KEY DATA Decent show despite covid blues

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KEY DATA

Rating BUY Sector relative Outperformer Price (INR) 1,077 12 month price target (INR) 1,600 Market cap (INR bn/USD bn) 1,051/14.1 Free float/Foreign ownership (%) 39.3/26.2

What’s Changed Target Price

Rating/Risk Rating ⚊

QUICK TAKE

Decent show despite covid blues

SBI Life reported 28% YoY increase in APE to INR16.2bn led by ULIPs, individual protection and annuity, while non-par savings and group business remained muted. VNB margin (on actual tax rate basis) expanded 250bps YoY to 21.2%. Consequently, VNB jumped 45% YoY to INR3.4bn.

Q1FY22 expectedly marked a steep rise in death claims, with the number of claims 1.28x FY21. This led to net claims of INR5.7bn. Covid reserve was also strengthened to INR4.4bn from INR1.8bn in Q4FY21 to tackle future stress. In our view, this is a minor blip (1.3% of EV) in an otherwise steady quarter of business performance. Maintain ‘BUY’ with TP of INR1,600 (earlier INR1,570) as we roll forward to Sep 2022E.

FINANCIALS (INR mn)

Year to March FY20A FY21A FY22E FY23E

APE 1,07,400 1,14,500 1,40,609 1,60,347

EV 2,62,878 3,33,778 3,88,994 4,55,524

PAT 14,222 14,559 20,025 23,217

Diluted EPS (INR) 14.2 14.6 20.0 23.2

EPS growth (%) 7.2 2.4 37.6 15.9

VNB margin (%) 18.7 20.3 22.2 24.0

RoEV (%) 20.5 19.1 17.8 18.4

P/E (x) 67.5 65.9 47.9 41.3

P/EV (x) 3.7 2.9 2.5 2.1

PRICE PERFORMANCE

Business fundamentals continue to be attractive

Growth in APE was led by ULIPs, individual protection and annuity. SBI Life sustained

strong momentum clocked in ULIPs over the past few quarters with a growth of 68%

YoY to INR10.2bn. Amongst the top 3, SBI Life was the only private life insurer to

grow the individual protection pie (76% YoY) as others posted decline in Q1FY22.

Management remains confident that premium pricing and stricter underwriting

standards augur well for mortality outcomes. Non-par and group businesses saw

some pressure as customer preference was stronger for other segments. Sales of

non-par savings/guaranteed products should improve over the coming weeks with

launch of low ticket size products at revised pricing, in our view. Consequently, there

is further room for margin to improve despite 250bps jump to 21.2% in Q1FY22.

High covid deaths spur bolstering of reserves

Q1FY22 expectedly marked a steep rise in death claims, with the number of claims

at 1.28x of FY21. SBI Life received over 8,900 claims in Q1 with net claims of

INR5.7bn. Covid reserve was also strengthened to INR4.4bn (1.3% of EV) from

INR1.8bn in Q4FY21 to tackle future stress. Management remains confident that this

will be more than sufficient and expects overall mortality experience to be within

expected range as mortality assumptions were strengthened at the end of Q4FY21.

Explore:

Outlook and valuations: Quality @ attractive valuations; retain ‘BUY’

Best in class cost ratio, improved persistency and strong premium growth have led

to another sound operating quarter. While margin has expanded, it still lag peers

and hence has highest room for improvement over FY21–23. The stock is trading at

2.5x FY22E P/EV; in our view, it deserves a re-rating upwards. We maintain ‘BUY/SO’.

Financials Year to March Q1FY22 Q1FY21 % Change Q4FY21 % Change

APE 16,200 12,700 27.6 39,700 (59.2)

PAT 2,231 3,909 (42.9) 5,324 (58.1)

Diluted (EPS) 2.2 3.9 (42.9) 5.3 (58.1)

VNB margin (%) - YTD 21.2 18.7 20.4

Above In line Below

Profit

Margins

Revenue Growth

Overall

36,000

39,600

43,200

46,800

50,400

54,000

750

815

880

945

1,010

1,075

Jul-20 Oct-20 Jan-21 Apr-21 Jul-21

SBILIFE IN Equity Sensex

India Equity Research Insurance July 26, 2021

SBI LIFE INSURANCE RESULT UPDATE

Santanu Chakrabarti Vinayak Agarwal +91 (22) 4342 8680 +91 (22) 6620 3020 [email protected] [email protected]

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SBI LIFE INSURANCE

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Financial Statements Policyholders' Account (INR mn) Year toMarch FY20A FY21A FY22E FY23E

First year premium 98,288 1,03,381 1,28,838 1,46,414

Renewal premium 2,40,422 2,96,299 3,30,916 3,76,181

Single Premium 67,637 1,02,861 1,17,706 1,39,336

NBP 0 0 0 0

APE 1,07,400 1,14,500 1,40,609 1,60,347

Gross Premium 4,06,347 5,02,542 5,77,461 6,61,931

Net Premium 4,03,240 4,97,683 5,74,921 6,59,108

Income from Invest. 29,968 3,14,560 2,01,467 2,33,260

Other Income 5,220 8,606 394 433

Total Income 4,38,428 8,20,849 7,76,782 8,92,802

Commissions (16,249) (17,788) (22,038) (25,104)

Operating expenses (24,131) (24,123) (35,225) (39,716)

Other expenses (10,543) (5,696) (8,318) (9,379)

Total Expenses (50,923) (47,607) (65,582) (74,198)

Benefits paid (net) (1,62,509) (2,15,826) (2,90,626) (3,45,172)

Change in liab (net) (2,06,049) (5,39,342) (3,96,574) (4,47,263)

Surplus 18,947 18,074 24,002 26,169

Appropriations 4,320 1,287 0 0

Trf to Shareholder a/c 14,627 16,788 24,002 26,169

Key Ratios (%)


APE growth 10.7 6.6 22.8 14.0

FYP growth 8.5 5.2 24.6 13.6

Single premium growth 25.2 23.2 11.7 13.7

Renewal prem growth 42.9 52.1 14.4 18.4

VNB margin 18.7 20.3 22.2 24.0

VNB growth 16.9 15.9 33.8 23.4

EV growth 17.3 27.0 16.5 17.1

Shareholders’ Account


Trf from Policyhldr ac 14,627 16,788 24,002 26,169

Income from Invest. 4,767 6,885 7,179 8,057

Contri. to the PH a/c (4,763) (8,248) (7,423) (6,681)

PBT 14,135 15,425 23,285 26,997

Provision for taxation 86 (866) (3,260) (3,780)

PAT 14,222 14,559 20,025 23,217

Source: Company and Edelweiss estimates

Balance Sheet (INR mn) Year to March FY20A FY21A FY22E FY23E

Net worth 87,431 1,04,004 1,16,782 1,34,984

Policyholders’ funds 7,45,358 9,51,343 11,36,006 13,48,984

Prov. For linked Liab 7,85,653 11,62,150 13,74,061 16,08,346

Funds for future app. 7,137 8,423 8,423 8,423

Total Liabilities 16,25,579 22,25,921 26,35,272 31,00,738

Shareholder invest. 68,279 86,047 93,426 1,07,987

Policyholders invest. 7,34,199 9,39,364 11,07,606 13,15,259

Linked assets 7,85,653 11,62,150 12,67,930 14,92,769

Total Fixed Assets 5,812 5,654 6,446 7,348

Net current assets 27,990 29,124 1,55,819 1,72,801

Other assets 3,645 3,581 4,046 4,572

Debit Balance in P&L 0 0 0 0

Total Assets 16,25,579 22,25,921 26,35,272 31,00,738

Assumptions


GDP (YoY) 4.8 (7.0) 7.0 6.0

Repo rate 4.4 3.5 3.5 4.0

USD/INR (average) 70.7 75.0 73.0 72.0

Tax rate (0.6) 5.6 14.0 14.0

Valuation


Price / EV (x) 3.7 2.9 2.5 2.1

RoEV (%) 20.5 19.1 17.8 18.4

Price / Book (x) 11.0 9.2 8.2 7.1

Price / AUM (x) 0.7 0.6 0.4 0.4

ROA (%) 0.9 0.8 0.8 0.8

ROE (%) 17.4 15.2 18.1 18.4

EV as % of Valuation 27.4 35.0 41.0 48.0


SBI LIFE INSURANCE

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Q1FY22 result review: Profit and loss statement

(INR mn) Q1FY22 Q1FY21 Growth (%) Q4FY21 Growth (%)

Gross Premium Income 83,767 76,434 9.6 1,56,467 (46.5)

(i) First Year Premiums 14,047 10,858 29.4 36,603 (61.6)

(ii) Renewal Premiums 50,317 45,849 9.7 94,596 (46.8)

(ii) Single Premium 19,402 19,728 (1.7) 25,269 (23.2)

Reinsurance Ceded -641 -554 15.8 -910 (29.5)

Net Premium Income 83,126 75,881 9.5 1,55,557 (46.6)

Income from Investments 74,099 85,828 (13.7) 45,059 64.4

Other Income 145 72 101.8 102 41.3

Contribution from Shareholder's Account - - 8,248

Total Income 1,57,369 1,61,781 (2.7) 2,08,967 (24.7)

Benefits Paid 47,918 28,528 68.0 76,597 (37.4)

Change in Valuation Liability 97,767 1,16,921 (16.4) 1,14,493 (14.6)

Bonus Paid - - -

Commission Paid 2,699 2,338 15.4 5,896 (54.2)

Operating expenses 6,055 5,376 12.6 6,565 (7.8)

Provision for Bad & Doubtful Debts 1,451 127 1,041.7 1,542 (5.9)

Total Expenses 1,55,889 1,53,289 1.7 2,05,092 (24.0)

Surplus before tax 1,480 8,491 (82.6) 3,875 (61.8)

Tax expense 361 2,393 (84.9) -1,202 (130.0)

Surplus After Tax 1,119 6,098 (81.6) 5,077 (78.0)

Less: Funds for Future Appropriation 1,531 3,276 (53.3) -7,098 (121.6)

Transfer to Shareholders Funds -412 2,822 (114.6) 12,175 (103.4)

Income from Investments 2,817 949 196.9 2,274 23.9

Other Income 30 16 93.6 16 94.8

Total Income 2,847 964 195.2 2,289 24.4

Expenses other than those related to insurance business 101 95 5.8 -5 (2,157.1)

Provision for Dimunition in Investment Value - -185 (100.0) - #DIV/0!

Contribution to Policyholder's Account - - 8,248

Profit Before Taxes 2,334 3,877 (39.8) 6,221 (62.5)

Tax 103 -32 (419.6) 898 (88.6)

Profit After Tax 2,231 3,909 (42.9) 5,324 (58.1)

Source: Company, Edelweiss Research

SBI LIFE INSURANCE



Q1FY22 result review: Balance sheet

(INR mn) Q1FY22 Q1FY21 Growth (%) Q4FY21 Growth (%)

Share capital 10,002 10,000 0.0 10,001 0.0

Reserve and surplus 93,202 82,756 12.6 90,926 2.5

Credit/[debit] fair value change account 2,573 361 612.4 3,077 (16.4)

Shareholder's Funds 1,05,777 93,117 13.6 1,04,004 1.7

Credit/[debit] fair value change account 28,428 -1,424 (2,096.8) 27,268 4.3

Policy Liabilities 9,57,479 7,85,122 22.0 9,24,075 3.6

Provision for linked liabilities 9,96,961 7,80,396 27.8 9,65,495 3.3

Fair value change (Linked) 1,48,749 34,676 329.0 1,26,540 17.6

Funds for discontinued policies 80,802 63,610 27.0 70,115 15.2

Funds for Future Appropriations 9,955 10,413 (4.4) 8,423 18.2

Total Liabilities 23,28,151 17,65,910 31.8 22,25,921 4.6

Shareholders’ 94,804 80,826 17.3 86,047 10.2

Policyholders’ 9,72,265 7,76,945 25.1 9,39,364 3.5

Asset held to cover linked liabilities 12,26,512 8,78,682 39.6 11,62,150 5.5

Investments 22,93,581 17,36,453 32.1 21,87,562 4.8

Loans 3,345 3,687 (9.3) 3,581 (6.6)

Fixed assets - net block 5,595 5,701 (1.9) 5,654 (1.0)

Deferred tax asset - - -

Net Current Assets (C) = (A-B) 25,630 20,069 27.7 29,124 (12.0)

Debit Balance in Profit & Loss Account (Shareholders' account) - - -

Total Assets 23,28,151 17,65,910 31.8 22,25,921 4.6



SBI LIFE INSURANCE


Q1FY22 result review: Key data

Key ratios Q1FY22 Q1FY21 Growth (%) Q4FY21 Growth (%)

Premium breakup (INRmn, YTD)

Individual APE 14,400 10,600 35.8 38,900 (63.0)

Group APE 1,800 2,100 (14.3) 800 125.0

New Business APE 16,200 12,700 27.6 39,700 (59.2)

Ind. Rated Premium Market share (%) (YTD)

Within Industry 8.5 10.3 -180 bps n.a. n.a.

Within Private Sector 18.9 17.6 130 bps 22.6 -370 bps

Product mix (%) - Based on Total APE mix

Par 7.4 8.7 -130 bps 8.1 -70 bps

Non Par 11.0 18.1 -707 bps 13.6 -256 bps

ULIP 62.6 48.0 1455 bps 70.0 -745 bps

Individual Savings 81.0 74.8 618 bps 91.7 -1071 bps

Group Savings 5.5 12.6 -708 bps -1.0 653 bps

Individual Protection 8.0 5.5 246 bps 6.3 168 bps

Group Protection 5.5 7.1 -157 bps 3.0 250 bps

Channel mix (%) - Based on Total APE mix (YTD)

Bancassurance 56.8 55.5 132 bps 60.7 -392 bps

Agency 29.0 26.6 245 bps 30.7 -172 bps

Others 14.2 18.0 -377 bps 8.6 563 bps

Persistency ratios (%) - Based on regular premium (YTD)

13th month 85.9 82.6 330 bps 85.4 50 bps

25th month 75.3 76.3 -100 bps 75.8 -50 bps

37th month 72.0 68.8 320 bps 72.1 -10 bps

49th month 65.7 60.9 480 bps 65.0 70 bps

61st month 47.9 50.0 -210 bps 48.7 -80 bps

Operational parameters (%)

Expenses (other than commission) ratio (%) 7.2 7.0 19 bps 4.2 303 bps

Commission ratio (%) 3.2 3.1 16 bps 3.8 -55 bps

Total cost ratio 10.4 10.1 36 bps 8.0 249 bps

Solvency ratio 215 239 -2400 bps 215 0 bps

On Actual tax rate basis

VNB 3,430 2,400 42.9 8,800 (61.0)

VNB margin (YTD) 21.2 18.7 250 bps 20.4 80 bps

EV

EV (INRbn) n.a n.a n.a 263 n.a

Operating RoEV (YTD) n.a n.a n.a 20.5 n.a


SBI LIFE INSURANCE



Q1FY22 Conference call highlights

With respect to business

Strong recovery after impact of second wave of COVID on Q1-FY22 business

Maintain leadership position in individual rated premium with a private market

share of 18.9% in Q1FY22

Decline in PAT is due to additional reserves created for covid. Covid reserve now

stands at INR4.4bn compared to INR1.8bn at the end of Q4FY21

With vaccination rollout and reduction in mortality, hopeful of current reserves

being more than sufficient

Mortality assumptions were strengthened at the end of Q4FY21 and current

experience is in line with improved assumptions

8,956 covid claims were received in Q1FY22. This is 1.28x increase in number of

claims reported from FY21 to Q1-FY22

COVID-19 claims net of reinsurance came in at INR5.7bn in Q1FY22. (gross

INR7.13bn)

Total of 28,000 claims were received in Q1FY22 with net claims of INR13.15bn

Actual total claims for Q1 is well within provisions made at the end of Q4FY21

Retention ratio has been consistent across segments over time

Improvement in persistency ratio across most cohorts due to focus on improving

quality of business

More reliance on digital and automation due to covid and therefore continuous

investment in these channels

Strive to increase in market share of protection and other profitable products

Offer an array of products and sell products based on preferences of customers

Increased adoption of technology like robotics, block chain and cloud computing

driving efficiencies are primary drivers of a better cost ratio

With respect to product mix

Aspires to offer an array of products to customers and not focus on any one

category in extremes

In current quarter, there was strong traction and demand for ULIPs

This had an impact on growth in non-par savings as customers preferred linked

products over non-linked on the back of strong capital market performance

Company is in the process of launching a new product in non-par category with

revised yield. This should also boost growth going ahead

Ticket size of this product will be much lower compared to current size

Remain confident of strong growth in non-par savings

Non-par book at 7%; size in balance sheet is much lower as it is a relatively new

business


SBI LIFE INSURANCE


Individual protection saw a strong growth of 76% in APE in Q1FY22

Actively growing individual protection and will continue to focus on it as it

remains a secular growth opportunity

Underwriting standards have always been conservative and therefore there is no

question of stricter underwriting. Players who reduced prices and standards to

gain market share have faced a problem

Proportion of sales of individual protection has remained steady over the last

few years with 50%-55% from tier 1 cities

Group protection saw a muted growth of 4% YoY

Will evaluate and continue offering GTI. Supply depends on a variety of factors

including reinsurance and pricing.

Share of protection and annuity at 12% of overall APE in Q1FY22

With respect to distribution

Diversified network of Traditional + Alternative channels enabled to maintain

business continuity during Covid-19

New key corporate agent partnerships grew by 86% YoY on a low base

In current quarter, share of protection sold by banca channel has increased from

18% to 23%

Strong analytics in place to identify customers who can buy specific products

Strong distribution network of banca and agency ensured a growth of 30% and

38% YoY respectively

Very happy with the way SBI Bank channel is performing

Aim to reach a stage where all branches of SBI are selling life insurance products

of the company. However, this will take some time and remain confident of

reasonable growth through this channel till then

SBI LIFE INSURANCE



Company Description

SBI Life has been consistently rated as one of the top players in India’s life insurance

sector on the basis of Annual Premium Equivalent (APE) as well as New Business

Premium (NBP). It was established in FY01 as a joint venture between State Bank of

India (SBI) and BNP Paribas Cardif. The company’s business comprises individual life

and group business, including participating, non-participating, pension, group

gratuity, group leave encashment, group superannuation, group immediate annuity,

unit-linked insurance products, variable insurance products, health and micro

insurance. Some of these policies have riders such as accident & disability benefit,

level term and critical illness. SBI Life was the second life insurance company in India

to be listed on NSE and BSE in FY18.

It reported AUM of INR1,548bn at Q2FY20 end and solvency ratio of 220%, well

above the regulatory threshold of 150%. The company has a market share of 13.6%

of the industry on an individual received premium (IRP) basis and 6.2% on NBP basis.

SBI Life has a balanced product mix with ULIPs forming 43% of NBP for Q1FY20. The

residual consists of group savings (29%), protection (12%), participating (7%) and

non-participating (9%). On the distribution front, while bancassurance contributes

more than half of total NBP (57%), the balance comes from agency (18%) and

others—corporate agents, brokers, online and group business (25%).

The company’s strategy is to maximise opportunities available by focusing on

geographical expansion through distribution channels, cost discipline, customer-first

approach, digital transformation and enhanced training.

Investment Theme

SBI Life Insurance (SBI Life) is the largest private life insurer in India with an individual

APE market share of 22.3% (FY19). It is the lowest cost player on an overall basis and

well-poised to notch up market share gains by straddling the entire gamut of

products fully backed by the deep nation-wide distribution of its parent, banking

behemoth SBI. We estimate SBI Life to clock APE CAGR of 16% over FY19–22 and

maintain ROEV of 18% via average annual expansion of 50bps in new business

margin.

Key Risks

Protracted weakness in capital markets affecting ULIP persistency: Limited

renewals obviously hurt a largely fixed cost-quasi asset management business -

through a rundown in asset size and consequent cost-driven profitability

pressures.

Regulatory changes that can have a profound impact.

Operational challenges such as managing activations across the massive branch

network and management continuity given its PSU parentage


SBI LIFE INSURANCE


Additional Data Management

CEO Mahesh Sharma

CFO Sangramjit Sarangi

COO

Other

Auditor GMJ & Co and SC Bapna & Associates

Holdings – Top 10* % Holding % Holding

Canada Pension 2.86 Standard Life A 1.42

Govt of Singapo 2.69 Vanguard Group 0.82

ICICI Pru Nifty 2.45 Baron Capital I 0.54

CA Emerald 1.90 DSP Investment 0.45

Temasek 1.51 Kotak Mahindra 0.32

*Latest public data

Recent Company Research Date Title Price Reco

03-May-21 A breakaway performance ; Result Update

958.6 Buy

23-Jan-21 Cost leadership strengthened by scale; Result Update

862.55 Buy

26-Oct-20 Protection spurt; Result Update 778.85 Buy

Recent Sector Research Date Name of Co./Sector Title

22-Jul-21 ICICI Lombard GI Covid claims play spoilsport; Result Update

22-Jul-21 Bajaj Finserv Soft quarter: Covid leaves a mark; Result Update

20-Jul-21 ICICI Prudential Life Stellar quarter sans mortality reserving; Result Update

Rating Interpretation

Source: Bloomberg, Edelweiss research

Daily Volume

Source: Bloomberg

Rating Distribution: Edelweiss Research Coverage

Buy Hold Reduce Total

Rating Distribution* 170 54 19 244

>50bn >10bn and <50bn <10bn Total

Market Cap (INR) 214 40 5 259

*1 stocks under review

Rating Rationale

Rating Expected absolute returns over 12 months

Buy: >15%

Hold: >15% and <-5%

Reduce: <-5%

TP1,220

TP1,010

500

645

790

935

1080

1225

Jul-18 Jan-19 Jul-19 Jan-20 Jul-20 Jan-21

(IN

R)

SBILIFE IN Equity Buy Hold Reduce0

25

50

75

100

125

Jul-18 Jan-19 Jul-19 Jan-20 Jul-20 Jan-21

(Mn

)

SBI LIFE INSURANCE



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ESL or its associates may have received compensation from the subject company in the past 12 months. ESL or its associates may have managed or co-managed public offering of securities for the subject company in the past 12 months. ESL or its associates may have received compensation for investment banking or merchant banking or brokerage services from the subject company in the past 12 months. ESL or its associates may have received any compensation for products or services other than investment banking or merchant banking or brokerage services from the subject company in the past 12 months. ESL or its associates have not received any compensation or other benefits from the Subject Company or third party in connection with the research report. Research analyst or his/her relative or ESL’s associates may have financial interest in the subject company. ESL and/or its Group Companies, their Directors, affiliates and/or employees may have interests/ positions, financial or otherwise in the Securities/Currencies and other investment products mentioned in this report. ESL, its associates, research analyst and his/her relative may have other potential/material conflict of interest with respect to any recommendation and related information and opinions at the time of publication of research report or at the time of public appearance.

Participants in foreign exchange transactions may incur risks arising from several factors, including the following: ( i) exchange rates can be volatile and are subject to large fluctuations; ( ii) the value of currencies may be affected by numerous market factors, including world and national economic, political and regulatory events, events in equity and debt markets and changes in interest rates; and (iii) currencies may be subject to devaluation or government imposed exchange controls which could affect the value of the currency. Investors in securities such as ADRs and Currency Derivatives, whose values are affected by the currency of an underlying security, effectively assume currency risk.

Research analyst has served as an officer, director or employee of subject Company: No

ESL has financial interest in the subject companies: No

ESL’s Associates may have actual / beneficial ownership of 1% or more securities of the subject company at the end of the month immediately preceding the date of publication of research report.

Research analyst or his/her relative has actual/beneficial ownership of 1% or more securities of the subject company at the end of the month immediately preceding the date of publication of research report: No

ESL has actual/beneficial ownership of 1% or more securities of the subject company at the end of the month immediately preceding the date of publication of research report: No

Subject company may have been client during twelve months preceding the date of distribution of the research report.

There were no instances of non-compliance by ESL on any matter related to the capital markets, resulting in significant and material disciplinary action during the last three years except that ESL had submitted an offer of settlement with Securities and Exchange commission, USA (SEC) and the same has been accepted by SEC without admitting or denying the findings in relation to their charges of non registration as a broker dealer.

A graph of daily closing prices of the securities is also available at www.nseindia.com

Analyst Certification:

The analyst for this report certifies that all of the views expressed in this report accurately reflect his or her personal views about the subject company or companies and its or their securities, and no part of his or her compensation was, is or will be, directly or indirectly related to specific recommendations or views expressed in this report.

http://www.nseindia.com/


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Additional Disclaimers

Disclaimer for U.S. Persons

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]

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