South Indian Bank Sector: Banks/Midcap

Reinitiating Coverage October 5, 2012

Sensex Nifty 18,938 5,747 Price: INR 23.2 Target Price: INR 27.3 BUY Background : South Indian Bank (SIB), among the mid-sized banks in the private sector space, operates a network of about 700 branches and about 700 ATMs. With about half of its branches located in Kerala the bank’s business is largely skewed towards the Southern state. SIB has established a strong brand recall among the Keralite-NRI diaspora. With no identifiable promoters SIB is run by a team of professionals. A slew of FII’s hold a 46.27% stake in the bank. As of June 30, 2012 the bank had deposits of ~INR 372bn and a loan book of ~INR 273bn. The bank is among the better capitalised banks in the industry with a Total CAR of 13.2%. Gross NPAs were reported at 1.08% with provision coverage ratio (PCR calc) of ~68%.

52 Week High/Low INR 28.3/19.9 Sturdy business growth Bloomberg code SIB IN Branch additions, regional advantages augur well for business growth Reuters code SIBK.BO South Indian Bank (SIB) has pegged a business target of INR 1,250bn by March 2016 (a growth of 25.1% Issued Equity CAGR over FY12-15). Branch expansion (plans to open 50 branches in FY13), regional advantages and a 1335.5 historical growth of 25% CAGR over FY07-12 lend confidence to our loan book growth estimates of 20.1% (shares in mn) Mkt. Cap in mn INR 30,984 CAGR over FY12-14. Mkt. Cap in mn USD $ 596 Bottom-line to be driven by business growth Net Interest Margins (NIMs) are likely to hover at 3%. Moderation in interest rates, coupled with lower credit Avg. Daily Vol. (‘000) 1613.31 offtake is a dampener. Higher cost of funds is likely to compress margins. Net interest income (NII) is Avg. Daily Vol. (mn) INR37.43/$0.72 expected to register a 25.8% CAGR growth over FY12-14, on the back of a healthy credit growth and flat margins. Other income is expected to be a drag on topline growth (23% CAGR). PAT is expected to grow at Shareholding Jun11 Mar11 Jun12 24.1% CAGR. Capital ratios comfortable Promoters(%) 0.00 0.00 0.00 SIB has set a reasonable business target of INR 1,250bn by March 2015 translating into a 25.1% CAGR over FII (%) 48.38 46.15 46.09 FY12-15. The bank is well poised to meet its capital fund requirements as it enjoys a return on equity of DII (%) 9.59 7.64 7.64 ~20%, a high retention ratio of 80%+ and current capital ratios at comfortable levels. Besides, with bulk of its Others (%) 51.62 46.21 46.27 total capital coming from Tier -1 capital the bank is on course to meet its capital adequacy norms in the next Pledge (% of couple of years though internal accruals. promoter 0.00 0.00 0.00 Diverse loan book; low exposure to any specific industry holding) The bank has a relatively diverse loan book exposure on the industry front. As of March 2012, exposure to stressed sectors is relatively lower; electricity and power together constituted ~5% of the loan book while infrastructure (excluding power) constituted ~7%, textiles ~3% and iron and steel ~1%. Gross NPAs and net Performance% 1M 3M 12M NPAs are expected to trend higher on the back of a slip in asset quality in stressed sectors that have seen SIB 5.5 -3.7 7.7 relatively low slippages. The gold loan book (excluding priority ~20% and including priority ~1/4ths of the loan Sensex 8.5 8.6 19.3 book), provides cushion to downside risks in asset quality. Valuation The stock trades at 1.0 X FY14 P/Adj BV and 5.0X P/E FY14. Asset quality concerns in the banking sector 30 120 have overshadowed earnings growth leading to a correction in valuation multiples. Backed by traction in business growth and steady NIMs, we expect earnings growth to continue. We value the stock at INR 27.3 25 100 per share, implying a FY13 P/Adj B of 1.4X and FY14 P/Adj BV of 1.2X. We rate the stock a BUY. 20 80 Risks Further deterioration in the power, infrastructure and textiles sector would hamper asset quality and earnings. 15 60 With NII contributing to bulk of topline, a dip in margins and / or a slowdown in credit growth would be a negative. 10 40 Valuation Summary 5 20 Y/E March ( INR mn) FY11 FY12 FY13E FY14E 0 0 Net Interest Income 7,911 10,217 13,028 16,164

Other Income 1,967 2,471 2,670 3,028

11 12 12

12 12

11 12 12

- - -

- -

- - -

- Pre Provisioning Profit 5,252 6,515 8,660 10,951

Jul

Jan

Oct

Jun

Apr

Feb

Mar

Dec

Sep

Aug Nov May PAT 2,876 4,017 4,630 6,183 EPS 2.5 3.5 3.5 4.6 SIB Relative to SENSEX (RHS) EPS growth (%) 23.0 33.1 18.7 21.5 PE 9.1 6.5 6.7 5.0 P /BV * 1.6 1.4 1.2 1.0

Dividend Yield (%) 2.2 2.6 2.6 3.0 GNPA (%) 1.1 1.0 1.3 1.4 Alagappan.Ar +91- 44-30007363 NNPA (%) 0.3 0.3 0.5 0.5 [email protected] PCR (calc) (%) 93.9 75.5 75.0 75.0 ROA (%) 1.1 1.2 1.0 1.1 ROE (%) 22.4 24.6 18.0 18.5 CAR – Tier I 11.3 11.5 12.4 12.2 ROE/PBV 15.8 20.3 17.2 20.5 * adjusted for uncovered loan losses, unearned reserves and intangible assets

Traction in business growth; better than industry During the years (FY07-12), SIB with a business growth of 26%CAGR outpaced the industry’s business growth of 19%CAGR. With the exception of FY 09, in the wake of the 2008 global financial crisis, business growth was lower than that of the system. Despite the fast pace of growth, management has kept a check on credit quality and C/D ratio has prevailed at a comfortable range of 65-76%. This has been backed by ramping up of footprint and regional spread.

Chart 1:FY07-12avg business growth higher by 7pps Chart 2: Business growth in line with peers

YoY% 5 year CAGR June 2012 Business Growth - SIB Business Growth - Industry

30% 30% 26% 20% 10% 19% 20% 20% 0%

15%

DCB CUB

10%

FY 08 FY 09 FY 10 FY 11 FY 12 5 Year Jun-12 Bank Federal

IndusInd Bank IndusInd ING Vysya Bank Vysya ING

CAGR Bank Karnataka

Karur Vysya Bank Vysya Karur South Indian Bank Indian South

Source: RBI, Bloomberg, Company, CSEC Research Source: RBI, Company, CSEC Research

Strong regional presence in Kerala Kerala and Tamil Nadu account for 72% of SIB’s branches with ~40% of its business coming from Kerala. Over the past five years (December 06-11) the two states have exhibited superior credit growth as compared to the rest of the country. A strong regional presence in Kerala and a visible presence in Tamil Nadu have augured well for growth prospects. As of December 2011, the two states (aggregate basis) recorded credit growth of 19.4% YoY (~346 bps higher than pan-India growth).

Chart 3: ~70% of SIB’s branches spread over Kerala and TN

Branches South India Branches as on March 2012 358 IndusInd Bank 527 46 ING Vysya Bank 400 17 DCB 86 599 South Indian Bank 706 Karnataka Bank 388 503

Karur Vysya Bank 368 451 706 Federal Bank 950 300 CUB 263

0 200 400 600 800 1,000

Source: Company, CSEC Research

Chart 4: Kerala, TN among the better states in growth Chart 5: Kerala, TN’s credit growth better than India y-o-y TN - Net State DP Growth Kerala - Net State DP Growth TN Kerala India y-o-y India GDP Growth 25.00% 20.8% 10.0% 20.2% 16.6% 8.3% 20.00% 18.3% 9.0% 7.9% 7.9% 8.0% 15.00% 7.0% 6.5% 6.0% 10.00% 5.0% 4.0% 5.00% 3.0% 2.0% 0.00% 1.0% 0.0% Credit Deposit Credit Deposit Growth 5 Growth 5 Growth Dec Growth Dec 5 year CAGR FY 12 Growth year CAGR year CAGR 2011/Dec 2011/Dec 2010 2010

Source: RBI, CSO, CSEC Research Source: RBI, Bloomberg, Company, CSEC Research

CASA component lower than that of peers SIB’s CASA (current and savings account deposits) component in deposits is lower as compared to peers. CASA ratio (current and savings account deposits/aggregate deposits) hovers at about the 20% mark CASA for most south based old private sector banks hover below the 25% mark. The bank appears to have a low penchant for savings accounts. Backed by its brand recall among the NRI-Keralite diaspora SIB has access to low cost NRE deposits. NRE deposits constitute about 5% of deposits.

Chart 6: CASA traditionally low Chart 7: CASA in line with that of south based peers

40% 30% CASA CASA - FY 2012 CASA - June 2012 Qtr

30% 21% 25% 21% 20% 20% 20% 10% 15% 0%

10%

DCB CUB

5% Federal Bank Federal

0% Bank IndusInd

Karnataka Bank Karnataka Bank Vysya ING Karur Vysya Bank Vysya Karur FY 07 FY 08 FY 09 FY 10 FY 11 FY 12 Jun-12 Bank Indian South

Source: Company, CSEC Research Source: Company, CSEC Research

Driven by high yields margins are healthy SIB’s margins have been healthy and have hovered about the 3% mark; better off than quite a few larger PSU banks. With a large share (50%+) of its loans going towards working capital financing the loan book re-prices rather swiftly. Loans against jewellery (excluding priority) comprise ~20% of the loan book that also helps in shoring up yields. Despite higher cost of funds as compared to peers the banks has maintained margins at ~3% supported by healthy yields on the loan book, NIMs are in line with that of peers.

Chart 8: Bulk of loan book - working capital finance Chart 9: NIM healthy at about the 3% mark

Bills Purchased & Discounted Cash Credit,Overdraft & Loans 3.5% NIMs Term Loans 3.2% 100% 3.0% 90% 80% 2.5% 70% 2.0% 60% 50% 1.5% 40% 30% 1.0% 20% 10% 0.5% 0% 0.0% FY 07 FY 08 FY 09 FY 10 FY 11 FY 12 FY 07 FY 08 FY 09 FY 10 FY 11 FY 12 Jun-12

Source: Company, CSEC Research Source: Company, CSEC Research

Chart 10: NIM in line with that of peers Chart 11: C/D ratio consistently lower than of industry

NIM - FY 2012 NIM - June 2012 Qtr 4% C/D SIB C/D Industry 90% 76% 3% 80% 74% 70% 2% 60% 1% 50% 40% 0%

30% DCB CUB 20% 10%

Federal Bank Federal 0%

IndusInd Bank IndusInd

Karnataka Bank Karnataka Bank Vysya ING

Karur Vysya Bank Vysya Karur FY 07 FY 08 FY 09 FY 10 FY 11 FY 12 Jun-12 South Indian Bank Indian South

Source: Company, CSEC Research Source: Company, CSEC Research, RBI

Chart 12: C/D ratio lower than most peers - June 2012

100% C/D Ratio - June 2012

80% 74%

60%

40%

20%

DCB

CUB

Federal Bank Federal

IndusInd Bank IndusInd

Karnataka Bank Karnataka Bank Vysya ING

Karur Vysya Bank Vysya Karur South Indian Bank Indian South

Source: Company, CSEC Research

Non-interest income contribution stable, low treasury component SIB’s non-interest income contribution is at the lower end of the band amongst peers. With bulk of its investment portfolio held in G-Secs and held-to-maturity form non-interest income has been less susceptible to volatility. In the recent past non-interest income has been stable with bulk of it coming from core items. Although non-interest income contribution has been lower than that of most peers, a low treasury component augurs well for stable contribution.

Chart 13: Non-interest income contribution steady Chart 14: Non-interest income lower than that of peers

30% Non-Interest Income / Operating Income FY12 June 2012 qtr 27% 40% 24% 40% 31% 33% 25% 24% 29% 29% 30% 22% 30% 20% 20% 20% 19% 20% 20% 20% 10%

15% 0% DCB 10% CUB

Federal Bank Federal

IndusInd Bank IndusInd

Karnataka Bank Karnataka Bank Vysya ING Karur Vysya Bank Vysya Karur 0% Bank Indian South FY 07 FY 08 FY 09 FY 10 FY 11 FY 12 Jun-12

Source: Company, CSEC Research Source: Company, CSEC Research

Cost/income ratio in line with peers despite low non-interest income While NIMs are in line with that of peers, lower contribution of non-interest income has been a dent in the bank’s profitability. This lower contribution, however, has been partially offset by lower operating costs. Cost/income (C/I) ratio has hovered between the 45% and 50%. Buoyed by healthy NIMs; and low staff costs - C/I ratio prevails at the lower end of the band in the industry.

Chart 15: Cost income ratio consistently at 45-50 % Chart 16: Cost income ratio in line with peers

Cost/Income - June 2012 Qtr Cost/Income 80% 73% 60% 58% 60% 50% 46% 48% 48% 47% 47% 49% 47% 50% 44% 43% 44% 43% 44% 40% 40% 20% 30% 0%

20%

DCB CUB 10%

Federal Bank Federal

IndusInd Bank IndusInd ING Vysya Bank Vysya ING

FY 07 FY 08 FY 09 FY 10 FY 11 FY 12 Jun-12 Bank Karnataka Karur Vysya Bank Vysya Karur Bank Indian South

Source: Company, CSEC Research Source: Company, CSEC Research

Chart 17: Staff costs in line with that of peers Chart 18: Business/ branch in line with southern peers

INR mn Staff costs/employee -FY 11 INR bn Business/Branch - Mar 2012 1.0 1.8 1.6 0.8 1.4 0.54 1.2 0.9 0.6 1.0 0.4 0.8 0.6 0.2 0.4 0.2

0.0 0.0

DCB

CUB

DCB

CUB

J &Bank K J

Federal Bank Federal

IndusInd Bank IndusInd

ING Vysya Bank Vysya ING

Karnataka Bank Karnataka

Karnataka Bank Karnataka Bank Vysya ING

Karur Vysya Bank Vysya Karur

South Indian Bank Indian South

Lakshmi Vilas Bank Vilas Lakshmi Lakshmi Vilas Bank Vilas Lakshmi

Source: Company, CSEC Research Source: Company, CSEC Research

Credit quality, better amongst peers With gross and net NPAs at 1.1% and 0.4% respectively they are at the lower end of the industry. Over the recent quarters, PCR (calc), excluding technical write-offs (written off in balance sheet but retained in branch books to pursue recovery) has been hovering about the 70% mark. In the June quarter, bogged down by a downturn in the power sector; SIB’s restructured loan book increased to INR 11.9bn ~4.4% of advances. Exposure to stressed sectors is relatively lower; as of March 2012 electricity and power together constituted ~5% of the loan book while infrastructure (excluding power) constituted ~4%, textiles ~3% and iron and steel ~1%. The gold loan book (excluding priority) comprises ~20% while as a whole it constitutes ~1/4ths of the loan book, provides cushion to downside risks in asset quality.

Chart 19: Credit quality better than most peers Table 2: Expsoure to Stressed sectors low

Loan Book Composition Mar-10 Mar-11 Mar-12 GNPAs - June 2012 NNPAs - June 2012 5% Trading 11.2% 7.9% 7.5% 4% NBFCs 6.1% 4.8% 5.7%

3% Electricity 5.0% 6.1% 4.9% 2% 1.1% Infrastructure 3.1% 2.3% 4.3% 1% 0.4% Power 0.4% 0.0% 0.3% 0%

Telecommunication 1.5% 0.8% 0.6% DCB CUB Roads & Ports 0.9% 1.2% 2.9%

Cotton Textiles 2.8% 2.7% 2.0% Federal Bank Federal

IndusInd Bank IndusInd Other Textiles 1.1% 1.3% 1.2%

Karnataka Bank Karnataka Bank Vysya ING Karur Vysya Bank Vysya Karur South Indian Bank Indian South Petroleum 0.0% 0.0% 1.4%

Cement 0.0% 0.0% 1.4% Source: Company, CSEC Research

QIP provides cushion to capital ratios With a total CAR of 13.16% and tier I ratio of 10.9% as of June 2012; the recent fund infusion of INR 4.4bn (200mn shares at INR 22.13/share – equity dilution of ~15%) is expected to add ~2.5% to total CAR and Tier-I capital. With healthy capital ratios SIB is comfortably positioned to grow its balance sheet. The bank plans to double its business target from INR 641bn to INR 1,250bn by March 2015. Return ratios have been healthy with ROA consistently above the 1.0% mark while ROEs have sustained above the 14% mark. The bank appears to be well capitalised to meet additional capital requirements through internal accruals.

Chart 20: ROA in line with that of peers – FY 12 Chart 21: ROE above peer average – FY12

1.8% 1.7% 25.0% 23.5% 1.6% 1.6% 21.2% 21.2% 1.6% 1.4% 1.3% 18.5% 19.2% 1.4% 20.0% 1.1% 1.1% 1.2% 14.4% 1.0% 15.0% 12.7% 12.7% 0.7% 0.7% 0.7% 9.8% 0.8% 8.4% 0.6% 10.0% 0.4% 5.0% 0.2%

0.0% 0.0%

DCB

CUB

DCB

CUB

J &Bank K J

Federal Bank Federal

IndusInd Bank IndusInd

Karnataka Bank Karnataka Bank Vysya ING

Karur Vysya Bank Vysya Karur

South Indian Bank Indian South

Karur Vysya Bank Vysya Karur

Lakshmi Vilas Bank Vilas Lakshmi

South Indian Bank Indian South Lakshmi Vilas Bank Vilas Lakshmi

Source: Company, CSEC Research Source: Company, CSEC Research

Chart 22: Healthy capital ratios in line with that of peers Chart 23: PAT shadows credit growth, albeit marginally

PAT Growth 5 Year CAGR Credit Growth 5 Year CAGR % CRAR Tier -1 March 2012 17 70% 18 16 15 60% 16 14 14 14 14 14 13 13 13 50% 14 12 12 11 11 12 11 40% 31% 10 30% 24% 8 20% 6 4 10% 2 0%

DCB

CUB

DCB

CUB

J &Bank K J

Bank

Federal Bank Federal

IndusInd Bank IndusInd

Karur Vysya Vysya Karur

South Indian Indian South

Karnataka Bank Karnataka Bank Vysya ING

Federal Bank Federal

IndusInd Bank IndusInd

Karur Vysya Bank Vysya Karur

South Indian Bank Indian South

Karnataka Bank Karnataka Bank Vysya ING Lakshmi Vilas Bank Vilas Lakshmi

Source: Company, CSEC Research Source: Company, CSEC Research

Outlook Credit growth at 20.1% CAGR South Indian Bank has pegged a business target of INR 1,250bn by March 2015. Branch expansions (about 50 in FY13), regional advantages and a strong historical growth of 25% CAGR over FY07-12 lend confidence to our estimates of ~20.1% CAGR credit growth (FY12-14). Though the RBI has pegged credit growth at 17% for FY13, outperformance over industry and marginal share in the industry lends confidence to the growth estimates. Deposits are also likely to keep track of credit growth; with the bank not having much of a penchant for other forms of debt funding. As a consequence the Credit-Deposit (C/D) ratio is expected to be maintained at ~75%.

PAT growth at 24.1% CAGR NIMs are likely to stay sticky and hover at 3.0%. Moderation of interest rates coupled with lower credit-offtake is a key dampener. Higher cost of funds is expected to keep margins under pressure. NII is expected to register a 25.8% CAGR growth over FY12-14, on the back of a healthy strong credit growth and flat margins. Other income, however, is expected to be a lag and contribute to a lower topline growth of 23% CAGR. A dip in asset quality is expected to wean away benefits of a lower C/I ratio. PAT is expected to grow at 24.1% CAGR.

Healthy capital ratios SIB has set a reasonable business target of INR 1,250 bn by March 2015 translating into a 25.1% CAGR over FY12- 15. The bank is well poised to meet its capital fund requirements as it enjoys a return on equity of ~20%, a high retention ratio of 80%+ and current capital ratios at comfortable levels. Besides, with bulk of its total capital coming from Tier -1 capital the bank is on course to meet its capital adequacy norms in the next couple of years though internal accruals.

Asset quality The bank has a relatively diverse loan book exposure on the industry front. Exposure to stressed sectors is relatively lower; electricity and power together constitutes ~5% of the loan book while infrastructure (excluding power) constitutes ~4%, textiles ~3% and iron and steel ~1%. Gross NPAs and net NPAs are expected to trend higher on the back of a slip in asset quality in stressed sectors that have seen relatively low slippages. The gold loan book (20% (excluding priority) comprises ~20%, provides cushion to downside risks in asset quality. Loans against jewellery (including agricultural loans) account for ~1/4ths of the loan book. The RBI’s lending norms on gold loans by NBFCs has come as a boost to south based banks (norms not applicable to these banks as loan book is diversified) where the practice of pledging jewellery is widely prevalent as compared to the rest of the country. These are amongst the least likely to slip into NPAs on the back a low LTV ratio.

Valuation Since January 2007, SIB has traded between 0.3X to 1.6X its 1 year fwd adjusted book value and between 2.3X to 10.6X its 1 year fwd earnings. The stock trades at 1X FY14 P/Adj BV and 5.0X P/E FY14. Asset quality concerns in the banking sector largely overshadowed earnings growth to a correction in valuation multiples. Backed by traction in business growth and steady NIMs, we expect earnings growth to continue. We value the stock at INR 27.3 per share, implying a FY13 P/Adj B of 1.4X and FY14 P/Adj BV of 1.2X. We rate the stock a BUY.

Chart 24: 1-year forward P / Adj BV band chart Chart 25:1-year forward P / E band chart

INR INR 45 50 40 SIB 45 SIB 1.6X 35 40 35 9X 30 1.2X 30 25 25 20 7X 0.7X 20 15 15 5X 10 0.5X 10 5 5 3X 0

07 08 09 10 11 12

------

07 08 09 10 11 12

------

Jul Jul Jul Jul Jul Jul

Jan Jan Jan Jan Jan Jan

Jul Jul Jul Jul Jul Jul

Jan Jan Jan Jan Jan Jan Source: Bloomberg, CSEC Research; Note: BV adjusted for uncovered loan losses and intangible assets Source: Bloomberg, CSEC Research

Valuation Metrics Table 3: Peers - Valuation NIM Cost/Income ROA ROE Company FY13E FY14E FY13E FY14E FY13E FY14E FY13E FY14E Karur Vysya Bank* 2.9 2.9 44.2 45.2 1.4 1.3 20.1 20.7 City Union Bank* 3.2 3.2 43.0 44.2 1.5 1.4 23.0 20.7 Federal Bank 3.5 3.5 40.4 40.0 1.3 1.3 14.4 15.1 IndusInd Bank 3.5 3.6 48.7 47.8 1.6 1.6 19.9 20.9 ING Vysya Bank 3.1 3.0 56.4 55.1 1.1 1.1 13.4 14.3 Karnataka Bank 2.4 2.5 50.6 50.5 0.8 0.8 11.4 12.8 South Indian Bank* 3.0 3.1 44.8 42.9 1.0 1.1 18.0 18.5 Tier-1 P/E P/BV Div Yield (%) FY13E FY14E FY13E FY14E FY13E FY14E FY13E FY14E Karur Vysya Bank* 12.8 12.4 7.8 6.3 1.5 1.2 3.3 3.3 City Union Bank* 11.8 11.9 8.1 7.7 1.6 1.4 2.2 3.0 Federal Bank 14.4 13.5 9.1 7.7 1.4 1.1 2.1 2.4 IndusInd Bank 10.9 10.2 17.1 13.6 3.2 2.6 0.9 1.1 ING Vysya Bank 10.3 9.7 11.3 9.3 1.4 1.3 1.2 1.4 Karnataka Bank 9.6 8.9 6.8 5.5 0.7 0.7 3.5 4.2 South Indian Bank* 12.4 12.2 6.7 5.0 1.0 0.9 2.6 3.0 Source: Bloomberg, CSEC Estimates

Risks A further degradation of the environment in the power, infrastructure and textiles sector would hamper asset quality and earnings. Gold loans along with a diversified loan book serve as cushion to asset quality. NII contributes to bulk of topline a dip in margins and / or a slowdown in credit growth would be a negative. However, a track record of industry outperformance, traction in business growth and stable margins provide comfort. With more than 50% of its loan book going towards working capital funding assets are expected to reprice faster.

Financials

Income Statement (Abstract) Per Share Ratios INR(million) Particulars FY11 FY12 FY13E FY14E Particulars FY11 FY12 FY13E FY14E EPS (Rs) 2.5 3.5 3.5 4.6 Interest income 24,460 35,834 44,890 52,917 Earnings growth 23.0 33.1 18.7 21.5

Interest expense 16,549 25,617 31,863 36,753 PPP* / Share (Rs) 4.6 5.7 6.5 8.2 Net interest income 7,911 10,217 13,028 16,164 BV / share (Rs) 16.3 16.8 17.8 18.5 Growth (%) 39.2 29.2 27.5 24.1 Adj BV / Share (Rs) 14.5 17.2 20.1 23.6 Other income 1,967 2,471 2,670 3,028 Div / Share (Rs) 0.5 0.6 0.6 0.7

Total Income 9,878 12,688 15,698 19,192 Staff Costs 2,898 3,741 4,171 4,932 Others 1,727 2,432 2,867 3,309 Op. Expenses 4,626 6,173 7,038 8,241 Pre-provision Profit 5,252 6,515 8,660 10,951 Key Ratios

Growth (%) 27.9 24.0 32.9 26.5 % Provisions 798 792 1,708 1,622 Particulars FY11 FY12 FY13E FY14E PBT 4,455 5,723 6,952 9,329 Gross NPAs 1.1 1.0 1.3 1.4 Provision for Tax 1,579 1,707 2,322 3,146 Net NPAs 0.3 0.3 0.5 0.5 PAT 2,876 4,017 4,630 6,183 PCR (calc) 73.9 71.4 65.0 65.0 Growth (%) 23.0 39.7 15.3 33.5 Credit /Deposit 68.9 74.7 73.5 73.9

CASA** 21.5 19.7 25.0 25.0

Capital Adequacy 14.0 14.0 14.1 13.5 Tier I CAR 11.3 11.5 12.4 12.2 Balance Sheet (Abstract) $ Yield on IEA 8.6 10.1 10.3 10.0

INR(million) Yield on Assets 10.9 12.5 12.1 11.9 Particulars FY11 FY12 FY13E FY14E Cost of Funds 5.9 7.1 7.8 7.4 Equity Capital 1,130 1,134 1,336 1,336 Net Interest Margin 3.1 3.1 3.0 3.1 Reserves & Surplus 18,452 21,675 29,615 34,464 Cost / Income 46.8 48.7 44.8 42.9 Networth 19,582 22,809 30,950 35,799 Provision/ Loans 0.4 0.3 0.5 0.4

Demand Deposits 64,041 71,803 110,103 133,126 Tax rates 35.4 29.8 33.4 33.7 Term Deposits 233,170 293,202 330,309 399,377 ROAA 1.1 1.2 1.0 1.1 Deposits 297,211 365,005 440,412 532,502 ROAE 22.4 24.6 18.0 18.5 Growth (%) 29.2 22.8 20.7 20.9 Dividend Payout 19.6 17.0 17.3 15.1

Borrowings 254 3,232 6,464 6,464 Subordinated Debt 2,650 2,650 2,465 2,280 Current liabilities 9,615 11,109 12,652 15,199 Valuation Ratios Total Liabilities 329,311 404,805 492,944 592,244 Particulars FY11 FY12 FY13E FY14E Cash 24,661 26,405 39,258 44,821 P / E 9.1 6.5 6.7 5.0 Advances 204,887 272,807 323,861 393,515 P / PPP* 5.0 4.0 3.6 2.8 Growth (%) 29.5 33.1 18.7 21.5 P / BV 1.4 1.2 1.0 0.9 Investments 8,924 9,400 11,672 13,882 P/ABV*** 1.6 1.4 1.2 1.0 Growth (%) 24.7 5.3 24.2 18.9 Dividend Yield 2.2 2.6 2.6 3.0 Fixed assets 3,568 3,775 4,768 5,532 Current assets 5,848 6,714 7,034 8,253 * PPP – Pre Provisioning Profit Total Assets 247,888 319,102 386,593 466,003 ** CASA – Current and Savings Deposits $ IEA – Interest Earning Assets Growth (%) 28.5 28.7 21.2 20.5 *** Book value adjusted for uncovered loan losses and intangible assets

Cholamandalam Securities Limited Member: BSE,NSE,MSE Regd. Office: Dare House,2 (Old) # 234) N.S.C Bose Road, Chennai – 600 001. Website : www.cholawealthdirect.com Email id – [email protected]

Chola Securities is a leading southern India based Stock broker. Our focus area of coverage within the Indian market is Mid and small caps with a focus on companies from southern India.

Our Institutional Equities services are carried out in partnership with RCCR, a boutique Investment research and Corporate Advisory firm founded by a team with extensive experience in the Asset management industry.

RESEARCH Singaravelu K P Head of Research +91-44 - 4505 6003 [email protected] Alagappan Ar Financial Services +91-44 - 3000 7363 [email protected] Sathyanarayanan M Consumption +91-44 - 3000 7361 [email protected] Vinayakam P Engineering +91-44 - 3000 7360 [email protected] Michel Charles C Technicals +91-44 - 3000 7353 [email protected] Rajasekhar R IT & Auto Ancillary +91-44 - 3000 7266 [email protected] Sreedevi K Associate +91-44 - 3000 7266 [email protected]

INSTITUTIONAL SALES Venkat Chidambaram Head of FII Business & Corporate Finance +91-44 - 24473310 [email protected] Lakshmanan T S P Chennai +91 - 9840019701 [email protected] Santosh Kumar Sharma Mumbai +022 - 22617210 [email protected]

RETAIL SALES Chetan Dilipkumar Daxini AHMEDABAD 079 - 64500318 / 19 [email protected] Sathyanarayana N BANGLORE 080 - 41503340 / 44 [email protected] Baskaran S CHENNAI - Annanagar 044 - 26208911 / 14 [email protected] Sridharan P S CHENNAI - Adyar 044 - 2452 2111 / 2333 [email protected] Chandrasekar K COIMBATORE 0422 - 4292041 / 4204620 [email protected] Maneesh Gupta DELHI 011 - 30461161 / 62 / 63 [email protected] Murthy A S L N HYDERABAD 040 - 23316567 / 68 [email protected] Shibarjun Mukherjee KOLKATA 033 - 44103638 / 39 [email protected] Sheetal Bheda MUMBAI 022 - 22617210 / 7203 [email protected] Gowthaman G MADURAI 0452 - 2601195 / 96 [email protected] Deepak V Kshirsagar PUNE 020 - 30225432 / 33 /34 [email protected] Gangadhar M VIZAG 0891 - 6642718 [email protected]

COMPLIANCE Balaji H Compliance +91-44 - 3000 7370 [email protected]

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