India Daily, December 31, 2012

December 31, 2012 India 28-Dec 1-day1-mo 3-mo Sensex 19,445 0.6 0.5 3.6

Nifty 5,908 0.7 0.5 3.6

Contents Global/Regional indices Special Reports Dow Jones 12,938 (1.2) (0.7) (3.7) Nasdaq Composite 2,960 (0.9) (1.7) (5.0)

Strategy FTSE 5,925 (0.5) 1.0 3.2 Strategy: India reforms: A job just begun Nikkie 10,395 0.7 10.0 17.2 Hang Seng 22,603 (0.3) 2.6 8.5 ` Recent reforms: Several slips between good intentions and patchy delivery KOSPI 1,997 0.5 3.3 0.0

` Some headway on economic reforms through the legislative route - still a Value traded – India

long way to go Cash (NSE+BSE) 118 155 144 ` The next two months will be critical for fiscal reforms Derivatives (NSE) 732 2,059 898 Deri. open interest 1,081 1,620 1,179 ` No real progress on investment reforms - this is a real worry for GDP recovery

Daily Alerts Forex/money market Change, basis points Change in Reco 28-Dec 1-day 1-mo 3-mo Sun TV Network: Expensive optimism now Rs/US$ 54.7 (14) 28 221 10yr govt bond, % 8.2 - (7) (11) ` A tale of two markets revisited: Tamil not as bad, others not as great as Net investment (US$mn) expected 27-Dec MTD CYTD ` We downgrade to REDUCE with 12-month forward fair value of Rs390; FIIs (5) 4,122 24,224 MFs (20) (480) (282) 21X FY2014E earnings

Top movers -3mo basis Sector Change, % Media: Arasu's end-(game)? Best performers 28-Dec 1-day 1-mo 3-mo UNSP IN Equity 1898.6 0.0 (4.9) 56.1 ` TRAI recommendations on the entry of governments into TV ESOIL IN Equity 70.7 2.0 0.5 39.5 distribution/broadcasting UT IN Equity 33.6 (0.3) 6.0 38.3 ADE IN Equity 272.2 0.7 13.5 35.3 ` Two questions for MIB: (1) Timing and (2) extent of acceptance of NHPC IN Equity 25.6 0.0 10.1 32.6 recommendations Worst performers ` Negative for Arasu and positive for Sun TV stock, but premature to write GMRI IN Equity 18.8 1.9 1.1 (24.2) MMTC IN Equity 627.4 (0.9) (7.3) (17.5) off Arasu BHFC IN Equity 252.7 (1.1) (4.8) (17.3) NMDC IN Equity 164.0 2.4 0.8 (15.4) ABB IN Equity 700.7 1.4 (1.8) (12.5)

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INDIA Strategy

India DECEMBER 31, 2012 NEW RELEASE

BSE-30: 19,445

India reforms: A job just begun. The Indian Prime Minister, in a speech to the National Development Council, stressed on (1) faster GDP growth (over 8%) for sustainable job creation, (2)a lower fiscal deficit through higher fuel prices and early implementation of GST, (3) agricultural reform and (4) higher growth (over 10%) in manufacturing. We applaud the articulation of the objectives but note that India would need to pursue more meaningful reforms to meet the desired objectives. Recent reforms have been quite modest and well below the market’s expectations; we wait for more.

Recent reforms: Several slips between good intentions and patchy delivery

Among the key reforms announced by the Indian Government over the past few months (see Exhibit 1), we see the increase in FDI limits in several sectors as the only meaningful one. (1) Some need to be followed up with more action (further price increases in the case of regulated fuels, for example), (2) some diluted (creation of a coordinating body against expectations of a single- window clearance agency for large projects) and (3) some stymied for lack of political consensus.

Some headway on economic reforms through the legislative route—still a long way to go

Exhibit 2 lists the economic bills passed by the parliament or approved by one of the two houses of parliament in the recently concluded winter session. Some of the economic bills are important for the banking sector (new banking licenses, strengthening of the debt recovery process). However, more important bills, particularly the GST Bill, have seen limited progress (see Exhibit 3). On GST (critical for taxation reforms), the Government’s December 31, 2012 deadline for finalization of the blueprint of the GST system is already upon us; it looks like GST is unlikely to be implemented before April 1, 2014.

The next two months will be critical for fiscal reforms

We see fiscal reforms through a combination of (1) higher prices of fuels, fertilizer and (2) better targeting of subsidies (on fuels and food) through direct cash-transfer schemes over the next few months as meeting the market’s expectations on reforms or disappointing the market. As per press reports, the Government is considering a scheme to link domestic prices of diesel and kerosene to global prices through periodic price increases. This would be a major breakthrough but we will celebrate after seeing one or two rounds of price increases given a tough economic

(high inflation) and political environment. The Union Budget on February 28, 2013 will provide more clarity on the Government’s resolve to improve India’s weak fiscal position. The direct cash- transfer scheme will make a modest start from January 2013 (see Exhibit 4).

No real progress on investment reforms—this is a real worry for GDP recovery

We would worry about investment capex declining from current levels instead of picking up (as the Street expects) without urgent action—(1) award of new projects, (2) formulation of new policies for award of natural resources (coal and mineral ores) and (3) fast-track clearance of pending projects (approve or reject them based on the current system). The RBI’s data on financial closures (see Exhibit 5) point to considerable slowing in capex over the next 12-18 months.

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

Economic recovery in CY2013/FY2014 looks increasingly suspect

(1) 3QFY13 results, (2) monthly volume data for various products such as consumer goods, automobiles and cement and (3) order booking for industrial companies (as disclosed along with their 3QFY13 results) will hold the key to the market’s optimism about economic recovery in CY2013/FY2014 and related earnings impact.

We are getting increasingly concerned about the market’s expectations of strong volume recovery and similar assumptions in our earnings model for several sectors in FY2014. Recent on-the-ground research of our team (discussions with dealers of consumer goods, automobiles), disclosures on order bookings by certain companies and monthly sales data do not provide any evidence of recovery. In fact, certain data points indicate further slowing of the economy.

Without a rebound in investments, we are not sure whether the consumption-led growth (as has been the case over the past 2-3 years) can continue for too long. There are increasing signs of consumption demand also slowing (see Exhibit 6 for quarterly volume growth of consumer staple companies over the past few quarters and Exhibit 7 for monthly domestic volume growth of cars and motorcycles over the past few months). (1) Anemic job creation; even the IT/ITES sector is tiring due to global demand issues (see Exhibit 8 for quarterly net additions for IT/ITES companies under our coverage) and (2) an extended period of high inflation will naturally impact consumption despite the Government’s attempts to boost consumption through entitlements and subsidies.

Increase in FDI limits in several sectors is the most meaningful reform among the recent announcements Key reforms announced by the Indian Government over the past few months

FDI in aviation, cable and DTH FDI in domestic airline companies (49% for foreign airlines versus nil previously), FDI in multi-brand distribution and multi-brand retail retailing (51% from nil) and a higher FDI limit in cable and DTH distribution (74% from 20-49% previously) Fuel-price increase Increase in diesel prices and capping the number of subsidized LPG cylinders to six per year Insurance and Pension Bill Insurance bill to allow foreign partners to raise their investments to 49% and pension bill to allow FDI up to 26% in pension funds Power sector Restructuring of debts of discoms with support through a transitional finance mechanism by the Central Government Creation of a Cabinet Committee on The committee will try to fast track projects above Rs10 bn by expediting clearances and setting Investments schedules for approval Designing of a new urea policy Designing of new urea policy to encourage domestic production of urea Direct cash-transfer scheme The scheme will be rolled out from January 2013 and will help bring down subsidies on food and kerosene over a period of time Land Acquisition Bill Land acquisition bill has been deferred till budget session. The Bill provides for a fair compensation to land owners in both rural and urban areas with the stipulation that consent of 80% of the people for acquiring land for private industry is necessary

Source: Press reports, Kotak Institutional Equities

KOTAK INSTITUTIONAL EQUITIES RESEARCH 3 India Strategy

A couple of important banking bills passed in the winter session of the parliament Economic bills passed by the parliament or approved by one of the two houses in the recently concluded winter session of the parliament

Title Key Objectives The Banking Laws (Amendment) Bill, 2011 Permits voting rights in proportion to shareholding and strengthens the supervisory and regulatory powers of RBI The companies Bill, 2011 Multiple updated provisions including on private placements, limits on directorships, changes in auditors, increase in fines, corporate social responsibility (2% of last three years profits), control of pay of management by the government The Enforcement of Security Interest and Recovery of Strengthens recovery process of secured loans and provides for registration of Debts Laws (Amendment) Bill, 2011 securitization transactions The Prevention of Money-Laundering (Amendment) Bill, Links the provisions of Indian law with the laws of foreign countries, enlarges the 2011 definition of money-laundering and removes existing limit of Rs0.5 mn in fine The Unlawful Activities (Prevention) Amendment Bill, 2011 Widens the definition of “terrorist acts”, and provides for attachment of property

Source: PRS, Kotak Institutional Equities

Many important economic bills are hanging fire at various stages Details of pending economic bills

Issues at hand Introduced Comments Impact The Constitution (115th Amendment) Bill, or the Goods and Services Tax Bill Give concurrent taxing powers to both the Union and In Lok Sabha on Referred to Standing Committee on ~100 bps increase in GDP, States. The bill suggests the creation of Goods and Mar 22, 2011 Mar 29, 2011. However, the Central ~70 bps increase in central Services Tax council and a Goods and Services Tax government is still building consensus taxes as percentage of GDP Dispute Settlement Authority with state governments Insurance Laws (Amendment) Bill, 2008 Allows foreign investors to hold up to 49% of the capital In Rajya Sabha on Standing Committee submitted its Greater FDI inflow possible in an Indian insurance company. It allows for nationalized Dec 22, 2008 report on Dec 13, 2011 and the general insurance companies to raise funds from the Cabinet approved many of the capital markets changes suggested on Sep 21, 2012 Land Acquisition, Rehabilitation and Resettlement Bill, 2011 Compensation for the owners of the acquired land shall In Lok Sabha on Two similar bills were introduced in Clarity in acquisition process; be four times the market value in case of rural areas and Sep 07, 2011 2007 but lapsed as the XIVth Lok a better sense of the pricing twice in case of urban areas. Sabha dissolved of the projects In case of acquisition of land for use by private companies or public private partnerships, consent of 80% of the displaced people will be required. Purchase of large pieces of land by private companies will require provision of rehabilitation and resettlement Mines and Minerals (Development and Regulation) Bill, 2011 The central government may invite competitive offers for Introduced in Lok Standing Committee to report by the Clarity in mines development grant of mineral concession in case of coal minerals, and Sabha on last week of the Winter session, 2012 process; clarity on the state governments may invite competitive offers in case Dec 12, 2011 profitability of the projects of other minerals Compensation shall be paid to every person or family holding occupation or rights of the land surface for which a license is granted. The holder of a mining lease will pay a specified amount of money each year to the District Mineral Foundation, which will be used for the benefit of persons or families affected by mining related operations. This amount is equivalent to 26% of profit in the case of coal and lignite, and is equivalent to the royalty paid during the financial year in case of major minerals

Source: PRS, Kotak Institutional Equities

4 KOTAK INSTITUTIONAL EQUITIES RESEARCH Strategy India

34 schemes identified by the Government for direct benefit transfer Demand for grants cleared in the Union Budget, March fiscal year-end, 2013 (Rs mn)

Ministry of Social Justice and Empowerment Post-Matric Scholarship for SC Students 14,700 Pre-Matric Scholarship for SC Students 8,055 Pre-Matric Scholarship for Children of Those Engaged in Unclean Occupations 100 Upgradation of Merit of SC Students National Overseas Scholarship Schemes for SC Students 536 Post-Matric Scholarship for OBCs 5,620 National Overseas Scholarship for OBCs 3,080 Post-Matric Scholarship for Economically Backward Class Students 450 Post-Matric Scholarship for Students with Disabilities 300 National Overseas Scholarship for Persons with Disabilities 297 Scholarship for Top Class Education for Students with Disabilities Top Class Education Scheme 240 Ministry of Human Resources Development, Department of Higher Education Scholarship to Universities/College Students 2,250 Fellowship Schemes of UGC Fellowship Schemes of AICTE 3,610 Subsidy on Fee to Students 8,000 Ministry of Human Resources Development, Department of School Education and Literacy National Means-cum-Merit Scholarship 630 National Scheme for Incentive for the Girl Child for Secondary Education 900 Ministry of Tribal Affairs National Overseas Scholarship for ST Students 10 Post-Matric Scholarship Scheme 6,297 Upgradation of Merit Scheme Top Class Education System 130 Rajiv Gandhi National Fellowship 4,832 Ministry of Minority Affairs Matric Scholarship Scheme 1,260 Maulana Azad National Fellowship 630 Merit-cum-Means Scholarship Scheme 1,980 Ministry of Women and Child Development Indira Gandhi Matritva Sahyog Yojana (IGMSY) 4,680 Dhanalakshmi Scheme 50 Ministry of Health and Family Welfare Janani Suraksha Yojana (see Note j) 37,350 Ministry of Labour and Employment Scholarship to the Children of Beedi Workers 1,600 Housing Subsidy to Beedi Workers Stipend to Children in the Special Schools under the Child Labour Project 1,350 Permanent Disability Benefits, Dependent Benefits, Sickness State Insurance Corp to the Insured Persons and Their Families Pension Withdrawal of PF, Premature Withdrawal of Pension, Payment Related to Employees Deposit Linked Insurance Total (of the 34 schemes) 108,938

Source: Government of India, detailed demand for grants by various ministries, Kotak Institutional Equities

KOTAK INSTITUTIONAL EQUITIES RESEARCH 5 India Strategy

Financial closure declined in FY2012 Capital expenditure sanctioned assistance by banks, March fiscal year-ends, 1991-2013

Capex sanctioned in the year (Rs bn, LHS) Growth (%, RHS) 6,000 400

5,000 300 4,000 200 3,000 100 2,000

0 1,000

0 (100) 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

1QFY13

Source: RBI, Kotak Institutional Equities

Slowdown in volumes of key consumer companies Volume growth of key consumer companies, March fiscal year-ends, 2011-13 (%)

50 APNT HUL Nestle Titan (Jewelry) 40

(10)

(20)

(30) Jun-10 Jun-11 Jun-12 Sep-10 Dec-10 Sep-11 Dec-11 Sep-12 Mar-10 Mar-11 Mar-12

Source: Company, Kotak Institutional Equities

6 KOTAK INSTITUTIONAL EQUITIES RESEARCH Strategy India

Monthly sales of automobiles moderated in November 2012 Monthly sales of major auto products, March fiscal year-ends, 2010-13

80 2-W Domestic motorcycles Domestic car UVs 60

(20)

(40) Jul-12 Jul-11 Jul-10 Jan-12 Jan-11 Jan-10 Sep-12 Nov-12 Sep-11 Nov-11 Sep-10 Nov-10 Mar-12 Mar-11 Mar-10 May-12 May-11 May-10

Source: SIAM, Kotak Institutional Equities

Weak hiring trend in IT companies due to global demand issues Net hiring trend of Indian IT companies under our coverage, March fiscal year-ends, 2010-13

Sep-09 Dec-09 Mar-10 Jun-10 Sep-10 Dec-10 Mar-11 Jun-11 Sep-11 Dec-11 Mar-12 Jun-12 Sep-12 Infosys 1,548 4,429 3,914 1,026 7,646 5,311 3,041 2,740 8,262 3,266 4,906 1,157 2,610 Wipro (b) (360) 4,855 5,955 4,224 2,975 3,591 2,894 4,105 5,240 5,004 (814) 2,632 2,107 TCS 320 7,692 10,775 3,271 10,717 12,497 11,700 3,576 12,580 11,981 11,832 4,962 10,531 HCL Tech 227 1,245 2,441 6,428 5,661 2,049 1,153 3,626 3,474 2,556 (612) 1,855 1,016 Mindtree (c) (243) 677 170 715 572 87 (124) 30 1,003 354 66 (170) 53 Hexaware (35) 131 167 727 277 203 153 755 745 153 307 109 410 Polaris (387) 519 188 207 959 172 124 455 471 604 382 832 (470) Total 1,070 19,548 23,610 16,598 28,807 23,910 18,941 15,287 31,775 23,918 16,067 11,377 16,257

Notes: (a) Consolidated hiring by various companies. (b) Wipro hiring is for IT services only. (c ) June 2009 quarter for Mindtree includes consolidation of Aztecsoft.

Source: Company, Kotak Institutional Equities

KOTAK INSTITUTIONAL EQUITIES RESEARCH 7

REDUCE Sun TV Network (SUNTV)

Media DECEMBER 31, 2012 CHANGE IN RECO. Coverage view: Neutral

Expensive optimism now. We downgrade the Sun TV stock to REDUCE (from ADD) Price (Rs): 422 after a 25% outperformance versus the BSE-30 Index over the past six months. We Target price (Rs): 390 share the Street’s optimism over (1) advertising recovery, (2) robust subscription growth, BSE-30: 19,445 led by Arasu and digitization and (3) sustainable operating margins (~50% in 2QFY13). But we differ on quantum: FY2014E-15E is unlikely to be a repeat of FY2010-11 (33% revenue CAGR ex-Sun Pictures) given (1) high ad volumes, (2) market-share losses and (3) delays in Chennai digitization; our robust subs revenue CAGR of over 20% assumes traction in DTH. We increase fair value to Rs390 (from Rs360) on aggressive assumptions.

Company data and valuation summary Sun TV Network Stock data Forecasts/Valuations 2012 2013E 2014E 52-week range (Rs) (high,low) 434-177 EPS (Rs) 17.6 17.5 19.9 Market Cap. (Rs bn) 166.3 EPS growth (%) (10.0) (0.3) 13.5 Shareholding pattern (%) P/E (X) 24.0 24.1 21.2 Promoters 77.0 Sales (Rs bn) 18.5 19.8 22.7 FIIs 13.1 Net profits (Rs bn) 6.9 6.9 7.8 MFs 2.9 EBITDA (Rs bn) 11.6 11.6 13.1 Price performance (%) 1M 3M 12M EV/EBITDA (X) 14.1 13.8 12.2 Absolute 8.6 24.7 47.1 ROE (%) 28.6 25.9 27.0 Rel. to BSE-30 5.9 19.9 20.8 Div. Yield (%) 2.3 2.4 2.8

A tale of two markets revisited: Tamil not as bad, others not as great as expected

We refer to our report A Tale of Two Markets on the Sun stock, dated September 30, 2011, in which we analyzed various BUs (business units), the opportunity and risks to the company and potential valuation scenarios for the stock. Even as expectations have not exactly panned out, the positives (the Arasu deal) have negated the impact of a few extreme negatives (Sun Pictures’ closure). Exhibit 1 presents the contours of our current Rs390 fair value, compared with Rs440 base-case and Rs360 stress-case valuation expectation at the time. However, this does not imply a return to the normal but a “new normal”; Exhibit 3 presents trends in 12-month forward valuations and earnings; valuations have normalized but earnings estimates are still 15% below- peak in September 2011. Nonetheless, “Sun-set” risks have proven to be unfounded. Sun has lost share across its markets but there is variance versus our expectation. Sun TV and the Tamil channels lost market share but not as much as expected (4-ppt loss in Sun TV from a high base of 57%). Conversely, Telugu, Kannada and Malayalam channels lost market share from low levels versus our expectations of relative stability. Correspondingly, our valuation of non-Tamil BUs has dropped to ~Rs220 from ~Rs260. The Arasu deal has helped to clear the risk of potential for closure of the Tamil BU; its valuation has increased to ~Rs170 from Rs140 (Rs180 in base-case and Rs100 in stress-case). The operational risks have not ebbed; our discussion with the competition suggests focus on non-Tamil BUs with relatively low entry barriers.

We downgrade to REDUCE with 12-month forward fair value of Rs390; 21X FY2014E earnings

We downgrade the Sun TV stock to REDUCE (from ADD) with fair value of Rs390 (Rs360 previously) led by aggressive ad and subscription growth assumptions in FY2014-15 and DCF roll- forward. Valuations of 21X FY2014E earnings would be considered fair (inexpensive in light of the impending digitization momentum) but for (1) continued network market share losses; near-term stability in Sun TV (Tamil C&S BU) ratings may be a brief lull; and (2) lack of digitization progress in Chennai. Sun TV noted improved traction in DTH platforms given the noise around DAS but penetration remains low (~26% as per TAM) given issues surrounding DAS license to Arasu.

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Sun TV Network Media

Break-up of Sun TV financials, FY2014E (Rs bn)

Tamil C&S Non-Tamil C&S Sun TV total Comments Advertising 6.4 7.3 13.7 Subscription 2.6 5.1 7.7 --Cable 0.4 1.4 1.8 --DTH 1.7 3.1 4.8 --Overseas 0.6 0.6 1.1 FM Radio 1.3 1.3 Revenues 9.0 13.7 22.7 Rev share (%) 40 60 100 Expenditure (4.1) (7.7) (11.8) EBIT 4.9 6.0 10.9 EBIT share (%) 45 55 100 Margin (%) 54 44 48 EPS (Rs/share) 9.0 10.9 19.9 P/E (X) 18 20 19 ~15% discount to Zee Valuation 163 221 384

Source: Kotak Institutional Equities estimates

Summary financials and valuations of Zee and Sun, FY2011-14E

Financials (Rs bn) Valuations (X) 2011 2012 2013E 2014E 2011 2012 2013E 2014E Zee consolidated Revenues 29.5 30.4 35.6 43.0 EBITDA 7.6 7.4 9.3 11.6 27.9 28.8 22.8 18.3 EPS (Rs/share) 5.8 5.9 7.3 8.9 39.4 38.9 31.6 25.9 Sports business Revenues 4.4 4.1 4.4 6.5 EBITDA (2.1) (1.5) (1.2) (1.0) R-GECs business Revenues 5.3 5.8 6.8 7.8 EBITDA 1.8 1.8 2.3 2.7 Hindi-rest business Revenues 19.8 20.6 24.4 28.7 EBITDA 7.9 7.1 8.2 10.0 Zee core business Revenues 25.1 26.4 31.2 36.5 EBITDA 9.7 8.9 10.5 12.7 21.9 23.9 20.2 16.8 EPS (Rs/share) 7.4 7.1 8.2 9.7 30.9 32.4 28.1 23.8 Sun TV stress-case Revenues 20.1 18.5 19.8 22.7 EBIT 11.0 9.4 9.6 10.9 14.4 16.8 16.4 14.5 EPS (Rs/share) 19.5 17.6 17.5 19.9 21.4 23.8 23.9 21.0

Notes: (a) Zee's FY2010 financials include only one quarter (4QFY10) of R-GEC financials.

Source: Company data, Kotak Institutional Equities estimates

KOTAK INSTITUTIONAL EQUITIES RESEARCH 9 Media Sun TV Network

12-month forward valuations (P/E; X) and earnings estimates (Rs/share) of Sun TV

12-m forward P/E (X, LHS) Avg. 12-m forward P/E (X, LHS) 12-m forward EPS (Rs, RHS) 60 30

50 25

40 20

30 15

20 10

10 5

- - 02-Dec-06 02-Dec-07 02-Dec-08 02-Dec-09 02-Dec-10 02-Dec-11 02-Dec-12

Source: Factset consensus estimates, Kotak Institutional Equities

Let us get one point beyond us: strong 2HFY13, but not sustainable

Sun TV is likely to report a strong 3QFY13 and 2HFY13 (may surprise the Street as well) with renewed strong advertising and subscription growth. However, with valuations at 24X FY2013E earnings, the Street is well discounting FY2014E. We are hopeful that the subscription revenue momentum in 2HFY13, led by the Arasu deal and DTH platforms, will accelerate and continue in FY2014, led by completion of digitization in Chennai. This is factored in our earnings estimates.

However, advertising (~65% share in Sun’s revenues) is constrained by continued network market-share decline. 2HFY13 may still be a strong performance but it will largely be a factor of (1) a low base (advertising decline in 2HFY12) and (2) sharp growth in advertising volumes (certainly in 3QFY13; see Exhibit 7). Sun reached 18 mins/hour of advertising time at the network level (blended) in 3QFY13, a 20%+ yoy increase. However, this sharp jump in advertising volumes (likely decline in realizations) only borrows from the future and would constrain advertising growth in FY2014E-15E.

Market share of key Sun TV Network channels, 1QFY12-3QFY13

4QFY11 1QFY12 2QFY12 3QFY12 4QFY12 1QFY13 2QFY13 3QFY13 Weight Sun TV 59 58 55 55 55 52 51 54 2.5 KTV 15 16 15 12 13 14 15 13 2.0 Gemini TV 36 33 32 31 32 29 30 29 2.0 Gemini Movies 15 13 12 10 12 12 12 12 1.5 Udaya TV 34 36 36 35 35 33 33 31 1.0 Udaya Movies 14 13 12 11 11 12 12 12 0.5 Surya TV 23 25 23 26 25 25 23 19 1.0 Kiran TV 5 7 7 6 8 9 9 9 0.5 Average 25 25 24 23 24 23 23 22 Weighted 31 30 29 28 29 27 27 27 Cumulative 338 335 315 309 314 302 302 297

Source: TAM Media Research, Kotak Institutional Equities

10 KOTAK INSTITUTIONAL EQUITIES RESEARCH Sun TV Network Media

Sun TV advertising (including slot sales) revenue growth, 1QFY10-2QFY13 (%)

60 52 43 45 38 30 30 20 17 14 15 4 5 1 4 3 (5) - (6) 1QFY10 3QFY10 1QFY11 3QFY11 1QFY12 3QFY12 1QFY13 (15)

Source: Company data, Kotak Institutional Equities

Sun TV subscription (including international) revenue growth, 1QFY10-2QFY13 (%)

56 57 60 47

40 24 19 20 3 4 (4) - (10) (9) 1QFY11 3QFY11 1QFY12 3QFY12 1QFY13 (20)

Source: Company data, Kotak Institutional Equities

Prime-time advertising of key Sun TV Network channels, 3QFY08-13

3QFY07 3QFY08 3QFY09 3QFY10 3QFY11 3QFY12 3QFY13 Weight Sun TV 16.4 17.0 19.3 20.6 19.4 21.0 2.5 KTV 8.6 11.7 11.9 12.5 10.3 16.5 2.0 Gemini TV 15.0 15.0 17.1 16.0 16.1 16.5 2.0 Gemini Movies 8.8 10.5 14.3 17.1 12.6 21.5 1.5 Udaya TV 10.7 11.9 14.6 16.1 15.9 16.8 1.0 Udaya Movies 7.2 10.1 16.1 16.3 12.9 22.0 0.5 Surya TV 9.7 9.6 9.9 13.0 12.8 12.8 1.0 Kiran TV 4.9 6.1 8.1 14.1 11.6 13.7 0.5 Average 10.2 11.5 13.9 15.7 14.0 17.6 Weighted 11.6 12.8 14.9 16.2 14.7 18.0 Growth (%) 10 16 9 (10) 23

Source: TAM Media Research, Kotak Institutional Equities estimates

KOTAK INSTITUTIONAL EQUITIES RESEARCH 11 Media Sun TV Network

Trends in advertising, subscription and everything else

` Advertising revenues. Sun has maintained a dominant position in the South Indian C&S market, effectively translating its first-mover advantage into entry barriers in content and distribution. Some of these barriers (film library, for example) continue to support the company in maintaining leadership; however, some have been eroded (Arasu Cable) and imply intensifying competition and continued erosion in Sun’s high network market share. We expect Sun’s market share to stabilize at lower-than-current levels and with near- 100% C&S penetration in the South Indian C&S TV market, implying below-par advertising growth. Sun’s new channels in niche categories (action movies, kids, lifestyle) will pick up some slack as they scale-up over time, but may not be able to completely negate the impact on flagship channels (GE/movies).

C&S TV viewership has been hurt by power cuts in key states such as Tamil Nadu, where Sun’s absolute ratings (GRPs) have taken a knock despite stable relative market shares. Sun TV expects this situation to continue for some time before it is resolved; this might spring a surprise in advertising realizations down the line (currently under pressure given loss of viewership on an absolute and relative basis). Another risk to our cautious view stems from a sharp recovery in advertising from interest-rate sensitive sectors; currently, FMCG (40-45% contribution to C&S advertising) is the only significant sector driving C&S TV advertising growth.

` Subscription revenues. Sun’s advertising:subscription ratio at 65:35 is considerably lower than Zee’s 55:45, despite its leadership position in the South Indian C&S market, which likely negates the lower absolute consumer ARPUs in South India versus Rest of India. We expect robust 20%+ CAGR in subscription revenues (including overseas revenues, currently a fraction of Zee) after the Arasu deal, helped by digitization. The latter is a contentious assumption since digitization in Chennai has been stalled due to the lack of a DAS license for Arasu; we doubt that the TN Chief Minister will let Arasu flounder given her electoral promise and Arasu may reinvent itself in a corporate avatar (a-la Sumangli Cable, part of the Sun Group associated with the DMK in the past). Currently, we model robust traction in DTH platforms (given the noise around DAS) in South India.

` Cost inflation. Sun TV’s industry-leading operating margins (~60%) historically have been a derivative of its dominant position in the South India C&S broadcasting segment. Margins have been under pressure recently (2QFY13 operating margin was less than 50%) led by (1) weak revenues (market share losses and Arasu impacting Sun’s subscription revenues in TN) and (2) cost inflation, driven by increasing competition. We are positively inclined towards Sun’s proactive approach to increasing content investments to meet competitive and declining market share challenges. Given its large film and content library, Sun had the option to limit its participation in content in an inflationary market, but with potentially adverse consequences to its leadership position in the long run; the company decided against going that route: Rightly so, in our view. We believe its historical ~60% margins were unsustainable anyway and the extant 50% margins may be sustainable, helped by recovery in advertising and subscription revenues.

` SunRisers IPL franchise. We view Sun’s Hyderabad IPL franchise, christened “SunRisers”, as a credible attempt at diversification beyond the politically sensitive Tamil C&S BU. Synergy benefits exist with Sun’s Telugu C&S BU (Gemini) though they may be modest initially. The acquisition of IPL title sponsorship by Pepsi at ~2X the price paid by DLF 5 years ago bodes well for revenue of SunRisers (central revenues are partly shared with franchises). However, we expect some incremental gains to be inflated by player costs. A cursory glance at the erstwhile Deccan Chargers’ squad (partially retained by SunRisers, as per media reports) indicates strong overseas talent but weak domestic talent. SunRisers needs more good domestic players given only four overseas players can play in a match, and are not always available during the IPL due to international commitments.

12 KOTAK INSTITUTIONAL EQUITIES RESEARCH Sun TV Network Media

Market share of key Sun TV Network channels, CY2006-12E

2006 2007 2008 2009 2010 2011 2012E Weight Sun TV 59 56 52 55 57 57 53 2.5 KTV 21 20 18 17 17 15 14 2.0 Gemini TV 38 36 32 31 35 33 30 2.0 Gemini Movies 22 19 18 16 17 12 12 1.5 Udaya TV 44 46 37 33 34 35 33 1.0 Udaya Movies 19 20 18 19 16 13 12 0.5 Surya TV 38 32 32 27 26 24 23 1.0 Kiran TV 7 7 8 9 10 6 9 0.5 Average 31 30 27 26 26 24 23 Weighted 36 34 31 30 31 30 28 Cumulative 395 372 337 332 343 325 304

Source: TAM Media Research, Kotak Institutional Equities

Market penetration across states, end-CY2006-11 (%)

C&S TV/TV HHs (%) Language 2006 2007 2008 2009 2010 2011 Tamil Nadu 85 91 93 94 95 97 Andhra Pradesh 89 89 93 95 97 98 Karnataka 78 80 84 88 94 98 Kerela 60 64 75 86 92 94 Maharashtra 54 58 67 70 79 86 West Bengal 62 60 66 69 82 88 Hindi-belt 40 46 53 60 71 80

India-average 57 61 68 73 82 88

Source: IRS Readership Survey, Kotak Institutional Equities

24-hour GRPs of key Tamil GE channels (%)

chg (%) 1QFY12 2QFY12 3QFY12 4QFY12 1QFY13 2QFY13 3QFY13 2QFY13 3QFY13 J Movie - - - - - 41 51 Jaya TV 111 112 102 74 70 78 57 (30) (45) KTV 417 389 310 300 318 354 283 (9) (9) Kalaignar TV 171 194 183 153 162 147 143 (24) (22) Raj TV 73 97 82 72 71 79 58 (19) (29) Sun TV 1,504 1,433 1,372 1,249 1,157 1,219 1,140 (15) (17) Vijay TV 158 209 244 239 271 236 208 13 (15) Zee Tamizh 63 74 86 86 84 106 88 43 1 Total 2,497 2,509 2,379 2,173 2,134 2,260 2,027 (10) (15) Share (%) 77 73 71 71 69 70 70

Source: TAM Media Research, Kotak Institutional Equities

KOTAK INSTITUTIONAL EQUITIES RESEARCH 13 Media Sun TV Network

24-hour GRPs of key Telugu GE channels (%)

chg (%) 1QFY12 2QFY12 3QFY12 4QFY12 1QFY13 2QFY13 3QFY13 2QFY13 3QFY13 Eenadu TV 357 381 343 330 327 316 320 (17) (7) Gemini Movies 298 271 204 259 236 229 241 (16) 19 Gemini TV 758 743 640 685 595 591 584 (20) (9) Maa Movies 124 126 112 118 106 101 127 (20) 13 Maa Telugu 387 426 401 412 408 400 408 (6) 2 Zee Telugu 326 339 311 317 329 313 335 (8) 8 Total 2,250 2,287 2,011 2,121 2,000 1,951 2,015 (15) 0 Share (%) 47 44 42 45 42 42 41

Source: TAM Media Research, Kotak Institutional Equities

24-hour GRPs of key Kannada GE channels (%)

chg (%) 1QFY12 2QFY12 3QFY12 4QFY12 1QFY13 2QFY13 3QFY13 2QFY13 3QFY13 ETV Kannada 212 214 199 181 190 223 195 4 (2) Kasturi 91 99 87 75 68 73 78 (26) (10) Suvarna 250 311 327 295 293 308 307 (1) (6) Udaya Movies 215 201 185 161 172 186 169 (7) (9) Udaya TV 582 609 576 530 478 507 448 (17) (22) Zee Kannada 221 258 273 254 217 228 222 (12) (19) Total 1,571 1,691 1,648 1,496 1,418 1,524 1,419 (10) (14) Share (%) 51 48 46 46 46 45 43

Source: TAM Media Research, Kotak Institutional Equities

24-hour GRPs of key Malayalam GE channels (%)

chg (%) 1QFY12 2QFY12 3QFY12 4QFY12 1QFY13 2QFY13 3QFY13 2QFY13 3QFY13 Amrita TV 112 118 91 65 49 55 50 (53) (46) Asianet 903 954 831 755 760 786 699 (18) (16) Asianet Plus 198 201 178 178 171 112 110 (44) (38) Kairali 146 143 103 85 94 80 74 (44) (28) Kiran TV 139 144 127 148 171 181 158 25 24 M Manorama - - 103 174 162 242 239 Surya TV 500 480 509 489 477 443 316 (8) (38) Total 1,998 2,040 1,941 1,892 1,884 1,899 1,645 (7) (15) Share (%) 32 31 33 34 34 33 29

Source: TAM Media Research, Kotak Institutional Equities

14 KOTAK INSTITUTIONAL EQUITIES RESEARCH Sun TV Network Media

Hindu's trade advertising on power cuts in South India

Source: Adage, Kotak Institutional Equities

Advertising/overhead spends of listed FMCG companies (Rs mn)

2QFY11 3QFY11 4QFY11 1QFY12 2QFY12 3QFY12 4QFY12 1QFY13 2QFY13 Advertising expenditure HUL 6,465 7,433 6,233 6,330 6,514 6,902 6,773 8,196 7,690 Dabur India 947 1,090 748 929 725 1,276 1,046 1,319 1,031 Glaxo India 1,077 898 1,026 1,000 1,196 1,142 1,091 1,161 1,386 Colgate India 789 1,206 690 634 1,143 1,075 583 837 889 Britannia 774 745 839 823 1,008 875 1,104 987 1,178 Marico India 547 592 413 712 627 877 778 1,038 955 Gillette India 450 731 727 876 702 806 836 744 851 GCPL 511 592 407 656 564 588 547 774 751 Proctor & Gamble 489 578 380 453 629 697 526 483 686 Total 12,049 13,865 11,463 12,413 13,108 14,238 13,284 15,539 15,417 growth (%) (5) 9 3 16 25 18 Overhead expenditure Nestle India 4,079 4,277 4,201 4,092 4,650 5,079 4,972 4,882 5,339 Asian Paints 2,961 3,343 3,355 3,277 3,848 4,102 4,191 3,847 4,424 TGB 1,254 1,310 1,126 902 1,276 1,126 1,163 994 1,116 Total 8,294 8,930 8,682 8,271 9,774 10,307 10,326 9,723 10,879 growth (%) 14 18 15 19 18 11

Source: Company data, Kotak Institutional Equities

KOTAK INSTITUTIONAL EQUITIES RESEARCH 15 Media Sun TV Network

Sun TV cable subscription revenues, 1QFY10-1QFY13 (Rs mn)

800

540 560 560 600 510 530 466 470 390 354 360 340 400 290 310 300

200

- 1QFY10 3QFY10 1QFY11 3QFY11 1QFY12 3QFY12 1QFY13

Source: Company data, Kotak Institutional Equities

Sun TV operating margins, 1QFY10-1QFY13 (%)

70 63 64 59 58 57 56 57 57 60 55 55 54 54 52 50 50

30 1QFY10 3QFY10 1QFY11 3QFY11 1QFY12 3QFY12 1QFY13

Source: Company data, Kotak Institutional Equities

Squad and player salaries of the erstwhile Deccan Chargers

Player Contract year Salary (US$) Country Dale Steyn 2011 1,200,000 Overseas Cameron White 2011 1,100,000 Overseas Dan Christian 2011 900,000 Overseas Kumar Sangakkara 2011 700,000 Overseas Parthiv Patel 2012 650,000 India Ishant Sharma 2011 450,000 India JP Duminy 2011 300,000 Overseas Shikhar Dhawan 2011 300,000 India Amit Mishra 2011 300,000 India Manpreet Gony 2011 290,000 India Darren Bravo 2012 100,000 Overseas Juan Theron 2011 85,000 Overseas Daniel Harris 2012 70,000 Overseas Tanmay Mishra 2012 20,000 India Chris Lynn 2011 20,000 Overseas Total 6,485,000

Source: Deccan Chargers, Kotak Institutional Equities

16 KOTAK INSTITUTIONAL EQUITIES RESEARCH

NEUTRAL Media

India DECEMBER 31, 2012 UPDATE

BSE-30: 19,445

Arasu’s end-(game)? In reply to MIB’s reference seeking recommendations on the entry of governments and affiliate entities into TV broadcasting/distribution, TRAI has reiterated its stance on the issue in its original recommendations in November 2008: central or state governments and affiliate entities should NOT be allowed entry into TV broadcasting/distribution. The acceptance of TRAI’s recommendations by MIB will not only impact Arasu’s DAS aspirations in Chennai but also the sustainability of its analog cable operations in Tamil Nadu. However, it would be premature to write off Arasu given (1) it is the electoral promise of the TN Chief Minister and (2) may reinvent itself in a political/corporate avatar (a la Sumangli Cable). Nonetheless, the news flow is positive for the Sun TV stock; we retain our REDUCE rating and Rs390 fair value for now.

TRAI recommendations on the entry of governments into TV distribution/broadcasting

Exhibit 1 presents a summary of TRAI recommendations on the entry of governments into TV broadcasting/distribution segments. TRAI has reiterated its earlier stance on this issue, laid down in its recommendations in November 2008. In summary, central and state governments and affiliate entities should NOT be allowed entry into TV broadcasting/distribution segments. Besides, TRAI has noted the (1) need to strengthen functional independence and autonomy of Prasar Bharti and (2) exit route for governments and affiliate entities that were given permission to operate in TV distribution/broadcasting segments in the past. TRAI has taken a reasonably broad view of this matter, seeking disqualification of political bodies of any kind (not just government and affiliate entities) from the media sector. TRAI cited views of the Sarkaria Commission, a Supreme Court judgment in 1995 and precedents in almost all developed democratic countries in framing its recommendations.

Two questions for MIB: (1) Timing and (2) extent of acceptance of recommendations

(1) MIB’s reference to TRAI, four years after the original recommendations in November 2008, elicits questions about its priorities during this period. We highlight (a) a large number of TV/news channels of political parties and affiliate entities or representatives were granted permission by the Central Government (Exhibit 2), many during this period, and (b) the cable distribution market in TN, which is almost entirely controlled by politically affiliated entities (Exhibit 3). (2) The extent of acceptance of the recommendation by MIB will also be critical. Exhibit 4 presents TRAI’s recommendations in its November 2008 report, which prohibit political parties and affiliate entities or representatives from running TV/channels channels. Will MIB accept TRAI’s November 2008 recommendations in entirety and shut down the TV/news channels run/controlled by political parties and their affiliate entities or representatives (including many regional/news channels run by Indian National Congress party representatives in their respective states)?

Negative for Arasu and positive for Sun TV stock, but premature to write off Arasu

The acceptance of the TRAI recommendations (in their entirely or selectively) by MIB will impact not only its DAS/digitization aspirations in Chennai in Phase-I but also the sustainability of its analog cable operations in the rest of Tamil Nadu. Any discontinuation of operations of Arasu Cable will be positive for the Sun TV stock; Sun’s TN cable subscription revenues declined to

Rs25mn/month from Rs100mn/month prior to Arasu; more important, Kal/Sumangli Cable (part of the Sun Group), can fill the gap left by Arasu Cable and re-establish Sun’s dominance in TN broadcasting. However, we believe it would be premature to write off Arasu as (1) it is the electoral promise of the TN Chief Minister and (2) may reinvent itself in a political/corporate avatar (a la Sumangli Cable). TARI had called for a 3-4 year transition period in its November 2008 recommendations.

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

India Media

Summary of TRAI recommendations on the entry of governments and affiliate entities into TV broadcasting/distribution, 2008

No. (#) Summary of TRAI recommendations 1 The Central Government Ministries and Departments, Central Government owned companies, Central Government. undertakings, Joint ventures of the Central Government and the private sector and Central Government funded entities should not be allowed to enter into the business of broadcasting and/or distribution of TV channels. 2 The State Government Departments, State Government owned companies, State Government undertakings, Joint ventures of the State Government and the private sector, and State Government funded entities should not be allowed to enter into the business of broadcasting and/or distribution of TV channels. 3 The arm’s length relationship between Prasar Bharti and the Government be further strengthened. The Authority also recommends that such measures should ensure functional independence and autonomy of Prasar Bharti. 4 The disqualifications as regards political bodies, stated below, to enter into broadcasting and/or distribution activities should be implemented through executive decision by incorporating the disqualifications into Rules, Regulations and Guidelines as necessary, pending enactment of any new legislation on broadcasting. (a) A body whose objects are wholly or mainly of a political nature; (b) A body affiliated to a body, referred to in clause (a); (c) An individual who is an officer of a body, referred to in clause (a) or (b); (d) A body corporate, which is an associate of a body corporate referred to in clause (a) or (b); (e) A body corporate, in which a body referred to in any of clauses (a) and (b) is a participant with more than a five per cent interest; (f) A body which is controlled by a person referred to in any of clauses (a) to (d) or by two or more persons, taken together; (g) A body corporate, in which a body referred to in clause (f), other than one which is controlled by a person, referred to in clause (c) or by two or more such persons, taken together, is a participant with more than a five percent interest.” 5 In case permission has been accorded to any State Government/State Government owned companies/State Government undertakings/Joint venture of the State Government and the private sector/State Government funded entities to enter into the cable distribution platform, then the Central Government should provide an appropriate exit route.

Source: TRAI, Kotak Institutional Equities

TV/news channels with alleged political affiliations

Channel State Alleged political affiliation Kalaignar TV Tamil Nadu DMK Jaya TV Tamil Nadu AIADMK Sun News Tamil Nadu DMK (erstwhile) Vasanth TV Tamil Nadu TN Congress Mega TV Tamil Nadu TN Congress Makkal TV Tamil Nadu PMK Captain TV Tamil Nadu DMDK Kairali TV Kerala CPI-M People TV Kerala CPI-M Jaihind TV Kerala Kerala Congress Indiavision Kerala Kerala Congress Sakshi TV Andhra Pradesh YSR Congress NTV Andhra Pradesh AP Congress TV-5 Andhra Pradesh AP Congress T-News Andhra Pradesh TRS Studio N Andhra Pradesh TDP Maha TV Andhra Pradesh TDP ETV2 Andhra Pradesh TDP (erstwhile) Kasthuri TV Karnataka JD(S) Janasri Karnataka BJP Samaya TV Karnataka BJP IBN-Lokmat Maharashtra Maharashtra Congress Saam TV Maharashtra NCP

Source: Various media reports, Kotak Institutional Equities

18 KOTAK INSTITUTIONAL EQUITIES RESEARCH Media India

TN cable distribution with alleged political affiliations

Company Association Alleged political affiliation Arasu Cable TN Chief Minister TN government Royal Cable Dhayanidhi Alagiri DMK JAK Communication Dhayanidhi Alagiri DMK Kal/Sumangli Cable Kalanidhi Maran DMK

Source: Various media reports, Kotak Institutional Equities

Summary of TRAI recommendations on the entry of governments and affiliate entities into TV broadcasting/distribution, 2008

No. (#) Summary of TRAI recommendations C1 Political bodies should not be allowed to enter into broadcasting activities. The disqualifications as regards political bodies, stated below, as contained in item 3 of Part I of the Schedule to the Broadcasting Bill, 1997 (which could not be implemented into law) be incorporated in the proposed legislation on broadcasting. (a) A body whose objects are wholly or mainly of a political nature; (b) A body affiliated to a body, referred to in clause (a); (c) An individual who is an officer of a body, referred to in clause (a) or (b); (d) A body corporate, which is an associate of a body corporate referred to in clause (a) or (b); (e) A body corporate, in which a body referred to in any of clauses (a) and (b) is a participant with more than a five per cent interest; (f) A body which is controlled by a person referred to in any of clauses (a) to (d) or by two or more persons, taken together; (g) A body corporate, in which a body referred to in clause (f), other than one which is controlled by a person, referred to in clause (c) or by two or more such persons, taken together, is a participant with more than a five percent interest. D1 Religious bodies may not be permitted to own their own broadcasting stations and teleports. The disqualifications as regards religious bodies, stated below, as contained in Item 2 of Part I of the Schedule to the Broadcasting Bill, 1997 may be incorporated in the proposed new legislation on broadcasting. However, such disqualification should not be construed to mean that religious contents in the broadcasting channels should not be allowed, so long as such content is in conformity with the appropriate content code or programme code as prescribed from time to time by the Government. Broadcasting channels may be permitted to carry programmes aimed at the propagation of different religious faiths subject to strict compliance with the applicable content code or programme code. (a) A body whose objectives are wholly or mainly of a religious nature; (b) A body which is controlled by a body referred to in clause (a) or by two or more such bodies taken together; (c) A body which controls a body referred to in clause (a); (d) A body corporate which is associate of a body corporate referred to in clause (a), (b) or (c); (e) A body corporate in which a body referred to in any of clauses (a) to (d) is a participant which more than five per cent. interest; (f) An individual who is an officer of a body referred to in clause (a); and (g) A body which is controlled by an individual referred to in clause (f) or by two or more such individuals taken together. E2-5 State Governments should continue to remain in the enforcement domain as regards the provisions of the Cable Television Networks (Regulation) Act, 1995 and, for the same reason, it would not be in the fitness of things for the State Governments to enter into the cable distribution area as a competitive service provider. In the interest of fair competition and level playing field in the cable sector and the need to ensure plurality of views over this important distribution platform and also considering the need to ensure that there is proper enforcement mechanism applicable to all the players in the field, the State Governments and their organs should stay away from distribution activities. However, in case the Central Government has already accorded permission to certain State Government owned entities to enter into the cable distribution platform, it should also provide for an appropriate exit route for such existing entities. It should provide for an appropriate time limit of three to four years within which such existing entities can make necessary alternative arrangements (such as re-organisation of equity structure, disinvestment, etc.) so as to avoid being disqualified for holding such permission upon expiry of such time limit and to provide for an exit route for such entities. Having regard to the dictum of the Hon’ble Supreme Court on the right under 19(1)(a) being one conferred on the citizens to have access to a plurality of views and opinions and the need to ensure that such plurality is available to all citizens in an atmosphere of fair competition driven by the principles of demand and supply and above all the need to prevent restriction of content by any of the players on political or religious considerations, TRAI recommends that political bodies, religious bodies and other publicly funded bodies may not be permitted into distribution activities.

Source: TRAI, Kotak Institutional Equities

KOTAK INSTITUTIONAL EQUITIES RESEARCH 19 India Media

Sun TV cable subscription revenues, 1QFY10-1QFY13 (Rs mn)

800

540 560 560 600 510 530 466 470 390 354 360 340 400 290 310 300

200

- 1QFY10 3QFY10 1QFY11 3QFY11 1QFY12 3QFY12 1QFY13

Source: Company data, Kotak Institutional Equities

Sun TV subscription (including international) revenue growth, 1QFY10-2QFY13 (%)

80 71

56 57 60 47 44 46 35 40 24 19 20 3 4 (4) - (10) (9) 1QFY10 3QFY10 1QFY11 3QFY11 1QFY12 3QFY12 1QFY13 (20)

Source: Company data, Kotak Institutional Equities

Market share of Sun TV network channels, CY2006-12E

Source: TAM Media Research, Kotak Institutional Equities

20 KOTAK INSTITUTIONAL EQUITIES RESEARCH Media India

Breakdown of Sun TV financials, FY2014E (Rs bn)

Source: Kotak Institutional Equities estimates

Consolidated financial summary of the Sun TV network, March fiscal year-ends, 2008-14E (Rs mn)

2008 2009 2010 2011 2012 2013E 2014E Profit model (Rs mn) Net sales 8,699 10,394 14,528 20,135 18,472 19,764 22,747 EBIT 4,736 5,166 7,700 10,974 9,408 9,616 10,900 Other income 556 505 350 487 796 634 799 Interest (expense)/income (159) (138) (49) (23) (58) (8) (8) Pretax profits 5,133 5,534 8,000 11,439 10,145 10,241 11,690 Tax-cash (1,947) (2,045) (2,912) (3,760) (3,389) (3,309) (3,790) Tax-deferred (67) (250) (78) (71) 72 (51) (47) Minority interest 148 281 190 90 101 28 (14) Net profits after minority interests 3,267 3,578 5,199 7,698 6,929 6,909 7,838 Earnings per share (Rs) 8.3 9.1 13.2 19.5 17.6 17.5 19.9

Balance sheet (Rs mn) Total equity 14,485 17,016 18,856 22,537 25,120 27,457 29,810 Deferred Tax 11 261 339 410 338 389 436 Total borrowings 695 716 1 1 — — — Currrent liabilities 2,516 2,343 4,607 4,472 2,380 2,861 3,306 Total capital 18,311 20,720 25,052 28,669 29,065 31,907 34,766 Cash 4,297 3,654 4,367 6,030 3,075 5,782 7,193 Current assets 4,542 5,543 6,279 7,791 11,252 11,102 12,011 Total fixed assets 5,048 6,697 8,859 8,651 8,147 8,026 7,956 Intangible assets 2,620 3,021 3,268 3,481 4,346 4,753 5,362 Total assets 18,311 20,720 25,052 28,669 29,065 31,907 34,766

Free cash flow (Rs mn) Operating cash flow, excl. working capital 4,393 5,620 8,107 12,240 10,383 11,491 13,423 Working capital (1,235) 413 (892) (965) (1,760) 631 (464) Capital expenditure (1,811) (4,291) (3,120) (2,002) (3,137) (1,000) (1,050) Investments (3,837) (627) (3,166) (4,335) (3,421) (4,470) (5,802) Other income 523 484 361 420 616 634 799 Free cash flow (698) 1,116 1,396 6,468 1,513 6,652 6,107

Ratios (%) Debt/equity 4.8 4.2 ————— Net debt/equity (24.9) (17.3) (23.2) (26.8) (12.2) (21.1) (24.1) RoAE 25 23 29 37 29 26 27 RoACE 24 23 28 37 29 27 28

Source: Company data, Kotak Institutional Equities estimates

KOTAK INSTITUTIONAL EQUITIES RESEARCH 21

KOTAK INSTITUTIONAL EQUITIES RESEARCH Kotak Institutional Equities: Valuation summary of KIE Universe stocks India DailyIndia Summary-December2012 31,

Maruti Suzuki 1,500 SELL 453,241 8,290 302 56.6 62.9 83.6 (28.6) 11.1 32.9 26.5 23.9 18.0 21.3 16.9 11.8 2.9 2.6 2.3 0.5 0.5 0.5 11.1 11.7 13.8 1,100 (26.7) 20.1 Motherson Sumi Systems 197 BUY 115,660 2,115 588 4.6 8.9 15.4 (31.9) 94.5 72.9 43.0 22.1 12.8 18.9 12.2 5.8 6.2 5.4 3.7 1.1 1.0 2.5 15.5 25.9 34.3 180 (8.5) 2.0 Tata Motors 310 BUY 997,693 18,248 3,218 44.6 41.8 51.7 58.7 (6.3) 23.8 7.0 7.4 6.0 5.8 5.1 4.0 3.0 2.2 1.7 1.3 2.0 1.6 54.8 31.9 32.3 350 12.9 56.4 Automobiles Attractive 3,426,463 62,670 25.8 1.1 22.9 13.0 12.9 10.5 9.4 8.3 6.5 3.9 3.2 2.6 1.4 1.7 1.8 29.7 24.5 24.3 Banks/Financial Institutions Andhra Bank 117 ADD 65,723 1,202 560 24.0 22.0 23.2 6.1 (8.4) 5.2 4.9 5.3 5.1 — — — 0.9 0.9 0.8 4.7 4.3 4.5 19.2 15.5 14.6 120 2.2 2.1 Axis Bank 1,360 ADD 561,771 10,275 413 102.7 108.5 112.9 24.4 5.6 4.1 13.2 12.5 12.0 — — — 2.5 2.2 1.9 1.2 1.2 1.3 20.3 18.2 16.4 1,420 4.4 44.3 Bajaj Finserv 907 SELL 131,152 2,399 145 94.8 74.4 75.3 21.3 (21.5) 1.1 9.6 12.2 12.0 — — — 2.6 1.9 1.7 1.7 1.7 1.7 32.2 18.1 14.7 740 (18.4) 3.8 Bank of Baroda 858 REDUCE 353,682 6,469 412 121.4 114.1 118.7 12.4 (6.0) 4.0 7.1 7.5 7.2 — — — 1.4 1.3 1.1 2.0 2.2 2.3 21.7 16.7 15.3 770 (10.2) 10.2 Bank of India 339 BUY 194,906 3,565 575 46.6 52.4 58.1 2.5 12.4 10.8 7.3 6.5 5.8 — — — 1.1 1.0 0.9 2.0 2.3 2.5 15.0 14.4 14.1 340 0.2 5.3 Canara Bank 493 REDUCE 218,532 3,997 443 74.1 68.4 77.4 (18.5) (7.7) 13.2 6.7 7.2 6.4 — — — 1.2 1.1 1.0 2.2 2.4 2.4 15.4 12.7 13.0 420 (14.9) 7.5 Corporation Bank 453 BUY 67,132 1,228 148 101.7 92.9 110.5 6.6 (8.6) 18.8 4.5 4.9 4.1 — — — 0.9 0.8 0.7 4.5 4.1 4.9 19.5 15.6 16.4 480 5.9 0.8 Federal Bank 540 ADD 92,288 1,688 171 45.4 46.2 48.1 32.3 1.7 4.2 11.9 11.7 11.2 — — — 1.7 1.5 1.4 1.7 1.7 1.8 14.4 13.1 12.4 515 (4.6) 5.5 HDFC 834 SELL 1,278,066 23,376 1,532 27.9 31.9 37.8 15.8 14.2 18.5 29.9 26.2 22.1 — — — 6.7 5.1 4.5 1.3 1.4 1.7 22.7 22.1 21.7 690 (17.3) 58.2 HDFC Bank 678 SELL 1,590,233 29,085 2,347 22.0 28.7 36.4 30.4 30.3 27.0 30.8 23.6 18.6 — — — 5.4 4.6 3.9 0.6 0.8 1.0 18.7 20.7 22.3 590 (12.9) 29.5 ICICI Bank 1,142 ADD 1,315,943 24,068 1,153 56.1 64.9 63.6 25.4 15.6 (2.0) 20.4 17.6 18.0 — — — 2.2 2.1 1.9 1.4 1.7 1.7 11.2 11.9 10.8 1,140 (0.1) 58.9 IDFC 173 ADD 261,790 4,788 1,512 10.3 12.5 14.9 17.2 21.9 18.7 16.8 13.8 11.6 — — — 2.1 1.9 1.7 1.4 1.4 1.7 13.7 14.6 15.5 170 (1.8) 19.8 India Infoline 84 REDUCE 27,557 504 327 4.5 7.7 8.5 (38.3) 68.5 10.5 18.6 11.0 10.0 — — — 1.6 1.3 1.2 1.6 3.1 1.7 7.7 13.1 12.7 65 (23.0) 1.3 Indian Bank 195 BUY 83,676 1,530 430 39.6 39.8 41.8 1.2 0.7 5.0 4.9 4.9 4.7 — — — 1.0 0.9 0.8 3.9 3.8 4.0 19.4 17.0 15.7 260 33.5 1.0 Indian Overseas Bank 85 REDUCE 67,944 1,243 797 13.2 14.7 20.5 (24.0) 11.9 39.3 6.5 5.8 4.2 — — — 0.7 0.7 0.6 5.2 4.0 5.6 9.9 9.5 12.2 75 (12.0) 2.0 IndusInd Bank 415 ADD 215,718 3,945 520 17.2 19.1 21.9 38.5 11.1 14.9 24.2 21.8 18.9 — — — 4.8 3.0 2.7 0.5 0.8 0.9 20.1 16.9 14.6 430 3.6 7.8 J&K Bank 1,310 REDUCE 63,544 1,162 48 165.6 199.0 183.3 30.6 20.2 (7.9) 7.9 6.6 7.1 — — — 1.6 1.3 1.2 2.6 3.1 2.8 21.2 21.6 17.2 1,250 (4.6) 2.6 LIC Housing Finance 293 NR 147,774 2,703 505 18.1 22.1 28.4 (11.8) 22.2 28.6 16.2 13.2 10.3 — — — 2.6 2.4 2.0 1.2 1.5 1.9 18.6 18.3 20.2 — — 15.1 L&T Finance Holdings 88 SELL 150,213 2,747 1,715 2.7 3.5 4.7 (5.6) 33.6 32.0 33.0 24.7 18.7 — — — 3.2 2.8 2.4 — — — 11.9 12.0 13.9 60 (31.5) 14.1 Mahindra & Mahindra Financial 1,124 ADD 127,762 2,337 114 60.4 77.6 91.8 33.6 28.5 18.2 18.6 14.5 12.2 — — — 4.4 3.0 2.5 1.1 1.6 1.9 22.8 23.5 21.1 1,065 (5.3) 4.3 Muthoot Finance 201 NR 74,770 1,368 372 24.0 25.7 25.1 52.4 7.1 (2.5) 8.4 7.8 8.0 — — — 2.6 1.9 1.6 2.0 — — 41.9 29.8 22.7 — — — Oriental Bank of Commerce 345 REDUCE 100,789 1,843 292 39.1 52.7 57.1 (24.0) 34.6 8.4 8.8 6.6 6.1 — — — 1.1 1.0 0.9 2.3 3.1 3.3 9.9 12.3 12.2 325 (5.9) 4.5 PFC 203 ADD 267,692 4,896 1,319 23.0 28.8 31.5 0.9 25.3 9.1 8.8 7.0 6.4 — — — 1.3 1.2 1.2 3.0 3.7 4.0 16.9 17.3 16.7 220 8.4 9.9 Punjab National Bank 843 REDUCE 285,826 5,228 339 144.0 139.6 153.6 2.9 (3.0) 10.0 5.9 6.0 5.5 — — — 1.2 1.2 1.0 2.6 2.5 2.8 21.1 16.7 16.1 800 (5.1) 10.3 Reliance Capital 478 ADD 117,738 2,153 246 21.1 36.7 21.7 126.7 74.0 (41.0) 22.7 13.0 22.1 — — — 1.1 1.0 1.0 1.6 2.3 1.4 5.7 8.0 4.5 450 (5.9) 36.5 Rural Electrification Corp. 242 REDUCE 238,998 4,371 987 28.6 35.7 39.1 10.0 24.9 9.7 8.5 6.8 6.2 — — — 1.7 1.6 1.5 3.1 3.9 4.3 20.5 22.1 20.9 234 (3.3) 8.7 Shriram City Union Finance 950 NR 52,568 961 55 65.4 83.0 100.6 34.7 26.9 21.2 14.5 11.4 9.4 — — — 3.0 2.3 1.8 0.6 1.1 1.4 23.3 23.0 22.9 — — 0.9 Shriram Transport 751 ADD 167,522 3,064 223 56.4 59.5 71.5 2.3 5.6 20.2 13.3 12.6 10.5 — — — 2.8 2.5 2.2 0.9 1.6 1.9 23.1 20.4 20.9 710 (5.4) 4.9 SKS Microfinance 153 RS 11,225 205 73 (189.0) (32.2) 0.5 (1,304.4) (83.0) (101.4) (0.8) (4.8) 340.6 — — — 2.6 4.8 4.4 — — — (122.9) (70.7) 1.4 — — 2.0 State Bank of India 2,380 ADD 1,596,742 29,204 671 174.5 209.2 218.7 34.0 19.9 4.6 13.6 11.4 10.9 — — — 2.4 2.3 2.0 1.7 1.7 1.8 15.7 15.7 14.6 2,400 0.9 103.7

Union Bank 275 ADD 151,263 2,767 551 32.3 37.5 40.6 (18.2) Daily India - December Summary 16.3 8.1 8.5 7.3 6.8 — — — 1.4 1.3 1.1 2.9 2.7 2.9 14.9 15.1 14.5 285 3.7 8.1 Yes Bank 463 ADD 163,451 2,989 353 27.7 33.2 39.6 32.1 19.9 19.3 16.7 14.0 11.7 — — — 3.5 2.9 2.4 0.9 1.0 1.2 23.1 22.7 22.4 415 (10.4) 19.4 Banks/Financial Institutions Cautious 10,243,990 187,361 14.6 14.6 10.0 14.1 12.3 11.2 ——— 2.3 2.1 1.9 1.5 1.7 1.9 16.4 17.0 16.7 Cement ACC 1,409 SELL 264,807 4,843 188 57.1 73.6 79.7 7.8 28.9 8.2 24.7 19.1 17.7 14.2 10.3 8.9 3.4 3.1 2.7 2.3 1.7 1.7 16.9 18.4 17.5 1,300 (7.8) 8.1 Ambuja Cements 201 SELL 306,454 5,605 1,522 7.8 10.6 12.7 (1.2) 36.2 20.0 25.8 19.0 15.8 15.0 11.1 9.2 3.5 3.2 2.9 1.1 1.4 1.9 14.6 18.2 19.5 180 (10.6) 9.6 Grasim Industries 3,142 ADD 288,166 5,271 92 288.6 335.4 363.9 24.4 16.2 8.5 10.9 9.4 8.6 7.2 5.6 4.7 1.7 1.5 1.3 1.1 1.1 1.1 16.7 16.7 15.7 3,600 14.6 4.8 India Cements 89 ADD 27,216 498 307 9.0 9.8 14.1 373.8 9.5 44.2 9.9 9.0 6.3 5.2 4.7 3.6 0.6 0.6 0.6 2.4 3.6 3.6 6.9 7.3 9.8 105 18.5 3.3 Shree Cement 4,525 SELL 157,635 2,883 35 159.6 252.2 281.8 179.3 58.0 11.7 28.3 17.9 16.1 8.8 10.0 8.4 5.9 4.6 3.7 0.4 0.4 0.4 24.3 28.8 25.6 3,340 (26.2) 2.9 UltraTech Cement 1,972 SELL 540,398 9,884 274 89.3 107.8 124.7 99.0 20.8 15.6 22.1 18.3 15.8 13.6 10.9 9.0 3.7 3.1 2.6 0.5 0.5 0.5 20.8 20.8 19.9 1,600 (18.9) 7.7 Cement Cautious 1,584,676 28,984 40.8 24.7 13.7 19.4 15.5 13.7 10.6 8.7 7.2 2.9 2.5 2.2 1.0 1.0 1.1 14.9 16.1 15.9

Source: Company, Bloomberg, Kotak Institutional Equities estimates

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Kotak Institutional Equities: Valuation summary of KIE Universe stocks

O/S Target ADVT- 28-Dec-12 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) 2012 2013E 2014E 2012 2013E 2014E 2012 2013E 2014E 2012 2013E 2014E 2012 2013E 2014E 2012 2013E 2014E 2012 2013E 2014E (Rs) (%) (US$ mn) Consumer products Asian Paints 4,395 SELL 421,539 7,710 96 99.9 114.3 133.9 23.6 14.4 17.2 44.0 38.5 32.8 30.8 26.3 22.0 16.4 12.9 10.2 0.9 0.8 0.8 42.9 38.9 35.7 3,300 (24.9) 5.5 Bajaj Corp. 232 BUY 34,198 625 148 8.1 10.9 12.5 16.5 33.4 15.5 28.5 21.3 18.5 29.4 20.3 17.0 8.0 6.9 5.9 1.7 2.3 2.7 29.9 34.7 34.5 225 (3.0) 0.6 Colgate-Palmolive (India) 1,542 SELL 209,640 3,834 136 32.8 39.5 46.1 10.9 20.4 16.6 47.0 39.0 33.5 40.5 32.7 27.6 48.1 39.4 34.3 1.6 1.8 2.2 109.0 111.0 109.7 1,150 (25.4) 2.8 Dabur India 129 ADD 226,269 4,138 1,753 3.7 4.5 5.2 12.6 21.1 15.7 35.1 29.0 25.0 27.8 22.4 18.8 12.9 10.3 8.3 1.0 1.2 1.4 41.4 40.1 37.0 140 8.4 2.7 GlaxoSmithkline Consumer 3,803 RS 159,950 2,925 42 86.0 108.5 126.4 20.8 26.1 16.4 44.2 35.0 30.1 35.1 29.5 25.1 14.0 11.6 9.8 0.9 1.2 1.5 34.4 36.2 35.3 - (100.0) 1.8 Godrej Consumer Products 721 ADD 233,195 4,265 324 17.7 22.3 28.5 18.7 26.2 27.7 40.8 32.3 25.3 28.3 21.9 17.1 8.3 6.6 5.7 0.7 0.7 0.7 25.2 24.2 28.0 760 5.5 2.6 Hindustan Unilever 522 REDUCE 1,127,442 20,621 2,159 11.9 15.4 16.8 23.9 29.5 8.6 43.8 33.8 31.1 37.3 29.5 24.7 32.1 27.5 23.8 1.7 2.4 2.7 83.4 87.5 82.5 510 (2.3) 20.8 ITC 289 ADD 2,248,914 41,132 7,771 7.9 9.5 11.2 23.7 19.3 18.4 36.5 30.6 25.8 25.8 21.1 17.4 11.4 10.1 8.7 1.6 1.8 2.0 35.5 36.6 37.7 330 14.0 31.3 Jubilant Foodworks 1,297 SELL 85,096 1,556 66 16.4 23.0 34.7 46.1 40.8 50.6 79.3 56.3 37.4 45.2 32.0 22.3 28.7 19.0 12.6 — — — 44.0 40.6 40.6 1,000 (22.9) 8.9 Jyothy Laboratories 163 ADD 26,715 489 164 2.8 4.3 7.5 (73.3) 53.8 76.2 59.1 38.4 21.8 38.6 21.3 14.9 4.4 4.0 3.3 — — — 6.1 10.8 16.6 195 19.4 0.7 Marico 219 ADD 140,925 2,577 645 5.2 6.6 8.0 34.2 27.4 20.6 42.0 33.0 27.3 30.3 22.5 18.1 12.1 9.2 7.2 0.3 0.4 0.5 31.0 32.3 30.0 220 0.6 1.6 Nestle India 4,965 SELL 478,709 8,756 96 104.6 113.0 139.2 20.5 8.0 23.2 47.5 43.9 35.7 31.3 27.1 21.8 37.6 28.0 20.2 1.0 1.1 1.2 94.7 73.0 65.7 4,000 (19.4) 2.4 Speciality Restaurants 171 ADD 8,018 147 47 4.9 6.3 8.5 7.6 28.2 34.9 34.9 27.2 20.2 22.2 17.4 12.5 7.0 5.1 4.1 — — — 16.2 14.0 12.2 200 17.1 0.7 Tata Global Beverages 160 BUY 99,222 1,815 618 5.4 6.5 7.7 36.3 19.7 19.6 29.7 24.8 20.8 17.5 13.5 11.4 1.7 1.7 1.6 1.1 1.3 1.6 7.8 8.6 9.9 165 2.8 12.7 Titan Industries 281 ADD 249,601 4,565 888 6.7 8.4 10.4 36.5 25.8 23.1 41.9 33.3 27.1 28.8 22.2 17.4 17.3 13.0 9.1 0.8 1.1 0.4 47.9 44.4 39.5 325 15.6 9.1 United Spirits 1,899 ADD 241,569 4,418 127 15.8 36.8 64.8 (55.4) 133.6 76.0 120.4 51.5 29.3 30.4 19.5 15.3 5.2 3.0 2.7 0.1 0.5 0.3 4.5 7.3 11.0 1,500 (21.0) 133.6 Consumer products Cautious 5, 991,002 109,575 18.5 23.5 20.1 41.4 33.5 27.9 29.4 23.5 19.2 12.6 10.3 8.8 1.3 1.6 1.7 30.4 30.7 31.4 Constructions IVRCL 45 REDUCE 11,975 219 267 0.9 3.3 6.1 (84.7) 265.1 85.8 49.7 13.6 7.3 10.2 7.2 5.9 0.6 0.6 0.5 0.9 0.9 0.9 1.2 4.3 7.6 43 (4.1) 10.6 NCC 55 ADD 14,176 259 257 1.4 2.4 3.0 (78.0) 73.5 25.1 39.4 22.7 18.1 9.0 8.3 8.8 0.6 0.6 0.6 0.6 1.1 1.8 1.5 2.6 3.1 55 (0.5) 2.1 Punj Lloyd 60 REDUCE 20,410 373 340 3.3 3.9 7.6 (322.9) 18.7 94.5 18.2 15.3 7.9 10.2 6.9 5.9 0.7 0.7 0.6 0.2 0.6 1.1 3.8 4.5 8.2 60 (0.2) 3.5 Sadbhav Engineering 137 BUY 20,569 376 150 9.3 5.3 9.1 20.4 (42.8) 69.4 14.6 25.6 15.1 8.4 11.6 8.3 2.6 2.4 2.1 0.4 0.4 0.4 17.9 9.4 13.9 180 31.5 0.4 Construction Cautious 67,130 1,228 (19.2) 16.4 75.0 21.5 18.4 10.5 9.6 7.7 6.7 0.8 0.8 0.7 0.5 0.7 1.0 3.9 4.3 7.1 Energy Aban Offshore 379 RS 16,498 302 44 68.3 70.9 92.0 (49.1) 3.8 29.9 5.6 5.3 4.1 8.2 7.1 6.4 0.6 0.6 0.5 0.9 1.2 1.3 12.3 13.2 13.8 — — 4.1 Bharat Petroleum 352 ADD 254,741 4,659 723 18.3 30.3 20.9 (5.7) 65.1 (31.1) 19.2 11.6 16.9 10.7 7.2 8.9 1.6 1.4 1.3 1.6 2.6 1.8 8.1 12.2 7.8 410 16.4 5.1 Cairn india 320 ADD 610,367 11,164 1,907 41.6 60.1 50.1 25.0 44.5 (16.7) 7.7 5.3 6.4 5.7 3.7 4.1 1.2 1.1 1.0 — 3.9 5.0 17.7 22.0 16.6 360 12.5 23.0 Castrol India 299 SELL 147,676 2,701 495 9.5 9.2 10.2 (4.4) (3.0) 11.2 31.6 32.6 29.3 21.6 22.5 20.0 27.0 25.9 24.2 2.5 2.5 2.7 87.9 81.1 85.4 200 (33.0) 1.1 GAIL (India) 351 ADD 445,617 8,150 1,268 28.8 30.9 31.3 2.3 7.2 1.4 12.2 11.4 11.2 7.9 7.4 7.0 1.9 1.7 1.5 2.5 2.7 2.7 15.7 14.9 13.5 410 16.7 6.1 GSPL 78 ADD 43,693 799 563 9.3 8.5 8.1 4.7 (8.6) (5.2) 8.3 9.1 9.6 5.1 5.2 5.1 1.6 1.3 1.2 1.3 1.3 1.3 20.7 15.8 13.0 85 9.5 1.4 Hindustan Petroleum 293 REDUCE 99,347 1,817 339 26.8 10.2 23.5 (34.4) (61.8) 129.2 10.9 28.6 12.5 2.5 3.3 2.7 0.6 0.6 0.6 2.9 1.1 2.5 5.4 2.0 4.5 315 7.5 3.7 Indian Oil Corporation 269 ADD 652,754 11,939 2,428 32.9 18.3 24.3 1.3 (44.3) 32.7 8.2 14.7 11.1 6.9 8.2 6.9 1.1 1.0 1.0 1.9 1.5 2.8 13.0 6.8 8.5 280 4.1 1.9 Oil India 466 BUY 280,154 5,124 601 57.3 59.1 64.4 19.5 3.0 9.1 8.1 7.9 7.2 3.1 2.7 2.0 1.5 1.3 1.2 4.1 4.5 5.1 17.2 15.6 15.4 575 23.4 1.1 India Daily Summary - December 31, 2012India DailySummary-December31, Oil & Natural Gas Corporation 266 BUY 2,274,057 41,592 8,556 32.8 29.8 33.0 33.1 (9.1) 10.7 8.1 8.9 8.1 3.3 3.7 3.1 1.3 1.2 1.1 3.7 3.8 4.1 16.8 13.4 13.5 300 12.9 14.9 Petronet LNG 159 ADD 119,363 2,183 750 14.1 15.0 14.2 70.7 6.6 (5.6) 11.3 10.6 11.2 7.7 7.5 6.7 3.1 2.4 2.0 1.6 1.7 1.9 29.7 24.8 19.0 180 13.1 3.7 Reliance Industries 840 REDUCE 2,504,785 45,812 2,981 61.3 61.8 60.2 (1.1) 0.9 (2.7) 13.7 13.6 14.0 8.0 8.7 8.1 1.4 1.3 1.2 1.0 1.1 1.1 11.7 10.8 9.7 775 (7.8) 48.1 Energy Neutral 7,449,052 136,242 12.9 (2.6) 2.6 9.8 10.1 9.8 5.6 5.7 5.1 1.4 1.3 1.1 2.1 2.5 2.8 13.9 12.4 11.7 Industrials ABB 701 SELL 148,474 2,716 212 8.7 11.4 20.1 192.0 31.1 76.0 80.5 61.4 34.9 51.3 36.5 21.8 5.9 5.5 4.9 0.4 0.5 0.5 7.4 9.3 14.9 500 (28.6) 0.7 BGR Energy Systems 260 REDUCE 18,787 344 72 31.1 27.9 33.9 (30.7) (10.1) 21.5 8.4 9.3 7.7 5.7 5.2 4.8 1.7 1.5 1.3 2.7 2.1 2.6 21.7 16.9 18.0 280 7.5 1.5 Bharat Electronics 1,269 REDUCE 101,536 1,857 80 106.3 110.7 125.7 (0.9) 4.1 13.5 11.9 11.5 10.1 6.5 5.1 3.7 1.7 1.6 1.4 1.6 2.4 2.4 15.3 14.3 14.6 1,300 2.4 0.9 Bharat Heavy Electricals 228 SELL 556,829 10,184 2,448 28.8 28.5 21.9 17.1 (1.0) (23.0) 7.9 8.0 10.4 5.3 5.5 6.3 2.2 1.8 1.6 2.8 2.7 2.1 30.9 24.9 16.4 205 (9.9) 18.7 Crompton Greaves 116 BUY 74,157 1,356 642 5.7 4.1 10.1 (60.0) (28.6) 147.4 20.2 28.3 11.4 8.9 11.8 6.9 2.0 2.0 1.7 1.2 1.3 1.5 10.6 7.1 16.1 155 34.1 6.1 Cummins India 523 ADD 145,003 2,652 277 22.0 25.4 29.8 (0.9) 15.3 17.3 23.7 20.6 17.5 21.9 17.7 14.8 7.1 6.3 5.5 2.1 2.4 2.8 30.7 31.1 32.0 525 0.4 2.0 Kalpataru Power Transmission 92 BUY 14,141 259 153 13.3 13.6 15.5 (4.1) 2.0 14.2 6.9 6.8 6.0 4.8 4.8 4.3 0.8 0.7 0.6 1.6 1.6 1.6 10.7 9.8 10.3 120 30.2 0.5 KEC International 67 BUY 17,328 317 257 6.9 6.8 8.9 (14.1) (1.8) 31.9 9.8 10.0 7.6 5.9 6.6 5.5 1.5 1.3 1.2 1.8 1.5 2.0 16.4 14.1 16.4 80 18.7 0.4 Larsen & Toubro 1,620 REDUCE 992,057 18,145 612 75.7 83.0 93.1 12.4 9.7 12.2 21.4 19.5 17.4 16.3 14.3 12.3 3.2 2.7 2.3 0.9 0.9 0.9 16.1 14.9 14.2 1,625 0.3 43.8 Maharashtra Seamless 272 BUY 19,216 351 71 43.9 33.9 39.1 (9.0) (22.6) 15.3 6.2 8.0 7.0 3.9 4.3 3.4 0.7 0.7 0.6 2.7 2.5 2.9 11.5 8.3 9.2 400 46.8 0.1 Siemens 669 SELL 235,418 4,306 352 13.6 23.3 27.4 (46.6) 71.2 17.6 49.2 28.7 24.4 30.2 16.8 14.0 5.5 4.8 4.2 0.3 0.7 0.8 11.7 17.9 18.3 575 (14.0) 3.2 Suzlon Energy 19 RS 34,392 629 1,777 (4.0) (3.7) (0.4) (34.1) (6.0) (88.1) (4.9) (5.2) (43.7) 8.1 8.3 6.7 0.7 0.8 0.8 — 1.0 1.0 (11.7) (13.7) (1.8) — — 7.5 KOTAK INSTITUTIONAL EQUITIES RESEARCH Tecpro Systems 149 ADD 7,505 137 50 24.4 25.1 27.6 (9.6) 2.9 9.9 6.1 5.9 5.4 4.9 5.0 4.6 1.0 0.9 0.8 — — — 17.1 15.3 14.8 200 34.5 0.1 Thermax 618 REDUCE 73,587 1,346 119 32.9 26.5 31.6 4.0 (19.5) 19.4 18.8 23.3 19.5 12.6 15.1 12.1 4.5 4.0 3.5 1.1 1.4 1.5 26.6 18.2 19.2 510 (17.4) 0.9 Voltas 105 REDUCE 34,761 636 331 9.4 7.3 9.1 (3.4) (22.6) 24.4 11.1 14.4 11.6 9.0 10.2 7.2 2.3 2.1 1.9 1.5 2.1 2.6 21.7 15.4 17.2 125 18.9 3.8 Industrials Cautious 2,473,192 45,234 6.1 3.9 5.3 16.3 15.7 14.9 11.1 10.5 9.7 2.7 2.4 2.1 1.4 1.5 1.4 16.6 15.1 14.1

Source: Company, Bloomberg, Kotak Institutional Equities estimates

KOTAK INSTITUTIONAL EQUITIES RESEARCH Kotak Institutional Equities: Valuation summary of KIE Universe stocks India DailyIndia Summary-December2012 31,

DB Corp 228 BUY 41,859 766 183 11.0 11.6 14.3 (14.5) 4.9 24.1 20.7 19.8 15.9 12.0 11.0 9.0 4.5 4.1 3.8 2.2 2.6 3.5 23.0 21.9 24.9 260 13.9 0.2 DishTV 76 ADD 80,674 1,476 1,064 (1.0) 0.4 1.4 (45.3) (143.5) 212.8 (74.8) 172.1 55.0 18.2 13.3 10.8 (86.0) (171.8) 81.0 — — — 694.0 (66.6) 557 85 12.1 7.2 Hindustan Media Ventures 148 BUY 10,847 198 73 8.9 10.5 11.0 22.3 17.4 5.0 16.5 14.1 13.4 9.1 7.7 6.8 2.5 2.2 2.0 0.7 1.4 2.7 15.9 16.3 15.4 180 21.8 0.0 HT Media 102 ADD 24,096 441 235 7.0 6.1 8.2 (8.4) (13.3) 34.6 14.5 16.8 12.5 6.3 6.8 4.7 1.5 1.4 1.4 0.4 2.0 3.9 11.0 8.8 11.2 120 17.1 0.3 Jagran Prakashan 102 BUY 32,273 590 316 5.6 6.0 7.0 (17.4) 6.7 16.8 18.1 17.0 14.6 10.0 9.3 8.1 4.3 4.0 3.6 3.4 3.4 3.4 24.5 24.3 25.8 130 27.4 0.2 Sun TV Network 421 REDUCE 165,789 3,032 394 17.6 17.5 19.9 (10.0) (0.3) 13.5 23.9 24.0 21.2 15.1 14.5 12.9 6.2 5.7 5.3 2.3 2.4 2.9 28.6 25.9 27.0 390 (7.3) 9.7 Zee Entertainment Enterprises 220 REDUCE 208,858 3,820 950 6.0 7.3 8.9 (0.5) 20.6 22.0 36.5 30.2 24.8 26.2 20.8 16.7 4.6 4.3 4.1 0.6 0.7 0.9 13.0 14.9 17.3 190 (13.6) 11.0 Media Neutral 583,130 10,665 (1.5) 15.8 22.4 30.4 26.2 21.4 15.9 13.9 11.6 5.0 4.6 4.2 1.2 1.4 1.8 16.4 17.5 19.6 Metals & Mining Coal India 353 BUY 2,232,203 40,827 6,316 23.2 24.8 28.4 34.4 6.5 14.5 15.2 14.3 12.5 9.7 8.4 7.0 5.3 4.2 3.4 2.8 2.1 2.4 38.0 32.8 30.4 404 14.3 12.6 Hindalco Industries 129 SELL 247,814 4,532 1,915 17.7 14.7 14.0 38.8 (16.9) (5.1) 7.3 8.8 9.2 7.2 8.3 8.6 0.8 0.7 0.7 1.2 1.2 1.2 11.1 8.5 7.5 115 (11.1) 15.1 Hindustan Zinc 137 ADD 576,713 10,548 4,225 13.2 14.0 14.7 13.2 6.1 4.9 10.4 9.8 9.3 6.5 6.1 4.8 2.1 1.8 1.6 1.8 1.9 1.9 22.6 20.3 18.3 155 13.6 2.2 Jindal Steel and Power 446 REDUCE 416,734 7,622 935 42.4 32.6 43.6 5.6 (23.2) 33.8 10.5 13.7 10.2 8.6 8.9 8.0 2.3 2.0 1.7 0.4 0.4 0.4 24.8 15.7 17.8 420 (5.8) 18.5 JSW Steel 814 SELL 181,575 3,321 223 24.1 68.9 66.7 (69.3) 185.9 (3.1) 33.8 11.8 12.2 5.8 6.2 6.4 1.1 1.0 0.9 0.9 1.2 1.2 8.2 9.8 8.0 585 (28.1) 14.8 National Aluminium Co. 49 SELL 127,444 2,331 2,577 3.4 3.2 3.6 (19.7) (5.9) 13.2 14.7 15.6 13.8 6.9 6.2 5.0 1.1 1.0 1.0 2.0 2.0 2.0 7.6 6.8 7.4 50 1.1 0.2 NMDC 164 BUY 650,211 11,892 3,965 18.5 17.9 19.1 12.6 (2.9) 6.7 8.9 9.1 8.6 5.0 5.1 4.4 2.7 2.2 1.9 2.7 3.0 3.0 33.3 26.5 23.8 190 15.9 10.0 Sesa Goa 195 ADD 169,431 3,099 869 31.0 27.8 28.0 (36.2) (10.5) 0.9 6.3 7.0 7.0 5.9 24.8 17.0 1.1 1.0 0.9 2.4 0.6 0.6 11.1 0.6 2.1 203 4.1 6.1 Sterlite Industries 117 ADD 392,924 7,187 3,361 15.8 16.2 16.9 3.9 2.7 4.2 7.4 7.2 6.9 4.3 3.8 3.1 0.9 0.8 0.7 1.7 1.7 1.7 12.1 11.2 10.7 122 4.4 12.5 Tata Steel 429 ADD 416,298 7,614 971 17.2 14.0 48.7 (72.3) (18.7) 247.1 24.9 30.6 8.8 8.0 7.9 6.1 1.0 1.0 0.9 2.8 2.8 2.8 6.4 3.2 10.6 400 (6.7) 32.4 Metals & Mining Cautious 5,411,347 98,973 0.5 0.4 14.1 11.5 11.5 10.1 7.1 7.2 6.2 2.0 1.7 1.5 2.3 2.0 2.1 17.0 15.2 15.3 Pharmaceutical Apollo Hospitals 790 ADD 109,934 2,011 139 15.8 22.0 29.2 19.3 39.6 32.6 50.0 35.8 27.0 21.5 17.8 14.3 4.4 3.9 3.5 — 0.7 1.0 9.6 11.5 13.6 820 3.8 7.9 Biocon 283 ADD 56,690 1,037 200 17.1 16.9 20.7 (6.9) (1.0) 22.0 16.6 16.7 13.7 9.4 9.8 8.0 2.5 2.3 2.1 1.8 1.8 2.2 15.7 14.2 15.7 287 1.3 3.1 Cipla 416 REDUCE 334,336 6,115 803 14.0 19.8 20.0 13.5 41.4 0.9 29.8 21.0 20.9 20.3 14.9 13.7 4.4 3.7 3.2 0.5 0.7 0.7 15.7 17.0 16.6 400 (3.9) 14.2 Cadila Healthcare 902 ADD 184,592 3,376 205 31.9 32.8 47.1 (8.2) 3.0 43.5 28.3 27.5 19.1 21.7 18.3 13.3 7.2 6.0 4.9 0.8 0.9 1.3 27.5 23.9 28.4 943 4.6 2.1 Dishman Pharma & chemicals 115 REDUCE 9,370 171 81 7.0 9.7 12.0 (29.0) 38.7 23.7 16.5 11.9 9.6 8.4 7.0 6.2 1.0 1.0 0.9 — — — 4.6 7.2 8.4 50 (56.6) 1.9 Divi's Laboratories 1,079 REDUCE 143,094 2,617 133 40.2 49.5 58.9 24.0 23.1 19.0 26.8 21.8 18.3 20.3 16.4 13.1 6.7 5.6 4.7 1.2 1.5 1.7 27.1 28.1 28.0 1,130 4.8 8.0 Dr Reddy's Laboratories 1,827 ADD 310,837 5,685 170 84.0 101.5 106.0 29.4 20.8 4.5 21.7 18.0 17.2 13.7 12.0 11.2 5.4 4.4 3.6 0.7 0.8 0.8 23.4 24.7 21.8 1,940 6.2 11.4 GlaxoSmithkline Pharmaceuticals 2,119 SELL 179,620 3,285 85 74.3 79.8 90.3 8.8 7.5 13.2 28.5 26.6 23.5 20.4 19.8 16.8 9.3 8.8 8.2 2.1 2.3 3.0 32.4 34.0 36.2 1,900 (10.3) 1.4 Glenmark Pharmaceuticals 535 REDUCE 144,765 2,648 271 21.9 22.3 28.3 31.1 1.8 27.0 24.5 24.0 18.9 27.3 16.8 13.2 6.0 4.9 4.0 — 0.5 0.6 20.7 22.7 23.6 510 (4.7) 5.0 Jubilant Life Sciences 222 REDUCE 35,317 646 159 22.9 31.0 37.4 58.7 35.4 20.7 9.7 7.2 5.9 8.5 6.5 5.6 1.5 1.2 1.0 0.9 1.4 1.8 16.2 19.4 19.7 185 (16.6) 1.2 Lupin 614 ADD 274,235 5,016 447 19.5 28.3 29.6 1.2 45.4 4.6 31.5 21.7 20.7 22.2 13.6 12.8 6.7 5.4 4.5 0.5 0.8 0.8 23.9 28.0 23.8 600 (2.2) 9.6 Ranbaxy Laboratories 503 SELL 212,198 3,881 422 (18.5) 38.8 23.5 (145.7) 309.1 (39.5) (27.1) 13.0 21.4 14.9 9.8 14.8 7.4 4.9 4.1 — — — (68.5) 45.6 20.8 482 (4.1) 7.2 Sun Pharmaceuticals 740 REDUCE 765,806 14,007 1,036 25.0 28.5 33.3 42.5 14.1 16.7 29.6 25.9 22.2 22.0 14.1 14.4 5.7 4.9 4.2 0.6 0.7 0.8 21.9 20.4 20.3 664 (10.2) 11.6 Pharmaceuticals Attractive 2,760,794 50,495 (8.2) 50.6 7.4 32.0 21.2 19.8 18.4 13.6 12.9 5.4 4.5 3.9 0.7 0.8 1.0 17.0 21.4 19.5 Real Estate DLF 225 NR 385,607 7,053 1,715 7.1 12.7 16.9 (22.1) 79.7 33.1 31.8 17.7 13.3 16.0 12.1 9.3 1.4 1.3 1.2 1.1 1.3 1.5 4.5 7.6 9.5 — — 31.7 Housing Development & Infrastructure 110 NR 46,069 843 419 22.0 28.8 28.8 11.3 30.5 0.2 5.0 3.8 3.8 5.6 5.0 4.6 0.4 0.4 0.4 — 1.4 1.8 8.3 10.8 9.6 — — 39.8 Mahindra Life Space Developer 409 NR 16,709 306 41 29.4 29.8 34.3 18.0 1.3 15.1 13.9 13.7 11.9 13.7 10.9 10.4 1.5 1.4 1.3 1.1 1.2 1.3 11.2 10.4 11.0 — — 0.6 India Daily Summary Daily India - December Summary Oberoi Realty 293 NR 96,480 1,765 330 14.1 14.3 22.4 (10.5) 1.4 57.3 20.8 20.5 13.1 17.3 13.4 8.5 2.6 2.4 2.1 0.7 0.9 1.0 13.1 12.0 16.9 — — 0.5 Phoenix Mills 259 NR 37,493 686 145 7.3 10.7 11.5 14.9 46.9 7.9 35.6 24.2 22.5 27.0 18.9 18.1 2.2 2.1 1.9 0.8 0.8 0.8 6.4 8.9 9.0 — — 0.6 Sobha Developers 388 NR 38,068 696 98 21.4 25.1 37.4 13.8 17.1 49.2 18.1 15.5 10.4 10.6 9.6 6.7 1.9 1.7 1.5 1.3 1.3 1.3 10.9 11.7 15.6 — — 1.1 Unitech 34 NR 87,908 1,608 2,616 0.9 1.8 2.3 (56.1) 84.8 32.7 35.4 19.2 14.4 33.7 18.5 14.3 0.7 0.7 0.7 0.3 0.3 0.3 2.1 3.7 4.7 — — 22.1 Real Estate Cautious 767,060 14,029 (7.0) 50.1 2.9 19.4 12.9 12.6 13.0 9.8 9.4 1.2 1.1 1.1 0.9 1.2 1.3 6.4 8.8 9.0

Source: Company, Bloomberg, Kotak Institutional Equities estimates

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Kotak Institutional Equities: Valuation summary of KIE Universe stocks

O/S Target ADVT- 28-Dec-12 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) 2012 2013E 2014E 2012 2013E 2014E 2012 2013E 2014E 2012 2013E 2014E 2012 2013E 2014E 2012 2013E 2014E 2012 2013E 2014E (Rs) (%) (US$ mn) Technology HCL Technologies 626 REDUCE 447,805 8,190 715 34.6 46.8 50.0 51.2 35.5 6.8 18.1 13.4 12.5 11.2 8.4 7.8 4.6 3.5 2.8 1.3 1.3 1.3 25.1 28.9 25.2 575 (8.2) 14.3 Hexaware Technologies 85 REDUCE 24,815 454 294 9.1 10.9 10.0 207.9 20.3 (8.2) 9.3 7.7 8.4 7.8 5.5 5.6 2.4 2.2 2.0 4.7 6.5 5.9 26.9 29.7 24.3 90 6.4 5.1 Infosys 2,323 REDUCE 1,333,517 24,390 574 144.9 160.5 168.5 21.0 10.8 5.0 16.0 14.5 13.8 10.5 9.3 8.3 4.3 3.6 3.1 2.0 2.2 2.4 29.0 26.9 24.1 2,350 1.2 51.1 Mahindra Satyam 105 ADD 123,833 2,265 1,176 10.2 10.2 11.1 142.3 0.1 9.1 10.3 10.3 9.5 9.3 5.7 5.0 4.1 3.0 2.4 — — 2.1 50.4 33.8 28.2 120 14.0 8.2 Mindtree 692 ADD 28,471 521 41 53.1 71.1 77.4 115.1 34.0 8.8 13.0 9.7 8.9 9.7 5.7 5.5 3.0 2.4 2.1 0.8 2.1 3.4 25.2 27.4 24.8 750 8.4 1.6 Mphasis 385 SELL 81,128 1,484 211 39.0 37.6 37.7 (24.6) (3.7) 0.4 9.9 10.2 10.2 8.2 7.6 7.4 2.1 1.8 1.7 1.7 4.4 4.9 22.8 19.0 17.4 375 (2.6) 1.2 Polaris Financial Technology 116 REDUCE 11,515 211 100 20.8 21.7 19.9 7.4 4.7 (8.2) 5.6 5.3 5.8 3.1 2.5 2.2 0.9 0.8 0.7 3.4 3.5 3.7 18.1 16.2 13.3 120 3.9 0.9 TCS 1,268 REDUCE 2,480,751 45,373 1,957 54.4 69.5 76.1 22.0 27.8 9.5 23.3 18.2 16.7 16.5 13.2 11.9 7.6 6.2 5.2 2.0 2.2 2.4 36.8 37.6 34.0 1,225 (3.4) 25.0 Tech Mahindra 921 ADD 117,396 2,147 128 80.1 96.0 104.8 63.5 19.9 9.1 11.5 9.6 8.8 14.6 9.9 9.1 2.9 2.5 2.2 0.4 0.7 0.9 28.4 28.8 27.3 1,025 11.3 11.2 Wipro 392 REDUCE 962,875 17,611 2,456 22.7 26.4 28.3 5.2 16.4 7.2 17.3 14.8 13.8 11.9 9.8 8.7 3.4 2.9 2.5 1.2 1.5 1.7 21.2 20.9 19.2 375 (4.3) 10.8 Technology Cautious 5,612,106 102,645 21.2 19.5 7.3 18.0 15.1 14.1 12.7 10.3 9.3 4.7 3.9 3.3 1.7 2.0 2.2 26.0 25.7 23.6 Telecom Bharti Airtel 319 ADD 1,211,624 22,160 3,798 11.2 8.1 12.9 (29.6) (27.8) 59.7 28.4 39.4 24.7 7.9 7.3 6.3 2.4 2.3 2.1 — 0.5 0.4 8.6 5.9 8.9 325 1.9 27.7 IDEA 104 ADD 343,213 6,277 3,303 2.2 3.3 6.0 (19.6) 52.3 81.4 47.5 31.2 17.2 9.4 7.9 6.2 2.6 2.4 2.1 — — — 5.7 8.1 13.2 101 (2.8) 4.1 MTNL 26 RS 16,601 304 630 (9.1) (8.4) (8.3) (11.9) (8.1) (1.7) (2.9) (3.1) (3.2) 0.3 0.4 0.4 0.2 0.2 0.2 — — — (5.7) (5.5) (5.8) — — 1.5 Reliance Communications 73 SELL 151,188 2,765 2,064 4.5 2.8 4.1 (31.0) (37.9) 46.5 16.3 26.2 17.9 9.0 7.7 6.7 0.4 0.4 0.4 — — — 2.4 1.6 2.2 50 (31.7) 17.8 Tata Communications 237 REDUCE 67,502 1,235 285 (27.9) (34.1) (23.7) 12.0 22.3 (30.4) (8.5) (6.9) (10.0) 9.8 8.3 7.3 2.9 4.7 8.8 — — — (27.0) (52.1) (61.4) 220 (7.1) 0.9 Telecom Neutral 1,790,128 32,741 (34.4) (28.4) 101.7 39.4 55.0 27.3 8.5 7.6 6.4 1.6 1.6 1.5 — — 0.3 4.0 2.8 5.4 Utilities Adani Power 62 SELL 134,833 2,466 2,180 (0.4) (7.4) (1.9) (118.0) 1,645.4 (74.3) (145.9) (8.4) (32.5) 37.3 47.0 13.7 2.2 3.2 3.5 — — — (1.5) (31.3) (10.2) 33 (46.6) 3.7 CESC 317 REDUCE 39,598 724 125 21.7 26.0 32.3 (9.3) 19.6 24.1 14.6 12.2 9.8 8.7 8.9 6.0 0.6 0.6 0.6 — 1.6 1.7 4.5 5.2 6.2 294 (7.2) 5.0 JSW Energy 66 SELL 108,568 1,986 1,640 2.0 4.7 5.4 (60.6) 131.8 15.5 32.8 14.1 12.2 15.1 8.5 6.5 1.9 1.7 1.5 — — — 5.8 12.6 12.8 54 (18.4) 2.2 Lanco Infratech 14 RS 30,011 549 2,223 (0.5) (0.7) 1.0 (131.8) 39.2 (233.2) (25.8) (18.5) 13.9 10.7 10.4 7.0 0.6 0.7 0.6 — — — (2.5) (3.6) 4.8 — — 5.9 NHPC 26 ADD 314,899 5,759 12,301 2.5 2.0 2.3 84.5 (21.6) 17.1 10.3 13.1 11.2 9.7 11.8 9.5 1.1 1.0 1.0 2.6 2.0 2.4 11.1 8.2 9.0 26 1.6 5.4 NTPC 157 ADD 1,291,652 23,624 8,245 10.8 12.7 13.7 (1.1) 17.4 7.8 14.5 12.3 11.5 11.9 10.2 9.3 1.8 1.6 1.5 2.1 2.4 2.6 12.6 13.6 13.5 180 14.9 8.6 Power Grid 114 ADD 525,474 9,611 4,630 7.1 8.1 10.0 22.9 14.3 23.8 16.1 14.0 11.3 12.7 11.5 9.1 2.2 2.0 1.8 1.9 2.2 2.7 14.6 15.1 16.9 140 23.3 7.2 Reliance Infrastructure 517 BUY 136,000 2,487 263 60.3 56.8 59.8 4.0 (5.8) 5.3 8.6 9.1 8.6 10.6 4.6 3.9 0.6 0.5 0.5 2.0 2.2 2.2 8.9 10.1 9.4 904 74.8 20.1 Reliance Power 93 SELL 262,139 4,794 2,805 3.1 3.7 3.2 14.0 19.8 (13.2) 30.2 25.3 29.1 68.8 27.1 19.7 1.5 1.4 1.3 — — — 5.0 5.7 4.7 79 (15.5) 12.7 Tata Power 109 ADD 269,667 4,932 2,468 4.6 3.4 6.0 (40.6) (26.8) 77.3 23.7 32.4 18.3 11.5 9.4 7.4 2.0 2.0 1.8 1.4 1.6 1.6 8.1 6.1 10.4 113 3.4 6.6 Utilities Attractive 3,112,841 56,934 (1.8) 0.3 23.2 16.2 16.1 13.1 13.4 11.5 9.2 1.5 1.4 1.3 1.7 1.8 2.0 9.5 9.0 10.2 Others Carborundum Universal 151 BUY 28,306 518 187 11.6 9.1 12.5 27.0 (21.4) 37.4 13.0 16.6 12.1 8.0 9.1 6.8 2.6 2.3 2.0 1.3 1.0 1.4 24.8 16.3 19.4 180 19.2 0.4 Coromandel International 264 SELL 74,542 1,363 283 22.6 23.2 23.4 (7.9) 2.5 0.9 11.7 11.4 11.3 9.4 9.3 6.9 3.1 2.6 2.3 2.7 2.8 2.9 27.8 23.7 20.6 260 (1.4) 0.7 India Daily Summary - December 31, 2012India DailySummary-December31, Havells India 638 REDUCE 79,588 1,456 125 31.5 31.7 37.3 28.2 0.8 17.6 20.3 20.1 17.1 12.8 11.6 9.9 7.9 5.4 4.3 1.0 1.1 1.2 45.6 31.8 28.2 580 (9.1) 3.3 Jaiprakash Associates 97 BUY 205,947 3,767 2,126 2.9 6.6 10.7 (51.5) 127.3 60.9 33.1 14.6 9.1 13.8 8.9 6.9 1.8 1.6 1.4 — — — 5.6 11.7 16.6 100 3.3 33.5 Jet Airways 565 SELL 48,785 892 86 (184.6) (11.0) 25.7 1,735.6 (94) (333.9) (3.1) (51.5) 22.0 (663.9) 11.6 8.1 37.3 134.9 18.9 — — — (164.4) (113.4) 150.8 350 (38.1) 34.6 Rallis India 150 BUY 29,219 534 194 5.1 6.7 8.6 (21.6) 32 27.4 29.5 22.4 17.5 15.0 12.9 9.7 5.3 4.6 3.9 1.5 1.5 1.5 20.4 20.9 24.1 155 3.2 1.4 SpiceJet 45 BUY 21,628 396 484 (13.7) 0.2 2.6 (649.9) (101.6) 1,045.0 (3.3) 199.6 17.4 (5.4) 23.0 9.8 (14.1) (50.5) 26.6 (2.1) (4.0) (3.5) (721) (11.1) 645.7 50 12.0 4.4 Tata Chemicals 350 BUY 89,111 1,630 255 32.9 35.3 40.4 28.2 7.4 14.3 10.6 9.9 8.7 5.9 5.3 4.7 1.3 1.1 1.0 2.9 2.9 2.9 12.3 11.7 11.9 360 2.9 3.9 United Phosphorus 129 REDUCE 59,503 1,088 462 12.0 15.0 16.0 (0.4) 24.9 6.5 10.7 8.6 8.1 5.8 5.3 4.7 1.4 1.3 1.1 1.9 1.9 1.9 14.5 16.0 15.0 120 (6.9) 4.8 Others 636,628 11,644 (67.8) 266.8 38.3 54.6 14.9 10.8 13.1 8.6 6.8 2.3 2.0 1.7 1.1 1.0 1.1 4.2 13.6 16.2 KS universe (b) 52,456,833 959,430 9.2 9.2 12.1 15.8 14.5 12.9 10.0 9.0 7.8 2.4 2.2 1.9 1.5 1.7 1.9 15.3 15.0 15.1 KS universe (b) ex-Energy 45,007,781 823,188 8.2 12.7 14.5 17.5 15.6 13.6 11.8 10.2 8.7 2.8 2.5 2.2 1.4 1.6 1.7 15.8 15.9 16.1 KS universe (d) ex-Energy & ex-Commodities 38,011,758 695,231 9.1 15.0 14.7 18.9 16.4 14.3 13.4 11.1 9.4 2.9 2.6 2.3 1.3 1.6 1.7 15.6 16.0 16.3

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. (c) EV/Sales & EV/EBITDA for KS universe excludes Banking Sector. (d) Rupee-US Dollar exchange rate (Rs/US$)= 54.68 KOTAK INSTITUTIONAL EQUITIES RESEARCH Source: Company, Bloomberg, Kotak Institutional Equities estimates

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% 35.5% * The above categories are defined as follows: Buy = We expect this stock to deliver more than 15% returns over the 30% next 12 months; Add = We expect this stock to deliver 23.3% 23.3% 5-15% returns over the next 12 months; Reduce = We 18.0% expect this stock to deliver -5-+5% returns over the next 20% 12 months; Sell = We expect this stock to deliver less than - 5% returns over the next 12 months. Our target prices are 10% 7.6% also on a 12-month horizon basis. These ratings are used 3.5% illustratively to comply with applicable regulations. As of 1.2% 0.0% 30/09/2012 Kotak Institutional Equities Investment Research 0% had investment ratings on 172 equity securities. BUY ADD REDUCE SELL

Source: Kotak Institutional Equities As of September 30, 2012

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.

27 KOTAK INSTITUTIONAL EQUITIES RESEARCH

Corporate Office Overseas Offices

Kotak Securities Ltd. Kotak Mahindra (UK) Ltd Kotak Mahindra Inc Bakhtawar, 1st Floor 8th Floor, Portsoken House 50 Main Street, Ste. 890 229, Nariman Point 155-157 Minories Westchester Financial Centre Mumbai 400 021, India London EC3N 1LS White Plains, New York 10606 Tel: +91-22-6634-1100 Tel: +44-20-7977-6900 Tel:+1-914-997-6120

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

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

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

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

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

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