Beware of history repeating itself

Edelweiss Research is also available on www.edelresearch.com, Bloomberg EDEL <GO>, Thomson FirstCall, Reuters and Factset Edelweiss Securities Limited

Beware of history repeating itself

The past decade and a half shows that relative performance between largecap and SMID indices usually always mean-reverts. Should this repeat, small caps’ outperformance to large caps might well reverse hereon. Smallcap Index’s 2Y CAGR premium to NIFTY hit 19% at Jul’21-end, a level at which it has peaked on four occasions since 2007.

History shows that usually when this happens, the next 12–24 months spell trouble for the smallcap space. Smallcap valuations are also 1.1x NIFTY, while the 10Y average is 0.8x. It is time to be very selective.

We add more value-based picks to our SMID model portfolio (new entries in Exhibit 7). Our overall top SMID picks: Coromandel, GSPL, JK Cement, Gujarat Gas, Quess, Birlasoft, Concor, VIP and Firstsource.

If history were to repeat, then small-cap outperformance is over

We had first published this analysis in mid-2019: how NIFTY and SMID indices’

relative performances (2Y/3Y rolling CAGRs) always mean-revert. In other words,

usually a large underperformance of any index is made good subsequently. From a

27% lag in Nov-19 (2Y CAGR), the sharp rally now puts the NSE Smallcap Index at a

19% premium (2Y CAGR) to NIFTY at Jul-21-end (Exhibit 1). If we go by history,

smallcap outperformance might well reverse. Furthermore, 12-24 months following

such sharp rallies usually spell trouble for small caps (Exhibit 2). Smallcap index

valuation is currently 1.1x NIFTY, while its 10Y average is 0.8x. We do note based on

the same analysis that mid-caps may not underperform as badly. The midcap

index’s 2Y CAGR premium to NIFTY is 8%, while its 10Y average is 5% (Exhibit 4).

Value pockets still exist: Focus on how valuations have moved

After such a sharp SMID rally, valuation expansion and earnings upgrades now

beginning to dry up, avoiding or overpaying for quality becomes as critical as

earnings growth and improving returns profiles. With this on top of our mind, we

have been building several screeners—and we present one in Exhibit 6. We screen

a 500-stock SMID universe for a 25% EPS CAGR and RoE expansion (FY21–23), and

include filters on how much valuations have re-rated during past 1Y (Exhibit 6).

‘Winners, Warriors & Value’ model portfolio: Beefing up value

We have kept our ‘Winners, Warriors & Value’ SMID model portfolio quite dynamic. Till early 2020, our model portfolio leaned more on structural plays (Winners), which we tilted towards cyclicals/recovery plays (Warriors) around mid-2020. This held us in good stead (with the WWV model portfolio beating Midcap index by 22% since mid-2019 and 15% during past 6M). Now, we beef up the ‘Value’ bucket of our model portfolio, weeding out some super performers (see Exhibit 7 for new entries and exits).

We are adding GSPL, KEI, Mahanagar Gas, Birlasoft, Concor, VIP and Trent (plays on re-opening), SIS India, Jindal Stainless, JK Cement, IEX, CESC, Federal Bank, Firstsource and Sunteck. At an overall level, our top SMID picks are: Coromandel, GSPL, JK Cement, Gujarat Gas, Quess, Birlasoft, Concor, VIP and Firstsource.

India Equity Research SMID Strategy August 25, 2021

SMALL & MIDCAP STRATEGY WINNERS, WARRIORS & VALUE

Alok P. Deshpande Aditya Narain Sameer Chuglani +91 (22) 6620 3163 +91 (22) 6620 3061 +91 (22) 4040 7415 [email protected] [email protected] [email protected]

SMALL & MIDCAP STRATEGY

Edelweiss Securities Limited

2 Edelweiss Research is also available on www.edelresearch.com, Bloomberg EDEL <GO>, Thomson FirstCall, Reuters and Factset

Smallcap Index’s 2Y rolling CAGR premium seems to have yet again peaked at 19% in the end of Jul-21

Source: Bloomberg, Edelweiss Research

After such strong SMID outperformance, rough periods for next 12–24 months look probable going by history

When 2Y returns CAGR differentials between NIFTY

and Smallcap Indices hit 20% peaks and 20%

troughs

Next 12 months

absolute returns (%)

Next 12 months

relative returns (%) to

large caps

Next 24 months

absolute returns (%)

Next 24 months

relative returns (%) to

large caps

PEAKS

(periods when Smallcap Index 2Y rolling CAGR

premium to NIFTY crossed 20%)

Dec-07 (71.0) (19.2) (39.9) (24.6)

Nov-10 (25.7) (8.1) (9.8) (10.1)

Aug-15 19.4 9.2 50.0 25.5

Feb-18 (29.0) (31.8) (32.1) (38.8)

Jul-21 ? ? ? ?

TROUGHS

(periods when Smallcap Index 2Y rolling CAGR

discount to NIFTY fell to 20%)

Feb-09 135.2 57.1 131.4 38.4

Jul-13 90.8 56.3 115.7 67.1

Jun-19 (25.6) (13.0) 57.0 23.6

Source: Edelweiss Research, Bloomberg

-30

-18

-6

6

18

30

Mar

-07

Mar

-08

Mar

-09

Mar

-10

Mar

-11

Mar

-12

Mar

-13

Mar

-14

Mar

-15

Mar

-16

Mar

-17

Mar

-18

Mar

-19

Mar

-20

Mar

-21

(%)

Smallcap over NIFTY (2Y Rolling CAGR)

Exhibit 1 tracks a monthly data series of

differentials between the 2Y CAGRs for

NSE Smallcap Index and NIFTY



Edelweiss Research is also available on www.edelresearch.com, Bloomberg EDEL <GO>, Thomson FirstCall, Reuters and Factset 3

NSE Smallcap Index valuation now at 1.1x NIFTY (LTA=0.8x)


Midcap index outperformance is actually close to long-term average


Exhibit 5: Also, midcap valuations are less than 1.1x NIFTY valuation, which is long-term average multiplier


0.4

0.6

0.7

0.9

1.0

1.2

No

v-1

1

May

-12

No

v-1

2

May

-13

No

v-1

3

May

-14

No

v-1

4

May

-15

No

v-1

5

May

-16

No

v-1

6

May

-17

No

v-1

7

May

-18

No

v-1

8

May

-19

No

v-1

9

May

-20

No

v-2

0

May

-21

Smallcap100 valuations relative to NIFTY (x)

-30

-18

-6

6

18

30

Ap

r-0

6

Ap

r-0

7

Ap

r-0

8

Ap

r-0

9

Ap

r-1

0

Ap

r-1

1

Ap

r-1

2

Ap

r-1

3

Ap

r-1

4

Ap

r-1

5

Ap

r-1

6

Ap

r-1

7

Ap

r-1

8

Ap

r-1

9

Ap

r-2

0

Ap

r-2

1

(%)

Midcap over NIFTY (2Y Rolling CAGR)

0.4

0.6

0.9

1.1

1.4

1.6

Oct

-05

Oct

-06

Oct

-07

Oct

-08

Oct

-09

Oct

-10

Oct

-11

Oct

-12

Oct

-13

Oct

-14

Oct

-15

Oct

-16

Oct

-17

Oct

-18

Oct

-19

Oct

-20

Midcapcap100 valuations relative to NIFTY (x)

Exhibit 3 looks at one-year forward

rolling P/E for Smallcap Index and NIFTY

Exhibit 4 tracks a monthly data series of

differentials between the 2Y CAGRs for

Midcap 100 Index and NIFTY




Exhibit 6: Example of a ‘horses for courses’ screener for current environment (FY21–23 EPS growth >25%, RoE expansion >2%, PE expansion in the past 1Y < 25%)


Note: Order based on earnings growth

6M 1Y 6M 1Y

Century Textiles & Inds 260.5 8.9 19.5 na 58.2 126.9 34.4 49.3

Quess Corp 206.2 16.6 18.5 11.7 18.7 126.5 -5.2 49.0

Lakshmi Machine Works 165.5 12.4 -22.2 na 30.7 135.9 6.8 58.3

Sunteck Realty 130.2 5.6 -10.4 66.6 4.1 49.6 -19.7 -28.0

Aster DM Healthcare 96.4 9.4 -10.9 8.8 25.0 34.2 1.1 -43.3

Apollo Tyres 80.0 5.7 -32.7 13.9 -10.0 66.8 -27.9 4.8

Asahi India Glass 78.8 11.3 -37.4 1.0 14.1 65.9 -9.8 -11.6

BEML 78.3 6.5 -9.2 65.5 31.7 80.0 7.8 2.5

Infibeam Avenues 75.3 4.3 3.5 80.7 -4.7 14.9 -28.6 -62.6

MOIL 72.2 9.6 -11.6 -35.2 15.1 12.6 -8.8 -65.0

IFB Industries 68.7 10.0 -62.8 67.4 -28.1 105.4 -52.0 27.8

Container Corp Of India 64.3 6.8 15.3 21.0 14.2 67.9 3.5 20.6

Sterlite Technologies 63.8 13.9 12.5 91.8 26.7 84.3 2.8 6.8

Natco Pharma 60.1 9.8 -29.8 20.8 13.5 10.8 -4.4 -51.3

Trident 56.3 7.9 4.1 117.6 47.4 203.5 23.5 126.0

Vardhman Textiles 54.7 6.2 -5.1 17.5 56.8 130.4 33.0 52.9

Bharat Dynamics 54.0 9.5 8.1 42.8 12.7 -11.3 -11.2 -88.8

NCC 51.2 4.9 17.4 51.3 -12.2 113.6 -36.1 36.1

Dilip Buildcon 50.8 5.5 18.8 55.4 -13.5 25.0 -37.3 -52.5

Prism Johnson 48.8 6.2 -33.6 32.9 15.4 141.7 -8.5 64.2

Aegis Logistics 47.7 7.9 4.4 9.3 -4.1 43.1 -28.0 -34.4

Symphony 44.2 8.9 -18.5 -13.2 -12.4 9.5 -36.3 -68.0

Indoco Remedies 44.2 6.7 13.6 -6.8 51.8 84.9 27.9 7.4

TVS Motor Co 42.6 7.3 -43.0 -16.5 -15.6 14.1 -33.5 -48.0

Zee Entertainment Enterprise 41.9 5.4 -22.1 -16.0 -18.2 -14.4 -36.1 -76.4

Apl Apollo Tubes 41.3 3.9 23.3 117.9 65.8 254.1 47.9 192.1

Engineers India 39.1 10.4 3.5 -13.6 -3.1 -1.3 -27.0 -78.9

India Grid Trust 38.9 4.8 8.9 44.3 8.7 53.6 -15.2 -24.0

Sundram Fasteners 38.8 6.5 -4.5 16.7 7.4 62.3 -10.5 0.3

Star Cement 38.7 5.7 15.2 41.7 19.0 25.7 -4.8 -51.8

Gateway Distriparks 35.4 4.0 18.9 22.2 51.6 199.2 27.7 121.6

Welspun India 34.8 4.8 6.3 84.0 71.5 140.5 47.6 63.0

Emami 33.1 12.0 18.9 57.4 23.7 69.5 5.8 7.5

Bayer Cropscience 30.6 5.8 -6.8 -9.4 8.0 -6.3 -9.9 -68.3

Endurance Technologies 29.2 3.1 -5.4 32.3 14.5 52.1 -3.3 -9.9

India Cements 28.6 2.4 -61.7 43.4 1.5 46.1 -22.4 -31.4

Suprajit Engineering 28.2 4.0 10.3 25.1 22.2 87.7 -1.6 10.2

Oberoi Realty 28.0 2.3 6.1 25.1 15.5 74.8 -2.4 12.8

Phill ips Carbon Black 27.7 3.2 1.3 108.2 14.6 92.8 -9.3 15.3

Oil India 27.0 2.9 -14.0 33.5 38.6 74.3 20.7 12.3

EPL 26.2 4.2 -17.0 -3.8 2.0 -21.7 -21.8 -99.2

Garware Technical Fibres 26.2 5.2 6.0 na 35.4 80.9 11.6 3.3

Gujarat Pipavav Port 25.6 5.7 2.9 7.2 7.5 29.9 -16.4 -47.6

Indraprastha Gas 25.2 2.6 5.9 -15.1 -3.8 28.1 -21.7 -33.9

Company

OutperformanceReturns

FY21-23 PAT

CAGR (%)

FY21-23 RoE

change (%)

PE change

since Sep'20

PE change

since Jan'20

(pre-COVID)




Exhibit 7: Our ‘Winners, Warriors & Value’ SMID model portfolio

Source: Bloomberg; Edelweiss Research

Stock Mcap

(USD mn)

Entry Exit Previous

Weight in

SMID Model

Portfolio (%)

Revised

Weight in

SMID Model

Portfolio (%)

FY22E FY23E FY22E FY23E FY22E FY23E

WINNERS (Quality, Market

leadership, Structural

Opportunities)

31.5 22.5

Gujarat Gas 6,459 4.0 5.0 12.6 23.2 28.8 28.6 33.3 27.0

Aarti Industries 4,452 3.5 3.5 40.0 16.2 16.8 15.2 42.9 36.9

PI Industries 6,320 3.0 3.5 24.1 28.3 18.3 22.6 51.5 40.1

Century Plyboards 1,186 3.0 3.0 43.2 29.3 20.3 21.7 31.3 24.2

Galaxy Surfactants 1,417 2.5 2.5 5.3 14.3 23.3 23.0 33.1 28.9

IEX 1,682 New - 3.0 25.2 20.2 44.5 45.3 48.3 40.2

SIS India 883 New - 2.0 52.4 13.5 15.0 14.9 22.1 19.5

Voltas 4,340 Exit 3.0 - 40.2 18.1 14.1 15.1 43.7 37.0

SRF 7,165 Exit 3.0 - 32.3 6.4 21.4 18.8 33.1 31.1

Exide Industries 1,815 Exit 3.5 - 12.2 5.1 11.9 11.7 15.8 15.1

TeamLease 910 Exit 2.0 - 49.7 27.9 16.9 18.1 56.1 43.8

Crisil 2,505 Exit 2.0 - 16.4 22.6 30.3 34.2 44.9 36.6

TCI Express 719 Exit 2.0 - 35.4 35.6 27.9 30.0 39.1 28.8

WARRIORS (Earnings recovery,

cyclically favourable, category

leaders)

47.5 47.5

LIC Housing Finance 2,500 5.0 4.0 -8.3 42.7 12.0 14.7 7.4 5.2

Blue Dart Express 1,802 5.0 4.0 125.1 25.9 41.5 39.3 46.5 36.9

AU Small Finance Bank 5,190 4.0 3.0 31.6 45.5 14.4 17.9 164.3 113.9

Coromandel 3,143 1.5 3.0 20.6 10.8 27.3 24.1 14.6 13.1

Mindtree 7,774 4.0 2.0 10.4 16.9 26.1 26.1 47.1 40.3

L&T Technology Services 5,554 4.0 2.0 48.0 20.1 27.1 27.6 40.5 33.7

Crompton Consumer 3,735 2.0 2.0 1.4 16.6 29.8 30.2 45.1 38.7

Ajanta Pharma 2,599 4.0 4.0 19.1 20.3 23.6 24.0 25.1 20.9

Bharat Forge 4,516 3.0 3.0 425.7 39.0 16.6 20.3 35.4 25.5

Schaeffler India 2,945 3.0 3.0 73.0 9.8 16.0 16.0 41.7 38.0

Kajaria Ceramics 2,330 3.0 2.0 28.5 21.3 20.7 23.0 42.8 35.3

JK Cement 3,157 New - 3.5 27.3 15.2 21.6 20.5 26.2 22.7

Concor 5,365 New - 3.0 86.8 35.7 10.5 13.5 36.5 26.9

Jindal Stainless 846 New - 2.0 193.0 16.1 28.1 25.0 6.0 5.2

VIP 856 New - 2.0 na 239.9 9.4 28.4 127.2 37.4

Trent 4,240 New - 2.0 na 133.2 4.6 10.0 288.2 123.6

CESC 1,307 New - 3.0 3.4 6.9 13.5 13.5 7.1 6.6

Bajaj Electricals 1,662 Exit 3.0 - 47.5 34.5 14.9 17.4 48.3 35.9

IPCA 4,386 Exit 4.0 - 1.4 15.3 22.4 21.7 28.1 24.4

Mahindra Logistics 759 Exit 2.0 - 183.3 36.6 14.1 16.9 66.2 48.4

VALUE (Re-rating candidates) 21.0 30.0

Quess Corp 1,622 4.0 5.0 144.6 38.0 13.7 17.4 36.0 26.1

Sterlite Technologies 1,321 3.0 3.0 111.6 44.2 25.1 30.0 16.8 11.7

Cyient 1,369 2.5 2.0 35.2 20.0 16.0 16.8 20.7 17.2

Sobha 728 2.5 2.5 920.5 -36.1 23.5 12.9 8.5 13.3

Somany Ceramics 363 2.0 2.0 97.6 33.2 16.2 18.5 23.6 17.7

KEI Industries 864 New - 2.0 30.1 32.9 18.3 20.3 18.0 13.5

Mahanagar Gas 1,443 New - 2.0 21.1 18.9 21.4 22.4 14.3 12.0

Federal Bank 2,216 New - 2.0 -6.7 22.5 9.0 9.9 10.5 8.6

GSPL 2,793 New - 3.0 16.2 24.6 19.6 19.5 11.1 8.9

Sunteck 680 New - 2.5 355.1 -14.6 6.7 5.4 26.4 30.9

Firstsource 1,694 New - 2.0 73.2 32.0 21.3 25.1 20.3 15.4

Birlasoft 1,551 New - 2.0 50.1 28.4 20.9 23.1 24.3 19.0

Brigade 962 Exit 2.5 - 1,112.9 -12.1 14.3 10.4 18.0 20.5

Prince Pipes 921 Exit 2.5 - -8.5 31.3 17.9 19.8 33.7 25.6

eClerx Services 1,017 Exit 2.0 - 31.7 7.7 21.6 19.5 20.2 18.7

EPS growth (%) RoE P/E




Exhibit 8: Our top SMID picks


Exhibit 9: WWV model portfolio performance since inception and since last change in portfolio


Stock Mcap

(USD mn) FY22E FY23E FY22E FY23E FY22E FY23E

Coromandel 3,143 20.6 10.8 27.3 24.1 14.6 13.1

GSPL 2,793 16.2 24.6 19.6 19.5 11.1 8.9

JK Cement 3,157 27.3 15.2 21.6 20.5 26.2 22.7

Gujarat Gas 6,459 12.6 23.2 28.8 28.6 33.3 27.0

Quess Corp 1,622 144.6 38.0 13.7 17.4 36.0 26.1

Birlasoft 1,551 50.1 28.4 20.9 23.1 24.3 19.0

Concor 5,365 86.8 35.7 10.5 13.5 36.5 26.9

VIP 856 na 239.9 9.4 28.4 127.2 37.4

Firstsource 1,694 73.2 32.0 21.3 25.1 20.3 15.4

EPS growth (%) RoE P/E

102.8

59.5

80.4 85.3

0.0

25.0

50.0

75.0

100.0

125.0

EdelweissSMID Model

Portfolio

NIFTY 50 NIFTYMidcap 100

NIFTYSmallcap 100

(%)

Performance since inception (Sep 19th, 2019)

33.1

11.9

17.7

23.0

0.0

7.0

14.0

21.0

28.0

35.0

EdelweissSMID Model

Portfolio

NIFTY 50 NIFTYMidcap 100

NIFTYSmallcap 100

(%)

Performance since last reset (Feb 25th, 2021)




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This research report is a product of Edelweiss Securities Limited, which is the employer of the research analyst(s) who has prepared the research report. The research analyst(s) preparing the research report is/are resident outside the United States (U.S.) and are not associated persons of any U.S. regulated broker-dealer and therefore the analyst(s) is/are not subject to supervision by a U.S. broker-dealer, and is/are not required to satisfy the regulatory licensing requirements of FINRA or required to otherwise comply with U.S. rules or regulations regarding, among other things, communications with a subject company, public appearances and trading securities held by a research analyst account.

This report is intended for distribution by Edelweiss Securities Limited only to "Major Institutional Investors" as defined by Rule 15a-6(b)(4) of the U.S. Securities and Exchange Act, 1934 (the Exchange Act) and interpretations thereof by U.S. Securities and Exchange Commission (SEC) in reliance on Rule 15a 6(a)(2). If the recipient of this report is not a Major Institutional Investor as specified above, then it should not act upon this report and return the same to the sender. Further, this report may not be copied, duplicated and/or transmitted onward to any U.S. person, which is not the Major Institutional Investor.

In reliance on the exemption from registration provided by Rule 15a-6 of the Exchange Act and interpretations thereof by the SEC in order to conduct certain business with Major Institutional Investors, Edelweiss Securities Limited has entered into an agreement with a U.S. registered broker-dealer, Edelweiss Financial Services Inc. ("EFSI"). Transactions in securities discussed in this research report should be effected through Edelweiss Financial Services Inc.

Disclaimer for U.K. Persons

The contents of this research report have not been approved by an authorised person within the meaning of the Financial Services and Markets Act 2000 ("FSMA"). In the United Kingdom, this research report is being distributed only to and is directed only at (a) persons who have professional experience in matters relating to investments falling within Article 19(5) of the FSMA (Financial Promotion) Order 2005 (the “Order”); (b) persons falling within Article 49(2)(a) to (d) of the Order (including high net worth companies and unincorporated associations); and (c) any other persons to whom it may otherwise lawfully be communicated (all such persons together being referred to as “relevant persons”). This research report must not be acted on or relied on by persons who are not relevant persons. Any investment or investment activity to which this research report relates is available only to relevant persons and will be engaged in only with relevant persons. Any person who is not a relevant person should not act or rely on this research report or any of its contents. This research report must not be distributed, published, reproduced or disclosed (in whole or in part) by recipients to any other person. Disclaimer for Canadian Persons

This research report is a product of Edelweiss Securities Limited ("ESL"), which is the employer of the research analysts who have prepared the research report. The research analysts preparing the research report are resident outside the Canada and are not associated persons of any Canadian registered adviser and/or dealer and, therefore, the analysts are not subject to supervision by a Canadian registered adviser and/or dealer, and are not required to satisfy the regulatory licensing requirements of the Ontario Securities Commission, other Canadian provincial securities regulators, the Investment Industry Regulatory Organization of Canada and are not required to otherwise comply with Canadian rules or regulations regarding, among other things, the research analysts' business or relationship with a subject company or trading of securities by a research analyst.

This report is intended for distribution by ESL only to "Permitted Clients" (as defined in National Instrument 31-103 ("NI 31-103")) who are resident in the Province of Ontario, Canada (an "Ontario Permitted Client"). If the recipient of this report is not an Ontario Permitted Client, as specified above, then the recipient should not act upon this report and should return the report to the sender. Further, this report may not be copied, duplicated and/or transmitted onward to any Canadian person.

ESL is relying on an exemption from the adviser and/or dealer registration requirements under NI 31-103 available to certain international advisers and/or dealers. Please be advised that (i) ESL is not registered in the Province of Ontario to trade in securities nor is it registered in the Province of Ontario to provide advice with respect to securities; (ii) ESL's head office or principal place of business is located in India; (iii) all or substantially all of ESL's assets may be situated outside of Canada; (iv) there may be difficulty enforcing legal rights against ESL because of the above; and (v) the name and address of the ESL's agent for service of process in the Province of Ontario is: Bamac Services Inc., 181 Bay Street, Suite 2100, Toronto, Ontario M5J 2T3 Canada.

Disclaimer for Singapore Persons

In Singapore, this report is being distributed by Edelweiss Investment Advisors Private Limited ("EIAPL") (Co. Reg. No. 201016306H) which is a holder of a capital markets services license and an exempt financial adviser in Singapore and (ii) solely to persons who qualify as "institutional investors" or "accredited investors" as defined in section 4A(1) of the Securities and Futures Act, Chapter 289 of Singapore ("the SFA"). Pursuant to regulations 33, 34, 35 and 36 of the Financial Advisers Regulations ("FAR"), sections 25, 27 and 36 of the Financial Advisers Act, Chapter 110 of Singapore shall not apply to EIAPL when providing any financial advisory services to an accredited investor (as defined in regulation 36 of the FAR. Persons in Singapore should contact EIAPL in respect of any matter arising from, or in connection with this publication/communication. This report is not suitable for private investors.

Disclaimer for Hong Kong persons

This report is distributed in Hong Kong by Edelweiss Securities (Hong Kong) Private Limited (ESHK), a licensed corporation (BOM -874) licensed and regulated by the Hong Kong Securities and Futures Commission (SFC) pursuant to Section 116(1) of the Securities and Futures Ordinance “SFO”. This report is intended for distribution only to “Professional Investors” as defined in Part I of Schedule 1 to SFO. Any investment or investment activity to which this document relates is only available to professional investor and will be engaged only with professional investors.” Nothing here is an offer or solicitation of these securities, products and services in any jurisdiction where their offer or sale is not qualified or exempt from registration. The report also does not constitute a personal recommendation or take into account the particular investment objectives, financial situations, or needs of any individual recipients. The Indian Analyst(s) who compile this report is/are not located in Hong Kong and is/are not licensed to carry on regulated activities in Hong Kong and does not / do not hold themselves out as being able to do so. Copyright 2009 Edelweiss Research (Edelweiss Securities Ltd). All rights reserved.

Aditya Narain

Head of Research

[email protected]

Beware of history repeating itself

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