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Eros International Reco: Buy

Stock Update

Ahead of expectations, outperformance on net income led by lower tax rate CMP: Rs146

Company details Result highlights

Price target: Rs165 Beats expectations, company focus on high-content right budget movies paying

Market cap: Rs1,341 cr off: For Q2FY14 Eros International Media Ltd (EIML) has reported a much better performance as compared with that of Q1FY2014, which was a relatively soft 52 week high/low: Rs235/107 quarter. The company has exceeded our estimate on the top line by 6%, margin NSE volume: 1.5 lakh by 384 basis points and net income by 34%. The company’s strategy of targeting (no. of shares) high-content right budget movies has paid off yet again in this quarter with the BSE code: 533261 super success of Grand with a box office collection over Rs100+ crore (in NSE code: EROSMEDIA Q1FY2014 was a big success). For the seasonally strong December Sharekhan code: EROSMEDIA quarter, EIML has five big budgets movies lined up (a) Krrish 3 (November 1,

Free float: 2.3 cr overseas); (b) Ram-Leela (November 15); (c) Singh Saab the Great (November (no. of shares) 22); d) R… Rajkumar (December 6); and (e) Kochadaiyaan (December 12). We expect EIML to report a strong Q3FY2014 driven by a strong movie slate and Shareholding pattern monetising of the satellite right deals.

Foreign  Revenues ahead of expectations: For the quarter, the revenues of EIML declined Public & Others 13% 7% Institutions by 12.3% year on year (YoY) to Rs201 crore, which is ahead of our expectation 2% Non-promoter corporate Results (consolidated) Rs cr 4% Particulars Q2FY14 Q1FY13 YoY % Q1FY14 QoQ % Net sales 201.1 229.3 -12.3 186.3 7.9 Promoters Direct costs 146.1 175.0 -16.5 138.1 5.7 74% Gross profit 55.0 54.3 1.3 48.2 14.1 SG&A 3.9 12.1 -68.1 8.7 -55.8 Price chart EBITDA 51.2 42.3 21.1 39.5 29.5 250 Depreciation 1.3 1.7 -25.0 1.3 0.8 230 EBIT 49.9 40.6 23.0 38.2 30.5 210 190 Other income 0.4 1.8 -76.4 7.9 -94.7 170 Interest expenses 6.2 2.7 126.3 4.6 34.5 150 PBT 44.1 39.6 11.4 41.5 6.2 130 110 Tax provision 8.5 15.2 -44.2 13.5 -37.1 90 PAT 35.6 24.4 46.0 28.0 27.1 Minority interest -1.4 -1.7 -20.1 -1.3 2.3 Jul-13 Oct-13 Oct-12 Jan-13 Apr-13 Net profit 37.0 26.1 41.8 29.3 26.0 Price performance Equity capital (FV Rs10/-) 91.9 91.9 91.9 EPS (Rs) 4.0 2.8 41.8 3.2 26.0

(%) 1m 3m 6m 12m Margin (%) GPM 27.4 23.7 25.9 Absolute 7.2 7.0 -15.6 -11.5 EBITDA 25.4 18.4 21.2 EBIT 24.8 17.7 20.5 Relative 4.0 3.0 -23.4 -21.6 NPM 18.4 11.4 15.7 to Sensex Tax rate 19.2 38.4 32.5

Sharekhan 2 October 23, 2013 Home Next investor’s eye stock update

of Rs190 crore. The revenue outperformance was believe will have long-term benefits. Additionally, the largely on account of a better than expected parent company’s impending listing on the New York performance of Grand Masti, which crossed the Rs100+ Stock Exchange (NYSE) remains a medium-term trigger crore box office collections, for which EIML was the for the re-rating of the stock (the company is sole distributor. Along with that the company also had expected to receive advances of close to Rs1,200 revenues coming in from the overseas rights of movies crore). We have tweaked our earnings estimates to like Phata Poster Nikla Hero for the quarter and incorporate the lower tax rate for FY2014E and monetisation of catalogue (satellite rights). During the FY2015E. We maintain our Buy rating on the stock quarter, EIML released 14 films, which includes four with a price target of Rs165. , and 10 Tamil and other regional language movies. In Q1FY2013, the company had released 12 films, which Other result highlights included seven Hindi, and five Tamil and other regional  During the quarter, the company took a step forward movies. In Q2FY2013, the company released 19 movies, in its monetising initiatives. The company’s online which included high-grossing movies like Cocktail, Vicky entertainment portal Eros Now added a number of Donor and Housefull 2. titles acquired from Viacom 18 and UTV.

 Margin beats estimate; net income outperformance  The joint venture with HBO Asia continues to receive led by lower tax rate: The company reported the an encouraging response. The two channels will now EBITDA margin at 25.4% for the quarter, which was be available on two additional platforms, Hathway almost 4 percentage points higher than our estimate Cable and GTPL. Next the response of the local cable of 21.6% and higher by 175 basis points YoY. The operators remains critical for the company. outperformance on the margin front was attributed  Television revenues during the quarter were largely to the higher monetisation of the relatively low- driven by the efficient catalogue monetisation and budget movie Grand Masti and also on account of a an increase in revenues by licencing agreement large drop of 68% YoY in the other expenses (on between Viacom 18 (the company has sold the account of lower foreign exchange [forex] losses). satellite rights of Raanjhanaa to Viacom 18). The net income for the quarter was up by 42% at Rs37 crore, which was much higher than our estimate  Listing on NYSE on cards: After a long delay owing of Rs28 crore. The outperformance on the net income to the difficult market condition in the USA, EIML’s front was primarily led by a lower than expected tax parent company Eros International Plc has finally filed rate, which was at 19% against our expectation of a registration with the Securities and Exchange 32%. The lower effective tax rate was on account of Commission (SEC) in the USA for listing its ordinary a change in the company’s accounting policy, as the shares on NYSE. EMIL’s parent company will file the company has started routing the monetisation F-1 form with the SEC in the USA. Further, the success revenues through its subsidiary Copsale based in of the NYSE listing will help EIML to get higher movie British Virgin Islands, thus the tax incidence is lower. advances from its parents also strengthen its book to bid for aggressive movie content acquisitions (expects  Valuation: The performance of the company for around Rs1,200 crore to come to the books, which Q2FY2014 indicates that the revenue momentum is allows the company to pay off its debts of Rs384 crore back with Q3FY2013 looking very solid in terms of at the end of FY2013). There are three key movie slate (the management expects revenues of implications of the listing: (a) the disclosure levels around Rs1,200 crore for FY2014). The company has of EMIL would improve significantly in line with the taken few more steps towards strengthening its SEC standards; (b) the company also expects advances strategic initiatives like HBO (extended offering to close to Rs1,200 crore from its parent company; and Hathway and Gujarat Telelink Pvt. Ltd [GTPL] (c) a strong listing of its parent will have a positive platforms) and Eros Now Online platforms (acquired rub-off effect on EIML (will potentially get re-rated). movie titles from UTV and Viacom 18), which we

Sharekhan 3 October 23, 2013 Home Next investor’s eye stock update

Upcoming film slate Film name Star cast (director) Tentative release Ram-Leela Ranvir Singh, Deepika Padukone () FY2014 R... Rajkumar , () FY2014 Kochadaiyaan (Tamil, Rajinikanth, Deepika Padukone Music – A.R. Rehman (Soundarya Rajinikanth) FY2014 Hindi, Telugu) Happy Ending Saif Ali Khan, Ileana Dcruz (Raj and DK) FY2014 Krrish 3 (overseas) Hritihk Roshan, (Rakesh Roshan) FY2014 Singh Saab the Great Sunny Deol (Anil Sharma) FY2014 Dishkiyaaoon Sunny Deol, Harman Baweja, (Sanamjit Singh Talwar) FY2014 Illuminati (untitled) Armaan Jain (Arif Ali) FY2014 Dekh Tamasha Dekh Satish Kaushik & others FY2014 Purani Jeans Aditya Seal (Tanushree Basu) FY2014 Chalo China Lara Dutta, Vinay Patak FY2015 Tanu Weds Manu Season 2 R. Madhavan, (Anand Rai) FY2015 Boney Kapoor (untitled) Arjun Kapoor, Sonakshi Sinha (Okkadu remake) FY2015 Sarkar 3 Amitabh Bacchan, Abhishek Bacchan (Ram Gopal Verma) FY2015 Rana (Tamil, Hindi, Telugu) Rajinikanth (K.S.Ravikumar) FY2015 R.Balki (untitled) (R.Balki) FY2015 Bajirao Mastani (Sanjay Leela Bhansali) FY2015 Tamil (untitled) Rajinikanth FY2015 Aankheen 2 (Apoorva Lakhia) FY2015 Illuminati (untitled) Saif Ali Khan (Saket Ali) FY2015 3 films Endemol Various FY2015 3 films Phantom Films Various FY2015 Untitled Paresh Rawal, Amit Sadh, , FY2015 Source: Company

Valuation The performance of the company for Q2FY2014 indicates tweaked our earnings estimates to incorporate the lower that the revenue momentum is back with Q3FY2013 tax rate for FY2014E and FY2015E. We maintain our Buy looking very solid in terms of movie slate (the management rating on the stock with a price target of Rs165. expects revenues of around Rs1,200 crore for FY2014). The company has taken few more steps towards Valuations strengthening its strategic initiatives like HBO (extended Particulars FY12 FY13 FY14E FY15E offering to Hathway and GTPL platforms) and Eros Now Revenues (Rs cr) 943.9 1,068.0 1,082.5 1,207.0 Online platforms (acquired movie titles from UTV and Net profit (Rs cr) 147.8 154.4 179.3 198.4 Viacom 18), which we believe will have long-term Y-o-Y growth (%) 27.9 3.1 16.1 10.7 benefits. Additionally, the parent company’s impending EPS (Rs) 16.3 16.8 19.5 21.6 listing on the NYSE remains a medium-term trigger for EV/EBITDA 7.0 6.9 6.4 5.5 P/E (x) 8.9 8.6 7.4 6.7 the re-rating of the stock (the company is expected to RoE (%) 19.5 16.8 16.7 15.9 receive advances of close to Rs1,200 crore). We have RoCE (%) 19.0 15.4 15.8 15.6

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Sharekhan 4 October 23, 2013 Home Next investor’s eye stock update

V-Guard Industries Reco: Hold

Stock Update

Price target revised to Rs520; Hold retained CMP: Rs496

Company details Result highlights

Price target: Rs520  Disappointing sales of electronics division dent quarterly performance: During Q2FY2014, V-Guard Industries (V-Guard) reported net sales 16% below our estimate Market cap: Rs1,480 cr as the electronics segment reported weak sales (declined by 18% year on year 52 week high/low: Rs591/391 [YoY] and 48% quarter on quarter [QoQ]). The fall in the electronics segment NSE volume: 50,743 (contributes 25% of the sales) was mainly due to the depressing performance in (no. of shares) the digital uninterruptible power supply (DUPS; down 48% YoY) and uninterruptible BSE code: 532953 power supply (UPS; down 27% YoY) respectively. The net sales grew by 7% YoY but declined by 18% QoQ to Rs334 crore. The operating profit declined by 10% YoY NSE code: VGUARD and 13% QoQ to Rs27 crore in Q2FY2014 on account of the lower sales. The profit Sharekhan code: VGUARD after tax (PAT) of V-Guard declined by 19% YoY and 18% QoQ to Rs14.5 crore, Free float: 1.0 cr which was also 20% lower than our estimate. Till H1FY2014, the net profit declined (no. of shares) by 17% YoY to Rs10.8 crore on a sales growth of 17% and the operating profit margin (OPM) contraction of 235 basis points YoY. Shareholding pattern  Earnings estimates revised downward: The weak sales trend and inventory build up indicate considerable moderation in the growth in the electronics Others 15% segment. Moreover, we believe that the general trend of lower load shedding DIIs in the run up to the upcoming elections would keep the demand for inverters 2% muted in the second half of the fiscal. Taking this into consideration, we have FII revised down our revenue and margin assumptions that have resulted in a 6-7% 17% downward revision in the earnings estimates for FY2014 and FY2015. Promoters 66%  Hold rating retained with revised price target of Rs520: In line with the revision in earnings estimates, we have revised down our price target to Rs520. We see limited upside from the current level but one should look at accumulating Price chart the stock on decline as the company would manage a healthy compounded

590 Results Rs cr 560 530 Particulars Q2FY14 Q2FY13 YoY % Q1FY14 QoQ % 500 Operational income 334 313 7 408 -18 470 Operating expenses 307 283 8 377 -19 440 Operating profits 27 30 -10 31 -13 410 380 Other income 1 1 1 1 3 Interest 5 4 12 5 -12 Jul-13 Oct-12 Jan-13 Oct-13 Apr-13 Depreciation 3 3 -2 3 -1 PBT 21 24 -14 24 -13 Price performance Tax 6 6 2 6 0

(%) 1m 3m 6m 12m Reported PAT 14 18 -19 18 -18 EPS 4.9 6.0 -19 5.9 -18 Absolute 5.8 -1.2 8.6 25.2 Margins (%) bps bps OPM 8.1 9.6 (147) 7.6 51 Relative 2.7 -4.8 -1.5 11.0 to Sensex NPM 4.3 5.7 (140) 4.3 1 Tax rate 29 25 455 26 389

Sharekhan 5 October 23, 2013 Home Next investor’s eye stock update

annual growth rate (CAGR) of close to 20% in the tough Weak sales reflected on operating profit; challenging business environment with the return on equity of over to manage margin ahead 25% despite the expected unfavourable shift in the In line with our estimate, V-Guard reported an OPM at 8.1% revenue mix (driven by the lower sales of inverter and in Q2FY2014. The company managed to improve its OPM other electronics products). over the last quarter, with lower selling and administrative expenses (S&A; as advertisement spending in the Indian Sales below estimate on weak performance of electronics Premiere League [IPL] occurred in Q1FY2014), and better segment management of the raw material cost. However, the OPM During Q2FY2014, V-Guard reported net sales 16% below reported in Q2FY2014 was 146-basis-point lower over than our estimate as the electronics segment reported weak that of Q2FY2013 as the S&A and employee costs grew at a sales. The sales of electronics segment declined by higher rate than sales. Hence, the operating profit got 18% YoY and 48% QoQ to Rs84.6 crore. On the other hand, adversely impacted both on Y-o-Y and Q-o-Q bases. in the last seven quarters, the segment used to notch a run rate of Rs100-140 crore. However, the electrical and The operating profit declined by 10% YoY and 13% QoQ to electromechanical segment clocked a revenue growth of Rs27 crore in Q2FY2014. On a muted sales growth of 7% YoY, Rs241 crore, which is in line with our estimate and the employee and S&A expenses weighed high with a higher exhibiting a healthy growth (18% YoY and 3% QoQ) too. growth (pushed down operating profit by 10% YoY). However Consequently, the net sales reported by V-Guard for the on a sequential basis, the decline in sales would be attributed quarter grew by 7% YoY but declined by 18% QoQ to Rs334 largely to the drop in the operating profit by 13%. crore (against our estimate of Rs396 crore). Sequentially, the S&A expenses declined sharply as a The fall in the electronics segment (contributes 25% of significant advertisement spend was done during the sales) was mainly due to the depressing performance Q1FY2014 in the IPL to reach a large audience base, in both the DUPS and UPS segments, which declined by especially in the non-south market. 48% YoY and 27% YoY respectively. The stabiliser segment recorded a growth of 8% YoY to Rs54 crore but declined The management aims to maintain the EBITDA margin of 40% sequentially. The poor performance in this segment around 9-9.5% during FY2014 but we believe it is was due to the seasonality effect, extended monsoon challenging especially in the current environment. We season, improved power situation in south India and high have built in the EBITDA margin of 8.5% in our estimate. base in the corresponding quarter of the last year. Margin profile

In the electrical and electromechanical segment 14.0% (contributes 72% of the sales), all the products grew in a 12.0% healthy range except pumps and low tension (LT) cables, 10.0% which declined by 22% YoY and 1% YoY respectively. The 8.0% sales decline in pumps was due to the extended monsoon 6.0% across India during the quarter. 4.0% 2.0% Segmental revenue performance Rs cr 0.0% Particulars Q2 Q2 YoY Q1 QoQ FY14 FY13 % FY14 % Q1FY12 Q2FY12 Q3FY12 Q4FY12 Q1FY13 Q2FY13 Q3FY13 Q4FY13 Q1FY14 Q2FY14 Electronics 85 103 -18 165 -49 Operating margin Electrical and electro 241 204 18 235 2 mechanical Net profit declined on lower sales; slipped below estimate Others 8 7 23 8 6 During Q2FY2014, the PAT of V-Guard declined by 19% YoY Segment revenue 334 313 7 408 -18 and 18% QoQ to Rs14.5 crore due to the cascading effect The geographic sales mix has tilted towards the non-south of the lower sales with poor performance of the electronics region marginally. The south region contributed 72% vs segment. This was also 20% lower than our estimate. the remaining 28 % from the non-south market in H1FY2014 net declined but improvement was seen in Q2FY2014. The non-south market showed a considerable balance sheet and cash flow growth of 34% YoY on a low base while the south market During H1FY2014, V-Guard reported sales growth of 17.3% declined by 2% YoY in Q2FY2014. YoY to Rs742 crore mainly due to the healthier

Sharekhan 6 October 23, 2013 Home Next investor’s eye stock update performances in the electrical and electromechanical  The company has improved its net working capital cycle segment and other segment. However, the electronics by four days with stringent receivable payable policy segment remained laggard in H1FY2014 with a 9% growth attributable to reducing debtor days by 13 and due to a poor performance in the UPS product. Despite a expanding the creditor days by two days during stellar sales growth in H1FY2014, the operating profit Q2FY2014. This has eventually led to a better cash declined by 10% YoY to Rs58 crore due to an increase in generation for the company of around Rs87 crore in the raw material, and selling and distribution costs during H1FY2014 as compared with Rs21 crore in H1FY2013. the period. This impacted the OPM as it recorded a decline of 7.8% (down 240 basis points YoY in H1FY2014). The Earnings estimates revised downward by 6-7% poor operational performance seeped into the net profit, The weak sales trend and inventory build up indicate which declined by 17% YoY to Rs10.8 crore in H1FY2014. considerable moderation in the growth in the electronics The geographic sales mix was more favourable towards segment. During Q2FY2014, there was a slippage of around the non-south market, which contributed 30% to sales in Rs40 crore from our expectations due to a poor H1FY2014 vs 25% in H1FY2013. performance of the electronics segment, which was also lower than its quarterly average run rate. On the positive side, the net working capital cycle stepped down to 69 days in H1FY2014 compared with 73 days in Moreover, we believe that the general trend of lower load H1FY2013, primarily on account of the lower receivable shedding in the run up to the upcoming elections would days. However, the inventory days have stepped up from keep the demand for inverters muted in the second half 70 days in H1FY2013 to 80 days in H1FY2014 reflecting a of the fiscal. Hence, in line with the revised guidance of weak sales conversion. The total debt was also reported management, we have cut down our sales estimate by lower by Rs14 crore (over that of last year) to Rs108 crore. 7-8% for FY2014 and FY2015. We also learned from the management that the cash from operations showed a healthy improvement at Rs87 crore In such an environment, we believe the overhead cost in H1FY2014 compared with Rs21 crore in H1FY2013. could weigh on the margin and the company may face However, the return on capital employed (RoCE) has challenge to achieve the EBITDA margin guidance of declined from 29% in H1FY2013 to 22% in H1FY2014 that 9-9.5%. We have built in the EBITDA margin of 8.5% in our we believe would also be attributed to the lower sales estimate. Consequently, we have revised down our from the electronics segment, which enjoys a higher RoCE. earnings estimate by 6-7% in FY2014 and FY2015.

Key conference call takeaways Moderating growth in electronics segment could adversely impact RoCE  Given the slower traction in the sales of electronics segment, the sales guidance was lowered to 20% from We are concerned on the moderation of V-Guard’s 25% in FY2014. electronics segment because the same segment is believed to be the primary driver of RoCE as its products are  The management aims to achieve the EBITDA margin outsourced (lower capital employed) and also earns of 9-9.5% in FY2014, with volume traction in H2FY2014. relatively better margin than the other segment. Most of  The management has guided that with a high the products of the other segment (electrical and advertisement spend on the IPL season (5.3% of sales) electromechanical) are manufactured in-house and earn in Q1FY2014, the company has cut down the relatively lower earnings before interest and tax (EBIT) advertisement spent to 3.3% of sales in Q2FY2014 as margin (as exhibited in segmental analysis). Thus if compared with a mere 2.1% in Q2FY2013. However, moderation in the sales growth of electronics segment for the full year, the management has guided that the continues, it could impact adversely the overall RoCE of advertisement spend would be maintained in the range the company. of 3.5-4% of revenues for FY2014. Price target revised down to Rs520 but Hold retained  The effective tax rate is expected to be around 21-22% Amidst the above mentioned concerns of slower sales and for FY2014 and FY2015 as the new plant at Kashipur impact on RoCE, we expect the company to deliver an (operational in Q1FY2014) enjoys an excise duty benefit. earnings growth of 20% with the return on equity of around  The management retained its capital expenditure 25% in the coming two quarters. Hence, though we have (capex) guidance of around Rs20 crore for FY2014, revised our price target in line with revision in earnings, while they expect the capex to come down to Rs10 but we have retained our Hold recommendation on the crore in FY2015. stock.

Sharekhan 7 October 23, 2013 Home Next investor’s eye stock update

Valuations One-year forward PE band Particulars FY11 FY12 FY13 FY14E FY15E 700 Net sales (Rs cr) 726.6 964.6 1,360.2 1,625.3 1,946.1 20x 600 Y-o-Y growth % 59.9 32.8 41.0 19.5 19.7 17x 500 Operating margin (%) 10.1 9.7 8.1 8.3 8.3 14x 400 Net profit (Rs cr) 39.0 50.8 62.9 78.9 96.8 11x 300 Adjusted EPS (Rs cr) 13.1 17.0 21.1 26.4 32.4 8x Y-o-Y growth % 53.1 30.3 23.8 25.4 22.6 200 PER (x) 37.9 29.1 23.5 18.7 15.3 100 P/B (x) 8.6 7.0 5.7 4.5 3.6 0 EV/EBIDTA (x) 21.5 16.5 14.3 11.9 9.9 Jul-08 Jul-09 Jul-10 Jul-11 Jul-12 Jul-13 Oct-08 Jan-09 Oct-09 Jan-10 Oct-10 Jan-11 Oct-11 Jan-12 Oct-12 Jan-13 Oct-13 Jan-14 RoCE (%) 25.1 27.6 27.8 26.7 26.6 Apr-08 Apr-09 Apr-10 Apr-11 Apr-12 Apr-13 RoNW (%) 24.9 26.6 26.7 26.7 26.0

Segmental analysis: electronics segment major RoCE driver Particulars Q1FY13 Q2FY13 Q3FY13 Q4FY13 Q1FY14 Q2FY14 H1FY14 H1FY13 Electronics segment Outsourced products (%) 100 100 100 100 100 100 100 100 In-House products (%) 0 0 0 0 0 0 0 0 Electrical and electromechanical Outsourced products (%) 42 39 42 42 41 34 38 40 In-House products (%) 58 61 58 58 59 66 62 60

Segment wise margin Particulars Q1FY13 Q2FY13 Q3FY13 Q4FY13 Q1FY14 Q2FY14 H1FY14 H1FY13 Electronics segment PBITM (%) 15.3 13.3 8.4 9.4 12.1 12.9 12.4 14.4 Electrical and electromechanical PBITM (%) 7.2 7.4 6.2 2.6 4.5 6.2 5.4 7.3

Segmental - capital employed Rs cr Particulars Q1FY13 Q2FY13 Q3FY13 Q4FY13 Q1FY14 Q2FY14 H1FY14 H1FY13 Electronics 71 75 93 129 90 85 85 75 Electrical and electromechanical 216 238 278 303 262 305 305 238 Others 22 29 30 33 27 32 32 29 Unallocated (177) (92) (136) (203) (100) (127) (127) (92) Total 131 249 265 261 279 295 295 249

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Sharekhan 8 October 23, 2013 Home Next investor’s eye viewpoint

Hero MotoCorp

Viewpoint

Demand recovery in sight CMP: Rs2,088

Q2FY2014 Results highlights  Hero MotoCorp Ltd (HMCL)’s Q2FY2014 results were Scooters to continue outperforming, to increase capacity ahead of our as well as the Street’s estimates. In H1FY2014, the scooter segment grew 17% year on year  The realisation per vehicle at Rs40,431 was 2.6% above (YoY) as against a flat growth for the motorcycle segment. our estimate on account of a better product mix and This is on account of increased acceptance of scooters in price the hikes taken. The contribution per vehicle at the metros and tier 1 cities. HMCL expects scooters to Rs11,514 was 9% above estimate due to a better mix continue to outperform and expects the share of the category and the subdued commodity prices during the quarter. to increase from 20% currently to 25% in the next two years. HMCL has planned to increase the scooter capacity from  HMCL reported an operating profit margin (OPM) of 60,000/month to 75,000/month by December 2013. 14.5%, which is 90 basis points higher than our estimate. Exports subdued in H1FY2014; expect to ramp up in H2  The lower depreciation further boosted the profit. HMCL exports declined by 18% YoY in H1FY2014 on account HMCL reported a profit of Rs481.4 crores, which is of a sluggish demand in the overseas markets. The higher than our estimate of Rs414.1 crore. company is currently exporting to 10 countries. In H2FY2014, HMCL is planning to enter eight new markets Results Rs cr in Africa and Latin America and expects to ramp up the Particulars Q2FY14 Q2FY13 YoY % Q1FY14 QoQ % volumes. HMCL maintained its guidance of achieving 1 Revenues 5726.2 5187.5 10.4 6159.5 -7.0 million units from the export markets by FY2017. EBIDTA 832.7 719.2 15.8 915.2 -9.0 Cost control initiatives to boost margin in long term EBIDTA margin (%) 14.5 13.9 14.9 Depreciation 286.9 289.5 -0.9 274.4 4.6 HMCL has initiated a long-term cost control programme Interest (income) 3.0 3.0 0.3 3.0 0.3 titled “Wave”. The initiative aims at reducing costs in the Other income 115.5 99.3 16.2 112.3 2.9 form of consolidating raw material purchases, savings in PBT 658.3 526.1 25.1 750.2 -12.2 logistics cost and e-bidding for certain components. HMCL Tax 176.9 85.5 106.9 201.6 -12.2 expects savings to the tune of Rs60-80 crore in H2FY2014. PAT 481.4 440.6 9.3 548.6 -12.2 The savings are expected to increase over the next few years resulting in a margin improvement for HMCL. EPS (Rs) 24.1 22.1 27.5 Competitive intensity to rise Conference call highlights The two-wheeler industry is set to witness increased Demand to pick up in H2FY2014 on account of festive competition with Honda Motorcycle & Scooter India (HMSI) season and higher rural income getting aggressive with new launches. Recently, it After registering a flat growth in H1FY2014, HMCL expects introduced Dream Neo and Activa I (its cheapest scooter) the demand to recover in H2FY2014. The festive season is with the new HET engine. Similarly, Bajaj Auto has planned expected to lead to a recovery in the demand in the second a slew of launches in the motorcycle space (particularly half. Further, the higher rural income due to a good monsoon in the commuter segment). HMCL being the market leader is expected to boost the demand. HMCL is launching 15 is prone to market share loss on new launches by new products (including refreshes) in H2FY2014 to tap the competition. Its market share in the two-wheeler space increased demand. Overall, HMCL is targeting a mid-single- (excluding mopeds) has declined from 42.7% in H1FY2013 digit growth in the volumes for FY2014. to 41.5% in H1FY2014.

Sharekhan 9 October 23, 2013 Home Next investor’s eye viewpoint

Valuation Valuations We maintain our volume assumptions for HMCL given the Particulars FY11 FY12 FY13 FY14E FY15E recovery in the festive season. However, we have increased Net sales (Rs cr) 19397.9 23579.0 23768.1 25860.8 30147.7 the margin assumption on account of an outperformance Growth (%) 22.5 21.6 0.8 8.8 16.6 in Q2FY2014 and continued cost control initiatives by the EBIDTA (Rs cr) 2612.5 3618.8 3284.5 3744.4 4517.9 company. We have assumed margin of 14.5% and 15% for FY2014 and FY2015 respectively. HMCL is likely to witness OPM (%) 13.5 15.3 13.8 14.5 15.0 increased tax rate on account of a reduction in the tax PAT (Rs cr) 2007.7 2378.1 2118.2 2170.3 2867.4 benefit from its Uttarakhand plant and an increase in the Growth (%) -10.0 18.4 -10.9 2.5 32.1 surcharge in the Union Budget. We expect earnings per FD EPS (Rs) 100.5 119.1 106.1 108.7 143.6 share (EPS) estimates of Rs108.7/share and Rs143.6/share P/E (x) 20.8 17.5 19.7 19.2 14.5 for FY2014 and FY2015 respectively. The stock is currently P/B (x) 14.1 9.7 8.3 6.5 5.0 trading at close to its average historical one year forward RoE (%) 67.9 55.4 42.3 33.8 34.6 P/E band, and largely factors in the demand recovery. We RoCE (%) 53.5 52.4 46.7 43.3 45.1 have a Neutral view on the stock.

Sharekhan Limited, its analyst or dependant(s) of the analyst might be holding or having a position in the companies mentioned in the article.

Sharekhan 10 October 23, 2013 Home Next investor’s eye Mutual Gains

Mutual Gains

Mutual Fund Debt Mutual Fund Picks

Macro data round up  The Wholesale Price Index (WPI)-based inflation grew at a seven- Key rates Closing value Weekly Mthly Yearly month high of 6.46% in September, compared to 6.1% in the previous month, owing to rising vegetable prices, especially Inflation* 6.46 6.10 6.10 8.07 onion. Food inflation swelled to a three-year high of 18.4% in 91 Days T-Bill 9.50 9.50 11.05 8.09 September compared to 18.2% in the previous month. 364 Days T- Bill 9.00 9.37 9.80 7.97  The Central Bank increased the repo rate by 25 bps to 7.50% at 10 Year G-Sec Yield 8.77 8.85 8.60 8.15 its Mid-Quarter Monetary Policy Review. Maintaining a spread of 100 bps, the reverse repo rate stood at 6.50%. The Central MIBOR 10.00 9.64 10.36 8.07 Bank also reduced the Marginal Standing Facility (MSF) rate by 6 Months LIBOR (USD) 0.37 0.37 0.39 0.64 75 basis points from 10.25% to 9.50% with immediate effect. Call Money Rate 9.65 9.51 10.30 8.03 With these changes, the MSF rate and the Bank Rate are recalibrated to 200 basis points above the repo rate. Repo Rate 7.50 7.50 7.25 8.00 Reverse Repo 6.50 6.50 6.25 7.00  India's industrial production growth slowed to 0.6% in August from an upwardly revised 2.75% in July, hurt by weak investment CRR 4.00 4.00 4.00 4.50 and consumer demand. The manufacturing sector contracted SLR 23.00 23.00 23.00 23.00 marginally 0.1% from a year earlier whereas Capital goods production contracted by 2% in August as compared to last year’s Bank Rate 9.50 9.50 9.50 9.00 data. While the basic goods production grew at 1.5% in August, *Inflation rate for September 2013 the electricity sector production grew at 7.2% versus 5.2% in July. The non-durable goods growth was reported at 5% versus 6.8% in July.

 On the global front, encouraging U.S. construction spending, manufacturing and services sector data coupled with upbeat Chinese exports numbers improved market sentiments. The wave of optimism faded somewhat amid lingering geo-political tensions in Syria and disappointing reports on U.S. non-farm payrolls, consumer credit and retail sales. According to Markit Economics, the Euro zone manufacturing sector expanded at the fastest pace in twenty-six months in August. Signs of expansion were also evident in British and German manufacturing sectors. Meanwhile, the Bank of Japan (BoJ) maintained its monetary stimulus and said that the economy is recovering. Bond / Debt market round up  Bond yields rose in September, a month in which the first monetary policy review by the new Central Bank Governor and the U.S. Federal Reserve’s (Fed) decision to continue with its bond-purchase program for the time being hit the headlines. In the first half of the month, bond yields fell sharply after market participants welcomed the RBI’s move to partially roll back its liquidity-tightening measures. Bond yields got further support on the back of a sharp rally in the domestic currency and a drop in global crude oil prices. However, yields started rising after the Central Bank announced a surprise hike in benchmark repo rate at its Mid-Quarter Monetary Policy Review on September 20. Bond yields got some support in the last week of the month after the RBI announced Open Market Operations (OMOs) to ease liquidity condition in the market ahead of the festive season.  The 10-year benchmark bond ended up 17 bps to close at 8.77%, compared to its previous month’s close of 8.60%, after touching a low of 8.19% on September 19. Bond / Debt Outlook: Bond prices are likely to remain range bound in the coming month. It is expected that main triggers for the markets will be any development related to the Fed’s bond-buyback program, movement in the domestic currency and updates on economic indicators. Investors will track upcoming debt ceiling discussions in the U.S. The RBI will conduct the auction of Government Securities and Treasury Bills for an aggregate amount of Rs. 45,000 crore and Rs. 60,000 crore, respectively during the next month.

Model portfolio – Asset classes

Investor Profile Conservative Moderately Conservative Moderately Aggressive Fixed Income 70-75% 75-80% 80-85% Ultra Short Term 15-20% 10-15% 5-10% Short Term 10-15% 10-15% 5-10% Floating Rate Funds 10-15% 5-10% 5-10% Long Term 5-10% 10-15% 15-20% Gilt* 10-15% 20-25% 25-35% Liquid Funds/Cash 20-25% 15-20% 10-15%

Sharekhan 11 October 23, 2013 Home Next investor’s eye Mutual Gains

Investment strategy Bond yields witnessed an upward trend recently on account of measures taken by the Reserve Bank of India (RBI) to curb volatility in the Indian currency. The rupee raised concerns over inflationary pressure and fiscal deficit of the country. However, the new RBI Governor announced various measures to support liquidity and partially roll back its liquidity-tightening measures announced in the month of July. At the time when bond yields are expected to remain volatile, it is better to have a portfolio allocation similar to that of a Conservative Fund. This is because a conservative approach helps to safeguard the portfolio from any major downside. However, one can switch to Aggressive Fund, if the bond yields stabilize and inflation data remains in line with market expectations. This shift will allow one to reap benefits of ease in bond yields as the rate cut hopes set in.

Tenure in yrs Research Process The model portfolio has been determined on the basis of the risk-return trade-off offered by various asset classes. As the risk appetite of the investor increases, the return expectation also increases. The portfolio volatility as measured by the standard deviation of the inherent asset classes has been used as a surrogate of risk. Allocation has been ascertained keeping in mind the trade-off between higher volatility in returns and the safety of capital. Therefore, while gilt funds are the most secure, the relatively higher volatility in returns may not be suitable for a conservative investor; at the same time a moderately conservative investor will be able to absorb the gyrations in returns. The model portfolio has been expressed in ranges to offer flexibility in creating actual portfolios. Sharekhan’s top debt fund picks Monthly Income Plan Funds that offer a marginal flavor of equity (upto 15% or more) especially for portfolios that are otherwise debt oriented. They predominantly invest in debt and money market instruments.

Returns (%) Exp* Avg. AAUM ** (Simple Annualized) Ratio Mat Credit Quality (% Allocation) Scheme Name (Rs Crs) (%) (Days) 1Mth 3 Mths 6Mths 1 Yr AAA/P+ AA/AA+ Below Cash & AA Call IDFC MIP - Reg 304.9 25.3 -8.8 1.1 6.1 2.3 3249 51.0 5.2 -- 43.9 DSP BR MIP Fund 525.8 28.3 -0.3 4.7 4.7 2.5 1067 39.6 17.9 7.8 34.7 Tata MIP Plus - Plan A 134.9 28.7 -6.6 3.8 4.9 2.3 1186 64.7 0.7 -- 34.6 SBI Magnum MIP 354.8 18.4 -11.3 0.0 4.9 2.3 2055 55.9 17.2 -- 26.8 BSL MIP II-Savings 5 270.8 20.9 -8.6 2.5 4.7 1.1 -- 59.6 18.6 3.9 17.9 Crisil MIP Blended Index 21.6 -14.7 -0.7 3.2

Income Funds Funds that invest in income bearing instruments with any maturity and across the yield curve to generate regular income, such as corporate bonds, gilts, treasury bills, certificates of deposit and commercial papers etc.

Returns (%) Exp* Avg. AAUM ** (Simple Annualised) Ratio Mat Credit Quality (% Allocation) Scheme Name (Rs Crs) (%) (Days) 1Mth 3 Mths 6Mths 1 Yr AAA/P+ AA/AA+ Below Cash & AA Call ICICI Pru LTP - Reg - Cum 303.4 9.3 9.0 8.8 8.4 -- 34 55.9 -- -- 44.1 BNP Paribas Flexi Debt 597.0 11.3 -3.5 6.5 8.6 1.9 675 69.9 11.4 -- 18.7 Tata Income - Plan A 1215.9 19.2 -6.6 4.8 7.6 1.1 1482 87.5 -- -- 12.5 UTI Dynamic Bond Fund 970.6 18.3 1.9 5.8 7.5 1.2 995 19.4 41.1 -- 39.5 HDFC MT Opp.Fund 2160.1 26.7 -0.9 4.9 7.1 0.3 953 82.5 10.6 -- 6.9 Crisil Composite Bond 15.1 -16.4 -1.4 3.5

Sharekhan 12 October 23, 2013 Home Next investor’s eye Mutual Gains

Short Term Debt Funds Funds invest in short-term debt instruments of high quality and low risk, that mature in about next 15 to 18 months and generally best suited to investors with 1 to 2 years of investment horizon.

Returns (%) Exp* Avg. AAUM ** (Simple Annualised) Ratio Mat Credit Quality (% Allocation) Scheme Name (Rs Crs) (%) (Days) 1Mth 3 Mths 6Mths 1 Yr AAA/P+ AA/AA+ Below Cash & AA Call Canara Robeco ST - Reg 423.0 18.5 3.0 6.9 7.8 0.9 694 90.7 1.4 -- 7.9 Sundaram Flexible - ST 750.6 19.6 4.6 7.1 7.4 1.5 164 99.3 -- -- 0.7 JPMorgan ST Income 1044.0 8.3 2.1 6.1 7.7 1.1 969 57.4 24.1 -- 18.5 Birla Sun Life ST - DAP 5191.7 20.4 3.6 6.8 8.0 0.3 -- 87.2 4.8 -- 8.0 UTI ST Income - Ret 3523.7 24.7 4.4 7.0 8.9 1.0 802 56.3 30.0 -- 13.8 Crisil ST Debt Index 21.7 4.0 7.1 7.7

Ultra Short Term Funds Funds that invest exclusively in debt instruments with very short maturity period, usually one year or less.

Returns (%) Exp* Avg. AAUM ** (Simple Annualised) Ratio Mat Credit Quality (% Allocation) Scheme Name (Rs Crs) (%) (Days) 1Mth 3 Mths 6Mths 1 Yr AAA/P+ AA/AA+ Below Cash & AA Call Religare Credit Opp -Reg 566.8 10.4 8.4 7.9 7.8 2.1 32 88.6 1.5 -- 9.9 IDFC Money Managr -TP 992.0 14.5 8.2 8.5 8.3 1.3 79 88.0 9.5 -- 2.5 Templton Low Duration 2051.4 15.4 8.1 9.1 9.2 0.8 91 41.4 54.6 2.9 1.0 BSL Ultra ST Fund - Ret 543.5 13.9 8.4 9.0 8.8 0.4 -- 64.6 13.5 -- 21.9 Reliance Money Managr 6825.6 14.4 8.8 8.8 8.7 1.0 103 76.6 16.4 -- 7.0 Crisil Liquid Fund Index 15.4 9.3 8.9 8.5

Floating Rate Funds Funds that predominantly invests in debt securities with a floating rate of interest. And these debt securities peg their coupon or interest rate payable to market driven rate such as Mibor.

Returns (%) Exp* Avg. AAUM ** (Simple Annualised) Ratio Mat Credit Quality (% Allocation) Scheme Name (Rs Crs) (%) (Days) 1Mth 3 Mths 6Mths 1 Yr AAA/P+ AA/AA+ Below Cash & AA Call SBI Income - FRP -SP Bond 146.8 10.5 9.6 9.0 9.0 1.0 40 98.0 -- -- 2.0 UTI FRF - STP 2521.4 14.3 10.2 10.0 9.5 0.5 161 99.2 -- -- 0.8 HSBC FRF - LTP – Reg. 166.4 12.6 9.0 8.4 7.9 1.3 64 99.5 -- -- 0.5 BSL FRF - LTP - Ret 2052.6 14.3 8.4 9.1 9.0 0.5 -- 56.6 23.6 -- 19.8 L&T FRF - Cumulative 538.2 11.5 8.2 9.0 9.7 0.4 40 70.2 0.0 -- 29.8 Crisil Liquid Fund Index 15.4 9.3 8.9 8.5

Liquid Fund Funds investing only in short-term money market and debt instruments that mature in up to 91 days such as treasury bills, commercial paper and certificates of deposit.

Returns (%) Exp* Avg. AAUM ** (Simple Annualised) Ratio Mat Credit Quality (% Allocation) Scheme Name (Rs Crs) (%) (Days) 1Mth 3 Mths 6Mths 1 Yr AAA/P+ AA/AA+ Below Cash & AA Call Union KBC Liquid Fund 1237.8 10.5 9.5 9.1 9.0 0.2 48 87.8 -- -- 12.2 Baroda Pioneer Liquid - Reg 3385.3 10.5 8.7 8.7 8.7 0.3 -- 94.2 -- -- 5.8 ICICI Pru Money Market Fund 1986.0 9.8 9.2 9.2 9.0 1.2 1 ------100.0 Reliance Liquidity Fund 5334.2 10.7 9.1 9.0 9.0 0.2 50 83.7 -- -- 16.3 HDFC Liquid Fund 10485.4 10.7 9.3 9.1 9.0 0.1 54 75.3 -- -- 24.7 Crisil Liquid Fund Index 15.4 9.3 8.9 8.5

Sharekhan 13 October 23, 2013 Home Next investor’s eye Mutual Gains

Gilt Funds Funds which invest only in government securities of different maturities with virtually no default risk.

Returns (%) Exp* Avg. AAUM ** (Simple Annualised) Ratio Mat Credit Quality (% Allocation) Scheme Name (Rs Crs) (%) (Days) 1Mth 3 Mths 6Mths 1 Yr AAA/P+ AA/AA+ Below Cash & AA Call Birla Sun Life GPLP - Reg 183.3 10.1 13.4 10.2 9.1 0.5 -- 72.2 -- -- 27.8 DSP BR Treasury Bill 425.7 12.2 15.1 11.3 9.6 0.6 92 99.4 -- -- 0.6 Religare Gilt - Short Duratn 200.2 10.2 14.8 10.8 14.4 0.6 22 98.8 -- -- 1.2 SBI Magnum Gilt STP 114.3 22.5 4.3 7.7 8.6 1.0 894 65.0 -- -- 35.0 IDFC G Sec - Invest - Plan A 283.2 7.6 -12.6 1.4 7.8 1.4 3993 76.9 -- -- 23.1 NSE GSec Composite 11.1 -17.8 -1.4 3.9 *Exp – Expense ratio (latest available date) ** AAUM (Rs crs) – Figure represents September 2013 quarter average AUM.

Methodology We have identified the best debt-oriented schemes available in the market today based on the following 5 parameters: Avg. rolling returns for one and two years, Sharpe ratio, Fama (net selectivity), Credit quality and Average Maturity. Credit quality-10%, Avg.Maturity-10%, Avg.rolling returns for 1 and 2 years – 20% each, Sharpe-20% and FAMA (net selectivity)-20%.

Tax rates

Tax on distributed income (payable by the scheme) rates

Scheme Type Individual Domestic Companies NRI Equity Oriented Schemes Nil Nil Nil Money market and Liquid schemes 28.325% 33.990% 28.325% 25% + 10% Surcharge** + 3% Cess 30% + 10% Surcharge** +3% Cess 25% + 10% Surcharge** + 3% Cess Debt schemes (other than 28.325% 33.990% 28.325% infrastructure debt fund) 25% + 10% Surcharge** + 3% Cess 30% + 10% Surcharge** + 3% Cess 25% + 10% Surcharge** + 3% Cess Infrastructure Debt Fund 28.325% 33.990% 5.665% 25% + 10% Surcharge** + 3% Cess 30% + 10% Surcharge** + 3% Cess 5% + 10% Surcharge** + 3% Cess

Tax Implications on Dividend received by Unit holders

Scheme Type Individual/ HUF Domestic Company NRI Equity Oriented schemes Nil Nil Nil Debt oriented schemes Nil Nil Nil

Capital Gains Long Term Capital Gains (Units Held for more than 12 months)

Scheme Type Individual/ HUF$ Domestic Company @ NRI$/#

Equity oriented schemes Nil Nil Nil

Other than equity 10% without indexation or 20% with 10% without indexation or 20% 10% without indexation or 20% with oriented schemes indexation whichever is lower with indexation whichever is lower indexation whichever is lower

Short Term Capital Gains (Units Held for 12 months or less)

Scheme Type Individual/ HUF$ Domestic Company @ NRI$/#

Equity oriented schemes 15% 15% 15%

Other than equity oriented schemes 30%^ 30% 30%^

Sharekhan 14 October 23, 2013 Home Next investor’s eye Mutual Gains

Tax Deduced at Source (Applicable only to NRI Investors)

Scheme Type Short term capital gains Long term capital gains Equity oriented schemes 15% Nil Other than equity oriented schemes 30% 20%##

* Securities transaction tax (STT) will be deducted on equity funds at the time of redemption/ switch to the other schemes/ sale of units. ** Effective from June 1, 2013. $ - Surcharge at the rate of 10% is proposed to be levied in case of individual/ HUF unit holders where their income exceeds Rs 1 crore. @ - Surcharge at the rate of @ 5% is proposed to be levied for domestic corporate unit holders where the income exceeds Rs 1 crore but less than Rs. 10 crore and at the rate of 10% where income exceeds Rs. 10 crore. # - Short term/ long term capital gain tax will be deducted at the time of redemption of units in case of NRI investors only. ## - After providing for indexation ^ Assuming the investor falls into highest tax bracket. Education Cess @3% will continue to apply on tax plus surcharge

Category Write-up Indian equity markets witnessed major gains during the month on the back of the U.S. Federal Reserve’s (Fed) decision to continue with its quantitative easing program for the time being. However, the RBI’s unexpected move to hike key policy rates at its Mid-Quarter monetary policy review didn’t go down well with the investors. According to data released by the Securities and Exchange Board of India (SEBI), Foreign Institutional Investors (FIIs) remained net buyers in the equity segment during the month. They net purchased equities to the tune of Rs. 13,057.80 crore against net sale of Rs. 5,922.50 crore recorded in the previous month. However, domestic mutual funds turned net sellers in Indian equity markets to the tune of Rs. 2,800.90 crore. The one-year returns on MIP category stood at 4.01%, marginally lower compared to 4.38% recorded in the previous month. Bond yields fell initially after the central bank partially rolled back its liquidity-tightening measures and on the back of a sharp rally in the domestic currency and a drop in global crude oil prices. However, yields started rising after the RBI announced a surprise hike in benchmark repo rate at its Mid-Quarter Monetary Policy Review. Bond yields got some support in the last week of the month after the RBI announced Open Market Operations (OMOs) to ease liquidity condition in the market ahead of the festive season. The RBI said that it will closely and continuously monitor the liquidity conditions and will take required actions, including OMOs, to ensure that adequate liquidity is available to support the flow of credit to the productive sectors of the economy. The one-year rolling returns on Gilt LT category stood at 4.09%, lower compared to 4.92% recorded in the previous month. In the short-term debt category, Gilt returned 7.23%, higher compared to 4.92% recorded in the previous month.

Risk Reward Graph

Sharekhan 15 October 23, 2013 Home Next investor’s eye Mutual Gains

Methodology The bubble diagram gives you a snapshot of how the mutual funds have performed on the risk – return parameter in the past. We have used bubble analysis method to measure their performance on two parameters i.e. Average rolling returns and Standard deviation. For all funds, we have considered one month rolling and periodic frequency for the period of one year, as on September 30, 2013.

Forthcoming NFOs

Fund House Scheme Name Open Date Close Date Structure Nature

DSP Blackrock Mutual Fund DSP BlackRock FMP - Series 124 - 3 Months 14/10/2013 21/10/2013 Close-Ended Fixed Maturity Plan

DWS Mutual Fund DWS Fixed Maturity Plan - Series 40 10/10/2013 14/10/2013 Close-Ended Fixed Maturity Plan

DSP Blackrock Mutual Fund DSP BlackRock FMP – Series 123 - 12M 17/10/2013 31/10/2013 Close-Ended Fixed Maturity Plan

ICICI Prudential Mutual Fund ICICI Prudential Capital Protection 07/10/2013 21/10/2013 Close-Ended Fixed Maturity Plan Oriented Fund IV - Plan E - 36M

Reliance Mutual Fund Reliance Interval Fund II - Series 2 07/10/2013 21/10/2013 Close-Ended Fixed Maturity Plan

Sundaram Mutual Fund Sundaram FTP - Plan EO (2 Years) 14/10/2013 21/10/2013 Close-Ended Fixed Maturity Plan

Disclaimer: Mutual fund investments are subject to market risk. Please read the offer document carefully before investing. Past performance may or may not be sustained in the future. “This document has been prepared by Sharekhan Ltd.(SHAREKHAN) This Document is subject to changes without prior notice and is intended only for the person or entity to which it is addressed to and may contain confidential and/or privileged material and is not for any type of circulation. Any review, retransmission, or any other use is prohibited. Kindly note that this document does not constitute an offer or solicitation for the purchase or sale of any financial instrument or as an official confirmation of any transaction. Though disseminated to all the customers simultaneously, not all customers may receive this report at the same time. SHAREKHAN will not treat recipients as customers by virtue of their receiving this report. The information contained herein is from publicly available data or other sources believed to be reliable. While we would endeavour to update the information herein on reasonable basis, SHAREKHAN, its subsidiaries and associated companies, their directors and employees (“SHAREKHAN and affiliates”) are under no obligation to update or keep the information current. Also, there may be regulatory, compliance, or other reasons that may prevent SHAREKHAN and affiliates from doing so. We do not represent that information contained herein is accurate or complete and it should not be relied upon as such. This document is prepared for assistance only and is not intended to be and must not alone be taken as the basis for an investment decision. The user assumes the entire risk of any use made of this information. Each recipient of this document should make such investigations as it deems necessary to arrive at an independent evaluation of an investment in the securities of companies referred to in this document (including the merits and risks involved), and should consult its own advisors to determine the merits and risks of such an investment. The investment discussed or views expressed may not be suitable for all investors. We do not undertake to advise you as to any change of our views. Affiliates of Sharekhan may have issued other reports that are inconsistent with and reach different conclusion from the information presented in this report. This report is not directed or intended for distribution to, or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction, where such distribution, publication, availability or use would be contrary to law, regulation or which would subject SHAREKHAN and affiliates to any registration or licensing requirement within such jurisdiction. The securities described herein may or may not be eligible for sale in all jurisdictions or to certain category of investors. Persons in whose possession this document may come are required to inform themselves of and to observe such restriction. SHAREKHAN & affiliates may have used the information set forth herein before publication and may have positions in, may from time to time purchase or sell or may be materially interested in any of the securities mentioned or related securities. SHAREKHAN may from time to time solicit from, or perform investment banking, or other services for, any company mentioned herein. Without limiting any of the foregoing, in no event shall SHAREKHAN, any of its affiliates or any third party involved in, or related to, computing or compiling the information have any liability for any damages of any kind. Any comments or statements made herein are those of the analyst and do not necessarily reflect those of SHAREKHAN.”

Sharekhan 16 October 23, 2013 Home Next Sharekhan Stock Ideas

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