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- - -
Contents
Daily Alerts
Change in Reco
Amara Raja Batteries: Downgrade to SELL
Company alerts
Cummins India: Pricing in transient kicker of shortage-led demand
Sector alerts
Energy: Another delay, hopefully the last one
Metals & Mining: Captive coal blocksa new chapter
Technology: Accenture results - largely neutral for Indian IT
INDIA DAILY
September 25, 2014
India 24-Sep 1-day 1-mo 3-mo
Sensex 26,745 (0.1) 1.2 5.7
Nifty 8,002 (0.2) 1.2 5.7
Global/Regional indices
Dow Jones 17,210 0.9 0.8 2.0
Nasdaq Composite 4,555 1.0 (0.0) 4.0
FTSE 6,706 0.5 (1.0) (0.4)
Nikkei 16,318 0.9 4.5 6.9
Hang Seng 24,048 0.5 (4.4) 5.2
KOSPI 2,042 0.3 (0.9) 3.0
Value traded India
Cash (NSE+BSE) 206 208 203
Derivatives (NSE) 4,349 2,098 3,291
Deri. open interest 2,359 2,216 2,214


Forex/money market
Change, basis points
24-Sep 1-day 1-mo 3-mo
Rs/US$ 60.9 8 37 84
10yr govt bond, % 8.7 2 (4) (13)
Net investment (US$ mn)
23-Sep MTD CYTD
FIIs (157) 1,112 14,023
MFs 29 152 954
Top movers
Change, %
Best performers 24-Sep 1-day 1-mo 3-mo
CIPLA IN Equity 600.0 2.7 18.2 40.7
BHFC IN Equity 794.6 (4.8) 0.3 35.0
LPC IN Equity 1367.3 0.7 8.2 33.5
DRRD IN Equity 3229.2 0.9 12.1 30.3
DIVI IN Equity 1730.5 1.1 9.7 28.0
Worst performers
JPA IN Equity 31.9 (7.9) (38.5) (56.8)
JSP IN Equity 189.5 (10.1) (25.2) (42.6)
GMRI IN Equity 19.3 (11.5) (22.8) (42.2)
UT IN Equity 20.2 (8.2) (10.4) (41.9)
IDBI IN Equity 67.5 (5.5) (14.5) (37.2)


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



Earnings upgrades unlikely
We have built in revenue growth of 15% CAGR between FY2015E and FY2017E, which is
based on the following assumptions (1) 15% CAGR in automotive four-wheeler replacement
and four-wheeler OEM volumes and (2) 14% CAGR in industrial revenues over FY2015-17E.
Replacement automotive volumes will likely track the growth of automobile OEM sales over the
past six years as organized players capture the first two replacements of battery, post which
customers tend to shift to unorganized players. In the past six years, automobile OEM volumes
have grown at 12% CAGR and we believe battery industry automotive replacement volumes
will likely grow at a similar rate.
We have also built in EBITDA margin of 17.5% between FY2015E and FY2017E, which is higher
than the companys past five-year average of 16%. We reckon that industrial business margins
could go down from current levels as competition in the industrial business is increasing with
Exide reentering the telecom business, and it will probably pursue business opportunities in the
industrial segment due to likely slowdown in the inverter battery business with improving power
situation. Exide Industries has also indicated that in the longer term it would like to maintain
EBITDA margins in the range of 14-15%; Amara Raja, which has higher EBITDA margin than
Exide due to lower overhead costs, will likely trend towards 15% EBITDA margin.
Expensive valuations drive downgrade to SELL (from ADD earlier)
We downgrade the stock to SELL (from ADD earlier) due to expensive valuations. We have kept
our earnings estimates and target price (`550) unchanged. We value the stock at 18X FY2016E
EPS.


Amara Raja Batteries (AMRJ)
Automobiles
Downgrade to SELL. We downgrade the stock to SELL (from ADD earlier) due to
expensive valuations and limited probability of improvement in EBIT margin. Our reverse
DCF valuation exercise indicates that the stock is discounting (1) 12% CAGR in sales
over the next 15 years, (2) EBIT margin of 14% till perpetuity and (3) terminal growth of
5%. We believe the companys EBIT margins have averaged around 12% in the past 15
years and the competitive intensity in the industrial business is increasing, which should
cap the EBIT margin in ~12% range in the longer term. We find the stock expensive;
downgrade to SELL (from ADD earlier) with an unchanged target price of `550.

SELL
SEPTEMBER 25, 2014
CHANGE IN RECO.
Coverage view: Attractive
Price (`): 630
Target price (`): 550
BSE-30: 26,745























Amara Raja Batteries
Stock data Forecasts/Valuations 2014 2015E 2016E
52-week range (Rs) (high,low) EPS (Rs) 21.5 24.4 29.9
Market Cap. (Rs bn) EPS growth (%) 28.2 13.6 22.5
Shareholding pattern (%) P/E (X) 29.6 26.1 21.3
Promoters 52.1 Sales (Rs bn) 34.4 40.8 47.5
FIIs 16.9 Net profits (Rs bn) 3.7 4.2 5.1
MFs 9.5 EBITDA (Rs bn) 5.6 6.9 8.3
Price performance (%) 1M 3M 12M EV/EBITDA (X) 19.0 15.8 13.1
Absolute 13.8 32.9 109.5 ROE (%) 30.3 27.4 27.2
Rel. to BSE-30 12.3 24.3 55.7 Div. Yield (%) 0.5 0.8 0.9
Company dat a and v aluat ion summary
675-288
108.8


Amara Raja Batteries Automobiles
KOTAK INSTITUTIONAL EQUITIES RESEARCH 3
Exhibit 1: Stock discounts 12% CAGR in revenues over the next 15 years and 5% perpetual growth after FY2030
Reverse DCF valuation exercise for Amara Raja Batteries, March fiscal year-ends (` mn)
20 14 20 15 20 16 20 17 20 18 20 19 20 20 20 28 20 29 20 30
Net sales 34,367 40,797 47,494 54,144 60,641 67,918 76,068 188,343 210,944 236,257
EBIT 4,958 5,669 6,808 7,885 8,490 9,509 10,650 26,368 29,532 31,895
EBIT (1-tax) 3,421 3,912 4,698 5,441 5,858 6,561 7,348 18,194 20,377 22,007
EBIT margin (%) 14.4 13.9 14.3 14.6 14.0 14.0 14.0 14.0 14.0 13.5
Depreciation (646) (1,196) (1,471) (1,596) (1,663) (1,863) (2,086) (5,166) (5,786) (6,480)
Gross block 9,955 13,955 15,455 16,455 17,326 19,405 21,734 53,812 60,270 67,502
Fixed asset turnover 3.5 2.9 3.1 3.3 3.5 3.5 3.5 3.5 3.5 3.5
Capex (4,000) (1,500) (1,000) (871) (2,079) (2,329) (5,766) (6,457) (7,232)
Working capital 4,124 4,896 5,699 6,497 7,277 8,150 9,128 22,601 25,313 28,351
Change in working capital (772) (804) (798) (780) (873) (978) (2,422) (2,712) (3,038)
FCF 336 3,865 5,239 5,870 5,471 6,128 15,173 16,993 18,218
WACC 12.0
Discounting year 0 1 3 4 5 13 14 15
Discounted FCF 336 3,865 4,677 4,179 3,477 3,477 3,477 3,477 3,328
Sum of cash flows 54,298
Terminal value 49,924
Enterprise value 104,222
Net cash 4,473
Equity value 108,695
Share count 171
Eq uit y value per s h ar e 6 36

Source: Kotak Institutional Equities estimates


Exhibit 2: We expect 15% CAGR in replacement four-wheeler battery volumes over FY2015-17E
Volume breakdown segment-wise, March fiscal year-ends, 2011-2017E (units)
20 11 20 12 20 13 20 14 20 15 E 20 16 E 20 17E
Vo lume s o ld ( mn un it s )
Four-wheeler OEM 1.29 1.52 1.55 1.52 1.56 1.80 2.07
Yoy chg (%) 50.0 17.8 2.0 (2.0) 3.0 15.0 15.0
Four-wheeler replacement 1.70 2.00 2.66 3.06 3.52 4.12 4.71
Yoy chg (%) 21.4 17.6 33.0 15.0 15.0 17.0 14.5
To t al f o ur - wh eeler vo lumes 2. 9 9 3. 5 2 4. 21 4. 5 8 5 . 0 8 5 . 9 2 6 . 78
Yoy chg (%) 32.3 17.7 19.6 8.7 11.0 16.4 14.7
Replacemen t / OEM ( X) 1. 32 1. 32 1. 72 2. 0 1 2. 25 2. 29 2. 28
Two-wheeler OEM 0.90 2.20 2.60 3.15
Two-wheeler replacement 1.80 2.00 2.74 3.56 4.63 5.56 6.39
Yoy chg (%) 28.6 11.1 37.0 30.0 30.0 20.0 15.0
To t al t wo - wh eeler vo lumes 1. 8 0 2. 0 0 2. 74 4. 46 6 . 8 3 8 . 16 9 . 5 4
Yoy chg (%) 28.6 11.1 37.0 62.8 53.1 19.4 17.0
To t al aut o mo t ive vo lumes 4. 79 5 . 5 2 6 . 9 5 9 . 0 4 11. 9 1 14. 0 7 16 . 32
Reven ue b r eak- up ( Rs mn )
Four-wheeler OEM 2,899 3,689 4,064 4,182 4,383 5,128 6,001
Four-wheeler replacement 6,002 7,273 10,447 13,215 15,197 17,781 20,359
To t al f o ur - wh eeler 8 , 9 0 1 10 , 9 6 2 14, 5 11 17, 39 7 19 , 5 8 0 22, 9 0 9 26 , 36 0
Two-wheeler OEM 549 1,365 1,641 2,023
Two-wheeler replacement 1,480 1,809 2,677 3,653 4,749 5,699 6,554
To t al t wo - wh eeler 1, 48 0 1, 8 0 9 2, 6 77 4, 20 2 6 , 114 7, 341 8 , 5 78
Automotive 10,381 12,771 17,187 21,599 25,695 30,250 34,938

Source: Kotak Institutional Equities estimates



Automobiles Amara Raja Batteries
4 KOTAK INSTITUTIONAL EQUITIES RESEARCH
Exhibit 3: We expect revenues to grow at 16% CAGR over the next three years
Revenue breakdown for Amara Raja Batteries by segment, March fiscal year-ends, 2011-17E (` mn)
20 11 20 12 20 13 20 14 20 15 E 20 16 E 20 17E
Reven ue ( Rs mn )
Four-wheeler OEM 2,899 3,689 4,064 4,182 4,383 5,128 6,001
Four-wheeler replacement 6,002 7,273 10,447 13,215 15,197 17,781 20,359
Two-wheeler OEM 549 1,365 1,641 2,023
Two-wheeler replacement 1,480 1,809 2,677 3,653 4,749 5,699 6,554
Automotive 10,381 12,771 17,187 21,599 25,695 30,250 34,938
Telecom 3,853 4,600 5,520 6,900 8,763 10,077 11,287
UPS 5,085 6,000 6,404 6,035 6,940 7,981 8,939
Railways and others 1,343 1,726 1,899 1,994 2,233 2,568 2,876
Trade auto batteries 17 535 856 800 840 966 1,111
Trade home UPS 48 346 1,092 714 749 824 907
Service and scrap revenue 38 50 152 330 364 400 440
To t al r even ues 20 , 76 5 26 , 0 29 33, 110 38 , 372 45 , 5 8 3 5 3, 0 6 6 6 0 , 49 6
Reven ue mix ( %)
Four-wheeler OEM 14 14 12 11 10 10 10
Four-wheeler replacement 29 28 32 34 33 34 34
Two-wheeler OEM 1 3 3 3
Two-wheeler replacement 7 7 8 10 10 11 11
Aut o mo t ive 5 0 49 5 2 5 6 5 6 5 7 5 8
Telecom 19 18 17 18 19 19 19
UPS 24 23 19 16 15 15 15
Railways and others 6 7 6 5 5 5 5
Trade auto batteries 0 2 3 2 2 2 2
Trade home UPS 0 1 3 2 2 2 1
Service and scrap 0 0 0 1 1 1 1
To t al r even ues 10 0 10 0 10 0 10 0 10 0 10 0 10 0

Source: Kotak Institutional Equities estimates



Amara Raja Batteries Automobiles
KOTAK INSTITUTIONAL EQUITIES RESEARCH 5
Exhibit 4: We expect earnings to grow at a healthy ~18% CAGR during FY2015-17E, driven by 15% CAGR in net sales
Amara Raja Batteries profit and loss, balance sheet and cash flow statement, March fiscal year-ends, 2011-17E (` mn)
20 11 20 12 20 13 20 14 20 15 E 20 16 E 20 17E
Pr o f it mo d el ( Rs mn )
Net sales 17,611 23,645 29,614 34,367 40,797 47,494 54,144
EBITDA 2, 5 46 3, 39 6 4, 5 15 5 , 6 0 3 6 , 8 6 5 8 , 278 9 , 48 0
Other income 96 280 466 455 372 590 875
Interest (15) (24) (10) (7)
Depreciation (417) (465) (661) (646) (1,196) (1,471) (1,596)
Pr o f it b ef o r e t ax 2, 210 3, 18 6 4, 310 5 , 40 6 6 , 0 41 7, 39 7 8 , 76 0
Tax expense (729) (1,036) (1,351) (1,692) (1,867) (2,286) (2,707)
Ad jus t ed n et pr o f it 1, 48 1 2, 15 1 2, 8 6 7 3, 6 74 4, 174 5 , 112 6 , 0 5 3
Ear n in g s per s h ar e ( Rs ) 8 . 7 12. 6 16 . 8 21. 5 24. 4 29 . 9 35 . 4
Balan ce s h eet ( Rs mn )
Equity 6,459 8,235 10,598 13,627 16,824 20,740 25,377
Total borrowings 1,000 855 881 857 84 84 84
Deferred tax liability 205 220 195 301 301 301 301
Current liabilities 3,495 4,206 6,030 6,609 7,876 8,793 9,766
To t al liab ilit ies 11, 15 9 13, 5 15 17, 70 5 21, 39 4 25 , 0 8 6 29 , 9 18 35 , 5 28
Net fixed assets 3,526 3,861 4,618 7,679 10,483 10,513 9,917
Investments 161 161 161 161 1,161 4,161 7,161
Cash 451 2,292 4,108 2,946 604 396 1,461
Other current assets 7,021 7,202 8,818 10,609 12,839 14,849 16,989
To t al as s et s 11, 15 9 13, 5 15 17, 70 5 21, 39 4 25 , 0 8 6 29 , 9 18 35 , 5 28
Fr ee cas h f lo w ( Rs mn )
Operating cash flow excl. working cap. changes 1,999 2,865 3,448 4,103 4,998 5,992 6,774
Working capital changes (1,138) 120 (94) (1,315) (962) (1,094) (1,167)
Capital expenditure (667) (809) (1,463) (3,731) (4,000) (1,500) (1,000)
Fr ee cas h f lo w 19 5 2, 176 1, 8 9 2 ( 9 43) 36 3, 39 9 4, 6 0 7
Rat io s
EBITDA margin (%) 14.5 14.4 15.2 16.3 16.8 17.4 17.5
PAT margin (%) 8.4 9.1 9.7 10.7 10.2 10.8 11.2
Net debt/equity (X) 0.1 (0.2) (0.3) (0.2) (0.0) (0.0) (0.1)
Book value (Rs/share) 37.8 48.2 62.0 79.8 98.5 121.4 148.6
RoAE (%) 24.9 29.3 30.4 30.3 27.4 27.2 26.3
Ro ACE ( %) 21. 9 26 . 5 28 . 8 28 . 6 26 . 4 27. 0 26 . 2

Source: Kotak Institutional Equities estimates








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Planned TN power cuts for industries and coal block de-allocation positive for powergen
The Tamil Nadu Generation and Distribution Corporation has announced power cuts for high-
tension industrial and commercial power users for late peak hours and non-peak hours. This is a
2H phenomenon (wind power supply tapers) though becomes relevant for genset companies
due to weak base (power cuts for industries moderated through FY2014). We assume a 2 GW
deficit impact, of which 25% may get captured by genset companies. This yields 5% growth
kicker for Cummins powergen sales for FY2015 (~1.5% impact on overall sales).
De-allocation of coal-blocks will have a delayed impact on power supply as these would
continue to operate for the next six months. Subsequent handover to Coal India or reallocation
may disrupt power supply in FY2016. A complete disruption will reduce coal supply for power
generation by 15-20 mn tons, affecting 4 GW of power. We assume 25% of this opportunity
to get captured by genset companies and build in an additional 10% growth kicker in FY2016.
Dealer feedback: demand for standby power remains weak, especially for Cummins
Our discussion with one of the key dealers for Cummins (for West and South India) brings out
focus of Cummins on improving its competitive positioning (longer warranty, better CPCB II-
compliant product). This may hinder growth for Cummins powergen segment in the near term
(pricing better for competition), though would eventually help the company garner higher
market share. Near-term outlook for demand for standby power remains weak.
CAT dealer statistics: recovery in core high hp exports for Cummins may not sustain
Caterpillars global dealer sales for electric power (in constant US$ terms) have declined in double
digits in July and August. This hints that the sequential recovery in HHP exports for Cummins in
1QFY15 may not sustain. Low hp exports have more than doubled yoy in 1QFY15, but can only
contribute as much of positive surprise (~30% of sales) over our estimates (35% CAGR).
We build in strong recovery in scale-up of new businesses; retain REDUCE
We revise estimates by 2-5% to `27.5, `31.8 and `39.9 from `27.0, `30.5 and `37.8 for
FY2015E-17E on higher estimates for domestic powergen sales growth margin (30-70 bps
increase on correcting commodity prices). We revise TP to `640 from `610.



Cummins India (KKC)
Industrials
Pricing in transient kicker of shortage-led demand. The recent announcements of
planned power cuts for industries in Tamil Nadu and the coal-block de-allocation will
benefit the powergen business for Cummins India in FY2015-16. The impact will be
muted for Cummins overall revenues apart from being transient. Dealer feedback for
domestic standby power demand though remains sedate, especially for Cummins.
Recovery in high hp exports for Cummins may also not sustain, as suggested by weak
Caterpillar global dealer sales. Revise TP to `640 (from `610); retain REDUCE.

REDUCE
SEPTEMBER 25, 2014
UPDATE
Coverage view: Neutral
Price (`): 680
Target price (`): 640
BSE-30: 26,745























Cummins India
Stock data Forecasts/Valuations 2014 2015E 2016E
52-week range (Rs) (high,low) EPS (Rs) 21.3 27.5 31.8
Market Cap. (Rs bn) EPS growth (%) (23.6) 28.9 15.7
Shareholding pattern (%) P/E (X) 31.9 24.7 21.4
Promoters 51.0 Sales (Rs bn) 39.8 47.8 59.4
FIIs 18.0 Net profits (Rs bn) 5.9 7.6 8.8
MFs 10.6 EBITDA (Rs bn) 7.0 8.7 11.5
Price performance (%) 1M 3M 12M EV/EBITDA (X) 26.5 21.3 16.2
Absolute 0.3 4.7 68.6 ROE (%) 23.9 27.9 28.5
Rel. to BSE-30 (0.9) (0.7) 25.6 Div. Yield (%) 1.5 1.9 2.1
Company dat a and valuat ion s ummar y
720-388
188.4


Cummins India Industrials
KOTAK INSTITUTIONAL EQUITIES RESEARCH 7
TN power cuts for industries and coal block de-allocation positive for powergen
We highlight the impending industry-focused power cuts in Tamil Nadu from October, as
announced by the state electricity authority (a 20% cut during non-peak hours and 10% of
supply available during peak hours of 6 pm to 10 pm). We note that power cuts to
industries in the South had moderated significantly over FY2014. Likely stiff power cuts in
2H can thus lead to better growth for powergen companies. We note that the wind power
tapers off in 2H, leading to the power shortage and the situation will self-correct starting
May.
We put below the trend in scheduled power cuts in the South, which shows the periodicity
in power cuts for South India as well as the weak base of last year (beneficial for Cummins
in 2HFY15).
Exhibit 1: Power cuts had declined substantially in FY2014, making case for growth in 2H as power cuts return
Details of power cuts (notified and load-shedding) on industries over Apr-2005 to Aug-2014 (MW)
6.5
7.6
10.3
12.4
13.3
12.8
6.7
8.1
0.1
0
2
4
6
8
10
12
14
A
p
r
-
0
5
A
p
r
-
0
7
A
p
r
-
0
9
A
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r
-
1
1
J
a
n
-
1
1
A
u
g
-
1
1
O
c
t
-
1
1
D
e
c
-
1
1
F
e
b
-
1
2
A
p
r
-
1
2
J
u
n
-
1
2
A
u
g
-
1
2
O
c
t
-
1
2
F
e
b
-
1
3
A
p
r
-
1
3
J
u
n
-
1
3
A
u
g
-
1
3
O
c
t
-
1
3
D
e
c
-
1
3
F
e
b
-
1
4
A
p
r
-
1
4
J
u
n
-
1
4
A
u
g
-
1
4
(GW)
South
Total
North

Source: CEA, Kotak Institutional Equities
The recent announcement of the Supreme Court on de-allocation of all private sector coal
blocks will also have a bearing on the power situation for the country. We account for the
impact of this development in the note below.
Modest impact for Cummins overall sales
Tamil Nadu power cuts. Based on past history of such shortages in the southern region,
we believe that this can yield an additional power deficit of 2 GW. Assuming 25% of this
demand buys gensets (many would already have, some will go for rented gensets), there
may be sales of about 500 MW. This translates into a `1.5 bn opportunity for related
engines and a `0.5 bn opportunity for Cummins. We build in this opportunity for
Cummins (assume 25% revenue growth for FY2015 versus 20% earlier). Overall impact
on Cummins Indias business will be lower at ~1-2% of sales for FY2015.
Coal block de-allocation. De-allocation of coal blocks will take away another 20 mn
tons of coal production or lead to a transient shortfall of about 4 GW. This will start
affecting power supply in FY2016 as the coal blocks that have been de-allocated can
produce for another six months. In FY2016, these blocks will either get reallocated or
given to Coal India. In both the cases, there can be a delay of 6-12 months before
resumption of normal supply. We factor in this benefit for Cummins by building in higher
20% revenue growth in FY2016 as well. This will improve sales of Cummins India by 2-
3% in FY2016.



Industrials Cummins India
8 KOTAK INSTITUTIONAL EQUITIES RESEARCH
Shortage-led demand is mostly out of Cumminss powergen sales
We believe that shortage-led demand has been broadly taken out in FY2012 and FY2014
and that growth from here should follow the pace of capacity additions. There is an upside
risk from shortage-led demand returning on the back of specific bottlenecks as seen in the
recent past.
Cummins management has cited in the past that standby powergen sales should equate to
50% of capacity additions on a steady-state basis. The current share of powergen sales is
close to 65% of thermal capacity additions, implying an adjusted share of close to 50%
(assuming additions beyond thermal and 10% replacement demand).
Exhibit 2: Contribution from shortage-led demand has corrected significantly over the past 2-3 years
Powergen market as a proportion of total capacity additions in the market, March fiscal year-ends, 2006-14
2006 2007 2008 2009 2010 2011 2012 2013 2014
Cummins India powergen sales (Rs mn) 5,813 8,138 10,265 10,022 10,423 13,446 12,532 15,790 10,942
Engine pricing (Rs mn/MW) 2.0 2.1 2.2 2.3 2.4 2.5 2.6 2.8 2.9
Impllied Cummins sales (GW) 3.0 4.0 4.8 4.4 4.4 5.4 4.8 5.7 3.8
Impllied market sales (GW) 8.9 11.9 14.3 13.3 13.1 16.1 14.3 17.2 11.3
Annul power capacity addition (GW 2.0 4.5 7.0 3.5 9.6 12.2 20.5 20.6 17.8
Power gen demand as s har e of t ot al capacit y addit ions (%) 445 264 204 384 137 133 70 83 64


Notes:
(a) We assume 5% growth in realization/MW for power gensets with base of Rs2.5 mn/MW in FY2011.
(b) We assume static 33% market share of Cummins in powergen market.
Source: CEA, Company, Kotak Institutional Equities estimates
Recovery in core high hp exports may not sustain
Based on Caterpillars dealer statistics, global electric power sales (in constant US$ terms)
have declined further in July 2014 (down 16% yoy) and August 2014 (down 13% yoy). This
hints that the sequential recovery in HHP exports for Cummins in 1QFY15 may not sustain.
Exhibit 3: Sharp double-digit decline over past four months
Yoy growth for CAT Global's electric power dealer sales (%)
(21)
(17) (15)
(40)
(20)
0
20
40
60
80
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
(%)
2013 2012 2011 2010 2014

Source: Company, Kotak Institutional Equities
Low hp exports had more than doubled yoy in 1QFY15, but can only contribute as much of
positive surprise (currently ~30% of sales) over our estimates (35% CAGR over FY2014-17E).
CAT dealer statistics


Cummins India Industrials
KOTAK INSTITUTIONAL EQUITIES RESEARCH 9
Exhibit 4: Low hp exports have doubled yoy though still account for 30% of export sales
Exports break-up for Cummins India, March fiscal year-ends (` mn)
LHP, 522
Mid range,
296
Heavy duty,
357
HHP, 1,429
Spares, 156
Export sales breakup in 1QFY14 (Rs2,800 mn)

LHP, 1,190
Mid range,
460
Heavy
duty, 400
HHP, 1,720
Spares, 120
Export sales breakup in 1QFY15 (Rs3,900 mn)

Source: Company, Kotak Institutional Equities

Strengthening competitive positioning further; no recovery visible in demand
Our discussion with one of the key dealers for Cummins (for West and South India) brings
out focus of Cummins on improving its competitive positioning (longer warranty, better
CPCB II-compliant product). This may hinder growth for Cummins powergen segment in
the near term (pricing better for competition), though would eventually help the company
garner higher market share. The sector as a whole though would not be able to grow at a
strong pace as power capacity additions would keep shortage-led demand in check (as seen
in recent months where power demand has grown in double digits with deficit maintained
at sub-4% levels). Entry of Perkins (now expected in Oct 2014) would also contain business
outperformance for Cummins.
CPCB-II Cummins focused on the long term, unlike competition. Cummins India
has taken a large price increase and has introduced electronic engines to comply with
CPCB-II norms (sets base for compliance with next set of emission norms revision also).
The competition has gone for a cheaper option in electronic gas recirculation (EGR). This
may benefit in the short term in terms of better pricing, though would reduce engine life
of their gensets. For its new engines, Cummins has increased warranty to five years from
two years. Cummins has been able to get compliance approval for its key 100 and 125
kVA products in August while some of its competitors still having not got approval for
their 500 kVA products.
Near-term demand outlook remains weak. On the back of transition issues related to
CPCB-II, there were dealer stock-outs in July, which have incrementally got corrected. The
company has taken higher price increase versus competition for its CPCB II-compliant
engines (provide a better product) and thus may see business go to competition in the
short term. There is limited potential for support from government spending as it
grapples with the situation of droughts announced in certain states. Private sector
sentiment though has changed for the positive post May 2014 and its expected to lead
to demand growth from November-December.



Powergen dealer
feedback


Industrials Cummins India
10 KOTAK INSTITUTIONAL EQUITIES RESEARCH
Low hp segment premium pricing in price-sensitive segment to limit share gains.
The dealer has recently been given the distributorship of Cummins sub-7.5kVA products.
For the entire LHP segment, Cummins has maintained its premium pricing and thus may
not be able to make strong market share gains in this price-sensitive segment. The dealer
shared the information of having done 5,000-6,000 genset sales in the segment in
FY2014, similar to FY2010 levels.
Distribution business getting impacted by lower usage. The dealer cited potential for
service income to remain weak as the power situation in its territory improves. The dealer
specifically pointed out Maharashtra, where there has been significant decline in usage of
generator sets. We note that the impact of this on Cumminss distribution segment sales
would be limited to the extent of share of power generation (distribution segment sales
get dominated by mining and construction sales).
Perkins entry gets delayed till Oct 2014. Perkins has further delayed the
commissioning of its Aurangabad facility to October 2014 from June 2014 (we note
more-than-a-year delay from original commissioning timeline of June 2013). The
company plans to produce 3,000 units of its 4,000 series engines (23 liter to 61 liter
engines), eventually ramping up to 5,000 units. At present, Cummins capacity in the
high hp capacity may be in the range of 12,000-15,000 units.
We build strong recovery in scale-up of new businesses; retain REDUCE
We revise estimates by 2-5% to `27.5, `31.8, `39.9 from `27.0, `30.5, `37.8 for FY2015E-
17E on higher estimates for domestic powergen sales growth (5% revision each in FY2015
and FY2016) and margin (30-70 bps increase). We revise TP to `640 from `610.
Exhibit 5: Key estimates for Cummins India, March fiscal year-ends, 2014-17E (` mn)

20 14 20 15 E 20 16 E 20 17E 20 15 E 20 16 E 20 17E 20 15 E 20 16 E 20 17E
Reven ues 39 , 76 7 47, 76 4 5 9 , 40 5 73, 38 7 47, 217 5 8 , 0 9 2 71, 8 77 1. 2 2. 3 2. 1
Power generation 10,942 13,678 16,413 18,875 13,130 15,100 17,365 4.2 8.7 8.7
Industrials 5,200 5,460 6,825 8,531 5,460 6,825 8,531 0.0 0.0 0.0
Auto 1,170 1,346 1,615 1,938 1,346 1,615 1,938 0.0 0.0 0.0
Distribution 9,300 10,229 11,764 13,528 10,229 11,764 13,528 0.0 0.0 0.0
Exports 11,979 16,171 21,831 29,472 16,171 21,831 29,472 0.0 0.0 0.0
EBITDA 6,968 8,685 11,457 14,404 8,454 10,906 13,592 2.7 5.1 6.0
EBITDA mar g in ( %) 17. 5 18 . 2 19 . 3 19 . 6 17. 9 18 . 8 18 . 9 ( +30 b ps ) ( +5 0 b ps ) ( +70 b ps )
PAT 6,000 7,426 8,564 10,733 7,290 8,215 10,155 1.9 4.2 5.7
Contribution from JVS (92) 192 248 315 192 248 315 0.0 0.0 0.0
Adjusted PAT 5,908 7,618 8,811 11,048 7,482 8,463 10,470 1.8 4.1 5.5
EPS ( Rs ) 21. 3 27. 5 31. 8 39 . 9 27. 0 30 . 5 37. 8 1. 8 4. 1 5 . 5
Gr o wt h ( %)
Revenues 20.1 24.4 23.5 18.7 23.0 23.7
Power generation 25.0 20.0 15.0 20.0 15.0 15.0
Industrials 5.0 25.0 25.0 5.0 25.0 25.0
Auto 15.0 20.0 20.0 15.0 20.0 20.0
Distribution 10.0 15.0 15.0 10.0 15.0 15.0
Exports 35.0 35.0 35.0 35.0 35.0 35.0
EBITDA 24.6 31.9 25.7 21.3 29.0 24.6
PAT 28.9 15.7 25.4 26.6 13.1 23.7
New es t imat es Old es t imat es % r evis io n

Source: Company, Kotak Institutional Equities estimates






Cummins India Industrials
KOTAK INSTITUTIONAL EQUITIES RESEARCH 11
Exhibit 6: Standalone balance sheet, profit model and cash flow statement of Cummins, March fiscal year-ends, 2010-17E (Rs mn)

20 10 20 11 20 12 20 13 20 14 20 15 E 20 16 E 20 17E
Balan ce s h eet
Sh ar eh o ld er s f un d s 15 , 6 10 18 , 0 6 3 20 , 432 23, 8 6 7 25 , 6 5 2 28 , 9 8 0 32, 8 19 37, 6 29
Loan funds 86 198 147 150 200
To t al s o ur ce o f f un d s 15 , 6 9 6 18 , 26 1 20 , 5 79 24, 345 26 , 117 28 , 9 8 0 33, 0 19 37, 6 29
Net block 3,337 3,564 4,649 4,934 9,192 12,608 16,068 17,443
Net f ixed as s et s 3, 337 4, 210 5 , 146 6 , 142 10 , 149 13, 35 8 16 , 318 17, 6 9 3
Investments and goodwill 7,329 7,255 5,975 6,276 4,954 5,267 5,267 5,267
Cash balances 559 1,037 2,235 3,547 865 606 144 1,716
Net cur r en t as s et s exclud in g cas h 4, 30 1 5 , 5 71 7, 15 3 8 , 38 1 10 , 149 9 , 748 11, 28 9 12, 9 5 4
To t al applicat io n o f f un d s 15 , 6 9 6 18 , 26 1 20 , 5 79 24, 345 26 , 117 28 , 9 8 0 33, 0 19 37, 6 29
Pr o f it mo d el
To t al o per at in g in co me 29 , 0 27 40 , 425 41, 172 46 , 0 12 39 , 76 7 47, 76 4 5 9 , 40 5 73, 38 7
Total operating costs (23,175) (32,791) (34,200) (37,545) (32,799) (39,079) (47,947) (58,983)
EBITDA 5 , 8 5 2 7, 6 34 6 , 9 72 8 , 46 7 6 , 9 6 8 8 , 6 8 5 11, 45 7 14, 40 4
Other operational income 578 914 651 922 776 880 957 1,043
Other income 638 804 1,233 1,949 1,777 2,141 1,325 1,436
PBDIT 6 , 48 9 8 , 438 8 , 20 6 10 , 416 8 , 745 10 , 8 26 12, 78 2 15 , 8 40
Financial charges (21) (48) (54) (46) (42) (11) (11)
Depreciation (361) (366) (420) (473) (528) (791) (1,040) (1,126)
Pre-tax profit 6,108 8,024 7,732 9,897 8,175 10,035 11,731 14,703
Taxation (1,670) (2,114) (2,282) (2,872) (2,175) (2,609) (3,167) (3,970)
PAT 4, 437 5 , 9 10 5 , 45 0 7, 0 25 6 , 0 0 0 7, 426 8 , 5 6 4 10 , 733
Ad jus t ed PAT 4, 49 7 6 , 16 6 6 , 111 7, 732 5 , 9 0 8 7, 6 18 8 , 8 11 11, 0 48
Cas h f lo w s t at emen t
Operating profit before working capital changes 4,819 6,324 5,924 7,544 6,570 8,217 9,615 11,870
Change in working capital / other adjustments 2,238 (1,270) (1,582) (1,229) (1,768) 401 (1,541) (1,665)
Cas h f lo w f r o m o per at in g act ivit es 7, 0 5 6 5 , 0 5 4 4, 342 6 , 315 4, 8 0 2 8 , 6 18 8 , 0 74 10 , 20 5
Fixed assets (607) (1,240) (1,355) (1,469) (4,534) (4,000) (4,000) (2,500)
Investments (3,337) 75 1,279 (300) 1,322 (314)
Cas h ( us ed ) / r ealis ed in in ves t in g act ivit ies ( 3, 9 44) ( 1, 16 6 ) ( 76 ) ( 1, 76 9 ) ( 3, 212) ( 4, 314) ( 4, 0 0 0 ) ( 2, 5 0 0 )
Borrowings (82) 94 67 401 (13) (465) 200 (200)
Dividend paid (2,775) (3,457) (3,544) (4,205) (3,311) (4,098) (4,725) (5,922)
Cas h ( us ed ) / r ealis ed in f in an cin g act ivit ies ( 2, 8 76 ) ( 3, 411) ( 3, 5 31) ( 3, 8 5 1) ( 4, 271) ( 4, 5 6 3) ( 4, 5 36 ) ( 6 , 133)
Cash generated /utilised 236 478 1,197 1,311 (2,681) (259) (462) 1,572
Cash at beginning of year 323 559 1,037 2,235 3,547 865 606 144
Cas h at en d o f year 5 5 9 1, 0 37 2, 235 3, 5 46 8 6 5 6 0 6 144 1, 716
Key r at io s ( %)
EBITDA margin 22.4 20.9 19.9 22.6 22.0 22.7 21.5 21.6
PAT margin 15.3 14.6 13.2 15.3 15.1 15.5 14.4 14.6
RoE 30.0 35.1 30.7 34.5 24.2 27.2 27.7 30.5
RoCE 26.1 27.7 22.5 28.5 19.9 27.2 26.7 29.6
Net debt / equity (X) 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
EPS ( Rs ) 16 . 2 22. 2 22. 0 27. 9 21. 3 27. 5 31. 8 39 . 9

Source: Company, Kotak Institutional Equities estimates



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



Government defers decision on gas price hike until mid-November
The government has deferred a decision on raising domestic gas price until November 15,
2014. We note that the Committee of Secretaries (comprising senior bureaucrats from the
power, fertilizer, expenditure and petroleum and natural gas ministries) formed to review the
gas pricing formula had already submitted its recommendation on a new mechanism for pricing
of domestic natural gas. Unauthenticated media articles suggest that the committee
recommended an increase in price to around US$6/mn BTU instead of ~US$8/mn BTU as per
the earlier Rangarajan Committee formula. Nevertheless, the CCEA has held back the final
decision until mid-November presumably due to sociopolitical considerations (impending state
elections) or a lack of consensus among the producing and consuming sectors (power and
fertilizer).
Higher gas (and oil) price is essential to incentivize indigenous production
In our view, low natural gas (and crude oil) prices will prevent any meaningful reinvestment in
existing fields and investments in new discovered fields and unexplored regions, which is
necessary to sustain and grow domestic production. Higher natural gas (and crude oil) prices
are essential to sustain the extant production of the upstream companies given (1) rising
operating costs and (2) significant reinvestment in mature fields to simply sustain production;
Exhibit 1 shows that the blended cost of oil and gas production for ONGCs domestic fields has
increased over the past few years while Exhibit 2 shows that domestic capex of ONGC has
increased over the years despite relatively steady production over the same period. In any case,
we believe a comprehensive market-based pricing regime for all forms of energy is ultimately
required to (1) remove inefficiencies in the energy chain, (2) rationalize domestic consumption
and (3) incentivize indigenous production. A market-based pricing regime will adequately
incentivize domestic producers, while taking care of the interests of consumers; a consumer will
end up paying higher prices for energy imports if indigenous production continues to lag
domestic demand as has been the case historically. This situation will continue in the future too.
Clarity on several policies is desirable to enhance energy security in the long term
The government may want to provide clarity on several aspects of the policy framework of the
Indian oil and gas sector(1) pricing mechanism for domestic natural gas, (2) pricing of crude
oil from nominated blocks of ONGC and OIL, (3) royalty calculation for onshore crude oil
production, (4) formal deregulation of diesel prices and further reforms for curtailing subsidies
on LPG/kerosene, (5) policy for extension of PSCs and (6) a framework for new PSCs for NELP X
round. In our view, the government can and should quickly fix these issues over the next few
months in order to focus on the more important aspect of increasing domestic energy
production and enhancing Indias energy security. We believe (1) enhancement of domestic
energy security and (2) acquisition of global energy assets should be the central objectives of
Indias energy policy given Indias deteriorating energy situation (see Exhibit 3).



Energy
India
Another delay, hopefully the last one. The government has deferred a decision on
rationalization of domestic gas prices until November 15, 2014. In our view, the
government needs to quickly fix the pricing policies for oil and gas as part of a broader
objective of enhancing Indias energy security. Non-remunerative pricing and policy
uncertainties have led to sluggish domestic production, resulting in rising energy deficit
and imports. Indias current energy policies that constrain domestic production and
inadvertently encourage energy imports at global prices should be reviewed.


NEUTRAL
SEPTEMBER 25, 2014
UPDATE
BSE-30: 26,745

























Energy India
KOTAK INSTITUTIONAL EQUITIES RESEARCH 13
Exhibit 1: ONGC's cost of production has increased over a period of time
Breakdown of ONGC's costs, March fiscal year-ends, 2000-14 (U$/boe)
-
5
10
15
20
25
30
35
2
0
0
0
2
0
0
1
2
0
0
2
2
0
0
3
2
0
0
4
2
0
0
5
2
0
0
6
2
0
0
7
2
0
0
8
2
0
0
9
2
0
1
0
2
0
1
1
2
0
1
2
2
0
1
3
2
0
1
4
Lifting costs SG&A Taxes DD&A One-off items
(US$/boe)

Source: Company, Kotak Institutional Equities estimates

Exhibit 2: ONGC's standalone capex has increased substantially despite steady production levels
Standalone capex and domestic production of ONGC, March fiscal year-ends, 2000-14 (` bn, mn boe)
-
50
100
150
200
250
300
350
400
-
50
100
150
200
250
300
350
400
2
0
0
0
2
0
0
1
2
0
0
2
2
0
0
3
2
0
0
4
2
0
0
5
2
0
0
6
2
0
0
7
2
0
0
8
2
0
0
9
2
0
1
0
2
0
1
1
2
0
1
2
2
0
1
3
2
0
1
4
Standalone capex [LHS] Domestic production [RHS]
(Rs bn)
(mn boe)

Source: Company, Kotak Institutional Equities estimates




India Energy
14 KOTAK INSTITUTIONAL EQUITIES RESEARCH
Exhibit 3: India's dependence on energy imports is expected to double by 2020
Energy deficit, March fiscal year-ends, 2010-20E (mtoe)
20 10 20 11 20 12 20 13 20 14 20 15 E 20 16 E 20 17E 20 18 E 20 19 E 20 20 E
En er g y d eman d
Coal (mn tons) 581 625 696 749 818 887 956 1,029 1,112 1,204 1,304
Natural gas (bcm) 59 65 65 59 54 57 61 68 78 85 89
Petroleum products (mn tons) 138 142 148 155 158 163 168 175 185 193 200
Electricity (hydro+nuclear) (bn kWh) 126 140 163 147 150 159 169 185 199 209 224
To t al d eman d ( mt o e) 49 1 5 22 5 6 4 5 9 1 6 22 6 6 4 70 7 75 7 8 18 8 77 9 38
En er g y s upply
Coal (mn tons) 515 523 536 571 594 615 649 680 707 736 766
Natural gas (bcm) 47 52 47 40 35 36 38 41 44 49 50
Crude oil (mn tons) 34 38 38 38 38 38 38 39 39 39 38
Electricity (hydro+nuclear) (bn kWh) 126 140 163 147 150 159 169 185 199 209 224
To t al s upply ( mt o e) 331 344 349 35 8 36 5 376 39 5 414 431 45 0 46 6
To t al en er g y s h o r t f all ( mt o e) 16 0 177 216 233 25 8 28 9 313 343 38 7 427 472
Notes:
(a) We assume that natural gas demand will be constrained by supply. We do not assume any incremental demand for gas from the power sector.

Source: Kotak Institutional Equities estimates




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



SC recommends de-allocation for all; allows six months relief to adjust to new normal
The Supreme Court has recommended de-allocation of 214 coal blocks, exempting only four
coal blocks allotted to Ultra Mega Power Projects (UMPP) and to state-owned companies such
as NTPC (Pakhri Barwadih) and SAIL (Tasra). As interim relief, the court allowed six months time
for the de-allocation to become effective, by which time the government should be in a position
to transition operations of producing coal blocks to Coal India and eventually look at auctioning
the coal blocks in a transparent bid process. The court also recommended payment of `295/ton
as penalty for the cumulative quantum of coal produced from the blocks. We highlight that the
SC order only deals with cancellation of coal blocks and handover of operational mines to Coal
India from April 1, 2015.
Impact assessmentone-time penalty, interim sourcing and sustainable rise in cost
The impacts for companies come from (1) immediate one-time payment of penalty for
cumulative coal extracted, which could fetch the government `78 bn for 265 mn tons mined,
(2) interim sourcing of coal at an incremental cost from Coal India, based on the notified price
or e-auctionthis would be applicable if the process extends beyond April 2015 and
(3) eventual outcome of the auction process that would determine the sustainable cost of coal
for continuing operations.
Auctioning will determine the cost of coal on a sustained basis
In our view, auctioning of coal blocks will likely solicit aggressive participation from a plethora
of power and steel capacities starved for coal. The floor price that would be bid may be in a
range that would make the effective cost of coal (cost of production + floor price) equivalent to
the notified price of coal (cheapest alternative after captive coal) at the lower end, with a cap
that makes the effective price of coal equivalent to that of imported coal. Alternatively, the
government, in a low-probability scenario, could seek upfront payment for the coal block that
absolves itself of responsibility of monitoring the production profiles of individual blocks.
Jindal Steel and Powerunknowns are declining but uncertainties prevail
Jindal Steel and Power, which enjoyed a higher proportion of coal allocations, has the most to
lose(1) a one-time penalty of ~`27 bn, payable for cumulative coal mined, (2) an earnings hit
in FY2016E probably due to higher cost and constrained availability until coal block auctioning
is complete, and (3) higher sustainable cost of coal, considering the floor price bid in the
auction process.
We assume companies such as JSP will have a higher propensity to bid for captive coal blocks
attached to its end-use projects than peers and accordingly business continuity will be
maintained though with inferior returns.





Metals & Mining
India
Captive coal blocksa new chapter. The much awaited Supreme Court judgment on
captive coal block allocations recommended de-allocation of all but four coal blocks.
The apex court also recommended payment of Rs295/ton for the cumulative coal mined
so far. As a relief measure, the de-allocation will be applicable from April 1, 2015, by
which time the government must gear up to work towards auctioning coal blocks and
allowing Coal India to assume operations until such an auction. JSP (REDUCE: TP cut to
`170 from `280) and Hindalco (REDUCE: TP cut to `165 from `180).


CAUTIOUS
SEPTEMBER 25, 2014
UPDATE
BSE-30: 26,745

























India Metals & Mining
16 KOTAK INSTITUTIONAL EQUITIES RESEARCH
Auctioning may take longer than expected, meanwhile Coal India may benefit
In our view, the process of auctioning and subsequent resumption of operations may take
time. Coal India may benefit in the interim as it takes on itself the onus of maintaining
production of operating coal blocks.
Auctionsvarious points worth considering
While the SC decision paves the way for the auction of coal blocks, several factors are worth
considering.
Benchmark price for auctions. As per the notified auctioning methodology,
consideration is payable through (1) 10% upfront payment based on the NPV of the coal
block and (2) production-based per ton payment on coal mined annually. The intrinsic
value, which forms the floor price, of the coal block is obtained by computing the NPV of
the block using the DCF model. This NPV is then reduced for discounts given by the
government. This NPV number is again reduced by a 10% upfront payment made to the
government. The balance NPV is then annuitized to become the `/ton number to be paid,
based on production.
For calculation of intrinsic value, the earlier regime decided to benchmark the value of
coal blocks to five-year average of global indices, Platts and Argus. These prices are
adjusted by 15% to account for inland freight costs. Media reports indicate questions are
being raised on the benchmarking to global prices as this will result in unrealistic
prices. What pricing methodology is used to arrive at intrinsic value is debatable. This
methodology eliminated the uncertainty in estimated coal reserves and actual production.
The winner in this process is one who agrees to the highest per ton payment to the
government.
A low-probability event is upfront-based auction payment for the coal block that could
also be considered, which absolves of government of responsibility of monitoring the
ongoing production profiles of individual blocks
Logistics will be an important consideration for auctions. Logistics costs play an
important part in the cost of coal delivered to plants. Competitive bidding would be a
function of the location of a coal block. Gare Palma coal block is close to many new
capacities that are running at sub-optimal utilization due to restricted coal availability.
Land acquisition. Land acquisition from the original leaseholders can be a challenge
given the myriad of issues involved. Changes to legislation may be required to expedite
the process.
End-use of coal blocks. Government may choose to prioritize allocation to a particular
sector. For example, in the recent failed auction for three coal blocks, the government
specified industries that would be eligible to participate.
Financial health of players. Debt/ EBITDA ratios in the industry are stretched including
for most large players. An entire upfront payment-based auction may not be preferred by
most in the industry.




Metals & Mining India
KOTAK INSTITUTIONAL EQUITIES RESEARCH 17
Impact on companiesnegative for JSP and Hindalco
We have computed the impact at three levels for
One-time payment for coal mined. The SC has asked companies to submit fines before
the end of CY2014. JSP has cumulatively mined about 90 mn tons of coal. The penalty
for JSP is `27 bn or `29/ share. Hindalco has mined about 17 mn tons and will have to
pay `5 bn or `3/share.
Higher cost for replacement of captive coal. Post March 2015, these companies can
get coal from other sources
In case the coal blocks are not auctioned and are run by Coal India, then through e-
auction or linkage as decided by the government and Coal India and
If the government auctions the coal blocks, then these players will have to bid and win
the coal blocks. We assume (1) that holders of captive coal blocks retain the block in
the auction process and (2) the auction price is paid in the form of per ton
consideration on annual coal production. We peg the incremental cost at `600/ton
(can be substantially higher) which is based on the difference between captive coal
mining cost and Coal Indias linkage price for non-power users.
Changes in our estimates
Exhibits 1 and 5 highlight changes in our JSP and Hindalco estimates. We increase power
and fuel costs to incorporate `600/ton of incremental cost for coal sourced from captive
mines and assume expansion projects to be fully reliant on e-auction and imported coal. We
also incorporate our economists revised forex rate of `60.5/61 for FY2015/16E from
Rs59.5/58. Company-wise impact will be as follows.
Jindal Steel and Power. We cut JSPs consolidated EBITDA estimate over FY2015-17 by 4-
7% led by
7-13% cut in standalone EBITDA. The decline in steel EBITDA is led by (a) increment cost
of `600/ton for coal sourced from captive mines for the Raigarh plant, and (2) higher cost
of coal for Angul steel plant for e-auction/imported coal purchases, and
3% decline in Jindal Powers EBITDA. The impact of `600/ton increase in coal costs has
been partly offset by a 6% increase in our power tariff assumption to Rs3.7/unit.
This results in cut in our JSP EPS estimate over FY2015-17 by 9-20%.
Hindalco. We cut Hindalcos consolidated EBITDA by 1-4%. The impact of higher coal costs
is partly offset by revenue gains from a lower USD-INR rate. Our standalone EBITDA declines
by 7-13% over FY2015-17E, led by (1) a `600/ton increase in coal costs on 2.2 mtpa coal of
Talabira 1, and (2) higher coal costs for Mahan and Aditya smelter from e-auction/imported
coal sourcing. Given the limited e-auction coal availability, we believe Hindalco will have to
source large quantities of imported coal, which will entail higher freight costs due to long
distance. We cut our EPS estimate for HIndalco by 7-14% for FY2015-17E.




India Metals & Mining
18 KOTAK INSTITUTIONAL EQUITIES RESEARCH
Coal block auctioning methodology
The government notified the coal block auctioning methodology in November 2013 for fully
explored coal blocks. The competitive bidding process follows:
Production linked payment. The bids are invited for production linked payment for per
ton of coal mined. The government sets a floor price and bids are accepted above the
floor price.
Intrinsic value of the coal block. To set the floor, the intrinsic value of the coal block is
computed by net present value method using the DCF model. The net present value is
then reduced for any discounts given by the government. The net present value is further
reduced by 10% upfront payment made to the government. The balance net present
value is then annuitized based on the estimated reserves to arrive at per ton consideration
to be paid on annual coal mined.
For intrinsic value computation, the earlier regime had decided to benchmark the value of
coal blocks to five year average of global indices, Platts and Argus. These prices are
adjusted by 15% to account for inland freight costs.
Upfront payment. The bidder has to make an upfront payment of 10% of the intrinsic
value of the coal block.
Tariff based bidding. In case of tariff-based bidding for power plants, the reserves price
is limited to 10% of the intrinsic value so as to ensure lower power generation costs.
Effectively this translates to 90% discount on the floor price for power firms for tariff
based bidding.

Exhibit 1: Jindal Steel and Power (consolidated), change in estimates, March fiscal year-ends, 2015-17E (` mn)

2015E 2016E 2017E 2015E 2016E 2017E 2015E 2016E 2017E
Cons olidat ed
Net sales 272,685 318,904 349,389 268,366 309,219 341,811 1.6 3.1 2.2
EBITDA 75,892 87,258 95,150 79,403 92,130 101,773 (4.4) (5.3) (6.5)
EPS (Rs ) 20.3 21.3 26.4 22.4 25.8 32.9 (9.4) (17.1) (19.7)
St andalone bus ines s
Net sales 189,146 218,172 239,868 187,514 214,341 238,909 0.9 1.8 0.4
EBITDA 49,911 50,244 54,652 53,751 55,735 62,589 (7.1) (9.9) (12.7)
Pr e- except ion PAT 13,689 8,199 9,003 15,657 12,378 15,563 (12.6) (33.8) (42.1)
J indal Power
Net sales 32,632 47,637 53,938 31,568 45,371 51,376 3.4 5.0 5.0
EBITDA 17,336 27,114 29,374 17,822 28,080 30,204 (2.7) (3.4) (2.7)
Pr of it af t er t ax 7,489 13,270 16,425 7,760 14,023 17,148 (3.5) (5.4) (4.2)
Old es t imat es Revis ed es t imat es % change

Source: Kotak Institutional Equities estimates




Metals & Mining India
KOTAK INSTITUTIONAL EQUITIES RESEARCH 19
Exhibit 2: Jindal Steel and Power, Key assumptions, March fiscal year ends (2012-17E)

20 12 20 13 20 14 20 15 E 20 16 E 20 17E
To t al s t eel s ales ( t o n s ) 2, 6 40 , 75 5 2, 8 77, 19 8 2, 8 19 , 146 3, 9 9 5 , 442 4, 75 1, 0 8 6 5 , 0 5 4, 5 27
Iron ore pellets (tons) 2,028,330 2,112,158 1,895,306 1,942,662 2,646,665 3,744,998
Power sales (mn units) 1,473 2,280 1,836 2,335 2,313 2,223
Reven ues ( Rs mn )
Sponge iron 1,815 598 1,003 2,786 1,460
Pig iron 1,995 714 111 9 1
Mild and finished steel sales 103,534 123,195 123,736 170,888 197,083 214,255
Iron ore pellets 18,981 20,223 17,120 16,576 21,260 30,083
Power 5,879 8,970 6,893 8,172 8,097 7,781
Others 10,534 14,583 14,220 15,642 15,642 15,642
To t al 147, 418 16 8 , 8 5 8 16 2, 0 9 2 212, 30 1 244, 8 8 0 26 9 , 232
Realizat io n ( Rs / t o n )
Sponge iron 20,899 19,532 18,057 17,391 17,935
Pig iron 21,119 25,527 24,597 24,525 24,456 25,000
Mild / finished steel 37,810 38,617 39,160 38,587 38,102 38,315
Mild / finished steel 789 710 648 638 625 628
Iron ore pellets 8,464 8,479 8,048 7,602 7,157 7,157
Power (Rs/ unit) 4.0 3.9 3.8 3.5 3.5 3.5
Re/ US$ r at e 47. 9 5 4. 4 6 0 . 5 6 0 . 5 6 1. 0 6 1. 0
St an d alo n e EBITDA ( Rs mn )
Iron ore 2,120 195
Pellets 17,168 17,910 6,440 5,735 6,634 9,388
Steel business 19,834 22,316 29,498 40,207 39,908 41,707
Power 3,683 5,367 3,771 3,969 3,701 3,557
To t al 42, 8 0 6 45 , 78 8 39 , 70 9 49 , 9 11 5 0 , 244 5 4, 6 5 2

Source: Company, Kotak Institutional Equities estimates

Exhibit 3: Jindal Steel and Power, SOTP-based valuation, March 2016E basis (` mn)

(Rs mn) (Rs /s har e)
Steel business + Shadeed EBITDA 60,401
Assigned multiple (X) 6
St eel bus ines s ent er pr is e value (Includes capt ive power ) 360,593 394
Less: Debt of steel business (including subsidiaries) 314,616 344
St eel bus ines s equit y value (A) 45,977 5 0
Power bus ines s
Equity value of Tamnar I and Tamnar II 147
Power bus ines s equit y value (B) 134,097 147
Other investments 2,229 2
Less: Penalty to be paid as per SC order for coal mined (26,550) (29)
Ar r ived mar ket capit alizat ion (A) + (B) 155,754 170
Tar get pr ice (Rs /s har e) 170

Source: Kotak Institutional Equities estimates




India Metals & Mining
20 KOTAK INSTITUTIONAL EQUITIES RESEARCH
Exhibit 4: Jindal Steel & Power (consolidated), profit model, balance sheet and cash flow model, March fiscal year-ends, 2012-17E (` mn)

20 12 20 13 20 14 20 15 E 20 16 E 20 17E
Pr o f it mo d el ( Rs mn )
Net sales 182,086 198,068 200,040 272,685 318,904 349,389
EBITDA 6 7, 9 32 6 5 , 6 8 5 5 7, 6 71 75 , 8 9 2 8 7, 25 8 9 5 , 15 0
Other income 1,419 1,364 656 1,359 2,513 3,695
Interest (3,600) (7,582) (14,915) (23,244) (29,672) (30,544)
Depreciaiton (13,865) (15,392) (18,292) (27,978) (31,973) (34,259)
Exceptional items (5,741) (26,550)
Pr o f it b ef o r e t ax 5 1, 8 8 6 38 , 335 25 , 120 ( 5 21) 28 , 128 34, 0 43
Taxes (11,863) (9,218) (6,182) (7,184) (8,148) (9,303)
Net pr o f it 40 , 0 23 29 , 116 18 , 9 38 ( 7, 70 5 ) 19 , 9 8 0 24, 740
Share in profit/(loss) of associates 200 402 26 26 26 26
Minority interest (574) (417) 140 (269) (476) (590)
Pr o f it af t er t ax an d min o r it y in t er es t 39 , 6 49 29 , 10 1 19 , 10 4 ( 7, 9 49 ) 19 , 5 29 24, 176
Ad jus t ed PAT 39 , 6 49 33, 46 2 19 , 10 4 18 , 6 0 1 19 , 5 29 24, 176
Ear n in g s per s h ar e ( Rs ) 42. 4 35 . 8 20 . 9 20 . 3 21. 3 26 . 4
Balan ce s h eet ( Rs mn )
Equity 181,111 212,523 226,105 216,449 234,265 256,728
Deferred tax liability 11,920 13,365 14,727 13,199 13,514 13,993
Total Borrowings 170,908 246,182 363,682 420,189 442,245 447,160
Current liabilities 83,066 93,084 125,405 104,880 106,778 108,609
Minority interest 3,071 5,573 10,802 11,074 11,550 12,140
To t al liab ilit ies 45 0 , 0 75 5 70 , 726 740 , 721 76 5 , 79 1 8 0 8 , 35 3 8 38 , 6 30
Net fixed assets 301,460 385,049 522,072 535,157 543,184 548,925
Goodwill 918 1,543 5,930 5,930 5,930 5,930
Investments 3,776 8,089 3,418 3,444 3,469 3,495
Cash 1,492 2,001 10,153 28,931 53,805 69,043
Other current assets 142,430 174,045 199,148 192,329 201,964 211,237
To t al as s et s 45 0 , 0 75 5 70 , 726 740 , 721 76 5 , 79 1 8 0 8 , 35 3 8 38 , 6 30
Fr ee cas h f lo w ( Rs mn )
Operating cash flow excl. working capital 59,602 58,430 50,074 41,993 81,939 90,022
Working capital changes (23,398) (23,207) 12,816 (13,706) (7,737) (7,442)
Capital expenditure (64,332) (93,466) (141,525) (41,063) (40,000) (40,000)
Fr ee cas h f lo w ( 28 , 128 ) ( 5 8 , 243) ( 78 , 6 36 ) ( 12, 777) 34, 20 2 42, 5 8 0
Rat io s
Debt/equity 1.0 1.2 1.7 2.0 2.0 1.8
Net debt/equity 0.9 1.1 1.6 1.8 1.7 1.5
RoAE (%) 24.8 14.9 8.9 8.6 8.9 10.1
Ro ACE ( %) 13. 3 8 . 5 5 . 7 5 . 6 6 . 1 6 . 7

Source: Company, Kotak Institutional Equities estimates




Metals & Mining India
KOTAK INSTITUTIONAL EQUITIES RESEARCH 21
Exhibit 5: Hindalco, change in estimates, March fiscal year ends, 2015-17E (` mn)

Revis ed es t imat es Old es t imat es Ch an g e ( %)
20 15 E 20 16 E 20 17E 20 15 E 20 16 E 20 17E 20 15 E 20 16 E 20 17E
Hin d alco
Aluminium metal sales (tons) 800,000 1,050,000 1,250,225 800,000 1,050,000 1,250,225
Aluminium price (US$/ton) 2,350 2,350 2,400 2,350 2,350 2,400
Net revenues 333,937 375,180 401,540 331,111 361,256 386,797 0.9 3.9 3.8
EBITDA 43,189 55,468 61,897 49,724 60,335 66,644 (13.1) (8.1) (7.1)
PAT 17,124 17,303 21,871 22,624 22,535 26,041 (24.3) (23.2) (16.0)
No velis
Shipments (tons) (inldg. Ingots) 3,185 3,403 3,600 3,185 3,403 3,600
Net revenues 696,047 763,703 822,589 684,542 726,144 782,134 1.7 5.2 5.2
Adjusted EBITDA 63,638 70,223 77,507 62,586 66,770 73,695 1.7 5.2 5.2
Adjusted EBITDA (US$ mn) 1,052 1,151 1,271 1,052 1,151 1,271
Co n s o lid at ed
Net revenues 1,065,042 1,174,107 1,259,353 1,050,380 1,121,629 1,203,160 1.4 4.7 4.7
EBITDA 109,281 128,356 141,837 114,740 129,688 142,703 (4.8) (1.0) (0.6)
PAT 33,651 34,341 42,078 38,907 38,661 45,104 (13.5) (11.2) (6.7)
EPS (Rs) 16.3 16.6 20.4 18.8 18.7 21.8 (13.5) (11.2) (6.7)
INR: USD 6 0 . 5 6 1. 0 6 1. 0 5 9 . 5 5 8 . 0 5 8 . 0 1. 7 5 . 2 5 . 2

Source: Kotak Institutional Equities estimates

Exhibit 6: Hindalco Industries, key assumptions, March fiscal-year ends, FY2012-17E (` mn)

20 12 20 13 20 14E 20 15 E 20 16 E 20 17E
Hin d alco
Aluminium prices - all in (US$/ton) 2,391 2,154 2,030 2,350 2,350 2,400
Metal sales volume (tons) 574,310 541,531 586,835 800,000 1,050,000 1,250,225
Blended realization (Rs/ton) 135,275 139,664 149,341 162,560 158,733 160,194
Co pper
Price (US$/ton) 8,485 7,852 7,115 7,150 7,150 7,150
Copper cathode volumes (tons) 183,501 165,512 179,571 179,571 179,571 179,571
Copper rods volumes (tons) 145,034 147,935 147,935 147,935 147,935 147,935
St an d alo n e EBITDA ( Rs mn ) 31, 0 48 22, 0 37 24, 9 19 43, 18 9 5 5 , 46 8 6 1, 8 9 7
No velis
Average realization (US$/ton) 3,898 3,522 3,373 3,612 3,679 3,746
Conversion premium (US$/ton) 1,582 1,544 1,595 1,662 1,679 1,696
Shipments ('000 tons) 2,838 2,786 2,895 3,185 3,403 3,600
EBITDA/ton (US$/ton) 371 320 274 327 337 352
EBITDA (US$ mn) 893 891 793 1,041 1,147 1,266
EBITDA - ad jus t ed ( US$ mn ) 1, 0 5 3 9 6 1 8 8 5 1, 0 5 2 1, 15 1 1, 271
EBITDA (Rs mn) 42,775 48,479 47,937 62,991 69,969 77,223
INR: USD 47. 9 5 4. 4 6 0 . 5 6 0 . 5 6 1. 0 6 1. 0

Source: Companies, Kotak Institutional Equities estimates





India Metals & Mining
22 KOTAK INSTITUTIONAL EQUITIES RESEARCH
Exhibit 7: Hindalco Industries, valuation, March 2016E basis (` mn)

Mult iple
(X) (Rs mn) (Rs /s har e)
Hindalco EBITDA 55,468 6.0 333,363 161
Novelis EBITDA 69,969 6.5 454,797 220
ABML EBITDA (proportionate stake) 979 6.0 5,873 3
Tot al Ent er pr is e Value 794,034 385
Add: Listed investments (20% discount to market price) 53,402 26
Less: Net debt 502,389 502,389 243
Less: Penalty to be paid as per SC order for coal mined (5,163) (3)
Ar r ived mar ket capit alizat ion 339,885 165
Tar get pr ice (Rs ) 165
Value

Source: Kotak Institutional Equities estimates




Metals & Mining India
KOTAK INSTITUTIONAL EQUITIES RESEARCH 23
Exhibit 8: Hindalco (consolidated), profit model, balance sheet and cash flow model, March fiscal year-ends, 2012-17E (` mn)

20 12 20 13 20 14 20 15 E 20 16 E 20 17E
Pr o f it mo d el ( Rs mn )
Net sales 808,214 801,928 876,955 1,065,042 1,174,107 1,259,353
EBITDA 8 1, 8 9 4 78 , 36 8 8 2, 8 6 3 10 9 , 28 1 128 , 35 6 141, 8 37
Other income 7,831 10,122 10,172 8,169 3,709 4,384
Interest (17,580) (20,791) (27,016) (36,953) (44,176) (44,606)
Depreciation (28,696) (28,611) (35,528) (39,349) (43,500) (45,428)
Pr o f it b ef o r e t ax 43, 449 39 , 0 8 8 30 , 49 1 41, 148 44, 38 9 5 6 , 18 6
Exceptional item (3,960) (5,163)
Taxes (7,862) (8,857) (5,249) (8,736) (11,374) (15,517)
Pr o f it af t er t ax 35 , 5 8 7 30 , 231 21, 28 2 27, 249 33, 0 15 40 , 6 6 9
Minority interest (2,113) 196 (200) 558 630 700
Share in profit/(loss) of associates 496 (158) 668 682 695 709
Repo r t ed n et in co me 33, 9 6 9 30 , 26 9 21, 75 0 28 , 48 9 34, 341 42, 0 78
Ad jus t ed n et in co me 33, 9 6 9 30 , 26 9 25 , 710 33, 6 5 1 34, 341 42, 0 78
Fully d ilut ed EPS ( Rs ) 16 . 5 14. 7 12. 5 16 . 3 16 . 6 20 . 4
Balan ce s h eet ( Rs mn )
Equity 319,113 353,302 405,992 432,003 463,867 503,467
Deferred tax liability 36,050 34,677 31,889 31,889 31,889 31,889
Total Borrowings 410,165 569,507 647,558 647,613 628,054 583,654
Current liabilities 231,604 232,461 276,713 302,241 322,778 325,029
Minority interest 17,091 17,593 17,806 17,248 16,618 15,918
To t al liab ilit ies 1, 0 14, 0 23 1, 20 7, 5 40 1, 379 , 9 5 7 1, 430 , 9 9 4 1, 46 3, 20 6 1, 45 9 , 9 5 7
Net fixed assets 242,338 264,158 481,442 620,898 726,737 710,532
Capital work in progress 227,981 338,311 230,593 125,863 10,924 10,000
Goodwill 110,665 118,397 130,192 130,192 130,192 130,192
Investments 105,510 124,476 129,611 130,293 130,988 131,697
Cash 32,960 37,695 50,213 30,724 53,595 45,065
Other current assets 294,569 324,504 357,767 392,886 410,631 432,332
Deferred tax 139 139 139 139
To t al as s et s 1, 0 14, 0 23 1, 20 7, 5 40 1, 379 , 9 5 7 1, 430 , 9 9 4 1, 46 3, 20 6 1, 45 9 , 9 5 7
Fr ee cas h f lo w ( Rs mn )
Operating cash flow excl. working capital 45,873 29,618 21,950 63,592 72,806 81,714
Working capital changes (9,322) (38,740) 9,623 (9,590) 2,791 (19,450)
Capital expenditure (143,641) (119,218) (94,236) (74,075) (34,400) (28,300)
Fr ee cas h f lo w ( 10 7, 0 9 0 ) ( 128 , 339 ) ( 6 2, 6 6 2) ( 20 , 0 73) 41, 19 8 33, 9 6 4
Rat io s
EBITDA margin (%) 10.1 9.8 9.4 10.3 10.9 11.3
EBIT margin (%) 6.6 6.2 5.4 6.6 7.2 7.7
Debt/equity (X) 1.3 1.6 1.6 1.5 1.4 1.2
Net debt/equity (X) 1.0 1.3 1.3 1.3 1.1 0.9
Net debt/EBITDA (X) 3.9 5.9 6.4 5.0 4.0 3.3
RoAE (%) 11.1 9.0 6.8 8.0 7.7 8.7
Ro ACE ( %) 6 . 5 4. 7 4. 0 5 . 3 6 . 2 6 . 7

Source: Company, Kotak Institutional Equities estimates



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



Accenture 4QFY14growth powered by outsourcing business
Accenture reported a solid 4QFY14 (Aug 2014 quarter) with revenue growth of 8% in c/c,
ahead of consensus estimates. The outsourcing business grew 13% yoy and powered growth.
Consulting business grew 4%. Growth was strong across all operating groups (verticals) except
resources. From a geographical standpoint, US grew at a robust 10% and EMEA grew 9% in
c/c. Bookings of US$8.3 bn declined yoy but were in line with the management guidance. Net
hiring of 12,353 people was strong, taking the total headcount to 305,882, of which 67% are
in the global delivery network.
Accentures digital business continues to lead the industry with close to US$5 bn of revenues in
FY2014, resource base of 27,000 people and healthy double-digit revenue growth.
FY2015 revenue growth outlook of 4-7%; outsourcing to be key growth driver
Accenture has guided 4-7% revenue growth for FY2015. Management indicated a greater comfort
of delivering growth in the upper half of the range. Acquisitions will likely contribute 1% to
FY2015 growth as compared to 2% in FY2014. Management indicated bulk of the growth will be
driven by the outsourcing segment, where it has guided for high-single-digit to low-double-digit
growth. The company expects consulting growth to be broadly similar to FY2014 growth of 3%.
The company expects FY2015E bookings to be largely stable and in the range of US$34-36 bn.
Read-through for Indian IT is neutral
Accentures result read-through is always tricky and open to multiple interpretations. A strong
outsourcing-led growth quarter by Accenture can be viewed as aggressive turf protection/market
share gain (negative for Indian IT) or strong demand environment (positive for Indian IT).
Accentures growth in the outsourcing business in the recent quarter is comparable to other Tier-1
IT, except TCS and CTSH. We believe that Accentures growth in the outsourcing segment, on
margin, reflects share gains. While the market may be large enough to absorb all players for now,
this once again reaffirms our long-held view of increasing competitive intensity in the global IT
services sector.
Accentures FY2015 consulting revenue growth outlook is similar to actuals of FY2014, i.e. 3%
growth. Accentures consulting business outlook is a good barometer for discretionary spending
though the correlation has reduced due to (1) offshore players that are chipping away at small
consulting assignments and (2) Accentures ERP-heavy portfolio is under increased pressure from
as-a-service models in the market. A higher consulting growth outlook would have given greater
comfort on discretionary spending.
Continued market share gains and large deals in traditional services continue to power Indian IT
growth. We maintain our positive view and retain Infosys, Wipro and Tech Mahindra as our top
picks.



Technology
India
Accenture resultslargely neutral for Indian IT. Accenture reported a solid 4QFY14
(Aug 2014 quarter) with revenue growth ahead of consensus expectations. Growth was
driven by outsourcing segment that grew 13% yoy in c/c while consulting revenues grew
4% in c/c. Management guidance of 4-7% for FY2015 (Aug year-end) assumes bulk of
the growth will be led by outsourcing segment. A stronger outlook for consulting
business could have been a positive read-through for Indian IT. Strong large cost takeout
deal wins and pipeline keep powering Indian IT growth and underpin our positive view.


CAUTIOUS
SEPTEMBER 24, 2014
UPDATE
BSE-30: 26,745

























Technology India
Exhibit 1: Accenture interim results, August fiscal year-ends (US$ mn)

4QFY13 3QFY14 4QFY14 % qoq % yoy
Revenues 7,087 7,736 7,777 0.5 9.7
Cost of revenues 4,737 5,199 5,309 2.1 12.1
SG&A expenses 1,366 1,358 1,389 2.3 1.7
EBIT 9 8 4 1,179 1,079 (8.4) 9.7
Other income (19) (3) 9
PBT 9 6 5 1,176 1,088 (7.5) 12.8
Provision for taxes 238 294 328
PAT 727 8 8 2 760 (13.8) 4.5
Minority interest 56 64 59 (8.3) 5.0
PAT af t er minor it y int er es t 671 817 701 (14.2) 4.5
Mar gins (%)
EBIT 13.9 15.2 13.9
Net income 10.3 11.4 9.8

Source: Company, Kotak Institutional Equities

Exhibit 2: Valuation summary of key Indian technology companies

24- Sep- 14 PER ( X) EV/ EBITDA ( X) EV/ Sales ( X)
Co mpan y Pr ice ( Rs ) Rat in g ( Rs m) ( US$ m) 20 14 20 15 E 20 16 E 20 14 20 15 E 20 16 E 20 14 20 15 E 20 16 E 20 14 20 15 E 20 16 E
HCL Technologies 1,709 REDUCE 1,210,255 19,852 89.8 102.3 110.0 19.0 16.7 15.5 12.9 11.5 10.3 3.4 2.9 2.4
Hexaware Technologies 189 SELL 57,152 937 12.6 10.6 12.3 15.0 17.9 15.4 9.9 12.0 10.3 2.2 2.1 1.9
Infosys 3,645 ADD 2,082,639 34,163 186.3 211.4 242.2 19.6 17.2 15.1 13.4 11.9 9.9 3.6 3.3 2.9
Mindtree 1,199 ADD 100,682 1,652 53.7 63.3 73.8 22.3 18.9 16.2 16.3 13.6 11.4 3.3 2.7 2.3
Mphasis 444 SELL 93,263 1,530 14.7 35.0 36.8 12.6 12.7 12.1 8.9 9.0 8.4 1.5 1.5 1.4
TCS 2,643 ADD 5,176,844 84,919 97.6 113.0 129.9 27.1 23.4 20.3 19.8 17.4 14.8 6.1 5.1 4.3
Tech Mahindra 2,485 ADD 592,610 9,721 128.0 142.1 166.9 19.4 17.5 14.9 13.3 12.4 10.3 3.0 2.5 2.1
Wipro 593 ADD 1,459,943 23,948 31.7 35.8 40.8 18.7 16.5 14.5 13.1 10.9 9.2 3.1 2.6 2.3
Technology Caut io us 10, 773, 389 176, 722 22. 5 19. 6 17. 2 15. 9 13. 9 11. 8 4. 3 3. 7 3. 1
KIE univer se 67, 715, 488 1, 110, 773 18. 7 16. 2 13. 8 11. 4 9. 8 8. 3 1. 6 1. 4 1. 3
Tar g et O/ S s h ar es EPS g r o wt h ( %) Net Pr o f it ( Rs mn ) EBITDA ( Rs mn ) Sales ( Rs mn )
Co mpan y Pr ice ( Rs ) ( mn ) 20 14 20 15 E 20 16 E 20 14 20 15 E 20 16 E 20 14 20 15 E 20 16 E 20 14 20 15 E 20 16 E
HCL Technologies 1,600 708 57.8 13.9 7.6 63,418 72,410 78,349 86,667 93,018 99,014 329,180 370,305 420,208
Hexaware Technologies 145 302 14.5 (16.4) 16.5 3,792 3,189 3,714 5,124 4,444 5,094 22,854 25,086 28,272
Infosys 4,100 571 13.0 13.5 14.5 108,670 120,804 138,374 136,340 149,024 175,559 501,330 535,383 606,367
Mindtree 1,180 84 31.4 18.0 16.5 4,508 5,320 6,198 6,100 7,180 8,392 30,316 35,970 41,744
Mphasis 400 210 (58.4) 138.0 5.2 3,091 7,355 7,738 4,397 10,037 10,384 25,939 61,423 64,121
TCS 2,800 1,959 37.4 15.7 15.0 191,166 221,242 254,492 251,322 282,883 328,712 818,094 964,766 1,121,376
Tech Mahindra 2,650 238 25.6 11.0 17.4 26,821 30,471 35,788 41,836 44,592 52,454 188,313 219,446 253,235
Wipro 650 2,463 27.1 13.1 13.9 77,966 88,215 100,461 102,241 115,949 131,322 437,628 479,442 533,465
Technology 29. 6 14. 5 13. 9 479, 432 549, 006 625, 114 634, 027 707, 128 810, 932 2, 353, 654 2, 691, 821 3, 068, 788
KIE univer se 6. 3 15. 7 16. 7
Notes:
(a) HCL Technologies' fiscal year ends in June.
(b) Hexaware Technologies' fiscal year ends in December.
(c) Mphasis has changed its accounting year to March from October. Period ending Mar 2014 is for 5 months. We have annualized financials for computing ratios.
Mkt cap. EPS ( Rs )

Source: Company, Kotak Institutional Equities estimates





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Kotak Institutional Equities: Valuation summary of KIE Universe stocks
Pr ice ( Rs )
Tar g et
pr ice Ups id e Mkt cap.
O/ S
s h ar es EPS ( Rs ) EPS g r o wt h ( %) PER ( X) EV/ EBITDA ( X) Ro E ( %)
ADVT-
3mo
Co mpan y Rat in g 24- Sep- 14 ( Rs ) ( %) ( Rs mn ) ( US$ mn ) ( mn ) 20 14 20 15 E 20 16 E 20 14 20 15 E 20 16 E 20 14 20 15 E 20 16 E 20 14 20 15 E 20 16 E 20 14 20 15 E 20 16 E 20 14 20 15 E 20 16 E 20 14 20 15 E 20 16 E ( US$ mn )
Aut o mo b iles
Amara Raja Batteries SELL 630 550 (12.7) 107,561 1,766 171 21.5 24.4 29.9 28.2 13.6 22.5 29.3 25.8 21.0 18.8 15.6 13.0 7.9 6.4 5.2 0.5 0.8 1.0 30.3 27.4 27.2 2.9
Apollo Tyres BUY 191 200 4.5 96,483 1,584 504 19.9 21.2 22.0 63.7 6.8 3.7 9.6 9.0 8.7 5.6 5.4 5.5 1.9 1.6 1.3 0.4 0.4 0.4 26.4 21.1 18.1 17.9
Ashok Leyland SELL 39 34 (12.1) 110,213 1,810 2,848 (1.8) (0.5) 1.2 (430.4) 72.8 350.2 (21.6) (79.4) 31.7 92.8 23.0 12.3 2.3 2.0 2.0 1.4 0.8 (3.7) 8.5 12.3
Bajaj Auto ADD 2,365 2,550 7.8 684,417 11,239 289 112.1 120.8 139.9 6.6 7.8 15.8 21.1 19.6 16.9 15.2 15.2 13.2 7.0 5.9 5.0 2.1 2.0 2.4 36.5 32.7 31.9 14.1
Bharat Forge SELL 795 620 (22.0) 188,559 3,096 237 22.0 27.7 34.8 110.7 26.1 25.6 36.2 28.7 22.8 20.3 14.7 12.1 7.0 5.9 4.9 0.4 0.6 0.8 21.0 22.4 23.4 13.2
Eicher Motors SELL 11,571 8,300 (28.3) 312,870 5,138 27 145.7 265.7 396.7 21.3 82.4 49.3 79.4 43.6 29.2 41.9 24.4 16.2 15.2 11.6 8.5 0.3 0.2 0.3 19.2 28.1 31.9 8.2
Exide Industries REDUCE 170 160 (5.7) 144,203 2,368 850 5.7 7.2 8.7 (6.8) 25.3 21.6 29.6 23.6 19.4 17.5 14.7 12.4 3.9 3.5 3.2 1.4 1.5 1.5 13.6 15.6 17.1 9.4
Hero Motocorp ADD 2,943 3,200 8.7 587,767 9,652 200 105.6 134.8 189.5 (0.4) 27.7 40.5 27.9 21.8 15.5 20.1 15.4 10.6 10.7 8.9 7.2 2.2 2.3 3.2 39.7 44.6 51.6 18.8
Mahindra & Mahindra REDUCE 1,357 1,310 (3.5) 762,910 12,528 562 68.5 58.9 65.6 8.7 (14.1) 11.4 19.8 23.1 20.7 14.8 15.3 13.9 4.3 4.1 3.7 1.4 0.6 0.9 23.2 9.4 12.6 27.9
Maruti Suzuki BUY 3,072 3,400 10.7 927,930 15,238 302 92.8 114.4 183.2 17.1 23.4 60.1 33.1 26.8 16.8 20.0 16.3 10.2 4.3 3.8 3.2 0.4 0.4 0.7 13.8 15.0 20.5 17.0
Motherson Sumi Systems ADD 407 375 (7.9) 359,106 5,897 882 8.7 11.2 18.0 72.1 29.6 60.5 46.9 36.2 22.6 14.8 12.1 7.7 12.1 8.8 6.0 0.6 0.8 1.3 34.2 27.0 30.3 13.5
Tata Motors BUY 513 590 14.9 1,652,043 27,128 3,218 46.5 48.1 62.0 51.4 3.4 28.8 11.0 10.7 8.3 5.6 5.0 4.3 2.5 2.0 1.6 0.4 28.7 21.1 21.9 50.8
WABCO India ADD 3,657 4,000 9.4 69,365 1,139 19 61.9 77.7 133.0 (10.2) 25.4 71.2 59.0 47.1 27.5 40.8 29.6 17.5 9.2 7.9 6.6 0.1 0.3 0.9 16.7 18.1 26.1 0.6
Aut o mo b iles At t r act ive 6 , 0 0 3, 426 9 8 , 5 8 2 24. 4 9 . 0 32. 0 19 . 9 18 . 2 13. 8 10 . 6 9 . 2 7. 3 4. 2 3. 5 2. 9 0 . 9 0 . 7 1. 0 21. 0 19 . 2 21. 0 20 6 . 1
Ban ks / Fin an cial In s t it ut io n s
Axis Bank ADD 397 430 8.3 932,642 15,315 2,349 26.5 29.7 34.5 19.6 12.3 16.1 15.0 13.4 11.5 2.5 2.2 1.9 1.0 1.3 1.5 17.4 17.0 17.2 28.7
Bajaj Finserv BUY 1,044 1,175 12.6 166,082 2,727 159 96.4 102.3 111.1 (6.6) 6.1 8.6 10.8 10.2 9.4 1.8 1.7 1.4 1.3 1.3 1.3 17.9 17.0 16.3 1.5
Bank of Baroda ADD 906 1,050 15.9 390,020 6,405 431 105.4 118.2 138.3 (0.6) 12.1 17.0 8.6 7.7 6.5 1.3 1.1 1.0 2.4 2.7 3.1 13.8 13.8 14.5 20.6
Bank of India ADD 264 320 21.4 169,560 2,784 643 42.4 61.9 66.7 (7.9) 45.7 7.8 6.2 4.3 4.0 0.8 0.7 0.6 1.9 2.8 3.0 11.2 14.3 13.6 18.4
Cholamandalam ADD 476 420 (11.8) 68,192 1,120 143 25.6 29.8 36.5 19.7 16.2 22.8 18.6 16.0 13.0 3.2 2.8 2.1 0.8 1.0 1.3 17.3 17.5 18.3 0.3
City Union Bank ADD 82 90 9.7 48,355 794 589 6.4 7.0 8.1 (5.8) 9.2 16.4 12.8 11.8 10.1 2.5 1.9 1.6 1.1 1.3 1.5 18.9 17.4 16.5 1.0
DCB Bank BUY 85 100 17.7 21,265 349 250 6.0 6.9 7.9 48.2 13.5 15.1 14.0 12.4 10.8 2.0 1.8 1.5 14.8 14.5 14.4 1.8
Federal Bank BUY 127 145 14.5 108,325 1,779 855 9.8 12.2 14.7 0.1 24.6 19.9 12.9 10.4 8.6 1.6 1.4 1.3 1.6 2.0 2.4 12.6 14.2 15.2 10.4
HDFC ADD 1,055 1,060 0.5 1,645,859 27,027 1,561 34.9 40.8 47.4 11.3 16.8 16.3 30.2 25.9 22.2 5.9 5.3 4.7 1.3 1.6 1.9 20.6 21.0 22.8 50.2
HDFC Bank REDUCE 855 800 (6.5) 2,052,268 33,700 2,399 35.3 42.9 51.1 25.0 21.5 18.9 24.2 19.9 16.8 4.8 4.1 3.4 0.8 1.0 1.2 21.3 21.7 21.8 27.1
ICICI Bank BUY 1,516 1,660 9.5 1,751,510 28,762 1,155 84.9 92.5 107.0 17.7 8.9 15.7 17.9 16.4 14.2 2.5 2.3 2.0 1.5 1.8 2.1 14.0 13.9 14.7 64.6
IIFL Holdings BUY 149 175 17.7 44,045 723 296 9.4 13.0 16.1 1.6 38.4 24.2 15.9 11.5 9.2 2.0 1.8 1.6 2.0 2.2 2.8 14.0 17.2 18.8 0.6
IndusInd Bank ADD 623 650 4.4 327,316 5,375 526 26.8 32.2 38.7 32.0 20.1 20.3 23.2 19.3 16.1 3.8 3.3 2.8 0.6 0.7 0.8 18.0 18.3 18.6 8.4
ING Vysya Bank BUY 609 720 18.3 114,987 1,888 189 34.8 42.3 51.6 (12.0) 21.4 22.1 17.5 14.4 11.8 1.7 1.6 1.4 1.0 1.2 1.5 11.4 11.0 12.2 1.7
J&K Bank REDUCE 145 140 (3.3) 70,217 1,153 485 24.4 21.0 21.7 12.1 (13.7) 3.3 5.9 6.9 6.7 1.2 1.2 1.0 3.5 3.0 3.1 22.3 16.7 15.3 3.0
Karur Vysya Bank BUY 521 580 11.4 62,774 1,031 121 40.1 54.0 66.7 (21.9) 34.8 23.5 13.0 9.6 7.8 1.9 1.5 1.3 2.2 2.6 3.2 13.4 16.8 17.1 1.5
LIC Housing Finance BUY 309 375 21.4 155,979 2,561 505 26.1 30.5 35.2 28.8 16.7 15.7 11.8 10.1 8.8 2.1 1.8 1.6 1.5 1.7 2.0 18.8 18.9 18.8 16.5
L&T Finance Holdings SELL 69 60 (13.0) 118,573 1,947 1,718 3.5 5.8 5.4 (18.5) 68.9 (8.3) 19.9 11.8 12.9 2.0 2.1 1.9 1.1 2.3 1.3 10.5 18.3 15.2 5.7
Magma Fincorp BUY 117 125 6.5 22,306 366 190 7.2 9.4 10.9 15.6 30.9 16.6 16.4 12.5 10.7 1.5 1.4 1.2 1.0 1.3 1.5 9.7 11.1 12.2 0.7
Mahindra & Mahindra Financial SELL 274 240 (12.4) 154,434 2,536 564 15.7 16.9 20.7 0.4 7.3 22.7 17.4 16.2 13.2 3.1 2.8 2.4 1.4 1.4 1.8 18.6 17.5 18.8 7.5
Muthoot Finance BUY 196 250 27.3 77,983 1,281 397 21.0 20.3 23.7 (22.3) (3.1) 16.4 9.4 9.7 8.3 1.8 1.5 1.3 2.9 3.1 3.6 19.0 17.1 17.1 1.4
Oriental Bank of Commerce ADD 254 330 29.9 76,162 1,251 300 38.0 48.9 56.4 (16.5) 28.7 15.3 6.7 5.2 4.5 0.7 0.7 0.6 3.0 3.9 4.4 8.7 10.5 11.2 8.6
PFC ADD 236 330 39.6 311,956 5,123 1,319 41.1 43.7 43.5 22.6 6.4 (0.4) 5.8 5.4 5.4 1.2 1.2 1.1 3.8 4.1 4.0 21.1 19.5 17.0 20.8
Punjab National Bank REDUCE 927 960 3.5 335,675 5,512 362 92.3 145.5 166.1 (31.3) 57.6 14.1 10.0 6.4 5.6 1.2 1.1 0.9 1.1 1.7 1.9 10.2 14.3 14.4 16.1
Rural Electrification Corp. ADD 249 365 46.7 245,712 4,035 987 47.4 50.5 50.9 22.7 6.4 0.8 5.2 4.9 4.9 1.2 1.1 1.0 3.8 4.0 4.4 24.6 21.9 18.8 13.7
Shriram City Union Finance REDUCE 1,649 1,550 (6.0) 108,369 1,780 66 86.2 91.4 115.8 6.2 6.1 26.7 19.1 18.0 14.2 3.7 2.6 2.2 0.5 0.6 0.8 19.8 16.9 16.8 0.6
Shriram Transport REDUCE 943 840 (11.0) 210,521 3,457 223 56.7 69.2 85.8 (7.1) 22.1 24.1 16.7 13.6 11.0 2.6 2.3 2.0 0.8 1.0 1.3 16.3 17.3 18.5 9.4
SKS Microfinance ADD 291 305 4.8 36,644 602 126 6.5 13.0 19.8 123.6 101.5 52.1 45.0 22.3 14.7 6.4 3.6 2.9 16.5 22.2 21.8 8.8
State Bank of India ADD 2,486 2,800 12.6 1,856,234 30,481 747 145.9 195.0 227.4 (29.3) 33.7 16.6 17.0 12.7 10.9 2.0 1.8 1.6 1.2 1.2 1.3 10.0 11.7 12.4 81.5
Union Bank ADD 205 220 7.2 129,370 2,124 630 26.7 40.5 46.1 (25.7) 51.6 13.6 7.7 5.1 4.5 0.9 0.8 0.7 1.9 2.9 3.3 10.3 14.1 14.2 17.5
Yes Bank ADD 568 575 1.2 235,410 3,866 414 44.9 42.2 45.5 23.7 (5.9) 7.9 12.7 13.5 12.5 3.3 2.1 1.8 1.2 1.3 1.4 25.0 18.8 15.4 33.0
Ban ks / Fin an cial In s t it ut io n sAt t r act ive 12, 429 , 5 28 20 4, 10 6 2. 1 19 . 4 14. 5 14. 9 12. 4 10 . 9 2. 3 2. 0 1. 8 1. 4 1. 6 1. 8 15 . 3 16 . 4 16 . 5 5 29 . 3
Pr ice/ BV ( X) Divid en d yield ( %)

Source: Company, Bloomberg, Kotak Institutional Equities estimates



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Kotak Institutional Equities: Valuation summary of KIE Universe stocks
Pr ice ( Rs )
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s h ar es EPS ( Rs ) EPS g r o wt h ( %) PER ( X) EV/ EBITDA ( X) Pr ice/ BV ( X) Ro E ( %)
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Co mpan y Rat in g 24- Sep- 14 ( Rs ) ( %) ( Rs mn ) ( US$ mn ) ( mn ) 20 14 20 15 E 20 16 E 20 14 20 15 E 20 16 E 20 14 20 15 E 20 16 E 20 14 20 15 E 20 16 E 20 14 20 15 E 20 16 E 20 14 20 15 E 20 16 E 20 14 20 15 E 20 16 E ( US$ mn )
Cemen t
ACC SELL 1,430 1,250 (12.6) 268,706 4,412 188 46.0 48.7 64.7 (37.6) 5.8 33.0 31.1 29.4 22.1 17.8 16.1 11.6 3.2 3.1 2.8 2.5 1.6 1.6 11.6 11.3 13.8 8.1
Ambuja Cements SELL 212 195 (8.0) 322,820 5,301 1,522 6.8 9.7 11.2 (34.6) 44.0 15.6 31.4 21.8 18.8 17.9 12.7 10.7 3.2 3.0 2.8 1.3 1.5 1.6 10.5 14.2 15.2 8.1
Grasim Industries ADD 3,617 3,500 (3.2) 332,227 5,456 92 214.4 209.2 244.3 (21.3) (2.4) 16.8 16.9 17.3 14.8 9.1 8.7 6.8 1.6 1.5 1.3 0.9 0.9 0.9 9.6 8.7 9.4 5.3
India Cements REDUCE 116 100 (13.6) 35,571 584 307 (2.3) 3.7 7.0 (133.4) 265.4 86.1 (51.3) 31.0 16.7 10.3 7.6 6.3 0.9 0.8 0.8 2.3 2.3 2.3 (1.8) 3.0 5.5 4.9
Shree Cement SELL 8,413 5,800 (31.1) 293,107 4,813 35 235.9 324.9 393.1 (18.2) 37.7 21.0 35.7 25.9 21.4 20.9 15.9 12.6 6.6 5.4 4.4 0.2 0.2 0.2 20.1 23.0 22.5 2.4
UltraTech Cement SELL 2,631 2,000 (24.0) 721,719 11,851 274 74.8 78.4 98.9 (26.2) 4.8 26.2 35.2 33.6 26.6 19.8 17.8 13.1 3.7 3.3 2.9 0.4 0.4 0.4 12.7 11.9 13.4 12.7
Cemen t Caut io us 1, 9 74, 15 0 32, 418 ( 29 . 5 ) 15 . 7 22. 7 29 . 6 25 . 6 20 . 9 15 . 3 13. 2 10 . 2 2. 9 2. 7 2. 4 0 . 9 0 . 8 0 . 9 9 . 9 10 . 4 11. 7 41. 5
Co n s umer pr o d uct s
Asian Paints SELL 638 575 (9.9) 611,826 10,047 959 12.8 15.3 17.7 10.3 19.7 15.2 49.8 41.6 36.1 30.0 25.3 21.8 14.3 12.2 10.4 0.8 1.0 1.2 33.1 33.5 33.0 10.3
Bajaj Corp. ADD 261 300 15.0 38,468 632 148 12.0 13.9 15.9 6.8 15.1 14.5 21.7 18.8 16.4 20.1 17.2 14.4 7.4 6.3 5.4 2.5 2.5 2.9 33.2 31.4 30.8 0.5
Britannia Industries BUY 1,392 1,460 4.9 166,928 2,741 120 33.0 40.2 49.9 51.8 21.9 24.2 42.2 34.6 27.9 26.4 21.2 17.3 20.9 14.1 11.0 0.9 1.1 1.4 58.3 48.6 44.4 3.1
Colgate-Palmolive (India) ADD 1,651 1,730 4.8 224,545 3,687 136 36.1 40.9 48.0 (1.2) 13.5 17.3 45.8 40.3 34.4 33.4 26.8 22.2 38.6 36.4 34.1 1.6 1.9 2.3 90.1 90.2 99.7 4.5
Dabur India ADD 225 245 8.9 392,181 6,440 1,744 5.2 6.2 7.3 19.0 17.8 18.6 42.9 36.4 30.7 35.0 29.6 24.7 14.8 11.9 9.8 0.8 1.1 1.2 38.5 36.1 34.9 7.0
GlaxoSmithKline Consumer REDUCE 5,291 5,300 0.2 222,530 3,654 42 160.4 140.3 163.4 54.5 (12.6) 16.5 33.0 37.7 32.4 29.7 35.1 28.8 12.9 10.8 9.1 0.9 0.9 1.1 42.5 29.8 29.3 0.9
Godrej Consumer Products REDUCE 1,024 880 (14.1) 348,621 5,725 340 22.1 25.6 31.0 9.3 15.5 21.2 46.2 40.0 33.0 32.3 27.6 22.8 8.7 7.4 6.4 0.5 0.6 0.8 21.3 21.3 22.2 2.2
Hindustan Unilever REDUCE 764 715 (6.4) 1,652,519 27,136 2,163 16.4 18.8 21.0 8.4 14.1 12.1 46.5 40.7 36.3 36.4 30.8 26.6 53.0 46.7 39.4 1.7 1.8 2.0 119.5 116.3 112.9 13.1
ITC ADD 377 390 3.4 3,053,758 50,146 8,096 10.8 12.0 13.9 15.7 11.2 15.6 35.0 31.4 27.2 25.3 21.9 18.5 11.1 10.1 9.0 1.6 2.0 2.2 35.6 35.1 36.9 38.4
Jubilant Foodworks SELL 1,234 1,080 (12.5) 81,844 1,344 66 18.0 21.8 30.6 (9.9) 21.2 40.4 68.7 56.7 40.4 32.7 27.7 20.0 14.9 11.8 9.3 0.2 24.1 23.2 26.0 5.6
Jyothy Laboratories REDUCE 241 220 (8.7) 43,627 716 181 4.7 10.5 11.7 21.4 123.4 10.8 51.1 22.9 20.7 31.8 22.8 17.7 5.9 5.1 4.4 1.2 1.2 1.5 12.4 23.9 22.7 1.4
Marico ADD 279 295 5.6 180,185 2,959 645 8.1 9.2 10.5 43.3 13.6 14.3 34.7 30.5 26.7 24.8 20.7 17.7 12.9 10.0 8.0 1.4 0.9 1.2 38.2 33.6 31.0 2.3
Nestle India SELL 6,130 5,300 (13.5) 591,045 9,706 96 114.4 122.4 146.2 3.3 7.0 19.4 53.6 50.1 41.9 29.8 27.8 23.8 22.9 18.4 15.1 0.8 0.8 1.0 56.4 46.5 44.2 2.5
Page Industries SELL 7,924 6,600 (16.7) 88,378 1,451 11 137.3 180.6 223.2 36.1 31.5 23.6 57.7 43.9 35.5 35.8 27.6 22.4 29.6 22.0 16.4 0.8 1.0 1.1 61.2 59.2 54.0 1.1
Speciality Restaurants BUY 147 160 9.0 6,894 113 47 4.0 3.2 5.3 (19.3) (19.3) 63.1 36.5 45.2 27.7 19.9 20.7 12.9 2.3 2.2 2.1 0.7 0.9 1.0 6.4 4.9 7.5 0.2
Tata Global Beverages REDUCE 165 155 (5.9) 103,979 1,707 631 6.0 6.5 7.5 (1.0) 8.0 15.9 27.4 25.4 21.9 14.8 13.6 11.8 1.5 1.5 1.4 1.3 1.4 1.5 7.0 6.9 7.6 9.2
Titan Company REDUCE 393 340 (13.5) 349,033 5,731 888 8.4 9.7 10.7 3.1 15.4 9.7 46.7 40.4 36.9 33.3 27.3 23.7 13.8 11.2 9.6 0.5 0.7 1.0 33.3 30.7 28.1 6.9
United Breweries SELL 707 650 (8.0) 186,842 3,068 264 8.5 9.5 12.8 31.3 11.1 34.9 82.7 74.4 55.2 33.6 29.9 24.9 10.9 10.1 8.8 0.1 0.2 0.3 13.8 13.8 16.7 2.0
United Spirits BUY 2,390 3,200 33.9 347,384 5,704 145 (8.9) 34.0 69.1 (197.5) 480.9 103.0 (267.4) 70.2 34.6 43.0 28.8 19.6 11.5 11.7 9.0 - 0.1 0.3 (3.3) 16.5 29.5 31.2
Co n s umer pr o d uct s Neut r al 8 , 6 9 0 , 5 8 5 142, 70 8 13. 2 16 . 5 18 . 2 42. 9 36 . 9 31. 2 29 . 4 25 . 2 21. 1 13. 3 11. 8 10 . 3 1. 2 1. 4 1. 6 31. 1 32. 0 32. 9 142. 3
En er g y
Aban Offshore RS 644 36,257 595 56 83.9 91.2 98.3 117.2 8.7 7.8 7.7 7.1 6.6 8.2 7.0 6.7 0.9 0.7 0.6 0.6 0.8 0.9 10.0 10.0 9.4 21.9
Bharat Petroleum ADD 642 770 19.9 464,398 7,626 723 56.2 50.7 52.3 53.7 (9.8) 3.2 11.4 12.7 12.3 7.7 8.4 7.5 2.3 2.0 1.8 2.6 2.4 2.4 19.9 15.9 14.8 17.8
Cairn india REDUCE 315 340 8.1 589,436 9,679 1,874 65.2 56.4 52.0 4.4 (13.4) (7.8) 4.8 5.6 6.0 3.7 4.2 4.2 1.0 0.9 0.8 4.1 3.9 3.8 23.4 14.7 14.6 12.7
Castrol India SELL 426 260 (38.9) 210,559 3,458 495 10.0 9.6 10.2 10.3 (3.9) 6.7 42.7 44.4 41.6 29.8 29.5 27.6 30.1 44.4 42.1 1.6 1.8 1.9 76.9 80.8 103.7 3.1
GAIL (India) BUY 443 520 17.5 561,493 9,220 1,268 32.6 34.7 41.3 (9.4) 6.2 19.2 13.6 12.8 10.7 9.0 8.5 6.6 1.9 1.7 1.5 2.3 2.4 3.0 13.9 13.3 14.2 10.7
GSPL ADD 93 95 1.9 52,475 862 563 7.4 7.5 8.5 (22.1) 1.0 13.6 12.5 12.4 10.9 6.5 6.4 5.8 1.4 1.3 1.2 1.1 1.6 2.7 11.9 10.8 11.2 3.0
Hindustan Petroleum REDUCE 479 500 4.4 162,386 2,667 339 51.1 44.5 51.7 106.4 (13.0) 16.3 9.4 10.8 9.3 8.5 7.2 5.9 0.9 0.8 0.8 3.2 2.8 3.3 9.1 7.2 7.9 15.5
Indian Oil Corporation ADD 356 430 20.9 863,258 14,176 2,428 23.2 33.4 37.6 38.1 43.8 12.6 15.3 10.6 9.5 9.8 7.0 5.1 1.3 1.2 1.1 2.4 3.2 3.6 8.1 10.8 11.1 6.8
Oil India BUY 610 720 18.1 366,425 6,017 601 49.6 58.4 73.1 (16.9) 17.8 25.1 12.3 10.4 8.3 5.8 4.3 3.3 1.7 1.5 1.4 3.5 4.3 5.4 12.5 13.5 15.5 4.7
Oil & Natural Gas Corporation ADD 414 465 12.4 3,539,419 58,121 8,556 31.2 37.1 45.6 6.2 18.9 23.2 13.3 11.2 9.1 6.0 4.6 3.7 1.7 1.5 1.4 2.3 3.0 3.9 12.7 13.4 14.9 41.1
Petronet LNG REDUCE 198 180 (9.0) 148,313 2,435 750 9.5 8.8 11.1 (38.1) (7.1) 25.7 20.8 22.4 17.8 11.4 11.9 10.2 2.7 2.4 2.2 1.0 1.1 1.6 13.2 10.8 12.1 6.0
Reliance Industries ADD 965 1,130 17.1 2,834,352 46,543 2,937 68.0 74.9 79.7 4.6 10.1 6.5 14.2 12.9 12.1 10.6 9.8 8.7 1.4 1.2 1.1 1.0 1.1 1.1 11.0 11.0 10.7 54.7
En er g y At t r act ive 9 , 8 28 , 76 9 16 1, 39 9 7. 4 9 . 9 12. 8 12. 0 11. 0 9 . 7 7. 7 6 . 5 5 . 4 1. 5 1. 4 1. 2 2. 1 2. 4 2. 9 12. 6 12. 6 12. 9 19 8 . 1
Divid en d yield ( %)

Source: Company, Bloomberg, Kotak Institutional Equities estimates



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Kotak Institutional Equities: Valuation summary of KIE Universe stocks
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Co mpan y Rat in g 24- Sep- 14 ( Rs ) ( %) ( Rs mn ) ( US$ mn ) ( mn ) 20 14 20 15 E 20 16 E 20 14 20 15 E 20 16 E 20 14 20 15 E 20 16 E 20 14 20 15 E 20 16 E 20 14 20 15 E 20 16 E 20 14 20 15 E 20 16 E 20 14 20 15 E 20 16 E ( US$ mn )
In d us t r ials
ABB SELL 1,165 750 (35.6) 246,853 4,054 212 8.3 15.6 25.1 25.5 86.6 61.1 139.6 74.8 46.4 65.8 44.0 30.4 9.2 8.5 7.3 0.3 0.3 0.3 6.7 11.8 16.9 2.0
Bharat Heavy Electricals SELL 212 160 (24.4) 518,035 8,507 2,448 14.1 11.6 13.7 (47.7) (18.2) 18.7 15.0 18.3 15.4 11.1 11.9 8.9 1.6 1.5 1.4 1.4 1.2 1.4 10.9 8.3 9.2 23.8
Crompton Greaves BUY 206 220 6.6 129,299 2,123 627 4.1 6.1 10.9 215.8 46.7 80.4 50.0 34.1 18.9 20.5 15.3 10.5 3.5 3.3 2.9 0.6 0.8 1.0 7.2 10.0 16.3 18.5
Cummins India REDUCE 680 615 (9.5) 188,371 3,093 277 21.3 27.0 30.5 (23.6) 26.6 13.1 31.9 25.2 22.3 29.8 24.2 18.5 7.3 6.5 5.8 1.5 1.8 2.1 24.2 26.7 26.7 3.1
Kalpataru Power Transmission ADD 154 200 30.1 23,585 387 153 8.1 10.9 11.0 (7.9) 34.8 1.3 19.0 14.1 13.9 8.4 7.1 5.9 1.1 1.1 1.0 1.0 1.0 1.0 6.0 6.8 6.8 0.8
KEC International ADD 103 125 21.7 26,412 434 257 3.3 6.7 10.4 30.4 102.5 54.9 31.1 15.3 9.9 9.4 7.4 6.0 2.1 1.7 1.5 0.6 1.5 2.3 6.9 12.4 16.4 1.0
Larsen & Toubro ADD 1,464 1,675 14.4 1,356,982 22,283 927 49.2 47.7 71.2 (6.1) (3.1) 49.2 29.8 30.7 20.6 19.7 17.7 13.8 3.5 3.3 2.9 0.9 0.9 1.2 12.6 11.0 14.7 53.2
Siemens SELL 863 550 (36.3) 307,139 5,044 356 8.7 19.9 24.8 91.7 128.7 24.5 99.2 43.4 34.8 46.6 24.6 20.3 6.6 6.3 5.6 1.0 0.6 0.7 7.2 14.9 17.1 5.6
Thermax REDUCE 915 800 (12.5) 108,969 1,789 119 20.6 22.2 34.0 (23.2) 7.6 53.0 44.3 41.2 26.9 28.7 30.1 18.8 5.3 5.0 4.5 0.7 0.8 1.2 12.6 12.5 17.4 1.2
Voltas REDUCE 222 220 (1.1) 73,531 1,207 331 6.8 9.2 11.6 15.0 35.6 25.7 32.8 24.2 19.2 26.8 17.4 13.1 4.0 3.6 3.2 1.0 1.2 1.6 12.9 15.7 17.7 13.1
In d us t r ials Neut r al 2, 9 79 , 175 48 , 9 21 ( 24. 7) 2. 4 36 . 9 29 . 7 29 . 0 21. 2 19 . 8 17. 6 13. 6 3. 2 3. 0 2. 7 1. 0 1. 0 1. 2 10 . 9 10 . 3 12. 7 122. 2
In f r as t r uct ur e
Adani Port and SEZ ADD 268 280 4.4 559,060 9,180 2,084 8.3 11.1 15.1 3.7 32.5 36.4 32.1 24.3 17.8 21.8 14.8 11.4 6.3 4.7 3.8 0.7 0.7 0.8 22.5 22.1 23.7 24.5
Container Corporation ADD 1,355 1,325 (2.2) 264,126 4,337 195 49.5 58.7 70.5 2.6 18.7 20.1 27.4 23.1 19.2 21.6 17.8 14.3 3.8 3.4 3.0 0.9 1.0 1.2 14.5 15.5 16.5 2.4
Gujarat Pipavav Port REDUCE 158 140 (11.4) 76,359 1,254 483 3.6 6.5 8.8 137.1 80.1 34.0 43.5 24.2 18.0 28.2 18.4 14.3 5.4 4.4 3.5 18.1 23.3 25.6 3.2
IRB Infrastructure REDUCE 231 210 (9.2) 76,859 1,262 332 13.8 14.3 17.1 (17.4) 3.2 20.2 16.7 16.2 13.5 9.4 8.3 7.1 2.1 1.7 1.6 1.7 1.7 1.7 13.1 11.6 12.0 29.1
In f r as t r uct ur e At t r act ive 1, 0 10 , 79 5 16 , 5 9 8 6 . 7 25 . 7 29 . 8 29 . 0 23. 1 17. 8 18 . 4 13. 7 10 . 9 4. 6 3. 7 3. 2 0 . 7 0 . 8 0 . 9 15 . 9 16 . 2 17. 9 6 0 . 5
Med ia
DB Corp ADD 351 350 (0.2) 64,330 1,056 183 16.7 18.6 23.0 40.5 11.0 23.7 21.0 18.9 15.3 12.8 10.9 8.9 5.6 5.0 4.3 2.0 2.6 3.1 28.2 27.9 30.3 0.4
DishTV ADD 55 60 8.8 58,735 964 1,065 (0.4) 0.0 1.5 68.2 105.0 7,286.5 (140.0) 2,793.7 37.8 10.8 9.8 7.9 (18.8) (18.9) (38) 17.9 (0.7) (67) 6.4
Jagran Prakashan ADD 121 135 11.6 37,663 618 311 7.6 7.7 9.7 50.2 1.5 26.1 15.9 15.7 12.4 10.1 8.2 6.8 3.9 3.6 3.2 2.6 3.3 4.1 25.0 23.8 27.1 0.7
Sun TV Network ADD 322 455 41.3 126,913 2,084 394 19.0 21.0 24.0 5.4 10.9 13.9 17.0 15.3 13.4 10.6 9.4 8.2 3.9 3.6 3 3.1 4.0 5.0 25.2 25.6 27 6.2
Zee Entertainment Enterprises ADD 300 315 5.0 288,184 4,732 960 9.2 9.7 11.9 21.7 5.3 23.6 32.7 31.0 25.1 23.5 20.7 17.7 6.1 5.4 4.8 1.0 1.3 1.7 20.6 21.3 22.7 11.2
Med ia Neut r al 5 75 , 8 26 9 , 45 6 27. 8 16 . 0 25 . 4 26 . 9 23. 2 18 . 5 14. 9 13. 0 11. 0 5 . 9 5 . 3 4. 7 1. 6 2. 1 2. 5 21. 8 22. 8 25 . 4 24. 8
Met als & Min in g
Coal India ADD 351 392 11.6 2,219,255 36,442 6,316 23.9 26.3 31.6 (12.9) 9.8 20.5 14.7 13.4 11.1 9.4 7.6 6.5 4.9 4.3 3.7 8.3 3.8 4.6 31.6 34.5 36.0 23.2
Hindalco Industries REDUCE 156 180 15.3 322,284 5,292 2,065 12.5 18.8 18.7 (15.1) 51.3 (0.6) 12.5 8.3 8.3 10.5 7.6 6.3 0.8 0.7 0.7 0.9 0.9 0.9 6.8 9.2 8.4 30.9
Hindustan Zinc ADD 162 190 17.6 682,549 11,208 4,225 16.5 16.9 18.3 0.7 2.5 8.1 9.8 9.6 8.8 6.1 5.6 4.3 1.8 1.6 1.4 2.2 2.2 2.2 20.1 17.8 16.9 4.0
Jindal Steel and Power REDUCE 190 280 47.8 173,374 2,847 915 20.9 22.4 25.8 (32.9) 7.4 14.8 9.1 8.4 7.4 9.2 7.2 6.2 0.8 0.7 0.6 0.9 1.0 1.0 8.9 8.9 9.4 19.8
JSWSteel BUY 1,223 1,450 18.5 295,660 4,855 242 66.2 102.1 137.4 22.0 54.3 34.6 18.5 12.0 8.9 7.0 6.4 5.5 1.3 1.2 1.1 0.9 0.9 0.9 8.1 10.7 13.0 12.9
National Aluminium Co. SELL 60 45 (25.4) 155,407 2,552 2,577 2.7 3.9 3.7 16.7 44.2 (3.9) 22.5 15.6 16.2 11.0 7.2 7.4 1.3 1.2 1.2 2.5 2.5 2.5 5.8 8.0 7.4 4.0
NMDC ADD 169 185 9.6 669,043 10,986 3,965 16.1 18.5 18.4 (1.8) 14.8 (0.6) 10.5 9.1 9.2 6.2 5.2 5.4 2.2 2.0 1.8 5.0 5.0 5.0 22.3 23.1 20.8 7.2
Sesa Sterlite REDUCE 282 290 3.0 834,945 13,711 2,965 16.9 28.2 24.6 (32.2) 66.5 (12.9) 16.6 10.0 11.5 5.7 5.2 4.9 1.1 1.1 1.0 1.2 1.2 1.2 7.1 9.6 8.9 30.1
Tata Steel REDUCE 472 525 11.2 458,700 7,532 971 37.1 46.2 47.6 986.0 24.3 3.0 12.7 10.2 9.9 7.3 6.6 6.4 1.1 1.0 0.9 2.1 1.7 1.7 9.7 10.5 9.9 48.7
Met als & Min in g Caut io us 5 , 8 11, 217 9 5 , 426 ( 6 . 3) 21. 6 7. 7 13. 3 10 . 9 10 . 1 7. 5 6 . 4 5 . 8 1. 8 1. 6 1. 5 4. 5 2. 8 3. 1 13. 6 15 . 0 14. 6 18 0 . 9
Ph ar maceut ical
Biocon SELL 495 360 (27.2) 99,108 1,627 200 20.9 20.7 23.5 34.8 (1.3) 13.9 23.6 23.9 21.0 14.1 14.1 11.8 3.3 3.1 2.8 1.0 1.3 1.4 14.5 13.2 14.2 10.7
Cipla BUY 600 610 1.7 481,753 7,911 803 16.0 19.0 25.1 (17.4) 18.6 32.2 37.5 31.6 23.9 27.4 21.3 15.4 4.8 4.3 3.7 0.4 0.7 0.9 13.4 14.3 16.7 17.3
Dr Reddy's Laboratories ADD 3,229 2,930 (9.3) 547,715 8,994 170 126.8 131.7 147.8 23.2 3.8 12.2 25.5 24.5 21.8 21.5 19.5 16.6 6.0 5.0 4.2 0.5 0.6 0.7 23.7 20.3 19.1 16.0
Lupin BUY 1,367 1,370 0.2 615,263 10,103 450 40.8 46.4 56.2 39.0 13.7 21.1 33.5 29.5 24.3 20.7 18.2 14.9 8.8 7.0 5.6 0.4 0.4 0.5 28.1 30.0 28.0 11.4
Sun Pharmaceuticals SELL 781 720 (7.8) 1,617,507 26,561 2,072 27.6 31.3 34.6 56.8 13.3 10.7 28.3 25.0 22.5 21.4 16.2 14.0 8.7 6.6 5.2 0.4 0.9 1.1 34.1 30.1 25.9 29.6
Ph ar maceut icals Neut r al 3, 36 1, 346 5 5 , 19 7 33. 1 11. 7 15 . 3 29 . 5 26 . 4 22. 9 21. 6 17. 6 14. 7 7. 0 5 . 7 4. 7 0 . 4 0 . 8 0 . 9 23. 9 21. 7 20 . 6 117. 8
Real Es t at e
DLF ADD 160 210 31.6 284,325 4,669 1,781 5.6 4.0 5.7 24.8 (27.8) 41.4 28.5 39.5 27.9 19.4 18.1 15.4 1.0 1.0 0.9 1.3 1.3 1.3 3.5 2.5 3.4 33.4
Godrej Properties REDUCE 241 225 (6.5) 47,718 784 198 8.0 10.2 12.4 (8.8) 27.0 20.9 29.9 23.6 19.5 22.9 16.4 11.6 2.7 2.4 2.2 0.8 0.8 1.0 9.9 10.8 12.0 1.2
Oberoi Realty BUY 233 325 39.5 76,446 1,255 328 9.5 16.7 26.0 (38.4) 76.0 56.1 24.6 14.0 8.9 16.6 11.1 6.1 1.7 1.6 1.4 0.9 0.9 0.9 7.3 11.8 16.3 1.1
Prestige Estates Projects REDUCE 216 240 11.3 75,460 1,239 350 9.0 12.2 17.5 9.9 35.9 43.4 24.0 17.7 12.3 14.3 11.7 9.1 2.5 2.2 1.9 0.7 0.6 0.6 11.0 13.5 16.8 1.9
Sobha Developers ADD 413 520 25.8 40,520 665 98 24.0 26.7 41.1 8.2 11.4 53.7 17.2 15.5 10.1 8.9 8.1 6.3 1.8 1.6 1.4 1.7 1.7 1.7 10.6 11.0 15.3 1.6
Sunteck Realty ADD 305 410 34.3 18,311 301 60 25.2 10.7 81.2 3,653.8 (57.4) 656.9 12.1 28.5 3.8 8.6 25.5 3.1 2.9 2.7 1.6 0.7 0.7 0.7 26.8 9.7 52.7 0.4
Real Es t at e At t r act ive 5 42, 78 0 8 , 9 13 14. 9 1. 5 6 4. 1 24. 7 24. 3 14. 8 16 . 7 15 . 0 10 . 5 1. 3 1. 3 1. 2 1. 1 1. 1 1. 1 5 . 3 5 . 2 8 . 0 39 . 6
Divid en d yield ( %)

Source: Company, Bloomberg, Kotak Institutional Equities estimates



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Kotak Institutional Equities: Valuation summary of KIE Universe stocks
Pr ice ( Rs )
Tar g et
pr ice Ups id e Mkt cap.
O/ S
s h ar es EPS ( Rs ) EPS g r o wt h ( %) PER ( X) EV/ EBITDA ( X) Pr ice/ BV ( X) Ro E ( %)
ADVT-
3mo
Co mpan y Rat in g 24- Sep- 14 ( Rs ) ( %) ( Rs mn ) ( US$ mn ) ( mn ) 20 14 20 15 E 20 16 E 20 14 20 15 E 20 16 E 20 14 20 15 E 20 16 E 20 14 20 15 E 20 16 E 20 14 20 15 E 20 16 E 20 14 20 15 E 20 16 E 20 14 20 15 E 20 16 E ( US$ mn )
Tech n o lo g y
HCL Technologies REDUCE 1,709 1,600 (6.4) 1,210,255 19,874 708 89.8 102.3 110.0 57.8 13.9 7.6 19.0 16.7 15.5 12.9 11.5 10.3 5.9 4.7 3.8 1.3 1.3 1.3 36.0 31.5 27.2 24.7
Hexaware Technologies SELL 189 145 (23.4) 57,152 938 302 12.6 10.6 12.3 14.5 (16.4) 16.5 15.0 17.9 15.4 9.9 12.0 10.3 4.8 5.7 4.9 5.8 3.9 3.2 31.6 29.0 34.4 5.3
Infosys ADD 3,645 4,100 12.5 2,082,639 34,199 571 186.3 211.4 242.2 13.0 13.5 14.5 19.6 17.2 15.1 13.4 11.9 9.9 4.7 4.0 3.5 1.7 2.0 2.2 26.3 25.1 24.7 55.8
Mindtree ADD 1,199 1,180 (1.6) 100,682 1,653 84 53.7 63.3 73.8 31.4 18.0 16.5 22.3 18.9 16.2 16.3 13.6 11.4 6.1 5.0 4.1 1.0 1.3 1.5 30.5 29.1 27.7 3.3
Mphasis SELL 444 400 (9.9) 93,263 1,531 210 14.7 35.0 36.8 (58.4) 138.0 5.2 30.2 12.7 12.1 21.4 9.0 8.4 1.8 1.7 1.6 1.6 3.9 4.1 6.1 13.9 13.8 1.6
TCS ADD 2,643 2,800 5.9 5,176,844 85,009 1,959 97.6 113.0 129.9 37.4 15.7 15.0 27.1 23.4 20.3 19.8 17.4 14.8 9.4 8.2 6.8 1.2 2.4 2.0 39.7 37.4 36.6 39.8
Tech Mahindra ADD 2,485 2,650 6.6 592,610 9,731 238 128.0 142.1 166.9 25.6 11.0 17.4 19.4 17.5 14.9 13.3 12.4 10.3 6.5 5.1 4.1 0.9 1.1 0.7 33.5 29.3 27.5 22.3
Wipro ADD 593 650 9.7 1,459,943 23,974 2,463 31.7 35.8 40.8 27.1 13.1 13.9 18.7 16.5 14.5 13.1 10.9 9.2 4.3 3.6 3.0 1.3 1.5 1.7 24.9 23.5 22.5 16.6
Tech n o lo g y Caut io us 10 , 773, 38 9 176 , 9 10 29 . 6 14. 5 13. 9 22. 5 19 . 6 17. 2 15 . 9 13. 9 11. 8 6 . 3 5 . 4 4. 5 1. 3 2. 0 1. 9 27. 9 27. 3 26 . 0 16 9 . 4
Teleco m
Bharti Airtel ADD 403 415 2.9 1,611,552 26,463 3,997 8.3 14.1 16.7 39.0 69.8 18.0 48.4 28.5 24.2 8.4 7.4 6.4 2.7 2.5 2.3 0.4 0.5 0.8 6.0 9.1 9.9 28.3
Bharti Infratel REDUCE 284 250 (11.9) 536,029 8,802 1,889 8.0 10.7 11.8 51.4 33.1 10.4 35.3 26.5 24.0 11.9 10.9 9.8 3.0 3.0 2.9 1.6 3.4 3.0 8.6 11.2 12.3
IDEA BUY 168 185 10.0 604,918 9,933 3,595 5.9 7.8 8.9 94.4 30.9 14.3 28.4 21.7 19.0 9.9 8.6 7.3 3.7 2.7 2.4 0.2 0.4 0.5 12.8 14.2 13.2 25.5
Reliance Communications SELL 102 95 (6.6) 251,012 4,122 2,467 3.2 3.4 5.3 (0.4) 5.7 53.6 31.4 29.7 19.3 8.9 7.0 6.5 0.9 0.7 0.7 2.4 2.8 3.7 16.9
Tata Communications ADD 360 390 8.4 102,529 1,684 285 1.2 3.0 5.7 104.2 140.8 93.1 291.3 120.9 62.6 6.9 7.0 6.4 12.7 11.4 9.5 3.1 9.9 16.5 4.7
Teleco m Neut r al 3, 10 6 , 0 40 5 1, 0 0 4 10 7. 4 5 1. 7 18 . 9 41. 3 27. 3 22. 9 8 . 9 7. 8 6 . 8 2. 5 2. 2 2. 1 0 . 5 0 . 9 1. 0 6 . 1 8 . 1 9 . 0 75 . 4
Ut ilit ies
Adani Power SELL 47 40 (14.3) 134,119 2,202 2,872 (1.0) (3.8) (2.1) 88.8 (279.5) 45.5 (46.2) (12.2) (22.3) 12.1 9.6 9.2 2.0 2.5 2.8 (5.4) (18.4) (11.7) 7.2
CESC ADD 777 695 (10.5) 97,019 1,593 125 39.3 56.2 69.9 14.9 42.8 24.4 19.7 13.8 11.1 14.0 9.4 7.4 1.3 1.2 1.1 1.0 1.0 1.0 6.8 8.8 10.1 7.6
JSWEnergy SELL 77 62 (19.6) 126,444 2,076 1,640 6.9 8.6 7.6 2.9 24.0 (11.7) 11.2 9.0 10.2 6.9 6.0 5.7 1.9 1.6 1.4 17.7 19.3 14.4 3.6
NHPC REDUCE 20 24 20.9 219,753 3,609 ##### 1.7 1.9 2.4 (12.6) 12.3 24.9 11.7 10.4 8.4 10.7 9.2 8.1 0.8 0.8 0.7 2.1 2.5 3.2 6.5 7.5 8.9 3.3
NTPC REDUCE 138 135 (2.2) 1,137,874 18,685 8,245 13.3 11.2 12.4 6.8 (15.5) 10.0 10.4 12.3 11.2 9.3 9.9 8.5 1.3 1.2 1.2 4.2 2.4 2.7 13.2 10.4 10.7 16.6
Power Grid BUY 136 145 6.7 710,712 11,671 5,232 8.6 9.5 13.0 (5.0) 9.8 37.5 15.7 14.3 10.4 11.9 9.6 7.8 2.1 1.9 1.7 1.9 2.1 2.9 14.9 13.8 17.1 13.9
Reliance Power SELL 76 62 (18) 213,049 3,498 2,805 3.7 4.0 4.1 1.5 9.4 2.3 20.8 19.0 18.5 25.0 24.5 12.3 1.1 1.0 1.0 5.4 5.6 5.4 11.5
Tata Power ADD 85 102 19.6 238,691 3,920 2,800 2.1 3.1 6.4 (46.6) 43.2 109.5 39.8 27.8 13.3 7.8 7.7 6.3 1.9 1.6 1.4 1.2 1.4 1.4 4.1 6.2 11.3 8.9
Ut ilit ies Caut io us 3, 0 45 , 0 5 4 5 0 , 0 0 3 10 . 2 ( 4. 6 ) 24. 6 13. 7 14. 4 11. 6 10 . 6 9 . 9 8 . 2 1. 3 1. 2 1. 2 2. 3 1. 8 2. 1 9 . 7 8 . 6 10 . 0 72. 5
Ot h er s
Carborundum Universal BUY 209 200 (4.3) 39,222 644 188 4.9 8.2 12.4 1.7 69.0 50.3 42.9 25.4 16.9 17.1 12.2 9.3 3.2 2.9 2.6 0.6 1.0 1.5 7.2 12.9 17.5 0.8
Coromandel International SELL 315 210 (33.4) 89,301 1,466 283 12.6 18.1 20.2 (17.5) 43.4 11.8 25.0 17.5 15.6 12.9 10.2 9.3 3.9 3.3 2.9 1.4 1.4 1.4 15.0 19.8 19.0 1.3
Godrej Industries REDUCE 314 330 5.2 105,186 1,727 335 7.7 11.9 15.3 13.8 55.5 28.3 40.9 26.3 20.5 30.9 18.7 13.4 3.8 3.3 2.9 0.6 0.6 0.6 8.8 13.6 15.0 3.0
Havells India ADD 257 280 9.1 160,207 2,631 624 8.0 9.5 11.4 19.9 18.3 21.0 32.1 27.1 22.4 19.9 16.7 14.0 9.4 8.0 6.7 1.2 1.4 1.7 31.2 31.7 32.5 7.7
Info Edge BUY 876 750 (14.4) 95,703 1,572 109 8.4 11.7 17.0 (20.1) 39.4 45.7 104.4 74.9 51.4 90.3 72.8 43.4 11.8 10.9 9.9 0.3 0.5 0.7 12.8 15.2 20.2 2.7
Jaiprakash Associates REDUCE 32 54 69.5 77,462 1,272 2,432 (5.4) 3.8 5.3 (373.8) 170.7 40.2 (5.9) 8.4 6.0 10.3 7.5 6.4 0.7 0.6 0.5 0.0 0.0 0.0 (9.9) 7.3 9.1 41.0
Just Dial ADD 1,624 1,650 1.6 113,698 1,867 70 17.1 20.6 32.6 69.2 20.4 57.8 94.7 78.7 49.9 75.3 61.3 36.1 21.2 18.3 15.0 0.4 0.4 0.7 25.0 25.0 33.1 9.2
Rallis India BUY 221 230 4.0 42,988 706 194 7.8 10.5 12.6 27.6 34.4 20.4 28.3 21.1 17.5 16.6 12.5 10.1 6.0 5.0 4.1 1.1 1.1 1.2 22.1 25.4 25.2 1.9
Tata Chemicals BUY 382 450 17.8 97,316 1,598 255 (40.5) 30.3 38.5 (357.7) 174.9 27.0 (9.4) 12.6 9.9 8.8 6.4 5.4 1.5 1.3 1.2 2.6 2.6 2.6 (15.9) 11.3 12.7 5.7
UPL ADD 346 370 7.0 148,168 2,433 429 21.8 27.7 31.8 27.3 27.0 14.8 15.9 12.5 10.9 8.1 7.1 6.2 2.8 2.4 2.0 1.2 1.3 1.4 19.8 21.3 20.7 11.5
Others 969,252 15,916 (87.8) 1,239.7 26.9 251.2 18.7 14.8 12.9 9.9 8.3 2.8 2.4 2.1 1.0 1.1 1.3 1.1 12.9 14.5 84.7
KIE un iver s e 6 7, 713, 0 17 1, 111, 9 18 6 . 3 15 . 7 16 . 7 18 . 7 16 . 2 13. 8 11. 4 9 . 8 8 . 3 2. 7 2. 4 2. 2 1. 6 1. 7 1. 9 14. 4 14. 9 15 . 6
KIE un iver s e ex- en er g y 5 7, 8 8 4, 248 9 5 0 , 5 19 6 . 1 17. 4 17. 8 20 . 6 17. 6 14. 9 12. 7 11. 0 9 . 3 3. 1 2. 8 2. 5 1. 6 1. 6 1. 7 15 . 0 15 . 8 16 . 4
KIE un iver s e ex- en er g y & ex- co mmo d it ies 5 0 , 0 9 8 , 8 8 2 8 22, 6 76 10 . 4 16 . 7 19 . 7 21. 8 18 . 7 15 . 6 14. 3 12. 5 10 . 3 3. 4 3. 0 2. 7 1. 3 1. 5 1. 6 15 . 6 16 . 2 17. 0
Notes:
(a) We have used adjusted book values for banking companies.
(b) 2014 means calendar year 2013, similarly for 2015 and 2016 for these particular companies.
(c) EV/EBITDA excludes banking Sector.
(d) Exchange rate (Rs/US$) = 60.90
Divid en d yield ( %)

Source: Company, Bloomberg, Kotak Institutional Equities estimates


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Disclosures
KOTAK INSTITUTIONAL EQUITIES RESEARCH 30







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 <-5% 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 analysts 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.


Kotak Institutional Equities Research coverage universe
Dist ribut ion of rat ings/invest ment banking relat ionships
Source: Kot ak Inst it ut ional Equit ies Asof June 30, 2014
Percent age of companiescovered by Kot ak Inst it ut ional
Equit ies, wit hin t he specif ied cat egory.
Percent age of companieswit hin each cat egory f or which
Kot ak Inst it ut ional Equit iesand or it saf f iliat es hasprovided
invest ment banking serviceswit hin t he previous12 mont hs.
* The above cat egoriesare def ined asf ollows: Buy = We
expect t hisst ock t o deliver more t han 15% ret urnsover t he
next 12 mont hs; Add = We expect t hisst ock t o deliver
5-15% ret urnsover t he next 12 mont hs; Reduce = We
expect t hisst ock t o deliver -5-+5% ret urnsover t he next
12 mont hs; Sell = We expect t hisst ock t o deliver lesst han -
5% ret urnsover t he next 12 mont hs. Our t arget pricesare
also on a 12-mont h horizon basis. These rat ingsare used
illust rat ively t o comply wit h applicable regulat ions. Asof
30/06/2014 Kot ak Inst it ut ional Equit iesInvest ment Research
had invest ment rat ingson 149 equit y securit ies.
15.4%
23.5%
35.6%
25.5%
2.0%
0.7%
2.0%
0.7%
0%
10%
20%
30%
40%
50%
60%
70%
BUY ADD REDUCE SELL





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