INDIA DAILY

November 21, 2016 India 18-Nov 1-day 1-mo 3-mo Sensex 26,150 (0.3) (6.9) (6.9) Nifty 8,074 (0.1) (7.1) (6.8) Contents Global/Regional indices Dow Jones 18,868 (0.2) 4.0 1.7 Daily Alerts Nasdaq Composite 5,322 (0.2) 1.2 1.6 Results FTSE 6,776 (0.3) (3.5) (1.2) Petronet LNG: Strong volumes drive earnings upgrade Nikkei 18,054 0.5 5.1 9.1 Hang Seng 22,344 0.4 (4.4) (2.6)

Voltas: Near term nebulous; medium term likely to be better KOSPI 1,967 (0.4) (3.2) (4.3)

Value traded – India Results, Change in Reco Cash (NSE+BSE) 199 265 259 Astral Poly Technik: Subdued operating performance; downgrade to SELL Derivatives (NSE) 3,461 4,449 4,888

Deri. open interest 2,970 2,895 3,054 Sector alerts

Insurance: A month of moderate performance Forex/money market

Change, basis points

18-Nov 1-day 1-mo 3-mo

Rs/US$ 68.1 31 141 133

10yr govt bond, % 6.8 - (21) (44)

Net investment (US$ mn)

17-Nov MTD CYTD (1,332 FIIs (140) 5,432 ) MFs 116 966 4,318

Top movers

Change, %

Best performers 18-Nov 1-day 1-mo 3-mo

CBK IN Equity 326.3 0.6 2.2 22.5

GAIL IN Equity 427.0 (1.8) (2.9) 17.4

PNB IN Equity 149.8 1.5 1.5 16.8

UNBK IN Equity 157.1 5.2 6.9 15.6

ONGC IN Equity 275.1 0.7 (1.7) 13.9

Worst performers

HDIL IN Equity 57.8 1.2 (28.3) (41.3)

SHTF IN Equity 831.8 (1.6) (27.8) (34.5)

DLFU IN Equity 116.4 3.8 (25.5) (30.6)

JPA IN Equity 8.0 (0.6) (29.5) (28.3)

ACEM IN Equity 198.8 2.4 (19.5) (28.1)

Kotak Institutional Equities Research [email protected] . Mumbai: +91-22-4336-0000

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

ADD Petronet LNG (PLNG) Energy NOVEMBER 21, 2016 RESULT Coverage view: Attractive

Strong volumes drive earnings upgrade. We raise our EPS estimates by 7-13% in Price (`): 376 FY2017-19 to factor in higher LNG off-take from Dahej and lower operating costs. The Target price (`): 415 recent award of contract for Kochi-Koottanad section improves visibility on off-take of BSE-30: 26,150 volumes from Kochi. We maintain our positive view with a revised DCF-based TP of ₹415 (₹370 previously), noting robust growth in earnings and free cash flows over the next several years. Risk to escalation in tariffs for RasGas contract is a key concern.

Company data and valuation summary Petronet LNG Stock data Forecasts/Valuations 2016 2017E 2018E 52-week range (Rs) (high,low) 411-204 EPS (Rs) 11.2 21.5 26.1

Market Cap. (Rs bn) 282.2 EPS growth (%) 13.9 91.3 21.8 Shareholding pattern (%) P/E (X) 33.5 17.5 14.4 Promoters 50.0 Sales (Rs bn) 271.3 263.6 317.3 FIIs 21.7 Net profits (Rs bn) 9.1 16.1 19.6 MFs 5.9 EBITDA (Rs bn) 15.9 26.3 31.2 Price performance (%) 1M 3M 12M EV/EBITDA (X) 18.7 11.2 8.9 Absolute (6.0) 15.1 78.3 ROE (%) 15.2 23.1 23.9 Rel. to BSE-30 0.8 23.8 73.7 Div. Yield (%) 0.7 1.3 1.9 Key takeaways from the conference call  Commencement of long-term tolling contracts from October. Long-term tolling contracts have commenced from October, post full commissioning of expansion project; the volumes are expected to ramp up by March 2017. PLNG capitalized ₹7.6 bn pertaining to re- gasification facility in August and around ₹11 bn pertaining to storage tanks in October.  Further expansion at Dahej. PLNG has also initiated further expansion project of 2.5 mtpa at Dahej, which is expected to commission by end-CY2019 at a cost of ~₹12 bn.  Review of tariffs escalation for RasGas contract. PLNG expects 5% escalation in tariffs for RasGas contract to continue in January 2017, once it is reviewed by the off-takers. However, we do not rule out a halt in escalation given a sharp decline in costs due to lower LNG prices, which may pose 4-7% downside risk to FY2018-19E EPS.  Visibility on off-take from Kochi. LNG off-take from Kochi is expected to increase by ~0.5 mtpa post stabilization of BPCL’s refinery expansion likely by March 2017. Further, expected completion of Kochi-Mangalore pipeline in about 18 months will likely increase utilization to

45-50%—an industry journal suggests that GAIL has awarded contract for Kochi-Koottanad pipeline section and is currently seeking bids for Koottanad-Mangalore section as well.  Gorgon volumes to ramp up by July 2017. LNG imports from Gorgon contract is expected to start from January and ramp up fully by July 2017; a portion of volumes may be diverted to Dahej given lack of off-take at Kochi. PLNG is also trying to renegotiate the pricing formula.  Higher dividends policy and overseas investments. PLNG has formulated a dividend payout policy at 30% of profits or 5% of net-worth, higher as compared to 20% in FY2014-

16. PLNG is evaluating options to invest in LNG projects in Bangladesh and Sri Lanka; however, the proposals are at initial stages and may take time to materialize.

Raise estimates by 7-13% driven by higher volumes and lower operating costs

We revise our FY2017-19 EPS estimates to `21.5 (+13%), `26.1 (+9%) and `28.6 (+7%) and Tarun Lakhotia [email protected] raise DCF-based TP to ₹415 (from ₹370 previously) to factor in (1) higher volumes, (2) lower Mumbai: +91-22-4336-0875 operating costs and (3) other minor changes. We model tariffs for Dahej (ex-tolling contracts) and Kochi to increase by 5% annually in CY2017-19E to ₹49/mn BTU and ₹83/mn BTU respectively, and remain flat thereafter. Our assumptions yield a reasonable 20-22% RoE in the long term factoring in potential competitive/regulatory risks to the LNG re-gasification business.

Kotak Institutional Equities Research [email protected] Mumbai: +91-22-4336-0000

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

Exhibit 1: Interim results of PLNG, March fiscal year-ends (` mn)

(% chg.) yoy 2QFY17 2QFY17E 2QFY16 1QFY17 2QFY17E 2QFY16 1QFY17 1HFY17 1HFY16 (% chg.) FY2017E Net sales 66,144 64,161 75,450 53,373 3.1 (12.3) 23.9 119,517 159,221 (24.9) 263,643 Total expenditure (58,880) (58,252) (70,737) (46,948) 1.1 (16.8) 25.4 (105,828) (150,950) (29.9) (237,300) Raw material (57,613) (57,006) (69,585) (45,768) 1.1 (17.2) 25.9 (103,381) (148,665) (30.5) (232,170) Staff cost (180) (191) (144) (183) (5.7) 25.6 (1.4) (363) (294) 23.7 (807) Other expenditure (1,086) (1,055) (1,008) (998) 3.0 7.7 8.8 (2,084) (1,991) 4.7 (4,324) EBITDA 7,264 5,909 4,713 6,425 22.9 54.1 13.1 13,689 8,272 65.5 26,342 Other income 915 506 386 494 81.0 137.1 85.4 1,408 730 92.9 2,590 Depreciation (860) (870) (808) (806) (1.1) 6.4 6.7 (1,666) (1,609) 3.5 (3,821) Interest (554) (575) (620) (556) (3.6) (10.6) (0.4) (1,111) (1,240) (10.5) (1,953) Profit before tax 6,765 4,970 3,671 5,556 36.1 84.3 21.8 12,321 6,153 100.2 23,159 Extraordinary/prior-period items — — — — — — — Current tax (2,170) (1,590) (1,142) (1,777) (3,947) (1,183) (4,854) Deferred tax — — — — — — (2,201) Profit after tax 4,596 3,380 2,529 3,779 36.0 81.7 21.6 8,374 4,970 68.5 16,103 Adjusted profit after tax 4,596 3,380 2,529 3,779 36.0 81.7 21.6 8,374 4,970 68.5 16,103 Adjusted EPS (Rs) 6.1 4.5 3.4 5.0 11.2 6.6 21.5 Other comprehensive income — — — — — Total comprehensive income 4,596 2,529 3,779 81.7 21.6 8,374 4,970 Tax rate (%) 32.1 32.0 31.1 32.0 32.0 19.2 30.5

Volumes (tn BTU) Overall 188.9 170.0 156.6 168.1 11.1 20.6 12.3 357.0 284.5 25.5 722.5 Dahej utilization (%) 109 130 121 130 118 110 104 Kochi utilization (%) 7 7 4 5 6 4 7 Dahej 184.4 165.8 153.9 165.2 11.2 19.8 11.6 349.6 279.3 25.2 705.0 Contracted 103.0 106.8 63.0 105.3 208.3 130.1 427.6 Spot 20.7 10.0 18.8 9.9 30.5 41.9 43.3 Tolling 60.7 49.1 72.1 50.1 110.8 107.4 234.1 Kochi 4.5 4.2 2.7 2.9 7.1 67.3 55.2 7.4 5.2 42.6 17.5 Spot 4.5 4.2 2.7 2.9 7.4 5.2 10.2 Tariffs (Rs/mn BTU) Implied blended tariffs 45.2 42.1 37.4 45.2 7.3 20.6 (0.2) 45.2 37.1 21.8 43.6 Dahej re-gasification tariffs 42.6 42.6 40.5 42.6 42.6 40.5 43.1 Kochi re-gasification tariffs 71.8 71.8 68.4 71.8 71.8 68.4 72.7 Estimated marketing margins (US$/mn BTU) 0.4 0.4 0.4 0.7 0.5 0.2 0.5

Source: Company, Kotak Institutional Equities estimates

Exhibit 2: Dahej utilization at 109% on pro-rata capacity Quarterly volumes for PLNG, 1QFY15 onwards (tn BTU)

1QFY15 2QFY15 3QFY15 4QFY15 1QFY16 2QFY16 3QFY16 4QFY16 1QFY17 2QFY17 Dahej 138.0 149.1 140.4 93.2 125.4 153.9 138.2 148.5 165.2 184.4 Contracted 96.4 93.9 94.3 60.0 67.1 63.0 37.7 109.4 105.3 103.0 Spot 16.8 24.4 18.1 12.4 23.1 18.8 21.1 12.5 9.9 20.7 Tolling 24.8 30.9 28.0 20.8 35.3 72.1 79.5 26.5 50.1 60.7 Kochi 0.7 1.3 1.0 2.4 2.5 2.7 4.2 5.1 2.9 4.5 Contracted — — — — — — — — — — Spot 0.6 1.3 1.0 2.4 2.5 2.7 4.2 5.1 2.9 4.5 Tolling 0.0 — — — — — — — — — Total re-gasification volumes 138.7 150.5 141.4 95.6 127.9 156.6 142.4 153.6 168.1 188.9 Reload volumes — — — 6.9 3.6 — — — — — Utilization (%) Dahej 108 117 110 73 99 121 109 117 130 109 Kochi 1 2 2 4 4 4 7 8 5 7

Source: Company, Kotak Institutional Equities estimates

KOTAK INSTITUTIONAL EQUITIES RESEARCH 3 Energy Petronet LNG

Exhibit 3: Implied spot margins remained high in 2QFY17 Calculation of implied margins for PLNG's spot volumes, March fiscal year-ends, 2011-17YTD (` mn)

FY2011 FY2012 FY2013 FY2014 FY2015 FY2016 1QFY17 2QFY17 Volumes (tn BTU) Dahej Contracted 381.2 372.1 376.2 374.5 344.5 277.2 105.3 103.0 Spot 31.0 103.6 103.1 62.5 71.7 75.4 9.9 20.7 Tolling 28.1 72.7 45.2 51.8 104.6 213.4 50.1 60.7 Total volumes 440.4 548.4 524.6 488.8 520.8 566.0 165.2 184.4 Kochi Contracted — — — — — Spot 2.6 5.4 14.5 2.9 4.5 Tolling 1.9 — — — — Total volumes 4.5 5.4 14.5 2.9 4.5 Reload cargoes 6.9 — — — Tariffs (Rs/mn BTU) Dahej re-gasification tariff 32.2 33.8 35.5 37.2 39.1 41.0 42.6 42.6 Kochi re-gasification tariff 62.7 65.9 69.2 71.8 71.8 Implied blended tariff 32.0 37.8 43.0 38.5 35.9 35.4 45.2 45.2 Computation of marketing margins Total reported contribution 14,105 20,712 22,577 18,981 18,901 20,578 7,606 8,531 Contribution from contracted volumes 12,258 12,564 13,340 13,942 13,465 11,375 4,481 4,383 Other operating income 915 2,452 1,705 2,031 4,081 8,859 2,284 2,759 Contribution from reload services/(ship idling costs) — — — — 600 (948) 140 — Internal consumption loss 1,488 2,250 3,021 2,821 3,772 2,758 503 634 Implied contribution from spot volumes 2,420 7,946 10,553 5,829 4,527 4,050 1,205 2,022 Re-gasification charges on spot volumes 1,010 3,499 3,655 2,491 3,154 4,100 629 1,202 Remaining contribution from spot volumes 1,410 4,447 6,898 3,337 1,373 (50) 576 820 Implied margins for spot cargoes (Rs/mn BTU) 45.5 42.9 66.9 51.3 17.8 (0.6) 45.1 32.6 Implied margins for spot cargoes (US$/mn BTU) 1.6 0.9 1.2 0.8 0.3 (0.0) 0.7 0.5

Source: Company, Kotak Institutional Equities estimates

Exhibit 4: LNG imports have increased in the recent months… Exhibit 5: …consumption remaining robust across sectors LNG imports in India, April 2015 onwards (mn tons) Sector-wise LNG consumption, December 2015 onwards (mcm/d)

(mn tons) (mcm/d) LNG import Fertilizers Power CGD Others 2.0 80 1.8 1.7 1.6 1.6 1.6 70 1.6 1.5 1.5 1.4 1.5 1.5 1.5 1.4 1.3 1.3 1.3 60 1.4 1.3 1.2 32 32 1.1 1.1 33 30 34 31 1.2 50 31 33 33 32 1.0 40 0.8 8 7 8 9 6 8 8 0.6 30 8 7 8 8 10 9 9 12 6 8 10 0.4 6 20 7 0.2 23 10 20 20 20 20 22 21 22 19 - 16

-

Jul-15

Jul-16

Jan-16

Jun-15

Jun-16

Oct-15

Feb-16

Apr-15

Sep-15

Apr-16

Sep-16 Dec-15

Nov-15 Dec-15 Jan-16 Feb-16 Mar-16 Apr-16 May-16 Jun-16 Jul-16 Aug-16 Sep-16

Mar-16

Aug-15

Aug-16 May-15 May-16

Source: PPAC, Kotak Institutional Equities Source: PPAC, Kotak Institutional Equities

4 KOTAK INSTITUTIONAL EQUITIES RESEARCH Petronet LNG Energy

Exhibit 6: We model moderate ramp-up in PLNG's re-gasification volumes Key assumptions for Petronet LNG, March fiscal year-ends, 2012-20E

2012 2013 2014 2015 2016 2017E 2018E 2019E 2020E Volume assumptions (mn tons) Contract LNG volumes 7.3 7.4 7.4 6.8 5.4 8.5 9.1 9.6 9.8 Spot LNG volumes 2.0 2.0 1.3 1.5 1.8 1.1 0.4 0.6 1.1 Tolling volumes 1.4 0.9 1.1 2.1 4.1 4.6 6.8 7.0 7.5 Total volumes 10.8 10.3 9.7 10.3 11.3 14.2 16.3 17.2 18.4 Dahej 10.8 10.3 9.6 10.2 11.0 13.9 15.5 16.0 16.5 Kochi — — 0.1 0.1 0.3 0.3 0.8 1.2 2.0 Total volumes 10.8 10.3 9.7 10.3 11.3 14.2 16.3 17.2 18.4 Price assumptions (US$/mn BTU) LNG purchase price (FOB) 8.1 10.2 12.3 13.3 9.4 5.3 4.8 5.2 5.7 Landed cost (incl. import tariff) 8.9 11.1 13.4 14.5 10.3 5.9 5.3 5.8 6.2 Re-gasification charges for Dahej 0.70 0.65 0.62 0.64 0.63 0.64 0.66 0.69 0.71 Re-gasification charges for Dahej (Rs/mn BTU) 33.8 35.5 37.2 39.1 41.0 43.1 45.2 47.5 49.3 Tolling contract charges for Dahej 0.61 0.62 0.65 0.68 Tolling contract charges for Dahej (Rs/mn BTU) 41.0 42.5 44.7 46.9 Re-gasification charges for Kochi 1.04 1.08 1.06 1.08 1.11 1.16 1.20 Re-gasification charges for Kochi (Rs/mn BTU) 62.8 65.9 69.2 72.7 76.3 80.1 83.1 Blended sales price 9.7 11.8 14.0 15.1 10.9 6.4 5.7 6.2 6.8 Marketing margins on spot LNG 0.9 1.2 0.8 0.3 (0.0) 0.5 0.2 0.2 0.2 Other assumptions Exchange rate (Rs/US$) 47.9 54.4 60.5 61.1 65.5 67.5 69.0 69.0 69.0

Source: Company, Kotak Institutional Equities estimates

Exhibit 7: Our DCF-based fair value for PLNG is `415 Calculation of equity value of PLNG using discounted cash flow valuation (` mn)

2018E 2019E 2020E 2021E 2022E 2023E 2024E 2025E 2026E 2027E EBITDA 31,198 34,524 40,304 46,051 51,077 54,567 58,041 60,396 60,678 60,968 Adjusted tax expense (5,655) (8,921) (11,133) (13,383) (15,353) (16,757) (18,119) (19,068) (19,287) (19,486) Change in working capital (1,042) (197) (1,345) (1,274) (1,792) (1,373) (1,545) (1,709) (1,488) (1,775) Operating cash flow 24,501 25,406 27,827 31,394 33,933 36,437 38,377 39,619 39,903 39,708 Capital expenditure (4,500) (5,750) (4,500) (1,285) (1,298) (1,311) (1,324) (1,337) (1,351) (5,774) Free cash flow 20,001 19,656 23,327 30,109 32,635 35,126 37,053 38,281 38,552 33,934 Discounted cash flow-now 18,019 15,953 17,051 19,828 19,362 18,774 17,837 16,602 15,062 11,944 Discounted cash flow-1 year forward 17,708 18,932 22,009 21,491 20,839 19,804 18,428 16,719 13,258 Discounted cash flow-2 year forward 21,015 24,437 23,855 23,132 21,983 20,461 18,558 14,717

Now +1-year +2-years Discount rate (%) 11.0% 11.0% 11.0% Total PV of free cash flow 170,432 181,134 193,361 Terminal value assumption Growth in perpetuity 0.0% 0.0% 0.0% Sensitivity of 12-month fair value to WACC and perpetual growth FCF in 2027E 33,934 33,934 33,934 Perpetual growth (%) Exit FCF multiple (X) 9.1 9.1 9.1 415 -2.0% -1.0% 0.0% 1.0% 2.0% Exit EV/EBITDA multiple (X) 5.1 5.1 5.1 10.0% 424 439 456 478 505 Terminal value 308,492 308,492 308,492 10.5% 406 419 435 453 476 PV of terminal value 108,584 108,584 108,584 11.0% 390 402 415 432 451 Total company value 279,017 289,718 301,945 11.5% 375 385 397 412 429 WACC(%) 12.0% 361 370 381 393 408 Net debt 11,613 (3,082) (16,198) Equity value 267,404 292,801 318,143 Shares outstanding (mn) 750 750 750 Equity value of regasification business (Rs) 357 390 424 Equity value of 26% stake in Dahej Port (Rs) 11.44 13 14 Fair value of PLNG, including dividends (Rs) 373 415 460

Source: Kotak Institutional Equities estimates

KOTAK INSTITUTIONAL EQUITIES RESEARCH 5 Energy Petronet LNG

Exhibit 8: Profit model, balance sheet, cash model, March fiscal year-ends, 2012-20E (` mn)

2012 2013 2014 2015 2016 2017E 2018E 2019E 2020E Profit model (Rs mn) Net sales 226,959 314,674 377,476 395,010 271,334 263,643 317,326 364,509 421,189 EBITDA 18,292 18,436 14,984 14,390 15,903 26,342 31,198 34,524 40,304 Other income 849 1,817 838 1,548 1,704 2,590 2,792 3,207 3,564 Interest (1,774) (1,184) (2,196) (2,935) (2,388) (1,953) (1,535) (994) (448) Depreciation (1,842) (1,866) (3,081) (3,154) (3,216) (3,821) (4,219) (4,271) (4,583) Pretax profits 15,525 17,203 10,545 9,849 12,004 23,159 28,237 32,465 38,838 Extraordinary items — — — 1,436 724 — — — — Tax (4,800) (5,430) (1,806) (720) (2,147) (4,854) (5,919) (9,574) (12,104) Deferred taxation (150) (280) (1,620) (1,740) (1,440) (2,201) (2,712) (1,461) (1,097) Adjusted net profits 10,575 11,493 7,119 7,389 8,417 16,103 19,606 21,430 25,637 Earnings per share (Rs) 14.1 15.3 9.5 9.9 11.2 21.5 26.1 28.6 34.2

Balance sheet (Rs mn) Total equity 35,198 44,497 49,861 56,886 63,764 75,368 88,674 102,005 115,337 Deferred taxation liability 3,630 3,910 5,530 7,270 8,710 10,911 13,623 15,085 16,181 Total borrowings 32,762 30,342 35,669 35,541 37,738 34,846 26,800 20,759 12,718 Currrent liabilities 20,521 32,080 28,066 11,538 14,267 13,588 15,079 16,402 17,933 Total liabilities and equity 92,110 110,828 119,127 111,236 124,480 134,713 144,177 154,250 162,168 Cash 9,839 12,685 12,327 3,621 21,829 23,234 29,883 36,957 42,083 Current assets 22,758 29,860 34,450 29,820 18,141 22,252 24,786 26,305 29,181 Total fixed assets 58,115 66,884 71,450 76,895 83,610 88,327 88,608 90,087 90,005 Investments 1,399 1,399 900 900 900 900 900 900 900 Total assets 92,110 110,828 119,127 111,236 124,480 134,713 144,177 154,250 162,168

Free cash flow (Rs mn) Operating cash flow, excl. working capital 10,378 11,094 11,341 10,291 12,032 19,535 23,745 23,956 27,752 Working capital (985) 4,037 (3,527) (4,451) 19,323 (4,791) (1,042) (197) (1,345) Capital expenditure (10,979) (8,406) (8,761) (8,279) (9,724) (8,538) (4,500) (5,750) (4,500) Investments 10,381 — 116 1,105 941 — — — — Free cash flow 8,794 6,725 (830) (1,334) 22,572 6,207 18,203 18,009 21,908 Other income 803 721 617 520 245 2,590 2,792 3,207 3,564

Ratios (%) Debt/equity 84 63 64 55 52 40 26 18 10 Net debt/equity 59 36 42 50 22 13 (3) (14) (22) RoAE 30.6 26.3 13.7 14.8 13.4 20.3 20.8 19.5 20.6 RoACE 39.6 45.4 17.8 10.8 11.1 18.6 19.7 21.6 24.5 Adjusted CROCI 34.5 38.5 13.2 10.9 12.9 16.0 18.6 19.4 20.1

Source: Company, Kotak Institutional Equities estimates

6 KOTAK INSTITUTIONAL EQUITIES RESEARCH

ADD Voltas (VOLT) Industrials NOVEMBER 21, 2016 RESULT Coverage view: Cautious

Near term nebulous; medium term likely to be better. Voltas’ 2QFY17 results were a Price (`): 293 mixed bag with a stable UCP performance and continued weak performance of MEP Target price (`): 330 division. Notwithstanding near-term impacts, Voltas continues to fortify its business with BSE-30: 26,150 (1) sustained investments in room AC segment, (2) better risks assessment for new MEP projects with evaluation by an independent project-review committee and (3) expanding scope, in terms of products, customers and geography. Retain ADD; TP ₹330 (from ₹360).

Company data and valuation summary Voltas Stock data Forecasts/Valuations 2016 2017E 2018E 52-week range (Rs) (high,low) 406-211 EPS (Rs) 10.4 11.3 13.2

Market Cap. (Rs bn) 96.8 EPS growth (%) 2.0 7.9 17.4 Shareholding pattern (%) P/E (X) 28.1 26.0 22.1 Promoters 30.3 Sales (Rs bn) 58.6 57.6 64.2 FIIs 22.4 Net profits (Rs bn) 3.4 3.7 4.4 MFs 15.6 EBITDA (Rs bn) 4.4 4.4 5.4 Price performance (%) 1M 3M 12M EV/EBITDA (X) 22.3 21.6 17.1 Absolute (26.7) (20.0) 15.4 ROE (%) 15.3 14.8 15.8 Rel. to BSE-30 (21.4) (13.9) 12.4 Div. Yield (%) 0.9 1.2 1.6

2QFY17—a mixed bag quarter

Voltas reported a mixed-bag quarter with sales down 8% yoy (~9 % below estimate led by MEP division), EBITDA above estimate by 7% though contours reveal less positive future takeaways (UCP stable, MEP continues to disappoint) and PAT sharply above estimate led by higher other income (on higher MTM gains). We discuss the results in details on Page 2.

Near term likely to be weak

We expect near-term earnings to be under pressure led by (1) lower sales and margin in the UCP division on demonization-led impacts and (2) continued subdued performance in MEP division. We model 2HFY17 (1) UCP sales to decline by 1% yoy (3Q is seasonally weak and 4Q will see inventory re-stocking for summer season) and (2) margins to decline by ~300 bps yoy led by negative operating leverage and higher incentives/discounting (versus 1HFY17 margin up 220 bps yoy).

Medium term looks encouraging

Voltas is taking several steps to grow the business and improve profitability. These are: (1) sustaining leadership in room AC segment through investment in (a) branding, (b) increasing channel partners, (c) building relationships with key accounts/dealers and (d) relevant product portfolio; (2) increase in air coolers sales with investment in A&P and distribution; the company sold ~50,000 units of air coolers in 1HFY17 (70,000 units in FY2016). With higher product Harish Bihani [email protected] portfolio (11 models) and dealer network, FY2017 could see 1.5X yoy growth in the category; Mumbai: +91-22-4336-0884 (3) better risks assessment for new projects in MEP. Prior to submitting tenders for large-value Aditya Mongia projects, they are now subject to scrutiny by an independent project review committee, which [email protected] may help ensure that booking of new orders are at reasonable margins. Near-term margins may Mumbai: +91-22-4336-0883 continue to be volatile given old projects in backlog; and (4) better-prepared to capture new Ajinkya Bhat opportunities in commercial ACs (launched variable frequency drive screw chillers, with [email protected] capacities up to 400 TR), smart city information networks, rural electrification (ongoing projects Mumbai: +91-22-4336-0888 in MP and Rajasthan) and EXPO 2020 and FIFA World Cup 2022 (commenced use of ‘Pre-Fab’ as a staple construction methodology across many of its projects).

Revise estimates; maintain ADD

We revise our estimates downwards by 11-16% for FY2017-19E to factor the changes (Exhibit Kotak Institutional Equities Research 7). We roll over to Sep 2018E and revise our SoTP-based target price to ₹330 (from ₹360). [email protected] Mumbai: +91-22-4336-0000

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

2QFY17 earnings call takeaways

 Impact of demonetization yet to be seen on primary UCP sales. The company acknowledged that there are various contrasting opinions in the market about the impact of recent demonetization on consumer discretionary spending. The management, however, mentioned that they have not witnessed any early impact on their primary sales to the channel. The possible reason cited was that the payments for primary sales are received through banking channels (such as checks and other instruments) and hence no immediate impact from the ongoing cash crunch. Besides, the company mentioned that the channel is replenishing the inventory depleted in the recent festive season.

However, the company understands that nearly 40% of the secondary sales to the end- consumer happen on cash basis, which could potentially get impacted by demonetization in the short term. However, the management alluded to 3Q being a seasonally weak quarter for the AC industry and is hopeful of the situation stabilizing by the onset of summer season.

As for any structural impact, the management clarified that it does not have direct sales exposure to real estate developers nor does it provide channel financing. Thus financially, the company does not expect any structural impact from demonetization.

 Getting ready for GST, no clear visibility on price response. The company mentioned that the AC industry currently faces a tax incidence of 25-26% and there are indications that GST may classify the sector in the 28% slab. However, high tax does not automatically mean increased prices. In most cases, the company tries to compensate that by improving operating efficiencies (such as lower costs through bulk purchases) and avoids taking a price increase. Given the high prices of air conditioners in India, the management is of the view that a further increase would not be in the interest of the industry but wouldn’t shy away from the same to protect margins if required. The company thus awaits the final rules of GST while getting internal processes ready for the change (ERP systems, cross-functional teams, etc.).

 E-commerce channel is being utilized for slow-moving SKUs. The company mentioned that while there are significant discounts offered on e-commerce platforms, the company usually lists the slow-moving SKUs on such platforms at a discount in order to salvage the units and maintain cash inflow. In such a case, it does not put the same SKUs in retail stores as it become difficult to match the pricing across the two channels.

 Other takeaways.

. The company marginally improved its market share in room air conditioners in the multi-brand outlets (MBOs) to 22% in 2QFY17.

. The company sold ~50,000 units of air coolers in 1HFY17 and ranks at number 4 in the market as of now. The management hinted at having a plan in place to propel the brand to first or second rank over the medium term.

Results analysis—strong growth in UCP pulled down by lower MEP sales

 2QFY17 consolidated revenues at ₹9.7 bn (down 7% yoy) was 7% below estimate, led by lower sales in MEP division.

 MEP (Electro-Mechanical Projects and Services) revenues in 2QFY17 stood at ₹5.4 bn (down 15% yoy), 11% below our estimate, led by slower-than-expected progress on certain international projects. EBIT margin stood at 1% (down 180 bps yoy), 100 bps below our estimate and reflects the slower progress made on closure of certain overseas legacy projects. The company plans to substantially complete closure of legacy projects by

8 KOTAK INSTITUTIONAL EQUITIES RESEARCH Voltas Industrials

end-FY2017, thereby raising hopes for a better FY2018. The company reported order backlog at ₹43 bn (up 14% yoy), of which 49% are international orders.

 UCP (Unitary Cooling Products for Comfort and Commercial use) reported revenues of ₹3.5 bn (up 13.5% yoy), marginally above our estimate, and EBIT margin at 11.5% (up 60 bps yoy), broadly in line with our estimate. Higher re-stocking of inventory for festive season and better efforts by company in the southern market has helped report better financials. The company highlighted in the result analysis: “…Sensing the uptick in consumer demand, Voltas had launched an aggressive marketing campaign in the South, ably supported by promotional offers and optimal pricing. This has resulted in further growing our Southern markets and widening the lead vis-a-vis our nearest competitor. As per independent third-party reports, Voltas continues to grow ahead of the market and remains the undisputed leader for Room Air Conditioners across all regions of India with an overall market share of 22% at Multi-Brand outlets.”

 EPS (Engineering Products and Services) revenues stood at ₹751 mn (down 22% yoy) and EBIT margin for the quarter was 40% (up 500 bps yoy). The lower sales performance was led by weak India equipment sales and EBIT margin uptick was led by product mix change (equipment to services sales proportion). Lower margin in MEP was more than compensated by higher margin in EPS and accordingly EBIDTA at ₹595 mn (down 3% yoy) was 7% ahead of estimate.

 Other income was up 48% yoy to ₹750 mn, which helped prop up PAT to ₹721 mn (up 7% yoy), ~30% ahead of estimate. We note that other income increase was led by MTM gains. As per Ind-AS, equity investments that are neither associates nor subsidiaries have to be shown at fair value on the balance sheet and gains or losses need to be carried to the P&L (Voltas has investments in Lakshmi Machine Works, among others).

Exhibit 1: Weak results led by a sharp sales decline in Electro-Mechanical Projects Voltas (consolidated) - 2QFY17 results - key numbers (Rs mn)

% change 2QFY17 2QFY17E 2QFY16 1QFY17 vs est. yoy qoq 1HFY17 1HFY16 % change FY2017E FY2016 % change Sales 9,581 10,500 10,371 18,397 (8.8) (7.6) (47.9) 27,977 25,924 7.9 57,300 58,574 (2.2) Expenses (8,986) (9,944) (9,756) (16,505) (7.9) (45.6) (25,491) (24,027) 6.1 (53,188) (54,205) (1.9) Stock 121 — (220) 167 (155.1) 288 (197) — 128 Raw material (6,283) — (6,888) (13,337) (8.8) (52.9) (19,620) (18,166) 8.0 (40,523) (41,388) (2.1) Employee costs (1,594) — (1,511) (1,628) 5.5 (2.1) (3,221) (3,001) 7.4 (6,102) (6,699) (8.9) Other expenses (1,230) — (1,137) (1,707) 8.2 (27.9) (2,937) (2,663) 10.3 (6,563) (6,246) 5.1 EBITDA 595 556 615 1,892 7.0 (3.3) (68.5) 2,487 1,897 31.1 4,113 4,369 (5.9) Other income 750 420 508 461 78.6 47.7 62.7 1,211 787 53.9 1,944 1,176 65.3 Interest (33) (41) (33) (48) (20.8) (2.4) (32.6) (81) (67) 20.9 (165) (153) 7.5 Depreciation (63) (79) (64) (66) (19.9) (1.4) (3.5) (129) (123) 4.5 (316) (278) 13.5 Profit before tax 1,249 856 1,025 2,239 45.9 21.9 (44.2) 3,488 2,494 39.9 5,576 5,114 9.0 Tax (505) (300) (378) (651) 68.6 33.6 (22.3) (1,156) (830) 39.3 (1,784) (1,600) 11.6 Adjusted PAT 744 557 647 1,588 33.7 15.0 (53.2) 2,332 1,664 40.2 3,792 3,515 7.9 Extraordinary items — — — 9 9 — — 407 Reported PAT 744 557 647 1,598 33.7 15.0 (53.4) 2,342 1,664 40.7 3,792 3,921 (3.3) Minority interest and profit from associates (23) — 26 (21) (44) 34 (70) (65) PAT for equity holders 721 557 673 1,576 29.6 7.2 (54.3) 2,297 1,698 35.3 3,722 3,856 (3.5) Other comprehensive income 229 — (150) 263 (13.1) 491 (199) — — Total comprehensive income 950 557 523 1,839 70.6 81.7 (48.4) 2,789 1,499 86.0 3,722 3,856 (3.5)

Key ratios (%) RM cost/sales 64.3 — 68.5 71.6 69.1 70.8 70.7 70.4 Employee cost/sales 16.6 — 14.6 8.8 11.5 11.6 10.6 11.4 Other exp./sales 12.8 — 11.0 9.3 10.5 10.3 11.5 10.7 EBITDA margin 6.2 5.3 5.9 10.3 8.9 7.3 7.2 7.5 Effective tax rate 40.4 35.0 36.9 29.1 33.1 33.3 32.0 31.3 PAT margin 7.8 5.3 6.2 8.6 8.3 6.4 6.6 6.0 EPS (Rs) 2.3 1.7 2.0 4.8 7.1 5.0 11.5 10.6

Order details Order backlog 42,450 44,086 37,360 44,170 13.6 (3.9) 42,450 37,360 13.6 39,983 39,140 2.2

Source: Company, Kotak Institutional Equities estimates

KOTAK INSTITUTIONAL EQUITIES RESEARCH 9 Industrials Voltas

Exhibit 2: UCP segment continued its strong growth trajectory but lower MEP sales pulled down consolidated revenues Voltas – 2QFY17 segmental numbers on consolidated basis (Rs mn)

% change 2QFY17 2QFY17E 2QFY16 1QFY17 vs est. yoy qoq 1HFY17 1HFY16 % change FY2017E FY2016 % change Revenues Electromechanical Projects 5,432 6,084 6,355 5,802 (10.7) (14.5) (6.4) 11,235 11,990 (6.3) 25,676 27,172 (5.5) Engg products and services 751 961 962 691 (21.9) (21.9) 8.6 1,442 1,663 (13.2) 3,344 3,702 (9.7) Unitary cooling products 3,542 3,455 3,121 11,956 2.5 13.5 (70.4) 15,498 12,399 25.0 28,281 25,566 10.6 Others — — — — — — — 1,885 Total 9,725 10,500 10,438 18,450 (7.4) (6.8) (47.3) 28,175 26,052 8.1 57,300 58,324 (1.8) Less Intersegment (2) — (1) (2) 31.3 (4) (3) 8.8 — (6) NM Total 9,723 10,500 10,437 18,448 (7.4) (6.8) (47.3) 28,171 26,048 8.1 57,300 58,318 (1.7) EBIT Electromechanical Projects 54 122 174 108 (56.0) (69.3) (50.6) 162 259 (37.6) 385 374 3.0 Engg products and services 304 269 340 193 12.8 (10.6) 57.6 496 579 (14.3) 1,020 1,127 (9.5) Unitary Cooling Products 409 407 341 1,779 0.3 19.9 (77.0) 2,187 1,477 48.1 3,677 3,382 8.7 Others — — — — — — — 183 Net Interest expense (33) (41) (33) (48) (81) (67) 20.9 (165) (153) 7.5 Other net unallocable income 516 99 204 208 724 245 195.3 659 201 228.9 Total Profit before tax 1,249 856 1,025 2,239 45.9 21.9 (44.2) 3,488 2,494 39.9 5,576 5,114 9.0 Capital Employed Electromechanical Projects 7,319 — 5,897 7,905 24.1 (7.4) 7,319 5,897 — 6,796 Engg products and services 817 — 749 711 9.1 14.9 817 749 — 797 Unitary Cooling Products 2,479 — 3,857 (1,485) (35.7) (266.9) 2,479 3,857 — 1,639 Others — — — — — — — 573 Unallocated 19,912 — 16,175 23,230 23.1 (14.3) 19,912 16,175 — 14,405 Total 30,527 — 26,678 30,360 14.4 0.5 30,527 26,678 — 24,210 EBIT margin (%) Electromechanical Projects 1.0 2.0 2.7 1.9 1.4 2.2 1.5 1.4 Engg products and services 40.4 28.0 35.3 27.9 34.4 34.8 30.5 30.5 Unitary Cooling Products 11.5 11.8 10.9 14.9 14.1 11.9 13.0 13.2 Total PBT margin 12.8 8.2 9.8 12.1 12.4 9.6 9.7 8.8

Source: Company, Kotak Institutional Equities estimates

Exhibit 3: Voltas – reconciliation of 2QFY16 Ind-AS versus 2QFY16 I-GAAP (Rs mn)

Particulars Adjustment for 2QFY16 Net profit after taxes, minority interest and share of profit / (loss) of 444 associate and joint ventures (under previous GAAP) Effect of measuring Mutual Fund investments at fair value through 180 profit and loss Effect of measuring other investments at fair value through other - comprehensive Income Tax on above items and dividend distribution tax (25) Others 73 Net profit after taxes, minority interest and share of profit / (loss) of 673 associate and joint ventures (under Ind-AS) Other comprehensive income (Net of tax) (150) Total Comprehensive Income as per Ind-AS 523

Source: Company, Kotak Institutional Equities

10 KOTAK INSTITUTIONAL EQUITIES RESEARCH Voltas Industrials

Exhibit 4: Order backlog in MEP was up 14% yoy as of 2QFY17 Quarterly order backlog trend of Voltas, March fiscal year-ends, 1QFY11-2QFY17 (Rs bn)

(Rs bn) Order backlog 60 Domestic International 50 50 51 47 49 50 46 45 46 44 43 41 42 43 42 15 39 39 39 40 39 15 19 37 38 38 37 40 16 17 36 36 35 19 18 20 23 23 24 22 30 22 21 18 19 20 20 22 29 22 17 24 20 22 22 20 35 34 31 32 31 26 26 23 23 10 19 19 18 22 19 20 19 19 20 21 16 14 14 16 16 15 14

-

FY2011

1QFY11

2QFY11

3QFY11

1QFY12

2QFY12

3QFY12

4QFY12

1QFY13

2QFY13

3QFY13

4QFY13

1QFY14

2QFY14

3QFY14

4QFY14

1QFY15

2QFY15

3QFY15

4QFY15

1QFY16

2QFY16

3QFY16

4QFY16

1QFY17 2QFY17

Source: Company, Kotak Institutional Equities

Exhibit 5: The MEP order inflow stood at Rs3.8 bn in 2QFY17, nearly double yoy, led by a large Rs1.2 bn order for a water treatment plant for Agra smart city Quarterly order inflow trend of Voltas, March fiscal year-ends, 1QFY11-2QFY17 (Rs bn)

(Rs bn) Order inflow 16 14 12 10 8 15 6 12 11 11 10 10 10 4 9 8 8 7 7 6 5 5 6 5 2 4 4 4 4 3 3 2 1 2

-

1QFY11

2QFY11

3QFY11

4QFY11

1QFY12

2QFY12

3QFY12

4QFY12

1QFY13

2QFY13

3QFY13

4QFY13

1QFY14

2QFY14

3QFY14

4QFY14

1QFY15

2QFY15

3QFY15

4QFY15

1QFY16

2QFY16

3QFY16

4QFY16

1QFY17 2QFY17

Source: Company, Kotak Institutional Equities

KOTAK INSTITUTIONAL EQUITIES RESEARCH 11 Industrials Voltas

Exhibit 6: Historically, we have witnessed higher working capital in the middle of the fiscal year, the trend continued this time as well Voltas consolidated balance sheet, March fiscal year-ends, 2011-1HFY17 (Rs mn)

2011 2012 2013 2014 1HFY15 2015 1HFY16 2016 1HFY17 Balance sheet Shareholders funds 13,617 14,778 16,256 18,193 19,711 21,021 22,681 23,952 30,271 Equity share capital 331 331 331 331 331 331 331 331 331 Reserves & surplus 13,286 14,448 15,926 17,863 19,380 20,690 22,351 23,621 29,940 Minority Interest 218 170 118 138 153 161 177 258 256 Loan funds 1,381 2,234 2,612 2,629 2,013 1,217 1,725 2,600 1,693 Total source of funds 15,216 17,183 18,987 20,960 21,877 22,398 24,584 26,810 32,220

Net fixed assets 2,458 2,050 2,110 2,103 2,035 1,935 2,083 2,224 2,324 Investments & Goodwill 3,529 4,006 4,962 8,119 8,359 11,737 11,392 15,981 18,079 Cash balances 4,980 2,710 3,498 2,818 1,940 2,516 2,473 1,971 1,864 Current assets 30,330 32,558 34,852 34,157 32,076 32,328 32,778 35,284 33,087 Inventories 8,224 8,334 9,784 9,010 8,472 8,671 9,453 8,928 7,166 Sundry debtors 20,742 11,668 21,601 13,352 11,235 13,386 11,009 13,066 7,611 Loans & advances, other CA 1,363 12,556 3,466 11,795 12,370 10,271 12,317 13,291 18,310 Current liabilities & Provisions 26,232 24,384 26,657 26,476 22,740 26,466 24,581 29,160 23,311 Current liabilities 23,075 21,593 23,865 23,686 20,642 22,925 21,715 25,076 20,807 Provisions 3,157 2,790 2,792 2,790 2,099 3,541 2,867 4,084 2,503 Net current assets 4,097 8,174 8,195 7,681 9,336 5,862 8,197 6,124 9,776 Deferred tax assets (net) 152 242 222 239 208 349 440 511 177 Total application of funds 15,216 17,183 18,987 20,960 21,877 22,398 24,584 26,810 32,220 Working capital (days of sales) Current assets 214 230 231 238 221 229 236 220 201 Inventories 58 59 65 63 58 62 68 56 44 Sundry debtors 146 82 143 93 78 95 79 81 46 Loans & advances, other CA 10 89 23 82 85 73 89 83 111 Current liabilities & Provisions 185 172 176 184 157 188 177 182 142 Current liabilities 163 152 158 165 143 163 156 156 127 Provisions 22 20 18 19 14 25 21 25 15 Net current assets 29 58 54 53 64 42 59 38 60

Source: Company, Kotak Institutional Equities

12 KOTAK INSTITUTIONAL EQUITIES RESEARCH Voltas Industrials

Exhibit 7: Change in consolidated earnings estimates for Voltas, March fiscal year-ends, 2016-19E (Rs mn)

New estimates Old estimates Change (%) 2016 2017E 2018E 2019E 2017E 2018E 2019E 2017E 2018E 2019E Electro-Mechanical Projects Revenues 27,171 25,676 27,064 29,257 27,018 27,507 29,512 (5.0) (1.6) (0.9) Yoy growth (%) 23.0 (5.5) 5.4 8.1 (0.6) 1.8 7.3 EBIT 374 385 812 1,463 540 1,100 1,476 (28.7) (26.2) (0.9) EBIT margin (%) 1.4 1.5 3.0 5.0 2.0 4.0 5.0 Unitary Cooling Products Revenues 25,566 28,281 33,183 38,276 30,672 36,206 42,233 (7.8) (8.4) (9.4) Yoy growth (%) 1.8 10.6 17.3 15.3 20.0 18.0 16.6 EBIT 3,382 3,677 4,314 4,784 4,294 5,069 5,490 (14.4) (14.9) (12.9) EBIT margin (%) 13.2 13.0 13.0 12.5 14.0 14.0 13.0 Engg products and services Revenues 3,702 3,344 3,678 4,046 3,699 4,069 4,476 (9.6) (9.6) (9.6) Yoy growth (%) 2.8 (9.7) 10.0 10.0 (0.1) 10.0 10.0 EBIT 1,127 1,020 1,030 1,133 1,036 1,099 1,208 (1.5) (6.3) (6.3) EBIT margin (%) 30.5 30.5 28.0 28.0 28.0 27.0 27.0

Consolidated numbers Revenues 58,574 57,569 64,207 71,875 61,657 68,064 76,517 (6.6) (5.7) (6.1) Yoy growth (%) 13.0 (1.7) 11.5 11.9 5.3 10.4 12.4 EBITDA 4,369 4,381 5,428 6,620 5,170 6,541 7,415 (15.3) (17.0) (10.7) EBITDA margin (%) 7.5 7.6 8.5 9.2 8.4 9.6 9.7 Profit after tax 3,449 3,722 4,370 5,228 4,175 5,201 5,884 (10.8) (16.0) (11.2) EPS (Rs) 10.4 11.3 13.2 15.8 12.6 15.7 17.8 (10.8) (16.0) (11.2) EPS growth (%) 2.0 7.9 17.4 19.6 21.0 24.6 13.1

Source: Company, Kotak Institutional Equities estimates

KOTAK INSTITUTIONAL EQUITIES RESEARCH 13 Industrials Voltas

Exhibit 8: In the base case, we arrive at an SoTP target price of Rs330/share Sum-of-the-parts analysis of Voltas, March fiscal year-ends (Rs mn)

Base case Bull case Sales growth (%) 2016 2017 2018 2019 Sales growth (%) 2016 2017 2018 2019 EMP 23 (6) 5 8 EMP 23 2 6 15 EPS 3 (10) 10 10 EPS 0 10 15 15 UCP 2 11 17 15 UCP 2 25 20 20 EBIT (Rs mn) EBIT (Rs mn) EMP 374 385 812 1,463 EMP 374 828 1,458 2,014 EPS 1,127 1,020 1,030 1,133 EPS 1,127 1,221 1,404 1,614 UCP 3,382 3,677 4,314 4,784 UCP 3,382 4,559 5,471 6,113 EBIT margin (%) EBIT margin (%) EMP 1.4 1.5 3.0 5.0 EMP 0.5 3.0 5.0 6.0 EPS 30.5 30.5 28.0 28.0 EPS 30.5 30.0 30.0 30.0 UCP 13.2 13.0 13.0 12.5 UCP 13.2 14.5 14.5 13.5 PBT (Rs mn) PBT (Rs mn) EMP 375 423 862 1,546 EMP 375 866 1,508 2,097 EPS 1,129 1,119 1,093 1,197 EPS 1,129 1,320 1,467 1,679 UCP 3,387 4,034 4,579 5,057 UCP 3,387 4,917 5,737 6,386 Tax rate (%) Tax rate (%) EMP 31 32 32 32 EMP 31 32 32 32 EPS 31 32 32 32 EPS 31 32 32 32 UCP 31 32 32 32 UCP 31 32 32 32 PAT (Rs mn) PAT (Rs mn) EMP 257 287 586 1,051 EMP 257 589 1,025 1,426 EPS 776 761 743 814 EPS 776 898 998 1,142 UCP 2,328 2,743 3,114 3,439 UCP 2,328 3,344 3,901 4,342 P/E multiple (x) P/E multiple (x) EMP 15 15 15 15 EMP 15 15 15 15 EPS 15 15 15 15 EPS 15 15 15 15 UCP 25 25 25 25 UCP 25 25 25 25 Mcap (Rs mn) Mcap (Rs mn) EMP 3,862 4,311 8,792 15,771 EMP 3,862 8,830 15,379 21,389 EPS 11,638 11,415 11,152 12,214 EPS 11,638 13,464 14,966 17,125 UCP 58,189 68,585 77,851 85,971 UCP 58,189 83,596 97,531 108,554 Total 74,295 83,614 97,062 113,187 Total 74,295 106,602 128,694 148,020 Value (Rs/share) 294 342 Target price (Rs/share) 389 448 Target price (Rs/share) 330 Target price (Rs/share) 404

EPS (Rs/share) 10.3 11.3 13.2 15.8 EPS (Rs/share) 10.3 14.8 18.2 21.2 P/E (at target price) 31.9 29.3 25.0 20.9 P/E (at target price) 39.0 27.2 22.2 19.1

Source: Company, Kotak Institutional Equities estimates

14 KOTAK INSTITUTIONAL EQUITIES RESEARCH Voltas Industrials

Exhibit 9: Segmental estimates for Voltas, March fiscal year-ends, 2011-19E (Rs mn)

2011 2012 2013 2014 2015 2016 2017E 2018E 2019E Valuation BVPS (Rs) 41.2 44.7 49.2 55.0 63.6 72.4 79.6 87.3 95.5 EPS (Rs) 10.0 9.4 5.9 6.8 10.2 10.4 11.3 13.2 15.8 P/E (X) 32.5 34.2 54.8 47.7 31.6 31.0 28.7 24.4 20.4 P/B (X) 7.8 7.2 6.6 5.9 5.1 4.5 4.1 3.7 3.4 Financials Revenue 51,768 51,857 55,310 52,661 51,831 58,574 57,569 64,207 71,875 yoy growth (%) 7.3 0.2 6.7 (4.8) (1.6) 13.0 (1.7) 11.5 11.9 EBITDA 4,408 3,365 2,452 2,656 4,100 4,369 4,381 5,428 6,620 EBITDA margin (%) 8.5 6.5 4.4 5.0 7.9 7.5 7.6 8.5 9.2 PAT 3,291 3,125 1,950 2,239 3,381 3,449 3,722 4,370 5,228 Segmental Electromechanical projects Order inflow 31,397 25,872 26,265 25,854 24,895 23,060 26,519 30,497 35,071 yoy growth (%) (1.4) (17.6) 1.5 (1.6) (3.7) (7.4) 15.0 15.0 15.0 Order backlog 48,880 42,920 37,190 36,120 38,930 39,140 39,983 43,417 49,231 Revenue 30,411 31,832 31,995 26,924 22,085 27,171 25,676 27,064 29,257 yoy growth (%) (2.3) 4.7 0.5 (15.8) (18.0) 23.0 (5.5) 5.4 8.1 EBIT 2,393 (1,042) (491) (395) 228 374 385 812 1,463 EBIT margin (%) 7.9 (3.3) (1.5) (1.5) 1.0 1.4 1.5 3.0 5.0 Engg products and services Revenue 5,638 4,121 4,310 4,482 3,601 3,702 3,344 3,678 4,046 yoy growth (%) 20.5 (26.9) 4.6 4.0 (19.7) 2.8 (9.7) 10.0 10.0 EBIT 1,031 687 821 1,247 1,081 1,127 1,020 1,030 1,133 EBIT margin (%) 18.3 16.7 19.0 27.8 30.0 30.5 30.5 28.0 28.0 Unitary cooling products Revenue 15,608 15,388 18,356 20,524 25,105 25,566 28,281 33,183 38,276 yoy growth (%) 31.5 (1.4) 19.3 11.8 22.3 1.8 10.6 17.3 15.3 EBIT 1,599 1,298 1,727 2,519 3,491 3,382 3,677 4,314 4,784 EBIT margin (%) 10.2 8.4 9.4 12.3 13.9 13.2 13.0 13.0 12.5 Others Revenue 126 427 502 520 661 1,885 - - - yoy growth (%) (68) 239 17 4 27 185 - - - EBIT 16 42 3 6 70 183 - - - EBIT margin (%) 12.7 9.7 0.6 1.1 10.6 9.7 - - -

Source: Company, Kotak Institutional Equities estimates

KOTAK INSTITUTIONAL EQUITIES RESEARCH 15 Industrials Voltas

Exhibit 10: Consolidated financials of Voltas, March fiscal year-ends, 2011-19E (Rs mn)

2011 2012 2013 2014 2015 2016 2017E 2018E 2019E Balance sheet Shareholders funds 13,617 14,778 16,256 18,193 21,021 23,952 26,334 28,869 31,587 Minority Interest 218 170 118 138 161 258 328 401 478 Loan funds 1,381 2,252 2,612 2,629 1,217 2,599 1,500 1,500 1,500 Total sources of funds 15,216 17,200 18,987 20,960 22,398 26,810 28,162 30,770 33,566 Net fixed assets 2,458 2,185 2,110 2,103 1,935 2,224 2,408 2,569 2,709 Investments & Goodwill 3,529 4,006 4,962 8,119 11,737 15,981 15,981 15,981 15,981 Cash balances 4,980 2,710 3,498 2,818 2,516 1,971 3,743 5,378 7,277 Net current assets excluding cash 4,097 8,056 8,195 7,681 5,862 6,124 5,520 6,333 7,089 Total applications of funds 15,216 17,200 18,987 20,960 22,398 26,810 28,162 30,770 33,566

Profit Model Total operating income 51,768 51,857 55,310 52,661 51,831 58,574 57,569 64,207 71,875 Total operating costs (47,360) (48,493) (52,858) (50,004) (47,730) (54,205) (53,188) (58,778) (65,255) EBITDA 4,408 3,365 2,452 2,656 4,100 4,369 4,381 5,428 6,620 Other income 810 985 901 1,002 1,087 1,176 1,675 1,566 1,661 Depreciation (210) (340) (278) (248) (280) (278) (316) (339) (360) EBIT 5,008 4,010 3,075 3,410 4,907 5,267 5,741 6,655 7,921 Financial charges (165) (314) (398) (225) (233) (153) (165) (121) (121) Pre-tax profit 4,843 3,696 2,677 3,184 4,675 5,114 5,576 6,535 7,801 Taxation (1,608) (571) (728) (941) (1,276) (1,599) (1,784) (2,091) (2,496) Recurring PAT 3,291 3,125 1,950 2,239 3,381 3,449 3,722 4,370 5,228 Reported PAT 3,693 1,621 2,071 2,454 3,843 3,856 3,722 4,370 5,228

Cash flow statement Net cashflow from operating activites (494) (2,672) 948 2,955 3,105 2,754 3,201 2,525 3,368 Cash (used)/realized in investing activities (288) 1,354 620 (2,847) (1,036) (3,673) 1,175 1,066 1,161 Cash (used)/realized in financing activities 96 (270) (673) (789) (2,360) 364 (2,604) (1,956) (2,630) Cash generated /utilised (686) (1,588) 895 (682) (291) (555) 1,772 1,635 1,899 Cash at beginning of year 4,695 4,109 2,521 3,407 2,725 2,434 1,971 3,743 5,378 Cash at end of year 4,109 2,521 3,407 2,725 2,434 1,879 3,743 5,378 7,277

Key ratios (%) EBITDA margin 8.5 6.5 4.4 5.0 7.9 7.5 7.6 8.5 9.2 PAT margin 6.4 6.0 3.5 4.3 6.5 5.9 6.5 6.8 7.3 RoE 26.9 22.0 12.6 13.0 17.2 15.3 14.8 15.8 17.3 RoCE 25.6 20.9 12.4 12.0 16.4 14.4 13.9 15.1 16.5 Recurring EPS (Rs) 10.0 9.4 5.9 6.8 10.2 10.4 11.3 13.2 15.8

Source: Company, Kotak Institutional Equities estimates

16 KOTAK INSTITUTIONAL EQUITIES RESEARCH

SELL Astral Poly Technik (ASTRA) Others NOVEMBER 21, 2016 RESULT, CHANGE IN RECO. Coverage view: Cautious

Subdued operating performance; downgrade to SELL. Astral’s consolidated EBITDA Price (`): 417 grew 8% yoy to ₹565 mn, 8% below our estimates, driven by weak performance of Target price (`): 360 the pipes business. Consolidated EPS of ₹2.5 benefited from higher adhesives margins BSE-30: 26,150 and other income. We cut our estimates by 8-16% factoring in the likely slowdown in real estate construction sector and downgrade the stock to SELL from REDUCE with a revised TP of `360 from ₹425, given expensive valuations at 32X FY2018E EPS.

Company data and valuation summary Astra Poly Technik Stock data Forecasts/Valuations 2016 2017E 2018E 52-week range (Rs) (high,low) 528-333 EPS (Rs) 8.4 10.2 13.0

Market Cap. (Rs bn) 49.9 EPS growth (%) 31.0 21.0 28.2 Shareholding pattern (%) P/E (X) 49.6 41.0 32.0 Promoters 59.3 Sales (Rs bn) 17.2 18.5 21.5 FIIs 18.6 Net profits (Rs bn) 1.0 1.2 1.6 MFs 5.0 EBITDA (Rs bn) 2.1 2.4 2.9 Price performance (%) 1M 3M 12M EV/EBITDA (X) 24.8 21.1 16.9 Absolute (0.7) (14.0) (0.0) ROE (%) 14.4 15.0 17.1 Rel. to BSE-30 6.5 (7.5) (2.6) Div. Yield (%) 0.1 0.1 0.1 Weaker-than-expected EBITDA offset by higher other income and favorable forex movement Astral reported consolidated EBITDA at ₹565 mn (+8% yoy, +4% qoq) in 2QFY17, 8% below our estimates led by weaker-than-expected performance of the pipes business, partially offset by continued improvement in performance of the adhesives business. Consolidated net income at ₹301 mn (+41% yoy, +13% qoq), EPS of ₹2.5, were 7% ahead of our estimate due to higher other income and forex-related gain as compared to adverse losses in previous quarters. Astral reported 22% growth in EPS to ₹4.7 in 1HFY17 driven by 28% growth in adhesives EBIT and lower forex-related loss, which was offset by 7% decline in the pipes segment profitability. Pipes segment impacted by weak margins; profitability of adhesives improves  Weakness in margins offsets robust growth in volumes. Standalone revenues grew 10% yoy to `3.3 bn in 2QFY17 driven by 15% growth in sales volumes of pipes to 20,522 tons. EBITDA grew by a modest 2% yoy to `426 mn driven by continued weakness in margins at 12.7% from 13.7% in 2QFY16. Net income jumped by 44% yoy to `215 mn, driven by higher other income and modest forex-related gain as compared to forex loss in 2QFY16.

Astral has expanded its pipes manufacturing capacity to 127,762 tons.

 Improvement in adhesives performance. Revenues from the adhesives segment grew moderately by 14% yoy to `1.1 bn; EBITDA grew sharply by 50% yoy to ₹156 mn driven by continued improvement in margins to 14% from 10.6% in 2QFY16 and 12.4% in 1QFY17. Resinova commissioned its new plant at Santej in October 2016 and expects to operate it at full capacity from January 2017.

Cut estimates by 8-16%; downgrade to SELL given expensive valuations at 32X FY2018E EPS

We reduce our EPS estimates to ₹10.2 (-8%) in FY2017, ₹13 (-12%) in FY2018 and ₹16.1 (-

16%) in FY2019 to factor in (1) slower growth in volumes due to likely slowdown in real estate construction activity and (2) lower margins for the pipes business given increasing competition.

Our TP reduces to ₹360 (₹425 previously), based on 20X September 2018E EPS of the pipes Tarun Lakhotia business and 35X September 2018E EPS of the adhesives business. We downgrade the stock to [email protected] SELL from REDUCE, as we find the risk-reward balance unfavorable currently given (1) expensive Mumbai: +91-22-4336-0875 valuations at 32X FY2018E EPS, (2) increasing competition in CPVC business and (3) potential downside risks to estimates from the imminent slowdown. We like Astral’s strong execution track record and expect (1) the adhesives business to drive robust long-term growth in earnings and (2) the pipes business to pick up, once construction activity revives.

Kotak Institutional Equities Research [email protected] Mumbai: +91-22-4336-0000

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

Exhibit 1: Standalone quarterly results (₹ mn)

(% chg.) yoy 2QFY17 2QFY17E 2QFY16 1QFY17 2QFY17E 2QFY16 1QFY17 1HFY17 1HFY16 (% chg.) FY2017E Net sales 3,343 3,633 3,051 3,172 (8.0) 9.6 5.4 6,515 5,786 12.6 13,877 Total expenditure (2,918) (3,142) (2,634) (2,764) (7.1) 10.8 5.6 (5,682) (4,984) 14.0 (12,104) Raw materials (2,220) (2,460) (1,959) (2,101) (9.8) 13.3 5.7 (4,320) (3,673) 17.6 (9,213) Purchases of stock (174) (175) (160) (222) (0.7) 8.4 (21.8) (396) (385) 2.9 (802) Employee expenses (103) (100) (85) (95) 2.9 20.0 8.4 (197) (168) 17.5 (424) Other expenses (422) (407) (430) (347) 3.7 (1.9) 21.7 (768) (758) 1.3 (1,666) EBITDA 426 491 417 408 (13.4) 2.1 4.4 833 802 3.8 1,773 Other income 17 8 4 8 24 10 46 Interest (37) (35) (28) (33) 6.6 32.6 13.1 (70) (56) 24.7 (141) Depreciation (103) (103) (86) (98) 0.1 20.0 5.2 (202) (169) 19.6 (420) Exchange fluctuation loss 8 (15) (73) (36) (28) (118) (50) Pre-tax profits 310 347 234 248 (10.6) 32.7 24.8 558 470 18.8 1,208 Income tax (95) (118) (84) (86) (180) (170) (390) Net profits 215 229 149 163 (5.9) 44.2 32.2 378 300 25.9 819 EPS (Rs) 1.8 1.9 1.3 1.4 (5.9) 42.5 32.2 3.2 2.5 24.4 6.8 Other comprehensive income (2) (1) (2) (3) (1) Total comprehensive income 213 149 161 375 299 Effective tax rate (%) 30.6 34.0 36.1 34.5 32.3 36.1 32.3 Operational details Volumes (tons) 20,522 21,320 17,856 19,355 (3.7) 14.9 6.0 39,877 33,824 17.9 85,736 Gross margins (%) 28.4 27.5 30.6 26.8 27.6 29.9 27.8 EBITDA margin (%) 12.7 13.5 13.7 12.8 12.8 13.9 12.8

Source: Company, Kotak Institutional Equities estimates

Exhibit 2: Adhesives and sealants segment reported strong numbers in recent quarters Financial performance of adhesives and sealants business, March fiscal year-ends, 2014-17YTD (₹ mn)

FY2014 FY2015 FY2016 1QFY17 2QFY17 Sales 3,283 3,847 4,103 1,106 1,118 EBITDA 247 350 420 137 156 PBT 211 284 327 NA NA PAT 146 207 NA NA NA EBITDA margin (%) 7.5 9.1 10.2 12.4 14.0

Notes: (a) FY2014-15 includes cumulative financials of Advanced Adhesives, Resinova and Seal It. (b) 4QFY16/FY2016 PBT adjusted for Rs368 mn of amortization, related to amalgamation.

Source: Company, Kotak Institutional Equities

18 KOTAK INSTITUTIONAL EQUITIES RESEARCH Astral Poly Technik Others

Exhibit 3: Consolidated quarterly results (₹ mn)

(% chg.) yoy 2QFY17 1QFY17E 2QFY16 1QFY17 1QFY17E 2QFY16 1QFY17 1HFY17 1HFY16 (% chg.) FY2017E Net sales 4,367 4,687 3,962 4,205 (6.8) 10.2 3.8 8,572 7,566 13.3 18,518 Total expenditure (3,802) (4,070) (3,440) (3,660) (6.6) 10.5 3.9 (7,461) (6,549) 13.9 (16,119) Raw materials (2,933) (3,065) (2,625) (2,789) (4.3) 11.8 5.2 (5,722) (4,983) 14.8 (12,075) Purchases of stock (80) (225) (89) (168) (64.6) (10.7) (52.6) (248) (239) 3.4 (802) Employee expenses (237) (235) (195) (228) 1.0 21.5 4.0 (466) (378) 23.2 (953) Other expenses (551) (545) (531) (475) 1.2 3.9 16.1 (1,026) (948) 8.2 (2,290) EBITDA 565 617 522 546 (8.4) 8.2 3.6 1,111 1,017 9.2 2,398 Other income 28 9 12 8 36 18 61 Interest (46) (44) (33) (40) 3.4 37.9 12.6 (86) (70) 22.7 (169) Depreciation (129) (124) (100) (118) 4.0 28.6 9.1 (247) (197) 25.5 (515) Exchange fluctuation loss 8 (20) (79) (36) (28) (118) (50) Pre-tax profits 427 438 322 358 (2.4) 32.9 19.3 786 650 20.9 1,725 Income tax (118) (149) (82) (86) (204) (163) (485) Net profits 310 289 239 272 7.0 29.3 13.8 582 487 19.4 1,240 Share of loss of joint venture 8 8 26 6 14 29 22 Net profits after minority 301 281 213 266 7.1 41.2 13.2 567 458 23.8 1,217 EPS (Rs) 2.5 2.3 1.8 2.2 7.1 39.5 13.2 4.7 3.9 22.4 10.2 Other comprehensive income (2) (0) (2) (4) (2) Total comprehensive income 299 213 264 563 456 Effective tax rate (%) 27.6 34.0 25.6 24.1 26.0 25.1 28.1 Operational details Gross margins (%) 31.0 29.8 31.5 29.7 30.4 31.0 30.5 EBITDA margin (%) 12.9 13.2 13.2 13.0 13.0 13.4 13.0

Segment details Segment revenue Plastic 3,576 3,267 3,397 9.5 5.3 6,973 5,885 18.5 15,556 Adhesives 1,314 1,147 1,317 14.5 (0.3) 2,631 2,132 23.4 5,202 Less: excise duty 524 453 510 15.7 2.7 1,034 453 128.4 2,241 Net sales 4,366 3,961 4,204 10.2 3.8 8,570 7,564 13.3 18,518 Segment EBIT Plastic 286 323 280 (11.3) 2.3 566 611 (7.3) Adhesives 158 119 150 33.1 5.1 308 241 27.9 Total 444 441 430 0.6 3.3 874 852 2.6 Segment EBIT (%) Plastic 8.0 9.9 8.2 8.1 10.4 Adhesives 12.0 10.3 11.4 11.7 11.3 Total 10.2 11.1 10.2 10.2 11.3 Capital employed Plastic 6,638 5,589 6,019 12,658 11,038 Adhesives 3,736 3,337 3,859 7,596 6,736 Unallocated (2,590) (2,338) (2,548) (5,138) (4,754) Total 7,785 6,587 7,330 15,115 13,019

Source: Company, Kotak Institutional Equities estimates

Exhibit 4: We are building in strong growth in Astral’s EBITDA over the next few years Segment-wise revenues and profitability, March fiscal year-ends, 2012-19E (₹ mn)

2012 2013 2014 2015 2016 2017E 2018E 2019E Revenues Pipes and fittings 5,793 8,209 10,728 12,521 13,323 13,877 15,977 18,397 Adhesives and sealants 26 124 230 1,929 4,060 4,641 5,513 6,590 Others/adjustments 8 (81) (161) (156) (201) — — — Consolidated revenues 5,827 8,252 10,796 14,294 17,183 18,518 21,489 24,987 EBITDA Pipes and fittings 818 1,116 1,507 1,516 1,666 1,773 2,140 2,496 Adhesives and sealants 3 36 41 198 432 626 800 1,007 Others/adjustments 6 1 3 (36) (24) — — — Consolidated EBITDA 827 1,153 1,551 1,678 2,074 2,398 2,940 3,503

Source: Company, Kotak Institutional Equities estimates

KOTAK INSTITUTIONAL EQUITIES RESEARCH 19 Others Astral Poly Technik

Exhibit 5: Astral is trading at a premium multiple as compared to peer group companies Comparable valuation for building products companies, March fiscal year-ends, 2017-18E

Price Market cap. P/E (X) EPS growth (%) (Rs) (Rs bn) 2017E 2018E 2017E 2018E Asian Paints 908 871 42.5 35.9 14.2 18.2 Pidilite 615 315 35.2 31.0 18.7 13.5 Havells 320 200 31.3 27.2 31.8 15.1 Berger Paints 187 182 38.1 31.0 29.4 21.9 Kansai Nerolac 319 172 36.4 31.2 30.0 16.9 Supreme Industries 839 107 26.2 21.4 NA 22.4 Finolex Industries 408 51 18.4 15.6 21.8 13.2 Astral 417 50 41.0 32.0 21.0 28.2 Century Plyboards 179 40 21.3 16.9 5.6 25.6 Greenply 274 33 22.2 18.1 18.9 22.8 Cera Sanitaryware 1,994 26 27.1 21.4 14.9 26.4 HSIL 297 22 17.9 15.5 35.3 14.9 Median 29.2 24.3 21.0 20.0 Mean 29.8 24.8 22.0 19.9

Source: Bloomberg, Kotak Institutional Equities estimates

20 KOTAK INSTITUTIONAL EQUITIES RESEARCH Astral Poly Technik Others

Exhibit 6: Consolidated profit model, balance sheet, cash flow, March fiscal year-ends, 2012-19E (₹ mn)

2012 2013 2014 2015 2016 2017E 2018E 2019E Profit model (Rs mn) Net sales 5,827 8,252 10,796 14,294 17,183 18,518 21,489 24,987 EBITDA 827 1,153 1,551 1,678 2,074 2,398 2,940 3,503 Other income 38 19 24 36 28 61 72 107 Interest and finance charges (228) (192) (311) (255) (344) (219) (139) (101) Depreciation (138) (181) (219) (364) (423) (515) (587) (660) Pre-tax profits 500 798 1,045 1,095 1,335 1,725 2,285 2,849 Income tax (105) (189) (252) (313) (319) (485) (700) (897) Minority interest — (4) (4) (23) (10) (22) (25) (30) Net profits 395 606 789 759 1,006 1,217 1,561 1,923 Earnings per share (Rs) 3.5 5.4 7.0 6.4 8.4 10.2 13.0 16.1

Balance sheet (Rs mn) Total equity 1,840 2,417 3,160 6,353 7,948 8,539 10,018 11,870 Deferred tax liability 15 82 118 177 211 211 211 211 Total borrowings 912 923 1,420 2,026 1,966 1,170 423 3 Other liabilities 2,037 2,020 2,245 3,097 3,714 3,629 4,087 4,637 Total liabilities and equity 4,804 5,442 6,944 11,653 13,840 13,550 14,739 16,721 Cash 355 115 10 115 542 528 766 1,696 Current assets 2,679 3,057 3,959 5,701 5,896 5,905 6,700 7,645 Total fixed assets 1,770 2,270 2,975 3,693 4,529 4,804 4,961 5,068 Goodwill — — — 2,144 2,874 2,312 2,312 2,312 Total assets 4,804 5,442 6,944 11,653 13,840 13,550 14,739 16,721

Free cash flow (Rs mn) Operating cash flow, excl. working capital 607 942 1,028 1,222 1,447 1,694 2,101 2,505 Working capital 77 (440) (665) (306) 1,108 (94) (337) (395) Capital expenditure (696) (681) (920) (854) (1,254) (790) (745) (767) Investments 7 13 9 (2,588) (730) — — — Free cash flow (4) (165) (548) (2,527) 571 810 1,020 1,344

Ratios (%) Debt/equity 49.1 37.0 43.4 31.8 24.5 13.6 4.2 0.0 Net debt/equity 30.0 32.4 43.1 30.0 17.7 7.5 (3.4) (14.3) RoAE 23.6 27.9 27.4 15.8 14.0 14.7 16.8 17.6 Adjusted RoACE 25.4 26.0 25.3 14.3 13.9 14.3 16.9 19.2

Source: Company, Kotak Institutional Equities estimates

KOTAK INSTITUTIONAL EQUITIES RESEARCH 21

Insurance India NOVEMBER 21, 2016 UPDATE BSE-30: 26,150

A month of moderate performance. Most life Insurance companies delivered moderate (10-15%) individual APE growth in October, translating into 13% individual APE growth for the private sector and 14% for overall industry. Equity inflows to mutual funds were at 15-month high, likely indicating that retail flows to financial savings have not slowed down. Currency demonetization will lead to near-term weakness but improve life insurance premiums considerably over the medium term.

Moderate growth for most in October 2016

Most private players reported moderate growth during October 2016. HDFC Life picked up QUICK NUMBERS from a muted performance over the past four months, Max Life came down from high growth from the beginning of FY2017, SBI slowed down considerably and ICICI Prudential Life  HDFC Life up 11% in remained a bit volatile. LIC reported 13% yoy growth but largely supported by single premium individual APE business (non-single individual up 6% yoy). Key highlights for major players:  SBI Life moderated  HDFC Life finally picked up at 11% growth in individual APE versus decline to flat to 22% yoy performance in the past few months. In the past, the company had highlighted that the weakness was due to slowdown in the banking channel and should pick up over the next  Bajaj Allianz months. continued to deliver strong growth—up  Bajaj Allianz, on a low base, continued to deliver high (50% yoy versus 70-80% in past two 50% yoy months) growth. Its ticket size was up 53% yoy and 7% mom.

 ICICI Prudential Life has been very volatile over the past few months with 2-32% yoy growth since April 2016. In October 2016, individual APE growth was moderate at 12%; ticket size was almost flat. This may be due to higher share of protection policies offsetting higher tickets in ULIPs.

 Max Life reported a muted FY2016 with 8% growth. Business momentum picked up with

about 33% growth in May and June 2016; it has moderated down to about 10% in October 2016. Growth was largely in ticket size (individual non-single ticket size up 12% yoy).

 SBI Life finally seems to have exited its hyper-growth phase with individual APE growth moderating to 22% in October 2016 from 37% in FY2016, peaking to 65% during April- August 2016 and slowing down to 34% in September 2016. September 2016 growth seems to have been driven by ticket size (up 35% yoy in individual non-single segment).

Retail inflows strong; expect volatility in the near term Nischint Chawathe [email protected] While life insurance collections seem to indicate some moderation, inflows to equity mutual Mumbai: +91-22-4336-0887

fund were at 15-month peak of ₹94 bn. This makes us believe that retail inflows to capital M B Mahesh CFA markets remain strong and hence life insurance inflows can pick up in later months. [email protected] However, we expect volatility in inflows to life insurance and mutual funds due to the Mumbai: +91-22-4336-0886

government’s impetus to curb black money. Abhijeet Sakhare [email protected] According to industry experts, considerable (about 15%) of life insurance premium inflows Mumbai: +91-22-4336-0889

are in cash. The cash segment will shrink over the next few months. However, we expect lesser black money to directly benefit financial savings including life insurance inflows in the

medium term. We hence believe that this is a huge net positive move, though near-term premium growth will be volatile.

Kotak Institutional Equities Research [email protected] Mumbai: +91-22-4336-0000

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

Exhibit 1: Adjusted life insurance premium up 16% for private players March fiscal year-end, October 2016 (Rs mn)

Oct-16 FY17 YTD

yoy yoy yoy yoy yoy yoy growth growth growth growth growth growth Individual (%) Group (%) Total (%) Individual (%) Group (%) Total (%) Aegon Religare 42 (64) — 42 (64) 328 (51) — 328 (51) Aviva 84 (29) 7 60 92 (26) 560 (40) 30 (65) 590 (42) Bajaj Allianz 838 50 163 47 1,000 49 4,206 50 1,164 26 5,370 44 Bharti Axa 291 6 20 44 311 7 1,868 11 129 45 1,997 13 Birla Sunlife 449 13 180 67 629 25 3,354 14 1,027 34 4,381 18 Canara HSBC 284 12 50 3,082 334 31 2,174 10 227 62 2,402 14 DHFL Pramerica 143 29 59 49 202 34 829 (0) 330 15 1,159 4 Future Generali 102 4 18 636 120 19 614 33 117 79 731 39 HDFC Life 2,473 11 514 189 2,987 24 15,339 2 2,339 71 17,678 8 ICICI Prudential 4,501 12 33 265 4,534 13 29,306 16 501 (56) 29,807 13 IDBI Federal 235 19 26 447 261 29 1,785 15 101 107 1,886 18 India First 287 95 133 (48) 420 4 1,410 82 872 2,282 50 Exide Life 275 (18) 4 (10) 279 (18) 3,035 31 29 (5) 3,064 30 Kotak OM 558 1 77 16 635 2 4,334 13 749 35 5,083 16 Max Life 1,346 10 42 118 1,388 12 10,695 17 201 50 10,896 17 MetLife 629 22 10 70 639 23 4,492 6 57 36 4,549 6 Reliance Life 459 (25) 8 (2) 467 (25) 3,165 (31) 238 (52) 3,403 (33) Sahara 8 (42) — 8 (42) 60 1 — 60 1 SBI Life 3,947 22 177 71 4,124 23 24,605 48 2,512 123 27,117 53 Shriram Life 201 (20) 16 (33) 218 (21) 1,853 7 180 44 2,032 9 Star Union Daichi 213 (2) 2 (88) 215 (7) 1,988 38 83 (58) 2,070 27 Tata AIA 505 72 6 (64) 511 64 3,945 97 39 (41) 3,985 93 Private players 17,871 13 1,544 56 19,415 16 119,945 19 10,926 30 130,870 20 LIC 17,378 15 3,791 (33) 21,169 2 115,617 16 41,439 26 157,056 18 Total Premium 35,249 14 5,335 (20) 40,584 8 235,562 17 52,364 26 287,926 19

Source: IRDA, Life council

Exhibit 2: Private sector volume in individual business were up 13% in October 2016 Yoy growth in adjusted individual business premium, March fiscal year-ends, 2014-2017YTD (%)

2014 2015 2016 Apr-16 May-16 Jun-16 Jul-16 Aug-16 Sep-16 Oct-16 YTD Bajaj Allianz (18.5) (22.6) (7.5) (21.3) 42.5 71.4 43.7 71.0 82.7 49.9 50.4 Birla Sunlife (18.9) (11.8) (7.7) 20.6 24.8 7.1 10.1 25.2 10.7 13.3 14.4 HDFC Standard Life (24.2) 25.0 12.3 24.0 43.9 (10.6) (17.6) (5.0) (0.1) 11.1 1.9 ICICI Prudential Life (1.7) 41.3 8.1 9.7 2.1 18.3 14.9 16.5 32.8 12.0 16.3 India First (37.2) 5.5 38.1 28.8 70.3 86.2 90.2 113.7 76.5 95.1 82.0 KMOM 1.2 32.8 52.2 0.3 5.2 27.1 3.5 28.0 17.7 0.7 12.8 Max Life 16.9 10.2 8.0 (13.3) 33.5 34.5 9.6 17.8 18.9 10.1 17.0 MetLife 2.8 23.4 28.5 (11.2) 26.4 14.2 (14.9) 12.2 2.4 22.2 5.7 Reliance Life 14.6 7.3 (25.6) (32.6) (29.7) (30.8) (40.1) (37.7) (22.6) (24.9) (31.4) SBI Life 17.7 11.0 37.0 69.1 70.8 68.4 50.7 61.8 34.0 22.0 48.4 Star Union Daichi 23.3 18.6 (9.0) (8.3) 69.3 14.5 15.2 19.7 122.5 (2.0) 38.3 Private sector (3.6) 15.8 13.5 5.7 26.6 23.8 12.6 20.6 24.1 13.3 18.8 LIC (3.4) (26.3) 2.9 9.3 22.0 4.2 15.7 26.9 17.0 15.1 15.6 Total (3.4) (10.4) 8.1 7.9 24.4 13.6 14.1 23.5 20.8 14.2 17.3

Source: IRDA, Life council

KOTAK INSTITUTIONAL EQUITIES RESEARCH 23 India Insurance

Exhibit 3: Private sector players’ APE growth has been volatile Adjusted premium equivalent of life insurance players, March fiscal year-ends, 2011-16 (Rs bn)

APE (Rs bn) YoY (%) Market share (%) 2011 2012 2013 2014 2015 2016 2012 2013 2014 2015 2016 Bajaj Allianz Life 20 14 14 11 9 9 (29) (2) (17) (18) (2) Birla Sunlife 16 12 11 9 9 8 (24) (11) (17) (7) (3) DHFL Pramerica 0.7 0.9 1.3 1.1 1.8 2.0 35 43 (17) 63 11 Exide 6.4 6.1 5.2 5.0 4.4 4.9 (5) (15) (3) (12) 10 HDFC Life 30 28 32 25 32 36 (7) 16 (22) 26 14 Max Life 17 15 15 18 20 21 (12) 0 17 10 8 Reliance Life 20 11 10 12 13 10 (44) (12) 19 8 (26) SBI Life 33 24 26 30 33 45 (27) 8 14 10 36 Private players 239 186 189 182 211 241 (22) 2 (3) 16 14 LIC 308 343 326 331 253 279 12 (5) 1 (23) 10 Total industry 547 529 515 513 464 520 (3) (3) (0) (9) 12

Source: IRDA, Kotak Institutional Equities

Exhibit 4: Mixed trends in ticket size growth Average policy size in individual non-single segment (Rs)

Oct-15 Sep-16 Oct-16 YoY (%) MoM (%) Aegon Religare 28,260 22,224 22,476 (20) 1 Aviva 41,383 59,921 57,491 39 (4) Bajaj Allianz 25,787 36,763 39,518 53 7 Bharti Axa 39,901 37,667 37,943 (5) 1 Birla Sun Life 22,671 27,111 25,032 10 (8) Canara HSBC Oriental 61,995 55,932 53,599 (14) (4) DHFL Pramerica 30,268 18,491 31,287 3 69 Future Generali 44,414 37,203 37,890 (15) 2 HDFC Life 33,195 42,196 39,316 18 (7) ICICI Prudential 95,771 98,875 93,756 (2) (5) IDBI Federal 30,696 36,327 34,048 11 (6) IndiaFirst 20,058 27,783 30,513 52 10 Exide Life 23,512 32,889 30,291 29 (8) KMOM 42,001 41,637 43,401 3 4 Edelweiss Tokio 29,962 34,220 36,524 22 7 Max Life 43,216 51,287 48,378 12 (6) PNB Metlife 32,601 42,640 45,225 39 6 Reliance 25,174 24,988 24,251 (4) (3) SBI 31,727 44,510 42,895 35 (4) Shriram 11,920 21,627 20,339 71 (6) Star Union 37,496 49,124 34,506 (8) (30) Tata AIA 37,661 66,291 48,340 28 (27) LIC 11,131 12,849 12,936 16 1

Source: Company, Kotak Institutional Equities

24 KOTAK INSTITUTIONAL EQUITIES RESEARCH Insurance India

Exhibit 5: Private players lose market share Trend in adjusted individual business market share, March fiscal year-ends, 2014-2017YTD (%)

YTD private 2014 2015 1QFY16 2QFY16 3QFY16 4QFY16 2016 Apr-16 May-16 Jun-16 Jul-16 Aug-16 Sep-16 Oct-16 YTD players Bajaj Allianz 2.2 1.9 1.3 1.3 1.7 1.9 1.6 1.4 1.6 1.5 1.7 1.8 1.9 2.4 1.8 2.8 Birla Sunlife 1.8 1.8 1.5 1.5 1.5 1.7 1.6 1.4 1.3 1.6 1.4 1.3 1.6 1.3 1.4 2.9 HDFC Standard Life 5.2 7.3 6.8 8.1 7.4 7.7 7.6 6.2 7.9 6.0 5.7 6.9 6.1 7.0 6.5 14.9 ICICI Prudential 7.2 11.3 11.7 13.0 11.7 9.9 11.3 10.9 10.2 12.1 13.6 13.6 12.4 12.7 12.4 25.0 Max Life 3.9 4.8 4.4 4.9 4.4 5.1 4.8 4.0 4.0 5.3 4.1 4.5 5.4 3.8 4.5 9.1 Met Life 1.3 1.8 2.1 2.2 2.1 1.9 2.1 2.4 1.9 1.9 1.7 1.8 2.0 1.8 1.9 4.2 Reliance Life 2.5 3.0 2.3 2.4 2.0 1.7 2.0 1.6 1.3 1.3 1.4 1.2 1.5 1.3 1.3 4.6 SBI Life 6.2 7.7 5.9 9.3 12.9 9.6 9.7 5.1 8.2 10.8 12.7 11.3 10.4 11.2 10.4 16.4 Private sector 37.9 48.9 46.0 53.1 54.2 50.9 51.4 44.0 46.2 51.1 52.0 52.5 54.1 50.6 50.8 100.0 LIC 62.1 51.1 54.0 46.9 45.8 49.1 48.6 55.7 53.5 48.7 47.8 47.3 45.6 49.2 49.0 -

Source: IRDA, Life council

Exhibit 6: Net inflows in equity mutual funds remained strong in October 2016 Movement of funds to equity schemes of mutual funds, March fiscal year-ends, 2013-2017YTD (Rs bn)

Inflows New Existing schemes schemes Total Redemptions Net inflow AUMs 2013 7 400 407 537 (129) 1,498 2014 32 402 434 511 (76) 1,656 1QFY15 21 254 275 175 100 2,108 2QFY15 31 367 398 160 238 2,476 3QFY15 58 280 338 175 162 3,195 4QFY15 44 382 426 220 206 3,451 Apr-15 6 148 154 48 106 3,451 May-15 13 128 140 39 101 3,652 Jun-15 1 178 179 57 123 3,723 1QFY16 20 454 474 144 329 3,723 Jul-15 1 137 138 77 61 3,936 Aug-15 11 156 166 75 92 3,827 Sep-15 0 125 126 71 54 3,865 2QFY16 12 418 430 223 207 3,865 Oct-15 5 134 139 76 63 3,968 Nov-15 2 121 123 59 64 4,027 Dec-15 4 130 134 98 36 4,057 3QFY16 11 385 396 233 163 4,057 Jan-16 0 109 109 80 29 3,844 Feb-16 1 107 109 84 25 3,566 Mar-16 5 129 134 147 (14) 3,864 4QFY16 6 345 352 311 41 3,864 Apr-16 1 110 111 66 44 3,998 May-16 1 132 133 86 47 4,151 Jun-16 0 139 140 136 3 4,282 1QFY17 2 382 383 289 95 4,282 Jul-16 1 124 124 99 25 4,505 Aug-16 — 213 213 148 65 4,674 Sep-16 4 196 200 163 37 4,686 2QFY17 5 533 538 410 127 4,686 Oct-16 4 179 183 89 94 4,848

Source: AMFI

KOTAK INSTITUTIONAL EQUITIES RESEARCH 25 India Insurance

Exhibit 7: Max Life has high share of par policies; SBI skewed to ULIPs Contribution of various products to APE, March fiscal year-ends, 2012-1QFY17 (% of total)

2012 2013 2014 2015 2016 1QFY17 Bajaj Life Unit linked policies 12 12 10 24 29 27 Participating policies 60 49 51 21 19 13 Non participating policies 28 39 38 54 52 60 Birla SL Unit linked policies 54 44 40 38 37 26 Participating policies 0 4 31 42 43 46 Non participating policies 46 52 29 20 20 28 ICICI Prudential Life Unit linked policies 56 60 66 85 84 75 Participating policies 18 7 18 13 13 16 Non participating policies 26 33 15 2 3 9 HDFC Life Unit linked policies 57 62 49 60 56 45 Participating policies 40 34 34 20 26 34 Non participating policies 3 5 17 21 18 21 Max Life Unit linked policies 12 10 21 26 25 28 Participating policies 76 74 67 58 60 57 Non participating policies 12 16 12 15 15 15 SBI Life Unit linked policies 44 35 32 40 54 56 Participating policies 21 22 31 40 30 24 Non participating policies 35 43 37 19 16 20 Max+ HDFC Unit linked policies 41 45 37 47 45 39 Participating policies 53 47 48 34 38 43 Non participating policies 6 8 15 19 17 19

Source: Company, Kotak Institutional Equities

26 KOTAK INSTITUTIONAL EQUITIES RESEARCH Insurance India

Private sector stable in group business; single business remains strong for LIC

LIC continues to have high share of single premium (77% in October 2016 and 83% share of total premium). Private players have generally been selective in this segment; the share of single premium of private players declined to 39% from 45% in September 2016. Bajaj Life, ICICI Prudential Life and SBI Life were the key players to bring down this ratio.

Exhibit 8: Share of single premium in overall business decreased for private players mom Share of single premium to total premium, March fiscal year-ends, 2014-2017YTD (%)

2014 2015 2016 Apr-16 May-16 Jun-16 Jul-16 Aug-16 Sep-16 Oct-16 Bajaj Allianz 38 44 52 60 51 35 36 34 52 33 Birla Sunlife 3 2 2 6 2 2 4 4 1 2 HDFC Life 42 47 49 63 57 65 61 52 72 69 ICICI Prudential 13 14 27 29 28 25 14 29 20 16 Max Life 21 25 28 41 35 28 31 31 29 30 Reliance Life 5 5 7 7 20 12 10 16 3 12 SBI Life 41 40 35 74 72 29 29 45 64 31 Private sector 30 31 34 51 50 36 33 36 45 39 LIC 65 71 76 76 76 79 82 80 83 77 Total 56 58 63 70 68 67 71 69 70 65

Source: IRDA, Life council

In the group business, the share of private players was stable at 29%. HDFC Life gained market share from SBI Life (Exhibit 9).

Exhibit 9: Private players’ market share is stable in group business Market share in group business, March fiscal year-ends, 2014-2017YTD (%)

2014 2015 2016 Apr-16 May-16 Jun-16 Jul-16 Aug-16 Sep-16 Oct-16 Bajaj Allianz 2.4 2.8 2.5 2.8 2.7 1.6 1.0 1.4 3.3 3.0 Birla Sunlife 1.4 2.0 1.9 1.1 2.3 1.4 0.8 0.8 3.6 3.4 HDFC Life 2.5 3.8 3.5 3.2 3.7 3.9 3.1 2.9 5.7 9.6 Max Life 0.3 0.4 0.3 0.4 0.4 0.3 0.3 0.4 0.3 0.8 Reliance Life 1.3 1.5 0.8 0.7 0.3 0.1 0.1 0.1 1.3 0.1 SBI Life 3.1 3.1 2.6 6.0 9.0 1.9 2.1 3.9 7.4 3.3 Private sector 17 21 19 20 26 16 12 15 29 29 LIC 83 79 81 80 74 83 88 85 71 71

Source: IRDA, Life council

KOTAK INSTITUTIONAL EQUITIES RESEARCH 27

September 2016: Results calendar India Daily Summary Daily Summary India Mon Tue Wed Thu Fri Sat Sun KOTAK INSTITUTIONAL EQUITIES RESEARCH EQUITIES INSTITUTIONAL KOTAK 21-Nov 22-Nov 23-Nov 24-Nov 25-Nov 26-Nov 27-Nov Natl. Aluminium IRB Infra.Devl. PC Jew eller Aditya Bir. Fas. Bata India Sobha Larsen & Toubro Siemens Manpasand Beverages 28-Nov 29-Nov 30-Nov 1-Dec 2-Dec 3-Dec 4-Dec Oil India Tata Pow er Co. Guj.St.Petronet Gillette India P & G Hygiene 5-Dec 6-Dec 7-Dec 8-Dec 9-Dec 10-Dec 11-Dec Colgate-Palmolive

12-Dec 13-Dec 14-Dec 15-Dec 16-Dec 17-Dec 18-Dec -

November 21, 21, November 2016 Crompton Greaves

Source: Bloomberg, NSE India

India Daily Summary Daily Summary India

-

November 21, November 2016

28

Kotak Institutional Equities: Valuation summary of KIE Universe stocks

29 Target O/S Price (Rs) price Upside Mkt cap. shares EPS (Rs) EPS growth (%) PER (X) EV/EBITDA (X) Price/BV (X) Dividend yield (%) RoE (%) ADVT-3mo Company Rating 18-Nov-16 (Rs) (%) (Rs mn) (US$ mn) (mn) 2017E 2018E 2019E 2017E 2018E 2019E 2017E 2018E 2019E 2017E 2018E 2019E 2017E 2018E 2019E 2017E 2018E 2019E 2017E 2018E 2019E (US$ mn) Automobiles Amara Raja Batteries SELL 937 820 (12.4) 159,966 2,346 171 32.2 37.9 43.8 12.4 17.7 15.5 29.1 24.7 21.4 16.8 14.5 12.8 6.3 5.3 4.5 0.7 0.8 0.9 23.8 23.4 22.7 6.1 Apollo Tyres BUY 189 250 32.1 96,307 1,413 509 20.6 21.9 27.6 2.1 6.3 26.1 9.2 8.6 6.9 5.9 5.5 4.2 1.4 1.2 1.1 1.0 1.1 1.4 16.0 15.1 16.5 11.6 Ashok Leyland SELL 80 75 (5.8) 226,674 3,325 2,846 4.6 5.1 5.6 31.2 11.7 9.9 17.4 15.6 14.2 9.6 8.8 8.2 3.6 3.1 2.7 1.7 1.9 2.1 22.0 21.4 20.6 15.1 Bajaj Auto REDUCE 2,575 2,900 12.6 745,062 10,929 289 148.4 162.9 185.8 17.6 9.8 14.0 17.3 15.8 13.9 12.2 10.8 9.0 5.1 4.4 3.7 2.3 2.5 2.9 32.0 29.8 29.0 12.2 Balkrishna Industries ADD 985 950 (3.5) 95,165 1,396 97 63.3 72.5 84.2 6.2 14.6 16.2 15.6 13.6 11.7 9.5 8.1 6.7 2.9 2.4 2.0 0.6 0.7 0.7 20.0 19.2 18.9 1.5 Bharat Forge SELL 907 810 (10.7) 211,110 3,097 237 25.6 34.3 43.2 (6.5) 34.3 25.6 35.5 26.4 21.0 17.5 13.9 11.4 5.3 4.6 4.0 0.6 0.8 1.1 16.0 18.8 20.5 12.7 Eicher Motors SELL 21,792 17,800 (18.3) 591,905 8,682 27 641.6 770.9 892.4 36.4 20.2 15.8 34.0 28.3 24.4 25.2 21.2 17.6 16.3 10.9 7.9 0.1 0.1 0.1 49.0 46.2 37.6 18.7 Exide Industries SELL 178 175 (1.9) 151,598 2,224 850 8.2 8.9 9.8 12.1 8.7 9.8 21.7 20.0 18.2 13.2 12.2 10.9 3.1 2.8 2.6 1.4 1.7 1.7 15.0 14.9 14.9 8.6 Fag Bearings BUY 4,188 5,000 19.4 69,593 1,021 17 120.4 161.3 196.3 1.3 34.0 21.7 34.8 26.0 21.3 20.0 15.6 12.6 4.8 4.2 3.7 0.3 0.8 1.4 14.5 17.1 18.4 0.3 Hero Motocorp SELL 2,935 3,000 2.2 586,163 8,598 200 183.7 193.7 210.1 17.1 5.4 8.5 16.0 15.2 14.0 10.5 9.8 8.9 6.2 5.4 4.6 3.1 3.3 3.6 42.3 38.0 35.6 22.4 Mahindra & Mahindra ADD 1,240 1,375 10.9 770,061 11,295 569 65.8 74.2 83.2 13.5 12.7 12.2 18.8 16.7 14.9 12.7 11.3 10.0 2.8 2.5 2.3 1.3 1.5 1.7 15.8 15.9 16.0 21.9 Maruti Suzuki BUY 4,951 6,600 33.3 1,495,568 21,937 302 265.6 316.8 368.0 75.5 19.3 16.2 18.6 15.6 13.5 11.3 8.9 7.2 4.6 3.8 3.2 1.3 1.6 1.9 26.9 26.6 25.7 59.9 Minda Corp. REDUCE 96 105 9.8 20,010 294 209 5.5 6.6 8.4 19.0 19.1 28.1 17.3 14.6 11.4 8.9 7.6 6.3 3.0 2.6 2.1 0.5 0.6 0.7 18.8 19.1 20.4 0.8 Motherson Sumi Systems SELL 290 280 (3.6) 407,615 5,979 1,404 11.7 14.6 17.3 27.9 25.7 18.2 24.9 19.8 16.8 10.1 8.3 6.9 5.2 4.4 3.8 1.2 1.5 1.8 27.0 24.1 24.3 12.1 SKF REDUCE 1,318 1,400 6.2 69,509 1,020 53 48.0 55.6 64.5 (0.5) 15.9 16.0 27.5 23.7 20.4 17.9 15.2 12.9 4.0 3.6 3.3 1.1 1.3 1.5 15.3 16.1 16.8 0.4 Suprajit Engineering REDUCE 189 190 0.5 24,823 364 131 7.6 9.1 10.8 39.5 18.9 19.0 24.7 20.8 17.5 13.9 11.9 10.2 4.7 4.0 3.4 0.7 0.9 1.1 20.6 20.8 21.1 0.2 Tata Motors BUY 471 600 27.3 1,512,553 22,186 3,396 36.5 50.6 59.4 (5.7) 38.5 17.4 12.9 9.3 7.9 5.0 3.9 3.4 1.7 1.5 1.2 - - - 14.3 16.9 16.7 65.4 Timken ADD 555 630 13.5 37,740 554 68 16.2 21.2 26.4 17.4 30.5 24.7 34.2 26.2 21.0 19.8 15.3 12.4 6.1 5.1 4.4 0.3 0.4 1.4 19.3 21.1 22.4 0.4 TVS Motor SELL 362 245 (32.3) 171,863 2,521 475 11.6 14.6 17.1 51.7 25.1 17.4 31.1 24.8 21.2 18.0 14.7 12.7 8.8 7.0 5.7 0.8 1.0 1.2 31.2 31.4 29.8 12.6 WABCO India BUY 5,029 6,300 25.3 95,386 1,399 19 133.8 157.2 191.1 24.0 17.5 21.6 37.6 32.0 26.3 23.8 19.8 16.0 7.4 6.1 5.1 0.2 0.2 0.3 21.7 21.0 21.1 0.6 Automobiles Neutral 7,606,405 111,572 16.7 22.2 15.8 18.0 14.8 12.7 9.2 7.5 6.4 3.4 2.9 2.4 1.1 1.3 1.4 18.7 19.4 19.1 284.4 Banks Axis Bank REDUCE 473 510 7.7 1,130,010 16,575 2,383 14.7 30.9 44.4 (57.4) 110.4 43.5 32.2 15.3 10.7 — — — 2.2 2.0 1.7 0.5 1.0 1.5 6.4 12.5 15.9 103.0 Bank of Baroda REDUCE 177 160 (9.6) 407,721 5,981 2,310 6.9 19.1 24.5 129.7 176.2 28.2 25.5 9.2 7.2 — — — 1.8 1.4 1.1 0.8 2.2 2.8 4.4 11.3 13.2 23.1 Bank of India ADD 122 140 15.2 128,145 1,880 817 (2.2) 28.5 40.1 97.1 1,406.2 40.7 (55.7) 4.3 3.0 — — — 1.1 0.8 0.6 (0.4) 4.7 6.6 (0.8) 10.1 12.9 9.7 Canara Bank REDUCE 326 275 (15.7) 177,178 2,599 543 17.5 57.8 57.2 133.8 229.7 (0.9) 18.6 5.6 5.7 — — — 1.5 1.3 0.9 — — — 3.0 9.7 9.1 19.8 City Union Bank REDUCE 138 145 5.5 82,251 1,206 598 8.3 9.9 11.0 11.3 20.0 10.7 16.6 13.8 12.5 — — — 2.6 2.2 1.9 1.0 1.2 1.3 15.2 16.1 15.7 2.1 DCB Bank ADD 110 140 26.9 31,420 461 284 6.7 8.0 10.8 (2.0) 18.6 36.0 16.5 13.9 10.2 — — — 1.7 1.6 1.3 — — — 10.4 11.1 13.3 3.2 Equitas Holdings REDUCE 157 180 14.5 52,704 773 270 5.3 7.1 8.8 (13.9) 33.8 22.8 29.5 22.0 17.9 — — — 2.4 2.2 2.0 — — — 10.0 10.1 11.2 3.8 Federal Bank BUY 71 95 33.6 122,163 1,792 1,719 5.1 6.7 7.6 82.8 32.2 13.7 14.0 10.6 9.3 — — — 1.5 1.4 1.2 1.8 2.4 2.7 10.4 12.6 13.1 11.7 HDFC Bank ADD 1,211 1,400 15.6 3,066,952 44,986 2,528 58.7 69.6 82.3 20.7 18.5 18.3 20.6 17.4 14.7 — — — 3.7 3.2 2.7 0.9 1.1 1.3 18.9 19.3 19.7 27.9 ICICI Bank BUY 265 340 28.5 1,539,749 22,585 5,849 16.4 21.8 26.4 (1.7) 33.6 20.8 16.2 12.1 10.0 — — — 2.0 1.7 1.5 1.9 2.5 3.0 10.3 12.8 14.1 78.8 IDFC Bank ADD 72 80 11.3 243,920 3,578 - 3.4 4.2 5.6 182.4 23.1 34.3 21.2 17.2 12.8 — — — 1.7 1.6 1.4 0.9 1.2 1.6 8.2 9.4 11.6 13.2

IndusInd Bank ADD 1,102 1,350 22.5 656,393 9,628 595 49.3 56.8 65.6 28.4 15.2 15.4 22.3 19.4 16.8 — — — 3.4 2.9 2.6 0.6 0.7 0.8 16.0 15.9 16.1 20.9 Daily Summary India J&K Bank BUY 61 85 39.5 29,547 433 485 4.9 13.0 16.2 (42.9) 166.3 24.2 12.4 4.7 3.8 — — — 0.7 0.5 0.4 1.6 4.4 5.4 3.6 9.2 10.6 2.7 Karur Vysya Bank BUY 91 120 31.9 55,448 813 609 9.6 10.4 14.3 2.8 8.7 37.4 9.5 8.7 6.4 — — — 1.2 1.1 1.0 13.2 14.3 19.6 12.2 12.2 15.2 1.6 Oriental Bank of Commerce ADD 123 120 (2.5) 42,614 625 321 13.2 28.1 47.4 172.8 112.3 68.4 9.3 4.4 2.6 — — — 0.8 0.6 0.5 2.2 4.6 7.7 2.8 5.8 9.2 8.6 Punjab National Bank REDUCE 150 135 (9.8) 318,663 4,674 1,964 8.1 23.3 26.2 139.9 188.8 12.3 18.6 6.4 5.7 — — — 2.0 1.3 1.0 1.1 3.1 3.5 4.6 12.0 12.2 29.1 Ujjivan Financial Services REDUCE 360 440 22.4 42,520 624 101 26.2 16.3 20.6 49.5 (37.6) 25.9 13.7 22.0 17.5 — — — 2.3 2.1 1.9 0.6 0.4 0.6 20.4 10.0 11.5 8.4 State Bank of India BUY 276 320 16.0 2,140,974 31,404 7,763 16.2 30.4 38.9 26.3 87.5 28.2 17.0 9.1 7.1 — — — 1.5 1.3 1.1 1.0 1.1 1.2 7.6 12.0 13.7 74.5 Union Bank ADD 157 145 (7.7) 107,997 1,584 687 15.1 36.4 47.0 (23.3) 141.5 29.0 10.4 4.3 3.3 — — — 1.1 0.8 0.6 1.0 2.3 3.0 5.0 11.1 12.8 11.9 YES Bank REDUCE 1,181 1,275 8.0 497,094 7,291 421 69.6 77.5 93.1 15.3 11.4 20.1 17.0 15.2 12.7 — — — 3.1 2.7 2.3 1.0 1.1 1.3 19.6 18.7 19.2 77.7 Banks Attractive 10,873,463 159,493 79.6 64.6 24.6 19.5 11.8 9.5 1.6 1.4 1.3 1.0 1.4 1.7 8.1 12.0 13.4 531.6 NBFCs Bajaj Finserv REDUCE 2,943 2,950 0.2 468,356 6,870 159 142.1 164.7 192.4 16.1 15.9 16.8 20.7 17.9 15.3 — — — 3.2 2.8 2.4 0.5 0.5 0.5 16.3 16.9 17.1 9.9 Cholamandalam ADD 984 1,250 27.0 153,731 2,255 156 44.7 55.1 67.3 23.4 23.4 22.1 22.0 17.9 14.6 — — — 3.9 3.3 2.8 0.6 0.7 0.8 17.6 18.6 19.3 6.3 HDFC ADD 1,250 1,550 24.0 1,975,890 28,983 1,580 51.0 55.6 64.8 7.8 9.0 16.5 24.5 22.5 19.3 — — — 4.9 4.3 3.5 1.4 1.6 1.8 21.4 20.4 20.4 50.4 IDFC BUY 57 80 40.4 90,968 1,334 1,594 5.4 6.5 8.5 192.7 18.7 31.0 10.5 8.8 6.7 — — — 0.8 0.7 0.7 0.5 0.6 0.7 12.6 14.0 16.9 6.7 IIFL Holdings ADD 256 330 28.7 81,203 1,191 317 21.6 23.5 27.8 34.1 8.7 18.2 11.8 10.9 9.2 — — — 1.9 1.6 1.4 1.1 1.2 1.4 21.2 19.0 19.6 1.1

KOTAK INSTITUTIONAL EQUITIES RESEARCH EQUITIES INSTITUTIONAL KOTAK L&T Finance Holdings BUY 87 125 44.3 151,844 2,227 1,754 2.9 7.5 8.4 (40.0) 157.6 11.9 29.7 11.5 10.3 — — — 2.0 1.8 1.6 1.0 2.2 2.5 7.0 16.3 16.3 12.1

LIC Housing Finance BUY 518 670 29.2 261,617 3,837 505 42.3 51.7 62.1 16.5 22.3 20.0 12.3 10.0 8.4 — — — 2.2 1.8 1.5 1.2 1.5 1.8 19.4 22.2 22.2 20.1 -

Mahindra & Mahindra Financial REDUCE 273 315 15.5 155,074 2,275 565 12.0 15.2 19.7 0.7 26.5 29.9 22.7 18.0 13.8 — — — 2.5 2.3 2.1 1.1 1.4 1.9 10.7 12.5 14.8 11.3 November 21, 21, November 2016 Max Financial Services ADD 525 595 13 140,054 2,054 267 7.0 7.1 7.2 62.8 1.5 1.5 74.7 73.6 72.5 — — — 0.5 0.5 0.6 10.9 10.5 10.0 4.6 Muthoot Finance ADD 302 375 24.3 120,399 1,766 399 26.8 27.9 30.1 32.2 4.0 7.8 11.2 10.8 10.0 — — — 1.9 1.7 1.5 2.7 2.8 3.0 17.9 16.7 16.2 4.3 PFC REDUCE 125 120 (4.0) 330,142 4,843 2,640 23.9 21.5 25.5 3.3 (10.3) 18.7 5.2 5.8 4.9 — — — 0.8 1.1 0.9 3.9 3.5 4.1 15.5 12.5 13.4 7.6 Rural Electrification Corp. ADD 133 145 9.4 261,677 3,838 1,975 29.0 19.8 21.8 1.8 (31.9) 10.3 4.6 6.7 6.1 — — — 0.9 1.0 0.9 4.7 3.2 3.5 19.2 12.0 12.1 14.5 Shriram City Union Finance REDUCE 1,813 2,275 25.5 119,493 1,753 66 99.7 132.5 167.2 24.5 32.8 26.2 18.2 13.7 10.8 — — — 2.4 2.2 1.9 0.6 0.8 1.0 13.5 15.8 17.2 1.4 Shriram Transport ADD 832 1,250 50.3 188,710 2,768 223 69.8 83.8 99.6 32.2 20.0 18.8 11.9 9.9 8.4 — — — 1.8 1.6 1.4 1.2 1.4 1.7 14.4 15.3 15.9 11.3 NBFCs Neutral 4,594,770 67,397 16.5 4.0 18.2 13.9 13.3 11.3 2.3 2.1 1.8 1.5 1.6 1.8 16.7 15.5 15.9 531.6

Source: Company, Bloomberg, Kotak Institutional Equities estimates

Kotak Institutional Equities: Valuation summary of KIE Universe stocks India Daily Summary Daily Summary India Target O/S Price (Rs) price Upside Mkt cap. shares EPS (Rs) EPS growth (%) PER (X) EV/EBITDA (X) Price/BV (X) Dividend yield (%) RoE (%) ADVT-3mo Company Rating 18-Nov-16 (Rs) (%) (Rs mn) (US$ mn) (mn) 2017E 2018E 2019E 2017E 2018E 2019E 2017E 2018E 2019E 2017E 2018E 2019E 2017E 2018E 2019E 2017E 2018E 2019E 2017E 2018E 2019E (US$ mn)

KOTAK INSTITUTIONAL EQUITIES RESEARCH EQUITIES INSTITUTIONAL KOTAK Cement ACC SELL 1,310 1,350 3.1 245,945 3,608 188 39.1 56.7 77.9 (1.1) 44.8 37.4 33.5 23.1 16.8 16.5 12.1 9.0 2.8 2.6 2.3 1.3 1.3 1.3 8.5 11.7 14.6 10.9 Ambuja Cements SELL 199 225 13.2 394,746 5,790 1,552 6.7 8.8 12.3 21.2 30.0 40.8 29.5 22.7 16.1 11.4 8.3 6.0 2.8 2.6 2.4 1.7 1.7 1.7 10.6 11.9 15.5 12.9 Dalmia Bharat ADD 1,526 2,130 39.6 135,508 1,988 89 50.5 102.5 136.3 134.9 103.0 33.0 30.2 14.9 11.2 9.1 7.2 5.8 3.2 2.6 2.1 0.1 0.1 0.1 11.0 19.2 21.0 3.0 Grasim Industries ADD 819 1,055 28.9 382,109 5,605 467 81.2 91.7 104.0 47.9 12.9 13.3 10.1 8.9 7.9 4.9 3.9 2.9 1.3 1.1 1.0 0.5 0.5 0.5 13.7 13.6 13.6 11.6 India Cements REDUCE 117 92 (21.2) 35,863 526 307 6.6 9.0 11.1 43.7 36.3 23.5 NM 13.0 10.5 7.4 6.5 5.7 0.9 0.9 0.8 1.8 1.8 1.8 5.5 7.1 8.3 11.6 J K Cement ADD 696 1,050 50.9 48,655 714 70 35.5 75.4 97.7 315.4 112.5 29.5 19.6 9.2 7.1 9.8 6.5 5.2 2.6 2.1 1.6 0.6 0.6 0.6 14.3 25.3 25.7 0.3 JK Lakshmi Cement ADD 355 535 50.9 41,714 612 118 17.2 34.7 46.3 772.6 101.1 33.5 20.6 10.2 7.7 10.4 6.2 4.9 2.7 2.2 1.7 0.6 0.6 0.6 14.1 23.8 25.2 0.8 Orient Cement ADD 134 195 46.1 27,350 401 205 2.5 14.3 18.5 (17.6) 470.6 29.6 53.3 9.3 7.2 14.3 6.6 5.3 2.7 2.1 1.7 1.3 1.3 1.3 5.0 25.5 26.3 1.1

Shree Cement SELL 14,129 13,300 (5.9) 492,215 7,220 35 543.6 636.0 782.9 371.2 17.0 23.1 26.0 22.2 18.0 14.1 11.5 9.3 6.2 4.9 3.9 0.2 0.2 0.2 26.8 24.5 23.9 3.8 UltraTech Cement SELL 3,393 3,000 (11.6) 931,113 13,658 274 123.8 149.3 175.7 56.3 20.6 17.7 27.4 22.7 19.3 15.2 12.7 10.7 3.9 3.4 2.9 0.3 0.3 0.3 15.3 15.9 16.2 17.6 Cement Cautious 2,735,219 40,121 70.4 28.4 23.1 22.2 17.3 14.0 10.5 8.2 6.6 2.8 2.5 2.1 0.6 0.6 0.6 12.7 14.3 15.3 73.7 Consumer products Asian Paints SELL 908 1,000 10.1 871,143 12,778 959 21.4 25.3 29.2 14.2 18.2 15.4 42.5 35.9 31.1 26.8 22.6 19.3 13.2 11.2 9.6 1.0 1.2 1.4 33.5 33.7 33.2 18.9

Bajaj Corp. BUY 384 475 23.7 56,647 831 148 17.6 19.7 21.7 10.7 12.0 10.4 21.9 19.5 17.7 18.2 15.6 13.4 11.3 10.7 10.2 3.3 3.9 4.3 52.6 56.3 59.2 0.6 -

Britannia Industries ADD 2,903 3,500 20.6 348,242 5,108 120 76.4 94.8 113.5 9.8 24.1 19.7 38.0 30.6 25.6 25.4 20.3 16.8 15.0 11.5 9.0 0.9 1.0 1.2 44.8 42.5 39.4 8.6 21, November 2016 Coffee Day Enterprises ADD 208 250 20.3 42,817 628 206 2.0 6.2 9.1 142.1 218.7 46.2 106.2 33.3 22.8 12.4 10.6 9.5 2.0 1.8 1.7 - - - 1.9 5.7 7.8 0.4 Colgate-Palmolive (India) ADD 917 1,075 17.2 249,520 3,660 272 23.7 27.9 33.6 11.8 17.6 20.4 38.7 32.9 27.3 23.0 19.7 16.5 19.4 15.2 12.1 1.3 1.4 1.6 55.9 51.8 49.4 4.3 Dabur India REDUCE 278 295 5.9 489,833 7,185 1,759 7.6 8.6 9.7 7.8 13.7 13.0 36.8 32.4 28.6 30.3 26.1 22.8 10.0 8.6 7.4 1.0 1.1 1.3 29.4 28.5 27.7 7.6

GlaxoSmithKline Consumer ADD 4,960 6,300 27.0 208,577 3,059 42 161.5 183.0 205.8 4.4 13.3 12.5 30.7 27.1 24.1 20.4 17.7 15.2 7.7 6.9 6.3 1.6 1.9 2.2 26.3 26.9 27.3 1.3 Godrej Consumer Products SELL 1,420 1,375 (3.2) 483,558 7,093 341 39.5 45.7 52.1 13.9 15.6 14.1 35.9 31.1 27.2 26.2 22.1 18.9 8.2 6.8 5.6 0.4 0.4 0.5 24.5 24.0 22.6 5.5 Hindustan Unilever REDUCE 803 885 10.2 1,737,565 25,487 2,164 20.8 23.3 26.0 8.1 11.7 11.7 38.5 34.5 30.9 26.9 23.6 20.8 28.3 29.0 29.9 2.2 2.5 2.8 72.7 83.1 95.4 18.8 ITC ADD 228 270 18.5 2,750,334 40,342 12,104 8.5 9.6 10.8 10.2 12.8 12.7 26.8 23.7 21.1 17.4 15.3 13.4 7.8 7.3 6.9 2.3 2.8 3.3 27.2 29.8 32.8 40.1 Jubilant Foodworks REDUCE 886 1,000 12.9 58,331 856 66 18.8 28.2 38.4 18.2 50.2 36.2 47.2 31.4 23.0 17.6 12.8 9.8 7.1 6.1 5.1 0.5 0.7 1.0 16.0 20.9 24.2 13.0 Jyothy Laboratories NR 349 — — 63,444 931 181 10.1 11.0 11.2 38.8 9.5 1.7 34.7 31.7 31.1 24.4 21.4 19.1 7.9 7.2 6.8 1.4 1.7 2.0 27.5 23.8 22.6 0.8 Manpasand Beverages REDUCE 662 630 (4.8) 37,857 555 50 15.3 20.4 28.7 51.8 33.2 40.8 43.2 32.4 23.0 23.5 18.2 13.4 5.0 4.4 3.7 0.2 0.3 0.5 12.1 14.3 17.5 0.9 Marico REDUCE 251 270 7.7 323,575 4,746 1,290 6.4 7.6 8.6 14.6 18.7 12.7 39.2 33.0 29.3 26.8 22.7 20.0 13.2 11.2 9.6 1.2 1.4 1.6 36.3 36.6 35.2 4.9 Nestle India SELL 5,882 5,750 (2.2) 567,088 8,318 96 115.7 142.0 162.6 24.9 22.7 14.5 50.8 41.4 36.2 28.2 23.7 20.9 18.0 16.0 14.6 1.1 1.4 1.8 37.4 41.0 42.2 3.5 Page Industries SELL 12,976 12,000 (7.5) 144,727 2,123 11 246.3 304.5 378.1 18.1 23.6 24.2 52.7 42.6 34.3 33.3 27.2 22.0 22.2 17.0 12.8 0.7 0.8 0.8 47.5 45.2 42.5 2.8 PC Jeweller ADD 349 450 28.9 62,533 917 179 26.2 30.7 37.5 22.0 17.3 22.3 13.3 11.4 9.3 7.1 5.6 4.7 2.1 1.8 1.5 1.1 1.3 1.6 17.7 17.6 17.6 3.0

Pidilite Industries ADD 615 725 17.9 315,321 4,625 513 17.5 19.9 22.8 18.7 13.5 14.6 35.2 31.0 27.0 23.2 20.3 17.4 9.4 7.9 6.7 0.8 1.0 1.1 29.2 27.6 26.7 6.1

S H Kelkar and Company REDUCE 287 260 (9.3) 41,441 608 145 8.1 9.6 10.8 53.0 19.4 12.6 35.6 29.8 26.5 21.3 18.5 16.2 4.9 4.4 4.0 0.8 1.0 1.1 14.5 15.7 16.0 0.6 Tata Global Beverages ADD 120 140 16.6 75,799 1,112 631 6.6 7.6 8.7 33.3 14.0 15.0 18.1 15.9 13.8 9.2 8.3 7.3 1.3 1.2 1.2 1.9 2.1 2.5 7.2 7.8 8.6 6.6 Titan Company REDUCE 303 380 25.3 269,266 3,950 888 10.3 12.2 13.9 32.1 18.0 14.5 29.4 24.9 21.8 19.9 16.6 14.1 6.6 5.7 4.9 1.1 1.2 1.5 24.2 24.5 24.1 9.1 United Breweries SELL 856 720 (15.9) 226,238 3,318 264 12.5 16.2 19.7 10.5 29.6 21.5 68.6 52.9 43.5 29.1 24.6 21.5 9.5 8.3 7.2 0.2 0.3 0.3 14.7 16.7 17.7 6.5 United Spirits ADD 1,869 2,650 41.8 271,661 3,985 145 32.6 50.0 67.8 170.4 53.1 35.7 NM 37.4 27.6 26.1 19.9 15.9 9.0 6.1 5.0 - - - 19.8 19.4 19.8 12.9 Consumer products Cautious 9,699,061 142,267 14.4 16.1 14.7 34.2 29.4 25.7 22.0 18.9 16.4 9.7 8.6 7.7 1.6 1.8 2.1 28.5 29.3 30.2 176.9 Energy BPCL REDUCE 643 660 2.7 929,236 13,630 1,446 56.1 54.0 57.7 9.1 (3.7) 6.8 11.5 11.9 11.1 8.0 7.4 6.8 2.9 2.5 2.2 2.6 2.5 2.7 27.3 22.4 20.9 25.5 Cairn India ADD 227 260 14.8 424,656 6,229 1,875 12.8 15.8 20.0 11.7 24.0 26.1 17.7 14.3 11.3 8.2 7.7 5.6 0.8 0.8 0.8 1.5 2.0 3.1 4.8 5.8 7.0 11.9 Castrol India ADD 391 470 20.2 193,373 2,836 495 13.5 14.8 16.0 12.0 9.5 8.1 29.0 26.5 24.5 18.6 17.4 16.0 29.8 26.6 23.2 2.6 2.8 2.9 108.9 106.2 101.3 18.8 GAIL (India) ADD 427 490 14.8 541,640 7,945 1,268 29.5 36.0 40.1 64.4 22.0 11.3 14.5 11.9 10.7 9.0 7.5 6.6 1.6 1.5 1.4 2.3 2.6 2.8 11.7 13.1 13.4 15.4 GSPL ADD 155 170 9.7 87,267 1,280 563 9.0 11.1 12.2 14.4 23.5 9.3 17.2 13.9 12.7 8.6 7.0 6.3 2.0 1.9 1.7 1.6 2.2 3.1 12.3 13.9 14.0 1.0 HPCL REDUCE 460 460 (0.0) 467,509 6,857 1,017 48.1 42.9 43.7 26.7 (10.8) 1.8 9.6 10.7 10.5 7.3 7.8 7.9 2.2 1.9 1.7 3.2 2.8 2.9 24.6 19.1 17.3 27.5 Indraprastha Gas ADD 840 880 4.7 117,656 1,726 140 46.6 51.1 55.1 40.5 9.7 7.9 18.0 16.5 15.2 10.7 9.7 8.8 4.2 3.7 3.4 1.5 1.9 2.3 25.1 24.1 23.2 11.8 IOCL BUY 301 400 33.0 1,460,171 21,418 4,856 34.9 34.7 35.8 78.9 (0.5) 3.1 8.6 8.7 8.4 5.5 5.4 5.2 1.7 1.5 1.4 3.5 3.5 3.6 21.4 18.7 17.2 23.7 Mahanagar Gas ADD 749 715 (4.5) 73,975 1,085 99 40.1 42.5 45.0 28.2 6.2 5.9 18.7 17.6 16.6 11.0 10.2 9.5 4.3 3.9 3.5 2.3 2.5 3.0 24.3 23.1 22.1 - ONGC SELL 275 260 (5.5) 2,353,615 34,523 8,556 22.6 24.6 28.6 11.4 9.1 16.0 12.2 11.2 9.6 5.0 4.6 4.1 1.2 1.1 1.1 3.1 3.3 3.8 10.1 10.4 11.4 24.9 Oil India SELL 419 370 (11.6) 251,605 3,691 601 35.9 37.9 43.0 (7.5) 5.6 13.7 11.7 11.1 9.7 6.8 6.4 5.7 1.1 1.0 1.0 3.0 3.6 4.1 9.4 9.4 10.2 3.1

India Daily Summary Daily Summary India Petronet LNG ADD 376 415 10.3 282,188 4,139 750 21.5 26.1 28.6 91.3 21.8 9.3 17.5 14.4 13.2 11.2 8.9 7.7 3.7 3.2 2.8 1.3 1.9 2.4 23.1 23.9 22.5 11.6 Reliance Industries ADD 988 1,150 16.5 2,907,643 42,650 3,240 91.1 98.7 102.4 7.7 8.3 3.7 10.8 10.0 9.6 10.0 8.0 7.2 1.2 1.1 1.0 1.2 1.4 1.6 11.7 11.5 10.9 64.0 Energy Attractive 10,090,534 148,009 21.3 6.0 8.0 11.1 10.5 9.7 7.3 6.5 5.9 1.4 1.3 1.2 2.4 2.5 2.9 12.6 12.2 12.1 239.3

Source: Company, Bloomberg, Kotak Institutional Equities estimates

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November 21, November 2016

30

Kotak Institutional Equities: Valuation summary of KIE Universe stocks

31 Target O/S Price (Rs) price Upside Mkt cap. shares EPS (Rs) EPS growth (%) PER (X) EV/EBITDA (X) Price/BV (X) Dividend yield (%) RoE (%) ADVT-3mo Company Rating 18-Nov-16 (Rs) (%) (Rs mn) (US$ mn) (mn) 2017E 2018E 2019E 2017E 2018E 2019E 2017E 2018E 2019E 2017E 2018E 2019E 2017E 2018E 2019E 2017E 2018E 2019E 2017E 2018E 2019E (US$ mn) Industrials ABB SELL 1,053 950 (9.8) 223,182 3,274 212 17.8 25.2 34.2 26.0 41.6 35.5 59.1 41.7 30.8 29.2 22.5 17.5 6.8 6.2 5.5 0.5 0.7 0.9 12.1 15.6 18.8 0.9 BHEL SELL 134 115 (14.4) 328,713 4,822 2,448 2.6 5.5 8.6 169.0 114.8 54.8 52.2 24.3 15.7 22.9 9.5 5.0 1.0 1.0 0.9 0.4 1.1 1.6 1.9 4.0 6.0 21.5 Carborundum Universal REDUCE 255 250 (2.0) 48,037 705 188 9.7 13.0 16.2 27.0 33.9 24.7 26.4 19.7 15.8 14.6 11.1 9.1 3.7 3.3 2.9 1.1 1.5 1.9 14.7 17.7 19.5 0.8 Crompton Greaves REDUCE 73 75 3.1 45,596 669 627 2.4 4.0 5.7 3.4 66.0 43.3 30.2 18.2 12.7 9.9 6.7 5.2 1.0 0.9 0.9 0.7 1.0 1.6 3.2 5.2 7.2 4.7 Crompton Greaves Consumer ADD 148 165 11.5 92,758 1,361 627 4.0 4.7 5.8 4.6 17.6 23.6 37.0 31.4 25.4 22.2 19.3 15.8 21.7 14.0 9.7 0.7 1.0 1.4 76.6 54.2 45.1 3.0 Cummins India REDUCE 782 850 8.7 216,757 3,179 277 27.6 30.8 34.6 4.4 11.4 12.4 28.3 25.4 22.6 26.5 23.2 20.3 6.2 5.7 5.1 1.8 2.0 2.3 23.0 23.3 23.8 3.3 Havells India REDUCE 320 370 15.6 199,922 2,932 624 10.2 11.8 13.5 31.8 15.1 14.8 31.3 27.2 23.7 20.6 17.3 14.7 6.3 5.6 5.0 1.3 1.5 1.9 21.1 21.7 22.3 9.1 Kalpataru Power Transmission BUY 235 300 27.8 36,017 528 153 10.2 13.5 20.2 33.0 32.5 49.9 23.0 17.4 11.6 7.7 6.8 5.4 1.5 1.4 1.2 0.6 0.6 0.6 6.5 8.1 11.2 0.7 KEC International BUY 139 170 22.3 35,748 524 257 9.9 13.3 16.5 33.2 33.6 24.4 14.0 10.5 8.4 7.2 6.2 5.5 2.1 1.8 1.5 1.0 1.3 1.6 15.8 18.2 19.3 1.1 L&T REDUCE 1,370 1,500 9.5 1,277,270 18,735 930 55.5 72.8 87.8 9.0 31.1 20.6 24.7 18.8 15.6 18.7 16.5 14.3 3.2 2.9 2.6 1.6 1.6 1.9 13.4 16.1 17.4 37.8 Siemens SELL 1,116 900 (19.4) 397,573 5,832 356 26.6 32.3 40.3 45.2 21.8 24.5 42.0 34.5 27.7 25.8 21.1 16.7 5.6 5.3 4.9 1.2 1.4 1.8 13.8 15.8 18.3 3.3 Thermax REDUCE 830 810 (2.4) 98,900 1,451 119 26.8 29.6 37.2 15.8 10.5 26.0 31.0 28.1 22.3 22.1 18.7 15.7 3.8 3.5 3.1 0.7 0.7 0.9 12.9 12.9 14.7 0.5 Voltas ADD 293 330 12.7 96,850 1,421 331 11.3 13.2 15.8 7.9 17.4 19.6 26.0 22.1 18.5 21.6 17.1 13.8 3.7 3.4 3.1 1.2 1.6 2.2 14.8 15.8 17.3 8.1 Industrials Cautious 3,097,323 45,432 37.0 32.5 25.4 30.4 22.9 18.3 19.1 15.9 13.1 2.9 2.7 2.5 1.2 1.4 1.8 9.6 11.8 13.5 94.9 Infrastructure Adani Port and SEZ ADD 262 315 20.3 542,382 7,956 2,085 17.0 14.3 14.8 23.5 (16.1) 4.0 15.4 18.4 17.7 13.9 12.5 12.0 3.3 2.9 2.6 0.6 0.8 1.0 23.9 16.8 15.4 22.2 Ashoka Buildcon BUY 150 220 46.7 28,072 412 188 4.7 3.5 3.5 49.6 (24.3) 0.5 32.2 42.6 42.4 8.9 8.4 7.6 1.5 1.4 1.4 0.9 1.3 1.5 4.6 3.4 3.4 0.6 Container Corporation REDUCE 1,219 1,250 2.5 237,674 3,486 195 36.7 42.6 49.7 (9.1) 15.9 16.7 33.2 28.6 24.5 20.9 16.7 14.0 2.8 2.6 2.5 1.0 1.2 1.4 8.6 9.4 10.4 3.1 Gateway Distriparks ADD 238 280 17.8 25,834 379 109 9.7 11.7 15.7 (4.3) 21.5 33.8 24.6 20.3 15.1 10.2 7.7 5.8 2.0 1.9 1.7 1.2 1.5 2.0 8.3 9.5 11.8 0.6 Gujarat Pipavav Port REDUCE 137 170 24.1 66,231 971 483 5.0 5.8 7.8 45.5 16.6 34.0 27.4 23.5 17.5 15.3 12.2 10.0 3.4 3.4 3.4 2.9 3.4 4.6 12.6 14.5 19.3 2.3 IRB Infrastructure BUY 192 275 43.4 67,391 988 351 19.7 19.5 22.9 8.6 (0.7) 17.2 9.8 9.8 8.4 6.7 7.0 6.1 1.1 1.0 1.0 2.0 2.0 — 12.7 10.7 11.9 9.3 Sadbhav Engineering ADD 282 315 11.6 48,415 710 172 11.1 12.8 13.9 37.8 15.8 8.0 25.5 22.0 20.4 16.4 13.3 11.3 3.0 2.6 2.4 — — — 12.2 12.7 12.3 0.6 Infrastructure Attractive 1,015,999 14,903 17.0 (7.0) 10.3 18.2 19.6 17.8 12.2 11.1 10.0 2.7 2.4 2.2 0.9 1.1 1.2 14.7 12.4 12.7 38.8 Internet Info Edge ADD 890 990 11.2 107,615 1,579 121 16.2 21.1 27.1 38.5 30.3 28.2 54.9 42.1 32.9 38.6 28.9 21.5 5.7 5.2 4.7 0.5 0.6 0.8 10.7 12.8 14.9 1.2 Just Dial REDUCE 399 430 7.9 27,696 406 69 17.1 18.8 21.0 (16.3) 10.3 11.5 23.3 21.2 19.0 15.1 11.0 9.1 3.6 3.1 2.7 — 0.5 0.5 16.4 15.7 15.3 12.6 Internet Attractive 135,312 1,985 11.1 22.8 22.5 43.0 35.0 28.6 30.6 23.0 17.8 5.1 4.6 4.1 0.4 0.6 0.7 11.8 13.0 14.2 13.8 Media DB Corp. REDUCE 374 380 1.6 68,736 1,008 184 22.2 25.2 29.7 37.5 13.4 17.8 16.8 14.9 12.6 9.1 8.1 6.7 4.5 4.1 3.7 2.9 3.7 4.5 28.5 28.9 30.7 0.6 DishTV BUY 89 110 23.2 95,179 1,396 1,066 2.1 3.4 4.8 (67.0) 58.8 40.3 NM 26.3 18.7 8.8 7.5 6.6 5.7 5.7 5.7 — — 1.1 13.7 21.7 30.5 9.9 Jagran Prakashan REDUCE 173 195 12.7 56,556 830 327 12.6 14.1 16.4 21.0 11.7 16.9 13.7 12.3 10.5 8.1 6.9 5.8 3.2 2.9 2.6 3.5 4.0 4.0 24.7 24.9 25.9 0.8 Ortel Communications BUY 144 185 28.5 4,373 64 30 4.0 5.6 12.5 1.7 40.6 122.6 36.1 25.7 11.5 8.6 7.1 5.4 2.9 2.6 2.1 — — — 8.3 10.6 20.2 0.0 PVR ADD 1,081 1,325 22.6 50,522 741 47 26.3 35.0 44.6 (2.2) 33.4 27.3 41.2 30.9 24.2 14.5 12.0 10.0 5.2 4.5 3.9 0.2 0.3 0.4 13.3 15.6 17.2 2.7

Sun TV Network ADD 459 550 19.9 180,826 2,652 394 27.5 29.8 34.2 17.4 8.4 15.0 16.7 15.4 13.4 10.3 9.2 7.9 4.6 4.2 3.8 3.3 3.7 4.1 29.2 28.8 30.1 12.3 Daily Summary India Zee Entertainment Enterprises BUY 447 560 25.4 428,984 6,292 960 12.5 17.0 19.5 33.2 35.8 14.8 35.7 26.3 22.9 19.6 16.1 14.2 4.5 4.2 3.8 0.6 0.8 0.9 15.3 16.5 17.4 18.7 Media Attractive 885,175 12,984 5.3 23.2 18.5 25.5 20.7 17.5 12.7 10.8 9.3 4.6 4.2 3.8 1.4 1.7 2.0 17.8 20.2 21.8 45.0 Metals & Mining Coal India REDUCE 307 315 2.7 1,937,229 28,416 6,316 22.1 25.6 28.6 (2.5) 15.8 11.7 13.9 12.0 10.7 8.7 7.8 7.0 5.3 4.9 4.5 5.0 5.8 6.5 38.0 42.6 44.0 18.9 Hindalco Industries REDUCE 165 150 (9.3) 341,445 5,008 2,065 11.8 12.4 12.6 334.9 5.3 1.4 14.0 13.3 13.2 7.4 6.9 6.7 0.8 0.8 0.8 0.6 0.6 0.6 6.2 6.1 5.9 27.5 Hindustan Zinc ADD 250 265 6.1 1,055,485 15,482 4,225 19.4 21.6 23.2 0.3 11.0 7.7 12.8 11.6 10.7 8.4 6.5 5.3 2.4 2.1 1.8 1.8 1.8 1.8 20.4 19.5 18.2 8.2 Jindal Steel and Power SELL 68 60 (11.2) 61,802 907 915 (13.2) (0.5) 5.2 27.7 96.3 1,151.0 (5.1) (137.7) 13.1 10.6 7.8 6.7 0.2 0.2 0.2 — — — (4.4) (0.1) 1.3 14.4 JSW Steel ADD 1,692 2,070 22.4 408,897 5,998 242 126.0 169.3 209.8 1,297.0 34.3 23.9 13.4 10.0 8.1 7.0 6.1 5.2 1.9 1.6 1.4 0.5 0.5 0.5 14.1 17.4 18.2 16.6 National Aluminium Co. SELL 50 36 (28.2) 96,936 1,422 2,577 2.2 2.9 3.2 (20.1) 33.6 10.5 23.3 17.4 15.7 4.8 3.3 2.7 1.0 1.0 0.9 2.0 2.0 2.0 4.3 5.6 5.9 1.0 NMDC SELL 114 75 (34.1) 360,209 5,284 3,965 7.2 7.6 8.0 (9.5) 5.5 5.3 15.8 15.0 14.2 8.0 7.3 6.9 1.5 1.5 1.5 5.3 5.3 5.3 9.5 10.0 10.4 7.7 Tata Steel ADD 385 465 20.7 374,015 5,486 971 20.8 52.8 58.8 188.9 153.6 11.2 18.5 7 6.6 8.6 6.2 5.8 1.4 1.2 1.1 2.1 2.1 2.1 7.4 18.2 17.4 43.8 Vedanta ADD 203 235 15.6 602,871 8,843 2,965 20.7 26.0 31.3 163.8 25.4 20.4 9.8 7.8 6.5 6.2 5.1 4.2 1.2 1.1 0.9 1.4 1.4 1.4 14.4 14.5 15.4 37.3 Metals & Mining Cautious 5,238,889 76,845 58.0 27.4 13.7 13.2 10.4 9.1 7.8 6.5 5.7 1.7 1.5 1.4 3.1 3.4 3.7 12.8 14.9 15.4 175.5 Pharmaceutical Apollo Hospitals REDUCE 1,196 1,325 10.8 166,428 2,441 139 23.9 33.6 43.0 10.4 40.4 28.1 50.0 35.6 27.8 22.9 18.7 15.9 4.5 4.1 3.7 0.5 0.7 0.9 9.3 12.1 14.2 3.8

KOTAK INSTITUTIONAL EQUITIES RESEARCH EQUITIES INSTITUTIONAL KOTAK Biocon SELL 873 585 (33.0) 174,510 2,560 200 28.7 27.5 32.1 43.8 (4.3) 16.9 30.4 31.7 27.1 18.0 14.7 11.9 3.6 3.4 3.1 1.2 1.1 1.3 12.6 11.0 11.8 17.1

Cipla BUY 551 650 18.0 442,726 6,494 805 19.5 27.7 36.3 16.3 42.1 31.1 28.3 19.9 15.2 16.5 12.2 9.4 3.4 3.0 2.6 0.7 1.0 1.4 12.4 15.8 — 15.3 -

Dr Lal Pathlabs SELL 1,186 1,000 (15.7) 98,154 1,440 83 20.6 24.1 28.5 29.2 17.0 18.3 57.7 49.3 41.7 36.6 30.5 25.6 15.3 12.2 9.9 0.3 0.3 0.4 29.8 27.6 26.2 2.8 November 21, 21, November 2016 Dr Reddy's Laboratories SELL 3,215 2,500 (22.2) 532,693 7,814 171 78.4 121.8 153.5 (43.7) 55.3 26.0 41.0 26.4 20.9 21.3 13.6 10.7 4.3 3.8 3.3 0.4 0.6 0.7 10.3 15.3 16.8 14.2 HCG BUY 251 270 7.7 21,329 313 85 2.1 2.2 4.3 1,331.8 4.1 97.6 120.1 115.4 58.4 24.2 19.4 14.9 3.9 3.7 3.5 — — — 3.3 3.3 6.2 0.6 Lupin REDUCE 1,418 1,600 12.9 639,178 9,376 450 65.5 72.5 87.4 29.8 10.7 20.5 21.6 19.5 16.2 14.2 12.2 9.8 4.7 3.9 3.2 0.7 0.8 0.9 24.0 21.9 21.9 25.1 Sun Pharmaceuticals REDUCE 689 715 3.8 1,657,851 24,318 2,406 31.9 32.8 37.3 44.1 3.0 13.7 21.6 21.0 18.5 12.8 11.7 9.8 4.3 3.6 3.1 0.9 1.0 1.1 22.0 18.8 18.1 39.7 Torrent Pharmaceuticals REDUCE 1,310 1,350 3.0 221,680 3,252 169 55.2 63.1 78.5 (46.1) 14.3 24.4 23.7 20.8 16.7 15.4 13.1 11.0 5.4 4.5 1.0 1.1 1.4 24.9 23.6 22.3 5.9 Pharmaceuticals Cautious 3,954,549 58,006 11.7 14.2 19.8 25.5 22.3 18.6 15.3 12.8 10.4 4.3 3.7 3.2 0.8 0.9 1.0 17.0 16.7 17.1 124.4

Source: Company, Bloomberg, Kotak Institutional Equities estimates

Kotak Institutional Equities: Valuation summary of KIE Universe stocks India Daily Summary Daily Summary India Target O/S Price (Rs) price Upside Mkt cap. shares EPS (Rs) EPS growth (%) PER (X) EV/EBITDA (X) Price/BV (X) Dividend yield (%) RoE (%) ADVT-3mo Company Rating 18-Nov-16 (Rs) (%) (Rs mn) (US$ mn) (mn) 2017E 2018E 2019E 2017E 2018E 2019E 2017E 2018E 2019E 2017E 2018E 2019E 2017E 2018E 2019E 2017E 2018E 2019E 2017E 2018E 2019E (US$ mn)

KOTAK INSTITUTIONAL EQUITIES RESEARCH EQUITIES INSTITUTIONAL KOTAK Real Estate DLF BUY 116 180 54.6 207,629 3,046 1,801 2.8 1.5 3.0 (9.2) (44.6) 98.7 42.0 75.9 38.2 14.9 13.6 12.2 0.7 0.7 0.7 1.7 1.7 1.7 1.7 1.0 1.9 22.0 Godrej Properties REDUCE 308 280 (9.1) 66,608 977 216 9.7 10.5 11.4 (9.3) 8.5 8.3 31.8 29.3 27.1 61.3 50.6 30.6 2.8 2.7 2.5 — 0.8 0.8 9.3 9.4 9.5 1.2 Oberoi Realty BUY 274 350 27.7 92,969 1,364 339 10.8 30.9 43.2 (13.7) 185.2 39.9 25.3 8.9 6.3 16.7 5.4 5.5 1.7 1.4 1.2 0.7 0.7 0.7 6.7 17.3 20.2 2.1 Prestige Estates Projects BUY 154 250 61.9 57,919 850 375 7.0 8.4 8.9 (24.8) 18.7 6.3 21.9 18.5 17.4 11.6 11.2 10.7 1.3 1.3 1.2 1.0 1.0 1.0 6.2 7.0 7.1 1.5 Sobha BUY 241 440 82.8 23,181 340 98 14.1 17.3 21.2 (9.9) 22.7 22.8 17.1 13.9 11.3 10.6 9.7 8.6 0.9 0.9 0.8 2.9 2.9 2.9 5.3 6.4 7.5 0.5 Sunteck Realty BUY 184 360 95.9 11,570 170 60 82.0 53.3 — 201.9 (34.9) (100.0) 2.2 3.4 - 1.7 (0.6) — 0.5 0.5 1.1 1.1 — 26.2 14.1 — 0.5 Real Estate Attractive 459,875 6,746 5.1 19.5 19.0 23.3 19.5 16.4 13.7 11.2 11.1 1.0 1.0 1.0 1.3 1.3 1.3 4.3 4.9 5.9 27.7 Technology

HCL Technologies REDUCE 764 800 4.7 1,077,606 15,806 1,413 58.1 59.6 63.0 48.0 2.6 5.8 13.2 12.8 12.1 9.3 8.7 7.9 3.3 3.0 2.7 3.2 3.8 4.3 27.2 24.5 23.5 22.6 Hexaware Technologies ADD 196 225 15.1 59,018 866 304 13.2 15.3 17.4 2.0 15.9 13.8 14.8 12.8 11.2 9.7 7.9 6.8 3.7 3.3 2.9 2.9 4.1 4.1 26.3 27.1 27.6 3.0 Infosys ADD 920 1,175 27.7 2,113,189 30,997 2,286 61.8 69.2 76.7 4.8 12.0 10.8 14.9 13.3 12.0 9.3 8.1 7.0 3.3 2.9 2.6 2.9 3.3 3.8 23.1 23.1 23.0 52.3 Mindtree REDUCE 442 460 4.0 74,223 1,089 168 27.0 34.6 41.3 (24.7) 28.1 19.4 16.4 12.8 10.7 9.2 7.2 5.8 2.8 2.4 2.1 1.6 2.1 2.5 17.8 20.1 20.9 5.6 Mphasis SELL 514 460 (10.5) 107,978 1,584 210 38.6 39.8 40.3 11.9 3.2 1.3 13.3 12.9 12.7 8.2 7.5 7.1 1.6 1.6 1.5 3.9 3.9 3.9 12.6 12.3 11.9 1.1

TCS REDUCE 2,125 2,325 9.4 4,187,356 61,421 1,970 132.4 142.3 156.4 7.8 7.4 9.9 16.0 14.9 13.6 11.4 10.1 9.0 4.8 4.1 3.6 2.5 2.7 2.9 32.6 29.8 28.2 46.1 -

Tech Mahindra BUY 445 520 16.8 432,300 6,341 872 33.9 39.9 45.4 (5.3) 17.9 13.8 13.2 11.2 9.8 8.8 7.1 5.8 2.4 2.1 1.8 2.8 1.4 1.6 19.4 19.9 19.3 20.4 21, November 2016 Wipro REDUCE 437 485 10.9 1,062,593 15,586 2,467 34.4 38.5 41.3 (4.6) 12.1 7.2 12.7 11.3 10.6 7.5 6.5 5.4 2.1 1.9 1.6 1.1 1.1 1.1 17.2 17.3 16.4 14.9 Technology Neutral 9,114,264 133,689 7.8 8.9 9.5 14.8 13.6 12.5 9.9 8.7 7.6 3.5 3.1 2.7 2.5 2.7 3.0 23.5 22.5 21.7 166.1 Telecom Bharti Airtel BUY 304 375 23.5 1,214,210 17,810 3,997 11.9 8.0 12.6 21.7 (33.0) 58.6 25.6 38.1 24.1 6.1 6.1 5.3 1.7 1.7 1.7 1.1 0.8 1.6 7.0 4.6 7.1 18.1 Bharti Infratel ADD 352 410 16.5 650,877 9,547 1,897 15.8 17.0 19.1 25.7 7.8 12.2 22.3 20.7 18.4 10.6 9.7 8.9 3.9 3.8 3.7 3.3 3.4 3.9 16.7 18.6 20.2 12.1 IDEA BUY 71 100 40.6 256,017 3,755 3,601 0.5 (4.8) (3.0) (94.4) (1,095.9) 37.2 147.4 (14.8) (23.6) 6.7 7.2 6.2 1.1 1.2 1.4 1.4 2.9 4.3 0.7 (7.9) (5.6) 13.5 Tata Communications ADD 608 670 10.2 173,280 2,542 285 23.1 22.7 28.6 1,306.8 (1.9) 26.5 26.3 26.8 21.2 8.2 7.3 6.6 707.7 25.8 11.6 1.1 1.1 1.1 (334.2) 185.4 75.5 10.8 Telecom Cautious 2,294,385 33,654 (9.7) (38.3) 58.4 27.0 43.7 27.6 6.8 6.8 6.0 2.1 2.1 2.1 1.7 1.7 2.4 7.8 4.8 7.6 54.5 Utilities Adani Power SELL 25 26 5.9 83,899 1,231 3,334 2.3 4.7 4.6 58.1 104.0 (2.9) 10.6 5.2 5.4 6.8 5.6 5.2 1.0 0.8 0.7 — — — 9.9 17.6 14.6 3.5 CESC ADD 595 640 7.5 78,871 1,157 133 52.2 68.7 90.0 87.0 31.4 31.0 11.4 8.7 6.6 7.1 6.6 5.8 0.8 0.8 0.7 1.6 1.7 1.8 7.6 9.5 11.5 3.8 JSW Energy ADD 57 75 31.9 93,237 1,368 1,640 5.1 8.0 7.6 (32.3) 56.2 (5.7) 11.0 7.1 7.5 6.3 4.8 4.8 1.0 0.9 0.9 3.5 3.5 3.5 9.6 13.9 12.0 3.5 NHPC REDUCE 26 24 (8.6) 290,605 4,263 11,071 2.8 3.4 3.6 4.1 22.1 7.2 9.5 7.8 7.2 7.7 6.2 5.3 0.9 0.9 0.8 6.0 7.4 7.8 9.6 11.3 11.7 1.8 NTPC BUY 159 180 13.2 1,311,441 19,236 8,245 12.1 15.3 16.9 (2.3) 26.2 10.5 13.1 10.4 9.4 11.0 9.3 7.5 1.4 1.3 1.2 2.3 2.9 3.2 10.9 12.7 12.9 9.6

Power Grid BUY 192 210 9.4 1,004,204 14,730 5,232 14.5 15.6 17.9 26.9 7.8 14.5 13.3 12.3 10.8 9.6 8.3 7.3 2.1 1.8 1.6 1.5 1.6 1.9 16.6 15.8 16.0 11.9

Reliance Power SELL 41 36 (11.1) 113,608 1,666 2,805 4.8 5.3 5.9 (1.1) 11.1 10.1 8.4 7.6 6.9 8.6 7.5 7.2 0.5 0.5 0.4 - - - 6.2 6.5 6.7 2.4 Tata Power ADD 70 80 14.2 189,459 2,779 2,800 5.5 6.2 6.8 0.9 12.1 9.6 12.6 11.3 10.3 8.7 8.1 7.4 1.2 1.1 1.0 1.7 1.7 1.7 10.0 10.4 10.5 6.1 Utilities Attractive 3,165,324 46,429 7.0 22.2 10.3 12.2 10.0 9.1 9.1 7.9 6.9 1.3 1.2 1.1 2.2 2.6 2.9 10.7 12.0 12.2 42.5 Others Astral Poly Technik SELL 417 360 (13.7) 49,936 732 120 10.2 13.0 16.1 21.0 28.2 23.2 41.0 32.0 26.0 21.1 16.9 13.8 6.0 5.1 4.3 0.1 0.1 0.2 15.0 17.1 17.9 0.4 Cera Sanitaryware REDUCE 1,994 2,050 2.8 25,939 380 13 73.7 93.2 112.2 14.9 26.4 20.4 27.1 21.4 17.8 15.7 12.5 10.4 5.2 4.3 3.5 0.5 0.5 0.5 20.8 21.8 21.7 0.8 Dhanuka Agritech BUY 710 820 15.5 35,514 521 50 25.6 30.5 37.5 22.4 19.3 22.9 27.8 23.3 18.9 19.7 16.2 13.0 6.1 5.1 4.2 1.0 1.2 1.5 24.1 23.8 24.2 0.7 Godrej Industries REDUCE 379 390 2.9 127,358 1,868 336 17.6 20.6 21.7 22.4 17.0 5.0 21.5 18.4 17.5 17.2 15.3 15.2 3.2 2.8 2.4 0.5 0.5 0.5 15.8 16.1 14.7 2.5 HSIL ADD 297 345 16.0 21,501 315 72 16.7 19.1 24.2 35.3 14.9 26.7 17.9 15.5 12.3 8.1 7.0 6.0 1.5 1.4 1.3 1.3 1.3 1.3 8.5 9.1 10.7 0.6 InterGlobe Aviation ADD 849 1,060 24.9 305,907 4,487 351 54.7 76.0 95.1 (3.6) 39.0 25.2 15.5 11.2 8.9 10.5 7.2 5.5 12.3 8.5 6.1 3.2 4.5 5.6 94.1 89.8 79.7 4.9 Kaveri Seed BUY 378 460 21.7 26,103 383 69 28.9 39.7 48.4 15.2 37.4 22.0 13.1 9.5 7.8 9.9 6.8 5.2 2.5 2.2 1.9 2.3 3.2 4.5 20.5 24.4 25.6 3.8 PI Industries ADD 773 940 21.7 105,938 1,554 136 31.4 36.1 42.2 35.8 14.9 17.0 24.6 21.4 18.3 19.2 15.8 13.1 6.9 5.4 4.3 0.5 0.6 0.7 31.7 28.3 26.3 1.2 Rallis India ADD 187 250 33.6 36,395 534 194 9.7 12.2 15.3 32.3 25.9 24.7 19.2 15.3 12.3 12.7 9.9 7.7 3.2 2.8 2.4 1.6 1.8 1.9 18.6 19.6 21.2 1.2 SRF BUY 1,426 1,910 33.9 81,890 1,201 57 86.0 102.3 117.6 16.8 19.0 15.0 16.6 13.9 12.1 9.9 8.5 7.5 2.7 2.3 2.0 0.8 0.8 0.9 17.2 17.6 17.4 6.9 Tata Chemicals ADD 464 550 18.5 118,245 1,734 255 32.7 53.0 50.2 6.6 62.2 (5.2) 14.2 8.8 9.2 8.1 6.4 5.5 1.7 1.3 1.2 2.2 2.2 2.2 12.7 17.3 13.8 8.8 TeamLease Services ADD 880 1,100 25.0 15,050 221 16 22.2 26.8 34.7 39.2 21.0 29.4 39.7 32.8 25.4 28.9 18.8 14.2 4.3 3.8 3.3 — — — 11.5 12.3 14.0 0.1 UPL ADD 624 760 21.9 316,114 4,637 429 33.9 43.5 51.5 6.7 28.1 18.6 18.4 14.3 12.1 10.6 8.9 7.5 3.3 2.7 2.3 0.7 0.8 0.9 21.2 21.0 20.4 16.5 Whirlpool SELL 912 980 7.4 115,758 1,698 127 26.3 31.8 38.4 36.2 21.2 20.6 34.8 28.7 23.8 20.6 17.2 14.3 7.7 6.4 5.3 — 0.7 0.8 25.0 24.4 24.4 1.3

India Daily Summary Daily Summary India Others 1,402,537 20,573 15.1 30.2 15.7 18.1 13.9 12.0 11.3 9.1 7.6 3.7 3.1 2.6 1.4 1.8 2.1 20.6 22.0 21.5 49.5 KIE universe 76,410,522 1,120,800 24.2 19.8 15.7 17.2 14.4 12.4 9.9 8.6 7.5 2.3 2.1 1.9 1.7 1.9 2.2 13.4 14.5 15.1 KIE universe (ex-energy) 66,319,989 972,790 25.0 23.4 17.4 18.8 15.3 13.0 10.8 9.2 8.0 2.6 2.3 2.1 1.6 1.8 2.1 13.7 15.2 15.9

Notes: (a) We have used adjusted book values for banking companies. (b) 2017 means calendar year 2016, similarly for 2018 and 2019 for these particular companies. (c) Exchange rate (Rs/US$)= 68.18 Source: Company, Bloomberg, Kotak Institutional Equities estimates

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November 21, November 2016

32

Disclosures

Disclosures

"Each of the analysts named below hereby certifies that, with respect to each subject company and its securities for which the analyst is responsible in this report, (1) all of the views expressed in this report accurately reflect his or her personal views about the subject companies and securities, and (2) no part of his or her compensation was, is, or will be, directly or indirectly, related to the specific recommendations or views expressed in this report: Nischint Chawathe, Tarun Lakhotia, Harish Bihani."

Kotak Institutional Equities Research coverage universe Distribution of ratings/investment banking relationships Percentage of companies covered by Kotak Institutional 70% Equities, within the specified category.

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

40% * The above categories are defined as follows: Buy = We 34.9% expect this stock to deliver more than 15% returns over the 29.0% next 12 months; Add = We expect this stock to deliver 5-15% 30% returns over the next 12 months; Reduce = We expect this stock to deliver -5-+5% returns over the next 12 months; Sell = We 18.8% 20% 17.2% expect this stock to deliver less than -5% returns over the next 12 months. Our target prices are also on a 12-month horizon basis. These ratings are used illustratively to comply with 10% 4.8% 4.3% applicable regulations. As of 30/09/2016 Kotak Institutional 0.5% 0.5% Equities Investment Research had investment ratings on 186 0% equity securities. BUY ADD REDUCE SELL

Source: Kotak Institutional Equities As of September 30, 2016

Ratings and other definitions/identifiers

Definitions of ratings

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

ADD. We expect this stock to deliver 5-15% returns over the next 12 months.

REDUCE. We expect this stock to deliver -5-+5% returns over the next 12 months.

SELL. We expect this stock to deliver <-5% 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.

NA = Not Available or Not Applicable. The information is not available for display or is not applicable.

NM = Not Meaningful. The information is not meaningful and is therefore excluded.

33 KOTAK INSTITUTIONAL EQUITIES RESEARCH

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