INDIA DAILY

August 20, 2020 India 19-Aug 1-day 1-mo 3-mo Sensex 38,615 0.2 3.2 25.3 Nifty 11,408 0.2 3.5 25.8 Contents Global/Regional indices Dow Jones 27,693 (0.3) 3.8 12.7 Daily Alerts Nasdaq Composite 11,146 (0.6) 3.5 18.9 FTSE 6,112 0.6 (2.4) 0.7 Results, Change in Reco Nikkei 23,078 (0.1) 1.6 12.1 Hang Seng 25,179 (0.7) 0.5 3.2 Muthoot Finance: Overheated KOSPI 2,337 (1.0) 6.3 17.5  Muthoot: Gold price rally benefits in multiple ways Value traded – India  Funding constrained growth in 1Q, 18% growth over next nine months Cash (NSE+BSE) 599 634 640 10,87 Derivatives (NSE) 15,973 10,808  Muthoot has been a great outperformer, riding gold prices; downgrade to 2 REDUCE Deri. open interest 4,056 3,482 2,487

Company alerts Forex/money market Tata Power: Cleaner, leaner, greener Change, basis points

 Aggressive plans driven by higher contribution from renewable segment 19-Aug 1-day 1-mo 3-mo

Rs/US$ 74.8 6 (10) (82)  Extant investment thesis is based on de-leveraging of balance sheet, 10yr govt bond, % 6.3 - 15 (8) resolution of Mundra Net investment (US$ mn)

18-Aug MTD CYTD

FIIs 141 5,374 4,086

MFs (76) (766) 3,336

Top movers

Change, %

Best performers 19-Aug 1-day 1-mo 3-mo

BHFC IN Equity 490 (1.9) 28.1 73.8

EDEL IN Equity 73 0.1 7.8 71.3

TPWR IN Equity 57 1.9 15.6 70.5

BAF IN Equity 3,410 (0.3) (0.9) 66.9

MMFS IN Equity 138 1.3 (1.5) 65.5

Worst performers

YES IN Equity 16 5.0 (18.8) (41.8)

BHARTI IN Equity 536 1.8 (6.9) (9.8)

DMART IN Equity 2,267 0.3 12.3 (7.6)

BHIN IN Equity 201 0.4 (0.9) 0.2

NEST IN Equity 16,346 (1.3) (5.2) 0.3

[email protected] Contact: +91 22 6218 6427

For Private Circulation Only. FOR IMPORTANT INFORMATION ABOUT KOTAK SECURITIES’ RATING SYSTEM AND OTHER DISCLOSURES. REFER TO THE END OF THIS MATERIAL. REDUCE Muthoot Finance (MUTH) Diversified Financials AUGUST 19, 2020 RESULT, CHANGE IN RECO. Sector view: Attractive

Overheated. Muthoot Finance reported marginal (1% qoq) loan book decline despite CMP (`): 1,256 sharp rally in gold prices, likely due to funding challenges. Even as we expect growth to Fair Value (`): 1,100 catch up over the next nine months, we find Muthoot’s valuations overheated post the BSE-30: 38,615 sharp stock rerating, following the rally in gold prices. Downgrade the stock to REDUCE from ADD with FV of Rs1,100. Improving funding and stabilizing Covid cases prompt us to look at other inexpensive NBFCs even as further rally in gold poses risk to our call.

Muthoot Finance Stock data Forecasts/valuations 2020 2021E 2022E 52-week range (Rs) (high,low) 1,406-477 EPS (Rs) 75.0 76.8 87.1 Mcap (bn) (Rs/US$) 504/6.8 EPS growth (%) 52.3 2.4 13.5 ADTV-3M (mn) (Rs/US$) 4,098/55 P/E (X) 16.7 16.4 14.4 QUICK NUMBERS Shareholding pattern (%) P/B (X) 4.4 3.6 3.0 Promoters 73.4 BVPS (Rs) 288.5 347.4 414.1  PAT up 59% yoy; FIIs 14.6 RoE (%) 28.1 24.1 22.9 core PBT up 34% MFs/BFIs 6.1/0.6 Div. yield (%) 1.2 1.2 1.4 Price performance (%) 1M 3M 12M NII (Rs bn) 58 63 72 yoy Absolute 4 61 99 PPOP (Rs bn) 41 44 50 Rel. to BSE-30 0 26 93 Net profits (Rs bn) 30 31 35  Standalone AUM up 15% yoy/down 1% Muthoot: Gold price rally benefits in multiple ways qoq

Muthoot has been a clear beneficiary of the sharp rally in gold prices that (1) potentially drives  Gold tonnage higher loan growth, (2) provides comfort on underlying asset quality, in an environment of pledged with heightened risk for rest of the NBFC sector, and (3) boosts yields as a comfortable LTV enables it Muthoot Finance to recover penal and other charges as well. down 6% yoy/qoq Funding constrained growth in 1Q, 18% growth over next nine months

We believe that the recent sharp rally in gold prices (34% since April) will provide further legs to growth over the next couple of months. Challenges on the funding side likely constrained the company in the first two months of 1QFY21, driving 1% qoq decline in the loan book. We continue to model 18% loan growth for the year with a catch-up over the next nine months. Funding access remains a crucial growth enabler (despite high gold prices); as the NBFC funding environment eases, we expect Muthoot to benefit as well. Muthoot has been a great outperformer, riding gold prices; downgrade to REDUCE

We are downgrading Muthoot Finance to REDUCE, after 61%/99% rally in past 6/12 months.

The sharp rally in gold prices, likely reflecting safe haven nature of the commodity, broadly corresponded with the rise in pandemic and has driven Muthoot’s stock. Early signs of rise in Nischint Chawathe Covid cases stabilizing coupled with rerating of Muthoot Finance prompt the downgrade. Muthoot’s business tends to be highly cyclical with linkages to the gold cycle and it would be M B Mahesh, CFA inaccurate to juxtapose current strong return ratios to arrive at long-term valuation multiples. Notably, Muthoot reported average RoA of 2.6-6.8% during the recent cycle, i.e. 2014-20 (peak Dipanjan Ghosh of 6.8% in FY2020) and RoE of 14-28% (peak of 28% in FY2020); the stock currently trades at 3X book FY2022E. At our RGM-based FV of Rs1,100 (from Rs1,025), the stock will trade at Abhijeet Sakhare 2.5X book June 2022E. In the current environment, we prefer inexpensively valued vehicle finance NBFCs (Cholamandalam, Shriram Transport Finance and SCUF) over Muthoot Finance. Ashlesh Sonje We are raising our estimates by 2-11%. We expect Muthoot Finance to deliver 16% loan book CAGR during FY2021-23E, driving 15% EPS CAGR during the period. Near-term RoE will likely remain high at 22-24%. It remains challenging to take a call on gold prices; continuous rise in gold prices will likely drive further rerating of Muthoot and poses risk to our stock call. [email protected] Contact: +91 22 6218 6427

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

Exhibit 1: Muthoot Finance-quarterly summary March fiscal year-ends, 1QFY20-1QFY21 (Rs mn)

Ind-AS Ind-AS Ind-AS Ind-AT (% chg.) Ind-AS Ind-AS Ind-AS 1QFY21 1QFY21E 1QFY20 4QFY20 1QFY21E 1QFY20 4QFY20 2021E 2020 (% chg.) 2022E Income statement Operational income 23,851 24,149 18,568 24,004 (1.2) 28.5 (0.6) 98,661 87,041 13.4 111,745 Interest income 23,161 23,874 18,274 23,506 (3.0) 26.7 (1.5) 97,369 85,644 13.7 110,131 Net gain on fair value change 581 100 96 312 480.9 502.0 86.0 300 590 (49.1) 300 Sale of services 18 50 54 41 (63.6) (66.3) (55.2) 632 785 (19.5) 754 Service charges 92 125 143 135 (26.7) (36.1) (32.2) 350 593 (41.0) 550 Other operational income — — — 9 10 (571) NM 10 Interest expense 8,715 7,571 6,416 7,700 15.1 35.8 13.2 34,419 27,753 24.0 38,354 NII 14,446 16,303 11,858 15,806 (11.4) 21.8 (8.6) 62,950 57,891 8.7 71,777 Net operational income 15,136 16,578 12,152 16,303 (8.7) 24.6 (7.2) 64,242 59,288 8.4 73,391 Other income 3 20 19 23 (86.1) (85.1) (87.6) 35 109 (68.0) 50 Total income 15,139 16,598 12,171 16,326 (8.8) 24.4 (7.3) 64,277 59,397 8.2 73,441 Operating expenses 3,738 5,300 3,972 5,304 (29.5) (5.9) (29.5) 20,193 17,996 12.2 23,643 Employee expense 2,362 3,153 2,295 3,088 (25.1) 2.9 (23.5) 11,535 10,290 12.1 13,968 Depreciation expense 99 100 96 122 (0.7) 3.5 (18.9) 456 431 5.8 461 Other operating expenses 1,277 2,047 1,581 2,094 (37.6) (19.2) (39.0) 8,203 7,276 12.7 9,214 PPOP 11,401 11,298 8,199 11,021 0.9 39.1 3.4 44,084 41,401 6.5 49,798 Provisions 146 106 33 48 37.5 342.4 205.2 2,698 985 173.9 2,833 PBT 11,255 11,191 8,166 10,974 0.6 37.8 2.6 41,385 40,416 2.4 46,966 Tax 2,847 2,865 2,866 2,822 (0.6) (0.7) 0.9 10,595 10,351 2.4 12,023 PAT 8,408 8,326 5,300 8,151 1.0 58.6 3.1 30,791 30,065 2.4 34,942 Core PBT 10,802 11,148 8,049 10,659 (3.1) 34.2 1.3 43,147 40,005 7.9 48,740 Tax rate (%) 25 26 35 26 -30 bps -980 bps -42 bps 26 26 -1 bps 26 Key highlights (Rs mn) AUM 412,957 432,750 358,159 416,106 (4.6) 15.3 (0.8) 490,706 416,106 17.9 563,272 Borrowings 388,693 281,289 372,264 38.2 4.4 422,630 372,264 13.5 454,022 Net worth 123,161 97,432 115,718 26.4 6.4 139,304 115,718 20.4 166,071 Key calculated ratios (%) Yield on loans on balance sheet 22.3 20.9 23.5 148 bps -113 bps 21.5 22.6 -111 bps 20.9 Cost of borrowings 9.2 9.3 8.8 -16 bps 34 bps 8.7 8.7 1 bps 8.8 NIM 13.9 15.4 13.5 15.8 -143 bps 40 bps -185 bps 13.9 15.3 -138 bps 13.6 Cost-to-income 24.7 31.9 32.6 32.5 -724 bps -794 bps -780 bps 31.4 30.3 112 bps 32.2 Cost-to-average AUM 3.6 5.0 4.5 5.3 -139 bps -93 bps -169 bps 4.5 4.7 -29 bps 4.5 Credt cost (% of AUM) 0.1 0.1 0.0 0.0 4 bps 10 bps 9 bps 0.6 0.3 34 bps 0.5 Asset quality Gross stage-3 (Rs mn) 10,553 11,474 8,992 (8.0) 17.4 14,230 8,992 58.3 15,208 Gross stage-3 (%) 2.6 3.2 2.2 -65 bps 39 bps 2.9 2.2 74 bps 2.7 Capital adequacy details (%) CAR 26.3 24.7 25.5 158 bps 83 bps Tier-I 25.2 24.3 24.3 87 bps 90 bps Operational highlights Branches (#) 4,573 4,502 4,567 1.6 0.1 4,557 4,567 (0.2) 4,607 Gold (weight in tons) 165 176 176 (6.3) (6.3) Employees (#) 25,430 24,644 25,554 3.2 (0.5) 26,773 25,554 4.8 28,691 Loan per gram (Rs) 2,503 2,035 2,364 23.0 5.9

Source: Company, Bloomberg, Kotak Institutional Equities estimates

Strong growth in earnings in 1QFY21

Muthoot reported strong growth in PAT (standalone) at 59% yoy in 1QFY21 led by robust growth in NII, strong cost control and lower tax rate. Core PBT was up 34% yoy.

NII increased 22% yoy led by (1) 15% yoy growth in AUM and (2) 40 bps yoy expansion in NIM to 13.9%. AUM was down 1% qoq despite sharp rise in gold prices (~20% qoq). This likely reflects challenges on the funding front in first two months of the quarter. On a qoq basis, NIM compressed ~185 bps due to lower yields (reflecting lower collections and likely lower penal charges) and rise in borrowing cost.

Operating expenses declined 6% yoy led by 19% yoy decline in other expenses. Employee expenses were muted at 3% yoy. Decline in other expenses was led by sharp decline in discretionary and marketing spends.

Credit cost was muted at 14 bps (<1.1% over FY2005-19).

KOTAK INSTITUTIONAL EQUITIES RESEARCH 3 Diversified Financials Muthoot Finance

Tepid growth despite sharp rally in gold prices

 Gold loans up 15% yoy/down 1% qoq. Muthoot reported 15% yoy rise in gold loans in 1QFY21. Sharp rally in gold prices helping rise in ticket size was the key driver. Gold prices increased >40% on a yoy basis. On qoq basis, gold loans declined 1% despite 20% qoq increase in gold prices, reflecting (1) challenges on incremental funding during April and May 2020 and (2)) disruptions in business activities owing to the lockdown as the business model is mostly branch-led.

 Gold tonnage down 6% yoy/qoq. Gold tonnage declined 6% yoy/qoq on the back of higher value of the pledged gold for customer who roll over (pay back the existing EMIs and start a new loan of broadly equal principal but lower gold tonnage). As funding constrained growth, tonnage declined, in our view. ~80% of Muthoot’s customer base is repeat customers (~4% of customers to whom loans were disbursed in 1Q1FY21 were new customers). Manappuram’s gold tonnage growth was weak as well, up 1% yoy (down 5% qoq).

AUM to pick up over next few quarters

We expect 16% AUM CAGR. Muthoot’s growth in gold loan AUM will likely be strong at 18% yoy in FY2021E driven by elevated gold prices. Recent rise in gold price will provides more legs to Muthoot’s growth. As funding eases, we expect growth to catch up. We are modeling moderate (15%) annual loan growth in FY2022E and FY2023E.

Increase in LTV for banks may not pose competition to NBFCs. RBI has recently increase LTV on non-crop gold loans for banks to 90% from 75%. We don’t find any significant impact on Muthoot Finance or other gold loan NBFCs that have a more agile credit delivery model (enabling them to charge 400-600 bps higher yields than banks).

4 KOTAK INSTITUTIONAL EQUITIES RESEARCH Muthoot Finance Diversified Financials

Exhibit 2: AUM growth was driven by rally in gold prices even as tonnage growth was muted across gold loan financiers Select data points for Muthoot and Manappuram, March fiscal year-ends, 2007-2020, 1QFY21

Rally in gold prices Drop in gold prices Rally in gold prices 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 1QFY21 YoY growth in gold prices (%) Gold price yoy 10 29 24 8 27 34 10 (7) (8) 9 (0) 8 4 25 43 Muthoot Standalone AUM (Rs bn) 14 22 33 73 157 247 260 219 234 244 273 291 342 416 413 YoY (%) 53 51 122 114 57 5 (16) 7 4 12 7 18 22 15 Gold weight (tons) 23 30 39 66 112 137 134 118 131 142 149 155 169 176 165 YoY (%) 30 30 69 70 22 (2) (12) 11 8 5 4 9 4 (6) Key ratios (%) Yield on AUM 19.9 22.1 20.2 19.9 22.4 21.1 20.4 18.8 20.1 21.9 22.0 21.3 22.6 22.3 NII/AUM 9.9 10.8 11.3 11.0 10.9 10.0 9.5 9.5 10.7 13.0 15.1 14.3 15.3 13.9 Cost-to-income 48.3 52.1 43.4 38.2 38.0 37.6 46.7 52.0 43.5 36.2 29.9 33.2 30.3 24.7 Cost-to-average AUM 5.1 5.9 5.0 4.2 4.2 3.8 4.5 5.1 4.8 4.8 4.7 4.9 4.7 3.6 Credit cost 0.0 0.0 0.1 0.3 0.2 0.3 0.2 0.2 0.7 1.1 0.8 0.1 0.3 0.1 Return ratios (%) ROAAUM 3.5 3.6 4.3 4.3 4.4 4.0 3.3 3.0 3.4 4.6 6.3 6.2 7.9 8.1 ROE 29.7 33.9 48.1 51.5 41.9 29.3 19.0 14.3 15.1 19.4 24.8 22.4 28.1 28.2 Asset quality GNPL/gross stage 3 (%) 0.5 0.3 0.6 2.0 1.9 2.2 2.9 2.1 4.4 2.7 2.2 2.6 Manappuram (Rs mn) Consolidated Standalone Gold AUM (Rs bn) 4 6 10 26 75 115 99 82 92 101 111 117 130 170 177 YoY (%) 48 73 167 188 53 (14) (18) 13 9 10 5 10 31 33 Gold weight (tons) 22 53 66 51 46 53 60 61 64 68 72 69 YoY (%) 136 24 (22) (11) 17 12 3 5 5 7 1 Key ratios (%) Yield on AUM 16.5 20.8 26.5 23.2 27.5 20.9 22.9 22.4 22.7 28.1 25.3 27.3 28.2 27.7 NII/AUM 13.4 15.8 18.9 16.7 16.2 9.8 11.5 12.4 13.5 18.7 18.3 19.1 18.9 17.8 Cost-to-income 46.4 49.8 42.6 44.8 44.3 63.9 64.1 60.3 58.6 41.6 48.9 48.4 40.4 31.3 Cost-to-average AUM 6.4 8.2 8.1 7.5 7.3 6.4 7.7 7.7 8.1 7.9 9.2 9.4 8.0 5.7 Credit cost 0.7 2.3 0.8 0.9 0.0 0.8 0.5 0.3 0.3 0.5 0.4 0.2 0.6 1.2 Return ratios ROAAUM 4.4 3.9 6.7 5.5 6.2 1.9 2.5 3.1 3.5 6.8 6.0 6.4 8.2 8.5 ROE 34.2 23.2 30.8 22.0 27.5 8.6 9.2 10.6 12.6 24.0 19.3 19.3 25.2 26.8 Asset quality GNPL (%) 1.1 1.2 1.2 1.0 2.0 0.7 0.5 0.9 1.3

Notes: (1) For Manappuram, data prior to FY2012 refers to consolidated entity. (2) For Manappuram, data for interest income prior to FY2012 refers to overall operational revenues. (3) Numbers from FY2018 onwards are based on Ind-AS.

Source: Company, Kotak Institutional Equities estimates

Exhibit 3: Muthoot’s stock price has shot up over the past few months on the back of rally in gold prices Movement of Muthoot’s stock price to gold prices, March fiscal year-ends, 2008-2020, 1QFY21

(Rs) Muthoot share price (LHS) US gold price (RHS) ($) 1,350 2,100

1,150 1,900

950 1,700

750 1,500

550 1,300

350 1,100

Jul-19 Jul-20

Jan-19 Jan-20

Jun-19 Jun-20

Oct-18 Feb-19 Oct-19 Feb-20

Sep-18 Sep-19 Apr-20 Apr-19

Dec-18 Dec-19

Nov-19 Nov-18

Mar-20 Mar-19

Aug-18 Aug-20 Aug-19 May-19 May-20

Source: Bloomberg, Company, Kotak Institutional Equities

KOTAK INSTITUTIONAL EQUITIES RESEARCH 5 Diversified Financials Muthoot Finance

Exhibit 4: Weakness is gold tonnage growth drags AUM growth Relationship between AUM (standalone) growth and gold tonnage growth, March fiscal year-ends, 2008- 2020, 1QFY21 (%)

AUM yoy Gold tonnage yoy 140

105

70

35

0

-35

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019 2020

1QFY21

Source: Company, Kotak Institutional Equities

Exhibit 5: Average gold prices increased >30% yoy in YTD FY2021E Domestic gold price, August 2009-August 2020 (Rs/gm)

5,500

4,400

3,300

2,200

1,100

-

Feb-10

Feb-11

Feb-12

Feb-13

Feb-14

Feb-15

Feb-16

Feb-17

Feb-18

Feb-19

Feb-20

Aug-09

Aug-10

Aug-11

Aug-12

Aug-13

Aug-14

Aug-15

Aug-16

Aug-17

Aug-18 Aug-19 Aug-20

Source: Bloomberg, Kotak Institutional Equities

Exhibit 6: Strong 24% yoy rise in average ticket size in 1QFY21 led by rally in gold prices Average ticket size, loan accounts and loan book, March fiscal year-ends, 2011-2020, 1QFY21

CAGR (%) 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 1QFY21 YoY (%) (2011-1QFY21) Average ticket size (Rs) 33,438 39,900 41,120 40,000 37,865 36,500 37,186 38,345 42,279 51,871 54,336 24 5 Loan accounts (# mn) 4.7 6.2 6.3 5.7 6.2 6.6 7.3 7.6 8.1 8.0 7.6 (7) 5 Loan book (Rs mn) 117,518 246,730 260,004 218,620 234,050 243,789 272,785 291,420 342,461 416,106 412,957 15 15

Notes: (1) Numbers from FY2018 onwards are based on Ind-AS.

Source: Company, Kotak Institutional Equities

6 KOTAK INSTITUTIONAL EQUITIES RESEARCH Muthoot Finance Diversified Financials

Exhibit 7: Recent rally in gold prices may be attributed to higher Exhibit 8: Gold prices rallied on the back of growing risk risk aversion led by sharp rise in Covid cases over the past few aversion during the pandemic months Relationship between gold prices and rise in Covid cases, March fiscal Relationship between gold prices and rise in Covid cases, March fiscal year-ends, March 2020-August 2020 year-ends, June 2020-August 2020

Covid-19 cases in India (LHS) Gold prices in India (RHS) Covid-19 cases globally (LHS) US gold price (RHS) (# mn) (# mn) (Rs/gm) ($) 3.0 25 2,200 5,800 2.4 20 2,040 5,440 1.8 5,080 15 1,880 1.2 4,720 10 1,720 0.6 4,360

0.0 4,000 5 1,560

Jul-20

Jul-20

Jul-20

Jul-20

Jun-20

Jun-20

Jun-20 Jun-20

Jun-20 - 1,400 Aug-20 Aug-20 Mar-20 Apr-20 May-20 Jun-20 Jul-20 Aug-20

Source: Johns Hopkins, Covid19India, Bloomberg, Kotak Institutional Source: Harvard Dataverse, Bloomberg Equities

Exhibit 9: Correlation of Muthoot’s loan growth to movement in gold prices Muthoot’s loans and gold prices, March fiscal year-ends, 2009-2020, 1QFY21

Muthoot's AUM (LHS, Rs bn) Gold price yoy (RHS, %) 500 60

400 45

300 30

200 15

100 -

- (15)

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019 2020

1QFY21

Source: Bloomberg, Company, Kotak Institutional Equities

KOTAK INSTITUTIONAL EQUITIES RESEARCH 7 Diversified Financials Muthoot Finance

Exhibit 10: Muthoot and SCUF’s branch-led model led to lower growth during the quarter; Manappuram benefitted from higher share of customers who transact through digital platforms Monthly run-rate of disbursements for select NBFCs, March fiscal year-ends, 2015-2020, 1QFY21

2015 2016 2017 2018 2019 2020 1QFY21 Growth in gold price YoY growth (7.9) 9.4 (0.2) 7.6 4.3 25 43.0 Disbursement monthly run-rate (Rs bn) Muthoot 43 41 48 55 61 81 69 YoY (%) (5) 17 15 11 32 6 QoQ (%) (30) Manappuram 20 31 44 52 75 141 228 YoY (%) 52 41 18 44 88 159 QoQ (%) 32 SCUF 5.2 4.1 5.5 5.6 4.8 5.9 2.2 YoY (%) (22) 35 1 (15) 24 (64) QoQ (%) (64)

Notes: (1) To arrive at monthly disbursement run-rate for Manappuram and SUCF, we divided overall disbursements for the period by number of months in the respective period.

Source: Company, Kotak Institutional Equities estimates

Exhibit 11: AUM growth to moderate in the near term Loans and yoy growth (standalone), March fiscal year-ends, 2007-2023E (%)

(Rs bn) AUM (LHS) YoY (RHS) (%) 650 121 140 113

520 105

390 53 51 55 70

260 18 22 18 35 12 15 15 5 7 4 7 130 (16) 0

- -35

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021E 2022E 2023E

Notes: (1) Numbers from FY2018 onwards are based on Ind-AS.

Source: Company, Kotak Institutional Equities estimates

Non-core business segments pause

Muthoot’s subsidiaries, engaged in microfinance, housing finance and auto loans, contribute ~12% to overall consolidated AUM for Muthoot Finance. Asset quality will likely deteriorate in most of these segments as the underlying customer segment is relatively more vulnerable to business disruptions due to Covid-19. Weak freight volumes will drive deterioration in asset quality for Muthoot Money while job losses/lower business volumes can weaken repayment capability of borrowers.

8 KOTAK INSTITUTIONAL EQUITIES RESEARCH Muthoot Finance Diversified Financials

 Disbursements down 45% yoy for Muthoot Home Finance. Muthoot HomeFin (MHIL) is a wholly owned subsidiary of Muthoot Finance, which focuses on extending affordable housing finance loans and targets customers in Economically Weaker Sections (EWS) and Lower Income Groups (LIG) in Tier II & Tier III locations. The company extends loans with average ticket size of ~Rs1 mn. MHIL had slowed down disbursements from 3QFY20 onwards owing to concerns over asset quality in select geographies (like Surat). Overall disbursements were down 45% yoy in 1QFY21 (down 37% yoy in FY2020). Going ahead, muted demand in 1HFY21, tightening of underwriting standards and rise in competition will lead to muted disbursements in FY2021E.

. Collections have improved from trough levels in March 2020 but remains well below pre-Covid levels. Overall ECL coverage on the book increased 88 bps yoy/65 bps qoq to 1.6%.

 MFI collections at ~76% in July 2020. Muthoot owns 70% in Belstar Investment Finance – a microfinance business with loan book of Rs25.8 bn (up 33% yoy/down 2% qoq) as of 1QFY21. The pace of growth has gradually slowed down over the past few quarters. On the back of Covid-related disruptions, the company will focus on collections in the next few quarters. Collections have improved to ~76% in July 2020 from trough levels observed in April and May 2020 (175 and 35%, respectively). Disbursements will gradually revive over the next few quarter although it will take time to normalize.

Exhibit 12: Contribution of subsidiaries to overall AUM is >10% Key data points for top subsidiaries, March fiscal year-ends, 2017-2020, 1QFY21 (Rs mn)

IGAAP Ind-AS Ind-AS Ind-AS Ind-AS 2017 2018 2019 2020 1QFY21 YoY (%) Loan book (Rs mn) Muthoot (parent) 272,785 291,420 342,461 416,106 412,957 15 Subsidiaries 10,167 25,970 37,494 46,079 45,541 16 Homefin 4,408 14,589 19,075 19,769 19,787 (0) Belstar (MFI) 5,759 11,381 18,419 26,310 25,754 33 Subsidiaries to parent (%) 3.7 8.9 10.9 11.1 11.0 7 bps PBT (Rs mn) Muthoot (parent) 19,210 8,194 7,942 10,974 11,255 38 Subsidiaries 213 142 390 312 193 (52) Homefin 53 70 87 6 5 (94) Belstar (MFI) 160 72 303 306 188 (39) Subsidiaries to parent (%) 1.1 1.7 4.9 2.8 1.7 -318 bps Net worth (Rs mn) Muthoot (parent) 65,164 78,120 97,928 115,718 123,161 26 Subsidiaries 1,785 3,335 7,944 9,238 9,395 14 Homefin 882 2,079 3,942 4,260 4,264 6 Belstar (MFI) 903 1,256 4,002 4,978 5,131 21

Subsidiaries to parent (%) 2.7 4.3 8.1 8.0 7.6 -84 bps

Source: Company, Kotak Institutional Equities

KOTAK INSTITUTIONAL EQUITIES RESEARCH 9 Diversified Financials Muthoot Finance

Exhibit 13: Disbursements down 45% yoy in 1QFY21 Key data points for Muthoot Home Finance, March fiscal year-ends, 2019-2020, 1QFY20-1QFY21 (Rs mn)

Ind-AS Ind-AS Ind-AS Ind-AS Ind-AS Ind-AS Ind-AS 1QFY20 2QFY20 3QFY20 4QFY20 1QFY21 YoY (%) 2019 2020 YoY (%) Key P&L items (Rs mn) Revenue 616 908 878 475 588 (5) 2,257 2,876 27 Expense 526 716 741 469 582 11 1,746 2,452 40 PBT 90 192 137 6 5 (94) 511 424 (17) PAT 62 139 105 12 4 (94) 363 318 (12) Key balance sheet items (Rs mn) Shareholder's funds 4,004 4,143 4,248 4,260 4,264 6 3,942 4,260 8 Liabilities 16,173 17,142 15,286 14,590 15,062 (7) 15,531 14,590 (6) Net assets 20,177 21,285 19,534 18,850 19,326 (4) 19,472 18,850 (3) Loan book 19,875 20,975 20,248 19,769 19,787 (0) 19,075 19,769 4 Disbursements 1,114 1,455 995 570 613 (45) 6,543 4,127 (37) Key reported ratios (%) Yield on advances 12.7 12.9 11.6 10.1 13.0 34 bps 12.2 11.8 -45 bps Interest spread 3.4 3.3 2.0 0.6 3.7 29 bps 3.4 2.3 -107 bps NIM 5.4 5.4 4.8 2.7 5.5 12 bps 5.4 4.4 -95 bps Cost to income 28.7 37.1 44.3 28.6 43.5 1479 bps 26.1 36.1 996 bps RoA 1.3 2.8 2.0 0.3 0.1 -120 bps 2.2 1.7 -57 bps RoE 6.3 3.7 10.0 1.1 0.4 -590 bps 14.1 7.8 -636 bps Asset quality details (%) Gross stage 3 0.8 1.1 1.9 1.7 1.7 89 bps 0.7 1.7 97 bps ECL coverage on stage 3 34.8 87.7 80.6 32.8 32.9 -184 bps 38.7 32.8 -589 bps Overall ECL coverage 0.7 1.4 1.9 0.9 1.6 88 bps 0 1 72 bps Capital adequacy details (%) CAR 45.0 45.0 50.0 52.0 47.0 200 bps 47.0 52.0 500 bps Other key metrics (#) Sales offices 101 132 107 107 107 6 132 107 (19) Employees 401 407 438 412 344 (14) 382 412 8 Customers 23,621 24,177 24,678 24,390 24,088 2 23,466 24,390 4

Source: Company, Kotak Institutional Equities

10 KOTAK INSTITUTIONAL EQUITIES RESEARCH Muthoot Finance Diversified Financials

Exhibit 14: 33% AUM growth in 1QFY21 Key data points for Belstar Investment and Finance, March fiscal year-ends, 2019-2020, 1QFY20-1QFY21 (Rs mn)

Ind-AS Ind-AS Ind-AS Ind-AS Ind-AS Ind-AS Ind-AS 1QFY20 2QFY20 3QFY20 4QFY20 1QFY21 YoY (%) 2019 2020 YoY (%) Key P&L items (Rs mn) Revenue 1,079 1,270 1,333 1,327 1,171 9 3,681 5,007 36 Expense 769 887 999 1,021 983 28 2,650 3,675 39 PBT 310 383 334 306 188 (39) 1,031 1,332 29 PAT 229 281 260 221 145 (37) 729 990 36 Key balance sheet items (Rs mn) Shareholder's funds 4,243 4,509 4,748 4,978 5,131 21 4,002 4,978 24 Liabilities 15,655 17,586 20,022 20,210 23,454 50 16,437 20,210 23 Net assets 19,898 22,095 24,770 25,188 28,585 44 20,439 25,188 23 Gross AUM 19,385 21,074 22,849 26,310 25,754 33 18,419 26,310 43 Asset quality details (%) Gross stage 3 1.2 1.0 1.1 0.9 1.1 -5 bps 1.2 0.9 -24 bps ECL coverage on stage 3 90.6 89.7 89.1 90.0 74.9 -1571 bps 82.1 90.0 791 bps Overall ECL coverage 1.5 1.4 1.5 1.4 1.6 9 bps 1.4 1.4 -3 bps Capital adequacy details (%) CAR 23 24 27 26 26 300 bps 26 26 0 bps Other key metrics (#) Branches 441 498 573 603 603 37 400 603 51 Employees 3,309 3,837 4,269 4,425 4,197 27 2,876 4,425 54

Source: Company, Kotak Institutional Equities

Exhibit 15: Gross stage 3 loans at 3.6% for Muthoot Money, down 130 bps qoq Key data points for Muthoot Money, March fiscal year-ends, 2020, 1QFY20-1QFY21 (Rs mn)

Ind-AS Ind-AS Ind-AS Ind-AS Ind-AS Ind-AS 1QFY20 2QFY20 3QFY20 4QFY20 1QFY21 YoY (%) QoQ (%) 2020 Key P&L items (Rs mn) Revenue 142 169 181 211 198 39 (6) 704 Expense 133 126 194 212 193 45 (9) 665 PBT 9 43 (13) (1) 5 (44) NM 39 PAT (0) 32 12 (16) (25) NM NM 27 Key balance sheet items (Rs mn) Shareholder's funds 1,035 1,067 1,078 1,062 1,037 0 (2) 1,062 Liabilities 3,116 3,455 4,086 4,323 4,161 34 (4) 4,323 Net assets 4,151 4,522 5,164 5,385 5,198 25 (3) 5,385 Loan book 3,927 4,263 4,915 5,090 4,966 26 (2) 5,090 Asset quality details (%) Gross stage 3 0.3 0.9 2.5 4.9 3.6 332 bps -127 bps 4.9 ECL coverage on stage 3 100 26 25 26 26 -7389 bps 1 bps 26 Overall ECL coverage 1.2 1.2 1.9 2.8 3.9 264 bps 106 bps 2.8 Other key metrics (#) Branches 24 24 24 24 18 (25) (25) 24 Employees 245 277 297 304 245 - (19) 304

Source: Company, Kotak Institutional Equities

NIM compressed 185 bps qoq

 NIM compression on qoq basis. On qoq basis, NIM compressed ~185 bps due to lower yields (reflecting lower collections and likely lower penal charges), higher liquidity on- balance sheet and fully realized cost of forex borrowings. On yoy basis, margins expanded 40 bps yoy.

. Calculated yields expanded 150 bps yoy to 22.3%. Yields, however, declined on sequential basis likely due to qoq lower collections (impact of lockdown-related disruptions). Calculated borrowing cost increased 35 bps qoq (down 16 bps yoy). According to management, the rise was due to higher cost of forex borrowings and elevated liquidity buffers.

KOTAK INSTITUTIONAL EQUITIES RESEARCH 11 Diversified Financials Muthoot Finance

NIM compression over medium term

We expect Muthoot’s NIM (calculated) to decline over the medium term led by compression in yields. Liquidity buffers will marginally reduce from FY2022E onwards providing some cushion. The yields of the company are significantly higher than loan-term average and we expect it to decline going ahead. Additionally, the company will likely pass on some of the funding side benefits (lower incremental cost of borrowings on bank loans, capital market borrowings, etc.) to its customers to push growth in gold loans.

 NIM (calculated) compression in the horizon. We expect calculated NIM to decline 140 bps in FY2021E to 13.9% on the back of compression in yields; borrowing cost will be broadly stable yoy. Calculated yields will likely decline ~110 bps yoy to 21.5%.

. While gold loans NBFCs have historically witnessed yield expansion during phases of rally in gold prices (higher collections and realization from auctions), the current environment will likely prompt the company to pass on funding side benefits to its customers whose repayment capability has reduced post the pandemic.

. While Muthoot faced challenges on incremental funding during April and May 2020, overall liquidity situation has started to improve aided by higher availability of bank lines and liquidity through various schemes announce by GOI/RBI.

Exhibit 16: We forecast NIM compression in FY2021E Yield on loans, cost of funds and NIMs, March fiscal year-ends, 2007-2023E (%)

Yields on AUM (LHS) Cost of funds (LHS) NIM (RHS) 25 18 22.3 22.6 21.7 21.9 22.0 21.3 21.5 21.1 20.4 20.9 20.8 19.9 19.5 19.9 19.7 20.1 20 18.8 15.1 15.3 16 14.3 13.9 13.6 13.8 15 13.0 14

10 11.0 11.2 12 10.6 10.9 10.8 10.7 10.0 9.7 9.5 9.5 5 10

9.1 10.9 12.2 11.2 12.0 17.0 14.3 11.9 10.7 11.8 11.5 9.1 9.3 8.7 8.7 8.8 8.8

0 8

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021E 2022E 2023E

Notes: (1) Numbers from FY2018 onwards are based on Ind-AS.

Source: Company, Kotak Institutional Equities estimates

12 KOTAK INSTITUTIONAL EQUITIES RESEARCH Muthoot Finance Diversified Financials

Exhibit 17: Average monthly disbursements moderated in Exhibit 18: Average monthly collections held on in 1QFY21 1QFY21 due to lower disbursements in April 2020 despite lower collections in April 2020 Average monthly disbursements, March fiscal year-ends, 2015-2020, Average monthly collections, March fiscal year-ends, 2015-2020, 1QFY20-1QFY21 (Rs bn) 1QFY20-1QFY21 (Rs bn)

Average monthly disbursements (Rs bn) Average monthly collections (Rs bn) 100 100

80 80

60 60 98 91 87 40 81 40 82 75 69 70 65 68 69 58 60 55 61 54 48 42 45 20 43 43 20 41

0

0

2015

2016

2017

2018

2019

2020

2015

2016

2017

2018

2019

2020

1QFY20

2QFY20

3QFY20

4QFY20

1QFY21

1QFY20

2QFY20

3QFY20 4QFY20 1QFY21

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

Exhibit 19: Share of bank loans at 40% Borrowing mix, March fiscal year-ends, 2013-2020, 1QFY21 (%)

Gold bonds Listed NCDs (secured) Bank loans Subordinated debt CP ECB Others - - 3 4 3 4 2 3 3 100 1 2 - 2 10 13 13 15 13 18 11 20 19 80 9 5 30 2 10 13 42 37 41 60 1 1 44 53 49 13 39 7 40 40 16 19 20 39 42 18 31 21 28 22 26 23 12

- 4 2 1 1

2013

2014

2015

2016

2017

2018

2019 2020

1QFY21 Notes: (1) Share of ECBs was 9.9% as of 3QFY20. (2) Numbers from 1QFY18 onwards are based on Ind-AS.

Source: Company, Kotak Institutional Equities

Credit cost muted at 5 bps in 4QFY20

 Collections have revived from trough levels. Muthoot reported average monthly collections of Rs70 bn in 1QFY21 compared to Rs87 bn in 4QFY20 and Rs60 bn in 1QFY20. While collections were negligible in April 2020, it bounced back from May 2020 onwards. Gross stage 3 loans increased 17% qoq reflecting weakness in repayment capability of the underlying borrowers.

. Management guided that the company has informed its borrowers that it will not auction any gold during the pandemic and will provide sufficient headroom for repayment; the company has not provided any explicit moratorium to its borrowers.

KOTAK INSTITUTIONAL EQUITIES RESEARCH 13 Diversified Financials Muthoot Finance

 Credit cost muted at 14 bps. Credit cost was muted at 14 bps (<1.1% over FY2005- 19). Overall ECL coverage on the book decreased to 1.3% in 1QFY21 from 1.93% in 1QFY21 (up 4 bps qoq).

Marginal rise in credit cost going ahead

 Lower auctions to drive rise in gross stage 3 ratio. Gold loans tend to have high delinquencies due to lower income segment of most borrowers, leading to volatile GNPLs and consequent volatile provisions; eventual credit losses are low due to secured nature of loans; as such, the ratio is less relevant. Timing of auctions lead to fluctuations in reported GNPLs/gross stage 3 loans. Management has guided that it will not auction any gold over the next few months; the company remains ‘in the money’ on gold loans due to recent rise in gold prices. As such, this can lead to rise in gross stage 3 ratio going ahead.

 Increase in credit cost in FY2021E. We expect credit cost to increase to ~60 bps by FY2021E. We have reduced our credit cost estimates to reflect improving collections and sufficient margin of safety on the back of rally in gold prices. Given the collateralized nature of lending, net credit loss from NPLs is negligible. Strong gold prices reduce the risk of haircuts/credit losses on loan auctions apart from enabling the company to charge penal interest. Sharp decline in gold prices pose risks to our estimates.

Exhibit 20: ECL coverage to increase marginally going ahead Asset quality forecast, March fiscal year-ends, 2019-2023E (Rs mn)

2019 2020 2021E 2022E 2023E AUM break-up (Rs mn) Stage-3 9,326 8,992 14,230 15,208 16,234 Stage-1 and 2 333,135 407,114 476,476 548,063 633,132 Gross AUM 342,461 416,106 490,706 563,272 649,366 AUM mix (%) Gross stage 3 2.7 2.2 2.9 2.7 2.5 Gross stage 1 and 2 97.3 97.8 97.1 97.3 97.5 ECL provisions (Rs mn) Stage-3 1,295 950 1,708 2,433 3,247 Stage-1 and 2 5,064 4,477 5,718 7,125 8,864 Total ECL provisions 6,359 5,427 7,425 9,558 12,111 ECL coverage ratio (%) Stage-3 13.9 10.6 12.0 16.0 20.0 Stage-1 and 2 1.5 1.1 1.2 1.3 1.4 ECL coverage 1.9 1.3 1.5 1.7 1.9 Credit cost break-up (% of average AUM) Overall credit cost 0.1 0.3 0.6 0.5 0.5 Write-offs 0.1 0.2 0.2 0.1 0.1

Provision for loans 0.0 0.1 0.4 0.4 0.4

Source: Company, Kotak Institutional Equities estimates

14 KOTAK INSTITUTIONAL EQUITIES RESEARCH Muthoot Finance Diversified Financials

Exhibit 21: GNPLs will marginally increase in FY2021E GNPL/gross stage 3 for Muthoot Finance, March fiscal year-ends, 2010-2023E

GNPL/gross stage 3 (%) 5 4.4

4

2.9 2.9 3 2.7 2.7 2.5 2.2 2.1 2.2 2.0 1.9 2

1 0.5 0.6 0.3

0

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021E

2022E 2023E

Source: Company, Kotak Institutional Equities estimates

Exhibit 22: Credit cost to inch up in FY2021E Credit cost for Muthoot Finance, March fiscal year-ends, 2007-2023E

Credit cost (% of AUM) 1.50

1.20 1.1

0.8 0.90 0.7 0.6 0.60 0.5 0.5 0.3 0.3 0.3 0.30 0.2 0.2 0.2 0.1 0.0 0.0 0.0 0.1

0.00

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021E 2022E 2023E

Source: Company, Kotak Institutional Equities estimates

KOTAK INSTITUTIONAL EQUITIES RESEARCH 15 Diversified Financials Muthoot Finance

Exhibit 23: 60% of cumulative disbursements are repaid within 6 months Collection efficiency, March fiscal year-end, 1QFY21 (%)

Source: Company, Kotak Institutional Equities

Exhibit 24: ~45% safety margin on gold loans over the years Margin of safety on loans, March fiscal year-ends, 2015-2020, 1QFY21 (%)

2015 2016 2017 2018 2019 2020 1QFY21 Gold loans assets (Rs bn) 233 243 272 288 336 407 405 Gold volume (tonnes) 131 142 149 155 169 176 165 Gold price per gram (Rs) 2,470 2,670 2,725 2,824 2,910 3,955 4,448 Lender's perspective Market price of gold held as ornaments (Rs bn) 324 379 406 438 492 696 734 Margin of safety on loans (%) 28 36 33 34 32 42 45

Source: Company, Kotak Institutional Equities

Operating expenses down 6%

Operating expenses declined 6% yoy led by 19% yoy decline in other expenses. Employee expenses were muted at 3% yoy. Decline in other expenses was led by sharp decline in discretionary and marketing spends. Additionally, renegotiation of rent for the quarter led to drop in expenses. Cost-to-income declined 795 bps yoy/780 bps qoq to 24.7%.

Cost ratios to marginally decline over medium term

We expect 12% yoy growth in operating expenses in FY2021E compared to 17% yoy in FY2020. While the company will focus on reducing discretionary spends, it will continue to invest in (1) business expansion of the gold loan franchise and (2) digital initiatives. Additionally, investment in collection efforts will remain high. Cost-to-average AUM will marginally drop by 20 bps over FY2020-22E to 4.5%.

Other highlights of the quarter

Muthoot has launched two new products during the quarter. The company has introduced ‘Loan at Home’ proposition whereby company’s representative collect, sanction and return gold collateral to the customer’s home thereby increasing overall satisfaction level. This is a cost-intensive business proposition and hence applicable only to high ticket size customers only (Rs0.2 mn+). Additionally, the company has launched a working capital facility based loan for its customer base. Under this scheme, the customer can keep a certain amount of loan with Muthoot and drawdown loans as and when required; this is broadly similar to ‘Akshaya Gold loan’ scheme which Catholic Syrian Bank offers to its customers. With low gold loan penetration (gold loans to overall gold stock outstanding in the country) at <10%, product innovation will further increase the size of pie.

16 KOTAK INSTITUTIONAL EQUITIES RESEARCH Muthoot Finance Diversified Financials

Exhibit 25: Branch productivity broadly stable Business per branch, March fiscal year-ends, 2015-2020, 1QFY21 (Rs mn)

2015 2016 2017 2018 2019 2020 1QFY21 East 66 80 74 90 102 117 116 West 59 65 76 85 96 108 113 North 76 78 86 91 103 123 122 South 48 48 53 54 61 74 72 Overall business 55 57 64 68 76 91 90

Notes: (1) Number from 1QFY18 onwards are based on Ind-AS.

Source: Company, Kotak Institutional Equities

Exhibit 26: Cost ratios to remain broadly stable Cost ratios, March fiscal year-ends, 2007-2023E

Cost-to-income (LHS) Cost-to-average AUM (RHS) (%) (%) 55 7.5

5.8 5.8 44 5.1 6.0 5.0 4.9 4.8 4.8 4.9 4.7 4.5 4.7 4.5 4.5 4.5 4.2 4.2 33 3.8 4.5

22 3.0

11 1.5

49.4 48.3 52.1 43.4 38.2 38.0 37.6 46.7 52.0 43.5 36.2 29.9 33.2 30.3 31.4 32.2 32.0

0 0.0

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021E 2022E 2023E Notes: (1) Number from 1QFY18 onwards are based on Ind-AS.

Source: Company, Kotak Institutional Equities

KOTAK INSTITUTIONAL EQUITIES RESEARCH 17 Diversified Financials Muthoot Finance

Exhibit 27: Decrease in share of advertising and business promotion expense Operating expenses mix, March fiscal year-ends, 2007-2020, 1QFY21 (%)

Employee expense Depreciation Rent Advertising Business promotion Ohers 100 16 18 17 17 18 16 16 18 18 26 23 20 29 31 2 80 33 3 3 1 1 2 3 3 3 6 6 5 4 5 7 4 4 2 2 6 6 2 2 10 14 15 14 15 11 2 7 12 13 14 14 13 12 6 3 60 13 12 5 7 5 4 3 3 2 7 9 12 4 11 4 8 8 11 6 6 4 40 57 56 58 59 58 57 61 50 55 55 20 41 44 41 44 45

-

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019 2020

1QFY21 Notes: (1) Numbers from FY2018 onwards are based on Ind-AS.

Source: Company, Kotak Institutional Equities estimates

Exhibit 28: Business expansion to moderate Exhibit 29: Marginal increase in per employee cost in FY2021E Branch and branch productivity for Muthoot Finance, March fiscal Employee count and per employee cost for Muthoot Finance, March year-ends, 2007-2023E fiscal year-ends, 2007-2023E

Branches (LHS) AUM per branch (RHS) Employees (LHS) Per employee cost (RHS) (#) (Rs bn) (#) (Rs mn) 5,000 0.20 32,500 1.00

4,000 0.16 26,000 0.80

3,000 0.12 19,500 0.60

13,000 0.40 2,000 0.08

6,500 0.20 1,000 0.04

0 0.00

- 0.00

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021E

2022E

2023E

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018 2019

2020

2021E 2022E 2023E Source: Company, Kotak Institutional Equities estimates Source: Company, Kotak Institutional Equities estimates

18 KOTAK INSTITUTIONAL EQUITIES RESEARCH Muthoot Finance Diversified Financials

Exhibit 30: Muthoot Finance – old and new estimates March fiscal year-ends, 2021-2023E (Rs mn)

New estimates Old estimates New vs old (%) 2021E 2022E 2023E 2021E 2022E 2023E 2021E 2022E 2023E AUM (Rs mn) 490,706 563,272 649,366 490,706 563,272 649,366 - - - AUM yoy (%) 17.9 14.8 15.3 17.9 14.8 15.3 0 bps 0 bps 0 bps NIM (%) 13.9 13.6 13.8 13.4 13.6 13.8 53 bps -1 bps -2 bps Interest income 97,369 110,131 126,294 97,369 112,766 129,325 - (2.3) (2.3) Interest expenses 34,419 38,354 42,551 36,816 40,952 45,458 (6.5) (6.3) (6.4) Net Interest income 62,950 71,777 83,742 60,554 71,814 83,867 4.0 (0.1) (0.1) Provisions 2,698 2,833 3,053 3,432 3,132 3,109 (21.4) (9.6) (1.8) Operating expenses 20,193 23,643 27,213 20,840 24,426 28,193 (3.1) (3.2) (3.5) Profit before tax 41,385 46,966 54,872 37,409 45,920 53,960 10.6 2.3 1.7 Tax 10,595 12,023 14,047 9,577 11,755 13,814 10.6 2.3 1.7 Profit after tax 30,791 34,942 40,825 27,832 34,164 40,147 10.6 2.3 1.7 Core PBT 43,147 48,740 56,629 40,104 47,993 55,774 7.6 1.6 1.5 EPS (Rs) 76.8 87.1 101.8 69.4 85.2 100.1 10.6 2.3 1.7 BVPS (Rs) 347.4 414.1 492.1 341.7 407.0 483.7 1.7 1.8 1.7 Cost-to-income (%) 31.4 32.2 32.0 33.8 33.2 33.1 -237 bps -105 bps -110 bps Credit cost (%) 0.6 0.5 0.5 0.8 0.6 0.5 -16 bps -6 bps -1 bps ROA (%) 5.7 5.8 6.0 5.1 5.6 5.9 55 bps 13 bps 10 bps ROE (%) 24.1 22.9 22.5 22.0 22.8 22.5 212 bps 13 bps -1 bps

Source: Kotak Institutional Equities estimates

Exhibit 31: Muthoot is trading at 3.4X one-year forward book One-year forward trading PER and PBR, March fiscal year-ends, August 2012-August 2020 (X)

Rolling PER (LHS) Rolling PBR (RHS) 20 4.0

16 3.3

12 2.6

8 1.9

4 1.2

0 0.5

Feb-13 Feb-14 Feb-15 Feb-16 Feb-17 Feb-18 Feb-19 Feb-20

Aug-12 Aug-13 Aug-14 Aug-16 Aug-17 Aug-18 Aug-19 Aug-20 Aug-15 Notes: (1) FY2018-FY2022E numbers are based on Ind-AS.

Source: Company, Bloomberg, Kotak Institutional Equities estimates

KOTAK INSTITUTIONAL EQUITIES RESEARCH 19 Diversified Financials Muthoot Finance

Exhibit 32: Muthoot Finance – key financial ratios and growth rates March fiscal year-ends, 2018-2023E (%)

Ind-AS Ind-AS Ind-AS Ind-AS Ind-AS Ind-AS 2018 2019 2020 2021E 2022E 2023E Growth in key parameters (%) Profit and loss statement - yoy (%) Operating income NA 10 27 13 13 14 Interest income NA 9 27 14 13 15 Net interest income NA 6 28 9 14 17 Total income NA 5 28 8 14 16 Operating expense NA 17 17 12 17 15 Employee expense NA 15 15 12 21 25 PPOP NA 1 33 6 13 16 PBT NA 8 31 2 13 17 PAT NA 11 52 2 13 17 Core PBT NA (1) 32 8 13 16 Balance sheet - yoy (%) Cash and bank balances NA 256 225 20 (24) 15 Loans NA 18 22 15 15 15 Investment NA 148 46 5 10 10 Net assets NA 24 33 14 10 15 Borrowings NA 27 38 14 7 14 Total liabilities NA 23 38 13 7 14 Shareholders' funds NA 25 18 20 19 19 Key ratios (%) Yield on loans 22.0 21.3 22.6 21.5 20.9 20.8 Cost of borrowings 9.1 9.3 8.7 8.7 8.8 8.8 NIM 15.1 14.3 15.3 13.9 13.6 13.8 Cost-to-income 29.9 33.2 30.3 31.4 32.2 32.0 Cost-to-average AUM 4.7 4.9 4.7 4.5 4.5 4.5 Credit cost (% of AUM) 0.8 0.1 0.3 0.6 0.5 0.5 ROE tree (% of average assets and off-balance sheet assets) Net interest income 13.9 13.1 13.1 11.6 11.8 12.2 Total income 14.3 13.5 13.4 11.9 12.1 12.5 Operating expenses 4.3 4.5 4.1 3.7 3.9 4.0 Provisions 0.8 0.1 0.2 0.5 0.5 0.4 (1-tax rate) 0.6 0.6 0.7 0.7 0.7 0.7 ROA 5.8 5.7 6.8 5.7 5.8 6.0 Average assets and off-balance sheet assets/average equity 4.3 3.9 4.1 4.2 4.0 3.8 ROE 24.8 22.4 28.1 24.1 22.9 22.5

Source: Company, Kotak Institutional Equities estimates

20 KOTAK INSTITUTIONAL EQUITIES RESEARCH Muthoot Finance Diversified Financials

Exhibit 33: Muthoot Finance – income statement and balance sheet March fiscal year-ends, 2018-2023E (Rs mn)

Ind-AS Ind-AS Ind-AS Ind-AS Ind-AS Ind-AS 2018 2019 2020E 2021E 2022E 2023E Operating income 62,670 68,788 87,041 98,661 111,745 127,654 Interest income 62,021 67,570 85,644 97,369 110,131 126,294 Net gain on fair value change 101 481 590 300 300 500 Other operational income 548 737 807 992 1,313.98 860.68 Interest expense 19,314 22,368 27,753 34,419 38,354 42,551 Net interest income 42,707 45,202 57,891 62,950 71,777 83,742 Net operational income 43,356 46,419 59,288 64,242 73,391 85,103 Other income 662 19 109 35 50 35 Total income 44,017 46,438 59,397 64,277 73,441 85,138 Employee expense 7,824 8,976 10,290 11,535 13,968 17,476 Other expenses 36,194 37,462 49,108 52,742 59,473 67,663 PPOP 30,843 31,044 41,401 44,084 49,798 57,925 Provisions 2,397 275 985 2,698 2,833 3,053 PBT 28,447 30,768 40,416 41,385 46,966 54,872 Tax 10,671 11,047 10,351 10,595 12,023 14,047 PAT 17,776 19,721 30,065 30,791 34,942 40,825 Core PBT 30,495 30,334 40,005 43,147 48,740 56,629 Balance sheet (Rs mn) Cash and cash equivalents 4,552 17,135 55,046 66,055 49,541 56,972 Bank balance other than above 318 220 1,360 1,496 1,645 1,810 Loans 295,068 349,329 426,042 490,706 563,272 649,366 Investment 3,954 9,826 14,383 15,103 16,613 18,274 Property plant and equipment 1,922 1,867 2,227 1,842 2,004 2,019 Other intangible assets 140 287 338 300 300 300 Other assets 1,968 2,023 5,201 2,127 2,412 2,876 Net assets 307,923 380,687 504,597 577,628 635,787 731,617 Borrowings 212,680 269,223 372,264 422,630 454,022 518,579 Provisions 2,239 2,106 3,633 2,500 2,500 2,500 Other liabilities 14,883 11,431 12,981 13,194 13,194 13,194 Total liabilities 229,802 282,760 388,878 438,324 469,716 534,273 Equity share capital 4,000 4,007 4,010 4,010 4,010 4,010 Reserves and surplus 74,120 93,921 111,708 135,294 162,061 193,334 Total shareholder funds 78,120 97,927 115,718 139,304 166,071 197,344 Loans under management 291,420 342,461 416,106 490,706 563,272 649,366

Source: Company, Kotak Institutional Equities estimates

KOTAK INSTITUTIONAL EQUITIES RESEARCH 21 BUY Tata Power (TPWR) Electric Utilities AUGUST 20, 2020 UPDATE Sector view: Attractive

Cleaner, leaner, greener. Tata Power hosted its annual investor meet highlighting its CMP (`): 57 growth aspiration through (1) step-up increase in revenue contribution from the Fair Value (`): 70 renewable business, (2) deleveraging its balance sheet through divestments, equity raise BSE-30: 38,615 and proposed InVIT for releasing fresh capital and (3) resolution of Mundra and merger of companies with the parent company to derive maximum fiscal efficiency. Maintain BUY with revised fair value estimate of Rs70/share (from Rs62/share).

Tata Power Stock data Forecasts/valuations 2020 2021E 2022E 52-week range (Rs) (high,low) 69-27 EPS (Rs) 4.4 4.4 6.3 Mcap (bn) (Rs/US$) 154/2.1 EPS growth (%) 110.5 0.2 41.9 ADTV-3M (mn) (Rs/US$) 1,780/24 P/E (X) 12.8 12.8 9.0 Shareholding pattern (%) P/B (X) 0.8 0.8 0.7 Promoters 37.2 EV/EBITDA (X) 7.6 7.8 7.2 FIIs 12.9 RoE (%) 6.9 6.4 8.5 MFs/BFIs 14.3/15.8 Div. yield (%) 3.3 0.0 0.0 Price performance (%) 1M 3M 12M Sales (Rs bn) 289 316 332 Absolute 15 75 (1) EBITDA (Rs bn) 78 76 78 Rel. to BSE-30 10 37 (4) Net profits (Rs bn) 12 12 17

Aggressive plans driven by higher contribution from renewable segment Tata Power laid out its five year target to double its revenues (Rs289 bn in FY2020) and triple its profits (Rs12 bn in FY2020), while nearly halving its debt to Rs250 bn (from Rs436 bn as of March 2020). More importantly, TPWR intends to achieve this growth through a 6X increase in revenues from its renewable business—a combination of increase in renewable capacity to 15 GW (from 2.5 GW currently) as well as higher project execution revenues of Rs220 bn from Rs21 bn currently. Management highlighted that they will not put up any more coal-based capacities, and will look to de-commission extant coal-based capacities that complete their useful life as well as tenure of their PPAs. Reduction in net debt is premised on asset monetization of Rs45 bn in FY2021E (Rs18 bn achieved upto 1QFY21), and listing of the renewable InVIT by 4QFY21 that will help take away external debt of Rs110 bn as well as equity infusion of Rs26 bn by the promoters through a preferential issue. Further, a large part of the incremental capex (Rs600 bn) will be under the renewable asset portfolio, wherein the capital will be recycled, by down-selling to the InVIT structure with overall asset sale proceeds of Rs300 bn (InVIT + Non Core).

Extant investment thesis is based on de-leveraging of balance sheet, resolution of Mundra Our investment thesis on Tata Power was premised on (1) compensation for under-recovery of fuel cost at Mundra (Rs0.45.kwh in 1QFY21), (2) monetization of non-core assets wherein the company has realized Rs18 bn and targets Rs45 bn in FY2021E, and (3) listing of renewable InVIT that would help ease the consolidated debt on Tata Power’s balance sheet as well as realize surplus depending on listing valuations. Murtuza Arsiwalla

The investment thesis is strengthened by (1) merger of Coastal Gujarat Power Ltd (Mundra UMPP) that will help utilize the unabsorbed losses of Rs180 bn as well as provide a tax off-set Samrat Verma on continuing losses to profits of the standalone business as well as Tata Power Solar Ltd and dividends from coal mines and InVIT, (2) aggressive growth plans for the renewable portfolio and regulated distribution business., while stating a zero-carbon footprint policy by FY2021E that will help improve the sustainability score of the company. Our earnings and fair value estimates do not factor the growth target in the renewable as well as distribution business, and we will review the progress of the company on stated targets. [email protected] Contact: +91 22 6218 6427

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

Maintain BUY rating with revised fair value of Rs70/share

We raise our fair value estimate for Tata Power to Rs70/share (from Rs62/share). The revision in fair value estimate is based on a higher multiple of 8X (from 7.5X) assigned to Tata Power Solar as well as the renewable portfolio owing to the ambitious growth targets of the company for these business verticals, as well as lowered holding company discount for the investment portfolio owing to continued progress on asset monetization. We highlight that our fair value estimate still does not factor compensation for under-recovery on fuel cost wherein a compensation of Rs0.1/kwh could improve earnings by Rs2.5 bn (Rs0.9/share).

Aggressive foray in renewable business both on generation as well as EPC

Tata Power is targeting an aggressive increase in revenues for the renewable business, targeting revenues of Rs230 bn by FY2025E from a modest Rs40 bn in FY2020.

Renewable assets comprise of Rs90 bn (Rs25 bn in FY2020) of revenues from the generation business on an enlarged capacity base of 15 GW (2.6 GW currently). We note that TPWR already has a pipeline of 1.5 GW that will likely be commissioned over the next two years, and is looking to win incremental business of 10 GW over the next five years. Management also highlighted that 75% of the current portfolio is with better procurers with 48% being sold to procurers with A and A+ category, 16% being sold to Tata Power’s distribution business, and another 10% being sold to bids floated by NTPC and SECI. On the distribution of tariffs, management highlighted that 30% of the sales are for tariffs >Rs6/kwh, 32% for sales at less than Rs3/kwh, while 38% of the power is being sold at tariffs between Rs3/kwh and Rs6/kwh.

Tata Power is also targeting an aggressive revenue build-up of Rs220 bn from EPC and rooftop solar business from a modest Rs21 bn currently. On the EPC business, the company expects to grow revenues to Rs120 bn (from Rs14.5 bn) with 60% of the business for third- party EPC and is targeting overall execution of 4 GW/annum with 20% market share.

TPWR is also targeting revenues of Rs100 bn (Rs6.8 bn in FY2020) from rooftop solar as well as the solar pumps market with a 33% market share in rooftop solar and a 16% market share for solar pumps.

Regulated business—incremental investment in extant distribution circles

Tata Power is targeting to double its regulated equity to Rs135 bn from Rs75 bn currently, with 90% of the incremental regulated equity increase in the transmission and distribution segment. The company is targeting an overall capex of Rs150 bn in the transmission and distribution segment, bulk of which is towards extant operations in Mumbai and Delhi, even as the company remains hopeful of adding 2-3 distribution circles through the public-private ownership route over the next five years. TPWR is less enthused by the distribution franchisee model and also sees lower opportunities in the competitively bid transmission projects.

We note that TPWR has committed to no new project being taken up for thermal assets, and is targeting to be carbon neutral by FY2050.

KOTAK INSTITUTIONAL EQUITIES RESEARCH 23 Electric Utilities Tata Power

Exhibit 1: Tata Power set out aggressive targets to double its revenue and triple its profits while nearly halving its net debt Summary of extant operations and targets for Tata Power, March fiscal year-ends, 2020-25E (Rs bn)

2020 2025 2020 2025 Consolidated Transmission and distribution Revenue 289 2X Service revenues 1 10 PAT 12 3X Cluster revenues 120 270 RoE 8 12 Revenues 120 280 Net debt- Equity 2.0 <1.5 Customers (mn) 2.6 20 Net debt 436 250 Renewable Regulated equity 75 135 Capacity (GW) 2.6 15 Generation 35 42 Generation 25 90 Transmission 16 33 Rooftop and pumps 7 100 Distribution 24 60 EPC 15 120 Capital Employed (%) Tata Power Solar 21 220 Mundra + Coal 39 17 TPSSL + Generation 47 310 Renewables 29 32 Internal business (7) (80) Transmission and Distribution (Regulated) 18 31 Renewable (consolidated) 40 230 Generation (Regulated) 14 18 New energy business Customer service 2 Revenues 1 35 Capacity (MW) EV Charging (Points) 170 100,000 Thermal 8,805 8,360 EV Charging (Cities) 20 100+ WHR 375 836 Hydro 447 871 Wind 932 932 Solar 1,705 7,005 Hybrid — 7,000 Total 12,264 25,004

Source: Company, Kotak Institutional Equities

Exhibit 2: Tata Power sum-of-the-parts valuation based on March 2022

Base Multiple Ownership Value (Rs mn) Methodology (X) (%) (Rs mn) (Rs/share) Mumbai Distribution Regulated equity 43,357 P/B 1.5 100 65,036 24 Delhi Distribution Regulated equity 17,090 P/B 1.5 51 13,074 5 Tala Transmission Regulated equity 4,680 DCF 51 1,593 1 Mundra Generation DCF 100 (88,341) (33) Maithon Generation Regulated equity 15,089 DCF 74 14,528 5 IEL Generation DCF 74 7,644 3 Renewable Generation EBITDA 22,793 EV/EBITDA 8.0 100 18,209 7 Coal Coal EBITDA 22,286 EV/EBITDA 6.0 30 86,680 32 Solar Equipment EBITDA 1,869 EV/EBITDA 8.0 100 14,955 6 Investments 56,199 21 Total 189,576 70

Source: Kotak Institutional Equities estimates

24 KOTAK INSTITUTIONAL EQUITIES RESEARCH Tata Power Electric Utilities

Exhibit 3: Our estimates factor no compensation for under-recovery at Mundra UMPP Subsidiary-wise key operational and financial assumptions, March fiscal year-ends, 2018-23E (Rs mn)

2018 2019 2020 2021E 2022E 2023E Standalone Revenue 73,006 76,881 70,750 74,813 76,652 78,783 EBITDA 23,581 23,751 22,704 25,723 26,350 27,113 PAT 13,586 6,664 8,648 7,328 7,835 8,489 Regulated equity 39,270 38,990 39,520 42,144 43,357 44,597 Delhi Revenue 69,297 77,789 83,507 99,380 112,274 126,894 EBITDA 10,097 10,930 12,188 12,092 12,527 12,791 PAT 3,059 3,356 4,141 4,499 5,473 6,188 Regulated equity 12,720 14,030 15,050 16,070 17,090 18,110 Mundra Revenue 63,568 70,643 70,169 70,477 71,330 71,484 EBITDA (987) (2,661) 7,902 3,681 4,422 4,461 PAT (14,104) (16,537) (8,905) (12,736) (11,608) (11,332) Capacity (MW) 4,000 4,000 4,000 4,000 4,000 4,000 Generation (MU) 24,599 24,752 24,463 24,883 24,883 24,883 PLF (%) 76 77 77 77 77 77 Tariff (Rs/unit) 2.55 2.79 2.62 2.80 2.83 2.84 Fuel cost (Rs/unit) 2.43 2.74 2.34 2.48 2.48 2.48 Coal (US$/ton) 62 60 50 60 60 60 Under-recovery 0.84 0.84 0.46 0.68 0.65 0.65 Net debt 157,868 155,998 150,984 144,958 140,436 134,110 Maithon Revenue 22,704 27,761 27,412 27,679 28,072 28,507 EBITDA 6,451 7,368 8,653 7,799 7,354 6,878 PAT 1,817 2,729 3,378 3,800 3,571 3,578 Regulated equity 14,440 14,030 15,089 15,089 15,089 15,089 Capacity (MW) 1,050 1,050 1,050 1,050 1,050 1,050 Generation (MU) 6,987 6,858 6,348 6,509 6,509 6,509 PLF (%) 81 79 71 75 75 75 Tariff (Rs/unit) 3.25 4.05 4.31 4.25 4.31 4.38 Fuel cost (Rs/unit) 1.93 2.58 2.48 2.54 2.61 2.69 TPREL Revenue 4,944 7,154 9,175 12,716 12,716 12,716 EBITDA 4,409 6,325 7,845 10,483 10,393 10,301 PAT 2,014 925 (472) 28 (578) (413) Capacity (MW) 624 824 1,139 1,839 1,839 1,839 Generation (MU) 823 1,349 2,056 3,000 3,000 3,000 Tariff (Rs/unit) 6.01 5.30 4.46 4.24 4.24 4.24 Net debt 71,901 79,778 94,263 122,773 118,231 113,328 WREPL Revenue 11,865 12,717 12,027 13,505 13,775 14,050 EBITDA 10,829 11,513 10,705 12,156 12,399 12,647 PAT 2,325 3,001 1,828 3,810 4,797 5,668 Capacity (MW) 1,008 1,008 1,010 1,010 1,010 1,010 Generation (MU) 1,688 1,756 1,527 1,681 1,681 1,681 Tariff (Rs/unit) 7.03 7.24 7.88 8.03 8.19 8.36 Net debt 46,350 44,085 47,730 41,361 33,423 24,549 Coal Revenue 86,410 88,730 87,820 81,421 87,800 89,492 EBITDA 28,890 23,560 17,840 18,578 22,286 22,669 PAT 14,240 11,260 6,580 8,276 9,808 9,965 Volumes (mn tons) 57 57 62 63 65 66 Net realization (US$/ton) 60 54 47 43 45 45 Cost (US$/ton) 35 37 37 33 33 33 Gross profit (US$/ton) 25 18 10 10 12 12 Solar Revenue 27,490 31,753 21,407 22,477 23,601 24,781 EBITDA 2,571 2,124 1,887 1,780 1,869 1,963 PAT 1,004 904 1,227 1,849 1,896 1,953 Consolidated Revenue 289,214 294,927 289,477 315,821 332,372 350,297 EBITDA 59,471 63,568 77,541 76,018 78,297 78,265 PAT 14,458 5,709 12,015 12,037 17,081 19,290

Source: Company, Kotak Institutional Equities estimates

KOTAK INSTITUTIONAL EQUITIES RESEARCH 25 Electric Utilities Tata Power

Exhibit 4: Tata Power: Profit model, balance sheet, cash model (consolidated), March fiscal year-ends, 2018 - 23E (Rs mn)

2017 2018 2019 2020 2021E 2022E 2023E Profit model (Rs mn) Net sales 272,883 289,214 294,927 289,477 315,821 332,372 350,297 EBITDA 52,372 59,471 63,568 77,541 76,018 78,297 78,265 Other income 2,022 4,327 3,958 5,626 5,384 6,999 9,261 Interest (31,140) (37,230) (41,700) (44,937) (43,866) (42,862) (41,720) Depreciation (19,886) (23,981) (23,932) (26,336) (28,046) (29,419) (29,845) Pretax profits 3,369 2,587 1,894 11,895 9,491 13,015 15,961 Tax 458 (1,643) (6,561) (6,415) (5,831) (5,812) (6,739) Minority interest & profit from associates 12,173 13,514 10,376 6,535 8,376 9,879 10,068 Net profits 16,000 14,458 5,709 12,015 12,037 17,081 19,290 Extraordinary items (6,515) 10,308 16,200 (1,841) — — — Earnings per share (Rs) 5.9 5.3 2.1 4.4 4.4 6.3 7.1

Balance sheet (Rs mn) Total equity 117,795 152,602 167,212 180,660 192,697 209,778 229,068 Deferred taxation liability 24,158 5,166 10,568 11,740 11,740 11,740 11,740 Total borrowings 503,154 426,836 465,146 460,035 471,003 462,269 456,098 Currrent liabilities 157,567 232,616 177,028 215,444 236,266 245,955 256,240 Capital contribution from Consumers Minority interest 18,690 20,153 21,667 23,320 26,371 29,482 32,656 Total liabilities and equity 821,364 837,373 841,620 891,200 938,077 959,226 985,802 Cash 9,543 11,858 7,875 20,882 28,892 53,849 83,969 Current assets 114,888 102,131 114,827 127,439 141,807 145,984 150,513 Total fixed assets 511,634 535,217 530,262 555,309 568,380 547,405 526,090 Investments 119,570 124,289 130,181 132,027 143,453 156,444 169,686 Deferred expenditure 65,729 63,878 58,476 55,544 55,544 55,544 55,544 Total assets 821,364 837,373 841,620 891,200 938,077 959,226 985,802 Key ratios Net debt / equity (X) 3.6 2.4 2.4 2.2 2.0 1.7 1.4 ROE (%) 13.7 10.7 3.6 6.9 6.4 8.5 8.8

Source: Company, Kotak Institutional Equities estimates

26 KOTAK INSTITUTIONAL EQUITIES RESEARCH

June 2020: Results calendar

27

Mon Tue Wed Thu Fri Sat Sun 17-Aug 18-Aug 19-Aug 20-Aug 21-Aug 22-Aug 23-Aug Petronet LNG J K Cement Muthoot Finance HCG Indiabulls Housing TCNS Clothing Oil India Zee Entertainment Enterprises Punjab National Bank Union Bank 24-Aug 25-Aug 26-Aug 27-Aug 28-Aug 29-Aug 30-Aug IRB Infrastructure P&G Hygiene Gillette India NMDC LIC Housing Finance Indraprastha Gas 31-Aug 1-Sep 2-Sep 3-Sep 4-Sep 5-Sep 6-Sep NHPC Coal India Jubilant Life Science Jubilant Foodw orks

Source: NSE, Kotak Institutional Equities

India Daily Summary Daily Summary India

KOTAK INSTITUTIONAL EQUITIES RESEARCH EQUITIES INSTITUTIONAL KOTAK

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August 20, August2020 20,

KOTAK INSTITUTIONAL EQUITIES RESEARCH 27

Kotak Institutional Equities: Valuation summary of KIE Universe stocks India Daily Summary Daily Summary India

Fair O/S ADVT

KOTAK INSTITUTIONAL EQUITIES RESEARCH EQUITIES INSTITUTIONAL KOTAK Price (Rs) Value Upside Mkt cap. shares EPS (Rs) EPS growth (%) P/E (X) EV/EBITDA (X) P/B (X) RoE (%) Dividend yield (%) 3mo Company Rating 19-Aug-20 (Rs) (%) (Rs bn) (US$ bn) (mn) 2020 2021E 2022E 2020 2021E 2022E 2020 2021E 2022E 2020 2021E 2022E 2020 2021E 2022E 2020 2021E 2022E 2020 2021E 2022E (US$ mn) Automobiles & Components Amara Raja Batteries REDUCE 737 700 (5) 126 1.7 171 39 34 44 36.7 (10.9) 27.3 19 21.4 16.8 11.4 11.5 9.2 3.4 3.1 2.7 18.9 15.2 17.1 1.5 1.2 1.5 11.7 Apollo Tyres BUY 128 140 9 73 1.0 638 8.3 2.9 9.9 (41.9) (64.7) 238.7 15.4 43.5 12.9 7.2 7.2 5.3 0.7 0.7 0.7 4.8 1.8 5.6 2.3 1.0 2.1 14.8 Ashok Leyland BUY 69 75 8 203 2.7 2,936 1.2 (0.4) 2.4 (82.3) (134.0) 674.7 56.3 NM 28.8 19.0 31.0 12.2 2.8 2.8 2.7 4.6 NM 9.5 5.0 0.0 1.0 36 Bajaj Auto BUY 3,060 3,400 11 885 12 289 176 159 194 15.0 (9.9) 22.0 17.4 19.3 15.8 14.3 14.9 11.6 4.4 4.1 3.7 24 22 24 3.9 3.1 3.8 37 Balkrishna Industries SELL 1,365 1,150 (16) 264 3.5 193 50 48 58 25.2 (3.4) 21.7 27.5 28.5 23.4 18.7 16.1 13.2 5.3 4.8 4.3 19.9 17.6 19.3 1.5 1.6 1.8 14.1 Bharat Forge SELL 490 340 (31) 228 3.0 466 8 1 13 (66.2) (80.3) 779.2 65.3 331.3 37.7 23.4 41.0 18.8 4.4 4.3 4.0 6.6 1.3 11.0 0.4 0.0 0.6 22 CEAT BUY 874 940 8 35 0.5 40 63 45 68 1.9 (28.8) 52.6 13.9 19.6 12.8 7.4 8.3 6.7 1.2 1.2 1.1 8.9 6.1 8.8 1.4 1.4 1.4 2.4 Eicher Motors REDUCE 21,261 19,200 (10) 581 7.8 27 671 592 824 (17.7) (11.8) 39.2 31.7 35.9 25.8 23.5 27.1 19.2 7.0 6.1 5.1 24 18.1 21 0.1 — — 74 Endurance Technologies REDUCE 1,047 875 (16) 147 2.0 141 40 31 47 11.1 (23.7) 53.2 26 34.1 22.3 12.9 14.5 10.3 4.9 4.4 3.8 18.8 12.8 16.8 0.5 0.4 0.7 1.5 Escorts BUY 1,160 1,300 12 103 2.1 101 55 55 74 0.4 1.4 34.2 21.2 20.9 15.6 14.8 12.0 8.6 3.0 2.4 2.1 14.0 11.2 13.4 0.2 0.7 1.0 38

Exide Industries REDUCE 166 155 (7) 141 1.9 850 10.0 7.7 9.0 10.3 (22.7) 16.6 16.7 21.6 18.5 10.2 11.4 10.0 2.2 2.1 2.0 13.8 10.1 11.1 2.5 2.1 2.1 8.7 -

Hero Motocorp REDUCE 2,933 2,700 (8) 586 7.8 200 159 141 169 (6.1) (11.6) 20.2 18.4 20.8 17.3 12.7 12.8 10.3 4.1 3.9 3.6 24 19.2 21 3.3 3.1 3.5 61 August 20, August2020 20, Mahindra CIE Automotive SELL 133 95 (29) 50 0.7 378 9.4 1.6 7.5 (34.9) (83.0) 366.5 14.1 82.6 17.7 6.5 13.1 7.2 1.1 1.1 1.0 8.0 1.3 5.9 — — — 0.4 Mahindra & Mahindra BUY 624 725 16 776 10.4 1,138 24 30 42 (50.0) 26.3 40.8 26.2 20.8 14.7 12.0 12.9 9.6 2.1 1.9 1.7 7.8 9.5 12.1 0.4 0.5 1.0 53 Maruti Suzuki SELL 6,993 4,500 (36) 2,113 28.2 302 187 140 225 (24.7) (25.0) 60.2 37 50 31 23.9 29.9 17.9 4.4 4.1 3.8 11.9 8.5 12.6 0.9 0.7 0.8 124 Motherson Sumi Systems ADD 125 115 (8) 395 5.3 3,158 3.7 1.5 6.4 (27.5) (60.6) 340.3 33.8 85.6 19.4 8.9 11.7 5.7 3.5 3.5 2.9 10.5 4.1 16.3 1.2 0.9 1.2 29 MRF SELL 59,838 58,500 (2) 254 3.4 4 3,355 2,161 2,902 25.8 (35.6) 34.3 18 27.7 20.6 10.4 10.0 8.0 2.1 1.9 1.8 12.3 7.2 9.0 0.2 0.1 0.1 11.0 Schaeffler India SELL 3,500 3,150 (10) 109 1.5 31 118 83 128 (18.3) (29.7) 55.1 30 42 27 15.9 20.6 14.1 3.7 3.4 3.1 13.0 8.4 11.9 — — — 0.5 SKF REDUCE 1,586 1,550 (2) 78 1.0 49 58 43 58 (10.7) (26.2) 33.6 27 37 28 20.7 26.8 19.2 4.1 5.3 4.6 15.2 14.5 16.7 0.8 6.8 0.6 1.3 Tata Motors SELL 125 90 (28) 450 5.5 3,829 (20.7) (20.5) 4.7 (284.1) 1.0 123.0 NM NM 26.5 6.0 6.5 4.2 0.7 0.8 0.8 NM NM 3.0 — — — 107 Timken SELL 987 825 (16) 74 1.0 75 33 35 42 65.6 6.2 20.1 30 28 24 19.3 16.8 13.6 4.7 4.1 3.5 16.9 15.3 15.9 0.1 0.1 0.1 0.5 TVS Motor SELL 435 260 (40) 206 2.8 475 13.0 7.4 14.7 (7.9) (43.1) 98.4 33 59 30 16.5 21.3 14.3 5.7 5.4 4.8 17.7 9.5 17.3 0.8 0.7 0.8 16.0 Varroc Engineering BUY 272 380 40 37 0.5 135 0 (14) 22 (99.4) (7,416.5) 259.8 1,459.4 NM 12.5 7.5 9.6 5.1 1.2 1.3 1.2 0.1 NM 9.5 — — — 1.0

Automobiles & Components Cautious 7,916 106.0 (39.2) (28.4) 149.2 38.7 54.1 21.7 12.2 13.2 8.8 2.9 2.8 2.5 7.4 5.1 11.6 1.4 1.1 1.3 665 Banks AU Small Finance Bank SELL 732 590 (19) 224 3.0 304 22.2 19.3 23.0 69.8 (13.1) 19.4 33 38 32 — — — 5.3 4.9 4.2 17.9 12.6 13.2 — — — 7.4 Axis Bank BUY 444 600 35 1,359 18.2 2,822 5.8 35 41 (68.3) 509.3 17.8 77 12.6 10.7 — — — 1.6 1.4 1.3 2.1 11.1 11.9 0.0 1.2 1.4 223 Bandhan Bank REDUCE 290 330 14 466 6.2 1,610 18.1 20.7 20.7 10.9 14.3 (0.3) 16.0 14.0 14.0 — — — 3.1 2.6 2.2 22.1 19.8 16.5 — — — 102 Bank of Baroda ADD 48 65 37 220 2.9 4,627 1.2 7.3 17 (27.7) 516.4 137.1 40 6.5 2.8 — — — 0.4 0.4 0.4 1.0 5.0 11.1 0.0 3.1 7.3 28 Canara Bank REDUCE 106 90 (15) 154 2.1 1,454 (21.7) (5.0) 7.5 (571.1) 76.9 249.7 NM NM 14.1 — — — 0.5 0.5 0.5 NM NM 2.1 — — — 22 City Union Bank ADD 124 140 13 91 1.2 737 6.5 5.6 10.2 (30.5) (13.8) 82.6 19 22.2 12.2 — — — 1.9 1.8 1.6 9.4 7.5 12.7 0.4 0.8 1.5 4.3 DCB Bank BUY 82 150 83 25 0.3 310 10.9 9.3 10.3 3.6 (14.7) 10.4 7.5 8.8 8.0 — — — 0.9 0.8 0.7 11.2 8.7 8.9 — 1.1 1.3 3.4 Equitas Holdings BUY 54 100 84 19 0.2 342 6.0 5.4 9.0 16.6 (10.4) 66.5 9.0 10.0 6.0 — — — 0.7 0.7 0.6 7.9 6.4 9.8 — — — 12.6 Federal Bank BUY 55 80 46 109 1.5 1,993 7.7 6.1 6.9 23.6 (21.2) 12.7 7.1 9.0 8.0 — — — 0.8 0.8 0.7 11.1 8.1 8.6 — 2.5 2.8 26 HDFC Bank ADD 1,067 1,200 13 5,865 78.4 5,483 48 49 54 23.7 2.9 10.3 22 22 20 — — — 3.5 3.1 2.8 16.4 14.9 14.6 — 0.9 1.0 260 ICICI Bank BUY 374 470 26 2,582 34.5 6,474 12.3 23 27 134.9 88.0 16.6 31 16.3 13.9 — — — 2.3 2.0 1.8 7.7 12.2 12.9 — 1.2 1.4 216 IndusInd Bank ADD 522 600 15 362 4.8 756 64 26 64 16.3 (59.2) 147.6 8 20.1 8.1 — — — 1.1 1.1 0.9 14.9 5.3 11.8 — 0.7 1.8 184 Karur Vysya Bank BUY 36 65 82 29 0.4 799 2.9 4 6 11.5 41.4 55.6 12 8.6 5.5 — — — 0.5 0.5 0.5 3.6 4.9 7.4 0.0 3.0 4.7 1.3 Punjab National Bank NR 34 — — 322 4.3 9,652 0 2 6 102.3 212.6 283.8 69 21.9 5.7 — — — 0.6 0.6 0.6 0.7 2.1 6.8 — — — 19.5 RBL Bank BUY 185 270 46 94 1.3 509 9.9 10 20 (51.1) 3.4 97.2 19 18.0 9.1 — — — 1.0 0.9 0.9 5.6 4.8 9.0 — 0.7 1.5 88 State Bank of India BUY 197 340 73 1,759 23.5 8,925 16 24 29 1,580.3 49.2 17.9 12 8.1 6.9 — — — 1.1 0.9 0.8 6.4 8.9 9.6 — 0.1 0.1 188 Ujjivan Financial Services BUY 247 490 98 30 0.4 121 26.9 34 44 117.0 24.9 31.6 9 7.4 5.6 — — — 1.4 1.2 1.0 15.7 17.0 19.3 1.3 1.7 2.4 19.5 Ujjivan Small Finance Bank ADD 36 39 9 62 0.8 1,728 2 2 2 34.2 (4.7) (2.9) 19 20.2 20.8 — — — 2.1 2.1 1.9 13.6 9.8 8.9 1.0 1.0 1.0 0.0 Union Bank RS 30 — — 193 2.6 9,414 (8) (2) 2 49.4 77.9 187.9 NM NM 18.3 — — — 0.5 0.7 0.7 NM NM 2.6 — (0.9) 0.8 2.4 Banks Attractive 14,361 191.9 43.3 93.2 43.7 35 17.9 12.4 1.5 1.3 1.2 4.4 7.5 9.9 0.1 0.8 1.0 1,436

Source: Company, Bloomberg, Kotak Institutional Equities estimates

28 KOTAK INSTITUTIONAL EQUITIES RESEARCH

28

Kotak Institutional Equities: Valuation summary of KIE Universe stocks

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

Company Rating 19-Aug-20 (Rs) (%) (Rs bn) (US$ bn) (mn) 2020 2021E 2022E 2020 2021E 2022E 2020 2021E 2022E 2020 2021E 2022E 2020 2021E 2022E 2020 2021E 2022E 2020 2021E 2022E (US$ mn) Building Products Astral Poly Technik SELL 1,112 765 (31) 168 2.2 151 16.4 18 25 25.6 11.3 37.9 68 61 44 37.8 33.2 25.0 11.2 9.6 8.1 17.8 17.0 20.0 0.1 0.2 0.4 2.5 Building Products Cautious 168 2.2 26.6 11.3 37.9 68 61 44 37.8 33.2 25.0 11.1 9.6 8.1 16.5 15.8 18.4 0.1 0.2 0.4 2.5 Capital goods ABB SELL 962 840 (13) 204 2.7 212 18 9 21 46.3 (50.0) 140.4 55 110 46 35.4 71.6 29.8 5.8 5.7 5.3 9.9 5.3 12.1 0.5 0.6 0.7 2.9 Ashoka Buildcon BUY 73 130 77 21 0.3 281 13.8 9.3 11.4 16.2 (32.8) 23.3 5.3 7.9 6.4 3.6 5.3 4.2 0.8 0.7 0.7 16.1 9.6 10.9 0.0 2.0 2.5 2.0 Bharat Electronics BUY 112 110 (2) 274 3.7 2,437 7.5 6.2 6.8 (3.3) (16.5) 8.6 15.0 18.0 16.6 9.3 11.0 9.7 2.7 2.5 2.3 18.9 14.5 14.5 2.5 2.1 2.3 25 BHEL REDUCE 38 28 (25) 132 1.8 3,482 -4.2 -1.5 2.5 (221.0) 64.0 263.0 NM NM 15.3 (50.8) (305.0) 6.1 0.5 0.5 0.5 NM NM 3.0 (5.4) (1.8) 2.6 35 Carborundum Universal ADD 254 285 12 48 0.6 189 14.4 12.1 15.2 9.9 (15.9) 26.0 17.6 21 16.7 11.5 11.6 9.2 2.6 2.4 2.2 15.2 11.8 13.7 1.6 1.3 1.7 1.1 Cochin Shipyard BUY 343 530 54 45 0.6 132 48 38 46 32.5 (21.6) 21.8 7.1 9.0 7.4 3.5 4.6 4.5 1.2 1.1 1.0 18.1 12.9 14.3 4.4 3.4 3.7 3.0 Cummins India BUY 462 500 8 128 1.7 277 26 18 26 (3.2) (28.8) 41.2 18.1 25 18.0 20.6 29.3 18.2 3.1 3.0 2.8 17.0 11.9 16.1 3.0 2.2 3.0 8.0 Dilip Buildcon BUY 405 545 35 55 0.7 137 30 27 46 (45.3) (12.3) 73.2 13.3 15.2 8.8 5.5 6.0 4.4 1.5 1.4 1.2 12.2 9.6 14.7 0.1 0.1 0.2 2.3 IRB Infrastructure BUY 131 150 15 46 0.6 351 21 15 11 (15.2) (27.9) (22.9) 6.4 8.8 11.5 3.7 6.6 6.2 0.7 0.7 0.6 11.1 7.6 5.6 3.8 2.9 1.9 5.1 Kalpataru Power Transmission BUY 255 470 84 39 0.5 153 25 25 39 (16.4) (1.3) 57.4 10.0 10.2 6.5 4.5 4.4 3.9 1.2 1.1 0.9 12.0 10.9 15.4 1.4 1.3 1.8 1.8 KEC International BUY 312 360 15 80 1.1 257 22.0 25 30 16.3 11.6 24.3 14.2 12.7 10.2 8.0 7.5 6.1 2.9 2.4 2.0 22 21 21 1.1 0.8 1.1 1.7 L&T BUY 1,009 1,210 20 1,417 18.9 1,403 63 35 66 3.3 (44.9) 90.3 15.9 29 15.2 16.4 20.2 14.0 2.5 2.1 1.9 15.8 7.8 13.1 1.8 1.5 2.0 73 Sadbhav Engineering BUY 50 113 128 8 0.1 172 4.2 5.3 11.4 (61.4) 26.0 115.4 11.8 9.4 4.3 6.4 6.1 3.8 0.4 0.4 0.4 3.5 4.2 8.6 — — — 0.4 Siemens SELL 1,224 1,000 (18) 436 5.8 356 19 32 36 (37.7) 70.6 11.7 64 38 34 43.7 25.4 22.6 4.6 4.2 3.9 7.3 11.7 12.1 0.4 0.7 0.8 67 Thermax BUY 791 810 2 94 1.3 113 19 14 29 (48.8) (24.9) 102.5 42 56 28 22.6 36.3 19.7 22.6 36.3 19.7 7.0 5.2 10.3 0.9 1.2 1.9 0.8 Capital goods Attractive 3,028 40.5 (18.5) (25.9) 69.6 21 28 16.4 2.1 1.9 1.8 10.2 6.9 10.8 1.3 1.3 1.8 1,436 Commercial & Professional Services SIS BUY 392 395 1 58 0.8 149 15 14 19 5.0 (10.2) 36.2 26 29 21 11.9 12.9 10.9 4.2 3.7 3.2 17.1 13.6 16.1 0.9 0.2 0.2 0.5 TeamLease Services ADD 2,194 2,000 (9) 38 0.5 17 20 49 67 (64.3) 140.9 36.5 107 45 33 39.2 31.5 24.5 6.6 5.7 4.9 6.3 13.7 16.1 — — — 1.1 Commercial & Professional Services Attractive 95 1.3 (16.7) 10.1 36.3 36 33 24 16.2 16.5 13.6 4.8 4.2 3.6 13.3 12.8 15.0 0.6 0.1 0.1 1.5 Commodity Chemicals Asian Paints REDUCE 1,886 1,800 (5) 1,809 24.2 959 27.2 21.9 36.1 20.7 (19.4) 64.9 69 86 52 43.2 50.7 34.0 17.9 16.1 13.9 27 19.7 29 0.6 0.5 0.9 60 Berger Paints SELL 556 430 (23) 540 7.2 971 6.8 6.2 9.4 32.2 (8.5) 51.7 82 90 59 51.0 53.4 37.6 20.3 17.5 14.9 26 21 27 0.4 0.3 0.6 11.7 Kansai Nerolac ADD 487 485 (0) 262 3.5 539 9.9 8.1 12.6 14.6 (18.6) 55.3 49 60 39 33.0 37.7 25.5 6.9 6.5 5.9 14.8 11.2 16.0 0.6 0.6 0.9 1.7 Tata Chemicals ADD 311 330 6 79 1.1 255 31.7 23.1 35.2 (26.2) (27.0) 52.2 9.8 13.5 8.8 4.7 5.1 3.9 0.6 0.6 0.6 6.4 4.5 6.6 3.5 2.6 4.0 7.2 Commodity Chemicals Neutral 2,691 36.0 9.2 (19.1) 59.6 58 72 45 33.8 38.1 26.7 9.1 8.5 7.7 15.6 11.8 17.0 0.7 0.6 0.9 80 Construction Materials ACC BUY 1,429 1,550 8 268 3.6 188 72.3 61.4 79.5 35.8 (15.1) 29.5 19.8 23 18.0 9.3 10.4 8.0 2.3 2.2 2.1 12.3 9.8 12.0 1.0 2.1 2.8 22 Ambuja Cements BUY 227 235 4 451 6.0 1,986 10.6 9.5 12.4 49.1 (10.2) 31.0 21 24 18.2 7.8 8.4 6.2 1.9 1.8 1.6 9.0 7.6 9.2 0.7 0.7 0.7 13.2

Dalmia Bharat BUY 780 1,075 38 146 2.0 192 14.0 17.9 36.9 (12.1) 28.0 106.9 56 44 21 7.7 7.5 5.7 1.4 1.4 1.3 2.5 3.2 6.3 — — — 2.2 India Daily Summary Daily Summary India Grasim Industries ADD 665 700 5 437 5.8 657 52.6 42.5 71.6 (21.1) (19.3) 68.5 12.6 15.6 9.3 7.8 8.2 5.5 0.8 0.7 0.7 6.0 4.8 7.6 0.6 0.1 0.3 23 J K Cement ADD 1,527 1,525 (0) 118 1.6 77 64.2 51.8 92.2 83.6 (19.4) 78.1 24 29 16.6 11.5 11.9 8.4 3.9 3.5 3.0 17.3 12.5 19.4 0.5 0.7 0.7 1.8 JK Lakshmi Cement BUY 271 340 26 32 0.4 118 23.5 16.0 27.4 478.7 (32.0) 71.4 11.5 17.0 9.9 5.2 6.1 4.7 1.9 1.7 1.5 17.4 10.6 16.2 0.9 0.9 1.5 1.7 Orient Cement ADD 69 75 9 14 0.2 205 4.2 3.7 6.3 82.1 (12.9) 72.1 16.3 18.7 10.9 6.8 6.5 5.3 1.3 1.2 1.1 8.0 6.6 10.8 1.1 2.9 2.9 0.9 Shree Cement SELL 22,080 16,000 (28) 797 10.6 36 435.2 382.0 651.5 34.6 (12.2) 70.5 51 58 34 21.7 23.4 16.3 6.2 5.7 5.0 13.9 10.3 15.8 0.5 0.5 0.5 19.9 UltraTech Cement BUY 4,196 4,600 10 1,211 16.2 289 132.9 133.7 219.9 45.2 0.6 64.4 32 31 19.1 14.8 14.2 9.7 3.1 2.8 2.5 10.5 9.4 13.9 0.3 0.4 0.5 33 Construction Materials Attractive 3,474 46.4 21.1 (10.2) 59.3 26 29 18.1 11.0 11.4 8.0 2.2 2.0 1.8 8.4 7.1 10.2 0.5 0.6 0.7 119

Source: Company, Bloomberg, Kotak Institutional Equities estimates

KOTAK INSTITUTIONAL EQUITIES RESEARCH EQUITIES INSTITUTIONAL KOTAK

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August 20, August2020 20,

KOTAK INSTITUTIONAL EQUITIES RESEARCH 29

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

KOTAK INSTITUTIONAL EQUITIES RESEARCH EQUITIES INSTITUTIONAL KOTAK Company Rating 19-Aug-20 (Rs) (%) (Rs bn) (US$ bn) (mn) 2020 2021E 2022E 2020 2021E 2022E 2020 2021E 2022E 2020 2021E 2022E 2020 2021E 2022E 2020 2021E 2022E 2020 2021E 2022E (US$ mn) Consumer Durables & Apparel Crompton Greaves Consumer SELL 261 210 (19) 163 2.2 627 7.9 6.9 8.8 33.1 (12.8) 27.1 33 38 30 28 28 22 11.1 8.5 7.0 39 26 26 0.8 0.0 1.0 3.1 Havells India SELL 629 490 (22) 394 5.3 626 11.8 8.7 13.8 (6.6) (26.1) 58.5 54 72 46 37 47 31 9.1 8.5 7.7 17.3 12.2 17.7 1.6 0.5 0.8 19.9 Page Industries REDUCE 18,920 16,000 (15) 211 2.8 11 308 277 397 (12.9) (10.0) 43.5 61 68 48 39 43 32 25.7 22.3 18.2 43 35 42 0.9 0.8 1.2 10.5 Polycab ADD 907 875 (4) 135 1.8 149 52 40 53 53.2 (21.5) 30.7 17.6 22 17.2 12 15 12 3.5 3.1 2.7 23 14.7 16.8 0.8 0.6 0.8 4.1 TCNS Clothing Co. REDUCE 353 360 2 22 0.3 66 11 0 14 (47.7) (99.8) ###### 33 17,631 25 13 23 9.4 3.5 3.3 2.8 10.9 0.0 11.9 — — — 0.2 Vardhman Textiles ADD 755 720 (5) 43 0.6 57 85 25 90 (34.1) (70.8) 260.6 8.9 30 8.4 6.5 11.6 5.5 0.7 0.7 0.7 8.3 2.3 8.0 2.3 1.7 2.7 0.2 Voltas SELL 650 530 (18) 215 2.9 331 16.2 12.9 19.7 3.4 (20.8) 52.8 40 50 33 33 46 27 5.0 4.7 4.3 12.8 9.6 13.5 0.6 0.5 0.8 21 Whirlpool SELL 2,011 1,700 (15) 255 3.4 127 38 30 49 17.0 (21.3) 67.1 54 68 41 35 46 28 10.0 9.2 8.2 20 14.1 21 0.2 0.4 1.0 1.6 Consumer Durables & Apparel Cautious 1,439 19.2 2.3 (27.6) 37 51 32 25 33 21 6.0 5.5 16.3 10.9 15.5 0.9 0.5 60 Consumer Staples Bajaj Consumer Care ADD 184 200 9 27 0.4 148 12.5 12.8 13.1 (16.6) 2.1 2.7 14.7 14.4 14.0 11.1 11.0 10.6 4.2 3.6 3.3 33 27 24 1.1 3.3 4.4 3.2

Britannia Industries ADD 3,875 4,150 7 933 12.5 240 59 81 86 22.1 36.7 6.3 66 48 45 51 36 34 21.2 17.5 13.9 32 39 34 0.9 0.7 0.9 45 -

Colgate-Palmolive (India) ADD 1,421 1,550 9 386 5.2 272 28 31 36 5.9 8.1 18.0 50 46 39 31.8 29.6 25.5 24.2 24.1 22.9 51 52 60 2.0 2.0 2.4 19.3 August2020 20, Dabur India REDUCE 494 415 (16) 873 11.7 1,767 8.6 9.5 11.0 6.1 10.2 15.3 57 52 45 48 42 35 13.2 12.2 11.1 25 24 26 0.6 1.2 1.4 25 Godrej Consumer Products ADD 691 750 9 706 9.4 1,022 13.8 15.4 18.5 (4.8) 11.8 20.3 50 45 37 34 31 26 8.9 7.8 7.1 18.6 18.6 19.9 0.9 1.1 1.4 15.0 Hindustan Unilever ADD 2,194 2,500 14 5,150 68.8 2,343 31 35 45 10.9 12.3 28.1 70 63 49 53 44 35 59.0 11.9 11.3 86 32 24 1.1 1.5 1.9 96 ITC BUY 198 260 31 2,442 32.6 12,308 11.6 10.5 12.3 14.4 (9.4) 17.9 17.2 19.0 16.1 11.9 13.6 11.3 3.8 3.7 3.6 21 18.9 22 5.1 4.5 5.3 81 Jyothy Laboratories ADD 148 160 8 54 0.7 367 4.7 5.5 6.0 (15.5) 17.5 9.1 31 27 24 22.6 18.3 16.9 4.4 4.2 3.9 13.6 16.1 16.6 2.0 2.4 2.7 1.6 Marico ADD 374 390 4 482 6.4 1,290 8.1 8.7 9.7 12.4 7.7 11.2 46 43 38 32 30 27 15.9 14.8 13.8 35 36 37 1.7 1.9 2.1 14.6 Nestle India REDUCE 16,346 16,000 (2) 1,576 21.1 96 204 227 270 22.6 10.9 19.1 80 72 61 55 48 41 81.6 64.1 51.3 70 100 94 2.1 1.1 1.3 34 Tata Consumer Products ADD 548 470 (14) 502 6.7 922 8.0 9.8 11.9 13.9 22.3 22.4 69 56 46 38 29 27 3.7 3.5 3.3 6.9 6.4 7.4 0.5 0.6 0.8 31 United Breweries ADD 1,015 1,120 10 268 3.6 264 16.2 4.9 20.3 (24.0) (70.0) 318.8 63 209 50 31 59 26 7.6 7.5 6.6 12.8 3.6 14.1 0.2 0.1 0.6 10.0 United Spirits ADD 591 620 5 429 5.7 727 11.5 8.6 14.0 21.7 (25.0) 62.8 51 69 42 29 36 26 10.7 9.4 7.7 23 14.6 20 — — — 31 Varun Beverages BUY 751 825 10 217 2.9 289 16.2 6.5 25.5 51.9 (60.0) 291.5 46 115 29 17 23 13 6.5 6.1 5.1 17.6 5.4 18.9 0.1 0.2 0.3 3.2

Consumer Staples Attractive 14,048 187.8 13.0 2.4 23.3 44 43 35 31 30 25 11.3 8.5 7.9 26 19.6 23 1.8 1.8 2.2 411 Diversified Financials Bajaj Finance REDUCE 3,410 2,800 (18) 2,055 27.5 600 104 74 131 49 (28) 77 33 46 26 — — — 6.3 5.6 4.7 20 13.0 19.8 0.3 0.2 0.4 465 Bajaj Finserv BUY 6,299 7,600 21 1,002 13.4 159 212 252 402 5 19 60 30 25 15.7 — — — 3.2 2.9 2.5 12.2 12.1 16.8 0.2 0.2 0.2 98 Cholamandalam BUY 227 300 32 186 2.5 820 12.8 13.9 20.2 (15) 8.5 45.0 17.7 16.3 11.2 — — — 2.4 2.2 1.9 14.7 13.1 16.7 0.8 0.7 1.0 38 IIFL Wealth ADD 1,128 1,200 6 98 1.3 88 23.8 33.4 48.7 (47) 40.8 45.8 47 34 23 — — — 3.3 3.2 3.1 7.0 9.7 13.7 0.9 1.9 2.8 0.3 L&T Finance Holdings ADD 67 90 34 134 1.8 2,005 8 5 9 (24.1) (44) 84.9 7.9 14.2 7.7 — — — 0.9 0.9 0.8 14.7 6.3 10.9 2.8 2.2 2.4 17.5 LIC Housing Finance ADD 278 350 26 140 1.9 505 47.6 36.2 66.6 4 (24.0) 84.1 5.8 7.7 4.2 — — — 0.9 0.9 0.8 13.9 9.6 16.0 2.9 2.2 4.0 23 Muthoot Finance REDUCE 1,256 1,100 (12) 504 6.7 401 75 77 87 52.3 2 13.5 16.7 16.4 14.4 — — — 4.4 3.6 3.0 28 24 23 1.2 1.2 1.4 55 Shriram City Union Finance BUY 974 1,300 34 64 0.9 66 152 101 177 1.2 (33) 75.1 6.4 9.6 5.5 — — — 0.9 0.9 0.8 14.7 8.9 14.1 0.6 1.3 2.7 0.9 Shriram Transport BUY 689 1,050 52 174 2.3 253 110.3 73.2 107.4 (2) (33.6) 46.6 6.2 9.4 6.4 — — — 0.9 0.9 0.8 14.8 9.5 12.2 0.7 1.6 2.3 54 Diversified Financials Attractive 7,813 104.4 32.3 (23.6) 40.8 19.1 25 17.7 2.9 2.8 2.5 15.1 11.3 14.1 0.8 0.9 1.1 952

Source: Company, Bloomberg, Kotak Institutional Equities estimates

30 KOTAK INSTITUTIONAL EQUITIES RESEARCH

30

Kotak Institutional Equities: Valuation summary of KIE Universe stocks

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

Company Rating 19-Aug-20 (Rs) (%) (Rs bn) (US$ bn) (mn) 2020 2021E 2022E 2020 2021E 2022E 2020 2021E 2022E 2020 2021E 2022E 2020 2021E 2022E 2020 2021E 2022E 2020 2021E 2022E (US$ mn) Electric Utilities CESC BUY 606 810 34 80 1.1 133 99 102 114 9 3.3 11.8 6.2 6.0 5.3 5.2 4.9 4.4 0.6 0.6 0.5 10.7 10.4 10.7 2.1 2.1 2.1 3.4 JSW Energy BUY 57 65 14 94 1.3 1,640 6.3 4.8 5.3 49 (25) 11.6 9.0 12.0 10.7 5.8 5.7 5.0 0.8 0.8 0.7 8.9 6.5 6.8 2— — — 2.0 NHPC ADD 21 26 24 210 2.8 10,045 2.8 3.0 3.2 10.7 6 8.7 7.5 7.0 6.5 7.4 8.1 7.2 0.7 0.6 0.6 9.2 9.3 9.7 7.0 8.3 9.0 1.5 NTPC BUY 95 130 37 937 12.5 9,895 11.1 13.0 15.4 (0.9) 17.3 18.3 8.5 7.3 6.1 10.0 7.9 6.2 0.8 0.8 0.7 10.0 11.0 12.0 3.3 3.9 4.9 23 Power Grid BUY 177 220 24 928 12.4 5,232 20.7 22 25 9 6.3 16.1 8.6 8.1 7.0 6.8 6.5 5.8 1.4 1.3 1.2 17.5 17.2 18.3 5.6 6.0 7.0 27 Tata Power BUY 57 70 23 153 2.1 2,705 4.4 4.4 6.3 110 0 41.9 12.8 12.8 9.0 7.6 7.8 7.2 0.8 0.8 0.7 6.9 6.4 8.5 3— — — 24 Electric Utilities Attractive 2,402 32.1 8.2 8.8 17.0 8.5 7.8 6.7 1.0 0.9 0.8 11.2 11.4 12.3 4.5 4.6 5.5 80 Fertilizers & Agricultural Chemicals Bayer Cropscience SELL 5,946 3,400 (43) 267 3.6 45 129.3 134.2 149.9 64.7 3.8 11.7 46 44 40 35 32 28 10.4 8.7 7.4 24 21 20 0.4 0.5 0.5 2.9 Dhanuka Agritech SELL 811 650 (20) 39 0.5 48 29.7 37.0 40.8 25.7 24.4 10.4 27.3 21.9 19.9 21.8 16.4 14.5 5.5 4.6 4.0 21 23 21 3.0 1.1 1.5 1.8 Godrej Agrovet SELL 485 420 (13) 93 1.2 192 11.5 14.9 17.5 0.8 29.1 17 42 33 28 24 17 14 4.2 3.8 3.4 10.4 12.3 13.0 1.1 1.1 1.2 1.9 Rallis India SELL 293 265 (9) 57 0.8 195 9.0 11.3 14.8 7.4 25.0 30.9 32.4 25.9 19.8 22.1 17.4 13.6 4.0 3.6 3.2 13.1 14.7 17.0 0.9 0.9 1.0 4.2 UPL SELL 499 390 (22) 382 5.1 765 23.2 31.9 36.5 22.7 37.6 14.2 22 15.6 13.7 9.3 8.0 7.3 2.3 2.1 1.9 11.5 14.2 14.6 1.2 1.7 1.9 41 Fertilizers & Agricultural Chemicals Cautious 1,135 15.2 24.6 31.8 16.7 34 26 22.0 15.3 12.6 11.2 4.4 3.9 3.4 13.0 15.1 15.5 0.8 0.9 1.1 58 Gas Utilities GAIL (India) BUY 101 140 38 458 6.1 4,510 13.2 7.6 11.0 (5.5) (42.1) 44.8 7.7 13.3 9.2 5.9 9.5 6.6 1.0 1.0 0.9 13.5 7.7 10.6 6.3 3.9 4.9 22 GSPL SELL 206 200 (3) 116 1.6 564 17.2 13.2 11.8 21.9 (23.1) (10.6) 12.0 15.6 17.4 5.4 6.3 6.6 1.7 1.6 1.5 15.5 10.6 8.7 1.0 1.0 1.1 3.0 Indraprastha Gas SELL 395 380 (4) 277 3.7 700 16.7 16.0 20.8 38.6 (4.1) 29.8 23.7 24.7 19.0 16.8 17.4 13.4 5.5 4.7 4.0 25 20 23 0.7 0.7 1.0 26 Mahanagar Gas ADD 970 1,115 15 96 1.3 99 74.6 53.8 81.3 32.8 (27.9) 51.1 13.0 18.0 11.9 8.9 11.7 7.6 3.2 2.9 2.6 28 17.0 23 2.6 2.1 3.5 14.1 Petronet LNG BUY 255 300 18 383 5.1 1,500 17.6 18.3 21.7 17.3 3.6 18.6 14.5 14.0 11.8 8.0 7.7 6.7 3.5 3.3 3.1 25 24 27 4.9 5.4 6.9 13.9 Gas Utilities Attractive 1,329 17.8 6.8 (25.2) 30.1 11.6 15.5 11.9 7.5 9.6 7.4 1.9 1.8 1.7 16.5 11.6 14.1 4.0 3.3 4.2 79 Health Care Services Apollo Hospitals BUY 1,685 1,700 1 234 3.1 139 18.4 1 44 9 (97) 6,877 91.4 2,695.1 38.6 16.7 25.6 14.7 7.0 7.0 6.3 7.7 0.3 17.2 0.7 0.0 1.0 22 Dr Lal Pathlabs SELL 1,872 1,300 (31) 156 2.1 83 27.1 26.7 37.2 13.4 (1.4) 39.2 69.2 70.1 50.4 43.3 43.8 30.7 15.1 13.1 11.1 23 20 24 0.4 0.4 0.6 3.6 HCG BUY 129 140 9 11 0.2 143 (12.0) (8.7) (2.4) (258) 28 73 NM NM NM 10.6 9.6 5.3 3.0 1.9 2.0 NM NM NM — — — 0.6 Metropolis Healthcare SELL 1,706 1,300 (24) 86 1.2 51 30.0 30.0 39.7 25.3 (0.1) 32 56.9 56.9 43.0 36.2 34.2 26.7 16.5 13.9 11.5 32 26 29 0.4 0.5 0.7 3.8 Narayana Hrudayalaya BUY 348 345 (1) 71 0.9 204 5.8 -7.4 7.6 101.0 (228) 202 59.8 NM 45.9 18.1 64.7 15.3 6.3 7.2 6.2 10.7 NM 14.6 — — — 1.0 Health Care Services Attractive 626 8.4 3 (68) 456 66.4 207.0 37.3 17.1 21.9 13.6 6.5 5.9 5.3 9.7 2.9 14.3 0.4 0.2 0.6 31 Hotels & Restaurants Jubilant Foodworks ADD 1,942 1,750 (10) 256 3.4 133 24 9 30 (2) (62.3) 240 82.4 218.5 64.2 28.5 37.1 22.5 22.7 22.3 17.1 26 10.3 30 0.3 0.2 0.5 29 Lemon Tree Hotels BUY 30 35 17 24 0.3 790 -0.1 -1.2 0.6 (118) (932) 147 NM NM 51.3 16.0 36.5 12.3 2.9 3.3 3.2 NM NM 6.2 — 0.0 0.9 1.5 Hotels & Restaurants Attractive 280 3.7 (18) (93) 2,172 92.4 1,414.1 62.2 25.8 37.0 20.2 14.3 14.9 12.4 15.5 1.1 19.9 0.3 0.1 0.6 31

Insurance Daily Summary India HDFC Life Insurance REDUCE 603 560 (7) 1,219 16.3 2,010 6.4 6.8 7.4 1.4 5.8 8.2 94 88 82 — — — 17.3 15.9 14.7 20 18.8 18.7 0.0 0.3 0.3 43 ICICI Lombard SELL 1,311 950 (28) 596 8.0 454 26.3 31.9 35.8 14 21 12 50 41 37 — — — 9.7 8.0 6.8 21 21 20 0.3 0.2 0.5 17.4 ICICI Prudential Life BUY 455 500 10 653 8.7 1,436 7.4 8.5 9.6 (6) 14.4 13.2 61 53 47 — — — 8.7 7.7 6.8 14.8 15.2 15.2 0.1 0.3 0.4 16.4 Max Financial Services NR 540 - (100) 146 1.9 343 10.1 9.5 26.7 452 (6) 180 53 57 20 — — — — — — 12.7 13.5 38 — 0.2 1.2 10.6 SBI Life Insurance BUY 864 1,050 22 864 11.5 1,001 14.2 15.5 16.6 7.2 8.9 7.4 61 56 52 — — — 10.8 9.3 8.1 18.4 18.0 16.7 — 0.3 0.3 17.5 Insurance Attractive 3,476 46.5 8.4 12.8 21.3 66.2 58.7 48 11.2 9.8 8.1 17.0 16.7 16.7 0.0 0.2 0.3 105

Source: Company, Bloomberg, Kotak Institutional Equities estimates

KOTAK INSTITUTIONAL EQUITIES RESEARCH EQUITIES INSTITUTIONAL KOTAK

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August 20, August2020 20,

KOTAK INSTITUTIONAL EQUITIES RESEARCH 31

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

KOTAK INSTITUTIONAL EQUITIES RESEARCH EQUITIES INSTITUTIONAL KOTAK Company Rating 19-Aug-20 (Rs) (%) (Rs bn) (US$ bn) (mn) 2020 2021E 2022E 2020 2021E 2022E 2020 2021E 2022E 2020 2021E 2022E 2020 2021E 2022E 2020 2021E 2022E 2020 2021E 2022E (US$ mn) Internet Software & Services Info Edge SELL 3,294 2,185 (34) 424 5.7 122.3 26.9 19.8 36.7 4.2 (26.5) 85.4 122.4 166.6 89.9 101.9 153.1 75.9 16.6 15.4 13.7 13.8 9.6 16.1 0.2 0.2 0.3 19.0 Just Dial ADD 401 400 (0) 26 0.3 61.8 42.0 24.7 29.9 31.4 (41.1) 21.0 9.6 16.2 13.4 3.9 9.0 6.3 2.0 2.0 1.8 24 12.2 14.1 — — — 13.9 Internet Software & Services Cautious 450 6.0 15.2 (34.4) 60.5 74.8 114.0 71.0 62.3 102.8 59.3 12.1 11.7 10.3 16.2 10.3 14.5 0.2 0.1 0.2 33 IT Services HCL Technologies ADD 710 770 8 1,926 25.7 2,716 40.8 42.2 46.4 11.4 3.4 9.9 17.4 16.8 15.3 11.0 10.0 8.9 4.0 3.2 2.8 24 21 19.7 0.7 1.4 1.9 52 Hexaware Technologies REDUCE 397 375 (6) 119 1.6 302 21.2 23.3 24.6 9.9 9.7 5.8 18.7 17.1 16.1 13.7 11.3 10.0 4.3 3.7 3.3 25 23 22 2.1 2.0 2.5 5.7 Infosys BUY 959 1,110 16 4,086 54.6 4,259 38.9 40.5 45.2 10.0 4.0 11.7 24.6 23.7 21.2 17.5 15.7 14.1 6.2 5.7 5.2 25 25 26 1.8 2.7 3.1 143 L&T Infotech ADD 2,385 2,800 17 416 5.6 176 86.6 91.0 110.6 0 5.1 21.5 27.5 26.2 21.6 19.7 16.9 14.7 7.7 6.6 5.6 30 27 28 1.1 1.3 1.5 5.2 Mindtree REDUCE 1,172 980 (16) 193 2.6 165 38.3 54.9 62.5 (16) 43 14 30.6 21.3 18.8 17.0 12.7 11.1 6.1 5.2 4.3 19.5 26 25 2.6 1.4 1.6 16.5 Mphasis REDUCE 1,203 1,100 (9) 225 3.0 187 63.5 64.3 70.6 13 1.1 9.9 18.9 18.7 17.0 12.9 12.1 10.7 3.8 3.5 3.2 21 19.6 19.6 2.9 2.9 2.9 6.0 TCS REDUCE 2,256 2,320 3 8,466 113.2 3,752 86.2 83.6 94.1 4 (3.0) 12.5 26.2 27.0 24.0 19.1 19.0 17.1 9.8 9.2 8.5 36 35 37 3.0 3.0 3.3 117

Tech Mahindra BUY 727 845 16 633 8.5 880 45.9 40.8 51.3 (3.9) (11.0) 25.7 15.8 17.8 14.2 9.9 9.9 7.7 2.9 2.7 2.4 19.2 15.7 17.9 2.1 2.1 2.4 45 -

Wipro ADD 280 285 2 1,599 21.4 5,703 16.6 17.0 18.2 11.1 2.4 7.1 16.8 16.4 15.3 10.7 9.9 9.0 2.9 2.5 2.3 17.3 16.2 15.7 0.5 0.7 3.0 45 August2020 20, IT Services Attractive 17,663 236.1 4.3 0.1 12.0 22.7 22.7 20.3 15.8 14.9 13.4 6.0 5.3 4.9 26 23 24 2.2 2.4 3.0 435 Media DB Corp. REDUCE 79 81 2 14 0.2 175 15.7 5.3 14.1 0.4 (66.5) 166.7 5.0 15.0 5.6 3.0 4.8 2.4 0.8 0.8 0.8 15.7 5.4 14.3 15.7 2.5 15.1 0.4 Jagran Prakashan REDUCE 42 37 (11) 12 0.2 281 7.0 3.9 7.3 (20.9) (44) NA 6.0 10.6 NA 1.9 2.4 NA 0.6 0.6 NA 10.3 5.7 10.3 10.8 4.8 12.0 0.4 PVR BUY 1,333 1,625 22 74 1.0 51 29.0 -32.7 59.3 (33) (213) 281 46.0 NM 22.5 14.6 42.7 9.8 3.0 3.9 3.4 8.5 NM 16.2 0.2 (0.2) 0.4 41 Sun TV Network REDUCE 438 435 (1) 173 2.3 394 35.5 34.9 39.7 (2) (1.6) 13.6 12.3 12.5 11.0 8.6 8.2 7.3 3.0 3.0 2.8 25 24 26 5.7 5.7 6.3 15.3 Zee Entertainment Enterprises REDUCE 197 185 (6) 189 2.5 960 11.1 11.0 16.5 (32.5) (1.4) 49.9 17.7 17.9 12.0 10.9 10.7 7.3 2.0 1.9 1.7 11.7 10.9 15.1 1.8 1.8 2.0 64 Media Cautious 461 6.2 (17.7) (20.1) 58.1 14.9 18.7 11.8 8.9 10.3 6.9 2.2 2.2 2.0 14.8 11.6 17.1 3.6 3.0 4.0 122 Metals & Mining Hindalco Industries BUY 197 285 45 442 5.9 2,220 17.8 16.6 26.8 (28.2) (6.7) 62 11.1 11.9 7.3 5.8 6.6 5.0 0.7 0.7 0.6 6.8 6.1 9.2 0.5 0.5 0.5 38 Hindustan Zinc BUY 232 290 25 979 13.1 4,225 16.1 15.3 20.1 (14.5) (5.0) 31.5 14.4 15.1 11.5 8.6 8.5 6.5 2.4 2.9 2.9 18.4 17.5 25 7.1 6.6 8.7 5.7

Jindal Steel and Power BUY 227 270 19 232 3.1 1,020 (7.7) 8.6 19.0 (343) 213 120 NM 26.4 12.0 7.5 6.4 5.3 0.7 0.7 0.7 NM 2.7 5.7 — — — 39 JSW Steel ADD 279 260 (7) 673 9.0 2,402 10.1 7.0 22.1 (68.3) (31) 216.0 27.6 39.9 12.6 10.8 10.7 6.7 1.8 1.8 1.6 6.8 4.5 13.2 0.8 0.8 0.8 33 National Aluminium Co. SELL 39 24 (38) 72 1.0 1,866 0.7 (0.4) 1.4 (91) (154) 461.1 52.2 NM 26.8 10.1 18.4 8.2 0.7 0.7 0.7 1.4 NM 2.7 3.9 0.0 1.9 7.6 NMDC ADD 98 105 8 299 4.0 3,062 14.6 11.9 11.1 (0.7) (18.8) (7) 6.7 8.2 8.8 4.7 5.7 6.2 1.1 1.0 1.0 16.7 12.8 11.2 5.7 6.1 5.7 8.6 Tata Steel BUY 432 475 10 491 6.6 1,146 35.2 (14.1) 59.1 (61) (140) 520 12.3 NM 7.3 8.8 10.2 5.7 0.7 0.7 0.7 5.9 NM 9.6 2.3 2.0 2.9 76 Vedanta BUY 129 165 28 480 6.4 3,717 6.5 11.6 17.8 (57) 77 54.1 19.8 11.2 7.2 5.0 5.0 4.0 0.9 0.9 0.8 4.2 7.9 11.9 3.0 9.5 8.8 37 Metals & Mining Attractive 3,668 49.0 (45.5) (19.3) 105.0 15.6 19.4 9.4 7.2 7.6 5.5 1.1 1.1 1.0 7.1 5.8 11.1 3.3 4.0 4.5 46

Source: Company, Bloomberg, Kotak Institutional Equities estimates

32 KOTAK INSTITUTIONAL EQUITIES RESEARCH

32

Kotak Institutional Equities: Valuation summary of KIE Universe stocks

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

Company Rating 19-Aug-20 (Rs) (%) (Rs bn) (US$ bn) (mn) 2020 2021E 2022E 2020 2021E 2022E 2020 2021E 2022E 2020 2021E 2022E 2020 2021E 2022E 2020 2021E 2022E 2020 2021E 2022E (US$ mn) Oil, Gas & Consumable Fuels BPCL BUY 404 480 19 876 11.7 1,967 11 35 37 (71.0) 229.9 6.0 38.4 11.6 11.0 21.5 9.0 8.6 2.4 2.2 2.0 5.9 19.5 18.8 4.1 4.3 4.6 62.1 Coal India BUY 135 215 59 833 11.1 6,163 27 20 20 (4) (24.7) (3.2) 5.0 6.6 6.8 3.9 5.9 5.5 2.6 2.6 2.6 57.0 38.9 37.6 11.1 14.8 14.8 21.1 HPCL BUY 211 260 23 321 4.3 1,524 7 34 29 (82.0) 371.9 (13.2) 29.5 6.3 7.2 18.2 7.3 7.5 1.1 1.0 1.0 3.8 17.0 13.7 4.6 8.0 6.9 24.4 IOCL BUY 88 110 25 828 11.1 9,181 (3.9) 9.6 12.9 (121.9) 343.8 34.3 NM 9.2 6.8 23.3 6.0 5.3 0.9 0.8 0.8 NM 9.2 11.6 4.8 4.9 6.6 28.9 Oil India SELL 97 70 (28) 105 1.4 1,084 21 3 6 (32) (85.6) 105.7 4.7 32.4 15.8 3.4 8.8 7.6 0.4 0.4 0.4 8.6 1.3 2.7 11.0 1.2 2.5 2.1 ONGC SELL 80 60 (25) 1,001 13.4 12,580 13 4 7 (43) (71.7) 89.6 5.9 20.9 11.0 2.7 4.6 3.7 0.4 0.4 0.4 7.3 2.1 3.8 6.3 2.4 3.8 22.3 Reliance Industries ADD 2,132 2,150 1 12,634 168.9 5,926 67 67 93 1.2 (0.1) 40.0 31.9 32.0 22.8 18.2 15.0 10.2 2.8 2.5 2.3 9.4 8.3 10.8 0.3 0.3 0.3 560.6 Oil, Gas & Consumable Fuels Attractive 16,597 221.8 (37.3) 4.1 34.3 22.1 21.3 15.8 11.5 10.3 7.8 1.9 1.7 1.5 8.4 8.1 9.7 1.8 1.7 1.9 721.5 Pharmaceuticals Aurobindo Pharma REDUCE 864 790 (9) 506 6.8 586 48 55 59 19.3 13 7.8 17.9 15.8 14.7 10.9 9.5 8.4 3.0 2.6 2.3 16.8 16.3 15.3 0.4 0.9 1.0 54.2 Biocon SELL 396 225 (43) 476 6.4 1,202 6.2 8.2 10.1 2 32 22.7 64 48 39 29.6 21.8 17.6 6.5 5.8 5.2 10.6 12.1 13.3 0.2 0.7 0.9 38.6 Cipla BUY 758 840 11 611 8.2 806 19.2 28 33 1.1 47 16 40 26.8 23.1 19.3 14.8 12.8 3.8 3.4 3.1 9.9 12.7 13.3 1.0 0.7 0.8 80.6 Dr Reddy's Laboratories SELL 4,489 3,400 (24) 746 10.0 166 130 155 201 30 19 29.7 35 28.9 22.3 18.1 15.8 12.4 4.8 4.2 3.6 13.9 14.6 16.3 0.5 0.5 0.7 68.1 Laurus Labs REDUCE 1,063 870 (18) 114 1.5 107 23.9 54.6 55 117.9 129 1 45 19.5 19.2 22.1 12.5 11.7 6.4 4.8 3.9 15.3 24.8 20.1 (0.3) — — 21.2 Lupin ADD 981 900 (8) 445 5.9 450 22 28 44 3.6 30 54 45 35 22.5 17.6 15.1 10.6 3.5 3.2 2.9 7.4 9.3 12.8 0.6 0.4 0.7 47.9 Sun Pharmaceuticals REDUCE 525 510 (3) 1,261 16.8 2,406 16.7 19.7 23 3.8 18 17 31 27 22.8 16.7 14.6 12.3 2.8 2.7 2.5 9.3 10.2 11.3 1.3 0.2 0.9 73.6 Torrent Pharmaceuticals REDUCE 2,795 2,450 (12) 473 6.3 169 57 72 89 22.6 25 24 49 39 31 23.0 19.6 16.7 9.8 8.4 7.2 20.1 21.7 22.8 1.5 0.9 1.1 32.8 Pharmaceuticals Attractive 4,632 61.9 12.5 25 20 34 27 22.9 17.7 14.8 12.3 3.9 3.5 3.1 11.2 12.8 13.7 0.8 0.5 0.8 417.2 Real Estate Brigade Enterprises BUY 155 235 51 32 0.4 204 6.4 7 15 (46) 6 114 24.3 22.9 10.7 10.8 10.0 5.1 1.4 1.3 1.2 5.9 6.0 12.0 1.6 1.6 1.6 0.8 DLF BUY 158 200 27 390 5.2 2,475 (2.4) 5.0 8.7 (140) 310 74 NM 31.6 18.2 37.4 43.5 25.2 1.1 1.1 1.1 NM 3.6 6.0 — 1.3 1.3 22.8 Embassy Office Parks REIT ADD 369 400 9 284 3.8 772 9.9 13.1 15.0 110 32 14 37 28 25 18.1 16.6 15.2 1.3 1.3 1.4 3.4 4.6 5.6 6.6 7.2 8.1 7.7 Godrej Properties SELL 890 690 (22) 224 3.0 252 10.7 11.9 15.4 (2.7) 11 29.4 83 75 58 69.3 84.0 145.4 4.7 4.4 4.1 7.4 6.0 7.3 — — — 6.5 Oberoi Realty ADD 380 450 18 138 1.8 364 19 22 28 (15.7) 14.1 29 20.0 17.6 13.6 14.7 13.9 11.7 1.6 1.5 1.3 8.3 8.8 10.3 0.5 0.5 0.5 1.9 Prestige Estates Projects ADD 250 275 10 100 1.3 401 10.9 6.6 10 25.1 (39) 54 23 38 24.5 7.5 8.1 6.9 1.8 1.8 1.7 8.7 4.9 7.2 0.6 0.6 0.6 2.7 Sobha BUY 263 400 52 25 0.3 95 30 32 40 (4) 8.8 24.7 8.9 8.1 6.5 5.0 4.5 4.2 1.0 0.9 0.8 12.1 12.1 13.6 2.7 2.7 2.7 1.0 Sunteck Realty BUY 242 300 24 35 0.5 140 7.1 8.8 18 (55.9) 23 105 34 27.4 13.4 25.4 21.4 11.9 1.2 1.1 1.0 3.5 4.2 8.1 0.4 0.4 0.4 2.4 Real Estate Attractive 1,229 16.4 (46.2) 101.9 45.1 60 29 20.3 17.2 17.0 13.5 1.5 1.5 1.4 2.5 4.9 6.9 1.7 2.3 2.5 45.7 Retailing Aditya Birla Fashion and Retail BUY 140 150 7 116 1.5 773 (2.1) (4.1) 2.7 (151.4) (92.4) 165.6 NM NM 52 11.6 17.8 9.1 9.9 7.1 5.7 NM NM 12.4 — — — 4.2 Avenue Supermarts SELL 2,267 1,480 (35) 1,468 19.6 648 21.0 20 39 45.1 (4.4) 92.8 108 113 59 67 74 39 12.8 11.9 9.9 15.8 11.1 18.4 — — — 22.0 Titan Company BUY 1,148 1,270 11 1,019 13.6 888 16.8 9 20 (0.2) (45.9) 124.5 68 126 56 41 66 36 15.3 14.1 12.0 23.4 11.6 23.1 0.3 0.3 0.5 58.6

Retailing Attractive 2,603 34.8 (2.8) (32.3) 153.4 98 145 57 45 61 33 13.8 12.3 10.3 14.0 8.5 17.9 0.1 0.1 0.2 84.7 India Daily Summary Daily Summary India Speciality Chemicals Castrol India BUY 123 165 34 122 1.6 989 8.4 5.1 8.9 16.8 (39.5) 75.0 14.7 24.3 13.9 9.7 15.9 9.3 8.9 8.9 8.6 65.3 36.5 63.0 4.5 4.1 6.9 2.2 Pidilite Industries REDUCE 1,450 1,400 (3) 737 9.8 508 23.1 18 28 30.1 (20.4) 54.9 63 79 51 46 54 36 16.5 14.7 12.6 27.2 19.7 26.7 0.5 0.4 0.7 18.9 S H Kelkar and Company BUY 81 105 30 11 0.2 141 4.6 5.3 6.5 (24.3) 14.4 23.4 17.4 15.2 12.4 9.0 8.1 6.4 1.4 1.3 1.2 7.8 8.8 10.1 2.5 1.2 2.2 2.1 SRF ADD 4,295 4,000 (7) 247 3.3 57 138 150 193 23.5 8.7 28.4 31.1 28.6 22.3 19.0 16.6 13.4 5.0 4.3 3.7 17.5 16.2 17.8 0.3 0.4 0.4 15.7 Speciality Chemicals Attractive 1,117 14.9 22.1 (17.1) 48.5 39 47 31.7 26.0 29.0 20.5 9.6 8.6 7.5 24.7 18.3 23.6 0.9 0.8 1.3 38.9

Source: Company, Bloomberg, Kotak Institutional Equities estimates

KOTAK INSTITUTIONAL EQUITIES RESEARCH EQUITIES INSTITUTIONAL KOTAK

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August 20, August2020 20,

KOTAK INSTITUTIONAL EQUITIES RESEARCH 33

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

KOTAK INSTITUTIONAL EQUITIES RESEARCH EQUITIES INSTITUTIONAL KOTAK Company Rating 19-Aug-20 (Rs) (%) (Rs bn) (US$ bn) (mn) 2020 2021E 2022E 2020 2021E 2022E 2020 2021E 2022E 2020 2021E 2022E 2020 2021E 2022E 2020 2021E 2022E 2020 2021E 2022E (US$ mn) Telecommunication Services Bharti Airtel BUY 536 710 32 2,923 39.1 5,456 (6.7) 4.8 13.8 NM NM NM NM 111.5 38.7 10.4 8.1 6.6 3.8 4.8 4.5 NM 3.8 12.1 0.4 1.1 1.1 176.7 Bharti Infratel ADD 201 215 7 372 5.0 1,850 16.5 16.3 17.5 25.7 (1.1) 7.4 12.2 12.3 11.5 5.1 4.9 4.6 2.8 2.7 2.7 21.7 22.2 23.7 5.3 7.9 8.4 29.1 Vodafone Idea RS 9 — — 250 3.3 28,735 (12.4) (7.3) (6.3) NM NM NM NM NM NM 8.1 10.0 8.0 4.2 -1.1 (0.6) NM 251 57 — — — 89 Tata Communications BUY 905 975 8 258 3.4 285 16.0 29.9 37.3 56.6 87.3 24.5 56.6 30.2 24.3 10.7 8.3 7.2 NM NM 64.9 NM NM NM 0.4 0.4 0.7 1.9 Telecommunication Services Attractive 3,803 50.8 NM 59.4 56.4 NM NM NM 9.2 8.2 6.8 4.0 7.5 10.1 NM NM NM 0.8 1.7 1.7 296.5 Transportation Adani Ports and SEZ BUY 357 400 12 725 9.7 2,032 26.9 18.7 21.9 34.7 (30.5) 16.9 13.2 19.1 16.3 12.5 13.5 11.4 2.8 2.5 2.2 21.8 14.0 14.5 3.6 0.9 0.9 18.4 Container Corp. SELL 393 370 (6) 240 3.2 609 17.3 7.6 13.3 5.7 (55.9) 74.9 23 52 30 13.0 23.8 15.5 2.4 2.3 2.3 10.3 4.6 7.8 0.9 1.1 1.8 15.9 Gateway Distriparks BUY 87 135 55 9 0.1 125 4.2 4.2 3.6 (37.5) 0.4 (15.1) 20.6 20.5 24.2 7.0 5.6 5.9 0.7 0.7 0.7 3.5 3.8 3.0 4.0 3.4 3.4 0.2 GMR Infrastructure BUY 21 26 23 128 1.7 7,147 (3.1) (1.8) (0.8) (25.4) 40.9 55.9 NM NM NM 16.2 18.8 16.9 (4.7) (7.6) (5.9) 106.6 55.8 25.2 — — — 4.1 Gujarat Pipavav Port BUY 82 111 36 39 0.5 483 6.0 4.5 5.8 42.2 (24.9) 27.3 13.5 18.0 14.1 7.4 7.8 6.9 1.9 1.9 1.9 14.2 10.6 13.5 6.9 5.2 6.6 0.8

InterGlobe Aviation SELL 1,215 900 (26) 468 6.2 383 (6.5) (200.9) 62.1 (258.9) (2,999.1) 130.9 NM NM 19.6 6.6 (9.8) 3.3 7.9 (67.4) 3.3 NM NM 477.2 — — — 49 -

Mahindra Logistics ADD 315 305 (3) 23 0.3 71 8.9 5.3 10.9 (29.0) (40.8) 106.4 35 60 29 14.5 18.0 12.1 4.1 3.9 3.6 12.2 6.7 12.9 — — — 0.4 August 20, August2020 20, Transportation Attractive 1,631 21.8 17.6 (192.0) 268.6 34 NM 21.9 11.4 24.8 9.5 3.8 4.0 3.5 11.2 NM 16.1 1.9 0.7 0.8 89 KIE universe 118,133 1579.1 (14.3) 8.0 46.0 30 27.9 19.1 13.2 12.9 10.0 2.8 2.6 2.3 9.2 9.2 12.3 1.4 1.5 1.8

Notes:

(a) We have used adjusted book values for banking companies. (b) 2020 means calendar year 2019, similarly for 2021 and 2022 for these particular companies. (c) Exchange rate (Rs/US$)= 74.82

Source: Company, Bloomberg, Kotak Institutional Equities estimates

34 KOTAK INSTITUTIONAL EQUITIES RESEARCH

34

Disclosures

of of the following trategic transaction As of June 30, 2020 n a merger or s any, noare longer in effect for this stock , if, fair value KOTAK INSTITUTIONAL EQUITIES RESEARCH , any, if for this stock,because is there notsufficient a

fair valuefair

.

Percentage of companies covered by Kotak Institutional Equities, the specifiedwithin category. Percentage of companies each within category for which Kotak Institutional Equities and or its affiliates has provided investment banking services the previouswithin months.12 * The above categories are defined as follows: Buy = We expect this stock to deliver more returns than 15% over the next months;12 Add = We expect this stock to deliver returns 5-15% over the next months;12 Reduce = We expect this stock to deliver returns over -5-+5% the next months;12 Sell = We expect this stock to deliver less returns overthan -5% the next months.12 Our target prices are also on a horizon 12-month basis. These ratings are used illustratively to comply with applicable regulations. As of 30/06/2020 Kotak Institutional Equities Investment Research had investment ratings on 203 equity securities. luded

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

SELL 1.5%

19.2% fair valuefair

term volatility in stock prices related to movements in the market.Hence, a particular Ratingmay not , if, any,have been suspended temporarily.Such suspension is in compliance with applicable regulation(s) - 0.5% 11.8% fair valuefair +5% returns over the next 12 months.

- REDUCE month horizon basis. 5 - - 15% returns over the next 12 5% returns over the next months.12 The information is not available fo - -

ake into account short ADD 23.6% 0.5% Kotak SecuritiesKotak has suspended coverage of this company.

are also on12 a Kotak SecuritiesKotak Research has suspended the investment and rating

The information is not meaningful and is therefore exc

Kotak SecuritiesKotak does not cover this company.

The investment and rating

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

Attractive, Neutral, Cautious. BUY 4.4% 45.3% We expect this stock to deliver

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

Fair Value estimates 0% 40% 30% 20% 10% 70% 60% 50% Source: Kotak Institutional Equities Kotak Institutional Equities Research coverage universe coverage Research Equities Institutional Kotak Distribution of ratings/investment banking relationships and shouldnot be relied upon. = NA AvailableNot or Applicable.Not = NM Meaningful.Not and/or and/or Kotak Securities policies in circumstances when Securities Kotak or its affiliates is acting in an advisory capacity i involving this company and in certain other circumstances. CS = Coverage Suspended. = NC Covered.Not = RatingRS Suspended. fundamental basis for determining an investment rating or Other definitions Other Coverage view. designations: ratings/identifiers Other NR = Rated.Not REDUCE. SELL. Our Our Ratings System notdoes t strictly be in accordance with the Rating System all at times. Ratings other and definitions/identifiers ratings of Definitions BUY. ADD.

35 Disclosures

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

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