul-13 210 The Hunger Games: Catching Fire Dec-13 52 Captain America: The Winter Soldier Apr-14 185 The Amazing Spider-Man 2 May-14 510 X-Men: Days of Future Past (English & Dubbed) May-14 425 Transformers: Age of Extinction? Jul-14 414 Fast & Furious 7 Apr-15 979 The Avengers - Age Of Ultron Apr-15 731 Jurassic World Jun-15 773 Mission: Impossible - Rogue Nation Aug-15 480 Spectre Nov-15 370 Star Wars: The Force Awakens Dec-15 160 Batman v Superman: Dawn of Justice Mar-16 322 The Jungle Book (Including all formats) Apr-16 1,802 Captain America: Civil War (All formats) May-16 541 The Conjuring 2? Jun-16 590 xXx: Return of Xander Cage Jan-17 309 Fast & Furious 8 Apr-17 832 Wonder woman Jun-17 250 Transformers: The Last Knight Jul-17 150 Spider-Man 3: Homecoming Jul-17 577 Annabelle: Creation Sep-17 450 Thor: Ragnarok Nov-17 569 Justice league Nov-17 375 Star Wars: The Last Jedi Dec-17 95 Jumanji: Welcome To The Jungle Dec-17 540 Black Panther Jan-18 503 Avengers: Infinity War Apr-18 2,227 Deadpool 2 May-18 505 Incredibles 2 Jun-18 403 Jurassic World: Fallen Kingdom Jun-18 800 Mission : Impossible Fallout Jul-18 766 Ant-Man And The Wasp Jul-18 325 Venom Oct-18 301 Aquaman Dec-18 533 Captain Marvel Mar-19 842 Avengers: Endgame Apr-19 3,655 Aladdin May-19 500 Toy Story 4 Jun-19 80 Spider-Man: Far from Home Jul-19 857 The Lion King Jul-19 1,500 Fast & Furious: Hobbs & Shaw Aug-19 688 Joker Oct-19 640 Frozen II Nov-19 440 Jumanji: The Next Level Dec-19 580 Star Wars: IX Dec-19 88

Source: Box office data, Kotak Institutional Equities

KOTAK INSTITUTIONAL EQUITIES RESEARCH 29 India Media

Exhibit 7: PVR's revenues are well-balanced across quarters; quarterly seasonality has gone down Break-up of PVR's ticket sales by quarters (%)

1Q 2Q 3Q 4Q 100%

90% 22 19 21 22 22 24 25 27 80% 70% 28 25 26 29 25 24 23 60% 24 50%

40% 28 28 27 25 24 28 28 23 30% 20% 27 27 28 10% 23 22 25 25 26 0% FY2012 FY2013 FY2014 FY2015 FY2016 FY2017 FY2018 FY2019

Source: Company, Kotak Institutional Equities

Exhibit 8: PVR (ex-SPI): Gross box office collections (GBOC) from Bollywood movies, March fiscal year- ends

PVR's GBOC from Bollywood (LHS, Rs mn) As % of PVR's total GBOC (RHS, %) 73 72 10,000 75 63 64 63 58 58 60 8,000 60

6,000 45

4,000 30

2,000 15

0 0 2013 2014 2015 2016 2017 2018 2019 9MFY20

Source: Company, Kotak Institutional Equities estimates

30 KOTAK INSTITUTIONAL EQUITIES RESEARCH Media India

Exhibit 9: PVR (ex-SPI): Gross box office collections (GBOC) from Hollywood movies, March fiscal year- ends

PVR's GBOC from Hollywood (LHS, Rs mn) As % of PVR's total GBOC (RHS, %) 24 5,000 25 22 21 19 19 4,000 20 17 16 16

3,000 15

2,000 10

1,000 5

0 0 2013 2014 2015 2016 2017 2018 2019 9MFY20

Source: Company, Kotak Institutional Equities estimates

Exhibit 10: PVR (ex-SPI): Gross box office collections (GBOC) from Regional movies, March fiscal year- ends

PVR's GBOC from Regional movies (LHS, Rs mn) As % of PVR's total GBOC (RHS, %) 5,000 25 22 21 19 19 4,000 18 18 20

3,000 15 12

9 2,000 10

1,000 5

0 0 2013 2014 2015 2016 2017 2018 2019 9MFY20

Source: Company, Kotak Institutional Equities estimates

KOTAK INSTITUTIONAL EQUITIES RESEARCH 31 India Media

Exhibit 11: Key Bollywood and Hollywood movies expected to be released in FY2021

Rel. Date Movie Cast Bollywood- key titles Mar 2020 Sooryavanshi Akshay Kumar, Katrina Kaif Apr 2020 '83 Kapil Dev biopic starring Ranveer Singh and Deepika Padukone Apr 2020 Gulabo Sitabo Ayushmann Khurrana, Amitabh Bachchan Apr 2020 Hungama 2 Shilpa Shetty, Paresh Rawal, Pranitha Subhash Apr 2020 Gunjan Saxena- The Kargil Girl Janhvi Kapoor May 2020 Coolie No. 1 Sara Ali Khan, Varun Dhawan May 2020 Jhund Amitabh Bachchan May 2020 Laxmmi Bomb Akshay Kumar, Kiara Advani May 2020 Radhe: The Most Wanted Bhai Salman Khan, Disha Patani, Randeep Hooda May 2020 Shakuntala Devi Biopic starring Vidya Balan Jun 2020 Bunty Aur Babli 2 Rani Mukherji, Saif Ali Khan Jun 2020 Roohi Afzana Rajkummar Rao, Janhvi Kapoor Jun 2020 Khaali Peeli Ishaan Khattar, Ananya Panday Jun 2020 Thalaivi Biopic starring Kangana Ranaut Jul 2020 Sadak 2 Pooja Bhatt, Alia Bhatt, Aditya Roy Kapoor, Sanjay Dutt, Makarand Deshpande Jul 2020 Shamshera Ranbir Kapoor, Sanjay Dutt, Ronit Roy, Vaani Kapoor Jul 2020 Bhool Bhulaiyaa 2 Kartik Aaryan, Kiara Advani Aug 2020 Jersey Shahid Kapoor, Mrunal Thakur, Pankaj Kapoor Aug 2020 Bhuj: The Pride of India Pranitha Subhash, Ajay Devgn, Sonakshi Sinha, Rana Daggubati, Sanjay Dutt, Ammy Virk, Nora Fatehi Sep 2020 Haseen Dilruba Taapsee Pannu, Vikrant Massey Sep 2020 Gangubai Kathiawadi Sanjay Leela Bhansali, Alia Bhatt Oct 2020 Toofan Farhan Akhtar, Mrunal Thakur, Isha Talwar, Paresh Rawal, Rajpal Yadav, Rishi Kapoor, Vijay Raaz Oct 2020 Rambo Tiger Shroff Oct 2020 Satyameva Jayate 2 John Abraham, Divya Khosla Kumar Oct 2020 Sardar Udham Singh Vicky Kaushal, Banita Sandhu Nov 2020 Dhaakad Kangana Ranaut Oct 2020 The Big Bull Abhishek Bachchan Dec 2020 Maidaan Ajay Devgn, Keerthy Suresh Dec 2020 Brahmastra Ranbir Kapoor, Alia Bhat Nov 2020 Prithviraj Akshay Kumar, Manushi Chhillar, Sanjay Dutt, Tara Sutaria Dec 2020 Laal Singh Chaddha Aamir Khan, Kareena Kapoor Jan 2021 Bachchan Pandey Kriti Sanon, Akshay Kumar Jan 2021 Mr.Lele Varun Dhawan Jan 2021 RRR Rajamouli, N.T Rama Rao Junior, Ram Charan,Ajay Devgan, Alia Bhatt Jan 2021 Atrangi Re Akshay Kumar, Dhanush, Sara Ali Khan Mar 2021 Luv Ranjan’S Next Starring Ranbir Kapoor Ranbir Kapoor,Shraddha Kapoor TBD 2020 Jayesh Bhai Zordar Ranveer Singh

Hollywood (English) Mar 2020 Mulan Liu Yifei, Donnie Yen, Jason Scott Lee, Yoson An, Gong Li, Jet Li Apr 2020 The New Mutants Anya Taylor-Joy, Charlie Heaton, Henry Zega, Blu Hunt, Alice Braga, Antonio Banderas, Happy Anderson Apr 2020 Peter Rabbit II Domhnall Gleeson, Daisy Ridley, Rose Byrne, James Corden, Margot Robbie, David Oyelowo,Elizabeth Debicki May 2020 Black Widow Scarlett Johansson, Florence Pugh, David Harbour, Robert Downey Jr May 2020 Fast Furious 9 Vin Diesel, John Cena, Michelle Rodriguez, Tyrese Gibson, Charlize Theron, Jordana Brewster, Ludacris Jun 2020 Wonder Woman 1984 Gal Gadot, Chris Pine, Kristen Wiig, Pedro Pascal, Robin Wright, Connie Nielson, Kristoffer Polaha Jun 2020 Top Gun: Maverick Tom Cruise, Val Kilmer, Miles Teller, Jennifer Connelly, Glen Powell Jun 2020 In The Heights Anthony Ramos, Lin-Manuel Miranda, Stephanie Beatriz, Dascha Polanco Jul 2020 Minions: The Rise of Gru Steve Carell, Pierre Coffin Jul 2020 Ghostbusters: After Life Bill Murray, Finn Wolfhard, Dan Aykoyd, Mckenna Grace, Sigourney Weaver Jul 2020 The Purge 5 Ana de la Reguera, Cassidy Freeman, Will Patton, Tenoch Huerta Jul 2020 Tenet Robert Pattinson, John Washington, Elizabeth Debicki, Dimple Kapadia, Himesh Patel Sep 2020 The Conjuring: The Devil Made Me Do It Horror sequel Oct 2020 Venom 2 Nov 2020 The Eternals Marvel movie: Angelina Jolie and Salma Hayek Nov 2020 No Time to Die Danial Craig, Rami Malek, Lea Seydoux, Lashana Lynch, Ana de Armas, Naomie Harris, Ben Whishaw Nov 2020 Godzilla vs. Kong Nov 2020 Escape Room 2 Dec 2020 Tom And Jerry Dec 2020 The Tomorrow War Notes: (1) Dates of several movies likely to change due to ongoing shutdown of cinemas (Covid-19)

Source: Kotak Institutional Equities

32 KOTAK INSTITUTIONAL EQUITIES RESEARCH Media India

Exhibit 12: Key regional movies expected to be released in FY2021

Rel. Date Movie Language Cast Regional Apr-20 Love Story Telugu Naga Chaitanya, Sai Pallavi Apr-20 Yuvarathna Kannada Puneeth Rajkumar, Dhananjay, Sayyesha Saigal, Vashista N Simha Apr-20 Aakaasam Nee Haddhura Telugu Suriya Sivakumar, Aparna Balamurali Apr-20 Robert Kannada Darshan, Jagapathi Babu, Vinod Prabhakar, Asha Bhat Apr-20 Master Tamil Vijay,Vijay Sethupath Apr-20 Penguin Tamil Keerthi Suresh Apr-20 Vt10 Telugu Varun Tej Apr-20 Red Telugu Ram Pothineni, Malvika Sharma Apr-20 Ee Kathalo Paathralu Kalpitam Telugu Pavan Tej Konidela Apr-20 Wild Dog Telugu Nagarjuna Akkineni, Dia Mirza Apr-20 Pspk 26 Telugu Pawan Kalyan Apr-20 Mosagallu Telugu Manchu Vishnu, Kajal Aggarwal Apr-20 Tuck Jagadish Telugu Nani, Ritu Varma Apr-20 Naarappa Telugu Venkatesh, Priyamani Apr-20 Icon Telugu Allu Arjun Apr-20 Viraata Parvam Telugu Rana Daggubati, Sai Pallavi Apr-20 Hero Telugu Vijay Deverakonda, Malavika Mohanan Apr-20 Soorarai Pottru Tamil Suriya, Aparna Balamurali, Jackie Shroff, Mohan Babu, Paresh Rawal May-20 Belashuru Bengali May-20 Solo Bratuke So Better Telugu Sai Dharam Tej, Nabha Natesh May-20 Seetimaarr Telugu Gopichand, Tamannaah Bhatia May-20 Nbk 106 Telugu Balakrishna May-20 Krack Telugu Ravi Teja, Shruti Haasan May-20 Goodachari 2 Telugu Adivi Sesh May-20 Akhil 4 Telugu Akhil Akkineni, Pooja Hegde Jun-20 Cobra Tamil Vikram, Srinidhi Shetty, Irfan Pathan Jun-20 Randamoozham Malayalam Mohanlal,Amitabh Bachchan Jun-20 Jodi Punjabi Diljit Dosanjh Jul-20 Gandugali Madakari Nayaka Kannada Darshan Jul-20 Mookuthi Amman Tamil Nayanthara Jul-20 Vd 12 Telugu Vijay Deverakonda Jul-20 Maanaadu Tamil Silambarasan, Kalyani Priyadarshan, Bharathiraja, S. A. Chandrasekhar, Premgi Jul-20 Aranya Telugu Rana Daggubati, Zoya Hussain Jul-20 Valimai Tamil Ajith Kumar Jan-00 Angrej 2 Punjabi Amrinder Gill, Aug-20 Yaadhum Oore Yaavarum Kelir Tamil Vijay Sethupathi, Megha Akash Aug-20 Chiru 152 Telugu Chiranjeevi , Trisha Krishnan Aug-20 Welcome Bhua Ji Punjabi Binnu Dhillon Aug-20 Doctor Tamil Sivakarthikeyan, Priyanka Arul Mohan, Vinay Aug-20 Daddy Cool Munde Fool 2 Punjabi Jassi Gill,Ranjit Bawa,Jaswinder Bhala Sep-20 Bilal Malayalam Amal Neeradmammoottydulquer Salmaancatherine Tresa Oct-20 Kgf 2 Kannada Yash, Srinidhi Shetty, Ananth Nag, Sanjay Dutt, Ahcyuth Kumar, Laxman, Oct-20 Kaaliyan Malayalam Prithviraj Sukumaransathyaraj Nov-20 Thalaivar 168 Tamil Rajinikanth, Kushboo, Meena, Keerthy Suresh Nov-20 Samraat Telugu Mahesh Babu Nov-20 Bila Ranga Baasha Kannada Sudeep Nov-20 Sukumara Kuruppu Malayalam Dulquer Salmaan Dec-20 Ponniyin Selvan Tamil Vikram, Aishwarya Rai Bachchan, Karthi, Jayam Ravi, Parthiban Dec-20 Karnan Tamil Dhanush, Rajisha Vijayan, Natty Dec-20 Laabam Tamil Vijay Sethupathi, Shruti Haasan, Kalaiyarasan, Sai Dhanshika Feb-21 Kokka Punjabi Feb-21 Raunak Mela Punjabi Binnu Dhillon Oct-20 Byomkesh Bakshi Next Bengali Notes: (1) Dates of several movies likely to change due to ongoing shutdown of cinemas (Covid-19)

Source: Kotak Institutional Equities

KOTAK INSTITUTIONAL EQUITIES RESEARCH 33 Kotak Institutional Equities: Valuation summary of KIE Universe stocks India

Fair O/S ADVT Price (Rs) Value Upside Mkt cap. shares EPS (Rs) EPS growth (%) P/E (X) EV/EBITDA (X) P/B (X) RoE (%) Dividend yield (%) 3mo KOTAK INSTITUTIONAL EQUITIES RESEARCH INSTITUTIONALKOTAK EQUITIES Company Rating 23-Mar-20 (Rs) (%) (Rs bn) (US$ bn) (mn) 2020E 2021E 2022E 2020E 2021E 2022E 2020E 2021E 2022E 2020E 2021E 2022E 2020E 2021E 2022E 2020E 2021E 2022E 2020E 2021E 2022E (US$ mn)

Automobiles & Components Daily Summary Amara Raja Batteries ADD 387 780 101 66 0.9 171 40 44 50 39.9 11.8 13.3 10 8.7 7.7 5.4 4.6 3.8 1.7 1.5 1.3 18.9 18.5 18.2 2.6 2.9 3.2 7.0 Apollo Tyres ADD 76 180 135 44 0.6 572 10.2 10.3 14.9 (29.0) 1.3 44.4 7.5 7.4 5.1 5.1 4.7 3.6 0.4 0.4 0.4 5.7 5.6 7.7 3.9 3.9 3.9 6.6 Ashok Leyland BUY 36 100 177 106 1.4 2,936 2.1 2.3 6.4 (69.8) 9.4 178.5 17.2 15.7 5.6 8.6 7.1 3.3 1.2 1.2 1.0 7.3 7.6 19.2 1.7 1.9 5.3 23 Bajaj Auto BUY 1,936 3,100 60 560 7 289 172 170 200 12.3 (1.2) 17.5 11.2 11.4 9.7 7.3 6.9 5.2 2.5 2.2 1.9 22 20 21 6.0 3.5 4.1 21 Balkrishna Industries SELL 701 1,030 47 136 1.8 193 50 53 59 25.6 6.0 11.4 14.1 13.3 11.9 9.2 7.4 6.2 2.6 2.4 2.1 19.6 18.7 18.7 2.9 3.1 3.5 12.8 Bharat Forge SELL 246 365 49 114 1.5 466 13 16 22 (41.6) 21.6 40.4 19.0 15.6 11.1 10.6 9.3 7.2 2.0 1.9 1.7 10.9 12.4 15.8 2.2 2.4 2.4 9.8 CEAT REDUCE 637 960 51 26 0.3 40 59 63 81 (4.9) 8.1 28.8 10.9 10.1 7.8 7.0 6.6 5.7 0.9 0.8 0.8 8.3 8.4 10.0 1.9 1.9 1.9 1.5 Eicher Motors ADD 13,706 19,500 42 374 4.9 27 770 747 979 (5.6) (2.9) 31.0 17.8 18.3 14.0 13.2 12.4 9.7 4.2 3.6 3.0 26 21 23 0.2 —— 46 Endurance Technologies BUY 671 850 27 94 1.2 141 40 40 50 11.1 (1.6) 26.3 17 16.9 13.4 8.1 7.5 5.9 3.1 2.7 2.3 18.6 15.9 17.2 0.9 1.0 1.3 0.5 Escorts BUY 551 1,080 96 49 0.9 89 54 63 75 (1.6) 16.9 19.7 10.3 8.8 7.3 6.9 5.6 4.2 1.4 1.3 1.1 13.9 14.3 15.0 1.5 1.7 2.0 33 Exide Industries SELL 133 180 36 113 1.5 850 10.3 10.2 10.9 14.1 (0.7) 6.7 12.8 12.9 12.1 7.4 6.8 6.1 1.7 1.6 1.5 14.1 12.9 12.7 2.6 3.0 3.0 6.2 -

Hero Motocorp ADD 1,616 2,150 33 323 4.2 200 167 141 166 (1.2) (15.7) 17.4 9.7 11.4 9.8 5.6 6.5 5.2 2.2 2.1 1.9 25 18.9 21 5.7 5.7 6.2 28 March 24, 2020 March 24, Mahindra CIE Automotive ADD 69 150 119 26 0.3 378 9.4 11.0 12.7 (34.9) 16.1 15.7 7.3 6.3 5.4 4.0 3.6 2.7 0.6 0.5 0.5 8.0 8.6 9.1 ——— 0.4 Mahindra & Mahindra BUY 293 815 178 365 4.8 1,138 39 39 45 (18.0) 0.7 15.2 7.5 7.5 6.5 4.8 4.7 3.9 0.9 0.8 0.7 12.0 10.9 11.5 2.7 2.7 3.1 26 Maruti Suzuki SELL 4,220 5,800 37 1,275 16.7 302 203 234 296 (18.2) 14.9 27.0 21 18 14 10.0 7.8 5.5 2.5 2.3 2.0 12.7 13.3 15.2 1.2 1.4 1.8 81

Motherson Sumi Systems SELL 53 105 97 169 2.2 3,158 4.2 5.9 7.0 (16.9) 38.3 18.9 12.6 9.1 7.6 4.9 3.4 2.7 1.4 1.2 1.0 11.7 14.2 14.4 2.4 2.8 3.3 18.2 MRF SELL 51,970 62,000 19 220 2.9 4 2,523 2,915 3,674 (5.4) 15.5 26.0 21 17.8 14.1 8.3 7.6 5.9 1.9 1.7 1.5 9.4 9.9 11.2 0.1 0.1 0.2 8.2 Schaeffler India SELL 3,589 3,900 9 112 1.5 31 118 134 171 (18.3) 14.0 27.3 31 27 21 16.4 14.8 11.6 3.8 3.3 2.9 13.0 13.3 14.8 ——— 0.5 SKF REDUCE 1,244 1,950 57 62 0.8 49 66 79 95 0.5 20.4 19.4 19 16 13 13.0 10.6 8.3 3.2 2.7 2.3 16.7 17.2 17.6 1.0 1.0 1.2 0.5 Tata Motors BUY 66 215 225 238 2.9 3,598 (3.4) 7.7 18.1 36.3 325.1 134.5 NM 8.6 3.6 3.2 2.4 2.1 0.4 0.4 0.3 NM 4.5 9.7 ——— 107 Timken SELL 726 825 14 55 0.7 75 31 32 39 57.4 3.8 20.9 23 23 19 14.5 12.6 10.1 3.5 3.0 2.6 16.1 14.4 15.1 0.1 0.1 0.2 0.7 TVS Motor SELL 331 350 6 157 2.1 475 14.4 13.8 21.8 1.8 (3.8) 58.0 23 24 15 11.9 11.6 8.3 4.2 3.7 3.2 19.1 16.4 23 1.3 1.0 1.6 9.9 Varroc Engineering BUY 165 540 228 22 0.3 135 15 29 46 (54.0) 88.2 58.7 10.7 5.7 3.6 4.3 3.1 2.1 0.7 0.6 0.5 6.4 10.9 15.0 ——— 0.4

Automobiles & Components Neutral 4,705 61.6 (10.9) 19.8 34.8 15.7 13.1 9.7 6.1 5.1 4.0 1.6 1.5 1.3 10.4 11.2 13.6 2.2 1.9 2.3 447 Banks AU Small Finance Bank SELL 583 625 7 177 2.3 302 24.4 28.5 36.2 86.7 17.0 27.0 24 20 16 ——— 4.0 3.3 2.8 19.0 17.1 18.2 0.0 —— 12.6 Axis Bank REDUCE 309 740 140 871 11.4 2,806 17.5 49 62 (3.9) 183.2 25.1 18 6.2 5.0 ——— 1.1 1.0 0.8 6.4 15.1 16.6 0.6 2.4 3.0 97 Bandhan Bank REDUCE 174 540 211 280 3.7 1,610 20.3 25.4 31.2 24.0 25.2 23.0 8.6 6.8 5.6 ——— 1.8 1.4 1.1 23.9 23 22 0.0 0.0 0.0 22 Bank of Baroda ADD 54 105 95 249 3.3 4,582 0.8 23.4 27 (50.0) 2,763.0 13.9 66 2.3 2.0 ——— 0.6 0.5 0.4 0.7 15.5 15.6 0.3 8.7 9.9 26 City Union Bank ADD 130 240 84 96 1.3 735 10.0 11.8 13.5 8.1 17.3 14.3 13 11.1 9.7 ——— 1.9 1.7 1.5 14.4 15.0 15.2 1.4 1.6 1.8 2.8 DCB Bank BUY 90 230 157 28 0.4 310 12.8 16.9 22.2 22.1 32.0 30.8 7.0 5.3 4.0 ——— 0.9 0.8 0.7 13.0 15.2 17.2 1.4 1.8 2.4 1.8 Equitas Holdings BUY 38 160 319 13 0.2 342 8.0 10.5 14.5 26.0 32.1 37.5 4.8 3.6 2.6 ——— 0.5 0.4 0.4 9.9 11.2 13.6 ——— 6.4 Federal Bank BUY 40 120 199 80 1.0 1,985 8.4 9.9 12.6 33.6 18.8 26.3 4.8 4.0 3.2 ——— 0.6 0.5 0.5 12.0 12.9 14.7 4.7 5.5 7.0 13.0 HDFC Bank BUY 772 1,050 36 4,231 55.4 5,447 48 50 56 24.5 4.3 10.5 16 15 14 ——— 2.5 2.2 2.0 16.5 15.2 14.9 1.2 1.3 1.4 152 ICICI Bank BUY 284 615 117 1,838 24.1 6,447 18.4 32 38 287.4 73.1 18.8 15 8.9 7.5 ——— 1.7 1.5 1.3 10.5 16.4 17.1 1.3 2.2 2.7 143 IndusInd Bank ADD 336 1,600 376 233 3.1 712 73 104 121 34.0 42.3 15.4 5 3.2 2.8 ——— 0.7 0.6 0.5 16.6 18.1 17.9 3.0 4.3 4.9 122 Karur Vysya Bank BUY 23 80 246 19 0.2 799 3.4 7 13 27.2 104.1 95.1 7 3.4 1.7 ——— 0.4 0.3 0.3 4.1 8.0 14.5 3.6 7.7 15.0 0.6 Punjab National Bank NR 35 —— 239 3.1 4,604 2 6 10 110.2 149.0 80.1 16 6.4 3.6 ——— 0.7 0.5 0.4 2.4 7.0 10.2 0.0 0.0 0.0 14.5 RBL Bank BUY 141 375 166 72 0.9 509 9.5 32 41 (53.3) 233.4 30.0 15 4.5 3.4 ——— 0.7 0.6 0.6 5.3 14.0 16.0 0.9 3.0 3.9 46 State Bank of India BUY 182 420 131 1,621 21.2 8,925 24 45 55 2,356.7 87.9 23.3 8 4.1 3.3 ——— 0.9 0.7 0.6 9.2 15.2 16.0 0.1 0.1 0.1 197 Ujjivan Financial Services BUY 147 490 234 18 0.2 121 26.9 34 44 117.0 24.9 31.6 5 4.4 3.3 ——— 0.8 0.7 0.6 15.7 17.0 19.3 2.1 2.9 4.1 8.2 Ujjivan Small Finance Bank SELL 25 45 77 44 0.6 1,714 2 3 3 48.2 33.3 26.9 12 9.3 7.3 ——— 1.5 1.4 1.2 15.1 14.9 16.7 1.6 2.2 2.7 0.0 Union Bank RS 26 —— 88 1.2 3,423 0 11 15 101.2 5,126.7 36.8 126 2.4 1.8 ——— 0.4 0.3 0.2 0.2 13.2 13.2 0.0 6.2 8.5 3.1 YES Bank RS 40 — (100) 499 6.5 12,546 (18.7) (3) 0 (352.2) 85.3 101.2 NM NM ###### ——— 6.6 21.2 10.5 NM NM 0.4 0.0 0.0 0.0 105 Banks Attractive 10,772 141.0 100.9 148.8 26.0 18 7.4 5.9 1.1 0.9 0.8 6.2 12.7 14.0 0.9 1.6 1.9 995

Source: Company, Bloomberg, Kotak Institutional Equities estimates

34 KOTAK INSTITUTIONAL EQUITIES RESEARCH 34

Kotak Institutional Equities: Valuation summary of KIE Universe stocks

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

Company Rating 23-Mar-20 (Rs) (%) (Rs bn) (US$ bn) (mn) 2020E 2021E 2022E 2020E 2021E 2022E 2020E 2021E 2022E 2020E 2021E 2022E 2020E 2021E 2022E 2020E 2021E 2022E 2020E 2021E 2022E (US$ mn) Building Products Astral Poly Technik SELL 754 765 1 114 1.5 151 19.4 22 27 48.5 14.7 19.4 39 34 28 22.8 19.3 15.8 7.3 6.1 5.0 21 19.6 19.4 0.1 0.1 0.2 2.1 Building Products Cautious 114 1.5 49.5 14.7 19.4 39 34 28 22.8 19.3 15.8 7.3 6.1 5.0 18.8 17.9 17.8 0.1 0.1 0.2 2.1 Capital goods ABB SELL 863 900 4 183 2.4 212 18 20 25 46.3 12.6 27.3 49 44 34 31.4 27.1 21.5 5.2 4.8 4.4 9.9 11.5 13.5 0.6 0.7 0.9 1.1 Ashoka Buildcon BUY 46 155 238 13 0.2 281 12.9 11.9 13.2 8.6 (7.9) 11.2 3.6 3.9 3.5 3.7 3.4 2.9 0.5 0.5 0.4 15.3 12.6 12.7 4.4 4.1 4.5 1.0 Bharat Electronics BUY 59 113 91 145 1.9 2,437 6.2 7.5 7.0 (20.2) 20.9 (6.9) 9.6 8.0 8.6 5.5 4.8 4.4 1.5 1.3 1.3 15.7 17.6 15.2 4.6 5.5 5.1 15.2 BHEL REDUCE 20 41 102 70 0.9 3,482 2.6 2.5 3.7 (25.0) (6.2) 51.0 7.7 8.2 5.4 1.8 1.4 1.3 0.2 0.2 0.2 2.9 2.7 4.0 6.3 5.4 7.4 9.8 Carborundum Universal ADD 188 345 83 36 0.5 189 13.7 16.3 19.0 4.7 19.2 16.1 13.7 11.5 9.9 8.3 6.6 5.5 1.9 1.7 1.5 14.4 15.6 16.3 2.2 2.6 3.0 0.4 Cochin Shipyard BUY 225 615 173 30 0.4 132 48 56 50 30.6 17.6 (10.8) 4.7 4.0 4.5 (1.3) (0.4) 1.1 0.8 0.7 0.6 17.7 18.3 14.6 5.3 6.2 6.0 1.7 Cummins India BUY 396 520 31 110 1.4 277 26 26 29 (0.2) (2.6) 12.2 15.1 15.5 13.8 14.5 14.5 12.9 2.5 2.4 2.2 17.2 15.8 16.8 3.3 3.2 3.6 7.2 Dilip Buildcon BUY 223 580 160 30 0.4 137 36 41 51 (35.6) 14.8 24.9 6.2 5.4 4.3 4.0 3.6 2.5 0.8 0.7 0.6 14.2 14.2 15.2 0.3 0.3 0.5 1.4 IRB Infrastructure BUY 50 154 206 18 0.2 351 22 16 16 (7.1) (29.8) 3.8 2.2 3.2 3.1 5.4 6.3 6.3 0.3 0.2 0.2 11.9 7.7 7.5 5.5 5.0 3.0 3.2 Kalpataru Power Transmission BUY 180 591 228 28 0.4 153 34 38 46 12.8 10.5 22.5 5.2 4.8 3.9 3.3 2.7 2.0 0.8 0.7 0.6 15.7 15.2 16.2 2.1 2.2 2.7 0.6 KEC International BUY 181 400 120 47 0.6 257 24.6 28 33 30.2 14.4 17.9 7.4 6.4 5.5 4.8 4.0 3.3 1.6 1.3 1.1 23 22 21 1.5 1.7 2.0 1.6 L&T BUY 724 1,550 114 1,016 13.3 1,403 70 68 86 13.8 (3.0) 27.6 10.4 10.7 8.4 13.4 11.4 9.8 1.7 1.4 1.3 16.9 14.3 16.0 1.5 5.4 3.7 62 Sadbhav Engineering BUY 36 137 281 6 0.1 172 7.2 11.7 13.6 (33.4) 61.1 16.3 5.0 3.1 2.6 4.3 2.3 1.9 0.3 0.3 0.2 5.9 9.0 9.6 ——— 0.7 Siemens SELL 996 1,200 20 355 4.6 356 35 40 46 14.1 15.2 13.9 29 25 22 18.9 16.5 14.2 3.6 3.3 3.0 13.1 13.8 14.3 1.0 1.1 1.3 9.4 Thermax BUY 678 1,140 68 81 1.1 113 26 39 47 (28.5) 48.4 20.8 26 17.3 14.3 15.9 13.6 11.3 15.9 13.6 11.3 9.5 13.1 14.3 1.1 1.4 1.6 1.3 Capital goods Neutral 2,166 28.4 3.6 2.7 20.3 11.6 11.3 9.4 1.4 1.3 1.2 12.4 11.4 12.6 1.9 3.8 3.1 995 Commercial & Professional Services SIS REDUCE 363 870 140 53 0.7 75 37 41 48 27.5 11.9 16.0 9.9 8.8 7.6 10.8 9.1 7.6 1.8 1.5 1.3 19.9 18.8 18.5 0.9 1.0 1.2 0.5 TeamLease Services BUY 1,619 2,230 38 28 0.4 17 53 57 78 (8.4) 9.2 36.8 31 28 21 25.6 21.9 16.1 4.4 3.8 3.2 15.4 14.5 16.9 ——— 1.0 Commercial & Professional Services Cautious 81 1.1 16.2 11.3 21.0 22 20.0 16.5 13.3 11.2 9.2 3.8 3.2 2.7 17.1 16.2 16.6 0.3 0.3 0.4 1.5 Commodity Chemicals Asian Paints REDUCE 1,498 1,825 22 1,437 18.8 959 28.9 34.2 40.5 28.5 18.2 18.3 52 44 37 32.8 28.5 24.5 13.5 12.0 10.7 27 29 31 0.9 1.2 1.4 41 Berger Paints SELL 413 430 4 402 5.3 971 7.5 8.6 10.2 46.6 14.6 19.1 55 48 40 35.5 30.3 25.6 14.0 12.0 10.3 27 27 28 0.7 0.8 0.9 10.2 Kansai Nerolac REDUCE 299 530 77 161 2.1 539 10.6 11.8 14.0 22.1 11.8 18.6 28 25 21 18.8 16.1 13.5 4.3 3.9 3.5 15.9 16.2 17.4 1.2 1.4 1.6 2.0 Tata Chemicals ADD 201 345 72 51 0.7 255 33.0 37.1 40.5 (23.1) 12.4 9.3 6.1 5.4 5.0 2.4 2.1 1.8 0.4 0.4 0.4 6.7 7.1 7.4 4.5 5.1 5.6 10.6 Commodity Chemicals Neutral 2,051 26.8 16.6 15.9 17.0 42 36 31 24.4 21.3 18.4 6.8 6.2 5.7 16.3 17.3 18.4 1.0 1.2 1.4 64 Construction Materials ACC BUY 998 1,425 43 187 2.5 188 72.3 68.5 76.0 35.8 (5.3) 11.1 13.8 14.6 13.1 5.9 6.2 5.5 1.6 1.5 1.5 12.3 10.9 11.4 1.4 3.4 3.8 14.7 Ambuja Cements BUY 146 190 30 290 3.8 1,986 10.6 10.4 11.7 49.1 (1.7) 12.5 13.8 14.0 12.5 4.3 4.3 3.6 1.2 1.1 1.0 9.0 8.3 8.6 1.0 1.0 1.0 10.8 Dalmia Bharat BUY 409 1,000 145 79 1.0 192 17.2 11.4 30.2 8.6 (34.0) 165.0 24 36 13.6 4.7 4.7 3.4 0.7 0.7 0.7 3.1 2.0 5.1 ——— 1.7

Grasim Industries ADD 433 865 100 285 3.7 657 74.4 77.5 90.0 18.9 4.2 16.2 5.8 5.6 4.8 4.4 3.5 2.9 0.5 0.4 0.4 8.4 8.1 8.8 1.6 1.6 1.6 22 Daily SummaryIndia J K Cement BUY 891 1,500 68 69 0.9 77 82.3 78.6 115.5 141.3 (4.5) 46.9 10.8 11.3 7.7 7.2 6.7 5.3 2.1 1.8 1.5 21 17.3 21 1.1 1.1 1.1 1.8 JK Lakshmi Cement BUY 204 300 47 24 0.3 118 19.2 19.7 27.0 374.8 2.4 37.5 10.6 10.4 7.6 4.8 4.6 3.9 1.4 1.3 1.1 14.3 13.0 15.7 1.0 1.0 1.0 1.1 Orient Cement BUY 40 65 63 8 0.1 205 4.7 4.3 5.7 102.0 (8.9) 34.3 8.5 9.3 7.0 5.0 4.8 3.8 0.7 0.7 0.7 8.9 7.8 10.0 5.0 5.0 5.0 0.2 Shree Cement REDUCE 16,959 16,600 (2) 612 8.0 36 450.4 514.6 698.0 39.3 14.3 35.6 38 33 24 15.9 14.4 11.5 4.7 4.2 3.7 14.3 13.4 16.2 0.6 0.6 0.6 14.2 UltraTech Cement BUY 3,055 3,750 23 882 11.5 289 140.9 148.4 201.7 54.1 5.3 35.9 22 21 15.1 10.1 9.6 7.7 2.4 2.1 1.9 11.4 10.9 13.2 0.4 0.4 0.4 32 Construction Materials Cautious 2,436 31.9 41.6 2.6 26.6 15.9 15.5 12.2 6.8 6.1 5.0 1.5 1.4 1.3 9.4 8.9 10.3 0.8 0.9 1.0 99

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

March 24, 2020 March 24, RESEARCH

KOTAK INSTITUTIONAL EQUITIES RESEARCH 35 Kotak Institutional Equities: Valuation summary of KIE Universe stocks India Fair O/S ADVT Price (Rs) Value Upside Mkt cap. shares EPS (Rs) EPS growth (%) P/E (X) EV/EBITDA (X) P/B (X) RoE (%) Dividend yield (%) 3mo

KOTAK INSTITUTIONAL EQUITIES RESEARCH INSTITUTIONALKOTAK EQUITIES Company Rating 23-Mar-20 (Rs) (%) (Rs bn) (US$ bn) (mn) 2020E 2021E 2022E 2020E 2021E 2022E 2020E 2021E 2022E 2020E 2021E 2022E 2020E 2021E 2022E 2020E 2021E 2022E 2020E 2021E 2022E (US$ mn) Consumer Durables & Apparel

Crompton Greaves Consumer SELL 191 210 10 120 1.6 627 7.1 8.4 9.5 19.1 18.3 13.6 27 23 20 17 14 12 8.4 6.7 5.4 35 33 30 1.3 1.3 0.0 3.9 Daily Summary Havells India SELL 499 520 4 312 4.1 625 13.2 17.1 20.4 4.8 29.4 19.8 38 29 24 23 18 15 6.6 5.9 5.1 18.5 21 22 0.9 1.2 1.4 15.9 Page Industries REDUCE 16,715 22,000 32 186 2.4 11 363 449 539 2.9 23.6 20.0 46 37 31 30 25 21 20.8 16.6 13.5 48 50 48 1.0 1.3 1.6 11.9 Polycab BUY 618 700 13 92 1.2 149 37 44 49 9.0 19.1 11.3 16.8 14.1 12.7 9 8 7 2.5 2.1 1.9 16.6 16.3 15.7 0.6 0.7 0.8 4.7 TCNS Clothing Co. ADD 375 770 105 23 0.3 65 9 12 16 (54.3) 31.7 26.0 40 30 24 10 8 6.3 3.4 3.0 2.7 9.2 10.7 11.9 2.3 3.2 3.3 0.2 Vardhman Textiles ADD 832 1,000 20 48 0.6 56 92 120 130 (28.9) 30.0 8.5 9.0 7.0 6.4 6.6 5.1 4.5 0.8 0.7 0.7 9.0 11.0 11.0 3.6 3.6 3.6 0.2 Voltas SELL 489 500 2 162 2.1 331 16.4 18.5 21.4 4.4 12.5 16.1 30 26 23 24 22 18 3.6 3.2 2.9 12.6 12.9 13.5 0.7 0.8 0.9 12.4 Whirlpool SELL 1,680 1,260 (25) 213 2.8 127 38 44 52 17.9 16.8 18.6 44 38 32 27 23 20 8.5 7.4 6.6 21 21 22 0.5 0.8 1.2 2.9 Consumer Durables & Apparel Cautious 1,156 15.1 0.1 22.2 30 25 21 18 15 13 4.7 4.2 15.7 17.0 17.4 1.0 1.2 52 Consumer Staples Bajaj Consumer Care BUY 121 280 132 18 0.2 148 15.3 15.8 17.7 1.6 3.3 12.1 7.9 7.6 6.8 5.8 5.5 4.8 3.5 3.0 2.7 46 42 42 8.3 9.1 10.0 0.7 Britannia Industries REDUCE 2,138 2,900 36 514 6.7 240 59 68 79 22.7 14.3 16.2 36 32 27 27 23 20 11.4 9.2 7.6 32 32 30 0.9 1.3 1.5 17.8 -

Colgate-Palmolive (India) ADD 1,095 1,600 46 298 3.9 272 30 36 41 12.5 18.5 14.6 36 31 27 22.8 19.6 17.2 20.2 20.0 19.5 56 65 74 2.4 2.7 3.1 10.6 March 24, 2020 March 24, Dabur India REDUCE 396 440 11 700 9.2 1,766 9.5 11.0 12.0 16.8 15.5 9.7 42 36 33 34 30 26 10.9 9.7 8.8 28 28 28 1.1 1.4 1.6 14.8 GlaxoSmithKline Consumer RS 8,191 —— 344 4.5 42 297 315 365 27 6.0 15.9 28 26 22 23 21 18 7.2 6.3 5.5 28 26 26 1.4 1.6 1.8 2.7 Godrej Consumer Products REDUCE 434 720 66 444 5.8 1,022 15.4 17.7 20.6 6.2 15.3 16.2 28 25 21 19 17 14 5.2 4.7 4.2 20.0 20 21 1.5 1.7 1.9 13.2

Hindustan Unilever BUY 1,870 2,250 20 4,048 53.0 2,160 33 38 45 18.6 12.9 18.5 56 50 42 39 35 30 44.9 37.9 32.2 87 83 83 1.3 1.7 2.2 53 ITC BUY 154 300 94 1,897 24.8 12,300 11.9 12.6 13.9 17.0 5.9 10.1 13.0 12.3 11.1 8.5 8.0 7.1 3.0 2.8 2.6 21 22 23 4.2 5.8 6.4 56 Jyothy Laboratories ADD 88 170 93 32 0.4 367 5.8 6.5 7.4 4.7 11.9 13.0 15.1 13.5 11.9 10.5 9.4 8.3 2.3 2.2 2.1 15.8 16.7 17.8 4.0 4.5 5.1 0.8 Marico BUY 240 350 46 310 4.1 1,290 8.2 8.4 9.8 13.8 2.6 15.9 29 29 25 20 19 17 9.7 9.3 8.9 34 33 37 2.3 2.6 2.9 11.5 Nestle India SELL 12,945 14,000 8 1,248 16.3 96 204 238 278 22.6 16.6 16.6 63 54 47 44 38 33 64.6 52.5 43.2 70 107 102 2.6 1.5 1.7 21 Tata Consumer Products ADD 227 400 77 143 1.9 631 8.8 10.3 11.5 25.1 18.2 11.1 26 22 19.7 14 12 11 1.9 1.8 1.7 7.4 8.3 8.8 1.3 1.5 1.9 29 United Breweries ADD 803 1,430 78 212 2.8 264 17.9 25.5 32.6 (15.8) 42.2 27.8 45 31 25 23 17 14 5.9 5.1 4.3 14.0 17.4 18.9 0.2 0.4 0.6 7.7 United Spirits BUY 448 660 47 326 4.3 727 13.1 15.2 20.3 38.9 15.7 34.1 34 30 22 22 19 15 8.4 5.7 4.1 27 23 22 0.4 0.6 0.7 21

Varun Beverages ADD 586 900 54 169 2.2 289 16.2 24.8 33.5 51.9 52.4 35.3 36 24 17.5 14 11 9 5.1 4.1 3.4 17.6 19.3 21 0.1 0.2 0.3 2.9 Consumer Staples Cautious 10,703 140.1 17.7 11.1 14.8 31 28 24 22 20 17 8.6 7.8 7.0 28 28 29 2.0 2.4 2.8 263 Diversified Financials Bajaj Finance REDUCE 2,266 3,850 70 1,363 17.8 599 101 135 163 46 33 21 22 16.7 13.9 ——— 4.0 3.3 2.7 23 22 22 0.4 0.6 0.7 109 Bajaj Finserv ADD 4,621 10,200 121 735 9.6 159 304 394 475 50 30 21 15.2 11.7 9.7 ——— 2.2 1.9 1.6 16.8 17.1 17.5 0.3 0.3 0.3 36 Cholamandalam ADD 136 375 176 110 1.4 820 17.3 22.9 25.5 14 32.3 11.5 7.9 6.0 5.3 ——— 1.3 1.1 0.9 19.2 19.9 18.7 1.4 1.8 2.1 9.2 HDFC BUY 1,521 2,680 76 2,633 34.5 1,721 107 72 85 88.2 (33) 17.4 14.2 21 17.9 ——— 3.0 2.8 2.5 22 13.7 14.8 2.6 1.8 2.1 118 IIFL Wealth REDUCE 784 1,200 53 68 0.9 85 34.7 45.6 66.8 (23) 31.4 46.5 23 17.2 11.7 ——— 2.3 2.2 2.1 10.1 13.0 18.4 3.3 3.8 5.5 0.9 L&T Finance Holdings REDUCE 49 115 137 97 1.3 1,999 9 13 16 (15.7) 35 27.8 5.2 3.8 3.0 ——— 0.6 0.6 0.5 13.2 15.7 17.4 2.6 3.0 3.3 14.9 LIC Housing Finance ADD 192 475 147 97 1.3 505 53.2 72.1 83.1 16 35.6 15.2 3.6 2.7 2.3 ——— 0.6 0.5 0.4 15.4 18.2 18.1 4.6 6.2 7.1 28 Mahindra & Mahindra Financial ADD 150 405 170 93 1.2 615 24.5 32.5 40.6 (3) 32.5 24.8 6.1 4.6 3.7 ——— 0.9 0.8 0.7 13.2 15.8 17.5 4.2 5.6 7.0 11.4 Muthoot Finance ADD 508 860 69 204 2.7 401 72 74 84 46.4 3 13.0 7.1 6.8 6.1 ——— 1.7 1.5 1.2 27 23 22 3.4 3.5 4.0 25 PNB Housing Finance NR 173 —— 29 0.4 169 66.9 77.6 88.6 (6) 16.0 14.2 2.6 2.2 2.0 ——— 0.4 0.3 0.3 14.1 14.6 14.8 4.3 4.9 5.6 5.8 Shriram City Union Finance BUY 921 1,975 114 61 0.8 66 171 191 214 14.0 12 12.0 5.4 4.8 4.3 ——— 0.9 0.8 0.7 16.4 15.9 15.6 2.4 2.6 2.9 0.2 Shriram Transport BUY 452 1,525 237 103 1.3 227 134.4 136.2 162.2 19 1.3 19.1 3.4 3.3 2.8 ——— 0.6 0.5 0.4 17.8 15.7 16.4 4.2 4.5 5.4 31 Diversified Financials Neutral 5,594 73.2 45.5 1.2 18.8 12.4 12.3 10.3 1.6 1.4 1.3 13.0 11.7 12.3 1.9 1.6 1.9 389

Source: Company, Bloomberg, Kotak Institutional Equities estimates

36 KOTAK INSTITUTIONAL EQUITIES RESEARCH 36

Kotak Institutional Equities: Valuation summary of KIE Universe stocks

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

Company Rating 23-Mar-20 (Rs) (%) (Rs bn) (US$ bn) (mn) 2020E 2021E 2022E 2020E 2021E 2022E 2020E 2021E 2022E 2020E 2021E 2022E 2020E 2021E 2022E 2020E 2021E 2022E 2020E 2021E 2022E (US$ mn) Electric Utilities CESC BUY 415 820 98 55 0.7 133 84 101 114 (7) 19.9 12.3 4.9 4.1 3.7 4.9 4.4 3.9 0.4 0.4 0.4 8.9 9.9 10.3 2.8 3.0 3.1 3.3 JSW Energy ADD 44 75 71 72 0.9 1,640 6.4 5.7 5.2 53 (10) (8.5) 6.9 7.6 8.4 4.2 3.5 2.7 0.6 0.5 0.5 8.5 7.0 6.0 ——— 0.7 NHPC ADD 18 27 48 183 2.4 10,045 3.4 3.4 3.7 34.3 2 6.8 5.4 5.3 4.9 5.2 5.6 5.1 0.6 0.5 0.5 10.8 10.5 10.6 9.3 8.4 9.1 4.1 NTPC BUY 76 160 109 756 9.9 9,895 12.3 14.3 15.5 9.4 16.8 7.9 6.2 5.3 4.9 8.2 7.0 5.6 0.7 0.6 0.6 10.9 11.8 11.7 4.8 5.6 6.1 27 Power Grid BUY 153 235 54 800 10.5 5,232 20.2 23 25 6 13.5 11.1 7.6 6.7 6.0 6.6 6.1 5.8 1.2 1.1 1.0 17.0 17.4 17.5 4.6 5.2 5.8 39 Tata Power BUY 33 60 82 89 1.2 2,705 3.6 4.8 6.7 71 32 40.7 9.1 6.9 4.9 6.9 6.5 5.8 0.5 0.5 0.4 5.7 7.0 9.1 ——— 6.5 Electric Utilities Attractive 1,955 25.6 12.2 13.5 9.9 6.7 5.9 5.4 0.8 0.7 0.6 11.4 11.9 12.1 4.7 5.2 5.7 81 Fertilizers & Agricultural Chemicals Bayer Cropscience SELL 3,065 3,000 (2) 138 1.8 45 103.8 119.4 138.3 32.3 15.1 15.8 30 26 22 21 18 15 5.5 4.7 4.1 19.6 19.7 19.7 0.7 0.8 0.9 1.4 Dhanuka Agritech SELL 299 470 57 14 0.2 48 28.0 30.3 33.4 18.1 8.5 10.1 10.7 9.8 8.9 8.3 7.2 6.0 1.9 1.6 1.4 19.1 17.9 17.1 1.9 2.0 2.2 0.4 Godrej Agrovet SELL 291 470 61 56 0.7 192 11.8 16.4 19.9 2.9 39.2 21 25 18 15 14 10 8 2.5 2.2 2.0 10.5 13.3 14.3 1.2 1.4 1.7 1.4 Rallis India ADD 150 230 54 29 0.4 195 10.9 12.5 14.4 29.4 14.8 14.8 13.7 12.0 10.4 9.7 8.3 7.1 2.0 1.8 1.6 15.6 16.0 16.4 1.8 2.0 2.2 2.0 UPL SELL 255 510 100 194 2.5 765 28.6 40.1 45.8 51.3 40.2 14.1 9 6.3 5.6 6.3 5.2 4.4 1.2 1.1 0.9 14.2 17.8 17.9 3.2 4.4 5.1 27 Fertilizers & Agricultural Chemicals Attractive 578 7.6 39.0 32.2 15.6 15 12 10.1 8.8 7.2 6.2 2.2 2.0 1.7 14.5 16.8 17.0 1.6 2.2 2.5 36 Gas Utilities GAIL (India) BUY 78 175 124 352 4.6 4,510 12.2 13.9 14.9 (12.4) 13.5 7.3 6.4 5.6 5.2 4.7 4.4 4.0 0.8 0.7 0.7 12.3 13.3 13.5 9.5 9.6 10.3 22 GSPL SELL 166 225 36 93 1.2 564 17.0 14.2 13.1 20.4 (16.1) (7.9) 9.8 11.6 12.6 4.0 4.2 4.2 1.4 1.3 1.2 15.4 11.5 9.7 1.5 1.3 1.6 2.1 Indraprastha Gas SELL 305 365 20 213 2.8 700 17.3 19.7 22.1 43.7 13.8 12.2 17.6 15.5 13.8 13.0 11.1 9.6 4.3 3.6 3.1 27 25 24 1.3 1.5 1.9 18.3 Mahanagar Gas ADD 700 1,300 86 69 0.9 99 76.8 84.0 89.4 36.7 9.4 6.5 9.1 8.3 7.8 5.6 4.8 4.2 2.4 2.1 1.9 29 27 25 4.7 5.4 6.4 14.3 Petronet LNG BUY 189 325 72 284 3.7 1,500 17.9 20.8 23.1 19.4 16.0 11.1 10.5 9.1 8.2 5.9 5.0 4.4 2.5 2.3 2.1 25 26 26 5.2 6.6 7.9 9.3 Gas Utilities Attractive 1,012 13.2 3.7 11.3 7.8 9.1 8.2 7.6 5.8 5.2 4.7 1.4 1.3 1.2 15.6 16.0 15.9 5.5 6.0 6.8 66 Health Care Services Apollo Hospitals BUY 1,159 1,820 57 161 2.1 139 23.6 23 49 39 (2) 112 49.1 50.0 23.6 12.5 14.2 10.4 4.6 4.3 3.9 9.6 8.9 17.4 0.7 0.8 1.7 18.1 Aster DM Healthcare NR 86 —— 43 0.6 505 6.9 8.8 10.6 4 27.5 21 12.5 9.8 8.1 5.5 4.7 4.0 1.6 1.4 1.2 13.3 15.0 15.8 ——— 0.9 Dr Lal Pathlabs SELL 1,252 1,080 (14) 104 1.4 83 31.5 36.6 42.1 31.9 16.2 15.2 39.8 34.2 29.7 25.7 21.9 18.7 9.3 7.8 6.6 25 25 24 0.8 0.9 1.0 3.2 HCG BUY 72 190 166 6 0.1 85 (8.0) (5.4) (5.2) (130) 33 3 NM NM NM 7.2 6.1 5.4 1.2 1.3 1.5 NM NM NM ——— 0.1 Metropolis Healthcare SELL 1,248 1,130 (9) 63 0.8 50 32.2 37.2 42.9 34.6 15.4 15 38.7 33.5 29.1 24.4 20.7 18.0 12.1 9.8 8.0 35 32 30 0.8 0.9 1.0 1.5 Narayana Hrudayalaya BUY 226 380 68 46 0.6 204 4.0 3.0 10.6 37.6 (24) 250 56.7 74.6 21.3 14.9 15.6 9.1 4.0 3.8 3.2 7.3 5.2 16.2 ——— 3.0 Health Care Services Attractive 425 5.6 21 14 54 38.1 33.3 21.7 12.2 11.7 9.2 4.4 4.0 3.5 11.6 12.1 16.4 0.6 0.7 1.0 27 Hotels & Restaurants Jubilant Foodworks ADD 1,285 1,900 48 170 2.2 132 27 38 52 12 42.1 36 47.8 33.6 24.8 17.1 13.5 10.7 13.7 10.3 7.8 28 35 36 0.5 0.8 1.2 26 Lemon Tree Hotels BUY 26 70 168 21 0.3 789 0.8 1.7 2.1 13 121 24 34.7 15.7 12.6 11.8 8.0 5.9 2.2 2.0 1.9 6.6 13.5 15.4 — 2.0 2.9 0.6 Hotels & Restaurants Attractive 190 2.5 12 54 34 45.7 29.7 22.2 15.8 12.0 9.4 8.7 7.1 5.8 19.1 24 26 0.4 0.9 1.4 27

Insurance Daily SummaryIndia HDFC Life Insurance ADD 342 590 72 691 9.0 2,009 7.2 8.4 9.8 12.6 17.9 16.1 47.8 40.5 35 ——— 11.0 9.9 8.9 24 26 27 0.5 0.6 0.7 22 ICICI Lombard SELL 826 825 (0) 376 4.9 454 26.8 33.4 38.9 16 25 16 30.8 24.7 21 ——— 6.0 5.1 4.3 21 22 22 0.7 0.9 1.0 8.3 ICICI Prudential Life BUY 239 580 143 343 4.5 1,436 8.2 9.0 10.3 4 9.0 15.3 29.0 26.6 23 ——— 4.4 3.9 3.4 16.1 15.5 15.7 0.6 0.6 0.7 15.0 Max Financial Services ADD 289 550 91 78 1.0 417 6.9 9.9 14.4 275 44 45 42.0 29.1 20 —————— 13.7 17.9 23 0.8 1.2 1.8 24 SBI Life Insurance ADD 539 1,010 87 539 7.1 1,000 13.7 16.1 17.7 3.5 17.5 9.4 39.3 33.4 31 ——— 6.3 5.4 4.7 17.1 17.4 16.5 0.4 0.5 0.5 12.1 Insurance Attractive 2,026 26.5 13.5 18.8 16.2 36.9 31.0 27 6.5 5.7 5.0 17.7 18.4 18.7 0.4 0.4 0.5 81

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

March 24, 2020 March 24, RESEARCH

KOTAK INSTITUTIONAL EQUITIES RESEARCH 37 Kotak Institutional Equities: Valuation summary of KIE Universe stocks India Fair O/S ADVT Price (Rs) Value Upside Mkt cap. shares EPS (Rs) EPS growth (%) P/E (X) EV/EBITDA (X) P/B (X) RoE (%) Dividend yield (%) 3mo

KOTAK INSTITUTIONAL EQUITIES RESEARCH INSTITUTIONALKOTAK EQUITIES Company Rating 23-Mar-20 (Rs) (%) (Rs bn) (US$ bn) (mn) 2020E 2021E 2022E 2020E 2021E 2022E 2020E 2021E 2022E 2020E 2021E 2022E 2020E 2021E 2022E 2020E 2021E 2022E 2020E 2021E 2022E (US$ mn) Internet Software & Services

Info Edge SELL 1,691 2,470 46 207 2.7 122.0 31.0 39.7 48.7 20.0 28.0 22.7 54.6 42.6 34.8 45.0 33.7 27.0 7.8 6.9 6.1 15.3 17.3 18.7 0.5 0.6 0.7 11.9 Daily Summary Just Dial BUY 275 460 67 18 0.2 64.8 40.7 35.3 36.6 27.6 (13.4) 3.8 6.8 7.8 7.5 1.0 0.3 (0.7) 1.4 1.2 1.1 24 17.2 15.4 1.5 1.3 1.3 16.5 Internet Software & Services Attractive 225 2.9 23.0 11.0 16.6 35.1 31.6 27.1 28.0 23.6 19.7 5.8 5.1 4.5 16.6 16.2 16.5 0.6 0.6 0.8 28 IT Services HCL Technologies ADD 417 620 49 1,132 14.8 2,702 39.9 42.2 46.2 9.0 5.6 9.6 10.5 9.9 9.0 6.5 5.9 5.1 2.3 2.0 1.8 24 22 21 3.7 3.9 3.9 31 Hexaware Technologies REDUCE 208 350 68 62 0.8 302 21.2 23.8 25.5 9.9 12.2 7.2 9.8 8.7 8.2 7.1 6.3 5.4 2.3 2.0 1.8 25 24 23 4.1 5.8 5.8 2.1 Infosys BUY 526 680 29 2,242 29.3 4,256 38.2 36.8 40.5 7.9 (3.6) 10.1 13.8 14.3 13.0 9.4 9.1 8.2 3.6 3.3 3.1 26 24 25 4.2 4.9 5.7 83 L&T Infotech ADD 1,293 1,900 47 225 2.9 175 84.5 98.5 116.2 (2) 16.5 18.0 15.3 13.1 11.1 10.0 8.4 6.9 4.0 3.4 2.8 28 28 28 2.3 2.6 2.9 3.9 Mindtree REDUCE 734 810 10 121 1.6 165 38.5 53.8 61.7 (16) 40 15 19.1 13.6 11.9 10.3 7.7 6.5 3.6 3.1 2.7 19.1 24 24 4.1 2.2 2.5 13.1 Mphasis REDUCE 642 850 32 120 1.6 186 60.2 64.1 66.8 7 6.4 4.3 10.7 10.0 9.6 6.2 5.6 5.2 2.1 1.9 1.8 20 20 19.6 4.7 6.2 7.0 4.1 TCS REDUCE 1,670 1,950 17 6,265 82.0 3,752 87.1 92.9 101.6 5 6.6 9.4 19.2 18.0 16.4 13.5 12.3 11.1 6.5 6.0 5.6 35 35 35 3.7 3.6 4.0 92 Tech Mahindra ADD 487 830 70 424 5.6 880 47.7 52.5 59.9 0.0 10.0 14.2 10.2 9.3 8.1 6.0 4.8 4.0 1.9 1.7 1.5 19.5 19.1 19.5 3.4 3.8 4.2 23 -

Wipro REDUCE 170 230 35 972 12.7 5,827 17.2 18.3 19.7 14.8 6.3 7.7 9.9 9.3 8.7 5.5 4.6 4.0 1.8 1.5 1.4 17.9 17.4 16.7 0.9 1.2 5.0 11.8 March 24, 2020 March 24, IT Services Cautious 11,564 151.4 4.4 4.8 9.8 14.9 14.2 12.9 9.9 9.0 8.1 3.8 3.4 3.1 26 24 24 3.5 3.7 4.4 264 Media DB Corp. REDUCE 80 135 69 14 0.2 175 18.0 18.7 18.6 14.6 4.1 (0.5) 4.4 4.3 4.3 2.1 1.9 1.9 0.7 0.7 0.8 16.9 17.4 17.4 15.6 18.8 21.3 0.2 Jagran Prakashan REDUCE 40 60 50 11 0.1 296 8.7 9.9 10.7 (0.9) 14 NA 4.6 4.1 NA 1.6 1.4 NA 0.6 0.6 NA 13.7 15.4 16.7 22.5 22.5 22.5 0.4 PVR BUY 1,214 1,800 48 62 0.8 51 32.7 34.5 67.2 (24) 5 95 37.2 35.2 18.1 11.4 11.6 7.6 3.3 3.0 2.7 10.7 9.0 15.7 0.3 0.3 0.6 16.3 Sun TV Network REDUCE 283 525 85 112 1.5 394 37.8 41.4 43.8 4 9.5 5.7 7.5 6.8 6.5 4.8 4.2 3.8 1.9 1.7 1.6 26 26 25 7.1 7.9 8.6 15.7 Zee Entertainment Enterprises ADD 122 340 179 117 1.5 960 17.2 18.4 21.0 4.4 6.9 13.7 7.1 6.6 5.8 4.3 3.7 3.1 1.2 1.1 1.0 17.8 17.3 17.6 3.7 4.5 4.5 53 Media Attractive 316 4.1 3.5 8.1 12.6 8.1 7.5 6.7 4.7 4.3 3.7 1.5 1.4 1.2 18.2 18.1 18.6 5.4 6.2 6.6 85 Metals & Mining Hindalco Industries BUY 88 250 184 197 2.6 2,224 22.1 24.9 28.1 (10.5) 12.6 13 4.0 3.5 3.1 3.8 3.4 2.8 0.3 0.3 0.3 8.2 8.6 8.9 1.4 1.4 1.4 23 Hindustan Zinc REDUCE 126 210 67 530 6.9 4,225 16.4 16.9 18.4 (13.1) 3.3 9.0 7.7 7.4 6.8 4.2 4.3 4.1 1.7 1.9 2.1 22 24 29 15.9 15.9 15.9 1.6

Jindal Steel and Power BUY 89 205 130 91 1.2 1,016 2.7 26.2 22.0 259 855 (16) 32.5 3.4 4.0 5.7 3.8 3.7 0.3 0.3 0.2 0.9 7.8 6.1 ——— 45 JSW Steel ADD 144 270 87 349 4.6 2,402 8.7 16.7 28.8 (72.8) 93 72.4 16.7 8.7 5.0 7.2 5.7 4.3 0.9 0.9 0.8 5.8 10.4 16.1 2.9 2.9 2.9 28 National Aluminium Co. SELL 28 35 25 52 0.7 1,866 0.6 2.3 2.2 (92) 254 (3.0) 43.5 12.3 12.7 4.8 3.6 5.5 0.5 0.5 0.5 1.2 4.1 4.0 4.4 8.1 7.9 5.7 NMDC ADD 63 135 114 193 2.5 3,062 16.9 17.3 15.7 14.6 2.4 (9) 3.7 3.6 4.0 2.4 2.4 2.7 0.7 0.6 0.6 19.2 18.3 15.5 13.4 13.7 12.5 14.1 Tata Steel BUY 271 480 77 308 4.0 1,146 9.8 49.4 91.4 (89) 403 85 27.6 5.5 3.0 6.5 5.3 3.7 0.5 0.4 0.4 1.7 8.6 14.1 3.7 3.7 3.7 85 Vedanta BUY 63 175 179 233 3.0 3,717 10.4 17.7 20.1 (32) 71 13.5 6.0 3.5 3.1 4.6 3.9 3.6 0.4 0.4 0.4 6.2 10.7 12.3 28.7 28.7 28.7 31 Metals & Mining Attractive 1,954 25.6 (43.2) 54.1 24.8 8.0 5.2 4.2 5.1 4.3 3.7 0.6 0.6 0.5 7.4 10.9 12.8 10.4 10.6 10.5 41

Source: Company, Bloomberg, Kotak Institutional Equities estimates

38 KOTAK INSTITUTIONAL EQUITIES RESEARCH 38

Kotak Institutional Equities: Valuation summary of KIE Universe stocks

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

Company Rating 23-Mar-20 (Rs) (%) (Rs bn) (US$ bn) (mn) 2020E 2021E 2022E 2020E 2021E 2022E 2020E 2021E 2022E 2020E 2021E 2022E 2020E 2021E 2022E 2020E 2021E 2022E 2020E 2021E 2022E (US$ mn) Oil, Gas & Consumable Fuels BPCL BUY 269 490 82 584 7.6 1,967 23 34 36 (35.6) 45.0 4.9 11.5 8.0 7.6 7.5 6.1 5.8 1.4 1.3 1.2 12.2 16.5 16.0 5.3 6.5 6.9 47.8 Coal India BUY 128 280 119 788 10.3 6,163 28 30 28 0 6.6 (8.4) 4.5 4.2 4.6 3.6 2.9 2.9 2.4 2.0 1.8 58.7 51.4 40.8 11.7 15.6 15.6 32.6 HPCL BUY 184 250 36 280 3.7 1,524 23 26 26 (43.2) 16.9 0.2 8.1 7.0 7.0 8.2 8.3 8.4 0.9 0.9 0.8 11.8 12.9 12.0 4.9 5.7 5.7 16.1 IOCL BUY 81 130 61 760 9.9 9,181 9.5 15.2 15.5 (46.9) 59.7 2.0 8.5 5.3 5.2 4.7 4.1 4.0 0.7 0.6 0.6 7.9 12.1 11.8 6.3 9.4 9.6 29.4 Oil India BUY 73 110 50 80 1.0 1,084 22 9 14 (27) (57.3) 47.3 3.3 7.8 5.3 1.7 2.9 2.4 0.3 0.3 0.3 8.4 3.5 5.0 12.3 5.1 7.6 5.1 ONGC BUY 60 90 49 760 9.9 12,580 18 7 12 (24) (62.5) 81.2 3.4 9.0 5.0 2.2 3.4 2.6 0.3 0.3 0.3 9.2 3.3 5.8 11.6 4.6 7.9 33.8 Reliance Industries BUY 884 1,850 109 5,240 68.6 5,927 76 93 107 14.9 22.8 15.4 11.7 9.5 8.2 8.6 6.6 5.4 1.2 1.1 1.0 11.0 12.2 12.6 0.8 0.8 0.9 219.7 Oil, Gas & Consumable Fuels Attractive 8,492 111.1 (13.0) 3.8 13.8 8.2 7.9 6.9 5.7 5.4 4.6 0.9 0.9 0.8 11.3 10.9 11.3 3.8 3.8 4.2 384.5 Pharmaceuticals Aurobindo Pharma ADD 295 540 83 173 2.3 584 47 53 56 15.3 14 4.6 6.3 5.5 5.3 4.3 4.0 3.7 1.1 0.9 0.8 16.8 16.4 15.0 2.1 2.5 3.0 32.9 Biocon SELL 256 200 (22) 307 4.0 1,202 7.5 9.0 10.1 24 20 12.1 34 28 25 16.7 12.6 11.1 3.9 3.5 3.2 12.3 12.3 12.5 1.0 1.2 1.4 17.4 Cipla BUY 375 570 52 303 4.0 806 21.1 26 33 11.0 22 27 18 14.6 11.5 9.0 8.0 6.2 1.8 1.7 1.5 10.6 11.4 13.0 1.1 1.4 1.8 19.3 Dr Reddy's Laboratories REDUCE 2,768 2,800 1 460 6.0 166 110 139 185 11 26 32.6 25 19.9 15.0 11.2 10.5 8.0 3.0 2.7 2.3 12.0 13.4 15.5 0.7 0.9 1.2 33.5 Laurus Labs BUY 320 500 56 34 0.4 107 23.5 34.0 37 114.8 44 8 14 9.4 8.8 8.3 6.2 5.5 1.9 1.6 1.3 14.9 16.7 15.3 ——— 1.0 Lupin BUY 592 840 42 268 3.5 450 19 34 48 (9.6) 79 42 31 17 12.3 10.3 7.6 5.7 1.9 1.8 1.6 6.2 10.2 12.9 0.8 0.9 1.2 16.3 Sun Pharmaceuticals ADD 325 480 48 779 10.2 2,406 19.1 23.2 25 18.3 22 8 17 14 12.9 9.2 7.1 5.9 1.7 1.5 1.4 10.6 11.1 11.4 1.2 1.4 1.5 36.9 Torrent Pharmaceuticals ADD 1,796 2,250 25 304 4.0 169 55 69 86 113.0 25 26 33 26 21 14.9 12.5 10.6 5.8 5.1 4.4 17.7 19.4 20.9 1.3 1.4 1.5 10.4 Pharmaceuticals Neutral 2,627 34.4 18.3 25 18 19 15 13.0 9.6 7.9 6.6 2.1 1.9 1.7 11.3 12.6 13.2 1.1 1.3 1.5 167.8 Real Estate Brigade Enterprises BUY 125 280 125 25 0.3 204 8.3 10 18 (29) 17 82 14.9 12.8 7.0 11.4 7.6 4.7 1.1 1.1 0.9 7.7 8.5 14.1 2.0 2.0 2.0 0.6 DLF BUY 126 230 82 312 4.1 2,475 4.5 6.9 10.6 (24) 51 54 28 18.4 11.9 26.3 29.9 17.6 0.9 0.8 0.8 3.2 4.6 6.8 1.6 1.6 1.6 26.8 Embassy Office Parks REIT ADD 330 450 36 255 3.3 772 11.9 15.5 18.2 151 30 18 28 21 18 15.6 12.9 11.7 1.2 1.2 1.3 4.1 5.6 6.9 7.1 9.0 10.4 1.7 Godrej Properties SELL 560 735 31 141 1.8 252 11.3 10.6 19.3 2.4 (7) 82.6 50 53 29 48.4 69.9 32.0 2.9 2.8 2.5 7.8 5.3 9.1 ——— 4.0 Oberoi Realty ADD 407 575 41 148 1.9 364 22 34 38 (4.0) 55.5 12 18.9 12.1 10.8 17.4 10.5 8.9 1.7 1.5 1.3 9.4 13.1 13.1 0.5 0.5 0.5 2.7 Prestige Estates Projects ADD 161 410 154 65 0.8 378 15.4 15.7 16 76.8 2 3 10 10 10.0 6.1 5.9 5.5 1.2 1.1 1.0 12.4 11.2 10.5 1.0 0.9 0.9 2.3 Sobha BUY 150 465 209 14 0.2 95 30 35 44 (5) 19.4 22.9 5.1 4.2 3.5 4.3 3.4 3.1 0.6 0.5 0.5 12.1 13.1 14.4 4.7 4.7 4.7 1.4 Sunteck Realty REDUCE 182 400 120 27 0.3 140 12.5 35.6 34 (22.7) 184 (6) 15 5.1 5.4 11.0 3.3 3.3 0.9 0.7 0.7 6.0 15.4 12.7 0.5 0.5 0.5 1.0 Real Estate Neutral 987 12.9 12.6 39.4 28.8 23 16 12.7 13.9 11.4 9.4 1.2 1.1 1.1 5.1 6.9 8.4 2.6 3.1 3.4 40.5 Retailing Aditya Birla Fashion and Retail BUY 160 230 43 124 1.6 773 1.8 2.8 4.6 (57.5) 58.0 65.7 91 57 35 11.3 9.7 8.5 7.9 7.0 5.8 9.1 12.9 18.2 ——— 2.6 Avenue Supermarts SELL 1,820 1,400 (23) 1,179 15.4 626 22.0 28 36 52.1 25.9 29.8 83 66 51 54 41 32 16.1 13.0 10.3 21.7 21.9 22.7 ——— 33.7 Titan Company ADD 801 1,475 84 711 9.3 888 18.1 24 30 7.4 30.7 26.8 44 34 27 27 22 17 10.1 8.4 7.0 24.5 27.1 28.6 0.7 1.0 1.3 39.6 Retailing Cautious 2,014 26.4 14.7 30.0 30.2 65 50 38 33 27 21 12.8 10.6 8.6 19.9 21.3 22.6 0.3 0.4 0.5 75.9

Speciality Chemicals Daily SummaryIndia Castrol India BUY 95 180 90 94 1.2 989 8.4 9.4 10.1 16.8 12.0 8.2 11.3 10.1 9.3 7.3 6.5 5.9 6.8 6.0 5.4 65.3 63.5 60.9 5.8 7.9 8.7 4.0 Pidilite Industries REDUCE 1,271 1,425 12 646 8.5 508 24.8 28 33 40.1 14.0 17.2 51 45 38 38 33 28 13.2 11.2 9.6 27.9 26.9 26.9 0.6 0.7 0.9 16.9 S H Kelkar and Company BUY 70 140 100 10 0.1 141 5.1 7.1 8.1 (16.0) 37.8 15.0 13.6 9.9 8.6 8.2 6.7 5.9 1.2 1.1 1.1 8.7 11.9 12.9 2.9 3.9 5.0 0.1 SRF ADD 2,687 3,900 45 154 2.0 57 144 174 207 28.6 21.2 18.8 18.7 15.4 13.0 12.0 9.8 8.2 3.1 2.6 2.2 18.1 18.4 18.6 0.5 0.6 0.7 14.3 Speciality Chemicals Neutral 904 11.8 27.7 16.0 15.1 30 26 22.7 20.1 17.2 14.8 7.5 6.4 5.5 24.8 24.7 24.4 1.2 1.5 1.7 35.3

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

March 24, 2020 March 24, RESEARCH

KOTAK INSTITUTIONAL EQUITIES RESEARCH 39 Kotak Institutional Equities: Valuation summary of KIE Universe stocks India Fair O/S ADVT Price (Rs) Value Upside Mkt cap. shares EPS (Rs) EPS growth (%) P/E (X) EV/EBITDA (X) P/B (X) RoE (%) Dividend yield (%) 3mo

KOTAK INSTITUTIONAL EQUITIES RESEARCH INSTITUTIONALKOTAK EQUITIES Company Rating 23-Mar-20 (Rs) (%) (Rs bn) (US$ bn) (mn) 2020E 2021E 2022E 2020E 2021E 2022E 2020E 2021E 2022E 2020E 2021E 2022E 2020E 2021E 2022E 2020E 2021E 2022E 2020E 2021E 2022E (US$ mn) Telecommunication Services

Bharti Airtel BUY 407 600 47 2,222 29.1 5,455 (5.5) 6.0 13.5 NM NM NM NM 67.7 30.3 9.1 6.7 5.6 2.8 2.8 2.7 NM 4.1 9.0 1.0 1.5 1.5 112.2 Daily Summary Bharti Infratel BUY 143 185 29 265 3.5 1,850 15.3 15.7 17.8 16.9 2.4 13.1 9.4 9.1 8.1 4.5 4.2 3.7 1.7 1.7 1.7 19.0 18.8 20.9 6.7 8.4 9.5 24.5 Vodafone Idea RS 3 —— 91 1.2 28,736 (22.3) (4.0) (6.2) NM NM NM NM NM NM 18.9 9.3 8.5 0.4 0.8 (1.4) NM NM NM ——— 27 Tata Communications BUY 234 425 81 67 0.9 285 10.0 7.9 15.1 23.3 (21.2) 90.1 23.3 29.6 15.6 5.2 5.3 4.5 277.2 27.9 10.2 NM 171 96.1 3.2 3.2 3.2 0.7 Telecommunication Services Cautious 2,645 34.6 NM 64.9 47.3 NM NM NM 9.7 7.0 6.0 2.2 2.5 2.8 NM NM NM 1.5 2.1 2.2 164.5 Transportation Adani Ports and SEZ BUY 208 470 126 422 5.5 2,032 25.1 25.3 28.7 25.8 0.8 13.5 8.3 8.2 7.2 8.2 7.1 6.1 1.6 1.4 1.2 20.2 18.5 18.1 7.5 2.1 2.4 17.9 Container Corp. BUY 299 400 34 182 2.4 609 16.6 19.3 24.3 1.5 16.5 26.0 18 15 12 9.1 8.0 6.2 1.7 1.6 1.5 9.7 10.9 12.9 0.8 2.8 3.5 7.8 Gateway Distriparks BUY 78 162 108 8 0.1 109 3.9 6.0 9.2 (42.8) 55.9 51.7 20.2 12.9 8.5 5.5 4.4 3.6 0.5 0.5 0.5 2.9 4.1 6.0 3.8 3.8 3.8 0.4 GMR Infrastructure BUY 16 30 89 96 1.3 6,036 (2.8) (0.9) (0.4) (13.2) 66.4 55.1 NM NM NM 13.5 10.9 12.7 (3.8) (9.6) (7.7) NM NM NM ——— 7.6 Gujarat Pipavav Port BUY 49 118 141 24 0.3 483 6.2 5.7 7.2 44.9 (8.2) 26.7 7.9 8.6 6.8 4.0 3.5 3.0 1.2 1.2 1.1 14.7 13.4 16.9 11.0 10.2 12.9 0.4 InterGlobe Aviation SELL 857 900 5 330 4.3 383 8.9 (16.4) 66.4 117.0 (285.5) 504.3 97 NM 12.9 3.5 4.2 - 4.3 4.7 #DIV/0! 4.7 NM NM — 0.0 0.8 31 -

Mahindra Logistics ADD 214 415 94 15 0.2 71 10.5 15.4 18.6 (16.4) 47.0 20.7 20 14 11 9.4 6.8 5.4 2.8 2.4 2.0 14.3 18.5 19.2 ——— 0.3 March 24, 2020 March 24, Transportation Attractive 1,078 14.1 26.8 5.6 85.4 21 20 10.6 7.6 7.0 4.8 2.4 2.1 2.2 11.3 10.7 20.5 3.4 1.6 2.1 65 KIE universe 78,769 1031.0 2.0 34.2 21.0 17 12.6 10.4 8.5 7.5 6.4 1.8 1.6 1.4 10.5 12.6 13.9 2.4 2.6 3.0

Notes:

(a) We have used adjusted book values for banking companies. (b) 2020 means calendar year 2019, similarly for 2021 and 2022 for these particular companies. (c) Exchange rate (Rs/US$)= 76.40

Source: Company, Bloomberg, Kotak Institutional Equities estimates

40 KOTAK INSTITUTIONAL EQUITIES RESEARCH 40

Disclosures

of the following trategic transaction n an merger or s any,are effect in longer no stock for this , if if , Asof December 2019 31, fair value KOTAK INSTITUTIONAL EQUITIES RESEARCH , if any,if stock,, for because this there not a sufficient is

fair value

.

luded

Percentageof companies covered by Kotak Equities,Institutional within the specified category. Percentageof companies within each category whichfor Kotak Institutional Equities and or its affiliates has provided investment banking services within the previousmonths. 12 The * above categories are defined as follows:expect this = Buy We stock to deliver more than 15% returns theover next months; 12 Add = expectWe this stock to deliver5-15% returns over the next months; 12 Reduce =expectWe this stock to deliver -5-+5% returns over thenext months; 12 =Sell expectWe this stock to deliver lessthan -5% returns over the next months. 12 targetOur prices are also on a 12-month horizon Thesebasis. ratings are used illustratively to comply with applicableregulations. As of 31/12/2019 Kotak InstitutionalEquities Investment Research had investmentratings on 202 equity securities.

r display not applicable.or is months. . The. investment previous rating and

fair value

SELL 1.0% 22.3%

term in stock volatility prices related the to movements in market.Hence, a may Rating particular not , if any,if , have been temporarily. suspended Such suspension compliance is in with applicable regulation(s) - fair value +5% returns+5% over the next months. 12

- 1.5% 20.3% month horizonmonth basis. 5 REDUCE - - 15% returns15% over the next 12 5% returns5% over the next months. 12 The is information not available fo - -

ake account into short Kotak Securities coverage has suspended company. of this ADD 27.7% 2.5%

are also on a on 12 are also Kotak Securities Research the has suspended investment rating and

The information is not meaningful and thereforeis exc

Kotak not cover does Securities company. this

The investment rating and

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

Attractive,Neutral, Cautious. BUY 2.5% 29.7% We expect stock to deliver this

We expect stock to deliver this 5 We expect this stockWe expect to deliver this < We expect stock to deliver this more than returns 15% over the months. 12 next

Fair Value estimates 0% 10% 50% 40% 30% 20% 70% 60% Source:Kotak Institutional Equities Kotak Institutional Equities Research Equities KotakInstitutional coverage universe Distributionof ratings/investment banking relationships fundamental for determining an basis investment rating or not beand should relied upon. Not NA = or NotAvailable Applicable. = NM Meaningful. Not NR = = Rated.Not NR and/or Kotak circumstances in policies Securities when Kotak Securities affiliates or an its advisory acting in capacity is i this companyinvolving and in certain other circumstances. CoverageCS = Suspended. Not NC = Covered. Suspended. Rating RS = Otherdefinitions Coverage view. designations: Otherratings/identifiers ADD. REDUCE. SELL. Our SystemOur Ratings not t does accordance bestrictly in with the System Rating at times. all Ratings and other definitions/identifiers other and Ratings Definitions ratings of BUY.

41 Disclosures

Corporate Office Overseas Affiliates Kotak Securities Ltd. Kotak Mahindra (UK) Ltd Kotak Mahindra Inc 27 BKC, Plot No. C-27, “G Block” 8th Floor, Portsoken House 369 Lexington Avenue Bandra Kurla Complex, Bandra (E) 155-157 Minories 28th Floor, New York Mumbai 400 051, India London EC3N 1LS NY 10017, USA Tel: +91-22-43360000 Tel: +44-20-7977-6900 Tel:+1 212 600 8856

Copyright 2020 Kotak Institutional Equities (Kotak Securities Limited). All rights reserved. 1. Note that the research analysts contributing to this report may not be registered/qualified as research analysts with FINRA; and 2. Such research analysts may not be associated persons of Kotak Mahindra Inc and therefore, may not be subject to NASD Rule 2711 restrictions on communications with a subject company, public appearances and trading securities held by a research analyst account. 3. Any U.S. recipients of the research who wish to effect transactions in any security covered by the report should do so with or through Kotak Mahindra Inc and (ii) any transactions in the securities covered by the research by U.S. recipients must be effected only through Kotak Mahindra Inc at [email protected]. This report is distributed in Singapore by Kotak Mahindra (UK) Limited (Singapore Branch) to institutional investors, accredited investors or expert investors only as defined under the Securities and Futures Act. Recipients of this analysis / report are to contact Kotak Mahindra (UK) Limited (Singapore Branch) (16 Raffles Quay, #35-02/03, Hong Leong Building, Singapore 048581) in respect of any matters arising from, or in connection with, this analysis / report. Kotak Mahindra (UK) Limited (Singapore Branch) is regulated by the Monetary Authority of Singapore. Kotak Securities Limited and its affiliates are a full-service, integrated investment banking, investment management, brokerage and financing group. We along with our affiliates are leading underwriter of securities and participants in virtually all securities trading markets in India. We and our affiliates have investment banking and other business relationships with a significant percentage of the companies covered by our Investment Research Department. Our research professionals provide important input into our investment banking and other business selection processes. Investors should assume that Kotak Securities Limited and/or its affiliates are seeking or will seek investment banking or other business from the company or companies that are the subject of this material and that the research professionals who were involved in preparing this material may participate in the solicitation of such business. Our research professionals are paid in part based on the profitability of Kotak Securities Limited, which include earnings from investment banking and other business. Kotak Securities Limited generally prohibits its analysts, persons reporting to analysts, and members of their households from maintaining a financial interest in the securities or derivatives of any companies that the analysts cover. Additionally, Kotak Securities Limited generally prohibits its analysts and persons reporting to analysts from serving as an officer, director, or advisory board member of any companies that the analysts cover. Our salespeople, traders, and other professionals may provide oral or written market commentary or trading strategies to our clients that reflect opinions that are contrary to the opinions expressed herein, and our proprietary trading and investing businesses may make investment decisions that are inconsistent with the recommendations expressed herein. In reviewing these materials, you should be aware that any or all of the foregoing, among other things, may give rise to real or potential conflicts of interest. Additionally, other important information regarding our relationships with the company or companies that are the subject of this material is provided herein. This material should not be construed as an offer to sell or the solicitation of an offer to buy any security in any jurisdiction where such an offer or solicitation would be illegal. We are not soliciting any action based on this material. It is for the general information of clients of Kotak Securities Limited. It does not constitute a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual clients. Before acting on any advice or recommendation in this material, clients should consider whether it is suitable for their particular circumstances and, if necessary, seek professional advice. The price and value of the investments referred to in this material and the income from them may go down as well as up, and investors may realize losses on any investments. Past performance is not a guide for future performance, future returns are not guaranteed and a loss of original capital may occur. Kotak Securities Limited does not provide tax advise to its clients, and all investors are strongly advised to consult with their tax advisers regarding any potential investment. Certain transactions -including those involving futures, options, and other derivatives as well as non-investment-grade securities - give rise to substantial risk and are not suitable for all investors. The material is based on information that we consider reliable, but we do not represent that it is accurate or complete, and it should not be relied on as such. Opinions expressed are our current opinions as of the date appearing on this material only. We endeavor to update on a reasonable basis the information discussed in this material, but regulatory, compliance, or other reasons may prevent us from doing so. We and our affiliates, officers, directors, and employees, including persons involved in the preparation or issuance of this material, may from time to time have "long" or "short" positions in, act as principal in, and buy or sell the securities or derivatives thereof of companies mentioned herein. Kotak Securities Limited and its non US affiliates may, to the extent permissible under applicable laws, have acted on or used this research to the extent that it relates to non US issuers, prior to or immediately following its publication. Foreign currency denominated securities are subject to fluctuations in exchange rates that could have an adverse effect on the value or price of or income derived from the investment. In addition, investors in securities such as ADRs, the value of which are influenced by foreign currencies affectively assume currency risk. In addition options involve risks and are not suitable for all investors. Please ensure that you have read and understood the current derivatives risk disclosure document before entering into any derivative transactions. Kotak Securities Limited established in 1994, is a subsidiary of Kotak Mahindra Bank Limited. Kotak Securities is one of India's largest brokerage and distribution house. Kotak Securities Limited is a corporate trading and clearing member of Bombay Stock Exchange Limited (BSE), National Stock Exchange of India Limited (NSE), Metropolitan Stock Exchange of India Limited (MSE), National Commodity and Derivatives Exchange (NCDEX) and Multi Commodity Exchange(MCX). Our businesses include stock broking, services rendered in connection with distribution of primary market issues and financial products like mutual funds and fixed deposits, depository services and Portfolio Management. Kotak Securities Limited is also a depository participant with National Securities Depository Limited (NSDL) and Central Depository Services (India) Limited (CDSL). Kotak Securities Limited is also registered with Insurance Regulatory and Development Authority as Corporate Agent for Kotak Mahindra Old Mutual Life Insurance Limited and is also a Mutual Fund Advisor registered with Association of Mutual Funds in India (AMFI). Kotak Securities Limited is registered as a Research Analyst under SEBI (Research Analyst) Regulations, 2014. We hereby declare that our activities were neither suspended nor we have defaulted with any stock exchange authority with whom we are registered in last five years. However SEBI, Exchanges and Depositories have conducted the routine inspection and based on their observations have issued advise letters or levied minor penalty on KSL for certain operational deviations. We have not been debarred from doing business by any Stock Exchange / SEBI or any other authorities; nor has our certificate of registration been cancelled by SEBI at any point of time. We offer our research services to primarily institutional investors and their employees, directors, fund managers, advisors who are registered with us Details of Associates are available on website i.e. www.kotak.com Research Analyst has served as an officer, director or employee of subject company(ies): No We or our associates may have received compensation from the subject company(ies) in the past 12 months. We or our associates have managed or co-managed public offering of securities for the subject company(ies) in the past 12 months. YES. Visit our website for more details We or our associates may have received compensation for investment banking or merchant banking or brokerage services from the subject company(ies) in the past 12 months. We or our associates may have received any compensation for products or services other than investment banking or merchant banking or brokerage services from the subject company(ies) in the past 12 months. We or our associates may have received compensation or other benefits from the subject company(ies) or third party in connection with the research report. Our associates may have financial interest in the subject company(ies). Research Analyst or his/her relative's financial interest in the subject company(ies): No Kotak Securities Limited has financial interest in the subject company(ies) at the end of the month immediately preceding the date of publication of Research Report: HDFC Bank - YES Nature of Financial interest: Holding equity shares or derivatives of the subject company. Our associates may have actual/beneficial ownership of 1% or more securities of the subject company(ies) at the end of the month immediately preceding the date of publication of Research Report. Research Analyst or his/her relatives has actual/beneficial ownership of 1% or more securities of the subject company(ies) at the end of the month immediately preceding the date of publication of Research Report: No Kotak Securities Limited has actual/beneficial ownership of 1% or more securities of the subject company(ies) at the end of the month immediately preceding the date of publication of Research Report: No Subject company(ies) may have been client during twelve months preceding the date of distribution of the research report. A graph of daily closing prices of securities is available at https://www.moneycontrol.com/india/stockpricequote/ and http://economictimes.indiatimes.com/markets/stocks/stock-quotes. (Choose a company from the list on the browser and select the"three years" icon in the price chart). Kotak Securities Limited. Registered Office: 27 BKC, C 27, G Block, Bandra Kurla Complex, Bandra (E), Mumbai 400051. CIN: U99999MH1994PLC134051, Telephone No.: +22 43360000, Fax No.: +22 67132430. Website: www.kotak.com / www.kotaksecurities.com. Correspondence Address: Infinity IT Park, Bldg. No 21, Opp. Film City Road, A K Vaidya Marg, Malad (East), Mumbai 400097. Telephone No: 42856825. SEBI Registration No. INZ000200137(Member of NSE, BSE, MSE, MCX & NCDEX). Member Id: NSE-08081; BSE-673; MSE-1024; MCX-56285; NCDEX-1262. AMFI ARN 0164, PMS INP000000258 and Research Analyst INH000000586. NSDL/CDSL: IN-DP-NSDL-23-97. Compliance Officer Details: Mr. Manoj Agarwal. Call: 022 - 4285 8484, or Email: [email protected]. Investments in securities market are subject to market risks, read all the related documents carefully before investing. In case you require any clarification or have any concern, kindly write to us at below email ids: Level 1: For Trading related queries, contact our customer service at ‘[email protected]’ and for demat account related queries contact us at [email protected] or call us on: Toll free numbers 18002099191 / 1860 266 9191 Level 2: If you do not receive a satisfactory response at Level 1 within 3 working days, you may write to us at [email protected] or call us on 022-42858445 and if you feel you are still unheard, write to our customer service HOD at [email protected] or call us on 022-42858208. Level 3: If you still have not received a satisfactory response at Level 2 within 3 working days, you may contact our Compliance Officer (Name: Mr. Manoj Agarwal) at [email protected] or call on 91- (022) 4285 8484. Level 4 : If you have not received a satisfactory response at Level 3 within 7 working days, you may also approach Managing Director / CEO (Mr. Jaideep Hansraj) at [email protected] or call on 91-(022) 4285 8301. First Cut notes published on this site are for information purposes only. They represent early notations and responses by analysts to recent events. Data in the notes may not have been verified by us and investors should not act upon any data or views in these notes. Most First Cut notes, but not necessarily all, will be followed by final research reports on the subject. There could be variance between the First cut note and the final research note on any subject, in which case the contents of the final research note would prevail. We accept no liability for the contents of the First Cut Notes.