INDIA DAILY

April 16, 2014 India 15-Apr 1-day1-mo 3-mo Sensex 22,485 (0.6) 3.1 6.9

Nifty 6,733 (0.6) 3.5 7.9

Contents Global/Regional indices Daily Alerts Dow Jones 16,263 0.6 1.2 (1.3) Nasdaq Composite 4,034 0.3 (5.0) (4.3)

Results FTSE 6,542 (0.6) 0.2 (4.1) Infosys: 4Q weak, guidance positive; valuations comforting Nikkei 14,255 1.8 (0.5) (9.5) Hang Seng 22,686 0.1 5.3 (1.3)

Company KOSPI 1,988 (0.2) 3.5 1.6 Zee Entertainment Enterprises: Endgame MediaPro - earlier than we Value traded – India expected Cash (NSE+BSE) 171 175 147 ABB: Positive on specific demand pockets; preparing for eventual demand pick- Derivatives (NSE) 1,610 1,717 1,556 up Deri. open interest 1,610 1,634 1,436

Economy

Economy: Inflation metric not too comforting Forex/money market Change, basis points 15-Apr 1-day 1-mo 3-mo Rs/US$ 60.4 1 (64) (97) 10yr govt bond, % 9.3 - 22 35 Net investment (US$mn) 11-Apr MTD CYTD FIIs (69) 677 4,762 MFs 13 (408) (1,638)

Top movers Change, % Best performers 15-Apr 1-day 1-mo 3-mo ADE IN Equity 417.6 (4.6) 30.4 67.9 CRG IN Equity 178.3 1.7 20.4 55.9 HDIL IN Equity 75.6 (3.3) 54.2 49.5 HPCL IN Equity 314.2 1.1 10.2 39.0 AL IN Equity 23.6 (2.1) 35.2 38.8 Worst performers GLXO IN Equity 2501.0 (1.4) (4.0) (15.8) INFO IN Equity 3259.8 0.8 (4.0) (12.5) IDEA IN Equity 140.1 (1.9) 2.4 (10.2) BOI IN Equity 220.6 (5.8) 9.2 (7.7) ntpc IN Equity 125.4 0.6 7.1 (5.8)

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

ADD Infosys (INFO)

Technology APRIL 16, 2014 RESULT Coverage view: Attractive

4Q weak, guidance positive; valuations comforting. Infosys results and guidance Price (`): 3,260 were broadly in line with our estimate. Commentary on demand environment has Target price (`): 3,750 softened a bit, negative in our view. Infosys’ FY2015E underperformance on revenue BSE-30: 22,485 growth to peers is already priced in. We maintain our positive view, based on (1) appropriate assessment of the challenges faced by the company and the confidence that a few right steps have been taken and (2) inexpensive valuations with the stock trading at 15X FY2015E earnings. We broadly retain estimates, target price (`3,750 from `3,800 earlier) and ADD rating.

Company data and valuation summary Infosys Stock data Forecasts/Valuations 2014 2015E 2016E 52-week range (Rs) (high,low) 3,850-2,186 EPS (Rs) 186.3 212.1 236.8 Market Cap. (Rs bn) 1,871.9 EPS growth (%) 13.0 13.8 11.7 Shareholding pattern (%) P/E (X) 17.5 15.4 13.8 Promoters 25.1 Sales (Rs bn) 501.3 552.0 612.5 FIIs 45.2 Net profits (Rs bn) 108.7 121.2 135.3 MFs 9.6 EBITDA (Rs bn) 136.3 155.3 175.9 Price performance (%) 1M 3M 12M EV/EBITDA (X) 11.8 10.1 8.6 Absolute (4.0) (12.2) 39.4 ROE (%) 26.3 25.2 24.2 Rel. to BSE-30 (6.8) (17.9) 13.1 Div. Yield (%) 2.1 2.4 2.6

Weak but in-line 4QFY14; forex gains boost net income

Infosys reported 4QFY14 revenues of US$2,092 mn (-0.4% qoq, +7.9% yoy), in line with our estimate. Revenues were impacted by (1) project cancellations and ramp-down from select retail and manufacturing clients and (2) further offshore shift – onsite volumes declined 1.3% qoq and offshore volumes grew 1.2%. Infosys’ EBIT margin expanded 50 bps to 25.5% (KIE: 25%) aided by (1) benefits of cost-optimization initiatives and (2) 90 bps decline in subcontracting costs, indicating easing of H-1B visas. Net income of `29.9 bn was 5% ahead of our estimates on the back of beat at the EBIT level and higher-than-expected other income.

Interpreting ‘weak’ 1HFY15 guidance

Infosys guided for 7-9% revenue growth for FY2015, implying 2-3% CQGR. What has worried investors is management commentary on a ‘weak’ 1HFY15. A ‘weak’ 1HFY15 does not imply that growth will be back-ended, instead it implies that the pick-up in 1HFY15 will not be as strong as it has been historically. To put it differently, growth will be even through the course of FY2015E, as opposed to being front-ended. The company still has work to do on revenue growth, especially to stop bleeding/loss of share in large accounts. Sales-effectiveness initiatives of the company are geared towards addressing gaps in overall go-to-market strategy. This will take 12 months to fully show up in results though early signs could be visible towards end-CY2014. The company could underperform peers in the interim, though this is already discounted in the stock price.

We retain ADD rating – inexpensive valuations, demand environment to help

Confidence of the Street might be low after moderated commentary on demand and margin assessment (management expects flat margins). We, however, keep the faith; our confidence is based on (1) appropriate assessment of the challenges faced by the company. Steps taken by the company up till now are a mixed bag and (2) inexpensive valuations with the stock trading at 15X FY2015E earnings. A steady demand environment also helps fix some of the internal challenges. Our EPS estimates moderate by ~1% for FY2015/16E due to a higher dividend payout ratio. Our target price is fine-tuned to `3,750 from `3,800 earlier.

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

Infosys Technology

Thoughts on high and sticky attrition

Infosys’ attrition rate has remained high and sticky despite being a high-emphasis area of the company. Infosys has taken several steps, including (1) compensation revision across all levels, (2) large number of promotions and (3) increase in the fixed component of compensation, among others. We are surprised that attrition rates have remained this high despite personal efforts of NRN to retain talent.

We believe that continued high attrition could be on account of change in expectation of performance from employees, lower tolerance level for underperformance and knock on effect of senior and mid-level exits of earlier quarters. We believe that bringing attrition under control is critical if the company has to succeed in the two key areas of its turnaround initiatives, i.e. sales effectiveness and delivery effectiveness.

Margin commentary surprisingly muted

Infosys indicated that EBIT margin in FY2015 could broadly be in the same range as FY2014 (24.5%). We find this surprising given the lack of any major headwinds. In our view, margin benefits of cost optimization and other operational adjustments like utilization, employee pyramid, etc. will continue into FY2015. We highlight that proportion of employees with 0-3 years of experience increased by 60 bps in 4QFY14, after several quarters of decline (see Exhibit 7). These efforts will be aided further as growth picks up. Margin benefits will indeed be reinvested into enhancing sales and delivery effectiveness, but is unlikely to result in flat margins unless one assumes serious pricing pressure and/or material Rupee appreciation; neither are likely in our view. We retain our 25.4% EBIT margin assumption for FY2015E.

Commentary on strength of demand environment moderates

Infosys’ commentary on demand was mixed, a noticeable change from the previously optimistic outlook. It highlighted that while overall pipeline was better than earlier, the pace of decision making and translation of budgets into spending was not as expected. It picked out certain verticals like retail & CPG, hi-tech manufacturing, healthcare, etc., which were facing challenges. Hi-tech had instances of cuts in previously finalized budgets, while retail vertical saw project ramp-downs and cancelations due to adverse business environment for the clients. Infosys also indicated that majority of the spending across verticals was in cost optimization and compliance-related projects and that discretionary spending was weak. Greater client scrutiny of projects was leading to delay in decision making and ramp-ups, which were impacting growth for Infosys.

Deal wins – decent, but figure not representative of all wins

Infosys won four large deals in 4QFY14, with cumulative TCV of US$700 mn. This takes the total TCV of deals won in the last six quarters to ~US$3.2 bn. We highlight that these TCV numbers are not representative since it does not include deal value of many segments like consulting, systems integration and product and platforms. Further, this also does not include signings below US$50 mn in TCV. In addition, expansion of scope of relationship (unless explicitly committed through a large deal) does not get captured either.

However, the company did indicate that it was short of its own targets in terms of large deal wins and win rates, which are critical to drive growth in traditional IT services.

Dividend payout stepped up and a positive

Infosys has revised its dividend payout policy to pay out up to 40% of net income as dividends (including DDT), from 30% earlier, effective from FY2014. The company announced a final dividend of `43/share, taking the total dividend for FY2014 to `63/share, a total payout (pre DDT) of 34% of earnings (see Exhibit 5). Infosys ended FY2014 with a sizeable cash balance of over US$5 bn, and the step-up in dividend payout is encouraging.

KOTAK INSTITUTIONAL EQUITIES RESEARCH 3 Technology Infosys

Interesting highlights from 4QFY14 results

` Offshore shift in revenues. Infosys’ offshore revenue mix increased further in 4QFY14, with a cumulative offshore shift of 260 bps in the last three quarters (see Exhibit 9). This is consistent with the trend highlighted by the company that clients were looking for increased offshorization to bring down total project costs.

` Subcontracting costs decline. Infosys’ cost of technical sub-contractors declined by 90 bps sequentially to 3.2% of revenues. This comes after many quarters of elevated sub- contracting costs. We believe this is indicative of easing visa scenario as the company has adequate inventory of visas to staff its onsite requirements. As highlighted earlier, push towards offshoring more work will also have contributed to the decline in sub-contracting costs, which are primarily onsite.

` Weaker client mix at the top. Client metrics for Infosys were mixed this quarter. The company added to its client buckets at the lower end while there was a decline in the number of US$100 mn and US$200 mn clients. Infosys attributed this to certain instances of billing falling just short of the threshold. However, we highlight that growth from top accounts has trailed company average for a few quarters now.

` Weak growth across geographies. After a 0.8% decline in 3QFY14, North America recorded another sequential decline of 0.7%. While weakness in retail & CPG and hi-tech segments would have impacted revenue growth in North America, we believe some of it could also be due to senior-level exits in the last few quarters. Europe grew a modest 0.8% while India and rest of the world declined.

` Cash generation was strong and balance sheet healthy. Infosys generated free cash flows of US$464 mn in 4QFY14 (+47% qoq, +40% yoy), a healthy 78% of EBITDA. For the full year, Infosys generated US$1.55 bn of FCF, up 33% yoy. FCF/EBITDA improved to 69% from 55% in FY2013. Receivable days declined by 2 during the quarter. Infosys ended FY2014 with DSO (including unbilled revenues) of 80 days, compared to 85 days in FY2013.

Other result and earnings call highlights

` Infosys won 4 large deals this quarter, with TCV of over US$700 mn. There were two deals each in the US and Europe. Among verticals, there was one deal win each in BFSI, manufacturing, retail & CPG and energy & resources.

` Weakness in retail and CPG vertical was attributed to – (1) heavy discounting in holiday season impacting clients’ profits, (2) harsh weather in North America and (3) issues like credit card thefts. These led to delays/cancelations of projects. In the hi-tech segment, Infosys highlighted that there were instances of cuts in budgets, which were finalized earlier in the year. Other verticals had modest outlooks as well, with high focus on cost optimization-related projects in traditional services, which were facing severe pricing pressure.

` Some of the emerging verticals like IMS and BPO had good quarters, growing 4% and 4.3%, respectively. Product engineering (+5.8% qoq) and testing (+5.3% qoq) had solid quarters as well while other services were weak.

` Infosys’ wage hikes have returned to the April-March cycle it followed previously. It has announced 6-7% wage hikes offshore and 1-2% onsite, effective Apr 2014. The wage hikes are expected to have 250-300 bps impact on margin in the Jun 2015 quarter.

` Infosys indicated that it will add to its local sales force across geographies.

4 KOTAK INSTITUTIONAL EQUITIES RESEARCH Infosys Technology

` Number of active clients stood at 890, with the quarter seeing 50 new clients added. Infosys indicated that it had 166 F-500 clients.

` Infosys ended Mar 2014 with a headcount of 160,405, a net addition of 2,001 qoq; quarterly annualized attrition increased to 22.6% from 21.4% in the previous quarter, and is still very high.

` Excluding the products division, utilization (ex-trainees) decreased by 20 bps to 76.7%, while utilization (including trainees) was up 40 bps to 72.9%.

` DSO (including unbilled revenues) declined by 2 days to 78 days.

` Infosys ended the quarter with outstanding hedges of US$1,058 mn. The company indicated that it will continue its short-term hedging policy.

Exhibit 1: Key changes to estimates, March fiscal year-ends, 2015E-16E (Rs mn)

New Old Change (%) 2015E 2016E 2015E 2016E 2015E 2016E Revenues 552,011 612,496 554,543 615,076 (0.5) (0.4) EBITDA 155,278 175,891 156,887 177,346 (1.0) (0.8) Depreciation (15,210) (17,916) (15,770) (18,535) (3.6) (3.3) EBIT 140,068 157,975 141,116 158,811 (0.7) (0.5) Net Profit 121,170 135,323 122,566 137,048 (1.1) (1.3) EPS (Rs/ share) 212.1 236.8 214.5 239.8 (1.1) (1.3)

Revenues (US$ mn) 9,047 10,208 9,088 10,251 (0.5) (0.4) Revenue growth (%) 9.7 12.8 10.1 12.8 Billing Rates (US$/ manmonth) Onsite 13,096 13,044 13,068 13,099 0.2 (0.4) Offshore 4,515 4,497 4,551 4,562 (0.8) (1.4) Margins (%) EBITDA 28.1 28.7 28.3 28.8 EBIT 25.4 25.8 25.4 25.8

Rs/ US$ rate 61.0 60.0 61.0 60.0 (0.0) 0.0

Source: Kotak Institutional Equities estimates

KOTAK INSTITUTIONAL EQUITIES RESEARCH 5 Technology Infosys

Exhibit 2: Infosys interim results (consolidated IFRS)

Change (%) Change 4QFY14 4QFY14E 4QFY13 3QFY14 4QFY14E 4QFY13 3QFY14 FY2014 FY2013 (%) FY2015E Revenues (US$ mn) 2,092 2,096 1,938 2,100 (0.2) 7.9 (0.4) 8,249 7,398 11.5 9,047 Revenues 128,750 129,299 104,540 130,260 (0.4) 23.2 (1.2) 501,330 403,520 24.2 552,011 Cost of revenues (77,560) (77,964) (64,940) (79,600) (0.5) 19.4 (2.6) (307,670) (241,490) 27.4 (332,126) Gross profit 51,190 51,335 39,600 50,660 (0.3) 29.3 1.0 193,660 162,030 19.5 219,884 S&M expenses (6,400) (6,942) (5,180) (6,440) (7.8) 23.6 (0.6) (26,250) (20,340) 29.1 (29,794) G&A expenses (8,370) (8,314) (6,720) (8,020) 0.7 24.6 4.4 (31,070) (26,090) 19.1 (34,812) Total SG&A expenses (14,770) (15,256) (11,900) (14,460) (3.2) 24.1 2.1 (57,320) (46,430) 23.5 (64,606) EBITDA 36,420 36,079 27,700 36,200 0.9 31.5 0.6 136,340 115,600 17.9 155,278 Depreciation (3,610) (3,532) (3,080) (3,610) 2.2 17.2 — (13,740) (11,310) 21.5 (15,210) EBIT 32,810 32,547 24,620 32,590 0.8 33.3 0.7 122,600 104,290 17.6 140,068 Other income 8,510 6,703 6,740 7,310 27.0 26.3 16.4 26,690 23,590 13.1 25,919 Profit before tax 41,320 39,250 31,360 39,900 5.3 31.8 3.6 149,290 127,880 16.7 165,987 Provision for tax (11,400) (10,794) (7,420) (11,150) 5.6 53.6 2.2 (40,620) (33,670) 20.6 (44,816) Net profit 29,920 28,456 23,940 28,750 5.1 25.0 4.1 108,670 94,210 15.3 121,170 Extraordinaries ———— (2,190) — — Net profit - reported 29,920 28,456 23,940 28,750 5.1 25.0 4.1 106,480 94,210 13.0 121,170 Tax rate (%) 27.6 27.5 23.7 27.9 27.2 26.3 27.0 EPS (Rs/ share) 52.4 49.8 41.9 50.3 5.1 25.0 4.1 186.3 164.9 13.0 212.1 No of shares outstanding (mn) 571.4 571.4 571.4 571.4 571.4 571.4 571.4 As % of revenues Gross profit margin 39.8 39.7 37.9 38.9 38.6 40.2 39.8 EBITDA margin 28.3 27.9 26.5 27.8 27.2 28.6 28.1 EBIT margin 25.5 25.2 23.6 25.0 24.5 25.8 25.4 S&M expenses 5.0 5.4 5.0 4.9 5.2 5.0 5.4 G&A expenses 6.5 6.4 6.4 6.2 6.2 6.5 6.3 SG&A expenses 11.5 11.8 11.4 11.1 11.4 11.5 11.7 Billing rates (US$/annum) Onsite 157,551 152,478 157,210 3.3 0.2 Offshore 54,315 53,815 54,666 0.9 (0.6) Volume growth (%) 0.4 1.8 0.7 Revenue mix (%) Onsite 51.1 52.1 51.1 Offshore 48.9 47.9 48.9 Total employees 160,405 156,688 158,404 2.4 1.3

Source: Company, Kotak Institutional Equities estimates

Exhibit 3: Infosys - FY2015E guidance

Guidance Lower end Upper end Revenues (US$ mn) 8,826 8,991 Growth yoy (%) 7.0 9.0

Revenues (Rs bn) 529 539 Growth yoy (%) 5.6 7.6

Notes: (a) Guidance based on USDINR rate of 60 for FY2015E.

Source: Company

6 KOTAK INSTITUTIONAL EQUITIES RESEARCH Infosys Technology

Exhibit 4: Revenue growth by segments

Revenues Growth (%) (US$ mn) (qoq) (yoy) Total revenues 2,092 (0.4) 7.9 by geography North America 1,251 (0.7) 7.2 Europe 527 0.8 8.8 India 54 (0.4) 16.9 ROW 259 (1.2) 7.9 by verticals Insurance, Banking and Financial services 701 (0.4) 6.7 Manufacturing 481 0.5 11.8 Retail 324 (3.5) 8.6 Telecom 180 8.4 (0.2) Energy and Utilities 111 1.5 10.0 Transportation & Logistics 36 5.8 1.9 Services 138 (6.1) 6.3 Others 121 (3.7) 13.8 by service line Application development 324 (2.9) 7.9 Application maintenance 406 0.7 5.2 Business Process Management 140 4.3 11.3 Consulting and SI 680 (3.1) 7.3 Infrastructure Management 151 4.0 7.9 Product Engineering Services 71 5.8 14.7 Testing Services 192 5.3 19.7 Others 54 3.6 3.9 Product revenues 73 (8.2) (5.5)

Source: Company, Kotak Institutional Equities

Exhibit 5: Infosys dividend payout history, March fiscal year-ends

Dividend (Rs/share) Payout (% of EPS) Year Interim Final Special Total Ex-special Total 2004 2 2 13 16 15.7 68.9 2005 3 3 — 6 16.8 16.8 2006 3 4 15 23 16.7 50.0 2007 5 7 — 12 17.2 17.2 2008 6 7 20 33 16.7 42.0 2009 10 14 — 24 22.9 22.9 2010 10 15 — 25 23.0 23.0 2011 10 20 30 60 24.9 49.9 2012 15 22 10 47 25.4 32.3 2013 15 27 — 42 25.5 25.5 2014 20 43 — 63 33.8 33.8

Source: Company, Kotak Institutional Equities

KOTAK INSTITUTIONAL EQUITIES RESEARCH 7 Technology Infosys

Exhibit 6: Quarterly annualized attrition remains high despite multiple corrective measures

Quarterly annualized attrition (%) 30 27.4

24.4 26 23.2 22.3 22.6 21.7 21.5 22 20.6 20.5 20.3 19.3 18.4 18.2 21.4 17.2 17.2 17.2 17.3 17.8 18 15.6 16.9 15.9 12.7 14 12.2

10 Jun-08 Jun-09 Jun-10 Jun-11 Jun-12 Jun-13 Sep-08 Dec-08 Sep-09 Dec-09 Sep-10 Dec-10 Sep-11 Dec-11 Sep-12 Dec-12 Sep-13 Dec-13 Mar-09 Mar-10 Mar-11 Mar-12 Mar-13 Mar-14

Source: Company, Kotak Institutional Equities

Exhibit 7: Pyramid expansion remains a major margin lever for Infosys

Employees with 0-3 year experience (%) 60

55

50

45

40

35

30

25 Sep-06 Sep-07 Sep-08 Sep-09 Sep-10 Sep-11 Sep-12 Sep-13 Mar-07 Mar-08 Mar-09 Mar-10 Mar-11 Mar-12 Mar-13 Mar-14

Source: Company, Kotak Institutional Equities

Exhibit 8: Decline in sub-contracting costs could be due to easing H-1B visa situation

Dec-11 Mar-12 Jun-12 Sep-12 Dec-12 Mar-13 Jun-13 Sep-13 Dec-13 Mar-14 Components of costs (Rs mn) Employee costs 48,400 47,870 52,600 54,320 57,870 60,650 65,130 77,040 73,460 72,710 Subcontracting costs 2,160 2,360 2,890 3,420 4,060 4,240 4,760 5,270 5,320 4,160 Other costs 11,070 9,390 11,210 12,120 12,610 11,950 12,950 13,450 15,280 15,460 As % of revenues Employee costs 52.1 54.1 54.7 55.1 55.5 58.0 57.8 59.4 56.4 56.5 Subcontracting costs 2.3 2.7 3.0 3.5 3.9 4.1 4.2 4.1 4.1 3.2 Other costs 11.9 10.6 11.7 12.3 12.1 11.4 11.5 10.4 11.7 12.0 EBITDA margin 33.7 32.6 30.6 29.1 28.5 26.5 26.5 26.1 27.8 28.3

Source: Company, Kotak Institutional Equities

8 KOTAK INSTITUTIONAL EQUITIES RESEARCH Infosys Technology

Exhibit 9: Infosys' revenue mix has shifted offshore in the last three quarters

Dec-11 Mar-12 Jun-12 Sep-12 Dec-12 Mar-13 Jun-13 Sep-13 Dec-13 Mar-14 Revenue mix (%) Onsite 51.2 51.5 51.4 52.5 53.3 54.1 55.3 54.4 52.9 52.7 Offshore 48.8 48.5 48.6 47.5 46.7 45.9 44.7 45.6 47.1 47.3

Note: Computation includes products, which are considered offshore

Source: Company, Kotak Institutional Equities estimates

Exhibit 10: Infosys' revenue productivity trends

Mar-12 Jun-12 Sep-12 Dec-12 Mar-13 Jun-13 Sep-13 Dec-13 Mar-14 Price realization (US$/manyear) Onsite 154,512 149,250 149,800 155,326 152,478 151,674 153,818 157,210 157,551 Offshore 56,251 54,110 53,388 54,618 53,815 52,600 53,499 54,666 54,315 Blended 85,744 82,542 82,370 85,385 84,826 84,270 84,806 85,367 84,691 Change, qoq (%) Onsite (0.2) (3.4) 0.4 3.7 (1.8) (0.5) 1.4 2.2 0.2 Offshore (1.6) (3.8) (1.3) 2.3 (1.5) (2.3) 1.7 2.2 (0.6) Blended (1.1) (3.7) (0.2) 3.7 (0.7) (0.7) 0.6 0.7 (0.8) Change, qoq (%) - constant currency Onsite (0.4) (2.8) 0.2 3.2 (1.5) 0.1 1.7 1.8 0.2 Offshore (1.8) (3.2) (1.5) 1.9 (1.2) (1.6) 2.0 1.7 (0.6) Blended (1.3) (3.2) (0.3) 3.2 (0.4) — 0.9 0.2 (0.8)

Source: Company, Kotak Institutional Equities

Exhibit 11: Utilization (including products) broadly flattish in 4QFY14

Dec-11 Mar-12 Jun-12 Sep-12 Dec-12 Mar-13 Jun-13 Sep-13 Dec-13 Mar-14 Including trainees (%) 69.7 66.5 66.9 69.5 69.0 70.2 72.3 74.5 73.8 74.1 Change qoq (bps) (86) (323) 44 254 (47) 120 210 220 (70) 30 Excluding trainees (%) 78.1 72.7 71.5 73.4 72.3 73.0 75.8 78.7 78.1 77.8 Change qoq (bps) 7 (537) (121) 186 (106) 70 280 290 (60) (30)

Source: Company

KOTAK INSTITUTIONAL EQUITIES RESEARCH 9 Technology Infosys

Exhibit 12: Infosys: quarterly operating metrics

Dec-11 Mar-12 Jun-12 Sep-12 Dec-12 Mar-13 Jun-13 Sep-13 Dec-13 Mar-14 Revenues (US$ mn) 1,806 1,771 1,752 1,797 1,911 1,938 1,991 2,066 2,100 2,092 Revenues (Rs mn) 92,980 88,520 96,160 98,580 104,240 104,540 112,670 129,650 130,260 128,750 Exchange rate (Re/US$) 51.5 50.0 54.9 54.9 54.5 53.9 56.6 62.8 62.0 61.5 Revenue by verticals (%) Insurance, Banking and Financial services 35.3 34.3 34.3 33.7 33.7 33.9 33.7 33.4 33.5 33.5 Manufacturing 20.4 21.3 22.0 22.1 21.7 22.2 22.5 23.2 22.8 23.0 Retail 15.2 15.8 16.9 17.0 16.0 15.4 15.8 15.7 16.0 15.5 Telecom 9.8 10.1 10.1 9.9 9.6 9.3 8.5 8.3 7.9 8.6 Energy and Utilities 6.0 6.1 4.6 5.3 5.4 5.2 4.9 5.1 5.2 5.3 Transportation & Logistics 2.0 1.6 1.4 1.7 1.8 1.8 1.8 1.8 1.6 1.7 Services 5.9 5.5 5.1 5.3 6.3 6.7 7.1 6.7 7.0 6.6 Others 5.4 5.3 5.6 5.0 5.5 5.5 5.7 5.8 6.0 5.8 Revenue by service offerings (%) ADM 38.9 37.8 38.0 38.4 35.8 35.4 35.0 35.1 35.1 34.9 - Application development 17.1 16.9 17.1 17.0 15.8 15.5 15.7 16.0 15.9 15.5 - Application maintenance 21.8 20.9 20.9 21.4 20.0 19.9 19.3 19.1 19.2 19.4 Business Process Management 5.2 6.2 6.2 6.0 6.5 6.5 6.3 6.3 6.4 6.7 Consulting and Package Implementation 30.6 31.1 29.9 30.0 32.6 32.7 33.6 33.3 33.4 32.5 Infrastructure Management 6.1 6.2 6.6 6.8 6.9 7.2 7.0 7.2 6.9 7.2 Product Engineering Services 3.6 3.4 3.5 3.4 3.2 3.2 3.2 3.3 3.2 3.4 Testing Services 7.9 7.8 8.3 8.6 8.4 8.3 8.4 8.4 8.7 9.2 Others 2.9 3.1 3.0 3.0 2.7 2.7 2.8 2.7 2.5 2.6 Product revenues 4.8 4.4 4.5 3.8 3.9 4.0 3.7 3.7 3.8 3.5 Revenue by geography (%) North America 63.7 62.4 64.1 63.9 61.0 60.2 61.4 61.5 60.0 59.8 Europe 22.6 23.1 21.4 21.9 24.0 25.0 23.6 24.0 24.9 25.2 India 2.1 2.0 2.0 1.6 2.2 2.4 2.6 2.4 2.6 2.6 ROW 11.6 12.5 12.5 12.6 12.8 12.4 12.4 12.1 12.5 12.4 Revenue by project type (%) Fixed price 42.5 41.3 39.9 42.5 43.4 42.5 42.1 42.1 42.9 43.5 Time and Material 57.5 58.7 60.1 57.5 56.6 57.5 57.9 57.9 57.1 56.5 Client metrics Top client contribution to revenues (%) 4.1 4.1 4.1 4.0 3.6 3.6 3.9 3.9 3.7 3.6 Top 5 client contribution to revenues (%) 15.0 15.4 16.2 16.0 14.6 14.7 14.9 15.0 14.1 14.1 Top 10 client contribution to revenues (%) 24.5 24.4 25.3 25.4 23.9 24.0 24.0 24.5 23.5 23.4 Number of active clients 665 694 711 715 776 798 836 873 888 890 New clients added in the period 49 52 51 39 89 56 66 68 54 50 Repeat business % 97.4 96.0 99.1 98.2 97.5 96.5 99.0 98.3 97.3 96.3 Million $ clients 391 399 403 413 419 448 466 469 495 501 5 Million $ clients 193 190 199 205 209 213 215 221 226 232 20 Million $ clients 80 79 83 82 81 80 82 86 88 91 50 Million $ clients 39 40 41 40 40 40 41 40 41 42 100 Million $ clients 13 13 12 11 12 12 15 15 15 13 Per-capita productivity (IT Services and Consulting) - Reported (US$) Onsite 154,818 154,512 149,250 149,800 155,326 152,478 151,674 153,818 157,210 157,551 Offshore 57,181 56,251 54,110 53,388 54,618 53,815 52,600 53,499 54,666 54,315 Blended 86,670 85,744 82,542 82,370 85,385 84,826 84,270 84,806 85,367 84,691 Currency-wise revenues (%) USD 71.9 70.8 72.3 71.9 69.8 68.6 69.3 69.5 68.5 67.8 GBP 6.7 7.1 6.9 6.3 6.2 6.1 5.6 5.9 6.0 6.0 Euro 8.2 8.3 6.7 8.3 9.6 10.4 9.8 10.1 10.4 10.8 AUD 7.1 8.2 8.4 8.3 8.3 8.1 7.9 7.6 7.9 8.1 Utilization measures (IT Services and Consulting) Including trainees 67.6 64.2 64.7 67.5 67.1 68.5 70.7 73.1 72.5 72.9 Excluding trainees 76.4 70.7 69.5 71.6 70.6 71.4 74.3 77.5 76.9 76.7 Employee metrics Total Employees (Consolidated) 145,088 149,994 151,151 153,761 155,629 156,688 157,263 160,227 158,404 160,405 S/W professionals (IT Services & Consulting) 118,794 122,337 121,245 123,076 123,796 123,666 122,687 125,019 123,657 125,344 Trainees 12,595 8,241 4,773 4,655 3,897 3,977 5,581 14,760 5,658 7,104 Infosys BPO 19,425 20,523 22,321 22,918 23,714 24,634 26,207 26,834 26,475 27,157 Gross additions 9,655 10,676 9,236 10,420 8,390 8,990 10,138 12,168 6,682 10,997 Net additions 3,266 4,906 1,157 2,610 1,868 1,059 575 2,964 (1,823) 2,001 Laterals hired 3,863 4,727 5,233 3,656 4,351 3,545 3,008 3,806 3,333 2,100 LTM Attrition 15.4 14.7 14.9 15.0 15.1 16.3 16.9 17.3 18.1 18.7 Attrition quarterly annualized 17.8 15.6 21.5 20.5 16.9 20.3 24.4 23.2 21.4 22.6

Source: Company, Kotak Institutional Equities

10 KOTAK INSTITUTIONAL EQUITIES RESEARCH Infosys Technology

Exhibit 13: Key assumptions driving Infosys earnings model, March fiscal year-ends, 2013-17E

2013 2014 2015E 2016E 2017E Key assumptions Revenue growth (US$ terms) (%) 5.8 11.5 9.7 12.8 14.4 Volume growth yoy (%) (IT only) 8.1 9.9 10.1 14.3 14.7 Pricing change yoy (%) Onsite (1.6) 2.1 1.4 (0.4) — Offshore (4.8) (0.4) 0.7 (0.4) — SG&A expense as % of revenues 11.5 11.4 11.7 11.9 12.1 Re/US$ rate 54.5 60.8 61.0 60.0 60.0

Source: Kotak Institutional Equities estimates

Exhibit 14: Profit model, balance sheet, cash model of Infosys, March fiscal year-ends, 2013-17E (Rs mn)

2013 2014 2015E 2016E 2017E Profit model Revenues 403,520 501,330 552,011 612,496 700,754 Cost of sales (241,490) (307,670) (332,126) (363,496) (411,671) SG&A expenses (46,430) (57,320) (64,606) (73,109) (84,797) EBITDA 115,600 136,340 155,278 175,891 204,285 Depreciation (11,310) (13,740) (15,210) (17,916) (21,659) EBIT 104,290 122,600 140,068 157,975 182,626 Other income 23,590 26,690 25,919 27,400 31,142 Pre-tax profits 127,880 149,290 165,987 185,374 213,769 Provision for tax (33,670) (40,620) (44,816) (50,051) (56,649) Recurring net income 94,210 108,670 121,170 135,323 157,120 Extraordinaries — (2,190) — — — Reported net income 94,210 106,480 121,170 135,323 157,120 Reported EPS (Rs) 164.9 186.3 212.1 236.8 275.0 Balance Sheet Shareholders funds 379,940 445,300 517,876 599,279 694,490 Deferred tax liability/(assets) (4, 690) (6,290) (6,290) (6,290) (6,290) Borrowings ————— Minority interest ————— Total liabilities 375,250 439,010 511,586 592,989 688,200 Gross block 113,810 139,500 163,093 194,950 221,579 Accumulated depreciation (42,420) (55,720) (70,930) (88,846) (110,505) Net block 71,390 83,780 92,163 106,103 111,074 CWIP 11,400 9,610 9,610 9,610 9,610 Net fixed assets 82,790 93,390 101,773 115,713 120,684 Cash and bank balances 218,320 259,500 305,093 352,535 411,851 Net current assets excluding cash 74,140 86,120 104,719 124,741 155,665 Total assets 375,250 439,010 511,586 592,989 688,200 Cashflow statement Operating profit before WC changes 115,600 136,340 155,278 175,891 204,285 Change in WC/other adjustments (13,100) (6,490) (18,599) (20,021) (30,924) Capital expenditure (32,460) (27,450) (23,593) (31,856) (26,629) Taxes paid (32,930) (31,478) (37,818) (42,653) (48,396) Free cash flow 37,110 70,922 75,267 81,360 98,335

Source: Company, Kotak Institutional Equities estimates

KOTAK INSTITUTIONAL EQUITIES RESEARCH 11

REDUCE Zee Entertainment Enterprises (Z)

Media APRIL 16, 2014 UPDATE Coverage view: Neutral

Endgame MediaPro—earlier than we expected. TRAI’s regulation restricting the Price (`): 275 role of content aggregators has claimed its first hit in MediaPro. Zee derived robust Target price (`): 250 revenue synergies from MediaPro—notably, the loss of bargaining power versus BSE-30: 22,485 distributors will be keenly felt, implying weaker-than-expected domestic subs growth. The timing is also inopportune, given (1) Zee’s planned large channel launches and (2) lack of a strong sports line-up in FY2015E. REDUCE with a 12-month forward FV of `250 (from `260); reduced subs growth and preference share adjustment.

Company data and valuation summary Zee Entertainment Enterprises Stock data Forecasts/Valuations 2014 2015E 2016E 52-week range (Rs) (high,low) 301-194 EPS (Rs) 9.1 9.8 11.6 Market Cap. (Rs bn) 264.5 EPS growth (%) 20.8 7.6 17.8 Shareholding pattern (%) P/E (X) 30.1 28.0 23.7 Promoters 43.1 Sales (Rs bn) 45.0 50.5 57.0 FIIs 47.3 Net profits (Rs bn) 8.7 10.6 12.2 MFs 4.0 EBITDA (Rs bn) 11.9 14.7 17.2 Price performance (%) 1M 3M 12M EV/EBITDA (X) 20.8 16.9 14.4 Absolute (0.6) (1.9) 32.5 ROE (%) 17.3 19.7 21.9 Rel. to BSE-30 (4.2) (8.8) 6.8 Div. Yield (%) 0.8 0.9 1.0

TRAI aggregator regulations trigger MediaPro break-up; change in operating dynamics, as well Media regulator TRAI’s recent regulations restricting the role of content aggregators (channel distribution companies owned by broadcasters), notability their ability to bundle channels of multiple broadcasters in one bouquet, claimed its first hit with Zee and Star deciding to discontinue MediaPro. The TRAI regulations acted as a trigger for the break-up as operating dynamics changed in the three years since the JV became operational. Star took complete control of its sports broadcasting JV in India (with Disney-ESPN) with its own distribution team; Star likely expects greater synergies in combined distribution of its entertainment and sports channels (strong sports line-up in FY2015E; large investment).

Robust revenue synergies for Zee from MediaPro; loss of bargaining power to impact Zee derived robust revenue and modest cost synergies from MediaPro, notably (1) improved bargaining power (Star/Zee are number one and two broadcasters in India) versus distributors, (2) improved transparency and understanding of the Indian cable landscape (dominated by analog cable in 1HFY12, when the JV was formed) and (3) reduced cost of combined distribution. The transparency in the Indian cable system has improved led by DAS (Phase-I/II). The cost impact is minimal since Zee’s sports business has its own distribution team. However, the loss of bargaining power will be keenly felt, resulting in weaker-than-expected subs growth. Zee’s sports franchise may not be able to compensate, in our view.

We retain REDUCE, cut estimates; 12-month forward fair value of `250 (from `260)

We reduce our fair value to `250 (from `260), cut FY2015-16E EBITDA estimates by 3-4% and

PAT estimates by 11-12% led by (1) reduced FY2015 domestic growth estimates to 13% (from 16%; EBITDA impact) and (2) preference share dividend adjustment (PAT/DCF impact) partially negated by DCF roll-forward. Valuations are expensive at ~28X FY2015E P/E but more important, ~44X FY2015E EV/FCF (FCF/PAT ratio of ~65%). However, we expect continued strong ad growth in the near term, given network market-share gains. Subs growth momentum at over 10% will also be maintained in the medium term, given (1) the strong bouquet and (2) 27.5% hike in wholesale channel rates by TRAI, over FY2015-16.

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

Zee Entertainment Enterprises Media

Exhibit 1: Breakdown of channels part of MediaPro distribution

Star network Zee network Other network MediaPro channels Hindi GE Star Plus Zee TV LikeOK Zee Anmol Star Pravah Zee Smile Channel V 9X Hindi Films Star Gold Zee Cinema MoviesOK &pictures Zee Classic Zee Action Zee Premier Marathi Ent. Star Pravah Zee Marathi Zee Talkies Bangla Ent. Star Jalsha Zee Bangla Jalsha Movies Zee Bangla Cinema Telugu Ent. Zee Telugu Kannada Ent. Suvarna Zee Kannada Suvarna Plus Tamil Ent. Vijay TV Zee Tamizh Malayalam Ent. Asianet Asianet Plus Asianet Movies Punjabi Ent. ETC Punjabi English Ent. Star World Zee Café HBO FX Zee Studio WB Fox Crime Zee Trendz MGM Star Movies NDTV Goodtimes Star Movies Action Infotainment NGC Fox Traveller Nat Geo Wild Nat Geo People Nat Geo Music Kids Baby TV ZeeQ Cartoon Network Pogo News Zee News CNN Zee 24 Ghante ABP News Zee 24 Taas ABP Ananda Zee PHH ABP Majha Zee Business NDTV 24X7 Zee UP NDTV India Zee 24 Ghantalu NDTV Profit Zee MP Zee Rajasthan Niche ETC Zing Zee Jagran Zee Salaam Zee Khana Khazana HD Star Plus HD Zee TV HD Star Gold HD Zee Cinema HD Star Movies HD Zee Studio HD Star World HD Nat Geo HD LifeOK HD Total 33 37 13 Other channels Sports Star Sports 1 Ten Cricket Star Sports 2 Ten Action Star Sports 3 Ten Sports Star Sports 4 Ten HD Star Sports 1 HD Star Sports 2 HD

Source: MediaPro, Kotak Institutional Equities

KOTAK INSTITUTIONAL EQUITIES RESEARCH 13 Media Zee Entertainment Enterprises

Exhibit 2: Top channels distributed by aggregators in India, CY2013

Among Top-10 Among Top-50 2012 2013 2012 2013 MediaPro 5 5 20 21 MSM Discovery 3 3 5 6 IndiaCast UTV 1 1 11 11 Total channels 9 9 36 38

Source: TRAI, Kotak Institutional Equities

Exhibit 3: Details of the India sports calendar, CY2014/FY2015

Time-period Tournament Type Seasonality Network Year Months CY2014/FY2015 India's tour of New Zealand Cricket NA Sony SIX 2014 Jan-Feb Asia Cup 2010 (IND-PAK) Cricket Once every 2 years Star Sports 2014 Feb-Mar ICC T20 World Cup 2014 Cricket Once every 2 years Star Sports 2014 Mar-Apr IPL T20 Season 7 Cricket Once a year Sony SIX 2014 Apr-May India's tour of Bangladesh Cricket NA NA 2014 Jul-Aug India's tour of England Cricket NA Star Sports 2014 Jul-Aug FIFA World Cup 2014 Soccer Once every 4 years Sony SIX 2014 Jun-Jul Commonwealth Games 2014 Various Once every 4 years Ten Sports 2014 Jul-Aug West Indies' tour of India Cricket NA Star Sports 2014 Oct-Nov India's tour of Australia Cricket NA Star Sports 2014 Dec-Jan ICC ODI World Cup 2015 Cricket Once every 4 years Star Sports 2015 Feb-Mar

Source: Industry, ICC, Kotak Institutional Equities estimates

Exhibit 4: Domestic subs growth of broadcasters, FY2011-14E (` bn)

2011 2012 2013 2014E CAGR (%) Zee Entertainment 7.2 8.7 11.6 13.5 23 --DTH 3.3 4.6 6.1 7.1 29 --Cable 3.9 4.1 5.5 6.4 18 Sun TV Network 5.2 5.0 5.1 6.5 8 --DTH 3.0 3.4 3.7 4.5 14 --Cable 2.1 1.6 1.4 2.0 (2) TV18 Broadcast (a) (1.0) 0.2 1.7 NA

Notes: (a) Net subs revenues (subs revenue - carriage/placement fees).

Source: Company, Kotak Institutional Equities

14 KOTAK INSTITUTIONAL EQUITIES RESEARCH Zee Entertainment Enterprises Media

Exhibit 5: Breakdown of C&S/pay-TV platforms in India, FY2009-14E (mn)

160 DTH Digital cable Analog cable

120 72 81 80 89 87 84 81 28 40 17 6 4 3 29 33 37 13 22 - 8 2009 2010 2011 2012 2013 2014E

Source: MPA, Kotak Institutional Equities estimates

Exhibit 6: Breakdown of domestic subs revenues of large broadcasters, FY2014E

Analog Cable 22%

DTH 53%

Digital Cable 25%

Source: Industry, Kotak Institutional Equities estimates

Exhibit 7: Market share of Zee network, CY2006-13 (%)

2006 2007 2008 2009 2010 2011 2012 2013 Weight Zee TV 21 27 22 20 18 16 17 18 8.0 Zee Cinema 32 30 29 30 25 25 23 19 2.0 &pictures ------2 1.5 Zee Bengali 21 38 39 27 23 30 31 30 1.5 Zee B Cinema ------2 4 1.0 Zee Marathi 43 45 48 39 36 27 26 36 1.0 Zee Talkies - 4 11 12 10 10 9 12 0.5 Zee Telugu 4 7 13 16 15 15 16 16 2.0 Zee Kannada 3 5 12 12 11 15 16 13 1.0 Average 14 17 19 17 15 15 16 17 Weighted 17.2 21.5 20.6 18.7 16.9 16.0 16.8 17.6 Cumulative 317 397 381 346 312 296 311 325

Source: TAM Media Research, Kotak Institutional Equities estimates

KOTAK INSTITUTIONAL EQUITIES RESEARCH 15 Media Zee Entertainment Enterprises

Exhibit 8: Market share of Zee network, 3QFY13-4QFY14 (%)

3QFY13 4QFY13 1QFY14 2QFY14 3QFY14 4QFY14 Weight Zee TV 16 19 17 16 18 18 8.0 Zee Cinema 21 21 20 19 19 18 2.0 Zee Bengali 32 31 31 30 31 32 1.5 Zee B Cinema 7 6 5 4 4 4 1.0 Zee Marathi 29 31 31 34 38 40 1.0 Zee Talkies 10 10 12 12 13 14 0.5 Zee Telugu 16 16 15 17 15 17 2.0 Zee Kannada 14 15 15 12 13 13 1.0 &pictures - - - 2 7 8 1.5 Average 16.1 16.7 16.3 16.4 17.5 18.1 Weighted 16.6 17.8 16.9 16.7 17.8 18.2 Cumulative 308 329 314 309 330 337

Source: TAM Media Research, Kotak Institutional Equities estimates

Exhibit 9: Zee subscription revenue growth, 3QFY11-14 (%)

Subscription growth Domestic subscription growth 50 44

37 40 33 29 26 30 36 23 22 21 29 19 20 26 12 12 19 17 16 16 16 10 14 11

- 6 1QFY12 3QFY12 1QFY13 3QFY13 1QFY14 3QFY14

Source: Company, Kotak Institutional Equities

Exhibit 10: List of Zee's new initiatives, FY2012-15E

Initiative Launch Comments Ten Golf 4QFY12 Niche golf channel Ditto TV 4QFY12 Internet/OTT TV Zee Cinema Bangla 2QFY13 Bangla film channel Zee Alwan 2QFY13 Arabic GE channel ZeeQ 3QFY13 Niche kids channel &pictures 2QFY14 Hindi film channel Zee Anmol 2QFY14 Hindi GE repeat channel Zee Film Hindi 3QFY14 Arabic film channel Zee Bioskop 3QFY14 Bahasa film channel Zee Zindagi FY2015 Hindi GE channel &TV FY2015 Hindi GE channel

Source: Company, Kotak Institutional Equities

16 KOTAK INSTITUTIONAL EQUITIES RESEARCH Zee Entertainment Enterprises Media

Exhibit 11: Comparative valuations of media companies

11-Apr-14 Mcap EPS growth (%) P/E (X) Price (Rs) (Rs bn) 2013 2014E 2015E 2016E 2013 2014E 2015E 2016E Dish TV India 49 52 NA NA NA NA NA NA NA 40 DB Corp 290 53 8 36 17 15 24 18 16 14 Jagran Prakashan 104 33 (10) 27 15 13 21 16 15 12 Sun TV Network 396 156 2 0 20 13 22 22 18 16 Zee Entertainment 275 263 27 21 8 18 37 30 28 24

Fair ROE (%) P/B (X) value (Rs) Rating 2013 2014E 2015E 2016E 2013 2014E 2015E 2016E Dish TV India 55 ADD NA NA NA NA NA NA NA NA DB Corp 330 ADD 21 25 26 26 5.2 4.5 4.0 3.6 Jagran Prakashan 130 BUY 17 20 20 20 3.5 3.2 3.0 2.7 Sun TV Network 420 ADD 25 23 24 23 5.6 5.1 4.7 4.4 Zee Entertainment 260 REDUCE 22 24 21 20 8.2 7.2 6.4 5.6

EV Yield EV/EBITDA (X) EV/FCFF (X) (Rs bn) (%) 2013 2014E 2015E 2016E 2013 2014E 2015E 2016E Dish TV India 59 NA 10 10 10 8 NA 19 35 24 DB Corp 54 1.9 14 11 10 9 31 21 16 14 Jagran Prakashan 36 1.9 12 10 8 7 20 18 15 14 Sun TV Network 151 2.4 16 15 12 11 35 29 26 23 Zee Entertainment 265 1.2 28 22 18 15 84 55 44 34

Source: Companies, Kotak Institutional Equities estimates

Exhibit 12: Estimated consolidated financials of ZEEL + ZEEN R-GECs, FY2009-16E (` mn)

Actuals KIE estimates 2009 2010 2011 2012 2013 2014E 2015E 2016E ZEEL + ZEEN R-GECs Total revenues 21,773 21,998 29,503 30,436 36,996 45,030 50,481 57,033 --Advertising revenues 10,593 10,670 17,076 15,831 19,639 24,504 28,331 32,348 --Subscription revenues 9,038 9,869 11,360 13,255 16,234 18,986 20,725 23,001 Operating income 5,480 6,135 7,614 7,399 9,543 11,880 14,667 17,179 Margin (%) 25.2 27.9 25.8 24.3 25.8 26.4 29.1 30.1 --Other income 1,572 1,220 878 1,226 1,459 1,641 1,746 1,750 --Interest expense (889) (331) (102) (47) (85) (85) (110) (110) --Depreciation (310) (285) (264) (335) (399) (415) (433) (439) Profit before tax 5,853 6,738 8,127 8,242 10,519 13,021 15,870 18,380 --Tax expense (1,633) (2,210) (2,841) (2,500) (3,338) (4,289) (5,228) (6,041) --Minority interest (98) 195 116 (16) 14 (43) (85) (113) --Extraordinary items 949 1,637 1,004 145 — 254 3,000 — --Preference share dividend — — — — — — (1,210) (1,210) Net income 5,072 6,361 6,405 5,871 7,195 8,942 12,348 11,016 Adj. net income 4,351 5,241 5,713 5,726 7,195 8,689 9,348 11,016 Adj. EPS (Rs) 5.0 5.8 5.8 5.9 7.5 9.1 9.8 11.6

Source: Kotak Institutional Equities estimates

KOTAK INSTITUTIONAL EQUITIES RESEARCH 17

SELL ABB (ABB)

Industrials APRIL 16, 2014 UPDATE Coverage view: Cautious Positive on specific demand pockets; preparing for eventual demand pick-up. Price (`): 815 While being cautious on near-term large project capex (power generation, industry), Target price (`): 600 ABB continues to prepare itself for eventual pick-up in demand (improving cost structure, expanding capacities, enhancing capabilities). In the near term, it expects BSE-30: 22,485 growth to be driven by (1) favorable change in PGCIL mix towards quality/grid reliability, (2) scale-up in exports and (3) gain in scale and relevance and leveraging scope in solar segment. High decadal growth requirement to justify current price deters a positive stance. Reiterate SELL on ABB (TP: `600 from `520) and Siemens (TP: `510 from `460).

Company data and valuation summary ABB Stock data Forecasts/Valuations 2014 2015E 2016E 52-week range (Rs) (high,low) 871-430 EPS (Rs) 8.3 19.8 26.1 Market Cap. (Rs bn) 172.7 EPS growth (%) 25.5 137.7 31.5 Shareholding pattern (%) P/E (X) 97.6 41.1 31.2 Promoters 25.1 Sales (Rs bn) 76.3 79.7 87.9 FIIs 45.2 Net profits (Rs bn) 1.8 4.2 5.5 MFs 9.6 EBITDA (Rs bn) 3.8 7.0 8.1 Price performance (%) 1M 3M 12M EV/EBITDA (X) 46.3 24.1 20.2 Absolute 2.0 25.6 71.6 ROE (%) 6.7 14.8 17.0 Rel. to BSE-30 (1.0) 17.5 39.3 Div. Yield (%) 0.4 0.4 0.4 Chang in PGCIL ordering mix to benefit; less optimistic on near-term demand pick-up (private, SEB) ABB cited a shift in PGCIL’s ordering mix towards (1) higher quality equipment (GIS, HVDC) and (2) grid reliability-focused equipment. It is better-placed in this range of equipment and thus continues to see steady business for itself from PGCIL (~15% of ABB’s current business). The company recently inaugurated its new facility for high-voltage GIS switchgear (up to 800 kV), which is in the process of getting approvals from PGCIL. ABB, however, is less positive on near- term demand pick-up in other segments (private, SEBs). Here it has turned selective in bidding (competitive intensity is high). Upbeat on exports and solar as well as capacity expansion on LV segment ABB remains bullish on exports (ordering up 28% yoy in CY2013), especially in power products (~50%, half of exports). It is also positive on its solar business (~`5-7 bn) on (1) huge scope (inverter, motor, solar pumps, drives, etc.), (2) value for reliability and (3) less clearances/approvals. ABB also expects scale-up in its low-voltage products business on pick-up in industrial activity and housing construction. Among business sectors, it expects growth opportunities from investment in power quality improvement, grid reliability, stability, renewables, rail, oil & gas and mining.

Annual report takeaways: Maintains focus on improving cost structure, capacities and capabilities

ABB generated `3 bn of operating cash in CY2013, which it utilized for capex (`2.2 bn) and paying dividend (`0.7 bn). Its working capital has remained at high levels of 72 days of sales. ABB has continued to focus on (1) rationalizing costs (employee count further), (2) expanding product capacities (dry-type transformer, miniature circuit breakers, GIS) and (3) enhancing capabilities (has imported 420 KV GIS technology). Royalty and related payments remain at high levels. Reiterate negative stance; revise fair value to `600 on higher 24X multiple We marginally revise estimates for ABB to `19.8/`26.5/`32.5 from `19.3/ `25.2/`30 for CY2014- 16E and TP to `600 on higher 24X multiple (from `560). We also revise TP for Siemens to `510 (on higher 24X multiple). Large decadal growth requirement (23%) apart from margins to justify ABB’s current market price deters us from turning positive on the otherwise large and early beneficiary of an up-cycle.

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

ABB Industrials

Takeaways from recent management meeting

` PGCIL ordering pattern has changed and that is beneficial to ABB. While PGCIL is maintaining the ordering run-rate in absolute sense, there has been a shift towards ordering higher quality equipment (such as GIS, HVDC) as well as equipment that can improve quality of the grid (in terms of reliability, control and automation). ABB is better- placed in this range of equipment and thus continues to see steady business for itself from PGCIL. ABB has put a factory for GIS, which has been inaugurated in November 2013 that manufactures GIS and PASS (plug and switch system) hybrid switchgear. This factory can produce up to 800 KV levels and is in the process of qualification for supplying to PGCIL. ABB is not bidding for GIS substations from PGCIL as it would have to currently import from Switzerland and that would be too costly. ABB’s business from PGCIL is of the order of `15 bn or so per annum (this may include orders in JV with ABB Global). This includes supplies to other vendors also who may be buying from ABB to use the equipment in their EPC orders for ultimate delivery to PGCIL, as well as orders in JV with ABB Global. Our tracking suggests that total direct orders for ABB group from PGCIL have been about `60 bn since FY2008-end.

ABB actually bid for the network security order that was won by Alstom T&D but lost the bid.

` Private utilities ordering facing pressure; even SEB ordering is limited. ABB used to supply distributed control system for power plants, electrical balance of plants as well as transmission equipment to private transmission developers (Megha, Isolux, etc.); however, this segment is very sedate now. Even SEB ordering is limited and is very competitive. SEBs typically have not been buying form Chinese/Koreans though. ABB is very selective in taking orders in this area.

` Exports – envisage strong growth; power products is a key export segment. Power products is an important segment for exports as well. Total 15-18% of revenues come from exports and may be half of that may be originating from the power products division. 70% of exports are to ABB group companies globally. Power products division in India is a focus factory for several products such as 72.5 KV circuit breakers.

` Upbeat on solar (already a large business); has helped stabilize discrete automation segment. ABB has several products for solar segment such as inverter, motor, solar pumps, drives, etc. Solar segment requires reliability over a long period of time and thus there is a need to buy high quality products from ABB. Solar is already a `5-7 bn segment for ABB now. Solar also faces fewer issues from environment perspective etc.

While industrial motors have faced almost a 40-50% price deterioration, pick-up in solar business as well as marginal additions from Baldor (`0.3-0.4 bn advanced motors business) and Power One (UPS business) has helped stabilize the segment. They have also added products like hi-frame motors and flame-proof motors that have helped stabilize the segment.

` Facilities expansion would help grow the low-voltage products segment. Low- voltage segment comprises products below 11 KV and in that ABB has recently started manufacturing facilities for breakers, MCB, etc. Margins would improve over a period of time with volumes. Segment is driven by housing construction sector as well as industrial systems.

KOTAK INSTITUTIONAL EQUITIES RESEARCH 19 Industrials ABB

Positive outlook on medium/long-term prospects; near term appears challenging Annual report Company has cited key areas of promise in power quality improvement, grid reliability and takeaways stability, renewables, rail, oil & gas and mining.

` Power systems. ABB believes that the power systems sector is likely to remain subdued in the short term on the back of sustained issues in the power-generation segment. Opportunities from renewables, T&D, flexible AC transmission systems technology and repair and maintenance R&M orders would help sustain the business. The management is, however, positive on the medium-to-long-term prospects of this segment with recent government efforts towards project clearances.

` Power products. ABB is relatively optimistic for this segment based on increasing focus on grid stability, opportunities in renewables and rail transport aided by the company’s operational initiatives such as “in country, for country” etc., which help improve the company offering. However, poor financial health of SEBs and upcoming national elections may lead to some slowdown/lack of activity in the near term.

` Process automation. The segment was adversely impacted by slow pace of capital investments in the core sector. While the big-ticket investments from core sectors are expected to remain slow in the near term, the company expects near-term business to be supported by opportunities from oil & gas, pharmaceuticals, mining, railways and energy- efficiency sectors.

` Discrete automation & motion. Large opportunities may remain low with sluggishness in project decisions in the core sector; near-term growth is expected to be driven by expansion in solar, wind, captive power plants, railways and other process industries.

` Low-voltage products. The segment was impacted by deferred investments in large industrial projects and muted growth in commercial and residential buildings sector. However, the company is positive on this segment with potential opportunities from renewables, energy-efficiency solutions, premium housing, data centers and railways.

Scope of business segments

` Power systems. The segment offers turnkey systems and services for transmission and distribution for power grid and power plants. The segment offers the instrumentation, control and entire balance of power plants, which improve performance and energy efficiency through flexible alternating current transmission systems, high voltage direct current systems, network management systems and utility communications.

` Power products. Here the company manufactures, engineers, supplies key components to transmit and distribute electricity, improving power supply and energy efficiency. The segment produces transformers, high- and medium-voltage switchgears, circuit breaker, capacitors, distribution relays, insulation paper and paper board components, etc.

` Process automation. ABB provides customers with integrated solutions for control, plant optimization and industry-specific application knowledge. The industries serviced include oil & gas, power chemicals and pharmaceuticals, pulp and paper, metals and minerals, marine and turbo charging.

` Discrete automation & motion. Here the company provides products with related services that are used as components in machinery and automation systems. Key products and services include power electronics systems, motors and generators, drives and robots.

` Low-voltage products. ABB also manufactures products and services that provide protection, control and measurement for electrical installations, enclosures, switchboards and electromechanical devices for industrial machines, plants and related services.

20 KOTAK INSTITUTIONAL EQUITIES RESEARCH ABB Industrials

Key orders won

Exhibit below captures the key orders won by ABB in its business segments.

Exhibit 1: Key orders won by the various segments of ABB in CY2013

Customer Scope of order CY2013 Power Systems NCC Ltd Electrical Balance of Plant (eBoP) for 1X 660 MW Nellore thermal power plant Inetest Technologies India Balance of System (BoS) for 5 MW solar PV plant (for Varroc Engg Pvt. Ltd) Sintex Industries Ltd Electrical Balance of Plant (eBoP) for 2X 150 MW Shirpur thermal power plant Tata Power Renewable Energy Ltd Turnkey order for 145 kV switchyard package for 20 MW solar plant at Satara Bhutan Power Corporation Turnkey project for 220/66 kV substation at Samtse and 66 kV bay extension at Gomtu NCC Ltd 400 kV GIS substation for evacuating power for 2X 660 MW Nellore thermal power plant Power Products Power Grid Corporation of India Ltd 765 kV circuit breakers Alstom T&D India Ltd High voltage capacitor and filters for Power Grid HVDC Champa and Kurukshetra projects Kuwait Oil Co. (export orders) Double bus bar UniGear AIS and supply order for transformers to Zambia Power Grid Corporation of India Ltd 500 MVA, single phase, 765 kV auto transformers for Varanasi and Kanpur GIS substations Process Automation Hindustan Zinc Ltd Mine hoist systems for world's largest greenfield zinc mine Hongsa Mines, Laos (Sandvik) Mining automation and converyor electrification Indian Railways Supply and rehabilitation of turbochargers to Diesel Modernization Works Cairn India Electrical works for e-houses for enhanced oil recovery systems for Mangala terminal Orient Cements Electrification and automation for greenfield cement plant at Gulbarga Discreet Automation and Motion Gamesa, Siemens, Tata Power, Inox Wind Wind generator orders Chittaranjan Locomotive Works Traction converters EPCs Solar inverter Hindalco High current rectifiers Source: Company, Kotak Institutional Equities

Operating cash flows improve

ABB reported positive operating cash flow of `3.3 bn in CY2013 and improvement versus negative cash flow of `502 mn in CY2012. The operating cash generated was primarily utilized towards capex of about `2.1 bn and dividend payment of `750 mn. The company increased its borrowings by about `2.9 bn yoy, leading to a year-end cash balance of `3.2 bn (versus `868 mn at end-CY2012).

Exhibit 2: Operating cash flow for ABB, December calendar year-ends, 2007-13 (` mn)

(Rs mn) Operating cash (annual report figures) 3,750 3,545 3,301

3,000 2,725

2,207 2,250

1,500 1,181

750 197

- 2007 2008 2009 2010 2011 2012 2013 (750) (502)

Source: Company, Kotak Institutional Equities

KOTAK INSTITUTIONAL EQUITIES RESEARCH 21 Industrials ABB

Working capital remains relatively flat though at high levels

Working capital levels of the company remained relatively flat at about 72 days of sales at end-CY2013. However, ABB reported a high debt levels by over `6.2 bn at end-CY2013 – an increase of about `2.9 bn against end-CY2012 levels of `3.3 bn, though note some sequential decline from `7.9 bn at end-1HCY13. Net debt has remained flat yoy.

Exhibit 3: Working capital levels of ABB, December calendar year-ends, 2004-13 (days of sales)

(days of sales) 75 71 72 64 58 60 55 47 45

29 30 20 22

15 3 - 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Source: Company, Kotak Institutional Equities

Capex: Commissions several new equipment lines in CY2013

ABB has set up a new dry-type transformer factory at Salvi, India (commissioned in CY2013). In addition, it has also set up a GIS and PASS facility at Salvi. It has also set up a new miniature circuit breaker line at Nelamangala In Bangalore. Overall, company has invested `2.2 bn in fixed assets in CY2013.

Exhibit 4: ABB's capex has significantly increased in recent years Exhibit 5: Gross block for ABB, December calendar year ends, Capital expenditure of ABB excluding acquisitions, December calendar 2005-13 (` bn) year-ends, 2003-13 (` mn)

(Rs bn) (Rs bn) 3 20 18

15 16 14 2 12 10 9 8 8 1 5 6 4 4

0 0 2005 2006 2007 2008 2009 2010 2011 2012 2013 2005 2006 2007 2008 2009 2010 2011 2012 2013

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

22 KOTAK INSTITUTIONAL EQUITIES RESEARCH ABB Industrials

Orders: Weakness sustains across segments; power systems impacted the most

Overall order inflows have declined 5% yoy in CY2013 at `70 bn (closer to CY2010 trough levels). While weakness in order inflows has been across business segments, it has been particularly severe in the power systems segment (down 27% yoy). Its share in order inflows has declined to 18% in CY2013 sales versus 42% in end-CY2013 backlog.

Exhibit 6: Segmental order booking for ABB, December calendar year-ends, 2005-13

(Rs bn) Power Systems Power Products Process Automation Automation Products

100 93 91 86 80 80 23 74 69 25 70 15 21 59 13 26 60 15 16 20 11 26 10 39 11 24 23 11 40 20 15 11 7 24 15 8 16 20 21 20 9 30 33 32 22 26 15 18 18 13 0 2005 2006 2007 2008 2009 2010 2011 2012 2013

Source: Company, Kotak Institutional Equities

Exhibit 7: Segmental order booking and backlog for ABB, December calendar year-end, 2013

CY2013 order inflows (Rs70 bn) CY2013 order backlog (Rs83 bn) Low Low voltage Power Systems Discrete voltage products 18% Automation products 10% & Motion 3% Discrete 18% Power Automation & Systems Motion 42% 27% Process Power Automation Products 13% 29% Process Automation Power 16% Products 24%

Source: Company, Kotak Institutional Equities

Revenue mix – key product lines have stagnated; growth driven by drives and services

Revenue mix for ABB has not changed significantly over the past three years. Most of the key product lines (switchgears, transformers, motors) have remained stagnant in absolute terms with growth being driven by electronic control/supply units for drives and services (erection, installation, etc.).

KOTAK INSTITUTIONAL EQUITIES RESEARCH 23 Industrials ABB

Exhibit 8: Revenue-mix of ABB's various products and services, December calendar year-ends, 2003, 2007, 2011 and 2013 (` mn)

Erection and CY2013 CY2011 other services Switchgears Erection and 7% 22% other services Switchgears 6% 23%

Power Project items transformers Project items 30% 7% 31% Power Motors & other transformers machines 9% 9% Motors & other Electronic machines control & supply Electronic Other products 9% Other products control & supply 13% units for drives 12% 12% units for drives 10%

Erection and Erection and CY2007 CY2004 other services other services Switchgears 6% 5% Switchgears 18% 24% Power transformers 6% Power transformers Project items Motors & other 8% machines 42% Project items 6% 51% Electronic Motors & other control & supply machines units for drives Electronic 4% Other products 5% Other products control & supply 8% 10% units for drives 7%

Source: Company, Kotak Institutional Equities

Strong growth in export orders; still remains a large net importer

ABB reported a 28% growth in export orders in CY2013 (to `11.6 bn). Significant export orders include those for dry-type transformers, safelink circuit breakers, high-voltage breakers and transformer, and miniature circuit breakers. Exports were spread over Europe, the Middle East, Brazil, Bangladesh, Bhutan, Nigeria, Oman, Angola, Australia, etc. It reported a more modest 13% yoy growth in export sales in CY2013 to `11.8 bn post almost doubling in exports in CY2012. ABB though still remains a large net importer (~`7.5 bn). The exhibit below captures the comparison of ABB’s exports and imports with those of other MNC majors in the industrials space.

24 KOTAK INSTITUTIONAL EQUITIES RESEARCH ABB Industrials

Exhibit 9: Value of total imports and exports for ABB, Areva, Crompton and Siemens, December calendar year-end, 2013 (` mn)

(Rs mn) Imports Exports 20,000

10,000

-

(10,000)

(20,000)

(30,000)

(40,000) ABB Alstom T&D (FY2013) Crompton (FY2013) Siemens (Sept2013)

Source: Company, Kotak Institutional Equities

Other takeaways

` Employee count declines for the second year. Employee count has declined for the second straight year to 6,371 (down 8% versus 6,926 at end-CY2011). This has helped reduce growth in employee cost to single digit for the past two years

Exhibit 10: Employee counts have declined 8% from 2011 levels Employee count and cost for ABB, December calendar year-ends, 2006-13

(mn) Employees (LHS) Per employee cost (RHS) (Rs000/employee)

8,000 1,063 1,200

847 1,000

7,000 800 626 6,926 6,752 600 6,371 6,222 6,000 6,128 400

200

5,000 0 2006 2007 2008 2009 2010

Notes: (a) Increase in employee count and cost in CY2011 was partly on account of Baldor acquisition.

Source: Company, Kotak Institutional Equities

` 420 kV GIS technology acquired. ABB India has imported the related technology in CY2013 although the same was not fully absorbed in the same.

` Royalty and related payments remain high. ABB's payments to parents and fellow subsidiaries have increased as share of sales over the past few years to 5% in CY2012-13 versus 2% in CY2006.

KOTAK INSTITUTIONAL EQUITIES RESEARCH 25 Industrials ABB

Exhibit 11: ABB's payments to parents and fellow subsidiaries have increased as share of sales Related party payments for ABB, December calendar year-ends, 2006-13

(Rs bn) Sales (LHS) Related party payments as share of sales (RHS) (%) 4.9 120 5.0

100 4.0

80 3.0 74 75 76 60 68 1.8 62 63 59 2.0 40 43 1.0 20

- - 2006 2007 2008 2009 2010 2011 2012 2013

Notes: (a) Above payments include those for royalty, trade-mark, technical, consultancy and other services.

Source: Company, Kotak Institutional Equities

Reiterate negative stance; revise fair value to `600 on higher 24X multiple

We marginally revise estimates for ABB to `19.8 and `26.1 from `19.3 and `25.2 for CY2014-15E and TP to `600 on higher 24X multiple (from `560). We also revise TP for Siemens to `510 (on higher 24X multiple). Large decadal growth requirement (23%) to justify ABB’s current market price deters us from turning positive on the otherwise large and early beneficiary of an up-cycle.

26 KOTAK INSTITUTIONAL EQUITIES RESEARCH ABB Industrials

Exhibit 12: Reverse DCF for ABB suggests a 23% revenue CAGR over CY2014-22, which is priced in over CY2013 base DCF valuation of ABB, December calendar year-ends, 2010-31E (` bn)

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2031 Total revenues 63 74 75 76 94 115 142 174 214 263 323 397 488 599 629 661 885 EBIT 1 3 3 4 8 10 14 17 21 26 32 40 49 60 63 66 89 EBIT*(1-tax rate) 1 2 2 2 5 7 9 12 14 18 22 27 33 40 42 44 59 Depreciation / Amortisation 1 1 1 1 1 1 2 2 2 3 3 4 5 6 7 8 10 (Incr)/Decr in Working Capital 1 0 (5) (0) (0) (4) (4) (5) (7) (8) (10) (12) (15) (18) (5) (5) (7) Capital Expenditure (1) (5) (1) (2) (3) (4) (5) (6) (8) (10) (12) (15) (18) (22) (6) (6) (8) Free Cash Flows 2 (1) (4) 1 2 0 1 2 2 2 3 3 4 5 38 40 54 Years discounted - - - - 0.8 1.8 2.8 3.8 4.8 5.8 6.8 7.8 8.8 9.8 10.8 11.8 17.8 Discount factor 1.0 1.0 1.0 1.0 0.9 0.8 0.7 0.6 0.6 0.5 0.5 0.4 0.4 0.3 0.3 0.3 0.1 Discounted cash flow 2 (1) (4) 1 2 0 1 1 1 1 1 1 2 2 11 10 7

Interest expense (0) (0) (0) (1) (1) (1) (1) (1) (1) (1) (1) (1) (1) (1) (1) (1) (1) Core PBT 1 3 2 3 6 9 13 16 20 25 31 39 48 59 62 65 88 Tax expense (0) (1) (1) (1) (2) (3) (4) (5) (7) (8) (10) (13) (16) (19) (20) (21) (29) Core PAT 1 2 1 2 4 6 9 11 14 17 21 26 32 39 41 44 59 Core EPS (Rs) 3 9 7 8 21 30 42 52 64 80 99 122 151 186 196 206 277

Enter target price 815 NPV Calc Sum of free cash flow 82 Near-term growth (CY2014-23) 22.9 Terminal value 94 Long-term growth (CY2024-31) 5.0 Enterprise value 176 Add Investments 0.2 WACC used (%) 12.5 Net debt 3 Terminal gorwth rate (%) 5.0 Net present value-equity 173 Capitalisation rate (%) 7.5 Shares o/s (mn) 212 Terminal value Calc NPV /share(Rs) 815 Cash flow in terminal year 54 Terminal value 758 Discount period (years) 18 Discount factor 0.1 Discounted value 94

Key assumptions EBIT margin (%) 1.9 4.0 3.4 4.9 8.0 9.0 10.0 10.0 10.0 10.0 10.0 10.0 10.0 10.0 10.0 10.0 10.0 Effective tax rate (%) 36.9 31.1 33.3 35.1 33.0 33.0 33.0 33.0 33.0 33.0 33.0 33.0 33.0 33.0 33.0 33.0 33.0

Capex as % of change in revenues 42.9 90.6 176.2 20.0 20.0 20.0 20.0 20.0 20.0 20.0 20.0 20.0 20.0 20.0 20.0 20.0

Depreciation as a % of avg. gross block 6.2 5.9 5.9 6.0 6.0 6.0 6.0 6.0 6.0 6.0 6.0 6.0 6.0 6.0 6.0 6.0 Year-end net WCap excl. cash (days of sales) 58 47 71 72 60 60 60 60 60 60 60 60 60 60 60 60 60

WACC used (%) 12.5 Terminal gorwth rate (%) 5.0

Source: Company, Kotak Institutional Equities

Exhibit 13: ABB's stock price possibly expensive even if we build a hypothesis that it recovers its past FATR and margins Valuations for ABB based on fixed asset turnover ratio and margins recovering to past peak from present low levels

Financials 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013E 2014E 2015E 2016E FATR 12.9 14.3 15.0 12.0 8.5 7.8 7.2 6.0 5.7 9.0 11.0 12.5 Revenue (Rs bn) 22.6 29.6 42.7 59.3 68.4 62.4 62.9 73.7 75.1 76.3 124.3 150.8 170.1 EBITDA (Rs bn) 2.1 3.2 4.8 7.2 7.7 5.3 0.8 2.8 2.4 3.8 9.9 14.3 17.0 EBITDA margin (%) 9.4 10.7 11.2 12.2 11.3 8.5 1.3 3.8 3.3 5.0 8.0 9.5 10.0 EPS (Rs/share) 7.1 10.3 16.1 23.2 12.9 16.7 3.0 8.7 6.7 8.3 30.1 44.9 53.7 BPS (Rs/share) 34.2 42.7 56.4 76.7 50.0 114.4 114.4 119.6 122.8 126.4 152.6 193.6 243.5

Return on Average Equity (RoAE) 27.4 32.9 35.2 29.5 15.7 2.6 7.5 5.5 6.7 21.5 26.0 24.6 Return on Average Equity (RoAE) - ex cash 45.6 50.5 54.5 33.5 16.7 0.5 5.8 2.8 3.9 17.7 24.2 26.5 Return on Average Capital Employed (RoACE) 27.3 32.4 35.1 30.3 16.3 3.1 8.3 6.2 7.8 20.3 26.2 24.8

Valuation ratios Share price (Rs) 826 Enter current market price here

Price/Earnings (P/E) 116.3 80.0 51.4 35.6 64.0 49.4 276.9 94.9 124.2 98.9 27.5 18.4 15.4 Price/Book (P/B) 24.2 19.4 14.6 10.8 16.5 7.2 7.2 6.9 6.7 6.5 5.4 4.3 3.4 Price/Sales 7.7 5.9 4.1 3.0 5.1 2.8 2.8 2.4 2.3 2.3 1.4 1.2 1.0 EV/EBITDA 80.3 53.8 35.6 23.3 45.0 32.2 202.0 60.9 71.1 45.3 17.8 12.0 9.7

Source: Company, Kotak Institutional Equities

KOTAK INSTITUTIONAL EQUITIES RESEARCH 27 Industrials ABB

Exhibit 14: Financials of ABB, December calendar year-ends, 2008-16E (` mn)

2008 2009 2010 2011 2012 2013 2014E 2015E 2016E Income statement Net revenues 68,370 62,372 62,871 73,703 75,137 76,316 79,723 88,769 103,011 Total operating expenses (60,673) (57,098) (62,033) (70,872) (72,689) (72,521) (72,746) (80,531) (93,244) Raw material cost (49,504) (45,179) (48,291) (54,785) (54,595) (53,985) (55,266) (61,529) (71,580) Employee expenses (4,030) (3,892) (4,901) (5,868) (6,240) (6,771) (6,454) (6,948) (7,830) Other expenses (7,139) (8,027) (9,111) (10,218) (11,854) (11,765) (11,026) (12,055) (13,834) EBITDA 7,698 5,274 838 2,831 2,448 3,796 6,977 8,237 9,767 EBITDA margin (%) 11.3 8.5 1.3 3.8 3.3 5.0 8.8 9.3 9.5 Other income 1,304 726 855 949 1,041 974 1,167 1,378 1,608 Interest (303) (241) (174) (307) (432) (1,011) (770) (150) — Depreciation (367) (485) (517) (795) (942) (1,033) (1,098) (1,090) (1,083) PBT 8,332 5,274 1,002 2,677 2,114 2,725 6,275 8,376 10,292 Tax (2,858) (1,728) (370) (832) (705) (956) (2,071) (2,764) (3,397) Net profit 5,474 3,546 632 1,845 1,409 1,769 4,204 5,612 6,896 EPS (Rs) 25.8 16.7 3.0 8.7 6.7 8.3 19.8 26.5 32.5 Balance sheet Shareholders funds 21,190 24,237 24,237 25,345 26,016 26,776 30,112 34,856 40,885 Equity capital 424 424 424 424 424 424 424 424 424 Reserves and surplus 20,766 23,814 23,813 24,921 25,593 26,352 29,689 34,432 40,461 Loan funds — — — 18 3,277 6,201 1,500 —— Total sources of funds 21,190 24,237 24,237 25,364 29,293 32,977 31,612 34,856 40,885 Total fixed assets 6,833 7,895 8,238 12,268 12,719 13,870 13,772 13,682 13,599 Investments 611 169 168 167 166 166 166 166 166 Cash and bank balance 3,482 5,241 5,871 2,691 868 3,166 5,959 8,880 13,332 Net working capital 10,301 10,931 9,914 9,493 14,600 14,976 10,917 11,330 12,990 Total application of funds 21,190 24,237 24,191 25,364 29,293 32,977 31,612 34,856 40,885 Cash flow statement Cash flow from operating activites 56 3,290 2,052 2,782 (2,785) 2,184 9,236 6,163 6,193 Cash flow from investing activities (2,118) (474) (598) (5,169) (1,567) (1,808) (1,000) (1,000) (1,000) Free cash flow (2,062) 2,816 1,454 (2,387) (4,352) 376 8,236 5,163 5,193 Cash flow from financing activities (472) (424) (424) (617) 2,623 2,289 (5,443) (2,242) (742) Cash generated/(utilised) (2,946) 1,759 630 (3,182) (1,730) 2,664 2,793 2,921 4,452 Net cash at start of the year 6,429 3,482 5,241 5,871 2,691 868 3,166 5,959 8,880 Net cash at end of the year 3,482 5,241 5,871 2,691 868 3,166 5,959 8,880 13,332

Source: Company, Kotak Institutional Equities estimates

28 KOTAK INSTITUTIONAL EQUITIES RESEARCH

Economy.dot INDIA Economy

Inflation APRIL 16, 2014 UPDATE BSE-30: 22,485

Inflation metric not too comforting. Both CPI and WPI accelerated in March as seasonal factors appear to have leveled off. While our projected inflation trajectory points toward a softening trend overall, the risks to inflation stays elevated. Any policy- led momentum swing for the economy by the new government could rekindle inflation fears as supply responses could be lagged. That said, the current set of inflation numbers is unlikely to prompt any immediate change in the monetary policy stance by the RBI, and we pencil in an extended status quo in rates.

CPI inflation accelerates while core remains sideways

Headline CPI expectedly rose in March, printing 8.31% as against the downwardly revised 8.03% QUICK NUMBERS in February. This reacceleration has put a halt to the three consecutive corrections in the headline print, helped by sharp correction in vegetable prices, which seem to have leveled off now. • March CPI rises to Consequently, food inflation has picked up to 9.1% from 8.6% previously. 8.31%, core sideways at 7.82% On the other hand, core CPI (excluding food and energy) remained largely sticky as against February levels, moderating a marginal ~2% points to 7.82% in March from downwardly revised • March WPI 7.84% previously. The next few months are likely to show a pick-up in headline print as seasonal accelerates to 5.7%, factors continue to normalize, before dropping sharply towards the end of CY2014, largely helped core WPI up at by favorable base effect. 3.50% WPI headline and core inflations inch up • Our base case is for March headline WPI inflation accelerated sharply, printing 5.70% after 4.68% in February. The the RBI on an pick-up in WPI was on expected lines and partly owed to the low base of March 2013. Also, like in extended pause in the case of CPI, WPI had benefitted from seasonal downward corrections of vegetable prices in the FY2015 recent months. This phenomenon now seems to have normalized. Additionally, sequential increases seen in fruits, pulses and milk have also pushed up the primary food inflation to 9.9% from 8.1% previously.

Core WPI inched up as well, printing 3.50% as against 3.15% in February, with basic metals alloys & metal products and chemical & chemical products growing 0.6% mom, nsa and 0.2% mom, nsa respectively. Notably, the sequential momentum (%3m/3m, saar) hints at core inflation stabilizing around current levels, depicting its sticky behavior.

RBI likely to stay on a pause

With seasonal factors at play for CPI (and unfavorable base effect for WPI), inflation can display a rise on a year-on-year basis in the coming months. However, this is unlikely to call for a policy action from the RBI, unless it diverges significantly from the projected trajectory. Even as CPI has emerged as the crucial macro variable for the RBI, we sense it is unlikely to totally lose focus of the WPI.

Our base estimate suggests a downward trending headline CPI (barring a few seasonal upticks), but indicates limited respite on the core front. As we hope for a new government to provide a policy momentum to the economy, the RBI should stay cognizant of any demand pick-up in 2HFY15 that can provide an upside risk to inflation in the absence of any immediate supply-side response. Added to this will be the near-term risks of an El-Nino phenomenon that might lead to renewed surprises in the food inflation to the higher side. Based on the above, we rule out the possibility of any easing of stance in the monetary policy in the months ahead and stick to our base-case scenario of an extended rate pause by the RBI in FY2015.

For Private Circulation Only. India Economy

Exhibit 1: Headline CPI inches up in March while core is largely sideways Trends in headline and core CPI (% yoy)

Headline CPI CPI Ex Food and Energy 11

10

9 8.31 7.9 8 7.82 7.5 7

6 Jul-14 Jul-13 Jul-12 Jan-15 Jan-14 Jan-13 Jan-12 Sep-14 Nov-14 Sep-13 Nov-13 Sep-12 Nov-12 Mar-15 Mar-14 Mar-13 Mar-12 May-14 May-13 May-12

Source: CEIC, Kotak Economic Research estimates

Exhibit 2: Headline and core WPI reaccelerate in March Trends in headline and core WPI (% yoy)

WPI inflation Core inflation 13

11 9 7 5.7 5.2 5

3 3.5 2.7 1

(1) (3) Jul-09 Jul-10 Jul-11 Jul-12 Jul-13 Jul-14 Nov-09 Nov-10 Nov-11 Nov-12 Nov-13 Nov-14 Mar-09 Mar-10 Mar-11 Mar-12 Mar-13 Mar-14 Mar-15

Source: CEIC, Kotak Economic Research estimates

30 KOTAK ECONOMIC RESEARCH Economy

Exhibit 3: Sequential momentum of core suggests stickiness at current levels Trends in core WPI (%3M/3M, saar)

17 Core WPI (%3m/3m,saar) 15 13 11 9 7 5 3 1 (1) Jul-11 Jul-12 Jul-13 Jan-11 Jan-12 Jan-13 Jan-14 Sep-11 Nov-11 Sep-12 Nov-12 Sep-13 Nov-13 Mar-11 Mar-12 Mar-13 Mar-14 May-11 May-12 May-13

Source: CEIC, Kotak Economic Research

KOTAK ECONOMIC RESEARCH 31

KOTAK INSTITUTIONAL EQUITIES RESEARCH March 2014: Results calendar India Daily India Summary-April16, 2014 Mon Tue Wed Thu Fri Sat Sun 14-Apr 15-Apr 16-Apr 17-Apr 18-Apr 19-Apr 20-Apr CMC DCBBA NK Indusind Bank CRISIL RIL Persistent Sys Infosys Mindtree Glaxosmithkl Phar TCS HCL Tech Liberty Shoes Wipro 21-Apr 22-Apr 23-Apr 24-Apr 25-Apr 26-Apr 27-Apr Hindustan Zinc Agro Tech Foods BSL ACC Amal LIC Housing Fin Foseco India Cairn India Ambuja Cements Axis Bank HDFC Bank Indiabulls Real Est Biocon Exide Inds Mahindra Lifesp MMFSL South Indian Bank ICICI Bank MRF SKF India IDFC L&T Finance Holdings Siemens Ultratech Cem State Bank Trav 28-Apr 29-Apr 30-Apr 1-May 2-May 3-May 4-May Alembic Pharma Automotive Stamp Dew an Housing Bata India Grasim Inds ABB India Godrej Cons Kansai Nerolac Shree Cement Dabur India Kotak Mah Bank Godrej Inds EPC Industrie Merck ING Vysya Bank Shoppers Stop Carborundum Uni 5-May 6-May 7-May 8-May 9-May 10-May 11-May IL&FS Invest Mgrs Gillette India Magma Fin Jai Corp Timken India Piramal Ent Gujarat Pipavav Procter & Gamble Zuari Agro Torrent Pharma HDFC Zuari Global TV Today 12-May 13-May 14-May 15-May 16-May 17-May 18-May Maharashtra Scoot Bajaj Finance Bajaj Auto Bajaj Finserv Bajaj Holdings Info Edge India 19-May 20-May 21-May 22-May 23-May 24-May 25-May Specular Mktg Mahindra Ugine 26-May 27-May 28-May 29-May 30-May 31-May 1-Jun

India DailyIndia Summary-April1 Godrej Inds Source: BSE, NSE, Kotak Institutional Equities 32

33 33

Kotak Institutional Equities: Valuation summary of KIE Universe stocks

O/S Target ADVT- 15-Apr-14 Mkt cap. shares EPS (Rs) EPS growth (%) PER (X) EV/EBITDA (X) Price/BV (X) Dividend yield (%) RoE (%) price Upside 3mo Company Price (Rs) Rating (Rs mn) (US$ mn) (mn) 2014E 2015E 2016E 2014E 2015E 2016E 2014E 2015E 2016E 2014E 2015E 2016E 2014E 2015E 2016E 2014E 2015E 2016E 2014E 2015E 2016E (Rs) (%) (US$ mn) Automobiles Amara Raja Batteries 409 ADD 69,828 1,160 171 22.5 23.9 27.2 34.3 6.0 14.1 18.1 17.1 15.0 11.6 10.4 9.3 5.2 4.2 3.5 1.1 1.2 1.3 31.9 27.0 25.2 410 0.3 1.7 Apollo Tyres 166 BUY 83,755 1,391 504 16.3 18.2 20.2 34.1 11.8 10.8 10.2 9.1 8.2 5.6 5.1 4.7 1.8 1.5 1.3 0.4 0.5 0.5 21.7 19.9 18.4 200 20.4 15.1 Ashok Leyland 24 SELL 62,792 1,043 2,661 (2.9) (1.4) 0.2 (636.7) 51.0 115.5 (8.1) (16.6) 107.1 (115.2) 33.0 12.5 1.5 1.7 1.6 — — 0.4 (20.2) (14.6) 2.4 15 (36.4) 4.5 Bajaj Auto 2,004 BUY 580,073 9,634 289 116.0 136.5 156.5 10.3 17.6 14.6 17.3 14.7 12.8 13.3 11.6 10.4 5.9 4.9 4.1 2.3 2.7 3.1 37.7 36.4 34.5 2,400 19.7 10.0 Bharat Forge 427 SELL 101,256 1,682 237 17.4 22.2 27.3 66.8 27.5 22.9 24.5 19.2 15.7 10.1 9.3 7.9 3.9 3.4 2.9 0.7 0.9 1.1 16.7 18.9 19.9 365 (14.5) 5.6 Eicher Motors 6,018 ADD 162,715 2,702 27 145.7 235.4 328.1 21.3 61.6 39.4 41.3 25.6 18.3 20.8 15.6 10.0 7.9 6.2 4.8 0.5 0.4 0.5 19.2 25.3 27.8 5,900 (2.0) 2.7 Exide Industries 126 ADD 107,143 1,779 850 5.1 6.3 7.4 (16.6) 23.0 16.8 24.6 20.0 17.1 14.6 12.8 11.2 2.9 2.6 2.4 1.0 1.3 1.5 12.2 13.7 14.5 125 (0.8) 3.5 Hero Motocorp 2,220 REDUCE 443,404 7,364 200 102.6 135.0 159.8 (3.3) 31.6 18.3 21.6 16.4 13.9 15.2 11.3 9.4 6.5 5.3 4.3 1.4 2.1 2.5 35.3 37.1 35.4 2,050 (7.7) 11.1 Mahindra & Mahindra 985 BUY 553,500 9,192 562 63.7 71.0 80.7 1.1 11.4 13.8 15.5 13.9 12.2 11.0 9.7 8.5 3.2 2.8 2.5 1.7 2.0 2.2 20.3 20.1 19.5 1,200 21.9 16.6 Maruti Suzuki 1,927 ADD 582,169 9,668 302 96.5 118.8 151.1 21.9 23.1 27.1 20.0 16.2 12.8 11.6 9.1 6.6 2.7 2.4 2.0 0.6 0.7 0.9 14.4 15.5 17.1 2,025 5.1 26.0 Motherson Sumi Systems 254 ADD 224,204 3,723 882 7.3 13.0 17.1 44.9 77.5 32.2 34.8 19.6 14.8 10.4 7.0 5.1 7.5 5.2 3.7 0.9 1.5 2.0 30.4 33.1 29.1 265 4.2 4.9 Tata Motors 412 ADD 1,325,592 22,015 3,218 44.8 54.9 65.3 45.7 22.5 19.1 9.2 7.5 6.3 4.5 4.0 3.4 2.3 1.8 1.4 — — — 30.3 27.2 24.9 450 9.2 41.5 Automobiles Neutral 4,296,430 71,353 21.6 21.5 20.7 14.6 12.0 10.0 7.7 6.4 5.3 3.2 2.6 2.1 0.9 1.1 1.3 22.0 21.8 21.5 143.3 Banks/Financial Institutions Axis Bank 1,445 ADD 676,288 11,231 468 127.6 136.4 153.5 15.3 6.8 12.6 11.3 10.6 9.4 — — — 1.8 1.6 1.4 1.6 1.9 2.2 16.8 15.9 15.8 1,550 7.3 72.4 Bajaj Finserv 771 BUY 122,626 2,037 159 85.6 89.6 100.1 (17.2) 4.7 11.6 9.0 8.6 7.7 — — — 1.4 1.2 1.1 1.8 1.8 1.8 16.2 14.8 14.6 850 10.3 0.4 Bank of Baroda 753 ADD 324,342 5,387 431 98.8 106.3 127.1 (6.9) 7.6 19.6 7.6 7.1 5.9 — — — 1.1 1.0 0.9 2.7 2.9 3.4 13.0 12.6 13.6 750 (0.4) 22.7 Bank of India 221 ADD 141,846 2,356 643 44.0 57.2 59.7 (4.5) 29.9 4.4 5.0 3.9 3.7 — — — 0.7 0.6 0.6 4.3 5.6 5.9 11.6 13.5 12.8 245 11.1 15.7 Canara Bank 270 REDUCE 124,402 2,066 461 46.8 57.7 73.1 (27.7) 23.1 26.7 5.8 4.7 3.7 — — — 0.6 0.6 0.5 3.5 4.3 5.4 8.3 9.5 11.1 260 (3.6) 10.9 Cholamandalam 287 ADD 41,098 683 143 26.0 30.6 35.2 21.6 17.7 14.9 11.0 9.4 8.2 — — — 1.8 1.6 1.4 1.4 1.7 1.9 17.6 17.9 17.8 300 4.5 0.4 City Union Bank 55 BUY 29,585 491 538 5.8 7.2 8.4 (14.7) 24.1 16.3 9.5 7.6 6.6 — — — 1.5 1.3 1.2 1.6 1.9 2.2 17.0 17.6 17.7 65 18.2 0.4 DCB Bank 66 BUY 16,407 272 250 6.0 6.8 8.0 48.0 13.0 16.6 10.9 9.6 8.2 — — — 1.5 1.3 1.2 — — — 14.7 14.4 14.5 70 6.7 0.8 Federal Bank 93 BUY 79,842 1,326 855 8.7 11.7 14.5 (11.6) 35.1 23.8 10.8 8.0 6.4 — — — 1.2 1.1 0.9 1.7 2.3 2.9 11.1 13.6 15.1 110 17.8 4.2 HDFC 888 REDUCE 1,372,386 22,792 1,546 35.8 41.0 46.9 14.3 14.3 14.4 24.8 21.7 18.9 — — — 4.9 4.4 3.9 1.6 1.8 2.1 20.9 21.4 21.8 850 (4.2) 43.1 HDFC Bank 724 REDUCE 1,722,580 28,608 2,379 36.1 44.6 53.2 27.8 23.6 19.3 20.0 16.2 13.6 — — — 4.1 3.4 2.9 1.0 1.2 1.4 21.7 22.6 22.7 720 (0.5) 27.0 ICICI Bank 1,219 BUY 1,406,802 23,363 1,154 82.7 84.6 98.8 14.7 2.3 16.8 14.7 14.4 12.3 — — — 2.0 1.8 1.7 2.0 2.1 2.4 13.7 12.8 13.7 1,375 12.8 67.9 IDFC 120 BUY 180,727 3,001 1,512 12.5 13.5 16.3 2.7 8.1 21.3 9.6 8.9 7.3 — — — 1.2 1.1 1.0 1.9 2.2 2.6 13.2 12.9 14.1 140 17.2 19.6 IIFL Holdings 78 ADD 23,576 392 304 9.2 9.7 11.2 (0.5) 6.0 14.9 8.4 8.0 6.9 — — — 1.1 1.0 0.9 2.0 2.1 2.5 13.8 13.3 13.5 70 (9.7) 0.2 IndusInd Bank 483 ADD 252,677 4,196 523 25.3 28.4 34.0 24.9 11.9 19.7 19.1 17.0 14.2 — — — 3.0 2.6 2.3 0.8 0.9 1.0 16.8 16.3 17.0 560 15.9 15.1 ING Vysya Bank 584 ADD 107,899 1,792 185 38.3 42.4 48.0 (3.3) 10.8 13.2 15.3 13.8 12.2 — — — 1.6 1.4 1.3 0.9 1.0 1.1 12.3 10.8 11.1 650 11.4 0.9 J&K Bank 1,655 REDUCE 80,254 1,333 48 226.3 204.3 205.3 4.0 (9.7) 0.5 7.3 8.1 8.1 — — — 1.4 1.3 1.2 3.1 2.6 2.6 20.8 16.4 14.7 1,450 (12.4) 1.2 Karur Vysya Bank 371 ADD 39,801 661 107 32.1 63.3 76.4 (37.5) 97.5 20.6 11.6 5.9 4.9 — — — 1.2 1.1 0.9 2.2 4.3 5.1 10.7 19.0 20.0 410 10.4 0.9 LIC Housing Finance 265 ADD 133,660 2,220 505 26.1 30.6 35.9 28.6 17.4 17.2 10.2 8.7 7.4 — — — 1.8 1.6 1.4 2.0 2.3 2.7 18.8 19.1 19.3 250 (5.6) 12.3 L&T Finance Holdings 68 SELL 116,089 1,928 1,715 3.3 4.6 5.7 (21.4) 38.8 22.0 20.2 14.6 12.0 — — — 1.9 1.6 1.4 — — — 9.8 11.9 12.9 55 (18.8) 11.4 Magma Fincorp 80 BUY 15,200 252 190 7.3 9.0 9.8 11.4 23.5 8.8 11.0 8.9 8.2 — — — 1.0 0.9 0.8 1.5 1.8 2.0 9.5 10.9 11.3 100 25.0 0.1 India Daily Summary DailySummary 16, India 2014- April Mahindra & Mahindra Financial 235 SELL 133,479 2,217 568 15.1 18.1 20.8 (2.6) 19.5 15.0 15.5 13.0 11.3 — — — 2.7 2.4 2.1 1.5 1.8 2.1 18.0 18.8 18.9 220 (6.3) 8.6 Muthoot Finance 165 NR 61,258 1,017 372 21.2 23.1 25.1 (21.6) 9.3 8.6 7.8 7.1 6.6 — — — 1.5 1.3 1.2 5.1 5.6 6.1 19.5 19.6 19.2 — — — Oriental Bank of Commerce 221 ADD 66,147 1,099 300 35.3 49.7 55.7 (22.5) 40.9 12.1 6.3 4.4 4.0 — — — 0.6 0.6 0.5 3.2 4.6 5.1 8.0 10.5 10.9 240 8.8 5.6 PFC 188 BUY 248,232 4,123 1,319 41.5 42.8 46.2 23.7 3.3 7.8 4.5 4.4 4.1 — — — 0.9 0.9 0.8 4.6 4.8 5.1 20.9 18.6 17.5 205 9.0 8.5 Punjab National Bank 764 REDUCE 276,513 4,592 362 95.8 131.3 151.1 (28.7) 37.1 15.1 8.0 5.8 5.1 — — — 1.0 0.9 0.8 2.5 3.5 4.0 10.6 13.1 13.6 730 (4.4) 17.0 Reliance Capital 364 ADD 89,504 1,486 246 13.4 20.2 25.4 (50.2) 50.8 26.1 27.2 18.0 14.3 — — — 0.8 0.7 0.7 1.1 1.7 2.1 2.8 4.2 5.1 450 23.8 16.7 Rural Electrification Corp. 241 ADD 238,356 3,958 987 47.8 48.5 52.2 23.5 1.5 7.7 5.1 5.0 4.6 — — — 1.1 1.0 1.0 3.6 4.0 4.6 24.4 20.8 19.2 255 5.6 6.1 Shriram City Union Finance 1,215 NR 71,867 1,194 59 76.5 94.0 107.6 (5.7) 22.8 14.5 15.9 12.9 11.3 — — — 2.6 2.2 1.9 0.8 1.0 1.1 17.9 18.3 18.0 — — 0.9 Shriram Transport 733 REDUCE 163,573 2,717 223 57.5 67.3 81.8 (5.6) 17.0 21.4 12.7 10.9 9.0 — — — 2.0 1.8 1.5 1.1 1.3 1.6 16.6 16.9 17.7 670 (8.6) 5.7 State Bank of India 1,964 ADD 1,466,299 24,352 747 141.2 179.1 200.2 (31.5) 26.9 11.8 13.9 11.0 9.8 — — — 1.8 1.6 1.4 2.2 2.3 2.4 9.8 11.1 11.5 2,050 4.4 60.3 Union Bank 152 ADD 95,617 1,588 630 25.3 34.6 40.1 (29.7) 36.7 15.8 6.0 4.4 3.8 — — — 0.7 0.6 0.5 3.7 5.0 5.8 9.6 12.0 12.6 145 (4.4) 7.9 Yes Bank 420 REDUCE 150,550 2,500 359 38.7 40.9 47.5 6.6 5.7 16.3 10.9 10.3 8.8 — — — 2.2 1.9 1.6 1.5 1.6 1.9 23.3 19.5 19.4 370 (11.9) 39.2 KOTAK INSTITUTIONAL EQUITIES RESEARCH Banks/Financial Institutions Cautious 10,069,481 167,229 (0.3) 15.8 14.7 12.3 10.6 9.2 ——— 1.8 1.7 1.5 1.9 2.1 2.4 14.9 15.7 16.0 504.1 Cement ACC 1,362 REDUCE 255,855 4,249 188 46.9 55.0 69.9 (36.4) 17.4 27.0 29.0 24.7 19.5 17.2 12.8 10.6 3.1 2.9 2.7 1.6 1.7 1.7 11.6 12.7 14.8 1,070 (21.4) 5.8 Ambuja Cements 214 SELL 325,560 5,407 1,522 6.8 9.2 10.8 (34.6) 35.4 17.5 31.6 23.4 19.9 18.1 14.4 12.4 3.2 3.1 3.0 1.3 1.4 2.2 10.5 13.6 14.9 150 (29.9) 5.2 Grasim Industries 2,780 ADD 255,148 4,237 92 206.5 227.0 278.3 (24.2) 9.9 22.6 13.5 12.2 10.0 7.9 6.2 4.8 1.2 1.1 1.0 1.2 1.2 1.2 9.3 9.4 10.6 2,800 0.7 3.3 India Cements 74 ADD 22,670 376 307 2.7 5.1 8.4 (60.7) 92.3 64.5 27.7 14.4 8.8 6.3 4.9 4.0 0.5 0.5 0.5 3.6 3.7 3.6 2.0 3.8 5.9 60 (18.7) 1.8 Shree Cement 5,832 SELL 203,173 3,374 35 220.4 285.1 358.2 (23.6) 29.4 25.6 26.5 20.5 16.3 16.4 12.6 9.6 4.6 3.9 3.2 0.3 0.3 0.3 18.9 20.6 21.3 3,950 (32.3) 1.7 UltraTech Cement 2,212 REDUCE 606,527 10,073 274 68.9 82.8 111.2 (32.0) 20.2 34.3 32.1 26.7 19.9 17.3 13.6 10.2 3.2 2.8 2.5 0.5 0.5 0.5 11.8 12.7 15.1 1,600 (27.7) 5.8 Cement Cautious 1,668,933 27,717 (30.7) 21.2 26.8 25.5 21.0 16.6 13.4 10.6 8.3 2.5 2.3 2.1 1.0 1.0 1.1 9.7 10.8 12.4 23.7

Source: Company, Bloomberg, Kotak Institutional Equities estimates

KOTAK INSTITUTIONAL EQUITIES RESEARCH Kotak Institutional Equities: Valuation summary of KIE Universe stocks India Daily India Summary-April16, 2014

O/S Target ADVT- 15-Apr-14 Mkt cap. shares EPS (Rs) EPS growth (%) PER (X) EV/EBITDA (X) Price/BV (X) Dividend yield (%) RoE (%) price Upside 3mo Company Price (Rs) Rating (Rs mn) (US$ mn) (mn) 2014E 2015E 2016E 2014E 2015E 2016E 2014E 2015E 2016E 2014E 2015E 2016E 2014E 2015E 2016E 2014E 2015E 2016E 2014E 2015E 2016E (Rs) (%) (US$ mn) Consumer products Asian Paints 535 SELL 512,692 8,515 959 12.6 14.6 16.9 8.4 16.2 15.6 42.5 36.6 31.6 25.4 21.9 18.9 12.2 10.4 9.0 1.0 1.2 1.5 32.7 32.4 32.2 425 (20.5) 8.3 Bajaj Corp. 218 BUY 32,207 535 148 12.2 14.4 16.1 8.7 17.5 11.8 17.8 15.2 13.6 16.5 13.8 11.6 5.9 5.3 4.7 3.2 3.8 4.2 32.4 31.3 32.7 245 12.2 0.3 Britannia Industries 883 BUY 105,910 1,759 120 32.1 38.4 46.4 48.0 19.4 20.9 27.5 23.0 19.0 19.1 15.8 13.1 13.8 10.6 8.4 1.4 1.9 2.4 58.1 52.2 49.4 1,050 18.9 1.2 Colgate-Palmolive (India) 1,397 SELL 190,023 3,156 136 35.2 41.1 48.3 (3.7) 16.9 17.4 39.7 34.0 28.9 28.9 23.8 19.9 33.6 31.7 29.9 2.0 2.4 2.8 88.7 92.4 102.5 1,200 (14.1) 1.7 Dabur India 179 ADD 311,791 5,178 1,744 5.2 6.3 7.4 18.4 21.6 17.4 34.3 28.2 24.0 27.6 22.6 19.0 11.9 9.6 7.9 1.1 1.3 1.6 38.3 37.7 36.0 190 6.3 4.1 GlaxoSmithKline Consumer 4,375 REDUCE 183,993 3,056 42 162.4 149.7 172.8 56.4 (7.9) 15.5 26.9 29.2 25.3 23.6 26.7 21.9 11.4 9.8 8.5 1.7 1.7 2.1 45.0 34.8 34.9 4,200 (4.0) 0.9 Godrej Consumer Products 842 REDUCE 286,583 4,759 340 22.3 27.3 32.9 10.3 22.3 20.5 37.7 30.8 25.6 26.5 21.5 17.3 7.0 5.9 5.0 0.7 0.8 1.0 21.3 22.4 23.0 735 (12.7) 3.1 Hindustan Unilever 612 REDUCE 1,323,836 21,986 2,163 16.8 18.7 20.4 9.1 11.3 9.2 36.4 32.7 29.9 28.7 25.2 22.1 37.4 30.4 25.7 1.8 2.1 2.4 113.3 97.5 89.1 560 (8.5) 13.1 ITC 341 ADD 2,751,732 45,699 8,071 10.9 12.4 13.9 16.3 14.7 11.9 31.4 27.4 24.5 22.6 19.2 16.8 10.4 9.4 8.5 1.8 2.2 2.6 36.6 37.8 38.5 365 7.1 38.0 Jubilant Foodworks 1,027 SELL 68,303 1,134 66 20.4 27.6 38.0 2.4 35.1 37.8 50.3 37.2 27.0 25.1 18.7 13.9 12.6 10.0 7.9 0.3 0.5 0.9 27.7 29.9 32.9 925 (9.9) 2.1 Jyothy Laboratories 202 ADD 36,476 606 181 7.3 11.5 12.5 87.3 57.8 9.3 27.7 17.6 16.1 20.2 16.3 12.5 3.8 3.2 2.8 1.2 1.2 1.5 16.3 19.9 18.8 215 6.7 0.6 Marico 210 REDUCE 135,585 2,252 645 7.5 8.6 9.8 34.2 13.8 14.5 27.9 24.5 21.4 19.6 16.9 14.4 8.3 6.8 5.6 1.1 1.3 1.6 30.9 28.8 27.5 215 2.3 1.0 Nestle India 4,834 SELL 466,075 7,740 96 114.4 128.5 153.1 3.3 12.3 19.2 42.2 37.6 31.6 23.4 21.0 18.0 18.0 14.7 12.1 1.0 1.2 1.5 56.4 49.0 47.0 4,500 (6.9) 4.3 Page Industries 5,648 REDUCE 63,000 1,046 11 137.3 186.4 222.8 36.1 35.8 19.5 41.1 30.3 25.4 26.1 19.6 16.3 21.4 15.6 11.6 1.1 1.3 1.5 61.0 60.5 53.2 6,100 8.0 2.3 Speciality Restaurants 145 BUY 6,821 113 47 4.4 5.1 6.3 (11.3) 16.0 23.0 32.8 28.3 23.0 18.2 13.7 10.3 2.2 2.1 1.9 1.0 1.4 1.7 6.9 7.5 8.5 145 (0.2) 0.3 Tata Global Beverages 153 REDUCE 96,594 1,604 631 6.0 7.2 8.0 (6.4) 20.5 11.2 25.7 21.3 19.2 14.6 13.0 11.7 1.6 1.5 1.4 1.5 1.8 2.1 7.6 8.6 9.1 138 (9.8) 5.8 Titan Industries 257 ADD 228,516 3,795 888 8.1 9.6 11.6 (0.7) 18.7 20.0 31.7 26.7 22.3 22.4 17.7 14.7 9.4 7.7 6.4 1.0 1.2 1.6 32.8 31.8 31.5 275 6.8 5.4 United Breweries 824 SELL 217,976 3,620 264 6.7 11.9 16.2 2.6 77.5 36.1 123.0 69.3 50.9 42.8 28.9 23.6 14.9 12.7 10.5 0.1 0.2 0.3 11.6 19.3 22.0 650 (21.2) 2.7 United Spirits 2,854 BUY 414,758 6,888 145 22.2 47.5 68.7 145.3 113.6 44.6 128.3 60.0 41.5 47.8 24.9 20.5 5.3 4.9 4.4 0.1 0.2 0.3 5.1 8.5 11.2 2,700 (5.4) 30.8 Consumer products Cautious 7,432,871 123,441 17.3 17.5 14.9 35.8 30.5 26.5 25.2 21.0 18.0 10.9 9.5 8.4 1.4 1.7 2.0 30.3 31.3 31.7 125.9 Constructions Sadbhav Engineering 119 BUY 20,368 338 171 5.4 9.2 10.2 9.4 71.0 10.7 22.1 12.9 11.7 9.8 7.3 6.8 1.8 1.6 1.4 0.5 0.5 0.5 7.9 12.0 11.9 160 34.7 0.3 Construction Cautious 20,368 338 192.7 127.2 (41.7) 15.5 6.8 11.7 6.4 5.6 10.0 0.5 0.5 1.4 0.7 1.1 0.5 3.3 7.0 11.9 0.3 Energy Aban Offshore 521 RS 22,680 377 44 67.1 94.4 106.3 73.7 40.7 12.6 7.8 5.5 4.9 7.9 6.8 6.8 0.8 0.8 0.7 1.0 1.0 1.1 13.3 15.2 14.5 — — 19.5 Bharat Petroleum 446 BUY 322,277 5,352 723 39.3 37.6 37.8 7.5 (4.2) 0.4 11.3 11.8 11.8 7.0 7.3 6.9 1.6 1.5 1.4 2.6 2.5 2.5 14.0 12.3 11.4 560 25.6 10.0 Cairn india 359 ADD 686,646 11,403 1,911 65.8 56.2 48.6 4.2 (14.6) (13.5) 5.5 6.4 7.4 4.3 4.3 4.5 1.2 1.0 0.9 3.3 3.3 3.3 23.6 17.3 13.4 375 4.4 13.6 Castrol India 303 SELL 149,691 2,486 495 10.0 10.7 11.8 10.3 7.5 9.8 30.3 28.2 25.7 20.9 18.8 17.0 21.4 30.7 29.0 2.3 2.8 3.1 76.9 89.4 116.2 250 (17.4) 0.7 GAIL (India) 368 ADD 466,864 7,753 1,268 36.1 36.7 39.6 0.2 1.7 8.0 10.2 10.0 9.3 6.9 6.1 5.3 1.5 1.4 1.2 2.6 2.9 3.3 15.4 13.8 13.3 410 11.4 7.6 GSPL 69 ADD 38,939 647 563 7.5 7.0 8.0 (21.6) (6.5) 13.8 9.2 9.9 8.7 5.1 5.2 4.6 1.0 0.9 0.9 1.4 2.0 4.6 11.9 10.0 10.5 70 1.2 0.5 Hindustan Petroleum 314 ADD 106,517 1,769 339 17.2 25.6 29.6 (30.7) 49.0 15.6 18.3 12.3 10.6 10.3 8.0 7.0 0.6 0.6 0.6 1.7 2.6 3.0 3.1 4.5 5.0 330 5.0 6.5 Indian Oil Corporation 266 ADD 646,684 10,740 2,428 19.9 25.5 32.9 18.3 28.2 29.1 13.4 10.4 8.1 7.6 5.7 4.3 1.0 0.9 0.8 2.8 3.4 4.1 7.0 8.4 10.0 315 18.3 3.8 Oil India 482 BUY 289,659 4,811 601 52.4 60.1 68.1 (12.2) 14.7 13.3 9.2 8.0 7.1 3.4 2.7 2.2 1.3 1.2 1.1 5.0 5.0 5.6 13.1 14.0 14.5 590 22.4 3.0 Oil & Natural Gas Corporation 319 ADD 2,732,205 45,375 8,556 30.8 36.0 39.3 5.0 16.9 9.1 10.4 8.9 8.1 4.8 3.9 3.5 1.3 1.2 1.1 3.3 3.9 4.4 12.5 13.3 13.2 350 9.6 20.4 Petronet LNG 142 BUY 106,500 1,769 750 9.3 10.7 13.4 (39.4) 14.9 25.5 15.3 13.3 10.6 8.9 7.1 6.0 1.9 1.7 1.5 1.4 1.9 2.5 13.0 13.1 14.4 155 9.2 2.6 Reliance Industries 949 ADD 2,787,507 46,293 2,937 68.4 75.5 77.4 5.2 10.4 2.6 13.9 12.6 12.3 9.6 7.9 7.6 1.3 1.2 1.1 0.9 1.1 1.1 11.0 11.0 10.3 1,060 11 .7 53.2 Energy Attractive 8,356,170 138,775 3.8 9.1 6.0 10.6 9.7 9.2 6.5 5.5 4.9 1.3 1.2 1.1 2.4 2.7 3.0 12.2 12.1 11.7 141.5 Industrials ABB 815 SELL 172,737 2,869 212 9.8 19.7 26.3 47.6 100.2 34.0 83.0 41.5 31.0 44.9 25.3 20.4 6.3 5.6 4.9 0.4 0.4 0.4 7.8 14.4 16.9 520 (36.2) 4.9 Bharat Heavy Electricals 182 SELL 445,463 7,398 2,448 13.9 10.0 10.5 (48.6) (27.7) 4.8 13.1 18.1 17.3 10.4 12.3 11.7 1.4 1.3 1.2 1.6 1.2 1.2 10.7 7.3 7.2 110 (39.6) 18.3 Crompton Greaves 178 BUY 111,751 1,856 627 4.2 8.5 10.9 222.2 101.5 28.9 42.3 21.0 16.3 17.1 12.4 9.9 3.0 2.7 2.4 0.8 0.9 1.1 7.2 13.5 15.6 165 (7.5) 8.6 Cummins India 569 SELL 157,824 2,621 277 22.1 24.8 27.5 (21.8) 12.3 10.8 25.7 22.9 20.7 24.1 20.8 18.2 5.9 5.3 4.8 1.8 1.9 2.1 24.3 23.1 22.9 470 (17.4) 2.4 Kalpataru Power Transmission 107 BUY 16,344 271 153 11.5 14.5 15.6 30.7 26.7 7.3 9.3 7.3 6.8 6.4 5.8 4.8 0.8 0.7 0.7 1.4 1.4 1.4 7.9 9.2 9.4 130 22.1 0.4 KEC International 74 BUY 19,037 316 257 3.8 7.6 10.0 48.1 103.6 31.2 19.7 9.7 7.4 7.3 5.6 4.8 1.5 1.2 1.1 0.8 1.5 2.0 7.7 13.6 15.1 80 8.0 0.4 Larsen & Toubro 1,298 ADD 1,198,045 19,897 923 50.7 58.4 71.8 (3.3) 15.3 22.8 25.6 22.2 18.1 17.5 15.6 13.5 3.1 2.7 2.3 0.9 1.0 1.2 12.8 13.0 13.9 1,300 0.2 43.7 Siemens 756 SELL 269,225 4,471 356 5.1 7.5 9.1 203.3 48.3 20.8 149.6 100.9 83.5 31.1 23.8 20.4 6.1 5.4 4.8 0.6 0.7 0.8 8.5 11.4 12.3 460 (39.2) 4.3 Thermax 729 REDUCE 86,860 1,443 119 24.4 32.3 37.5 (4.3) 32.1 16.2 29.8 22.6 19.4 18.3 14.6 11.9 4.2 3.8 3.3 1.0 1.3 1.5 14.8 17.6 18.1 630 (13.6) 0.7

Voltas 164 BUY 54,202 900 331 6.5 8.5 10.3 9.7 DailyIndia Summary-April1 31.2 20.8 25.3 19.3 16.0 17.8 12.4 10.0 3.1 2.8 2.5 1.2 1.6 1.9 12.5 15.0 16.4 150 (8.5) 7.5 Industrials Cautious 2,531,489 42,042 (22.4) 7.4 18.3 24.6 22.9 19.4 16.8 15.2 13.2 2.7 2.5 2.2 1.1 1.1 1.2 11.1 10.8 11.5 91.2

Source: Company, Bloomberg, Kotak Institutional Equities estimates 34

35 35

Kotak Institutional Equities: Valuation summary of KIE Universe stocks

O/S Target ADVT- 15-Apr-14 Mkt cap. shares EPS (Rs) EPS growth (%) PER (X) EV/EBITDA (X) Price/BV (X) Dividend yield (%) RoE (%) price Upside 3mo Company Price (Rs) Rating (Rs mn) (US$ mn) (mn) 2014E 2015E 2016E 2014E 2015E 2016E 2014E 2015E 2016E 2014E 2015E 2016E 2014E 2015E 2016E 2014E 2015E 2016E 2014E 2015E 2016E (Rs) (%) (US$ mn) Infrastructure Adani Port and SEZ 187 ADD 377,263 6,265 2,017 8.1 10.9 13.9 0.1 35.7 27.1 23.2 17.1 13.5 15.7 12.7 9.8 4.5 3.7 3.0 0.8 1.0 1.2 21.7 23.6 24.5 200 7.0 7.1 Container Corporation 919 BUY 179,187 2,976 195 51.3 58.7 67.8 6.5 14.4 15.5 17.9 15.6 13.5 13.3 11.1 9.3 2.6 2.3 2.0 1.3 1.5 1.7 15.1 15.4 15.9 1,025 11.5 1.1 Gujarat Pipavav Port 85 BUY 41,117 683 483 4.0 5.5 5.8 163.6 36.0 6.3 21.1 15.5 14.6 15.3 11.9 9.9 2.9 2.5 2.1 — — — 17.7 18.4 16.8 100 17.6 1.4 IRB Infrastructure 116 ADD 38,405 638 332 14.7 11.8 3.2 (12.2) (19.5) (73.3) 7.9 9.8 36.5 7.6 7.3 6.7 0.9 0.8 0.9 3.5 3.5 3.5 12.6 8.8 2.3 85 (26.4) 5.0 Infrastructure Cautious 635,971 10,562 3.6 21.1 12.6 19.2 15.9 14.1 13.0 10.9 8.9 3.0 2.6 2.3 1.0 1.2 1.4 15.6 16.5 16.2 14.6 Media DB Corp 285 ADD 52,334 869 183 16.2 18.5 21.3 35.9 14.6 15.2 17.7 15.4 13.4 10.2 8.8 7.6 4.4 3.9 3.5 2.5 3.2 3.9 26.9 27.2 27.9 330 15.6 0.8 DishTV 49 ADD 51,643 858 1,065 (0.8) 0.5 1.8 38.8 159.4 305.6 (63.9) 107.6 26.5 10.2 8.8 7.0 (21.9) (27.4) 798 — — — 41.3 (22.6) (214) 60 23.7 2.8 Eros International 165 ADD 15,194 252 92 18.1 21.5 18.1 5.4 18.7 (16.0) 9.1 7.7 9.1 6.7 5.5 6.2 1.3 1.1 1.0 — — — 15.4 15.6 11.3 180 8.9 0.8 Jagran Prakashan 104 BUY 32,732 544 316 6.3 7.5 9.3 25.0 19.1 23.0 16.4 13.8 11.2 9.0 7.7 6.4 3.2 3.0 2.7 3.0 4.0 4.9 20.5 22.4 25.3 130 25.6 0.6 Sun TV Network 399 ADD 157,415 2,614 394 18.0 21.3 24.0 0.0 18.3 12.7 22.2 18.7 16.6 13.2 11.3 10.0 4.9 4.6 4.3 2.5 3.3 4.0 24.1 26.2 27.6 410 2.6 3.8 Zee Entertainment Enterprises 267 REDUCE 253,175 4,205 950 9.2 11.2 13.1 20.9 22.8 16.8 29.1 23.7 20.3 19.9 15.7 13.3 4.8 4.5 4.4 0.8 1.0 1.1 17.3 19.9 22.2 260 (2.4) 13.5 Media Neutral 593,403 9,855 15.8 26.8 16.5 24.6 19.4 16.7 12.8 10.6 9.3 4.3 3.9 3.7 1.6 2.1 2.6 17.3 20.3 22.1 23.2 Metals & Mining Coal India 293 BUY 1,849,431 30,714 6,316 24.4 27.9 34.9 (11.0) 14.0 25.4 12.0 10.5 8.4 6.6 5.4 4.2 3.9 3.4 2.9 8.9 4.9 6.1 31.5 34.7 37.5 335 14.4 17.9 Hindalco Industries 134 REDUCE 276,757 4,596 2,065 11.6 14.2 15.9 (26.6) 22.3 12.1 11.6 9.4 8.4 10.2 7.5 6.2 0.7 0.7 0.6 1.0 1.0 1.0 6.4 7.3 7.6 110 (17.9) 18.7 Hindustan Zinc 130 ADD 550,940 9,150 4,225 16.3 15.9 16.1 (0.2) (2.7) 1.5 8.0 8.2 8.1 4.2 3.9 3.2 1.5 1.3 1.1 2.4 2.4 2.4 18.0 15.4 14.0 160 22.7 3.0 Jindal Steel and Power 268 REDUCE 250,854 4,166 935 23.5 22.5 23.4 (24.6) (4.0) 3.7 11.4 11.9 11.5 9.8 7.9 6.5 1.0 1.0 0.9 0.7 0.7 0.7 9.7 8.4 8.1 240 (10.6) 8.6 JSW Steel 1,012 SELL 244,727 4,064 242 73.7 104.0 126.0 124.2 41.1 21.2 13.7 9.7 8.0 6.3 6.0 5.3 1.1 1.0 0.9 0.9 0.9 0.9 8.3 11.0 12.0 820 (19.0) 12.5 National Aluminium Co. 39 REDUCE 100,770 1,674 2,577 2.5 3.0 2.9 8.0 21.8 (4.5) 15.7 12.9 13.5 5.2 4.0 4.4 0.8 0.8 0.8 3.2 3.2 3.2 5.3 6.3 5.8 32 (18.2) 0.3 NMDC 150 ADD 594,903 9,880 3,965 16.1 16.9 16.8 (1.8) 5.3 (1.1) 9.3 8.9 9.0 5.2 5.0 5.2 2.0 1.9 1.8 6.7 6.7 6.7 22.5 22.2 20.5 165 10.0 6.9 Sesa Sterlite 190 ADD 562,991 9,350 2,965 19.5 20.5 19.0 (26.1) 5.6 (7.7) 9.8 9.2 10.0 4.7 4.6 4.4 0.8 0.7 0.7 1.6 1.6 1.6 8.9 8.2 7.1 210 10.6 18.6 Tata Steel 409 REDUCE 397,452 6,601 971 35.5 41.9 46.9 937.2 18.0 12.0 11.5 9.8 8.7 7.1 6.5 6.0 1.1 1.0 0.9 2.0 2.0 2.0 9.7 10.6 10.9 400 (2.2) 38.4 Metals & Mining Neutral 4,828,826 80,195 (4.0) 10.1 11.0 10.7 9.8 8.8 6.3 5.7 5.0 1.5 1.4 1.3 5.1 3.5 4.0 14.0 14.2 14.4 124.9 Pharmaceutical Apollo Hospitals 890 REDUCE 123,828 2,056 139 25.7 28.6 37.2 17.7 11.0 30.2 34.6 31.2 23.9 18.7 16.6 13.3 4.1 3.8 3.4 0.7 0.8 1.1 12.5 12.7 14.9 850 (4.5) 2.0 Biocon 452 SELL 89,221 1,482 198 20.0 23.8 27.0 28.9 19.0 13.4 22.5 18.9 16.7 13.0 11.2 9.6 3.0 2.7 2.5 1.3 1.6 1.8 14.0 15.1 15.5 370 (18.1) 7.7 Cipla 401 ADD 321,690 5,342 803 15.9 18.9 23.0 (17.8) 18.2 21.9 25.1 21.2 17.4 16.6 14.0 11.3 3.1 2.8 2.4 0.5 0.5 — 13.6 13.9 14.9 420 4.8 11.9 Cadila Healthcare 976 ADD 199,773 3,318 205 35.6 45.7 59.1 11.6 28.2 29.3 27.4 21.4 16.5 21.8 16.3 12.8 5.7 4.8 4.0 0.9 1.1 1.4 22.7 24.5 26.3 920 (5.7) 2.9 Divi's Laboratories 1,318 SELL 174,830 2,903 133 61.4 66.6 78.4 35.3 8.5 17.7 21.5 19.8 16.8 16.6 13.9 11.6 5.8 4.9 4.1 1.5 1.6 1.9 29.6 26.9 26.7 1,200 (8.9) 4.7 Dr Reddy's Laboratories 2,575 BUY 438,871 7,289 170 129.0 146.2 168.6 34.0 13.3 15.3 20.0 17.6 15.3 13.7 12.1 10.3 4.8 4.0 3.3 0.8 0.9 1.0 26.8 24.8 23.6 2,950 14.6 17.7 GlaxoSmithKline Pharmaceuticals 2,501 RS 211,972 3,520 85 63.4 68.4 83.7 (22.2) 7.9 22.4 39.5 36.6 29.9 33.6 29.7 22.7 10.2 9.9 9.5 1.9 2.1 2.5 26.3 27.5 32.4 — — 4.2 Glenmark Pharmaceuticals 581 ADD 157,490 2,616 271 26.0 32.7 40.0 14.6 25.7 22.3 22.4 17.8 14.5 14.2 11.5 9.6 5.0 4.1 3.2 0.3 0.3 0.3 23.9 25.5 24.9 585 0.6 5.8

Lupin 942 ADD 421,684 7,003 448 38.6 44.0 52.5 31.3 14.1 19.3 24.4 21.4 17.9 15.5 12.8 11.0 6.3 5.1 4.2 0.7 0.8 1.0 29.3 26.7 25.8 970 2.9 9.1 DailySummary 16, India 2014- April Ranbaxy Laboratories 469 REDUCE 198,198 3,292 423 (23.9) 17.4 24.6 (209.6) 172.6 41.4 (19.6) 27.0 19.1 30.5 17.0 13.4 5.7 4.1 3.7 — — — (26.7) 17.7 20.3 310 (33.9) 31.2 Sun Pharmaceuticals 616 SELL 1,276,654 21,202 2,071 26.0 26.6 28.7 47.6 2.3 7.9 23.7 23.2 21.5 16.6 15.2 13.8 6.5 5.1 4.1 0.4 0.5 0.5 29.7 24.7 21.3 540 (12.4) 28.2 Pharmaceuticals Attractive 3,614,211 60,023 (2.0) 31.8 14.8 30.1 22.8 19.9 17.0 14.5 12.3 5.4 4.5 3.7 0.7 0.8 0.8 18.0 19.6 18.8 125.5 Real Estate DLF 166 ADD 295,614 4,909 1,780 4.3 6.7 7.2 1.2 53.7 8.2 38.2 24.9 23.0 16.8 14.3 13.3 1.0 1.0 0.9 0.6 0.6 0.6 2.7 3.9 4.1 200 20.4 23.8 Godrej Properties 213 REDUCE 42,373 704 199 7.4 12.8 20.7 (16.6) 73.8 62.1 28.9 16.6 10.3 22.0 12.0 6.9 1.9 1.7 1.5 0.9 0.9 1.2 8.0 10.9 15.7 195 (8.3) 1.2 HDIL 76 NR 31,656 526 419 4.9 12.8 10.2 179.0 163.1 (20.6) 15.5 5.9 7.4 15.7 9.2 10.8 0.3 0.3 0.3 — — — 1.9 5.0 3.8 — — 13.1 Oberoi Realty 221 BUY 72,392 1,202 328 9.6 23.8 27.3 (37.3) 146.8 14.8 22.9 9.3 8.1 17.1 6.2 4.5 1.6 1.4 1.2 0.9 0.9 0.9 7.4 16.4 16.3 290 31.5 0.7 Prestige Estates Projects 178 BUY 62,335 1,035 350 13.1 17.1 35.9 60.9 30.1 110.0 13.5 10.4 5.0 8.9 7.3 1.7 2.0 1.7 1.3 — — — 15.6 17.4 29.0 200 12.3 0.6 Sobha Developers 371 BUY 36,338 603 98 23.0 30.8 39.9 3.9 33.8 29.6 16.1 12.0 9.3 9.0 6.9 6.0 1.6 1.4 1.3 1.3 1.3 1.3 10.2 12.4 14.4 475 28.2 1.2 Sunteck Realty 295 BUY 17,690 294 60 57.7 24.7 119.8 8,501.6 (57) 385.4 5.1 12.0 2.5 4.0 8.6 1.3 2.2 1.9 1.1 0.7 0.7 0.7 52.7 16.6 54.9 470 59.3 0.3

KOTAK INSTITUTIONAL EQUITIES RESEARCH Real Estate Cautious 558,398 9,274 31.3 49.2 42.5 21.7 14.6 10.2 13.8 10.6 7.4 1.0 1.0 0.9 0.6 0.6 0.6 4.8 6.8 8.9 40.9

Source: Company, Bloomberg, Kotak Institutional Equities estimates

KOTAK INSTITUTIONAL EQUITIES RESEARCH Kotak Institutional Equities: Valuation summary of KIE Universe stocks India Daily India Summary-April16, 2014

O/S Target ADVT- 15-Apr-14 Mkt cap. shares EPS (Rs) EPS growth (%) PER (X) EV/EBITDA (X) Price/BV (X) Dividend yield (%) RoE (%) price Upside 3mo Company Price (Rs) Rating (Rs mn) (US$ mn) (mn) 2014E 2015E 2016E 2014E 2015E 2016E 2014E 2015E 2016E 2014E 2015E 2016E 2014E 2015E 2016E 2014E 2015E 2016E 2014E 2015E 2016E (Rs) (%) (US$ mn) Technology HCL Technologies 1,425 REDUCE 1,008,758 16,753 708 85.7 91.7 95.4 50.5 7.0 4.1 16.6 15.5 14.9 10.9 10.1 9.3 5.1 4.1 3.4 1.0 1.1 1.3 35.0 29.4 25.2 1,300 (8.8) 35.5 Hexaware Technologies 168 REDUCE 50,559 840 302 12.6 12.9 12.6 14.5 2.0 (2.0) 13.3 13.0 13.3 9.3 9.3 9.4 3.4 3.6 3.2 6.6 3.8 3.8 28.1 26.8 25.7 130 (22.4) 5.5 Infosys 3,260 ADD 1,862,650 30,934 571 183.8 214.5 239.8 11.5 16.7 11.8 17.7 15.2 13.6 11.7 9.8 8.4 4.1 3.5 3.0 2.1 2.4 2.6 25.8 24.9 23.9 3,800 16.6 72.2 Mindtree 1,399 ADD 58,770 976 42 106.2 118.8 133.0 30.1 11.9 11.9 13.2 11.8 10.5 9.6 8.1 6.8 3.5 2.8 2.3 1.1 1.3 1.4 29.8 26.4 24.0 1,600 14.3 2.9 Mphasis 414 SELL 87,271 1,449 211 14.4 36.3 36.4 (59.1) 151.7 0.4 28.7 11.4 11.4 20.2 7.9 7.6 1.7 1.6 1.5 1.7 4.4 4.4 6.1 14.7 13.9 365 (11.9) 1.1 Polaris Financial Technology 191 REDUCE 19,038 316 100 19.3 23.5 25.5 (3.0) 21.4 8.4 9.9 8.1 7.5 3.9 3.5 3.2 1.3 1.1 1.0 2.3 2.4 2.5 13.6 14.8 14.3 135 (29.3) 6.1 TCS 2,253 ADD 4,409,082 73,224 1,957 96.8 111.9 124.9 35.8 15.7 11.6 23.3 20.1 18.0 16.7 14.4 12.7 8.4 6.8 5.6 1.5 1.7 2.2 40.7 37.3 34.1 2,400 6.5 55.6

Tech Mahindra 1,764 ADD 419,633 6,969 238 126.8 141.7 158.9 24.4 11.8 12.1 13.9 12.4 11.1 9.2 8.1 7.1 4.3 3.3 2.6 0.3 0.3 0.3 32.1 27.2 23.9 2,100 19.0 28.8 Wipro 589 ADD 1,449,599 24,074 2,463 31.3 35.9 39.8 25.5 14.8 10.8 18.8 16.4 14.8 12.9 10.5 9.2 4.3 3.6 3.0 1.4 1.5 1.7 24.7 23.7 22.2 610 3.6 16.9 Technology Attractive 9,365,359 155,535 27.3 14.8 10.5 19.8 17.2 15.6 13.6 11.6 10.2 5.5 4.5 3.8 1.5 1.7 2.1 27.8 26.3 24.5 224.6 Telecom Bharti Airtel 325 ADD 1,300,177 21,593 3,997 8.3 14.2 20.8 39.0 70.0 46.8 39.1 23.0 15.7 7.0 5.9 5.0 2.5 2.3 2.1 0.2 0.9 1.9 6.4 10.2 13.9 345 6.1 29.6 Bharti Infratel 196 ADD 369,571 6,138 1,889 7.4 9.7 10.8 39.3 31.1 11.5 26.5 20.2 18.1 8.0 7.1 6.4 2.1 2.1 2.0 2.3 3.2 3.7 8.0 10.3 11.2 200 2.2 — IDEA 140 BUY 462,792 7,686 3,303 5.9 8.9 12.3 92.0 52.3 37.2 23.8 15.7 11.4 6.9 5.5 4.3 2.9 2.5 2.1 0.4 0.5 0.6 12.8 17.0 19.7 160 14.2 15.0 Reliance Communications 133 SELL 275,028 4,568 2,064 7.6 7.1 10.9 132.4 (5.6) 52.1 17.6 18.6 12.3 8.1 7.9 6.9 0.9 0.9 0.8 — — — 5.3 4.7 6.7 85 (36.2) 14.9 Tata Communications 313 REDUCE 89,091 1,480 285 (3.0) 7.3 8.1 89.7 342.1 11.0 (103.2) 42.6 38.4 6.7 6.0 5.6 14.0 10.4 9.4 — — — (8.3) 28.0 25.7 290 (7.2) 4.8 Telecom Attractive 2,496,659 41,463 127.8 49.0 39.2 30.7 20.6 14.8 7.2 6.2 5.3 2.1 2.0 1.8 0.5 1.0 1.7 6.9 9.5 12.2 64.3 Utilities Adani Power 53 SELL 151,925 2,523 2,872 (9.4) (2.8) (0.7) (4.9) 70.5 75.6 (5.6) (19.0) (77.7) 16.8 10.6 9.5 4.5 5.9 6.4 — — — (70.7) (26.9) (7.9) 38 (28.2) 4.4 CESC 516 ADD 64,442 1,070 125 36.9 46.5 60.1 7.8 26.0 29.1 14.0 11.1 8.6 11.3 8.9 7.4 0.9 0.9 0.8 1.2 1.5 1.5 6.7 8.0 9.5 476 (7.7) 2.8 JSW Energy 59 REDUCE 97,334 1,616 1,640 7.0 7.1 6.2 4.5 0.8 (12.9) 8.5 8.4 9.6 5.5 5.1 5.0 1.4 1.2 1.1 — — — 17.4 15.3 11.7 47 (20.8) 1.5 NHPC 20 ADD 223,627 3,714 11,071 2.1 2.3 2.6 8.8 11.0 9.7 9.6 8.6 7.9 9.7 7.6 6.8 0.8 0.7 0.7 2.6 3.1 3.4 7.8 8.5 8.8 22 8.9 1.5 NTPC 125 ADD 1,033,981 17,172 8,245 13.2 12.4 13.1 5.8 (6.3) 6.0 9.5 10.2 9.6 8.4 8.6 7.7 1.2 1.1 1.0 3.2 3.0 3.1 13.0 11.2 11.1 135 7.7 14.5 Power Grid 108 BUY 564,228 9,370 5,232 8.6 9.4 13.0 (6.0) 9.9 38.6 12.6 11.5 8.3 10.8 8.8 7.1 1.6 1.5 1.3 2.4 2.7 3.7 14.7 13.6 17.1 130 20.5 9.9 Reliance Infrastructure 501 BUY 131,699 2,187 263 65.5 59.8 84.1 (7.6) (8.6) 40.6 7.6 8.4 6.0 10.4 10.0 8.7 0.5 0.5 0.4 2.3 2.3 2.3 9.2 8.7 8.7 580 15.8 14.7 Reliance Power 74 SELL 207,159 3,440 2,805 3.6 3.7 7.6 (0.9) 3.4 106.9 20.7 20.0 9.7 24.9 18.8 9.8 1.1 1.0 0.9 — — — 5.3 5.2 9.9 61 (17) 8.5 Tata Power 85 NR 208,945 3,470 2,468 3.9 5.2 5.2 (3.9) 34.0 1.0 22.0 16.4 16.2 7.2 6.7 6.4 1.6 1.5 1.4 1.4 1.4 1.4 7.2 9.4 8.9 — — 6.1 Utilities Attractive 2,683,340 44,564 0.7 11.2 22.9 13.2 11.9 9.7 10.0 8.8 7.5 1.2 1.1 1.0 2.2 2.2 2.5 8.8 9.2 10.5 63.9 Others Carborundum Universal 144 BUY 26,985 448 187 5.1 8.9 13.1 6.1 76.0 46.2 28.3 16.1 11.0 11.2 8.2 6.2 2.1 1.9 1.7 0.6 1.1 1.6 8.1 12.9 16.6 150 4.2 0.1 Coromandel International 222 SELL 62,839 1,044 283 12.2 19.3 21.7 (20.3) 58.4 12.8 18.3 11.5 10.2 10.4 7.8 7.1 2.6 2.2 1.9 2.1 2.1 2.1 14.0 20.0 19.3 190 (14.4) 0.6 Havells India 934 REDUCE 116,490 1,935 125 38.1 43.5 48.0 14.8 14.2 10.5 24.5 21.5 19.4 14.9 13.1 11.3 6.2 5.1 4.2 0.8 0.9 1.0 28.3 26.1 23.8 740 (20.7) 3.7 Info Edge 559 BUY 61,065 1,014 109 11.6 14.7 19.2 9.4 27.1 31.0 48.4 38.1 29.1 39.0 28.1 19.9 8.9 7.8 6.7 0.7 0.9 1.2 19.3 21.8 24.9 630 12.7 1.8 Jaiprakash Associates 58 ADD 129,263 2,147 2,219 2.5 7.2 8.2 25.4 193.0 14.2 23.7 8.1 7.1 10.3 7.6 7.0 1.0 0.9 0.8 — — — 4.3 11.7 12.1 44 (24.5) 25.7 Just Dial 1,187 ADD 83,115 1,380 70 16.7 22.7 30.0 64.6 36.2 32.0 71.2 52.3 39.6 53.1 37.7 26.7 16.8 14.1 11.6 — 0.7 0.9 25.4 29.3 32.2 1,350 13.7 17.7 MCX India 584 REDUCE 29,660 493 51 30.2 32.9 26.9 (48.5) 9 (18.3) 19.3 17.7 21.7 11.5 10.2 14.8 2.4 2.3 2.3 2.8 2.8 2.8 13.0 13.4 10.8 500 (14.4) 18.1 Rallis India 169 BUY 32,798 545 194 7.6 11.0 12.6 23.8 45 14.7 22.3 15.3 13.4 12.1 9.4 7.8 4.6 3.7 3.0 1.3 1.3 1.3 23.2 26.9 24.8 200 18.6 0.6 Tata Chemicals 281 BUY 71,719 1,191 255 13.8 31.3 36.1 (12.2) 126.7 15.2 20.4 9.0 7.8 6.8 4.9 4.3 1.0 0.9 0.8 3.6 3.6 3.6 4.2 9.6 10.1 300 6.6 2.0 UPL 221 SELL 97,838 1,625 443 20.1 21.3 22.6 14.6 6.2 6.3 11.0 10.4 9.8 6.1 5.5 5.0 1.8 1.6 1.4 1.1 1.1 1.1 18.0 16.5 15.3 155 (29.9) 6.3 Others 650,705 10,807 2.9 65.1 14.0 20.3 12.3 10.8 10.0 7.7 7.0 1.9 1.7 1.5 1.2 1.3 1.4 9.2 13.5 13.6 76.6 KIE universe 59,802,614 993,171 5.4 15.8 14.1 16.1 13.9 12.2 9.8 8.4 7.4 2.3 2.1 1.9 1.8 1.9 2.2 14.4 15.0 15.3 KIE universe ex-energy 51,446,444 854,396 5.8 17.6 16.2 17.5 14.9 12.8 10.9 9.4 8.1 2.6 2.4 2.1 1.7 1.8 2.1 15.1 15.9 16.4 KIE universe ex-energy & ex-commodities 44,948,685 746,485 9.4 18.9 16.8 18.6 15.6 13.4 12.2 10.4 8.9 2.9 2.6 2.3 1.4 1.6 1.9 15.5 16.5 17.0

Notes: (a) For banks we have used adjusted book values.

(b) 2012 means calendar year 2011, similarly for 2013 and 2014 for these particular companies. DailyIndia Summary-April1 (c) EV/Sales & EV/EBITDA for KS universe excludes Banking Sector. (d) Rupee-US Dollar exchange rate (Rs/US$)= 60.21

Source: Company, Bloomberg, Kotak Institutional Equities estimates 36

Disclosures

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

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

40% 36.6% * The above categories are defined as follows: Buy = We expect this stock to deliver more than 15% returns over the 30% 28.0% next 12 months; Add = We expect this stock to deliver 5-15% returns over the next 12 months; Reduce = We 18.9% expect this stock to deliver -5-+5% returns over the next 20% 16.5% 12 months; Sell = We expect this stock to deliver less than - 5% returns over the next 12 months. Our target prices are 10% also on a 12-month horizon basis. These ratings are used 4.3% 3.7% 2.4% illustratively to comply with applicable regulations. As of 0.6% 31/03/2014 Kotak Institutional Equities Investment Research 0% had investment ratings on 164 equity securities. BUY ADD REDUCE SELL

Source: Kotak Institutional Equities As of March 31, 2014

Ratings and other definitions/identifiers

Definitions of ratings

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

ADD. We expect this stock to deliver 5-15% returns over the next 12 months.

REDUCE. We expect this stock to deliver -5-+5% returns over the next 12 months.

SELL. We expect this stock to deliver <-5% returns over the next 12 months.

Our target prices are also on a 12-month horizon basis.

Other definitions

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

Other ratings/identifiers

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

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

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

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

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

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

KOTAK INSTITUTIONAL EQUITIES RESEARCH 38

Corporate Office Overseas Offices

Kotak Securities Ltd. Kotak Mahindra (UK) Ltd Kotak Mahindra Inc 27 BKC, Plot No. C-27, “G Block” 8th Floor, Portsoken House 50 Main Street, Ste. 890 Bandra Kurla Complex, Bandra (E) 155-157 Minories Westchester Financial Centre Mumbai 400 051, India London EC3N 1LS White Plains, New York 10606 Tel: +91-22-43360000 Tel: +44-20-7977-6900 Tel:+1-914-997-6120

Copyright 2014 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].

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

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

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

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

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.