INDIA DAILY

September 21, 2011 India 20-Sep 1-day1-mo 3-mo Sensex 17,099 2.1 5.9 (2.6)

Nifty 5,140 2.2 6.1 (2.6)

Contents Global/Regional indices Special Reports Dow Jones 11,409 0.1 5.5 (6.4) Nasdaq Composite 2,590 (0.9) 10.6 (3.6)

Initiating Coverage FTSE 5,364 2.0 6.4 (7.1) Bajaj Finserv: Focusing on profitable growth Nikkie 8,722 0.0 0.0 (7.8) Daily Alerts Hang Seng 18,744 (1.4) (3.4) (14.2) KOSPI 1,836 (0.1) 5.2 (10.4)

Company Value traded – India DB Corp: DBCL's Marathi expansion Cash (NSE+BSE) 127 136 138 Sector Derivatives (NSE) 1,323 1,907 1,702 Deri. open interest 1,410 1,467 1,378 Consumer products: Takeaways from Godfrey Phillips' AGM

Energy: Subsidy Sudoku remains unresolved

Strategy Forex/money market Strategy: Takeaways from our GameChanger forum: The Next Big Things Change, basis points 20-Sep 1-day 1-mo 3-mo Rs/US$ 48.1 0 239 321 10yr govt bond, % 8.3 1 9 13 News Round-up Net investment (US$mn) 19-Sep MTD CYTD ` IMF lowers global growth forecast to 4% in 2011 & 2012. India to see growth FIIs (1) 338 392 slowdown to 7.5% in 2011 from 10.1% in 2010. (FNLE) MFs 31 (171) (282) ` Green ministry softens stand in coal mining. Ray of hope for power, metal companies. The GoM is yet to evolve a consensus over the classification of coal Top movers -3mo basis Change, % mining areas into 'go' and 'no-go' zones. (BSTD) Best performers 20-Sep 1-day 1-mo 3-mo ` Coal India (COAL IN), the government's near-monopoly producer, is planning to MM IN Equity 814.4 1.8 13.3 28.5 again try to interest major firms, here and abroad, into reviving some of its IDEA IN Equity 98.3 1.6 4.6 25.9 abandoned mines. Its first attempt, in 2008, finally had no takers. (BSTD) BJAUT IN Equity 1628.1 1.6 14.1 23.2 UTCEM IN Equity 1144.3 0.7 15.8 18.2 ` Reliance Industries Ltd (RIL IN) announced on Monday that it is planning a IBULL IN Equity 166.7 2.0 15.3 14.3 maintenance and inspection shutdown of the Light Cycle Oil Hydrocracker and Worst performers Vacuum Gas Oil Hydrotreating unit of its refinery at Jamnagar refinery complex from IVRC IN Equity 40.3 (3.4) 14.0 (39.4) EDSL IN Equity 243.2 4.7 10.5 (38.9) September 19 and September 23 respectively. (THBL) CRG IN Equity 159.7 0.1 17.0 (36.2) ` NTPC Ltd (NTPC IN) is on course to achieve a target of 75,000 MW in just over five HDIL IN Equity 112.4 1.3 11.7 (28.4) years up from the current capacity of 34,854 MW. (THBL) RPWR IN Equity 83.8 4.9 1.0 (23.8)

` L&T (LT IN) is set to partner government-owned Hindustan Shipyard for ship-building, as the defense ministry has recommended the company as the preferred partner. A deal would give L&T lots to cheer about after it expressed disappointment over the recent deal between Pipavav Shipyard (PIPV IN) and Mazagon Dock. (BSTD)

` Bhel (BHEL IN) has informed BSE that the board in its meeting on Tuesday has fixed October 4 as the record date for the purpose of sub-division of existing equity shares of face value of INR 10 each into 5 equity shares of face value of INR 2 each. (FNLE)

` The 2,400-MW gas based Samalkot power project of Reliance Power (RPWR IN) is gathering steam with all six turbines from US-based GE arriving in India. (THBL)

` HCL Technologies (HCLT IN) will establish a software delivery center in Dublin, Ireland, that will create 80 jobs for IT graduates over three years. (BSTD)

Source: ECNT= Economic Times, BSTD = Business Standard, FNLE = Financial Express, THBL = Business Line.

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

ADD Bajaj Finserv (BJFIN)

Banks/Financial Institutions SEPTEMBER 20, 2011 INITIATING COVERAGE Coverage view: Attractive

Focusing on profitable growth. We believe that a robust insurance business and Price (Rs): 566 expansion across segments of financial services will drive the business prospects of Bajaj Target price (Rs): 650 Finserv. A well-established life insurance business, rapidly growing lending business, BSE-30: 17,099 brand equity of the Bajaj group and strong financial capability are its key strengths. We like the business though the current stock price captures most of the value. We initiate coverage with an ADD rating and SOTP-based TP of Rs650/share.

SOTP-based valuation provides 15% potential upside

We initiate coverage on Bajaj Finserv with an SOTP-based target price of Rs650, i.e. 10X PER and 1.6X PBR FY2013E for 11% core earnings CAGR and about 16% RoE. Life insurance remains the largest contributor (61%) followed by the rapidly growing NBFC—Bajaj Finance. Faster-than- expected growth in the lending business, turnaround in the general insurance industry and optimal utilization of the surplus generated by the life insurance business will likely provide an upside to our fair estimate. Bajaj Finserv proposes to enter into new businesses like financial distribution and mutual fund, which will likely accrue value over time.

Group-wide focus on margins over market share

Bajaj Finserv has emerged as a diversified financial services company operating across the spectrum of lending and protection. Its businesses have focused on developing a diversified and sustainable business model with a clear preference for profitability over volume growth.

` Resisting temptation to grow (in an unfavorable environment) over the past three years, Bajaj Life is the first private company to coup its accumulated losses.

` Diversification and transformation of new business strategy have taken Bajaj Finance to a high profitability zone (RoE of 18-20%) and 23% PAT CAGR over the next three years.

` The general insurance business will likely generate normalized RoE of 16-17% though near- term earnings will likely be subdued.

Key risks: Underperformance due to extreme caution, regulatory changes

(1) Consistent decline in growth rate in APE and low persistency in the life insurance business can pull down embedded value; management’s proposed growth plans are hence positive. (2) Changes in regulatory environment have affected the businesses of life and general insurance; impending changes by RBI can affect the NBFC business. (3) Higher-than-expected losses in the third-party motor pool can put more pressure on profitability.

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

Bajaj Finserv Banks/Financial Institutions

Bajaj Finserv SOTP-based valuation, March fiscal year-end, 2013E

Value per Share of Value Ownership share SOTP (Rs mn) (%) (Rs) (%) Comments Bajaj Allianz Life Insurance 123,749 51 392 61 NBAP margin of 10.5%, EV+18X NBV FY2013E Bajaj Allianz General 13,226 51 42 6 1.3X PBR FY2013E for 16-17% medium-term ROE Bajaj Finance 43,830 63 171 27 1.9X PBR FY2013E for 18-20% RoE Net cash 2,164 100 15 2 1X cash Windmills 2,400 100 17 3 15X net earnings FY2013Efrom windfarm business IRR on insurance investments 1,445 10 2 Total 646 100

Source: Kotak Institutional Equities

Bajaj Finserv: Consolidated P&L and Balance Sheet March fiscal year-ends, 2009-2014E (Rs mn) 2009 2010 2011 2012E 2013E 2014E Profit and loss (Rs mn) Total income 97,896 238,527 178,922 177,740 188,865 214,532 Interest income 704 840 14,842 21,912 27,708 32,880 Bajaj Finance — — 14,061 21,156 26,934 32,086 Others 704 840 780 755 774 794 Insurance premium 124,924 132,755 117,248 105,242 105,148 119,624 Investment income (27,780) 103,045 43,929 50,075 55,498 61,517 Other income 49 1,887 2,903 511 511 511 Expenses (96,037) (229,567) (160,069) (159,255) (171,090) (194,237) Interest expenses — — (3,780) (7,812) (10,399) (12,522) Provisions — — (2,046) (1,787) (2,785) (3,367) Operating expenses (25,017) (23,393) (27,864) (29,366) (34,270) (40,504) Commission expenses (10,594) (9,944) (6,533) (5,871) (6,132) (6,936) Depreciation (297) (219) (100) (75) (50) (40) Benefits paid (21,638) (40,223) (66,899) (70,005) (62,021) (65,578) Change in reserve (38,490) (155,788) (52,848) (44,339) (55,433) (65,291) Income from associates 140 382 — — — — PBT 1,859 8,959 18,853 18,486 17,774 20,295 Tax (1,083) (1,644) (3,938) (5,760) (5,587) (6,392) PAT 776 7,315 14,915 12,725 12,187 13,902 Minority interest (64) (1,721) (3,598) (3,648) (3,304) (3,806) PAT post minority interest 713 5,594 11,317 9,078 8,883 10,097 PBT before surrender premium 1,569 6,859 15,253 15,486 16,774 20,295 Shares (mn) 145 145 145 145 145 145 EPS (Rs) 4.938.778.262.761.469.8 BVPS (Rs) 144 178 242 334 415 483 Balance sheet Fixed assets 3,641 4,616 5,967 5,226 5,595 6,044 Loan book — — 72,701 115,395 137,771 168,314 Investments 206,002 371,313 440,781 493,475 546,739 606,082 Other current assets 15,683 20,310 25,052 36,629 53,980 77,207 Total assets 225,326 396,239 544,501 650,724 744,084 857,647 Borrowings 3,107 3,107 67,085 106,506 124,589 153,678 Policyholders funds 158,658 314,446 367,294 411,634 467,066 532,357 Funds for future appropriation 5,023 9,430 11,577 14,380 16,759 19,455 Other liabilities 34,221 38,243 49,481 51,282 53,353 55,734 Total liabilities 201,009 365,226 495,437 583,801 661,768 761,224 Shareholders funds 20,879 25,804 35,068 48,256 59,999 69,825 Equity capital 7,234 7,234 7,234 7,234 7,234 7,234 Reserves 13,645 18,570 27,834 41,022 52,765 62,591 Minority interest 3,439 5,209 13,997 18,668 22,317 26,598

Source: Kotak Institutional Equities

KOTAK INSTITUTIONAL EQUITIES RESEARCH 3

BUY DB Corp (DBCL)

Media SEPTEMBER 21, 2011 UPDATE Coverage view: Neutral

DBCL’s Marathi expansion. We reiterate our BUY rating on DBCL with FY2013E TP of Price (Rs): 220 Rs330 (Rs350 previously) factoring in (1) reduced advertising growth in FY2012E (~13% Target price (Rs): 330 in core/legacy markets versus ~18% previously) and (2) substituting Bihar (Hindi) market BSE-30: 17,099 expansion for Maharashtra (Marathi). The Marathi expansion is well underway with new edition launches in three key cities. DBCL is focused on Tier-II/III cities in the market (excluding Mumbai-Pune metros) given its track record in such markets. We discuss the Marathi market: in terms of (1) competition and (2) penetration.

Company data and valuation summary DB Corp Stock data Forecasts/Valuations 2011 2012E 2013E 52-week range (Rs) (high,low)310-216 EPS (Rs) 14.1 13.0 15.5 Market Cap. (Rs bn) 40.4 EPS growth (%) 32.7 (8.1) 19.9 Shareholding pattern (%) P/E (X) 15.6 17.0 14.2 Promoters 86.5 Sales (Rs bn) 12.7 15.0 18.2 FIIs 5.1 Net profits (Rs bn) 2.6 2.4 2.8 MFs 3.5 EBITDA (Rs bn) 4.0 4.0 4.8 Price performance (%) 1M 3M 12M EV/EBITDA (X) 10.1 10.0 8.3 Absolute (5.3) (5.4) (19.9) ROE (%) 35.0 26.9 28.6 Rel. to BSE-30 (10.6) (3.2) (6.7) Div. Yield (%) 1.8 2.7 3.6

Reiterate BUY with FY2013E-based TP of Rs330 led by core/legacy markets

Exhibit 1 presents a breakdown of 1QFY12 financials of DBCL into mature (print, FM Radio) and emerging businesses; DBCL’s strong positioning and well-diversified presence (Exhibit 2) across 4 regional markets (core/legacy) resulted in robust 11% yoy revenue and 5% yoy EBITDA growth despite RM pressures. The RM pressures have started to wane with 2-3% correction in domestic newsprint prices, which will likely support financials in 2HFY12E.

We have fine-tuned our FY2013E TP to Rs330 (Rs350 previously) and FY2012E-13E EPS estimates to Rs13 (Rs14.2 previously) and Rs15.5 (Rs17.1 previously) largely due to (1) reduced core/legacy advertising growth in FY2012E (~13% versus ~18% previously) and (2) start-up losses in Marathi expansion negated by deferment of Bihar expansion. We do not expect Bihar expansion in the near term given (1) Jharkhand and Maharashtra expansions, (2) competition in MP-Chhattisgarh markets and (3) FM radio Phase-III (likely to come in by end-FY2012E).

DBCL’s Marathi expansion: A tale of two markets (metros versus Tier-II/III cities)

DBCL’s Maharashtra (Marathi) expansion is well underway with edition launches in Aurangabad, Nashik and Jalgaon. The Marathi print market in Maharashtra is a tale of two markets: (1) metros (Mumbai-Pune) and (2) Tier-II/III (rest of Maharashtra). DBCL is focused on the rest of Maharashtra

(RoM) market given (1) its execution track record in Tier-II/III regional markets and (2) dominance of English print in metro markets. The Marathi print has average penetration (~25%) and limited fragmentation (based on Herfindahl-Hirschman Index), excluding the Mumbai-Pune metros (Exhibits 3-7). Lokmat is the only real competition in RoM market, with a large gap over smaller competition such as Sakal, Punya Nagari and Pudhari (in Kolhapur).

However, emerging competition from Maharashtra Times (Times of India group) remains a threat, though limited to Pune and Nashik currently. Marathi C&S TV has emerged in the past 10 years but advertising is yet low (

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

DB Corp Media

DBCL's mature business financials, 1QFY11-1QFY12 (Rs mn)

1QFY12 Emerging Mature 1QFY11 chg (%) Revenues 219 3,307 2,977 11 EBITDA (173) 1,198 1,145 5 Margin (%) (79) 36 38 (2)

Notes: (a) Mature business financials includes legacy print and FM Radio.

Source: Company data, Kotak Institutional Equities

Readership of DBCL across core, legacy markets (mn)

Q1 2010 Q2 2010 Q3 2010 Q4 2010 Q1 2011 chg (%) MPCG Dainik Bhaskar 4.3 4.2 4.3 4.6 4.7 10 Nai Dunia 1.3 1.5 1.6 1.9 2.0 51 Hari Bhoomi 1.1 1.1 1.2 1.2 1.2 10 Patrika Dainik 0.6 0.7 0.9 1.1 1.1 91 Rajasthan Rajasthan Patrika 6.6 6.8 7.1 7.0 6.9 4 Dainik Bhaskar 6.0 6.1 6.1 6.4 6.3 5 CPH Dainik Bhaskar 2.4 2.4 2.4 2.4 2.4 (2) Punjab Kesari 2.1 2.1 2.1 2.1 2.0 (2) Dainik Jagran 1.9 1.8 1.8 1.8 1.7 (11) Gujarat Gujarat Samachar 4.6 4.5 4.5 4.4 4.4 (2) Divya Bhaskar 3.5 3.7 3.8 3.7 3.8 8 Sandesh Dainik 3.1 3.1 3.4 3.3 3.2 4

Source: Indian Readership Survey, Kotak Institutional Equities

Readership statistics of various Hindi/regional markets

Population Literates TR AIR AIR/Literacy AIR/TR State Language (mn) (mn) (mn) (mn) (%) (%) Kerala Malayalam 28,435 27,508 22,762 18,706 68 82 Rajasthan Hindi 48,302 30,283 17,485 10,884 36 62 Gujarat Gujarati 46,622 33,466 15,051 10,245 31 68 Maharashtra Marathi 91,137 64,630 40,499 18,067 28 45 Punjab Punjabi 22,595 16,937 9,241 4,685 28 51 Karnataka Kannada 48,163 32,580 17,396 8,987 28 52 Andhra Pradesh Telugu 67,414 41,980 23,432 11,459 27 49 Uttaranchal Hindi 7,352 5,552 3,349 1,483 27 44 Tamil Nadu Tamil 58,621 46,884 28,998 12,047 26 42 Maharashtra (adj) Marathi 69,927 50,668 32,117 12,541 25 39 Jharkhand Hindi 22,606 13,299 7,287 3,268 25 45 Haryana Hindi 19,849 14,856 7,607 3,426 23 45 Uttar Pradesh Hindi 137,014 83,786 42,405 17,580 21 41 Chhattisgarh Hindi 17,431 11,225 5,186 2,321 21 45 Madhya Pradesh Hindi 51,748 31,433 13,636 6,198 20 45 West Bengal Bengali 71,478 51,318 19,531 9,667 19 49 Bihar Hindi 68,196 37,286 17,272 6,396 17 37 Orissa Oriya 32,153 21,807 10,045 3,550 16 35

Notes: (a) Adjusted for Mumbai and Pune cities.

Source: IRS Q1 2011, Kotak Institutional Equities

KOTAK INSTITUTIONAL EQUITIES RESEARCH 5 Media DB Corp

Market share of Marathi print in MAH market, excluding Mumbai-Pune (%)

2007 2008 2009 2010 2011E Daily Sakal 18 18 17 20 22 Deshonatti 8 7 6 6 5 Lokmat 34 35 37 39 41 Loksatta 3 3 3 2 2 Maharashtra Times 2 2 1 1 1 Pudhari Dainik 11 11 12 13 13 Punaya Nagari 13 13 14 12 11 Others 11 11 10 8 6 HH-Index 1,891 1,971 2,055 2,274 2,500

Notes: (a) Adjusting for the readership of Mumbai and Pune cities.

Source: Indian Readership Survey, Kotak Institutional Equities

Readership of various Marathi print brands in other cities (mn)

Q1 2010 Q2 2010 Q3 2010 Q4 2010 Q1 2011 chg (%) Nashik Lokmat 0.25 0.26 0.26 0.25 0.27 8 Daily Sakal 0.09 0.10 0.10 0.12 0.11 26 Punya Nagari 0.09 0.10 0.10 0.09 0.09 (3) Nagpur Lokmat 0.25 0.24 0.24 0.24 0.24 (6) Daily Sakal 0.04 0.04 0.04 0.04 0.04 (18) Deshonatti 0.06 0.05 0.04 0.03 0.03 (52) Aurangabad Lokmat 0.25 0.25 0.26 0.24 0.27 9 Daily Sakal 0.06 0.06 0.07 0.07 0.09 44 Punya Nagari 0.07 0.08 0.08 0.08 0.07 (1) Solapur Lokmat 0.16 0.16 0.15 0.15 0.13 (19) Daily Sakal 0.03 0.04 0.04 0.05 0.04 40 Punya Nagari 0.04 0.04 0.04 0.04 0.03 (21) Kohlapur Pudhari 0.19 0.18 0.18 0.17 0.17 (9) Daily Sakal 0.07 0.08 0.08 0.08 0.08 13 Lokmat 0.06 0.07 0.06 0.06 0.07 12 Total Lokmat 1.0 1.0 1.0 0.9 1.0 0 Daily Sakal 0.3 0.3 0.3 0.3 0.4 21 Punya Nagari 0.2 0.2 0.2 0.2 0.2 (6) Pudhari 0.2 0.2 0.2 0.2 0.2 (9) Market share (%) Lokmat 58 58 57 56 57 Daily Sakal 18 18 20 21 21 Punya Nagari 12 13 13 12 11 Pudhari 11 11 10 10 10

Source: Indian Readership Survey, Kotak Institutional Equities

6 KOTAK INSTITUTIONAL EQUITIES RESEARCH DB Corp Media

Market share of Marathi print in MAH market (%)

2007 2008 2009 2010 2011E Daily Sakal 18 18 18 20 21 Deshonatti 6 5 5 4 4 Lokmat 30 31 32 34 35 Loksatta 6 6 6 5 5 Maharashtra Times 5 6 5 5 5 Pudhari Dainik 9 9 10 12 12 Punaya Nagari 11 11 11 10 9 Others 15 13 13 11 9 HH-Index 1,587 1,656 1,717 1,881 1,982

Source: Indian Readership Survey, Kotak Institutional Equities

Readership of various Marathi print brands in Mumbai-Pune (mn)

Q1 2010 Q2 2010 Q3 2010 Q4 2010 Q1 2011 chg (%) Mumbai Maharashtra Times 0.93 0.97 0.99 0.96 1.02 10 Loksatta 0.62 0.65 0.68 0.65 0.65 5 Lokmat 0.59 0.64 0.62 0.57 0.56 (4) Navakal 0.61 0.59 0.55 0.49 0.51 (16) Mumbai Choufer 0.41 0.45 0.45 0.41 0.39 (4) Saamna 0.30 0.33 0.32 0.32 0.32 9 Pudhari 0.10 0.16 0.21 0.25 0.24 136 Punya Nagari 0.16 0.20 0.20 0.19 0.19 18 Daily Sakal 0.11 0.12 0.13 0.14 0.12 5 Pune Daily Sakal 0.89 0.97 1.05 1.08 1.10 23 Lokmat 0.62 0.66 0.73 0.76 0.71 15 Pudhari 0.30 0.33 0.38 0.42 0.48 60 Loksatta 0.07 0.08 0.08 0.08 0.06 (6) Punya Nagari 0.04 0.05 0.05 0.04 0.04 (7) Saamna 0.02 0.04 0.03 0.03 0.04 84 Total Lokmat 1.2 1.3 1.3 1.3 1.3 5 Daily Sakal 1.0 1.1 1.2 1.2 1.2 21 Maharashtra Times 0.9 1.0 1.0 1.0 1.0 10 Pudhari 0.4 0.5 0.6 0.7 0.7 79 Loksatta 0.7 0.7 0.8 0.7 0.7 4 Navakal 0.6 0.6 0.6 0.5 0.5 (16) Mumbai Choufer 0.4 0.4 0.4 0.4 0.4 (4) Saamna 0.3 0.4 0.4 0.3 0.4 14 Punya Nagari 0.2 0.2 0.3 0.2 0.2 13 Market share (%) Lokmat 21 21 21 21 20 Daily Sakal 17 17 18 19 19 Maharashtra Times 16 16 15 15 16 Pudhari 7 8 9 10 11 Loksatta 12 12 12 11 11 Navakal 11 10 9 8 8 Mumbai Choufer 7 7 7 6 6 Saamna 5 6 5 5 6 Punya Nagari 4 4 4 4 4

Source: Indian Readership Survey, Kotak Institutional Equities

KOTAK INSTITUTIONAL EQUITIES RESEARCH 7 Media DB Corp

GRPs of various Marathi C&S TV channels in Maharashtra

2QFY11 3QFY11 4QFY11 1QFY12 2QFY12 chg (%) Gross rating points (%) DD Marathi 31 27 25 21 28 (13) ETV Marathi 161 160 167 179 214 33 Mi Marathi 39 36 40 32 48 24 Saam TV 15 14 14 14 18 18 Star Pravah 103 110 129 160 219 113 Zee Marathi 228 212 221 192 192 (16) Zee Talkies 61 69 77 76 80 31 Total 638 628 672 673 798 25 Market share (%) DD Marathi 5 4 4 3 3 ETV Marathi 25 26 25 27 27 Mi Marathi 6 6 6 5 6 Saam TV 2 2 2 2 2 Star Pravah 16 17 19 24 27 Zee Marathi 36 34 33 28 24 Zee Talkies 10 11 11 11 10

Source: TAM Media Research, Kotak Institutional Equities

The Marathi expansion (contd.)

We discuss key characteristics of the Marathi print market and DBCL’s Marathi expansion below. As highlighted previously, DBCL is focused on the Tier-II/III cities in the Marathi print market; DBCL’s has strong execution track record in such markets having established leadership or strong runners-up position in Rajasthan, Haryana, Gujarat and Punjab markets previously (Exhibit 2). DBCL’s multi-stage survey positioned Divya Marathi brand as the independent newspaper in the market (differentiator) given key competitors (Lokmat, Sakal) had known political affiliations.

` The Marathi print advertising market is ~Rs9-10 bn/annum overall. However, Mumbai and Pune cities contribute ~Rs1.5 bn each to the pie, which is not an addressable market for DBCL. Thus, the addressable (RoM) Marathi print advertising market for DBCL would be in the region of ~Rs6-7 bn. The RoM market is witnessing 15-20% growth in print advertising, similar to other regional markets.

ƒ A majority (~60%) of the advertising spends are driven by local advertisers; DBCL has a good track record of converting and expanding the scope of local advertising in its legacy/core markets (3L+ advertisers). Finally, DBCL will likely aim to leverage its extensive existing network to (1) bring national advertisers on-board and (2) negate the lack of Mumbai-Pune cities in its footprint.

` DBCL has avoided high fragmentation markets such as Mumbai, which has also helped keep check on the cost of expansion. Exhibit 10 presents the circulation of key competitors Lokmat and Sakal excluding Pune and Mumbai. Exhibit 11 presents the sensitivity of annual cost of operation at various levels of circulation and all-inclusive cost of circulation (per-copy). Thus, the breakeven point of DBCL in the market is ~Rs2.2 bn/annum (~1 mn circulation, ~Rs6/copy cost).

ƒ DBCL does not have to depend entirely on advertising since cover prices in regional markets are at reasonable levels even in a competitive environment. The circulation scheme launched by DBCL in the market (Exhibit 12) results in effective realization of ~Rs1.8-2.1 depending on the city/urban or upcountry/rural area.

8 KOTAK INSTITUTIONAL EQUITIES RESEARCH DB Corp Media

Net State Domestic GDP at current prices, March fiscal year-ends, 2005-10 (Rs bn)

2005 2006 2007 2008 2009 2010 CAGR (%) Maharashtra 3,684 4,336 5,241 6,141 6,996 8,179 17 Uttar Pradesh 2,291 2,567 2,940 3,324 3,847 4,530 15 Andhra Pradesh 2,013 2,294 2,691 3,260 3,729 4,268 16 Tamil Nadu 1,939 2,285 2,770 3,141 3,619 4,177 17 Gujarat 1,723 2,064 2,407 2,816 3,149 3,704 17 Rest of Maharashtra (a) 1,658 1,951 2,359 2,763 3,148 3,681 17 West Bengal 1,901 2,096 2,386 2,722 3,098 3,663 14 Karnataka 1,480 1,741 2,037 2,426 2,687 2,967 15 Rajasthan 1,126 1,253 1,514 1,723 1,998 2,267 15 Delhi 947 1,091 1,283 1,495 1,747 2,072 17 Kerela 1,048 1,203 1,351 1,540 1,766 2,025 14 Haryana 859 975 1,176 1,394 1,655 1,958 18 Madhya Pradesh 999 1,096 1,277 1,429 1,649 1,923 14 Punjab 857 950 1,124 1,358 1,554 1,772 16 Bihar 688 735 921 1,072 1,321 1,545 18 Orissa 666 721 860 1,089 1,203 1,342 15 Jharkhand 531 533 584 752 843 948 12 Chattisgarh 414 457 575 693 785 932 18 Assam 472 524 570 623 718 817 12 Uttarakhand 223 269 327 403 466 544 20 Himachal Pradesh 212 237 262 289 320 356 11 Jammu & Kashmir 228 248 270 294 322 352 9 Goa 109 126 143 168 193 223 15 Chandigarh 76 92 111 128 145 167 17 Tripura 82 90 100 108 117 127 9 Meghalaya 58 64 76 85 95 110 14 Puducherry 51 72 75 83 89 95 13 Nagaland 48 53 57 62 NA NA Manipur 46 51 55 61 69 78 11 Arunachal Pradesh 31 34 36 41 48 63 15 Mizoram 24 27 29 34 42 51 16 Andaman and Nichobar 16 18 23 27 32 35 17 Sikkim 15 17 19 21 25 30 14

Source: Central Statistical Organization, Kotak Institutional Equities estimates

Circulation of key Marathi dailies in Maharashtra (mn)

Lokmat Sakal Total circulation 1.70 1.50 Mumbai city 0.12 0.09 Mumbai edition 0.16 0.13 Pune city 0.25 0.38 Pune edition 0.43 0.57 Addressable circulation 1.10 0.80

Source: Audit Bureau of Circulation, Kotak Institutional Equities

KOTAK INSTITUTIONAL EQUITIES RESEARCH 9 Media DB Corp

Breakeven cost of operations for DBCL's Marathi expansion (Rs bn/annum)

All-inclusive cost (Rs/copy) 5.0 5.5 6.0 6.5 7.0 0.8 1.4 1.6 1.7 1.9 2.0 0.9 1.6 1.8 1.9 2.1 2.3 1.0 1.8 2.0 2.2 2.3 2.5 (mn) 1.1 2.0 2.2 2.4 2.6 2.8 Circulation 1.2 2.2 2.4 2.6 2.8 3.0

Source: Kotak Institutional Equities estimates

Effective cover price realization for DBCL from Divya Marathi (Rs/copy)

Urban Rural Comments Circulation scheme Initial cost to consumer (Rs) 199 199 Monthly payment (Rs) 45 55 To be paid to hawker at home Annual cost to consumer (Rs) 540 660 Realization by company (Rs) 739 859 Consumer freebies Free gift to consumer (Rs) 199 199 Retail price of gift to consumer Cost to company (Rs) 100 100 Volume discount for DBCL Free advertising given (Rs) 540 660 Cost to company (Rs) - - Limited advertising in the newspaper at launch Total cost to company 100 100 Effective realization Realization by company (Rs) 640 760 Per-copy realization 1.8 2.1

Source: Company data, Kotak Institutional Equities

Estimates of financials of HT's expansions, FY2012E (Rs bn)

HT Mumbai HH UPU Comments Revenues Print order (mn) 0.5 1.0 Cover price (Rs/copy) 0.8 2.6 Blended pricing Commission (Rs/copy) 1.2 1.0 Net realization (Rs/copy) (0.4) 1.6 Circulation revenues (0.1) 0.6 Key differential Advertising revenues 1.6 1.3 Total revenues 1.5 1.9 Variable costs Newsprint price (US$/ton) 750 700 Effective pricing Number of pages (#) 36 20 Newsprint cost (Rs/copy) 5.1 2.6 Newsprint cost (0.9) (1.0) Gross contribution 0.6 0.9 Other costs Employee costs (0.4) (0.3) Network benefit Other costs (0.6) (0.7) Other costs (1.0) (1.0) Operating contribution (0.4) (0.1)

Source: Kotak Institutional Equities estimates

10 KOTAK INSTITUTIONAL EQUITIES RESEARCH DB Corp Media

Reiterate BUY on attractive valuations

The valuations of print media/media stocks recently have been impacted by the slowdown in advertising spends in FY2012E led by (1) rising interest rate environment and (2) resulting slowdown in economic growth. Additionally, the prices of domestic newsprint increased disproportionate to prices of imported newsprint in 2HFY11-1HFY12, which impacted regional players somewhat given their newsprint mix (70-80% domestic newsprint). However, we believe the valuation compression has been overdone given (1) cyclicality of advertising revenues and (2) recent correction in pricing of domestic newsprint. The street is attributing trough valuations to trough earnings/growth. We discuss DBCL valuations from two perspectives below, adjusting for new expansions.

` DBCL stock trades at 12X FY2013E earnings adjusted for expansion in Jharkhand and Maharashtra expansions. We believe DBCL’s mature business have the potential to deliver at least industry-equivalent 15% CAGR in advertising and earnings growth; FY2012E may be an exceptionally weak year in that respect where revenue and earnings growth may be constrained by factors discussed above. We highlight DBCL’s strong, well-diversified presence across its 4 core/legacy markets (Exhibit 2), which have been further strengthened over time with launch of hyper-local editions.

` DBCL stock trades at 14X FY2013 consolidated earnings including the startup losses from Jharkhand and Maharashtra expansion; we highlight that FY2013E may likely see operating losses peak in these markets. We believe DBCL has the potential to deliver industry-leading consolidated 20%+ CAGR in advertising and earnings growth, led by incremental revenue contribution from new expansions and simultaneous reduction in startup losses (Rs0.8 bn in FY2013E). We again highlight DBCL’s focus and execution record in Tier-II/III markets, which is playing to its strengths.

Valuation of Indian print media companies, March fiscal year-ends, 2010-13E

EV EBITDA (Rs bn) EV/EBITDA (X) (Rs bn) 2010 2011 2012E 2013E 2010 2011 2012E 2013E JAGP 32 2.8 3.4 3.6 4.3 11.3 9.3 8.8 7.3 JAGP (adjusted) 31 2.8 3.4 3.6 4.3 10.8 8.9 8.4 7.0 DBCL 41 3.4 4.0 4.0 4.8 12.1 10.3 10.3 8.7 DBCL (adjusted) 41 3.4 4.2 4.6 5.6 12.1 9.8 9.1 7.4 HMVL 8 0.8 0.9 1.0 1.4 10.1 9.5 8.2 5.9 HTML 29 2.6 3.1 3.7 4.7 11.5 9.4 8.0 6.3 HTML (adjusted) 29 2.6 3.0 3.4 4.4 11.5 9.7 8.6 6.7

Price EPS (Rs/share) P/E (X) (Rs) 2010 2011 2012E 2013E 2010 2011 2012E 2013E JAGP 106 5.8 6.8 7.0 8.4 18.1 15.5 15.2 12.6 JAGP (adjusted) 106 5.9 7.0 7.2 8.7 17.9 15.0 14.6 12.2 DBCL 220 10.6 14.1 13.0 15.5 20.7 15.6 17.0 14.2 DBCL (adjusted) 220 10.6 14.8 14.7 18.3 20.7 14.8 15.0 12.0 HMVL 140 7.9 8.2 9.0 12.1 17.7 17.0 15.6 11.5 HTML 142 6.0 7.7 8.9 11.0 23.6 18.4 15.9 12.9

Readership (mn) EV/Reader (X) Q2 2010 Q3 2010 Q4 2010 Q1 2011 Q2 2010 Q3 2010 Q4 2010 Q1 2011 JAGP 16.7 16.6 16.8 16.6 1,907 1,913 1,897 1,918 DBCL 17.0 17.3 17.7 17.8 2,437 2,394 2,338 2,327 HMVL 10.1 10.8 11.5 11.8 836 782 740 718 Discount (%) 62 64 65 66

Notes: (a) Adjusted for higher dividend payout versus peers DBCL and HTML. (b) Adjusted for near-term startup losses in Jharkhand and Maharashtra. (c) Adjusted for 22% minority interest in subsidiary HMVL post IPO in October-2010.

Source: Company data, Kotak Institutional Equities estimates

KOTAK INSTITUTIONAL EQUITIES RESEARCH 11 Media DB Corp

Financial summary of DB Corp Limited, March fiscal year-ends, 2008-14E (Rs mn)

2008 2009 2010 2011 2012E 2013E 2014E Profit model Net sales 8,627 9,610 10,630 12,652 14,995 18,166 21,674 EBITDA 1,829 1,461 3,430 4,031 4,041 4,766 5,804 Other income 116 109 112 142 180 209 223 Interest (397) (510) (357) (153) (153) (153) (153) Depreciation (220) (290) (378) (433) (519) (555) (618) Pretax profits 1,328 770 2,806 3,587 3,549 4,267 5,255 Extraordinary items 8 —————— Current tax (560) (377) (841) (897) (1,101) (1,338) (1,674) Deferred taxation (70) (47) (216) (102) (79) (80) (72) Net income 706 346 1,749 2,588 2,369 2,849 3,508 Adjusted net income 763 464 1,828 2,585 2,375 2,848 3,506 Earnings per share (Rs) 4.5 2.8 10.6 14.1 13.0 15.5 19.1

Balance sheet Total equity 2,198 2,577 6,487 8,289 9,382 10,523 11,466 Deferred taxation liability 346 393 609 695 774 854 927 Total borrowings 3,436 5,631 3,207 2,372 2,372 2,372 2,372 Current liabilities 1,714 2,189 2,073 2,189 2,673 3,242 4,011 Total capital 7,936 10,914 12,420 13,548 15,200 16,990 18,778 Cash 808 452 1,951 1,731 2,266 2,956 3,411 Other current assets 3,404 3,536 3,664 4,187 4,854 5,492 6,376 Total fixed assets 3,623 6,471 6,475 7,358 7,807 8,269 8,718 Investments 68 238 205 163 163 163 163 Miscellaneous expenditure 33 217 126 110 110 110 110 Total assets 7,936 10,914 12,420 13,548 15,200 16,990 18,778

Free cash flow Operating cash flow, excl. working capital 1,556 1,016 2,566 3,297 2,940 3,428 4,129 Working capital changes 674 122 (174) (556) (184) (69) (115) Capital expenditure (1,081) (2,966) (603) (1,433) (968) (1,016) (1,067) Income from investments 113 109 111 142 180 209 223 Free cash flow 1,262 (1,718) 1,899 1,450 1,969 2,552 3,170

Ratios (%) Debt/equity 135 190 45 26 23 21 19 Net debt/equity 103 174 18 7 1 (5) (8) ROAE (%) 34 17 36 32 25 26 29 ROACE (%) 15 8 21 25 21 22 25

Source: Company data, Kotak Institutional Equities estimates

12 KOTAK INSTITUTIONAL EQUITIES RESEARCH

NEUTRAL Consumer products

India SEPTEMBER 20, 2011 UPDATE BSE-30: 17,099

Takeaways from Godfrey Phillips’ AGM. (1) GPI is endeavoring to diversify into other forms of tobacco consumption (it had launched ‘Sonna’ bidi, ‘Pan Vilas’ pan masala and has recently ventured into the chewing tobacco business). (2) It is concerned about high VAT rates at state level—VAT rate in its key state Rajasthan is the highest in India. (3) Marlboro has sales of US$3 mn per month—it has an annualized ~Rs1.8 bn sales or ~0.6% value market share in the Indian cigarette market. It has a pan-India distribution coverage of ~70,000 outlets (compared with ITC’s competing products’ coverage of >2mn outlets, in our view). We had expected significant challenges for Marlboro’s ramp-up in India (due to difference in blend, distribution challenges etc).

GPI a committed player but gaining foothold in a market with an undisputed leader is difficult

` Godfrey Phillips India (GPI) has launched ‘FS1’ cigarette—another attempt in the King Size filter cigarette (KSFT) segment, ‘Sonna’ bidi and ‘Pan Vilas’ pan masala. Pan Vilas has achieved sales of Rs240 mn in FY2011, Rs360 mn in YTD FY2012 and the management expects it to achieve Rs1.1 bn sales (~3% of GPI’s sales). The company recently ventured into the chewing tobacco business as well.

Our view: GPI’s endeavor is to capture a higher share of wallet of the panwalla (tobacco/cigarette retailer in India). Considering the market dominance of ITC in cigarettes, GPI needs to increase its relative importance with the panwalla to improve its trade presence. While the efforts are commendable, probability of sustained success in the new categories for GPI looks limited due to the highly unorganized nature of bidi, pan masala and chewing tobacco categories (where the terms of trade are likely very different to a relatively professional cigarette industry).

` The company is concerned about the high VAT rates across states, particularly the recent steep increase in many states.

Our view: GPI derives most of its revenues from North and West India (key states are Delhi, Rajasthan, Maharashtra etc.). The VAT rates in its key states are one of the highest in India (Delhi and Maharashtra at 20% and Rajasthan 40%). This taxation structure has the potential to relatively weaken the market position of GPI, in our view.

` According to GPI, Marlboro is currently clocking monthly sales of US$3 mn. The company confirmed that it has withdrawn the pouch pack of Marlboro Compact (2 cigarettes for Rs7) from the market.

Our view: Marlboro has an annualized Rs1.8 bn or ~0.6% value market share in the Indian cigarette market. It has distribution coverage of ~70,000 outlets (compared with ITC’s competing products’ coverage of >2mn outlets, like Gold Flake Kings, Wills Classic, India Kings etc., in our view). We had expected significant challenges for Marlboro’s ramp-up in

India (due to difference in blend, distribution challenges etc.). Please refer our notes dated September 16, 2011 and October 29, 2010.

` GPI intends to increase its geographical presence by expanding to Andhra Pradesh (it had aggressively tried to enter Tamil Nadu and West Bengal in the past few years). The GPI management was very bullish on the prospects of the geographical expansion opportunity—GPI is a major player in North and West India and has negligible presence in the South and East.

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

India Consumer products

Our view: We maintain our view that the push-based sales at the retail outlet level have been difficult for Marlboro to implement considering the market dominance of ITC (~75-80% market share).

` GPI expects modest upside from manufacturing and distribution of Marlboro in India by GPI—manufacturing and distribution margins which will accrue to GPI based on the ‘tolling’ arrangement with Philip Morris (PM).

` GPI will likely have enhanced ability and inclination to invest in existing brands (Four Square, North Pole, Cavanders and Red & White) as these are now ‘irrevocably’ licensed to GPI by PM (as against an earlier arrangement of short-term licensing contracts).

14 KOTAK INSTITUTIONAL EQUITIES RESEARCH

ATTRACTIVE Energy

India SEPTEMBER 20, 2011 UPDATE BSE-30: 17,099

Subsidy Sudoku remains unresolved. We see the lack of clarity on the subsidy- sharing mechanism as affecting the sentiment for the sector and may result in lower valuations for companies slated for divestment––ONGC, OIL and IOCL. We believe a stable pricing and subsidy-sharing mechanism will provide certainty to earnings for the sector and will help the government achieve its disinvestment target from the sale of shares of these oil companies.

Subsidy-sharing mechanism still clouded in mystery

The lack of clarity on the subsidy-sharing mechanism for FY2012E continues to impact investor QUICK NUMBERS sentiment for the sector. The situation has been exacerbated by recent media reports on higher subsidy will be borne by the upstream companies. As per media reports, upstream companies may • `476 bn of subsidy be asked to bear `567 bn as subsidy burden for FY2012E (one-third of notional gross under- losses for ONGC will recovery of `1.7 tn estimated before price hikes and duty cuts). The management of ONGC has result in unlikely confirmed that it has not received any communication from the government to the effect. low net realization Hopefully, the government will protect earnings of downstream companies of US$41/bbl

We continue to work on the philosophy that the government will provide sufficient compensation • 45% potential to the downstream companies to ensure a certain level of profitability for these companies. We upside to our fair assume that downstream companies will bear `74 bn as net under-recoveries for FY2012E versus value of ONGC; `69 bn for FY2011. We would highlight that the government had given full compensation to the 32% for OIL downstream companies in FY2009 when the companies had a weak operational year. We note that downstream companies had a tough 1QFY12 given weak refining margins, which were partly • 16-24% upside for mitigated by adventitious gains. Exhibit 1 gives the key details of 1QFY12 results of downstream downstream oil companies. stocks from current levels We maintain our assumption of upstream share at 39% of the gross under-recoveries

We maintain our assumption that the upstream companies will bear 39% of the gross under- recoveries for FY2012E. We compute gross under-recoveries at `1.1 tn and upstream share at `417 bn for FY2012E. Even if we assume that the government keeps the net crude oil price realization at FY2011 levels, we compute the share of upstream companies at ~45% of the gross under-recoveries. We compute FY2012E EPS for ONGC and OIL at `34 and `129 in this scenario.

Media reports suggest that the upstream companies will bear `567 bn, which puts the share of upstream companies at ~50% of our base-case estimate. However, we see a low likelihood of such a scenario as it would translate into a crude oil price realization of US$41/bbl for ONGC which is significantly lower versus the realization in FY2008-11. Exhibits 2 and 3 gives the net crude price realization for ONGC and OIL and Exhibit 4 gives the earnings and net crude price realization for ONGC and OIL under various scenarios of subsidy sharing.

Weakening of rupee will result in higher gross under-recoveries

We see the recent weakening of the Indian Rupee versus the US Dollar as resulting in higher gross under-recoveries for the sector. A weakening of the Rupee against US dollar would result in higher gross under-recoveries as the domestic prices of diesel, LPG and kerosene are regulated. A `1/US$ depreciation will result in additional gross under-recovery of ~`70 bn for the industry on an annualized basis (at US$110/bbl). The impact on the upstream and downstream companies will depend on the eventual subsidy-sharing mechanism worked out by the government (see our note ‘A weakening rupee is largely positive’ released on September 14, 2011 for a detailed discussion on the impact of weakening rupee on upstream and downstream companies.

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

India Energy

Downstream companies reported weak operational results in 1QFY12 1QFY12 results of downstream oil companies (` mn)

BPCL HPCL IOCL EBITDA (21,642) (25,684) (18,618) Net income (25,619) (30,803) (37,187) Adventitious gains 12,120 2,180 14,050 Net under-recovery (33,560) (30,605) (76,726) Refining margin (US$/bbl) 3.0 1.1 4.7

Source: Company, Kotak Institutional Equities

We expect ONGC’s net realization to improve over the next few years ONGC's net crude price realization, March fiscal year-ends, 2003-2014E (US$/bbl)

(US$/bbl) 80 74.3 70.8 61.3 55.9 60 52.9 53.8 47.7 48.8 42.3 44.2 37.8 40 28.5 26.5

20

0 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012E 2013E 2014E 1QFY12

Source: Company, Kotak Institutional Equities estimates

We expect OIL’s net realization to improve over the next few years OIL's net crude price realization, March fiscal year-ends, 2004-14E (US$/bbl)

(US$/bbl) 90 78.0 79.4 73.0 75 59.8 59.6 56.2 58.5 60 55.6 48.8 47.0 45 34.4 28.2 30

15

0 2004 2005 2006 2007 2008 2009 2010 2011 2012E 2013E 2014E

1QFY12

Source: Company, Kotak Institutional Equities estimates

16 KOTAK INSTITUTIONAL EQUITIES RESEARCH Energy India

Potential upside to earnings if upstream companies have to bear one-third of subsidy losses EPS estimates and net crude realizations for ONGC and OIL, March fiscal year-end, 2012E (`) EPS Net realizations ONGC OIL ONGC OIL Base case: assuming 39% subsidy burden on upstream companies 37.2 171.7 61.3 73.0 Bull case: assuming 33.3% subsidy burden on upstream companies 40.5 188.2 68.5 78.5 Bear case: assuming net crude price realization of FY2011 33.7 128.9 53.8 58.5 Bear case: assuming subsidy burden of Rs567 bn on upstream companies (a) 30.4 138.5 41.4 58.7

Notes: (a) We assume exchange rate of Rs47/US$ for this scenario.

Source: Kotak Institutional Equities estimates

We assume higher subsidy burden on downstream companies for FY2012-13E Share of various participants of under-recoveries, March fiscal year-ends, 2007-13E (` bn)

2007 2008 2009 2010 2011 2012E 2013E Dated Brent crude oil price (US$/bbl) 65 79 89 67 84 110 100 Gross under-recoveries 521 798 1,061 491 814 1,100 700 Payment by government (direct budgetary support) 27 27 29 30 32 31 31 Payment by government (oil bonds/cash) 241 353 713 260 410 578 334 Share of BPCL 53 86 162 53 94 132 76 Share of HPCL 49 77 147 56 90 126 73 Share of IOCL 138 190 404 152 227 320 185 Receipt from upstream companies 205 257 329 144 303 417 261 Share of ONGC 170 220 282 116 249 349 216 Share of GAIL 15 14 18 13 21 23 17 Share of Oil India 20 23 29 15 33 45 28 Net under-recovery of OMCs 48 161 (10) 56 69 74 74

Source: Company, Kotak Institutional Equities estimates

Revised earnings and fair valuation for BPCL, HPCL and IOCL, maintain rating

We have revised our earnings estimates for BPCL, HPCL and IOCL to reflect (1) FY2011 annual report, (2) exchange rate assumption of `45.75/US$ for FY2012E versus `44.75/US$ and (3) other minor changes. Exhibit 6 gives our revision in EPS estimates for FY2012-14E. Exhibits 7-9 give our key assumptions behind earnings models of BPCL, HPCL and IOCL.

We have revised our target price for BPCL, HPCL and IOCL to `780 (`800 previously), `430 (`460 previously) and `385 (`420 previously). We maintain our ADD rating on BPCL and HPCL and BUY rating on IOCL (see Exhibit 10). Exhibits 11-13 give our financial summaries for the downstream oil companies.

We have revised our earnings for downstream companies Revision in EPS estimates, March fiscal year-ends, 2012-14E (`)

2012E 2013E 2014E Old EPS New EPS Old EPS New EPS Old EPS New EPS BPCL 59 54 59 55 66 61 HPCL 26 20 39 34 40 33 IOCL 33 28 36 32 41 37

Source: Kotak Institutional Equities estimates

KOTAK INSTITUTIONAL EQUITIES RESEARCH 17 India Energy

BPCL earnings model assumptions, March fiscal year-ends, 2007-2014E

2007 2008 2009 2010 2011 2012E 2013E 2014E Rs/US$ 45.3 40.3 45.8 47.4 45.6 45.8 45.6 45.0 Weighted average duty on products (%) 6.7 6.6 3.3 2.6 5.8 3.0 2.2 2.2 Import tariff on crude (%) 5.1 5.2 0.9 0.4 5.2 1.2 —— Import 'tariff' on domestic crude (%) 2.6 2.6 0.5 0.2 2.6 0.6 — — Effective duty protection (%) 1.6 1.4 2.4 2.2 0.7 1.8 2.2 2.2 Refinery yield (US$/bbl) 71.5 89.6 97.5 73.2 93.9 117.2 106.3 101.5 Cost of crude (US$/bbl) -Imported 64.0 78.8 90.0 69.8 84.7 110.7 100.7 95.7 -Domestic 68.7 84.1 94.9 70.8 88.0 114.0 104.0 99.0 Landed cost of crude (US$/bbl) 68.3 84.0 92.4 70.3 89.4 112.8 101.7 96.7 Net refining margin (US$/bbl) 3.2 5.6 5.2 2.9 4.5 4.3 4.6 4.9 Crude throughput (mn tons) 19.8 20.9 20.0 20.4 21.8 22.1 22.7 22.7 -Imported 13.5 13.9 13.1 14.1 14.8 15.1 15.7 15.7 -Domestic 6.3 7.0 6.8 6.3 7.0 7.0 7.0 7.0 Production of main products 17.9 19.0 18.1 18.6 19.9 20.2 20.7 20.7 Production of other products 0.6 0.6 0.6 0.6 0.7 0.7 0.7 0.7 Fuel and loss 1.3 1.4 1.3 1.2 1.2 1.3 1.3 1.3 Fuel and loss (%) 6.6 6.6 6.6 5.9 5.7 5.7 5.7 5.7 Sales volume (mn tons) 24.5 26.7 27.8 29.5 31.3 32.4 33.8 35.5 Marketing margins (Rs/ton) (1,140) (3,010) (5,944) 573 (1,933) (3,856) (196) 724

Source: Company, Kotak Institutional Equities estimates

HPCL earnings model assumptions, March fiscal year-ends, 2007-2014E

2007 2008 2009 2010 2011 2012E 2013E 2014E Rs/US$ 45.3 40.3 45.8 47.4 45.6 45.8 45.6 45.0 Weighted average duty on products (%) 6.6 6.5 3.3 2.9 6.7 3.6 2.6 2.6 Import duty on crude 5.1 5.2 0.9 0.4 5.2 1.2 —— Import ’tariff’ on domestic crude (%) 2.6 2.6 0.5 0.2 2.6 0.6 — — Effective duty protection (%) 1.4 1.3 2.4 2.5 1.6 2.4 2.6 2.6 Refinery yield (US$/bbl) 73.1 89.8 96.0 73.3 94.7 116.3 105.7 101.1 Cost of crude (US$/bbl) -Imported 64.8 78.1 89.9 70.1 84.6 110.6 100.6 95.6 -Domestic 69.3 84.5 95.2 71.0 88.1 114.1 104.1 99.1 Landed cost of crude 68.8 83.2 92.0 70.6 89.4 112.6 101.4 96.4 Net refining margin (US$/bbl) 4.3 6.6 4.0 2.7 5.3 3.7 4.3 4.7 Crude throughput (mn tons) 16.7 16.8 15.8 15.8 14.8 17.4 18.2 18.2 -Imported 12.9 12.6 11.7 11.3 10.6 13.2 14.0 14.0 -Domestic 3.8 4.2 4.2 4.5 4.2 4.2 4.2 4.2 Production of main products 15.2 15.2 14.4 14.1 13.1 15.6 16.3 16.3 Production of other products 0.4 0.6 0.4 0.6 0.5 0.5 0.5 0.5 Fuel and loss 1.0 1.0 1.0 1.1 1.1 1.3 1.4 1.4 Fuel and loss (%) 6.0 6.0 6.1 7.2 7.5 7.5 7.5 7.5 Sales volume (mn tons) 23.4 26.2 27.0 27.7 27.7 28.5 29.7 31.1 Marketing margin (Rs/ton) (710) (2,345) (5,021) 698 (1,885) (3,463) (66) 769

Source: Company, Kotak Institutional Equities estimates

18 KOTAK INSTITUTIONAL EQUITIES RESEARCH Energy India

IOCL earnings model assumptions, March fiscal year-ends, 2007-2014E

2007 2008 2009 2010 2011 2012E 2013E 2014E Rs/US$ 45.3 40.3 45.8 47.4 45.6 45.8 45.6 45.0 Weighted average duty on products (%) 6.7 6.5 3.7 2.6 5.9 3.1 2.3 2.3 Import duty on crude (%) 5.1 5.2 0.9 0.4 5.2 1.2 —— Effective 'import duty' on domestic crude (%) 2.6 2.6 0.5 0.2 2.6 0.6 — — Effective duty protection (%) 1.6 1.3 2.8 2.2 0.8 1.9 2.3 2.3 Refinery yield (US$/bbl) 71.1 91.0 94.9 73.7 94.3 118.1 107.4 102.7 Cost of crude (US$/bbl) Domestic - Northeast 61.8 74.8 87.3 67.6 82.4 108.4 98.4 93.4 - Gujarat 58.4 73.8 84.1 64.4 80.0 106.0 96.0 91.0 - Rest of India 67.2 82.2 92.9 69.2 85.9 111.9 101.9 96.9 Imported 65.2 80.3 91.3 69.7 85.5 111.5 101.5 96.5 Landed cost of crude (US$/bbl) 66.9 82.8 91.1 69.2 88.3 111.9 100.8 95.8 Net refining margin (US$/bbl) 4.2 8.2 3.7 4.5 6.0 6.2 6.6 6.9 Crude throughput (mn tons) 44.0 47.4 51.3 50.7 53.0 55.9 56.2 56.2 Domestic - Northeast 1.5 1.5 2.1 2.1 2.2 2.2 2.2 2.2 - Gujarat 5.9 5.9 6.0 5.8 5.9 6.1 6.1 6.1 - Rest of India 2.7 2.7 4.9 4.8 4.8 5.0 5.0 5.0 Imported 33.9 37.3 38.3 38.0 40.0 42.6 42.9 42.9 Other products 1.1 1.1 1.4 1.4 1.4 1.4 1.4 1.4 Fuel and loss 3.9 4.2 4.2 4.5 4.7 4.9 4.9 4.9 Production of main products 38.9 42.1 45.7 44.8 46.9 49.6 49.9 49.9 Fuel and loss (%) 8.9 8.8 8.2 8.8 8.8 8.8 8.8 8.8 Sales volume (mn tons) 53.4 57.4 61.0 64.0 67.0 69.1 72.1 75.6 Marketing margin (Rs/ton) (633) (2,203) (5,266) 955 (1,338) (3,261) 33 843

Source: Company, Kotak Institutional Equities estimates

Fair valuation of OMCs (`)

BPCL HPCL IOCL Profit after tax (Rs mn) 19,905 Profit after tax (Rs mn) 11,487 Profit after tax (Rs mn) 76,753 Less: income from investments Less: income from investment valued Less: income from investment valued 1,793 941 10,800 valued separately (Rs mn) separately (Rs mn) separately (Rs mn) Adjusted profit after tax (Rs mn) 18,112 Adjusted profit after tax (Rs mn) 10,546 Adjusted profit after tax (Rs mn) 65,953 Adjusted EPS 50 Adjusted EPS 31 Adjusted EPS 27 P/E multiple (X) 10 P/E multiple (X) 9 P/E multiple (X) 10 Fair value on P/E (without value Fair value on P/E (without value Fair value on P/E (without value 501 280 272 of investments) (A) of investments) (A) of investments) (A)

Add: Value of investments (Rs mn) 100,636 Add: Value of investments (Rs mn) 51,535 Add: Value of investments (Rs mn) 273,997 KRL treasury shares 26,308 MRPL (Rs50/share) 14,858 Oil and Natural Gas Corp. 200,009 Numaligarh 13,606 HPCL-Mittal Energy (Book value) 23,069 Chennai Petroleum Corp. 15,453 Indraprastha Gas 10,962 Oil India 9,630 Gas Authority of India 13,722 Oil India Ltd 9,363 Other unquoted investments 3,978 Oil India Ltd. 14,980 Petronet LNG 9,375 Value of investments (Rs) (B) 152 IOC treasury shares (IBP Co.) 11,904 Other equity 31,022 Total equity value (A) + (B) 432 Petronet LNG Ltd. 9,375 Value of investments (Rs) (B) 278 Other equity 8,554 Total equity value (A) + (B) 779 Value of investments (Rs) (B) 113 Total equity value (A) + (B) 384

Current stock price 665 Current stock price 369 Current stock price 309 KIE target price 780 KIE target price 430 KIE target price 385 Potential upside (%) 17 Potential upside (%) 16 Potential upside (%) 24 KIE rating ADD KIE rating ADD KIE rating BUY

Source: Kotak Institutional Equities estimates

KOTAK INSTITUTIONAL EQUITIES RESEARCH 19 India Energy

Consolidated profit model, balance sheet, cash model of BPCL, March fiscal year-ends, 2007-2014E (` mn)

2007 2008 2009 2010 2011 2012E 2013E 2014E Profit model (Rs mn) Net sales 965,569 1,102,081 1,340,734 1,202,170 1,508,382 1,881,380 1,780,793 1,765,678 EBITDA 35,362 28,472 27,507 32,635 32,737 46,680 47,042 50,029 Other income 7,332 13,954 15,087 22,402 17,550 14,125 12,794 11,468 Interest (4,774) (6,725) (22,699) (10,110) (11,008) (12,894) (11,083) (8,351) Depreciation (9,041) (10,982) (10,755) (12,423) (16,554) (18,991) (19,287) (20,325) Pretax profits 28,879 24,719 9,141 32,505 22,724 28,920 29,466 32,821 Extraordinary items (68) — — (8,290) 1,503 — — — Tax (9,286) (9,059) (5,103) (11,317) (7,177) (9,585) (9,221) (9,949) Deferred taxation (268) (1,108) 2,421 3,033 (1,482) 202 (339) (700) Adjusted net profits 18,100 15,806 6,324 20,830 14,602 19,537 19,905 22,172 Earnings per share (Rs) 50.1 43.7 17.5 57.6 40.4 54.0 55.1 61.3

Balance sheet (Rs mn) Total equity 102,735 116,768 121,281 130,867 140,576 152,682 165,017 178,756 Deferred taxation liability 13,826 14,814 12,392 8,593 10,075 9,873 10,212 10,912 Total borrowings 108,292 150,224 211,714 221,952 189,719 171,719 138,219 104,638 Currrent liabilities 112,767 145,803 128,313 171,312 219,583 242,031 237,809 236,826 Total liabilities and equity 337,620 427,608 473,701 532,724 559,954 576,305 551,257 531,132 Cash 8,640 9,616 4,416 3,424 3,800 4,372 4,989 5,515 Current assets 127,698 187,457 148,469 232,416 272,259 301,462 289,758 285,940 Goodwill — ——————— Total fixed assets 118,334 127,354 140,033 161,871 170,116 176,691 182,729 185,897 Investments 82,949 103,182 180,784 135,013 113,780 93,780 73,780 53,780 Total assets 337,621 427,608 473,701 532,724 559,954 576,305 551,257 531,132

Free cash flow (Rs mn) Operating cash flow, excl. working capital 29,920 22,988 19,717 22,972 16,688 23,230 25,774 31,289 Working capital 11,451 (25,161) 20,585 (48,542) 14,758 (10,377) 9,967 2,835 Capital expenditure (17,908) (20,665) (23,323) (33,698) (24,813) (24,596) (24,361) (23,053) Investments (45,481) (21,684) (82,456) 35,270 20,872 20,000 20,000 20,000 Other income 4,337 6,434 6,655 13,694 10,146 17,747 10,309 11,468 Free cash flow (17,682) (38,088) (58,822) (10,304) 37,651 26,003 41,688 42,540

Ratios (%) Debt/equity 105.4 128.7 174.6 169.6 135.0 112.5 83.8 58.5 Net debt/equity 97.0 120.4 170.9 167.0 132.3 109.6 80.7 55.5 RoAE 16.3 12.7 4.8 11.3 10.7 12.5 11.8 12.2 RoACE 10.9 7.3 7.2 7.9 6.2 8.4 8.5 9.2

Key assumptions (standalone until FY2005) Crude throughput (mn tons) 19.8 20.9 20.0 20.4 21.8 22.1 22.7 22.7 Effective tariff protection (%) 1.6 1.4 2.4 2.2 0.7 1.8 2.2 2.2 Net refining margin (US$/bbl) 3.2 5.6 5.2 2.9 4.5 4.3 4.6 4.9 Sales volume (mn tons) 24.5 26.7 27.8 29.5 31.3 32.4 33.8 35.5 Marketing margin (Rs/ton) (1,140) (3,010) (5,944) 573 (1,933) (3,856) (196) 724 Subsidy under-recoveries (Rs mn) (10,400) (33,354) 2,728 (12,375) (15,841) (17,246) (16,803) (16,725)

Source: Company, Kotak Institutional Equities estimates

20 KOTAK INSTITUTIONAL EQUITIES RESEARCH Energy India

Profit model, balance sheet, cash model of HPCL, March fiscal year-ends, 2007-2014E (` mn)

2007 2008 2009 2010 2011 2012E 2013E 2014E Profit model (Rs mn) Net sales 889,959 1,043,130 1,249,348 1,073,004 1,332,138 1,748,958 1,654,559 1,627,849 EBITDA 24,036 15,757 28,707 32,469 30,705 25,298 35,765 39,018 Other income 6,845 11,980 9,057 16,462 13,435 11,291 9,511 7,350 Interest (4,230) (7,925) (20,828) (9,038) (8,840) (10,916) (10,906) (9,808) Depreciation (7,040) (8,508) (9,813) (11,644) (14,070) (15,509) (17,367) (20,022) Pretax profits 19,611 11,303 7,122 28,249 21,230 10,165 17,004 16,539 Extraordinary items 3,030 — — (6,999) 2,231 — — — Tax (6,625) (1,799) (2,416) (5,616) (3,340) (2,034) (3,402) (3,309) Deferred taxation (365) (2,025) (343) (2,046) (3,910) (1,264) (2,115) (2,057) Prior period adjustment 61 3,870 1,387 (575) (822) — — — Adjusted net profits 13,617 11,349 5,750 17,489 13,848 6,867 11,487 11,173 Earnings per share (Rs) 40.2 33.5 17.0 51.6 40.8 20.3 33.9 33.0

Balance sheet (Rs mn) Total equity 95,987 105,633 107,306 115,580 125,458 129,864 137,233 144,401 Deferred tax liability 14,209 15,960 16,034 18,080 31,956 33,221 35,335 37,392 Total borrowings 105,175 167,867 227,552 213,024 250,212 265,962 229,385 190,868 Currrent liabilities 101,195 124,337 117,558 165,551 196,066 240,054 236,345 233,232 Total liabilities and equity 316,566 413,797 468,450 512,234 603,692 669,100 638,298 605,894 Cash 868 2,940 6,083 2,432 800 2,983 3,223 4,060 Current assets 113,779 190,034 153,844 203,988 265,110 327,858 313,083 305,993 Total fixed assets 130,644 152,452 166,558 191,943 224,432 244,909 263,749 257,597 Investments 71,275 68,371 141,965 113,872 113,350 93,350 58,243 38,243 Total assets 316,566 413,796 468,450 512,234 603,692 669,100 638,298 605,894

Free cash flow (Rs mn) Operating cash flow, excl. working capital 23,966 (18,679) (12,139) 28,120 26,967 7,106 16,439 23,021 Working capital changes 8,936 (6,504) 48,461 (6,530) (25,876) (22,368) 13,552 3,978 Capital expenditure (38,510) (31,638) (19,275) (36,180) (46,101) (30,742) (31,190) (10,990) Investments (31,704) (1,851) (70,386) 16,521 4,365 20,000 35,107 20,000 Other income 2,067 4,692 3,187 8,037 6,919 14,898 7,025 7,350 Free cash flow (35,246) (53,980) (50,151) 9,968 (33,724) (11,106) 40,934 43,360

Ratios (%) Debt/equity 95.4 138.1 184.5 159.4 159.0 163.1 132.9 105.0 Net debt/equity 94.7 135.6 179.6 157.6 158.4 161.3 131.1 102.8 RoAE 14.9 9.8 4.7 10.1 10.6 4.3 6.8 6.3 RoACE 8.6 5.0 5.3 6.8 5.5 3.4 4.5 4.6

Key assumptions Crude throughput (mn tons) 16.7 16.8 15.8 15.8 14.8 17.4 18.2 18.2 Effective tariff protection (%) 1.4 1.3 2.4 2.5 1.6 2.4 2.6 2.6 Net refining margin (US$/bbl) 4.3 6.6 4.0 2.7 5.3 3.7 4.3 4.7 Sales volume (mn tons) 23.4 26.2 27.0 27.7 27.7 28.5 29.7 31.1 Marketing margin (Rs/ton) (710) (2,345) (5,021) 698 (1,885) (3,463) (66) 769 Subsidy under-recoveries (Rs mn) (7,685) (31,191) 5,587 (12,297) (15,042) (16,350) (16,609) (16,844)

Source: Company, Kotak Institutional Equities estimates

KOTAK INSTITUTIONAL EQUITIES RESEARCH 21 India Energy

Consolidated profit model, balance sheet, cash model of IOCL, March fiscal year-ends, 2007-2014E (` mn)

2007 2008 2009 2010 2011 2012E 2013E 2014E Profit model (Rs mn) Net sales 2,149,428 2,444,378 3,041,265 2,660,338 3,268,847 4,964,131 4,744,445 4,734,134 EBITDA 110,451 120,872 61,445 146,723 130,233 163,484 169,361 179,207 Other income 27,451 43,748 45,155 68,588 47,740 32,376 38,856 36,956 Interest (17,058) (17,556) (41,758) (16,638) (29,243) (42,240) (37,142) (26,350) Depreciation (28,686) (29,918) (31,389) (34,943) (48,611) (50,497) (54,362) (55,527) Pretax profits 92,157 117,145 33,453 163,729 100,119 103,124 116,713 134,286 Extraordinary items 24,757 5,374 — (14,995) (787) — — — Tax (25,834) (38,293) (13,316) (47,193) (2,843) (26,533) (33,929) (41,993) Deferred taxation (8,040) (473) 1,435 5,556 (16,090) (6,925) (3,938) (1,576) Net profits 82,729 83,430 25,523 108,238 79,570 69,665 78,846 90,717 Net profits after minority interests 62,702 74,517 27,437 116,128 77,742 68,914 77,837 89,093 Earnings per share (Rs) 26.3 31.2 11.5 47.9 32.0 28.4 32.1 36.7

Balance sheet (Rs mn) Total equity 378,117 450,449 470,654 547,804 585,889 630,399 680,760 738,659 Deferred tax liability 59,859 60,331 58,876 54,072 69,411 76,336 80,274 81,850 Total borrowings 290,215 382,818 465,250 497,522 569,564 684,752 558,366 457,624 Currrent liabilities 330,791 386,724 376,107 472,991 629,775 738,263 716,856 708,693 Total liabilities and equity 1,058,981 1,280,322 1,370,888 1,572,389 1,854,638 2,129,750 2,036,256 1,986,826 Cash 9,385 8,413 8,076 13,501 13,068 15,839 15,094 13,159 Current assets 437,178 599,256 473,965 648,895 896,572 1,174,751 1,118,371 1,101,057 Total fixed assets 415,014 460,307 565,545 690,165 754,268 756,842 750,472 750,292 Investments 197,403 212,345 323,301 219,828 190,731 182,318 152,318 122,318 Total assets 1,058,981 1,280,322 1,370,888 1,572,389 1,854,638 2,129,750 2,036,256 1,986,826

Free cash flow (Rs mn) Operating cash flow, excl. working capital (37,508) (97,660) (355,838) 137,666 87,149 90,923 93,560 104,982 Working capital changes 3,022 (13,588) 96,862 (180,915) (52,481) (182,649) 43,760 9,151 Capital expenditure (48,752) (72,423) (131,274) (136,063) (133,765) (49,282) (43,263) (49,464) Investments 99,909 92,679 300,134 147,314 27,599 8,413 30,000 30,000 Other Income 13,372 18,048 16,423 24,514 24,042 50,853 30,068 36,956 Free cash flow 30,042 (72,944) (73,692) (7,484) (47,456) (81,743) 154,126 131,625

Ratios (%) Debt/equity 66.3 74.9 87.9 82.7 86.9 96.9 73.4 55.8 Net debt/equity 64.1 73.3 86.3 80.4 84.9 94.6 71.4 54.2 RoAE 16.1 16.3 5.5 21.2 12.8 10.4 10.9 11.6 RoACE 11.2 11.4 5.1 12.4 9.0 7.5 7.7 8.4

Key assumptions (IOC standalone) Crude throughput (mn tons) 44.0 47.4 51.3 50.7 53.0 55.9 56.2 56.2 Effective tariff protection (%) 1.6 1.3 2.8 2.2 0.8 1.9 2.3 2.3 Net refining margin (US$/bbl) 4.2 8.2 3.7 4.5 6.0 6.2 6.6 6.9 Sales volume (mn tons) 53.4 57.4 61.0 64.0 67.0 69.1 72.1 75.6 Marketing margin (Rs/ton) (633) (2,203) (5,266) 955 (1,338) (3,261) 33 843 Subsidy under-recoveries (Rs mn) (21,900) (97,738) — (31,588) (38,032) (40,396) (40,165) (40,473)

Source: Company, Kotak Institutional Equities estimates

22 KOTAK INSTITUTIONAL EQUITIES RESEARCH Strategy.dot

INDIA Strategy

GameChanger SEPTEMBER 21, 2011 UPDATE BSE-30: 17,099

Takeaways from our GameChanger forum: The Next Big Things. We organised an investor access event to launch the latest GameChanger report 'The Next Big Things'. More than 170 investors came in through the day to meet with and listen to back-to- back presentations of the promoters or top management representatives of 10 of the 14 companies profiled in the report. Our report, catalouged into five actionable and long-term themes in India, highlights the opportunities and challenges that these companies face: the presentations reinforced the messages that we highlight in our report.

` Tega Industries Mehul Mohanka, Executive Director

` ItzCash Naveen Surya, Executive Director

` NetAmbit Girish Batra, Chairman & Managing Director

` Chetas Control Systems Mahesh Deshmukh, Managing Director

` Tirumala Milk Products M. Shankar Narayanan, Managing Director, Carlyle India

` TeamLease Staffing Solutions Ashok Reddy, Managing Director

` Lemon Tree Hotels Patu Keswani, Chairman & Managing Director

` Manipal Universal Learning Anand Sudarshan, Managing Director, Chief Executive Officer

` Prizm Payment Services Loney Antony, Managing Director

` redBus Phanindra Sama, Chief Executive Officer

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

KOTAK INSTITUTIONAL EQUITIES RESEARCH Kotak Institutional Equities: Valuation summary of key Indian companies India Daily Summary - September 21, 2011 Daily 21, India Summary- September

O/S Target 20-Sep-11 Mkt cap. shares EPS (Rs) EPS growth (%) PER (X) EV/EBITDA (X) Price/BV (X) Dividend yield (%) RoE (%) price Upside ADVT-3mo Company Price (Rs) Rating (Rs mn) (US$ mn) (mn) 2011E 2012E 2013E 2011E 2012E 2013E 2011E 2012E 2013E 2011E 2012E 2013E 2011E 2012E 2013E 2011E 2012E2013E 2011E 2012E 2013E (Rs) (%) (US$ mn) Automobiles Ashok Leyland 26 SELL 69,577 1,448 2,661 2.4 2.1 2.4 68.1 (11.9) 12.8 11.0 12.5 11.1 7.6 8.0 7.2 1.5 1.5 1.4 3.8 3.8 3.8 21.8 17.4 18.2 26 (0.6) 4.2 Bajaj Auto 1,628 SELL 471,172 9,805 289 90.4 102.5 113.5 43.9 13.5 10.7 18.0 15.9 14.3 13.7 12.4 11.5 9.5 7.2 5.6 2.5 2.5 2.5 84.9 51.6 43.7 1,590 (2.3) 13.8 Bharat Forge 292 ADD 69,375 1,444 237 12.5 16.4 20.3 1,402.1 30.8 23.5 23.3 17.8 14.4 10.9 8.8 7.5 3.1 2.6 2.2 1.2 — — 8.2 14.1 15.2 320 9.5 3.1 Exide Industries 133 SELL 113,050 2,353 850 7.5 6.8 7.9 18.0 (8.9) 17.0 17.8 19.6 16.8 12.9 14.0 12.2 4.1 3.5 3.0 1.1 1.0 1.0 25.5 19.4 19.5 120 (9.8) 6.4 Hero Honda 2,206 SELL 440,478 9,166 200 99.3 111.3 128.2 (11.1) 12.1 15.1 22.2 19.8 17.2 15.9 14.8 12.1 9.4 9.7 9.3 4.8 3.2 3.2 56.5 63.6 60.2 1,795 (18.6) 21.0 Mahindra & Mahindra 814 ADD 500,042 10,406 614 41.7 46.9 52.2 22.7 12.5 11.2 19.5 17.4 15.6 14.9 12.7 11.2 4.7 3.9 3.2 1.4 1.2 1.2 27.3 24.5 22.6 900 10.5 32.2 Maruti Suzuki 1,155 ADD 333,665 6,943 289 79.2 66.0 90.3 (8.4) (16.7) 36.8 14.6 17.5 12.8 9.0 10.2 7.0 2.4 2.1 1.9 0.6 0.6 0.6 17.6 12.9 15.5 1,240 7.4 12.5 Tata -September Daily Summary India Motors 166 ADD 552,615 11,500 3,325 27.2 23.1 23.9 737.9 (15.0) 3.6 6.1 7.2 6.9 4.6 5.2 4.9 2.8 2.1 1.7 2.3 1.7 1.7 66.1 34.2 27.3 180 8.3 55.1 Automobiles Cautious 2,549,974 53,064 88.4 (4.3) 11.5 12.7 13.3 11.9 8.5 8.7 7.7 4.0 3.3 2.8 2.3 1.8 1.8 31.7 25.2 23.4 Banks/Financial Institutions Andhra Bank 122 BUY 68,409 1,424 560 22.6 24.2 27.5 5.0 6.9 13.5 5.4 5.1 4.4 ———1.1 0.9 0.8 4.5 4.8 5.5 23.2 19.4 19.2 190 55.4 1.9 Axis Bank 1,144 BUY 469,623 9,773 411 82.5 98.9 119.7 33.0 19.8 21.1 13.9 11.6 9.6 ———2.5 2.1 1.8 1.2 1.5 1.8 19.3 19.7 20.3 1,700 48.6 48.6 Bank of Baroda 770 BUY 302,422 6,293 393 108.0 109.5 129.1 29.1 1.4 17.9 7.1 7.0 6.0 ———1.6 1.3 1.1 2.5 2.5 3.0 25.9 20.4 20.5 1,250 62.4 7.3 Bank of India 319 BUY 174,289 3,627 547 45.5 54.0 70.7 37.4 18.7 30.9 7.0 5.9 4.5 ———1.1 1.0 0.8 2.5 3.0 4.0 17.3 17.2 19.5 470 47.6 6.2 Canara Bank 435 BUY 192,572 4,007 443 90.9 86.3 108.7 23.3 (5.0) 25.9 4.8 5.0 4.0 ———1.1 0.9 0.8 2.5 2.8 2.8 23.2 17.7 19.0 600 38.0 7.8 Corporation Bank 440 BUY 65,111 1,355 148 95.4 93.4 114.1 16.3 (2.1) 22.2 4.6 4.7 3.9 ———0.9 0.8 0.7 4.6 4.5 5.4 21.9 18.1 19.2 630 43.3 0.8 Federal Bank 377 BUY 64,510 1,342 171 34.3 44.5 56.2 26.3 29.8 26.1 11.0 8.5 6.7 ———1.3 1.2 1.0 2.3 2.9 3.7 12.0 14.2 16.0 500 32.6 4.2 HDFC 675 REDUCE 990,231 20,606 1,467 24.1 27.8 31.9 22.4 15.6 14.6 28.0 24.2 21.2 ———5.7 5.0 3.9 1.3 1.5 1.8 21.7 22.1 21.5 730 8.1 35.1 HDFC Bank 491 ADD 1,142,943 23,784 2,326 16.9 21.9 27.6 31.0 29.5 26.5 29.1 22.5 17.8 ———4.5 3.9 3.3 0.7 0.9 1.1 16.7 18.6 20.2 560 14.0 34.0 ICICI Bank 882 BUY 1,016,308 21,149 1,152 44.7 58.0 63.1 23.9 29.7 8.8 19.7 15.2 14.0 ———1.8 1.7 1.6 1.6 2.0 2.1 9.7 11.7 11.8 1,100 24.7 81.8 IDFC 115 BUY 173,799 3,617 1,509 8.8 9.9 12.0 4.6 12.8 21.6 13.1 11.6 9.6 ———1.7 1.4 1.3 1.9 1.7 2.1 14.7 13.1 13.9 150 30.2 23.9 India Infoline 78 SELL 25,449 530 327 7.4 4.8 6.5 (9.3) (34.5) 33.8 10.6 16.1 12.1 ———1.5 1.3 1.2 4.0 1.3 1.8 12.9 8.7 10.3 70 (10.1) 1.2 Indian Bank 209 BUY 89,951 1,872 430 38.8 42.0 50.9 10.5 8.2 21.2 5.4 5.0 4.1 ———1.1 1.0 0.8 3.6 3.8 4.6 22.3 20.4 21.0 300 43.3 1.7 Indian Overseas Bank 100 BUY 61,566 1,281 619 17.3 21.1 30.8 33.6 22.0 45.4 5.7 4.7 3.2 ———0.8 0.7 0.6 5.0 4.3 4.7 12.7 13.3 17.0 190 91.0 1.6 IndusInd Bank 272 BUY 126,906 2,641 466 12.4 15.2 18.2 45.2 22.6 19.9 22.0 17.9 15.0 ———3.5 3.0 2.7 0.7 0.9 1.1 20.8 17.7 17.9 325 19.3 3.7 J&K Bank 847 ADD 41,080 855 48 126.9 141.8 152.8 20.1 11.8 7.7 6.7 6.0 5.5 ———1.2 1.0 0.9 3.1 3.4 3.7 19.0 18.4 17.3 950 12.1 0.7 LIC Housing Finance 217 ADD 103,230 2,148 475 20.5 22.9 27.5 47.2 11.4 20.4 10.6 9.5 7.9 ———2.6 2.2 1.8 2.0 2.3 2.7 25.8 23.7 23.9 260 19.6 22.3 Mahindra & Mahindra Financial 676 BUY 69,263 1,441 102 45.2 56.4 69.2 26.1 24.8 22.7 15.0 12.0 9.8 ———2.8 2.4 2.1 1.5 1.8 2.3 22.0 21.4 22.3 825 22.0 1.3 Muthoot Finance 172 BUY 63,902 1,330 371 15.7 21.6 26.7 108.4 37.1 23.7 10.9 8.0 6.4 ———4.8 2.1 1.6 — — — 51.5 36.7 28.1 230 33.7 — Oriental Bank of Commerce 291 BUY 84,757 1,764 292 51.5 55.6 65.4 13.7 8.0 17.6 5.6 5.2 4.4 ———0.8 0.7 0.7 3.6 3.9 4.5 15.5 13.9 14.7 430 48.0 3.9 PFC 159 BUY 210,200 4,374 1,320 22.8 23.4 28.3 11.1 2.4 21.3 7.0 6.8 5.6 ———1.4 1.0 0.9 2.5 2.9 3.6 18.4 17.0 16.7 225 41.3 16.3 Punjab National Bank 1,003 BUY 317,794 6,613 317 140.0 163.0 201.5 13.0 16.5 23.6 7.2 6.2 5.0 ———1.6 1.3 1.1 2.2 3.3 4.1 24.4 23.5 24.2 1,500 49.5 7.0 Reliance Capital 419 REDUCE 103,129 2,146 246 9.3 16.5 24.8 (25.3) 77.0 50.4 45.0 25.4 16.9 ———1.5 1.4 1.4 0.9 1.6 2.4 3.3 5.7 8.3 470 12.2 20.3 Rural Electrification Corp. 188 BUY 185,382 3,858 987 26.0 29.0 32.5 28.1 11.5 12.3 7.2 6.5 5.8 ———1.5 1.3 1.1 4.0 4.4 5.0 21.5 20.8 20.4 240 27.8 12.2 Shriram Transport 651 REDUCE 145,275 3,023 223 55.1 65.6 75.3 40.8 19.0 14.8 11.8 9.9 8.6 ———3.0 2.5 2.1 1.0 2.0 2.3 28.1 26.8 25.2 700 7.5 8.5 SKS Microfinance 313 RS 23,032 479 74 15.7 (39.1) 3.9 (41.8) (349.4) (109.9) 19.9 (8.0) 80.6 ———1.3 1.5 1.5 — — — 8.3 (17.4) 1.9 — — 9.3 State Bank of India 1,991 BUY 1,264,093 26,305 635 130.2 195.6 256.1 (9.9) 50.3 30.9 15.3 10.2 7.8 ———1.9 1.7 1.4 1.7 1.8 1.9 12.6 17.8 20.0 2,750 38.1 114.6 Union Bank 242 BUY 126,757 2,638 524 39.5 50.2 60.4 (3.9) 27.1 20.5 6.1 4.8 4.0 ———1.1 1.0 0.8 3.9 4.9 5.9 20.9 21.9 22.5 425 75.8 4.9 Yes Bank 290 BUY 100,499 2,091 347 21.5 26.2 32.3 43.2 22.1 23.3 13.5 11.0 9.0 ———2.6 2.2 1.8 0.9 1.1 1.3 21.7 21.7 22.2 420 45.1 16.6 Banks/Financial Institutions Attractive 7,802,483 162,366 20.1 20.0 22.9 12.7 10.6 8.6 ——— 2.0 1.8 1.5 1.7 2.0 2.3 16.0 16.6 17.5 Cement ACC 1,067 SELL 200,412 4,170 188 55.6 60.1 72.7 (33.2) 8.2 20.9 19.2 17.7 14.7 11.8 9.9 7.7 2.9 2.7 2.4 3.3 2.2 2.2 17.5 17.3 18.1 980 (8.1) 6.1 Ambuja Cements 147 SELL 223,256 4,646 1,522 7.9 7.8 9.8 (1.5) (0.5) 25.5 18.6 18.7 14.9 11.3 10.3 8.0 2.8 2.6 2.3 1.4 1.5 1.6 16.6 14.8 16.9 135 (7.9) 6.2 Grasim Industries 2,320 BUY 212,712 4,426 92 233.3 259.5 289.3 (22.5) 11.2 11.5 9.9 8.9 8.0 6.3 5.3 4.5 1.5 1.3 1.1 1.5 1.5 1.5 15.8 15.3 15.0 2,900 25.0 3.7 India Cements 72 ADD 22,178 462 307 1.9 8.3 9.2 (81.2) 339.0 10.4 38.2 8.7 7.9 14.2 5.7 5.1 0.5 0.5 0.5 2.2 4.4 4.4 1.4 6.2 6.5 82 13.6 1.6 Shree Cement 1,789 REDUCE 62,334 1,297 35 57.2 83.1 132.9 (72.5) 45.5 59.8 31.3 21.5 13.5 7.0 6.6 4.6 3.3 3.0 2.6 0.6 0.6 0.6 10.7 14.5 20.7 1,730 (3.3) 1.3 UltraTech Cement 1,144 ADD 313,570 6,525 274 44.9 73.1 85.9 (49.2) 63.0 17.5 25.5 15.6 13.3 12.4 8.3 6.9 2.5 2.2 1.9 0.4 0.5 0.5 16.7 17.3 17.3 1,220 6.6 3.6 Cement Neutral 1,034,462 21,527 (23.5) 23.6 18.8 17.6 14.3 12.0 9.4 7.4 6.1 2.2 1.9 1.7 1.5 1.3 1.4 12.3 13.5 14.2

Source: Company, Bloomberg, Kotak Institutional Equities estimates

24

2 25 25 India India DailySummary - September 21,2011 Kotak Institutional Equities: Valuation summary of key Indian companies

O/S Target 20-Sep-11 Mkt cap. shares EPS (Rs) EPS growth (%) PER (X) EV/EBITDA (X) Price/BV (X)Dividend yield (%) RoE (%) price Upside ADVT-3mo Company Price (Rs) Rating (Rs mn) (US$ mn) (mn) 2011E 2012E 2013E 2011E 2012E 2013E 2011E 2012E 2013E 2011E 2012E 2013E 2011E 2012E 2013E 2011E 2012E2013E 2011E 2012E 2013E (Rs) (%) (US$ mn) Consumer products Asian Paints 3,078 SELL 295,231 6,144 96 80.8 94.6 111.4 13.0 17.1 17.7 38.1 32.5 27.6 25.4 20.7 17.0 14.4 11.1 8.9 1.0 0.9 1.1 43.9 40.0 36.8 2,900 (5.8) 5.2 Colgate-Palmolive (India) 988 SELL 134,381 2,796 136 29.6 34.1 38.8 (4.9) 15.0 14.1 33.4 29.0 25.4 29.1 25.3 21.2 35.0 35.6 28.4 2.2 3.0 2.8 113.4 121.6 124.2 900 (8.9) 2.3 Dabur India 105 SELL 181,956 3,786 1,740 3.3 3.7 4.4 12.8 14.1 18.8 32.0 28.1 23.6 25.8 21.3 17.9 13.9 10.7 8.5 1.1 1.3 1.5 51.2 43.8 40.6 110 5.2 3.0 GlaxoSmithkline Consumer (a) 2,381 ADD 100,126 2,084 42 71.3 83.2 104.0 28.8 16.7 25.0 33.4 28.6 22.9 24.0 20.7 17.3 10.7 9.1 7.7 2.1 1.6 1.9 32.2 33.5 35.5 2,900 21.8 1.1 Godrej Consumer Products 424 ADD 137,267 2,856 324 14.9 18.4 22.7 31.3 23.4 23.8 28.5 23.1 18.6 24.2 17.0 13.0 8.0 5.6 4.5 1.2 0.8 0.8 35.9 28.7 27.0 510 20.2 2.5 Hindustan Unilever 343 ADD 740,687 15,413 2,159 9.9 11.3 13.3 4.8 14.1 17.7 34.7 30.4 25.9 29.5 25.8 21.1 28.1 24.4 21.1 2.2 2.7 3.2 66.3 85.9 87.5 370 7.9 19.5 ITC 199 ADD 1,524,614 31,726 7,681 6.4 8.0 9.1 20.7 24.9 13.1 31.0 24.8 21.9 20.5 16.7 14.6 9.1 7.8 6.8 2.3 1.9 2.3 33.2 35.5 34.4 230 15.9 34.1 Jubilant Foodworks 915 SELL 59,852 1,245 65 11.2 16.6 24.1 99.6 48.6 45.1 81.7 55.0 37.9 49.8 30.5 21.3 31.2 19.9 13.1 ———46.6 44.2 41.6 750 (18.0) 32.1 Jyothy Laboratories 169 ADD 13,631 284 81 10.5 9.4 11.8 (5.0) (10.1) 25.2 16.1 17.9 14.3 13.5 12.1 10.0 2.0 1.9 1.8 3.5 2.8 3.5 12.3 11.1 12.9 220 30.1 0.4 Marico 141 ADD 86,016 1,790 612 4.2 5.4 7.1 10.9 27.3 32.6 33.3 26.2 19.7 22.3 17.9 13.6 9.2 7.2 5.6 0.5 0.7 0.9 32.8 31.3 32.2 185 31.5 1.5 Nestle India (a) 4,247 SELL 409,478 8,521 96 86.8 103.6 123.2 16.7 19.3 18.9 48.9 41.0 34.5 32.6 26.7 22.0 47.9 34.8 26.2 1.1 1.4 1.7 116.5 98.3 86.8 3,500 (17.6) 2.2 Tata Global Beverages 92 ADD 56,985 1,186 618 4.0 6.0 7.1 (34.6) 52.6 17.6 23.3 15.3 13.0 9.0 7.7 6.4 1.1 1.1 1.1 2.2 3.3 3.9 6.5 9.6 10.8 120 30.2 4.5 Titan Industries 227 ADD 201,439 4,192 888 4.9 7.4 8.8 71.7 51.5 17.8 46.1 30.5 25.9 33.7 21.2 17.4 18.5 13.2 10.0 0.6 1.0 1.3 47.8 50.5 44.0 240 5.8 24.2 United Spirits 792 ADD 99,408 2,069 126 29.5 39.2 50.6 8.3 32.8 29.0 26.8 20.2 15.6 14.5 11.1 9.6 2.3 2.1 1.8 0.4 0.3 0.5 9.1 10.7 12.5 1,100 39.0 5.2 Consumer products Neutral 4,041,070 84,093 16.3 21.8 17.2 33.8 27.7 23.6 23.5 19.1 16.0 10.4 8.8 7.6 1.8 1.8 2.1 30.8 31.9 32.0 Constructions IVRCL 40 BUY 10,747 224 267 5.9 5.7 6.6 (25.2) (4.1) 15.6 6.8 7.1 6.1 5.9 5.7 5.5 0.5 0.5 0.5 1.0 1.0 1.0 8.2 7.3 7.9 75 86.3 5.3 Nagarjuna Construction Co. 69 BUY 17,666 368 257 6.4 5.9 7.7 (29.7) (7.8) 30.8 10.8 11.7 9.0 8.4 7.9 7.4 0.7 0.7 0.7 2.9 2.9 2.9 7.1 6.3 7.8 100 45.2 1.4 Punj Lloyd 62 REDUCE 21,105 439 340 (1.5) 5.5 7.4 (56.6) (467.8) 34.9 (41.9) 11.4 8.4 13.2 5.9 5.2 0.7 0.7 0.6 (0.1) 0.8 1.0 (1.7) 6.1 7.7 65 4.6 8.0 Sadbhav Engineering 139 BUY 20,833 434 150 7.8 10.8 11.9 51.0 38.9 10.6 17.9 12.9 11.7 10.6 8.5 7.7 3.2 2.6 2.2 0.4 0.4 0.4 18.1 20.4 18.6 180 29.5 0.2 Construction Attractive 70,351 1,464 (1.1) 67.6 23.4 18.2 10.8 8.8 9.1 6.7 6.1 0.9 0.8 0.8 1.0 1.2 1.3 4.8 7.6 8.7 Energy Aban Offshore 394 BUY 17,123 356 44 116.2 95.3 107.2 9.0 (18.0) 12.4 3.4 4.1 3.7 6.7 6.7 6.4 0.8 0.7 0.6 0.9 1.0 1.1 29.2 19.4 18.0 700 77.9 9.2 Bharat Petroleum 665 ADD 240,424 5,003 362 38.9 54.0 55.1 (32.5) 38.9 1.9 17.1 12.3 12.1 10.9 7.6 7.3 1.6 1.5 1.4 2.1 2.7 2.7 9.2 11.8 11.2 780 17.3 7.8 Cairn india 305 REDUCE 580,845 12,087 1,902 33.3 45.8 49.7 501.1 37.4 8.6 9.2 6.7 6.1 6.7 4.8 3.9 1.4 1.2 1.1 — 1.6 4.9 16.9 19.8 19.2 295 (3.4) 13.3 Castrol India (a) 516 SELL 127,596 2,655 247 19.8 21.9 22.3 28.5 10.8 1.6 26.1 23.5 23.1 16.7 15.7 15.3 24.7 22.5 21.4 2.9 3.3 3.5 100.2 100.2 94.7 425 (17.6) 1.9 GAIL (India) 436 BUY 553,565 11,519 1,268 28.2 34.3 36.0 13.8 21.8 4.9 15.5 12.7 12.1 9.8 9.3 8.3 2.7 2.3 2.0 1.7 2.1 2.3 17.5 18.4 16.5 560 28.3 10.1 GSPL 107 SELL 60,056 1,250 563 9.0 8.5 8.4 23.1 (6.1) (0.1) 11.9 12.6 12.6 7.5 7.3 7.1 2.6 2.2 1.9 0.9 1.6 2.4 25.5 19.1 16.4 92 (13.8) 5.4 Hindustan Petroleum 369 ADD 125,230 2,606 339 40.8 20.3 33.9 (20.8) (50.4) 67.3 9.0 18.2 10.9 4.1 5.0 3.5 0.8 0.8 0.7 3.8 1.7 2.8 9.0 4.1 6.5 430 16.4 8.6 Indian Oil Corporation 309 BUY 751,329 15,635 2,428 32.4 28.4 32.1 (34.0) (12.5) 12.9 9.5 10.9 9.7 8.9 7.8 6.8 1.3 1.2 1.1 3.1 2.8 3.2 13.3 10.8 11.3 385 24.4 4.4 Oil India 1,325 BUY 318,596 6,630 240 120.0 171.7 190.1 4.2 43.1 10.7 11.0 7.7 7.0 5.6 3.1 2.5 1.9 1.6 1.4 2.8 4.2 4.5 16.2 20.1 19.4 1,750 32.1 1.8 Oil & Natural Gas Corporation 262 BUY 2,237,268 46,556 8,556 24.7 37.2 40.8 7.4 50.8 9.7 10.6 7.0 6.4 4.0 3.0 2.4 1.5 1.3 1.2 3.3 4.6 5.4 14.3 19.1 18.3 380 45.3 29.3 Petronet LNG 175 SELL 131,250 2,731 750 8.1 11.5 11.4 50.3 41.3 (0.7) 21.6 15.3 15.4 12.4 9.9 10.1 4.3 3.6 3.0 1.1 1.7 1.7 20.9 24.6 20.2 125 (28.6) 11.0 Reliance Industries 852 BUY 2,539,216 52,840 2,981 62.0 67.4 74.9 24.8 8.8 11.0 13.7 12.6 11.4 7.5 6.8 5.8 1.6 1.4 1.2 0.9 1.1 1.2 13.0 12.7 12.6 1,045 22.7 89.0 Energy Attractive 7,682,499 159,869 11.5 23.7 10.1 11.5 9.3 8.4 6.4 5.2 4.4 1.6 1.4 1.3 2.0 2.6 3.2 13.8 15.1 14.9 Industrials ABB 815 SELL 172,780 3,595 212 3.0 21.1 27.3 (82.2) 606.1 29.6 273.2 38.7 29.9 199.1 26.1 19.5 7.1 6.2 5.3 0.2 0.4 0.4 2.6 17.1 19.1 700 (14.1) 1.7 BGR Energy Systems 361 Reduce 26,084 543 72 44.8 40.4 39.0 60.0 (9.7) (3.5) 8.1 8.9 9.3 5.4 4.9 4.6 2.7 2.2 1.9 2.8 2.2 2.2 39.0 27.4 21.9 400 10.7 5.1 Bharat Electronics 1,582 ADD 126,592 2,634 80 107.3 121.7 135.5 11.6 13.5 11.3 14.8 13.0 11.7 6.8 5.7 4.2 2.5 2.1 1.9 1.4 1.6 1.6 18.2 17.6 17.1 1,875 18.5 1.3 Bharat Heavy Electricals 1,640 REDUCE 802,960 16,709 490 122.8 126.6 137.4 39.7 3.0 8.5 13.4 13.0 11.9 8.9 8.2 7.4 4.0 3.2 2.7 1.9 1.6 1.8 33.3 27.6 24.6 1,800 9.7 32.3 Crompton Greaves 160 BUY 102,448 2,132 642 14.3 10.6 13.5 11.5 (25.8) 26.7 11.1 15.0 11.9 7.2 8.4 6.3 3.1 2.7 2.2 1.5 1.0 1.1 31.7 19.1 20.5 210 31.5 17.5 Larsen & Toubro 1,563 REDUCE 951,572 19,802 609 67.7 79.6 98.2 18.1 17.5 23.4 23.1 19.6 15.9 16.2 12.2 10.5 3.6 3.0 2.5 0.9 0.9 0.9 17.0 16.6 17.2 1,800 15.2 61.2 Maharashtra Seamless 369 BUY 26,040 542 71 46.1 41.6 46.7 19.3 (9.7) 12.3 8.0 8.9 7.9 4.3 4.3 3.6 1.0 0.9 0.9 2.2 2.3 2.5 13.3 11.1 11.5 460 24.6 0.1 Siemens 876 SELL 295,420 6,148 337 22.4 28.9 32.5 39.5 28.8 12.3 39.0 30.3 27.0 23.1 19.5 16.9 9.1 7.4 6.1 0.6 0.7 0.7 25.2 26.9 24.8 830 (5.3) 3.1 Suzlon Energy 40 SELL 70,607 1,469 1,746 (6.0) 1.8 3.2 (4.6) (129.2) 80.6 (6.7) 23.0 12.7 20.4 7.6 6.6 1.0 1.0 1.0 — 0.5 0.5 (15.8) 4.4 7.7 40 (1.1) 19.5 Tecpro Systems 243 ADD 12,258 255 50 27.0 29.4 32.7 24.2 8.9 11.4 9.0 8.3 7.4 5.6 5.7 5.1 1.8 1.6 1.4 — — — 26.8 20.5 19.6 300 23.5 0.3 Thermax 504 REDUCE 60,069 1,250 119 31.6 33.0 35.1 44.3 4.4 6.3 15.9 15.3 14.4 10.7 9.6 8.9 4.6 3.8 3.2 1.8 1.9 2.0 31.5 27.2 24.3 550 9.1 1.8 KOTAK INSTITUTIONAL EQUITIES RESEARCH Voltas 120 ADD 39,755 827 331 9.8 9.7 10.5 (14.3) (1.1) 8.8 12.3 12.4 11.4 7.4 7.1 5.9 2.9 2.5 2.1 1.7 2.5 (0.0) 26.1 21.6 19.9 150 24.8 4.0 Industrials Cautious 2,686,583 55,906 25.5 20.5 16.0 20.4 16.9 14.6 12.9 10.5 9.1 3.6 3.0 2.6 1.2 1.2 1.2 17.7 18.0 17.8 Infrastructure Container Corporation 888 ADD 115,435 2,402 130 63.5 70.0 77.9 4.9 10.3 11.2 14.0 12.7 11.4 9.0 7.8 6.8 2.3 2.0 1.8 1.7 1.8 2.0 17.6 16.9 16.6 1,150 29.5 0.8 GMR Infrastructure 30 RS 109,289 2,274 3,667 (0.0) (0.4) 0.5 (102.0) 3,980.8 (243.5) (3,438.0) (84.2) 58.7 13.3 11.5 9.2 1.0 1.0 1.0 — — — (0.0) (2.0) 2.8 — — 2.5 Gujarat Pipavav Port 66 BUY 27,976 582 424 (1.2) 1.2 2.6 (65.8) (201.6) 115.2 (55.0) 54.1 25.1 28.3 16.7 11.2 3.8 3.6 3.1 — — — (9.1) 9.4 13.6 78 18.1 0.6 GVK Power & Infrastructure 17 RS 27,320 569 1,579 1.0 1.0 0.3 (0.6) 1.6 (73.4) 17.6 17.4 65.2 18.2 16.7 19.7 0.8 0.8 0.8 — 1.7 2.0 4.7 4.6 1.2 — — 3.5 IRB Infrastructure 173 ADD 57,516 1,197 332 13.6 11.3 11.0 17.4 (16.9) (2.6) 12.7 15.3 15.7 8.3 8.4 7.2 2.3 1.7 1.4 0.9 — — 19.3 12.6 9.6 185 6.9 6.3 Mundra Port and SEZ 154 ADD 311,393 6,480 2,017 4.6 6.8 10.5 36.3 50.3 53.2 33.9 22.6 14.7 27.3 18.4 13.0 7.1 5.7 4.4 — — — 23.2 28.0 33.5 175 13.4 5.5 Infrastructure Cautious 648,929 13,504 12.1 19.6 39.6 28.3 23.6 16.9 15.5 12.7 10.3 2.4 2.2 2.0 0.4 0.4 0.4 8.5 9.2 11.6

Source: Company, Bloomberg, Kotak Institutional Equities estimates

KOTAK INSTITUTIONAL EQUITIES RESEARCH Kotak Institutional Equities: Valuation summary of key Indian companies India Daily Summary - September 21, 2011 Daily 21, India Summary- September

O/S Target 20-Sep-11 Mkt cap. shares EPS (Rs) EPS growth (%) PER (X) EV/EBITDA (X) Price/BV (X)Dividend yield (%) RoE (%) price Upside ADVT-3mo Company Price (Rs) Rating (Rs mn) (US$ mn) (mn) 2011E 2012E 2013E 2011E 2012E 2013E 2011E 2012E 2013E 2011E 2012E 2013E 2011E 2012E 2013E 2011E 2012E 2013E 2011E 2012E 2013E (Rs) (%) (US$ mn) Media DB Corp 220 BUY 40,395 841 183 14.1 13.0 15.5 32.7 (8.1) 19.9 15.6 17.0 14.2 10.1 10.0 8.3 4.9 4.3 3.8 1.8 2.7 3.6 35.0 26.9 28.6 330 49.7 0.9 DishTV 76 ADD 81,091 1,687 1,062 (1.8) 0.0 1.3 (27.5) (101.9) 3,944.0 (42.7) 2,305.1 57.0 37.9 17.4 11.7 38.6 37.9 22.8 — — — (62.3) 1.7 49.9 100 31.0 7.7 Eros International 258 ADD 24,991 520 97 11.8 15.8 19.9 19.0 34.0 25.9 21.9 16.3 13.0 15.3 11.6 8.4 3.7 3.0 2.4 — — — 24.9 20.2 20.5 250 (3.0) 2.4 Hindustan Media Ventures 141 BUY 10,365 216 73 7.3 9.0 12.1 198.7 22.8 35.0 19.3 15.7 11.6 9.4 8.2 5.9 2.6 2.2 1.9 — — 2.1 22.3 15.1 17.7 220 55.8 0.1 HT Media 143 ADD 33,511 697 235 7.7 8.9 11.0 26.3 15.3 23.6 18.5 16.0 13.0 8.7 7.3 5.6 2.4 2.2 2.1 1.4 2.8 4.2 15.0 14.4 16.6 190 33.2 0.4 Jagran Prakashan 105 BUY 33,338 694 316 6.8 7.0 8.4 17.2 1.7 20.5 15.4 15.2 12.6 9.3 8.6 7.1 4.8 4.3 3.9 3.2 3.8 4.7 31.5 30.0 32.7 160 51.8 0.5 Sun TV Network 301 BUY 118,795 2,472 394 19.6 21.6 25.4 48.6 10.0 17.9 15.4 14.0 11.9 9.2 8.2 6.9 4.9 4.4 4.0 2.9 4.0 5.3 36.6 34.7 36.6 440 46.0 10.1

Zee Entertainment -September Daily Summary India Enterprises 118 BUY 115,447 2,402 978 5.8 6.2 7.7 10.0 6.4 23.3 20.2 19.0 15.4 13.5 12.4 9.8 2.7 2.6 2.5 1.1 1.1 1.3 14.2 14.3 16.9 160 35.6 5.9 Media Neutral 457,934 9,529 50.5 19.3 27.1 23.3 19.5 15.3 12.4 10.5 8.3 4.2 3.9 3.5 1.5 2.0 2.7 18.1 19.8 22.9 Metals & Mining Coal India 378 ADD 2,390,112 49,737 6,316 17.3 25.5 29.4 13.6 47.6 15.1 21.9 14.8 12.9 13.1 9.3 7.8 6.8 5.3 4.2 1.4 2.0 2.3 35.1 40.3 36.4 470 24.2 31.2 Hindalco Industries 150 ADD 287,331 5,979 1,915 12.8 18.3 17.6 (36.0) 43.3 (4.0) 11.7 8.2 8.5 6.3 6.1 6.4 1.0 0.9 0.8 1.0 1.0 1.0 9.7 11.4 10.0 175 16.6 27.1 Hindustan Zinc 135 BUY 568,263 11,825 4,225 11.6 13.1 14.7 21.8 12.7 11.8 11.5 10.2 9.2 7.6 5.9 4.4 2.5 2.1 1.7 0.7 0.7 0.7 24.3 22.2 20.4 160 19.0 2.8 Jindal Steel and Power 555 REDUCE 518,817 10,796 934 40.2 43.5 52.9 5.1 8.2 21.6 13.8 12.8 10.5 10.2 9.5 8.1 3.7 2.9 2.3 0.3 0.3 0.3 30.9 25.5 24.4 595 7.1 20.1 JSW Steel 697 SELL 157,488 3,277 226 78.6 70.2 107.5 (2.2) (10.7) 53.1 8.9 9.9 6.5 6.5 6.8 5.8 1.0 0.9 0.8 1.7 1.8 1.8 13.6 9.3 12.9 660 (5.3) 33.7 National Aluminium Co. 65 SELL 167,649 3,489 2,577 4.1 5.0 4.8 36.3 20.5 (4.1) 15.7 13.0 13.6 7.4 5.8 5.6 1.5 1.4 1.3 2.3 2.3 2.3 9.9 11.1 10.0 65 (0.1) 0.6 Sesa Goa 224 SELL 200,010 4,162 895 47.0 40.1 41.6 59.8 (14.6) 3.7 4.8 5.6 5.4 3.9 4.1 3.3 1.6 1.2 1.0 1.8 1.8 1.8 36.8 22.1 17.9 230 2.9 16.6 Sterlite Industries 134 BUY 449,729 9,359 3,361 15.2 17.0 19.0 26.2 12.0 11.5 8.8 7.9 7.1 5.5 4.2 3.5 1.1 1.0 0.9 0.8 0.8 0.8 13.0 13.0 12.8 185 38.3 17.4 Tata Steel 461 BUY 447,917 9,321 971 75.3 68.7 76.9 (2,258.1) (8.8) 12.0 6.1 6.7 6.0 5.9 6.1 5.2 1.3 1.0 0.9 2.6 1.7 1.7 24.7 15.5 15.7 625 35.5 49.3 Metals & Mining Attractive 5,187,315 107,945 39.1 16.1 12.9 12.5 10.8 9.6 7.9 6.8 5.9 2.4 2.0 1.7 1.3 1.5 1.7 19.0 18.5 17.8 Pharmaceutical Apollo Hospitals 520 ADD 72,246 1,503 139 13.2 17.8 21.4 21.0 34.5 19.9 39.3 29.2 24.3 17.9 13.6 11.2 3.8 2.8 2.5 — — — 9.8 10.7 10.5 650 25.0 1.0 Biocon 336 BUY 67,110 1,397 200 18.4 19.4 21.4 23.9 5.6 10.3 18.3 17.3 15.7 10.5 10.0 9.0 3.2 2.9 2.6 — — — 19.4 17.9 17.4 445 32.6 3.0 Cipla 282 REDUCE 226,745 4,718 803 12.3 14.5 16.5 (10.0) 17.5 13.7 22.9 19.5 17.1 19.8 14.1 11.6 3.4 3.0 2.7 1.0 1.1 1.2 15.4 16.0 16.5 310 9.8 8.4 Cadila Healthcare 824 ADD 168,672 3,510 205 34.7 39.4 47.7 40.6 13.4 21.0 23.7 20.9 17.3 20.5 17.1 13.2 7.8 6.1 4.8 0.8 1.0 1.2 37.5 32.5 30.9 1,045 26.9 2.4 Dishman Pharma & chemicals 64 REDUCE 5,234 109 81 9.8 8.0 8.7 (31.8) (18.3) 8.0 6.5 8.0 7.4 8.3 6.3 5.8 0.6 0.6 0.5 — — — 9.6 7.2 7.3 70 8.8 0.2 Divi's Laboratories 732 ADD 97,106 2,021 133 32.4 36.7 45.0 25.7 13.5 22.4 22.6 19.9 16.3 18.7 14.3 11.7 5.4 4.6 3.9 — — — 25.9 25.0 26.2 830 13.4 2.7 GlaxoSmithkline Pharmaceuticals (a) 2,059 REDUCE 174,361 3,628 85 68.3 78.2 88.6 15.5 14.6 13.3 30.2 26.3 23.2 20.0 17.7 15.2 8.9 8.2 7.6 1.9 2.4 2.8 30.9 32.6 33.9 2,220 7.8 1.4 Glenmark Pharmaceuticals 327 ADD 88,481 1,841 270 17.0 26.2 23.5 33.6 54.5 (10.3) 19.3 12.5 13.9 21.3 14.3 12.2 4.3 3.3 2.7 — — — 20.6 29.8 21.2 395 20.7 4.6 Jubilant Life Sciences 217 REDUCE 34,616 720 159 14.4 16.5 22.7 (45.6) 14.5 37.6 15.1 13.2 9.6 11.6 9.3 7.8 1.6 1.4 1.3 0.9 0.9 1.4 12.3 11.7 14.2 205 (5.7) 1.3 Lupin 484 ADD 216,723 4,510 448 19.2 20.6 26.3 25.6 7.2 27.5 25.1 23.4 18.4 21.0 18.2 13.5 6.5 5.3 4.3 0.6 0.7 0.9 29.5 25.3 26.2 530 9.6 9.8 Ranbaxy Laboratories 487 SELL 206,182 4,291 423 40.6 16.9 20.8 475.0 (58.3) 22.7 12.0 28.8 23.4 14.7 24.9 19.4 3.7 3.2 2.8 — — — 34.5 11.9 12.8 435 (10.7) 7.8 Sun Pharmaceuticals 484 ADD 501,645 10,439 1,036 17.5 20.4 24.3 34.4 16.3 19.2 27.6 23.7 19.9 23.5 18.8 15.3 4.9 4.1 3.5 0.7 0.8 1.0 21.0 20.2 20.7 560 15.6 10.7 Pharmaceuticals Cautious 2,194,864 45,674 30.2 3.5 3.6 22.9 22.1 21.3 17.3 14.8 14.1 3.7 3.1 3.0 0.7 0.8 0.8 16.0 14.2 14.0 Property DLF 212 BUY 363,746 7,569 1,715 9.1 11.9 15.7 (14.5) 31.3 31.8 23.4 17.8 13.5 15.7 12.4 9.4 1.4 1.3 1.2 0.9 1.2 1.4 5.4 7.5 9.2 270 27.3 37.6 Housing Development & Infrastructure 112 BUY 50,018 1,041 445 19.8 28.7 34.3 24.0 44.8 19.7 5.7 3.9 3.3 5.5 3.8 3.3 0.5 0.4 0.4 — 0.9 1.3 10.0 12.3 12.7 150 33.5 20.5 Indiabulls Real Estate 83 RS 33,426 696 402 4.0 8.5 15.4 (1,095.5) 114.1 81.5 20.9 9.8 5.4 14.4 11.6 5.1 0.3 0.3 0.3 — 0.6 0.8 1.4 2.9 5.0 — — 9.0 Mahindra Life Space Developer 297 BUY 12,139 253 41 24.9 30.8 37.5 30.2 23.7 21.6 11.9 9.6 7.9 9.0 6.5 4.8 1.2 1.1 1.0 1.7 1.5 1.7 10.4 11.6 12.7 450 51.3 0.2 Oberoi Realty 225 BUY 74,111 1,542 330 15.7 20.0 28.0 14.8 27.6 39.7 14.3 11.2 8.0 10.4 7.2 4.5 2.2 1.9 1.6 0.4 0.7 1.1 19.9 18.2 21.3 315 40.1 0.3 Phoenix Mills 217 BUY 31,424 654 145 6.3 7.4 10.7 53.0 17.2 44.1 34.3 29.3 20.3 25.3 21.2 15.8 2.0 1.9 1.8 0.8 0.9 0.9 5.8 6.6 8.9 300 38.3 0.3 Puravankara Projects 68 ADD 14,524 302 213 5.5 9.0 10.9 (18.9) 62.8 21.5 12.3 7.6 6.2 17.3 9.5 8.0 1.0 0.9 0.8 1.5 2.2 2.9 8.0 12.0 13.1 80 17.6 0.0 Sobha Developers 221 BUY 21,667 451 98 18.8 20.6 27.2 33.8 9.2 32.2 11.7 10.7 8.1 10.7 9.6 6.8 1.2 1.1 1.0 1.4 1.6 1.8 10.2 10.3 12.4 370 67.5 0.9 Unitech 29 RS 74,826 1,557 2,616 2.3 2.6 2.7 (23.4) 12.8 4.9 12.3 10.9 10.4 13.9 11.3 9.2 0.6 0.6 0.5 — 0.7 1.0 5.4 5.7 5.4 — — 18.2 Property Cautious 708,799 14,750 5.3 44.3 29.6 16.5 11.5 8.8 13.2 9.4 7.1 1.0 0.9 0.8 0.8 1.1 1.3 6.1 8.1 9.5

Source: Company, Bloomberg, Kotak Institutional Equities estimates

26

2 27 27 India India DailySummary - September 21,2011 Kotak Institutional Equities: Valuation summary of key Indian companies

O/S Target 20-Sep-11 Mkt cap. shares EPS (Rs) EPS growth (%) PER (X) EV/EBITDA (X) Price/BV (X)Dividend yield (%) RoE (%) price Upside ADVT-3mo Company Price (Rs) Rating (Rs mn) (US$ mn) (mn) 2011E 2012E 2013E 2011E 2012E 2013E 2011E 2012E 2013E 2011E 2012E 2013E 2011E 2012E 2013E 2011E 2012E 2013E 2011E 2012E 2013E (Rs) (%) (US$ mn) Sugar Bajaj Hindustan 47 REDUCE 10,723 223 228 1.9 3.7 1.6 (28.7) 90.5 (57.3) 24.3 12.8 29.9 17.3 5.8 5.6 0.4 0.3 0.3 1.2 1.2 1.2 1.7 2.7 1.1 60 27.8 1.7 Balrampur Chini Mills 50 BUY 12,347 257 247 6.7 4.0 7.7 111.0 (40.5) 94.0 7.5 12.6 6.5 10.8 8.6 5.7 0.8 0.8 0.7 1.6 1.5 1.5 11.6 6.5 11.9 80 60.0 1.6 Shree Renuka Sugars 61 BUY 40,826 850 670 10.5 6.4 5.0 214.7 (39.4) (21.0) 5.8 9.6 12.1 8.5 6.6 5.5 1.6 1.4 1.3 1.6 1.6 1.6 34.4 16.1 11.4 75 23.2 9.7 Sugar Cautious 63,897 1,330 122.4 (24.7) (7.4) 7.9 10.5 11.3 10.8 6.6 5.6 0.9 0.8 0.8 1.6 1.5 1.5 11.6 8.1 7.0 Technology HCL Technologies 403 SELL 284,256 5,915 705 22.9 29.5 32.8 30.4 28.9 11.3 17.6 13.7 12.3 10.7 8.3 7.3 3.4 2.9 2.5 1.8 2.0 2.0 21.0 22.6 21.7 375 (7.0) 10.2 Hexaware Technologies 73 ADD 21,301 443 290 3.0 7.5 7.3 (36.8) 154.4 (3.4) 24.8 9.8 10.1 18.2 8.3 7.0 2.2 2.0 1.8 2.0 4.1 4.4 9.3 21.3 18.6 80 9.1 3.0 Infosys Technologies 2,437 BUY 1,398,580 29,104 574 119.7 134.3 160.3 10.5 12.1 19.4 20.4 18.1 15.2 13.7 12.1 9.9 5.4 4.5 3.8 2.5 1.7 2.0 28.0 27.1 27.2 2,900 19.0 77.2 Mahindra Satyam 69 SELL 81,497 1,696 1,176 4.2 6.7 7.0 68.9 58.4 4.7 16.5 10.4 9.9 11.9 6.1 4.7 4.7 3.3 2.4 — — — 27.6 37.1 28.2 70 1.0 10.8 Mindtree 351 ADD 14,437 300 41 24.7 35.2 37.2 (52.7) 42.4 5.8 14.2 10.0 9.4 7.9 6.1 4.9 1.9 1.6 1.4 0.7 1.0 3.2 14.4 17.2 16.1 375 6.9 2.2 Mphasis BFL 342 SELL 72,151 1,501 211 51.8 38.6 30.0 18.8 (25.5) (22.2) 6.6 8.9 11.4 5.6 6.7 7.2 2.2 1.8 1.6 1.2 1.3 1.5 38.6 22.3 14.8 300 (12.4) 3.5 Patni Computer Systems 295 ADD 39,328 818 133 42.6 25.9 27.2 16.5 (39.3) 5.2 6.9 11.4 10.9 3.7 4.1 2.8 1.2 1.2 1.1 22.4 1.8 1.8 18.4 8.2 10.2 300 1.6 1.5 Polaris Software Lab 133 REDUCE 13,275 276 100 19.3 18.8 19.0 25.7 (2.6) 0.7 6.9 7.1 7.0 3.8 2.9 2.5 1.3 1.1 1.0 2.8 2.9 3.1 20.2 16.8 14.8 130 (2.4) 2.3 TCS 1,058 ADD 2,070,620 43,089 1,957 44.5 52.8 61.1 26.8 18.6 15.6 23.8 20.0 17.3 17.9 14.7 12.3 8.2 6.7 5.6 1.7 2.0 2.3 37.8 36.9 35.2 1,160 9.6 46.5 Tech Mahindra 648 SELL 81,661 1,699 126 48.8 72.1 75.5 (25.2) 47.8 4.7 13.3 9.0 8.6 9.1 9.1 8.0 2.4 2.1 1.9 0.6 0.6 1.5 20.5 26.0 23.8 600 (7.4) 3.7 Wipro 351 ADD 861,231 17,922 2,454 21.6 22.4 24.5 14.5 3.9 9.1 16.3 15.6 14.3 11.9 10.6 9.4 3.6 3.1 2.6 1.2 1.3 1.5 24.3 21.1 19.7 370 5.4 12.0 Technology Attractive 4,938,336 102,764 17.1 13.1 13.0 19.2 17.0 15.0 13.8 11.8 10.1 5.0 4.2 3.6 1.9 1.7 2.0 26.2 24.9 23.8 Telecom Bharti Airtel 391 ADD 1,486,381 30,931 3,798 15.9 18.2 28.0 (32.6) 14.5 53.7 24.6 21.5 14.0 10.5 8.1 6.2 3.0 2.7 2.2 — — — 13.3 13.3 17.4 460 17.5 50.4 IDEA 98 ADD 324,714 6,757 3,303 2.7 2.7 5.1 (0.5) (1.4) 89.2 36.1 36.6 19.4 11.4 8.7 6.6 2.6 2.5 2.2 — — — 7.6 7.0 12.0 115 17.0 18.7 MTNL 35 SELL 22,302 464 630 (10.4) (9.1) (8.4) (33.7) (11.9) (8.1) (3.4) (3.9) (4.2) 0.6 0.7 0.9 0.2 0.2 0.2 — — — (6.1) (5.7) (5.5) 35 (1.1) 0.8 Reliance Communications 84 SELL 179,558 3,737 2,133 6.3 2.6 5.2 (71.1) (59.4) 103.2 13.3 32.9 16.2 6.1 6.6 5.7 0.4 0.4 0.4 — — — 3.2 1.3 2.7 80 (5.0) 18.3 Tata Communications 204 REDUCE 58,240 1,212 285 15.2 15.7 15.9 8.2 3.5 1.5 13.5 13.0 12.8 6.3 5.9 5.6 0.8 0.8 0.8 3.7 4.2 4.4 5.5 5.5 5.4 205 0.3 1.4 Telecom Cautious 2,071,195 43,101 (42.4) 2.1 62.3 25.7 25.2 15.5 9.6 8.0 6.2 1.7 1.6 1.5 0.1 0.1 0.1 6.8 6.5 9.5 Utilities Adani Power 88 REDUCE 210,123 4,373 2,393 2.4 11.0 15.0 200.7 368.5 35.8 37.3 8.0 5.9 36.7 7.7 5.0 3.3 2.2 1.6 — — — 8.5 33.5 31.8 100 13.9 3.6 CESC 283 BUY 35,357 736 125 37.7 42.5 51.3 9.1 12.7 20.8 7.5 6.7 5.5 5.4 5.8 5.5 0.7 0.7 0.6 1.7 1.9 2.1 10.5 10.7 11.5 440 55.5 2.1 JSW Energy 63 REDUCE 102,746 2,138 1,640 5.1 4.8 4.7 12.9 (6.2) (1.8) 12.2 13.0 13.3 12.7 8.4 6.6 1.8 1.6 1.4 (1.6) — — 16.1 13.0 11.3 60 (4.2) 1.8 Lanco Infratech 18 BUY 40,347 840 2,223 2.0 3.0 3.4 (5.8) 47.2 16.6 9.0 6.1 5.3 8.6 8.0 7.5 1.0 0.8 0.7 — — — 12.2 15.0 14.6 45 147.9 8.9 NHPC 25 ADD 303,213 6,310 12,301 1.3 1.8 2.1 (27.2) 36.0 16.3 18.3 13.4 11.6 13.3 10.1 8.1 1.1 1.0 1.0 1.7 2.0 2.3 6.3 8.0 8.8 30 21.7 2.4 NTPC 172 REDUCE 1,418,220 29,512 8,245 11.0 11.2 12.0 5.3 1.4 6.8 15.6 15.4 14.4 12.9 12.4 11.6 2.1 1.9 1.7 2.2 2.0 2.1 13.7 12.8 12.6 180 4.7 10.2 Reliance Infrastructure 458 BUY 121,511 2,529 265 58.0 64.1 76.3 (6.5) 10.5 19.0 7.9 7.1 6.0 7.8 4.1 3.0 0.5 0.5 0.5 2.0 2.2 2.5 6.4 11.2 12.2 920 100.8 15.2 Reliance Power 84 SELL 234,925 4,889 2,805 2.7 2.9 2.9 (5.0) 7.6 (0.5) 30.9 28.7 28.8 164.8 70.4 14.7 1.4 1.4 1.3 — — — 4.9 4.9 4.7 88 5.1 6.3 Tata Power 998 BUY 246,291 5,125 247 76.5 75.9 87.6 21.5 (0.7) 15.4 13.0 13.1 11.4 10.5 8.7 8.1 1.7 1.5 1.4 1.4 1.5 1.7 13.8 12.3 12.9 1,350 35.3 8.6 Utilities Cautious 2,712,733 56,451 5.1 18.9 13.4 15.7 13.2 11.7 14.2 10.6 8.8 1.6 1.4 1.3 1.5 1.5 1.6 10.1 10.9 11.3 Others Carborundum Universal 314 SELL 29,373 611 93 18.3 18.9 21.0 67.7 3.7 10.6 17.2 16.6 15.0 12.4 10.5 9.2 3.4 2.9 2.5 1.2 1.3 1.4 20.7 18.4 17.8 290 (7.7) 0.2 Havells India 366 REDUCE 45,668 950 125 24.5 25.8 28.8 334.1 5.1 11.5 14.9 14.2 12.7 9.9 9.1 7.9 6.4 4.6 3.4 0.7 0.8 0.8 53.9 37.6 30.9 370 1.1 3.4 Jaiprakash Associates 73 BUY 154,168 3,208 2,126 6.0 6.3 7.2 230.2 3.9 15.6 12.0 11.6 10.0 11.8 10.2 9.7 1.4 1.3 1.2 — — — 13.3 11.7 12.3 115 58.6 22.0 Jet Airways 281 BUY 24,293 506 86 (10.1) (43.4) 16.9 (91.0) 331 (139.0) (28.0) (6.5) 16.6 9.5 10.0 7.1 1.5 1.9 1.7 — — — (5.0) (11.7) 10.9 650 131.0 12.0 SpiceJet 25 BUY 9,874 205 403 2.2 2.1 4.3 (12.4) (4.3) 101.0 11.0 11.5 5.7 9.5 13.4 7.6 3.3 2.5 1.8 — — — (466) 24.8 36.2 65 165.3 2.6 Tata Chemicals 335 REDUCE 85,216 1,773 255 26.2 32.9 38.8 (0.7) 25.4 17.9 12.7 10.2 8.6 7.7 5.4 4.6 1.6 1.4 1.2 3.0 3.6 4.5 16.9 18.6 19.5 365 9.1 2.9 United Phosphorus 153 BUY 70,633 1,470 462 12.3 15.9 19.8 3.9 28.8 24.3 12.4 9.6 7.7 7.6 5.2 4.4 1.9 1.6 1.4 1.3 2.0 2.3 18.0 18.5 19.8 220 43.8 3.9 Others 419,224 8,724 232.5 10.1 38.5 14.8 13.5 9.7 10.2 8.7 7.7 1.8 1.6 1.4 1.0 1.2 1.5 12.0 12.0 14.5 KS universe (b) 45,270,649 942,059 18.2 17.3 16.5 15.4 13.1 11.3 10.0 8.4 7.1 2.4 2.1 1.8 1.6 1.7 2.0 15.4 15.8 16.2 KS universe (b) ex-Energy 37,588,150 782,190 20.3 15.4 18.6 16.6 14.4 12.1 11.6 9.8 8.3 2.6 2.3 2.0 1.5 1.5 1.7 16.0 16.1 16.7 KS universe (d) ex-Energy & ex-Commodities 31,366,372 652,718 18.8 15.0 19.9 17.5 15.2 12.7 13.0 10.9 9.1 2.7 2.4 2.1 1.5 1.5 1.7 15.5 15.7 16.5

KOTAK INSTITUTIONAL EQUITIES RESEARCH Notes: (a) For banks we have used adjusted book values. (b) 2010 means calendar year 2009, similarly for 2011 and 2012 for these particular companies. (c) EV/Sales & EV/EBITDA for KS universe excludes Banking Sector. (d) Rupee-US Dollar exchange rate (Rs/US$)= 48.06

Source: Company, Bloomberg, Kotak Institutional Equities estimates

Disclosures

Kotak Institutional Equities Research coverage universe (IMP: Our ratings definitions have changed as of September 6, 2011) Distribution of ratings/investment banking relationships Percentage of companies covered by Kotak Institutional Equities, 70% within the specified category.

60% Percentage of companies within each category for which Kotak Institutional Equities and or its affiliates has provided investment 50% banking services within the previous 12 months.

40% * The above categories are defined as follows: Buy = We expect 34.3% this stock to outperform the BSE Sensex by 10% over the next 12 30% 27.1% 27.1% months; Add = We expect this stock to outperform the BSE Sensex by 0-10% over the next 12 months; Reduce = We expect this stock to underperform the BSE Sensex by 0-10% over the 20% next 12 months; Sell = We expect this stock to underperform the 11.4% BSE Sensex by more then 10% over the next 12 months. These 10% ratings are used illustratively to comply with applicable 4.8% 3.6% 1.8% regulations. As of 30/06/2011 Kotak Institutional Equities 0.0% 0% Investment Research had investment ratings on 166 equity securities. BUY ADD REDUCE SELL

Source: Kotak Institutional Equities As of June 30, 2011

Ratings and other definitions/identifiers

Definitions of ratings

BUY. We expect this stock to deliver more than 17.5% returns over the next 12 months.

ADD. We expect this stock to deliver 7.5-17.5% returns over the next 12 months.

REDUCE. We expect this stock to deliver 0-7.5% returns over the next 12 months.

SELL. We expect this stock to deliver less than 0% returns over the next 12 months.

Our target prices are also on a 12-month horizon basis.

Other definitions

Coverage view. The coverage view represents each analyst’s overall fundamental outlook on the Sector. The coverage view will consist of one of the following designations: Attractive, Neutral, Cautious.

Other ratings/identifiers

NR = Not Rated. The investment rating and target price, if any, have been suspended temporarily. Such suspension is in compliance with applicable regulation(s) and/or Kotak Securities policies in circumstances when Kotak Securities or its affiliates is acting in an advisory capacity in a merger or strategic transaction involving this company and in certain other circumstances.

CS = Coverage Suspended. Kotak Securities has suspended coverage of this company.

NC = Not Covered. Kotak Securities does not cover this company.

RS = Rating Suspended. Kotak Securities Research has suspended the investment rating and price target, if any, for this stock, because there is not a sufficient fundamental basis for determining an investment rating or target. The previous investment rating and price target, if any, are no longer in effect for this stock and should not be relied upon.

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29 KOTAK INSTITUTIONAL EQUITIES RESEARCH

Corporate Office Overseas Offices

Kotak Securities Ltd. Kotak Mahindra (UK) Ltd Kotak Mahindra Inc Bakhtawar, 1st Floor 6th Floor, Portsoken House 50 Main Street, Suite No.310 229, Nariman Point 155-157 The Minories Westchester Financial Centre Mumbai 400 021, India London EC 3N 1 LS White Plains, New York 10606 Tel: +91-22-6634-1100 Tel: +44-20-7977-6900 / 6940 Tel:+1-914-997-6120

Copyright 2011 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.

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

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

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

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