INDIA DAILY

May 22, 2014 India 21-May 1-day1-mo 3-mo Sensex 24,298 (0.3) 6.7 17.4

Nifty 7,253 (0.3) 6.4 17.8

Contents Global/Regional indices Special Reports Dow Jones 16,533 1.0 0.5 2.7 Nasdaq Composite 4,132 0.8 0.2 (3.1)

Strategy FTSE 6,821 0.3 3.0 (0.2) Strategy: Hot or sticky - dissecting the foreign investment influx into India for Nikkei 14,171 0.9 (1.5) (4.7) answers Hang Seng 22,837 0.0 0.5 1.2

KOSPI 2,013 0.2 0.4 2.8 Theme Report Value traded – India

Banks/Financial Institutions: Day 1 takeaways from Chasing Growth - Cash (NSE+BSE) 272 210 176 Financial Services conference Derivatives (NSE) 1,762 1,951 1,608 Daily Alerts Deri. open interest 2,231 1,752 1,530

Results

Zee Entertainment Enterprises: Weak results and outlook Forex/money market Change, basis points Sector 21-May 1-day 1-mo 3-mo Telecom: India wireless 4QFY14 round-up - volumes rebound well, mixed bag Rs/US$ 58.6 0 (227) (321) on RPM 10yr govt bond, % 9.0 (6) (27) (18) Net investment (US$mn) 20-May MTD CYTD FIIs 3 2,351 7,647 MFs (90) (197) (1,918)

Top movers Change, % Best performers 21-May 1-day 1-mo 3-mo IVRC IN Equity 28.9 8.9 79.8 159.9 HDIL IN Equity 92.4 (1.2) 29.1 123.5 UT IN Equity 26.1 (0.6) 54.9 111.3 ADE IN Equity 515.4 (3.3) 17.1 106.5 IHFL IN Equity 395.1 8.7 38.4 105.9 Worst performers FTECH IN Equity 232.2 (3.7) (33.6) (28.7) DRRD IN Equity 2300.1 (1.0) (9.9) (15.9) INFO IN Equity 3157.1 1.1 0.2 (15.8) GLXO IN Equity 2549.6 1.0 2.7 (15.8) WPRO IN Equity 493.1 (0.3) (7.1) (13.7)

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. Strategy.dot

INDIA Strategy

India Quantitative MAY 22, 2014 UPDATE

BSE-30: 24,298

Hot or sticky—dissecting the foreign investment influx into India for answers. We categorize foreign investment activity into various types of market participants so as to gauge the investment horizon of the recent inflow of foreign capital. Sector-wise foreign investment classification shows that financials and energy attracted more than 50% of the foreign investments as sector rotation from defensives to cyclical stocks is underway.

QUICK NUMBERS Categorizing foreign investment activity—investment advisors overshadow stickier investors • Investment advisors India has attracted foreign inflows worth US$15.9 bn since September 2013 with more than constitute 50% of US$7 bn being pumped into equities in the course of the past three months alone (see Exhibit 1). the FII participation In order to understand the risk profile and investment horizon of the recent foreign equity in CYTD14 investments, we segregated these flows into various categories of market participants (see Exhibit 2). While CY2013 witnessed larger participation from long-term investors like sovereign wealth • SWF and PF funds (SWF) and pension funds (PF), investment advisors and managers have constituted more participation has than 50% of the foreign equity inflows since September 2013. Loosely regulated categories like dropped to ~18% broad-based funds have also increased their participation over the past three months. over the past three months A closer look at investment managers and advisors—volatile investment trend in recent times

Exhibit 3 showcases the volatile investment trend foreign investment advisors and managers have • Financials attract exhibited over the past two years. The investment horizon for the category has been erratic amid more than 40% of capital remigration from emerging markets to developed markets considering their regional focus. FII inflows in The infamous ETFs are also classified under the following category. While investment managers CYTD14 and advisors were net sellers worth `286 bn (~US$5 bn) between January 2013 and August 2013, they have aggressively changed gear, cumulatively pumping `477 bn into the equity markets • PSU banks could (~US$8 bn) since then. soon be inaccessible for FIIs SWF and PF participation—drops from 35% in August 2013 to 18% over the past three months

Long-term investors like pension funds (PF) and sovereign wealth funds (SWF) were actively buying Indian equities in CY2013. In the period between January 2013 and August 2013, these two categories have cumulatively purchased Indian equities worth `300 bn (~US$5 bn) even as investment advisors and managers were selling out of the region (see Exhibit 4). The transition to the FPI regime has resulted in reclassification of assets across investor categories thereby distorting

(exaggerating) SWF and PF activity for December 2013 (see Exhibit 5). Considering ~35% cumulative participation by SWF (13%) and PF (22%) in the January-August 2013 period, foreign investments by these categories have dropped substantially over the past three months (18%) with investment managers and other broad-based funds taking up the charge.

Saifullah Rais [email protected] Mumbai: +91-22-4336-0895

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. Strategy India

Sector-wise FII inflows—PSU banks could soon become inaccessible

Exhibit 6 showcases the sectors attracting foreign equity investments in recent times. In CYTD14, more than 40% of the net FII inflows are being directed towards financials with the energy sector (16%) coming in a distant second. It is evident that sector rotation from defensives to cyclical stocks is underway in CYTD14 with FII selling witnessed in sectors like healthcare and information technology in favor of energy and financials. The revived foreign interest in the banking space may hit a regulatory hurdle considering five out of the 12 CNX Bank Nifty constituents are already in RBI’s FII restricted list (see Exhibit 7). The PSU constituents of the CNX Bank Nifty may soon become inaccessible for foreign investors with only ~US$4 bn of foreign headroom available (as on March 31, 2014). Since then, the banking space (excluding NBFCs) has witnessed another US$0.36 bn of foreign investments in April 2014 taking the three-month tally to US$1.8 bn. At the current pace of FII inflows, the available foreign headroom could be fully utilized over the course of the next few months.

Exhibit 1: FIIs have already invested US$7.4 bn in CYTD14 FII flows in equity segment, calendar year-ends, 2000-14 (US$ bn)

40

29.3 30 24.5 20.0 20 17.3 17.6 10.8 8.4 8.6 10 6.7 7.4 3.7 2.1 1.5 2.8 0.8 (0.0) 0.4 1.2 0 (0.5) Jan Feb Apr Mar May (10) 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

(13.3) (20)

Source: Bloomberg, Kotak Institutional Equities

KOTAK INSTITUTIONAL EQUITIES RESEARCH 3 India Strategy

Exhibit 2: Largest deployments seen by investment advisors and managers; loosely regulated broad-based funds also active Composition of estimated market participation based on SEBI-declared FII AUC data, end-April 2014

AUC Segregated flows (Rs bn) (a) Market participation (%) Type (US$ bn) 1-mo 3-mo CYTD14 1-mo 3-mo CYTD14 Mutual Fund II 108 (44) (21) (10) (60) (6) (3) Others (broad based fund/portfolio) II 39 33 48 19 46 14 6 Sovereign Wealth Fund I 20 5 14 40 7 4 12 Pension Fund II 20 20 41 57 28 12 17 Investment Manager/Advisor II 20 86 209 170 118 62 51 Investment Trust II 16 (6) 17 22 (8) 5 7 Asset Management Company II 4 (2) 18 23 (3) 5 7 Broad Based Fund II 3 (3) 0 7 (4) 0 2 Bank II 3 (1) 17 19 (2) 5 6 Insurance/Reinsurance Company II 2 0 1 2 1 0 1 Foreign Governmental Agency I 1.4 (3) (3) (6) (4) (1) (2) Endowment III 0.6 (1) (2) (3) (1) (1) (1) Foreign Corporate III 0.6 5 6 4 7 2 1 Central Bank I 0.6 (1) 0 2 (1) 0 1 Charitable Trust III 0.6 0 2 4 0 1 1 Trustee of a Trust III 0.1 (17) (14) (15) (24) (4) (5) University Fund II 0.2 0 1 1 1 0 0 Insurance II 0.2 (0) (0) (1) (0) (0) (0) SEBI FII inflows (Rs bn) 73 336 335 100 100 100 SEBI FII inflows (US$ mn) 1,211 5,309 5,297

Notes: (a) Flow segregation is estimated based on AUC appreciation normalized MoM for market performance. (b) We normalized asset appreciation by BSE-200 index price movement. (c) Estimation error is distributed across market participants based on asset value. (d) Latest data as of end-April 2014.

Source: SEBI, Kotak Institutional Equities estimates

4 KOTAK INSTITUTIONAL EQUITIES RESEARCH Strategy India

Exhibit 3: Investment advisors sold ~US$5 bn of Indian equities between January 2013 and August 2013 Net foreign equity inflows by investment managers, 2013-current

Total FII (Rs bn) Investment managers/advisors (Rs bn) 300 250 200 150 100 50 0 (50) (100) (150) Jul-13 Jan-13 Jun-13 Jan-14 Feb-13 Apr-13 Oct-13 Feb-14 Apr-14 Sep-13 Nov-13 Dec-13 Aug-13 Mar-13 Mar-14 May-13 Notes: (a) Flow segregation is estimated based on AUC appreciation normalized MoM for market performance. (b) We normalized asset appreciation by BSE-200 index price movement.

Source: SEBI, Kotak Institutional Equities estimates

Exhibit 4: SWF and PF participation has dropped post-August 2013 Net foreign equity inflows by pension funds and sovereign wealth funds, 2013-current

Sovereign wealth funds (Rs bn) Pension funds (Rs bn) Total FII (Rs bn) 300 250 200 150 100 50 0 (50) (100) (150) Jul-13 Jan-13 Jun-13 Jan-14 Feb-13 Apr-13 Oct-13 Feb-14 Apr-14 Sep-13 Nov-13 Dec-13 Aug-13 Mar-13 Mar-14 May-13 Notes: (a) Flow segregation is estimated based on AUC appreciation normalized MoM for market performance. (b) We normalized asset appreciation by BSE-200 index price movement. (c) Reclassification of assets under custody in December 2013.

Source: SEBI, Kotak Institutional Equities estimates

KOTAK INSTITUTIONAL EQUITIES RESEARCH 5 India Strategy

Exhibit 5: The 'others' category has been reclassified across different investor categories FII asset under custody, November-December 2013 (Rs bn)

FII AUC (b) (Rs bn) Difference (a) Investor type Dec-13 Nov-13 (Rs bn) Mutual Fund 6,156 5,892 102 Others (broad based fund/portfolio) 2,220 1,629 532 Sovereign Wealth Fund 1,118 686 402 Pension Fund 1,070 716 326 Investment Manager/Advisor 988 811 151 Investment Trust 897 809 64 Asset Management Company 187 179 2 Broad Based Fund 186 167 14 Bank 174 171 (2) Insurance/Reinsurance Company 114 107 3 Foreign Governmental Agency 86 71 13 Endowment 35 11 24 Foreign Corporate 32 29 2 Central Bank 31 4 26 Charitable Trust 31 27 3 Trustee of a Trust 21 20 (0) University Fund 12 1 10 Insurance 10 10 0 Institutional Portfolio Manager 3 — 3 Foundation 3 1 1 Foreign Individual 2 2 0 Charitable Society 1 1 0 International/Multilateral Organization — — — Others 2 1,511 (1,509) Total FII AUC 13,378 12,857 168 Net FII inflows (Rs bn) 156

Notes: (a) Difference is calculated by normalizing December 2013 asset value for MoM performance. (b) 'AUC' stands for assets under custody.

Source: SEBI, Kotak Institutional Equities

Exhibit 6: Financials have attracted more than 40% of foreign investments in CYTD14 Net FII investments classified into GICS sectors

FII inflows (US$ mn) FII market participation (%) Sectors 1-mo 3-mo CYTD14 CY2013 1-mo 3-mo CYTD14 CY2013 Consumer Discretionary 131 627 720 1,730 8 12 14 9 Consumer Staples 56 160 (16) (525) 4 3 (0) (3) Energy 337 748 849 1,829 21 15 16 9 Financials 509 2,212 2,132 3,435 32 43 41 17 Healthcare 82 (569) (538) 1,863 5 (11) (10) 9 Industrials 178 617 574 2,027 11 12 11 10 Information Technology (82) 219 428 3,157 (5) 4 8 16 Materials 66 190 189 457 4 4 4 2 Telecommunication 100 307 307 418 6 6 6 2 Utilities 133 119 122 2,399 8 2 2 12 Others 80 504 484 3,029 5 10 9 15 Total 1,592 5,139 5,256 20,001 100 100 100 100

Notes: (a) Latest data as on April 30, 2014.

Source: SEBI, Kotak Institutional Equities estimates

6 KOTAK INSTITUTIONAL EQUITIES RESEARCH Strategy India

Exhibit 7: PSU banks have foreign headroom worth ~US$4 bn available in the absence of capital raising Foreign headroom of constituents within the CNX Bank Index

Outstanding Free-float FII limits (%) Available Company Type (mn shares) (%) Total Available Restricted (US$ mn) Axis Bank Private 471 70 62 13 Y NA Bank of Baroda PSU 429 45 20 4 Y NA Bank of India PSU 642 40 20 10 N 319 Canara Bank PSU 461 35 20 11 N 338 Federal Bank Private 855 100 74 33 N 553 HDFC Bank Private 2,401 80 49 15 Y NA ICICI Bank Private 1,155 100 49 9 N 2,642 IndusInd Bank Private 526 85 49 6 Y NA Punjab National Bank PSU 362 45 20 3 Y NA State Bank of India PSU 747 40 20 10 N 3,316 Yes Bank Private 361 75 49 11 N 383 PSU 3,974 Private 4,228

Source: Bloomberg, Kotak Institutional Equities

KOTAK INSTITUTIONAL EQUITIES RESEARCH 7

ATTRACTIVE Banks/Financial Institutions

Chasing Growth - Financial Services MAY 22, 2014 THEME

BSE-30: 24,298

Day 1 takeaways from Chasing Growth - Financial Services conference. We hosted our fifth annual financial services conference today. The recent price action appears to build in a significant amount of optimism about growth and lower impairment ratios for banks. However, discussions with the management and speakers at our conference indicate that the recovery is unlikely to take place soon and growth is more than a few quarters away.

Day 1 – May 21 speakers at Chasing Growth – Financial Services conference

1. Dr KC Chakrabarty - Deputy Governor, Reserve Bank of India

2. Umesh Warmorkar - Senior VP, ARCIL

3. Rajeev Jain - CEO, Bajaj Finance

4. Tamal Bandopadhyay - Deputy Managing Editor, Mint

5. Vishwavir Ahuja - MD and CEO, Ratnakar Bank

6. Naveen Surya - MD, Itz Cash

7. Harshil Doshi – Symantec

Day 1 – May 21 companies at Chasing Growth - Financial Services conference

1. Bajaj Finance

2. Bank of India

3. CDR Cell

4. HDFC

5. IDBI Bank

6. IDFC

7. Kotak Mahindra Bank

8. Syndicate Bank

M.B. Mahesh, CFA [email protected] Mumbai: +91-22-4336-0886

Nischint Chawathe [email protected] Mumbai: +91-22-4336-0887

Geetika Gupta [email protected] Mumbai: +91-22-4336-0888

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.

Banks/Financial Institutions Chasing Growth - Financial Services

DR KC CHAKRABARTY

Deputy Governor, RBI Dr Chakrabarty discussed some interesting points on regulation and its implication on the real world.

If regulation constrains innovation, why do we need regulation? However, regulations are the reality for banks. The cost of non-regulation can be much higher. Lax regulation or no regulation can lead to a disproportionate sharing of costs of a crisis. These costs need to be borne, if so required. The implication is that the cost of intermediation will be higher. This will impact RoE. Investors will need to consider increased costs of doing business and the cost of failure.

Regulations will now be global and individual countries will have much less flexibility. Regulatory capture at the local level will be difficult. Supervision is becoming more critical— rules are important but supervision is even more critical. There will be peer reviews across regulators.

Regulation is crucial for banks. Banks are very special institutions as they (1) do financial intermediation through maturity and liquidity transformation, (2) make payments and settlements and (3) are heavily leveraged. For the third reason, there is significant need for regulation. Interconnectedness of institutions creates its own risk (apart from credit and liquidity risks). The banking business is a matter of public confidence and hence requires regulation.

What have been the big changes in recent times? Quality and quantity of capital are undergoing change. Who gets to decide how risky an asset is? RWA is hence not the best way. A second line of defence is required. That the self-correcting mechanism of the market will take care is a myth that has been exploded. Market-determined risk weights may not be appropriate. The second line of defence is leverage ratio. The importance of liquidity is needs to be well understood as illiquidity can lead to insolvency. Systemic risk (interconnectedness, settlement of counter parties especially in derivative transactions, and shadow banking) are important to understand and regulate. We now have “too big to fail” institutions and they require more capital buffers.

Emerging markets need to think about whether (1) they need to increase capital required or (2) improve risk management (supervisory) capability. An Ideal situation should be a balanced development but the knee-jerk reaction is to increase capital requirement. This has an impact on the return on equity. How the pendulum will move towards balance needs to be seen but banks need to convince regulators that they have better RM capability.

Integrity of transactions (KYC) is becoming important. As governments are financially challenged, they will rely on banks to help to weed out non-tax-paid transactions. This is leading to massive fines (and not just capital requirement).

People who get the benefit of innovation (the bankers) do not pay the cost (which goes to common tax payers). Consumer protection issues are becoming critical—passing on of risks to consumers needs to be checked. Consumer-protection regulators may be the new norm—this will again increase costs for banks.

KOTAK INSTITUTIONAL EQUITIES RESEARCH 9 Chasing Growth - Financial Services Banks/Financial Institutions

UMESH WAMORKAR

Senior VP, ARCIL The US has a market-based approach and capital efficiency is higher there as there are multiple participants and stringent, well-defined laws. India is still in the nascent stage of putting many of these pieces in place. There is a huge disadvantage as most transactions on distressed assets are being resolved through the debt side and less on the equity side.

Arcil is the largest ARC in India, with around `15 bn capital and `90 bn assets under management. The initial management came from various banks. Arcil has recovered around `100 bn of debt.

Arcil acquires NPAs in a trust or scheme. Investors subscribe to security receipts (SRs). FY2013-14 saw a large number of NPLs sold by banks to ARCs. ARCIL participated selectively, considering risk-reward in this segment. The focus of the company has been on generating a higher share of income through debt resolution rather than asset management fees. ARCIL has been a bit more cautious where banks have been selling NPLs through SRs compared to cash as the risk-reward ratio has been poor, given their historical experience.

New regulations have helped ARCs to some extent –(1) FDI in equity of ARCs is permitted up to 100%, (2) FIIs registered with the Securities and Exchange Board of India (SEBI) can invest in SRs up to 74% of each tranche of scheme, (3) NBFCs are also considered QIBs and allowed to invest in SRs (4) QFIs have recently been allowed by the RBI to invest in SRs issued by ARCs.

10 KOTAK INSTITUTIONAL EQUITIES RESEARCH Banks/Financial Institutions Chasing Growth - Financial Services

TAMAL BANDHOPADYAY

Deputy Managing There are three inter-linked issues—(1) bad loans, (2) capital issues and (3) banking sector reforms. The Economist has called the Indian banking system rotten and it calculates 4% of Director, Mint GDP required in cleaning up India’s system—more than what the US had to spend in the GFC.

Both in percentage terms and in absolute terms, the NPA situation is poor with `10-12 tn stuck in bad and restructured assets—with public-sector banks facing the biggest brunt of the crisis. The mood now seems to be that we may be in for a change of scenario—infra assets, which were stuck the most, should get moving now. With a decisive government in place, things should start to look better. Raghuram Rajan is very concerned about the health of banks and hence has been aggressively following up on getting banks’ balance sheets healthier.

The capital base is not growing as much as it should because of NPAs. The RBI’s conservative estimate is (over and above retained profit) `8 tn if credit growth is 20% (this has been around 14% growth yoy in FY2013 and FY2014). Even at 14-15%, there will be requirement of `5 tn. The current net worth is about `6.6 tn (public sector is `4.4 tn). Adding in Basel 2 requirements, there is a lot of capital required to be raised. The current situation of public-sector banks is not conducive to raising capital.

Follow a hands-off policy, says the Nayak Committee. How do you expect banks to perform if you cannot attract talent? Maybe without reducing to below 51%, there will be reform in the way the board and management is run in public-sector banks. Why did it take four years to give out two licenses? The RBI is not very comfortable with giving licenses to companies. However, the RBI is now looking at on-tap licensing and differentiated-banks licenses— hopefully by December this year.

On the macro-economic level, inflation remains enemy number one (both the RBI and the central government agree on this—though the means to resolve this issue is not very clear) even as CAD and FD look manageable. The overall macro-economic scenario is dramatically better than it was last year.

KOTAK INSTITUTIONAL EQUITIES RESEARCH 11 Chasing Growth - Financial Services Banks/Financial Institutions

MR. NAVEEN SURYA

Managing Director, Money is a matter of trust. Many types of monies exist and they provide several opportunities to people who can create trust. The difference between money and currency is Itz Cash that of it being legal tender. Money needs to be durable, portable, divisible, uniform, in controlled supply and acceptable.

Any payment system competes with physical cash. ~90% of retail transactions are still in physical cash but ~90% of corporate payments are now in the e-cash format. The Payment and Settlement Act 2007, implemented in 2010, marked a change and now we are in a growth era on payments. Companies have lapped up RTGS and NEFT and on the consumer side, prepaid cards and wallets have grown dramatically, along with ECS and online payments.

Prepaid cards, in less than seven years, are more than credit cards in India, and payments are more than debit cards. 60-70% of bill payments are still made in cash—the need is to create a biller- and payment-agnostic model. Bharat Bill Payment will create standards for creating bill payments and settlements. Aadhar-linked payment via prepaid cards is a pilot being run.

Retail payments are of two types—(1) those that can be made from anywhere, such as bills, and movie tickets, and (2) those that require physical presence. There is debate on whether telecoms or banks will win. Which device/instrument will win? Most will survive. Depending on the context, many of these will survive and grow. 90% of cash is used by 80% of people in India—(1) people who understand and have access to technology and (2) people who do not have understanding or access. For the latter, ItzCash has created a large outreach (~270,000 outlets).

The question is whether we will move from eMoney to eCurrency.

12 KOTAK INSTITUTIONAL EQUITIES RESEARCH Banks/Financial Institutions Chasing Growth - Financial Services

BAJAJ FINANCE

Key highlights

` Moderate profitability in the medium term. Bajaj Finance’s guidance indicates 3% RoA and 20% RoE in the medium term. Its profitability will decline in the medium term (RoA of 3.8% in FY2013 and 3.3% in FY2014) due to a shifting product mix. In other words, the reduction in RoA/RoE is by design and not due to unforeseen circumstances (like NPLs). The shift in the business mix will help the company to access a larger pool of loans and hence support higher long-term growth.

` Slowdown in consumers, higher growth in business loans. Over the past few quarters, Bajaj Finance has shifted focus on small business loans (likely due to a high base and slowdown in the consumer business)—disbursements of small business loans were up 43% yoy and consumer loans were up 38% yoy in 4QFY14. The management guidance indicates moderate growth (18-20% loan growth) in the medium term due to lower growth in consumer finance; business loans will likely increase to 55-60% of loans in FY2016. While the management guidance indicates growth in commercial loans from 2HFY15, we believe this is contingent on the recovery of the economy.

` Extensive use of technology. Bajaj Finance has used technology extensively across all its products (not just consumer loans). The company offers personal and business loans through digital platforms and wants to eventually launch all its products through digital platforms. The company currently offers 14 products across consumer, business and corporate loans. It has been gradually expanding its product suite over the past six years and proposes to expand the same.

` Term deposits recently launched. Bajaj Finance offers term deposits at 9.65% for three years. The company has mobilized `1.9 bn, which is 1% of its balance sheet in last three months. Thus, the company positions itself as an entity offering full-fledged banking services though in the NBFC format (except CASA deposits).

` Home loans are the latest addition in its product suite. Most home loans are currently made to the self employed—they earn higher yields than loans to the salaried segment. The salaried home-loans segment (dominated by SBI, HDFC and ICICI Bank) is immensely competitive. In order to deliver threshdold RoE of about 12% in this segment, the company will follow three sg\trategies —(1) offers such loans only to the existing customer base (thus saving on the cost of origination); (2) it proposes to cross-sell/ bundle new products (like insurance) along with home loans; and (3) about 90% of the home loans will be securitized, which will boost RoE.

KOTAK INSTITUTIONAL EQUITIES RESEARCH 13 Chasing Growth - Financial Services Banks/Financial Institutions

BANK OF INDIA

Key takeaways

` Key focus for FY2015—(1) loan growth at over 15% levels; (2) focus on improving domestic NIM to 3% from 2.8% in FY2014; (3) gross NPLs to fall to less than 3%; and while the pipeline of restructured loans remains at 2HFY14 levels there is some scope to upgrade as repayment schedules are meeting expectations; and (4) some benefit of operating leverage is likely to be used to expand the business.

` The bank sold `47.4 bn of NPLs this year (`33.4 bn of gross NPLs and `14 bn of prudentially written-off loans). Out of the `33.4 bn of NPLs, `7.7 bn were created in FY2014 and have been adjusted to reported slippages of the current financial year. The management indicated the total sale consideration for NPLs sold was `26.3 bn. The written off loans of `14 bn were sold at `6.2 bn (`3.5 bn of provisions released and `4.3 bn of surplus though has not been adjusted with earnings, so far). It appears the bank partially adjusted some of the gains with losses that occurred while selling the NPLs to ARCs, as net gains that the bank has today is `3 bn.

` BoI continued to grow the loan book aggressively, by 28% yoy, led by strong growth in both domestic (30% yoy) and international loans (26% yoy). The management is less concerned about incremental loans in the corporate portfolio as they were lent to NBFCs and PSUs, where the risk of default is low. The international loan book declined sequentially by 8% as the focus is primarily on improving NIM.

` Capital is a concern but the bank is actively looking at various opportunities and all instruments to augment tier-1 ratio. At this point, the bank believes capital would not be a concern for growth.

14 KOTAK INSTITUTIONAL EQUITIES RESEARCH Banks/Financial Institutions Chasing Growth - Financial Services

CDR CELL

Key takeaways

` A total of 17 cases were referred in 4QFY14, with debt of `223 bn. Total approved cases were 475, with debt of `3,000 bn as of FY2014. CDR expects 500-600 fresh cases to come for restructuring in FY2015. The same number was `1.3 bn in FY2014 and `900 mn in FY2013. Almost half of the freshly referred cased were from the iron and steel and infrastructure sectors, whereas a few years ago a large part used to be from the sugar and textiles sectors.

` Cases once referred to the CDR cell have to be finalized within 180 days, but usually they extend to over 200 days. On average, most cases have a two-year moratorium plus eight years for repayment of debt. However payments are generally backdated. 60% of the payments have taken place in the past 3-4 years.

` About a quarter of the cases are expected to move out of CDR in case of an economic recovery. The success of the cases referred to the CDR cell has been 70% in the past—in periods of an economic recovery, ~70% of cases moved out of the CDR. Companies in the growth/expansion phase generally prefer to pay up and move out of CDR as there are several limitations/restrictions imposed on companies during the process.

KOTAK INSTITUTIONAL EQUITIES RESEARCH 15 Chasing Growth - Financial Services Banks/Financial Institutions

IDBI BANK

Key takeaways

` Growth likely to be constrained by the ability to raise capital. IDBI Bank is slightly short of meeting tier-1 requirements as per Basel-3 norms, the tier-1 ratio being 7.8%. The bank is looking to raise tier-1 capital through AT-1 bonds in FY2015. Inability to raise capital could restrict the bank’s growth to less than 10% yoy.

` Asset sales to ARCs. IDBI sold `13 bn in 4QFY14 and some were sold in 3QFY14. Gross book value of these accounts is `18 bn. However, the management is of the view that the process is only transferring stress from the loan book to the investment book (in the form of security receipts) of banks. The provision of SRs, if any, is subject to the economic condition.

` Employee expenses. None of the employees of the bank is a part of IBA, though salary hikes are generally in line with IBA. The bank made full provisions for changes in the pension table in 4QFY13 itself, when changes were first announced. The average age of the employees is only 33 years, against over 40 years for most other PSU banks.

16 KOTAK INSTITUTIONAL EQUITIES RESEARCH Banks/Financial Institutions Chasing Growth - Financial Services

IDFC

Key takeaways

` PSL loans to be a constraining factor. PSL is the biggest constraint on growth for IDFC at the moment. IDFC would be required to meet the full PSL requirement from March 31, 2017. RoA on RIDF investments, done in case it is unable to meet PSL requirements, is -8%, hence in the interim, IDFC will like to grow only short term loans that can be repaid by March 2017 (but they are difficult to locate in the infrastructure space) or will lend only to the extent that it is able to meet PSL requirements. IDFC is therefore looking to grow in the retail space in the medium term.

` Improvement in asset quality could be a catalyst in the short term. In the context of subdued loan growth in the medium term, improvement in asset quality can be the only positive on current infrastructure loans. IDFC had a total restructured book of `27 bn in FY2014, out of which 75% was in the power sector. Half of the power exposure is to gas-based power plants. IDFC is hopeful of some recovery in the restructured book, in line with improvement in the macro-economic situation. However, it remains worried about its gas-based power exposure, some of the loans of which are yet to be restructured.

` Open to inorganic growth after 2-3 years of operation as a bank. IDFC is open to growing through the inorganic route, but only after 2-3 years of operation as a bank. The bank will begin operations only by October 2015. FY2017 will be the first full year of operations in which IDFC will need to comply with priority-sector requirements. IDFC will, however, need to start complying with SLR and CRR requirements in FY2016.

KOTAK INSTITUTIONAL EQUITIES RESEARCH 17 Chasing Growth - Financial Services Banks/Financial Institutions

SYNDICATE BANK

Key takeaways

` SME and retail to be thrust areas. Syndicate Bank is targeting SME and retail segments for incremental growth in the loan book. Retail loan growth is likely to increase to 25% yoy in FY2015, from only 7% yoy in FY2014, led by housing and gold loans.

` Margins expected to have bottomed out. Margins are likely to have bottomed out at 2.8% in 4QFY14, which was mainly due to high interest reversals, resulting in lower yields on advances. While lending spreads are not expected to improve as the incremental loan book is likely to be driven by housing, low interest reversals from a decline in pace of fresh delinquencies are expected to provide upside to margins. The management highlighted a target of 3% for margin improvement.

` Shift in loan mix in the international book. Most of the current overseas business is inter-bank lending where spreads are very low—35 bps margins. The bank is looking to improve margins to 60 bps by shifting the loan mix towards a higher share of corporate loans, and it has sanctioned some loans in this quarter already. However, the risk weights on corporate loans will be much higher than inter-bank loans.

` Employee costs to increase in FY2015-16E. The bank has not yet adopted the new assumptions in the pension table and provisions for the same will be made over the next two years. The bank is using a salary escalation rate of 5% and discount rate of 8.5% in the pension table. The bank plans to recruit 5,000 employees and another 1,500 will retire in the coming year. The average age of employees is 44 years.

18 KOTAK INSTITUTIONAL EQUITIES RESEARCH

REDUCE Zee Entertainment Enterprises (Z)

Media MAY 22, 2014 RESULT Coverage view: Neutral

Weak results and outlook. Zee reported a large miss on 4QFY14 EBITDA (`3.1 bn, Price (`): 294 13% below estimates) in spite of positive one-offs in the sports business. Non-sports Target price (`): 300 business margin declined sharply on investments in new channels and higher BSE-30: 24,298 programming content (for regional channels). The company’s outlook suggests continued weakness in subscription revenues and core margin with potential growth moderation (from FY2014) in advertising growth. We retain REDUCE (and revise target price to `300, from `260, based on rollover) on valuations.

Company data and valuation summary Zee Entertainment Enterprises Stock data Forecasts/Valuations 2014 2015E 2016E 52-week range (Rs) (high,low)302-208 EPS (Rs) 8.8 10.8 11.0 Market Cap. (Rs bn) 282.0 EPS growth (%) 16.1 23.6 1.5 Shareholding pattern (%) P/E (X) 33.5 27.1 26.7 Promoters 43.1 Sales (Rs bn) 44.2 47.2 54.0 FIIs 47.9 Net profits (Rs bn) 8.4 10.4 10.5 MFs 3.4 EBITDA (Rs bn) 12.0 14.4 14.4 Price performance (%) 1M 3M 12M EV/EBITDA (X) 22.9 18.8 18.3 Absolute 9.9 8.8 20.0 ROE (%) 19.4 20.4 18.4 Rel. to BSE-30 2.9 (7.3) (0.7) Div. Yield (%) 1.0 1.4 1.7

Sports business positively impacted by syndication revenues and masks weakness in core

ZEE’s sports business delivered very strong revenues of `1.9 bn and operating profit of `351 mn. 4QFY14 numbers include the impact of large sports syndication income (~`800 mn in 4QFY14 versus similar levels in FY2013). This positive impact (and related positive EBITDA for 4QFY14) is unlikely to be sustained. We build a yoy decline in losses for FY2015 (on the absence of India cricket matches) and expect reversion to `1 bn levels in FY2016.

Non-sports business—weak on subscription revenues; investments in programming affect margins

` Modest 12% yoy revenue growth, led by strong advertising. ZEE continued to outperform the market in advertising but expects incremental growth to follow market growth (expectation of gradual improvement from 11% growth in FY2014). On the subscription side, the company cited the impact of (1) a strong base (digitization benefits accrued in FY2013), (2) difficulties/delays in passing on price hikes and (3) specific provisions taken (`200 mn for DigiCable). In a scenario of delay in digitization for phase III/IV, the company expects muted growth in subscription revenues in FY2015.

` Sharp decline in margin; may be sustained at current levels. EBIT margin declined to 27% in 4QFY14 from over 30% over the past several quarters on (1) investment in content (increased programming hours for regional channels) and (2) start-up costs for new channels. The company expects such investments to continue (it plans to increase programming hours for ZEE TV and launch more channels such as Zindagi). Due to this, coupled with cost inflation, the

company expects 12-15% growth in content costs in FY2015. Lokesh Garg We retain our REDUCE rating and revise target price to `300 on roll forward to March 2016 [email protected] Mumbai: +91-22-4336-0884 We build in revenue CAGR of 11% over FY2014-16 (advertising 14%; subscription 10%) and Aditya Mongia broadly flattish EBITDA margin (~27%). We retain our REDUCE rating and revise target price to [email protected] `300 (from `260) on roll forward to March 2016 (we broadly retain estimates). Mumbai: +91-22-4336-0883

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.

Media Zee Entertainment Enterprises

Exhibit 1: Results of Zee Entertainment (ZEEL), March fiscal year-ends (` mn)

chg (%) 4QFY14 4QFY14E 4QFY13 3QFY14 4QFY14E 4QFY13 3QFY14 FY2014 FY2013 chg (%) Total revenues 11,588 11,000 9,643 11,884 5 20 (2) 44,217 36,996 20 Advertising revenues 5,824 5,900 4,792 6,843 (1) 22 (15) 23,800 19,639 21 Subscription revenues 4,635 4,950 4,546 4,565 (6) 2 2 18,022 16,234 11 --Domestic subscription 3,344 3,700 3,374 3,322 (10) (1) 1 13,184 11,648 13 --International subscription 1,292 1,250 1,172 1,243 3 10 4 4,839 4,586 6 Others (incl. syndication) 1,129 150 305 476 653 270 137 2,394 1,123 113 Total expenditure (8,472) (7,400) (7,220) (8,976) 14 17 (6) (32,174) (27,453) 17 Cost of revenues (5,444) (4,400) (4,669) (6,095) 24 17 (11) (20,688) (17,401) 19 Employee costs (998) (1,000) (835) (959) (0) 20 4 (3,905) (3,491) 12 SG&A expenses (2,030) (2,000) (1,716) (1,923) 1 18 6 (7,581) (6,561) 16 EBITDA 3,116 3,600 2,423 2,907 (13) 29 7 12,043 9,543 26 OPM (%) 26.9 32.7 25.1 24.5 27.2 25.8 Other income 155 400 538 380 (61) (71) (59) 1,297 1,460 (11) Interest expense (70) (50) (28) (32) 40 147 120 (158) (85) 87 D&A expense (189) (100) (115) (135) 89 65 40 (501) (399) 26 Pretax profits 3,012 3,850 2,818 3,121 (22) 7 (4) 12,680 10,519 21 Extraordinaries - - - - 510 - Tax provision (850) (1,300) (1,014) (985) (35) (16) (14) (4,291) (3,338) 29 Minority interest 14 - (8) (2) 19 14 39 Reported PAT 2,176 2,550 1,796 2,134 (15) 21 2 8,919 7,196 24 Adjusted PAT 2,176 2,550 1,796 2,134 (15) 21 2 8,575 7,196 19 Tax rate (%) 28.2 33.8 36.0 31.6 32.5 31.7

Additional data Zee consolidated Total revenues 11,588 11,000 9,643 11,884 5 20 (2) 44,217 36,996 20 Operating profit 2,927 3,500 2,308 2,773 (16) 27 6 11,541 9,144 26 Entertainment business Total revenues 11,588 9,900 8,571 9,969 17 35 16 39,585 32,036 24 Operating profit 5,883 3,600 2,713 3,814 63 117 54 15,824 10,014 58 Entertainment margin (%) 51 36 32 38 40 31 Sports business Total revenues - 1,100 1,072 1,915 (100) (100) (100) 4,632 4,960 (7) Operating loss (2,956) (100) (405) (1,041) 2,856 630 184 (4,283) (870) 392

Source: Company, Kotak Institutional Equities estimates

Exhibit 2: Market share of the Zee network, 3QFY13-4QFY14 (%)

3QFY13 4QFY13 1QFY14 2QFY14 3QFY14 4QFY14 Weight Zee TV 16 19 17 16 18 18 8.0 Zee Cinema 21 21 20 19 19 18 2.0 Zee Bengali 32 31 31 30 31 32 1.5 Zee B Cinema 7 6 5 4 4 4 1.0 Zee Marathi 29 31 31 34 38 40 1.0 Zee Talkies 10 10 12 12 13 14 0.5 Zee Telugu 16 16 15 17 15 17 2.0 Zee Kannada 14 15 15 12 13 13 1.0 &pictures - - - 2 7 8 1.5 Average 16.1 16.7 16.3 16.4 17.5 18.1 Weighted 16.6 17.8 16.9 16.7 17.8 18.1 Cumulative 308 329 314 309 330 335

Source: TAM Media Research, Kotak Institutional Equities estimates

20 KOTAK INSTITUTIONAL EQUITIES RESEARCH Zee Entertainment Enterprises Media

Exhibit 3: Market share of the Zee network, CY2006-13 (%)

2006 2007 2008 2009 2010 2011 2012 2013 Weight Zee TV 21 27 22 20 18 16 17 18 8.0 Zee Cinema 32 30 29 30 25 25 23 19 2.0 &pictures ------2 1.5 Zee Bengali 21 38 39 27 23 30 31 30 1.5 Zee B Cinema ------2 4 1.0 Zee Marathi 43 45 48 39 36 27 26 36 1.0 Zee Talkies - 4 11 12 10 10 9 12 0.5 Zee Telugu 4 7 13 16 15 15 16 16 2.0 Zee Kannada 3 5 12 12 11 15 16 13 1.0 Average 14 17 19 17 15 15 16 17 Weighted 17.2 21.5 20.6 18.7 16.9 16.0 16.8 17.6 Cumulative 317 397 381 346 312 296 311 325

Source: TAM Media Research, Kotak Institutional Equities estimates

Exhibit 4: Top ad segments in TV and print in India, CY2008-12 (%)

TV Print 2008 2012 2008 2012 Auto 5.6 6.0 6.8 11.4 BFSI 7.7 4.3 8.3 5.7 Fashion/Jewelry 3.2 3.7 5.1 7.1 Corporate 3.6 3.4 3.6 2.2 Education 1.5 1.8 17.1 10.6 FMCG 48.7 54.4 5.8 10.3 Durables 5.3 6.3 6.5 4.9 Media 0.2 0.1 1.9 1.4 Real Estate 3.3 3.7 6.4 8.6 Retail 1.1 0.8 5.5 5.8 Telecom/DTH 13.9 9.4 6.2 4.1 Tourism 0.8 1.4 4.3 2.3 Others 5.1 4.7 22.5 25.6

Source: Pitch Madison 2013 survey, Kotak Institutional Equities

KOTAK INSTITUTIONAL EQUITIES RESEARCH 21 Media Zee Entertainment Enterprises

Exhibit 5: Comparative valuations of media companies, March fiscal year-ends, 2013-16E

21-May-14 Mcap EPS growth (%) P/E (X) Price (Rs) (Rs bn) 2013 2014E 2015E 2016E 2013 2014E 2015E 2016E Dish TV India 53 56 NA NA NA NA NA NA NA 44 DB Corp 268 49 8 36 17 15 23 17 14 13 Jagran Prakashan 110 35 (10) 27 15 13 22 17 16 13 Sun TV Network 412 162 2 0 20 13 23 23 19 17 Zee Entertainment 294 280 27 23 17 1 39 32 27 27

Fair ROE (%) P/B (X) value (Rs) Rating 2013 2014E 2015E 2016E 2013 2014E 2015E 2016E Dish TV India 55 ADDNANANANANANANANA DB Corp 330 ADD 21 25 26 26 4.8 4.2 3.7 3.3 Jagran Prakashan 130 BUY 17 20 20 20 3.7 3.4 3.1 2.9 Sun TV Network 420 ADD 25 23 24 23 5.8 5.3 4.9 4.6 Zee Entertainment 260 REDUCE 22 24 23 18 8.8 7.7 6.7 6.0

EV Yield EV/EBITDA (X) EV/FCFF (X) (Rs bn) (%) 2013 2014E 2015E 2016E 2013 2014E 2015E 2016E Dish TV India 63 NA 11 11 11 9 NA 20 38 26 DB Corp 49 2.1 13 10 9 8 29 19 15 13 Jagran Prakashan 38 1.8 13 10 9 7 21 19 16 15 Sun TV Network 157 2.3 16 16 13 11 36 31 27 24 Zee Entertainment 282 1.1 30 23 20 20 89 58 42 38

Source: Companies, Kotak Institutional Equities estimates

4QFY14 results analysis

` Zee’s sports business delivered very strong revenues of `1.9 bn (+83% yoy) and operating profit of `351 mn. 4QFY14 numbers are not comparable yoy as they include the positive impact of sports syndication from sales of telecast rights of its overseas cricket properties. The management expects the sports business to make losses in FY2015, the fundamental issue being lack of proper subscription monetization and dependence on advertising unlike in other countries.

` Non-sports business (entertainment, new initiatives) delivered modest 12% yoy revenue growth, led by ad growth of over 22% yoy and flattish subscription revenues.

ƒ Advertising growth to fall in line with market. While advertising growth was ahead of the market (grew at 11% in the year), incremental growth would depend on pick-up in advertisement spending (the company does not expect significant market share gains). The company expects advertising growth for television to pick up gradually from current levels (does not anticipate runaway growth over the next 1-2 quarters).

ƒ Subscription revenue to remain sedate. Subscription revenues were up 2% yoy in 4QFY14 at `4.6 bn. The domestic part of it actually declined 1% yoy. Sales were impacted by (1) benefits of digitization in the base (FY2013), (2) difficulties/delays in passing on price hikes and (3) specific provisions taken (`200 mn for DigiCable). In a scenario of delay in digitization for phase III/IV, the company expects muted growth in subscription revenues in FY2015.

22 KOTAK INSTITUTIONAL EQUITIES RESEARCH Zee Entertainment Enterprises Media

ƒ Margins may remain under pressure. Non-sports margins for 4QFY14 declined significantly to 27% from over 30% over the past several quarters. Essentially, the company was impacted by investments made in existing and new channels. The company expects pressure on margin to continue (may remain at these levels) due to (1) continued investments in new channels (Zindagi), (2) increase in programming hours for all channels (15-20% increase), (3) general cost inflation and the impact of the closure of Media-Pro JV (loss of synergy).

` Zee reported a consolidated tax rate of 28% and standalone tax rate of 35% in 4QFY14. The lower consolidated tax rate was possibly due to improved profitability in subsidiaries, which reported a modest 16% tax rate. The volatility in Zee standalone and Zee “rest” financials continued in 4QFY14; Zee attributed this to the sport syndication business in 4QFY14.

Exhibit 6: Zee sports revenue and EBITDA, 4QFY11-14 (` bn)

Sports EBITDA Sports revenue

3.0

2.0 1.8 1.9 1.4 1.6 1.3 1.5 1.1 1.1 1.2 0.9 0.9 0.9 1.0

- 0.4 4QFY11 2QFY12 4QFY12 2QFY13 4QFY13 2QFY14 4QFY14 (0.2) (0.2) (0.1) (0.2) (0.2) (0.1) (0.1) (0.2) (0.4) (0.6) (0.6) (1.5) (1.0)

Source: Company, Kotak Institutional Equities

KOTAK INSTITUTIONAL EQUITIES RESEARCH 23 Media Zee Entertainment Enterprises

Exhibit 7: ZEEL's non-sports revenues and operating margins, 4QFY11-14

(Rs bn) Zee non-sports revenues (LHS, Rs bn) Zee non-sports margins (RHS, %) (%) 10.0 50

8.0 40 38 38 35 33 34 34 32 33 31 32 33 6.0 30 29 30 27

4.0 20

2.0 10 6.6 6.5 6.1 6.4 6.8 7.1 7.4 7.7 8.3 8.6 8.6 9.3 10.0 9.6 - - 3QFY11 4QFY11 1QFY12 2QFY12 3QFY12 4QFY12 1QFY13 2QFY13 3QFY13 4QFY13 1QFY14 2QFY14 3QFY14 4QFY14

Source: Company, Kotak Institutional Equities

Exhibit 8: ZEEL's non-sports revenues and operating cost growth, 3QFY11-14 (%)

Non-sports revenue growth Non-sports operating cost growth 40

30

20

10

- 4QFY11 2QFY12 4QFY12 2QFY13 4QFY13 2QFY14 4QFY14

Source: Company, Kotak Institutional Equities

Exhibit 9: Zee's new initiatives, March fiscal year-ends, 2012-14

Initiative Launch Comments Ten Golf 4QFY12 Niche golf channel Ditto TV 4QFY12 Internet/OTT TV Zee Cinema Bangla 2QFY13 Bangla film channel Zee Alwan 2QFY13 Arabic GE channel ZeeQ 3QFY13 Niche kids channel &pictures 2QFY14 Hindi film channel Zee Anmol 2QFY14 Hindi GE repeat channel Zee Film Hindi 3QFY14 Arabic film channel Zee Bioskop 3QFY14 Bahasa film channel

Source: Company, Kotak Institutional Equities

24 KOTAK INSTITUTIONAL EQUITIES RESEARCH Zee Entertainment Enterprises Media

Exhibit 10: Zee’s amortization policy across program types

Program Amortization policy Reality shows, chat shows, events, current affairs, game Non-Fiction shows and sports rights are fully expensed on telecast Film rights are amortized on a straight-line basis over the Films licensed period or 60 months from the commencement of rights, whichever is shorter. Programs (other than above) are amortized over 3 years, Fiction starting from the year of first telecast as per management estimate of future potential (80:10:10 as per company).

Source: Company, Kotak Institutional Equities

Exhibit 11: Hindi films premiered on the Zee network, 1QFY12-4QFY14

1QFY12 2QFY12 3QFY12 4QFY12 Shaitaan No Problem Bbuddah Hoga… Don2 Pyar ka Punchnama Shagird Double Dhamaal Desi Boyz Chalo Dilli Bin Bulaye Baraati Players 1QFY13 2QFY13 3QFY13 4QFY13 Agneepath Agent Vinod English Vinglish NA My Friend Pinto Joker 1QFY14 2QFY14 3QFY14E 4QFY14 Race 2 Barfi Chennai Express Besharam Kai Po Che ABCD Phata Poster… Zanjeer Heroine Himmatwala Ghanchakkar Ramaiya Vastavaiya

Source: Company, Kotak Institutional Equities

KOTAK INSTITUTIONAL EQUITIES RESEARCH 25 Media Zee Entertainment Enterprises

Exhibit 12: Trends in Zee content inventory, March fiscal year-ends, 2010-14 (` bn)

Zee Entertainment Zee Entertainment

15 11.7 12 8.7 9 7.3 5.4 6 4.7

3

- 2010 2011 2012 2013 2014

Source: Company, Kotak Institutional Equities

Exhibit 13: Zee subscription revenue growth, March fiscal year-ends 2011-14 (%)

Subscription growth Domestic subscription growth 50 44

37 40 33 26 30 23 36 22 21 29 19 20 26 12 12 19 16 16 16 10 14 11 (1) - 6 2QFY12 4QFY12 2QFY13 4QFY13 2QFY14 4QFY142 (10)

Source: Company, Kotak Institutional Equities

Exhibit 14: Key financials of ZEEL, consolidated and standalone (` mn)

ZEEL consolidated ZEEL standalone ZEEL "rest" 4QFY14 3QFY14 4QFY13 4QFY14 3QFY14 4QFY13 4QFY14 3QFY14 4QFY13 Revenues 11,588 11,884 9,643 7,485 8,504 6,867 4,103 3,380 2,776 Op. expenses 8,472 8,976 7,220 5,412 6,247 4,256 3,061 2,729 2,965 EBITDA 3,116 2,907 2,423 2,073 2,257 2,611 1,043 651 (188) EBITDA margin (%) 26.9 24.5 25.1 27.7 26.5 38.0 25.4 19.3 (6.8) Pre-tax profits 3,012 3,121 2,818 2,095 2,464 2,812 917 658 6 Tax provision (850) (985) (1,014) (731) (880) (975) (119) (105) (40) Reported PAT 2,162 2,136 1,804 1,364 1,584 1,837 798 552 (34) Tax rate (%) 28.2 31.6 36.0 34.9 35.7 34.7 13 16 652

Notes: (a) ZEEL "rest" primarily comprises sports and overseas operations.

Source: Company data, Kotak Institutional Equities

26 KOTAK INSTITUTIONAL EQUITIES RESEARCH

ATTRACTIVE Telecom

India MAY 22, 2014 UPDATE

BSE-30: 24,298

India wireless 4QFY14 round-up—volumes rebound well, mixed bag on RPM. The March 2014 quarter was a reasonably strong one for GSM incumbents on balance; the pause in voice RPM uptick was more than mitigated by robust voice volume growth and sustained strength on the data side. The overall price/volume/margin equation drove healthy EBITDA growth for the incumbents. We continue to be constructive on Bharti and Idea, risks from Rel-Jio’s imminent entry notwithstanding.

Top three composite revenue growth a healthy 12.5% yoy; healthy EBITDA performance

Sequential revenue growth for the top three combined accelerated marginally to 4% qoq—Idea reported the strongest 5.3% qoq topline growth, Bharti grew 4.1% and Vodafone 3%. Yoy revenue growth for the incumbents was a healthy 12.5%, sustaining momentum gained over the past four quarters; the incumbents ended FY2014 with yoy revenue growth of nearly 14%, despite significant pressure on VAS and SMS revenues (partly impacted by adverse regulatory changes). Voice revenues for the composite grew 12.6% yoy in FY2014, a combination of 7.5% volume growth and around 4.8% jump in voice RPM. Pure data revenue growth was a robust 87.5% due to strong 111% data volume growth even as realization per MB fell around 11% yoy. SMS/VAS revenues for the composite declined nearly 18% yoy. We expect revenue growth to accelerate marginally in FY2015 as drag from this revenue stream subsides a tad.

Within the incumbent pack, Idea reported the strongest growth (+5.3% qoq, +16% yoy), continuing to gain market share. Our channel checks indicate that Idea sustained its strong relative performance in the current quarter as well.

Strong RPM improvement-led revenue growth aided healthy EBITDA growth of 25% yoy in FY2014 for GSM incumbents combined. Composite EBITDA margins expanded 270 bps yoy to around 31%.

A quick look at Vodafone’s and Uninor’s 4QFY14 performance

` Vodafone. Wireless revenues were up 3% qoq and 12% yoy at `94.2 bn; sequential revenue growth was the weakest among incumbents. Revenue growth was led by around 2.8% growth in voice revenues (+3.7% volume, voice RPM down 0.8% qoq) and 12.4% qoq in data revenues (in line with Bharti and Idea). Data volumes grew a healthy 24% and 132% yoy to 32.7 bn MB. EBITDA margin expanded by a modest 60 bps in 2HFY14 over 1HFY14. Vodafone India turned PAT-positive for the first time under Vodafone’s parentage. The company spent `70 bn on capex (ex-spectrum) in FY2014, a jump of 48% yoy. We note that Vodafone had

indicated accelerated capex spending over FY2014-17 to catch up on voice coverage with Bharti as well as building an all-IP core network. ` Uninor. Uninor continues to pursue its chosen ‘discounting’ positioning successfully in the market, even as one can question its sustainability in the long run. The company reported a healthy 12% qoq and 36% yoy growth in revenue in 4QFY14 to `9.3 bn. Revenue growth was led by voice volumes which grew by a robust 14% qoq and 34% yoy. More than the

percentage growth (which benefits from a low base), Uninor’s success can be gauged from the absolute voice traffic addition—at +10 bn yoy, it compares favorably with Bharti’s 12 bn, Rohit Chordia Vodafone’s 11 bn, and Idea’s 14 bn. The company now boasts higher MOU in the market at [email protected] Mumbai: +91-22-4336-0885 463 min/sub/month in 4QFY14. At half the RPM levels (23 paise/min in 4QFY14) of the leading incumbents (44-46 paise/min), the company continues to make losses at the EBITDA level; Shyam M. [email protected] however, EBITDA losses are reducing sequentially. Mumbai: +91-22-4336-0862

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.

India Telecom

Some thoughts on data KPIs

We discuss some trends in various data KPIs (see Exhibit 2). ` Data revenues grew 12-13% qoq and 67-89% yoy for the three incumbents as strong data volume growth momentum was sustained. Data volumes grew a healthy 20-31% qoq and 95-139% yoy for the three majors. ` Strong per-user volume growth. Data usage per customer grew by around 50% yoy for both Bharti and Vodafone. Idea’s change in definition of active data subs made comparison on a per-user metrics meaningless. ` 3G shift is not impacting 2G data volume growth, despite natural cannibalization. 2G volumes are displaying healthy growth trends as well—encouraging as heavy users of 2G data form the 3G-upshift base for the future. Idea is the only player that discloses 2G and 3G data KPIs in detail separately—Idea saw a strong 130% yoy growth in 2G data volumes in 4QFY14, in line with overall data volume growth of 139% yoy. ` Sustained investments on 3G. The three incumbents continue to aggressively expand their 3G network footprint, having upgraded 19-22% of their pan-India 2G cell-site base to 3G. We note that this number appears optically low given that none of these players has pan-India 3G spectrum footprint. ` Data realizations fell sharply (6-15% qoq) for the three incumbents in 4QFY14. We note that part of the realization fall is optical given that it reflects customers moving up to larger packs (which have lower realizations) even as there have been some like-on-like competition-induced price cuts as well on select packs in select circles.

Exhibit 1: Key data KPIs for Bharti and Vodafone

Sep-12 Dec-12 Mar-13 Jun-13 Sep-13 Dec-13 Mar-14 Bharti Data (2G & 3G) KPIs Total data subs ('000s) 40,600 41,480 43,490 46,584 50,631 54,429 58,078 As % of total subs 21.8 22.8 23.1 24.4 26.2 27.4 28.3 ARPU (Rs/sub/month) 43 47 55 63 70 75 79 Total volumes (mn MB) 15,879 19,777 23,937 27,271 33,630 38,960 46,690 Realization per MB (paise) 32.4 29.3 29.3 31.0 30.3 30.1 28.4 Implied data revenue (Rs mn) 5,141 5,799 7,005 8,445 10,176 11,741 13,252 As % of India wireless revenues 4.9 5.7 6.5 7.4 9.2 10.3 11.1 Usage per customer (MB) 133 161 187 203 231 249 277 3G KPIs 3G subs ('000s) 4,014 5,187 6,391 6,796 8,015 9,485 10,982 As % of total data subs 9.9 12.5 14.7 14.6 15.8 17.4 18.9 3G BTS 20,333 22,515 24,573 25,604 26,616 28,179 31,301 As % of total BTS 15.7 17.1 18.4 19.0 19.7 20.6 22.6 Vodafone (a) Data (2G & 3G) KPIs Total data subs ('000s) 32,000 33,100 37,300 41,200 42,500 45,700 52,000 As % of total subs 21.0 22.4 24.5 26.6 27.3 28.5 13,549.5 ARPU (Rs/sub/month) 48 53 57 63 65 68 Total volumes (mn MB) 10,378 12,166 14,121 17,803 22,481 26,430 32,739 Usage per customer (MB) 117 134 143 150 196 200 223 Realization per MB (paise) 41.0 39.0 40.0 40.0 33.0 34.6 436.1 3G KPIs 3G subs ('000s) 2,100 2,500 3,300 3,700 4,500 5,200 7,000 As % of total data subs 6.6 7.6 8.8 9.0 10.6 11.4 13.5 3G BTS 15,500 17,600 22,400 As % of 2G BTS 13.3 14.9 18.7

Source: Companies, Kotak Institutional Equities

28 KOTAK INSTITUTIONAL EQUITIES RESEARCH Telecom India

Exhibit 2: Key data KPIs for Idea

Sep-12 Dec-12 Mar-13 Jun-13 Sep-13 Dec-13 Mar-14 Idea Data (2G & 3G) KPIs Total data subs ('000s) 18,918 21,754 26,219 30,906 33,618 25,522 25,256 As % of total subs 16.1 18.8 23.0 25.4 26.9 20.1 19.6 ARPU (Rs/sub/month) 50 52 55 54 55 91 104 Total volumes (TB) 8,744 10,040 11,421 13,791 17,452 20,840 27,299 Realization per MB (paise) 31.7 30.5 33.9 33.5 31.0 29.6 25.3 Implied data revenue (Rs mn) 2,772 3,062 3,872 4,620 5,410 6,169 6,907 % of subs base with smartphones 7.0 8.0 8.7 10.0 11.7 12.7 3G KPIs 3G subs ('000s) 3,700 4,100 5,100 5,500 6,200 8,700 10,200 As % of total data subs 19.6 18.8 19.5 17.8 18.4 34.1 40.4 3G ARPU (Rs/sub/month) 87 97 105 109 116 112 111 3G data volumes (mn MB) 4,079 4,512 5,231 6,334 7,578 9,469 13,084 3G BTS 14,467 15,545 17,140 17,481 18,031 19,904 21,381 As % of total BTS 16.9 17.7 19.0 19.0 18.8 19.6 20.4

Note: (a) Idea changed the definitio of 'data subs' in Dec 2013 as well as Mar 2014 quarters.

Source: Company, Kotak Institutional Equities

Exhibit 3: India wireless metrics - comparison for key players (1)

4QFY14 Jun-12 Sep-12 Dec-12 Mar-13 Jun-13 Sep-13 Dec-13 Mar-14 qoq (%) yoy (%) Wireless revenues (Rs mn) Bharti 102,092 99,760 102,473 107,219 113,727 110,586 114,337 119,045 4.1 11.0 Vodafone (a) 78,680 77,666 79,237 84,102 90,372 88,980 91,468 94,167 3.0 12.0 Idea 53,890 51,798 54,387 59,067 64,404 61,869 64,980 68,440 5.3 15.9 Uninor 9,451 7,812 7,422 6,823 6,998 7,189 8,327 9,306 11.8 36.4 Voice revenues (Rs mn) Bharti 85,446 82,995 84,703 88,584 93,999 92,299 94,654 98,392 3.9 11.1 Vodafone (a) 69,161 67,344 68,311 71,257 76,616 75,923 77,051 79,243 2.8 11.2 Idea 46,076 43,718 46,446 50,089 54,099 51,908 54,518 57,147 4.8 14.1 Non-voice revenues (Rs mn) Bharti 16,646 16,765 17,770 18,636 19,728 18,287 19,683 20,653 4.9 10.8 Vodafone (a) 9,518 10,322 10,927 12,845 13,756 13,058 14,417 14,924 3.5 16.2 Idea 7,814 8,081 7,940 8,978 10,305 9,961 10,462 11,293 7.9 25.8 Data revenues Bharti 4,436 5,141 5,799 7,005 8,445 10,176 11,741 13,252 12.9 89.2 Vodafone (a) 4,013 4,427 4,913 6,019 7,065 8,161 8,917 10,024 12.4 66.5 Idea 2,353 2,772 3,062 3,872 4,620 5,410 6,169 6,907 12.0 78.4 EBITDA margin (%) Bharti 29.9 30.7 29.2 30.6 32.4 33.5 34.1 34.9 Idea 23.3 23.6 23.5 26.0 28.6 27.6 27.4 28.2 Uninor (50.3) (61.5) (54.8) (27.1) (14.5) (19.3) (13.4) (9.0) Vodafone (half-yearly) (a) 28.0 28.9 29.1 29.7 Network traffic (bn minutes) Bharti 239.3 234.2 240.8 253.1 258.4 251.3 255.0 264.8 3.8 4.6 Vodafone (a) 188.3 181.8 185.5 195.5 200.5 195.5 199.0 206.5 3.7 5.6 Idea 130.9 125.6 132.2 143.4 147.3 138.8 144.6 157.1 8.6 9.5 Uninor 32.7 46.7 31.1 30.3 30.7 32.9 35.8 40.7 13.6 34.1

Source: Companies, Kotak Institutional Equities estimates

KOTAK INSTITUTIONAL EQUITIES RESEARCH 29 India Telecom

Exhibit 4: India wireless metrics - comparison for key players (2)

4QFY14 Jun-12 Sep-12 Dec-12 Mar-13 Jun-13 Sep-13 Dec-13 Mar-14 qoq (%) yoy (%) RPM (Rs/min) Bharti 0.427 0.426 0.426 0.424 0.440 0.440 0.448 0.449 0.3 6.1 Vodafone (a) 0.418 0.427 0.427 0.430 0.451 0.455 0.460 0.456 (0.8) 6.0 Idea 0.412 0.412 0.411 0.412 0.437 0.446 0.449 0.436 (3.0) 5.8 Uninor 0.289 0.167 0.239 0.225 0.228 0.219 0.233 0.229 (1.6) 1.7 Voice RPM (Rs/min) Bharti 0.357 0.354 0.352 0.350 0.364 0.367 0.371 0.372 0.1 6.2 Vodafone (a) 0.367 0.371 0.368 0.365 0.382 0.388 0.387 0.384 (0.9) 5.3 Idea 0.352 0.348 0.351 0.349 0.367 0.374 0.377 0.364 (3.5) 4.1 ARPU (Rs/sub/month) Bharti 185 177 185 193 200 192 195 196 0.9 1.8 Vodafone 174 169 176 187 196 191 193 192 (0.5) 2.7 Idea 156 148 158 167 174 164 169 173 2.4 3.6 Uninor 97 83 88 90 97 95 103 106 3.1 17.5 MOU (min/sub/month) Bharti 433 417 435 455 455 437 434 437 0.6 (4.1) Vodafone (a) 413 395 412 435 435 420 420 421 0.2 (3.1) Idea 379 359 384 405 398 368 376 397 5.6 (2.1) Uninor 334 496 371 401 426 434 442 463 4.8 15.5 End-period subs (mn) Bharti 187 186 182 188 191 193 199 206 3.5 9.2 Vodafone 154 153 147 152 155 156 160 167 3.8 9.3 Idea 117 115 114 122 125 127 129 136 5.5 11.7 Uninor 46 42 42 32 32 32 33 36 8.6 12.4 Quarter net adds (mn) Bharti 6.0 (1.4) (4.0) 6.3 2.7 2.5 5.1 7.0 Vodafone 3.2 (1.0) (5.2) 4.9 2.7 0.5 4.9 6.2 Idea 4.4 (1.7) (1.5) 7.7 3.4 2.3 1.5 7.1 Uninor 3.1 (3.4) (0.6) (9.8) 0.6 0.1 0.4 2.8 Monthly churn (%) Bharti 8.8 8.5 5.9 3.2 3.2 3.2 2.7 2.4 Vodafone 6.1 6.3 5.3 3.9 4.1 4.4 3.8 3.6 Idea 9.9 10.1 6.9 4.3 5.1 5.3 5.6 4.2

Notes: (1) Some of the Vodafone operating metrics are KIE estimates.

Source: Companies, Kotak Institutional Equities estimates

30 KOTAK INSTITUTIONAL EQUITIES RESEARCH 31 31

March 2014: Results calendar Mon Tue Wed Thu Fri Sat Sun 19-May 20-May 21-May 22-May 23-May 24-May 25-May JUBL FOOD Aditya Birla Nuv Mahindra Ugine Ashok Leyland BGR Energy D B REALTY Reliance Infra AIA Engineering NIIT Cummins India Colgate Palmolive Chennai Petro Reliance Pow er Care Texmaco Infra Gujarat State Pet Engineers India Divis Lab Specular Mktg Mangalore Ref Texmaco Rail & Engg IRB Inf ra HDIL Force Motors TBZ Muthoot Cap UCO Bank JK Lakshmi Cem ITC Maharashtra Seam Pidilite Inds Zee Entert Jyothy Lab Lanco Infra PTC India Punj Lloyd ZEEMEDIA Motherson Sumi Neyveli Lignite VA Tech Wabag Novartis India SBI PC Jew eller Shree Renuka Sug Sobha Dev SREI Infra Sun TV Netw ork 26-May 27-May 28-May 29-May 30-May 31-May 1-Jun Britannia Inds Bharat Forge Aban Offshore Bajaj Elect Astrazeneca Phar Canara Bank Bombay Dyeing Amara Raja BHEL Berger Paints City Union Bank Container Corp Apollo Hosp BPCL Bharat Elect Educomp Sol Dish TV India BEML Coal India L&T Gail India Everest Kanto Dishman Pharma Crompton Greav Mahindra & Mahindra Hathw ay Bhaw ani Inox Leisure Godrej Inds Fortis Healthcare Monsanto India India Cements Jaiprakash Asso Havells India GMR Infra NMDC JUBILANT Jet Air India Hero MotoCorp GVK Pow er Religare Enter Muthoot Fin JSW Steel HPCL HATHWAY CAB Tata Chemicals Prestige Estates Netw ork18 Media Indraprastha Gas Hindalco Inds REC OIL INDIA Karur Vysya Bank Indian Oil Corp 2014India DailySummary-May22, Wockhardt Pow er Finance Max India IPCA Lab Shipping Corp National Alum MMTC Shriram Epc PHOENIX MILL ONGC Thermax Pidilite Inds Page Inds Tide Water Ramky Infra Pow er Grid Corp TV18 Broadcast TATAGLOBAL PVR

KOTAK INSTITUTIONAL EQUITIES RESEARCH Unitech Sun Pharma Tata Motors Tata Pow er Voltas

Source: BSE, NSE, Kotak Institutional Equities

KOTAK INSTITUTIONAL EQUITIES RESEARCH Kotak Institutional Equities: Valuation summary of KIE Universe stocks India Daily2014India Summary-May22,

O/S Target ADVT- 21-May-14 Mkt cap. shares EPS (Rs) EPS growth (%) PER (X) EV/EBITDA (X) Price/BV (X) Dividend yield (%) RoE (%) price Upside 3mo Company Price (Rs) Rating (Rs mn) (US$ mn) (mn) 2014E 2015E 2016E 2014E 2015E 2016E 2014E 2015E 2016E 2014E 2015E 2016E 2014E 2015E 2016E 2014E 2015E 2016E 2014E 2015E 2016E (Rs) (%) (US$ mn) Automobiles Amara Raja Batteries 395 ADD 67,462 1,150 171 22.6 24.3 28.7 34.9 7.4 18.1 17.4 16.2 13.8 11.0 10.0 8.6 5.0 4.0 3.3 1.1 1.2 1.5 32.0 27.4 26.3 410 3.8 1.7 Apollo Tyres 183 BUY 92,248 1,573 504 19.9 21.5 22.7 63.7 8.0 5.6 9.2 8.5 8.1 5.4 5.1 4.6 1.9 1.6 1.3 0.4 0.5 0.5 26.0 22.2 19.3 220 20.2 15.7 Ashok Leyland 29 SELL 77,027 1,313 2,661 (2.9) (1.4) 0.2 (636.7) 51.0 115.5 (10.0) (20.3) 131.4 (129.8) 37.1 14.1 1.8 2.0 2.0 — — 0.3 (20.2) (14.6) 2.4 15 (48.2) 6.5 Bajaj Auto 1,961 BUY 567,557 9,677 289 112.1 129.1 147.2 6.6 15.2 14.1 17.5 15.2 13.3 13.7 12.1 10.9 5.8 4.8 4.1 2.5 2.6 3.0 36.6 34.9 33.2 2,400 22.4 10.5 Bharat Forge 489 SELL 116,123 1,980 237 17.4 22.2 27.3 66.8 27.5 22.9 28.1 22.1 17.9 11.5 10.6 9.1 4.5 3.9 3.3 0.6 0.8 1.0 16.7 18.9 19.9 365 (25.4) 6.4 Eicher Motors 7,266 REDUCE 196,477 3,350 27 145.7 236.6 334.8 21.3 62.4 41.5 49.9 30.7 21.7 25.6 18.0 12.0 9.6 7.5 5.7 0.4 0.3 0.4 19.2 25.4 28.3 6,150 (15.4) 3.3 Exide Industries 135 ADD 115,048 1,962 850 5.8 6.5 8.3 (6.2) 12.7 27.4 23.5 20.8 16.3 13.9 13.1 10.7 3.1 2.8 2.5 1.3 1.2 1.6 13.7 14.1 16.1 135 (0.3) 5.3 Hero Motocorp 2,341 REDUCE 467,448 7,970 200 102.6 135.0 159.8 (3.3) 31.6 18.3 22.8 17.3 14.6 16.1 12.0 10.0 6.9 5.6 4.6 1.3 2.0 2.4 35.3 37.1 35.4 2,050 (12.4) 11.8 Mahindra & Mahindra 1,150 BUY 646,584 11,025 562 63.7 71.0 80.7 1.1 11.4 13.8 18.1 16.2 14.2 12.7 11.2 9.9 3.7 3.3 2.9 1.5 1.7 1.8 20.3 20.1 19.5 1,200 4.3 21.4 Maruti Suzuki 2,169 BUY 655,272 11,173 302 92.8 111.8 155.1 17.1 20.6 38.7 23.4 19.4 14.0 13.5 11.3 7.8 3.0 2.7 2.3 0.6 0.6 0.8 13.8 14.7 17.6 2,500 15.2 18.7 Motherson Sumi Systems 287 ADD 253,046 4,315 882 7.3 13.0 17.1 44.9 77.5 32.2 39.3 22.1 16.7 11.6 7.8 5.8 8.4 5.8 4.2 0.8 1.4 1.8 30.4 33.1 29.1 265 (7.6) 6.7 Tata Motors 437 ADD 1,406,038 23,974 3,218 44.8 54.9 65.3 45.7 22.5 19.1 9.8 8.0 6.7 4.7 4.2 3.6 2.5 1.9 1.5 — — — 30.3 27.2 24.9 450 3.0 38.0 Automobiles Attractive 4,660,329 79,461 21.9 20.3 21.8 15.8 13.2 10.8 8.3 7.0 5.8 3.5 2.8 2.3 0.9 1.0 1.2 22.0 21.6 21.5 146.0 Banks/Financial Institutions Axis Bank 1,815 ADD 852,830 14,541 470 132.3 143.2 163.6 19.6 8.2 14.2 13.7 12.7 11.1 — — — 2.3 2.0 1.7 1.1 1.4 1.5 17.4 16.4 16.5 1,970 8.5 78.8 Bajaj Finserv 881 BUY 140,105 2,389 159 96.9 92.5 95.0 (6.3) (4.5) 2.6 9.1 9.5 9.3 — — — 1.5 1.4 1.2 1.5 1.5 1.5 18.0 15.1 13.9 950 7.9 1.1 Bank of Baroda 934 ADD 402,406 6,861 431 105.4 111.8 146.4 (0.6) 6.1 30.9 8.9 8.4 6.4 — — — 1.3 1.2 1.0 2.3 2.4 3.2 13.8 13.1 15.3 1,050 12.4 32.4 Bank of India 307 ADD 197,530 3,368 643 42.4 61.6 67.1 (7.9) 45.0 8.9 7.2 5.0 4.6 — — — 0.9 0.8 0.7 1.6 2.4 2.6 11.2 14.2 13.7 320 4.2 22.4 Canara Bank 406 REDUCE 187,248 3,193 461 52.9 66.0 83.8 (18.5) 24.9 26.9 7.7 6.2 4.8 — — — 0.8 0.7 0.6 2.8 3.5 4.5 8.9 9.9 11.6 360 (11.3) 20.7 Cholamandalam 346 ADD 49,554 845 143 25.6 31.1 38.2 19.7 21.3 22.8 13.5 11.1 9.1 — — — 2.2 2.0 1.7 1.1 1.4 1.7 17.3 18.2 19.1 345 (0.3) 0.6 City Union Bank 69 BUY 37,142 633 538 5.8 7.2 8.4 (14.7) 24.1 16.3 11.9 9.6 8.3 — — — 1.9 1.7 1.4 1.2 1.5 1.8 17.0 17.6 17.7 75 8.6 1.2 DCB Bank 72 BUY 17,986 307 250 6.0 7.0 8.1 48.2 16.0 16.1 11.9 10.2 8.8 — — — 1.7 1.5 1.3 — — — 14.8 14.8 14.8 80 11.3 1.3 Federal Bank 119 BUY 101,873 1,737 855 10.0 11.9 14.6 2.0 18.9 23.2 11.9 10.0 8.1 — — — 1.5 1.4 1.2 1.7 2.0 2.5 12.8 13.8 15.2 130 9.1 7.6 HDFC 941 ADD 1,468,040 25,031 1,561 34.9 40.1 46.0 11.2 15.0 14.9 27.0 23.5 20.4 — — — 5.3 4.7 4.2 1.5 1.7 2.0 20.6 21.1 21.6 960 2.0 49.2 HDFC Bank 810 REDUCE 1,942,031 33,112 2,399 35.3 44.0 52.7 25.0 24.4 19.8 22.9 18.4 15.4 — — — 4.5 3.8 3.2 0.8 1.0 1.2 21.3 22.2 22.3 780 (3.6) 32.1 ICICI Bank 1,441 BUY 1,663,893 28,370 1,155 84.9 92.9 106.5 17.7 9.4 14.6 17.0 15.5 13.5 — — — 2.3 2.1 1.9 1.6 1.9 2.2 14.0 14.0 14.6 1,650 14.5 88.3 IDFC 132 ADD 199,858 3,408 1,512 11.8 10.2 12.1 (2.5) (13.7) 18.8 11.2 12.9 10.9 — — — 1.3 1.2 1.1 1.7 1.5 1.7 12.6 9.9 10.9 140 5.9 25.6 IIFL Holdings 102 ADD 30,967 528 304 9.4 10.1 11.3 2.0 7.1 12.3 10.8 10.1 9.0 — — — 1.4 1.3 1.1 2.9 1.7 1.9 14.2 14.5 14.2 100 (2.0) 0.3 IndusInd Bank 560 ADD 294,385 5,019 526 26.8 30.1 36.3 32.0 12.5 20.5 20.9 18.6 15.4 — — — 3.4 3.0 2.6 0.7 0.8 1.0 17.5 16.7 17.5 610 8.9 17.6 ING Vysya Bank 630 BUY 116,495 1,986 185 35.6 42.8 51.4 (10.1) 20.3 20.0 17.7 14.7 12.3 — — — 1.7 1.5 1.4 1.0 1.1 1.4 11.4 10.9 11.9 720 14.2 1.9 J&K Bank 1,820 REDUCE 88,264 1,505 48 243.9 226.8 222.5 12.1 (7.0) (1.9) 7.5 8.0 8.2 — — — 1.6 1.4 1.2 2.7 2.6 2.5 22.3 17.9 15.5 1,800 (1.1) 1.9 Karur Vysya Bank 436 ADD 46,720 797 107 32.1 63.3 76.4 (37.5) 97.5 20.6 13.6 6.9 5.7 — — — 1.5 1.3 1.1 1.8 3.6 4.4 10.7 19.0 20.0 475 9.0 1.3 LIC Housing Finance 322 ADD 162,543 2,771 505 26.1 31.1 35.0 28.8 19.1 12.8 12.3 10.4 9.2 — — — 2.2 1.9 1.7 1.4 1.7 1.9 18.8 19.2 18.6 350 8.7 17.8 L&T Finance Holdings 73 SELL 125,606 2,142 1,715 4.9 5.4 6.6 14.5 11.0 21.5 15.0 13.6 11.2 — — — 1.9 1.7 1.6 — — — 13.7 13.3 14.7 60 (18.1) 14.9 Magma Fincorp 91 BUY 17,376 296 190 7.2 9.5 10.5 15.6 32.8 10.6 12.8 9.6 8.7 — — — 1.2 1.1 1.0 1.3 1.6 1.8 9.7 11.2 11.8 115 25.8 0.1 Mahindra & Mahindra Financial 285 SELL 160,485 2,736 564 15.7 19.1 22.2 0.4 21.1 16.4 18.1 14.9 12.8 — — — 3.3 2.8 2.4 1.3 1.6 1.8 18.6 19.6 19.8 240 (15.7) 9.8 Oriental Bank of Commerce 319 ADD 95,517 1,629 300 38.0 49.3 57.3 (16.5) 29.8 16.2 8.4 6.5 5.6 — — — 1.0 1.0 0.9 2.4 3.1 3.6 9.0 11.3 12.1 350 9.9 8.8 PFC 295 ADD 389,202 6,636 1,319 41.5 42.8 46.2 23.7 3.3 7.8 7.1 6.9 6.4 — — — 1.4 1.5 1.3 2.9 3.0 3.3 20.9 18.6 17.5 260 (11.9) 14.1 Punjab National Bank 986 REDUCE 357,164 6,090 362 82.5 136.6 174.2 (38.6) 65.6 27.5 12.0 7.2 5.7 — — — 1.3 1.1 1.0 1.0 1.7 2.1 9.1 13.5 15.2 1,000 1.4 24.0 Rural Electrification Corp. 327 ADD 323,123 5,509 987 47.8 48.5 52.2 23.5 1.5 7.7 6.9 6.7 6.3 — — — 1.6 1.4 1.3 2.6 2.9 3.4 24.4 20.8 19.2 300 (8.3) 9.5 Shriram City Union Finance 1,390 NR 82,213 1,402 59 76.5 94.0 107.6 (5.7) 22.8 14.5 18.2 14.8 12.9 — — — 2.9 2.5 2.2 0.7 0.9 1.0 17.9 18.3 18.0 — — 2.1 Shriram Transport 873 REDUCE 194,824 3,322 223 56.7 63.9 76.1 (7.1) 12.7 19.2 15.4 13.7 11.5 — — — 2.4 2.1 1.8 0.9 1.0 1.2 16.3 16.1 16.7 800 (8.4) 8.0 State Bank of India 2,459 ADD 1,836,037 31,305 747 138.7 176.1 196.8 (32.8) 27.0 11.7 17.7 14.0 12.5 — — — 2.2 2.0 1.8 1.8 1.9 1.9 9.7 11.0 11.3 2,700 9.8 86.9 Union Bank 207 ADD 130,346 2,222 630 26.7 34.7 40.9 (25.7) 29.7 17.9 7.7 6.0 5.1 — — — 1.0 0.9 0.8 1.9 2.5 2.9 10.3 12.1 12.9 220 6.4 15.1 Yes Bank 535 REDUCE 192,901 3,289 361 45.4 44.4 49.2 25.3 (2.2) 10.7 11.8 12.0 10.9 — — — 2.7 2.3 2.0 1.6 1.6 1.7 26.9 20.7 19.6 520 (2.8) 55.7 Banks/Financial Institutions Attractive 11,980,717 204,277 1.5 16.6 15.7 14.4 12.4 10.7 ——— 2.2 2.0 1.8 1.5 1.7 2.0 15.3 16.1 16.4 650.9

Source: Company, Bloomberg, Kotak Institutional Equities estimates India Daily Summary - May

32

2 33 33

Kotak Institutional Equities: Valuation summary of KIE Universe stocks

O/S Target ADVT- 21-May-14 Mkt cap. shares EPS (Rs) EPS growth (%) PER (X) EV/EBITDA (X) Price/BV (X) Dividend yield (%) RoE (%) price Upside 3mo Company Price (Rs) Rating (Rs mn) (US$ mn) (mn) 2014E 2015E 2016E 2014E 2015E 2016E 2014E 2015E 2016E 2014E 2015E 2016E 2014E 2015E 2016E 2014E 2015E 2016E 2014E 2015E 2016E (Rs) (%) (US$ mn) Cement ACC 1,380 SELL 259,359 4,422 188 46.0 49.2 63.6 (37.6) 7.0 29.1 30.0 28.0 21.7 17.1 15.3 11.3 3.1 3.0 2.8 2.6 1.7 1.7 11.6 11.4 13.6 1,120 (18.9) 8.3 Ambuja Cements 215 SELL 326,702 5,570 1,522 6.8 9.3 11.2 (34.6) 37.9 20.2 31.8 23.0 19.2 18.2 13.4 10.9 3.3 3.0 2.9 1.3 1.4 1.6 10.5 13.6 15.2 170 (20.8) 7.4 Grasim Industries 2,953 ADD 271,171 4,624 92 214.4 241.9 285.9 (21.3) 12.8 18.2 13.8 12.2 10.3 7.8 6.4 5.0 1.3 1.2 1.1 1.2 1.2 1.2 9.3 9.4 10.6 2,800 (5.2) 3.9 India Cements 92 ADD 28,245 482 307 2.6 5.1 8.6 (60.9) 94.1 67.0 34.7 17.9 10.7 7.1 5.7 4.6 0.6 0.6 0.6 2.9 2.9 2.9 2.0 3.8 6.0 60 (34.7) 2.9 Shree Cement 6,282 SELL 218,868 3,732 35 230.4 302.6 365.1 (20.1) 31.4 20.7 27.3 20.8 17.2 15.7 13.1 10.2 5.0 4.1 3.3 0.3 0.3 0.3 19.7 21.6 21.4 4,520 (28.0) 2.1 UltraTech Cement 2,271 SELL 622,785 10,619 274 74.8 88.0 115.5 (26.2) 17.7 31.3 30.4 25.8 19.7 17.0 13.7 10.3 3.2 2.9 2.5 0.5 0.5 0.5 12.7 13.3 15.3 1,800 (20.7) 9.0 Cement Cautious 1,727,131 29,448 (27.0) 19.5 25.0 25.1 21.0 16.8 13.3 10.8 8.4 2.5 2.3 2.1 1.1 1.0 1.0 10.2 11.1 12.5 33.6 Consumer products Asian Paints 546 SELL 524,011 8,935 959 12.8 14.9 17.2 10.3 16.6 15.4 42.6 36.6 31.7 25.6 21.8 18.8 12.2 10.4 8.8 1.0 1.2 1.4 33.1 32.6 32.0 450 (17.6) 8.0 Bajaj Corp. 214 ADD 31,543 538 148 12.0 13.4 15.3 6.8 11.3 14.2 17.8 16.0 14.0 16.4 14.4 12.0 6.1 5.2 4.5 3.0 3.0 3.5 33.2 31.6 30.3 230 7.6 0.5 Britannia Industries 838 BUY 100,530 1,714 120 32.1 38.4 46.4 48.0 19.4 20.9 26.1 21.9 18.1 18.1 15.0 12.4 13.1 10.1 8.0 1.5 2.0 2.5 58.1 52.2 49.4 1,050 25.3 1.5 Colgate-Palmolive (India) 1,365 SELL 185,651 3,165 136 35.2 41.1 48.3 (3.7) 16.9 17.4 38.8 33.2 28.3 28.2 23.3 19.4 32.8 30.9 29.2 2.1 2.4 2.9 88.7 92.4 102.5 1,200 (12.1) 1.8 Dabur India 184 ADD 320,946 5,472 1,744 5.2 6.3 7.3 19.0 19.4 17.0 35.1 29.4 25.1 28.5 23.3 19.5 12.1 9.9 8.1 1.0 1.3 1.5 38.3 36.9 35.4 200 8.7 3.9 GlaxoSmithKline Consumer 4,566 REDUCE 192,036 3,274 42 160.4 145.9 169.0 54.5 (9.1) 15.8 28.5 31.3 27.0 25.3 28.4 23.5 11.1 9.2 7.7 1.0 1.1 1.3 42.5 30.7 29.8 4,250 (6.9) 0.9 Godrej Consumer Products 801 REDUCE 272,648 4,649 340 22.2 26.5 31.9 9.3 19.5 20.4 36.2 30.3 25.1 25.4 21.0 17.0 6.8 5.8 4.9 0.7 0.9 1.1 21.3 22.1 22.7 750 (6.4) 2.7 Hindustan Unilever 561 REDUCE 1,214,032 20,700 2,163 16.8 18.7 20.2 9.0 11.5 7.9 33.4 30.0 27.8 26.6 23.0 20.4 39.0 33.5 28.9 2.3 2.5 2.7 119.5 114.7 107.3 580 3.3 12.7 ITC 342 ADD 2,757,382 47,015 8,071 10.9 12.4 13.9 16.3 14.7 11.9 31.5 27.4 24.5 22.6 19.3 16.9 10.5 9.4 8.6 1.8 2.2 2.6 36.6 37.8 38.5 365 6.8 43.5 Jubilant Foodworks 1,133 SELL 75,091 1,280 66 18.0 22.5 30.7 (9.9) 25.1 36.7 63.0 50.4 36.9 30.0 23.5 17.6 13.7 10.7 8.5 - - 0.3 24.1 23.8 26.0 1,000 (11.7) 4.6 Jyothy Laboratories 200 ADD 36,205 617 181 7.3 11.5 12.5 87.3 57.8 9.3 27.5 17.4 15.9 20.1 16.1 12.4 3.7 3.2 2.8 1.3 1.3 1.5 16.3 19.9 18.8 215 7.5 0.5 Marico 227 REDUCE 146,322 2,495 645 8.1 8.4 9.7 43.3 4.0 15.6 28.1 27.1 23.4 20.0 17.4 14.6 10.5 8.3 6.7 1.5 1.1 1.3 38.2 31.6 29.6 215 (5.2) 1.2 Nestle India 4,693 SELL 452,514 7,716 96 114.4 118.6 138.5 3.3 3.7 16.7 41.0 39.6 33.9 22.8 21.8 18.9 17.5 14.7 12.5 1.0 1.2 1.5 56.4 46.7 45.4 4,300 (8.4) 6.2 Page Industries 5,787 REDUCE 64,542 1,100 11 137.3 186.4 222.8 36.1 35.8 19.5 42.1 31.0 26.0 26.7 20.0 16.7 21.9 16.0 11.9 1.0 1.3 1.5 61.0 60.5 53.2 6,100 5.4 1.7 Speciality Restaurants 157 BUY 7,382 126 47 4.4 5.1 6.3 (11.3) 16.0 23.0 35.5 30.6 24.9 19.7 14.9 11.2 2.4 2.2 2.1 1.0 1.3 1.6 6.9 7.5 8.5 145 (7.8) 0.3 Tata Global Beverages 153 REDUCE 96,626 1,648 631 6.0 7.2 8.0 (6.4) 20.5 11.2 25.7 21.3 19.2 14.7 13.1 11.7 1.6 1.5 1.4 1.5 1.8 2.1 7.6 8.6 9.1 138 (9.9) 6.3 Titan Industries 310 ADD 275,613 4,699 888 8.4 9.5 11.3 3.1 13.0 18.4 36.8 32.6 27.5 26.3 21.7 18.0 10.9 8.9 7.5 0.7 0.8 1.3 33.3 30.1 29.5 290 (6.6) 7.1 United Breweries 795 SELL 210,295 3,586 264 6.7 11.9 16.2 2.6 77.5 36.1 118.6 66.8 49.1 41.4 27.9 22.7 14.4 12.2 10.2 0.1 0.2 0.3 11.6 19.3 22.0 650 (18.3) 1.8 United Spirits 2,758 REDUCE 400,778 6,833 145 22.2 41.6 68.8 145.3 86.9 65.5 123.9 66.3 40.1 46.8 29.1 23.5 5.1 5.8 5.1 0.1 (0.2) 0.3 5.1 8.2 13.5 2,700 (2.1) 31.4 Consumer products Cautious 7,364,145 125,562 16.9 16.6 15.0 35.6 30.5 26.6 25.0 21.1 18.1 10.8 9.7 8.6 1.5 1.7 2.0 30.4 31.9 32.2 136.3 Energy Aban Offshore 666 RS 28,967 494 44 67.1 94.4 106.3 73.7 40.7 12.6 9.9 7.1 6.3 8.2 7.1 7.1 1.1 1.0 0.9 0.8 0.8 0.8 13.3 15.2 14.5 — — 16.8 Bharat Petroleum 560 ADD 405,142 6,908 723 39.3 40.0 39.6 7.5 1.9 (1.1) 14.3 14.0 14.2 8.2 8.2 8.0 2.0 1.8 1.7 2.1 2.1 2.1 14.0 13.0 11.8 600 7.1 13.8 Cairn india 348 REDUCE 663,951 11,321 1,908 65.2 54.6 49.8 3.3 (16.2) (8.9) 5.3 6.4 7.0 4.6 4.9 5.0 1.1 1.0 0.9 3.6 3.4 3.4 23.4 16.8 13.7 355 2.0 15.4 Castrol India 290 SELL 143,274 2,443 495 10.0 9.5 10.3 10.3 (4.9) 8.9 29.0 30.5 28.0 20.0 20.5 18.8 20.5 33.8 37.8 2.4 2.9 3.3 76.9 83.6 127.3 225 (22.3) 0.7 GAIL (India) 414 ADD 524,960 8,951 1,268 35.9 35.7 38.3 (0.4) (0.6) 7.5 11.5 11.6 10.8 7.7 7.0 6.1 1.7 1.6 1.4 2.4 2.5 2.9 15.3 13.4 12.9 450 8.7 10.2 GSPL 80 ADD 44,848 765 563 7.5 7.0 8.0 (21.6) (6.5) 13.8 10.6 11.4 10.0 5.7 5.9 5.3 1.2 1.1 1.0 1.3 1.8 4.0 11.9 10.0 10.5 70 (12.2) 1.0

Hindustan Petroleum 424 REDUCE 143,893 2,453 339 17.2 31.2 35.0 (30.7) 81.9 12.1 24.7 13.6 12.1 11.3 8.3 7.3 0.8 0.8 0.7 1.3 2.3 2.6 3.1 5.5 5.9 400 (5.8) 10.4 2014India DailySummary-May22, Indian Oil Corporation 346 ADD 839,828 14,319 2,428 19.9 26.3 32.9 18.3 32.3 24.8 17.4 13.1 10.5 8.7 6.5 5.2 1.3 1.2 1.1 2.2 2.7 3.2 7.0 8.6 10.0 365 5.5 5.6 Oil India 607 BUY 364,742 6,219 601 52.4 61.1 73.2 (12.2) 16.6 19.8 11.6 9.9 8.3 5.0 4.0 3.2 1.7 1.5 1.4 4.0 4.1 4.9 13.1 14.2 15.5 670 10.4 3.9 Oil & Natural Gas Corporation 398 ADD 3,408,947 58,124 8,556 30.7 36.2 41.1 4.5 18.1 13.6 13.0 11.0 9.7 5.9 4.9 4.3 1.6 1.5 1.4 2.6 3.1 3.5 12.5 13.4 13.8 420 5.4 29.8 Petronet LNG 158 ADD 118,388 2,019 750 9.5 10.0 12.4 (38.1) 5.8 23.0 16.6 15.7 12.8 9.3 8.2 7.1 2.1 1.9 1.7 1.3 1.4 2.1 13.2 12.3 13.3 165 4.5 3.5 Reliance Industries 1,078 REDUCE 3,167,261 54,003 2,937 68.0 71.3 71.4 4.6 4.8 0.1 15.9 15.1 15.1 11.8 10.7 10.3 1.5 1.4 1.3 0.9 1.0 1.0 11.0 10.5 9.6 1,085 0.6 72.4 Energy Attractive 9,854,199 168,018 3.3 8.2 7.5 12.5 11.6 10.8 7.8 6.7 6.0 1.5 1.4 1.3 2.1 2.3 2.6 12.2 12.0 11.8 183.5

Source: Company, Bloomberg, Kotak Institutional Equities estimates KOTAK INSTITUTIONAL EQUITIES RESEARCH

KOTAK INSTITUTIONAL EQUITIES RESEARCH Kotak Institutional Equities: Valuation summary of KIE Universe stocks India Daily2014India Summary-May22,

O/S Target ADVT- 21-May-14 Mkt cap. shares EPS (Rs) EPS growth (%) PER (X) EV/EBITDA (X) Price/BV (X) Dividend yield (%) RoE (%) price Upside 3mo Company Price (Rs) Rating (Rs mn) (US$ mn) (mn) 2014E 2015E 2016E 2014E 2015E 2016E 2014E 2015E 2016E 2014E 2015E 2016E 2014E 2015E 2016E 2014E 2015E 2016E 2014E 2015E 2016E (Rs) (%) (US$ mn) Industrials ABB 935 SELL 198,211 3,380 212 8.3 18.1 26.2 25.5 117.2 44.5 112.1 51.6 35.7 53.0 30.2 23.3 7.4 6.7 5.8 0.3 0.4 0.4 6.7 13.6 17.3 600 (35.9) 4.6 Bharat Heavy Electricals 271 SELL 663,422 11,312 2,448 13.9 10.6 12.1 (48.6) (23.7) 14.2 19.5 25.6 22.4 15.9 18.5 16.4 2.0 1.9 1.8 1.1 0.8 1.0 10.7 7.6 8.2 140 (48.3) 27.4 Crompton Greaves 187 BUY 116,985 1,995 627 4.2 9.0 12.3 222.2 113.1 37.1 44.3 20.8 15.2 17.8 12.4 9.4 3.1 2.8 2.5 0.8 0.9 1.2 7.2 14.3 17.3 220 17.9 14.0 Cummins India 579 REDUCE 160,360 2,734 277 22.1 25.5 29.8 (21.8) 15.4 16.7 26.2 22.7 19.4 24.5 20.5 16.8 6.0 5.4 4.8 1.8 2.0 2.3 24.3 23.7 24.8 550 (4.9) 3.2 Kalpataru Power Transmission 152 BUY 23,349 398 153 11.5 14.5 15.6 30.7 26.7 7.3 13.3 10.5 9.8 7.5 6.7 5.5 1.1 1.0 1.0 1.0 1.0 1.0 7.9 9.2 9.4 130 (14.6) 0.7 KEC International 109 BUY 27,907 476 257 3.3 7.9 10.5 30.3 138.1 33.7 32.9 13.8 10.3 9.7 7.1 6.1 2.2 1.8 1.6 0.5 1.1 1.5 6.9 14.4 16.1 95 (12.5) 0.7 Larsen & Toubro 1,476 ADD 1,362,542 23,232 923 51.6 61.5 81.0 (1.6) 19.3 31.6 28.6 24.0 18.2 18.8 16.3 13.5 3.5 3.1 2.6 0.8 0.9 1.2 13.0 13.6 15.5 1,575 6.7 60.6

Siemens 925 SELL 329,460 5,617 356 12.9 20.7 24.5 183.6 61.2 18.3 71.9 44.6 37.7 37.7 25.5 21.8 7.7 6.8 6.1 0.4 0.6 0.7 11.1 16.2 17.0 510 (44.9) 5.9 Thermax 870 REDUCE 103,696 1,768 119 24.4 33.4 40.6 (4.3) 36.7 21.6 35.6 26.1 21.4 22.4 17.3 13.5 5.0 4.5 3.9 0.8 1.1 1.4 14.8 18.1 19.5 815 (6.4) 1.2 Voltas 188 REDUCE 62,254 1,061 331 6.5 9.0 11.1 9.7 39.8 22.7 29.1 20.8 17.0 20.8 13.6 10.8 3.5 3.2 2.8 1.0 1.4 1.8 12.5 16.0 17.6 200 6.2 9.4 Industrials Cautious 3,048,187 51,973 (21.6) 12.5 25.9 29.3 26.0 20.7 19.4 16.9 14.0 3.3 3.0 2.6 0.9 0.9 1.1 11.3 11.4 12.8 127.8 Infrastructure Adani Port and SEZ 226 ADD 455,238 7,762 2,017 8.1 10.9 13.9 0.1 35.7 27.1 28.0 20.7 16.2 18.5 15.1 11.7 5.4 4.4 3.6 0.6 0.8 1.0 21.7 23.6 24.5 200 (11.4) 18.4 Container Corporation 1,160 BUY 226,255 3,858 195 51.3 58.7 67.8 6.5 14.4 15.5 22.6 19.8 17.1 17.4 14.6 12.3 3.2 2.9 2.6 1.0 1.2 1.3 15.1 15.4 15.9 1,025 (11.7) 2.4 Gujarat Pipavav Port 119 BUY 57,336 978 483 5.4 7.0 9.1 48.3 29.9 29.5 22.0 17.0 13.1 15.6 12.4 9.2 3.4 2.8 2.3 — — — 19.7 21.5 22.7 115 (3.0) 2.9 IRB Infrastructure 183 REDUCE 60,922 1,039 332 11.2 13.6 15.2 (32.9) 21.3 11.4 16.3 13.4 12.1 8.7 8.1 7.0 1.4 1.4 1.3 2.2 2.2 2.2 9.8 10.4 10.8 180 (1.8) 11.1 Sadbhav Engineering 165 BUY 26,282 448 159 5.2 6.9 9.3 6.3 32.7 34.7 31.7 23.9 17.7 13.2 11.0 9.1 2.6 2.3 2.1 0.4 0.4 0.4 8.1 9.8 11.7 170 2.8 0.6 Infrastructure Attractive 826,032 14,084 (0.7) 27.2 22.7 24.5 19.3 15.7 15.2 12.7 10.2 3.7 3.2 2.7 0.8 0.9 1.1 15.0 16.6 17.5 35.4 Media DB Corp 270 ADD 49,473 844 183 16.2 18.5 21.3 35.9 14.6 15.2 16.7 14.6 12.6 9.6 8.3 7.1 4.2 3.7 3.3 2.6 3.3 4.1 26.9 27.2 27.9 330 22.3 0.9 DishTV 53 ADD 56,488 963 1,065 (0.8) 0.5 1.8 38.8 159.4 305.6 (69.9) 117.7 29.0 11.1 9.5 7.6 (23.9) (30.0) 873 — — — 41.3 (22.6) (214) 60 13.1 4.4 Jagran Prakashan 110 BUY 34,708 592 316 6.3 7.5 9.3 25.0 19.1 23.0 17.4 14.6 11.9 9.5 8.2 6.8 3.4 3.1 2.9 2.8 3.7 4.6 20.5 22.4 25.3 130 18.5 0.6 Sun TV Network 412 ADD 162,459 2,770 394 18.0 21.3 24.0 0.0 18.3 12.7 22.9 19.3 17.2 13.7 11.7 10.3 5.1 4.7 4 2.4 3.2 3.9 24.1 26.2 28 410 (0.5) 4.0 Zee Entertainment Enterprises 294 REDUCE 281,988 4,808 960 8.8 10.8 11.0 16.1 23.6 1.5 33.5 27.1 26.7 22.9 18.8 18.3 5.9 5.2 4.7 1.0 1.4 1.7 19.4 20.4 18.4 300 2.2 14.0 Media Neutral 585,117 9,977 17.0 27.9 15.0 29.9 23.4 20.3 15.3 12.9 11.5 5.9 5.3 4.7 1.6 2.0 2.5 19.7 22.5 23.2 23.9 Metals & Mining Coal India 371 BUY 2,342,740 39,945 6,316 24.4 27.9 34.9 (11.0) 14.0 25.4 15.2 13.3 10.6 9.4 7.9 6.5 5.0 4.3 3.7 7.1 3.8 4.8 31.5 34.7 37.5 335 (9.7) 21.5 Hindalco Industries 160 REDUCE 329,714 5,622 2,065 11.5 12.7 9.5 (26.9) 10.3 (25.7) 13.8 12.5 16.9 11.5 8.6 7.4 0.8 0.8 0.8 0.9 0.9 0.9 6.4 6.5 4.6 135 (15.5) 23.1 Hindustan Zinc 145 ADD 612,414 10,442 4,225 16.5 15.6 16.0 0.7 (5.2) 2.5 8.8 9.3 9.0 5.1 4.9 4.1 1.6 1.4 1.3 2.4 2.4 2.4 17.5 14.7 13.5 165 13.8 3.2 Jindal Steel and Power 288 REDUCE 263,217 4,488 915 20.9 21.5 22.8 (32.9) 3.0 6.0 13.8 13.4 12.6 10.8 8.5 7.3 1.2 1.1 1.0 0.6 0.6 0.7 8.9 8.6 8.4 260 (9.6) 11.5 JSW Steel 1,217 SELL 294,243 5,017 242 73.7 104.0 126.0 124.2 41.1 21.2 16.5 11.7 9.7 6.9 6.6 5.8 1.4 1.2 1.1 0.8 0.8 0.8 8.3 11.0 12.0 820 (32.6) 13.5 National Aluminium Co. 50 REDUCE 130,022 2,217 2,577 2.5 3.0 2.9 8.0 21.8 (4.5) 20.3 16.7 17.4 8.5 6.4 6.6 1.1 1.0 1.0 2.5 2.5 2.5 5.3 6.3 5.8 32 (36.6) 1.6 NMDC 178 ADD 704,131 12,006 3,965 16.1 17.4 17.2 (1.8) 7.9 (0.8) 11.0 10.2 10.3 6.6 6.1 6.2 2.4 2.2 2.1 5.6 5.6 5.6 22.5 22.6 20.9 170 (4.3) 7.9 Sesa Sterlite 249 ADD 738,796 12,597 2,965 16.0 20.4 18.5 (36.1) 28.1 (9.4) 15.6 12.2 13.5 5.4 5.2 4.9 1.0 0.9 0.9 1.2 1.2 1.2 7.1 8.0 6.8 200 (19.7) 28.2 Tata Steel 463 REDUCE 449,326 7,661 971 37.1 44.9 47.1 986.0 20.8 5.1 12.5 10.3 9.8 7.1 6.8 6.6 1.1 1.0 0.9 2.2 1.7 1.7 9.7 10.2 9.9 435 (6.0) 48.9 Metals & Mining Cautious 5,864,601 99,994 (5.5) 12.7 8.4 13.4 11.9 11.0 7.4 6.7 6.0 1.8 1.7 1.5 4.2 2.9 3.3 13.6 14.0 13.9 159.4 Real Estate DLF 193 ADD 343,133 5,851 1,780 4.3 6.7 7.2 1.2 53.7 8.2 44.4 28.9 26.7 18.5 15.7 14.7 1.2 1.1 1.1 0.5 0.5 0.5 2.7 3.9 4.1 200 3.7 36.4 Godrej Properties 245 REDUCE 48,737 831 199 7.4 12.8 20.7 (16.6) 73.8 62.1 33.3 19.1 11.8 24.4 13.3 7.7 2.2 2.0 1.7 0.8 0.8 1.0 8.0 10.9 15.7 195 (20.3) 1.8 Oberoi Realty 246 BUY 80,745 1,377 328 9.6 23.8 27.3 (37.3) 146.8 14.8 25.5 10.3 9.0 19.2 7.0 5.2 1.8 1.6 1.4 0.8 0.8 0.8 7.4 16.4 16.3 290 17.9 1.0 Prestige Estates Projects 214 ADD 74,813 1,276 350 10.2 14.2 19.4 24.3 40.3 36.0 21.1 15.0 11.0 12.4 9.8 7.8 2.5 2.1 1.8 0.6 0.6 0.6 12.3 15.2 17.8 230 7.6 0.8 Sobha Developers 437 BUY 42,878 731 98 23.0 30.8 39.9 3.9 33.8 29.6 19.0 14.2 11.0 10.2 7.8 6.7 1.9 1.7 1.5 1.1 1.1 1.1 10.2 12.4 14.4 475 8.6 1.7 Sunteck Realty 340 BUY 20,412 348 60 57.7 24.7 119.8 8,501.6 (57.2) 385.4 5.9 13.8 2.8 4.5 9.7 1.5 2.5 2.1 1.2 0.6 0.6 0.6 52.7 16.6 54.9 470 38.1 0.4 Real Estate Attractive 610,719 10,413 20.0 41.4 39.5 27.0 19.1 13.7 15.6 12.3 9.2 1.4 1.4 1.2 0.6 0.6 0.6 5.3 7.1 9.1 42.0

Source: Company, Bloomberg, Kotak Institutional Equities estimates India Daily Summary - May

34

2 35 35

Kotak Institutional Equities: Valuation summary of KIE Universe stocks

O/S Target ADVT- 21-May-14 Mkt cap. shares EPS (Rs) EPS growth (%) PER (X) EV/EBITDA (X) Price/BV (X) Dividend yield (%) RoE (%) price Upside 3mo Company Price (Rs) Rating (Rs mn) (US$ mn) (mn) 2014E 2015E 2016E 2014E 2015E 2016E 2014E 2015E 2016E 2014E 2015E 2016E 2014E 2015E 2016E 2014E 2015E 2016E 2014E 2015E 2016E (Rs) (%) (US$ mn) Technology HCL Technologies 1,336 REDUCE 945,923 16,128 708 86.9 92.0 96.4 52.7 5.8 4.8 15.4 14.5 13.9 10.1 9.6 8.7 4.8 3.9 3.2 1.0 1.2 1.4 35.6 30.1 26.0 1,300 (2.7) 34.5 Hexaware Technologies 143 SELL 43,256 738 302 12.6 11.1 11.7 14.5 (12.0) 5.0 11.3 12.9 12.3 7.2 8.5 8.2 3.6 4.3 3.8 7.7 5.4 4.1 31.6 30.5 32.7 120 (16.3) 6.1 Infosys 3,157 ADD 1,803,967 30,758 571 186.3 205.2 227.9 13.0 10.1 11.0 16.9 15.4 13.9 11.3 10.0 8.6 4.1 3.5 3.1 2.2 2.4 2.5 26.3 24.5 23.6 3,600 14.0 69.8 Mindtree 1,351 ADD 56,739 967 42 107.3 116.3 128.3 31.4 8.4 10.3 12.6 11.6 10.5 9.1 8.1 7.0 3.5 2.9 2.4 1.8 2.2 2.4 30.5 26.9 24.7 1,540 14.0 3.1 Mphasis 380 SELL 79,849 1,361 210 14.7 35.5 35.1 (58.4) 141.3 (1.2) 25.8 10.7 10.8 18.3 7.5 7.5 1.6 1.5 1.4 1.8 4.7 4.6 6.1 14.1 13.2 355 (6.6) 1.0 TCS 2,083 ADD 4,079,678 69,560 1,959 97.6 109.3 121.1 37.4 12.0 10.8 21.3 19.0 17.2 15.5 13.7 12.1 7.4 6.1 5.1 1.5 2.1 2.3 39.7 35.1 32.5 2,400 15.2 59.9 Tech Mahindra 1,747 ADD 415,195 7,079 238 128.0 136.4 149.8 25.6 6.5 9.8 13.6 12.8 11.7 9.1 8.4 7.6 4.5 3.6 2.9 1.0 1.0 1.0 33.5 28.1 24.7 2,000 14.5 32.3 Wipro 493 REDUCE 1,214,505 20,708 2,463 31.7 35.2 37.9 27.1 11.3 7.5 15.6 14.0 13.0 10.7 8.8 7.9 3.5 3.0 2.6 1.6 1.8 2.0 24.9 23.1 21.2 565 14.6 21.2 Technology Attractive 8,639,113 147,301 29.0 10.7 9.4 18.1 16.4 15.0 12.5 11.1 9.8 5.0 4.3 3.6 1.6 2.0 2.2 27.9 26.0 24.2 227.9 Telecom Bharti Airtel 339 ADD 1,356,318 23,126 3,997 8.3 12.2 16.3 39.0 47.0 33.0 40.7 27.7 20.8 7.4 6.4 5.4 2.3 2.1 2.0 0.5 0.7 1.4 6.0 7.9 9.8 370 9.0 28.1 Bharti Infratel 235 ADD 443,825 7,567 1,889 8.0 9.5 11.0 51.4 17.9 15.6 29.2 24.8 21.5 9.8 8.9 8.0 2.5 2.4 2.4 1.9 2.8 3.2 8.6 9.8 11.1 220 (6.3) — IDEA 142 BUY 469,894 8,012 3,303 6.0 7.4 8.4 94.7 24.8 12.6 23.9 19.1 17.0 8.3 8.0 6.7 2.8 2.5 2.2 0.3 0.5 0.6 12.8 13.9 13.9 170 19.5 12.3 Reliance Communications 138 SELL 281,796 4,805 2,042 3.2 3.3 5.4 (0.4) 2.1 63.3 42.5 41.6 25.5 9.4 8.0 7.4 1.0 1.0 1.0 — — — 2.4 2.5 3.9 85 (38.4) 15.2 Tata Communications 338 BUY 96,188 1,640 285 (3.7) 4.1 4.5 87.5 211.5 9.6 (91.7) 82.3 75.1 7.0 6.7 6.2 11.9 10.3 8.9 — — — (9.4) 13.5 12.7 380 12.6 5.7 Telecom Attractive 2,648,021 45,150 106.3 34.7 26.6 35.9 26.7 21.1 8.0 7.1 6.2 2.2 2.0 1.9 0.6 0.9 1.4 6.0 7.6 9.1 61.3 Utilities Adani Power 62 SELL 178,777 3,048 2,872 (1.6) (3.2) (1.2) 82.2 (98.7) 61.7 (38.8) (19.5) (50.9) 13.7 10.3 9.8 2.7 3.2 3.4 — — — (8.5) (15.1) (6.4) 38 (39.0) 11.7 CESC 596 ADD 74,406 1,269 125 36.9 46.5 60.1 7.8 26.0 29.1 16.1 12.8 9.9 12.0 9.4 7.8 1.1 1.0 0.9 1.1 1.3 1.3 6.7 8.0 9.5 476 (20.1) 3.7 JSW Energy 73 REDUCE 120,048 2,047 1,640 6.9 7.6 6.9 2.9 9.8 (8.7) 10.6 9.7 10.6 6.3 5.9 5.7 1.7 1.5 1.3 — — — 17.2 16.4 13.0 52 (29.0) 2.8 NHPC 23 ADD 259,054 4,417 11,071 2.1 2.3 2.6 8.8 11.0 9.7 11.1 10.0 9.1 10.5 8.3 7.4 0.9 0.8 0.8 2.3 2.7 3.0 7.8 8.5 8.8 22 (6.0) 2.5 NTPC 146 ADD 1,200,952 20,477 8,245 13.3 12.0 12.8 6.8 (10.0) 7.1 10.9 12.2 11.3 9.6 9.6 8.8 1.4 1.3 1.2 3.9 2.5 2.6 13.2 11.1 11.1 138 (5.3) 21.0 Power Grid 124 BUY 651,072 11,101 5,232 8.6 9.4 13.0 (6.0) 9.9 38.6 14.6 13.2 9.6 11.5 9.4 7.5 1.9 1.7 1.6 2.1 2.3 3.2 14.7 13.6 17.1 130 4.5 11.9 Reliance Infrastructure 696 BUY 182,964 3,120 263 65.5 59.8 84.1 (7.6) (8.6) 40.6 10.6 11.6 8.3 12.4 12.1 10.6 0.7 0.6 0.6 1.6 1.6 1.6 9.2 8.7 8.7 580 (16.6) 25.1 Reliance Power 88 SELL 248,113 4,230 2,805 3.7 4.2 4.3 1.5 15.6 2.3 24.2 20.9 20.4 26.9 26.8 23.7 1.3 1.2 1.1 — — — 5.4 5.9 5.7 68 (23) 10.0 Tata Power 96 NR 237,825 4,055 2,468 3.9 5.2 5.2 (3.9) 34.0 1.0 25.0 18.7 18.5 7.6 7.1 6.8 1.8 1.7 1.6 1.2 1.2 1.2 7.2 9.4 8.9 — — 9.3 Utilities Cautious 3,153,210 53,764 12.5 (1.2) 18.6 13.9 14.1 11.9 10.7 9.6 8.5 1.4 1.3 1.2 2.3 1.9 2.1 9.8 9.1 10.0 97.9 Others Carborundum Universal 181 BUY 33,965 579 187 4.5 8.2 11.0 (5.8) 82.4 34.1 40.2 22.0 16.4 15.1 11.0 9.0 2.7 2.5 2.2 0.4 0.8 1.0 7.2 11.9 14.2 160 (11.7) 0.1 Coromandel International 250 SELL 70,849 1,208 283 12.6 20.6 23.1 (17.5) 63.6 12.0 19.9 12.1 10.8 10.7 7.9 7.1 2.9 2.5 2.1 1.9 1.9 1.9 14.4 21.1 20.0 210 (16.1) 0.7 Havells India 962 REDUCE 119,983 2,046 125 38.1 43.5 48.0 14.8 14.2 10.5 25.3 22.1 20.0 15.3 13.5 11.7 6.4 5.3 4.4 0.8 0.9 1.0 28.3 26.1 23.8 740 (23.0) 3.9 Info Edge 674 BUY 73,628 1,255 109 8.4 11.5 16.3 (20.1) 36.9 42.1 80.3 58.7 41.3 67.4 55.8 34.4 9.1 8.4 7.6 0.4 0.6 0.9 12.8 14.9 19.4 630 (6.6) 1.4 Jaiprakash Associates 77 ADD 170,427 2,906 2,219 2.5 7.2 8.2 25.4 193.0 14.2 31.2 10.7 9.3 10.8 7.4 6.1 1.3 1.2 1.1 — — — 4.3 11.7 12.1 44 (42.7) 34.9 Just Dial 1,246 BUY 87,245 1,488 70 16.9 23.5 31.1 67.2 38.5 32.6 73.5 53.1 40.0 55.3 39.0 27.3 16.3 13.8 11.5 0.5 0.7 0.9 24.7 28.1 31.3 1,350 8.3 15.8 Rallis India 191 BUY 37,163 634 194 7.5 10.9 12.7 23.3 44.8 16.3 25.3 17.5 15.0 13.8 10.4 8.6 5.2 4.2 3.4 1.2 1.2 1.2 23.1 26.8 25.1 200 4.7 1.4 Tata Chemicals 315 BUY 80,294 1,369 255 13.8 31.3 36.1 (12.2) 126.7 15.2 22.8 10.1 8.7 7.2 5.3 4.7 1.1 1.0 0.9 3.2 3.2 3.2 4.2 9.6 10.1 300 (4.8) 3.5 India Daily Summary - May 22, 2014India DailySummary-May22, UPL 302 ADD 129,396 2,206 429 22.0 25.1 28.0 26.0 13.8 11.5 13.7 12.0 10.8 7.1 6.5 5.8 2.4 2.0 1.7 0.8 0.8 0.8 19.1 18.4 17.5 250 (17.2) 16.2 Others 729,322 12,435 10.1 69.9 15.0 23.5 13.8 12.0 10.7 7.9 6.7 2.2 1.9 1.7 1.0 1.0 1.1 9.2 13.8 14.0 77.9 KIE universe 61,650,060 1, 051,161 6.5 13.8 13.9 17.1 15.0 13.2 10.3 9.0 7.9 2.5 2.2 2.0 1.8 1.8 2.1 14.4 14.8 15.1 KIE universe ex-energy 51,795,861 883,142 7.4 15.3 15.6 18.3 15.9 13.7 11.3 9.8 8.5 2.8 2.5 2.2 1.7 1.7 2.0 15.2 15.7 16.2 KIE universe ex-energy & ex-commodities 44,204,129 753,700 11.9 15.7 16.7 19.1 16.5 14.1 12.4 10.7 9.2 3.0 2.7 2.4 1.4 1.6 1.8 15.8 16.3 16.8

Notes: (a) For banks we have used adjusted book values. (b) 2012 means calendar year 2011, similarly for 2013 and 2014 for these particular companies. (c) EV/Sales & EV/EBITDA for KS universe excludes Banking Sector. (d) Rupee-US Dollar exchange rate (Rs/US$)= 58.65 KOTAK INSTITUTIONAL EQUITIES RESEARCH Source: Company, Bloomberg, Kotak Institutional Equities estimates

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: Rohit Chordia, Lokesh Garg, M.B. Mahesh, Nischint Chawathe, Saifullah Rais."

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% 36.6% * The above categories are defined as follows: Buy = We expect this stock to deliver more than 15% returns over the 30% 28.0% next 12 months; Add = We expect this stock to deliver 5-15% returns over the next 12 months; Reduce = We 18.9% expect this stock to deliver -5-+5% returns over the next 20% 16.5% 12 months; Sell = We expect this stock to deliver less than - 5% returns over the next 12 months. Our target prices are 10% also on a 12-month horizon basis. These ratings are used 4.3% 3.7% 2.4% illustratively to comply with applicable regulations. As of 0.6% 31/03/2014 Kotak Institutional Equities Investment Research 0% had investment ratings on 164 equity securities. BUY ADD REDUCE SELL

Source: Kotak Institutional Equities As of March 31, 2014

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.

37 KOTAK INSTITUTIONAL EQUITIES RESEARCH

Corporate Office Overseas Offices

Kotak Securities Ltd. Kotak Mahindra (UK) Ltd Kotak Mahindra Inc 27 BKC, Plot No. C-27, “G Block” 8th Floor, Portsoken House 50 Main Street, Ste. 890 Bandra Kurla Complex, Bandra (E) 155-157 Minories Westchester Financial Centre Mumbai 400 051, India London EC3N 1LS White Plains, New York 10606 Tel: +91-22-43360000 Tel: +44-20-7977-6900 Tel:+1-914-997-6120

Copyright 2014 Kotak Institutional Equities (Kotak Securities Limited). All rights reserved.

1. Note that the research analysts contributing to this report may not be registered/qualified as research analysts with FINRA; and

2. Such research analysts may not be associated persons of Kotak Mahindra Inc and therefore, may not be subject to NASD Rule 2711 restrictions on communications with a subject company, public appearances and trading securities held by a research analyst account.

3. Any U.S. recipients of the research who wish to effect transactions in any security covered by the report should do so with or through Kotak Mahindra Inc and (ii) any transactions in the securities covered by the research by U.S. recipients must be effected only through Kotak Mahindra Inc at [email protected].

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

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

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

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

This report is distributed in Singapore by Kotak Mahindra (UK) Limited (Singapore Branch) to institutional investors, accredited investors or expert investors only as defined under the Securities and Futures Act. Recipients of this analysis / report are to contact Kotak Mahindra (UK) Limited (Singapore Branch) (16 Raffles Quay,

#35-02/03, Hong Leong Building, Singapore 048581) in respect of any matters arising from, or in connection with, this analysis / report. Kotak Mahindra (UK)

Limited (Singapore Branch) is regulated by the Monetary Authority of Singapore.