INDIA DAILY

September 13, 2017 India 12-Sep 1-day 1-mo 3-mo Sensex 32,159 0.9 3.0 3.4 Nifty 10,093 0.9 3.9 5.1 Contents Global/Regional indices Dow Jones 22,119 0.3 1.2 3.7 Special Reports Nasdaq Composite 6,454 0.3 3.2 3.8 Theme Report FTSE 7,401 (0.2) 1.2 (1.3) Nikkei 19,875 0.5 0.7 (0.1) Media: Box office trends - behemoths command BO, rest divide scraps Hang Seng 27,846 (0.4) 3.6 7.7  Key trends: Bollywood growth lopsided, regional/Hollywood strong, social KOSPI 2,368 0.1 2.1 (0.3) media impact grows Value traded – India Daily Alerts Cash (NSE+BSE) 318 297 298 Derivatives (NSE) 4,901 5,712 3,317

Company alerts Deri. open interest 3,574 3,498 3,301 Gujarat Pipavav Port: LPG the lone silver lining

 Pipavav well-placed to become strategic hub for LPG imports on the west Forex/money market coast Change, basis points  Volatility in container trade may continue 12-Sep 1-day 1-mo 3-mo Rs/US$ 64.0 (2) (13) (39)  Pricing support from improving financials of shipping lines unlikely to go to 10yr govt bond, % 6.9 1 2 2 Pipavav Net investment (US$ mn)

 Revise estimates to incorporate the LPG opportunity; retain REDUCE 11-Sep MTD CYTD

FIIs (65) (617) 6,546 Sector alerts MFs 57 352 10,467

Energy: Weakness in industrial fuels; base affects auto fuels Top movers

 Petroleum demand declines 6.1% yoy in August, staying flat in 5MFY18 Change, % Best performers 12-Sep 1-day 1-mo 3-mo

 Subdued off-take of industrial fuels likely reflecting impact from GST JPA IN Equity 21.9 0.2 3.1 64.0

implementation RCAPT IN Equity 775.3 0.2 23.3 57.3  Auto fuels demand declines in August impacted by higher inventory-led UT IN Equity 7.6 0.0 1.3 46.6 base of last year VEDL IN Equity 330.7 0.3 18.5 38.7 JSTL IN Equity 269.7 1.4 20.7 36.4  LPG growth remains strong as kerosene declines; other petroleum products Worst performers gain pace HDIL IN Equity 65.9 1.0 12.7 (23.1) Economy alerts TTMT/A IN Equity 222.1 3.4 (0.5) (20.1) DRRD IN Equity 2165.8 0.3 7.7 (17.5) Economy: Inflation continues to inch up LPC IN Equity 981.9 0.5 4.4 (16.8)

 August CPI inflation accelerates as vegetable prices continue to play BOB IN Equity 141.9 3.2 (0.3) (16.4) spoilsport

 Core CPI inflation inches higher on the back of housing segment (7CPC HRA impact)

 IIP growth yet to pick up  Inflation trend supports RBI staying put for rest of FY2018

For Private Circulation Only. FOR IMPORTANT INFORMATION ABOUT KOTAK SECURITIES’ RATING SYSTEM AND OTHER DISCLOSURES. REFER TO THE END OF THIS MATERIAL. ATTRACTIVE Media India SEPTEMBER 13, 2017 THEME BSE-30: 32,159

Box office trends—behemoths command BO, rest divide scraps. Our analysis of box office (BO) performance of 300+ movies spanning 10 years reveals several key trends—(1) lopsided growth of Bollywood BO; top 5 movies are growing at 10%+ CAGR while growth for the next 20 movies has remained broadly flat for the past five years, (2) negative impact of social media outweighs its positive influence, and (3) Hollywood and regional BO is growing steadily for multiplexes and offer promise. Content volatility is here to stay and needs to be priced into valuations of multiplex stocks. We like PVR (REDUCE) but the stock is fully priced.

Key trends: Bollywood growth lopsided, regional/Hollywood strong, social media impact grows

 Bollywood box office—winners-take-all, belly and tail drag growth. Aggregate net domestic box office collection (NBOC) for the top-5 Bollywood (Hindi) movies is set to grow at 13%+ CAGR over CY2012-17E whereas that for the ‘belly’ (movies #6-25) and the ‘tail’ (balance 200 movies) has nearly stopped growing. This implies that footfalls of the non-top-5 Hindi movies have declined over CY2012-17E at an industry level, assuming 5% CAGR in ticket prices. We would attribute this trend to (1) moviegoers watching fewer films in theatres, partly due to shorter windows between theatrical and TV/digital releases (four weeks in a few cases) and high inflation in ticket/F&B prices, and (2) piracy.

Bollywood contributes about 40% to the box office in India and accounts for 55-60% of PVR’s ticketing revenues. About 200-250 Hindi movies are released every year. Of these, the top 5/25/50 contribute about 35%/80%/95% to Hindi box office. In our view, the long-term outlook for multiplexes is contingent on broad-based growth (across top-50 movies driven by footfalls + pricing) of Bollywood box office (Exhibits 1-3).

 Social media a big persuader. BO collections of Salman Khan’s ‘Tubelight’ and Shahrukh Khan’s ‘Jab Harry met Sejal’ collapsed within 3-4 days of release. This may suggest the increasing influence of social media—adverse reviews appear to accelerate the fall in daily BO collections, notwithstanding star power. We note that the BO of a movie depends on a number of variables (release date, competition, popularity of trailer/songs, etc.). Given this, it is difficult to accurately calculate the net impact of social media. Our analysis indicates that adverse reviews on social media potentially reduce the BO collection of a movie by at least 10%, if not more (Exhibits 4-5).

Word of mouth influenced movie performance even in the past. Its impact is now amplified by social media. We do note that good reviews boost the BO performance of movies. However, at present, the negative impact of adverse reviews seems to be a tad higher than the positive influence of good reviews. This trend needs to be watched.

 Hollywood and regional BO are bright spots. Contribution of English and regional movies to PVR’s ticket sales increased to 42% in FY2017 from 27% in FY2013. These genres are growing faster than Bollywood for PVR. We expect this trend to continue. The pace of growth depends on (1) regional—screen additions in southern markets, and (2) Hollywood— Jaykumar Doshi continued rise in consumption of English content and success of Hollywood (Exhibits 7-11).

 A few encouraging trends. The success of ‘Bahubali 2’ would encourage Indian film industry to produce more crossover films (movies that cut across states/regions). The industry is already attempting it with ‘Robot 2’ (January 2018E). Success of Indian films in overseas markets (e.g. ‘Dangal’ grossed ₹12.4 bn in China; about 2.7X that in India) would enable higher investments in movies in the medium-to-long term. Finally, we believe Bollywood is yet to fully exploit the potential and power of sequels.

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

Content volatility is here to stay and needs to be priced into valuations

The above trends (#1 and #2) suggest that the film/exhibition industry faces a few structural challenges that may not be addressed in the near term. Additionally, we note that Bollywood is heavily dependent on the three Khans (Salman, Aamir and Shahrukh) and Akshay Kumar all of whom are more than 50 years old. The next-gen actors have shown some promise but are yet to deliver with consistence. Hollywood and regional movies would aid BO growth of multiplexes while Bollywood can be a drag. We believe volatility in content (periodic disappointments) is a characteristic of this business and it needs to be captured in valuations. We model 7% CAGR in domestic BO revenues over FY2017-20E for the industry and 13% CAGR for PVR driven by market share gains.

We like PVR but prefer to wait for a better entry point, REDUCE

We like PVR for its premium location presence and branding and leadership in organic growth, monetization of footfalls (F&B/ad revenues) and profitability. However, the stock is a tad expensive. Our FY2019-20E forecast for PVR builds normalized occupancy of 32.5% to factor content volatility. We value PVR at 12X EV/EBITDA and TP of ₹1,225.

Key observations and thoughts

Bollywood—big-star blockbuster movies keep getting bigger

NBOC of top 5, next 20 (movie # 6 to 25) and top 25 Bollywood movies grew at CAGR of 16%, 19% and 18% over CY2007-12. We note that NBOC of movie #6 to 25 has remained flat over CY2012-17E; likely 5-6% CAGR in top 25 movies will be driven by 13% CAGR of top 5 movies (Exhibit 1). Clearly, flat NBOC despite about 5% inflation in ticket price suggests that aggregate footfalls (admits) of Bollywood movies other than the top 5 has declined for the industry. We note that the number of Bollywood movies with NBOC of ₹1 bn+ has remained flattish at 8-10 per year over the past five years (Exhibit 2).

Growth driven by increase in ticket prices + market share gains of multiplexes

At a broader level, a bulk of the BO growth for the industry is driven by the increase in average ticket price (ATP; about 5% CAGR for PVR) and market share gain by multiplexes (ATP > ₹150) from single screens (ATP < ₹100). As per industry estimates, footfalls of the most recent Bollywood blockbuster hit, Dangal, was about 37 mn as compared to previous bests of about 50 mn for Gadar (2001) and about 48 mn of Dilwale Dulhania Le Jaayenge (1995).

Social media: not-so-hidden persuaders

Box office performance of a movie depends on a number of factors such as (1) release weekend—long weekend versus regular weekend. Big-star movies are usually released on top 3-4 long weekends around holidays, (2) competition— conflict in release dates of two big movies results in cannibalization, (3) popularity of trailers, songs, word of mouth, etc., and (4) performance of lead actor’s last movie and star power. Besides these factors, critic reviews play an influential role. Even more effective is unbiased reviews on social network.

Given many variables, it is difficult to accurately assess the impact of social media on box office performance of any movie. We have made an attempt by comparing performance of two recent disappointments (Salman Khan’s ‘Tubelight’ and Shahrukh Khan’s ‘Jab Harry met Sejal’) with similar movies a few years ago when social media penetration was not as high (Exhibit 4).

Total NBOC of a good movie is typically 2.5 to 3X the amount it collects in the first three days; this ratio has remained broadly flat over the past 5 years for good movies. However, in case of poor content this ratio has dropped to about 1.6X from 1.8X earlier notwithstanding star power (Exhibit 3). It implies accelerated drop in daily BO collection of poor content.

KOTAK INSTITUTIONAL EQUITIES RESEARCH 3 India Media

Additionally, we note that the gap in opening day collection of a good and poor movie from the same big star is significant as compared to past. For instance, first three days’ NBOC of Jai Ho (somewhat flop movie; Jan 2014) was 72% of that of Kick (super hit movie; Jul 2014); both Salman Khan movies. We note that first three days’ NBOC of Tubelight (somewhat flop movie; Jun 2014) was only 61% of that of Sultan (super hit movie; Jul 2016); both Salman Khan movies and Eid releases.

Social media also has a positive influence on BO performance of good content, especially in case of movies that have moderate marketing spends (small-budget movies). At present, we believe the negative impact of adverse reviews on social media outweighs its positive influence on select good movies. We believe social media reduces NBOC of a poor movie by at least 10% and perhaps more in case of movies that do not have star power.

Hollywood—steady progress and holds promise

PVR’s gross ticketing revenues from Hollywood titles grew at CAGR of 32% to ₹3.4 bn over FY2013-17 (about 24% of PVR’s gross ticketing revenues). Several Hollywood sequels and themes enjoy loyal viewer base in India (especially Marvel productions, Fast & Furious and horror movies). We note that about half of Hollywood’s top 20 titles in any year, do not gain material traction in India. For instance, animation films, Star Wars series and films based on alien theme have not done as well in India in terms of collections. With time, we expect Indian audience to develop liking for broader set of Hollywood movies. It presents a promising opportunity. We note that PVR has 35-40% share in Hollywood box office collections in India.

While the opportunity for Indian multiplexes is promising, we note that Hollywood has its own set of challenges—high dependence on Marvel movies (super hero/sci-fi movies) and other sequels/franchises, which are plagued by repetitive themes.

Regional—a growth opportunity for multiplexes

Regional movies contribute about 50% to Indian box office. However, its contribution to ticket sales of multiplexes is much lower (19% for PVR in FY2017). This divergence is due to very high share of single screen in the South. About 85-90% of cinema screens in South are single screens whereas balance 10-15% are multiplex screens. Regional movies will continue to drive growth for multiplex chains as they add more screens in southern markets. We note that high penetration of multiplexes have enabled Marathi movie Sairat cross ₹1 bn in gross collections in CY2016. Southern film industry is much bigger and offers potential; the pace of addition of multiplex screens in South holds the key. It will drive growth for multiplex chains such as PVR as well as overall domestic box office.

4 KOTAK INSTITUTIONAL EQUITIES RESEARCH Media India

Exhibit 1: Well-balanced growth across the two buckets (top 5 and top 6-25 movies) during CY2007-12 Domestic Net Box Office collections (NBOC) of the top 25 Bollywood movies, calendar year-ends, 2007-12 (Rs mn)

2007 2008 2009 2010 2011 2012 2007-12 Movie NBOC Movie NBOC Movie NBOC Movie NBOC Movie NBOC Movie NBOC CAGR (%) Top-5 movies (Rs mn) (Rs mn) (Rs mn) (Rs mn) (Rs mn) (Rs mn) 1 Om Shanti Om 782 Ghajini 1,141 3 Idiots 2,030 Dabangg 1,388 Bodyguard 1,489 Ek Tha Tiger 1,850 18.8 2 Welcome 702 Rab Ne Bana Di Jodi 847 Love Aaj Kal 670 Golmaal 3 1,063 Ready 1,198 Dabangg 2 1,508 3 Chak De India 665 Singh Is King 679 Wanted 603 Raajneeti 937 Don 2 1,067 Rowdy Rathore 1,330 4 Taare Zameen Par 618 Race 608 Ajab Prem Ki Ghazab Kahani630 My Name Is Khan 825 Ra.One 1,143 Agneepath 1,226 5 Partner 600 Jodhaa Akbar 560 De Dana Dan 480 Housefull 756 Singham 1,003 Jab Tak Hai Jaan 1,215 Total top-5 movies 3,367 3,836 4,413 4,969 5,900 7,129 16.2 Top 6-25 movies 6 Bhool Bhulaiyaa 491 Jaane Tu... Ya Jaane Na556 Kambakkht Ishq 475 Tees Maar Khan 609 Zindagi Na Milegi Dobara903 Housefull 2 1,090 7 Heyy Babyy 471 Golmaal Returns 511 New York 460 Once Upon A Time In Mumbai555 The Dirty Picture 800 Barfi 1,060 8 Guru 455 Dostana 444 Kaminey 419 Kites 493 Rockstar 620 Son Of Sardaar 1,051 9 Ta Ra Rum Pum 384 Bachna Ae Haseeno 362 All The Best 418 I Hate Luv Storys 432 Mere Brother Ki Dulhan 587 Bol Bachchan 1,002 10 Namastey London 373 Sarkar Raj 343 Blue 385 Atithi Tum Kab Jaoge?411 Yamla Pagla Deewana 553 Talaash 907 11 Dhamaal 325 Jannat 301 Paa 313 Anjaana Anjaani 403 Delhi Belly 520 Oh My God! 820 12 Jab We Met 311 Tashan 294 Delhi 6 307 Khatta Meetha 386 Murder 2 479 Cocktail 760 13 Shootout At Lokhandwala297 Fashion 265 Chandni Chowk To China295 Badmaash Company 354 Thank You 466 Raaz 3 711 14 Jhoom Barabar Jhoom 273 Rock On 253 Wake Up Sid 280 Peepli [Live] 304 Double Dhamal 439 Khiladi 786 700 15 Salaam-E-Ishq 227 Bhootnath 239 London Dreams 257 Guzaarish 293 Desi Boyz 424 Student Of The Yr 690 16 Apne 221 Kismat Konnection 228 Raaz 255 Raavan 292 Aarakshan 400 Kahaani 536 17 Saawariya 209 Mere Baap Pehle Aap 227 Kurbaan 233 Action Replayy 291 Tanu Weds Manu 368 Kya Super Cool Hain Hum451 18 Eklavya - The Royal Guard189 Thoda Pyaar Thoda Magic217 Dil Bole Hadippa 233 Ishqiya 286 Ladies Vs Ricky Bahl 330 Jannat 2 441 19 Cash 186 U Me Aur Hum 210 Billu 229 Prince 285 Rascals 326 Ishaqzaade 441 20 Fool N Final 178 Kidnap 205 Luck 210 No Problem 280 Dum Maaro Dum 317 Agent Vinod 433 21 Laaga Chunari Mein Daag175 Sunday 203 Life Partner 207 Karthik Calling Karthik 269 Patiala House 312 Ek Main Aur Ekk Tu 397 22 Cheeni Kum 173 Krazzy 4 196 Rocket Singh 201 Robot 238 Mausam 298 Vicky Donor 371 23 Dhol 161 One Two Three 171 Do Knot Disturb 169 Lafangey Parindey 218 Dil Toh Baccha Hai Ji 289 Heroine 364 24 Life In A Metro 158 Yuuvraj 169 8 X 10 Tasveer 153 We Are Family 216 Force 273 English Vinglish 350 25 Aaja Nachle 141 Halla Bol 127 Dev D 153 Paathshaala 216 Haunted - 3D 256 Jism 2 306 Total top 6-25 movies 5,399 5,521 5,653 6,831 8,959 12,882 19.0 Total top 25 movies 8,765 9,357 10,066 11,800 14,859 20,011 18.0

Source: Box office data, Kotak Institutional Equities

Exhibit 1 (continued): Top 5 movies continue to grow at 10%+ CAGR while the next 20 movies have been a drag Domestic Net Box Office collections (NBOC) of the top 25 Bollywood movies, calendar year-ends, 2007-12 (Rs mn)

2012 2013 2014 2015 2016 2017E 2012-17E NBOC Movie NBOC Movie NBOC Movie NBOC Movie NBOC Movie NBOC CAGR (%) Top-5 movies (Rs mn) (Rs mn) (Rs mn) (Rs mn) (Rs mn) (Rs mn) 1 Ek Tha Tiger 1,850 Dhoom 3 2,615 PK 3,244 Bajrangi Bhaijaan 3,165 Dangal 3,730 Baahubali 2 5,064 22.3 2 Dabangg 2 1,508 Chennai Express 2,184 Kick 2,150 Prem Ratan Dhan Payo1,880 Sultan 3,001 Tiger Zinda Hain 3,000 3 Rowdy Rathore 1,330 Krrish 3 1,985 Happy New Year 1,900 Bajirao Mastani 1,710 Rustom 1,220 Padmavati 2,500 4 Agneepath 1,226 Yeh Jawaani Hai Deewani1,850 Bang Bang 1,485 Tanu Weds Manu Returns1,510 Airlift 1,210 Toilet: Ek Prem Katha1,350 5 Jab Tak Hai Jaan 1,215 Bhaag Milkha Bhaag 1,080 Singham Returns 1,400 Dilwale 1,439 MS Dhoni 1,202 Raees 1,311 Total top-5 movies 7,129 9,714 10,179 9,704 10,363 13,225 13.2 Top 6-25 movies 6 Housefull 2 1,090 Ram-Leela 1,054 Holiday - A Soldier Is1,100 Never Off DutyBahubali (Hindi) 1,103 Ae Dil Hai Mushkil 1,115 Tubelight 1,170 7 Barfi 1,060 Grand Masti 938 Jai Ho 1,080 ABCD 2 1,043 Housefull 3 1,071 Badrinath Ki Dulhania1,135 8 Son Of Sardaar 1,051 Aashiqui 2 780 2 States 1,018 Welcome Back 940 Shivaay 1,003 Jolly LLB 2 1,069 9 Bol Bachchan 1,002 Special 26 668 Ek Villain 978 Baby 790 Fan 835 Secret Superstar 1,000 10 Talaash 907 Race 2 963 Humpty Sharma Ki Dulhaniya751 Brothers 788 Baaghi 745 Golmaal Again 1,000 11 Oh My God! 820 Satyagraha 620 Gunday 729 Gabbar Is Back 787 Kapoor & Sons 711 Kaabil 926 12 Cocktail 760 Raanjhanaa 589 Entertainment 630 Piku 777 Neerja 699 Baadshaho 800 13 Raaz 3 711 R... Rajkumar 581 Action Jackson 577 Drishyam 765 Dear Zindagi 672 Hindi Medium 634 14 Khiladi 786 700 Once Upon A Time In Mumbaai556 Queen Dobaara! 570 Dil Dhadakne Do 758 Dishoom 646 Jab Harry Met Sejal 577 15 Student Of The Yr 690 Besharam 540 Mary Kom 560 Singh Is Bliing 743 Pink 638 Half Girlfriend 557 16 Kahaani 536 Boss 530 Humshakals 555 Tamasha 672 Udta Punjab 591 Mubarakan 531 17 Kya Super Cool Hain Hum451 Kai Po Che 484 Haider 500 Phantom 500 Befikre 578 Jagga Jasoos 506 18 Jannat 2 441 Himmatwala 474 Ragini Mms 2 459 Hate Story 3 442 Mohenjo Daro 537 Newton 500 19 Ishaqzaade 441 Shuddh Desi Romance 468 Yaariyan 369 Kis Kisko Pyaar Karoon432 Ki & Ka 508 Judwaa 2 450 20 Agent Vinod 433 Madras Café 417 Bhootnath Returns 355 Roy 406 Wazir 377 Sachin: A Billion Dreams408 21 Ek Main Aur Ekk Tu 397 Chashme Baddoor 417 Hasee Toh Phasee 352 Shaandaar 377 A Flying Jatt 354 Lucknow Central 350 22 Vicky Donor 371 Matru Ki Bijlee Ka Mandola381 Mardaani 350 Tevar 372 Ghayal Once Again 353 Shubh Mangal Saavdhan350 23 Heroine 364 Bullett Raja 370 Finding Fanny 276 Hamari Adhuri Kahani 323 Azhar 325 Naam Shabana 340 24 English Vinglish 350 Phata Poster Nikhla Hero365 Khoobsurat 247 Talvar 300 Kahaani 2 313 Mom 337 25 Jism 2 306 ABCD – Any Body Can 351Dance Raja Natwarlal 234 NH10 292 Force 2 313 Munna Michael 310 Total top 6-25 movies 12,882 11,546 11,690 12,610 12,384 12,951 0.1 Total top 25 movies 20,011 21,260 21,869 22,314 22,747 26,176 5.5

Notes: (1) We have estimated NBOC of few movies that are yet to be released in 2017 (marked in blue font).

Source: Box office data, Kotak Institutional Equities estimates

KOTAK INSTITUTIONAL EQUITIES RESEARCH 5 India Media

Exhibit 2: Top 1-2 Hindi movies break records; next 10-15 films not moving up Count of Hindi movies with NBOC of Rs1 bn+, Rs2 bn+, Rs3 bn+ and Rs5 bn+, calendar year-ends

Rs1 bn+ Rs2 bn+ Rs3 bn+ Rs5 bn+ 15

12

9 9 9 8 7 7

6 5 5

3 2 2 2 2 2 1 1 1 1

0 2010 2011 2012 2013 2014 2015 2016 Aug-17

Source: Box office data, Kotak Institutional Equities

Exhibit 3: Split of domestic Box Office revenues, Calendar year-end, 2016

Industry Box Office (domestic) Bollywood Box Office (domestic) Hollyw ood Movies 13% #25-225 23% Top 5 35%

Regional 50%

Bollyw ood 37%

Movies #6- 25 42%

Source: FICCI KPMG, Kotak Institutional Equities estimates

6 KOTAK INSTITUTIONAL EQUITIES RESEARCH Media India

Exhibit 4: Adverse reviews in ‘social media’ era are impacting NBOC of poor content, more than it did in pre-social media era

First 3 days' NBOC / First 3 First 3 days' NBOC / First 3 collection NBOC days' collection collection NBOC days' collection (Rs mn) (Rs mn) (X) (Rs mn) (Rs mn) (X) Select hit movies in CY2010-13 Select flop movies in CY2010-13 Dabangg 488 1,388 2.8 Jai Ho 607 1,080 1.8 Rowdy Rathore 481 1,330 2.8 Talaash 465 907 2.0 Dhoom 3 1,076 2,615 2.4 Ra One 530 1,143 2.2 Chennai Express 936 2,184 2.3 Khiladi 786 340 700 2.1 Krrish 3 728 1,985 2.7 Besharam 320 540 1.7 Average 2.6 Average 1.9

Select hit movies in CY2016-17 Select flop movies in CY2016-17 Dangal 1,170 3,730 3.2 Tubelight 648 1,170 1.8 Sultan 1,015 3,001 3.0 Jab Harry Met Sejal 450 577 1.3 Airlift 443 1,210 2.7 Mohenjo Daro 306 537 1.8 Toilet: Ek Prem Katha 515 1,350 2.6 Befikre 344 578 1.7 Badrinath Ki Dulhania 430 1,135 2.6 Jagga Jasoos 331 506 1.5 Average 2.8 Average 1.6

Source: Box office data, Kotak Institutional Equities

Exhibit 5a: Daily BO trends of Kick (super hit) and Jai Ho (somewhat flop movie) in 2014 when social media penetration was a tad lower

Kick (NBOC in Rs mn, Jul 2014- Eid weekend) Jai Ho (NBOC in Rs mn, Jan 2014- Republic day weekend) 350 302 289 300 265 272 263 Ei

250 26th 178 200 167 Jan 217 154 144 142 150 106 95 92 100 73 58 59 45 51 34 42 39 38 50 23 24 55 18 17 0 Fri Sat Sun Mon Tue Wed Thu Fri Sat Sun Mon Tue Wed Thu

Source: Box Office data, Kotak Institutional Equities

KOTAK INSTITUTIONAL EQUITIES RESEARCH 7 India Media

Exhibit 5b: Daily BO trends of Sultan (super hit) and Tubelight (somewhat flop movie) in 2016-17; Tubelight opens significantly below Sultan and its daily BO collection collapses starting 5th day

Sultan (NBOC in Rs mn, Jul 2016- Eid weekend) Tubelight (NBOC in Rs mn, Jun 2017- Eid weekend) 382 400 365 373 366

350 Eid 317 300 225 250 212 212 191 200 Eid 152 129 150 108 115 155 95 100 120 65 74 45 41 28 33 37 34 35 50 22 12 10 8 6 0 Wed Thu Fri Sat Sun Mon Tue Wed Thu Fri Sat Sun Mon Tue Wed Thu

Source: Box office data, Kotak Institutional Equities

Exhibit 5c: Daily BO collection of Shahrukh Khan’s ‘Jab Harry Met Sejal’ falls significantly starting 4th day

Jab Harry Met Sejal (NBOC in Rs mn, Jun 2017) 200

153 150 155 150

100 72

50 29 18 14 8 11 10 22 1 1 1 0 Fri Sat Sun Mon Tue Wed Thu Fri Sat Sun Mon Tue Wed Thu

(50)

Source: Box office data, Kotak Institutional Equities

8 KOTAK INSTITUTIONAL EQUITIES RESEARCH Media India

Exhibit 6: Contribution of Hollywood, Bollywood and regional movies to industry's and PVR's box office (FY2017)

Industry PVR

Hollywood 13% Regional 19% Hollywood 24%

Regional 50%

Bollywood 37%

Bollywood 57%

Source: : FICCI KPMG, Company, Kotak Institutional Equities

Exhibit 7: PVR: Contribution of Hollywood titles to ticketing revenues on rise PVR: Gross box office collections (GBOC) from Hollywood movies, March fiscal year-ends

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

3,000 15

2,000 10

1,000 5

0 0 2013 2014 2015 2016 2017

Source: Box office data, Kotak Institutional Equities

KOTAK INSTITUTIONAL EQUITIES RESEARCH 9 India Media

Exhibit 8: PVR: Contribution of regional movies to ticketing revenues on rise PVR: Gross box office collections (GBOC) from regional movies, March fiscal year-ends

PVR's GBOC from Regional movies (LHS, Rs mn) As % of PVR's total GBOC (RHS, %)

5,000 25 22

19 4,000 18 20

3,000 15 12

9 2,000 10

1,000 5

0 0 2013 2014 2015 2016 2017

Source: Box office data, , Kotak Institutional Equities

Exhibit 9: PVR: Contribution of Bollywood titles to ticketing revenues is declining PVR: Gross box office collections (GBOC) from Bollywood movies, March fiscal year-ends

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

6,000 45

4,000 30

2,000 15

0 0 2013 2014 2015 2016 2017

Source: Box office data, Kotak Institutional Equities

10 KOTAK INSTITUTIONAL EQUITIES RESEARCH Media India

Exhibit 10: About 50% of Hollywood's top 20 movies in any year barely receive any traction in India; it presents an opportunity Box office performance of top 20 Hollywood movies in India, calendar year-ends, 2014-17

2014 2015 2016 2017 so far Movie W. GBOC India Movie W. GBOC India Movie W. GBOC India Movie W. GBOC India Top 20 movies (US$ mn) (US$ mn) (US$ mn) (US$ mn) 1 Transformers: Age of Extinction 1,104  Star Wars: The Force Awakens 2,068  Captain America: Civil War 1,153  Beauty and the Beast 1,263  2 The Hobbit: The Battle of the Five Armies956 O Jurassic World 1,672  Rogue One: A Star Wars Story 1,056 O Fast & Furious 8 1,239  3 Guardians of the Galaxy 773  Fast & Furious 7 1,516  Finding Dory 1,029  Despicable Me 3 1,001  4 Maleficent 759 O Avengers: Age of Ultron 1,405  Zootopia 1,024 O Guardians of the Galaxy 2 863  5 The Hunger Games: Mockingjay - Part755 1 O Minions 1,159  The Jungle Book (2016) 967  Wolf Warrior 2 853 O 6 X-Men: Days of Future Past 748  Spectre 881  The Secret Life of Pets 876 O Wonder Woman 815  7 Captain America: The Winter Soldier714  Inside Out 858 O Batman v Superman: Dawn of Justice873  Pirates of the Caribbean: Dead Men Tell No793 Tales  8 Dawn of the Planet of the Apes 711  Mission: Impossible - Rogue Nation 683  Fantastic Beasts and Where To Find 814Them O Spider-Man: Homecoming 748  9 The Amazing Spider-Man 2 709  The Hunger Games: Mockingjay - Part 2653 O Deadpool 783  Logan 617  10 Interstellar 675  The Martian 630  Suicide Squad 746 O Transformers: The Last Knight 605  11 Big Hero 6 658 O Fifty Shades of Grey 571 O Doctor Strange 678  Kong: Skull Island 567 O 12 How to Train Your Dragon 2 622  Cinderella (2015) 544 O Moana 643 O The Boss Baby 499 O 13 American Sniper 547 O The Revenant 533 O Sing 632 O Dunkirk 475 O 14 Godzilla (2014) 529  Ant-Man 519 O The Mermaid (Mei ren yu) 554 O The Mummy (2017) 408  15 Rio 2 500 O San Andreas 474  X-Men: Apocalypse 544  Fifty Shades Darker 379 O 16 Teenage Mutant Ninja Turtles (2014)493 O Hotel Transylvania 2 473 O Kung Fu Panda 3 521 O War for the Planet of the Apes 366  17 The LEGO Movie 469 O Terminator: Genisys 441  La La Land 446 O Your Name. 355 O 18 Lucy 463 O Kingsman: The Secret Service 414 O Warcraft 434 O xXx: The Return of Xander Cage 346  19 Penguins of Madagascar 373 O Home (2015) 386 O Jason Bourne 416 O Cars 3 345 O 20 Edge of Tomorrow 371 O Mad Max: Fury Road 378 O Ice Age: Collision Course 409 O The Great Wall 332 O

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

Source: Box office data, Kotak Institutional Equities

Exhibit 11: Box office collections of key Hollywood titles in India

Movie name Release date NBOC (Rs mn) Mission : Impossible Ghost Protocol Dec-11 315 The Avengers Apr-12 365 The Amazing Spider-Man Jul-12 498 The Dark Knight Rises Jul-12 403 Iron Man 3 May-13 450 Fast & Furious 6 May-13 425 Superman: Man Of Steel Jun-13 241 The Wolverine Jul-13 210 The Hunger Games: Catching Fire Dec-13 52 Captain America: The Winter Soldier Apr-14 185 The Amazing Spider-Man 2 May-14 510 X-Men: Days of Future Past (English & Dubbed) May-14 425 Transformers: Age of Extinction? Jul-14 414 Fast & Furious 7 Apr-15 979 The Avengers - Age Of Ultron Apr-15 731 Jurassic World Jun-15 773 Mission: Impossible - Rogue Nation Aug-15 480 Spectre Nov-15 370 Star Wars: The Force Awakens Dec-15 160 Batman v Superman: Dawn of Justice Mar-16 322 The Jungle Book (Including all formats) Apr-16 1,802 Captain America: Civil War (All formats) May-16 541 The Conjuring 2? Jun-16 590 xXx: Return of Xander Cage Jan-17 309 Fast & Furious 8 Apr-17 832 Wonder women Jun-17 200 Transformers: The Last Knight Jul-17 150 Spider-Man 3: Homecoming Jul-17 577 Annabelle: Creation Sep-17 450

Source: Box office data, Kotak Institutional Equities

KOTAK INSTITUTIONAL EQUITIES RESEARCH 11 India Media

Exhibit 12: Multiplex industry model, March fiscal year-ends, 2014-20E

2014 2015 2016 2017 2018E 2019E 2020E 2021E 2022E Exhibition industry GBOC (Rs mn) 93,400 93,500 101,400 99,800 106,786 114,261 122,259 130,817 139,975 Growth (%) 0 8 (2) 7 7 7 7 7 Exhibition industry GBOC (US$ mn) 1,537 1,528 1,543 1,488 1,637 1,731 1,852 1,982 2,121

Multiplex industry Multiplex screens (#) 1,800 2,000 2,150 2,300 2,500 2,700 2,900 3,100 3,300 Annual footfall capacity (mn) 807 872 941 997 1,063 1,137 1,210 1,280 1,348 Occupancy (%) 31.0 28.0 31.5 30.5 30.0 30.0 30.0 30.0 30.0 Footfalls (mn) 250 244 296 304 319 341 363 384 404 Gross ATP (Rs) 135 150 158 165 175 184 192 200 208 Multiplex ticket sales - gross (Rs mn) 33,786 36,628 46,696 50,300 55,888 62,797 69,798 76,803 84,122 Share of multiplexes in industry GBOC (%) 36 39 46 50 52 55 57 59 60

PVR's share (%) - In multiplex screens 23 23 24 25 26 26 26 26 26 - In total ticketing revenues (industry GBOC) 11 11 13 15 15 16 17 18 19 - In multiplex ticketing revenues 29 28 28 29 29 29 30 30 31

Source: FICCI KPMG, Kotak Institutional Equities estimates

12 KOTAK INSTITUTIONAL EQUITIES RESEARCH Media India

Exhibit 13: Movie pipeline

Rel. Date Movie Cast Bollywood- key titles 21-Apr-17 Noor Sonakshi Sinha 28-Apr-17 Baahubali : The Conclusion (Telugu / Hindi) Prabhas, Anushka Shetty, Rana Daggubati,Tamannaah 19-May-17 Half Girlfriend Shraddha Kapoor, Arjun Kapoor 19-May-17 Hindi medium Irfan Khan 26-May-17 Sachin : A Billion Dreams Mayuresh Pem, Sachin Tendulkar 23-Jun-17 Tubelight Salman Khan 16-Jun-17 Raabta Kriti Sanon, Sushant Singh Rajput 14-Jul-17 Jagga Jasoos Katrina Kaif, Ranbir Kapoor 28-Jul-17 Indu Sarkar Kirti Kulhari, Neil Nitin Mukesh 28-Jul-17 Mubarakan Anil Kapoor, Arjun Kapoor, Athiya Shetty, Ileana D'Cruz 4-Aug-17 Gurgaon Akshay Oberoi, Pankaj Tripathy, Aamir Bashir 4-Aug-17 Jab Harry Met Sejal Shahrukh Khan, Anushka Sharma 11-Aug-17 Toilet : Ek Prem Katha Bhumi Pednekar, Akshay Kumar 18-Aug-17 Haseena Parkar Shraddha Kapoor 18-Aug-17 Bareilly Ki Barfi Rajkumar Rao, Kriti Sanon, Ayushmann Khurrana 25-Aug-17 A Gentleman - Sundar, Susheel, Risky Sidharth Malhotra, Jacqueline Fernandez, Suniel Shetty 25-Aug-17 Sniff!!! Baby Sunny Gill, Surekha Sikri 25-Aug-17 Babumoshai Bandookbaaz Bidita Bag, Jatin Goswami, Nawazuddin Siddiqui, Divya Dutta 1-Sep-17 Shubh Mangal Savadhan Ayushmann Khurrana, Bhumi Pednekar 1-Sep-17 Baadshaho Ajay Devgn, Emraan Hashmi 8-Sep-17 Kaalakaandi Saif Ali Khan, Esha Talwar, Akshay Oberoi, Deepak Dobriyal 8-Sep-17 Poster Boys Sunny Deol, Bobby Deol 8-Sep-17 Love Per Square Foot Angira Dhar, Vicky Kaushal 8-Sep-17 Daddy Arjun Rampal 15-Sep-17 Simran Kangana Ranaut 15-Sep-17 Lucknow Central Farhan Akhtar, Kriti Sanon 22-Sep-17 Bhoomi Sharad Kelkar, Sanjay Dutt, Aditi Rao Hydari 29-Sep-17 Judwaa 2 Varun Dhawan 6-Oct-17 Yaara Shruti Haasan, Vidyut Jamwal, Tigmanshu Dhulia 6-Oct-17 Chef Saif Ali Khan, Padmapriya, Dhanish Karthik 20-Oct-17 Secret Superstar Aamir Khan, Zaira Wasim, Meher Vij, Raj Arjun 20-Oct-17 Golmaal Again Parineeti Chopra, Ajay Devgn, Tabu 3-Nov-17 Qareeb Qareeb Single Parvathy Menon, Irrfan Khan 3-Nov-17 Ittefaq Sonakshi Sinha, Siddharth Malhotra 17-Nov-17 Padmavati Deepika Padukone, Ranveer Singh, Aditi Rao Hydari 1-Dec-17 Tumhari Sullu Vidya Balan 1-Dec-17 102 Not Out Amitabh Bachchan, Rishi Kapoor 8-Dec-17 Fukrey Returns Naseeruddin Shah, Arshad Warsi, Divya Dutta 21-Dec-17 Tiger Zinda Hain Salman Khan, Katrina Kaif, Sudeep 22-Dec-17 Bazaar Saif Ali Khan 25-Jan-18 Robot 2.0 Rajinikanth, Akshay Kumar, Amy Jackson, Sudhansu Pandey 26-Jan-18 Five Sanjay Dutt 26-Jan-18 Chanda Mama Door Ke Jacqueline Fernandes, Sushant Singh Rajput 26-Jan-18 Aiyaary Siddharth Malhotra 9-Feb-18 Pari Anushka Sharma Hollywood (English) Apr-17 Fast & Furious 8 Vin Diesel, Dwayne Johnson, Charlize Theron 5-May-17 Guardians Of The Galaxy (3D / Imax 3D) Chris Pratt, Vin Diesel, Chris Sullivan 26-May-17 Baywatch Priyanka Chopra, Dwayne Johnson, Alexandra Daddario 2-Jun-17 Wonder Woman (3D / Imax 3D) Gal Gadot, Robin Wright, Chris Pine 18-Aug-17 Annabelle 2 Miranda Otto, Stephanie Sigman, Javier Botet 22-Sep-17 Lego Ninjago (3D) Olivia Munn, Justin Theroux, Dave Franco 22-Sep-17 Kingsman The Golden Circle (Imax) Taron Egerton, Channing Tatum, Jeff Bridges 6-Oct-17 Blade Runner 2049 (3D / Imax ) Ryan Gosling, Ana De Armas, Jared Leto 13-Oct-17 Mother Jennifer Lawrence, Javier Bardem, Ed Harris 20-Oct-17 The Mountain Between Us Kate Winslet, Idris Elba 3-Nov-17 Thor : Ragnarok (3D / Imax) Chris Hemsworth, Tom Hiddleston, Cate Blanchett 10-Nov-17 Daddy's Home 2 Linda Cardellini, Mel Gibson, Mark Wahlberg 10-Nov-17 Murder On The Orient Express Johnny Depp, Daisy Ridley, Michelle Pfeiffer 17-Nov-17 Justice League Part 1 (3D / Imax) Amy Adams, Jason Momoa, Gal Gadot 22-Nov-17 Coco (3D) Gael García Bernal, Benjamin Bratt, Renee Victor 15-Dec-17 Star Wars : The Last Jedi (3D / Imax 3D) Daisy Ridley, John Boyega, Mark Hamill 15-Dec-17 Ferdinand The Bull Donald Sutherland, Paul Feig, Chris O'Dowd 22-Dec-17 Jumanji Karen Gillan, Dwayne Johnson, Kevin Hart 5-Jan-18 Insidious Chapter 4 Bruce Davison, Spencer Locke, Josh Stewart 12-Jan-18 Gnomeo & Juliet : Sherlock Gnomes James Mcavoy, Johnny Depp, Emily Blunt 23-Feb-18 Pacific Rim : The Uprising Tian Jing, Adria Arjona, Scott Eastwood 2-Mar-18 Red Sparrow Jennifer Lawrence, Joel Edgerton 16-Mar-18 Tomb Raider (3D / Imax 3D) Alicia Vikander

Source: Kotak Institutional Equities

KOTAK INSTITUTIONAL EQUITIES RESEARCH 13 India Media

Exhibit 14: Net box office collections (NBOC) of key movies, March fiscal year-ends

FY2015 FY2016 FY2017 FY2018 NBOC NBOC NBOC NBOC Movie (Rs mn) Movie (Rs mn) Movie (Rs mn) Movie (Rs mn) Holiday 1,100 Tanu Weds Manu Returns 1,510 The Jungle Book (All) 1,802 Bahubali 2 (Hindi) 5,058 2 States 1,020 ABCD 2 1,042 Fan (Shah Rukh Khan) 835 Bahubali 2 (Regional) 5,500 Ek Villan 989 Fast And Furious 7 979 Housefull 3 1,068 The Fate Of The Furious 831 Humshakals 557 Gabbar Is Back 788 Baaghi 743 Half Girlfriend 557 The Amazing Spider-Man 2 510 Piku 778 Udta Punjab 573 Hindi Medium 633 Hits Heropanti 507 Jaurassic World 767 Captain America : Civil War 541 Tubelight 1,170 Mein Tera Hero 506 Dil Dhadakne Do 763 Sairat 800 The Amazing Spider-Man 2 510 Avengers: Age of Ultron 731 X-Men: Days of Future Past 420 1Q Total 6,119 Total 7,357 6,362 13,749 Bhoothnath Returns 355 Hamari Adhuri Kahani 323 Ki & Ka 487 Sachin: A Billion Dreams 408 Revolver Rani Detective Byomkesh Bakshy! 251 Begum Jaan 186 Bombay Velvet 221

Flops

Total 355 Total 795 Total 487 Total 594 Kick 2,140 Bajrangi Bhaijaan 3,168 Sultan (Salman Khan) 3,000 Toilet Ek Prem Katha 1,350 Singham Returns 1,397 Bahubali (a) 2,604 Kabali 2,065 Baadshaho 800 Humpty Sharma ki Dulhania 752 Welcome Back 902 Rustom (Akshay Kumar) 1,221 Spider-Man: Homecoming 577 Entertainment 628 Brothers 788 Dishoom 646 Mubarakan 531 Hits Mary Kom 559 Drishyam 751 PINK 563 Annabelle: Creation 450 Phantom 500 Mission Impossible - 5 480 2Q Total 5,476 Total 8,212 7,495 3,708 Mardaani 350 Terminator Genisys (3D / Imax 3D)234 Mohenjo Daro (Hrithik Roshan)537 Jab Harry Met Sejal 577 Finding Fanny 276 Hero 293 Baar Baar Dekho 269 Jagga Jasoos 506 Daawat-e-Ishq 248 Katti Batti 181 Happy Bhag Jayegi 261 Shubh Mangal Saavdhan 350 Flops Khoobsurat 248 The Fantastic Four (Imax) 63 Akira 258 MOM 337 Great Grand Masti 128 Total 1,122 Total 770 Total 1,452 1,770 PK 3,243 Prem Ratan Dhan Payo 1,875 Dangal (Aamir Khan) 1,923 Happy New Year 1,884 Bajirao Mastaani 1,698 M.S. Dhoni 1,201 Bang Bang 1,449 Dilwale (SRK, Kaajol) 1,439 Ae Dil Hai Mushkil 1,116 Action Jackson 576 Singh Is Bling 740 Shivaay (Ajay Devgan) 1,006 Hits Haider 501 Tamasha 672 Dear Zindagi 673 Befikre 579 3Q

Total 7,652 Total 6,423 Total 6,497 The Shaukeens 209 Spectre (Imax) 369 Force 2 313 Shaandaar 359 Kahaani 2 314 Flops Jazbaa 233 Rock On 2 87 Total 209 Total 961 Total 714 Baby 788 Airlift (Akshay Kumar) 1,248 Dangal (Contd.) 1,823 MSG: The Messenger 672 Neerja 696 Raees (SRK) 1,311 Kapoor & Sons 709 Kaabil (Hrithik Roshan) 927 Hits Jolly LLB 2 (Akshay Kumar) 1,068 Badrinath Ki Dulhaniya 1,135 Total 1,460 Total 2,653 Total 6,265 4Q Roy 406 Rocky Handsome 215 Rangoon 202 Tevar 372 Fitoor 173 The Ghazi Attack 182 Badlapur Don't Miss The Beginning356 Wazir 378 Commando 2 244 Flops NH 10 293 Jai GangaaJal 306 Logan 246 Batman v Superman: Dawn of 317Justice xXx: Return of Xander Cage 310 Total 1,425 Total 1,389 Total 1,184

Source: Box office data, Kotak Institutional Equities

14 KOTAK INSTITUTIONAL EQUITIES RESEARCH Media India

Exhibit 15: Kotak Institutional Equities: valuation summary of key Indian media companies

11-Sep-17 Mkt cap. EPS (Rs) P/E (X) EV/EBITDA (X) RoE (%) Company Price (Rs) Rating (Rs m) (US$ m) 2017 2018E 2019E 2017 2018E 2019E 2017 2018E 2019E 2017 2018E 2019E DB Corp. 378 REDUCE 69,527 1,088 20.5 22.8 28.4 18.4 16.5 13.3 10.5 9.1 7.3 25.6 25.2 28.5 DishTV 77 ADD 82,240 1,287 1.0 0.7 1.7 75.3 104.2 44.4 9.1 8.9 7.5 25.1 14.9 28.0 Jagran Prakashan 177 REDUCE 57,896 906 10.6 13.2 15.3 16.7 13.5 11.6 8.3 7.4 6.3 18.6 19.9 23.3 Sun TV Network 828 ADD 326,460 5,110 26.2 28.4 35.0 31.7 29.1 26.4 22.0 20.2 16.2 28.0 28.0 31.4 Zee Entertainment Enterprises 520 BUY 499,433 7,817 13.9 15.8 19.7 37.3 33.0 26.4 23.8 20.8 17.2 20.8 20.9 22.1 PVR 1,347 REDUCE 62,934 985 21.4 33.0 45.7 63.0 40.8 29.5 19.8 16.1 13.0 10.9 14.9 17.9 Media Attractive 1,098,490 17,193 33.3 29.7 23.5 17.6 15.9 13.1 21.0 21.3 23.4 KIE universe 98,530,465 1,540,850 22.7 21.6 17.1 12.4 11.6 9.6 13.1 12.7 14.5

Target O/S shares EPS CAGR (%) EPS growth (%) Net Profit (Rs mn) EBITDA (Rs mn) Sales (Rs mn) Company Price (Rs) (mn) 2017-19E 2017 2018E 2019E 2017 2018E 2019E 2017 2018E 2019E 2017 2018E 2019E DB Corp. 390 184 17.7 27 11 25 3,773 4,201 5,230 6,444 7,174 8,632 22,574 24,474 27,258 DishTV 88 1,066 30.1 NA (28) 134 1,093 789 1,851 9,729 9,868 11,419 30,144 31,990 34,512 Jagran Prakashan 200 311 19.9 2 24 16 3,477 4,097 4,765 6,396 7,072 7,946 22,830 24,544 26,674 Sun TV Network 820 394 15.7 14 9 23 10,307 11,210 13,796 14,247 15,412 19,131 26,457 28,867 34,373 Zee Entertainment Enterprises 570 960 18.9 28 13 25 13,386 15,137 18,937 19,260 22,106 26,403 64,332 66,715 78,168 PVR 1,225 47 46.2 (21) 54 38 999 1,541 2,134 3,570 4,391 5,374 21,628 23,741 27,465 Media (3) 12 26 33,034 36,976 46,713 59,646 66,024 78,906 187,965 200,331 228,451 KIE universe 20 5 26

Notes: (a) Zee EPS is excluding impact of redeemable preference share (RPS) dividends. Reported number would be lower by Rs1.3 in FY2018E and Rs1 in FY2019E.

Source: Company, Kotak Institutional Equities estimates

KOTAK INSTITUTIONAL EQUITIES RESEARCH 15 REDUCE Gujarat Pipavav Port (GPPV) Infrastructure SEPTEMBER 13, 2017 UPDATE Coverage view: Attractive

LPG the lone silver lining. GPPV is well-placed to become a strategic hub for LPG Price (`): 141 imports on the west coast. Volatility in container trade, however, may continue Target price (`): 150 considering more consolidation happening among shipping lines, and existing services BSE-30: 32,159 preferring single-port call at the Indian ports. Improving financials of shipping lines, if it continues, can aid realization. Related benefits would be limited for GPPV considering its low and declining capacity utilizations and impending commissioning of PSA terminal at JNPT. We increase our estimates for the LPG business and TP to ₹150 (from ₹140).

Company data and valuation summary Gujarat Pipavav Port Stock data Forecasts/Valuations 2017 2018E 2019E 52-week range (Rs) (high,low) 195-121 EPS (Rs) 5.2 5.6 6.7 Market Cap. (Rs bn) 68.2 EPS growth (%) 50.4 7.4 20.7 Shareholding pattern (%) P/E (X) 27.3 25.4 21.0 Promoters 43.0 Sales (Rs bn) 6.8 7.4 8.5 FIIs 35.3 Net profits (Rs bn) 2.5 2.7 3.2 MFs 13.5 EBITDA (Rs bn) 4.2 4.6 5.3 Price performance (%) 1M 3M 12M EV/EBITDA (X) 15.4 14.0 11.7 Absolute 2.2 1.7 (27.0) ROE (%) 12.7 13.1 15.2 Rel. to BSE-30 (0.8) (1.7) (35.6) Div. Yield (%) 2.8 3.0 3.6

Pipavav well-placed to become strategic hub for LPG imports on the west coast

Our analysis of the demand-supply scenario of the northern India suggests more than 1 mn tons of related LPG demand getting imported from ports in south India. Such quantum may shift to the west coast in the near term. Pipavav is well-placed versus peers in terms of (1) ability to handle VLGCs (versus Kandla), (2) natural breakwater limiting tidal difference (versus Kandla and Mundra) and (3) capacity to expand (versus Mumbai). The port would enhance capacity beyond the rated 1.4 mn tons (>70% utilized) in the near term based on rail evacuation (does not need approvals). It is hopeful of getting an interconnection with the Kandla-Gorakhpur pipeline (applied in October 2016), which would further enhance capacity.

Volatility in container trade may continue

Volatility in container trade services would continue based on talks of (1) further consolidation among shipping lines and (2) capacity addition on the Asia-Europe route driving closure of select services. In addition, shipping lines may consider single port call at Indian ports for services having small volumes for northern hinterland (advantage JNPT, potential negative for GPPV). Our discussion with GPPV suggests that its new line addition (goes to two other ports) is unlikely to cover up for the ~40,000 TEU loss of a recent service in the near term.

Pricing support from improving financials of shipping lines unlikely to go to Pipavav

For the past quarter, 10 of the 12 key shipping lines reported a profit and all reported material yoy improvement in financials. Sustenance of such trend would bode well for Indian ports that have grown their rupee-denominated realization by 3-4% CAGR over the past 3-4 years. Aditya Mongia Pipavav was at the lower end of this range. It would be difficult for Pipavav to benefit from a potential uptick in sectoral realization based on low and declining capacity utilizations at the port and impending 1 mn TEU capacity addition at the competing JNPT from December 2017. Ajinkya Bhat

Revise estimates to incorporate the LPG opportunity; retain REDUCE

We revise estimates by 0-4% to ₹5.6, ₹6.7 and ₹7.9 for FY2018-20E on higher assumptions for LPG business (1 mn tons addition over FY2017-21E) and marginal growth in container realization in FY2019. Roll forward to September 2019E increases SoTP to ₹150. Retain REDUCE.

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

Pipavav can potentially become a hub on the west coast for LPG imports

 Port capacities required on west coast. The west coast is ideally suited for swapping with the south coast the imports that are destined to northern hinterland. Our analysis of the port profile of imports and net demand across regions suggest that about 1 mn tons of net demand of north India (less domestic supply) is served from ports in south India. The northern demand is by itself growing by 0.6 mn tons per annum against supply base of ~3 mn tons per annum. Capacity addition of import terminals on the west coast thus is required.

Exhibit 1: The deficit in north is ~1 mn tons more than the imports from the west coast; gets serviced from the south coast ports Region-wise reliance on LPG imports and supply from nearby ports, March fiscal year-end, 2016 (mn tons)

Consumption Domestic supply Reliance on imports Approximate supply from nearby ports 7.0

6.0

5.0

4.0 3.2 3.0 2.1 2.0

1.0

- North West East and north-east South (1.0)

Source: Sagarmala reports, PNGRB, Aegis Logistics, Kotak Institutional Equities estimates

 GPPV better-placed: West coast comprises Pipavav, Mumbai and Kandla. Of these, Kandla cannot handle VLGCs based constraints on draft and jetty capacity. The output from Mumbai can only increase as much as it operates at close to the rated 1.1 mn TEU capacity. Pipavav, however, operates at less than 50% of its rated 1.4 mn tons capacity and can take material quantum of the 1 mn tons of the northern hinterland demand.

 Evacuation beyond roads to enhance rated capacity. From an evacuation perspective, Aegis Logistics has received consent of GPPV for evacuating LPG by rail and is in the process of setting up a railway gantry at the port. In addition, the port had applied to PNGRB for an interconnection to the Kandla-Gorakhpur pipeline in October 2016. Both these developments may get realized for GPPV, enhancing this road-based rated capacity of 1.4 mn tons.

 Financials impact. Pipavav’s liquid segment possibly accounts for ~10% share of EBITDA, of which LPG would account for a majority share. Quick ramp-up in LPG volumes (can grow 2-3X over the next couple of years) can have a material 15-20% share of EBITDA.

KOTAK INSTITUTIONAL EQUITIES RESEARCH 17 Infrastructure Gujarat Pipavav Port

Exhibit 2: We expect 1 mn tons of LPG volumes getting added over the next four years Build-up in liquid volumes for GPPV, March fiscal year-ends, 2016-21E (mn tons)

2.0 1.8

1.5 1.6 1.3

1.2 1.0

0.8 0.7 0.7

0.4

- 2016 2017 2018E 2019E 2020E 2021E

Source: Company, Kotak Institutional Equities estimates

Container volumes may continue to be volatile

Consolidation among shipper liners continues with Japanese/South Korean players aiming for alliances among themselves and China Cosco aiming to add OOCL to its portfolio. Another lever of volatility relates to select services getting closed as newer and larger shipping capacities get deployed. According to an analysis done by Seaintel, there would be an injection of 11.5% of capacity for the three large shipping alliances in 2HCY17. Considering a case of 5% growth in demand, the entity expects closure of one service per shipping line in CY2017 in the Asia-Europe route.

Exhibit 3: We build a modest 8% CAGR in container volumes for GPPV Build-up in container volumes for GPPV, March fiscal year-ends, 2016-21E (mn tons)

1.20

0.91 0.84 0.77 0.80 0.69 0.71 0.66

0.40

0.00 2016 2017 2018E 2019E 2020E 2021E

Source: Company, Kotak Institutional Equities estimates

18 KOTAK INSTITUTIONAL EQUITIES RESEARCH Gujarat Pipavav Port Infrastructure

Benefits from shipping lines turning in black unlikely to come to Pipavav

The recent quarter has been a good quarter for shipping lines with 10 of them reporting profit while only two have reported losses. This has been driven by an uptick in global trade demand and better say of the larger shipping lines that are adding larger-sized ships (better pricing).

This bodes well for shipping lines that have grown their rupee-denominated realization at 3- 4% CAGR over the past 3-4 years. This may not necessarily be the case for Pipavav, where pricing grew at the lower end of the 3-4% CAGR range. The port is reporting a declining trend in volumes and is currently operating close to 50% utilization levels. In addition, the port would see renewed competition from JNPT due to the commissioning of the first 1 mn TEU capacity of the upcoming CT-4 terminal of PSA (expected from December). We note that JNPT continues to grow at a good pace (volumes up 6.5% over YTD-FY2017 and up 8.5% in August 2017).

Exhibit 4: Some of the largest shipping lines have turned profitable in past couple of quarters Quarterly financials of largest shipping lines in the world, December calendar year-ends, 3QCY15-2QCY17 (US$ mn)

(US$ mn) 3QCY15 4QCY15 1QCY16 2QCY16 3QCY16 4QCY16 1QCY17 2QCY17 AP Moller Maersk (shipping line segment) Revenues 6,018 5,194 4,974 5,061 5,359 5,321 5,493 6,100 Profit 264 (182) 37 (151) (116) (146) (66) 339 Cash profit (segment FCF) 159 188 73 (20) 192 229 (55) 209 CMA CGM Revenues 3,977 3,574 3,399 3,538 4,466 4,574 4,620 NA Profit 57 (44) (95) (123) (259) 49 93 NA Cash profit (PAT + depreciation) 157 64 15 (6) (88) 222 240 NA COSCO Revenues 2,432 1,430 2,078 2,492 2,899 3,224.96 3,078 3,575 Profit (195) 142 (665) (368) (276) (85) 73 447 Cash profit (PAT + depreciation) NA NA NA NA NA NA NA NA Evergreen Marine Revenues 1,032 940 864 918 1,006 1,076 1,089 1,246 Profit (80) (122) (138) (39) (50) (35) 5 96 Cash profit (PAT + depreciation) (16) (57) (73) 25 11 27 67 159 Hapag-Lloyd Revenues 2,375 2,228 2,123 2,100 2,152 2,177 2,272 2,628 Profit 4 (51) (47) (112) 9 44 (66) 18 Cash profit (PAT + depreciation) 133 83 84 21 142 179 70 178 Orient Overseas International Revenues NA 2,909 NA 2,561 NA 2,737 NA 2,898 Profit NA 45 NA (57) NA (163) NA 54 Cash profit (PAT + depreciation) NA 207 NA 143 NA 46 NA 267 Mitsui O.S.K. Lines (MOL) Revenues 3,726 3,396 3,431 3,337 3,453 3,359 3,724 3,629 Profit (100) 124 (1,584) 24 156 44 (112) 61 Cash profit (PAT + depreciation) 90 315 (1,380) 220 353 235 107 249

Source: Company, FactSet, Kotak Institutional Equities

KOTAK INSTITUTIONAL EQUITIES RESEARCH 19 Infrastructure Gujarat Pipavav Port

Exhibit 5: GPPV has seen an increase in pricing at the lower end of the range Terminal handling charges of ports for imports as quoted by a large shipping line

Jul-14 Apr-15 Jan-16 Sep-16 Feb-17 Apr-17 Sep-17

CAGR - 3.8 % CAGR - 3.5 % CAGR - 4.3 % CAGR - 3.1 % 9,000 8,000 7,560 7,500 6,700 6,700 6,950 7,000 6,550 6,300 5,720 6,000 5,000 4,000 3,000 2,000 1,000 - Mundra Hazira Nhava Sheva - GTI Pipavav

Source: Shipping line, Kotak Institutional Equities

Exhibit 6: Pipavav has seen an increase in rates of about 2% since January 2016 Increase in port handling charges for imports as quoted by a key shipping line (%)

Change over Jul-14 and Apr-15 Change over Apr-15 and Jan-16 Change from 15th September 2016 Change from 4th February 2017 Change from 11th April 2017 Change from 23rd September 2017 12 10 9 9

8 6 7 6 5 4 4 3 3 2 2 2 1 2 ------(2) (4) (6) Mundra Hazira Nhava Sheva - GTI Pipavav

Source: Shipping line, Kotak Institutional Equities

20 KOTAK INSTITUTIONAL EQUITIES RESEARCH Gujarat Pipavav Port Infrastructure

Exhibit 7: We build modest growth in overall realization, flattish container realization over 2016-21E Build-up in realizations for GPPV, March fiscal year-ends, 2016-21E (Rs/ton)

700 611 589 568 600 542 553 507 500

400

300

200

100

0 2016 2017 2018E 2019E 2020E 2021E

Source: Company, Kotak Institutional Equities estimates

Change in estimates

We revise our estimates by 0-4% to ₹5.6, ₹6.7 and ₹7.9 for FY2018E-20E on higher assumptions for LPG business (1 mn tons addition over FY2017-21E) and marginal growth in container realization in FY2017. Roll forward to September 2019E increases SoTP to ₹150.

Exhibit 8: Change in estimates for GPPL, March fiscal year-ends, 2017-20E

New estimates Old estimates % change 2017 2018E 2019E 2020E 2018E 2019E 2020E 2018E 2019E 2020E Volumes Container volumes (TEUs) 663,380 709,817 770,151 835,614 716,450 777,349 843,423 (0.9) (0.9) (0.9) Yoy growth (%) (4.5) 7.0 8.5 8.5 8.0 8.5 8.5 Bulk volumes (tons) 2,112,078 2,323,286 2,555,614 2,683,395 2,323,286 2,555,614 2,683,395 — — — Yoy growth (%) (14.8) 10.0 10.0 5.0 10.0 10.0 5.0 Liquid volumes (tons) 685,960 960,344 1,344,482 1,546,154 891,748 1,070,098 1,230,612 7.7 25.6 25.6 Yoy growth (%) 2 40 40 15 30 20 15 Ro/ro volumes 83,607 125,411 150,000 165,000 125,411 150,000 165,000 — — — Yoy growth (%) 325.6 50.0 19.6 10.0 50.0 19.6 10.0 Total volumes (mn tons) 12 13 15 16 13 15 16 (0.1) 1.6 1.7 Yoy growth (%) (5.8) 10.1 11.5 8.6 10.2 9.7 8.5 Tariffs (blended rate) Container (Rs/TEU) 6,474 6,474 6,604 6,868 6,474 6,474 6,733 — 2.0 2.0 yoy increase (%) 1.5 — 2.0 4.0 — — 4.0 Bulk (Rs/ton) 540 561 578 595 561 578 595 — — — yoy increase (%) 1.5 4.0 3.0 3.0 4.0 3.0 3.0 Liquid (Rs/ton) 558 581 604 628 581 604 628 — — — yoy increase (%) 1.5 4.0 4.0 4.0 4.0 4.0 4.0 Ro/ro realization 3,150 3,308 3,473 3,647 3,308 3,473 3,647 — — — yoy increase (%) 5.0 5.0 5.0 5.0 5.0 5.0 5.0 Overall realization (Rs / ton) 542 553 568 589 553 562 583 0.0 1.1 1.1 yoy increase (%) 6.3 1.9 2.8 3.7 1.9 1.7 3.7 Revenues (Rs mn) Container 4,295 4,595 5,086 5,739 4,638 5,033 5,679 (0.9) 1.1 1.1 Bulk 1,140 1,304 1,477 1,597 1,304 1,477 1,597 — — — Liquid 383 558 812 971 518 646 773 7.7 25.6 25.6 Ro/ro 263 415 521 602 415 521 602 — — — Total revenues 6,610 7,415 8,493 9,566 7,418 8,275 9,308 (0.0) 2.6 2.8 yoy increase (%) 0.1 12.2 14.5 12.6 12.2 11.5 12.5 EBITDA 4,186 4,579 5,333 6,129 4,579 5,134 5,896 0.0 3.9 4.0 EBITDA margin (%) 63.3 61.8 62.8 64.1 61.7 62.0 63.3 3 bps 74 bps 73 bps PBT 3,470 3,980 4,802 5,677 3,981 4,605 5,443 (0.0) 4.3 4.3 Tax (971) (1,297) (1,563) (1,835) (1,297) (1,498) (1,757) (0.0) 4.4 4.4 Tax rate (%) 28.0 32.6 32.5 32.3 32.6 32.5 32.3 0 bps 3 bps 4 bps PAT 2,499 2,683 3,239 3,843 2,684 3,108 3,686 (0.0) 4.2 4.3 EPS 5.2 5.6 6.7 7.9 5.6 6.4 7.6 (0.0) 4.2 4.3

Source: Companies, Kotak Institutional Equities estimates

KOTAK INSTITUTIONAL EQUITIES RESEARCH 21 Infrastructure Gujarat Pipavav Port

Exhibit 9: SoTP-based target price of Rs150/share Sum-Of-Total-Parts valuation of GPPL

Value Stake GPPL stake value Per share (Rs bn) (%) (Rs bn) (Rs) Method of valuation Pipavav port 61,664 100.0 61,664 128 Sep-19 FCFE valuation Pipavav Rail Corporation Ltd (PRCL) 24,853 38.8 9,643 20 16X Sep-19 Total value for GPPV 86,517 71,307 147

Source: Company, Kotak Institutional Equities estimates

Exhibit 10: Profit, balance sheet and cash model of GPPL (standalone), CY2009-FY2020E (Rs mn)

CY2010 CY2011 CY2012 CY2013 15MFY15 FY2016 FY2017 FY2018E FY2019E FY2020E Profit model Net sales 2,839 3,968 4,160 5,179 8,670 6,600 6,831 7,415 8,493 9,566 Total operating costs (1,665) (2,138) (2,342) (2,611) (3,656) (2,839) (2,645) (2,836) (3,161) (3,437) EBITDA 1,174 1,830 1,819 2,568 5,015 3,761 4,186 4,579 5,333 6,129 EBITDA margin (%) 41.3 46.1 43.7 49.6 57.8 57.0 61.3 61.8 62.8 64.1 Other income 81 149 154 168 401 258 354 452 552 663 Financial charges (1,271) (852) (684) (374) (262) (2) (4) — — — Depreciation (493) (558) (549) (756) (833) (964) (1,065) (1,051) (1,082) (1,115) Pre-tax profit (509) 570 740 1,605 4,321 3,054 3,470 3,980 4,802 5,677 Adjusted PAT (509) 570 740 1,605 4,321 1,661 2,499 2,683 3,239 3,843 EPS (Rs) (1.1) 1.2 1.5 3.3 8.9 3.4 5.2 5.6 6.7 7.9 Balance sheet Shareholders' funds 7,359 7,930 12,117 14,035 17,908 19,164 20,195 20,852 21,649 22,583 Equity share capital 4,236 4,236 4,834 4,834 4,834 4,834 4,834 4,834 4,834 4,834 Reserves and surplus 3,123 3,694 7,283 9,201 13,073 14,329 15,361 16,018 16,814 17,749 Loan funds 7,973 6,759 3,207 2,819 — — — — — — Total sources of funds 15,332 14,689 15,325 16,854 17,908 19,164 20,195 20,852 21,649 22,583 Total fixed assets 12,908 12,819 14,039 14,639 14,046 17,309 17,684 16,274 15,769 15,260 Investments 830 830 830 830 830 830 830 830 830 830 Cash and bank balances 1,949 1,272 511 2,023 2,439 2,898 3,522 4,212 5,683 7,291 Net current assets excl. cash (354) (232) (56) (638) 593 (599) (2,258) (880) (1,008) (1,135) Total application of funds 15,332 14,689 15,325 16,854 17,908 19,164 20,195 20,852 21,649 22,583 Cash flow statement Cash flow from operations 889 608 2,621 2,900 4,435 3,894 4,020 2,471 4,557 5,136 Cash flow from investing activities (523) (532) (1,751) (909) (1,137) (3,648) (1,430) 379 (578) (606) Free cash flows 366 76 870 1,991 3,298 246 2,590 2,850 3,980 4,529 Cash flow from financing activities 641 (2,141) (888) (544) (3,316) (2) (2,272) (2,376) (2,877) (3,375) Cash generated /utilised 1,151 (1,544) 105 598 (953) 1,036 (661) 1,211 2,033 2,272 Net cash at start of year 798 1,949 405 511 1,108 155 1,195 534 1,745 3,778 Net cash at end of year 1,949 405 511 1,108 155 1,191 534 1,745 3,778 6,050

Source: Company, Kotak Institutional Equities estimates

22 KOTAK INSTITUTIONAL EQUITIES RESEARCH Gujarat Pipavav Port Infrastructure

Exhibit 11: Key numbers and valuation metrics for GPPL versus Adani Ports and SEZ

Pipavav Port Adani Ports (consol) FY2017 FY2018E FY2019E FY2020E FY2017 FY2018E FY2019E FY2020E Volumes Total (mn tons) 12 13 15 16 170 191 222 253 Financial summary (Rs mn) Revenues 6,831 7,415 8,493 9,566 84,394 108,220 124,408 130,762 EBIDTA 4,186 4,579 5,333 6,129 54,147 65,261 78,910 81,312 PAT 2,499 2,683 3,239 3,843 39,115 34,326 44,123 45,932 Net debt (3,522) (4,212) (5,683) (7,291) 185,503 183,630 174,847 147,884 Book value 20,195 20,852 21,649 22,583 175,260 204,184 240,010 276,446 Key ratios (%) Revenue growth 3.5 8.5 14.5 12.6 18.7 28.2 15.0 5.1 PAT growth 50.4 7.4 20.7 18.6 35.0 (12.2) 28.5 4.1 EBIDTA margin 61.3 61.8 62.8 64.1 64.2 60.3 63.4 62.2 RoE 12.7 13.1 15.2 17.4 25.1 18.4 20.0 18.0 RoCE 12.7 13.1 15.2 17.4 12.6 13.9 15.5 14.8 Per share (Rs) EPS 5.2 5.6 6.7 7.9 18.9 16.6 21.3 22.2 BVPS 41.8 43.1 44.8 46.7 84.6 98.6 115.9 133.5 Key valuation ratios at MP(X) P/E 23.2 21.6 17.9 15.1 20.3 23.2 18.0 17.3 P/B 2.9 2.8 2.7 2.6 4.5 3.9 3.3 2.9 P/Sales 10.6 9.8 8.5 7.6 9.4 7.3 6.4 6.1 EV/EBITDA 13.0 11.8 9.8 8.3 18.1 15.0 12.3 11.6 Valuation at TP (X) P/E 25.2 23.4 19.4 16.4 21.4 24.4 19.0 18.3 P/B 3.1 3.0 2.9 2.8 4.8 4.1 3.5 3.0 P/Sales 9.2 8.5 7.4 6.6 9.9 7.8 6.7 6.4 EV/EBITDA 14.2 12.8 10.7 9.1 18.9 15.7 12.8 12.1

Source: Company, Kotak Institutional Equities estimates

KOTAK INSTITUTIONAL EQUITIES RESEARCH 23 ATTRACTIVE Energy India SEPTEMBER 13, 2017 UPDATE BSE-30: 32,159

Weakness in industrial fuels; base affects auto fuels. Domestic petroleum consumption declined by 6.1% yoy in August driven by (1) weakness in off-take of industrial fuels, 29% decline in petcoke and 7-8% decline in FO/naphtha, and (2) 3.7% decline in diesel and 1% decline in gasoline from a higher inventory-led base of August 2016. Auto fuel volumes will normalize as daily fuel price changes prevent dealers to benefit from managing inventories; however, the sustained weakness in industrial fuels is worrying, perhaps reflecting the transient impact on the economy post GST.

Petroleum demand declines 6.1% yoy in August, staying flat in 5MFY18 Domestic petroleum consumption declined by 6.1% yoy to 15.7 mn tons in August 2017, after declining 1% in past two months and growing 3-5% in April-May 2017. We note that demand for industrial fuels, such as petcoke, fuel oil and naphtha, has weakened in the past few months, reflecting near-term slowdown in the economy, perhaps transient, from implementation of GST. Overall volumes remained flat in 5MFY18, somewhat better than 3% decline post- demonetization in 4QFY17, but quite subdued when compared to a robust 8% growth during pre- demonetization phase in 9MFY17, reflecting moderation in demand across all fuels.

Subdued off-take of industrial fuels likely reflecting impact from GST implementation The off-take of industrial fuels, such as pet coke, furnace oil and naphtha, has reduced sharply over the past three months presumably reflecting slowdown in manufacturing activities around the implementation of GST. We rule out any significant substitution of liquid fuels by LNG, as consumption of the latter by the industries has remained flattish broadly during this period. The off-take of industrial fuels declined sharply in August with consumption of (1) petcoke declining 29.3% yoy, (2) fuel oil/ LSHS declining 6.8% yoy and (3) naphtha declining 7.6% yoy. In 5MFY18, domestic consumption of (1) petcoke has declined 12.4% yoy, (2) fuel oil/ LSHS declined 7.6% yoy and (3) naphtha declined 16.5% yoy.

Auto fuels demand declines in August impacted by higher inventory-led base of last year

Auto fuels demand was negatively impacted by a higher base—(1) diesel demand declined 3.7% yoy as compared to 13% growth in August 2016 and (2) gasoline demand declined 0.8% yoy versus 25% growth in the previous year. Auto fuel volumes in August 2016 were likely boosted by inventory build-up by dealers in anticipation of price hike on September 1, when retail prices were actually increased by 5-6%; implementation of daily fuel prices inhibits dealers to profiteer from any such fluctuation now. In 5MFY18, auto fuels demand growth has been moderate with diesel growing by 4.5% yoy and gasoline increasing by 8.3% yoy. Jet fuel demand remains strong growing at 10.6% in August and 9.7% in 5MFY18.

LPG growth remains strong as kerosene declines; other petroleum products gain pace

LPG demand grew 11.8% yoy in August 2017 and 11.5% in 5MFY18, reflecting increasing Tarun Lakhotia connections under the Pradhan Mantri Ujjwala Yojana scheme. This is also corroborated by accelerated sharp decline in kerosene consumption, down 41% yoy in August and 36% yoy in Akshay Bhor 5MFY18, further impacted by reduced quotas for the states. Lubricants and greases demand grew by 6.6% yoy in August, but declined 8.1% yoy in 5MFY18. Bitumen and other petroleum fuels consumption grew by 8-8.5% yoy in August 2017.

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

Exhibit 1: Domestic petroleum consumption growth has slowed down over the past few months Monthly consumption of petroleum products, August 2016 onwards

Aug-16 Sep-16 Oct-16 Nov-16 Dec-16 Jan-17 Feb-17 Mar-17 Apr-17 May-17 Jun-17 Jul-17 Aug-17 Consumption ('000 tons) LPG 1,840 1,868 1,850 1,871 1,932 1,982 1,801 1,882 1,657 1,790 1,885 1,919 2,057 Gasoline/Petrol 2,204 1,815 2,106 2,026 1,965 1,804 1,896 2,105 2,086 2,403 2,065 2,143 2,187 Naphtha+NGL 1,146 1,108 1,163 1,061 1,034 987 1,053 1,093 1,000 1,005 967 708 1,059 Jet fuel 555 574 570 591 641 632 579 617 610 627 601 614 614 Kerosene 497 501 380 387 399 367 371 414 331 353 357 317 292 Diesel 6,134 5,213 6,675 6,750 6,560 5,804 6,161 6,802 6,968 7,524 6,796 6,304 5,910 LDO 41 37 43 42 39 35 35 35 39 32 35 38 37 Lubricants/greases 246 221 268 292 292 268 274 293 284 268 269 244 263 Furnace oil/LSHS 582 666 610 580 611 542 541 556 604 629 522 544 542 Bitumen 211 267 457 530 572 509 571 720 573 686 451 249 229 Petroleum coke 2,749 1,955 1,860 1,572 1,649 1,766 1,622 2,120 1,937 1,955 1,734 1,814 1,943 Others 571 570 572 528 462 585 528 659 563 558 645 582 617 Total-petroleum products 16,775 14,794 16,553 16,229 16,157 15,281 15,432 17,296 16,652 17,830 16,327 15,476 15,749 Growth (%) LPG 18.7 15.4 9.6 15.8 7.6 16.2 3.1 1.6 4.2 12.0 16.9 12.3 11.8 Gasoline/Petrol 24.9 (3.4) 13.8 14.3 7.9 (0.6) 3.1 2.9 4.5 15.4 11.9 11.7 (0.8) Naphtha+NGL (4.1) 5.7 6.9 4.8 (9.6) (15.2) (1.8) (6.4) (9.3) (7.3) (15.2) (41.3) (7.6) Jet fuel 10.5 15.4 6.7 9.7 17.1 18.8 10.4 6.5 9.6 9.8 8.5 9.9 10.6 Kerosene (13.3) (11.1) (34.0) (31.8) (30.4) (34.5) (33.8) (26.8) (35.8) (33.4) (32.9) (36.8) (41.2) Diesel 13.0 (11.4) 5.2 10.5 1.2 (7.7) (3.9) 0.3 3.0 8.1 6.5 8.6 (3.7) LDO 32.2 (0.3) 18.6 51.6 9.0 7.9 8.8 (28.4) 14.9 (11.7) (5.6) 8.6 (9.7) Lubricants/greases (5.3) (23.4) 11.0 (3.5) (0.7) (14.1) (18.6) (27.4) 4.0 (7.9) (19.3) (19.0) 6.6 Furnace oil/LSHS 9.5 12.0 16.0 14.1 17.2 (13.6) (10.2) (24.9) (7.9) 3.4 (17.6) (8.7) (6.8) Bitumen (11.9) (11.3) (12.1) 22.4 0.7 (7.4) (10.1) (8.7) (15.8) 0.2 (11.6) 9.5 8.5 Petroleum coke 79.2 19.6 22.2 11.7 9.3 (18.2) (20.9) 7.8 23.4 3.0 (25.5) (16.3) (29.3) Others (3.4) 1.8 6.7 (4.0) (16.1) 18.0 0.2 24.7 11.5 5.3 14.0 (4.3) 8.1 Total-petroleum products 18.2 (0.8) 7.0 9.3 2.0 (5.9) (5.5) (1.0) 2.5 5.7 (0.9) (1.0) (6.1)

Source: PPAC, Kotak Institutional Equities

Exhibit 2: Petroleum consumption remains flat in FYTD18 Consumption of petroleum products

August April-August Annual 2017 2016 chg. (%) FY2018 FY2017 chg. (%) FY2017 FY2016 chg. (%) LPG 2.1 1.8 11.8 9.3 8.4 11.5 21.5 19.6 9.8 Gasoline/Petrol 2.2 2.2 (0.8) 10.9 10.0 8.3 23.8 21.8 8.8 Naphtha + NGL 1.1 1.1 (7.6) 4.7 5.7 (16.5) 13.2 13.3 (0.7) Jet fuel 0.6 0.6 10.6 3.1 2.8 9.7 7.0 6.3 11.8 Kerosene 0.3 0.5 (41.2) 1.7 2.6 (36.0) 5.4 6.8 (20.9) Diesel 5.9 6.1 (3.7) 33.5 32.0 4.5 76.0 74.6 1.8 LDO 0.0 0.0 (9.7) 0.2 0.2 (1.2) 0.4 0.4 10.3 Lubricants/greases 0.3 0.2 6.6 1.3 1.4 (8.1) 3.4 3.6 (6.1) Furnace oil/LSHS 0.5 0.6 (6.8) 2.8 3.1 (7.6) 7.2 6.6 8.3 Bitumen 0.2 0.2 8.5 2.2 2.3 (5.4) 5.9 5.9 0.0 Petroleum coke 1.9 2.7 (29.3) 9.4 10.7 (12.4) 23.3 19.3 20.5 Others 0.6 0.6 8.1 3.0 2.8 6.7 6.7 6.4 5.2 Total-petroleum products 15.7 16.8 (6.1) 82.0 82.0 0.0 193.7 184.7 4.9

Source: PPAC, Kotak Institutional Equities

KOTAK INSTITUTIONAL EQUITIES RESEARCH 25 INDIA Economy Inflation SEPTEMBER 13, 2017 UPDATE BSE-30: 32,159

Inflation continues to inch up. CPI inflation continued to move up from its trough and is set to hit the 4% mark in November. Vegetable prices continued increasing sequentially in line with the seasonal effect. Core inflation inched up on the back of housing (7CPC HRA effect). We expect the upward trend to continue over the next few months along with some sequential seasonal softening of food prices in 3QFY18. We maintain our call that the RBI would pause for the rest of FY2018.

August CPI inflation accelerates as vegetable prices continue to play spoilsport

CPI inflation accelerated further to 3.4% in August from 2.4% in July, led largely by surge in QUICK NUMBERS food inflation. Food inflation was at 2% compared to 0.4% in July. On a sequential basis, the food index moved up 1.2% mom primarily led by vegetables (5.9%) and fruits (2.5%). Price of  August headline CPI pulses continued to contract sequentially. The high frequency data from the wholesale markets inflation at 3.4% are indicating some moderation in prices of fruits and vegetables in September while prices of cereals and pulses remain contained. Fuel and light inflation came in at 4.9% (4.9% in July).  Core CPI inflation at We estimate September headline inflation at around 3.6%. 4.5%

Core CPI inflation inches higher on the back of housing segment (7CPC HRA impact)  July IIP growth remains muted at Core inflation picked up to 4.5% in August (from 3.9% in July). Monthly momentum also 1.2% inched higher at 0.9%, compared to 0.6% in June. The sequential uptick in housing segment (1.4% in August after increasing 1% in July) corroborated with our estimated uptick due to  Expect RBI to 7CPC HRA being factored in. Over the next six months, we expect core inflation in a range of remain on a pause 4.2-4.9%, as the full impact of the center’s HRA component flows through even as demand- for rest of FY2018 side pressures remain muted. Excluding HRA, core inflation is expected to range 3.8-4.2% (Exhibit 1).

IIP growth yet to pick up

July IIP printed a growth of 1.2% compared to (-)0.2% in June. Sector-wise, manufacturing growth was at 0.1% in July indicating extremely tepid production normalization after pre-GST jitters seen in June. Sequentially manufacturing production contracted 0.8% mom. Most of the uptick in manufacturing growth was helped by pharma products (18.9%), and other transport equipment such as two-wheelers (10.5%) and basic metals (3.6%) while contraction of 43.5% in tobacco products, 11.1% in electrical equipment and 6.2% in chemical and chemical products were drag on manufacturing sector’s growth. Electricity grew 6.5% while mining grew 4.8%. On use-based basis, capital goods continued to contract with August at (-)1%. Consumer non-durables grew 3.4%, while consumer durables contracted 1.3%. Infrastructure and construction sector grew at 3.7%. Suvodeep Rakshit

Inflation trend supports RBI staying put for rest of FY2018

We expect headline CPI inflation to inch higher henceforth as adverse base effect, mean reversion Upasna Bhardwaj of food prices and 7CPC HRA impact begins to seep in, pushing the headline inflation towards 4.7% by March 2018 (4.3% without HRA). Nonetheless, core inflation is expected to remain Madhavi Arora tepid, averaging 4.4% in FY2018 compared to 4.7% in FY2017 underscoring the weak underlying demand pressures. We reiterate our call that the RBI will pause for the rest of FY2018. We remain watchful of the incoming data and reckon that room for any further cut can open up again if inflation surprises below the 4% mark on the back of (1) improvement in food supplies amid good monsoon, (2) imported disinflation due to INR appreciation and (3) downward surprise of core inflation owing to weaker-than-expected growth.

For Private Circulation Only. Economy India

Exhibit 1: Inflation trajectory to continue inching up Trends in headline and core inflation (% yoy)

CPI inflation Core CPI inflation 9

8

7

6 4.7 5

4 4.6

3

2

1

Jul-14

Jul-15

Jul-16

Jul-17

Jan-14

Jan-15

Jan-16

Jan-17

Jan-18

Sep-14

Sep-15

Sep-16

Sep-17

Nov-14

Nov-15

Nov-16

Nov-17

Mar-14

Mar-15

Mar-16

Mar-17

Mar-18

May-14

May-15 May-16 May-17

Source: CEIC, Kotak Economic Research estimates

Exhibit 2: Manufactured products inflation yet to signal recovery from pre-GST disruptions Use-based classification of IIP growth, March fiscal year-ends, 2016-18 (%)

Mining (%) Manufacturing (%) Electricity (%) General (%) 2016 2017 2018 2016 2017 2018 2016 2017 2018 2016 2017 2018 April (4.0) 6.7 3.0 1.4 4.9 2.9 0.5 14.4 5.4 0.7 6.0 3.2 May 1.6 5.7 0.2 1.2 7.7 2.6 7.0 6.1 8.3 1.8 7.3 2.8 June (1.9) 10.2 0.4 1.5 7.5 (0.5) 0.6 9.8 2.1 1.0 8.0 (0.2) July 3.5 0.9 4.8 0.5 5.3 0.1 4.1 2.1 6.5 1.3 4.5 1.2 August 6.0 (4.3) 3.2 5.5 5.6 2.1 3.7 4.0 September 7.2 (1.2) 0.6 5.8 10.4 5.1 2.2 5.0 October 12.2 1.0 8.5 4.8 8.3 3.0 9.0 4.2 November 5.7 8.1 0.0 4.0 1.1 9.5 0.8 5.1 December 4.1 10.8 2.9 0.6 3.4 6.4 3.1 2.4 January 2.2 8.6 4.1 2.5 6.2 5.1 4.0 3.5 February 11.3 4.6 6.3 0.7 9.5 1.2 7.2 1.2 March 4.7 10.1 4.6 3.3 11.9 6.2 5.2 4.4 Average 4.4 5.1 2.9 4.4 5.7 5.9 3.3 4.6

Source: CEIC, Kotak Economic Research

Exhibit 3: Capital goods and consumer durables growth continues to contract Use-based classification of IIP growth, March fiscal year-ends, 2016-18 (%)

Intermediate Infrastructure and Consumer non- Primary goods Capital goods goods construction goods Consumer durables durables 2016 2017 2018 2016 2017 2018 2016 2017 2018 2016 2017 2018 2016 2017 2018 2016 2017 2018 April (3.0) 12.6 3.0 3.8 9.2 (4.8) (1.2) (0.3) 3.6 4.0 0.8 4.7 1.8 9.3 (0.7) 5.7 0.2 8.8 May 4.8 4.6 3.7 (4.8) 14.7 (1.4) 0.5 4.3 0.4 0.1 7.4 0.2 (1.1) 9.9 0.8 4.2 11.3 9.5 June 2.2 8.2 (0.2) (8.1) 14.8 (6.6) (1.9) 6.0 (0.3) 2.5 6.6 0.1 7.7 4.5 (2.4) (0.1) 11.4 4.7 July 5.3 4.2 2.3 (5.0) 8.8 (1.0) 1.7 2.5 (1.8) 1.3 (0.9) 3.7 3.8 0.2 (1.3) (6.6) 14.5 3.4 August 7.3 (1.0) 2.8 0.5 0.5 4.6 4.5 6.5 1.8 7.3 1.5 11.3 September 5.6 2.2 2.4 (7.5) 1.3 1.8 1.6 8.7 (2.8) 10.3 1.6 12.7 October 5.9 5.2 20.3 (4.7) 5.0 4.7 1.0 7.4 17.7 1.5 15.3 5.6 November 3.8 5.5 6.4 5.3 (2.6) 5.7 (5.3) 3.9 (4.5) 6.8 5.3 3.3 December 2.7 7.4 4.7 (6.2) 1.9 2.1 (0.1) 5.5 5.2 (5.0) 5.4 (0.2) January 4.5 3.8 12.6 (0.6) 2.5 3.3 2.2 2.6 3.1 (2.0) 3.5 9.6 February 10.5 0.8 4.3 (2.4) 5.3 2.3 11.1 (1.9) 6.7 (4.6) 1.4 10.4 March 9.7 5.8 1.0 9.4 5.3 3.1 11.3 1.1 2.2 (0.6) (3.7) 7.5 Average 5.0 5.0 3.4 3.5 1.5 3.3 2.9 4.0 3.5 3.1 2.8 8.1

Source: CEIC, Kotak Economic Research

KOTAK ECONOMIC RESEARCH 27 India Daily Summary - September 13, 2017 1.4 1.4 3.4 3.4 7.3 7.3 4.4 4.4 9.1 9.1 7.8 7.8 2.6 8.7 8.7 4.5 0.7 0.7 1.5 1.5 5.2 6.9 6.9 5.9 5.9 0.6 0.6 0.6 0.8 6.6 6.6 0.5 0.5 0.8 0.8 5.8 5.8 17.4 12.3 14.3 17.7 21.7 23.4 13.2 12.7 16.2

18.2 20.1 36.2 16.2

24.5 10.1 62.7 38.3 52.4 17.5 24.5 14.0 11.9 24.6 10.2 53.2 11.9 22.5

18.1 20.2 15.5 70.8 82.0 69.1 15.6 53.6 26.9 477.5 477.5 325.7

(US$mn)

ADVT-3mo

16.2 13.1 19.5 16.6 15.1 11.5 16.0 18.4 14.4 16.1 17.3 20.2 8.4 15.3 21.7 23.5 19.1 18.8 9.7 21.6 14.5 12.9 16.3 13.4 10.2 16.8 11.7 15.3 9.6 13.1 18.8 13.1 22.5 25.7 16.1 21.3 15.9 12.0 10.7 13.3 14.6 17.9 31.6 15.1 16.0 20.8 20.2 9.1 34.5 28.1 13.9 13.7 11.6 19.9 17.2 22.5 20.5 21.3 18.3 15.6 26.4 RoE(%) 1.2 9.6 17.3 15.4 10.5 15.9 11.5 19.6 16.0 14.1 11.0 14.3 18.5 14.8 14.8 17.6 19.9 8.7 14.8 23.2 23.1 19.3 19.2 8.7 21.7 10.3 10.4 15.7 11.2 10.1 16.4 12.1 13.0 7.9 12.3 18.6 12.1 22.8 25.0 15.2 21.9 15.0 10.7 6.0 12.9 14.6 16.8 32.8 15.3 16.5 21.4 19.9 9.2 37.8 28.0 13.1 12.7 8.9 20.0 17.0 21.2 21.5 21.6 18.7 14.5 22.6 0.6 15.6 7.6 17.5 15.1 12.6 14.3 12.4 18.9 11.9 13.5 14.9 19.2 8.6 14.4 26.3 22.0 18.7 19.4 (6.8) 5.3 0.1 16.1 11.0 6.3 16.4 9.3 10.9 6.7 8.4 18.2 21.3 22.8 14.6 21.9 14.3 11.7 14.8 15.5 33.8 14.9 13.9 18.0 3.1 44.8 25.7 10.0 6.7 0.8 17.7 12.7 19.4 21.7 21.0 17.7 11.3 19.4 2.8 2.9 0.9 1.5 1.3 1.1 1.0 1.3 3.2 0.9 1.7 5.9 1.7 1.0 1.5 0.4 0.9 1.4 1.1 0.7 1.4 3.4 1.2 0.6 0.2 0.7 3.4 4.0 2.5 1.7 1.7 1.0 1.2 1.3 1.5 0.7 1.2 1.5 1.3 0.9 2.8 1.4 0.1 0.3 0.9 0.1 0.9 1.3 3.8 4.1 1.0 0.9 1.2 0.6 2.3 0.8 1.1 2.0 — ——— —— —————— ——— ——— — — 1.3 0.4 1.1 1.0 0.9 1.1 2.8 0.7 1.5 5.5 1.5 1.0 1.2 0.4 0.8 1.4 0.9 0.6 1.2 1.1 0.4 0.2 0.5 3.1 3.8 1.9 1.3 1.5 0.8 1.1 1.1 1.3 0.6 1.0 1.3 1.3 0.7 2.6 1.3 0.1 0.2 0.1 0.8 1.1 3.2 0.8 0.8 1.0 0.6 2.0 0.7 1.1 1.5 Dividendyield (%)

1.1 0.8 0.8 0.7 0.9 3.3 0.6 1.3 4.0 1.2 0.9 1.0 0.7 1.5 0.5 1.1

1.0 0.0 0.2 0.4 1.8 2.7 1.4

1.0 0.9 0.7 0.8 0.8 1.1 0.5 0.9 1.1 1.3 0.4 2.3 1.1 0.1 0.2 0.1 0.6 0.7 1.5 0.6 0.6 0.3 0.5 1.8 0.5 1.1 1.1 2.6 1.5 3.0 1.9 1.6 0.9 3.8 2.1 0.9 3.3 3.3 1.7 2.8 #DIV/0! 7.3 0.8 2.8 4.4 0.7 3.0 1.2 2.1 3.2 2.9 0.9 0.7 1.5 3.5 1.1 1.6 3.4 4.3 5.4 3.2 4.3 2.0 2.0 2.3 1.7 2.9 3.8 5.2 2.0 2.0 2.0 1.3 5.2 0.9 9.1 8.1 1.7 1.0 0.8 4.6 2.0 5.2 2.6 3.6 3.4 1.3 3.6 Price/BV (X) Price/BV 3.4 2.1 1.2 1.4 2.7 2.3 4.3 1.8 4.4 1.3 2.1 2.7 2.4 2.7 2.2 2.3 1.3 2.5 4.6 3.9 3.5 8.7 4.5 4.0 1.9 4.6 1.9 2.6 3.5 1.8 2.0 4.6 4.6 1.5 1.6 6.0 0.9 2.9 1.6 3.6 2.2 1.8 1.1 4.2 2.4 1.0 3.6 3.8 2.0 3.1 7.9 3.9 3.3 4.9 1.2 3.7 1.5 2.3 3.8 3.2 1.1 0.8 1.8 4.0 1.2 1.9 4.0 5.0 6.3 3.6 5.1 2.3 2.2 2.6 1.9 3.2 4.4 5.9 2.2 2.2 2.4 1.6 6.2 1.2 11.8 9.8 2.0 1.2 1.1 5.3 2.3 6.0 3.1 4.0 3.9 1.5 4.3 4.2 7.5 2.5 2.5 2.8 1.9 2.7 3.8 1.7 5.0

5.9 4.0 6.1 3.5 5.0 6.8 7.5 15.9 11.7 6.1 6.9 4.5 4.6 7.7 9.3 8.1 9.0 11.3 6.6 13.1 12.9 3.1 12.8 13.4 11.3 17.1 7.3 21.0 18.9 7.5 13.7 14.1 11.9 11.1 5.5 8.9 EV/EBITDA (X) EV/EBITDA ——— ——— ——— —————— ——— —————— ————————— ——— ————————— ——— ————————— —————— ——— ——— ——— ——— ——— ——— ——— ——————————————— ————————— ——— 9.1 11.1 9.9 10.2 13.8 7.7 15.7 14.8 3.7 14.2 16.6 12.7 21.3 8.5 25.2 22.4 8.9 15.7 17.1 13.7 12.7 6.8 11.8

11.6

13.2

12.1 11.8 17.6 18.9 5.1 10.6 17.3 28.3 15.5 20.3 14.2

11.6 29.7 28.1 21.3 10.9 19.2 16.1 9.4 15.3 15.2 5.3 9.3 7.0 8.1 6.3 6.1 7.0 23.1 41.0 16.1 11.1 15.5 10.7 11.7 6.7 5.1 24.4 12.0 9.9 19.5 92.6 20.6 18.6 24.6 34.9 20.2 14.7 4.4 21.3 15.2 5.9 16.8 21.7 6.4 5.2 9.8 21.5 11.9 11.6 22.6 13.0 15.9 13.9 20.5 20.2 6.8 13.0 16.2 21.4 19.5 13.7 21.9 28.0 21.1 22.9 17.6 11.9 5.3 5.7 12.4 29.8 31.6 4.9 24.8 13.9 24.6 17.7 8.9 15.0 PER (X) PER 19.7 7.7 5.5 7.5 7.5 5.5 6.5 7.6 (6.9) 21.6 17.1 14.0 14.4 11.8 23.9 27.4 23.5 21.1 17.3

21.1 12.2 21.7 13.6 21.4 15.6 34.2 21.3 27.8 19.3 24.0 22.1 14.5 27.3 20.4 16.2 37.9 27.9 33.0 17.6 29.7 19.4 18.1 25.2 17.8 27.5 13.6 12.9 41.6 49.1 38.4 19.2 36.7 22.5 27.5 18.5 15.6 30.5 14.3 25.0 30.8 28.8 36.8 35.0 29.6 18.5 26.9 26.9 30.5 45.0 18.2 20.5 78.8 15.5 12.9 30.2 13.8 23.3 93.0 23.0 21.7 28.5 35.7 25.7 18.9 28.8 12.8 25.3 15.4 27.5 14.8 19.6 15.4 23.6 23.8 15.6 20.2 22.8 25.5 34.3 23.1 14.1

35.9 37.9 30.3 16.0 28.3 19.5 10.9 22.5

8.1 6.8 99.6 34.8

25.1 19.4

21.9 37.8 19.2 41.9

1,718.0

91.8 208.9

58.5

7.0 0.5 8.3 9.5 2.2 16.7 15.1 32.4 67.2 28.4 22.1 41.3 37.3 27.4 37.7 31.2 17.0 21.9 19.2 13.0 14.9 19.9 19.7 19.4 11.6 16.9 17.4 27.6 33.0 73.8 9.6 5.8 30.5 17.8 21.6 14.5 10.9 15.4 15.7 13.5 18.1 20.1 19.8 24.8 22.9 21.5 9.6 22.3 45.1 18.2 52.3 16.8 29.4 19.8 14.9 10.4 33.5 36.3 42.6 22.4 13.9 25.6 36.6 25.5 16.5 19.8 52.8 59.7 28.5 18.0 19.6 15.8 26.8 29.5 20.6 (15.2) 13.4 24.1 16.5 15.9 20.8 24.0 29.6 17.7 23.3 16.8 16.3 20.6 22.0 15.1

228.9

EPSgrowth(%) 1.4 1.4 15.3 7.3 7.3 32.2 4.0 4.0 2.9 2.9 67.4 7.6 0.3 18.7 32.7 8.7 8.7 10.7 3.5 3.5 22.4 8.5 8.5 21.5 9.9 9.9 5.9 15.8 (2.6) (1.3) (1.3) 125.6 (7.2) (7.2) 217.2 (1.4) (1.4) 15.1 (1.5) (1.5) 26.0 16.5 16.5 19.1 19.1 22.2 17.3 31.4 22.0 11.2 13.3 15.2 25.3 17.7 20.1 45.7 45.7 37.5 37.5 12.5 12.5 21.0 21.0 22.5 22.5 20.2 20.2 23.5 23.5 25.2 25.2 20.1 20.1 22.5 22.5 23.6 23.6 16.1 57.7 57.7 27.9 27.9 35.1 35.1 21.6 13.8 13.8 19.5 18.6 15.5 10.5 83.0

59.9 85.6 (12.4) (13.1)

103.9 (21.4) (19.4) (12.8) (82.7) (12.5) (15.4)

111.2 (98.8) 7,334.7

409.6

133.6 112.5 126.9 106.7

1,032.7 (342.6)

7.9 9.8 9.8 43.1 34.7 73.1 12.4 77.4

22.0

20.3 99.7 80.7 81.0 94.0 29.6 40.5 66.8 59.8

178.4

121.5 266.4 165.8

3.7 3.7 4.8 4.2 4.2 7.7 8.0 8.8 6.4 6.4 9.3 11.6 23.3 12.1 21.4 47.7 22.3 43.3 24.2 83.1 100.3 21.6 24.5 54.4 67.5 24.8 19.2 37.6 23.0 63.1 25.3 30.8 51.3 63.6 29.3 46.4 18.7 24.9 20.1 22.0 14.8 15.7 15.5 25.2 14.9 84.3 15.2 93.5 57.3 12.8 13.6 26.6 35.1 41.5 24.5 29.9 49.9 29.6 68.7

177.7 171.4 344.9 398.0 4,192 4,757 203.3 216.0 222.9 209.6 142.9

1,094.3

EPS(Rs)

4.3 4.3 5.8 6.7 0.2 0.2 16.0 8.7 8.7 11.9 3.0 3.0 6.3 6.3 7.0 7.0 1.8 1.8 20.9 6.0 8.8 9.6 12.3 0.8 9.6 12.3 9.0 10.7 9.8 11.7 9.0 9.8 10.7 43.4 33.2 12.4 14.7 13.4 73.2 17.4 24.2 13.1 17.0 16.1 74.0 33.6 13.0 11.6 11.0 33.5 17.0 66.2 25.5

45.9 55.7

25.6 29.8 85.3 56.3 54.5 68.8

10.5

68.2 80.5 28.5 65.6

55.3

122.3 16.9

29.0 35.5 58.6 (19.6)

105.7 2018E 2019E 2020E 2018E 2019E 2020E 2018E 2019E 2020E 2018E 2019E 2020E 2018E 2019E 2020E 2018E 2019E 2020E 2018E 2019E 2020E 149.6 220.6

907.7 150.2

India Daily Summary - September 13, 2017 17 27 51 19 40 97 66 68 227 131 233 171 318 726 138 119 338 378 475 601 308 597 505 565 598 569 850 509 O/S shares

122.7

184.2

275.2 3,045 56.7 144.6 183.8 130.7

80.3 783.8 19.3

88.0

130.5 614 691 708 521 904 788 906 Mkt cap. Mkt 91,331 1,427 39,277 97,632 1,525 44,206 45,328 71,926 1,124 50,422 (Rsmn) (US$mn) (mn) 92,490 1,445 709 57,867 82,360 1,287 82,195 1,284 58,015 243,377 3,802 324,973 5,077 1,975 333,179 5,205 223,239 3,487 1,724 111,435 1,741 172,292 2,691 1,186 163,242 2,550 274,018 4,281 168 160,172 2,502 267 223,610 3,493 133,662 2,088 223,052 3,484 408 301,107 4,704 2,128 710,073 11,092 2,105 276,823 4,324 4 202,392 3,162 134,052 2,094 136,513 2,133 138,160 2,158 335,554 5,242 2,640 847,693 13,242 456 195,262 3,050 3,399 110,250 1,722 192,100782,592 3,001 12,225 200 326,845 5,106 2,310 285,767 4,464 304,935 4,764 346,209 5,408 2,926 255,205 3,987 369,625 5,774 1,895 619,459 9,677 1,435 903,692 14,117 159 886,973 13,856 848,829 13,260 289 206,996 3,234 400 185,805 2,903 156 807,886 12,620 7,572,647 118,297 4,737,372 74,005 2,563 2,463,312 38,481 302 2,360,434 36,874 8,632 1,318,497 19,276 3,396 1,188,123 18,560 2,395 1,042,988 16,293 2,865,160 44,758 1,589 1,867,660 29,176 6,408 14,194,247 221,737 10,186,749 157,812 — 3.3 1.1 3.3 4.2 4.5 5.1 0.1 8.3 5.4 6.1 9.7 0.5 0.8 5.9 (2.1) (4.1) (1.3) (7.4) (3.5) (4.0) (1.0) (0.4) (7.0) (8.5) 14.1 27.1 24.2 13.4 11.6 20.1 22.9 22.0 13.9 39.1 13.5 37.5 28.0 16.9 (11.7) (27.4) (17.2) (14.2) (12.3) (37.1) (27.6) (18.7) (17.9) (18.4) (27.8) (28.1) (11.5) (18.3) (13.9) (28.9) (25.9) (18.5) (50.1)

— 70 170 145 325 435 170 140 370 275 215 130 170 320 740 110 510 165 150 790 400 350 390 100 250 180 540 165 200 200 195 350 525 690 500 600 650 1,170 1,520 1,250 4,700 1,670 1,575 1,615 3,200 1,760 2,525 1,050 1,850 1,800 1,500 1,950 1,000 8,050 5,000 5,850 price Upside Target 74,000 74,000 20,500 20,500

81 57 127 432 134 273 142 337 171 241 142 742

449 702 702 203

153 153 291 291

167 115 226 339 145 642 642 263 263 118 165 165 518 518 597 369 369 540 540 299 299 388 189 496 496 799 799 660 968

1,742 1,742 1,073 1,301 1,778 1,228 2,933 1,645 1,645 1,851 1,851 1,189 1,798 1,835 1,835 1,562 1,562 4,946 4,946 3,919 2,095 5,679 8,155 5,875 1,689

65,271 32,582

Price (Rs) Price

NR SELL SELL SELL SELL BUY BUY SELL BUY BUY SELL BUY SELL BUY BUY SELL BUY SELL SELL SELL SELL SELL ADD ADD ADD ADD ADD ADD ADD ADD ADD ADD ADD ADD ADD ADD ADD ADD ADD ADD ADD ADD ADD Rating 12-Sep-17 (Rs) (%) REDUCE REDUCE REDUCE REDUCE REDUCE REDUCE REDUCE REDUCE REDUCE REDUCE REDUCE REDUCE REDUCE REDUCE Neutral Attractive Cautious ShriramTransport NBFCs ShriramUnion City Finance PNBHousing Finance RuralElectrification Corp. PFC LIC Housing LIC Finance Mahindra& Mahindra Financial MuthootFinance SELL MaxFinancial Services IIFL Holdings IIFL L&TFinance Holdings YESBank Banks Cholamandalam HDFC Prudential ICICI Life UnionBank NBFCs Finserv Bajaj BharatFinancial Inclusion UjjivanFinancial Services StateBank of India RBL Bank RBL J&KBank PunjabNational Bank KarurVysya Bank IndusIndBank IDFC Bank IDFC ICICI Bank ICICI MothersonSystems Sumi EquitasHoldings HDFCBank MahindraAutomotive CIE Mahindra& Mahindra MarutiSuzuki MRF SKF SuprajitEngineering TataMotors Union City Bank DCBBank FederalBank ExideIndustries SchaefflerIndia HeroMotocorp India WABCO Automobiles Bankof Baroda CanaraBank CEAT EicherMotors Timken Banks BankAxis Bankof India BharatForge TVSMotor BalkrishnaIndustries Company Automobiles AmaraRaja Batteries ApolloTyres AshokLeyland Auto Bajaj Source: Company, Bloomberg, Kotak Institutional Equities estimates Equities Institutional Kotak Bloomberg, Company, Source: Kotak Institutional Equities: Valuation summary of KIE Universe stocksValuation of KIEKotak Universe summary Equities: Institutional

KOTAK INSTITUTIONAL EQUITIES RESEARCH 28

Kotak Institutional Equities: Valuation summary of KIE Universe stocks

Target O/S

29 Price (Rs) price Upside Mkt cap. shares EPS (Rs) EPS growth (%) PER (X) EV/EBITDA (X) Price/BV (X) Dividend yield (%) RoE (%) ADVT-3mo Company Rating 12-Sep-17 (Rs) (%) (Rs mn) (US$ mn) (mn) 2018E 2019E 2020E 2018E 2019E 2020E 2018E 2019E 2020E 2018E 2019E 2020E 2018E 2019E 2020E 2018E 2019E 2020E 2018E 2019E 2020E (US$ mn) Cement ACC SELL 1,851 1,500 (19.0) 347,641 5,431 188 46.4 69.8 99.7 35.0 50.6 42.8 39.9 26.5 18.6 21.4 14.9 10.6 3.8 3.5 3.0 0.9 0.9 0.9 9.8 13.6 17.3 12.4 Ambuja Cements REDUCE 289 250 (13.4) 573,454 8,958 1,986 7.8 11.4 14.5 33.9 46.2 27.7 37.2 25.4 19.9 13.0 9.3 7.1 2.8 2.6 2.4 1.0 1.0 1.0 7.7 10.7 12.5 9.9 Dalmia Bharat ADD 2,797 2,780 (0.6) 248,811 3,887 89 109.4 151.7 180.1 181.9 38.6 18.8 25.6 18.4 15.5 10.6 8.2 6.8 3.8 3.2 2.6 0.1 0.1 0.1 16.9 18.8 18.6 4.9 Grasim Industries ADD 1,254 1,255 0.1 824,526 12,880 467 87.6 102.8 117.6 29.2 17.3 14.4 14.3 12.2 10.7 9.0 7.2 5.8 1.7 1.5 1.3 0.4 0.4 0.4 12.3 12.8 13.0 29.2 India Cements SELL 192 175 (9.0) 59,273 926 308 7.9 11.9 15.1 39.7 49.7 27.0 NM 16.2 12.8 9.1 7.3 6.1 1.1 1.0 1.0 0.6 0.6 0.6 4.7 6.7 7.9 14.6 J K Cement REDUCE 1,040 1,085 4.3 72,731 1,136 70 66.6 92.4 113.0 92.7 38.7 22.3 15.6 11.3 9.2 9.9 7.9 6.6 3.4 2.7 2.1 0.8 0.8 0.8 23.8 26.4 25.5 0.4 JK Lakshmi Cement ADD 428 555 29.6 50,375 787 118 21.2 43.1 57.2 204.5 103.7 32.6 20.2 9.9 7.5 9.0 5.9 4.5 3.1 2.4 1.8 0.5 0.5 0.5 16.5 27.2 27.7 0.7 Orient Cement ADD 162 180 11.0 33,230 519 205 8.9 12.9 17.0 668.3 45.2 31.5 18.2 12.5 9.5 9.0 7.3 5.9 3.0 2.5 2.0 1.1 1.2 1.4 17.3 21.5 23.4 0.9 Shree Cement SELL 18,941 14,000 (26.1) 659,841 10,308 35 599.4 690.6 894.9 56.0 15.2 29.6 31.6 27.4 21.2 19.1 15.2 11.9 6.8 5.5 4.4 0.1 0.1 0.1 24.0 22.2 23.1 4.5 UltraTech Cement SELL 4,222 3,100 (26.6) 1,159,123 18,107 275 130.8 162.7 192.4 36.0 24.3 18.3 32.3 26.0 21.9 18.1 14.8 12.4 4.3 3.7 3.2 0.2 0.2 0.2 14.0 15.3 15.6 15.8 Cement Cautious 4,029,005 62,939 46.6 28.5 22.6 28.2 21.9 17.9 13.4 10.4 8.4 3.4 3.0 2.6 0.4 0.4 0.4 12.1 13.6 14.5 93.3 Consumer products Asian Paints REDUCE 1,255 1,000 (20.3) 1,203,985 18,808 959 21.9 25.8 30.0 9.2 17.9 16.1 57.4 48.7 41.9 35.8 30.1 25.8 14.2 12.9 11.6 0.9 1.1 1.3 26.1 27.8 29.2 15.9 Bajaj Corp. ADD 396 460 16.2 58,410 912 148 16.9 19.4 21.5 7.1 14.5 11.3 23.4 20.5 18.4 20.2 16.9 14.3 11.4 10.8 10.2 3.3 3.7 4.0 49.5 54.2 57.0 0.5 Britannia Industries ADD 4,316 4,300 (0.4) 518,175 8,095 120 88.5 110.0 132.0 20.0 24.4 20.0 48.8 39.2 32.7 32.2 26.0 21.7 15.4 12.3 10.0 0.6 0.7 1.0 35.0 34.8 33.6 9.1 Coffee Day Enterprises BUY 244 290 18.7 50,316 786 206 5.8 9.8 14.1 158.2 69.7 43.9 42.2 24.9 17.3 12.3 10.8 9.4 2.1 2.0 1.8 — — — 5.2 8.3 10.8 0.3 Colgate-Palmolive (India) ADD 1,157 1,200 3.7 314,810 4,918 272 24.5 29.9 35.6 18.8 22.1 19.0 47.2 38.7 32.5 27.8 22.9 19.5 20.8 17.4 14.6 1.1 1.4 1.6 47.8 49.0 49.0 6.3 Dabur India REDUCE 307 300 (2.2) 540,611 8,445 1,762 7.7 8.8 9.9 7.4 13.9 13.3 39.9 35.0 30.9 34.3 29.8 25.8 9.8 8.6 7.6 1.0 1.2 1.5 26.1 26.1 26.2 6.5 GlaxoSmithKline Consumer ADD 5,105 5,750 12.6 214,694 3,354 42 158.0 180.3 200.7 1.2 14.1 11.3 32.3 28.3 25.4 21.9 18.5 16.0 6.3 5.8 5.4 1.6 1.8 2.2 20.4 21.4 22.0 0.7 Godrej Consumer Products SELL 939 820 (12.7) 639,666 9,993 681 21.3 24.6 28.2 11.3 15.3 14.7 44.1 38.2 33.3 31.8 27.0 23.3 10.5 9.0 7.8 0.8 0.8 0.9 25.5 25.4 25.0 13.4 Hindustan Unilever REDUCE 1,247 1,100 (11.8) 2,698,346 42,152 2,160 23.2 26.7 30.2 18.0 15.4 12.9 53.8 46.6 41.3 36.9 32.0 28.3 39.3 37.4 35.7 1.4 1.7 1.9 75.0 82.2 88.5 22.3 ITC ADD 278 340 22.5 3,380,644 52,811 12,235 9.2 10.2 11.4 11.0 11.0 12.2 30.3 27.3 24.3 20.1 18.0 15.9 7.0 6.7 6.4 2.1 2.4 2.8 22.0 23.9 26.1 73.0 Jubilant Foodworks SELL 1,425 1,025 (28.1) 94,011 1,469 66 16.7 26.5 37.7 59.4 58.3 42.3 85.1 53.8 37.8 27.0 20.9 16.1 10.8 9.7 8.4 0.4 0.6 0.8 13.2 19.0 23.8 20.9 Jyothy Laboratories NR 417 — — 75,798 1,184 182 10.9 11.4 12.8 67.1 5.0 11.6 38.3 36.5 32.7 28.3 24.9 22.0 6.6 6.3 6.0 1.4 1.7 1.9 17.6 17.6 18.7 0.7 Manpasand Beverages REDUCE 899 760 (15.4) 51,417 803 57 17.5 23.4 34.0 37.7 34.0 45.1 51.4 38.4 26.4 25.4 17.3 12.7 4.1 3.8 3.3 0.1 0.2 0.3 8.3 10.2 13.4 1.2 Marico REDUCE 330 290 (12.1) 425,985 6,655 1,291 6.6 7.7 8.6 13.7 15.9 12.1 49.7 42.9 38.3 34.9 30.0 26.4 16.4 14.7 13.3 1.1 1.4 1.6 34.8 36.1 36.5 6.5 Nestle India REDUCE 7,389 6,100 (17.4) 712,392 11,129 96 123.4 148.3 170.7 17.6 20.1 15.2 59.9 49.8 43.3 33.5 28.3 24.7 22.1 20.8 19.7 1.2 1.4 1.7 38.2 43.0 46.7 5.5 Page Industries REDUCE 18,601 15,200 (18.3) 207,474 3,241 11 295.1 358.7 440.7 25.7 21.5 22.9 63.0 51.9 42.2 40.6 33.2 27.2 25.0 20.2 16.4 0.7 0.8 1.0 44.0 43.1 42.9 4.4 PC Jeweller ADD 351 290 (17.4) 125,825 1,966 394 14.0 16.4 18.6 18.8 17.4 13.6 25.1 21.4 18.9 11.7 10.0 8.4 3.2 2.8 2.5 0.2 0.4 0.5 14.4 14.1 14.1 12.3 Pidilite Industries REDUCE 851 775 (8.9) 436,062 6,812 513 17.9 21.4 25.1 6.8 19.4 17.3 47.5 39.7 33.9 31.9 26.6 22.3 10.9 9.3 8.0 0.7 0.8 1.0 24.5 25.2 25.4 6.0 S H Kelkar and Company ADD 258 295 14.5 37,262 582 145 8.6 10.1 11.7 19.0 17.1 16.3 29.9 25.5 21.9 18.2 15.4 13.2 4.2 3.7 3.4 0.9 1.1 1.3 14.6 15.4 16.1 0.5 Tata Global Beverages ADD 212 200 (5.7) 133,831 2,091 631 7.4 8.9 10.5 21.2 21.3 17.1 28.7 23.7 20.2 15.2 12.7 10.8 2.0 1.9 1.8 1.2 1.5 1.7 7.3 8.4 9.4 15.8 Titan Company SELL 638 470 (26.3) 566,319 8,847 888 12.4 14.6 17.0 38.9 17.7 16.2 51.5 43.7 37.6 34.5 28.8 24.3 11.4 9.8 8.5 0.6 0.7 0.9 23.9 24.1 24.1 16.8 United Breweries SELL 780 675 (13.5) 206,342 3,223 264 11.9 15.7 19.4 37.4 31.5 23.8 65.3 49.7 40.1 27.3 23.2 19.7 8.0 7.1 6.2 0.2 0.3 0.4 12.8 15.0 16.4 2.7 United Spirits REDUCE 2,604 2,400 (7.8) 378,448 5,912 145 34.8 55.4 72.3 27.2 59.4 30.4 74.9 47.0 36.0 39.1 28.3 22.4 12.9 8.9 6.7 — — — 20.7 22.4 21.3 19.2 Daily Summary India Varun Beverages BUY 525 580 10.4 95,897 1,498 182 12.0 15.2 19.8 39.0 27.3 29.7 43.9 34.5 26.6 13.7 11.8 10.2 4.5 4.0 3.5 — — — 10.9 12.3 14.1 1.2 Consumer products Cautious 13,166,720 205,685 15.0 16.3 15.0 42.7 36.7 31.9 27.6 23.7 20.5 10.6 9.6 8.7 1.3 1.5 1.8 24.8 26.2 27.3 261.7 Energy BPCL SELL 534 440 (17.6) 1,158,056 18,091 1,967 34.4 39.3 42.7 (15.9) 14.3 8.7 15.5 13.6 12.5 11.2 9.6 8.8 3.1 2.7 2.4 1.9 2.2 2.4 21.3 21.2 20.2 32.3 Castrol India ADD 390 450 15.4 192,829 3,012 495 13.4 15.0 16.7 (0.3) 12.0 11.7 29.2 26.1 23.3 18.7 16.7 14.9 32.0 30.7 28.4 2.8 3.1 3.3 110.4 120.4 126.5 5.1 GAIL (India) BUY 410 440 7.4 692,758 10,822 1,691 25.9 28.7 31.3 15.7 11.0 9.1 15.8 14.3 13.1 9.9 9.1 8.4 1.7 1.6 1.5 2.3 2.4 2.7 11.1 11.5 11.8 17.5 GSPL ADD 199 190 (4.4) 112,077 1,751 564 11.3 12.0 13.2 28.3 6.0 10.4 17.6 16.6 15.0 8.8 8.1 7.2 2.2 2.1 1.9 1.1 1.5 2.7 13.5 12.9 13.2 2.6 HPCL REDUCE 482 420 (12.9) 734,787 11,479 1,524 34.5 33.5 35.2 (19.9) (3.0) 5.1 14.0 14.4 13.7 9.9 10.2 10.0 3.1 2.7 2.4 2.2 2.1 2.2 23.9 20.2 18.7 33.4 Indraprastha Gas SELL 1,428 1,070 (25.1) 199,899 3,123 140 53.6 59.5 65.0 23.8 11.0 9.2 26.6 24.0 22.0 16.4 14.7 13.4 5.9 5.1 4.6 0.9 1.1 1.4 23.7 22.8 22.0 8.3 IOCL REDUCE 435 435 0.0 2,111,833 32,990 4,739 37.5 40.6 42.1 (31.3) 8.1 3.8 11.6 10.7 10.3 6.6 6.1 5.8 1.9 1.7 1.5 3.3 3.3 3.4 16.9 16.5 15.6 33.3 Mahanagar Gas SELL 1,180 785 (33.5) 116,533 1,820 99 47.9 47.5 46.8 20.2 (0.9) (1.4) 24.6 24.9 25.2 14.4 14.4 14.4 5.6 5.2 4.8 1.8 2.0 2.0 24.2 21.7 19.7 3.6 ONGC ADD 162 190 17.2 2,080,909 32,507 12,833 14.9 19.6 22.0 (11.6) 31.5 12.2 10.9 8.3 7.4 4.6 3.8 3.4 0.9 0.8 0.8 3.1 4.0 4.6 8.4 10.4 11.0 20.1 Oil India SELL 331 270 (18.5) 250,776 3,918 757 22.8 28.2 30.5 (24.6) 23.4 8.3 14.5 11.8 10.9 8.2 6.7 6.2 0.9 0.9 0.8 3.0 3.8 4.1 6.0 7.4 7.7 2.8 Petronet LNG BUY 236 245 3.8 354,150 5,532 1,500 13.2 15.2 17.3 16.1 14.7 14.4 17.9 15.6 13.6 10.9 9.3 7.9 3.9 3.4 3.0 1.5 1.9 2.6 23.8 23.4 23.3 16.9 Reliance Industries REDUCE 824 750 (9.0) 4,874,953 76,154 5,918 40.8 46.3 52.1 (19.2) 13.5 12.5 20.2 17.8 15.8 13.5 9.8 8.5 1.7 1.6 1.5 0.8 1.0 1.1 8.3 8.8 9.3 116.0

KOTAK INSTITUTIONAL EQUITIES RESEARCH EQUITIES INSTITUTIONAL KOTAK Energy Attractive 12,879,560 201,199 (18.0) 15.4 9.7 15.4 13.3 12.2 8.9 7.3 6.5 1.7 1.5 1.4 1.9 2.2 2.4 10.8 11.5 11.7 292.1

-

September 13, 2017 13, September Source: Company, Bloomberg, Kotak Institutional Equities estimates

Kotak Institutional Equities: Valuation summary of KIE Universe stocks India Daily Summary Daily Summary India Target O/S Price (Rs) price Upside Mkt cap. shares EPS (Rs) EPS growth (%) PER (X) EV/EBITDA (X) Price/BV (X) Dividend yield (%) RoE (%) ADVT-3mo Company Rating 12-Sep-17 (Rs) (%) (Rs mn) (US$ mn) (mn) 2018E 2019E 2020E 2018E 2019E 2020E 2018E 2019E 2020E 2018E 2019E 2020E 2018E 2019E 2020E 2018E 2019E 2020E 2018E 2019E 2020E (US$ mn)

KOTAK INSTITUTIONAL EQUITIES RESEARCH EQUITIES INSTITUTIONAL KOTAK Industrials ABB SELL 1,398 1,160 (17.0) 296,163 4,627 212 23.3 32.9 44.5 32.0 41.2 35.3 59.9 42.4 31.4 33.5 25.8 19.6 8.2 7.3 6.2 0.5 0.6 0.6 14.4 18.2 21.3 2.4 BHEL SELL 132 107 (19.0) 323,206 5,049 2,448 2.8 6.6 8.7 38.7 133.7 33.2 47.0 20.1 15.1 17.1 8.4 6.0 1.0 1.0 0.9 0.5 1.3 1.7 2.1 4.8 6.2 9.2 Carborundum Universal SELL 350 290 (17.1) 66,036 1,032 189 11.4 14.7 17.9 22.8 28.9 21.8 30.7 23.8 19.6 19.3 15.0 12.2 4.3 3.9 3.4 1.0 1.3 1.5 14.8 17.2 18.6 0.8 CG Power and Industrial REDUCE 85 77 (9.7) 53,430 835 627 2.0 4.3 6.6 (32.4) 114.2 54.3 42.9 20.0 13.0 14.2 9.2 6.8 1.4 1.5 1.4 -2— (0.5) 1.5 3.2 7.3 10.9 2.8 Crompton Greaves Consumer REDUCE 217 210 (3.4) 136,255 2,129 627 5.3 6.5 7.8 13.8 22.6 19.6 40.8 33.3 27.8 25.1 20.7 17.5 16.0 11.0 8.4 0.7 0.9 1.1 47.9 39.3 34.3 2.6 Cummins India SELL 925 830 (10.3) 256,355 4,005 277 28.4 32.2 36.5 8.2 13.3 13.2 32.5 28.7 25.4 29.3 25.0 21.9 6.3 5.9 5.4 1.7 1.8 2.1 20.2 21.2 22.2 4.9 Havells India SELL 506 410 (19.0) 316,388 4,942 625 9.9 13.1 16.0 4.0 33.1 21.3 51.2 38.5 31.7 30.3 23.1 19.2 8.8 8.0 7.2 0.8 1.2 1.6 18.0 21.7 23.9 8.3 Kalpataru Power Transmission BUY 349 415 19.0 53,504 836 153 16.3 23.7 33.2 14.8 45.4 39.8 21.4 14.7 10.5 8.0 6.8 5.5 2.0 1.8 1.6 0.6 0.6 0.6 10.0 13.2 16.2 0.8 KEC International ADD 327 315 (3.8) 84,184 1,315 257 15.5 20.2 24.2 31.0 30.3 19.6 21.1 16.2 13.5 10.4 8.6 7.4 4.4 3.6 2.9 0.6 0.8 1.0 22.8 24.3 23.7 4.1

L&T REDUCE 1,230 1,190 (3.3) 1,723,021 26,916 1,399 49.1 56.3 69.6 16.1 14.6 23.7 25.0 21.9 17.7 20.1 17.6 15.7 3.4 3.1 2.8 1.4 1.6 2.0 14.1 14.9 16.9 49.7 Siemens SELL 1,345 1,020 (24.2) 479,071 7,484 356 28.8 36.8 46.2 28.7 27.7 25.3 46.6 36.5 29.1 28.7 22.2 17.5 6.6 6.1 5.6 1.1 1.4 1.7 14.5 17.3 20.1 3.4 Thermax REDUCE 888 890 0.2 105,817 1,653 113 26.5 35.1 42.9 23.9 32.6 22.2 33.5 25.3 20.7 21.6 17.4 14.4 3.6 3.3 2.9 0.7 0.8 0.9 11.3 13.7 15.0 0.6 Voltas SELL 563 460 (18.2) 186,123 2,908 331 17.4 18.0 20.7 13.5 3.1 15.5 32.3 31.3 27.1 26.1 22.2 19.2 4.9 4.4 4.0 0.6 0.8 0.9 16.3 14.9 15.4 10.9

Industrials Cautious 4,079,551 63,729 17.1 26.4 24.8 32.2 25.4 20.4 21.0 17.1 14.6 3.4 3.2 2.9 1.0 1.3 1.6 10.7 12.5 14.3 100.6 -

Infrastructure 2017 13, September Adani Port and SEZ ADD 389 405 4.1 805,704 12,586 2,071 16.9 21.3 22.2 (10.6) 26.2 4.1 23.0 18.3 17.5 15.2 12.4 11.7 3.9 3.4 2.9 0.6 0.9 1.0 18.4 19.9 17.8 20.2 Ashoka Buildcon BUY 200 265 32.6 37,420 585 188 13.3 15.4 17.3 35.5 15.7 12.4 15.0 13.0 11.6 10.8 9.0 8.3 1.8 1.6 1.5 1.1 1.2 1.4 12.7 13.2 13.4 0.7 Container Corporation REDUCE 1,398 1,160 (17.0) 340,717 5,323 244 38.5 44.3 53.1 18.1 15.1 19.8 36.3 31.6 26.3 19.3 16.1 13.0 3.7 3.4 3.2 1.5 1.8 2.1 10.3 11.2 12.7 7.6

Gateway Distriparks BUY 235 265 12.6 25,600 400 109 7.1 11.1 15.8 4.4 57.5 42.7 33.4 21.2 14.9 25.4 20.4 16.2 2.4 2.2 2.0 0.9 1.4 2.0 7.4 10.9 14.3 1.2 Gujarat Pipavav Port REDUCE 141 150 6.4 68,165 1,065 483 5.6 6.7 7.9 7.4 20.7 18.6 25.4 21.0 17.7 14.0 11.7 9.9 3.3 3.1 3.0 3.0 3.6 4.2 13.1 15.2 17.4 1.9 IRB Infrastructure BUY 214 255 19.3 75,122 1,174 351 28.4 30.7 28.1 39.4 8.2 (8.7) 7.5 7.0 7.6 6.8 5.3 5.1 1.2 1.0 0.9 — — — 17.2 15.7 12.4 6.4 Sadbhav Engineering ADD 295 320 8.4 50,665 791 172 15.4 18.7 15.9 41.0 21.2 (15.1) 19.1 15.8 18.6 14.5 12.3 10.7 2.7 2.3 2.1 — — — 14.9 15.7 11.7 0.5 Infrastructure Attractive 1,403,394 21,923 2.9 21.2 5.2 22.3 18.4 17.5 13.7 11.3 10.5 3.2 2.9 2.5 0.9 1.2 1.4 14.6 15.5 14.6 38.5 Internet Info Edge ADD 996 1,015 1.9 120,869 1,888 121 21.8 26.4 31.5 29.2 20.9 19.5 45.7 37.8 31.6 32.1 25.9 21.1 5.6 5.0 4.5 0.5 0.7 0.8 12.7 14.0 15.1 1.6 Just Dial REDUCE 391 390 (0.2) 27,176 425 70 15.3 17.8 19.6 (12.6) 16.6 10.2 25.6 22.0 19.9 13.1 10.3 8.5 2.7 2.5 2.2 — 0.5 0.5 11.1 11.7 11.7 15.3 Internet Attractive 148,045 2,313 13.6 19.6 16.9 40.0 33.4 28.6 27.0 21.7 18.0 4.7 4.2 3.8 0.5 0.6 0.7 11.7 12.7 13.3 16.9 Media DB Corp. REDUCE 371 390 5.2 68,166 1,065 184 22.8 28.4 31.7 11.3 24.5 11.5 16.2 13.0 11.7 8.9 7.2 6.2 3.9 3.5 3.3 3.5 4.3 5.4 25.2 28.5 29.1 0.4 DishTV ADD 78 88 12.5 83,413 1,303 1,066 0.7 1.7 2.4 (27.8) 134.4 36.6 NM 45.1 33.0 9.1 7.6 6.7 14.6 11.1 8.3 — — — 14.9 28.0 28.7 5.2 Jagran Prakashan REDUCE 179 200 12.0 58,370 912 311 13.2 15.3 17.4 23.7 16.3 13.8 13.6 11.7 10.3 7.4 6.4 5.5 2.8 2.6 2.4 4.5 4.8 5.0 19.9 23.3 24.3 0.9 PVR REDUCE 1,347 1,225 (9.0) 62,950 983 47 33.0 45.7 56.0 54.4 38.4 22.4 40.8 29.5 24.1 16.1 13.0 11.3 5.7 4.9 4.1 0.2 0.3 0.4 14.9 17.9 18.6 5.0 Sun TV Network ADD 826 820 (0.7) 325,435 5,084 394 28.4 35.0 40.3 8.8 23.1 15.2 29.0 23.6 20.5 20.1 16.1 13.7 7.8 7.0 6.3 2.1 2.3 2.7 28.0 31.4 32.4 16.4 Zee Entertainment Enterprises BUY 532 570 7.1 511,391 7,989 960 15.8 19.7 23.0 13.1 25.1 16.7 33.8 27.0 23.1 21.4 17.7 14.9 6.5 5.5 4.8 0.7 0.8 1.0 20.9 22.1 22.1 18.0 Media Attractive 1,109,725 17,336 11.9 26.3 16.4 30.0 23.8 20.4 16.1 13.2 11.4 6.4 5.6 4.9 1.4 1.6 1.9 21.3 23.4 23.8 45.9 Metals & Mining Coal India ADD 258 260 1.0 1,598,408 24,970 6,207 19.7 22.8 24.5 31.9 15.7 7.6 13.1 11.3 10.5 9.2 7.9 7.5 6.0 5.5 5.0 5.4 6.2 6.7 47.7 50.5 49.6 16.6 Hindalco Industries BUY 251 265 5.6 563,034 8,795 2,227 19.3 25.1 28.5 125.7 29.8 13.8 13.0 10.0 8.8 7.2 5.9 5.1 1.1 1.0 0.9 0.4 0.4 0.4 8.8 10.2 10.5 36.4 Hindustan Zinc REDUCE 313 280 (10.4) 1,320,835 20,634 4,225 23.7 26.3 25.8 20.6 10.8 (2.0) 13.2 11.9 12.1 8.8 7.3 6.7 3.5 3.0 2.6 2.3 2.5 2.5 29.5 27.2 22.8 9.7 Jindal Steel and Power BUY 146 165 13.2 133,411 2,084 915 (7.4) 7.0 12.9 64.3 194.0 85.0 (19.6) 20.8 11.3 9.0 6.8 5.9 0.5 0.4 0.4 — — — (2.3) 2.2 3.9 22.7 JSW Steel ADD 270 235 (12.9) 651,924 10,184 2,417 17.6 20.6 23.0 20.9 16.8 11.7 15.3 13.1 11.7 8.3 7.7 7.4 2.4 2.1 1.8 0.9 0.9 0.9 16.9 17.1 16.5 17.2 National Aluminium Co. ADD 82 78 (4.5) 157,920 2,467 1,933 5.8 6.3 6.9 57.4 8.9 10.1 14.2 13.0 11.8 6.3 5.4 4.5 1.4 1.3 1.2 1.2 1.2 1.2 10.5 10.5 10.6 4.4 NMDC SELL 135 110 (18.7) 428,074 6,687 3,164 10.6 9.6 10.3 30.1 (9.7) 6.8 12.7 14.1 13.2 8.2 9.2 8.5 1.8 1.7 1.7 4.1 4.1 4.1 14.6 12.5 12.8 6.2 Tata Steel ADD 683 715 4.7 663,243 10,361 971 56.6 65.6 74.4 36.8 16.0 13.3 12.1 10 9.2 7.2 6.7 6.1 1.9 1.7 1.4 1.5 1.5 1.5 15.6 17.0 16.8 49.9 Vedanta BUY 330 365 10.5 1,228,161 19,186 3,717 30.2 42.9 46.2 53.3 42.2 7.7 10.9 7.7 7.1 7.2 5.6 5.0 1.8 1.6 1.4 2.7 3.9 4.2 17.6 22.4 21.3 48.5 Metals & Mining Attractive 6,745,010 105,368 43.6 22.8 8.2 13.1 10.7 9.9 7.9 6.7 6.1 2.2 2.0 1.8 2.8 3.2 3.4 16.6 18.3 17.7 211.7 Pharmaceutical Apollo Hospitals REDUCE 1,095 1,190 8.7 152,286 2,379 139 24.7 34.2 44.9 55.4 38.5 31.3 44.3 32.0 24.4 19.9 16.6 13.6 3.9 3.6 3.2 0.6 0.8 1.0 9.1 11.6 14.0 6.3

Aurobindo Pharma ADD 758 760 0.2 444,363 6,942 584 Daily Summary India 45.2 50.6 50.9 14.6 12.0 0.6 16.8 15.0 14.9 11.2 9.6 9.0 3.7 3.0 2.5 0.3 0.4 0.4 24.8 22.3 17.0 36.0 Biocon SELL 341 230 (32.6) 204,810 3,199 601 7.6 9.6 15.3 (25.6) 26.9 58.4 45.0 35.4 22.4 20.2 15.7 11.0 3.7 3.4 3.1 0.8 1.0 1.6 8.5 10.0 14.5 20.9 Cipla BUY 561 650 16.0 451,026 7,046 805 23.1 33.0 39.8 84.5 43.3 20.5 24.3 17.0 14.1 14.7 10.7 8.8 3.1 2.7 2.4 0.8 1.2 1.5 13.6 17.2 18.1 10.5 Dr Lal Pathlabs REDUCE 804 880 9.4 67,012 1,047 83 20.9 24.0 28.4 9.4 14.7 18.6 38.5 33.5 28.3 23.2 20.0 16.7 8.4 6.9 5.8 0.4 0.4 0.5 23.8 22.6 22.3 2.3 Dr Reddy's Laboratories SELL 2,166 2,250 3.9 359,064 5,609 166 75.9 124.5 164.6 4.7 63.9 32.3 28.5 17.4 13.2 15.2 8.7 6.5 2.7 2.4 2.1 0.5 0.9 1.2 9.7 14.4 15.6 24.9 HCG BUY 262 310 18.3 22,457 351 85 1.9 3.8 6.8 (26.6) 99.6 78.9 136.9 68.6 38.3 22.0 16.3 13.3 5.0 4.6 4.1 — — — 3.7 7.0 11.4 0.5 Laurus Labs ADD 533 570 6.9 56,410 881 106 20.8 29.4 41.0 15.3 41.4 39.5 25.7 18.2 13.0 14.0 10.6 8.2 3.6 3.0 2.5 — — — 15.2 18.2 20.8 1.2 Lupin ADD 982 1,020 3.9 443,597 6,930 450 42.7 56.0 64.7 (24.8) 31.1 15.5 23.0 17.5 15.2 12.5 9.6 8.1 2.9 2.6 2.2 0.7 0.9 1.0 13.4 15.5 15.7 34.3 Sun Pharmaceuticals REDUCE 483 410 (15.2) 1,159,796 18,118 2,406 15.7 21.2 26.4 (45.7) 35.2 24.2 30.8 22.8 18.3 14.9 11.2 9.0 3.0 2.6 2.3 0.5 0.9 1.1 9.9 12.3 13.6 40.3 Torrent Pharmaceuticals REDUCE 1,206 1,155 (4.2) 204,033 3,187 169 54.8 63.2 68.9 (0.7) 15.2 9.1 22.0 19.1 17.5 14.5 12.5 11.4 4.0 3.5 3.0 1.0 1.2 1.3 19.7 18.2 17.2 3.5 Pharmaceuticals Cautious 3,564,854 55,689 (15.9) 32.2 20.2 26.2 19.8 16.5 14.4 10.9 9.0 3.2 2.8 2.5 0.6 0.9 1.1 12.2 14.1 14.9 180.7

Source: Company, Bloomberg, Kotak Institutional Equities estimates

-

September 13, 2017 September 13,

30

Kotak Institutional Equities: Valuation summary of KIE Universe stocks

Target O/S

31 Price (Rs) price Upside Mkt cap. shares EPS (Rs) EPS growth (%) PER (X) EV/EBITDA (X) Price/BV (X) Dividend yield (%) RoE (%) ADVT-3mo Company Rating 12-Sep-17 (Rs) (%) (Rs mn) (US$ mn) (mn) 2018E 2019E 2020E 2018E 2019E 2020E 2018E 2019E 2020E 2018E 2019E 2020E 2018E 2019E 2020E 2018E 2019E 2020E 2018E 2019E 2020E (US$ mn) Real Estate Brigade Enterprises BUY 268 320 19.4 36,365 568 136 11.1 11.4 12.1 (17.4) 2.1 6.5 24.1 23.6 22.1 10.9 11.4 11.0 1.6 1.5 1.4 0.9 0.9 0.9 7.5 6.5 6.6 0.6 DLF REDUCE 196 185 (5.8) 350,471 5,475 1,784 2.1 2.2 2.7 (45.9) 5.6 23.4 93.4 88.5 71.7 19.1 17.4 17.4 1.4 1.4 1.4 1.0 1.0 1.0 1.5 1.6 2.0 35.4 Godrej Properties REDUCE 653 330 (49.5) 141,424 2,209 216 4.9 8.4 7.0 (48.5) 71.2 (17.0) 132.8 77.5 93.4 ###### 125.5 167.7 6.7 6.3 6.1 - 0.4 0.4 5.2 8.4 6.7 2.5 Oberoi Realty REDUCE 416 390 (6.1) 141,122 2,205 339 27.4 45.9 39.6 145.2 67.6 (13.7) 15.2 9.1 10.5 9.7 8.8 7.5 2.2 1.8 1.5 0.5 0.5 0.5 15.4 21.7 15.7 1.3 Prestige Estates Projects BUY 255 260 2.1 95,531 1,492 375 8.3 10.1 - (17.7) 21.9 (100.0) 30.7 25.2 - 14.7 14.0 - 2.0 1.9 #DIV/0! 0.6 0.6 - 6.8 7.8 - 1.2 Sobha ADD 404 440 8.8 38,941 608 96 19.6 21.5 24.5 30.0 9.5 14.1 20.6 18.8 16.5 12.4 11.8 11.0 1.4 1.4 1.3 1.7 1.7 1.7 7.0 7.3 8.0 1.8 Real Estate Attractive 843,892 13,183 7.9 33.2 (15.1) 36.0 27.0 31.9 17.3 16.1 16.0 1.9 1.8 1.9 0.7 0.8 0.7 5.2 6.6 6.0 44.4 Technology HCL Technologies REDUCE 864 900 4.2 1,232,989 19,261 1,400 62.7 65.1 69.0 6.0 3.9 6.0 13.8 13.3 12.5 10.0 9.1 8.4 3.2 2.9 2.7 1.0 3.8 4.3 24.6 23.1 22.3 17.0 Hexaware Technologies REDUCE 274 250 (8.6) 82,714 1,292 304 15.2 16.7 18.3 10.9 9.8 9.5 18.0 16.4 15.0 12.0 10.5 9.3 4.4 4.0 3.6 2.9 2.9 3.7 25.7 25.5 25.4 4.8 Infosys NR 884 — — 2,030,635 31,722 2,175 62.8 64.5 68.2 0.1 2.8 5.7 14.1 13.7 13.0 10.2 9.6 8.8 3.1 2.9 2.7 3.7 4.1 4.4 21.2 22.1 21.8 114.5 L&T Infotech BUY 768 850 10.7 131,318 2,051 175 59.5 63.7 69.3 6.7 7.1 8.8 12.9 12.0 11.1 9.2 7.8 6.9 3.7 3.2 2.8 3.1 3.7 4.2 30.5 28.3 27.1 0.5 Mindtree NR 443 — — 74,394 1,162 164 29.3 33.4 38.0 16.7 14.3 13.5 15.1 13.2 11.7 9.1 7.1 5.9 2.8 2.4 2.1 1.8 2.0 2.3 18.4 19.5 19.4 4.2 Mphasis SELL 603 530 (12.1) 126,860 1,982 193 41.3 42.3 43.2 7.8 2.4 2.1 14.6 14.3 14.0 10.7 9.9 9.4 2.2 2.0 1.9 3.3 3.3 3.3 13.8 14.7 14.1 0.8 TCS REDUCE 2,487 2,350 (5.5) 4,900,060 76,547 1,914 133.1 143.3 156.4 (0.3) 7.7 9.1 18.7 17.4 15.9 13.7 12.3 11.2 6.1 5.6 5.1 3.3 3.6 3.9 30.5 33.4 33.5 38.3 Tech Mahindra ADD 441 450 1.9 384,813 6,011 883 32.9 36.6 41.6 2.7 11.4 13.5 13.4 12.0 10.6 7.9 6.4 5.3 2.1 1.9 1.7 2.1 2.1 2.1 16.7 16.6 16.7 15.4 Wipro REDUCE 298 265 (11.1) 1,451,490 22,675 4,507 17.7 19.6 21.9 1.1 10.7 11.6 16.9 15.2 13.6 10.9 9.5 8.3 2.8 2.4 2.1 0.3 0.5 0.8 16.4 16.7 16.1 15.2 Technology Cautious 10,415,273 162,703 (1.5) 5.8 8.5 16.8 15.9 14.6 11.5 10.4 9.4 4.0 3.6 3.3 2.6 3.1 3.4 24.1 23.0 22.7 210.6 Telecom Bharti Airtel REDUCE 405 430 6.1 1,619,746 25,303 3,997 2.8 8.5 16.2 (70.7) 204.8 89.9 145.1 47.6 25.1 8.9 7.4 6.0 2.4 2.4 2.2 0.2 0.2 0.7 1.7 5.0 9.1 22.1 Bharti Infratel REDUCE 370 350 (5.4) 684,540 10,694 1,850 15.8 18.0 19.5 6.6 14.0 8.0 23.4 20.5 19.0 10.2 9.2 8.7 4.3 4.3 4.2 3.3 3.8 4.1 18.7 21.0 22.2 23.6 IDEA RS 79 — — 283,859 4,434 3,605 (10.5) (9.0) (4.6) (734.6) 15.1 48.1 (7.5) (8.8) (16.9) 11.6 9.2 6.8 1.4 1.6 1.8 — — — (16.7) (16.7) (9.9) 18.4 Tata Communications ADD 698 720 3.1 199,058 3,110 285 13.6 18.8 23.2 29.9 37.5 23.5 51.2 37.2 30.2 11.0 9.7 8.8 10.1 8.0 6.3 0.9 0.9 1.1 21.8 23.9 23.4 6.4 Telecom Cautious 2,787,204 43,541 (90.2) 542.5 123.7 442.7 68.9 30.8 9.6 8.0 6.6 2.6 2.7 2.6 1.0 1.1 1.4 0.6 3.8 8.3 70.4 Utilities Adani Power SELL 33 26 (21.6) 127,858 1,997 3,857 (0.0) 1.8 4.3 99.3 5,075.4 136.8 (914.4) 18.4 7.8 7.0 6.3 5.3 4.3 3.5 2.4 — — — (0.5) 20.9 36.6 5.1 CESC ADD 1,049 1,000 (4.7) 139,112 2,173 133 85.2 103.9 112.3 63.4 22.0 8.1 12.3 10.1 9.3 8.1 7.2 6.6 0.9 0.9 0.8 1.2 1.3 1.3 7.6 8.7 8.8 9.9 JSW Energy ADD 77 67 (13.3) 126,694 1,979 1,640 3.9 6.0 6.4 3.7 52.7 6.4 19.6 12.9 12.1 7.5 6.1 5.7 1.2 1.1 1.1 2.6 2.6 2.6 6.1 9.0 9.1 11.8 NHPC ADD 29 32 10.7 296,494 4,632 10,259 3.2 3.6 4.1 7.4 13.8 12.8 9.1 8.0 7.1 9.0 7.0 6.4 1.0 0.9 0.9 6.1 6.9 7.8 11.0 12.0 13.0 2.7 NTPC BUY 170 180 5.7 1,404,615 21,942 8,245 13.8 15.9 17.1 12.1 15.1 7.3 12.3 10.7 10.0 10.4 8.5 7.3 1.4 1.3 1.2 2.4 2.8 3.0 11.4 12.2 12.1 18.9 Power Grid BUY 215 250 16.1 1,126,361 17,596 5,232 16.5 19.0 21.6 14.6 15.2 14.0 13.1 11.4 10.0 8.4 7.5 6.8 2.0 1.8 1.6 1.6 1.8 2.0 16.2 16.5 16.6 17.1 Reliance Power SELL 40 38 (5.9) 113,327 1,770 2,805 4.8 5.0 5.8 14.6 4.5 16.7 8.5 8.1 6.9 7.7 7.4 6.8 0.5 0.5 0.4 — — — 6.1 6.0 6.6 2.1 Tata Power REDUCE 81 80 (1.2) 218,951 3,420 2,800 5.6 6.6 7.6 (12.4) 18.2 15.3 14.5 12.3 10.7 9.9 9.6 9.2 1.8 1.6 1.4 1.5 1.5 1.5 12.6 13.5 13.9 5.4 Utilities Attractive 3,553,413 55,510 22.1 18.3 13.5 12.7 10.8 9.5 8.9 7.7 6.9 1.4 1.3 1.2 2.2 2.5 2.7 11.0 11.9 12.4 73.1

Others Daily Summary India Astral Poly Technik SELL 723 450 (37.8) 86,579 1,353 120 14.4 18.2 22.2 18.7 26.0 22.1 50.2 39.8 32.6 27.7 21.8 17.7 8.6 7.1 5.9 0.1 0.1 0.1 18.6 19.5 19.8 1.1 Avenue Supermarts SELL 1,087 685 (37.0) 678,442 10,598 624 12.7 16.2 20.0 49.8 27.2 23.5 85.4 67.1 54.3 50.3 39.3 31.9 14.6 12.0 9.8 — — — 18.7 19.7 19.9 — Bayer Cropscience ADD 4,231 4,900 15.8 149,574 2,337 34 112.9 135.6 169.1 37.2 20.0 24.7 37.5 31.2 25.0 25.9 21.0 16.7 7.9 6.6 5.5 0.5 0.6 0.8 19.9 23.1 24.0 0.9 Cera Sanitaryware REDUCE 2,994 2,655 (11.3) 38,943 608 13 88.7 106.2 129.0 16.3 19.7 21.5 33.8 28.2 23.2 19.7 16.7 13.6 6.3 5.1 4.3 0.3 0.3 0.2 20.3 20.0 20.1 0.3 Dhanuka Agritech REDUCE 672 750 11.6 33,613 525 50 26.6 31.0 36.6 11.3 16.6 18.1 25.3 21.7 18.4 17.3 13.8 11.6 5.6 4.8 4.0 1.0 1.2 1.4 24.2 23.9 23.8 0.3 Godrej Industries RS 648 — — 217,987 3,405 336 14.6 15.9 19.7 6.8 8.9 24.2 44.5 40.8 32.9 39.0 33.0 36.0 6.0 5.3 4.7 0.3 0.3 0.3 14.4 13.9 15.1 4.3 HSIL ADD 382 360 (5.8) 27,643 432 72 16.3 21.1 23.8 14.7 29.3 13.1 23.4 18.1 16.0 9.5 8.1 7.4 1.8 1.7 1.5 1.0 1.0 1.0 7.9 9.6 10.0 0.7 InterGlobe Aviation ADD 1,203 1,400 16.4 435,125 6,797 360 72.1 92.2 112.5 56.5 28.0 22.0 16.7 13.0 10.7 10.5 7.5 5.2 7.1 4.6 3.2 4.4 5.7 6.9 54.2 42.9 35.4 12.7 Kaveri Seed SELL 576 525 (8.8) 39,741 621 66 33.9 41.2 46.6 19.2 21.3 13.1 17.0 14.0 12.4 14.3 11.4 9.6 4.1 3.5 3.0 1.8 2.5 2.8 23.5 27.1 26.3 9.1 PI Industries BUY 757 910 20.2 104,174 1,627 136 32.4 37.8 44.4 (3.3) 16.7 17.5 23.4 20.0 17.0 17.0 13.9 11.7 5.3 4.3 3.6 0.5 0.6 0.7 25.2 23.8 22.9 2.8 Rallis India ADD 223 260 16.5 43,405 678 194 11.3 14.6 17.1 15.9 29.2 17.5 19.8 15.3 13.1 12.1 9.3 7.7 3.4 3.0 2.5 1.5 1.6 1.8 18.3 20.7 20.9 0.7 SRF BUY 1,595 1,800 12.9 91,580 1,431 57 82.4 105.0 124.3 (6.9) 27.4 18.4 19.4 15.2 12.8 11.0 8.8 7.6 2.6 2.3 2.0 0.8 0.8 0.9 14.4 16.1 16.6 4.2 Tata Chemicals ADD 633 650 2.6 161,337 2,520 255 44.8 48.8 52.8 33.5 9.0 8.2 14.1 13.0 12.0 8.0 7.0 6.2 1.8 1.7 1.5 1.7 1.7 1.7 14.7 13.5 13.2 6.5 TeamLease Services ADD 1,654 1,480 (10.5) 28,283 442 17 41.3 53.6 68.0 6.6 29.7 26.8 40.0 30.8 24.3 39.8 30.0 22.9 6.3 5.2 4.3 — — — 17.0 18.4 19.3 0.4 UPL ADD 815 920 12.9 413,822 6,465 507 44.9 56.5 65.4 25.9 25.8 15.8 18.1 14.4 12.5 11.4 9.6 8.2 4.1 3.4 2.8 0.9 1.1 1.3 24.9 25.7 24.4 15.4

KOTAK INSTITUTIONAL EQUITIES RESEARCH EQUITIES INSTITUTIONAL KOTAK Vardhman Textiles ADD 1,187 1,225 3.2 68,140 1,064 55 95.3 122.4 132.3 (16.4) 28.4 8.1 12.5 9.7 9.0 9.4 6.5 6.0 1.4 1.3 1.1 1.7 1.7 2.5 11.7 13.6 13.3 1.0

Whirlpool SELL 1,216 1,020 (16.1) 154,270 2,410 127 30.9 38.0 46.3 22.6 22.8 21.7 39.3 32.0 26.3 24.4 20.2 16.6 8.9 7.3 6.0 0.5 0.6 0.8 24.7 25.0 25.1 1.5 -

Others 2,706,073 42,273 25.9 23.2 18.2 26.2 21.3 18.0 16.6 13.4 11.3 5.3 4.4 3.6 1.2 1.4 1.7 20.2 20.5 20.1 60.8 September 13, 2017 13, September KIE universe 99,451,948 1,552,276 5.5 25.9 16.3 21.8 17.3 14.9 11.7 9.7 8.6 2.8 2.5 2.3 1.4 1.7 1.9 12.7 14.5 15.2 KIE universe (ex-energy) 86,572,388 1,351,077 12.7 28.3 17.6 23.2 18.1 15.4 12.5 10.5 9.2 3.1 2.8 2.5 1.3 1.6 1.8 13.3 15.3 16.1

Notes: (a) We have used adjusted book values for banking companies. (b) 2017 means calendar year 2016, similarly for 2018 and 2019 for these particular companies. (c) Exchange rate (Rs/US$)= 64.01 Source: Company, Bloomberg, Kotak Institutional Equities estimates

Disclosures a sufficient able regulation(s) of of the following Asof June 30, 2017 in an advisory capacity in a merger or strategic transaction

vestment and rating price target,if any, no longer are in effect for this stock Percentageof companies covered by Kotak Equities,Institutional within the specified category. Percentageof companies within each category whichfor Kotak Institutional Equities and or its affiliates has provided investment banking services within the previousmonths. 12 The * above categories are defined as expectfollows: this = Buy We stock to deliver more than 15% returns theover next months; 12 Add = expectWe this stock to deliver5-15% returns over the next months; 12 Reduce =expectWe this stock to deliver -5-+5% returns over the next months; 12 =Sell expectWe this stock to deliver lessthan -5% returns over the next months. 12 targetOur prices are also on a 12-month horizon Thesebasis. ratings are used illustratively to comply with applicableregulations. As of 30/06/2017 Kotak InstitutionalEquities Investment Research had investmentratings on 196 equity securities.

SELL 3.1%

23.0%

his company. basis. 3.6% +5% returns over the next 12 months. 27.6%

- REDUCE 5 - is not meaningful and is therefore excluded. 15% returns over the next 12 months. 5% returns over the next months.12 The information is not available for display is not or applicable. - -

month horizon -

ADD 2.6% 36.2% Kotak SecuritiesKotak has suspended coverage of this company. to to deliver 5

Kotak SecuritiesKotak Research has suspended theinvestment and rating price target, if any,for this stock,because there is not

The information

Kotak SecuritiesKotak does not cover t

The investment and rating target price, any, if have been suspended temporarily. Such suspension is in compliance with applic

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

Attractive, Neutral, Cautious. BUY 1.5% 13.3% We expect this stock to deliver

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

= Rated.Not 0% 20% 10% 70% 60% 50% 40% 30% Source:Kotak Institutional Equities Kotak Institutional Equities Research Equities KotakInstitutional coverage universe Distributionof ratings/investment banking relationships NA = NA AvailableNot or Applicable.Not = NM Meaningful.Not CS = Coverage Suspended. = NC Covered.Not = RatingRS Suspended. fundamental basis for determining an investment rating or target. The previous in and shouldnot be relied upon. Coverage view. designations: ratings/identifiers Other NR and/or Kotak Securities policies in circumstances when Securities Kotak or its affiliates is acting involving this company and in certain other circumstances. REDUCE. SELL. Our target prices are also on a 12 definitions Other Ratings other and definitions/identifiers ratings of Definitions BUY. ADD. 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 2017 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 BSE Limited (BSE), National Stock Exchange of India Limited (NSE), MSEI and United Stock Exchange of India Limited (USEIL). 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 our 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 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: YES 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 www.nseindia.com 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.: +91-22 43360 000, Fax No.: +91-22- 6713 2430. Website: www.kotak.com. SEBI Registration No: NSE INB/INF/INE 230808130, BSE INB 010808153/INF 011133230, MSEI INE 260808130/INB 260808135/INF 260808135, Research Analyst INH000000586, AMFI ARN 0164 and PMS INP000000258. NSDL: IN-DP-NSDL-23-97. CDSL: IN-DP-CDSL-158-2001. Compliance Officer Details: Mr. Manoj Agarwal. Call: +91-22-4285 6825, or Email: [email protected]. 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: Online Customers - 30305757 (by using your city STD code as a prefix) or Toll free numbers 18002099191 / 1800222299, Offline Customers - 18002099292 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 +91-22-4285 8445 and if you feel you are still unheard, write to our customer service HOD at [email protected] or call us on +91-22-4285 8208. 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: Manoj Agarwal) at [email protected] or call on +91-22-4285 6825. Level 4: If you have not received a satisfactory response at Level 3 within 7 working days, you may also approach CEO (Mr. Kamlesh Rao) at [email protected] or call on +91-22-6652 9160. 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.