Kotak Muthoot Finance

8/12/2019 Kotak Muthoot Finance

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

Kotak Institutional Equities [email protected]: +91-22-4336-0000

We reinitiate coverage with a BUY rating

Muthoot Finance is the largest gold loan NBFC with a gold loan book of `218 bn in March 2014.We expect Muthoot to deliver 17-18% RoE and 11% EPS CAGR over FY2014-17. We reinitiatecoverage on Muthoot with a BUY rating and target price of ` 250. At our target price, Muthootwill trade at 11X PER and 1.7X PBR FY2016E.

Regulatory developments positive, recent gold price decline a risk

Gold prices declined by 10% over the past month. A reduction in import duty of gold will furtherreduce prices of gold in domestic markets. While the decline in gold price is a risk, we are assertiveon the business because (1) recent regulations (increase in the maximum LTV to 75% for gold-loanNBFCs) indicate a positive regulatory stance on the business and bode well for lenders, (2) despitea sharp decline in gold prices over the past few quarters, Muthoot reported negligible credit losses,likely indicating its superior risk-management systems.

Moderate growth, stable profitability

We forecast moderate loan growth in the mediumterm (7% yoy in FY2015, 17% yoy in FY2016

and 18% yoy in FY2017). Decrease or increase in gold prices will provide downside/upside to ourestimates. While we expect borrowing cost to decline over time, we expect Muthoot to pass onthe same to its borrowers. Stable spreads in the business (though recent capital infusion boostsNIM), stable credit costs and operating expense ratios will drive its profitability, in our view. Whilerecent regulatory developments are positive, adverse regulations (though currently not envisaged)remain an overhang.

Muthoot Finance (MUTH)Banks/Financial Institutions

Strong structural play, gold-price volatility a headwind. We believe MuthootFinance is well placed to deliver 18% RoE and 15-20% loan growth in the mediumterm. We are positive about its long-term growth prospects though volatile gold priceswill likely put pressure on near-term growth. Strong risk management systems (as seenover past few quarters) and lower LTV (64-70%) are positives in the currentenvironment. We reinitiate coverage with a BUY rating and price target of ` 250.

Muthoot FinanceStock data Forecasts/Valuations 2014 2015E 2016E

52-week range (Rs) (high,low) EPS (Rs) 21.0 20.7 22.9Market Cap. (Rs bn) 79.4 EPS growth (%) (22.3) (1.3) 10.6

Shareholding pattern (%) P/E (X) 9.5 9.6 8.7Promoters 80.1 NII (Rs bn) 22.7 22.7 25.7

FIIs 10.3 Net profits (Rs bn) 7.8 8.2 9.1MFs 1.1 BVPS 107.4 131.4 146.3

Price performance (%) 1M 3M 12M P/B (X) 1.9 1.5 1.4Absolute 11.0 20.8 40.5 ROE (%) 19.0 17.3 16.5Rel. to BSE-30 (1.7) 2.3 8.0 Div. Yield (%) 2.8 3.1 3.4

Company data and valuation summary

222-73

BUY

JUNE 09, 2014

RE-INITIATING COVERAGE

Coverage view: Attractive

Price ( ` ): 200

Target price ( ` ): 250

BSE-30: 25,396

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

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

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


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Banks/Financial Institutions Muthoot Finance

2 KOTAK INSTITUTIONAL EQUITIES RESEARCH

Du Pont analysisstable profitability over the medium term

We expect Muthoot to deliver about 3% RoA and 18% RoE over the medium term.We expect the company to maintain about 8% spreads (9% NIM) and operatingexpenses of 4% of the loan book. Muthoot reported high RoEs in the past (30-50%

RoE over 2008-13) due to higher leverage (asset-to-equity ratio of 8-13X). We expectthe company to maintain lower leverage (asset-to-equity ratio of ~6X and tier-I CARof 16%) over time. The current regulations prescribe minimum tier-I CAR of 12%.

Exhibit 1: We expect Muthoot Finance to deliver 18% RoE in the medium termDu Pont analysis, March fiscal year-ends, 2012-17E (percentage of average AUMs)

2012 2013 2014 2015E 2016E 2017ENet interest income 9.8 9.0 8.2 8.6 8.8 8.8 Other income 0.1 0.1 0.2 0.2 0.2 0.2 Credit costs 0.2 0.3 0.2 0.2 0.2 0.2 Operating expenses 3.8 3.4 3.9 3.9 4.0 3.8 PBT post extraordinaries 5.9 5.4 4.3 4.8 4.8 5.1 1-tax rate 0.7 0.7 0.7 0.7 0.7 0.7 RoA 4.0 3.6 2.8 3.1 3.1 3.3 Average assets / average equity (X) 10.5 8.2 6.7 5.5 5.3 5.5 RoE 41.9 29.3 19.0 17.3 16.5 18.2

Source: Company, Kotak Institutional Equities estimates

Moderate growth in gold loans

Muthoot is the largest gold-loan NBFC with market share of about 10% in the organizedsector. The long-term potential of gold loans is strong, considering overall gold stock of18,000 tons ` 48 tn of gold in India. This business has been traditionally carried out by

moneylenders and other players in the unorganized segment. After a high growth phase, weexpect Muthoot to deliver 17-18% loan growth over the medium term.

High growth phase over 2007-13. A low base and a sharp rise in gold prices drove highgrowth in Muthoots gold loan book in the past (62% CAGR in gold loans over FY2007-13).The company increased the number of its branches at 40% CAGR over the period to 4,082branches in FY2013. Gold price increased by 19% CAGR during the period.

Subdued business in the past two years. Muthoot reported 5% loan growth in FY2013and 16% decline in the loan book in FY2014 due to a decline in gold prices in FY2013. Goldprices declined to ` 2,800/gm in April 2013 from ` 3,180/gm in November 2012. Gold priceswere almost stable yoy at ` 2,895/gm until March 2014. Business has largely declined inSouth India (see Exhibit 5). The company added 300 branches (7% of the total) in the lasttwo years. The final RBI guidelines post the KUB Rao Committee recommendations inSeptember 2013 restricting maximum LTV at 60% of underlying gold also affected growthto some extent.

Moderate outlook. We expect the gold loan book to grow by 7% in FY2015 and 17% yoyin FY2016 and FY2017. While Muthoots gold loan book has been declining qoq for the lastfour quarters, the quantum of qoq loan book reduction is now lower (see Exhibit 6). Themanagement said it was recovering/liquidating the loan book of ` 12 bn; it expects the loanbook to resume growth from 2QFY15 and its guidance indicates about 10% loan growthfor the year. Domestic gold prices declined by 10% in the last one month; likely reduction inimport duty will further reduce domestic gold pricesthis will put pressure on loan growth.However the recent relaxation in LTV (increase in maximum LTVs to 75% from 60%) willease the pressure.


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Muthoot Finance Banks/Financial Institutions

KOTAK INSTITUTIONAL EQUITIES RESEARCH 3

Exhibit 2: Muthoot has 10% market share in the organized gold-loan marketGold-loan market in India, March fiscal year-ends, 2009-14 ( ` bn)

2009 2010 2011 2012 2013 2014Total 294 500 800 1,602 1,865 2,050 Co-operative banks 36 49 40 50 50 50 Private sector banks 40 58 55 110 250 270 Public sector banks 149 233 375 892 1,035 1,200 NBFCs 69 161 330 550 530 530 Muthoot Finance (Rs bn) 34 74 159 247 260 219 (% of total) 11 15 20 15 14 11 (% of NBFCs) 49 46 48 45 49 41

Source: IMACS, Kotak Institutional Equities

Exhibit 3: We expect Muthoot to add 700 branches in the nextthree yearsGrowth in branches, March fiscal year-ends, 2010-17E

1,605

2,733

3,5004,082 4,260 4,360

4,6604,960

-

1,200

2,400

3,600

4,800

6,000

2 0 1 0

2 0 1 1

2 0 1 2

2 0 1 3

2 0 1 4

2 0 1 5 E

2 0 1 6 E

2 0 1 7 E

Branches (LHS)(#)

Source: Kotak Institutional Equities

Exhibit 4: Loan growth is likely to pick up over FY2015-16Growth in branches, March fiscal year-ends, 2010-17

-

70

140

210

280

350

2 0 1 0

2 0 1 1

2 0 1 2

2 0 1 3

2 0 1 4

2 0 1 5 E

2 0 1 6 E

2 0 1 7 E

(32.0)

-

32.0

64.0

96.0

128.0Loans (LHS) YoY growth (RHS)(Rs bn) (%)


Exhibit 5: Business per branch reduced in South IndiaBusiness per branch, March fiscal year-ends, 4QFY12-4QFY14 ( ` mn)

4Q FY 12 1QFY 13 2QFY 13 3QFY 13 4QFY 13 1QFY 14 2QFY 14 3Q FY 14 4Q FY 14Total 66 62 62 65 64 61 57 52 51

East 53 62 62 65 64 61 57 52 61West 51 47 52 55 54 52 49 49 51North 63 62 65 69 71 73 71 69 70South 72 65 63 66 64 60 55 49 46



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Exhibit 6: The gold-loan portfolio has been declining over the past four quartersSequential growth in gold loans, March fiscal year-ends, 1QFY13-4QFY14

1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14

Loans under management (Rs bn) 233 237 257 260 258 244 226 219 QoQ (Rs bn) (13) 4 20 3 (2) (14) (18) (7)

QoQ (%) (5.4) 1.7 8.3 1.1 (0.6) (5.6) (7.4) (3.2)

Source: Company, Kotak Institutional Equities

NIM, opex will be stable

We model stable spreads of 8.5% for Muthoot over the next three years. We forecast a 100bps decline in borrowings during the period, which will be fully passed on to Muthootsborrowers, in our view. We believe the recent regulatory developments will help to reduceMuthoots borrowing costs; the impact of recent regulatory developments on the trajectoryof borrowings costs is discussed later.

NIM will expand to 10% in FY2015E from 9.5% in FY2014 after the recent capital infusion.Muthoot recently raised ` 4 bn or 10% of FY2014 net worth at ` 165/share.

We expect operating expenses to stay stable at about 4% of loans. Overall moderatebusiness traction and limited branch additions will support this ratio.

Exhibit 7: We forecast stable spreads in our estimatesYield on loans, cost of funds and NIMs, March fiscal year-ends, 2008-17E (%)

-

5.0

10.0

15.0

20.0

25.0

2 0 1 0

2 0 1 1

2 0 1 2

2 0 1 3

2 0 1 4

2 0 1 5 E

2 0 1 6 E

2 0 1 7 E

7.0

8.0

9.0

10.0

11.0

12.0

13.0Yield on loans (LHS-%) Cost of borrowings (LHS-%) NIM (RHS-%)



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Exhibit 8: Operating expenses to assets to reduce in the medium term with moderation in branchexpansionOperating expenses to average AUMs, March fiscal year-ends, 2010-17E (%)

-

0.5

1.0

1.5

2.0

2.5

2 0 1 0

2 0 1 1

2 0 1 2

2 0 1 3

2 0 1 4

2 0 1 5 E

2 0 1 6 E

2 0 1 7 E

3.0

3.3

3.6

3.9

4.2

4.5

Staff expenses (LHS) Non-staff expenses (LHS) Operating expenses (RHS)


Low NPLs despite volatile gold prices

Low credit losses. While gold prices corrected by 18% between September 2012 and June2013, Muthoot reported stable asset quality performance. Gross NPLs increased but weremanageable (2% in FY2013 from 0.6% in FY2012); credit cost was low at 0.2-0.3%.

Strong risk management practises. Most of Muthoots gold loans have a contractualtenure of about one year. According to the management, most customers repay their loansin about three months. The company follows strong risk-management practises. It activelymonitors LTV on gold loans, persuades customers to top up gold or repay loans and auctions

jewelry (post default).

LTV is not high. Muthoots loan book had average LTV of 64% in March 2014. In 4QFY14,Muthoot disbursed loans at about 70% LTV (lower than 75% LTV as per the currentregulations). We believe that the risk of 10-15% decline in gold prices is manageable forMuthoot given (1) average LTV of 64%, (2) yields of about 20% (assume bullet repayment)and (3) tenure of three months for most loans, maximum tenure of one year.


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Exhibit 9: Gold prices increased substantially since FY2011Domestic gold prices ( ` /gm)

0

700

1,400

2,100

2,800

3,500

M

a y - 0

8

N o v - 0 8

M

a y - 0

9

N o v - 0 9

M

a y - 1

0

N o v - 1 0

M

a y - 1

1

N o v - 1 1

M

a y - 1

2

N o v - 1 2

M

a y - 1

3

N o v - 1 3

M

a y - 1

4

Source: Company, Bloomberg, Kotak Institutional Equities

Exhibit 10: Gold prices came off 10% in the last monthDomestic gold price ( ` /gm)

2,000

2,300

2,600

2,900

3,200

3,500

M a y - 1

2

J u n - 1

2

J u l - 1 2

A u g - 1

2

S e p - 1

2

O c t - 1

2

N o v - 1 2

D e c - 1

2

J a n - 1

3

F e b

- 1 3

M a r - 1

3

A p r - 1 3

M a y - 1

3

J u n - 1

3

J u l - 1 3

A u g - 1

3

S e p - 1

3

O c t - 1

3

N o v - 1 3

D e c - 1

3

J a n - 1

4

F e b

- 1 4

M a r - 1

4

A p r - 1 4

M a y - 1

4

Source: Company, Bloomberg, Kotak Institutional Equities

Exhibit 11: NPLs and write-offs increased in the last two yearsNPLs, provisions and write-offs, March fiscal year-ends, 2010-14

2010 2011 2012 2013 2014

Gross NPLs (Rs mn) 343 460 1,382 5,256 4,160 Gross NPLs (%) 0.5 0.3 0.6 2.0 1.9 Net NPLs (Rs mn) 306 390 1,198 4,434 3,041 Net NPLs (%) 0.4 0.2 0.5 1.7 1.4 Provision (Rs mn) 37 70 184 822 1,119

Provisions for the year (Rs mn) 27 323 419 868 438 Write-offs (Rs mn) 6 18 63 130 226


Positive regulatory developments

Relaxation in LTV for NBFCs is positive. In January 2014, the RBI relaxed the cap on LTVfor gold-loan NBFCs to 75% from 60%. Over the last four years, RBI had introduced severalregulations/guidelines that reduced the scope of operations of gold-loan NBFCs. Therelaxation in LTV is the first guideline that increases the scope of their operations, in ourview.

Regulation for banks, as well. The RBI also recently introduced an LTV cap of 75% forgold loans by banks; the RBI had not imposed a cap on gold loan LTVs for banks earlier. Webelieve this is the first step by the regulator to reduce regulatory arbitration between banksand NBFCs in gold loans.

Positive signal for stakeholders. We believe this regulatory stance (that improves thescope of operations of gold-loan NBFCs) increases the confidence of bankers and otherstakeholders in gold-loan NBFCs. This will, over time, increase access to banking funds andlikely reduce cost of borrowings (as discussed below).


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Exhibit 12: Summary of regulations that have implications on gold-loan NBFCs

Date Guidelines Key recommendationsGold loans from NBFCs not be classified as PSLLoans refinanced to gold-loan companies not be classified as PSLLTV capped at 60% for gold-loan NBFCsMinimum tier-1 capital ratio of 12% to be maintainedMiximum gap of six months between two placementsMinimum subscription of Rs2.5 mnMaximum of 49 investorsLTV ratio stable at 60%, standardization in calculation of LTV ratioMeasures to increase transparency in the auction processRegulations for opening new branchesPAN card mandatory for all transactions over Rs0.5 mnAll loans over Rs0.1 mn to be disbursed through checksCap on maximum LTV raised to 75% from 60%Cap on maximum LTV of 75% applies to banks, as well

Jan-11 Priority-sector lending (PSL) targets for banks

Mar-12 Cap on maximum LTV ratio

Jan-14 Increase in maxium LTV ratio

Jun-13 Debt private placement by NBFCs

Sep-13Final guidelines based on KUB Raorecommendations

Source: RBI, Kotak Institutional Equities

Can positive regulatory developments change business dynamics?

Muthoots borrowing costs are higher than other NBFCs. Muthoot and other gold-loanNBFCs borrow from banks and debt markets at about 12% or 200 bps over the bank baserate150-250 bps over the borrowing costs of most large-asset finance NBFCs.

Regulatory uncertainty raised borrowing costs, but they are likely to reverse. InFY2008, Muthoots borrowing costs were about 9.5%-in line with peers. A low duration onthe asset side and liquid security (underlying gold) makes gold loans relatively less riskycompared to other asset-finance companies. Regulatory uncertainty and volatile gold priceswere the likely reasons for the rise in borrowing costs of gold loan NBFCs, in our view. Afavorable view on the business (after recent regulatory developments) will help Muthoot toregain comfort from banks. We hence believe Muthoots borrowing costs and other gold-loan NBFCs will decline over time.

Lower borrowing costs will make Muthoot more competitive. We expect Muthoot topass on the reduction in borrowing costs to its customers, thus making it more competitivein the system. Notably, most NBFCs offer gold loans at about 20% IRR compared to banks,which offer loans at 12-15%. Reduction in borrowing costs by 100-300 bps, will help NBFCsto offer gold loans at 17-19%, thus making them relatively competitive in the lending

system. We are currently not modeling a sharp decline in borrowing costs in our model. Thisremains an upside to our estimate.


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Exhibit 13: Borrowing costs for Muthoot increased faster than other NBFCsCalculated borrowing costs, March fiscal year-ends, 2007-14 (%)

2007 2008 2009 2010 2011 2012 2013 2014

LIC Housing Finance 7.9 8.5 8.8 8.0 7.8 9.1 9.5 9.5 Mahindra Finance 7.3 9.1 9.9 8.6 8.2 9.3 9.6 9.5

Muthoot 9.1 10.9 12.2 11.2 12.0 17.0 14.3 11.9 Shriram City Union Finance 11.1 11.1 11.8 11.5 9.8 11.5 12.6 10.9 Shriram Transport 11.0 11.0 11.3 11.3 11.0 10.7 10.6 11.6


The ability to refinance gold bonds is crucial

Muthoot is primarily dependent on banks (30% of total) and gold bonds (42% of total) forits borrowings. The share of gold bonds increased to 42% in March 2014 from 29% inMarch 2012.

In June 2013, the RBI introduced guidelines for debt placement of NCDs by NBFCs, whichprescribed a minimum ticket size of ` 2.5 mn under the private-placement route. We believeMuthoot will find it challenging to continue with these gold bonds after these regulations.We expect the company to replace the bonds with bank loans and increase the quantum ofNCDs under public issuance (13% of borrowings as on March 2014). As discussed above, amore assertive view of banks after the recent regulatory developments will improveMuthoots financial flexibility to refinance these bonds.

Exhibit 14: Muthoot is largely dependant on banks for fundingBreak-up of borrowings, March fiscal year-end, 2014 (%)

CPs2%Subordinated debt

13%

Bank loans30%

Listed NCDs(secured)

13%

Gold bonds42%



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Exhibit 15: Muthoot trades at 1.5X one-year forward PBROne-year forward trading PER and PBR, June 2011-June 2014

0.0

2.0

4.0

6.0

8.0

10.0

J u n - 1

1

S e p - 1

1

D e c - 1

1

M a r - 1

2

J u n - 1

2

S e p - 1

2

D e c - 1

2

M a r - 1

3

J u n - 1

3

S e p - 1

3

D e c - 1

3

M a r - 1

4

J u n - 1

4-

0.5

1.0

1.5

2.0

2.5Rolling PER (X) (LHS) Rolling PBR (X) (RHS)

Source: Company, Bloomberg, Kotak Institutional Equities estimates


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Exhibit 16: Muthoot Finance key financial ratios and growth ratesMarch fiscal year-ends, 2012-17E

2012 2013 2014 2015E 2016E 2017EGrowth in key parameters (%)Profit and loss statement - yoy (%)Interest income 97 18 (9) (5) 9 14Interest costs 126 21 (7) (9) 5 11Net interest income 73 15 (10) 0 13 17Net total income 73 16 (9) 1 13 17Provisioning expenses 30 107 (50) 21 28 19Net income (post provisions) 74 14 (8) 0 13 17

Operating expneses 72 14 12 (5) 15 8Staff expenses 90 30 9 0 13 17Other operating expenses 55 (4) 19 (12) 19 (4)Depreciation expenses 83 38 5 (18) 7 6

PBT post extraordinaries 75 14 (21) 5 11 24Tax 64 15 (18) 5 11 24PAT 81 13 (22) 5 11 24Balance sheet - yoy (%)

Gold loans 83 22 (16) 7 17 18Gold loans (incl sell down) 55 5 (16) 7 17 18Fixed assets 15 13 8 0 7 6Other current assets (13) 76 11 (7) 13 14Total assets 67 26 (13) 5 16 17Borrowings 30 56 (18) 3 14 18Current liabilities 1110 (70) 5 (10) 60 20Total liabilities 62 25 (16) 2 17 18Share capital 16 0 0 7 0 0Reserves and surplus 152 32 16 24 12 13Shareholders funds 119 34 9 22 11 13

Key ratios (%)

Interest yield (incl loans sold down) 22.3 21.1 20.4 20.6 20.0 19.5 Interest cost (incl loan sold down) 13.4 13.2 11.9 11.9 11.5 11.0 Spreads 9 8 8 9 9 9NII/ loans under management 11 10 9 10 10 10

Operating costs/ net income (post provisions) 38.7 38.9 47.6 44.9 45.9 42.7 Cash/ total assets + loan sold down 3.0 4.6 8.0 5.5 5.2 4.9 Tax rate 33.0 33.6 34.6 34.5 34.5 34.5 Debt/ equity (X) 5.3 6.1 4.7 3.9 4.0 4.2 Du Pont analysis(% of average assets including loans sold down)Net interest income 9.8 9.0 8.2 8.6 8.8 8.8 Other income 0.1 0.1 0.2 0.2 0.2 0.2 Credit costs 0.2 0.3 0.2 0.2 0.2 0.2 Operating expenses 3.8 3.4 3.9 3.9 4.0 3.8 PBT post extraordinaries 5.9 5.4 4.3 4.8 4.8 5.1 1-tax rate 0.7 0.7 0.7 0.7 0.7 0.7 RoA 4.0 3.6 2.8 3.1 3.1 3.3 Average assets / average equity (X) 10.5 8.2 6.7 5.5 5.3 5.5 RoE 41.9 29.3 19.0 17.3 16.5 18.2



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Exhibit 17: Muthoot Finance key financial line itemsMarch fiscal year-ends, 2012-17E ( ` mn)

2012 2013 2014 2015E 2016E 2017EIncome statement (Rs mn)

Interest income 45,263 53,523 48,934 46,724 50,882 58,115 Interest costs 23,337 28,253 26,259 23,984 25,202 28,039 Net interest income 21,926 25,271 22,675 22,741 25,680 30,076 Other income 228 347 540 600 700 700 Net total income 22,153 25,618 23,215 23,341 26,380 30,776 Provisioning expenses 419 868 438 502 651 776 Net income (post provisions) 21,734 24,750 22,777 22,839 25,729 30,000 Operating expneses 8,421 9,638 10,841 10,251 11,803 12,783

Staff expenses 4,192 5,453 5,917 5,935 6,724 7,872 Other operating expenses 3,899 3,731 4,448 3,924 4,660 4,464 Depreciation expenses 329 454 476 392 419 446

PBT post extraordinaries 13,314 15,112 11,936 12,588 13,926 17,217 Tax 4,392 5,071 4,135 4,343 4,805 5,940

PAT 8,922 10,041 7,801 8,245 9,122 11,277 No of shares (mn) 372 372 372 397 397 397 EPS - adjusted for bonus (Rs) 24 27 21 21 23 28 BVPS - adjusted for bonus (Rs) 79 106 115 131 146 165

Balance sheet (Rs mn)AssetsGold loans 213,730 260,004 218,620 235,014 273,807 322,249 Investments 75 825 354 354 354 354 Fixed assets 2,682 3,030 3,269 3,270 3,495 3,720 Current assets 17,230 30,304 33,695 31,213 35,405 40,419

Cash and bank balances 7,950 13,420 20,489 14,762 16,238 17,862 Other cash balance 6,246 13,420 13,420 14,762 16,238 17,862

Other current assets 9,280 16,884 13,206 16,451 19,167 22,557

Total assets 233,717 294,163 255,938 269,851 313,061 366,742 LiabilitiesBorrowings 154,804 240,889 198,620 204,466 233,832 275,968 Current liabilities 46,914 13,975 14,673 13,206 21,129 25,355 Total liabilities 204,461 254,864 213,293 217,672 254,961 301,323 Share capital 3,717 3,717 3,717 3,971 3,971 3,971 Reserves and surplus 25,540 33,639 38,928 48,209 54,129 61,448 Shareholders funds 29,257 39,299 42,645 52,179 58,100 65,419 Aggregate loan book (incl sell down)Loans under management 246,730 260,004 218,620 235,014 273,807 322,249 Total assets under management 266,717 294,163 255,938 269,851 313,061 366,742



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Disclosures


"I, Nischint Chawathe, hereby certify that all of the views expressed in this report accurately reflect my personal views aboutthe subject company or companies and its or their securities. I also certify that no part of my compensation was, is or will be,directly or indirectly, related to the specific recommendations or views expressed in this report."

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

Source: Kotak Institutional Equities As of March 31, 2014

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

Percentage of companies within each category for which KotakInstitutional Equities and or its affiliates has provided investmentbanking services within the previous 12 months.

* The above categories are defined as follows: Buy = We expectthis stock to deliver more than 15% returns over the next 12months; Add = We expect this stock to deliver5-15% returns over the next 12 months; Reduce = We expect thisstock to deliver -5-+5% returns over the next 12 months; Sell =We expect this stock to deliver le ss than -5% returns over the next12 months. Our target prices are also on a 12-month horizonbasis. These ratings are used illustratively to comply with applicableregulations. As of 31/03/2014 Kotak Institutional EquitiesInvestment Research had investment ratings on 164 equitysecurities.

16.5%

28.0%

36.6%

18.9%

4.3% 3.7% 2.4%0.6%

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 15% returns over the next 12 months.

ADD. We expect this stock to deliver 5-15% returns over the next 12 months.

REDUCE. We expect this stock to deliver -5-+5% returns over the next 12 months.

SELL.We expect this stock to deliver


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Kotak Muthoot Finance

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