INDIA DAILY

May 10, 2017 India 9-May 1-day 1-mo 3-mo Sensex 29,933 0.0 1.2 5.6 Nifty 9,317 0.0 1.5 6.0 Contents Global/Regional indices Dow Jones 20,976 (0.2) 1.5 3.5 Daily Alerts Nasdaq Composite 6,121 0.3 4.1 6.7 Results FTSE 7,342 0.6 (0.1) 1.1 Bharti Infratel: Of healthy near-term outlook and medium-term risks Nikkei 19,905 0.3 5.9 2.7 Hang Seng 24,932 0.2 2.8 5.8  4QFY17 earnings print - operationally in line; energy spread surprises KOSPI 2,297 0.2 6.8 11.2  FY2017 round-up - a decent year especially in the backdrop of MSA Value traded – India renegotiations Cash (NSE+BSE) 274 302 327

 View - near-term strength overshadowing medium-term risks; stock Derivatives (NSE) 3,306 3,040 8,870 overpriced. REDUCE Deri. open interest 3,191 2,858 3,318

InterGlobe Aviation: Weak, but in-line performance

Forex/money market  Lag in passing on increase in fuel cost dented margins, as expected Change, basis points

 See yield stabilizing in FY2018E as fares converge; low industry margins to 9-May 1-day 1-mo 3-mo

stem further declines Rs/US$ 64.7 25 9 (208)  Slightly increase estimates, raise TP to Rs1,200 (Rs1,060 earlier), maintain 10yr govt bond, % 7.3 1 (6) 11 ADD Net investment (US$ mn) 8-May MTD CYTD ABB: Uptick in ordering the only silver lining FIIs (91) 386 2,903  1QCY17 results: subdued start to the year on execution, Ind-AS impact on MFs 35 1,057 6,951 margins Top movers Change, %  One-off impact of Ind-AS transition pulls down margins, order inflows Best performers 9-May 1-day 1-mo 3-mo encouraging RECL IN Equity 220.6 1.9 20.7 51.3

 Double-digit margins unlikely to be crossed in a hurry, thanks to ever- HDIL IN Equity 97.3 4.7 17.5 40.2

increasing royalties FB IN Equity 118.1 (0.4) 31.2 39.8  Marginally reduce estimates, increase target price to Rs1,170 on roll- RCAPT IN Equity 682.5 3.3 12.9 38.5 forward BOI IN Equity 181.1 (2.3) 24.4 35.3 Worst performers

Results, Change in Reco IDEA IN Equity 87.0 (0.7) (1.1) (21.2) Godrej Consumer Products: In-line quarter UNSP IN Equity 1897.1 (0.3) 0.4 (19.4) TTMT/A IN Equity 262.3 0.4 (9.7) (17.5)

 Headline consolidated financials - revenues miss; EBITDA/PAT a tad above TTMT IN Equity 426.8 1.0 (10.1) (16.2) estimates DIVI IN Equity 632.1 0.8 (4.0) (15.7)  Headline standalone financials - mixed category-level performance

 Raise EPS estimates a tad; downgrade to SELL (from REDUCE)

For Private Circulation Only. FOR IMPORTANT INFORMATION ABOUT KOTAK SECURITIES’ RATING SYSTEM AND OTHER DISCLOSURES. REFER TO THE END OF THIS MATERIAL. REDUCE Bharti Infratel (BHIN) Telecom MAY 10, 2017 RESULT Coverage view: Cautious

Of healthy near-term outlook and medium-term risks. BHIN delivered a robust but Price (`): 366 operationally in-line 4QFY17 earnings print to round up a decent FY2017. Acceleration Target price (`): 335 in tenancy additions led by R-Jio’s network expansion should ensure a strong FY2018E BSE-30: 29,933 as well, in our view. Risks (Idea/Voda merger, etc.) start playing out sometime in FY2019E in our view – these could mean 3-4 years of no EBITDA growth from FY2019E levels, per our math. So, play the near-term momentum or trust the DCF? We prefer the latter. Rollover drives TP increase to ₹335 (from ₹315). REDUCE.

Company data and valuation summary Bharti Infratel Stock data Forecasts/Valuations 2017 2018E 2019E 52-week range (Rs) (high,low) 414-282 EPS (Rs) 14.9 16.1 17.7 Market Cap. (Rs bn) 676.8 EPS growth (%) 18.3 8.1 10.0 Shareholding pattern (%) P/E (X) 24.6 22.8 20.7 Promoters 72.0 Sales (Rs bn) 134.2 146.0 155.0 FIIs 24.9 Net profits (Rs bn) 27.5 29.7 32.7 MFs 0.5 EBITDA (Rs bn) 59.0 64.4 69.0 Price performance (%) 1M 3M 12M EV/EBITDA (X) 11.5 10.5 9.7 Absolute 5.3 14.7 (2.9) ROE (%) 16.2 19.0 20.5 Rel. to BSE-30 4.5 8.6 (16.7) Div. Yield (%) 4.5 3.4 3.8

4QFY17 earnings print – operationally in line; energy spread surprises

BHIN’s 4QFY17 earnings print was largely in line with our expectations on service revenues and EBITDA. Overall EBITDA was marginally ahead on account of higher-than-expected energy spread. Service revenues grew 7.4% yoy, led largely by tenancy growth as rental/tenant was largely flat yoy. Service EBITDA grew 7.3% yoy as core service margins were flat. Rental costs (paid by BHIN to site owners) increased 13% yoy despite only a 2% growth in tower base; the company attributed the same to regular escalations and higher rentals paid on incremental tenants added. Recurring PAT declined 17% yoy to ₹5.97 bn on account of a sharp decline in other income (volatility in this line item induced by Ind-AS adoption, which requires MTM of liquid marketable investments).

FY2017 round-up – a decent year especially in the backdrop of MSA renegotiations

Surge in tenancy additions in the second half helped BHIN report a decent revenue and EBITDA growth print for FY2017 despite pressure from rental freeze post MSA renegotiations at the beginning of the fiscal. EOP tenancy ratio improved 0.127X yoy in FY2017 (to 2.323) versus an improvement of 0.074X in FY2016. This helped the company deliver a reasonably healthy 8% growth each in service revenues and EBITDA for the year. Overall EBITDA grew faster at 9% yoy as energy spread grew 29% yoy; energy margin of 6.8% for the year (up 100 bps yoy) remained ahead of the management’s reiterated guided range of 3-5%. Recurring EPS grew 22% in FY2017 to ₹14.1/share while the company paid a dividend of ₹16/share.

Between BHIN standalone and Indus, BHIN SA had a stronger year (+9.8% service revenue growth, +11.3% service EBITDA growth, +13.5% overall EBITDA). Indus had a subdued year with 6.6% service revenue growth and 4.9% service EBITDA growth. Rohit Chordia View – near-term strength overshadowing medium-term risks; stock overpriced. REDUCE

We see industry consolidation and potential pricing pressure given the sorry state of affairs in the customer industry as key risks that the market seems to be ignoring. We are not believers of the ‘sale to private equity = independence = higher pricing power’ narrative either. Near-term positives are fully priced in. We remain cautious; REDUCE.

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

Earnings model changes and valuation

Exhibit 1 captures the key changes to our earnings model. Our service revenue and EBITDA estimates for FY2018/19E go up by 2-4% as we bake in higher tenancy growth from R-Jio. EPS estimates go up by 1-2%, lower than revision in EBITDA estimates as we take our capex assumptions up a tad.

Exhibit 2 depicts our DCF-based SoTP valuation for BHIN. Our fair value target for the company stands revised to ₹335/share (from ₹315) as we roll over our DCF to Mar 2019E and also reduce WACC by 50 bps each for BHIN standalone and Indus to 10% and 9.5%, respectively. Our target price includes an anchor-tenant (Vodafone and Idea) consolidation impact of ₹40/share.

Exhibit 1: Bharti Infratel – key changes to estimates, March fiscal year-ends, 2018-19E

Revised Earlier Change (%) 2018E 2019E 2018E 2019E 2018E 2019E Consolidated financials Revenues (Rs mn) 145,968 154,951 141,728 148,661 3.0 4.2 Service revenues (Rs mn) 91,615 97,824 89,818 94,936 2.0 3.0 EBITDA (Rs mn) 64,368 69,042 62,743 66,651 2.6 3.6 EBITDA margin (%, on service revenues) 70.3 70.6 69.9 70.2 PAT (Rs mn) 29,706 32,665 29,163 32,294 1.9 1.1 EPS (Rs/share) 16.1 17.7 15.8 17.5 1.9 1.1 Capex (Rs mn) 22,565 21,738 19,980 18,413 12.9 18.1 Operational metrics (standalone) # of towers 39,949 40,699 40,208 40,958 (0.6) (0.6) Tenancy ratio (X) 2.41 2.47 2.32 2.39 3.9 3.4 Service rental/ tenant/ month (Rs) 37,234 37,607 37,070 37,446 0.4 0.4 Operational metrics (Indus) # of towers 125,230 126,730 125,381 126,381 (0.1) 0.3 Tenancy ratio (X) 2.48 2.53 2.43 2.49 1.9 1.5 Service rental/ tenant/ month (Rs) 33,229 33,642 32,931 33,323 0.9 1.0

Source: Kotak Institutional Equities estimates

KOTAK INSTITUTIONAL EQUITIES RESEARCH 3 Telecom Bharti Infratel

Exhibit 2: SoTP-based valuation of Bharti Infratel

Rs mn Mar-2019E Bharti Infratel standalone EV (DCF-based) 341,280 Net debt/ (cash) (58,854) Equity value - A 400,134 Implied EV/tower (Rs mn) 8.5 Implied EV/EBITDA (X) 9.7 42% stake in Indus Indus EV (DCF-based) 902,391 Net debt/ (cash) 27,972 Equity value 874,419 Attributable equity value for BIL's 42% stake - B 367,256 Implied EV/tower - Indus (adjusted) (Rs mn) 7.4 Implied EV/EBITDA - Indus (adjusted) (X) 10.2 Overall valuation Total EV 644,484 Total EV (US$ mn) 9,915 Implied EV/EBITDA (X) 8.9 Total Equity value = A + B 693,939 Implied PE (X) 19.6 Total Equity value (US$ mn) 10,514 Fair value estimate (Rs/share) 375 Anchor-tenant consolidation discount (Rs/share) 40 Target price (Rs/share) 335 Key assumptions BIL (standalone) WACC (%) 10.0 BIL (standalone) terminal growth (%) 3.5 Indus WACC (%) 9.5 Indus terminal growth (%) 3.5

Source: Kotak Institutional Equities estimates

4 KOTAK INSTITUTIONAL EQUITIES RESEARCH Bharti Infratel Telecom

Exhibit 3: Condensed financial statements, BIL consolidated, March fiscal year-ends, 2015-19E (Rs mn)

2015 2016 2017 2018E 2019E Key financials Income statement Gross revenues 116,683 123,314 134,237 145,968 154,951 Service revenues 71,261 78,105 84,327 91,615 97,824 Power and fuel reimbursements 45,450 45,209 49,943 54,386 57,159 EBITDA 50,041 54,108 58,969 64,368 69,042 EBIT 28,194 31,872 36,344 41,445 45,869 PBT 30,515 35,766 42,213 46,139 50,774 PAT 19,924 22,474 27,471 29,706 32,665 OPM (on gross,%) 42.9 43.9 43.9 44.1 44.6 OPM (on net,%) 70.2 69.3 69.9 70.3 70.6 EPS (Rs/share) 10.52 11.85 14.85 16.06 17.66 Balance sheet Total Equity 170,200 182,262 154,865 157,542 160,408 Borrowings 17,131 17,046 39,535 41,635 41,635 Other liabilities 84,216 45,469 52,272 55,433 57,605 Total equity and liabilities 271,547 244,777 246,672 254,610 259,648 Net fixed assets 150,381 142,019 138,894 138,536 137,101 Cash and equivalents 40,560 49,193 37,960 44,564 49,748 Other assets 80,606 53,565 69,818 71,510 72,799 Total assets 271,547 244,777 246,672 254,610 259,648 Cash flow statement Operating cash flow 39,895 33,041 49,782 49,405 51,817 Capex (18,144) (20,645) (21,761) (22,565) (21,738) Free cash flow 21,751 12,396 28,021 26,840 30,079 Key operating metrics End-period tower base (#) 85,892 88,808 90,646 92,546 93,926 End-period tenants (#) 182,294 195,035 210,606 226,555 234,905 Tenancy (X) 2.12 2.20 2.32 2.45 2.50 Rental/tenant/month (Rs) 33,983 34,499 34,648 34,928 35,331 Revenue/tower/annum 842,030 894,163 939,819 1,000,208 1,049,218 EBITDA/tower/annum 591,292 619,440 657,206 702,746 740,509

Source: Company, Kotak Institutional Equities estimates

KOTAK INSTITUTIONAL EQUITIES RESEARCH 5 Telecom Bharti Infratel

Exhibit 4: Condensed financial statements, BIL standalone, March fiscal year-ends, 2015-19E

2015 2016 2017 2018E 2019E Key financials Income statement Gross revenues 53,889 55,584 60,847 66,511 70,683 Service revenues 32,103 34,616 37,968 41,433 44,364 Power and fuel reimbursements 21,786 20,968 22,879 25,078 26,319 EBITDA 23,940 24,884 28,251 31,000 33,340 EBIT 12,718 13,334 16,594 19,231 21,444 PBT 32,737 18,723 35,881 38,947 42,373 PAT 27,252 12,623 27,554 29,908 32,539 Balance sheet Total Equity 179,635 182,420 154,993 157,067 159,001 Borrowings ― ― 24,970 24,970 24,970 Other liabilities 42,580 24,612 27,665 29,819 31,335 Total equity and liabilities 222,215 207,032 207,628 211,855 215,306 Net fixed assets 65,382 61,332 58,527 56,693 54,761 Cash and equivalents 68,201 72,267 74,296 79,411 84,096 Other assets 88,632 73,433 74,805 75,751 76,448 Total assets 222,215 207,032 207,628 211,855 215,306 Key operating metrics End-period tower base (#) 37,196 38,458 39,099 39,949 40,699 End-period tenants (#) 75,819 81,632 89,263 96,201 100,409 Tenancy (X) 2.04 2.12 2.28 2.41 2.47 Rental/tenant/month (Rs) 36,911 36,642 37,029 37,234 37,607 Revenue/tower/annum 878,319 915,114 979,099 1,048,305 1,100,181 EBITDA/tower/annum 654,984 657,837 728,522 784,340 826,792

Source: Company, Kotak Institutional Equities estimates

6 KOTAK INSTITUTIONAL EQUITIES RESEARCH Bharti Infratel Telecom

Exhibit 5: Condensed financial statements, Indus Towers, March fiscal year-ends, 2015-19E

2015 2016 2017 2018E 2019E Key financials Income statement Gross revenues 149,576 161,262 174,817 189,262 200,717 Service revenues 93,233 103,545 110,378 119,480 127,288 Power and fuel reimbursements 56,343 57,717 64,438 69,783 73,429 EBITDA 62,145 69,581 73,138 79,448 85,005 EBIT 36,848 44,138 47,021 52,889 58,153 PBT 33,774 40,576 43,724 50,405 56,407 PAT 21,617 26,350 28,452 32,800 36,706 Balance sheet Total Equity 121,836 133,752 132,171 133,352 134,674 Borrowings 40,788 40,586 40,693 45,693 45,693 Other liabilities 99,790 49,998 52,807 55,206 56,768 Total equity and liabilities 262,414 224,336 225,671 234,251 237,134 Net fixed assets 202,821 192,486 191,660 193,253 192,517 Cash and equivalents 569 3,455 12,512 17,721 19,932 Other assets 59,024 28,395 21,500 23,277 24,685 Total assets 262,414 224,336 225,671 234,251 237,134 Key operating metrics End-period tower base (#) 115,942 119,881 122,730 125,230 126,730 End-period tenants (#) 253,513 270,006 288,913 310,368 320,229 Tenancy (X) 2.19 2.25 2.35 2.48 2.53 Rental/tenant/month (Rs) 31,907 32,964 32,914 33,229 33,642 Revenue/tower/annum 814,443 878,161 909,921 963,700 1,010,380 EBITDA/tower/annum 542,872 590,112 602,925 640,813 674,752

Source: Company, Kotak Institutional Equities estimates

KOTAK INSTITUTIONAL EQUITIES RESEARCH 7 Telecom Bharti Infratel

Exhibit 6: Bharti Infratel – 4QFY17 review, March fiscal year-ends (Rs mn)

Change (%) Rs mn 4QFY16 3QFY17 4QFY17 QoQ YoY 4QFY17E vs KIE (%) Revenues 31,817 34,007 35,204 3.5 10.6 34,685 1.5 Costs Power and fuel (10,386) (11,938) (12,004) 0.6 15.6 (11,687) 2.7 Rent (2,677) (2,932) (3,029) 3.3 13.1 (2,999) 1.0 Employee expenses (1,088) (1,204) (1,157) (3.9) 6.3 (1,223) (5.4) Others (3,171) (3,132) (3,291) 5.1 3.8 (3,229) 1.9 Total (17,322) (19,206) (19,481) 1.4 12.5 (19,138) 1.8 EBITDA 14,495 14,801 15,723 6.2 8.5 15,547 1.1 EBITDA margin (%, overall) 45.6 43.5 44.7 44.8 Service EBITDA margin (%) 65.9 65.7 65.8 65.9 D&A - net (5,697) (5,664) (5,684) 0.4 (0.2) (5,729) (0.8) EBIT 8,798 9,137 10,039 9.9 14.1 9,818 2.3 Net finance costs and other income 1,462 1,304 127 (90.3) (91.3) 523 (75.7) PBT 10,260 10,441 10,166 (2.6) (0.9) 10,341 (1.7) Provision for taxes (3,727) (4,237) (4,200) (0.9) 12.7 (3,910) 7.4 PAT 6,533 6,204 5,966 (3.8) (8.7) 6,431 (7.2) Exceptional items 651 Net income 7,184 6,204 5,966 (3.8) (17.0) 6,431 (7.2) Other comprehensive income 6 9 39 Total comprehensive income 7,190 6,213 6,005 # of shares 1,897 1,850 1,850 1,850 EPS (Rs/share) 3.44 3.35 3.22 (3.8) (6.4) 3.48 Margins (%) EBITDA 45.6 43.5 44.7 44.8 EBIT 27.7 26.9 28.5 28.3 PAT 20.5 18.2 16.9 18.5 Effective tax rate 36.3 40.6 41.3 37.8 Key operating metrics Consol revenue break-up (Rs mn) Service revenues 20,322 21,175 21,834 3.1 7.4 21,869 (0.2) Energy reimbursements 11,495 12,832 13,370 4.2 16.3 12,802 4.4 Gross revenues 31,817 34,007 35,204 3.5 10.6 34,671 1.5 Energy spread 1,109 894 1,366 53 23 1,116 22.5 Service EBITDA 13,386 13,907 14,357 3.2 7.3 14,432 (0.5) Consolidated metrics Total towers (#) 88,808 90,255 90,646 0.4 2.1 90,633 0.0 Total tenants (#) 195,035 204,934 210,606 2.8 8.0 211,225 (0.3) Tenancy ratio (end-period) 2.20 2.27 2.32 2.3 5.8 2.33 (0.3) Sharing revenue per tower (Rs/month) 76,602 78,407 80,464 2.6 5.0 Sharing revenue per operator (Rs/month) 35,012 34,966 35,029 0.2 0.0 Bharti Infratel - standalone Total towers (#) 38,458 38,997 39,099 0.3 1.7 39,233 (0.3) Total tenants (#) 81,632 86,112 89,263 3.7 9.3 88,883 0.4 Tenancy ratio (end-period) 2.12 2.21 2.28 3.4 7.6 2.27 0.8 Sharing revenue per tower (Rs/month) 78,455 81,366 84,238 3.5 7.4 83,741 0.6 Sharing revenue per operator (Rs/month) 37,128 37,428 37,512 0.2 1.0 37,436 0.2 Indus towers Total towers (#) 119,881 122,044 122,730 0.6 2.4 122,381 0.3 Total tenants (#) 270,006 282,909 288,913 2.1 7.0 291,290 (0.8) Tenancy ratio (end-period) 2.25 2.32 2.35 1.6 4.5 2.38 (1.1) Sharing revenue per tower (Rs/month) 75,254 76,223 77,661 1.9 3.2 78,203 (0.7) Sharing revenue per operator (Rs/month) 33,519 33,221 33,244 0.1 (0.8) 33,289 (0.1)

Source: Company, Kotak Institutional Equities estimates

8 KOTAK INSTITUTIONAL EQUITIES RESEARCH Bharti Infratel Telecom

Exhibit 7: BHIN – key operational metrics

Mar-15 Jun-15 Sep-15 Dec-15 Mar-16 Jun-16 Sep-16 Dec-16 Mar-17 Consolidated financial metrics (Rs mn) Service revenues 18,419 18,728 19,262 19,793 20,322 20,573 20,744 21,175 21,834 Energy reimbursements 11,048 11,303 11,148 11,263 11,495 11,533 12,175 12,832 13,370 Gross revenues 29,467 30,031 30,410 31,056 31,817 32,106 32,919 34,007 35,204 EBITDA 13,369 12,946 13,166 13,680 14,687 13,947 14,498 14,801 15,723 EBIT 7,761 7,446 7,531 8,097 8,798 8,299 8,869 9,137 10,039 PBT 8,801 7,444 9,770 8,292 10,260 9,932 11,674 10,441 10,166 PAT 5,575 4,424 5,916 4,950 7,184 6,286 7,568 6,204 5,966 Total capex 5,651 4,904 5,916 5,417 5,007 4,416 5,112 6,830 5,431 Maintenance capex 1,317 1,426 1,194 1,166 966 1,359 1,178 1,164 1,346 Simple FCF 7,464 7,972 7,149 8,180 9,578 9,577 9,321 8,014 10,297 Adjusted funds from operations (AFFO) 11,798 11,450 11,871 12,431 13,618 12,633 13,255 13,680 14,382 Bharti Infratel - Standalone Total towers (#) 37,196 37,486 37,801 38,206 38,458 38,642 38,832 38,997 39,099 Towers added 449 290 315 405 252 184 190 165 102 Total tenants (#) 75,819 77,292 78,949 80,366 81,632 81,908 83,085 86,112 89,263 Gross tenancy addition 1,488 1,473 1,657 1,877 1,266 1,005 1,250 3,110 3,623 Net tenancy addition 1,488 1,473 1,657 1,417 1,266 276 1,177 3,027 3,151 Tenancy ratio (end-period) 2.04 2.06 2.09 2.10 2.12 2.12 2.14 2.21 2.28 Sharing revenue per tower (Rs/month) 74,382 73,860 78,949 80,366 81,632 81,908 83,085 86,112 89,263 Sharing revenue per operator (Rs/month) 36,630 36,026 36,422 36,753 37,128 37,622 37,868 37,428 37,512 Indus towers Total towers (#) 115,942 116,454 117,579 118,687 119,881 120,739 121,330 122,044 122,730 Towers added 902 512 1,125 1,108 1,194 858 591 714 686 Total tenants (#) 253,513 256,960 261,159 265,606 270,006 272,603 275,499 282,909 288,913 Gross tenancy addition 4,902 3,447 4,199 4,804 4,400 3,668 3,082 7,858 8,266 Net tenancy addition 4,902 3,447 4,199 4,447 4,400 2,597 2,896 7,410 6,004 Tenancy ratio (end-period) 2.19 2.21 2.22 2.24 2.25 2.26 2.27 2.32 2.35 Sharing revenue per tower (Rs/month) 70,370 71,462 72,812 74,027 75,254 74,902 74,587 76,223 77,661 Sharing revenue per operator (Rs/month) 32,371 32,534 32,889 33,203 33,519 33,215 32,941 33,221 33,244

Source: Company

Exhibit 8: BHIN – energy spread trends

Rs mn Mar-15 Jun-15 Sep-15 Dec-15 Mar-16 Jun-16 Sep-16 Dec-16 Mar-17 Energy reimbursements 11,048 11,303 11,148 11,263 11,495 11,533 12,175 12,832 13,370 Power and fuel costs (9,835) (10,733) (10,762) (10,717) (10,386) (11,144) (11,447) (11,938) (12,004) Spread 1,213 570 386 546 1,109 389 728 894 1,366 Incremental energy spread 253 (643) (184) 160 563 (720) 339 166 472 Incremental EBITDA 638 (473) 198 528 873 (548) 551 303 922 Pure service (ex-energy) EBITDA margin (%) 66.0 65.8 66.0 66.1 65.9 65.9 66.4 65.7 65.8

Source: Company

KOTAK INSTITUTIONAL EQUITIES RESEARCH 9 Telecom Bharti Infratel

Exhibit 9: BHIN per tower economics

Mar-15 Jun-15 Sep-15 Dec-15 Mar-16 Jun-16 Sep-16 Dec-16 Mar-17 Rs '000/tower Revenue 345 349 350 354 360 360 368 378 389 Service revenues 215 217 222 226 230 231 232 235 241 Energy reimbursements 129 131 128 129 130 129 136 143 148 Overall costs (188) (199) (200) (199) (196) (204) (206) (213) (215) Power and fuel expenses (115) (125) (124) (122) (117) (125) (128) (133) (133) Rental cost (29) (29) (29) (30) (30) (31) (32) (33) (33) Employee expenses (12) (12) (13) (12) (12) (13) (13) (13) (13) Other expenses (32) (33) (34) (34) (36) (34) (33) (35) (36) EBITDA 156 150 151 155 164 157 162 164 174 Depreciation (66) (63) (64) (63) (64) (63) (63) (63) (63) Finance charges 12 (0) 26 2 17 18 31 14 1 PBT 103 86 113 95 116 111 130 116 112 PAT 65 51 68 57 74 71 84 69 66 Maintenance capex (15) (17) (14) (13) (11) (15) (13) (13) (15) AFFO 138 133 137 142 154 142 148 152 159 Simple FCF 87 93 82 93 108 108 104 89 114

Source: Company

Exhibit 10: Upgrade capex is a meaningful part of total capex

Rs mn 1QFY16 2QFY16 3QFY16 4QFY16 1QFY17 2QFY17 3QFY17 4QFY17 Total Capex (Rs mn) 4,904 5,916 5,417 5,007 4,416 5,112 6,830 5,431 Of which, maintenance capex (Rs mn) 1,426 1,194 1,166 966 1,359 1,178 1,164 1,346 Implied 'growth' capex (Rs mn) 3,478 4,722 4,251 4,041 3,057 3,934 5,666 4,085 # of towers added (#) 505 787 871 753 544 439 464 391 Assumed capex per new tower (Rs mn) 3.00 3.00 3.00 3.00 3.00 3.00 3.00 3.00 Capex on new towers (Rs mn) 1,515 2,361 2,613 2,259 1,632 1,317 1,392 1,173 Implied 'upgrade capex' 1,963 2,361 1,638 1,782 1,425 2,617 4,274 2,912 Upgrade capex per upgrade tenancy (Rs mn) 0.67 0.69 0.42 0.57 0.56 1.01 0.67 0.49

Source: Company, Kotak Institutional Equities estimates

Exhibit 11: BHIN – condensed cash-flow statement

1QFY16 2QFY16 3QFY16 4QFY16 1QFY17 2QFY17 3QFY17 4QFY17 EBITDA 12,896 13,094 13,622 14,495 13,947 14,498 14,801 15,723 - capex (4,904) (5,916) (5,417) (5,007) (4,416) (5,112) (6,830) (5,431) Simple FCF 7,992 7,178 8,205 9,488 9,531 9,386 7,971 10,292

Source: Company

10 KOTAK INSTITUTIONAL EQUITIES RESEARCH Bharti Infratel Telecom

Exhibit 12: Bharti Infratel – consolidated interim financials, March fiscal year-ends (Rs mn)

Change (%) Rs mn 4QFY16 3QFY17 4QFY17 QoQ YoY FY2016 FY2017 YoY (%) Revenues 14,181 15,300 16,053 4.9 13.2 55,583 60,847 9.5 Costs Power and fuel (4,821) (5,374) (5,465) 1.7 13.4 (19,901) (21,143) 6.2 Rent (707) (799) (842) 5.4 19.1 (2,798) (3,184) 13.8 Employee expenses (625) (698) (675) (3.3) 8.0 (2,578) (2,746) 6.5 Others (1,332) (1,373) (1,376) 0.2 3.3 (5,423) (5,523) 1.8 Total (7,485) (8,244) (8,358) 1.4 11.7 (30,700) (32,596) 6.2 EBITDA 6,696 7,056 7,695 9.1 14.9 24,883 28,251 13.5 EBITDA margin (%, overall) 47.2 46.1 47.9 44.8 46.4 Service EBITDA margin (%) 70.4 69.8 70.7 68.8 69.8 D&A - net (2,952) (2,934) (2,967) 1.1 0.5 (11,550) (11,657) 0.9 EBIT 3,744 4,122 4,728 14.7 26.3 13,333 16,594 24.5 Net finance costs and other income 1,755 1,661 421 (74.7) (76.0) 5,389 7,253 34.6 PBT 5,499 5,783 5,149 (11.0) (6.4) 18,722 23,847 27.4 Share of associate 3,059 3,041 3,272 7.6 7.0 11,069 11,950 8.0 PBT after share of associate 8,558 8,824 8,421 (4.6) (1.6) 29,791 35,797 20.2 Provision for taxes (2,025) (2,620) (2,455) (6.3) 21.2 (7,968) (9,604) PAT 6,533 6,204 5,966 (3.8) (8.7) 21,823 26,193 20.0 Exceptional items 651 — — 651 1,277 Net income 7,184 6,204 5,966 (3.8) (17.0) 22,474 27,470 22.2 Other comprehensive income 6 9 39 (17) 84 Total comprehensive income 7,190 6,213 6,005 (3.3) (16.5) 22,457 27,554 22.7 # of shares 1,897 1,850 1,850 1,897 1,850 EPS (Rs/share) 3.79 3.35 3.22 (3.8) (14.9) 11.51 14.16 23.1 Margins (%) EBITDA (on gross) (%) 47.2 46.1 47.9 44.8 46.4 EBIT (on gross) (%) 26.4 26.9 29.5 24.0 27.3 PAT (on gross) (%) 46.1 40.5 37.2 39.3 43.0 Effective tax rate (%) (55.6) 29.7 29.2 (59.1) (50.1)

Service revenues 9,012 9,499 9,868 3.9 9.5 34,578 37,958 9.8 Energy reimbursements 5,159 5,801 6,185 6.6 19.9 20,968 22,879 9.1 Intersegmental 9 — — 38 9 Total 14,180 15,300 16,053 4.9 13.2 55,584 60,846 Energy EBITDA 338 427 720 68.6 113.0 1,067 1,736 62.7 Service EBITDA 6,358 6,629 6,975 5.2 9.7 23,816 26,515 11.3

Source: Company

KOTAK INSTITUTIONAL EQUITIES RESEARCH 11 Telecom Bharti Infratel

Exhibit 13: Indus Towers – interim financials, March fiscal year-ends (Rs mn)

Change (%) Rs mn 4QFY16 3QFY17 4QFY17 QoQ YoY FY2016 FY2017 YoY (%) Revenues 41,990 44,567 45,621 2.4 8.6 161,264 174,817 8.4 Costs Power and fuel (13,250) (15,629) (15,569) (0.4) 17.5 (54,040) (60,452) 11.9 Rent (4,690) (5,079) (5,205) 2.5 11.0 (17,917) (20,102) 12.2 Employee expenses (1,102) (1,205) (1,150) (4.5) 4.3 (4,048) (4,602) 13.7 Others (4,379) (4,212) (4,586) 8.9 4.7 (15,679) (16,521) 5.4 Total (23,421) (26,124) (26,510) 1.5 13.2 (91,683) (101,679) 10.9 EBITDA 18,569 18,440 19,114 3.7 2.9 69,581 73,138 5.1 EBITDA margin (%, on gross) 44.2 41.4 41.9 43.1 41.8 EBITDA margin (%, on net) 62.2 62.2 61.6 63.6 62.7 D&A - net (6,536) (6,500) (6,469) (0.5) (1.0) (25,443) (26,117) 2.6 EBIT 12,033 11,940 12,645 5.9 5.1 44,138 47,021 6.5 Net finance costs and other income (698) (850) (702) (17.4) 0.7 (3,564) (3,298) (7.5) PBT 11,336 11,090 11,943 7.7 5.4 40,574 43,724 7.8 Provision for taxes (4,052) (3,850) (4,152) 7.9 2.5 (14,217) (15,271) 7.4 PAT 7,283 7,240 7,790 7.6 7.0 26,357 28,452 7.9 Exceptional items — — — — — Net income 7,283 7,240 7,790 7.6 7.0 26,357 28,452 7.9 Other comprehensive income (12) 12 14 (31) (21) Total comprehensive income 7,271 7,252 7,805 26,326 28,431 # of shares 1,888 1,850 1,850 1,888 1,850 EPS (Rs/share) 3.86 3.91 4.21 7.6 9.2 13.96 15.38 10.2 Margins (%) EBITDA (on gross) (%) 44.2 41.4 41.9 43.1 41.8 EBIT (on gross) (%) 28.7 26.8 27.7 27.4 26.9 PAT (on gross) (%) 17.3 16.2 17.1 16.3 16.3 Effective tax rate (%) 35.7 34.7 34.8 35.0 34.9

Service revenues 26,907 27,800 28,490 2.5 5.9 103,545 110,378 6.6 Energy reimbursements 15,086 16,767 17,131 2.2 13.6 57,717 64,438 11.6 Total 41,993 44,567 45,621 161,262 174,817 Energy EBITDA 1,836 1,138 1,562 37.2 (14.9) 3,676 3,986 8.4 Service EBITDA 16,733 17,302 17,552 1.4 4.9 65,905 69,152 4.9

Source: Company

12 KOTAK INSTITUTIONAL EQUITIES RESEARCH ADD InterGlobe Aviation (INDIGO) Others MAY 10, 2017 RESULT Coverage view:

Weak, but in-line performance. IndiGo’s 4QFY17 earnings were weak (PAT down Price (`): 1,140 25% yoy), though in line with estimates as lag in passing the increase in fuel cost via Target price (`): 1,200 price hikes was expected to dent margins in the quarter. We see IndiGo’s share price BSE-30: 29,933 remaining buoyant, as likely stabilization in its yield should create solid momentum in its earnings going forward, and its strong payout ratio (74% in FY2017) should attract premium valuations. Increase TP to Rs1,200 (Rs1,060 earlier), maintain ADD.

Company data and valuation summary InterGlobe Aviation Stock data Forecasts/Valuations 2017 2018E 2019E 52-week range (Rs) (high,low) 1,169-790 EPS (Rs) 46.0 70.0 90.2 Market Cap. (Rs bn) 412.2 EPS growth (%) (18.9) 52.0 28.9 Shareholding pattern (%) P/E (X) 24.8 16.3 12.6 Promoters 85.9 Sales (Rs bn) 185.8 247.9 309.6 FIIs 6.3 Net profits (Rs bn) 16.6 25.2 32.5 MFs 1.1 EBITDA (Rs bn) 21.4 32.8 40.2 Price performance (%) 1M 3M 12M EV/EBITDA (X) 16.3 10.2 8.0 Absolute 9.8 34.7 5.8 ROE (%) 86.1 116.8 131.0 Rel. to BSE-30 8.9 27.5 (9.2) Div. Yield (%) 3.0 4.5 5.8

Lag in passing on increase in fuel cost dented margins, as expected

Revenues, at Rs48.5 bn, were up 19% yoy in 4QFY17, led by (1) 26% growth in volumes and (2) 6% decline in average yield, in line with estimates. Yield declined 10% yoy in January, but decline was much lower in February and March, as the company (along with the industry) improved pricing to pass on the sharp spurt in ATF price (+42% yoy) in the quarter. Lag in improvement in pricing, however, led to fuel cost, as % of revenues, increasing sharply by 1,040 bps yoy, though the dent in EBITDAR margins was contained to 940 bps, on account of (1) MTM gains of Rs796 mn in other expenses and (2) low increase in staff cost (+8% yoy) due to high base. EBITDAR, at Rs13.3 bn, was down 12% yoy, though came slightly ahead of estimates. PAT, at Rs4.4 bn, was down 25% yoy, despite sharp jump in other income (59% yoy), as lease rentals increased by 21% yoy. FY2017 was a tough year for IndiGo (PAT down 16% yoy) on account of declining yield, however, the company maintained high dividend payout (74% in FY2017), given still healthy profitability and high cash on books (Rs44 bn).

See yield stabilizing in FY2018E as fares converge; low industry margins to stem further declines

We count the recent stabilization in yield for IndiGo and industry as a major positive, and remain confident of our expectations of minor improvement in IndiGo’s yield in FY2018-20E, leading to meaningful earnings accretion (expect EPS CAGR of 32%) in FY2017-20E. We note that IndiGo started FY2017 on a high base in its yield, as it enjoyed premium pricing over SpiceJet and other LCCs until FY2016, the normalization of which led to a steep 10% decline in its yield, and ruined its FY2017 earnings performance. With LCC fares converging in recent months as per our observations, likely stability in IndiGo’s yield in coming quarters is more visible, in our view. We rule out further decline in industry yield from FY2018E, on account of low scope for price-based competition given low margins of IndiGo’s peers.

Slightly increase estimates, raise TP to Rs1,200 (Rs1,060 earlier), maintain ADD Mohan Lal

We have increased our FY2018-19E EPS estimate by ~6% to account for higher capacity addition guidance by the management. Our TP has increased to Rs1,200 (Rs1,060 earlier), using 13X multiple (12.5X earlier) on FY2019E EPS. We see upsides in IndiGo’s stock price once yield stabilizes while (1) continued strength in its volume growth, (2) high dividend yield and (3) reasonable valuations should attract premium valuations, in our view.

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

Exhibit 1: Sharp spurt in fuel costs dented earnings performance in 4QFY17 Interim results of IndiGo, March fiscal year-ends (Rs mn)

Change (%) 4QFY17 4QFY17E 3QFY17 4QFY16 KIE est Qoq Yoy 2017 2016 Chng. (%) ASKs (mn) 14,120 13,758 14,390 11,370 3 (2) 24 54,580 42,830 27 Total income 48,482 47,843 49,865 40,907 1 (3) 19 185,805 161,399 15 Total expenditure (35,160) (35,346) (35,457) (25,821) (1) (1) 36 (133,118) (105,152) 27 Fuel cost (17,734) (17,940) (17,041) (10,561) (1) 4 68 (64,651) (48,930) 32 Employee expense (5,339) (5,092) (5,273) (4,923) 5 1 8 (20,482) (17,880) 15 Other expenditure (12,087) (12,314) (13,142) (10,338) (2) (8) 17 (47,986) (38,342) 25 EBITDAR 13,322 12,498 14,408 15,085 7 (8) (12) 52,687 56,247 (6) EBITDAR (%) 27.5 26.1 28.9 36.9 28.4 34.8 Aircraft and engine rentals (net) (8,242) (7,649) (8,164) (6,789) 8 1 21 (31,254) (25,068) 25 EBITDA 5,080 4,849 6,245 8,296 5 (19) (39) 21,433 31,180 (31) Depreciation (1,052) (1,160) (1,184) (1,249) (9) (11) (16) (4,573) (5,055) (10) Interest (777) (743) (759) (723) 4 2 7 (3,308) (3,041) 9 Other income 2,937 2,408 1,719 1,852 22 71 59 7,891 5,151 53 PBT 6,189 5,352 6,021 8,177 16 3 (24) 21,443 28,235 (24) Exceptional items — — — — — — Tax expense (1,786) (1,070) (1,149) (2,339) 67 56 (24) (4,852) (8,373) (42) PAT 4,403 4,282 4,873 5,838 3 (10) (25) 16,592 19,862 (16) Adjusted PAT 4,403 4,282 4,873 5,838 3 (10) (25) 16,592 19,862 (16) EPS (Rs) 12.2 11.9 13.5 16.6 3 (10) (27) 46.0 56.6 (19) Key ratios (as % of sales) Fuel cost 36.6 34.2 25.8 34.8 30.3 Employee expense 11.0 10.6 12.0 11.0 11.1 Other expenditure 24.9 26.4 25.3 25.8 23.8 Aircraft and engine rentals (net) 17.0 16.4 16.6 16.8 15.5

Source: Company, Kotak Institutional Equities

Exhibit 2: Decline in yield was much lower in 4QFY17, versus earlier quarters Trend in operating parameters for IndiGo, March fiscal year-ends

4QFY16 1QFY17 2QFY17 3QFY17 4QFY17 Key operating parameters Passenger volumes (mn) 8.9 9.9 10.5 11.5 10.8 ASKs (mn) 11,370 12,710 13,370 14,390 14,120 RPKs (mn) 9,670 10,580 10,980 12,560 12,160 Average ticket price (Rs) 3,958 4,032 3,442 3,797 3,928 Yield (Rs per RPK) 4.2 4.3 3.8 4.0 4.0 Average ATF price (Rs per ASK) 0.9 1.1 1.2 1.2 1.3 Staff and other operating costs (Rs per ASK) 1.3 1.3 1.2 1.3 1.3 Load factor (%) 85 83 82 87 86 EBITDAR margins ex-fuel cost (%) 62.7 64.0 61.3 63.1 64.1 Yoy growth (%) ASKs 19.4 25.2 26.7 33.9 24.2 RPKs 22.6 18.5 32.7 38.2 25.7 Passenger volumes 24.3 20.0 37.0 38.0 21.4 Average ticket price (15.1) (10.9) (13.9) (15.9) (0.7) Yield (12.7) (8.2) (11.3) (16.0) (5.8) Average ATF price (Per ASK) (29.9) (18.9) (1.4) 7.1 41.9 Staff and other operating costs (per ASK) 2.7 2.5 1.9 2.3 2.1

Source: Company , DGCA, Kotak Institutional Equities

14 KOTAK INSTITUTIONAL EQUITIES RESEARCH InterGlobe Aviation Others

Exhibit 3: ATF price recovered sharply on a qoq basis by 11% Trend in monthly ex-Delhi ATF price (Rs per liter)

60

55

50

45

40

35

30

05-Jul-16

19-Jul-16

03-Jan-17

17-Jan-17

31-Jan-17

07-Jun-16

21-Jun-16

11-Oct-16

25-Oct-16

14-Feb-17

28-Feb-17

12-Apr-16

26-Apr-16

13-Sep-16

27-Sep-16

06-Dec-16

20-Dec-16

08-Nov-16

22-Nov-16

01-Mar-16

15-Mar-16

29-Mar-16

02-Aug-16

16-Aug-16

30-Aug-16 10-May-16 24-May-16

Source: IOCL, Kotak Institutional Equities

Other highlights

 The management noted that yield improved in February and March 2017, on a month on month basis, as the company, and the industry, took price hikes to pass on the sharp increase in ATF price since the start of the quarter. However, the decline in yield by 10% in January 2017 still impacted margins in the quarter.

 The management has increased its guidance of fleet size in FY2018E to 170, from 154 earlier, citing higher expected demand in coming months. This implied an addition of 39 planes in FY2018, out of which 28 will be A320 neos. IndiGo expects its fleet to contain 47 neos by FY2018 end, accounting for 28% of its total fleet of narrow body aircraft.

 As per the management, the newly inducted A320neo aircraft are giving 15% better fuel efficiency, versus the old A320ceo model. The technical issues with the aircraft are continuing, though expected to get resolved in coming months.

 Other operating spend in 4QFY17 contained MTM gain of Rs796 mn (loss of Rs552 mn in 3QFY17), while other income included MTM gain of Rs826 mn.

 Tax rate, at 23% in FY2017, was low on account of availing of tax credit from earlier periods. The management expects tax rate to range 28-30% in FY2018E.

 IndiGo reported cash balance of Rs93 bn at the end of 4QFY17. The cash balance comprised Rs44 bn of free cash and Rs49 bn of restricted cash. Gross debt stood at Rs26 bn at the end of FY2017.

KOTAK INSTITUTIONAL EQUITIES RESEARCH 15 Others InterGlobe Aviation

Exhibit 4: Pricing on metro routes has converged among LCC players in recent months Airline-wise average of airfares on select metro routes, for one-way ticket booked a month in advance, (Rs)

Month Air India GoAir Indigo Jet Airways SpiceJet Vistara/others Average Jul-16 3,862 3,050 3,439 3,859 3,153 3,618 3,642 Aug-16 4,013 3,103 3,639 3,934 3,803 3,605 3,788 Sep-16 3,707 2,741 3,216 4,174 2,669 2,401 3,421 Oct-16 3,758 2,363 3,203 3,246 2,572 3,115 3,160 Nov-16 4,143 3,038 3,266 3,593 2,742 3,416 3,503 Dec-16 3,205 2,926 3,412 3,474 3,237 3,853 3,394 Jan-17 2,958 2,710 3,005 2,964 2,630 3,283 2,977 Feb-17 3,336 2,833 2,874 2,960 2,619 2,926 2,999 Mar-17 4,181 3,113 3,157 3,523 3,046 4,155 3,546 Mom change (%) Jul-16 (7.2) (17.2) (7.1) 12.9 (10.2) (13.8) (3.9) Aug-16 3.9 1.7 5.8 1.9 20.6 (0.4) 4.0 Sep-16 (7.6) (11.7) (11.6) 6.1 (29.8) (33.4) (9.7) Oct-16 1.4 (13.8) (0.4) (22.2) (3.6) 29.8 (7.6) Nov-16 10.3 28.6 2.0 10.7 6.6 9.6 10.8 Dec-16 (22.6) (3.7) 4.5 (3.3) 18.1 12.8 (3.1) Jan-17 (7.7) (7.4) (11.9) (14.7) (18.8) (14.8) (12.3) Feb-17 12.8 4.6 (4.4) (0.2) (0.4) (10.9) 0.7 Mar-17 25.4 9.9 9.9 19.0 16.3 42.0 18.2 Premium/discount to average sample universe fare Jul-16 6 (16) (6) 6 (13) (1) Aug-16 6 (18) (4) 4 0 (5) Sep-16 8 (20) (6) 22 (22) (30) Oct-16 19 (25) 1 3 (19) (1) Nov-16 18 (13) (7) 3 (22) (2) Dec-16 (6) (14) 1 2 (5) 14 Jan-17 (1) (9) 1 (0) (12) 10 Feb-17 11 (6) (4) (1) (13) (2) Mar-17 18 (12) (11) (1) (14) 17

Notes: (a) We have taken ticket prices (as listed on Cleartrip.com) at the start of each month, for a one-way morning flight ticket, booked a month in advance

Source: Cleartrip, Kotak Institutional Equities

Change in estimates

We have increased our FY2018-19E EPS estimates by ~6% to account for higher capacity addition guidance by the management. We expect IndiGo to improve yield by ~3% on average in FY2018-20E, mainly to pass on the expected increase in fuel price. Strong expected topline growth in FY2018-20E should result in small improvement in margins on account of operating leverage benefits.

Exhibit 5: Change in estimates for IndiGo, March fiscal year-ends (Rs mn)

New Old Change (%) 2017 2018 2019 2017 2018 2019 2017 2018 2019 Revenues (Rs mn) 185,804 247,880 309,601 184,647 229,444 280,769 1 8 10 EBITDAR (Rs mn) 52,686 71,498 90,472 53,601 69,235 84,186 (2) 3 7 PAT (Rs mn) 16,591 25,362 32,648 16,779 24,067 30,698 (1) 5 6 EPS (Rs) 46.0 70.4 90.6 46.6 66.8 85.2 (1) 5 6

Source: Kotak Institutional Equities estimates

16 KOTAK INSTITUTIONAL EQUITIES RESEARCH InterGlobe Aviation Others

Exhibit 6: Our assumptions for IndiGo, March fiscal year-ends

2012 2013 2014 2015 2016 2017 2018E 2019E 2020E Real GDP growth (%) 4.5 4.9 6.6 7.2 7.4 7.7 8.2 8.5 8.5 USD/INR rate 48 54 61 61 66 67 66 68 69 Crude price, Dated Brent (US$/bbl) 114 111 108 86 47 49 60.0 62.5 65.0 Indigo's fleet size 55 66 77 94 107 131 170 201 231 Indigo's ASKs (mn units) 18,006 24,977 29,968 35,327 42,833 54,580 69,028 84,989 97,918 Yoy growth (%) 44 39 20 18 21 27 26 23 15 Indigo RPKs (mn units) 14,826 20,260 23,135 28,177 35,954 46,290 58,325 71,157 81,831 Yoy growth (%) 39 37 14 22 28 29 26 22 15 Load factor (%) 82 81 77 80 84 85 84 84 84 Average ticket price (Rs) 3,911 4,895 5,071 4,882 4,248 3,779 3,986 4,046 4,086 Yoy growth (%) 9.2 25.2 3.6 (3.7) (13.0) (11.0) 5 2 1 Yield (Rs per RPK) 3.8 4.5 4.8 4.9 4.5 4.0 4.2 4.4 4.4 Yoy growth (%) 4.1 21.0 5.8 2.9 (9.2) (10.6) 6 2 1 Ancilliary revenues (as % of ticket revenues) 11.6 11.3 12.0 13.3 14.8 14.8 15.8 16.8 17.3 EBITDAR margins ex-fuel cost (%) 66.9 71.3 69.2 68.7 64.4 62.4 63.2 63.3 63.0

Source: Company, Kotak Institutional Equities estimates

Exhibit 7: Summary financials: IndiGo Profit and loss model, cash flow statement and balance sheet for IndiGo, March fiscal year-ends (Rs mn)

2012 2013 2014 2015 2016 2017 2018E 2019E 2020E Profit model (Rs mn) Sales 55,647 92,031 111,166 139,253 161,399 185,804 247,880 309,601 361,142 EBITDAR 8,496 22,498 21,769 38,219 56,176 52,686 71,498 90,472 105,654 EBITDA 489 8,936 5,066 18,697 30,054 21,465 32,845 40,240 45,822 Other income 1,440 2,371 3,155 3,838 4,614 7,891 9,912 12,820 15,003 Interest (514) (578) (1,226) (1,155) (1,349) (3,308) (2,467) (2,467) (2,467) Depreciation (665) (856) (2,260) (3,022) (5,031) (4,573) (4,569) (4,609) (4,649) Profit before tax 749 9,873 4,736 18,357 28,289 21,476 35,721 45,984 53,708 Tax expense 657 (2,040) 9 (5,402) (8,392) (4,852) (10,359) (13,335) (15,575) Extraordinary items — — — — — — — — — PAT 1,406 7,834 4,744 12,956 19,897 16,624 25,362 32,648 38,133 Year-end number of shares — — 3,776 10,797 15,434 12,252 18,728 24,109 28,159 Fully diluted number of shares 307 307 307 307 360 360 360 360 360 EPS-fully diluted (Rs) 4.1 22.8 13.8 37.7 56.7 46.1 70.4 90.6 105.8 Balance sheet (Rs mn) Equity 2,433 3,890 4,076 4,207 18,343 20,188 23,009 26,640 30,882 Total borrowings 10,156 18,004 33,462 39,262 29,499 23,499 23,499 23,499 23,499 Deferred incentives 11,804 15,304 17,533 17,516 15,832 21,832 31,582 39,232 49,764 Other long term liabilities 2,952 8,004 13,869 24,784 29,902 23,533 32,621 39,750 46,762 Current liabilities and provisions 9,126 13,322 22,075 21,914 36,615 32,516 30,985 31,820 30,095 Total liabilities 36,471 58,525 91,015 107,682 130,191 121,568 141,695 160,942 181,001 Net fixed assets 8,860 17,713 39,560 48,765 47,275 38,742 34,673 30,563 26,414 Investments 4,523 10,105 22,309 27,237 26,908 14,118 19,570 23,847 28,053 Cash & cash equivalent 18,322 24,789 23,730 25,161 46,928 85,648 100,901 115,221 132,109 Loans and advances/other current assets 4,765 5,917 5,417 6,519 9,080 10,453 13,945 18,704 21,817 Total assets 36,471 58,525 91,015 107,682 130,191 148,961 169,088 188,335 208,394 Free cash flow (Rs mn) Operating cash flow 422 7,717 4,604 15,966 21,333 16,581 22,486 26,905 30,246 Working capital changes 8,535 9,696 11,309 7,765 15,904 6,949 8,363 6,579 8,498 Capital expenditure (331) (9,153) (23,237) (10,170) (3,541) 3,960 (500) (500) (500) Free cash flow 8,626 8,260 (7,324) 13,561 33,695 27,490 30,349 32,984 38,244 Ratios (%) EBITDAR 15.3 24.4 19.6 27.4 34.8 28.4 28.8 29.2 29.3 EBITDA margin 0.9 9.7 4.6 13.4 18.6 11.6 13.3 13.0 12.7 Net debt/equity (X) (0.0) 0.8 4.1 6.6 (0.0) (1.0) (0.9) (0.8) (0.8) Book value (R/share) 7.1 11.3 11.9 12.2 52.3 56.0 63.9 73.9 85.7 ROAE 57.8 201.4 116.4 308.0 108.5 82.2 110.2 122.6 123.5 ROACE 20.7 85.6 13.4 32.3 94.8 NM NM NM NM

Source: Company, Kotak Institutional Equities estimates

KOTAK INSTITUTIONAL EQUITIES RESEARCH 17 SELL ABB (ABB) Industrials MAY 10, 2017 RESULT Coverage view: Cautious

Uptick in ordering the only silver lining. 1QCY17 results were subdued on execution Price (`): 1,532 and margin due to elusive private sector capex and margin impact from Ind-AS changes. Target price (`): 1,170 Strong 28% growth in orders was led by renewables, T&D and railways as well as thrust BSE-30: 29,933 on services and exports. We remain positive on opportunity of uptick in ordering though not so much on related margin benefits; it continues to get impacted by increase in royalty. Broadly retain estimates; increase TP to ₹1,170 (from ₹1,100) on roll-forward.

Company data and valuation summary ABB Stock data Forecasts/Valuations 2017 2018E 2019E 52-week range (Rs) (high,low) 1,594-931 EPS (Rs) 17.8 25.2 36.9 Market Cap. (Rs bn) 324.7 EPS growth (%) 25.5 42.1 46.5 Shareholding pattern (%) P/E (X) 86.3 60.7 41.5 Promoters 75.0 Sales (Rs bn) 86.5 110.2 130.5 FIIs 4.4 Net profits (Rs bn) 3.8 5.3 7.8 MFs 2.7 EBITDA (Rs bn) 7.5 10.1 13.1 Price performance (%) 1M 3M 12M EV/EBITDA (X) 42.7 31.1 23.8 Absolute 11.1 25.0 22.3 ROE (%) 12.0 15.4 20.0 Rel. to BSE-30 10.2 18.3 5.0 Div. Yield (%) 0.3 0.5 0.6

1QCY17 results: subdued start to the year on execution, Ind-AS impact on margins

1QCY17 revenues of ₹22 bn were up 8% yoy but 9.5% below estimates. The growth was led by renewables and T&D sectors amid a challenging macro. Among the reorganized segments, robotics & motion and power grids performed well with double-digit growth while electrification products and industrial automation grew in low single digits. Strong growth in services (20%+), exports and the company’s proactive customer engagement provided support.

One-off impact of Ind-AS transition pulls down margins, order inflows encouraging

ABB reported flattish yoy EBITDA of ₹1.7 bn. The margin print of 7.9% was 70 bps lower yoy and 20 bps below estimate. The decline was led by one-off Ind-AS adjustments of Expected Credit Loss (ECL) provisions and MTM adjustments for derivatives. However, the operational excellence initiatives helped ABB improve gross margins by 30 bps yoy. Key positive from the result was a strong 28% increase in order inflows to ₹23 bn on 17% increase in base orders. The growth was driven by government spending in T&D, railways as well as orders in renewables. The large installed base was leveraged to generate service orders as well. Private capex recovery is likely to be elusive until end-CY2017.

Double-digit margins unlikely to be crossed in a hurry, thanks to ever-increasing royalties

Looking into the annual report of ABB India for CY2016, we see a further increase in royalty expenses to 3.5% of revenues versus 2.5% in 2012 and merely 1% in 2007. Such reliance on the parent for hi-tech solutions/systems business would likely increase with new drivers of domestic capex (O&G, transportation, ports, grid stability). This coupled with intense Aditya Mongia competition for base orders, as per ABB, may cap EBITDA margin at 10% or so versus past peak of 13% (royalty share was 1% then), in our view. The upside risks to margin stem from exports and services increasing much beyond the current combined share of 35%. Ajinkya Bhat Marginally reduce estimates, increase target price to ₹1,170 on roll-forward

We revise estimates for CY2017-19E on (1) increased order inflows in CY2017, (2) one-off margin impact of ECL provisions in the year and (3) a perceived cap on margins as explained above. We increase target price to ₹1,170 on 30X Mar 2019E roll-forward EPS. Retain SELL.

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

Exhibit 1: Weaker-than-expected revenue growth in 1QCY17, margins impacted by ECL provisions; order inflow uptick was a positive ABB 1QCY17 – key numbers, calendar year-ends (Rs mn)

Ind-AS Ind-AS Ind-AS % change Ind-AS Ind-AS 1QCY17 1QCY17E 1QCY16 4QCY16 vs est. yoy qoq CY2017E CY2016 % change Sales 21,688 23,963 20,035 24,939 (9.5) 8.3 (13.0) 110,159 86,646 27.1 Expenses (19,974) (22,022) (18,306) (21,923) 9.1 (8.9) (100,065) (79,232) 26.3 Stock 517 647 (743) (20.2) (169.5) — (666) (100.0) Raw material cost (14,344) (13,489) (15,322) 6.3 (6.4) (70,889) (55,506) 27.7 Employee expenses (1,933) (1,872) (1,802) 3.3 7.3 (9,040) (7,503) 20.5 Other expenses (4,214) (3,593) (4,055) 17.3 3.9 (20,136) (15,557) 29.4 EBITDA 1,714 1,941 1,729 3,017 (11.7) (0.9) (43.2) 10,094 7,414 36.1 Other income 186 52 149 97 257.2 24.3 91.8 260 658 (60.5) Interest (212) (204) (223) (303) 3.8 (5.0) (30.1) (480) (919) (47.8) Depreciation (376) (393) (359) (389) (4.2) 4.9 (3.2) (1,650) (1,510) 9.3 PBT 1,312 1,396 1,296 2,422 (6.1) 1.2 (45.8) 8,224 5,644 45.7 Tax (430) (514) (442) (835) (16.4) (2.7) (48.5) (2,878) (1,957) 47.1 Net profit 882 882 854 1,587 (0.0) 3.2 (44.4) 5,345 3,687 45.0 Extraordinary items — — — — — — Reported PAT 882 882 854 1,587 (0.0) 3.2 (44.4) 5,345 3,687 45.0 Key ratios (%) Raw material/ Sales 63.8 64.1 64.4 64.4 64.8 Employee exp./ Sales 8.9 9.3 7.2 8.2 8.7 Other exp./ Sales 19.4 17.9 16.3 18.3 18.0 EBITDA margin 7.9 8.1 8.6 12.1 9.2 8.6 PBT Margin 6.0 5.8 6.5 9.7 7.5 6.5 PAT Margin 4.1 3.7 4.3 6.4 4.9 4.3 Tax rate 32.8 36.8 34.1 34.5 35.0 34.7 EPS 4.2 4.2 4.0 7.5 (0.0) 3.2 (44.4) 25.2 17.4 45.0 Order details Order booking 23,420 18,300 56,280 28.0 (58.4) 119,142 124,650 (4.4) Order backlog 120,230 78,040 124,660 54.1 (3.6) 136,763 124,660 9.7

Source: Company, Kotak Institutional Equities estimates

Exhibit 2: Strong growth in robotics & motion and power grids driven by renewables and T&D upgrades, margin decline across segments was a result of ECL provisions under Ind-AS ABB’s 1QCY17 segmental results – key numbers, calendar year-ends (Rs mn)

Ind-AS Ind-AS Ind-AS % change Ind-AS Ind-AS 1QCY17 1QCY16 4QCY16 yoy qoq CY2017E CY2016 % change Revenues Robotics & Motion 4,993 4,505 5,347 10.8 (6.6) 23,905 19,245 24.2 Electrification Products 6,910 6,675 6,997 3.5 (1.2) 26,505 23,895 10.9 Industrial Automation 3,075 2,975 4,315 3.4 (28.7) 13,959 14,923 (6.5) Power Grids 8,665 7,676 10,692 12.9 (19.0) 48,395 37,178 30.2 Net Sales 21,688 20,035 24,939 8.3 (13.0) 110,159 86,646 27.1 EBIT Robotics & Motion 381 461 946 (17.5) (60) 2,274 1,721 32.2 Electrification Products 782 942 841 (17) (7) 3,669 2,843 29.0 Industrial Automation 110 179 647 (38.7) (83) 1,622 1,562 3.8 Power Grids 526 491 547 7 (4) 2,904 1,620 79.2 Total 1,799 2,073 2,981 (13.2) (39.7) 10,470 7,746 35.2 Interest expense (212) (223) (303) (5.0) (30.1) (480) (919) (47.8) Unallocated (275) (554) (256) (50.3) 7.3 (1,766) (1,184) 49.2 Total Profit Before Tax 1,312 1,296 2,422 1.2 (45.8) 8,224 5,644 45.7 EBIT margin (%) Robotics & Motion 7.6 10.2 17.7 9.5 8.9 Electrification Products 11.3 14.1 12.0 13.8 11.9 Industrial Automation 3.6 6.0 15.0 11.6 10.5 Power Grids 6.1 6.4 5.1 6.0 4.4

Source: Company, Kotak Institutional Equities

KOTAK INSTITUTIONAL EQUITIES RESEARCH 19 Industrials ABB

Exhibit 3: Reconciliation of Ind-AS financials to I-GAAP, December calendar year-ends (Rs mn)

1QCY16 4QCY16 CY2016 Net profit after tax (I-GAAP) 710 1,468 3,763 Adjustments: Impact of provision for expected credit loss 140 (27) (240) MTM of forward contracts and embedded derivatives 97 167 12 Reclassification of net actuarial gain / (loss) on defined benefit (2) 59 176 obligation to other comprehensive income Discounting of non-current financial assets / liabilities, net (12) (24) (64) Others 1 6 (0) Tax impact of above adjustments (net) (78) (62) 42 Net profit after tax (Ind-AS) 855 1,587 3,687 Other comprehensive income (net of tax) 2 (39) (115) Total comprehensive income (Ind-AS) 856 1,548 3,572

Source: Company, Kotak Institutional Equities

Subdued start to the year beyond a good order inflow print

 Revenue up 8% yoy led by renewables and T&D. ABB India reported 1QCY17 net revenues of ₹22 bn, up 8% yoy but 9.5% below estimates. Double-digit growth in robotics & motion (up 11% yoy) and power grids (up 13% yoy) segments was pulled down by low single-digit growth in electrification products and industrial automation. The company has reorganized the business segments from Jan 1, 2017 (parts of erstwhile discrete automation & motion transferred to electrification products). Frequent changes to segmentation make it difficult to compare numbers with estimates.

Revenue growth was led by the company’s proactive approach to leverage its large installed base offering its expertise to assess, automate and optimize customer operations. Service revenues grew more than 20% yoy in the quarter (12-13% of revenues).

 Gross margin up 30 bps yoy; expected credit gain in base leading to flattish yoy EBITDA. ABB India reported 1QCY17 EBITDA of ₹1.7 bn, down 1% yoy due to a high 17% yoy increase in other expenses. Gross margin improved by 30 bps yoy reflecting the operational excellence initiatives aimed at savings in auxiliary expenses. Expected credit gain of ₹140 mn in the base quarter led to a flattish EBITDA. EBITDA margin for the quarter stood at 7.9% (down 70 bps yoy), marginally below our 8.1% estimate. Employee and other expenses saw an impact of Ind-AS (actuarial valuation and ECL provisions).

 Profits up 3% yoy, in line with estimates. Net profit for 1QCY17 stood at ₹882 mn, up 3.2% yoy and in line with estimates. Lower interest (due to lower rates and MIBOR- linked NCDs) and higher depreciation countered each other’s impact while higher other income led to the marginal PAT growth.

 Order inflow in the quarter was encouraging. ABB reported 1QCY17 order inflow of ₹23 bn, up 28% yoy (while the base orders grew 17% yoy) driven by government initiatives, especially in power T&D sector. Various state utilities continued with the T&D network upgradation and digitization. Traction in transportation sector led by railways, growth in services (up 40% yoy) due to intensive focus on installed base and growing exports (up 120% yoy) led to the market-beating order inflows. The growth was seen across only certain select sectors and a broad-based market recovery remains elusive. ABB’s 28% order inflow growth is encouraging on this background and exhibits the resilience of the company’s business prospects arising out of a broad portfolio of offerings.

20 KOTAK INSTITUTIONAL EQUITIES RESEARCH ABB Industrials

Order backlog as of 1QCY17 stood at ₹120 bn. The related 54% yoy growth would partly translate into stronger revenue growth once execution starts on the HVDC order. We estimate a 27% yoy growth in the revenues for ABB India over CY2017.

 Key impact of Ind-AS on account of ECL provisions and MTM of derivatives. The company adopted Ind-AS standard from Jan 1, 2017. The reconciliation with I-GAAP shows expected credit loss (ECL) provisions and fair valuation of embedded derivatives as the key items accounting for the difference with I-GAAP financials for previous quarters.

1QCY17 earnings call takeaways

 Government spending to drive growth. The management of ABB sees a majority of its potential market being supported by government spending that will drive ordering and revenue growth in the coming year. While bank NPAs are holding back private sector investments, there are several underlying infrastructure themes that would see strong government spending. Some of these themes are:

. Power generation. Nearly 35 GW of thermal power plants are currently over 25 years old and are in need of retrofits/replacement. While companies such as BHEL would supply the heavy equipment, the company mentioned that a lot of other technological components involve ABB offerings. Key theme in this area would be the ability to easily ramp up or ramp down generation depending on the demand and power tariff from other sources (such as renewables) feeding into the grid.

. Power T&D. The company mentioned that in 1QCY17, state utilities continued their T&D network upgradation and digitalization initiatives driving the traction on T&D orders. The increasing generation from renewable sources would accelerate this further to ensure grid stability and to cope with the renewables feed-in. Further, the enhanced transparency on power availability has made state utilities accountable to provide sufficient power to all citizens and will thus need to keep expanding T&D networks to fulfill the demand. ABB has strong offerings in T&D sector (substation equipment, grid stability and smart-grid offerings).

. Railways. The management expressed high optimism on ordering from railways. Given the size of the entity, it has a very high capacity to absorb latest technology and upgrade. In the month of May 2017, Indian Railways will also invite bids for a JV to manufacture 5,000 electric coaches, which is expected to be a US$3 bn worth of opportunity as per ABB. Indian Railways is also planning to install solar power plants worth 500 MW to supply power to 8,000 stations in the country. Such initiatives will benefit ABB.

. Oil & gas. The company expects US$6 bn worth of total investments in O&G sector in refineries to be triggered by adoption of Euro-VI pollution norms. ABB has strong offering in the sector for process automation, energy efficiency, monitoring and digitalization.

. Cement. The government initiative on ‘housing for all’ and the decision to use cement for road construction has led to increased buoyancy in the sector and the company is witnessing increased enquiries from cement players. The enquiries pertain to ahead-of- the-curve expansion as well as productivity/efficiency improvement projects for existing capacities.

. Ports. The thrust on port modernization also opens up opportunities for ABB where its cutting edge technologies are being used worldwide in various port operations.

KOTAK INSTITUTIONAL EQUITIES RESEARCH 21 Industrials ABB

 Focus on cost optimization and cash generation to continue. The company cited the marginal reduction in the material cost as an evidence of its continued thrust on cost optimization and localization. Personnel and other expenses were higher in the quarter on account of Ind-AS related impact (actuarial valuation ECL provisions). The company currently has receivables worth 126 days of sales and realizing that cash is a key agenda item for the management. The company’s interest cost has also gone down marginally in 1QCY17 on account of lower interest rates and MIBOR-linked NCDs.

 Renewables will be a key growth area. The company currently has a solar inverter manufacturing capacity of 4.5 GW per annum and a high existing installed base (~45% of India’s 12 GW of solar plants as per management estimates). The management expressed confidence on ABB’s renewables portfolio despite competitive price pressures as the investors working on thin return profiles in renewables space need reliable high- quality products to perform for 20-22 years.

 India to be a key export base for ABB Group. The management mentioned that the parent company wants to utilize ABB India as a key export base for certain markets. Exports currently constitute 12% of orders and 15% of revenues.

 Other takeaways.

. GST, once implemented, will have a certain transient impact for a few months and the company is still trying to assess the impact.

. The current capacity utilization for ABB is hovering at 75-80%.

. The current order book is split 50-50 between short/medium cycle orders and long- cycle orders.

ABB India CY2016 annual report takeaways

Observations on financials

 Capex increased in CY2016, likely led by solar inverter capacities. The company reported a capex of ₹1.4 bn in CY2016, higher than ~₹1 bn seen in the past two years. The increase was likely led by certain capacity expansions such as doubling of solar inverter manufacturing capacity in Bengaluru.

 Expenditure on royalty, technology and trademark fees continues to inch up. The company spent 3.5% of revenues in CY2016 on royalty, technology and trademark fees. This proportion has increased 60% in absolute terms from 2.5% of sales in CY2012.

22 KOTAK INSTITUTIONAL EQUITIES RESEARCH ABB Industrials

Exhibit 4: Royalty as share of sales has been steepening over the past two years Trajectory of royalty as a share of sales for ABB India, December calendar year-ends, 2006-16 (%)

4.0 3.5 3.5 3.1 3.0 2.8 2.7 2.5 2.5 2.3

2.0 1.8

1.5 1.3 1.3 1.0 1.0

0.5 0.1 - 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Source: Company, Kotak Institutional Equities

 OCF and FCF sharply increase on working capital improvements. The company reported an operating cash flow of ₹8.6 bn in CY2016 (versus ₹3.8 bn in CY2015) and free-cash flow of ₹7.6 bn (versus ₹2.9 bn in CY2015). The improvement was led by a sharp reduction in trade receivables as the company continues with its strategy of favoring cash flows over revenues and improving operational efficiencies. Net cash balance at the end of CY2016 also was a comfortable ₹12 bn (versus ₹6 bn as of CY2015).

 RoE and RoCE improve further. ABB reported pre-tax RoCE of 10.9% in CY2016 (up 40 bps yoy) and RoE of 11.3% (up 100 bps yoy).

Takeaways from management discussion and analysis

 Order inflows in CY2016 were supported by technology push. The overall Indian market ordering scenario remained subdued in CY2016 owing to subdued output by capital goods sector, despite a performance improvement in cement, steel and electricity on government spending. Disruptive events such as demonetization further exacerbated the situation. In such a challenging macro environment, ABB was able to grow order inflows and order book due to a strong technology push in transmission business (large HVDC order) and continued traction in transportation (order for 1,600 traction transformers for 800 electric freight locomotives) and renewables (solar inverter and grid integration orders).

 Going big on renewables. ABB India has been aggressive in pursuing renewables opportunities in India in recent times. The company doubled its manufacturing capacity for solar inverters in India in CY2016. Other key achievements in this area during the year include: (1) commissioning substations and plant electrification & automation systems for world’s largest single location 648 MW solar plant in Tamil Nadu and (2) integrating wind energy with the recently won 1,800 km Raigarh-Pugalur HVDC link. The company also signed an MoU with IIT Madras for development of micro-grids and battery storage.

KOTAK INSTITUTIONAL EQUITIES RESEARCH 23 Industrials ABB

 RAS approach helped improve service business. ABB has a large installed base in India and the management has been leveraging it to garner service revenues when the greenfield orders have remained subdued amid low industrial capacity utilizations. Apart from the transactional relationships of spare parts and field services, the company adopted a new approach of Reliability, Availability and Safety (RAS) to provide customized solutions. The proactive approach involved solutions for energy efficiency, power quality, retrofit and debottlenecking, equipment performance management, cyber security, remote monitoring, etc. Service revenues constituted 12% of total revenues in CY2016.

 Geographical expansion for exports. The company saw expanding footprint for export orders in Middle East and Africa. Major success was achieved in exports of transformers, high voltage circuit breakers, rectifiers and LV motors as well as systems for process industries and O&G.

 Outlook. The company expects 2017 to remain challenging due to downgraded growth prospects for India post demonetization while the key order drivers would be the government projects for modernization of railways, ports, metros, power T&D as well as Digital India and Smart Cities programmes.

. Power grids. Outlook for renewables remains bright due to conducive policies. Grid upgradation (HVDC, stability solutions) and metro rail projects (over 20 projects in various stages of planning) would lead the ordering. Private capex is likely to recover in 2HCY17.

. Discrete automation & motion. This division has shifted focus to light industries considering the continued challenges in heavy industries. The division thus increased penetration in F&B, HVAC, machinery and renewables. The company expects volumes and price realizations to come under pressure due to competitors developing new domestic capacities.

. Electrification products. Capacity utilization on some of the division’s lines is at an all-time high led by increased emphasis on local manufacturing, new product offerings and market penetration. Increased demand is expected for energy efficient solutions, smart systems in infrastructure and renewables. The core focus of the division would be on segments such as water, data centers, pharmaceuticals, hospitality, healthcare and F&B.

. Process automation. Topline growth for the core sector is likely to remain dormant until the end of CY2017. The potential growth would arise from investments triggered in O&G on implementation of Euro-VI norms, LPG import terminals and LNG re- gasification. The management plans to focus on value-added services including IoT to improve its growth.

24 KOTAK INSTITUTIONAL EQUITIES RESEARCH ABB Industrials

Exhibit 5: ABB’s current order backlog provides revenue visibility of more than a year, boosted by the large HVDC order won in the last quarter Order booking, backlog & revenue visibility trend for ABB, calendar year-ends, 1QCY07-1QCY17

(Rs bn) Order booking (LHS, Rs bn) Order backlog (LHS, Rs bn) (years) 1.5 Visibility (RHS, no. of years) 140

120 1.2

100 0.9 80

60 0.6

40 0.3 20

- -

1QCY07

3QCY07

1QCY08

3QCY08

1QCY09

3QCY09

1QCY10

3QCY10

1QCY11

3QCY11

1QCY12

3QCY12

1QCY13

3QCY13

1QCY14

3QCY14

1QCY15

3QCY15

1QCY16 3QCY16 1QCY17

Source: Company, Kotak Institutional Equities estimates

Exhibit 6: Despite a significant reduction in raw material costs on operational improvements, ABB has been unable to maintain margins over the last decade Comparison of various cost components for ABB India, December calendar year-ends, 2007 and 2016 (%)

EBITDA margin Raw material cost Employee cost Royalties Other expenses 100% 9.2 14.0 90% 1.0 5.1 3.5 80% 8.9 70% 60%

50% 71.8 40% 65.0 30% 20% 10% 12.9 8.6 0% 2007 2016

Source: Company, Kotak Institutional Equities

KOTAK INSTITUTIONAL EQUITIES RESEARCH 25 Industrials ABB

Exhibit 7: Change in estimates for ABB, December calendar year-ends, 2016-19E (Rs mn)

New estimates Old estimates % change CY2016 CY2017E CY2018E CY2019E CY2017E CY2018E CY2019E CY2017E CY2018E CY2019E Order inflows 124,650 119,142 142,525 170,504 114,632 137,113 164,010 3.9 3.9 4.0 Revenues 86,484 110,159 130,477 154,171 110,985 128,193 150,161 (0.7) 1.8 2.7 Discrete Automation & Motion 23,367 23,905 35,529 44,462 30,844 36,815 44,015 (22.5) (3.5) 1.0 Electrification Products 17,757 26,505 25,526 28,637 20,779 24,084 28,252 27.6 6.0 1.4 Process Automation 13,261 13,959 16,663 19,800 13,695 16,053 19,021 1.9 3.8 4.1 Power Grids 35,280 48,395 56,041 65,349 48,319 54,455 62,820 0.2 2.9 4.0 EBITDA 7,467 10,094 13,137 15,700 10,505 13,080 15,555 (3.9) 0.4 0.9 EBITDA margin (%) 8.6 9.2 10.1 10.2 9.5 10.2 10.4 Interest cost (849) (480) — — (510) — — Recurring PAT 3,543 5,345 7,829 9,618 5,570 7,768 9,497 (4.0) 0.8 1.3 Recurring EPS (Rs) 16.7 25.2 36.9 45.4 26.3 36.7 44.8 (4.0) 0.8 1.3 Growth (%) Order inflows 53.9 (4.4) 19.6 19.6 (8.0) 19.6 19.6 Revenues Discrete Automation & Motion 13.3 2.3 48.6 25.1 32.0 19.4 19.6 Electrification Products 7.6 49.3 (3.7) 12.2 17.0 15.9 17.3 Process Automation (0.8) 5.3 19.4 18.8 3.3 17.2 18.5 Power Grids (0.2) 37.2 15.8 16.6 37.0 12.7 15.4 EBITDA 4.8 35.2 30.1 19.5 40.7 24.5 18.9 PAT 18.1 50.9 46.5 22.8 57.2 39.5 22.3

Source: Company, Kotak Institutional Equities estimates

26 KOTAK INSTITUTIONAL EQUITIES RESEARCH ABB Industrials

Exhibit 8: Key financials of ABB, December calendar year-ends, 2011-19E (Rs mn)

2011 2012 2013 2014 2015 2016 2017E 2018E 2019E Income statement Net revenues 74,490 75,650 77,220 77,333 81,403 86,484 110,159 130,477 154,171 Total operating expenses (70,872) (72,689) (72,521) (71,776) (74,278) (79,017) (100,065) (117,340) (138,471) Raw material cost (54,785) (54,595) (53,985) (52,429) (53,000) (56,173) (70,889) (83,312) (97,670) Employee expenses (5,868) (6,240) (6,771) (7,052) (7,499) (7,678) (9,040) (11,210) (13,279) Other expenses (10,218) (11,854) (11,765) (12,295) (13,779) (15,166) (20,136) (22,818) (27,522) EBITDA 3,618 2,961 4,699 5,557 7,125 7,467 10,094 13,137 15,700 EBITDA margin (%) 4.9 3.9 6.1 7.2 8.8 8.6 9.2 10.1 10.2 Other income 162 55 70 173 130 378 260 295 520 Interest (307) (432) (1,011) (1,050) (912) (849) (480) — — Depreciation (795) (942) (1,033) (1,128) (1,598) (1,510) (1,650) (1,746) (1,866) PBT 2,677 1,642 2,725 3,552 4,746 5,486 8,224 11,686 14,354 Tax (832) (705) (956) (1,267) (1,747) (1,943) (2,878) (3,856) (4,737) Net profit 1,845 937 1,769 2,285 2,999 3,543 5,345 7,829 9,618 Recurring EPS (Rs) 8.7 4.4 8.3 10.8 14.2 16.7 25.2 36.9 45.4 Balance sheet Shareholders funds 25,345 26,016 26,776 28,120 30,086 32,828 36,438 42,036 49,422 Equity capital 424 424 424 424 424 424 424 424 424 Reserves and surplus 24,921 25,593 26,352 27,696 29,662 32,404 36,014 41,612 48,998 Loan funds 18 3,277 6,201 3,711 6,000 6,000 — — — Total sources of funds 25,364 29,293 32,977 31,831 36,086 38,828 36,438 42,036 49,422 Total fixed assets 12,268 12,719 13,870 13,792 12,904 12,704 12,255 12,009 11,644 Investments 167 166 166 165 164 163 163 163 163 Cash and bank balance 2,691 868 3,166 2,260 5,736 11,892 10,371 12,537 18,032 Net working capital 9,493 14,600 14,976 14,939 16,269 12,763 12,343 16,021 18,277 Total application of funds 25,364 29,293 32,977 31,831 36,086 38,828 36,439 42,037 49,423 Cash flow statement Cash flow from operating activites 1,181 (502) 3,301 4,790 3,817 8,626 7,635 5,602 8,707 Cash flow from investing activities (3,612) (3,398) (2,197) (1,477) (764) (681) (940) (1,205) (980) Free cash flow (CFO+net capex) (355) (2,243) 1,084 3,721 2,915 7,586 6,435 4,102 7,207 Cash flow from financing activities (799) 2,106 1,191 (4,221) 422 (1,788) (8,216) (2,231) (2,231) Cash generated/(utilised) (3,230) (1,794) 2,296 (908) 3,474 6,156 (1,521) 2,166 5,496 Net cash at start of the year 5,776 2,545 752 3,149 2,241 5,716 11,869 10,348 12,514 Net cash at end of the year 2,644 767 3,166 2,260 5,736 11,892 10,371 12,537 18,032

Source: Company, Kotak Institutional Equities estimates

KOTAK INSTITUTIONAL EQUITIES RESEARCH 27 SELL Godrej Consumer Products (GCPL) Consumer Products MAY 10, 2017 RESULT, CHANGE IN RECO. Coverage view: Cautious

In-line quarter. We are a bit surprised at the Street’s reaction to GCPL’s 4QFY17 Price (`): 1,929 earnings print; reported topline was weaker than our expectations while EBITDA and Target price (`): 1,600 PAT were only marginally ahead. Substantial margin expansion, that has aided robust BSE-30: 29,933 earnings growth for the past two years, is unlikely to be a recurring theme. Revenue growth prognosis is better but completely in the price. We downgrade the stock to SELL with a revised TP of ₹1,600 (from ₹1,420) as we roll over to March 2019E and increase our target multiple to 31X from 28X.

Company data and valuation summary Godrej Consumer Products Stock data Forecasts/Valuations 2017 2018E 2019E 52-week range (Rs) (high,low) 1,958-1,272 EPS (Rs) 38.3 46.0 52.5 Market Cap. (Rs bn) 657.1 EPS growth (%) 11.3 20.2 14.1 Shareholding pattern (%) P/E (X) 50.4 41.9 36.7 Promoters 63.3 Sales (Rs bn) 92.7 103.9 117.2 FIIs 28.4 Net profits (Rs bn) 13.0 15.7 17.9 MFs 0.5 EBITDA (Rs bn) 19.0 22.1 25.0 Price performance (%) 1M 3M 12M EV/EBITDA (X) 35.5 29.8 25.9 Absolute 13.5 23.3 43.0 ROE (%) 25.1 27.3 26.4 Rel. to BSE-30 12.6 16.7 22.8 Div. Yield (%) 0.8 0.8 0.8

Headline consolidated financials – revenues miss; EBITDA/PAT a tad above estimates

GCPL’s consolidated revenues at ₹23.9 bn (+12% yoy) was a tad below estimates; however, sharper-than-expected jump in GMs (up 280 bps yoy, 170 bps ahead of our estimates) and lower-than-expected A&SP (down 75 bps yoy, flat in absolute terms) drove a modest outperformance in EBITDA (+19% yoy) to ₹5.46 bn. EBITDA margin expanded 130 bps yoy to 23% largely aided by 280 bps yoy jump in GMs partly negated by sharp 260 bps jump in other expenses. We note reported performance was aided by consolidation of SON/Canon; organic reported revenue and EBITDA growth for the quarter stood at 5% and 11% yoy. Recurring PAT grew 22% yoy to ₹3.8 bn partly aided by 150 bps yoy drop in ETR. For FY2017, GCPL reported revenue, EBITDA and PAT growth 10%, 15% and 12% yoy respectively (organic reported revenue/EBITDA growth of 3% and 7% yoy respectively); recurring EPS stood at ₹38.3/share.

Headline standalone financials – mixed category-level performance

GCPL reported standalone revenue, EBITDA and PAT growth of 9%, 19% and 21% yoy respectively; EBITDA margin expanded 250 bps yoy to 27.9% aided by robust 360 bps GM expansion. Domestic revenue growth was led by 5% branded volume growth; category-level highlights – (1) HI delivered a soft quarter with 4% revenue growth impacted by erratic weather in March, especially in North India, (2) hair color growth inched higher at 13% yoy (volume-led) led by sustained share gains in Godrej Expect Rich Crème, (3) soaps delivered a modest 9% yoy sales growth aided by mid-single digit volume growth, price hikes and withdrawal of consumer offers and (4) other brands delivered another strong quarter (revenues up 33% yoy). Rohit Chordia Raise EPS estimates a tad; downgrade to SELL (from REDUCE)

We have raised our EPS estimates for FY2018-19 by ~1% as we raise our margin estimates a Anand Shah tad led by higher-than-expected GM expansion. Higher dividend payout, superior growth prognosis and sustained margin expansion are likely to keep the Street excited in the near term; however, we believe this narrative is already in the price; rich valuations at 37X FY2019E EPS leave little margin for safety. Downgrade the stock to SELL (from REDUCE) with a revised TP of ₹1,600/share (from ₹1,420) as we roll over to March 2019E (based on 31X target PE multiple).

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

Exhibit 1: Interim consolidated results of Godrej Consumer Products (as per Ind-AS), March fiscal year-ends (Rs mn)

(% chg.) 4QFY17 4QFY17E 4QFY16 3QFY17 KIE Est yoy qoq FY2017 FY2016 (% chg.) Gross revenues 24,802 25,396 22,044 24,753 (2) 13 0 95,837 87,424 10 Less: Excise (997) (822) (761) (836) (17) 1 (19) (3,409) (3,292) 7 Excise as % of sales (%) 4.0 3.2 3.5 3.4 78 bps 56 bps 64 bps 3.6 3.8 -21 bps Net sales 23,805 24,574 21,283 23,916 (3) 12 (0) 92,428 84,132 10 Other operating income 93 93 30 105 4 19 8 251 107 15 Net operating revenues 23,898 24,667 21,313 24,022 (3) 12 (1) 92,679 84,239 10 Material cost (10,337) (11,077) (9,788) (10,573) (7) 6 (2) (41,325) (38,672) 7 Gross Profit 13,561 13,590 11,525 13,448 (0) 18 1 51,354 45,566 13 Gross Margin (%) 57.0 55.3 54.2 56.2 166 bps 281 bps 73 bps 55.6 54.2 140 bps Employee cost (2,471) (2,555) (2,294) (2,555) (3) 8 (3) (9,885) (9,441) 5 Advertising and promotion (1,551) (1,859) (1,543) (1,919) (17) 1 (19) (7,181) (6,694) 7 Other expenditure (4,075) (3,901) (3,081) (3,929) 4 32 4 (15,311) (12,898) 19 Total expenditure (18,435) (19,392) (16,706) (18,976) (5) 10 (3) (73,702) (67,706) 9 EBITDA 5,463 5,275 4,607 5,045 4 19 8 18,977 16,533 15 EBITDA margin (%) 23.0 21.5 21.6 21.1 148 bps 130 bps 185 bps 20.5 19.7 88 bps Other income 257 221 105 189 16 145 36 753 664 13 Interest (379) (351) (252) (397) 8 50 (4) (1,452) (1,190) 22 Depreciation (369) (375) (284) (363) (2) 30 2 (1,416) (1,006) 41 Pretax profits 4,972 4,770 4,175 4,474 4 19 11 16,862 15,001 12 Tax (1,145) (1,093) (1,023) (986) 5 12 16 (3,792) (3,361) 13 PAT 3,827 3,678 3,152 3,489 4 21 10 13,071 11,640 12 Minority interest (0) 0 (16) 1 (175) (98) (121) (31) (29) 5 PAT after MI 3,827 3,678 3,136 3,490 4 22 10 13,040 11,611 12 Extraordinary items 73 — (1,888) 28 1 (3,335) Net profit (reported) 3,899 3,678 1,248 3,518 6 212 11 13,041 8,276 58 EPS (Rs) 11.2 10.8 9.2 10.3 4 22 10 38.3 34.1 12 Income tax rate (%) 23.0 22.9 24.5 22.0 12 bps -148 bps 99 bps 22.5 22.4 8 bps Costs as a % of sales Material cost 43.3 44.9 45.9 44.0 -166 bps -268 bps -77 bps 44.6 45.9 -132 bps Employee cost 10.3 10.4 10.8 10.6 -2 bps -43 bps -30 bps 10.7 11.2 -55 bps Advertising and promotion 6.5 7.5 7.2 8.0 -105 bps -75 bps -151 bps 7.7 7.9 -20 bps Other expenditure 17.1 15.8 14.5 16.4 123 bps 259 bps 69 bps 16.5 15.3 120 bps

Source: Company, Kotak Institutional Equities

KOTAK INSTITUTIONAL EQUITIES RESEARCH 29 Consumer Products Godrej Consumer Products

Exhibit 2: Interim standalone results of Godrej Consumer Products (as per Ind-AS), March fiscal year-ends (Rs mn)

(% chg.) 4QFY17 4QFY17E 4QFY16 3QFY17 KIE Est yoy qoq FY2017 FY2016 (% chg.) Gross revenues 13,258 13,330 12,101 12,634 (1) 10 5 50,137 48,200 4 Less: Excise (997) (822) (761) (836) 21 31 19 (3,409) (3,292) 4 Excise as % of sales (%) 7.5 6 6.3 6.6 135 bps 123 bps 90 bps 6.8 6.8 -4 bps Net sales 12,261 12,508 11,341 11,798 (2) 8 4 46,728 44,908 4 Other operating income 288 180 178 161 60 62 79 753 634 19 Net operating income 12,549 12,688 11,518 11,959 (1) 9 5 47,481 45,542 4 Material cost (5,277) (5,613) (5,204) (4,972) (6) 1 6 (20,472) (19,945) 3 Gross Profit 7,273 7,075 6,315 6,988 3 15 4 27,009 25,597 6 Gross Margin (%) 59.3 56.6 55.7 59.2 275 bps 363 bps 8 bps 57.8 57.0 80 bps Employee cost (754) (730) (665) (732) 3 13 3 (2,990) (3,314) (10) Advertising and promotion (1,134) (1,238) (1,037) (1,360) (8) 9 (17) (5,282) (4,936) 7 Other expenditure (1,970) (1,856) (1,739) (1,822) 6 13 8 (7,370) (7,483) (2) Total expenditure (9,135) (9,437) (8,646) (8,885) (3) 6 3 (36,115) (35,678) 1 EBITDA 3,415 3,251 2,872 3,074 5 19 11 11,366 9,864 15 EBITDA margin (%) 27.9 26.0 25.3 26.1 185 bps 252 bps 179 bps 24.3 22.0 235 bps Other income 195 176 99 166 11 98 18 636 614 4 Interest (121) (81) (73) (92) 50 65 32 (361) (547) (34) Depreciation (147) (153) (129) (144) (4) 14 2 (567) (449) 26 Pretax profits 3,342 3,192 2,769 3,004 5 21 11 11,075 9,482 17 Tax (811) (751) (674) (690) 8 20 17 (2,595) (2,226) 17 PAT 2,531 2,441 2,095 2,314 4 21 9 8,480 7,257 17 Extraordinary items — — — — — — Net profit (reported) 2,531 2,441 2,095 2,314 4 21 9 8,480 7,257 17 EPS (Rs) 7.4 7.2 6.2 6.8 4 21 9 24.9 21.3 17 Income tax rate (%) 24.3 23.5 24.3 23.0 73 bps -8 bps 128 bps 23.4 23.5 -5 bps Costs as a % of sales Material cost 42.0 44.2 45.2 41.6 -220 bps -314 bps 47 bps 43.1 43.8 -68 bps Employee cost 6.0 5.7 5.8 6.1 26 bps 23 bps -12 bps 6.3 7.3 -98 bps Advertising and promotion 9.0 9.8 9.0 11.4 -73 bps 2 bps -234 bps 11.1 10.8 28 bps Other expenditure 15.7 14.6 15.1 15.2 106 bps 59 bps 46 bps 15.5 16.4 -91 bps

Source: Company, Kotak Institutional Equities

Exhibit 3: Key changes to consolidated earnings (Ind-AS), GCPL, March fiscal year-ends, 2018-19E

Revised Earlier Change (%) 2018E 2019E 2018E 2019E 2018E 2019E Revenues (Rs mn) 103,591 116,813 104,940 117,807 (1.3) (0.8) EBITDA (Rs mn) 22,142 25,027 22,115 24,833 0.1 0.8 EBITDA (%) 21.4 21.4 21.1 21.1 PAT (Rs mn) 15,677 17,885 15,547 17,823 0.8 0.3 EPS (Rs/share) 46.0 52.5 45.7 52.3 0.8 0.3

Source: Company, Kotak Institutional Equities estimates

30 KOTAK INSTITUTIONAL EQUITIES RESEARCH Godrej Consumer Products Consumer Products

Key highlights from results and earnings call

 Overall consolidated revenues grew 13% yoy while organic c/c business growth stood at 8% yoy. India business posted 10% yoy growth in revenues (led by 5% branded business volume growth). International business posted 16% yoy reported growth (22% c/c growth) aided by consolidation of Strength of Nature (SON) and Canon Chemicals during the quarter (not in the base yet); organic c/c growth stood at 6% yoy (1% yoy growth in organic reported revenues).

 The company announced a dividend of `12/share aggregating to full year dividend of `15/share and dividend payout (including DDT) of 47%; we note this is a substantial jump from FY2016 dividend payout of ~29% (`5.8/share).

 GCPL’s board has elevated Nisaba Godrej, currently ED of the company, as Executive Chairperson; Adi Godrej will assume the Chairman Emeritus position at GCPL.

Domestic business – modest performance overall

 Soaps delivered a modest 9% yoy sales growth aided by mid-single digit volume growth, price hikes and withdrawal of consumer offers. Management highlighted – (1) Cinthol continues to outperform and gain market share, (2) it continues to scale back consumer/trade offers and initiate select price hikes and (3) Godrej No1 is also recovering; as excess stock in consumer homes gets exhausted and replenishment cycle resumes – it expects growth to pick up.

 HI segment delivered a soft quarter with 4% revenue growth impacted by erratic weather in March especially in North India. Management highlighted – (1) January and February were strong months for HI business, however, hot weather conditions in March impacted growth, (2) GCPL continues to gain market share across most formats, (3) it continues to make competitive brand investments and drive higher penetration, (4) it recently launched HIT gel stick – an affordable roach solution priced at `30 and (5) it will continue to drive growth in this category through market share gains, innovations (several NPDs planned) and distribution expansion.

 Hair colors growth inched higher at 13% yoy (volume-led) led by sustained share gains in Godrej Expect Rich Crème (reached highest ever market share on exit basis). Management highlighted – (1) it continues to drive penetration and distribution reach in this category and remains confident of double-digit growth in FY2018 and (2) Bblunt range has done well though it’s still early days; GCPL has also lined up several NPDs in hair colors for FY2018.

 Other brands continued to deliver strong performance with 33% yoy growth this quarter. Aer has done particularly well and GCPL is now the No1 player in overall air care market. Cinthol Deo Stick has also been well received by consumers.

 Overall, management remains confident of strong growth in FY2018 in domestic business led by good demand recovery (demand levels back to pre-demonetization levels). However, in near-term, it does expect temporary disruption due to GST transition; nonetheless, it expect consumer-level demand to remain intact.

KOTAK INSTITUTIONAL EQUITIES RESEARCH 31 Consumer Products Godrej Consumer Products

Exhibit 6: Soaps posted mid-single digit volume growth Exhibit 7: Soaps segment revenue grew 9% yoy GCPL’s soaps volume growth trends (%) GCPL's soaps value growth trends (%)

15 20

15 10 15 11 10 13 13 13 11 5 7 10 10 7 5 5 9 4 6 6 6 4 4 5 3 1 - 3 - 1 2 2 (3) (4) (6) (5) (5) (6) (5) (10) (8) (10)

(10) (15)

1QFY14

1QFY14

2QFY14

2QFY14

3QFY14

3QFY14

4QFY14

4QFY14

1QFY15 1QFY15

2QFY15 2QFY15

3QFY15 3QFY15

4QFY15 4QFY15

1QFY16 1QFY16

2QFY16 2QFY16

3QFY16 3QFY16

4QFY16 4QFY16

1QFY17

1QFY17

2QFY17

2QFY17

3QFY17

3QFY17

4QFY17 4QFY17

Source: Company, Kotak Institutional Equities Source: Company, Kotak Institutional Equities

Exhibit 8: Hair colours posted a robust quarter with 13% yoy growth in revenues GCPL's hair colours revenue growth trend (%)

40

35 37 30 32 25 20 24 15 16 17 14 10 12 12 13 9 10 5 7 (1) - 4 - (2)

(5)

1QFY14

2QFY14

3QFY14

4QFY14

1QFY15

2QFY15

3QFY15

4QFY15

1QFY16

2QFY16

3QFY16

4QFY16

1QFY17

2QFY17

3QFY17 4QFY17

Source: Company, Kotak Institutional Equities estimates

32 KOTAK INSTITUTIONAL EQUITIES RESEARCH Godrej Consumer Products Consumer Products

Exhibit 9: Household insecticides (HI) posted a weak quarter with 4% yoy growth in revenues GCPL's HI revenue growth trend (%)

30 25 25 20 24 15 17 18 16 15 15 10 13 11 10 5 8 9 4 2 - (5) (2) (11) (10)

(15)

1QFY14

2QFY14

3QFY14

4QFY14

1QFY15

2QFY15

3QFY15

4QFY15

1QFY16

2QFY16

3QFY16

4QFY16

1QFY17

2QFY17

3QFY17 4QFY17

Source: Company, Kotak Institutional Equities

IBD – currency headwinds drag organic growth; reported growth boosted by SON acquisition

 Indonesia posted another weak quarter with flattish c/c growth (1% reported growth) due to weak macro conditions; c/c sales growth (ex-HI) stood at 9% yoy. EBITDA margins expanded 60 bps yoy to 24% led by better product mix and cost control initiatives. Management highlighted – (1) GCPL continues to gain share in HI and air fresheners on MAT basis, (2) it has cross pollinated Aer pockets to Indonesia, (3) HI market in Indonesia remained challenging due to heavy rainfall; however, competitive intensity in HI business has come down and management expects gradual recovery in HI business in Indonesia in FY2018 and (4) management remains confident of sustaining margins aided by better leverage and gains from Project Pie.

 Africa posted c/c revenue growth of 61% yoy (including SON/Canon acquisition; organic c/c growth at 16% yoy). EBITDA margins expanded 40 bps yoy to 17% aided by calibrated price hikes, better mix and SON acquisition (higher margin). Management highlighted that – (1) SON/Canon posted `1.53 bn sales for the quarter, (2) GCPL continues to focus on leveraging SON acquisition to turbo charge building its wet hair care platform in Africa; it will relaunch wet hair care range in 2HFY18 and (3) it plans to relaunch Darling brand over next 12-18 months with a new brand architecture.

 Latin America posted 19% c/c growth (17% reported growth); EBITDA margin expanded 670 bps yoy to 29% led by GM expansion and cost savings initiatives. Management highlighted that it plans to relaunch Issue brand and increase focus on innovations in FY2018.

 Europe posted 5% c/c revenue decline due to counterfeit stock related issues in Bio-Oil and increased competitive intensity in deodorants. EBITDA margins expanded 590 bps yoy to 15% due to judicious marketing investments and one-time reversal of A&SP provisions. Management highlighted that overall demand environment remains challenging amid uncertainty post Brexit.

KOTAK INSTITUTIONAL EQUITIES RESEARCH 33 Consumer Products Godrej Consumer Products

Exhibit 10: Indonesia performance remains weak; other geographies dragged by currency headwinds GCPL’s geography-wise IBD revenue breakup (` mn)

4QFY17 4QFY16 3QFY17 4,500 3,890 3,950 4,010 4,000 3,851 3,500 3,290 3,279 3,000 2,500 2,000 1,660 1,610 1,530 1,480 1,419 1,500 1,183 1,000 970 810 406 500 340 - 390 - Megasari Africa SON/Canon Latin America Europe Others

Source: Company, Kotak Institutional Equities

Exhibit 11: IBD margins expand across geographies led by LatAm and Europe GCPL's geography-wise IBD margins (%)

35 4QFY17 4QFY16 3QFY17

29.0 30

24.0 23.4 25 23.0 22.3 19.0 20 18.0 17.0 16.6 15.0 15 9.1 10.0 10

5

- Megasari Africa (incl SON) Latin America Europe

Source: Company, Kotak Institutional Equities

34 KOTAK INSTITUTIONAL EQUITIES RESEARCH Godrej Consumer Products Consumer Products

Exhibit 12: Indonesia c/c growth remains weak; consolidation of SON aids reported growth in Africa during the quarter GCPL's international business revenue growth trends, yoy (%)

1QFY15 2QFY15 3QFY15 4QFY15 1QFY16 2QFY16 3QFY16 4QFY16 1QFY17 2QFY17 3QFY17 4QFY17 Reported growth Indonesia 10.0 1.0 14.0 (1.0) 1.0 (2.0) (3.0) 16.0 8.0 6.0 7.0 1.0 Africa 17.0 10.0 30.0 14.0 26.0 23.0 7.0 20.0 46.0 60.0 41.0 47.0 LatAm (4.0) (4.0) 1.0 15.0 23.0 18.0 16.0 (6.0) (16.0) (12.0) (4.0) 17.0 Europe 42.0 (4.0) (18.0) (2.0) (6.0) 12.0 14.0 18.0 (5.0) (15.0) (5.0) (18.0) Constant currency growth Indonesia 21.0 15.0 19.0 6.0 8.0 7.0 3.0 13.0 3.0 (2.0) - - Africa 12.0 15.0 36.0 23.0 32.0 33.0 16.0 26.0 52.0 75.0 54.0 61.0 LatAm 26.0 31.0 25.0 27.0 29.0 24.0 28.0 31.0 10.0 20.0 24.0 19.0 Europe 21.0 (9.0) (13.0) 7.0 (2.0) 13.0 10.0 15.0 (3.0) (2.0) 16.0 (5.0) Exchange rate impact Indonesia (11.0) (14.0) (5.0) (7.0) (7.0) (9.0) (6.0) 3.0 5.0 8.0 7.0 1.0 Africa 5.0 (5.0) (6.0) (9.0) (6.0) (10.0) (9.0) (6.0) (6.0) (15.0) (13.0) (14.0) LatAm (30.0) (35.0) (24.0) (12.0) (6.0) (6.0) (12.0) (37.0) (26.0) (32.0) (28.0) (2.0) Europe 21.0 5.0 (5.0) (9.0) (4.0) (1.0) 4.0 3.0 (2.0) (13.0) (21.0) (13.0)

Note: (1) Reported growth in FY2017 in Africa business boosted by SON acquisition.

Source: Company, Kotak Institutional Equities

Exhibit 13: SOTP valuation for GCPL, March fiscal year-ends, March 2019E

EBITDA (Rs mn) EBITDA multiple (x) EV Geography Mar-19E Mar-19E (Rs mn) Domestic 14,465 24 345,722 Africa 3,186 20 64,732 15% discount to domestic business Indonesia 3,655 20 74,255 15% discount to domestic business Latam 1,579 19 30,186 20% discount to domestic business US/Africa (SON) 1,622 19 31,006 20% discount to domestic business UK 512 17 8,571 30% discount to domestic business EV (Rs mn) 554,473 Less: Net debt (Rs mn) 9,852 Equity value (Rs mn) 544,620 Price per share (Rs) 1,600

Source: Company, Kotak Institutional Equities estimates

KOTAK INSTITUTIONAL EQUITIES RESEARCH 35 Consumer Products Godrej Consumer Products

Exhibit 14: Key net revenues (pre-trade promotions) and profit assumptions for GCPL, March fiscal year-ends, 2014-20E (Rs mn)

2014 2015 2016 2017 2018E 2019E 2020E Revenue breakup (Rs mn) Domestic 41,297 44,735 48,359 50,049 56,104 63,055 70,616 - Soaps 13,306 14,604 15,105 14,840 16,487 17,889 19,320 - Hair colour 5,143 5,635 6,083 6,344 7,068 7,959 8,948 - Household insecticides 19,264 20,977 23,648 24,358 27,168 30,836 34,922 - Others 3,583 3,519 3,523 4,507 5,380 6,372 7,426 IBD 34,872 38,038 38,923 45,497 50,921 57,591 64,888 - Indonesia/ Middle East 14,042 15,008 15,048 15,807 17,312 19,539 21,952 - Africa 10,010 11,850 13,420 14,500 16,516 18,744 21,214 - Latin America 6,030 6,170 5,900 5,690 6,523 7,518 8,630 - US/Africa (SON) — — — 5,400 6,552 7,371 8,274 - Europe 4,790 5,010 4,555 4,100 4,018 4,420 4,818 Total Revenue (Consolidated) 75,826 82,422 84,132 92,428 103,591 116,813 131,238 yoy growth (%) Domestic 14.8 8.3 8.1 3.5 12.1 12.4 12.0 - Soaps 6.0 9.8 3.4 (1.8) 11.1 8.5 8.0 - Hair colour 25.3 9.6 8.0 4.3 11.4 12.6 12.4 - Household insecticides 17.7 8.9 12.7 3.0 11.5 13.5 13.3 - Others 21.0 (1.8) 0.1 27.9 19.4 18.4 16.5 IBD 24.0 9.1 2.3 16.9 11.9 13.1 12.7 - Indonesia/ Middle East 9.3 6.9 0.3 5.0 9.5 12.9 12.4 - Africa 40.8 18.4 13.2 8.0 13.9 13.5 13.2 - Latin America 14.6 2.3 (4.4) (3.6) 14.6 15.3 14.8 - US/Africa (SON) — — — — 21.3 12.5 12.3 - Europe 65.2 4.6 (9.1) (10.0) (2.0) 10.0 9.0 Total Revenue (Consolidated) 18.5 8.7 2.1 9.9 12.1 12.8 12.3 EBITDA (Rs mn) Domestic 7,465 8,335 9,886 11,360 12,878 14,465 16,179 IBD 4,306 5,381 6,472 7,774 9,324 10,617 12,059 - Indonesia/ Middle East # 1,783 2,206 2,804 2,908 3,349 3,879 4,469 - Africa 1,521 1,896 2,190 2,154 2,684 3,186 3,818 - Latin America 600 829 1,002 1,056 1,337 1,579 1,855 - US/Africa (SON) — — — 1,188 1,441 1,622 1,820 - Europe 412 431 475 510 512 575 629 Total EBITDA (Consolidated) 11,771 13,716 16,358 19,134 22,202 25,082 28,238 EBITDA margin (%) Domestic 18.1 18.6 20.4 22.7 23.0 22.9 22.9 IBD 12.3 14.1 16.6 17.1 18.3 18.4 18.6 - Indonesia/ Middle East # 12.7 14.7 18.6 18.4 19.3 19.9 20.4 - Africa 15.2 16.0 16.3 14.9 16.3 17.0 18.0 - Latin America 10.0 13.4 17.0 18.6 20.5 21.0 21.5 - US/Africa (SON) 22.0 22.0 22.0 22.0 - Europe 8.6 8.6 10.4 12.4 12.8 13.0 13.1 Total EBITDA (Consolidated) 15.5 16.6 19.4 20.7 21.4 21.5 21.5 yoy growth (%) Domestic 15.9 11.7 18.6 14.9 13.4 12.3 11.8 IBD 15.7 25.0 20.3 20.1 19.9 13.9 13.6 - Indonesia/ Middle East # (12.8) 23.7 27.1 3.7 15.2 15.8 15.2 - Africa 36.9 24.7 15.5 (1.7) 24.6 18.7 19.8 - Latin America 122.1 38.1 20.9 5.4 26.6 18.1 17.5 - US/Africa (SON) 21.3 12.5 12.3 - Europe 32.8 4.6 10.3 7.4 0.5 12.2 9.4 Total EBITDA (Consolidated) 15.9 16.5 19.3 17.0 16.0 13.0 12.6

Notes. (1) # After payment of technical fees; jump in FY2016 partly optical due to stoppage of food business contract manufacturing

Source: Company, Kotak Institutional Equities estimates

36 KOTAK INSTITUTIONAL EQUITIES RESEARCH Godrej Consumer Products Consumer Products

Exhibit 15: GCPL: Consolidated Profit model, balance sheet, cash flow model (Ind-AS), March fiscal year-ends, 2014-2020E (Rs mn)

2014 2015 2016 2017 2018E 2019E 2020E Profit model (Rs mn) Net revenues 75,826 82,422 84,132 92,428 103,591 116,813 131,238 EBITDA 11,503 13,684 16,358 18,977 22,142 25,027 28,188 Other income 826 839 946 1,004 1,325 1,832 2,264 Interest expense (1,074) (1,032) (1,190) (1,452) (1,302) (1,246) (1,190) Depreciation (819) (908) (1,006) (1,416) (1,629) (1,842) (2,023) Extraordinary items 58 260 (3,335) 1 — — — Pretax profits 10,495 12,843 11,772 17,114 20,537 23,771 27,239 Tax (2,104) (2,737) (3,361) (3,792) (4,546) (5,529) (6,752) Minority Interest (595) (693) (29) (31) 0 0 0 Net Income 7,796 9,413 8,383 13,292 15,991 18,242 20,488 PAT after MI but before EO/Norm tax 7,539 8,811 11,611 13,040 15,677 17,885 20,081 Earnings per share (Rs) 22.1 25.9 34.1 38.3 46.0 52.5 59.0 Balance sheet (Rs mn) Total shareholder's equity 37,754 43,107 50,977 53,020 62,020 73,229 85,403 Total borrowings 23,734 27,172 28,911 33,408 31,708 30,008 28,308 Other financial liabilities — — — 9,112 9,112 9,112 9,112 Deferred tax liability (203) (312) (413) 1,898 1,898 1,898 1,898 Minority Interest 2,251 1,620 842 — — — — Total liabilities and equity 63,536 71,587 80,317 97,438 104,739 114,247 124,722 Net fixed assets incl CWIP 52,884 57,756 63,540 81,864 83,367 83,704 84,068 Investments 1,363 1,857 1,874 9,335 9,335 9,335 9,335 Cash 7,048 8,942 7,459 9,127 23,050 32,677 43,350 Net current assets 2,241 3,032 7,445 (2,888) (11,013) (11,469) (12,031) Total assets 63,536 71,587 80,317 97,438 104,739 114,247 124,722 Free cash flow (Rs mn) Operating cash flow (excl working capital) 9,600 11,246 13,196 12,068 17,527 19,410 21,328 Working capital 1,565 (721) (4,596) 106 8,125 456 563 Capital expenditure (6,495) (8,424) (8,555) (7,207) (3,659) (2,707) (2,914) Free cash flow 4,670 2,101 45 4,967 21,993 17,159 18,977 Key ratios (%) Sales growth 18.5 8.7 2.1 9.9 12.1 12.8 12.3 EPS growth 9.3 16.9 31.8 12.3 20.2 14.1 12.3 EBITDA margin 15.1 16.5 19.4 20.5 21.3 21.4 21.4 Gross margin 53.2 53.6 54.1 55.4 56.0 55.9 55.7 Ad spends (% of sales) 11.0 11.0 7.9 7.7 7.8 7.7 7.6 ROE (%) 21.3 21.8 24.7 25.1 27.3 26.4 25.3 ROCE (%) 17.3 18.8 20.1 19.7 20.2 21.1 21.8

Note: (1) FY2016 P&L and forecasts based on IND-AS and hence not strictly comparable to pre-FY2016 P&L which were based on IGAAP.

Source: Company, Kotak Institutional Equities estimates

KOTAK INSTITUTIONAL EQUITIES RESEARCH 37 India Daily Summary - May 10, 2017 Sun 14-May 21-May 28-May 4-Jun Sat 13-May Bank Central Bank K & J Cements K J Bank Karnataka 20-May 27-May 3-Jun Fri 12-May Fas. AdityaBir. Agritech Dhanuka Pharma Glaxosmit Pow er Kalpataru Sumi Motherson Commu. Ortel of India Bank State Pow erCo. Tata Pow Industries er& CG Mahindra Tech Healthcare Cadila Century Textiles Century Pathlabs Lal Dr Labs Reddy's Dr Bank Oriental Enterprises Piramal Co. & Kelkar H S Company Titan 19-May 26-May 2-Jun Thu CESC Enter CoffeeDay Bosch 11-May ArvindLtd Nuvo AdityaBirla Auto Bajaj Holdings Bajaj of Baroda Bank India Cummins Gatew ayDistr. JyothyLab. VysyaKarur Bank Finance Muthoot Inds. Pidilite Services Lease Team AshokLeyland Inds. Britannia Corporation Container Guj.St.Petronet L C O I MphasiS Industries Page India Timken Guj Pipavav Port Pipavav Guj India Havells 25-May 1-Jun AsianPaints L H C GlaxoSmith Pharma Glenmark Technologies HCL Fincorp Magma 18-May

India Daily Summary - May 10, 2017 Wed Steel JSW Brew eries United Lupin 10-May Bharat Dalmia Finance Bajaj Finserv Bajaj Unilever Hind. Cement Lakshmi JK Batteries Raja Amara Vardhman Textile Vardhman Entertainmen Zee 24-May 31-May Hero Motocorp Hero Cellular Idea Siemens 17-May

es Tue Cement Shree Sobha Steel Tata India Whirlpool 9-May Airtel Bharti Inds Grasim Fin.Services Oracle Indstries I P Natl.Bank Punjab Voltas Electron Bharat Indstries Hindalco M & M Cement Ramco The Thermax Spirits United Petronet LNG Petronet 23-May 30-May Carborundum Univarsal Carborundum Consumer Godrej Aviat Interglobe 16-May Mon 8-May AB B India Bata Colgate-Palmolive Ind.Bank South Vedanta (India) GAIL L E H B (India) Edg. Info 22-May 29-May Bharti Infratel Bharti Bank Canara (I) Bank Union 15-May Source: NSE, Kotak Institutional Equiti Institutional Kotak NSE, Source: March March 2017: Results calendar

KOTAK INSTITUTIONAL EQUITIES RESEARCH 38 India Daily Summary - May 10, 2017 4.3 4.3 2.4 2.4 3.3 3.3 1.3 1.3 1.5 1.5 9.7 9.7 7.5 7.5 8.1 8.1 5.4 5.4 2.5 2.5 8.4 1.0 1.0 0.4 0.4 0.3 0.3 0.7 0.7 0.7 0.7 0.3 0.3 8.3 8.3 6.9 6.9 5.8 5.8 6.5 6.5 12.1 14.3 13.4 73.4 11.2 13.4 32.7 11.1 21.4 17.3 21.7

19.4

14.9 17.0

19.4

19.1 18.1

52.3

14.9

12.5 14.5 13.8 25.8 63.5 51.0 25.6 29.0 88.4 75.6 10.0 53.8 26.5 65.5 80.9

580.3 580.3 288.6

(US$mn)

ADVT-3mo

15.7 12.0 18.4 15.6 13.9 10.6 17.7 13.3 10.0 14.0 19.9 17.8 21.5 25.9 19.5 19.0 18.3 20.9 8.9 14.8 10.6 11.5 15.2 15.1 11.5 11.2 16.1 7.9 13.0 17.9 11.6 8.6 15.2 12.2 11.5 9.5 11.4 13.2 20.4 27.7 22.6 15.7 22.6 16.8 23.4 20.4 22.1 15.7 36.7 17.7 14.6 34.0 20.9 21.8 28.9 21.6 15.5 21.1 RoE(%) 3.4 8.9 6.6 15.1 10.2 15.8 9.9 17.4 14.9 12.5 13.1 17.4 13.2 10.5 11.7 19.2 14.6 21.0 26.3 20.0 18.7 18.2 19.0 3.5 14.4 3.1 9.9 12.7 12.7 9.3 8.5 15.8 6.7 9.1 18.0 11.2 7.6 15.1 10.0 7.1 4.1 10.1 9.7 20.2 27.2 20.9 13.3 22.5 16.2 22.9 19.1 21.2 15.5 39.2 16.0 14.8 40.6 19.6 22.3 29.0 21.6 12.8 21.9 1— 17.7 7.4 15.1 11.6 11.7 22.3 18.9 17.7 10.9 6.4 19.1 13.7 22.6 29.7 20.4 18.0 16.5 2.7 18.6 14.0 6.5 12.2 11.1 3.0 (22.6) 15.5 7.2 10.3 17.9 9.8 14.4 (1.5) 4.4 6.8 20.0 25.2 18.1 18.2 15.4 26.5 18.8 21.9 15.4 40.4 14.2 14.6 41.3 17.2 23.8 29.5 21.7 15.8 21.9 1.4 1.3 1.2 0.8 1.2 1.9 2.9 4.1 0.5 1.9 1.2 1.6 1.2 1.5 0.8 0.3 1.7 0.9 0.5 1.1 0.6 3.0 2.7 3.4 0.6 1.1 2.5 1.0 1.1 1.0 3.8 2.2 1.0 0.2 1.0 1.1 0.7 1.2 1.2 0.6 1.3 1.5 3.3 1.2 1.3 0.1 0.9 0.5 2.5 2.1 1.3 0.9 -

——— ——— ——— —— ——— 0.4 Dividendyield (%) 1.2 1.0 1.0 0.7 0.9 2.1 2.6 3.7 0.5 1.4 1.0 1.4 1.1 - 1.3 0.6 0.3 0.6 0.8 0.1 1.0 0.5 2.3 2.0 2.4 0.5 0.9 1.6 0.9 1.0 0.9 2.2 1.8 0.7 0.2 0.9 0.3 0.6 1.0 1.0 0.5 1.0 1.3 3.0 0.6 1.3 0.1 0.7 0.4 2.2 1.9 1.3 0.8 1.2 0.8 1.0 0.5 1.0 3.3 2.1 3.3 0.7 0.9 0.6 0.9 - 1.2 0.5

0.3 0.4 0.8 0.4 0.9 0.3 1.8 0.6 (6.7) 0.4 1.2 1.7 0.7 0.8

0.8 (0.4) 0.7 1.0 0.2 0.5 0.2

0.5 0.9 0.8 0.5 1.1 1.2 2.7 0.3 1.1 0.1 0.5 0.4 1.9 1.6 1.3 0.7 2.6 1.6 2.9 2.3 1.7 1.4 2.0 1.1 2.6 2.0 2.5 2.7 7.9 4.1 3.1 2.9 3.6 0.9 2.7 2.1 1.3 4.1 1.3 1.2 0.8 3.3 1.3 1.8 3.4 2.0 2.3 2.2 1.0 2.4 1.0 1.2 2.0 6.1 7.5 5.7 1.2 4.3 4.0 5.4 2.5 4.1 2.5 5.2 4.2 3.4 9.6 4.8 2.9 4.2 2.8 1.3 4.4 Price/BV (X) Price/BV 3.3 2.1 1.1 3.1 3.2 4.3 1.9 3.4 1.3 2.3 2.4 1.2 4.3 2.2 2.4 3.2 1.7 3.1 4.1 2.9 1.5 2.5 2.8 3.6 4.5 4.8 1.6 1.6 1.5 4.5 2.6 2.6 1.6 1.5 2.5 9.8 5.8 5.0 2.9 1.7 3.4 2.6 1.9 1.6 2.2 1.2 2.9 2.4 2.9 3.1 8.8 5.1 3.6 3.6 4.1 1.2 3.0 2.3 1.5 4.6 1.4 1.6 1.0 3.8 1.4 2.0 3.9 2.2 2.4 2.4 1.4 2.8 1.3 1.4 2.3 7.4 9.0 6.6 1.5 5.2 4.4 6.2 3.1 4.8 2.7 6.0 4.7 3.7 12.8 5.6 3.5 4.9 3.2 1.5 5.1 4.0 1.7 7.2 3.6 7.0 4.3 3.7 1.6

8.8 10.6 8.0

6.2 4.9

5.5

5.3

17.9 6.5

5.8

6.1 7.9 20.0 17.6 16.1 3.6 11.6 16.2 9.7 7.3 11.5 11.1 9.6 15.2 15.0 20.7 13.4 8.4 10.7 8.0 4.6 13.2 EV/EBITDA (X) EV/EBITDA ——— ——— —————— —————— ——— —————— ——— ——— ——— ——— ——— ——— ——— ——— ——— ——— ——— ——— ——— ——— ——— ——— ——— ——— ——— ——— ——— —————— ——— ——— ——— 9.6 24.7 20.9 20.3 4.4 13.6 18.9 11.5 8.8 14.1 12.7 10.7 18.9 16.5 24.5 16.2 10.4 13.1 9.2 5.9 14.8

12.1

30.1 28.6 28.4 5.9 18.0 22.2 13.6 10.2 17.1 14.2 12.3 23.9 18.5 32.0 20.1 12.7 15.6 10.2 6.1 17.2 16.3 13.2 16.0 12.1 14.7 6.5 11.3 12.1 86.6 18.1 12.2 15.1 16.7 32.3 23.6 16.1 15.2 20.9 18.7 5.9 20.1 9.4 27.0 7.3 8.4 6.0 21.3 17.4 12.2 19.9 17.2 25.9 17.9 6.5 16.0 5.3 9.0 14.7 32.7 29.6 27.2 8.6 20.8 24.8 24.6 13.6 20.0 16.4 15.2 25.2 24.3 32.3 24.7 14.5 15.8 14.0 8.9 22.4 PER (X) PER 6.0 6.5 7.2 10.0 (3.0) 18.5 24.4 20.6 25.6 22.1 15.9 13.7 11.0 8.6 24.4 19.3 33.7 22.0 26.2 33.3 28.6 27.7 24.1 47.1 36.8 17.8 25.2 14.0 16.1 22.9 30.7 23.5 36.2 30.4 22.0 21.6 47.0 32.8 29.7 21.6 17.9 27.0 27.5 21.5 48.2 47.5 26.3 20.7 21.0 39.7 40.2 21.0 18.4 18.6 45.8 17.5 19.6 35.0 19.9 26.9 19.6 46.5 36.6 35.5 20.0 10.9 30.0 15.0 17.5 13.6 87.9 23.4 14.9 19.3 35.3 27.0 19.3 20.5 24.6 21.8 72.1 12.1 36.1 9.9 24.9 22.0 18.6 22.7 31.8 24.2 16.0 18.3 11.1 39.7 35.9 34.6 11.7 25.1 29.3 17.4 18.7 16.5 31.2 26.3 30.8 17.3 18.3 16.1 12.2 25.4 (46.0)

9.1

9.2 89.3 34.9 18.8 29.1 34.7 10.7 43.5 72.8 23.0 36.7 37.0

2.9 2.9 12.8 1.5 1.5 1.5 8.4 8.4 21.8 0.9 0.9 16.3 9.9 9.9 22.9 (0.3) (1.5) 26.0 52.3 13.8 45.8 33.4 24.4 22.6 21.3 12.4 14.3 24.3 19.0 18.4 36.7

14.2 21.6 19.8 23.8 17.4 27.8 30.6 19.2 17.0 19.2 14.1 12.6 35.5 147.1 14.2 21.4 27.2 15.5 18.9 19.1 28.1 14.9 20.9 13.6 8.9 23.9 8.0 14.1 24.4 16.1 14.6 13.5 95.7 18.6 76.9 39.0 30.5 53.6 29.8 46.0 15.6 29.4 15.5 34.9 170.3 258.3 33.4 49.6 21.1 20.7 19.3 232.3 143.1 (11.4)

135.3

EPSgrowth(%) 7.2 7.2 78.7 1.2 1.2 (3.9) 2.3 2.3 13.3 1.1 1.1 30.7 4.1 4.1 (10.8) 6.7 6.7 18.7 5.1 5.1 44.2 1.9 1.9 (0.9) 4.8 4.8 13.9 5.3 5.3 17.7 9.2 9.2 37.0 7.8 7.8 14.8 2.6 2.6 18.1 (1.2) (1.2) (72.9) (9.0) (9.0) 33.6 (0.1) (0.1) 16.2 (1.5) (1.5) 27.4 (6.9) (6.9) 24.8 13.8 13.8 64.5 64.5 74.4 74.4 26.3 13.3 13.3 21.4 11.4 11.4 13.7 11.1 11.1 10.7 22.4 22.4 27.9 39.7 39.7 19.4 19.4 (16.6) (35.0) 13.0 13.0 33.6 33.6 17.6 17.6 32.0 32.0 24.8 24.8 16.7 16.7 94.7 94.7 606.6 21.9 21.9 34.6 34.6 10.3 10.3 29.3 29.3 29.3 29.3 62.8 16.5 26.9 20.8 18.8 18.0 19.0

(11.6) (23.8) (40.5)

(58.9)

(55.5) (58.0) 124.6 126.2 136.3 129.8

(421.1)

149.7

83.1 144.6 25.5 19.6 32.9 7.2 17.9 55.8 8.9 29.6 12.7 64.4 50.2 67.0 209.2 85.6 30.4 16.8 31.4 23.7 20.7 14.1 14.0 66.9 3.7 24.6 77.2 6.9 6.4 10.7 57.7 10.5 34.4 20.8 35.3 180.2 16.8 26.3 49.9 11.8 64.7 16.5 8.4 332.0 81.6 184.7 9.8 840.7 44.9 106.2 181.5 5.9 26.4 39.4 EPS(Rs) 7.1 4.7 5.3 3.0 4.8 7.0 4.5 5.5 (3.9) 2017 2018E 2019E 2017 2018E 2019E 2017 2018E 2019E 2017 2018E 2019E 2017 2018E 2019E 2017 2018E 2019E 2017 2018E 2019E 11.7 13.7 11.4 27.6 34.0 15.4 16.2 49.6 16.8 56.8 66.9 121.5 23.0 22.1 29.2 7.1 13.9 45.9 6.5 25.6 11.6 56.4 37.2 55.9 178.2 73.6 11.2 4.7 24.6 17.6 15.5 10.8 9.7 57.2 3.0 16.2 67.7 6.1 5.2 7.9 23.4 9.2 19.9 16.9 23.6 148.4 13.9 20.7 36.5 9.7 56.0 13.8 6.6 274.6 71.8 198.6 216.2 149.1 9.0 36.1 89.1 156.3 5.2 19.3 34.7 17 27 19 53 97 66 68 223 131 237 171 318 138 119 375 338 475 687 597 565 505 609 598 598 569 850 509 O/S shares 1,432— 56.3 84.2

28.3 7.0

42.3

21.6

21.0 46.0 144.0 72.9 8.1 17.3

11.9 8.7 (27.5) 47.9 3,399—

7.0 18.8 7.8

122.2 10.7 15.1

6.7 48.2

5.5 238.9 63.9 174.7 117.0 8.2 575.9 575.9 736.8 27.6 77.0 136.1

21.6 29.4 674 485 913 285 753 625 862 496 369 209

Mkt cap. Mkt 32,112 77,254 1,194 40,404 72,661 1,114 55,737 23,882 (Rsmn) (US$mn) (mn) 40,564 54,846 48,698 84,565 1,307 140,131 2,166 123,017 1,901 223,148 3,449 431,393 6,651 2,310 111,719 1,727 738,173 11,410 158,412 2,449 399 167,577 2,590 267 184,479 2,851 235,793 3,645 1,895 731,662 11,313 456 148,632 2,297 827,937 12,797 289 235,923 3,647 2,846 119,239 1,843 227,858 3,522 439,706435,667 6,796 6,734 2,640 1,975 344,559 5,326 157,076 2,428 369,301 5,708 2,128 220,788 3,413 203,046 3,146 1,720 190,927 2,949 1,055 236,926 3,662 201,663 3,117 258,763 4,000 588,492 9,096 105,004168,564 1,623 2,605 156 696,749 10,769 159 209,849 3,244 100,795 1,565 833,506 12,883 655,475 10,131 200 150,785 2,331 850,539 13,148 568,306 8,784 1,404 6,470,400 100,010 8,814,317 136,239 2,420,333 37,410 1,589 1,241,115 19,194 2,395 2,301,664 37,166 7,763 1,751,160 27,067 5,826 3,935,436 60,884 2,563 1,365,675 21,109 3,396 2,002,579 30,953 302 13,148,053 204,987 7.7 1.7 1.3 4.3 4.1 4.6 7.6 7.8 9.1 3.6 9.7 9.8 8.0 9.9 0.6 5.5 6.6 8.6 (1.7) - (1.1) (7.8) (6.3) (6.3) (6.4) (0.4) (2.5) (9.9) (8.9) (9.5) (5.6) (9.6) (8.0) 11.3 21.1 21.4 16.4 23.8 26.5 (37.4) (14.3) (14.1) (27.4) (13.3) (12.9) (18.4) (12.0) (24.6) (11.0) (41.8) (15.7) (19.8) (16.5) (25.9) (15.9)

70 90 90 145 410 410 145 110 120 175 210 150 180 390 675 260 750 450 670 180 360 350 350 180 190 350 150 155 525 290 670 540 300 105 200 935 290 765 1,675 1,200 3,300 1,450 1,450 1,450 1,400 3,200 1,050 1,850 1,500 6,100 5,100 1,600 3,050 6,600 price Upside Target 19,700 19,700

84 83 65

221 324 134 174 374 427 114 237 234 167 167 397 397 627 627

494 494 410 761 761 179 338 297 297

119 301 301 118 192 192

181 181 187 187 716

245

683 165 165 169 169 518 518 499 499 405 405 883 559

1,422 1,422 1,342 1,342 1,112 1,112 2,125 1,524 4,378 3,282 1,004 1,004 1,079 1,079 1,603 1,603 1,536 1,536 1,604 1,604 4,649 4,649 1,538 1,538 2,861 2,861 6,629 5,890

27,129 Price (Rs) Price

SELL SELL SELL SELL BUY SELL BUY BUY BUY BUY SELL BUY SELL SELL SELL SELL BUY SELL ADD ADD ADD ADD ADD ADD ADD ADD ADD ADD ADD ADD ADD ADD ADD ADD ADD ADD ADD ADD ADD Rating 9-May-17 (Rs) (%) REDUCE REDUCE REDUCE REDUCE REDUCE REDUCE REDUCE REDUCE REDUCE REDUCE REDUCE REDUCE REDUCE REDUCE REDUCE Neutral Attractive Cautious ShriramTransport NBFCs ShriramUnion City Finance PFC RuralElectrification Corp. MuthootFinance MaxFinancial Services Mahindra& Mahindra Financial SELL LIC Housing LIC Finance L&TFinance Holdings IIFL Holdings IIFL ICICI Prudential ICICI Life HDFC BharatFinancial Inclusion Cholamandalam NBFCs Finserv Bajaj YESBank Banks UnionBank UjjivanFinancial Services StateBank of India PunjabNational Bank Bank RBL KarurVysya Bank J&KBank IndusIndBank IDFC Bank IDFC ICICI Bank ICICI HDFCBank FederalBank DCBBank EquitasHoldings CanaraBank Union City Bank Bankof India Bankof Baroda Banks BankAxis Automobiles WABCO India WABCO TVSMotor Timken TataMotors SuprajitEngineering SKF MothersonSystems Sumi MindaCorp. MarutiSuzuki Mahindra& Mahindra HeroMotocorp FAG Bearings FAG ExideIndustries EicherMotors BharatForge BalkrishnaIndustries Bajaj Auto Bajaj AshokLeyland ApolloTyres Company Automobiles AmaraRaja Batteries Source: Company, Bloomberg, Kotak Institutional Equities estimates Equities Kotak Institutional Bloomberg, Company, Source: Kotak Institutional Equities: Valuation summary of KIE Universe stocksValuation of KIEKotak Universe summary Equities: Institutional

39 KOTAK INSTITUTIONAL EQUITIES RESEARCH

Kotak Institutional Equities: Valuation summary of KIE Universe stocks India Daily Summary Daily Summary India Target O/S Price (Rs) price Upside Mkt cap. shares EPS (Rs) EPS growth (%) PER (X) EV/EBITDA (X) Price/BV (X) Dividend yield (%) RoE (%) ADVT-3mo Company Rating 9-May-17 (Rs) (%) (Rs mn) (US$ mn) (mn) 2017 2018E 2019E 2017 2018E 2019E 2017 2018E 2019E 2017 2018E 2019E 2017 2018E 2019E 2017 2018E 2019E 2017 2018E 2019E (US$ mn)

KOTAK INSTITUTIONAL EQUITIES RESEARCH EQUITIES INSTITUTIONAL KOTAK Cement ACC SELL 1,701 1,375 (19.2) 319,464 4,938 188 34.3 48.1 72.8 (13.3) 40.2 51.3 49.6 35.4 23.4 25.2 20.2 14.0 3.7 3.5 3.1 1.0 1.0 1.0 7.5 10.1 14.1 9.5 Ambuja Cements REDUCE 258 230 (10.7) 511,403 7,905 1,985 5.8 7.7 11.3 4.2 33.7 45.7 44.4 33.2 22.8 16.3 12.9 9.1 2.6 2.5 2.4 1.3 1.3 1.3 7.6 7.8 10.8 10.5 Dalmia Bharat ADD 2,407 2,220 (7.7) 214,096 3,309 89 29.0 84.0 121.6 35.0 189.4 44.8 82.9 28.7 19.8 15.1 11.2 9.0 5.2 4.4 3.6 0.1 0.1 0.1 6.5 16.7 20.2 9.9 Grasim Industries ADD 1,167 1,225 5.0 544,735 8,420 467 73.0 84.2 98.8 32.8 15.4 17.4 16.0 13.9 11.8 8.1 6.4 4.9 1.9 1.7 1.5 0.4 0.4 0.4 12.4 12.7 13.2 31.0 India Cements SELL 209 120 (42.6) 64,170 992 307 6.2 8.8 11.2 35.1 42.5 27.1 NM 23.6 18.6 11.4 9.8 8.5 1.7 1.6 1.5 1.0 1.0 1.0 5.1 7.0 8.4 16.1 J K Cement ADD 1,015 970 (4.5) 70,990 1,097 70 28.7 66.1 87.1 236.0 130.4 31.8 35.4 15.4 11.7 14.4 9.6 7.9 4.0 3.2 2.5 0.4 0.4 0.4 11.7 23.0 24.3 0.7 JK Lakshmi Cement ADD 500 490 (2.0) 58,835 909 118 6.4 25.8 39.8 224.4 302.3 54.3 78.0 19.4 12.6 19.1 9.7 7.4 4.2 3.5 2.8 0.4 0.4 0.4 5.5 19.8 24.8 0.9 Orient Cement ADD 166 180 8.5 33,998 525 205 (1.6) 10.6 14.3 (151.6) 774.4 35.6 (105.9) 15.7 11.6 25.9 8.8 7.1 3.4 2.9 2.4 0.3 1.1 1.1 (3.2) 20.2 22.8 1.2

Shree Cement SELL 19,460 13,500 (30.6) 677,932 10,478 35 389.3 528.1 713.4 237.5 35.7 35.1 50.0 36.8 27.3 25.5 18.9 14.8 9.5 7.6 6.0 0.5 0.1 0.1 20.4 23.0 24.7 4.7 UltraTech Cement SELL 4,433 2,950 (33.5) 1,216,866 18,809 275 96.2 126.3 157.4 11.4 31.3 24.6 46.1 35.1 28.2 24.0 19.3 15.8 5.1 4.5 3.9 0.2 0.2 0.2 11.8 13.6 14.9 17.0 Cement Cautious 3,712,489 57,382 33.3 38.3 30.3 37.5 27.1 20.8 16.7 12.9 10.1 3.7 3.3 2.9 0.5 0.5 0.5 9.9 12.2 14.0 101.5 Consumer products Asian Paints REDUCE 1,165 900 (22.8) 1,117,657 17,275 959 19.8 22.3 26.4 5.8 12.5 18.5 58.8 52.3 44.1 36.6 32.3 27.3 17.1 14.9 12.9 0.7 0.9 1.0 31.3 30.4 31.3 16.0

Bajaj Corp. ADD 372 430 15.5 54,914 849 148 15.8 16.8 19.3 (0.5) 6.2 15.0 23.6 22.2 19.3 19.7 18.5 15.5 11.1 10.8 10.2 3.1 3.5 3.9 47.8 49.2 54.3 0.6 -

Britannia Industries ADD 3,593 3,550 (1.2) 431,157 6,664 120 75.0 92.5 113.2 7.9 23.2 22.5 47.9 38.9 31.7 32.9 26.5 21.4 18.7 14.4 11.2 0.7 0.8 1.0 44.2 41.9 39.8 8.3 May2017 10, Coffee Day Enterprises ADD 253 255 0.9 52,077 805 206 2.3 6.6 9.8 151.1 188.9 47.9 110.1 38.1 25.8 14.4 12.2 10.8 2.4 2.2 2.1 — — — 2.2 6.0 8.3 1.0 Colgate-Palmolive (India) BUY 1,006 1,100 9.4 273,550 4,228 272 21.6 26.4 31.8 2.0 21.9 20.5 46.5 38.1 31.7 27.4 22.5 18.8 21.7 17.6 14.4 1.1 1.3 1.6 51.6 50.9 50.1 7.2 Dabur India REDUCE 273 290 6.1 481,688 7,445 1,762 7.2 7.8 9.0 3.6 9.1 14.6 38.2 35.0 30.5 31.7 29.3 25.5 9.9 8.7 7.6 0.8 1.2 1.4 28.0 26.5 26.5 6.8

GlaxoSmithKline Consumer ADD 5,161 5,700 10.4 217,049 3,355 42 156.7 173.7 193.9 1.4 10.8 11.6 32.9 29.7 26.6 22.3 19.8 17.2 8.0 7.4 6.8 1.6 1.8 2.1 25.6 25.8 26.5 1.7 Godrej Consumer Products SELL 1,929 1,600 (17.1) 657,104 10,157 341 38.3 46.0 52.5 11.3 20.2 14.1 50.4 41.9 36.7 35.5 29.8 25.9 12.4 10.6 9.0 0.8 0.8 0.8 25.1 27.3 26.4 5.3 Hindustan Unilever REDUCE 952 860 (9.7) 2,060,569 31,849 2,164 19.3 22.0 25.4 0.6 14.3 15.3 49.4 43.3 37.5 33.9 29.4 25.2 32.9 32.4 32.1 1.8 1.9 2.2 66.5 75.5 85.9 18.6 ITC ADD 272 280 3.1 3,298,014 50,976 12,140 8.4 9.5 10.7 8.5 13.1 12.6 32.4 28.6 25.4 21.5 18.9 16.7 9.3 8.7 8.3 2.0 2.3 2.8 27.0 29.7 32.6 47.9 Jubilant Foodworks SELL 992 850 (14.3) 65,439 1,011 66 13.1 20.8 30.5 (17.9) 59.4 46.3 76.0 47.7 32.6 24.5 17.5 13.2 8.2 7.3 6.4 0.3 0.5 0.9 11.3 16.3 21.1 8.9 Jyothy Laboratories NR 371 — — 67,450 1,043 181 9.5 10.7 11.1 31.6 12.3 3.9 38.9 34.6 33.3 27.2 23.2 20.3 8.5 7.8 7.4 1.3 1.6 1.9 26.5 23.5 22.8 1.1

Manpasand Beverages REDUCE 695 685 (1.5) 39,774 615 57 13.0 19.7 27.2 28.9 51.6 38.0 53.4 35.2 25.5 24.9 18.1 12.2 3.4 3.1 2.8 0.2 0.3 0.4 8.4 9.3 11.7 0.7

Marico REDUCE 303 285 (5.8) 390,561 6,037 1,291 6.2 7.1 8.1 10.8 14.2 15.0 48.9 42.8 37.3 33.3 30.2 26.1 16.8 14.8 12.9 1.1 1.3 1.4 36.1 36.7 37.0 6.2 Nestle India SELL 6,700 5,700 (14.9) 645,985 9,985 96 99.3 124.4 149.6 7.1 25.3 20.3 67.5 53.9 44.8 34.8 30.5 25.9 21.4 20.0 18.7 0.9 1.3 1.6 32.8 38.4 43.2 3.5 Page Industries REDUCE 14,301 13,000 (9.1) 159,512 2,465 11 249.6 309.5 380.7 19.7 24.0 23.0 57.3 46.2 37.6 36.2 29.5 24.1 24.3 18.5 13.9 0.7 0.7 0.7 48.0 45.5 42.4 2.5 PC Jeweller REDUCE 449 390 (13.2) 80,460 1,244 179 21.5 23.7 27.2 (3.6) 10.1 14.8 20.9 19.0 16.5 10.7 8.7 7.6 2.8 2.4 2.2 0.9 1.0 1.2 14.8 14.2 13.8 3.7 Pidilite Industries ADD 745 730 (2.0) 381,846 5,902 513 16.7 19.1 22.2 13.2 14.6 16.1 44.7 39.0 33.6 29.3 25.4 21.5 11.5 9.7 8.2 0.7 0.8 0.9 28.0 26.9 26.5 5.1 S H Kelkar and Company SELL 310 270 (12.8) 44,782 692 145 7.5 9.0 10.3 41.5 20.2 14.3 41.4 34.4 30.1 25.0 21.7 18.8 5.4 4.9 4.4 0.7 0.9 1.0 13.6 14.9 15.5 1.7 Tata Global Beverages ADD 154 150 (2.6) 97,226 1,503 631 6.9 7.9 9.0 39.1 13.5 14.9 22.3 19.6 17.1 11.5 10.4 9.0 1.6 1.5 1.5 1.5 1.6 1.9 7.4 8.0 8.8 5.0 Titan Company REDUCE 467 390 (16.5) 414,729 6,410 888 10.0 12.1 14.0 28.3 20.9 15.5 46.6 38.5 33.4 31.3 26.0 22.1 10.3 8.8 7.6 0.7 0.8 1.0 23.6 24.6 24.4 10.8 United Breweries SELL 797 680 (14.7) 210,757 3,258 264 10.8 14.3 18.3 (4.4) 32.4 27.8 73.8 55.7 43.6 30.1 25.2 21.4 9.0 7.9 6.9 0.2 0.3 0.3 12.8 15.1 17.0 2.9 United Spirits ADD 1,897 2,400 26.5 275,694 4,261 145 30.8 47.4 66.4 154.9 54.1 40.1 61.6 40.0 28.6 27.3 21.6 16.6 11.8 7.8 5.5 — — — 21.7 23.5 22.7 15.4 Varun Beverages BUY 498 550 10.6 90,799 1,403 182 8.6 12.0 15.6 66.3 39.9 29.5 57.8 41.3 31.9 14.2 12.8 11.0 4.6 4.3 3.8 - - - 11.8 11.0 12.6 0.9 Consumer products Cautious 11,608,793 179,432 9.5 16.3 16.1 42.7 36.7 31.6 27.2 23.5 20.2 11.6 10.4 9.4 1.3 1.5 1.8 27.2 28.4 29.7 181.6 Energy BPCL SELL 721 675 (6.4) 1,043,266 16,125 1,446 51.9 50.7 55.4 1.0 (2.3) 9.3 13.9 14.2 13.0 10.2 9.0 8.1 3.5 3.0 2.7 4.1 2.1 2.3 26.5 23.0 21.8 27.7 Cairn India ADD 285 280 (1.9) 535,286 8,274 1,876 12.9 16.5 20.4 12.5 28.5 23.5 22.2 17.3 14.0 11.0 9.3 7.1 1.1 1.0 1.0 1.2 1.6 2.5 4.9 6.0 7.1 16.7 Castrol India ADD 440 470 6.9 217,434 3,361 495 13.5 14.7 15.9 12.3 8.4 8.5 32.5 30.0 27.6 20.8 19.8 18.1 36.5 35.9 35.1 2.5 2.7 3.0 114.1 120.6 128.4 5.8 GAIL (India) ADD 422 425 0.8 713,392 11,027 1,691 22.9 26.3 28.7 70.2 15.1 9.0 18.4 16.0 14.7 11.2 10.0 9.3 2.1 2.0 1.8 1.9 2.0 2.1 12.1 12.8 12.9 31.1 GSPL ADD 171 175 2.6 96,120 1,486 563 8.7 11.0 12.0 9.7 27.3 8.8 19.7 15.5 14.2 9.9 7.9 7.2 2.2 2.0 1.9 1.2 1.6 2.1 11.8 13.7 13.6 2.5 HPCL REDUCE 527 550 4.3 535,725 8,280 1,017 52.1 43.9 45.8 37.2 (15.7) 4.2 10.1 12.0 11.5 7.8 8.7 8.5 2.7 2.3 2.1 5.5 2.5 2.6 27.6 20.7 19.0 29.0 Indraprastha Gas SELL 1,011 970 (4.1) 141,582 2,188 140 45.6 51.0 55.9 37.7 11.8 9.5 22.2 19.8 18.1 13.4 11.9 10.8 5.1 4.5 4.0 1.2 1.6 2.0 24.6 24.1 23.5 9.1 IOCL BUY 441 470 6.5 2,142,911 33,122 4,856 41.9 38.6 41.4 114.8 (7.9) 7.1 10.5 11.4 10.7 6.7 6.9 6.5 2.6 2.4 2.1 4.1 4.0 4.3 26.0 21.7 21.1 29.0 Mahanagar Gas SELL 992 775 (21.9) 97,968 1,514 99 39.9 42.5 44.9 27.8 6.5 5.6 24.8 23.3 22.1 14.7 13.8 13.0 5.8 5.2 4.8 2.0 2.1 2.3 24.5 23.6 22.7 2.8 ONGC ADD 186 210 12.9 2,387,623 36,904 12,833 16.5 19.3 21.7 22.2 17.2 12.0 11.3 9.6 8.6 5.1 4.2 3.8 1.2 1.1 1.1 3.0 3.6 4.0 11.1 12.2 12.7 21.8 Oil India SELL 325 320 (1.6) 260,693 4,029 802 27.6 31.1 33.8 (5.0) 12.5 8.8 11.8 10.5 9.6 6.7 5.7 5.2 1.1 1.1 1.0 3.4 3.8 4.2 9.7 10.3 10.6 3.0 Petronet LNG ADD 429 425 (0.9) 321,675 4,972 750 21.2 25.5 27.8 88.9 20.3 8.9 20.2 16.8 15.4 12.9 10.4 9.1 4.3 3.7 3.2 1.2 1.6 2.1 22.9 23.4 22.1 14.2 Reliance Industries ADD 1,330 1,420 6.7 3,936,506 60,845 2,959 101.1 87.1 99.2 18.7 (13.8) 13.9 13.2 15.3 13.4 13.3 10.5 8.0 1.5 1.4 1.3 0.8 1.0 1.2 11.2 8.8 9.3 534.3 Energy Attractive 12,430,180 192,128 32.7 (1.0) 11.0 12.9 13.0 11.7 8.7 7.6 6.5 1.7 1.6 1.5 2.5 2.4 2.7 13.5 12.3 12.6 726.9

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

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May 10, 2017

Kotak Institutional Equities: Valuation summary of KIE Universe stocks

41 Target O/S Price (Rs) price Upside Mkt cap. shares EPS (Rs) EPS growth (%) PER (X) EV/EBITDA (X) Price/BV (X) Dividend yield (%) RoE (%) ADVT-3mo Company Rating 9-May-17 (Rs) (%) (Rs mn) (US$ mn) (mn) 2017 2018E 2019E 2017 2018E 2019E 2017 2018E 2019E 2017 2018E 2019E 2017 2018E 2019E 2017 2018E 2019E 2017 2018E 2019E (US$ mn) Industrials ABB SELL 1,532 1,170 (23.6) 324,718 5,019 212 17.8 25.2 36.9 25.5 42.1 46.5 86.3 60.7 41.5 42.7 31.1 23.8 9.9 8.9 7.7 0.3 0.5 0.6 12.0 15.4 20.0 2.2 BHEL SELL 177 110 (37.8) 432,736 6,689 2,448 3.5 3.6 7.4 193.6 3.2 104.0 50.6 49.1 24.0 32.5 25.4 10.3 1.3 1.3 1.2 0.4 0.5 1.1 2.6 2.6 5.1 17.8 Carborundum Universal REDUCE 298 260 (12.9) 56,286 870 189 9.6 12.7 16.0 25.8 32.9 26.0 31.1 23.4 18.6 17.0 13.1 10.6 4.3 3.9 3.4 1.0 1.3 1.6 14.5 17.4 19.4 0.9 CG Power and Industrial REDUCE 84 65 (22.2) 52,333 809 627 2.9 3.5 5.1 26.1 19.0 46.8 28.4 23.9 16.3 13.7 10.6 7.4 1.2 1.1 1.1 0.7 0.7 1.2 4.0 4.8 6.8 3.6 Crompton Greaves Consumer SELL 241 205 (14.8) 150,826 2,331 627 4.5 5.5 6.6 17.4 21.3 19.9 53.1 43.8 36.5 32.1 27.3 23.2 32.8 20.8 14.2 0.4 0.6 0.8 82.5 58.2 46.4 4.3 Cummins India REDUCE 1,067 915 (14.2) 295,717 4,571 277 28.1 32.2 36.0 6.4 14.5 11.7 37.9 33.1 29.6 34.1 28.9 25.3 8.5 7.7 6.9 1.4 1.5 1.7 23.4 24.3 24.6 4.3 Havells India SELL 493 415 (15.9) 308,335 4,766 624 9.4 11.3 13.4 20.9 20.1 19.2 52.6 43.8 36.7 35.1 27.0 22.6 9.7 8.7 7.9 0.8 0.9 1.2 19.5 21.0 22.5 9.2 Kalpataru Power Transmission BUY 363 370 1.9 55,722 861 153 10.4 13.3 19.3 36.1 27.4 45.0 34.8 27.3 18.9 9.8 8.7 7.4 2.3 2.1 1.9 0.4 0.4 0.4 6.7 8.0 10.7 0.7 KEC International ADD 221 235 6.3 56,855 879 257 10.3 14.6 18.1 37.9 42.5 23.4 21.5 15.1 12.2 9.8 8.1 7.0 3.3 2.8 2.3 0.6 0.9 1.1 16.3 19.9 20.7 2.4 L&T BUY 1,743 1,870 7.3 1,626,505 25,140 930 57.0 77.7 96.9 12.0 36.2 24.7 30.6 22.4 18.0 23.2 18.7 15.6 4.0 3.7 3.3 1.4 1.8 2.2 13.7 17.2 19.5 38.2 Siemens SELL 1,448 940 (35.1) 515,591 7,969 356 24.3 30.2 37.3 42.8 24.2 23.6 59.6 48.0 38.9 36.7 29.8 23.9 7.4 7.0 6.5 0.8 1.0 1.3 12.8 15.0 17.4 4.7 Thermax REDUCE 1,011 850 (16.0) 120,515 1,863 119 25.8 30.5 36.7 11.5 18.4 20.2 39.3 33.2 27.6 27.5 22.1 19.2 4.7 4.2 3.8 0.5 0.6 0.7 12.4 13.4 14.5 1.1 Voltas REDUCE 428 360 (15.9) 141,635 2,189 331 13.3 14.8 17.0 27.1 11.3 15.2 32.3 29.0 25.2 27.2 23.0 19.0 5.2 4.6 4.1 0.8 0.9 1.0 17.2 17.0 17.3 10.9 Industrials Cautious 4,137,774 63,956 42.9 28.0 29.6 39.1 30.6 23.6 25.2 20.3 16.1 3.9 3.6 3.3 1.0 1.2 1.5 9.9 11.9 14.2 100.2 Infrastructure Adani Port and SEZ ADD 348 370 6.5 719,656 11,123 2,085 18.0 12.7 14.6 30.9 (29.5) 15.3 19.3 27.4 23.7 16.5 16.1 14.6 4.4 3.9 3.4 0.4 0.6 0.8 25.2 15.0 15.3 22.3 Ashoka Buildcon BUY 203 250 23.2 37,991 587 188 7.7 6.0 10.1 148.6 (23.0) 69.2 26.2 34.1 20.1 10.9 10.0 8.1 1.9 1.9 1.8 1.0 1.2 1.4 7.6 5.6 9.0 2.5 Container Corporation REDUCE 1,196 950 (20.6) 291,572 4,507 244 28.1 31.8 37.8 (13.1) 13.3 18.9 42.6 37.6 31.6 27.2 22.4 18.2 3.4 3.2 3.1 0.8 0.9 1.1 8.2 8.9 10.0 9.1 Gateway Distriparks BUY 254 290 14.2 27,617 427 109 8.9 10.5 14.3 (11.8) 18.2 35.4 28.5 24.1 17.8 12.2 9.5 7.1 2.1 2.0 1.9 1.1 1.2 1.7 7.6 8.6 10.9 0.7 Gujarat Pipavav Port BUY 161 170 5.8 77,713 1,201 483 5.3 6.0 7.8 53.3 13.3 30.9 30.5 26.9 20.6 17.8 14.5 12.2 4.0 3.9 3.9 2.5 2.8 3.7 13.2 14.7 18.9 1.2 IRB Infrastructure BUY 259 275 6.1 91,061 1,407 351 20.8 16.2 17.9 14.9 (21.8) 10.5 12.5 16.0 14.4 7.5 7.6 6.7 1.5 1.4 1.4 1.5 1.7 1.4 13.4 9.0 9.5 12.0 Sadbhav Engineering ADD 324 345 6.4 55,623 860 172 11.2 12.6 14.5 42.8 12.8 15.4 29.0 25.7 22.3 18.5 14.7 12.9 3.4 3.0 2.7 — — — 12.3 12.5 12.9 1.1 Infrastructure Attractive 1,301,233 20,113 23.0 (19.3) 18.1 22.2 27.6 23.3 14.6 13.7 12.0 3.4 3.1 2.9 0.7 0.9 1.1 15.4 11.4 12.4 48.9 Internet Info Edge ADD 847 960 13.4 102,616 1,586 121 18.2 19.7 24.5 55.1 8.7 24.3 46.6 42.9 34.5 39.9 29.2 22.6 5.3 4.9 4.5 0.5 0.6 0.7 11.9 11.9 13.6 1.1 Just Dial REDUCE 504 400 (20.6) 35,051 542 69 18.6 16.5 19.5 (9.1) (11.0) 17.9 27.2 30.5 25.9 22.9 18.4 14.7 4.5 4.0 3.5 0.4 0.3 0.4 17.7 13.7 14.3 21.7 Internet Attractive 137,666 2,128 23.0 1.4 22.2 39.5 39.0 31.9 34.1 25.8 20.2 5.1 4.6 4.2 0.5 0.5 0.6 12.9 11.9 13.1 22.8 Media DB Corp. REDUCE 381 380 (0.1) 69,922 1,082 184 21.2 24.3 29.2 31.3 14.7 19.8 17.9 15.6 13.1 10.1 8.7 7.1 4.7 4.2 3.8 2.9 3.7 4.5 27.4 28.4 30.8 7.0 DishTV BUY 95 105 10.4 101,339 1,567 1,066 1.5 2.4 3.6 (76.9) 62.8 48.8 NM 39.0 26.2 10.2 8.4 7.0 6.1 6.1 6.1 — — 1.1 9.6 15.6 23.2 10.6 Jagran Prakashan REDUCE 196 190 (3.0) 64,027 990 327 11.3 12.9 15.0 8.8 14.3 16.1 17.3 15.2 13.1 10.1 8.5 7.4 3.7 3.4 3.1 3.1 3.6 3.6 22.4 23.6 24.9 0.7 Ortel Communications BUY 108 185 71.8 3,271 51 30 (0.9) 1.9 7.6 (122.1) 316.0 308.8 (124.5) 57.6 14.1 9.3 7.3 5.5 2.4 2.3 2.0 — — — (1.9) 4.1 15.1 0.0 PVR REDUCE 1,548 1,450 (6.3) 72,264 1,118 47 22.4 33.9 43.2 (17.0) 51.4 27.3 69.1 45.6 35.8 22.3 17.5 14.8 7.5 6.6 5.7 0.1 0.2 0.3 11.4 15.4 17.0 4.8 Sun TV Network ADD 858 750 (12.6) 337,983 5,224 394 26.3 29.8 36.3 12.4 13.2 21.9 32.6 28.8 23.6 21.4 18.5 15.1 8.8 8.0 7.1 1.7 2.0 2.2 28.1 29.1 31.9 24.5 Zee Entertainment Enterprises BUY 496 540 8.9 476,047 7,358 960 12.5 15.5 18.8 32.9 24.2 21.2 39.7 31.9 26.4 22.4 19.3 16.1 5.0 4.6 4.2 0.5 0.7 0.8 15.3 15.1 16.7 12.6 Media Attractive 1,124,853 17,389 (1.0) 21.5 23.2 34.5 28.4 23.1 17.4 14.8 12.3 5.8 5.4 4.9 1.1 1.3 1.6 16.9 18.9 21.1 60.2 Metals & Mining Coal India ADD 278 320 15.0 1,726,591 26,687 6,207 18.1 25.5 28.5 (20.0) 40.7 11.7 15.3 10.9 9.8 9.6 7.1 6.3 5.7 5.2 4.8 7.2 6.4 7.2 33.5 50.0 51.0 24.4

Hindalco Industries REDUCE 186 180 (3.4) 418,152 6,463 2,242 10.7 14.3 15.7 294.3 34.2 9.8 17.5 13.0 11.8 7.5 7.0 6.5 1.0 0.9 0.8 0.5 0.5 0.5 5.9 7.2 7.4 42.7 Daily Summary India Hindustan Zinc REDUCE 254 265 4.3 1,073,231 16,588 4,225 19.7 22.2 23.9 1.5 12.8 7.6 12.9 11.4 10.6 9.4 7.0 5.8 3.5 2.9 2.4 11.6 2.0 2.0 24.4 27.4 24.4 16.1 Jindal Steel and Power BUY 114 160 40.6 104,130 1,609 915 (21.9) (6.6) 6.7 (20.3) 69.9 201.9 (5.2) (17.3) 16.9 13.0 8.8 6.7 0.3 0.3 0.3 — — — (7.5) (1.7) 1.7 34.8 JSW Steel ADD 192 225 16.9 465,194 7,190 2,417 14.6 19.5 22.1 1,487.5 33.5 13.4 13.2 9.9 8.7 7.2 6.2 5.6 2.1 1.8 1.5 0.4 0.4 0.4 16.2 19.4 18.4 17.1 National Aluminium Co. SELL 68 42 (38.0) 130,859 2,023 1,933 3.1 3.4 3.4 15.5 9.0 0.1 21.7 19.9 19.9 10.0 8.3 8.0 1.3 1.2 1.2 1.5 1.5 1.5 5.2 6.2 5.9 3.6 NMDC SELL 126 105 (16.4) 397,385 6,142 3,164 10.2 9.1 9.9 28.6 (11.1) 8.4 12.3 13.8 12.7 9.0 9.2 8.4 1.7 1.7 1.6 4.8 4.8 4.8 12.1 12.2 12.8 8.0 Tata Steel ADD 434 515 18.8 421,022 6,508 971 10.3 51.7 60.7 144.1 400.6 17.4 41.9 8 7.1 8.7 6.5 5.9 1.7 1.4 1.2 1.8 1.8 1.8 3.7 18.5 18.6 43.5 Vedanta ADD 225 290 28.7 668,242 10,329 3,717 21.1 30.3 34.3 168.3 43.9 13.2 10.7 7.4 6.6 6.3 4.8 4.0 1.3 1.2 1.0 1.2 1.2 1.2 14.6 16.7 16.4 50.7 Metals & Mining Attractive 5,404,805 83,540 44.4 44.8 14.0 14.9 10.3 9.1 8.3 6.5 5.7 1.9 1.7 1.5 5.4 3.2 3.5 12.8 16.6 17.0 240.9 Pharmaceutical Apollo Hospitals REDUCE 1,279 1,300 1.6 177,948 2,750 139 20.6 30.9 38.7 (4.9) 49.6 25.4 62.0 41.5 33.1 25.7 20.9 18.0 4.9 4.5 4.1 0.4 0.6 0.8 8.1 11.3 13.0 10.6

KOTAK INSTITUTIONAL EQUITIES RESEARCH EQUITIES INSTITUTIONAL KOTAK Aurobindo Pharma ADD 594 770 29.6 348,219 5,382 584 41.8 46.3 51.5 23.3 10.6 11.2 14.2 12.8 11.6 10.3 8.9 7.8 3.7 2.9 2.4 0.3 0.4 0.5 29.6 25.5 22.8 24.5 Biocon SELL 1,046 605 (42.2) 209,210 3,234 200 30.6 24.5 27.8 53.1 (20.0) 13.8 34.2 42.8 37.6 22.2 19.2 15.5 4.3 4.0 3.7 1.0 0.8 0.9 13.3 9.8 10.3 12.9 Cipla BUY 553 650 17.6 444,854 6,876 805 19.1 27.3 35.6 13.7 43.2 30.3 29.0 20.3 15.5 17.1 12.4 9.7 3.4 3.0 2.6 0.7 1.0 1.4 12.2 15.6 17.9 13.1 Dr Lal Pathlabs SELL 952 1,000 5.1 79,046 1,222 83 19.6 23.6 27.8 23.0 20.6 17.9 48.6 40.3 34.2 30.2 24.3 20.4 12.4 9.9 8.0 0.3 0.4 0.4 28.5 27.3 25.8 3.4 Dr Reddy's Laboratories SELL 2,581 2,500 (3.1) 427,634 6,610 166 78.1 90.9 138.5 (43.9) 16.4 52.3 33.0 28.4 18.6 17.0 13.2 8.8 3.5 3.1 2.7 0.5 0.5 0.8 10.3 11.6 15.7 21.3 HCG BUY 259 270 4.1 22,225 344 85 2.3 2.5 4.5 1,502.4 7.8 79.9 111.0 103.0 57.3 25.2 19.8 15.2 4.0 3.8 3.6 — — — 3.6 3.8 6.5 1.4

Lupin ADD 1,251 1,350 7.9 564,860 8,731 450 61.9 66.1 75.0 22.7 6.8 13.5 20.2 18.9 16.7 12.9 11.5 9.8 4.2 3.5 3.0 0.7 0.8 0.9 22.8 20.3 19.5 23.4 -

Sun Pharmaceuticals REDUCE 639 660 3.2 1,533,949 23,710 2,406 31.1 30.1 34.9 40.8 (3.3) 15.8 20.5 21.2 18.3 12.1 11.7 9.6 4.0 3.4 2.9 1.0 0.9 1.1 21.5 17.4 17.3 36.9 May2017 10, Torrent Pharmaceuticals REDUCE 1,311 1,310 (0.0) 221,758 3,428 169 57.3 58.7 69.1 (44.0) 2.4 17.8 22.9 22.3 19.0 15.7 14.3 12.3 5.7 4.7 2.0 1.0 1.2 26.6 23.1 21.0 11.3 Pharmaceuticals Cautious 4,029,703 62,285 10.9 6.6 19.8 22.9 21.5 17.9 14.0 12.4 10.0 4.0 3.5 3.0 0.8 0.8 1.0 17.6 16.1 16.6 158.8

Source: Company, Bloomberg, Kotak Institutional Equities estimates

Kotak Institutional Equities: Valuation summary of KIE Universe stocks India Daily Summary Daily Summary India Target O/S Price (Rs) price Upside Mkt cap. shares EPS (Rs) EPS growth (%) PER (X) EV/EBITDA (X) Price/BV (X) Dividend yield (%) RoE (%) ADVT-3mo Company Rating 9-May-17 (Rs) (%) (Rs mn) (US$ mn) (mn) 2017 2018E 2019E 2017 2018E 2019E 2017 2018E 2019E 2017 2018E 2019E 2017 2018E 2019E 2017 2018E 2019E 2017 2018E 2019E (US$ mn)

KOTAK INSTITUTIONAL EQUITIES RESEARCH EQUITIES INSTITUTIONAL KOTAK Real Estate DLF ADD 200 160 (19.8) 355,852 5,501 1,784 3.7 1.6 1.9 18.7 (55.2) 14.2 54.6 121.8 106.6 18.1 19.1 18.7 1.2 1.2 1.2 1.0 1.0 1.0 2.2 1.0 1.1 27.6 Godrej Properties REDUCE 530 335 (36.8) 114,672 1,773 216 9.6 10.5 11.4 29.4 9.9 8.3 55.4 50.4 46.6 55.0 77.4 46.8 4.8 4.5 4.2 - 0.5 0.5 9.1 9.3 9.4 4.4 Oberoi Realty REDUCE 400 390 (2.6) 135,856 2,102 339 11.2 30.1 43.5 (11.1) 170.0 44.3 35.9 13.3 9.2 24.3 8.4 9.1 2.4 2.1 1.7 0.5 0.5 0.5 6.9 16.8 20.4 2.7 Prestige Estates Projects BUY 250 225 (9.9) 93,656 1,448 375 7.0 8.4 8.9 (24.8) 18.7 6.3 35.5 29.9 28.1 15.2 14.6 13.9 2.2 2.0 1.9 0.6 0.6 0.6 6.2 7.0 7.1 2.0 Sobha BUY 410 395 (3.6) 39,464 610 96 14.8 17.1 17.9 (5.2) 15.6 4.5 27.6 23.9 22.9 15.5 13.9 13.5 1.5 1.5 1.4 1.7 1.7 1.7 5.5 6.2 6.3 3.6 Sunteck Realty BUY 451 360 (20.2) 27,040 439 60 55.8 57.8 113.7 105.4 3.7 96.6 8.1 7.8 4.0 7.9 6.2 2.9 1.4 1.2 0.4 0.4 0.4 18.6 16.3 26.0 1.8 Real Estate Attractive 766,540 11,873 9.8 19.6 37.0 38.7 32.4 23.6 18.7 16.2 14.8 1.7 1.6 1.5 0.7 0.8 0.8 4.3 5.0 6.5 42.0 Technology

HCL Technologies REDUCE 850 840 (1.1) 1,214,760 18,744 1,430 57.5 61.4 64.6 46.4 6.8 5.3 14.8 13.8 13.2 10.6 9.5 8.7 3.7 3.3 3.0 2.9 3.4 3.9 27.3 25.4 24.0 19.7 Hexaware Technologies ADD 251 230 (8.3) 76,288 1,172 304 13.7 14.5 16.5 5.9 6.1 13.3 18.3 17.2 15.2 12.4 11.0 9.5 4.5 4.1 3.7 2.2 3.2 3.2 26.5 24.8 25.5 4.3 Infosys ADD 947 1,015 7.2 2,163,778 33,611 2,286 62.8 63.7 70.4 6.4 1.4 10.6 15.1 14.9 13.4 10.5 10.6 9.4 3.1 3.3 3.0 2.9 3.2 3.7 22.6 21.3 23.4 57.2 L&T Infotech BUY 748 800 6.9 130,222 1,973 174 55.8 59.7 65.2 13.3 7.0 9.2 13.4 12.5 11.5 9.3 8.2 7.0 4.1 3.5 3.1 1.2 3.2 3.7 37.6 30.5 28.7 0.9 Mindtree REDUCE 505 460 (8.8) 84,877 1,311 168 26.4 30.8 36.0 (26.3) 16.4 17.2 19.1 16.4 14.0 10.8 9.0 7.4 3.3 2.9 2.5 1.4 1.6 1.9 17.9 18.8 19.4 4.0

Mphasis SELL 576 450 (21.8) 120,996 1,872 210 39.5 40.8 41.1 14.8 3.3 0.6 14.6 14.1 14.0 9.4 9.7 9.4 1.8 1.9 1.8 3.5 3.5 3.5 12.9 12.6 13.1 1.3 -

TCS REDUCE 2,353 2,405 2.2 4,635,465 71,649 1,970 133.4 136.8 149.3 8.6 2.5 9.1 17.6 17.2 15.8 12.9 12.4 11.1 5.2 5.7 5.2 2.3 3.6 4.0 32.6 31.3 34.7 51.9 May2017 10, Tech Mahindra BUY 425 510 20.1 370,341 5,724 872 34.0 38.2 43.4 (4.8) 12.2 13.7 12.5 11.1 9.8 7.6 6.2 5.1 2.3 2.0 1.7 2.9 1.4 1.7 19.5 19.1 18.6 25.6 Wipro REDUCE 509 455 (10.6) 1,235,177 19,132 2,427 35.0 34.9 37.2 (3.0) (0.2) 6.6 14.5 14.6 13.7 8.6 8.6 7.7 2.4 2.2 2.0 0.4 1.0 2.4 17.2 15.4 15.2 14.7 Technology Cautious 10,031,902 155,188 8.9 0.6 8.5 15.9 15.8 14.6 11.0 10.6 9.4 3.7 3.8 3.4 2.3 3.0 3.5 23.2 23.8 23.5 179.6 Telecom Bharti Airtel BUY 345 375 8.6 1,380,102 21,332 3,997 8.1 3.9 9.5 (17.0) (51.3) 141.8 42.6 87.5 36.2 7.0 7.5 6.3 2.0 2.0 2.0 0.7 0.3 1.0 4.8 2.3 5.6 27.3 Bharti Infratel REDUCE 366 335 (8.4) 676,772 10,461 1,850 14.9 16.1 17.7 18.3 8.1 10.0 24.6 22.8 20.7 11.5 10.5 9.7 4.4 4.3 4.2 4.5 3.4 3.8 16.2 19.0 20.5 53.7 Tata Communications ADD 653 730 11.7 186,191 2,878 285 10.5 16.6 22.9 540.1 57.9 38.1 62.2 39.4 28.5 10.8 9.7 8.5 11.7 9.1 6.9 1.0 1.0 1.0 51.0 26.0 27.6 8.2 Telecom Cautious 2,556,309 39,519 (42.2) (75.4) 264.2 47.0 191.4 52.5 7.9 8.5 7.3 2.4 2.4 2.5 1.6 1.1 1.6 5.0 1.3 4.7 135.0 Utilities

Adani Power SELL 31 24 (23.1) 104,019 1,860 3,334 (2.0) 4.2 4.2 (233.7) 315.3 (0.2) (15.9) 7.4 7.4 8.7 6.3 5.9 1.5 1.3 1.1 — — — (9.3) 18.9 15.9 9.0

CESC SELL 971 785 (19.2) 128,729 1,990 133 53.7 75.6 96.8 92.1 40.8 28.2 18.1 12.9 10.0 8.7 8.0 7.0 1.4 1.3 1.2 1.1 1.2 1.2 7.8 10.3 12.1 10.3 JSW Energy ADD 69 67 (2.8) 112,996 1,747 1,640 3.8 6.6 6.9 (50.0) 72.6 5.2 18.2 10.5 10.0 6.6 5.8 5.3 1.1 1.0 1.0 2.9 2.9 2.9 6.6 10.0 9.9 8.1 NHPC ADD 31 32 3.1 343,744 5,313 11,071 2.9 3.4 3.6 21.6 17.6 6.7 10.8 9.2 8.6 9.8 7.4 6.5 1.1 1.0 1.0 5.2 6.1 6.5 10.0 11.3 11.6 3.3 NTPC BUY 161 185 14.7 1,329,580 20,551 8,245 12.1 15.3 16.5 5.4 26.0 8.2 13.3 10.6 9.7 11.3 9.4 7.9 1.4 1.3 1.2 2.3 2.8 3.1 10.9 12.7 12.6 13.1 Power Grid BUY 208 230 10.4 1,090,002 16,848 5,232 14.3 15.7 17.7 25.9 9.2 13.2 14.5 13.3 11.7 9.9 8.6 7.5 2.2 2.0 1.8 1.4 1.5 1.7 16.5 15.9 15.9 18.7 Reliance Power SELL 48 34 (28.5) 133,384 2,062 2,805 4.2 4.4 4.6 (14.3) 5.9 4.5 11.4 10.8 10.3 9.4 8.5 8.3 0.6 0.6 0.6 — — — 5.5 5.6 5.6 7.4 Tata Power REDUCE 83 80 (3.7) 232,672 3,474 2,800 6.8 5.3 7.4 24.2 (22.9) 39.8 12.2 15.8 11.3 10.7 10.3 10.5 1.4 1.4 1.2 1.4 1.4 1.4 12.3 8.9 11.5 7.1 Utilities Attractive 3,475,126 53,844 6.0 25.7 10.9 14.2 11.3 10.2 10.0 8.5 7.5 1.4 1.3 1.2 2.1 2.4 2.6 10.2 11.8 12.0 76.9 Others Astral Poly Technik SELL 592 360 (39.2) 70,860 1,095 120 10.2 13.0 16.1 21.0 28.2 23.2 58.2 45.4 36.9 29.8 24.0 19.7 8.5 7.2 6.1 0.1 0.1 0.1 15.0 17.1 17.9 3.3 Avenue Supermarts SELL 780 580 (25.6) 486,817 7,525 563 8.5 13.0 16.4 49.1 52.4 26.8 91.8 60.2 47.5 48.8 36.0 28.1 11.4 10.5 8.6 - - - 17.9 19.0 19.9 - Cera Sanitaryware REDUCE 3,051 2,140 (29.9) 39,677 613 13 74.2 89.0 104.4 15.6 20.0 17.3 41.1 34.3 29.2 24.4 20.4 17.4 7.8 6.4 5.3 0.3 0.3 0.3 20.7 20.5 19.8 0.4 Dhanuka Agritech ADD 897 900 0.4 44,860 693 50 26.1 30.8 37.8 24.8 18.1 22.7 34.4 29.1 23.7 24.5 20.2 16.3 7.7 6.4 5.3 0.8 1.0 1.2 24.5 23.9 24.3 0.4 Godrej Industries REDUCE 568 430 (24.2) 190,776 2,949 336 17.6 20.6 21.7 22.4 17.0 5.0 32.2 27.5 26.2 23.6 21.2 21.3 4.8 4.1 3.6 0.3 0.3 0.3 15.8 16.1 14.7 4.6 HSIL ADD 345 325 (5.7) 24,924 385 72 14.9 17.3 20.1 20.6 16.2 16.5 23.2 20.0 17.1 10.1 8.4 7.5 1.7 1.6 1.5 1.2 1.2 1.2 7.6 8.3 9.1 0.6 InterGlobe Aviation ADD 1,140 1,200 5.2 412,164 6,371 360 46.0 70.0 90.2 (18.9) 52.0 28.9 24.8 16.3 12.6 16.3 10.2 8.0 20.4 17.9 15.4 3.0 4.5 5.8 86.1 116.8 131.0 9.6 Kaveri Seed REDUCE 556 540 (2.9) 38,395 593 69 25.8 35.2 43.3 3.1 36.4 23.0 21.6 15.8 12.9 19.7 13.4 10.6 4.7 3.8 3.2 1.4 1.9 2.7 20.6 26.0 27.2 7.1 PI Industries ADD 842 960 14.0 115,855 1,791 136 30.7 34.4 40.6 32.5 12.2 18.1 27.5 24.5 20.7 22.0 18.2 15.0 7.5 6.0 4.8 0.5 0.6 0.7 31.0 27.3 25.8 1.5 Rallis India ADD 236 270 14.3 45,934 710 194 9.7 11.6 14.9 32.1 19.5 28.7 24.3 20.3 15.8 16.8 12.8 9.9 4.1 3.6 3.1 1.3 1.4 1.5 18.6 18.8 21.1 1.5 SRF BUY 1,762 1,910 8.4 101,152 1,563 57 84.2 95.7 113.1 14.4 13.6 18.2 20.9 18.4 15.6 12.3 10.7 9.3 3.3 2.9 2.5 0.6 0.7 0.8 16.8 16.6 17.0 6.1 Tata Chemicals ADD 636 630 (0.9) 162,012 2,504 255 31.6 45.7 49.5 3.1 44.7 8.3 20.1 13.9 12.9 9.9 7.9 6.9 2.4 1.8 1.7 1.6 1.6 1.6 12.3 14.9 13.6 5.8 TeamLease Services BUY 1,122 1,200 7.0 19,182 296 17 21.9 31.6 40.6 37.6 44.3 28.3 51.2 35.5 27.7 39.1 25.6 18.8 5.5 4.8 4.1 - - - 11.3 14.4 15.8 0.5 UPL ADD 814 860 5.7 413,440 6,390 507 35.7 43.0 53.6 12.2 20.5 24.7 22.8 18.9 15.2 13.6 11.4 9.6 5.0 4.2 3.4 0.7 0.9 1.1 23.8 23.9 24.6 19.7 Vardhman Textiles NR 1,323 NA - 75,898 1,173 63 109.5 116.8 125.3 18.3 6.6 7.3 12.1 11.3 10.6 6.6 6.3 5.6 1.8 1.6 1.4 1.2 1.5 1.5 16.1 14.8 14.2 0.7 Whirlpool REDUCE 1,191 1,000 (16.0) 151,092 2,335 127 25.2 30.9 38.0 28.8 22.6 22.8 47.2 38.5 31.3 28.6 23.8 19.7 10.2 8.5 7.0 - 0.5 0.6 24.2 24.0 24.5 1.6 Others 2,328,436 35,990 11.8 31.0 20.8 29.6 22.6 18.7 17.4 13.9 11.7 5.9 4.9 4.2 0.9 1.3 1.6 20.1 21.9 22.6 62.4 KIE universe 91,543,181 1,416,998 19.6 15.6 18.5 21.3 18.4 15.5 11.8 10.2 8.8 2.8 2.6 2.3 1.6 1.7 1.9 13.1 13.9 14.9 KIE universe (ex-energy) 79,113,001 1,224,871 16.2 20.5 20.3 23.7 19.7 16.4 12.9 11.1 9.5 3.1 2.8 2.5 1.5 1.6 1.8 13.0 14.4 15.6

India Daily Summary Daily Summary India

Notes: (a) We have used adjusted book values for banking companies. (b) 2017 means calendar year 2016, similarly for 2018 and 2019 for these particular companies. (c) Exchange rate (Rs/US$)= 64.70 Source: Company, Bloomberg, Kotak Institutional Equities estimates

42

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May 10, 2017

Disclosures

a sufficient able regulation(s) of of the following Asof March 2017 31, KOTAK INSTITUTIONAL EQUITIES RESEARCH in an advisory capacity in a merger or strategic transaction

vestment and rating price target,if any, no longer are in effect for this stock Percentageof companies covered by Kotak Equities,Institutional within the specified category. Percentageof companies within each category whichfor Kotak Institutional Equities and or its affiliates has provided investment banking services within the previousmonths. 12 The * above categories are defined as expectfollows: this = Buy We stock to deliver more than 15% returns theover next months; 12 Add = expectWe this stock to deliver5-15% returns over the next months; 12 Reduce =expectWe this stock to deliver -5-+5% returns over the next months; 12 =Sell expectWe this stock to deliver lessthan -5% returns over the next months. 12 targetOur prices are also on a 12-month horizon Thesebasis. ratings are used illustratively to comply with applicableregulations. As of Kotak 31/3/2017 Institutional EquitiesInvestment Research had investment ratings 192equity securities. on

SELL 1.6%

17.2%

his company. basis. 2.1% +5% returns over the next 12 months. 28.1%

- REDUCE 5 - is not meaningful and is therefore excluded. 15% returns over the next 12 months. 5% returns over the next months.12 The information is not available for display is not or applicable. - -

month horizon -

ADD 33.3% 3.6% Kotak SecuritiesKotak has suspended coverage of this company. to to deliver 5

Kotak SecuritiesKotak Research has suspended theinvestment and rating price target, if any,for this stock,because there is not

The information

Kotak SecuritiesKotak does not cover t

The investment and rating target price, any, if have been suspended temporarily. Such suspension is in compliance with applic

The coverage view represents each analyst’s fundamental overall outlook on the Sector.The coverage viewwill consist of one

Attractive, Neutral, Cautious. BUY 1.6% 21.4% We expect this stock to deliver

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

= Rated.Not 0% 20% 10% 70% 60% 50% 40% 30% Source:Kotak Institutional Equities Kotak Institutional Equities Research Equities KotakInstitutional coverage universe Distributionof ratings/investment banking relationships NA = NA AvailableNot or Applicable.Not = NM Meaningful.Not CS = Coverage Suspended. = NC Covered.Not = RatingRS Suspended. fundamental basis for determining an investment rating or target. The previous in and shouldnot be relied upon. Coverage view. designations: ratings/identifiers Other NR and/or Kotak Securities policies in circumstances when Securities Kotak or its affiliates is acting involving this company and in certain other circumstances. REDUCE. SELL. Our target prices are also on a 12 definitions Other Ratings other and definitions/identifiers ratings of Definitions BUY. ADD.

43 Disclosures

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