India Daily, March 7, 2012 - kotaksecurities.com private circulation only. for important information...

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

INDIA DAILYMarch 7, 2012 India 6-Mar 1-day1-mo 3-mo

Sensex 17,173 (1.1) (3.0) 2.2

Nifty 5,222 (1.1) (2.6) 3.6

Global/Regional indices

Dow Jones 12,759 (1.6) (0.7) 5.0

Nasdaq Composite 2,910 (1.4) 0.3 9.8

FTSE 5,766 (1.9) (2.1) 3.5

Nikkie 9,570 (0.7) 7.3 9.7

Hang Seng 20,584 (1.1) (0.6) 7.0

KOSPI 1,984 (0.8) 0.1 3.4

Value traded – India

Cash (NSE+BSE) 180 185 118

Derivatives (NSE) 1,658 1,187 888

Deri. open interest 1,260 1,253 1,177

Forex/money market

Change, basis points

6-Mar 1-day 1-mo 3-mo

Rs/US$ 50.4 0 124 (127)

10yr govt bond, % 8.3 (1) - (29)

Net investment (US$mn)

5-Mar MTD CYTD

FIIs 40 218 7,532

MFs (29) (97) (282)

Top movers -3mo basis

Change, %

Best performers 6-Mar 1-day 1-mo 3-mo

WLCO IN Equity 130.0 (6.5) 4.2 86.8

HDIL IN Equity 100.3 (1.8) 19.6 51.4

MMTC IN Equity 821.7 (1.5) (9.1) 47.9

RELI IN Equity 618.4 (6.0) 12.0 47.6

RPWR IN Equity 125.7 (7.1) 27.4 45.1

Worst performers

UNSP IN Equity 515.4 (1.0) (26.6) (30.6)

ESOIL IN Equity 56.5 (5.9) (11.7) (19.1)

GAIL IN Equity 351.5 (0.5) (7.3) (12.6)

DLFU IN Equity 197.8 3.0 (13.6) (12.2)

EDSL IN Equity 195.8 (2.5) (17.3) (12.0)

Contents

Special Reports

Theme Report

Consumer products: Bazaar bytes #4: Increasing competition in the mosquito-repellant category

Daily Alerts

Company

Mahindra & Mahindra: South and West tractor markets slip

Sector

Energy: India Energy Monthly, March 2012

Strategy

Strategy: Everybody's job just got a bit harder

Strategy: India witnesses inflows worth US$929 mn as LTRO 2 meets expectations

News Round-up

Reliance Ind. (RIL IN) - DE Shaw JV reworks business plan, venture to focus on proprietary trading, change triggered by delay in capital infusion. (ECNT)

Reliance Industries Ltd (RIL IN) wants to buy Cairn India's (CAIR IN) Rajasthan crude oil for processing at its only-for-exports Jamnagar refinery in Gujarat, and has approached the government for approval for the same. (BSTD)

Tata Motors (TTMT IN) is aiming to make a car, Tata Megapixel that can deliver up to 100km from a litre of fuel by using a unique combination of technology. (ECNT)

Budget may offer capital gains tax incentive for new investors. 50% deduction on short-term capital gains tax will be allowed for new investors in equities, up to an annual cap of INR 70,000. (FNLE)

Small Industries Development Bank of India (Sidbi) which has sanctioned a USD 20.41mn term loan to SKS Microfinance, has put a condition that the troubled MFI will have to use the resource for lending to the poor outside Andhra Pradesh, & especially in states which are under-served in terms of microfinance penetration. (ECNT)

Now, L&T (LT IN) jumps into Hexaware (HEXW IN) race to reboot Infotech. Ropes in Citibank as advisor; debt to help firm break into the USD 1bn tech club. (BSTD)

At a time when fuel conservation is becoming imperative across the world, Tata Motors (TTMT IN) is aiming to make a car, Tata Megapixel, that can deliver up to 100 km from a litre of fuel by using a unique combination of technology. (FNLE)

Ranbaxy Laboratories (RBXY IN) said it has launched the generic versions of cholesterol lowering Atorvastatin tablets in Italy, Sweden, Netherlands and Germany. (BSTD)

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

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

‘Maxo’ in a new avatar: both for consumers and for the trade

We find renewed heightened activity by Jyothy Laboratories (JYL, rated ADD) in its ‘Maxo’ brand to (1) regain the 2% market share, it lost, in coils and (2) to gain a foothold in the liquids segment (relatively premium compared with coils). We recall that JYL’s mosquito repellant, ‘Maxo’, historically had a strong presence in coils (with ~24% market share), but due to higher trade discounts, profitability was elusive. The company’s roll back of promotions (over the past 18 months) to improve profitability met with limited success and it lost ~2% market share in the process: the management intends to regain market share even at a ‘cost’. Furthermore, we highlight its relaunch of liquid vaporizer with the proposition that the bottle fits in all machines (see Exhibit 1). A liquid vaporizer requires a small plug-n-play apparatus to operate and Maxo’s proposition could recruit consumers, if the marketing communication is successful.

‘All Out’: All might not quite be lost for S C Johnson

The ‘All Out’ brand, which introduced the liquid vaporizer segment within the mosquito-repellant category, recently lost market leadership to GCPL’s ‘Good Knight’. A plethora of innovations (such as jumbo coil, low-smoke coil and double-action vaporizer machine) had improved consumer perception of Good Knight as the innovation leader in the category, which helped GCPL gain substantial market share over the past two years (industry sources suggest GCPL has ~43% share now versus ~33% in 2010). S C Johnson (after acquiring the ‘All Out’ brand from Karamchand Appliances) was possibly in reorganization/consolidation mode, which seems to have helped GCPL to gain share. The recent marketing campaign by S C Johnson (Exhibit 2, a full front page campaign in DNA newspaper) likely suggests its unwillingness to lose further market share. We also note that it had earlier launched a “me-too” version of Good Knight’s ‘2X effective’ product proposition (called ‘Power Slider’) with limited marketing success, in our view.

GCPL’s ability to outperform industry growth appears limited

We remain constructive on GCPL (rated ADD): a large part of our bullishness stems from confidence in strong growth and profitability of the household insecticides category, which forms about half of the overall sales mix (of which, India forms ~35% of the overall sales mix). Good category growth of ~20% over the past few years has been driven by changes in consumer habits, in our view. Mosquito repellants have evolved from being just a seasonal product, used during mosquito-menace seasons (monsoons and the period after winter). The category’s higher urban penetration has been due to product use as a disease-prevention device, in our view. However, a repeat of the strong growth of ~35% over FY2011-12 appears challenging for GCPL. We model sales growth of 17% for the insecticides business for GCPL over FY2012-14E.

Consumer products India

Bazaar bytes #4: Increasing competition in the mosquito-repellant category. We expand the coverage of ‘Bazaar bytes’—it will have category views, besides snippets from our on-the-ground reconnaissance. We once again take a deep-dive into the mosquito-repellant category (see our earlier note dated August 26, 2011) and find significantly higher competitive activity: (1) a two-pronged re-launch of ‘Maxo’ by Jyothy (a differentiated product delivery in liquids and its willingness to compete on price and trade discounts (once again) in coils), (2) aggressive brand communication for ‘All Out’ by S C Johnson and (3) new ‘Nature Guard’ variant by Reckitt Benckiser under ‘Mortein’. While GCPL’s insecticides business could potentially grow well in FY2012-14E (we model 17% sales growth), its ability to outpace industry growth appears limited.

ATTRACTIVE

MARCH 07, 2012

THEME

BSE-30: 17,173

QUICK NUMBERS

• Aggressive brand communication for ‘All Out’

• Two-pronged relaunch of ‘Maxo’

• ‘Nature Guard’ variant by Reckitt Benckiser under ‘Mortein’

• GCPL’s ability to outperform industry growth appears limited

Consumer products India

KOTAK INSTITUTIONAL EQUITIES RESEARCH 3

JYL’s ‘Maxo’ in a new avatar

Source: Kotak Institutional Equities

S C Johnson’s ‘All Out’ brand’s ‘Wake Up Consumer’ campaign Full front page campaign in DNA newspaper



Tractor volume growth is likely to remain sluggish for the next few months

We believe tractor volume growth will remain flat over the next few months due to a decline in demand in West and South regions. The key reason for demand slowdown in these regions is a sharp decline in cotton and paddy prices, as these are key regions where cotton and paddy are grown.

Agricultural credit has also moderated to low single digits in the past few months due to a sharp decline in credit from PSU banks (see Exhibit 1). Our channel checks suggest that PSU and nationalized banks account for 50% of tractor lending while NBFCs and private banks comprise the rest 50%. NBFC and private banks have indicated that they have not seen their NPAs rise significantly because of tighter norms while PSU banks have indicated that their NPAs have risen sharply in the tractor portfolio.

We forecast a 7% yoy growth in tractor volumes in FY2013E as we believe labor shortage will drive mechanization of farms; we expect tractor lending to remain robust to support growth.

M&M remains our only BUY pick in the auto sector

M&M continues to remain our preferred pick in the auto sector due to attractive valuations, strong growth in utility vehicle and LCV volumes. We believe the stock has corrected sharply due to two factors – (1) expectations of a sharp rise in diesel tax on passenger vehicles and (2) slowdown in tractor volume growth in the recent months. We believe the impact of a diesel tax on M&M will be muted as the M&M utility vehicle product portfolio is less price-sensitive than small cars and M&M faces very little competition in the utility vehicle segment. We see the tractor cycle continuing over the next few years due to an acute labor shortage which will drive mechanization of farms.

We value the stock on sum-of-the-parts valuation methodology. Our target price is Rs 815 and we retain our BUY rating on the stock.

Mahindra & Mahindra (MM)

Automobiles

South and West tractor markets slip. Domestic tractor volume growth has started to moderate significantly since Nov 2011, especially in southern and western states. Major states where tractor demand has been impacted include Andhra Pradesh, Maharashtra, Karnataka, UP and West Bengal. Key reasons for moderation in tractor demand in these markets are 15-20% yoy decline in cotton and paddy prices, poor monsoons in South India and drought in certain regions in Andhra Pradesh.

Mahindra & MahindraStock data Forecasts/Valuations 2012 2013E 2014E

52-week range (Rs) (high,low) EPS (Rs) 41.6 44.4 48.9Market Cap. (Rs bn) 418.2 EPS growth (%) (0.2) 6.7 10.0

Shareholding pattern (%) P/E (X) 16.4 15.3 13.9Promoters 25.3 Sales (Rs bn) 306.3 363.7 414.9FIIs 32.1 Net profits (Rs bn) 25.6 27.3 30.0MFs 3.2 EBITDA (Rs bn) 35.3 38.7 43.0

Price performance (%) 1M 3M 12M EV/EBITDA (X) 12.4 11.2 9.9Absolute (4.1) (9.0) 0.9 ROE (%) 22.0 20.1 19.0Rel. to BSE-30 (1.1) (11.0) 8.6 Div. Yield (%) 1.4 1.4 1.4

Company data and valuation summary

877-616

BUY

MARCH 06, 2012

UPDATE

Coverage view: Cautious

Price (Rs): 681

Target price (Rs): 815

BSE-30: 17,173

Mahindra & Mahindra Automobiles


West and South India tractor demand has been impacted by decline in crop prices

Domestic tractor volume growth has started to moderate significantly since Nov 2011, especially in southern and western states. Major states where tractor demand has been impacted include Andhra Pradesh, Maharashtra, Karnataka, UP and West Bengal. UP and Maharashtra are the top-two tractor markets in India while AP is the sixth largest tractor market in India.

We highlight the key reasons for moderation in tractor demand in these states

Cotton, paddy and pulses prices have declined by 15-20% over the last one year while wheat prices have been relatively stable (refer to Exhibits 7, 8 and 9). Andhra Pradesh is the largest rice-producing state and third largest cotton-producing state in India. Decline in cotton and paddy prices has impacted tractor demand in AP, West Bengal and Maharashtra as farmers’ profitability has been impacted despite higher cotton and paddy production this year versus last year.

Agricultural credit has also moderated to low single digits in the past few months due to a sharp decline in credit from PSU banks (see Exhibit 1). Our channel checks suggest PSU and nationalized banks account for 50% of tractor lending while NBFCs and private banks comprise the rest 50%. NBFC and private banks have indicated that they have not seen their NPAs rise significantly because of tighter norms while PSU banks have indicated that their NPAs have risen sharply in the tractor portfolio.

We believe tractor volume growth will remain under pressure in the next few months but expect a slight improvement in demand once the rabi crop is sold in the markets and the Government steps up efforts to increase agricultural lending. We are forecasting a 7% yoy growth in tractor volumes in FY2013E as we believe labor shortage will drive mechanization of farms; we expect tractor lending to remain robust to support growth.

Exhibit 1: Agricultural credit growth has moderated to low single digits over the past few months Yoy growth in agricultural credit, Jan ’10-Jan ’12 (%)

5

10

15

20

25

30

Jan-

10

Mar

-10

May

-10

Jul-1

0

Sep-

10

Nov

-10

Jan-

11

Mar

-11

May

-11

Jul-1

1

Sep-

11

Nov

-11

Jan-

12

Source: RBI

Automobiles Mahindra & Mahindra

6 KOTAK INSTITUTIONAL EQUITIES RESEARCH

Exhibit 2: Tractor volume growth has been impacted due to decline in South and West markets since Nov ’11 Region-wise trends in domestic tractor volumes, Apr ’11-Jan ’12 (units)

Region Apr-11 May-11 Jun-11 Jul-11 Aug-11 Sep-11 Oct-11 Nov-11 Dec-11 Jan-12 Apr-Jan 12 Apr-Jan 11 % yoy chgNorth India (U.P, Punjab, Haryana, JK, HP, Uttarakhand, Rajasthan)

15,047 14,713 17,203 13,127 12,552 19,931 24,525 15,870 13,400 14,143 160,511 138,361 16.0

yoy chg (%) (5.4) (10.1) 17.3 20.2 21.1 33.4 29.7 22.3 22.3 14.6

M&M 34.8 34.2 35.9 32.2 34.6 34.4 38.3 34.1 34.7 33.1 34.4 33.1 TAFE 26.0 29.4 28.1 31.0 20.2 19.2 24.2 30.2 29.2 29.7 28.6 25.5 Escorts 17.6 15.4 17.2 17.7 17.4 17.2 16.9 17.6 16.7 17.0 16.9 19.3 John Deere 5.3 4.2 4.0 4.5 3.0 3.5 6.4 2.4 2.7 3.4 4.0 4.2 Sonalika 9.8 9.8 9.2 9.7 10.2 10.0 9.3 9.0 10.5 10.3 9.6 10.5 South India (A.P,Karnataka, Tamil Nadu and Kerala)

8,591 9,013 10,778 8,669 7,774 8,346 10,530 5,772 7,053 10,420 86,946 76,579 13.5

yoy chg (%) 45.5 28.4 42.0 25.1 21.8 16.4 17.5 (14.5) (10.4) (13.2)

M&M 48.2 51.1 53.6 46.2 50.6 43.9 47.8 50.1 53.3 54.3 50.0 50.9 TAFE 19.1 21.0 17.9 22.7 17.6 18.8 15.6 21.7 22.8 21.2 20.1 18.8 Escorts 3.9 4.0 3.6 4.3 5.9 5.5 4.1 5.6 4.7 5.5 4.6 4.9 John Deere 19.6 13.3 14.8 16.5 12.2 16.6 23.5 9.8 9.3 8.9 14.8 14.2 Sonalika 3.9 4.4 3.8 4.8 4.6 5.0 3.6 5.8 4.0 2.5 4.1 3.9 Central India (M.P, Chattisgarh) 5,236 5,002 6,354 3,653 3,653 8,265 10,447 4,185 3,718 4,086 54,599 51,125 6.8 yoy chg (%) (7.3) (18.3) 13.8 14.0 15.0 25.9 17.2 (1.4) 0.6 2.9

M&M 35.0 39.2 42.3 39.1 37.4 40.4 43.4 38.8 39.8 37.8 39.9 39.9 TAFE 19.7 23.6 19.0 18.9 13.9 10.5 19.0 22.4 27.9 27.9 21.8 20.4 Escorts 14.8 12.2 13.4 13.8 13.6 13.2 13.5 16.4 11.3 12.2 13.4 14.7 John Deere 10.2 8.1 7.4 10.4 6.1 7.6 10.9 5.8 5.6 6.3 8.2 8.3 Sonalika 11.2 9.6 11.0 12.0 7.7 10.2 7.7 9.0 11.5 10.1 9.8 9.8

West India (Maharashtra and Gujarat) 9,133 8,619 8,760 7,817 8,519 14,487 15,429 7,870 7,113 8,715 96,462 74,028 30.3

yoy chg (%) 44.9 42.5 61.0 53.5 58.8 89.9 18.5 1.7 (7.5) (10.2)

M&M 48.1 46.9 49.2 47.0 37.3 42.4 54.6 44.2 42.7 44.1 48.3 47.2TAFE 18.5 22.7 19.8 22.6 11.2 8.9 11.5 23.7 22.3 22.7 18.7 16.6 Escorts 5.3 5.3 6.6 5.6 11.4 13.3 5.9 7.0 5.7 6.9 5.9 8.5 John Deere 11.5 6.3 5.2 8.7 3.2 4.8 11.8 5.4 7.3 7.3 8.2 9.9 Sonalika 6.8 7.4 6.8 5.8 13.3 10.6 6.6 7.2 7.9 5.9 6.7 7.2 Eastern India (Bihar, Orrisa, WB, Assam, Manipur, Jharkhand)

4,643 4,705 5,795 5,375 4,016 6,019 7,221 6,201 5,730 5,012 54,717 52,475 4.3

yoy chg (%) (1.3) (7.9) 9.8 3.8 (8.7) 2.1 14.0 12.5 11.0 2.3

M&M 49.8 53.1 48.1 47.4 47.9 50.5 48.4 48.4 46.2 48.0 48.5 50.2 TAFE 13.3 15.5 13.6 16.5 13.5 8.4 16.6 18.6 19.8 20.4 17.4 16.8 Escorts 10.8 9.3 11.6 10.8 5.2 5.7 10.1 12.4 11.9 11.3 11.7 13.0 John Deere 7.8 5.4 4.1 7.6 8.6 7.6 9.1 3.1 4.5 5.0 5.8 5.4 Sonalika 11.3 10.6 14.4 11.2 5.9 7.0 10.7 12.3 14.4 8.9 12.2 10.9Total domestic vols 42,650 42,052 48,890 38,641 36,514 57,048 68,152 39,898 37,014 42,376 453,235 392,568 15.5 yoy chg (%) 10.9 3.4 26.8 23.4 23.0 35.2 21.4 7.2 4.6 (1.3)

North 35.3 35.0 35.2 34.0 34.4 35.1 36.0 39.8 36.2 33.4 35.4 35.2South 20.1 21.4 22.0 22.4 21.3 14.6 15.5 14.5 19.1 24.6 19.2 19.5Central 12.3 11.9 13.0 9.5 10.0 14.5 15.3 10.5 10.0 9.6 12.0 13.0Eastern 21.4 20.5 17.9 20.2 10.9 10.3 10.6 15.5 15.5 11.8 12.1 13.4West 10.9 11.2 11.9 13.9 23.4 25.5 22.6 19.7 19.2 20.6 21.3 18.9

Source: TMA data



Exhibit 3: AP, West Bengal, UP and Punjab are major rice-producing states State-wise distribution of rice production (%)

Maharashtra3%

Haryana4%

Karnataka5%

Tamil Nadu7%

Chattishgarh7%

Orissa7%

Punjab12%

UP13%

West Bengal13%

Others14%

Andhra Pradesh15%

Source: RBI

Exhibit 4: UP, Punjab and Haryana are major wheat-producing states State-wise distribution of wheat production (%)

UP36%

Punjab18%

Haryana13%

MP9%

Rajasthan8%

Others7%

Bihar5%

Gujarat4%

Source: RBI



Exhibit 5: Gujarat, Maharashtra and AP are major cotton-producing states State-wise distribution of cotton production (%)

Gujarat32%

Others26%

Maharashtra26%

Andhra Pradesh16%

Source: RBI

Exhibit 6: MP, Rajasthan and Maharashtra are the major pulses-producing states State-wise distribution of pulses production (%)

MP20%

Rajasthan18%

Maharashtra17%

UP11%

Karnataka8%

Others8%

AP8%

Gujarat4%

Bihar3%

Chattishgarh3%

Source: RBI



Exhibit 7: Cotton prices have declined by 15% since Jan ’11 impacting tractor demand in AP, Maharashtra and Gujarat Average cotton prices in mandis, Jan ’11-Feb ’12 (Rs/quintal)

3,000

3,500

4,000

4,500

5,000

5,500

Jan-

11

Mar

-11

May

-11

Jul-1

1

Sep-

11

Nov

-11

Jan-

12

Source: Agmarket.nic.in

Exhibit 8: Paddy prices have declined by 17% since Jan ’11 impacting tractor demand in AP and West Bengal Average paddy prices in mandis, Jan ’11-Feb ’12 (Rs/quintal)

1,000

1,300

1,600

1,900

Jan-

11

Mar

-11

May

-11

Jul-1

1

Sep-

11

Nov

-11

Jan-

12


Exhibit 9: Wheat prices have been relatively stable since Jan ’11 Average wheat prices in mandis, Jan ’11-Feb ’12 (Rs/quintal)

1,200

1,400

1,600

1,800

Jan-

11

Feb-

11

Mar

-11

Apr

-11

May

-11

Jun-

11

Jul-1

1

Aug

-11

Sep-

11

Oct

-11

Nov

-11

Dec

-11

Jan-

12

Feb-

12




We forecast a 7% yoy growth in tractor volumes in FY2013E M&M volume assumptions, March fiscal year-ends, 2009-14E (units)

2009 2010 2011 2012E 2013E 2014EUtility Vehicles - domestic 153,655 201,489 230,110 271,530 293,252 337,240 XUV500 15,000 42,000 46,200 Utility Vehicles - exports 8,500 10,567 19,042 28,563 32,847 37,775 Utility vehicles 162,155 212,056 249,152 315,093 368,100 421,215 Maxximo + Gio 12,639 44,683 67,025 77,078 88,640 3-wheelers 44,533 57,424 62,142 68,978 74,496 80,455 Auto division 206,688 282,119 355,977 451,095 519,674 590,310 Tractors 95,348 174,634 213,653 235,018 251,470 271,587 Total vehicles 302,036 456,753 569,630 686,113 771,143 861,897 Growth (yoy %)Utility Vehicles - domestic 3.3 31.1 14.2 18.0 8.0 15.0 XUV500 180.0 10.0 Utility Vehicles - exports (31.2) 24.3 80.2 50.0 15.0 15.0 Utility vehicles 0.6 30.8 17.5 26.5 16.8 14.4 Maxximo + Gio 253.5 50.0 15.0 15.0 3-wheelers 31.3 28.9 8.2 11.0 8.0 8.0 Auto division 6.0 36.5 26.2 26.7 15.2 13.6 Tractors (3.4) 83.2 22.3 10.0 7.0 8.0 Total vehicles 2.8 51.2 24.7 20.4 12.4 11.8

Source: Company, Kotak Institutional Equities estimates

Our SOTP-based target price of M&M is Rs815 M&M sum-of-the-parts valuation table

EPS MultipleValue per

share(Rs/share) (X) (Rs) Comment

M&M standalone + MVML 47.5 13.0 618 Based on 13X FY2013E EPS less dividend income from subsSubsidiaries 194 Tech Mahindra 47 Based on KIE target price price of Rs600/shareMahindra Holidays 27 Based on current price of Rs291/shareM&M Financial Services Ltd 63 Based on KIE target price price of Rs825/shareMahindra Lifespace Developers Ltd 11 Based on KIE target price price of Rs405/shareMahindra Forgings 4 Based on current price of Rs65/shareMahindra Navistar Automotive 5 Based on FY2011 book value at 51% stakeMahindra two wheelers 2 Based on FY2011 book valueSsangyong Motors 34 Based on investment made by M&M in the firm of 463 mn dollarsSOTP-based value 812 Target price 815




We forecast a 7% yoy growth in M&M standalone earnings in FY2013E M&M standalone profit and loss, balance sheet and cash flow statement, March fiscal year-ends, 2009-14E (Rs mn)

2009 2010 2011 2012E 2013E 2014EProfit model (Rs mn)Net sales 130,937 186,021 234,937 306,283 363,657 414,890 EBITDA 10,926 29,552 34,655 35,326 38,733 43,010 Other income 2,703 1,994 3,095 3,648 3,269 3,625 Interest (453) (278) 503 443 647 791 Depreciation (2,915) (3,708) (4,139) (5,341) (6,298) (7,430) Profit before tax 10,262 27,560 34,114 34,075 36,351 39,996 Current tax (585) (7,493) (7,617) (8,519) (9,088) (9,999) Deferred tax (1,412) (97) (958) — — —Net profit 8,368 20,878 26,714 25,955 27,263 29,997 Adjusted net profit 8,368 20,878 25,619 25,657 27,263 29,997 Adjusted earnings per share (Rs) 14.0 33.9 41.7 41.8 44.4 48.9 Adjusted earnings per share ex subs dividends (Rs) 11.8 32.5 39.7 39.2 41.6 45.8 Balance sheet (Rs mn)Equity 52,621 80,671 106,678 125,603 146,236 169,602 Total Borrowings 40,528 28,802 24,053 18,293 18,293 18,293 Current liabilities 47,978 52,000 67,676 86,081 99,840 111,436 Total liabilities 141,126 161,473 198,406 229,978 264,368 299,331 Net fixed assets 32,143 37,027 43,719 55,377 66,079 74,649 Investments 57,864 63,980 93,253 99,753 107,253 112,253 Cash 15,744 17,432 6,146 (136) 1,737 10,476 Other current assets 35,249 42,992 55,288 74,984 89,299 101,953 Miscellaneous expenditure 126 41 — — — —Total assets 141,126 161,473 198,406 229,978 264,368 299,331 Free cash flow (Rs mn)Operating cash flow excl. working capital 10,395 23,409 27,724 26,807 29,645 33,011 Working capital changes 5,918 (45) 2,074 106 (557) (1,057) Capital expenditure (9,152) (9,607) (12,070) (17,000) (17,000) (16,000) Free cash flow 7,161 13,758 17,728 9,913 12,088 15,954 RatiosEBITDA margin (%) 8.3 15.9 14.8 11.5 10.7 10.4 PAT margin (%) 6.4 11.2 11.4 8.5 7.5 7.2 Debt/equity (X) 0.8 0.4 0.2 0.1 0.1 0.1 Net debt/equity (X) 0.5 0.1 0.2 0.1 0.1 0.0 Book Value (Rs/share) 89.1 135.4 173.7 204.6 238.2 276.2 RoAE (%) 17.1 30.0 27.3 22.0 20.1 19.0 RoACE (%) 10.6 19.9 21.0 18.4 17.4 16.7



Crude oil prices: Increase sharply in February

Crude oil (Dated Brent) prices surged in February 2012 led by (1) rising concerns on potential supply disruptions from ongoing geopolitical tensions in Iran, Sudan and Syria and (2) sharp increase in speculative activities due to enhanced liquidity in global markets. Average crude oil prices (Dated Brent) increased 8% mom to US$120/bbl in February 2012 versus US$111/bbl in January 2012. Light-heavy differential (Arab Light versus Arab Heavy) declined to US$2.5/bbl in February 2012 versus US$2.8/bbl in January 2012. Spot natural gas price (Henry Hub) declined to US$2.5/mn BTU in February 2012 versus US$2.7/mn BTU in January 2012.

Global refining margins: Decline sharply in the recent weeks

Singapore complex gross refining margins declined to US$1.2/bbl in February 2012 versus US$2.2/bbl in January 2012 led by contraction of cracks for diesel, fuel oil and kerosene. Key product cracks moved as follows—(1) gasoline cracks were at US$15/bbl (+US$1/bbl mom), (2) diesel cracks were at US$17.5/bbl (-US$1.3/bbl wow), (3) naphtha cracks were at -US$3.1/bbl (+US$2.2/bbl wow), (4) kerosene cracks were at US$16.5/bbl (-US$0.9/bbl wow) and (5) fuel oil cracks were at -US$0.6/bbl (-US$3.9/bbl wow). We note that the complex refining margins have declined to -US$1.5/bbl in the recent week led by inability of downstream players to pass through increase in crude prices given weak global demand. We estimate India refining margins to decline sharply to US$7.1/bbl in March 2012 versus US$9.3/bbl in February 2012.

India marketing margins: Losses increase led by increase in global product prices

We compute higher subsidy losses assuming unchanged domestic prices for diesel at –Rs9.6/liter (versus –Rs8.2/liter in February 2012 and –Rs2.6/liter in FY2011) led by a steep increase in global diesel prices. We compute higher marketing losses for gasoline at –Rs5.1/liter (versus –Rs2.5/liter in February 2012 and –Rs2.2/liter in FY2011) led by a sharp increase in global gasoline prices. We compute higher subsidy losses on LPG and kerosene at Rs492/cylinder and Rs30/liter for March 2012 versus Rs424/cylinder and Rs29/liter in February 2012.

We have included some key exhibits here. For more details, please refer our India Energy Monthly, March 2012.

Energy India

India Energy Monthly, March 2012 Crude oil prices: Increase sharply in February Global refining margins: Decline sharply in the recent weeks India marketing margins: Losses increase led by increase in global product prices

ATTRACTIVE

MARCH 07, 2012

UPDATE

BSE-30: 17,173

Energy India


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India Energy


Refining margins have declined in the recent month Singapore refining margins (US$/bbl)

Simple refining margins, March fiscal year-ends (US$/bbl) Complex refining margins, March fiscal year-ends (US$/bbl)2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012YTD 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012YTD

1Q 0.5 0.3 1.0 1.7 3.0 2.5 2.3 2.4 (1.5) (0.9) 0.8 1Q 1.3 0.8 1.2 4.6 4.9 6.2 6.6 4.3 (0.1) (0.1) 1.82Q 0.4 0.1 1.2 3.1 2.8 (0.7) 1.0 1.7 (1.3) 0.2 1.3 2Q 0.6 0.1 2.3 5.8 6.1 2.5 2.9 0.7 (0.7) 0.4 2.53Q 1.1 1.4 1.6 6.5 2.2 (1.2) 2.3 1.3 (2.5) (0.7) 1.5 3Q 1.2 1.6 3.2 9.0 3.9 1.0 3.9 1.0 (2.7) 0.5 0.34Q (0.0) 3.0 2.9 2.1 1.1 1.2 0.2 0.7 (0.3) 0.7 1.9 4Q 0.6 3.7 5.4 5.0 2.8 4.1 2.8 2.4 0.8 1.6 1.3Average 0.5 1.2 1.7 3.3 2.3 0.5 1.5 1.5 (1.4) (0.2) 1.4 Average 0.9 1.5 3.1 6.1 4.4 3.4 4.0 2.1 (0.7) 0.6 1.5

Weekly margins Weekly marginsCurrent -1 Wk -2 Wk -3 Wk -4 Wk Current -1 Wk -2 Wk -3 Wk -4 Wk

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1.41.2

(US$/bbl)

Source: Bloomberg, Kotak Institutional Equities

Refining margins for domestic refiners have declined in the recent month Gross refining margins for a typical Indian refinery based on Arab Gulf fob prices (US$/bbl), Prices (US$/ton)

Quarterly averages, fiscal year-endMar-11 Apr-11 May-11 Jun-11 Jul-11 Aug-11 Sep-11 Oct-11 Nov-11 Dec-11 Jan-12 Feb-12 Mar-12 1QFY12 2QFY12 3QFY12 4QFY12

Product pricesLPG 879 929 889 846 832 809 782 745 782 822 947 1,043 899 829 770 938 Naphtha 948 1,010 948 902 936 901 911 847 841 860 926 1,006 968 913 866 931 Gasoline 1,013 1,093 1,043 1,005 1,054 1,019 1,042 1,027 947 952 1,028 1,097 1,050 1,026 1,005 1,026 Jet fuel 1,021 1,064 979 978 997 956 955 949 990 943 993 1,033 1,021 977 965 989 Kerosene 1,021 1,064 979 978 997 956 955 949 990 943 993 1,033 1,021 977 965 989 Diesel 961 1,016 930 926 944 903 900 893 946 910 947 981 969 924 913 946 Fuel oil 626 661 628 639 652 635 640 641 673 646 702 712 638 642 651 687 Bitumen 636 671 638 649 662 645 650 651 683 656 712 722 648 652 661 697 Crude oil pricesCrude oil-Brent 835 898 836 830 850 804 809 799 807 788 811 874 856 828 805 824 Crude oil-Dubai 793 845 792 785 803 767 774 757 793 775 801 848 810 785 774 808 Refining margins on fob basisWeighted average product price 897 949 882 873 894 859 861 848 877 853 905 945 910 875 862 901 Crude oil--Brent & Dubai 33:67 mix 807 862 806 800 818 779 786 771 797 779 805 856 825 799 785 814 Gross refining margin (US$/ton) 91 87 76 73 75 80 76 77 80 73 100 88 84 76 77 87 Gross refining margin (US$/bbl) 12.4 11.9 10.4 10.0 10.3 11.0 10.4 10.6 10.9 10.0 13.8 12.1 11.6 10.4 10.6 12.0 Net refining margin 4.7 3.6 2.6 2.3 2.5 3.5 2.8 3.2 3.2 2.6 6.0 3.9 3.7 2.8 3.1 4.2 Tariff protected refining margins in India plus freightWeighted average product price 880 963 1,018 947 906 928 893 894 881 911 886 940 980 976 909 895 935 Crude oil--Brent & Dubai 50:50 Mix 790 859 918 859 810 829 789 796 781 808 790 815 867 878 809 795 824 Gross refining margin (US$/ton) 90 104 100 88 96 99 103 99 100 103 96 125 113 97 99 101 111 Gross refining margin (US$/bbl) 12.3 14.2 13.7 12.1 13.2 13.5 14.2 13.5 13.7 14.1 13.2 17.1 15.4 13.3 13.6 13.8 15.2 Net refining margin (7% internal consumption)

4.7 6.0 4.9 3.8 5.4 5.6 6.6 5.9 6.3 6.4 5.6 9.3 7.1 4.9 5.9 6.2 7.3

Source: Kotak Institutional Equities estimates

Energy India


Marketing margins for key petroleum products have declined in the recent month Calculation of marketing margins/subsidy of key products

Average (Fiscal years)Mar-11 Apr-11 May-11 Jun-11 Jul-11 Aug-11 Sep-11 Oct-11 Nov-11 Dec-11 Jan-12 Feb-12 Mar-12 2009 2010 2011 2012

International price (US$/ton)LPG 802 879 929 889 846 832 809 782 745 782 822 947 1,043 666 551 721 859 Gasoline 935 1,013 1,093 1,043 1,005 1,054 1,019 1,042 1,027 947 952 1,028 1,097 795 625 767 1,027 Kerosene 931 1,021 1,064 979 978 997 956 955 949 990 943 993 1,033 858 573 734 988 Diesel 864 961 1,016 930 926 944 903 900 893 946 910 947 981 801 538 692 938

India IPP price (incl. transport) (a)LPG (Rs/cylinder) 614 655 694 668 634 637 651 651 643 688 703 765 832 529 472 568 685 Gasoline (Rs/liter) 34.9 37.2 40.4 38.3 35.5 37.9 38.6 40.6 41.4 39.5 38.7 40.0 42.6 28.9 24.1 29.3 39.2 Kerosene (Rs/liter) 35.8 38.5 40.6 37.4 37.0 38.4 38.8 40.0 41.0 44.0 41.0 41.4 43.0 33.1 23.8 28.9 40.1 Diesel (Rs/liter) 36.0 39.3 42.0 38.2 36.6 38.0 38.2 39.3 40.3 43.9 41.3 41.2 42.6 32.2 23.1 29.5 40.1

India retail price without taxesLPG (Rs/cylinder) 291 291 291 301 341 341 341 341 341 341 341 341 341 267 256 282 329 Gasoline (Rs/liter) 31.7 31.7 33.9 35.9 35.9 35.9 37.2 38.5 38.9 37.5 37.5 37.5 37.5 23.9 21.2 27.0 36.5 Kerosene (Rs/liter) 10.8 10.8 10.8 11.2 12.8 12.8 12.8 12.8 12.8 12.8 12.8 12.8 12.8 8.0 8.0 10.1 12.4 Diesel (Rs/liter) 27.3 27.3 27.3 28.4 33.0 33.0 33.0 33.0 33.0 33.0 33.0 33.0 33.0 24.6 24.0 26.9 31.6

Marketing margin or (subsidy) (b)LPG (Rs/cylinder) (323) (365) (404) (367) (294) (296) (310) (310) (303) (348) (362) (424) (492) (262) (216) (285) (356) Gasoline (Rs/liter) (3.2) (5.4) (6.6) (2.4) 0.3 (2.0) (1.4) (2.1) (2.4) (1.9) (1.2) (2.5) (5.1) (5.0) (2.9) (2.2) (2.7) Kerosene (Rs/liter) (24.9) (27.7) (29.8) (26.2) (24.2) (25.6) (26.0) (27.1) (28.2) (31.2) (28.2) (28.6) (30.2) (25.1) (15.9) (18.8) (27.7) Diesel (Rs/liter) (8.7) (12.0) (14.7) (9.8) (3.6) (5.0) (5.2) (6.3) (7.3) (10.9) (8.3) (8.2) (9.6) (7.6) 0.9 (2.6) (8.4)

Notes: (a) Selling prices include transport costs estimated at Rs1.2/l for diesel and Rs1.3/l for gasoline.(b) Portion of subsidy on kerosene and LPG reimbursed by the government.

Source: Kotak Institutional Equities estimates


Economic reforms or more populism?

In light of its weak performance in the recent state elections (see Exhibits 1-2), the INC party may have to grapple with the best course of action over the next two years as it prepares for the national elections, due in the middle of CY2014. The FY2013 Union Budget may provide more clarity about the Government’s thinking on its future course of action. A budget that spells out (1) fiscal consolidation through reforms and (2) medium-term vision for economic development will be welcomed by the market. We would refer readers to our February 27, 2012 report titled Now for the hard work for our budget expectations with particular focus on India’s fiscal position (see Exhibit 3 for our fiscal projections).

Political stability or policy paralysis?

The INC may have to deal with the unwelcome prospect of some of its allies (both inside and outside the Government) pushing for mid-term national elections so as to benefit from their strong showing in recent state elections. This is a remote possibility, in our view. On the other hand, the Samajwadi Party (SP), the majority winner in India’s biggest State (Uttar Pradesh), may decide to join the ruling coalition at the Center instead of merely providing it with outside support as it now does. Exhibit 4 gives the break-down of seats in the Lok Sabha, by political parties.

Reforms or status quo?

We suspect the market will be less hopeful about reforms after the outcome of the recent state elections. The market was perhaps hoping for (1) a coalition government of SP and INC in UP and (2) SP joining the ruling coalition alliance at the Center, which would have provided more stability to the ruling coalition and the ability to implement reforms.

Defensive strategy or aggressive strategy for the portfolio? A rhetorical question

We believe it would be best to follow a defensive strategy (as we have recommended since early February 2012; see Exhibits 5-7 for our Model Portfolio, Top-5 Buy ideas and Top-5 Sell ideas) until there is concrete evidence of improved governance in India. Also, the market’s expectations of a significant improvement in macro-economic factors (fiscal consolidation and lower interest rates) may be misplaced in light of high crude oil prices and structural issues in the economy, which can only be addressed through tough reforms.

Strategy.dot

Strategy

Everybody’s job just got a bit harder. The weak performance of the Indian National Congress (INC) party in the recent state elections may raise fresh challenges for (1) the Government (future approach to economy and politics), (2) other political parties (future electoral and political strategy), (3) the market (further uncertainty) and (4) investors (bewildering number of factors to track). We stick with our defensive stance. The FY2013 Union Budget due on March 16, 2012 will provide more clarity.

INDIA

MARCH 07, 2012

UPDATE

BSE-30: 17,173

QUICK NUMBERS

• Congress (I) won 28 seats in the UP Assembly elections versus 22 in 2007

• FY2013E GFD/GDP at 5.4% under a benign set of assumptions

• Ruling coalition + SP has 287 seats in the Lok Sabha out of 545 seats

Strategy India


INC loses momentum from 2009 national elections in 2012 assembly elections Seats and voting shares across key parties in UP elections, 2007-09-12

2007 2009 2012Seat (#) Vote (%) Seat (#) Vote (%) Seat (#) Vote (%)

Samajwadi Party (SP) 97 25 23 23 224 Bahujan Samaj Party (BSP) 206 30 20 27 80 Bharatiya Janata Party (BJP) 51 17 10 18 47 Indian National Congress (INC) 22 9 21 18 28 Rashtriya Lok Dal (RLD) 10 4 5 3 9 INC+RLD 32 12 26 21 37 - Others/Independents 17 1 15 Total 403 80 403

Notes:(a) 2007 and 2012 data is for Assembly elections and 2009 is for National elections.

Source: Election Commission of India, Kotak Institutional Equities

INC gained in Uttarakhand but not in Punjab Seat share across key parties in Punjab and Uttarakhand elections, 2007-12

Seat (#) Seat (#)Punjab 2007 2012 Uttarakhand # 2007 2012Shiromani Akali Dal (SAD) 49 56 Bharatiya Janata Party (BJP) # 35 31 Indian National Congress (INC) 44 46 Indian National Congress (INC) # 21 32 Bharatiya Janata Party (BJP) 19 12 Bahujan Samaj Party (BSP) # 8 3 SAD+BJP 68 68 Uttarakhand Kranti Dal (UKD) 3 3 1 Others/Independents 5 3 Others/Independents 3 3 Total 117 117 Total 70 70

Source: Election Commission of India, Kotak Institutional Equities

The UPA alliance has 265 seats and is dependent on outside support for a stable government Seat share across key parties in the Lok Sabha

Seat (#) CommentUnited Progressive Alliance (UPA) 265 --Indian National Congress (INC) 206 --All-India Trinamool Congress (AITC) 19 --Dravida Munnetra Kazhagam (DMK) 18 --Nationalist Congress Party (NCP) 9 --Rashtriya Lok Dal (RLD) 5 --Others/Independents 8 National Democratic Alliance (NDA) 153 --Bharatiya Janata Party (BJP) 114 --Janata Dal United (JDU) 20 --Shiv Sena 11 --Shiromani Akali Dal (SAD) 4 --Others/Independents 4 Samajwadi Party (SP) 22 Outside support to UPABahujan Samaj Party (BSP) 21 Outside support to UPACommunist Party of India-M (CPI-M) 16 Biju Janata Dal (BJD) 14 All India Anna DMK (AIADMK) 9 Telugu Desam Party (TDP) 6 Communist Party of India (CPI) 4 Rashtriya Janata Dal (RJD) 4 Outside support to UPAJanata Dal Secular (JDS) 3 Others/Independents 23 Current strength 540 Maximum strength 542

Source: Lok Sabha website, Kotak Institutional Equities estimates

India Strategy


The FY2013E budget needs to give a clear and credible signal of consolidation Major Central Government budgetary items, March fiscal year-ends, 2010-13E, (Rs bn)

2012RBE/ 2012E/ 2013BE/ 2013E/2010 2011RE 2011P 2012RBE 2012E 2013BE 2013E 2011P 2011P 2012E 2012E

Receipts1. Revenue receipts (2d + 3) 5,728 7,838 7,943 7,899 7,499 8,666 8,596 (1) (6) 16 15 2. Gross tax revenue (a + b ) 6,245 7,869 7,951 9,324 8,954 10,466 10,368 17 13 17 16 2.a. Direct taxes 3,792 4,479 4,493 5,346 5,018 5,770 5,671 19 12 15 13 2.a.1. Corporation tax 2,447 2,964 2,994 3,600 3,294 3,788 3,689 20 10 15 12 2.a.2. Income tax 1,344 1,515 1,499 1,746 1,724 1,982 1,982 16 15 15 15 2.b. Indirect taxes 2,454 3,390 3,457 3,978 3,937 4,696 4,696 15 14 19 19 2.b.1. Customs duty 833 1,318 1,361 1,517 1,493 1,425 1,425 11 10 (5) (5) 2.b.2. Excise duty 1,036 1,378 1,384 1,641 1,488 1,863 1,863 19 8 25 25 2.b.3. Service tax 584 694 713 820 956 1,408 1,408 15 34 47 47 2.c Transfers to States and UTs 1,680 2,232 2,223 2,680 2,570 3,004 2,976 21 16 17 16 2.d Net tax revenue 4,565 5,637 5,728 6,645 6,384 7,463 7,392 16 11 17 16 3. Non-tax revenue 1,163 2,201 2,215 1,254 1,114 1,203 1,203 (43) (50) 8 84. Non-debt capital receipts (a + b) 332 317 356 550 550 575 575 55 54 5 5 4.a Recovery of loans 86 90 128 150 150 175 175 18 18 17 17 4.b Other receipts (Disinvestments) 246 227 228 400 400 400 400 75 75 0 05. Total receipts (1 + 4) 6,060 8,156 8,299 8,449 8,049 9,241 9,171 2 (3) 15 14

6. Non-plan expenditure 7,211 8,216 8,216 8,162 9,119 9,440 9,995 (1) 11 4 10 6.a. Interest payments 2,131 2,408 2,347 2,680 2,800 3,150 3,250 14 19 13 16 6.b. Subsidies 1,414 1,642 — 1,436 2,273 1,880 2,335 — — (17) 3 6.b.1. Food 584 606 — 606 650 850 850 — — 31 31 6.b.2. Fertilizer 613 550 — 500 800 650 800 — — (19) 0 6.b.3. Oil 150 384 — 236 729 285 590 — — (61) (19) 6.b.3. Other subsidies 67 102 — 94 94 95 95 — — 1 1 6.c. Others 3,667 4,166 — 4,046 4,046 4,410 4,410 — — 9 97. Plan expenditure 3,034 3,950 3,774 4,415 4,140 4,554 4,554 17 10 10 108. Total expenditure (6 + 7) 10,245 12,166 11,989 12,577 13,259 13,994 14,549 5 11 6 10DeficitPrimary deficit (PD) 2,054 1,602 1,343 1,448 2,410 1,603 2,129 8 79 (33) (12)Gross fiscal deficit (GFD) 4,185 4,010 3,690 4,128 5,210 4,753 5,379 12 41 (9) 3Gross borrowings 4,510 4,475 4,370 5,100 5,100 4,494 5,119

Net market borrowing (dated securities) 3,984 3,354 3,254 4,359 4,359 3,593 4,219Short-term borrowing (T-Bills) (91) 100 100 575 575 150 150Cash carried forward 87 150 182 160 160 590 590All other sources of financing deficit 205 406 155 (141) 116 420 420Nominal GDP at market prices 64,574 76,741 76,741 89,809 88,713 100,246 99,891 17 16 13 13PD/GDP (%) 3.2 2.1 1.8 1.6 2.7 1.6 2.1GFD/GDP (%) 6.5 5.2 4.8 4.6 5.9 4.7 5.4

Notes:(a) 2010 represents actual government financials for FY2010.(b) 2011RE are FY2011 revised estimates; 2011P represents provisional estimates for FY2011 as available from CGA.(c) 2012E and 2013E represents KIE estimates; we assume crude oil price at US$110/bbl for FY2013E.(d) 2012RBE represent FY2012 budget estimates with the 2HFY12 borrowing calendar; FY2013BE represent our expectation of the budget.

Source: Ministry of Finance, Kotak Institutional Equities estimates

Strategy India


Moved to defensives Kotak Institutional Equities Model Portfolio

6-Mar Weightage (%) Diff. 6-Mar Weightage (%) Diff.Company Price (Rs) Rating BSE-30 KS reco. (bps) Company Price (Rs) Rating BSE-30 KS reco. (bps)Bajaj Auto 1,704 SELL 1.7 1.7 — Coal India 330 ADD 1.4 2.9 150 Hero Motocorp 1,872 SELL 1.3 — (133) Hindalco Industries 132 REDUCE 1.3 — (130) Mahindra & Mahindra 681 BUY 2.2 2.2 — Jindal Steel and Power 547 REDUCE 1.7 1.2 (50) Maruti Suzuki 1,332 SELL 1.3 1.3 — Sterlite Industries 114 ADD 1.2 1.2 —Tata Motors 267 REDUCE 3.9 3.9 — Tata Steel 425 ADD 2.1 2.6 50 Automobiles 10.4 9.1 (133) Metals & Mining 7.7 7.9 20

State Bank of India 2,148 BUY 4.4 4.4 — Cipla 306 SELL 1.1 — (113) PSU Banking 4.4 4.4 — Dr Reddy's Laboratories 1,689 REDUCE — 0.8 75

Lupin 498 ADD — 1.0 100 HDFC 651 REDUCE 6.4 5.4 (100) Sun Pharmaceuticals 559 ADD 1.6 2.6 100 HDFC Bank 507 ADD 6.6 8.1 150 Pharmaceuticals 2.7 4.3 162 ICICI Bank 853 BUY 7.1 6.6 (50) Mahindra & Mahindra Financial 686 BUY — 0.5 50 DLF 198 ADD 0.6 — (64) Pvt. Banking/Financing 20.1 20.6 50 Real estate 0.6 — (64)

Hindustan Unilever 380 REDUCE 2.8 2.8 — Infosys 2,852 ADD 9.7 11.2 150 ITC 210 ADD 7.9 9.4 150 TCS 1,202 REDUCE 5.1 5.1 —Consumers 10.7 12.2 150 Wipro 432 ADD 1.8 2.3 50

Technology 16.6 18.6 200 GAIL (India) 352 ADD 1.3 1.3 —Oil & Natural Gas Corporation 283 BUY 3.3 4.8 150 Bharti Airtel 336 ADD 3.1 3.1 —Reliance Industries 777 REDUCE 8.9 7.7 (113) Telecom 3.1 3.1 —Energy 13.5 13.9 37

NTPC 175 REDUCE 2.1 1.1 (100) Bharat Heavy Electricals 276 REDUCE 1.7 — (172) Tata Power 108 BUY 1.3 1.3 —Larsen & Toubro 1,235 REDUCE 4.9 2.4 (250) Utilities 3.4 2.4 (100) Industrials/Construction 6.6 2.4 (422)

BSE-30 17,173 100.0 100.0 —Zee Entertainment Enterprises 139 BUY — 1.0 100 Media — 1.0 100

Notes:(a) Weights are with respect to February 27, 2012 prices.


Solid companies dominate the Top-5 list Kotak Institutional Equities Top-5 list, March fiscal year-ends, 2011-13E

Mkt cap. CMP TargetCompanies Sector Rating (US$ mn) (Rs) (Rs) 2011 2012E 2013E 2011 2012E 2013E 2011 2012E 2013EHDFC Bank Banking ADD 23,466 507 560 16.9 22.1 28.1 30.1 23.0 18.0 — — —

Infosys Technology ADD 32,552 2,852 3,100 119.7 146.1 173.7 23.8 19.5 16.4 16.4 13.1 10.5

ITC Consumer Products ADD 32,129 210 230 6.4 7.9 9.0 32.8 26.8 23.5 21.8 18.3 15.8

Oil & Natural Gas Corporation Energy BUY 48,070 283 330 24.7 28.7 35.2 11.5 9.9 8.0 4.3 4.0 3.1

Sun Pharmaceuticals Pharmaceuticals ADD 11,512 559 625 17.5 23.4 28.1 31.9 23.9 19.9 27.4 17.3 14.3

BSE-30 17,173

EPS (Rs) P/E (X) EV/EBDITA (X)


Introducing Top-5 Sell ideas Kotak Institutional Equities Top sell ideas, March fiscal year-ends, 2011-13E

Mkt cap. CMP TargetCompanies Sector Rating (US$ mn) (Rs) (Rs) 2011 2012E 2013E 2011 2012E 2013E 2011 2012E 2013EACC Cement SELL 4,829 1,293 1,030 53.0 57.1 69.9 24.4 22.6 18.5 14.5 13.6 9.9

Bharat Heavy Electricals Industrials REDUCE 13,411 276 260 24.6 28.5 25.9 11.2 9.7 10.6 7.3 6.9 7.0

HDFC Banking REDUCE 18,989 651 725 24.1 27.7 31.8 27.0 23.5 20.5 — — —

Hero Motocorp Automobiles SELL 7,431 1,872 1,850 99.3 118.0 131.8 18.8 15.9 14.2 12.3 11.3 9.9

Larsen & Toubro Industrials REDUCE 14,950 1,235 1,325 67.7 80.7 87.0 18.2 15.3 14.2 13.6 10.6 9.7

BSE-30 17,173

EPS (Rs) P/E (X) EV/EBDITA (X)



Country flows: Total Indian inflows amount to US$929 mn in February 2012

India, along with other EM regions, has witnessed strong inflows in the past couple of months on the back of ECB’s attempt to infuse liquidity into their banking system. On an mom basis, net Indian inflows amounted to US$929 mn, out of which US$583 mn was attributed to ETFs. China (US$2.08 bn), Brazil (US$1.26 bn) and South Korea (US$1.15 bn) saw strong inflows as well. On a proportional basis, India net inflows have been ~1.6% of total estimated allocations.

Country allocations: India allocations for Asia ex-Japan funds bounce back to 9.8%

Allocations to India by Asia ex-Japan funds bounced back from lows last witnessed in April 2009. CY2011 was marred with down-trending allocations, falling from a peak of 11.4% in March 2011 to 9.2% in December 2011. In January 2012, allocations to India by Asia ex-Japan funds moved up to 9.8% while a similar trend emerged in GEM and BRIC funds as well. Having said that, allocations to India for most of these foreign funds remain negative on a 3-month basis.

Fund flows: Strong inflows for iShares MSCI EM ETF worth US$3.8 bn in past three months

On the India-dedicated front, HSBC GIF India Equity Fund has witnessed the highest inflows followed by ETFs like Lyxor MSCI India ETF, WisdomTree India Earnings Fund and iShares S&P India Nifty 50 Index Fund. While non-ETF activity seemed to dominate the flows in funds dedicated to the Asia ex-Japan region, EM inflows were dominated by the two usual suspects (MSCI EM ETFs of Vanguard and iShares). On a cumulative basis, these two ETFs have witnessed inflows worth US$3.9 bn in the last month and US$7.6 bn in the past three months. Even on a proportional basis, inflows into Vanguard MSCI EM ETF are significant, amounting to ~10% of the total fund size (US$55 bn).

Strategy.dot

Strategy Foreign fund-flow tracker

India witnesses inflows worth US$929 mn as LTRO 2 meets expectations. KIE’s foreign fund-flow tracker gives us a comprehensive view of market flow activity in India and among its emerging market peers. Using a top-down approach, we analyze country flows and the underlying factors which affect them, such as fund flows and country allocations for different fund types.

INDIA

MARCH 06, 2012

UPDATE

BSE-30: 17,173

QUICK NUMBERS

• India inflows at US$929 mn in February 2012

• Allocations to India bounce back to 9.8%

• EM ETFs of Vanguard and iShares continue to see huge inflows

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Kotak Institutional Equities: Valuation summary of KIE Universe stocks

6-Mar-12 Mkt cap.O/S

shares EPS (Rs) EPS growth (%) PER (X) EV/EBITDA (X) RoE (%)Target price Upside ADVT-3mo

Company Price (Rs) Rating (Rs mn) (US$ mn) (mn) 2011 2012E 2013E 2011 2012E 2013E 2011 2012E 2013E 2011 2012E 2013E 2011 2012E 2013E 2011 2012E 2013E 2011 2012E 2013E (Rs) (%) (US$ mn)

Automobiles

Apollo Tyres 77 BUY 38,638 767 504 8.7 7.4 10.0 (26.1) (15.4) 34.6 8.8 10.4 7.7 6.3 5.6 4.4 1.4 1.3 1.1 0.7 0.6 0.7 20.1 14.4 16.8 90 17.4 3.8

Ashok Leyland 28 ADD 74,100 1,471 2,661 2.4 1.7 2.8 68.1 (26.8) 58.6 11.7 16.0 10.1 8.0 9.2 6.9 1.6 1.6 1.5 3.6 3.6 3.6 21.8 14.6 21.5 33 18.5 3.6

Bajaj Auto 1,704 SELL 493,123 9,791 289 90.4 106.6 122.3 43.9 18.0 14.7 18.9 16.0 13.9 14.4 12.0 10.7 10.0 7.2 5.5 2.3 2.3 2.3 84.9 52.5 44.7 1,715 0.6 20.3

Bharat Forge 307 REDUCE 72,780 1,445 237 12.5 17.5 20.0 1,402.1 39.2 14.6 24.5 17.6 15.3 11.3 8.9 7.9 3.3 2.8 2.4 1.1 — — 8.2 14.6 15.6 315 2.7 2.5

Exide Industries 135 SELL 114,410 2,272 850 7.5 5.1 6.5 18.0 (32.1) 28.4 18.1 26.6 20.7 13.0 17.2 13.8 4.2 3.8 3.3 1.1 0.9 0.9 25.5 14.9 17.0 105 (22.0) 3.7

Hero Motocorp 1,872 SELL 373,778 7,421 200 99.3 118.0 131.8 (11.1) 18.8 11.7 18.8 15.9 14.2 12.3 11.3 9.9 8.0 6.9 5.9 5.6 3.7 3.7 56.5 66.1 59.5 1,850 (1.2) 22.1

Mahindra & Mahindra 681 BUY 418,226 8,304 614 41.7 41.6 44.4 22.7 (0.2) 6.7 16.3 16.4 15.3 12.6 12.4 11.2 3.9 3.3 2.9 1.7 1.4 1.4 27.3 22.0 20.1 815 19.7 37.1

Maruti Suzuki 1,332 SELL 384,699 7,638 289 79.2 52.3 89.9 (8.4) (33.9) 71.7 16.8 25.4 14.8 10.8 17.5 9.2 2.7 2.5 2.2 0.6 0.6 0.6 17.6 10.3 15.8 1,250 (6.1) 19.0

Tata Motors 267 REDUCE 887,775 17,627 3,325 27.2 34.3 38.7 737.9 26.2 12.8 9.8 7.8 6.9 6.6 5.2 4.3 4.6 3.0 2.2 1.4 1.1 1.1 66.1 46.8 37.0 285 6.7 76.7

Automobiles Cautious 2,857,530 56,736 82.8 10.4 17.7 13.9 12.6 10.7 9.2 8.1 6.7 4.3 3.5 2.8 2.1 1.7 1.7 31.1 27.4 25.7

Banks/Financial Institutions

Andhra Bank 125 BUY 69,976 1,389 560 22.6 23.6 23.0 5.0 4.4 (2.8) 5.5 5.3 5.4 — — — 1.1 0.9 0.8 4.4 4.6 4.5 23.2 19.0 16.3 150 20.0 1.6

Axis Bank 1,148 BUY 486,917 9,668 424 82.5 95.5 102.8 33.0 15.7 7.6 13.9 12.0 11.2 — — — 2.6 2.2 1.9 1.2 1.4 1.5 19.3 19.6 18.2 1,350 17.6 58.7

Bajaj Finserv 609 ADD 88,168 1,751 145 78.2 63.2 62.9 102.3 (19.2) (0.4) 7.8 9.6 9.7 — — — 2.5 1.8 1.5 2.1 2.1 2.1 37.2 21.9 16.8 650 6.7 1.8

Bank of Baroda 805 BUY 316,112 6,276 393 108.0 115.6 121.2 29.1 7.1 4.9 7.5 7.0 6.6 — — — 1.6 1.4 1.2 2.4 2.6 2.7 25.9 21.5 19.2 1,050 30.5 9.8

Bank of India 352 BUY 192,758 3,827 547 45.5 46.7 62.0 37.4 2.7 32.8 7.7 7.5 5.7 — — — 1.2 1.1 0.9 2.3 2.4 3.1 17.3 15.1 17.6 450 27.8 5.9

Canara Bank 477 BUY 211,510 4,200 443 90.9 74.8 93.2 23.3 (17.7) 24.6 5.3 6.4 5.1 — — — 1.2 1.0 0.9 2.3 2.5 2.5 23.2 15.5 16.9 550 15.2 7.9

Corporation Bank 457 BUY 67,703 1,344 148 95.4 107.5 107.5 16.3 12.7 (0.0) 4.8 4.3 4.3 — — — 0.9 0.8 0.7 4.4 4.9 4.9 21.9 20.6 17.8 600 31.3 0.8

Federal Bank 404 BUY 69,069 1,371 171 34.3 42.4 49.7 26.3 23.5 17.3 11.8 9.5 8.1 — — — 1.4 1.3 1.1 2.1 2.6 3.1 12.0 13.5 14.3 500 23.8 4.1

HDFC 651 REDUCE 955,099 18,964 1,467 24.1 27.7 31.8 22.4 14.9 14.7 27.0 23.5 20.5 — — — 5.5 4.9 3.7 1.4 1.6 1.9 21.7 22.0 21.4 725 11.4 70.5

HDFC Bank 507 ADD 1,180,278 23,434 2,326 16.9 22.1 28.1 31.0 30.9 27.2 30.1 23.0 18.0 — — — 4.7 4.0 3.4 0.7 0.9 1.1 16.7 18.8 20.5 560 10.4 32.4

ICICI Bank 853 BUY 982,790 19,513 1,152 44.7 53.2 56.7 23.9 19.0 6.5 19.1 16.0 15.1 — — — 1.8 1.7 1.6 1.6 1.9 2.0 9.7 10.7 10.7 1,100 28.9 100.2

IDFC 140 ADD 211,516 4,200 1,509 8.8 10.6 12.8 4.6 20.6 20.8 16.0 13.3 11.0 — — — 2.0 1.7 1.5 1.5 1.5 1.8 14.7 13.9 14.6 155 10.6 25.2

India Infoline 66 SELL 19,003 377 286 7.4 4.0 4.3 (9.3) (45.5) 5.7 9.0 16.5 15.6 — — — 1.1 1.1 0.9 5.3 1.3 1.3 12.9 6.7 7.3 70 5.5 1.1

Indian Bank 238 BUY 102,457 2,034 430 38.8 41.9 46.6 10.5 8.0 11.2 6.1 5.7 5.1 — — — 1.3 1.1 0.9 3.1 3.3 3.7 22.3 20.4 19.4 300 25.8 2.1

Indian Overseas Bank 97 BUY 60,081 1,193 619 17.3 14.4 27.8 33.6 (17.2) 93.6 5.6 6.8 3.5 — — — 0.7 0.7 0.6 5.1 2.0 4.0 12.7 9.1 15.9 140 44.2 1.7

IndusInd Bank 309 ADD 144,053 2,860 466 12.4 16.8 17.9 45.2 35.2 7.1 25.0 18.5 17.2 — — — 3.6 3.1 2.7 0.6 0.9 0.9 20.8 19.3 17.4 330 6.7 4.4

J&K Bank 814 ADD 39,473 784 48 126.9 155.4 160.6 20.1 22.5 3.4 6.4 5.2 5.1 — — — 1.1 1.0 0.9 3.2 3.9 4.0 19.0 20.0 17.9 950 16.7 0.5

LIC Housing Finance 240 ADD 113,846 2,260 475 20.5 19.3 29.5 47.2 (5.8) 52.7 11.7 12.4 8.1 — — — 2.9 2.5 2.1 1.8 1.7 2.6 25.8 20.3 26.0 270 12.6 13.7

Mahindra & Mahindra Financial 684 BUY 70,118 1,392 102 45.2 55.6 71.9 26.1 23.0 29.3 15.1 12.3 9.5 — — — 2.8 2.5 2.1 1.5 1.8 2.3 22.0 21.1 23.1 825 20.5 1.6

Muthoot Finance 158 BUY 58,702 1,166 371 15.7 23.1 27.5 108.4 46.4 19.3 10.0 6.9 5.7 — — — 4.4 1.9 1.4 — — — 51.5 38.7 28.4 240 51.9 —

Oriental Bank of Commerce 282 BUY 82,393 1,636 292 51.5 43.0 57.9 13.7 (16.5) 34.7 5.5 6.6 4.9 — — — 0.8 0.7 0.7 3.7 3.1 4.1 15.5 10.9 13.4 370 31.0 2.9

PFC 188 BUY 247,758 4,919 1,320 22.8 22.7 29.3 11.1 (0.5) 29.0 8.2 8.3 6.4 — — — 1.6 1.2 1.1 2.1 2.4 3.1 18.4 16.7 17.4 225 19.9 13.5

Punjab National Bank 933 BUY 295,681 5,871 317 140.0 152.0 166.5 13.0 8.6 9.5 6.7 6.1 5.6 — — — 1.5 1.2 1.1 2.4 3.3 3.6 24.4 22.0 20.5 1,270 36.1 9.1

Reliance Capital 402 ADD 98,944 1,965 246 9.3 8.4 22.6 (25.3) (10.2) 170.0 43.2 48.1 17.8 — — — 1.4 1.4 1.3 0.9 0.8 2.2 3.3 2.9 7.6 470 16.9 33.9

Rural Electrification Corp. 199 BUY 196,441 3,900 987 26.0 28.7 33.7 28.1 10.5 17.2 7.7 6.9 5.9 — — — 1.5 1.3 1.2 3.8 4.1 4.9 21.5 20.7 21.1 230 15.6 11.3

SKS Microfinance 120 RS 8,853 176 74 15.7 (89.1) (27.5) (41.8) (667.7) (69.1) 7.7 (1.3) (4.4) — — — 0.5 0.8 0.9 — — — 8.3 (44.7) (19.3) — — 2.1

State Bank of India 2,148 BUY 1,444,624 28,683 673 130.2 179.2 219.6 (9.9) 37.7 22.6 16.5 12.0 9.8 — — — 2.2 1.8 1.5 1.5 1.7 1.8 12.6 16.4 16.8 2,450 14.1 145.7

Union Bank 227 BUY 121,778 2,418 536 39.5 31.6 44.0 (3.9) (19.8) 39.0 5.8 7.2 5.2 — — — 1.1 1.0 0.8 3.4 2.8 3.9 20.9 14.4 17.5 340 49.6 6.5

Yes Bank 342 ADD 118,846 2,360 347 20.9 27.1 31.8 39.6 29.3 17.3 16.3 12.6 10.8 — — — 3.1 2.6 2.1 0.7 0.9 1.1 21.1 22.4 21.7 375 9.5 19.4

Banks/Financial Institutions Attractive 8,174,226 162,300 20.0 13.1 20.1 13.4 11.8 9.8 — — — 2.1 1.8 1.6 1.6 1.8 2.1 16.0 15.5 16.2

Cement

ACC 1,293 SELL 242,872 4,822 188 53.0 57.1 69.9 (36.3) 7.8 22.4 24.4 22.6 18.5 14.5 13.6 9.9 3.6 3.2 2.8 2.7 1.8 1.8 17.5 16.1 17.6 1,030 (20.3) 9.7

Ambuja Cements 161 SELL 245,179 4,868 1,522 7.9 7.8 10.0 (1.5) (1.2) 28.6 20.4 20.7 16.1 12.5 11.8 8.8 3.1 2.8 2.5 1.3 1.4 1.5 16.6 14.6 17.1 145 (10.0) 9.2

Grasim Industries 2,681 BUY 245,888 4,882 92 232.0 275.8 281.7 (22.9) 18.9 2.2 11.6 9.7 9.5 6.9 5.6 5.0 1.7 1.5 1.3 0.7 1.3 1.3 15.7 16.2 14.5 2,900 8.2 4.2

India Cements 96 ADD 29,474 585 307 1.9 11.6 12.2 (81.2) 511.9 5.9 50.8 8.3 7.8 16.4 5.5 4.7 0.7 0.6 0.6 1.7 3.3 3.3 1.4 8.5 8.4 110 14.6 2.6

Shree Cement 2,806 REDUCE 97,760 1,941 35 57.2 80.2 119.4 (72.5) 40.3 48.9 49.1 35.0 23.5 11.4 8.7 7.6 5.1 4.6 4.1 0.5 0.6 0.7 10.7 13.9 18.4 2,085 (25.7) 0.6

UltraTech Cement 1,406 REDUCE 385,191 7,648 274 44.9 79.7 89.4 (49.2) 77.7 12.2 31.3 17.6 15.7 15.3 10.0 8.7 3.1 2.7 2.3 0.4 0.4 0.6 16.7 18.7 17.7 1,220 (13.2) 4.6

Cement Neutral 1,246,363 24,747 (24.3) 30.9 13.9 21.5 16.4 14.4 11.2 8.7 7.2 2.6 2.3 2.0 1.1 1.1 1.2 12.1 14.0 14.1

Price/BV (X) Dividend yield (%)

Source: Company, Bloomberg, Kotak Institutional Equities estimates

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shares EPS (Rs) EPS growth (%) PER (X) EV/EBITDA (X) Price/BV (X) RoE (%)Target price Upside ADVT-3mo


Consumer products

Asian Paints 3,160 SELL 303,150 6,019 96 80.8 94.4 106.9 13.0 16.8 13.3 39.1 33.5 29.6 26.1 22.8 18.4 14.8 11.4 9.3 1.0 0.9 1.1 43.9 39.9 35.6 2,500 (20.9) 5.5

Colgate-Palmolive (India) 1,038 SELL 141,201 2,804 136 29.6 32.5 39.1 (4.9) 9.9 20.3 35.1 31.9 26.5 30.6 27.4 22.1 36.8 37.4 29.8 2.1 2.7 2.6 113.4 116.1 124.9 900 (13.3) 2.0

Dabur India 103 ADD 179,172 3,557 1,740 3.3 3.7 4.4 12.8 12.1 19.2 31.5 28.1 23.6 25.4 21.5 18.4 13.6 10.6 8.4 1.1 1.3 1.5 51.2 43.2 40.2 115 11.7 3.2

GlaxoSmithkline Consumer (a) 2,606 ADD 109,593 2,176 42 71.3 84.5 105.4 28.8 18.5 24.8 36.5 30.9 24.7 26.5 23.2 19.0 11.7 9.9 8.2 1.9 1.3 1.7 32.2 33.8 35.2 3,000 15.1 1.0

Godrej Consumer Products 448 ADD 144,807 2,875 324 14.9 16.8 21.8 31.3 13.1 29.8 30.1 26.6 20.5 25.4 20.3 15.2 8.4 6.3 5.1 1.1 0.7 0.7 35.9 27.6 28.9 500 11.7 1.9

Hindustan Unilever 380 REDUCE 821,018 16,301 2,159 9.9 11.8 14.2 4.8 19.7 19.7 38.5 32.2 26.9 32.9 26.3 21.0 31.2 26.8 23.0 2.0 2.6 3.1 66.3 89.8 92.4 420 10.5 20.5

ITC 210 ADD 1,616,014 32,086 7,681 6.4 7.9 9.0 20.7 22.5 14.1 32.8 26.8 23.5 21.8 18.3 15.8 9.6 8.3 7.3 2.1 1.8 2.1 33.2 34.9 34.3 230 9.3 29.9

Jubilant Foodworks 959 SELL 62,920 1,249 66 11.2 16.3 24.0 99.6 45.4 47.3 85.6 58.9 40.0 52.4 32.6 22.4 32.8 21.1 13.8 — — — 46.6 43.6 41.7 800 (16.6) 21.9

Jyothy Laboratories 188 ADD 14,597 290 78 10.3 8.4 10.8 (6.2) (18.8) 28.0 18.2 22.4 17.5 14.7 34.1 25.4 2.2 2.1 2.0 3.2 2.5 3.1 12.3 9.7 11.7 190 1.0 0.4

Marico 157 BUY 96,772 1,921 615 3.9 5.2 6.8 (12.8) 33.5 31.7 40.6 30.4 23.1 24.9 21.5 16.3 10.3 8.1 6.2 0.4 0.5 0.6 30.3 30.3 30.8 190 20.8 0.7

Nestle India (a) 4,462 SELL 430,241 8,542 96 86.8 104.6 125.1 16.7 20.5 19.6 51.4 42.7 35.7 34.2 28.2 22.9 50.3 33.8 20.1 1.1 1.1 1.3 116.5 94.7 70.7 3,600 (19.3) 2.5

Tata Global Beverages 114 BUY 70,374 1,397 618 4.0 5.3 6.6 (34.6) 35.1 23.0 28.7 21.3 17.3 11.9 11.6 9.4 1.4 1.3 1.2 1.8 1.6 1.9 6.4 8.2 9.5 110 (3.3) 7.2

Titan Industries 231 ADD 204,901 4,068 888 4.9 6.5 7.9 71.7 32.5 20.7 47.0 35.4 29.3 33.0 25.0 20.2 19.7 14.9 11.6 0.5 1.0 1.3 49.2 48.0 44.4 230 (0.3) 18.4

United Spirits 515 BUY 64,725 1,285 126 35.3 36.6 42.7 29.5 3.5 16.9 14.6 14.1 12.1 11.8 10.0 9.2 1.5 1.4 1.3 0.5 0.5 0.6 11.2 10.5 11.1 900 74.6 21.5

Consumer products Attractive 4,259,483 84,572 16.3 19.3 18.1 35.4 29.7 25.1 24.9 20.8 17.3 11.0 9.4 8.0 1.7 1.6 2.0 31.0 31.6 31.8

Constructions

IVRCL 51 ADD 13,537 269 267 5.9 2.9 3.9 (25.2) (50.5) 33.6 8.6 17.3 13.0 6.4 8.2 7.1 0.7 0.7 0.6 1.2 0.8 0.8 8.2 3.9 5.0 70 38.1 10.6

Nagarjuna Construction Co. 56 BUY 14,279 284 257 6.4 1.8 3.7 (29.7) (71.1) 100.8 8.7 30.2 15.0 7.7 9.5 8.1 0.6 0.6 0.6 1.9 3.6 3.6 7.1 2.0 4.0 65 16.8 1.6

Punj Lloyd 52 REDUCE 17,726 352 340 (1.5) 5.1 6.6 (56.6) (442.7) 28.9 (35.2) 10.3 8.0 12.4 9.1 6.4 0.6 0.6 0.5 (0.1) 0.9 1.1 (1.7) 5.7 6.9 60 14.9 5.0

Sadbhav Engineering 137 BUY 20,518 407 150 7.8 10.0 10.0 51.0 28.5 0.5 17.6 13.7 13.6 10.5 8.4 8.2 3.2 2.6 2.2 0.4 0.4 0.4 18.1 19.2 16.3 180 31.5 0.5

Construction Attractive 66,061 1,312 (1.1) 15.6 27.8 17.1 14.7 11.5 8.9 8.9 7.1 0.8 0.8 0.8 0.8 1.3 1.4 4.8 5.4 6.5

Energy

Aban Offshore 462 BUY 20,110 399 44 134.2 71.5 92.4 25.9 (46.7) 29.1 3.4 6.5 5.0 6.6 7.6 6.7 0.9 1.2 1.0 0.8 0.9 1.0 33.3 20.8 21.4 615 33.1 11.5

Bharat Petroleum 669 RS 241,780 4,801 362 38.9 42.3 53.5 (32.5) 8.8 26.3 17.2 15.8 12.5 10.9 8.5 8.1 1.6 1.5 1.4 2.1 2.1 2.6 9.2 9.3 11.0 — — 7.7

Cairn india 361 SELL 686,211 13,625 1,903 33.3 45.7 63.8 501.1 37.1 39.7 10.8 7.9 5.7 7.9 6.1 3.9 1.7 1.4 1.3 — - 4.2 16.9 19.7 23.9 360 (0.2) 21.0

Castrol India (a) 506 SELL 125,074 2,483 247 19.8 19.5 21.0 28.5 (1.8) 7.8 25.5 26.0 24.1 16.4 17.9 16.4 24.2 22.9 21.3 3.0 3.0 3.3 100.2 90.4 91.4 400 (20.9) 0.9

GAIL (India) 352 ADD 445,871 8,853 1,268 28.2 29.6 28.0 13.8 5.2 (5.4) 12.5 11.9 12.5 7.8 8.4 8.7 2.1 1.9 1.7 2.1 2.3 2.3 17.5 16.1 13.3 435 23.8 11.1

GSPL 77 REDUCE 43,122 856 563 8.9 9.2 8.5 21.7 3.4 (7.1) 8.6 8.3 9.0 5.8 5.2 5.3 1.9 1.6 1.4 1.3 1.8 2.8 25.2 20.5 16.2 87 13.5 2.8

Hindustan Petroleum 312 RS 105,669 2,098 339 40.8 11.0 28.8 (20.8) (73.2) 162.9 7.6 28.4 10.8 3.4 3.0 3.5 0.7 0.7 0.6 4.5 1.1 2.9 9.0 2.2 5.7 — — 4.8

Indian Oil Corporation 280 RS 680,069 13,503 2,428 32.4 30.1 29.8 (34.0) (7.2) (0.9) 8.6 9.3 9.4 8.4 7.3 6.7 1.2 1.1 1.1 3.4 0.6 3.2 13.3 12.2 11.1 — — 2.8

Oil India 1,261 BUY 303,207 6,020 240 120.0 146.1 189.9 4.2 21.8 30.0 10.5 8.6 6.6 5.2 3.4 2.4 1.8 1.6 1.4 3.0 4.4 5.9 16.2 17.5 20.1 1,750 38.8 2.6

Oil & Natural Gas Corporation 283 BUY 2,417,789 48,005 8,556 24.7 28.7 35.2 7.4 16.3 22.8 11.5 9.9 8.0 4.3 4.0 3.1 1.6 1.5 1.3 3.1 3.5 4.1 14.3 14.8 16.3 330 16.8 19.9

Petronet LNG 162 SELL 121,350 2,409 750 8.1 14.9 13.6 50.3 83.4 (8.2) 20.0 10.9 11.9 11.5 7.7 8.3 4.0 3.1 2.5 1.2 1.9 1.9 20.9 31.1 22.5 140 (13.5) 6.7

Reliance Industries 777 REDUCE 2,314,896 45,962 2,981 62.0 62.7 61.6 24.8 1.2 (1.7) 12.5 12.4 12.6 6.9 6.2 6.2 1.4 1.3 1.2 1.0 1.0 1.0 13.0 11.9 10.6 855 10.1 87.8

Energy Attractive 7,505,148 149,015 11.6 8.4 14.2 11.2 10.3 9.0 6.2 5.5 4.7 1.5 1.4 1.3 2.1 2.0 2.9 13.8 13.6 14.0

Industrials

ABB 809 SELL 171,370 3,403 212 3.0 11.7 22.7 (82.2) 291.5 94.5 271.0 69.2 35.6 197.4 45.9 23.2 7.1 6.6 5.7 0.2 0.4 0.4 2.6 9.9 17.3 515 (36.3) 1.9

BGR Energy Systems 322 REDUCE 23,252 462 72 44.8 29.4 27.2 60.0 (34.4) (7.4) 7.2 11.0 11.8 4.9 5.7 4.9 2.4 2.1 1.8 3.1 1.8 1.7 39.0 20.5 16.5 260 (19.3) 8.1

Bharat Electronics 1,561 ADD 124,860 2,479 80 107.3 115.8 132.8 11.6 8.0 14.7 14.5 13.5 11.7 6.6 7.4 5.0 2.4 2.1 1.9 1.4 1.6 1.6 18.2 16.8 16.9 1,650 5.7 1.9

Crompton Greaves 136 ADD 87,212 1,732 642 14.3 6.4 10.3 11.5 (55.2) 60.0 9.5 21.2 13.2 6.1 10.3 7.2 2.7 2.4 2.1 1.8 1.0 1.2 31.7 12.0 17.0 170 25.0 7.6

Cummins India 460 REDUCE 127,581 2,533 277 22.2 21.6 25.9 37.1 (2.9) 19.8 20.7 21.3 17.8 18.5 19.2 15.2 7.1 6.2 5.4 2.3 2.3 2.7 35.1 29.7 31.2 475 3.2 2.7

KEC International 63 BUY 16,299 324 257 8.0 6.7 8.1 4.1 (16.5) 21.6 7.9 9.5 7.8 6.3 6.6 5.8 1.6 1.4 1.3 1.9 2.1 1.9 22.5 16.2 17.2 65 2.5 0.5

Larsen & Toubro 1,235 REDUCE 751,960 14,930 609 67.7 80.7 87.0 18.1 19.2 7.8 18.2 15.3 14.2 13.6 10.6 9.7 2.8 2.3 2.0 1.2 1.1 1.1 17.0 16.8 15.4 1,325 7.3 77.7

Maharashtra Seamless 371 BUY 26,174 520 71 48.2 42.1 46.8 24.8 (12.6) 11.0 7.7 8.8 7.9 4.9 4.9 4.1 1.0 0.9 0.9 2.2 2.3 2.5 13.8 11.1 11.5 460 24.0 0.2

Siemens 786 SELL 267,540 5,312 340 25.5 22.3 27.9 13.6 (12.7) 25.5 30.8 35.3 28.2 21.3 22.4 17.8 6.9 6.0 5.2 0.8 0.6 0.7 24.4 18.2 19.7 550 (30.0) 3.1

Suzlon Energy 27 REDUCE 47,478 943 1,746 (6.0) (0.9) 3.8 (4.6) (85.7) (539.2) (4.5) (31.6) 7.2 17.5 8.0 5.4 0.7 0.7 0.7 — 0.7 0.7 (15.8) (2.2) 9.7 32 17.6 17.4

Tecpro Systems 166 ADD 8,353 166 50 27.0 28.2 24.4 24.2 4.3 (13.5) 6.1 5.9 6.8 4.3 5.1 5.0 1.3 1.1 1.0 — — — 26.8 19.7 15.0 220 32.9 0.2

Thermax 525 REDUCE 62,578 1,242 119 31.6 33.3 33.1 44.3 5.4 (0.7) 16.6 15.8 15.9 11.2 10.7 10.4 4.8 3.9 3.4 1.7 1.8 1.7 31.5 27.4 22.9 500 (4.8) 1.3

Voltas 108 ADD 35,571 706 331 9.8 7.5 8.4 (14.3) (23.0) 11.9 11.0 14.3 12.8 6.5 9.6 8.2 2.6 2.3 2.1 1.9 2.2 2.4 26.1 17.2 17.4 125 16.2 7.7

Industrials Cautious 2,424,788 48,144 24.3 14.5 9.6 17.2 15.0 13.7 11.3 9.9 8.9 3.1 2.6 2.3 1.5 1.4 1.4 18.1 17.6 16.8

Infrastructure

Adani Port and SEZ 144 ADD 289,605 5,750 2,017 4.6 5.6 7.3 36.3 22.1 31.3 31.5 25.8 19.7 25.5 18.6 13.8 6.8 5.7 4.6 0.6 0.7 1.0 23.4 23.8 25.8 160 11.5 3.8

Container Corporation 912 ADD 118,516 2,353 130 67.6 71.0 77.5 11.7 5.0 9.2 13.5 12.9 11.8 9.5 8.4 7.3 2.4 2.1 1.9 1.7 1.8 2.0 18.9 17.4 16.7 1,100 20.6 1.4

GMR Infrastructure 27 RS 104,316 2,071 3,892 (0.3) (0.8) (0.2) (178.0) 131.2 (77.8) (79.6) (34.4) (154.9) 18.2 13.1 10.8 1.1 0.9 0.9 — — — (1.8) (4.0) (0.9) — — 4.2

Gujarat Pipavav Port 56 ADD 23,825 473 424 (1.2) 1.4 2.5 (65.8) (212.6) 85.7 (46.8) 41.6 22.4 24.7 15.5 12.3 3.2 3.0 2.6 — — — (9.1) 10.4 13.0 65 15.6 0.3

GVK Power & Infrastructure 16 RS 25,662 510 1,579 1.0 1.0 0.3 (0.6) 1.6 (73.4) 16.6 16.3 61.2 17.8 16.4 19.4 0.8 0.7 0.7 — 1.8 2.2 4.7 4.6 1.2 — — 6.6

IRB Infrastructure 178 ADD 59,211 1,176 332 13.6 11.9 15.2 30.4 (12.9) 27.9 13.1 15.0 11.7 8.5 8.9 7.4 2.3 1.7 1.4 0.8 — — 19.3 13.1 13.0 190 6.7 6.9

Infrastructure Cautious 621,135 12,333 10.5 5.7 30.4 28.0 26.4 20.3 16.6 13.8 11.3 2.4 2.1 1.9 0.7 0.7 0.9 8.7 7.9 9.3

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Media

DB Corp 204 BUY 37,426 743 183 14.1 11.2 13.5 32.7 (20.7) 20.6 14.5 18.3 15.1 9.4 10.7 8.8 4.5 3.9 3.5 1.9 1.9 2.9 35.0 23.0 24.5 300 46.9 0.1

DishTV 53 BUY 56,073 1,113 1,063 (1.8) (0.7) 0.6 (27.7) (62.1) (192.8) (29.6) (78.0) 84.1 26.6 12.4 9.2 89.4 (614.7) 97.4 — — — (81.9) (268.1) 275.3 80 51.7 7.6

Eros International 185 BUY 17,944 356 97 11.8 15.6 19.6 19.0 32.7 25.6 15.7 11.8 9.4 10.8 8.3 6.0 2.7 2.2 1.7 — — — 24.9 20.1 20.4 270 45.9 1.4

Hindustan Media Ventures 138 BUY 10,128 201 73 7.3 9.0 10.6 198.0 23.3 17.8 18.9 15.3 13.0 9.1 8.7 6.6 2.6 2.3 2.0 0.7 0.7 1.4 23.3 16.1 16.5 190 37.7 0.1

HT Media 143 ADD 33,634 668 235 7.7 7.5 9.2 31.0 (3.1) 23.3 18.6 19.2 15.6 8.8 9.6 7.1 2.4 2.2 2.0 0.3 1.4 2.8 14.9 11.8 13.4 160 11.9 0.1

Jagran Prakashan 102 BUY 32,400 643 316 6.8 6.5 7.8 16.7 (5.3) 21.6 15.0 15.9 13.1 9.0 8.6 7.4 4.6 4.2 3.7 3.4 3.4 3.9 32.8 27.6 30.0 150 46.4 0.2

Sun TV Network 308 ADD 121,298 2,408 394 19.5 18.5 21.4 48.1 (5.4) 15.9 15.8 16.7 14.4 9.5 9.8 8.6 5.0 4.6 4.3 2.8 3.6 4.5 36.5 30.2 32.2 390 26.7 6.1

Zee Entertainment Enterprises 139 BUY 136,384 2,708 978 5.8 6.1 7.4 9.2 3.9 22.6 23.9 23.0 18.7 16.2 15.6 12.4 3.2 3.1 3.0 1.0 0.9 1.1 14.2 14.0 16.5 160 14.8 3.6

Media Neutral 445,286 8,841 51.2 3.9 27.6 22.6 21.7 17.0 12.0 11.2 9.1 4.2 3.8 3.5 1.5 1.8 2.3 18.4 17.7 20.8

Metals & Mining

Coal India 330 ADD 2,085,348 41,405 6,316 17.3 23.4 26.9 13.6 35.1 14.9 19.1 14.1 12.3 11.1 8.6 7.4 6.0 4.7 3.8 1.2 2.1 2.4 35.1 37.3 34.1 380 15.1 29.7

Hindalco Industries 132 REDUCE 252,288 5,009 1,915 12.8 17.2 16.1 (36.0) 34.3 (6.0) 10.3 7.7 8.2 5.8 6.6 6.4 0.9 0.8 0.7 1.1 1.1 1.1 9.7 10.8 9.2 160 21.4 33.1

Hindustan Zinc 132 ADD 557,066 11,061 4,225 11.6 12.7 14.7 21.8 8.8 16.0 11.3 10.4 9.0 7.4 6.4 4.5 2.5 2.1 1.8 0.8 1.9 1.9 24.3 21.8 21.4 150 13.8 2.2

Jindal Steel and Power 547 REDUCE 510,922 10,144 934 40.2 40.9 46.1 5.1 1.7 12.7 13.6 13.4 11.9 10.1 9.7 9.0 3.6 2.9 2.3 0.3 0.3 0.3 30.9 24.1 21.8 530 (3.1) 23.0

JSW Steel 707 SELL 159,748 3,172 226 78.6 32.3 77.7 (2.2) (58.9) 140.5 9.0 21.9 9.1 6.6 5.6 6.0 1.0 0.9 0.9 1.7 1.4 1.4 13.6 14.1 9.9 680 (3.8) 41.6

National Aluminium Co. 59 SELL 151,284 3,004 2,577 4.2 3.2 3.7 36.4 (23.9) 15.8 14.1 18.6 16.0 6.3 8.9 7.1 1.4 1.3 1.3 2.6 2.6 2.6 9.9 7.2 8.0 53 (9.7) 0.8

Sesa Goa 198 REDUCE 177,419 3,523 895 48.6 32.7 46.8 65.3 (32.7) 43.1 4.1 6.1 4.2 3.5 5.4 5.7 1.4 1.2 0.9 2.0 2.0 2.0 36.8 17.2 22.1 220 10.9 19.9

Sterlite Industries 114 ADD 382,841 7,601 3,361 15.2 13.5 15.2 26.2 (11.0) 12.4 7.5 8.4 7.5 4.7 4.0 3.2 0.9 0.8 0.8 1.0 1.8 1.8 13.0 10.5 10.8 132 15.9 25.0

Tata Steel 425 ADD 412,801 8,196 971 75.3 27.8 58.4 (2,258.1) (63.1) 110.4 5.6 15.3 7.3 5.6 7.5 5.8 1.2 1.0 0.9 2.8 2.8 2.8 24.7 7.1 13.4 525 23.5 62.0

Metals & Mining Cautious 4,689,716 93,115 39.1 (1.9) 18.4 11.3 11.5 9.7 7.2 7.1 6.1 2.2 1.9 1.6 1.2 1.9 2.0 19.0 16.3 16.7

Pharmaceutical

Apollo Hospitals 565 BUY 78,455 1,558 139 13.2 17.1 21.2 21.0 29.3 24.0 42.7 33.0 26.6 19.4 14.4 12.4 4.1 3.1 2.7 — — — 9.8 10.3 10.5 650 15.1 4.9

Biocon 266 BUY 53,190 1,056 200 18.4 16.8 20.7 23.9 (8.7) 23.2 14.5 15.8 12.9 8.1 8.8 7.0 2.6 2.4 2.1 — — — 19.4 15.7 17.2 380 42.9 4.0

Cipla 306 SELL 245,975 4,884 803 12.3 14.1 17.7 (10.0) 14.1 25.5 24.9 21.8 17.4 21.5 17.0 13.1 3.7 3.3 2.9 0.9 1.0 1.1 15.4 15.6 17.3 320 4.5 9.2

Cadila Healthcare 697 REDUCE 142,710 2,834 205 34.7 31.1 40.9 40.6 (10.5) 31.4 20.1 22.4 17.1 17.5 17.6 13.2 6.6 5.4 4.3 0.9 0.9 1.2 37.5 26.4 28.1 700 0.4 1.9

Dishman Pharma & chemicals 51 REDUCE 4,156 83 81 9.8 5.1 8.3 (31.8) (48.6) 64.7 5.2 10.1 6.1 7.6 7.3 5.5 0.5 0.5 0.4 — — — 9.6 4.6 7.2 60 17.4 0.4

Divi's Laboratories 723 ADD 95,958 1,905 133 32.4 37.4 46.4 25.7 15.6 24.1 22.3 19.3 15.6 18.4 15.0 10.9 5.3 4.6 3.9 — — — 25.9 25.4 26.8 935 29.3 3.0

Dr Reddy's Laboratories 1,689 REDUCE 287,114 5,701 170 64.9 90.7 106.9 932.5 39.7 17.8 26.0 18.6 15.8 18.2 12.2 10.1 6.2 4.8 3.8 0.7 0.8 0.8 24.8 29.3 27.1 1,740 3.0 12.4

GlaxoSmithkline Pharmaceuticals (a) 2,080 SELL 176,187 3,498 85 68.3 74.3 82.8 15.5 8.8 11.5 30.5 28.0 25.1 20.2 20.2 16.7 9.0 9.1 8.5 1.9 2.2 2.7 30.9 32.4 35.0 1,930 (7.2) 1.2

Glenmark Pharmaceuticals 295 REDUCE 79,785 1,584 270 17.0 19.9 22.4 33.6 17.6 12.2 17.4 14.8 13.2 19.6 18.3 10.8 3.9 3.1 2.6 — — — 20.6 23.6 21.5 340 15.3 3.0

Jubilant Life Sciences 182 REDUCE 29,048 577 159 14.4 16.9 29.5 (45.6) 17.3 74.1 12.6 10.8 6.2 10.5 7.9 6.3 1.3 1.2 1.0 1.1 1.1 1.6 12.3 16.3 18.0 180 (1.3) 0.4

Lupin 498 ADD 223,222 4,432 448 19.2 21.1 26.5 25.6 9.7 25.3 25.9 23.6 18.8 21.6 18.7 13.9 6.7 5.4 4.4 0.6 0.7 0.9 29.5 25.8 26.2 520 4.4 7.7

Ranbaxy Laboratories 413 SELL 174,141 3,458 422 40.6 19.9 30.4 474.9 (50.9) 52.3 10.2 20.7 13.6 12.5 13.3 9.6 3.1 4.3 3.2 — — — 34.5 17.4 27.4 380 (8.0) 8.5

Sun Pharmaceuticals 559 ADD 579,004 11,496 1,036 17.5 23.4 28.1 34.4 33.4 20.1 31.9 23.9 19.9 27.4 17.3 14.3 5.6 4.6 3.7 0.6 0.7 0.9 21.0 23.1 22.9 625 11.8 9.8

Pharmaceuticals Neutral 2,168,946 43,065 43.1 8.5 24.2 22.7 20.9 16.9 18.4 14.5 11.2 3.6 3.2 2.7 0.7 0.8 0.9 16.0 15.3 16.1

Property

DLF 198 ADD 339,057 6,732 1,715 9.1 9.7 12.7 (14.5) 6.5 31.5 21.8 20.5 15.6 15.1 13.9 11.2 1.3 1.2 1.2 1.0 1.3 1.5 5.4 6.1 7.6 260 31.5 44.0

Housing Development & Infrastructure 100 BUY 44,211 878 441 19.8 19.4 29.8 24.2 (2.1) 53.6 5.1 5.2 3.4 5.2 6.6 4.9 0.5 0.4 0.4 — 1.0 1.5 10.0 8.4 11.6 130 29.7 31.1

Indiabulls Real Estate 66 RS 26,427 525 402 4.0 8.5 15.4 (1,095.5) 114.1 81.5 16.5 7.7 4.3 12.2 9.7 4.2 0.2 0.2 0.2 0.5 0.8 1.1 1.4 2.9 5.0 — — 10.3

Mahindra Life Space Developer 320 BUY 13,065 259 41 24.9 26.7 32.2 30.2 6.9 20.8 12.8 12.0 9.9 9.8 8.1 6.3 1.3 1.2 1.1 1.6 1.4 1.6 10.4 10.2 11.2 405 26.5 0.4

Oberoi Realty 280 BUY 92,293 1,832 330 15.7 14.9 26.4 14.8 (5.0) 77.3 17.8 18.8 10.6 13.6 13.8 6.6 2.8 2.5 2.0 0.4 0.5 0.9 19.9 13.9 21.1 300 7.2 0.5

Phoenix Mills 200 BUY 28,933 574 145 6.3 7.4 10.7 53.0 17.2 44.1 31.6 26.9 18.7 23.3 19.5 14.6 1.8 1.7 1.6 0.9 1.0 1.0 5.8 6.6 8.9 300 50.2 0.2

Puravankara Projects 71 REDUCE 15,174 301 213 5.5 7.4 9.5 (18.9) 33.2 29.4 12.9 9.7 7.5 17.7 12.9 10.6 1.0 0.9 0.8 1.4 2.1 2.8 8.0 9.9 11.8 80 12.5 0.1

Sobha Developers 274 BUY 26,845 533 98 18.8 15.6 25.7 33.8 (17.2) 65.3 14.5 17.6 10.6 12.3 13.3 8.4 1.4 1.3 1.2 1.1 1.3 1.5 10.2 7.9 12.0 340 24.2 0.9

Unitech 27 RS 71,163 1,413 2,616 2.3 1.5 2.0 (23.4) (35.3) 34.7 11.7 18.1 13.4 13.5 15.8 10.9 0.6 0.6 0.5 0.4 0.7 1.1 5.4 3.3 4.0 — — 14.9

Property Cautious 695,283 13,805 5.3 12.4 45.0 16.2 14.4 10.0 13.1 12.0 8.6 1.0 0.9 0.8 0.8 1.1 1.4 6.1 6.4 8.5

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Technology

HCL Technologies 481 REDUCE 339,387 6,739 705 22.9 33.8 39.9 30.4 47.9 18.0 21.1 14.2 12.1 12.8 8.4 7.2 4.0 3.0 2.5 1.5 1.7 1.7 21.0 22.8 22.3 460 (4.4) 9.5

Hexaware Technologies 107 ADD 31,522 626 294 3.0 9.1 10.7 (36.8) 207.9 17.3 36.4 11.8 10.1 29.1 10.3 6.9 3.3 3.1 2.6 1.4 2.8 3.0 9.3 26.9 28.0 110 2.4 3.9

Infosys 2,852 ADD 1,637,306 32,509 574 119.7 146.1 173.7 10.5 22.0 18.9 23.8 19.5 16.4 16.4 13.1 10.5 6.3 5.2 4.3 2.1 1.6 1.9 28.0 29.3 28.9 3,100 8.7 70.3

Mahindra Satyam 67 REDUCE 78,557 1,560 1,176 4.2 8.7 8.1 68.9 106.3 (6.5) 15.9 7.7 8.2 11.3 5.1 3.9 4.6 2.9 2.1 — — — 27.6 45.7 29.7 80 19.8 7.2

Mindtree 445 ADD 18,320 364 41 24.7 50.5 53.9 (52.7) 104.5 6.8 18.0 8.8 8.3 10.1 5.9 4.5 2.4 1.9 1.7 0.6 1.1 3.6 14.4 23.9 21.5 540 21.3 0.7

Mphasis 389 SELL 81,992 1,628 211 51.8 39.0 35.9 18.8 (24.6) (8.1) 7.5 10.0 10.9 6.4 8.3 7.3 2.5 2.1 1.8 1.0 1.2 1.3 38.6 22.8 17.9 350 (10.0) 3.0

Polaris Financial Technology 150 REDUCE 14,975 297 100 19.3 21.7 24.0 25.7 12.5 10.4 7.8 6.9 6.3 4.6 2.8 2.1 1.5 1.2 1.1 2.5 2.6 2.7 20.2 19.2 18.2 145 (3.5) 1.3

TCS 1,202 REDUCE 2,352,554 46,710 1,957 44.5 54.6 66.4 26.8 22.6 21.6 27.0 22.0 18.1 20.2 15.4 12.6 9.3 7.4 6.0 1.2 1.6 1.9 37.8 37.6 36.6 1,250 4.0 37.7

Tech Mahindra 604 SELL 76,079 1,511 126 48.0 74.7 80.7 (26.3) 55.5 8.0 12.6 8.1 7.5 8.5 9.1 7.4 2.3 2.0 1.7 0.7 0.7 1.7 20.2 27.0 25.5 600 (0.6) 1.9

Wipro 432 ADD 1,060,373 21,054 2,454 21.6 23.2 28.2 14.5 7.4 21.7 20.0 18.6 15.3 14.9 12.7 10.1 4.4 3.7 3.1 1.0 1.1 1.4 24.3 21.7 22.2 460 6.5 12.7

Technology Attractive 5,753,631 114,239 17.0 20.9 18.2 22.4 18.5 15.7 16.1 12.8 10.4 5.9 4.8 4.0 1.5 1.5 1.8 26.2 25.9 25.3

Telecom

Bharti Airtel 336 ADD 1,274,285 25,301 3,798 15.9 12.8 20.8 (32.6) (19.9) 62.9 21.1 26.3 16.1 9.4 7.9 6.1 2.6 2.6 2.2 — — — 13.3 9.9 14.7 390 16.2 47.2

IDEA 95 ADD 313,318 6,221 3,303 2.7 2.1 4.6 (0.5) (22.2) 118.5 34.9 44.8 20.5 11.1 8.7 6.6 2.5 2.5 2.2 — — — 7.6 5.7 11.6 100 5.4 10.1

MTNL 30 RS 19,089 379 630 (10.4) (9.1) (8.4) (33.7) (11.9) (8.1) (2.9) (3.3) (3.6) 1.0 1.3 1.7 0.2 0.2 0.2 — — — (6.1) (5.7) (5.5) — — 2.0

Reliance Communications 92 SELL 188,959 3,752 2,064 6.5 3.9 1.0 (71.1) (39.7) (73.5) 14.0 23.3 87.7 6.3 8.1 6.8 0.5 0.5 0.5 — — — 3.2 2.0 0.6 60 (34.5) 27.8

Tata Communications 229 REDUCE 65,165 1,294 285 (24.9) (27.0) (26.6) (13.0) 8.4 (1.4) (9.2) (8.5) (8.6) 11.6 8.7 7.8 1.8 2.6 4.2 — — — (17.5) (25.1) (37.0) 215 (6.0) 1.7

Telecom Cautious 1,860,816 36,947 (45.8) (27.5) 66.7 26.9 37.1 22.3 9.1 8.2 6.4 1.6 1.6 1.5 — — — 6.0 4.4 6.9

Utilities

Adani Power 73 SELL 174,345 3,462 2,393 2.4 2.3 8.1 200.7 (4.3) 259.1 30.9 32.3 9.0 33.8 23.0 6.5 2.8 2.4 1.9 — — — 8.5 7.9 23.2 60 (17.6) 9.2

CESC 262 BUY 32,789 651 125 39.1 32.1 39.9 13.1 (17.9) 24.4 6.7 8.2 6.6 4.6 6.6 6.3 0.7 0.7 0.6 1.5 1.5 1.8 10.8 8.2 9.4 400 52.4 1.4

JSW Energy 61 REDUCE 99,220 1,970 1,640 5.1 1.6 2.3 12.9 (69.5) 44.8 11.8 38.7 26.7 12.4 18.5 8.6 1.7 1.7 1.6 (1.7) — — 16.1 4.5 6.3 43 (28.9) 3.5

Lanco Infratech 19 BUY 42,015 834 2,223 1.6 0.8 0.9 (22.6) (48.7) 3.0 11.5 22.3 21.7 10.6 10.3 8.6 0.9 0.9 0.8 — — — 9.2 3.9 3.7 33 74.6 14.4

NHPC 21 BUY 253,395 5,031 12,301 1.3 2.0 2.2 (27.2) 49.2 7.2 15.3 10.2 9.5 11.3 10.5 7.6 1.0 0.9 0.8 2.9 2.7 2.8 6.4 9.0 9.1 29 40.8 2.8

NTPC 175 REDUCE 1,439,246 28,576 8,245 10.9 11.4 12.2 4.2 4.1 7.6 16.0 15.3 14.3 12.1 13.5 11.6 2.1 1.9 1.8 2.3 2.0 2.1 13.6 13.0 12.9 175 0.3 9.0

Reliance Infrastructure 618 BUY 163,999 3,256 265 58.0 65.3 71.4 (6.5) 12.5 9.4 10.7 9.5 8.7 13.6 7.7 8.6 0.7 0.7 0.6 1.2 1.7 1.8 6.8 11.7 8.9 890 43.9 31.5

Reliance Power 126 SELL 352,604 7,001 2,805 2.7 2.6 2.9 (0.2) (5.3) 13.5 46.4 49.0 43.2 177.5 66.9 28.3 2.1 2.0 1.9 — — — 4.9 4.2 4.5 76 (39.5) 18.0

Tata Power 108 BUY 267,568 5,313 2,468 7.6 4.9 8.7 21.5 (36.3) 77.6 14.2 22.2 12.5 11.0 9.4 8.1 1.8 1.9 1.7 1.3 1.4 1.6 13.8 8.4 14.5 125 15.3 10.2

Utilities Cautious 2,825,181 56,094 4.3 (1.1) 21.9 16.5 16.7 13.7 13.8 13.2 9.9 1.6 1.5 1.4 1.6 1.5 1.6 9.9 9.2 10.4

Others

Carborundum Universal 160 REDUCE 29,985 595 187 9.1 11.6 11.7 67.7 26.6 1.0 17.6 13.9 13.7 10.8 7.9 7.6 3.5 2.9 2.5 1.2 1.5 1.5 25.2 25.9 22.0 150 (6.5) 0.1

Havells India 526 ADD 65,619 1,303 125 24.5 30.4 36.1 334.1 23.8 19.0 21.4 17.3 14.6 13.5 11.2 9.2 9.2 6.5 4.6 0.5 0.5 0.6 53.9 44.1 37.1 600 14.1 3.7

Jaiprakash Associates 70 BUY 148,001 2,939 2,126 6.0 6.4 8.1 230.2 6.2 26.1 11.6 10.9 8.6 11.7 10.4 8.2 1.4 1.2 1.1 — — — 13.3 12.0 13.6 97 39.4 29.0

Jet Airways 282 SELL 24,311 483 86 (10.1) (233.8) (33.8) (91.0) 2,225 (85.6) (28.0) (1.2) (8.3) 9.8 (160.7) 10.4 1.5 (5.8) (3.4) — — — (5.0) — — 280 (0.6) 15.8

SpiceJet 21 BUY 9,313 185 441 2.5 (8.7) 1.9 (1.8) (450.3) (122.1) 8.5 (2.4) 10.9 12.3 (7.4) 10.9 2.9 15.2 6.4 — — — (961) (201.8) 82.1 45 113.3 1.9

Tata Chemicals 354 REDUCE 90,286 1,793 255 26.2 32.9 38.8 (0.7) 25.4 17.9 13.5 10.8 9.1 8.0 5.6 4.8 1.7 1.5 1.3 2.8 3.4 4.2 16.9 18.6 19.5 365 3.0 2.2

United Phosphorus 137 ADD 63,221 1,255 462 12.3 11.8 17.9 3.9 (4.4) 51.5 11.1 11.6 7.7 6.8 5.4 4.4 1.7 1.5 1.3 1.5 2.2 2.6 18.0 14.5 19.0 150 9.6 4.2

Others 430,735 8,552 233.8 (67.1) 326.9 15.2 46.1 10.8 10.3 10.9 7.5 1.8 1.8 1.6 1.0 1.2 1.5 12.1 3.9 14.7

KS universe (b) 46,048,797 914,302 18.4 7.9 19.9 15.7 14.5 12.1 10.1 9.1 7.5 2.4 2.1 1.9 1.5 1.6 1.9 15.4 14.8 15.6

KS universe (b) ex-Energy 38,543,648 765,286 20.6 7.7 21.6 17.0 15.8 13.0 11.8 10.6 8.6 2.7 2.4 2.1 1.4 1.5 1.7 16.0 15.2 16.2

KS universe (d) ex-Energy & ex-Commodities 32,607,570 647,425 19.3 9.2 22.6 18.2 16.6 13.6 13.3 11.7 9.4 2.8 2.5 2.2 1.4 1.4 1.7 15.6 15.1 16.2

Notes:

(a) For banks we have used adjusted book values.

(b) 2010 means calendar year 2009, similarly for 2011 and 2012 for these particular companies.

(c) EV/Sales & EV/EBITDA for KS universe excludes Banking Sector.

(d) Rupee-US Dollar exchange rate (Rs/US$)= 50.37

Dividend yield (%)


Kotak Institutional Equities Research coverage universeDistribution of ratings/investment banking relationships

Source: Kotak Institutional Equities As of December 31, 2011

Percentage of companies covered by Kotak Institutional Equities, within the specified category.

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

* The above categories are defined as follows: Buy = We expect this stock to deliver more than 17.5% returns over the next 12 months; Add = We expect this stock to deliver 7.5-17.5% returns over the next 12 months; Reduce = We expect this stock to deliver 0-7.5% returns over the next 12 months; Sell = We expect this stock to deliver less than 0% returns over the next 12 months. Our target prices are also on a 12-month horizon basis. These ratings are used illustratively to comply with applicable regulations. As of 31/12/2011 Kotak Institutional Equities Investment Research had investment ratings on 167 equity securities.

13.2%

42.5%

26.9%

17.4%

6.6%4.2%

2.4% 3.0%

0%

10%

20%

30%

40%

50%

60%

70%

BUY ADD REDUCE SELL

Ratings and other definitions/identifiers

Definitions of ratings

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

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

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

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

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

Other definitions

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

Other ratings/identifiers

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

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

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

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

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

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


Disclosures

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Tel:+1-914-997-6120

Copyright 2012 Kotak Institutional Equities (Kotak Securities Limited). All rights reserved.

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

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

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

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

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

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

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