Consumer Finance - Kotak - Mar 2020 PDF

INDIA DAILY
March 30, 2020 India 27-Mar 1-day 1-mo 3-mo

Sensex 29,816 (0.4) (22.1) (28.3)
Nifty 8,660 0.2 (22.7) (29.3)
Contents Global/Regional indices

Dow Jones 21,637 (4.1) (14.8) (24.0)
Special Reports Nasdaq Composite 7,502 (3.8) (12.4) (16.1)
Strategy FTSE 5,510 (5.3) (16.3) (27.4)

Nikkei 18,724 (3.4) (11.4) (20.7)
Strategy: Case count rising
Hang Seng 23,484 0.6 (10.1) (17.1)
 Is the lockdown working? KOSPI 1,663 (3.2) (16.3) (24.1)
 Economic indicators all point towards the same direction Value traded – India
Theme Report Cash (NSE+BSE) 613 533 441

Derivatives (NSE) 4,290 34,374 8,094
Banks/Diversified Financials: Impairments primed to rise even as growth pauses
Deri. open interest 1,569 5,780 3,007
 RBI acts decisively to address near-term concerns
 Focusing on growth revival and lowering 'reported' stress
Forex/money market
 Lending business weakly positioned; insurance relatively better Change, basis points
27-Mar 1-day 1-mo 3-mo

Daily Alerts
Rs/US$ 75.1 (5) 274 381
Company alerts 10yr govt bond, % 6.7 - 3 (31)
Lupin: Nepexto receives positive CHMP opinion Net investment (US$ mn)
26-Mar MTD CYTD

 Nepexto receives positive CHMP opinion (7,542
FIIs 1 (5,755)
)
 Limited impact of Covid-19 so far MFs (8) 3,158 4,823
 Stock offers deep value - BUY Top movers
Change, %
Thermax: The bitter truth, the long wait and opportunity to consolidate share
Best performers 27-Mar 1-day 1-mo 3-mo
 Bitter truth: normalization of execution unlikely in 1HFY20 for cash- HUVR IN Equity 2,141 (2.5) (1.6) 10.5
conscious Thermax DMART IN Equity 2,080 4.3 (10.5) 10.4
NEST IN Equity 15,109 1.3 (4.2) 1.7

 The wait for demand to revive once end-customers move out of survival
DRRD IN Equity 2,917 (1.1) (0.4) 1.0
zone
DIVI IN Equity 1,863 (1.1) (11.6) 0.7
 Lockdown may be an opportunity for Thermax to consolidate share and/or Worst performers
improve margin IIB IN Equity 411 (5.7) (62.8) (73.2)
 Lower estimates by 24% to incorporate weak order backlog and near-term IHFL IN Equity 91 (5.0) (67.5) (70.4)
ordering prospects EDEL IN Equity 35 5.0 (60.0) (69.2)
TTMT IN Equity 71 (0.1) (45.2) (61.5)

Economy alerts
TTMT/A IN Equity 31 1.8 (45.0) (60.2)
Economy: Pulling out all the stops
 MPC surprises with bold moves; rates to come down
 Liquidity push will stabilize credit markets
 Regulatory measures to ease financial burden across sectors
 More measures will be in the offing if Covid-19 situation does not improve
Kotak Institutional Equities Research

kotak.research@kotak.com . Mumbai: +91-22-4336-0000
For Private Circulation Only. FOR IMPORTANT INFORMATION ABOUT KOTAK SECURITIES’ RATING SYSTEM AND OTHER DISCLOSURES.
REFER TO THE END OF THIS MATERIAL.
INDIA
Strategy
Covid-19 Tracker MARCH 30, 2020
UPDATE
BSE-30: 29,816
Case count rising. The number of confirmed Covid-19 cases in India rose to 987 on
March 28 from 657 on March 25 and the number of deaths doubled to 24 from 12 in
this period. On a more positive note, the number of recovered patients increased to 84
on March 28 from 43 on March 25. We also see some indication of slower growth in
the number of confirmed cases, however, we will wait and watch before confirming if
the lockdown has helped control the growth in cases. The economic indicators we
track continue to show a slowdown in the economy.
QUICK NUMBERS
Is the lockdown working?
 Number of
The number of confirmed cases is still increasing, albeit at a slower pace (Exhibits 1 and 2). We
would, however, be wary of drawing any firm conclusions from a slower growth period of two confirmed cases
or three days. For comparison, we check the impact of lockdown on the ground zero of Covid- doubling roughly
19, the Hubei province in China. We show (Exhibit 4) that the effect of the complete lockdown every four days
in the province reflected in flattening of growth of new cases with a lag of roughly three weeks.
 Electricity
The growth in confirmed cases in Hubei did start to slow a week after the lockdown though.
The good news for India is that the growth rate of confirmed cases in India, when the national consumption down
lockdown was announced, was already lower compared to that in Hubei, when the province 40% in Gujarat
level lockdown was announced there. India’s current trajectory shows the number of confirmed
 Roughly 19 tests per
cases doubling every four days (Exhibit 3).
million people
Economic indicators all point towards the same direction conducted in India
There are no major surprises in the daily indicators we track.
 Road traffic continues to remain negligible (Exhibits 6-9) and pollution level (Exhibits 10 and
11) also remains below the preceding three month average.
 Electricity consumption has fallen further (Exhibits 17-26) with some states like Gujarat,
Haryana and Delhi now consuming ~40% less electricity compared to the same period last
year. The nationwide consumption of electricity in the last seven days was 23% lower than
the electricity consumed in the same period in CY2019. This indicates a significant slowdown
in industrial and commercial activity.
 The trend in website traffic to sites like bookmyshow.com and makemytrip.com remains
unchanged with these sites losing their relative ranks further.
 Covid-19 is still occupying a large share of people’s mindshare. The number of Google
searches for coronavirus continues to rise. The website for Ministry of Health and Family
Welfare is now the 74th most visited website in India.
Anurag Singh
anurag.singh4@kotak.com
Mumbai: +91-22-4336-1374

kotak.research@kotak.com
Mumbai: +91-22-4336-0000
For Private Circulation Only. FOR IMPORTANT INFORMATION ABOUT KOTAK SECURITIES’ RATING SYSTEM AND OTHER DISCLOSURES, REFER TO THE END OF THIS MATERIAL.
Strategy India
DAILY INDICATORS SHOW SLOWING OF ECONOMIC ACTIVITY

KIE’s Covid-19 Tracker examines the impact of Covid-19 on the economy through several sets of factors
contributing to daily economic activity. We find that (1) road traffic and vehicular pollution are at an
extremely low level, (2) electricity consumption has gone down meaningfully, and (3) people are cancelling
non-essential activities (movies/ shows/ travel). These findings are indeed obvious (and can be verified based
on anecdotal evidence), but importantly, we believe that this tracker will provide some insight into the
inflection point when economic activity starts to return to normalcy.
Covid-19 updates
Exhibits 1 and 2 show the change in the number of confirmed cases and deaths due to
Covid-19. The left chart shows the same with vertical axis in log-scale. The shaded region in
both graphs is the period of nation-wide lockdown.
Exhibit 1: Growth in the number of confirmed cases slowing? Exhibit 2: Total confirmed cases has almost reached 1000
Number of confirmed Covid-19 cases and deaths in India (log-scaled) Number of confirmed Covid-19 cases and deaths in India
Number of confirmed cases Number of deaths Number of confirmed cases Number of deaths
1,000 1,000
750
100
500
10
250
1 0
4-Mar 11-Mar 18-Mar 25-Mar 4-Mar 11-Mar 18-Mar 25-Mar
Source: Johns Hopkins University, Kotak Institutional Equities Source: Johns Hopkins University, Kotak Institutional Equities
The exhibit below shows the growth in the number of cases in India compared to the same
in other countries. We show the data starting from the day when the end-of-day count of
cases exceeded 30. The vertical axis is log scaled. The horizontal axis is the number of days
since the end-of-day count exceeded 30. The slope of each country’s curve tells us how fast
the number of cases is expanding in that country. South Korea managed to contain the virus
roughly 20 days after the number of cumulative cases breached 30. India has just crossed that
stage. While the number of cases in India is an order of magnitude lower than those of South
Korea at that stage, the rate of change in the number of confirmed cases is higher for India.
We also show three straight lines which show the trajectory where the number of cases
double every two days, every four days and every week respectively. As we can see in the
exhibit, India’s confirmed cases trajectory shows that the number of confirmed cases will
double every four days.
The growth rate of confirmed cases in India is still slower than most of the other countries. We
would wait to comment on the reason behind India’s slower pace of growth in cases; the
two primary candidates which have been suggested are (1) proactive measures taken by the
government, and (2) under-testing.
India Strategy
Exhibit 3: India’s cumulative number of cases is roughly doubling every four days
Cumulative number of Covid-19 cases in India, compared to number of cases in other countries
India Italy US Spain

UK Brazil South Korea Japan
France Double every 2 days Double every 4 days Double every week
300,000
30,000
3,000
300
30
T+0 T+5 T + 10 T + 15 T + 20 T + 25 T + 30 T + 35 T + 40
Source: Johns Hopkins University, Kotak Institutional Equities
Impact of lockdown
There is a slight slowdown in the rise of number of confirmed cases in India. To see if we
can attribute it to the nationwide lockdown, we check how long did it take for the
lockdown to have an impact on the number of confirmed cases in Hubei province in China,
which was the ground zero for Covid-19.
Exhibit 4 shows the number of confirmed cases in Hubei and in India after the lockdowns
were announced in the respective places (January 23 for Hubei and March 24 for India). It
took about three weeks for the full impact of lockdown to be felt on the growth of
confirmed cases. However, the pace of growth in confirmed cases did slow down after the
initial week of the lockdown.
India also has an advantage when compared to Hubei as the rate at which confirmed cases
were growing in India at the time of lockdown was lower when compared to what it was in
Hubei when lockdown was announced there.
Exhibit 4: Confirmed cases in Hubei start rising at a slower pace a week after the lockdown
Number of confirmed cases in Hubei and India after the announcement of lockdown in the respective places
100,000 Hubei India
10,000
1,000
100
10
1
T+1 T+8 T+15 T+22 T+29 T+36 T+43
Source: Johns Hopkins University, Kotak Institutional Equities

Strategy India
Data shows a slowdown in economic activity

We track the following indicators as a proxy for economic activity.
 Data on road traffic. Our hypothesis is that fewer vehicles on road is an indication of
slower economic activity. We track traffic data through TomTom.com which provides the
current road congestion level and compares it with the historical average. This data is
available for four Indian cities – Mumbai, New Delhi, Bengaluru and Pune (Exhibits 6-9).
Daily peak time traffic levels were down about 40% - 50% even before the nation-wide
lockdown was announced on March 24.
 Vehicular pollution. Our hypothesis remains the same for vehicular pollution. We track
the NO2 level in the air for a set of Indian cities. Vehicular pollution from the burning of
fossil fuels is a major contributor of NO2 in the air. Thus, reduced levels of NO2 (see
Exhibit 10) in the air implies fewer vehicles. Our data source is aqicn.org and the Central
Pollution Control Board. We see a fall in vehicular pollution and general pollution levels.
 Covid-19 mindshare. We also track the mindshare of Covid-19 in people’s minds. We

are assuming that before economic activity picks full steam, people will need to stop
worrying about Covid-19. Thus, the number of people searching for Covid-19 will reduce
before we see an uptick in the economy. We track Google trend data for Coronavirus
searches (Exhibit 12) and the relative ranking of the website of Ministry of Health and
Family Welfare (mohfw.gov.in) through alexa.com (Exhibit 13).
 Discretionary spending. We use visitors to websites like bookmyshow.com and

makemytrip.com as a proxy for discretionary spending. Fears of Covid-19 had already
seen people avoiding movie theatres and non-essential travel. With the closure of cinema
halls, the number of visitors on bookmyshow.com has dropped further. Similarly,
makemytrip.com is also seeing fewer visitors on its site. We use alexa.com’s relative
ranking of these websites as a proxy for discretionary spending (Exhibits 14 and 15). We
acknowledge that a big portion of business for these sites comes through their apps, but
notably, the website traffic trend provides a directional indicator. We also show the box
office collections for the prior weekend (Exhibit 16).
 Electricity consumption. If Covid-19 leads to a prolonged lockdown and temporary

shutting down of factories, we expect electricity consumption to go down. We show the
daily electricity consumption of major states (Exhibits 17-26) in India, comparing it to
consumption in the same week of CY2019. The electricity consumption of many states is
now down 15% to 40% as compared to the same week in CY2019. This shows a sharp
slowdown in industrial activity.
All the above indicators show some degree of a slowing down of economic activity (see
Exhibit 5).
India Strategy
Exhibit 5: Economic activity slows down

Daily indicators tracked by KIE
Indicator Direction Comments

All four cities show a significant decline in road
Traffic data Downwards
traffic
Most cities showing signs of lower pollution in

Pollution data Downwards
general, and lower vehicular pollution in particular.
Electricity consumption for several states is down

Electricity 15% to 40% compared to the same week in
Downwards
consumption CY2019. This is an indication of slowing industrial
activity.
Large uptrend in Google searches for Coronavirus.

Covid-19 mindshare Downwards
MHFW website also being visited a lot.
Both bookmyshow.com and makemytrip.com

Discretionary websites have seen their alexa.com relative rank slip
Downwards
spending a lot in the last few weeks. Box office collections are
extremely low.
Source: Kotak Institutional Equities
Exhibits 6 to 9 show the vehicular congestion data for four major cities – Mumbai, New
Delhi, Bengaluru and Pune. Current congestion data is compared to day-of-week adjusted
historical average. We see a sharp fall in traffic congestion, which indicates that there are far
fewer (hardly any) vehicles on the road in these cities. Even before the nationwide lockdown
was announced on March 24, peak time traffic was down 40% - 50% compared to
historical averages.
Exhibit 6: Traffic data shows a steep fall in road traffic (Part 1 - Mumbai)
Daily traffic congestion data (Mumbai), relative to historical average (%)
Source: TomTom.com, Kotak Institutional Equities

Strategy India
Exhibit 7: Traffic data shows a steep fall in road traffic (Part 2 – New Delhi)
Daily traffic congestion data (New Delhi), relative to historical average (%)
Exhibit 8: Traffic data shows a steep fall in road traffic (Part 3 - Bengaluru)
Daily traffic congestion data (Bengaluru), relative to historical average (%)

India Strategy
Exhibit 9: Traffic data shows a steep fall in road traffic (Part 4 - Pune)
Daily traffic congestion data (Pune), relative to historical average (%)
We also check pollution levels to confirm this. As Exhibits 10 and 11 show, vehicular
pollution and pollution in general is lower in many of the large Indian cities indicating a lack
of vehicular traffic.
We show the Air Quality Index (AQI) calculated on the basis of NO2 levels (Exhibit 10) and
PM2.5 (Exhibit 11). The recent seven day average AQI (7D average) is lower than the Dec
2019 to Feb 2020 average AQI (Dec2019 – Feb2020 average) for most cities. The last
recorded pollution data is as of March 28.
Exhibit 10: Vehicular pollution is lower in many cities

AQI based on NO 2 levels (lower values indicate lower level of pollution)
35 7D average Dec2019 - Feb2020 average
30
25
20
15
10
0
Ahmedabad
Indore
Kolkata
Lucknow
Delhi
Hyderabad
Chennai
Bengaluru
Mumbai
Nagpur
Kanpur
Source: aqicn.org, Central Board of Pollution Control, Kotak Institutional Equities

Strategy India
Exhibit 11: General pollution levels are also lower in many cities
AQI based on PM2.5 levels (lower values indicate lower level of pollution)
7D average Dec2019 - Feb2020 average

250
200
150
100
50
0
Ahmedabad
Indore
Kolkata
Hyderabad
Lucknow
Delhi
Chennai
Nagpur
Mumbai
Kanpur
Bengaluru
Source: aqicn.org, Central Board of Pollution Control, Kotak Institutional Equities
Exhibits 12 and 13 show the mindshare of coronavirus. We expect Google trend data for
coronavirus to trend downwards for several days before situation is normalized. The MHFW
website is now the 74th most visited website in India.
Exhibit 12: With the number of cases rising in India, Covid-19 has gained mindshare …
Google trends data for ‘Coronavirus’
100 Google trend: Coronavirus

90
80
70
60
50
40
30
20
10
0
5-Jan
29-Dec
23-Feb
16-Feb
9-Feb
1-Mar
8-Mar
22-Mar
2-Feb
15-Mar
12-Jan
26-Jan
19-Jan
Source: Google trends, Kotak Institutional Equities

India Strategy
Exhibit 13: … this has also resulted in people visiting the MHFW website
Relative ranking of mohfw.gov.in website (proxy for % of internet users visiting the website, March 29 data)
Source: alexa.com, Kotak Institutional Equities
In the absence of concurrent data for discretionary spending, we look at the rank of popular
websites like bookmyshow.com (Exhibit 14) and makemytrip.com (Exhibit 15). Data suggests
that even before the various measures taken by government (canceling domestic flights and
shutting down movie theatres), the number of visitors to these sites had been falling. The
box office collection data (Exhibit 16) also verifies this.
It is clear that the low current box office numbers and reduction in discretionary spending
(movie tickets or travel) is driven by partial or total lockdown. However, we present these
metrics for several reasons:
 As mentioned, these metrics were dropping even before state and central governments
enforced partial or total lockdown
 We expect them to remain subdued for some time even after the lockdown is lifted.
People will likely remain cautious for a while before they venture out to movie theatres,
or start making travel plans.
Therefore, our expectation is that these metrics will continue registering lower numbers and
we will see an uptick only when consumer sentiment is restored. Box office collection data is
reported on a weekly basis (with one week lag) but the other two metrics will be updated
on a daily basis.
Exhibit 14: Sharp fall in the relative ranking of bookmyshow.com

Relative ranking of bookmyshow.com website (proxy for % of internet users visiting the website, March 29)

Strategy India
Exhibit 15: Similar fall in the relative ranking of makemytrip.com

Relative ranking of makemytrip.com website (proxy for % of internet users visiting the website, March 29)
Exhibit 16: No-show: box-office collections have fallen like a stone

Box office collections for weekends (mn Rs)
1,200 Total Collection
1,000
800
600
400
200
0
3-Jan
22-Nov
29-Nov
6-Dec
13-Dec
20-Dec
27-Dec
14-Feb
21-Feb
28-Feb
6-Mar
7-Feb
13-Mar
10-Jan
17-Jan
24-Jan
31-Jan
Source: Box office mojo, Kotak Institutional Equities
We also track the electricity consumption (Exhibits 17 to 26) of a few major states –
Maharashtra, New Delhi, Andhra Pradesh, Karnataka, Gujarat, Tamil Nadu, Telangana,
Madhya Pradesh, Uttar Pradesh and Haryana. We show daily electricity consumption
compared to the same week in the calendar year prior (CY2019). The horizontal axis shows
the week of the year. Rather than comparing to recent 1-month or 3-month figures, we
compare against same week from previous calendar year to isolate any effect of the
weather.
If Covid-19 leads to a temporary shutdown of factories, we will likely see this reflected in the
lower electricity consumption. Anecdotally, the temperature in North India during February
and early March has been cooler than usual which may also be one of the factors in
marginally lower electricity consumption in those months. We start seeing lower electricity
consumption starting from the day of ‘Junta curfew’ - a lockdown on March 22. The latest
data (as of March 27) shows that electricity consumption in many states is down by 15% to
40%.
India Strategy
Exhibit 17: Roughly 25% less electricity consumption in Maharashtra points to industrial slowdown
Electricity consumption (mn kWh) in Maharashtra compared to same week last calendar year
600 Maharashtra 2019 Maharashtra 2020
500
462
400
351
300
200
100
0
Week 5 Week 6 Week 7 Week 8 Week 9 Week 10 Week 11 Week 12 Week 13
Source: Central Electricity Regulatory Commission, Kotak Institutional Equities
Exhibit 18: Significantly lower (~40%) electricity consumption in Delhi

Electricity consumption (mn kWh) in New Delhi compared to same week last calendar year
80 Delhi 2019 Delhi 2020
70 69.1
60
50
42.4
40
30
20
10
0

Strategy India
Exhibit 19: Relatively lower fall in electricity consumption in Andhra Pradesh

Electricity consumption (mn kWh) in Andhra Pradesh compared to the same week last calendar year
250 Andhra Pradesh 2019 Andhra Pradesh 2020
200 196.7
161
150
100
50
0
Exhibit 20: Electricity consumption in Karnataka is relatively stable

Electricity consumption (mn kWh) in Karnataka compared to same week last calendar year
300 Karnataka 2019 Karnataka 2020
250
232.7
214.6
200
150
100
50
0

India Strategy
Exhibit 21: Tamil Nadu also shows a decline (~25%) in electricity consumption
Electricity consumption (mn kWh) in Tamil Nadu compared to same week last calendar year
400 Tamil Nadu 2019 Tamil Nadu 2020
350
327
300
250 244.5
200
150
100
50
0
Exhibit 22: Electricity consumption only marginally lower in Telangana

Electricity consumption (mn kWh) in Telangana compared to same week last calendar year
300 Telangana 2019 Telangana 2020
250
219.1
208.6
200
150
100
50
0

Strategy India
Exhibit 23: More than 40% fall in electricity consumption in Gujarat

Electricity consumption (mn kWh) in Gujarat compared to same week last calendar year
Gujarat 2019 Gujarat 2020

400
350 350.5
300
250
200 201.7
150
100
50
0
Exhibit 24: Large fall (~30%) in electricity consumption for Madhya Pradesh
Electricity consumption (mn kWh) in Madhya Pradesh compared to same week last calendar year
300 MP 2019 MP 2020
250
200 202.5
150
142.8
100
50
0

India Strategy
Exhibit 25: Lower consumption in Uttar Pradesh by ~25%

Electricity consumption (mn kWh) in Uttar Pradesh compared to same week last calendar year
UP 2019 UP 2020
350
300 292.2
250
219.4
200
150
100
50
0
Exhibit 26: Electricity consumption down significantly (~43%) in Haryana

Electricity consumption (mn kWh) in Haryana compared to same week last calendar year
160 Haryana 2019 Haryana 2020
140
120
113.9
100
80
64.8
60
40
20
0

ATTRACTIVE/NEUTRAL
Banks / Diversified Financials
India MARCH 30, 2020
THEME
BSE-30: 29,816
Impairments primed to rise even as growth pauses. RBI’s liquidity injection

measures, loan moratorium and regulatory ratio relaxation can well provide temporary
relief to the financial system. However, we expect weak growth momentum and risks in
asset quality, especially in unsecured retail and MSME. Housing finance and gold loans
may be better positioned. Asset management and broking will remain weak, life and
general insurance may fare better. We will revisit estimates and recommendations over
the next few days after incorporating this thesis.
RBI acts decisively to address near-term concerns
To tackle the unexpected fallout from the outbreak of Covid-19, the RBI has initiated the
following measures: (a) Interest rate measures through a repo rate cut of 75 bps (to 4.4%)
which would likely result in lower bond yields and spreads (in the short-to-medium term though
the long term is likely stickier) as fiscal slippages are on the upside, (b) liquidity measures
which would inject Rs3.7 tn of funds (Rs1.37 tn each through CRR and MSF relaxations and Rs1
tn of LTROs). The LTROs will likely ease the near freeze and sharp spike in yields seen recently in
the CP/CD/corporate bond space, (c) asset impairment relief through a moratorium in all term
loans (corporate and retail) for banks and NBFCs for three months beginning March 01, 2020
(loan repayment schedule shifted by three months) while interest on working capital would be
delayed for the three months (to be paid in full at the end of the moratorium) (d) regulatory
ratio relaxation with deferment of NSFR and CET-1 of 625 bps by a period of six months.
Focusing on growth revival and lowering ‘reported’ stress
As we examine the approaches taken by lenders, we see the following areas dominating
discussions: (a) the quantum of loan covered by the current moratorium as lenders are still likely
to push borrowers to make as much payment as possible (b) retail and MSME growth, especially
that of the private banks and NBFCs has most likely come to an abrupt slow down. We are
likely to see significant revisions to underwriting policies which would consequently have an
impact on growth, NIM and profitability. We should ideally expect lenders to scale down
growth expectations in the more profitable unsecured books and non-salaried segments.
(c) Past experience suggests that the restructuring or moratorium window usually tends to be
much longer as regulators address the near-term challenges. A prolonged moratorium or
restructuring window tends to be negative for the sector as the ability to understand the true M B Mahesh, CFA
loan book status or profitability comes under discussion. mb.mahesh@kotak.com
Mumbai: +91-22-4336-0886
Lending business weakly positioned; insurance relatively better Nischint Chawathe

nischint.chawathe@kotak.com
In the initial leg, we expect a struggle to get the re-rating for lenders, especially those with the Mumbai: +91-22-4336-0887
high risk product segments like unsecured loans, MSME as we see risk in growth, NIM,
Dipanjan Ghosh
operating costs and provisions. Even the pro-cyclicals like asset management and broking dipanjan.ghosh@kotak.com
should be in a relatively weak position. We prefer housing finance (with lower share of Mumbai: +91-22-4336-0888
affordable housing) and gold financing amongst lenders. Insurance segments may be better
Venkat Madasu
placed than the lending segment in the BFSI sector. ULIP business will slow down due to muted venkat.madasu@kotak.com
capital market conditions, but we do expect an increased appetite for term and health Mumbai: +91-22-4336-0895
insurance policies, as overall customer consciousness about under-insurance increases; this may Ashlesh Sonje
partially offset headwinds of lower ULIPs volumes and increases in reinsurance rates. Our ashlesh.sonje@kotak.com
preferred ideas in the lending segment would be with ICICI Bank, SBI, HDFC and Muthoot Mumbai: +91-22-4336-0889
Finance. We re-iterate our positive stance on Chola and Shriram Transport post recent price
corrections even as we expect some near-term headwinds in the CV business.

Mumbai: +91-22-4336-0000
India Banks
CONSUMER LENDING BOOK GETS ITS THIRD STRIKE

India’s loan growth has been driven primarily by retail loans and MSME. The key growth players were private
banks and NBFCs. Demonetization and RERA had a first order impact, IL&FS crisis brought in the second leg of
impact while Covid-19 is emerging as a third whammy. The intensity of the pain will depend on (1) period of
lockdown and drop in business volumes, (2) time horizon for pick-up in credit growth, (3) asset quality
behavior demonstrated by borrowers during an uncertain macro, and (4) government and regulatory
support.
Unexpected and abrupt ending to a long consumer cycle

It is becoming increasingly likely that Covid-19 will derail the longest consumer credit cycle
that we have seen in recent history. The last leg of the retail cycle, as always in most cycles,
gets support from the riskiest segment. As we have seen in recent years, we note that the
growth in the unsecured loans and MSME loans was the fastest. Lenders have highlighted
that the composition of loan book has a higher share of salaried segment while the MSME
loans has a disproportionately higher share of collateralized lending. Most of these
arguments can be questioned given the abrupt halt in the economy. Note that while we are
building this argument, it is fair to assume that this will undergo changes as greater clarity
emerges on the cycle and the measures taken to revitalize the economy or missteps that
could prolong the pain we have witnessed in the corporate credit cycle that probably has
ended recently.
We would look at the three-pronged argument to build a weak retail argument. We have
seen three major events in the past few years, which are probably resulting in a more
subdued to a negative outlook on the retail and MSME business.
 Demonetization and RERA had the first order impact. These two events which
happened in close succession had a direct impact on some of the large ticket items in the
retail portfolio such as housing. Lending institutions did not see a direct impact, though
these two events started to cramp the retail portfolio.
 IL&FS crisis and its impact on NBFCs. The second event was the IL&FS crisis as it
exposed the asset liability mismatches in the system. The crisis resulted in many NBFCs
starting to address liabilities-side challenges through slower growth and composition of
funding sources while the few negative incidents like Dewan Housing, Altico Finance and
Reliance Housing Finance/Commercial Finance exposed a riskier underwriting book that
was probably less appreciated. However, while NBFCs had slowed down considerably,
banks and a few well positioned NBFCs were still growing at a much faster pace and
more specifically in the riskier product segments like unsecured loans and MSME.
 Covid-19 is looking like a third strike. Most lending businesses have already seen a
decline in credit growth over the past few quarters on the back of (1) weak retail
sentiment leading to relatively lower growth in secured products like housing (2) sharp
decline in CV lending on the back of steep drop in CV volumes, (3) gradual decline in
pace of MFI and lower share of new borrowers in incremental growth, (4) cautious stance
in LAP and developer financing owing to asset quality issues that have surfaced in these
segments, and (5) muted growth in corporate/wholesale loans amidst weak capex cycle.
Growth in bank credit dropped to ~6% yoy in the March 2020 and is primarily driven by
retail loans and lending to NBFCs (Exhibits 1 and 2). Gold loan companies however
reported strong growth over the past two quarters owing to rise in underlying asset price
and is a counter-cyclical play on economic cycles. Exhibits 3-7 show the break-up of asset
class mix for banks and NBFCs.
18 KOTAK INSTITUTIONAL EQUITIES RESEARCH

Banks India
Exhibit 1: Loan growth has slowed down to ~6%

Loan growth for SCBs, March fiscal year-ends, March 2008-March 2020
Advances (Rs tn) (LHS) Advances yoy (%) (RHS)

105 35
88 28
71 21
54 14
37 7
20 0
Mar-09
Mar-11
Mar-14
Mar-16
Mar-18
Mar-08
Mar-10
Mar-12
Mar-13
Mar-15
Mar-17
Mar-19
Mar-20
Source: RBI, Kotak Institutional Equities
Exhibit 2: Retail lending and lending to NBFCs drive growth for SCBs in 10MFY20
Loan growth for SCBs, March fiscal year-ends, 2010-2019 January 2020
Proportion of loans Growth yoy Share in incremental loan growth yoy
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 YTD 2020 2011 2012 2013 2014 2015 2016 2017 2018 2019 YTD 2020 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 YTD 2020
Agriculture & Allied 13.7 13.1 12.7 12.1 12.0 12.8 13.5 14.0 13.4 12.9 13.0 16.2 13.3 7.7 12.9 15.0 15.3 12.4 3.8 7.9 6.5 17.7 10.4 10.5 7.4 11.5 21.1 21.5 20.0 6.4 8.6 26.7
Priority Sector 35.9 34.4 33.1 31.6 33.1 33.5 34.0 34.3 33.2 31.7 31.1 16.2 12.1 8.2 18.8 9.9 10.7 9.4 4.8 7.3 4.0 36.5 27.4 25.1 20.5 43.9 38.2 39.6 38.3 19.8 19.7 47.0
Agriculture & Allied 13.7 13.1 12.7 12.1 12.0 12.8 13.5 14.0 13.3 12.8 12.8 16.2 13.3 7.7 12.9 15.0 15.2 12.3 3.1 8.2 6.1 17.7 10.4 10.5 7.4 11.5 21.1 21.5 19.8 5.2 8.8 27.2
SME 12.3 12.1 11.6 11.5 12.8 13.3 12.9 12.7 13.0 12.4 12.4 19.1 12.3 12.5 25.9 13.1 5.9 6.4 10.5 7.1 8.1 14.7 11.0 9.0 11.0 22.0 19.6 8.7 9.9 15.9 7.5 (5.0)
Manufacturing 6.8 5.7 5.5 5.8 6.3 6.3 5.7 5.2 4.9 4.3 4.2 2.4 12.2 20.0 22.5 9.1 (2.3) (0.5) 0.9 0.7 0.5 8.5 0.8 4.2 8.3 9.7 6.7 (1.6) (0.3) 0.6 0.3 (9.7)
Services 5.5 6.3 6.1 5.7 6.5 7.0 7.3 7.5 8.1 8.0 8.2 39.7 12.5 5.8 29.4 16.9 13.3 11.8 17.1 11.0 12.4 6.1 10.3 4.8 2.7 12.4 12.8 10.3 10.2 15.3 7.2 4.7
Housing 7.2 6.5 6.2 5.5 5.5 5.4 5.2 5.2 4.9 5.0 5.2 10.5 10.7 0.3 13.0 6.7 6.2 7.6 2.0 15.2 7.6 4.7 3.5 4.2 0.1 5.3 4.3 3.7 4.8 1.2 6.0 23.4
Weaker Sections 5.8 5.4 5.4 5.6 7.0 6.7 7.3 7.8 7.4 7.7 8.0 11.7 18.1 17.1 41.2 4.9 17.9 16.2 2.6 16.4 17.5 8.6 3.2 5.9 7.0 17.1 4.0 13.3 14.1 2.4 9.9 47.3
Industry 43.1 43.8 45.2 45.8 45.5 44.3 41.7 37.8 35.1 33.4 31.7 23.0 20.3 14.9 12.8 5.6 2.7 (1.9) 0.7 6.9 2.5 58.7 46.6 53.7 50.6 43.4 29.8 13.4 (9.2) 3.2 19.7 (88.0)
Mining & Quarrying 0.6 0.7 0.8 0.7 0.6 0.6 0.6 0.5 0.5 0.5 0.5 40.9 27.6 6.6 3.5 0.3 8.5 (11.6) 19.8 1.1 0.4 0.9 1.1 1.2 0.4 0.2 0.0 0.6 (0.8) 1.1 0.0 1.0
Food processing 2.2 2.1 2.2 2.4 2.6 2.9 2.3 2.1 2.0 1.8 1.7 17.6 22.1 24.5 24.6 17.3 (12.5) (3.0) 6.7 1.1 (0.2) 2.7 1.8 2.8 4.0 4.4 5.3 (3.9) (0.8) 1.7 0.2 (11.0)
Textiles 4.0 4.0 3.7 3.8 3.7 3.4 3.1 2.8 2.7 2.4 2.1 20.4 9.4 14.9 10.2 (0.1) 1.9 (4.6) 6.9 (3.0) (4.1) 4.3 3.8 2.2 4.2 2.8 (0.1) 0.7 (1.7) 2.3 (0.7) (13.9)
Rubber, Plastic others 0.5 0.7 0.7 0.6 0.7 0.6 0.6 0.6 0.6 0.5 0.6 65.9 15.7 4.1 18.8 1.9 (1.1) 4.8 8.2 8.1 8.8 0.5 1.6 0.7 0.2 0.9 0.1 (0.1) 0.3 0.5 0.4 3.2
Glass & Glassware 0.2 0.1 0.1 0.2 0.2 0.1 0.1 0.1 0.1 0.1 0.1 13.4 14.8 18.5 16.9 1.5 0.6 (10.8) 6.5 17.0 (12.5) 0.1 0.1 0.1 0.2 0.2 0.0 0.0 (0.2) 0.1 0.2 (1.1)
Cement 0.8 0.8 0.9 0.9 1.0 0.9 0.8 0.8 0.7 0.6 0.6 19.8 24.9 24.0 17.6 3.9 (3.1) (0.1) (3.1) 5.9 4.3 1.3 0.8 1.2 1.6 1.2 0.4 (0.3) (0.0) (0.3) 0.3 2.7
Basic metals 5.4 5.8 6.1 6.5 6.5 6.4 6.4 5.9 5.4 4.3 3.8 31.6 22.4 19.7 14.9 6.8 7.9 1.2 (1.2) (10.7) (9.3) 7.8 8.0 7.9 9.0 7.1 5.2 5.6 0.9 (0.8) (4.7) (32.7)
Construction 1.5 1.2 1.1 1.1 1.1 1.2 1.1 1.2 1.2 1.2 1.2 (1.7) 11.9 7.3 19.9 18.8 0.3 10.3 9.5 10.4 10.6 1.3 (0.1) 0.8 0.6 1.6 2.5 0.0 1.4 1.3 1.0 3.0
Infrastructure 12.5 14.2 14.7 15.0 15.1 15.4 14.7 12.8 11.6 12.2 11.6 37.8 20.5 15.7 14.6 10.5 4.4 (6.1) (1.7) 18.5 5.1 25.1 22.2 17.6 17.3 16.2 18.6 7.4 (10.7) (2.6) 17.5 (25.5)
Power 6.2 7.3 7.7 8.5 8.8 9.3 8.9 7.4 6.8 6.6 6.3 42.4 23.9 25.5 17.1 14.5 4.0 (9.4) (1.1) 9.5 0.9 14.5 12.3 10.5 14.8 10.8 14.9 4.1 (9.9) (1.0) 5.2 (6.7)
Telecom 2.0 2.5 2.2 1.8 1.6 1.5 1.4 1.2 1.1 1.3 1.5 57.8 0.5 (6.8) 0.5 4.2 (0.7) (6.8) (0.6) 36.7 46.7 2.1 5.3 0.1 (1.1) 0.1 0.8 (0.1) (1.1) (0.1) 3.3 18.0
Roads 2.4 2.5 2.6 2.7 2.9 2.8 2.7 2.5 2.2 2.2 2.2 23.6 22.1 18.2 20.2 6.9 5.2 1.4 (7.5) 12.2 2.1 6.0 2.7 3.3 3.5 4.0 2.3 1.6 0.4 (2.3) 2.1 0.0
Other Infrastructure 1.9 1.9 2.2 1.9 1.9 1.8 1.8 1.6 1.6 2.1 1.7 20.7 32.2 0.5 9.1 2.9 9.2 (0.1) 3.7 53.5 (1.6) 2.5 1.9 3.8 0.1 1.3 0.6 1.8 (0.0) 0.7 6.8 (36.9)
Services 23.9 24.2 23.7 23.7 24.2 23.5 23.5 25.4 26.7 28.0 27.3 22.6 14.4 13.1 16.1 5.7 9.1 16.9 13.8 17.8 8.9 18.4 25.3 21.0 23.3 28.1 16.0 23.5 47.7 41.8 38.6 (43.3)
Transport 1.7 1.9 1.8 1.6 1.7 1.5 1.5 1.6 1.6 1.6 1.6 33.3 9.1 4.2 16.0 (0.8) 8.9 10.7 9.8 14.2 6.1 3.0 2.7 1.0 0.6 1.9 (0.2) 1.5 2.0 1.8 1.8 1.8
Professional Services 1.4 1.2 1.1 1.2 1.4 1.4 1.6 1.9 2.0 2.0 1.9 4.2 5.0 18.8 41.2 6.0 23.9 31.6 12.9 10.4 2.0 (0.2) 0.3 0.4 1.6 3.5 1.0 3.7 6.0 3.0 1.7 1.0
Trade 5.4 5.0 5.2 5.7 5.9 6.1 5.8 6.0 6.1 6.1 5.8 13.1 21.1 22.4 18.1 12.2 4.2 12.3 9.1 13.1 4.8 4.6 3.3 6.4 8.8 7.5 8.4 2.8 8.5 6.6 6.5 (13.6)
Real Estate 3.0 2.6 2.6 2.6 2.8 2.8 2.7 2.6 2.4 2.3 2.6 5.8 15.6 11.9 21.6 8.6 6.7 4.5 0.1 8.9 14.7 (0.1) 0.8 2.5 2.3 4.1 2.8 2.1 1.5 0.0 1.7 16.6
NBFCs 3.7 5.0 5.3 5.3 5.3 5.2 5.4 5.5 6.5 7.4 8.3 62.3 23.9 14.1 12.9 6.1 13.2 10.9 26.9 29.2 32.2 3.3 10.9 7.2 5.6 5.1 3.8 7.5 7.0 17.7 15.3 84.1
Personal Loans 19.3 19.0 18.4 18.4 18.3 19.4 21.3 22.8 24.8 25.7 28.1 19.5 12.9 13.6 12.5 15.5 19.4 16.4 17.8 16.4 16.9 5.3 17.6 14.8 18.8 17.0 33.1 41.5 41.6 48.6 33.0 204.5
Housing 9.9 9.7 9.4 9.4 9.7 10.5 11.4 12.1 12.7 13.4 14.8 19.3 12.3 13.2 17.9 16.7 18.8 15.2 13.3 19.0 17.5 4.9 9.0 7.3 9.3 12.4 19.0 21.7 20.7 19.3 19.6 124.6
Credit card 0.7 0.5 0.5 0.5 0.4 0.5 0.6 0.7 0.9 1.0 1.2 (10.2) 12.9 21.9 (0.2) 22.6 23.7 38.4 31.6 28.6 31.6 (1.8) (0.3) 0.4 0.8 (0.0) 1.2 1.3 2.6 2.8 2.1 17.0
Education 1.2 1.2 1.2 1.1 1.1 1.1 1.0 1.0 0.9 0.8 0.8 16.7 16.4 9.8 9.2 5.5 7.7 2.7 (0.5) (2.5) (3.1) 1.9 1.0 1.2 0.9 0.8 0.7 0.9 0.3 (0.1) (0.2) (1.1)
Vehicle 2.1 2.0 2.1 2.3 1.9 2.1 2.3 2.4 2.5 2.3 2.5 14.5 22.2 24.5 (4.3) 17.2 22.7 11.5 11.3 6.5 9.8 0.4 1.4 2.7 3.8 (0.7) 3.9 5.2 3.2 3.2 1.3 11.0
Other Personal Loans 3.4 4.0 3.7 3.6 3.6 3.9 4.5 5.3 6.6 7.0 7.9 42.0 8.1 11.1 12.6 18.3 25.2 27.0 35.3 19.4 20.7 (0.3) 6.7 2.0 3.1 3.4 7.7 11.0 14.6 22.3 10.5 72.6
KOTAK INSTITUTIONAL EQUITIES RESEARCH 19

India Banks
Exhibit 3: High share of SME loans for banks like Bank of Baroda while others have been quite slow
Asset-class mix for banks, March fiscal year-ends, 2014-2019, 3QFY20 (%)
Share of loan book (%) YoY growth rate (%)

2014 2015 2016 2017 2018 2019 3QFY20 2015 2016 2017 2018 2019 3QFY20
PSU banks
Bank of Baroda
Housing 5 5 7 8 10 12 12 15 11 21 48 22 66
Auto — 1 1 1 1 2 2 NM 6 (1) 30 49 114
Unsecured retail — 0 1 1 0 0 1 NM 1 (3) (1) 12 165
Agri 7 9 9 12 11 12 13 32 (8) 30 5 22 66
Other retail 7 6 5 6 7 8 2 (10) (18) 10 41 23 (75)
SME 14 14 14 14 13 12 13 9 (15) 3 7 (4) 76
Wholesale 67 65 64 59 56 54 56 4 (11) (8) 6 6 58
Total 100 100 100 100 100 100 100 8 (10) (0) 12 10 53
Canara Bank
Housing 4 5 6 7 7 8 9 29 24 19 13 22 22
Auto 1 1 1 2 2 2 2 22 14 20 31 40 15
Unsecured retail 4 5 6 6 6 7 9 51 16 14 7 31 27
Agri 16 18 21 22 22 21 23 21 14 10 11 10 13
Other retail 2 2 3 2 0 0 1 (14) 79 (24) (78) (27) 119
SME 17 18 21 22 22 20 21 21 10 11 10 4 8
Wholesale 56 51 42 39 41 42 34 (0) (19) (2) 17 12 (25)
Total 100 100 100 100 100 100 100 10 (2) 5 12 12 (2)
PNB
Housing 5 6 7 8 10 11 14 26 25 18 31 25 16
Auto 1 1 1 1 1 1 1 14 17 16 9 (3) (1)
Unsecured retail 1 1 1 1 1 1 2 3 4 15 6 (47) 284
Agri 16 16 16 16 16 18 19 13 7 4 4 18 (3)
Other retail 4 5 5 6 5 7 6 31 17 9 (2) 38 (32)
SME 14 14 8 19 20 18 19 12 (35) 142 7 (3) (7)
Wholesale 59 56 62 49 46 44 40 4 26 (20) (2) (1) (21)
Total 100 100 100 100 100 100 100 9 13 2 3 6 (10)
SBI
Housing 12 12 13 14 15 17 19 13 20 46 13 28 13
Auto 2 2 3 3 3 3 3 15 20 50 15 8 3
Agri 10 9 8 10 9 9 9 (0) 5 53 (2) 8 5
Other retail — — — — — — — NM NM NM NM NM NM
SME 15 14 14 14 13 13 12 1 20 26 (2) 7 (5)
Wholesale 56 56 56 51 51 50 48 7 14 20 4 11 (7)
Total 100 100 100 100 100 100 100 7 15 29 5 12 0
Union Bank
Housing 8 9 10 10 10 10 10 26 19 6 (0) 9 4
Auto 1 1 1 1 1 1 1 21 13 10 19 5 8
Unsecured retail 1 1 1 1 1 1 2 (17) 66 4 6 7 29
Agri 11 12 14 15 15 15 15 23 23 13 4 7 0
Other retail 0 1 0 1 3 5 5 266 (65) 198 331 42 24
SME 19 21 20 21 20 21 21 21 3 10 2 6 5
Wholesale 59 55 53 51 49 47 46 5 1 6 (0) (2) 3
Total 100 100 100 100 100 100 100 12 6 9 4 4 4
Source: Company, Kotak Institutional Equities

Banks India
Exhibit 4: High share of SME loans for regional banks like City Union Bank and Federal Bank

2014 2015 2016 2017 2018 2019 3QFY20 2015 2016 2017 2018 2019 3QFY20
Old private banks
City Union bank
Housing 5 6 7 7 7 6 7 32 27 15 12 14 9
Auto — — — — — — — NM NM NM NM NM NM
Unsecured retail 7 9 10 11 12 15 13 57 22 27 30 45 (15)
Agri 19 17 16 18 14 15 13 (2) 12 28 (6) 19 (9)
Other retail 7 4 3 3 3 3 3 (34) (17) 8 22 7 22
SME 48 51 52 48 52 48 50 20 19 3 28 9 7
Wholesale 13 12 12 13 12 13 14 (4) 24 16 9 27 17
Total 100 100 100 100 100 100 100 11 17 12 18 17 3
DCB
Housing 38 43 43 43 40 40 41 42 25 22 20 16 14
Auto 2 3 4 4 6 10 10 54 96 22 93 93 11
Unsecured retail — — — — — — — NM NM NM NM NM NM
Agri 14 15 17 18 18 20 21 39 37 30 29 29 18
Other retail 3 4 9 7 7 5 5 69 184 (5) 29 (17) 11
SME 17 13 12 12 12 12 11 (2) 18 22 29 16 (1)
Wholesale 26 23 15 16 17 13 12 15 (19) 31 37 (11) (0)
Total 100 100 100 100 100 100 100 29 23 22 29 16 11
Federal bank
Housing 17 18 19 18 18 19 21 22 19 18 26 30 19
Auto — — — — 2 2 3 NM NM NM NM 62 45
Unsecured retail — — — — 0 1 1 NM NM NM NM 143 90
Agri 12 12 11 10 10 10 10 23 5 13 22 25 12
Other retail 15 13 11 12 8 7 6 5 (9) 40 (17) (0) 8
SME 25 25 26 22 20 19 19 17 16 9 15 12 9
Wholesale 31 32 34 38 43 42 40 20 18 45 39 16 5
Total 100 100 100 100 100 100 100 18 13 26 25 19 11
KVB
Housing 5 6 7 8 9 11 12 23 33 14 27 27 19
Auto 2 2 2 2 2 2 2 7 6 11 10 3 (3)
Unsecured retail 2 2 2 1 1 1 2 8 6 (3) (4) 18 21
Agri 18 17 18 17 17 16 17 1 15 (1) 13 3 7
Other retail 4 4 4 4 4 8 8 25 2 (4) 20 128 (11)
SME 33 32 32 35 35 34 33 5 9 14 11 6 (7)
Wholesale 37 37 35 33 31 28 26 5 2 (1) 6 (2) (10)
Total 100 100 100 100 100 100 100 6 9 5 11 10 (3)

India Banks
Exhibit 5: High share of SME and unsecured loans for HDFC Bank. ICICI Bank is relatively better positioned
2014 2015 2016 2017 2018 2019 3QFY20 2015 2016 2017 2018 2019 3QFY20
New private banks
Axis bank
Housing 22 22 22 23 23 23 24 21 19 19 13 17 18
Auto 4 3 4 5 5 5 7 5 39 35 23 31 54
Agri 6 6 7 7 7 7 6 33 31 14 15 11 2
Other retail 4 5 4 5 6 5 7 42 4 21 47 9 54
SME 17 15 13 13 13 13 11 4 8 10 19 12 (8)
Wholesale 44 45 46 42 40 37 36 25 22 0 12 5 10
Total 100 100 100 100 100 100 100 22 21 10 18 13 15
HDFC bank
Housing 6 7 7 7 6 6 7 25 32 20 (5) 42 27
Auto 17 16 15 16 16 15 13 13 22 25 24 10 3
Agri — 4 5 5 5 5 4 NM 39 26 23 12 1
Other retail 7 4 4 3 3 3 3 (35) 16 4 22 20 10
SME 8 5 5 7 8 7 7 (25) 34 43 49 5 15
Wholesale 51 53 52 49 45 47 49 26 25 13 9 31 23
Total 100 100 100 100 100 100 100 21 27 19 19 24 19
ICICI bank
Housing 21 23 25 28 29 30 31 26 23 17 17 19 14
Auto 8 8 8 9 9 9 9 6 18 16 16 18 7
Agri — — — — — — — NM NM NM NM NM NM
Other retail 7 9 10 11 13 13 13 41 22 18 31 15 16
SME 4 4 4 5 5 5 3 14 12 16 15 19 (39)
Wholesale 57 53 49 43 38 35 34 7 4 (6) (2) 3 9
Total 100 100 100 100 100 100 100 14 12 7 10 14 11
IndusInd bank
Housing 5 6 8 9 8 8 8 64 55 39 26 24 20
Auto 34 30 28 27 25 25 24 9 23 19 23 24 12
Other retail 5 4 4 4 4 4 4 (1) 15 27 33 38 12
SME 28 30 30 32 30 33 27 34 30 36 20 42 (13)
Wholesale 27 29 29 28 31 28 25 32 27 25 41 18 (2)
Total 100 100 100 100 100 100 100 25 29 28 28 29 15
RBL
Housing — — — — 10 12 13 NM NM NM NM 70 21
Auto — — — — — — — NM NM NM NM NM NM
Unsecured retail — — — 7 14 19 25 NM NM NM 146 94 59
Agri — — 8 7 4 3 3 NM NM 20 (25) (0) (5)
Other retail — — 31 18 3 3 3 NM NM (19) (76) 32 20
SME — — — 1 4 5 5 NM NM NM 374 57 17
Wholesale — — 61 66 65 59 52 NM NM 51 30 26 (3)
Total — — 100 100 100 100 100 NM NM 39 32 40 13
Yes bank
Housing — — — 3 3 5 6 NM NM NM 98 57 13
Auto — — — 3 5 7 8 NM NM NM 132 66 (17)
Unsecured retail — — — 3 3 4 6 NM NM NM 54 62 29
Other retail 21 11 11 1 1 2 2 (31) 30 (87) 98 62 3
SME 16 25 24 23 20 18 21 115 28 27 34 6 (13)
Wholesale 63 65 65 68 68 66 57 39 31 40 54 15 (44)
Total 100 100 100 100 100 100 100 36 30 35 54 19 (31)
Bandhan bank
Housing — — — — 29 NM NM NM NM NM NM
Auto — — — — — NM NM NM NM NM NM
Microfinance 100 100 85 86 61 NM NM 39 29 40 5
Other retail — — 4 4 1 NM NM NM NM 34 (77)
Agri — — — — — NM NM NM NM NM NM
SME — — 6 4 4 NM NM NM NM (7) 35
Wholesale — — 4 5 5 NM NM NM NM 89 39
Total — 100 100 100 100 100 NM NM 39 51 38 62

Banks India
Exhibit 6: Most SFBs have a higher share of lending towards the riskier customer or product segments

2016 2017 2018 2019 3QFY20 2017 2018 2019 3QFY20
Small finance banks
Equitas SFB
Housing — 6 5 3 3 NM 1 (19) 53
Auto 25 26 25 23 23 28 17 30 30
Microfinance 54 44 25 24 22 0 (31) 34 19
Other retail 22 1 2 1 2 (95) 135 (28) 181
Agri — 0 3 4 4 NM 829 84 34
SME — 22 39 45 46 NM 112 61 36
Wholesale — — — — — NM NM NM NM
Total 100 100 100 100 100 22 21 42 32
Ujjivan SFB
Housing 0 2 4 8 11 372 228 157 89
Auto — — — — — NM NM NM NM
Microfinance 87 85 84 78 72 15 17 32 14
Other retail 12 13 9 8 10 21 (15) 25 65
Agri — — — — — NM NM NM NM
SME 0 1 3 6 7 762 298 164 77
Total 100 100 100 100 100 18 18 40 28
AU SFB
Housing — — — — — NM NM NM NM
Auto — 50 44 42 42 NM 32 43 29
Microfinance — — — — NM NM NM NM
Other retail — 39 38 35 40 NM 47 40 51
Agri — — — — NM NM NM NM
SME 11 17 22 19 NM 136 96 31
Total — 100 100 100 100 NM 49 51 31
Exhibit 7: High share of unsecured retail credit for Bajaj Finance

Asset-class mix for NBFCs, March fiscal year-ends, 3QFY20 (%)
Retail
Housing Auto loans Personal/
Home loans LAP LRD+CF Others Overall CV/CE 2W Tractor PV Others Overall Gold MFI SME Consumer Wholesale Others
Aavas 73.9 26.1 100.0
Bajaj Finance 30.5 10.9 10.9 12.9 36.7 9.0
CanFin 90.0 4.6 5.4 100.0
Chola 21.4 21.4 25.4 7.2 5.6 12.5 22.6 73.4 5.2
CreditAccess Grameen 94.9 5.1
HDFC 76.0 19.0 95.0 5.0
Indostar 7.5 22.6 30.1 43.9 17.6 8.4
IIFL Finance 34.3 12.9 47.2 21.0 8.3 22.1 1.4
LICHF 76.8 16.4 6.9 100.0
Magma (consolidated) 23.0 15.0 9.0 18.0 23.0 65.0 12.0
Manappuram (consolidated) 2.5 5.8 67.3 20.9 3.5
MMFS (standalone) 18.0 17.0 48.0 10.0 93.0 7.0
Muthoot (standalone) 98.0 2.0
REPCO 81.4 18.6 100.0
SCUF 20.9 3.7 24.7 9.7 57.4 8.2
Spandana 100.0
STFC 69.1 3.1 22.5 0.0 94.7 5.3
Sundaram 52.6 5.8 25.6 16.0 100.0

India Banks
We believe the abrupt halt to the economy we are witnessing currently has given limited
room for the best-in-class lenders to adjust for the new set of incoming weak data. On the
face of it, it appears that they are more exposed than we would have seen them in previous
circumstances--in the past, these institutions have been nimble in reducing risk in each
portfolio well before peers.
The impact of Covid-19 on the overall slowdown in credit growth is difficult to quantify as
the intensity of the pain on overall retail and SME segments is hard to gauge. Additionally,
there can be second order impact of the slowdown in select sectors on growth and asset
quality behavior in other sectors. However, it is safe to assume that Covid-19 will lead to a
sharp decline in overall credit growth in the economy. Fiscal and regulatory support
announced by the Indian government and RBI will stimulate marginal demand in select asset
classes though the overall credit environment will be muted.
Two pronged approach: tighten credit standards, reduce risky product segments
Given the current environment, we would want to build the following as our base case
argument in terms of the approach of lenders to business:
 Tighten credit standards. This would include reducing the share of customers who are
in the below prime segment, thin credit files or new-to-credit till we have established
payment behavior.
 Reduce the contribution of the riskier product segments like unsecured personal
loans and MSME loans (especially that of unsecured line of credit). The credit card
business is indeed also a payment product, but we should expect a lower focus by lenders
in cross-selling other loans such as personal loans in this product.
Asset book positioning: housing and gold loans relatively well positioned
We are building a relatively positive outlook on housing and gold loan business.
Disbursements are likely to remain weak, but we expect a slower repayment book to aid
these businesses. Gold loans have the benefit of being the easiest segment for borrowers to
access credit while the risk for the borrowers remains broadly unchanged. We are more
concerned about the unsecured retail, consumer and SME business at this point as the
contribution to earnings is high and these businesses would have an impact on NIM, fees and
cost ratios as well as on provisions.
Moderate growth in housing, affordable housing growth likely under stress

We expect housing sales to remain sluggish through most of FY2021E. Real estate sales
have already been sluggish (Exhibit 8) and the current lockdown will compound the
challenges in this sector. Muted real estate sales will likely translate into weak disbursements
and low loan growth in housing finance. Exhibit 9 shows that housing finance industry
reported ~13% yoy growth in 3QFY20 and 15% CAGR in FY2017-19. Loan growth for
FY2021E will likely slow down further. Lower rate of prepayments, elongation of tenure due
to the moratorium will likely provide some support to loan growth. Asset quality
performance in the prime segments will likely hold better than most other retail segments,
likely prompting more competition in this sector - weak credit growth will add to the same
 Affordable housing under stress. We find higher impact in the fast-growth, affordable
housing sector; Exhibits 10-13 show high loan growth in this segment and the recent rise
in affordable housing NPL. Most companies offering affordable housing loans in the
ticket size of Rs0.5-1.5 mn will see significant slowdown in credit growth. The underlying
customer segment is the EWS, LIG and MIG segments with average household income of
Rs20,000-50,000 per month in most cases. A significant share of customers are self-
employed, cash salaried or daily wage earners. One can expect a severe hit to their daily
business activities, leading to stress on earnings. Additionally, stress in asset quality for
the affordable housing segment had started to surface over the past few quarters and most
companies had tightened underwriting norms, leading to a drop in overall disbursement
growth. Under such circumstances, one can expect a further slowdown in this segment.

Banks India
 Cautious stance in LAP and construction finance. Rising concerns over asset quality
and the underlying value of collateral have led to a cautious stance on LAP by most
financiers. NBFCs/HFCs and select banks had expanded rapidly in the developer financing
segment over FY2015-18. Post the IL&FS crisis, most of these developers faced a cash
flow crunch as incremental funding from NBFCs/HFCs slowed down (Exhibit 14). This was
coupled with higher inventory and lower residential real estate sales, leading to a gradual
build-up of stress for select developers. Most companies like LIC Housing, HDFC, etc.
witnessed a rise in GNPLs in the developer finance segment by 1-10%. A significant
proportion of these loans are under the moratorium and one can expect a further rise in
delinquencies. Under such circumstances, incremental lending to developer financing is
mostly for the completion of on-going projects and new residential launches are muted.
Covid-19 is expected to amplify the impact of the slowdown in real estate market as retail
sentiment dampens further.
Exhibit 8: Residential real estate sales had started to pick up

Absorption trend, residential, Calendar year-ends, 2010-20 (mn sq. ft)
45 Bengaluru Chennai MMR NCR Pune
40
35
30
25
20
15
10
5
0
Dec-10
Dec-11
Dec-18
Dec-19
Dec-12
Dec-13
Dec-14
Dec-15
Dec-16
Dec-17
Jun-11
Jun-12
Jun-13
Jun-14
Jun-15
Jun-16
Jun-17
Jun-18
Jun-19
Source: Propequity, Kotak Institutional Equities

India Banks
Exhibit 9: NBFCs have started to lose market share in housing loans

Housing loans market share, Calendar year-ends, 2012-2019, 3QFY20
Market share (%) Loan book (Rs bn)
2012 2013 2014 2015 2016 2017 2018 2019 3QFY20 2012 2013 2014 2015 2016 2017 2018 2019 3QFY20
Key public banks
BoB 2.2 2.1 2.2 2.2 2.1 2.0 2.6 2.8 3.9 141 160 196 225 250 302 447 546 818
Canara Bank 2.5 1.7 2.2 1.6 1.7 1.7 1.6 1.7 1.9 158 131 197 165 205 243 276 336 391
PNB 2.0 1.9 1.9 2.1 2.2 2.1 2.4 2.7 2.8 126 143 170 215 269 317 415 520 582
SBI 16.2 15.8 15.7 15.6 15.8 15.1 18.0 20.7 20.9 1,027 1,195 1,407 1,592 1,906 2,226 3,131 4,004 4,404
Other banks
ICICI Bank 7.7 7.7 7.9 8.7 9.1 8.7 8.6 9.2 9.3 489 579 709 893 1,095 1,279 1,502 1,782 1,964
Axis Bank 4.4 5.1 5.7 6.0 6.1 5.9 5.7 6.0 6.2 282 389 509 616 734 874 991 1,155 1,312
HDFC Bank 2.3 2.2 2.2 2.4 2.6 2.6 2.1 2.7 2.9 143 168 193 241 318 384 363 514 617
IDBI Bank 4.1 3.3 2.7 2.8 2.3 2.0 1.9 1.9 2.0 261 248 243 281 272 289 322 377 416
Kotak Bank 1.3 1.4 1.4 1.4 1.9 1.8 1.9 2.1 2.2 83 107 121 147 230 261 324 407 460
Union Bank 1.7 1.6 1.7 1.8 1.8 1.9 1.4 1.4 1.4 105 123 154 188 217 278 252 281 290
Bank of India 1.3 1.4 1.5 1.6 1.6 1.5 1.5 1.7 1.6 83 103 131 166 197 222 266 324 346
Central Bank of India 1.1 1.0 1.2 1.4 1.4 0.8 1.2 NA NA 68 77 108 140 163 125 214 NA NA
Syndicate Bank 1.3 1.2 1.1 1.2 1.2 1.0 1.0 0.9 0.9 84 89 97 120 142 150 173 182 197
Corporation Bank NA 1.2 1.2 1.1 1.1 1.0 0.8 0.7 0.7 NA 88 105 115 131 142 142 136 149
OBC 0.8 0.8 0.8 1.0 1.1 1.1 0.8 1.0 1.0 53 63 72 105 127 164 144 184 215
Allahabad Bank 1.5 1.2 1.1 0.7 0.7 0.7 0.7 0.8 0.7 93 93 96 68 86 99 126 148 154
Bank of Maharashtra NA NA 1.0 1.0 0.9 0.9 0.8 0.6 0.7 NA NA 89 99 106 136 136 118 139
IOB 0.7 0.7 0.7 0.7 0.8 0.7 0.8 0.7 0.7 42 50 61 68 91 96 132 140 146
Federal Bank 0.9 0.7 0.7 0.7 0.7 0.6 0.7 0.8 0.8 56 51 59 69 79 91 116 154 176
Dena Bank NA NA 0.6 0.4 0.5 0.4 0.4 0.3 NA NA NA 55 44 58 63 68 60 NA
South Indian Bank 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.2 11 16 15 21 26 29 36 46 52
Total banks (from RBI) 63.7 60.5 60.2 61.6 61.8 58.3 56.0 56.6 59.5 4,034 4,567 5,386 6,285 7,468 8,601 9,746 10,966 12,532
Key NBFCs
HDFC Ltd 14.0 14.8 14.9 15.3 14.9 13.9 14.6 14.9 15.1 888 1,113 1,333 1,557 1,800 2,044 2,538 2,888 3,185
LIC Housing Finance 9.5 10.0 9.9 9.9 9.2 8.2 7.8 7.6 7.5 599 751 886 1,007 1,107 1,209 1,353 1,481 1,579
Gruh 0.7 0.7 0.6 0.7 0.7 0.8 0.8 0.9 NA 47 50 54 70 89 111 132 173
CanFin Homes 0.4 0.5 0.7 0.7 0.7 0.8 0.8 0.8 0.9 26 40 58 71 88 117 142 164 182
PNBHF 0.4 0.6 0.8 1.0 1.4 1.6 2.1 2.5 2.4 26 43 68 104 167 229 365 489 509
L&T Housing Finance 0.0 0.0 0.0 0.0 0.5 0.5 0.5 0.5 0.5 63 76 89 105 115
REPCO 0.4 0.4 0.4 0.5 0.5 0.5 0.5 0.5 0.5 24 30 38 49 62 72 80 90 95
Sundaram Housing Finance 0.6 0.7 0.7 0.7 0.6 0.5 0.5 0.5 0.5 37 55 64 68 75 77 82 91 95
Tata Housing Finance 0.0 0.0 0.5 0.9 1.1 1.1 1.2 1.4 1.4 43 91 130 169 211 269 290
Aavas 0.0 0.0 0.0 0.1 0.1 0.1 0.2 0.2 0.4 4 8 15 22 32 45 88
Aptus 0.1 3 5 8 13 18
All NBFCs listed above 34.4 35.0 35.5 37.3 37.9 36.1 37.8 38.1 35.5 2,180 2,640 3,176 3,807 4,579 5,328 6,572 7,379 7,491
Other NBFCs 1.9 4.5 4.4 5.2 5.7 5.5 6.3 5.3 5.0 119 340 389 527 694 818 1,089 1,033 1,049
Total NBFCs 36.3 39.5 39.8 42.5 43.6 41.7 44.0 43.4 40.5 2,299 2,980 3,566 4,334 5,273 6,145 7,661 8,412 8,539
Total Banks and NBFCs 6,332 7,547 8,952 10,205 12,084 14,746 17,406 19,378 21,071
Notes:
(1) We have used KIE estimates for companies where housing loans data is not explicitly available.
Source: Company, RBI, Kotak Institutional Equities estimates

Banks India
Exhibit 10: Growth in affordable housing has slowed pace Exhibit 11: Affordable housing loan disbursements declined
Affordable housing credit outstanding, March fiscal year-ends, 2015- 11% yoy in 1QFY20 and 5% yoy in FY2019
2019, 1QFY20 Affordable housing loan disbursements, March fiscal year-ends, 2015-
2019, 1QFY20
(Rs tn) Credit outstanding (LHS) YoY (RHS) (%)
12.5 25
22 Disbursements (LHS) YoY (RHS)
(Rs tn) (%)
20 3.0 22.5
22
10.0 20
16 18
2.4 15.0
7.5 15
1.8 7.5
10
5.0 10
1.2 0.0
5 (5)
2.5 5 0.6 -7.5
(10)
1.7 2.0 1.8 2.2 2.1 (11) 0.5
5.1 6.1 6.4 7.8 8.6 8.8 0.0 -15.0
0.0 0
2016
2017
2019
2015
2018
1QFY20
2015 2016 2017 2018 2019 1QFY20
Source: CRISIL Research

Exhibit 12: Affordable housing NPLs have increased Exhibit 13: Sharp rise in affordable housing NPLs for HFCs
Housing NPLs, March fiscal year-ends, 2015-2019, 1QFY20 (%) Player-wise affordable housing NPLs, March fiscal year-ends, 2015-
2019, 1QFY20 (%)
(%) Normal housing Affordable housing
3.0 (%) Public sector banks HFCs
New private banks Old private banks
Overall affordable
3.0
2.4 2.7
2.4
2.4 2.2
2.1
1.8
1.8 1.8
1.8
2.7
1.2 2.4
2.2 2.1 2.7 2.7 2.7
1.9 2.5 2.6
1.8 1.8 1.8 1.2 2.3 2.3 2.3
1.4 1.5 2.1 2.1
0.6 1.2 1.9 1.9
1.1
1.3 1.4 1.3
0.6 1.2 1.1 1.2
0.0 1.3 1.2 1.5 1.8 1.9 2.6

2015 2016 2017 2018 2019 1QFY20 0.0
2015 2016 2017 2018 2019 1QFY20


India Banks
Exhibit 14: Real estate exposure of NBFCs increased over FY2015-2018; dropped ~300 bps in 9MFY20
Real estate exposure for banks and NBFCs, March fiscal year ends, 2015-2019, 3QFY20 (Rs bn)
NBFCs Banks (RBI)

5,000
4,000
3,000
2,000
1,000
-
2015 2016 2017 2018 2019 3QFY20
Source: Company, Kotak Institutional Equities estimates
Muted auto volumes underpin decline in pace of growth in auto loans
Lower freight rates, disruption in infrastructure (due to the lockdown), SME and e-commerce
business and price rise (initially expected at ~10-15%) due to the transition to BS-VI will
drive weak CV volumes (Exhibit 15). Our auto analyst expects 5-10% decline in CVs in
FY2021E; a prolonged slowdown in business due to the lockdown poses risk of further
downgrade in our estimates. CV industry has been weak in FY2019 with 37% growth in
MHCVs and 12% growth in LCV in 11MFY20. Most CV financiers have reported a drop in
CV disbursements over the past few quarters. CV AUM growth declined sharply for most
companies (Exhibit 16). Additionally, select companies have witnessed a marginal rise in
gross stage 3 loans/GNPLs leading to a slowdown in growth. 2W volumes will likely decline
5-10% yoy in FY2021E on the back of weak rural sentiment. Strong water reservoir levels do
provide some comfort to borrowers, but the lockdown and supply chain disruption will likely
pose a risk of disappointment in tractor sales. In the absence of visible stimulus and weak
retail demand post Covid-19 PV (passenger vehicle), volumes will be tepid and hence growth
in this segment will likely pick pace from FY2022E.
Exhibit 15: CV volumes will remain muted in FY2021E

Segment-wise auto sales in India (not adjusted for impact of Covid-19), March fiscal year-ends, 2002-2023E (%)
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020E 2021E 2022E 2023E
PV 4 11 27 18 8 21 12 0 26 29 4 1 (6) 4 7 9 8 3 (13) 10 12 8
Car 5 5 29 18 8 22 12 1 25 30 2 (7) (5) 5 8 4 3 2 (15) 6 13 8
UV (3) 35 23 18 8 16 14 (4) 27 27 14 30 (9) 1 5 23 18 4 (8) 17 10 8
CV (4) 33 36 22 10 33 4 (21) 39 27 19 (2) (20) (3) 11 4 20 18 (21) (4) 22 11
MHCV 1 31 39 23 4 33 (1) (33) 34 32 8 (23) (25) 16 30 0 13 15 (31) (4) 23 10
LCV (12) 36 32 21 20 33 12 (7) 43 23 30 14 (18) (12) (0) 8 25 19 (15) (4) 22 12
2W 15 12 11 16 14 11 (8) 3 26 26 14 3 7 8 3 7 15 5 (10) (5) 12 6
Tractors (10) (20) 6 26 16 21 (5) 1 32 20 11 (2) 20 (13) (11) 18 26 8 5 5 8 8
Notes:
(1) Adjustment for Covid-19 sales volumes can be 2-10% lower than our estimates.
Source: SIAM, Kotak Institutional Equities estimates

Banks India
Exhibit 16: Pace of growth in CV AUM declined for most companies in 3QFY20
Player-wise CV AUM growth, March fiscal year-ends, 2009-2019, 3QFY20 (%)
YoY (%) 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 3QFY20
CV loans
Banks
DCB (20) (45) (63) 44 8 52 54 96 22 93 35 11
HDFC 34 (25) 36 60 23 43 8 24 23 21 21 4
ICICI (22) (15) 17 20 (15) (17) (13) 18 19 15 32 15
IndusInd (4) 19 44 43 19 (5) 8 30 23 27 24 11
KMB (8) 11 69 25 0 (30) (4) 43 45 40 30 6
AU 43 43 29
Equitas 232 163 47 28 28 17 30 32
Total banks (11) (9) 32 32 3 (2) 1 27 25 28 26 10
NBFCs
AU Financiers 156 71 21 (3) (7) 20 23
Cholamandalam (13) 65 33 47 33 4 (3) 12 12 38 27 15
Hinduja Leyland 162 6 1 54 40 28 28 36 28
Magma Fincorp 2 14 15 13 18 (6) (5) (25) (22) 32 30 13
Mas financials 18 (12) (15) 20 6 0
Mahindra Finance 40 55 99 47 41 (6) 2 23 22 63 27
Reliance Capital 16 (0) 51 (18) (0) 25 (25) (25) 85 (33) (8) (13)
Shriram transport 19 25 24 11 24 6 11 18 9 24 8 7
Sundaram Finance 3 11 21 9 12 4 5 24 19 19 17 (5)
Tata Motor Finance 54 104 (25) 64 37 (3) (19) 37 (5) 14 56 20
Others key players 16 (0) 51 (18) (0) 33 (22) (24) 75 (30) (7) (12)
Total of above 17 36 18 26 25 5 2 17 10 21 23 11
Other NBFCs 17 36 18 26 25 (16) (11) 17 10 21 23 11
Total NBFCs 17 36 18 26 25 3 1 17 10 21 23 11
Total banks and NBFCs 2 24 23 29 17 1 1 20 15 24 24 11
Note:
(1) Impact of Covid-19 is not baked in the above estimates.
Source: SIAM, Kotak Institutional Equities estimates
Gold loans: counter-cyclical play on the economy.
Most gold loan companies like Muthoot and Manappuram have reported strong growth in
gold loan AUM on the back of a rally in gold prices (Exhibit 17). Gold loan companies tend
to demonstrate higher growth and strong yields during a rise in gold prices and as such are
counter-cyclical plays on economic cycles. Gold prices have increased ~25% yoy in March
2020 and ~9% yoy over the past 6 months, translating in strong growth in gold loans
(Exhibit 18). Trend in gold prices will be an important factor to drive growth in FY2021E.
Exhibit 17: Average gold prices increased 25% yoy in FY2020

Domestic gold price, March 2009-March 2020 (Rs/gm)
4,350
3,480
2,610
1,740
870
-
Mar-09
Mar-10
Mar-14
Mar-18
Mar-19
Mar-11
Mar-12
Mar-13
Mar-15
Mar-16
Mar-17
Mar-20
Sep-11
Sep-12
Sep-15
Sep-16
Sep-19
Sep-09
Sep-10
Sep-13
Sep-14
Sep-17
Sep-18
Source: Bloomberg, Kotak Institutional Equities estimates

India Banks
Exhibit 18: Rally in gold prices drive rise in gold AUM

Gold prices and gold loans, March fiscal year-ends, 2007-2019, 1QFY20-3QFY20 (Rs mn)
Rally in gold prices Drop in gold prices Rally in gold prices
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 1QFY20 2QFY20 3QFY20 1HFY20 9MFY20
YoY growth in gold prices (%)
Gold price yoy 10 29 24 8 27 34 10 (7) (8) 9 (0) 8 4 8 20 21 20 21
Muthoot Standalone
AUM (Rs bn) 14 22 33 73 157 247 260 219 234 244 273 291 342 358 357 385 357 385
YoY (%) 53 51 122 114 57 5 (16) 7 4 12 7 18 16 11 19 11 19
Gold weight (tons) 23 30 39 66 112 137 134 118 131 142 149 155 169 176 171 173 171 173
YoY (%) 30 30 69 70 22 (2) (12) 11 8 5 4 9 9 2 4 2 4
Manappuram (Rs mn) Consolidated Standalone
Gold AUM (Rs mn) 4 6 10 26 75 115 99 82 92 101 111 117 130 133 152 161 152 161
YoY (%) 48 73 167 188 53 (14) (18) 13 9 10 5 10 7 20 29 20 29
Gold weight (tons) 22 53 66 51 46 53 60 61 64 68 68 72 74 72 74
YoY (%) 136 24 (22) (11) 17 12 3 5 5 4 7 11 7 11
Source: Company, Bloomberg, Kotak Institutional Equities estimates
Unsecured retail, consumer lending, SME business to take the bulk of the impact
We expect consumer/unsecured retail, SME and even the MFI businesses to see a sharp
decline in overall credit growth. Weak retail sentiment would anyways lead to a drop in
small ticket personal loans and consumer durable loans. The economic slowdown will likely
drive a change in the behavior of retail consumers. A drop in underlying business volumes,
disruptions in normal business due to lockdown, lower financing capability and cash flow
mismatches may lead to lower credit growth in these segments. Growth in MSMEs was
muted at ~5% yoy in 2QFY20 (Exhibit 19). MFIs are mostly daily wage earners involved in
small scale business activities and are relatively vulnerable to external shocks, as witnessed
during demonetization). A prolonged period of lockdown or drop in overall business
volumes can impact credit off-take. Additionally, MFI credit growth has slowed down over
the past few quarters led by (1) concerns over over-leveraging in select geographies and (2)
lower rate of new borrower acquisition (Exhibit 20).
Exhibit 19: MSME lending has slowed down

MSME loans, March fiscal year-ends, 2QFY18-2QFY20 (Rs tn)
2QFY18 3QFY18 4QFY18 1QFY19 2QFY19 3QFY19 4QFY19 1QFY20 2QFY20 YoY (%)
Very small (<1 mn) 0.7 0.8 0.8 0.8 0.8 0.9 0.9 0.9 0.9 6.0
Micro 1 (1-5 mn) 1.8 1.9 2.0 2.0 2.1 2.2 2.3 2.2 2.2 8.8
Micro 2 (5-10mn) 1.2 1.3 1.4 1.4 1.4 1.5 1.6 1.5 1.5 7.8
Small (10-150 mn) 7.0 7.7 8.3 8.4 8.5 8.9 9.2 9.0 8.9 4.6
Medium (150-500 mn) 4.1 4.3 4.6 4.6 4.7 4.8 5.0 4.8 4.7 1.9
Total MSME 14.7 15.9 17.0 17.2 17.5 18.3 18.8 18.5 18.3 4.7
Source: SIDBI, Kotak Institutional Equities

Banks India
Exhibit 20: MFI growth has slowed down

MFI GLP and disbursements, March fiscal year-ends, 3QFY18-3QFY20
GLP Disbursal GLP YoY (RHS) Disbursal YoY (RHS)

(Rs bn) 2,129 (%)
2,200 66 72
1,936 1,962
56 1,885
46 1,683
1,760 54
1,537 44
1,437
1,305 29
1,320 1,210 36
39 35 28 27
35 39
27
880 23 20 18
17 22
440 0
393 533 438 500 508 679 527 586 620

0 -18
3QFY18 4QFY18 1QFY19 2QFY19 3QFY19 4QFY19 1QFY20 2QFY20 3QFY20
Source: CrifHighmark, Kotak Institutional Equities
Asset quality: Covid-19 has the potential for a rise in defaults

One-off events like demonetization have led to a significant impact on asset quality in select
sectors. The pain of Covid-19 is expected to be relatively higher and spread out across
sectors due to a contagion effect. We expect a significant rise in SME, affordable housing,
MFI, unsecured retail and consumer loan delinquencies. RBI’s three month moratorium
period for term loans and deferment of interest payment for WC loans will likely give some
headroom for customers to repay EMIs without defaulting. However, a prolonged economic
slowdown can drive slippages. Gross stage 3 loans/GNPLs will not increase in 1QFY21E,
though the pain is expected to show up incrementally over the next 9 months of FY2021E.
Early warning indicators (PAR 30+) had started to deteriorate even prior to the crisis for most
of these segments and Covid-19 is expected to result in a multiplier effect.
 Asset quality woes in unsecured retail and consumer lending businesses. We have
argued in our previous reports that early warning indicators have started to deteriorate in
the unsecured retail (personal loans and credit cards) and consumer loans businesses. The
repayment capability of retail customers (especially those at the lower end of the
economic strata) has a high relationship to the overall economic cycle. Bajaj Finance
reported a rise in PAR 30 across consumer financing segments in 3QFY20 (Exhibit 21).
Covid-19 will further accentuate the impact of stress in retail consumer loans. We expect
a sharp deterioration in asset quality in these segments in FY2021E though the extent of
the pain is difficult to gauge at this stage. This is discussed in detail in later sections.

India Banks
Exhibit 21: PAR 30+ has increased across most product classes over the past few quarters
PAR 30+, March fiscal year ends, 4QFY16-3QFY20 (%)
Change (bps)
4QFY16 1QFY17 2QFY17 3QFY17 4QFY17 1QFY18 2QFY18 3QFY18 4QFY18 1QFY19 2QFY19 3QFY19 4QFY19 1QFY20 2QFY20 3QFY20 YoY QoQ Min. Max.
Consumer durables 1.7 1.1 1.3 1.2 1.4 1.0 0.8 0.7 0.7 0.5 0.6 0.6 0.8 0.9 0.8 0.9 30.0 5.0 0.5 1.7
2-wheeler portfolio 4.8 4.8 4.9 7.0 6.8 7.0 7.1 6.2 5.6 6.0 5.7 5.0 4.7 5.3 6.0 6.8 179.0 86.0 4.7 7.1
Lifestyle finance 0.9 1.4 1.6 1.7 1.7 1.7 1.0 0.8 0.8 0.8 0.7 0.6 0.8 1.0 1.1 1.3 67.0 12.0 0.6 1.7
Digital product finance 2.1 2.3 2.4 2.2 1.7 1.3 0.7 0.6 0.9 0.9 0.7 0.7 1.0 1.5 1.4 1.2 51.0 -14.0 0.6 2.4
Personal loans cross sell 1.4 1.5 1.5 1.2 1.4 1.5 1.5 1.4 1.3 1.3 1.2 1.2 1.2 1.4 1.6 1.7 49.0 14.0 1.2 1.7
Salaried personal loans 0.3 0.3 0.4 0.3 0.3 0.4 0.3 0.3 0.2 0.2 0.2 0.2 0.2 0.3 0.3 0.3 7.0 4.0 0.2 0.4
Small business 0.7 0.8 0.8 0.8 0.9 1.0 0.9 1.0 1.0 0.8 0.9 0.8 0.9 1.0 0.9 1.1 28.0 17.0 0.7 1.1
Loan against property 0.7 0.6 0.5 0.6 0.7 0.9 1.9 1.6 0.8 0.7 0.8 3.0 2.3 2.2 2.3 2.8 -13.0 54.0 0.5 3.0
Home loans 0.7 0.9 0.9 0.5 0.9 0.9 0.9 0.8 0.2 0.5 0.4 0.3 0.4 0.4 0.4 0.3 -3.0 -6.0 0.2 0.9
Rural B2C 0.6 0.7 0.7 0.8 0.7 0.7 0.9 0.9 0.8 0.9 1.0 1.2 32.0 18.0 0.6 1.2
Rural B2B 0.7 0.6 0.4 0.3 0.4 0.4 0.4 0.3 0.5 0.7 0.8 0.6 27.0 -25.0 0.3 0.8
 Pain of business disruptions for SMEs/MSMEs and MFIs. Most SMEs and MFIs would
have witnessed disruptions in daily business activities post the recent lockdown due to
Covid-19. This will result in a cash flow crisis over the next few months. Demand for
certain segments (like exporters) would have reduced significantly. Prior to the slowdown,
select segments like the diamond business in Surat or auto ancillaries had slowed down
and asset quality has started to deteriorate (Exhibits 22 to 24). Covid-19 can have
multiple spillover impacts on different parts of the value chain for a SME/MSME unit can
significant deteriorate cash flows. This can result in a rise in delinquencies even post the
moratorium period. For MFIs, disruption in daily or weekly cash flows can impact
repayment behavior as observed during demonetization. Lessons from previous one-off
events like AP crisis, demonetization, floods, etc. suggest that collections drop steeply and
recover within six months to two years. Post the moratorium period, most MFI lenders will
start to recognize incremental pain on their P&L (higher credit cost or write-offs) while
recoveries will continue to happen over a longer period. Additionally, MFI delinquencies
had increased in select areas like Assam and few districts of Karnataka prior to Covid-19
(Exhibit 25).
Exhibit 22: All MSME segments witnessed a deterioration in asset quality in 1QFY20
MSME NPL rates, March fiscal year-ends, 1QFY18-1QFY19 (%)
Very small (<1 mn) Micro 1 (1-5 mn) Micro 2 (5-10mn)

Small (10-150 mn) Medium (150-500 mn)
21.0
18.1
17.3 17.1 17.0 17.1
18.0 16.9 16.7
16.0 16.2
15.0
11.6 11.7 12.0 11.9

11.1 11.5
12.0 11.0 10.5 10.7
11.0 10.8
10.4 10.4 10.3 10.4 10.4
8.3 9.8 9.8 8.4
9.0 8.0 8.0 8.2 8.5
7.7 7.9 7.7
8.4 8.1 8.1 8.1 8.2
7.9 7.7 7.9 7.5
6.0
2QFY18 3QFY18 4QFY18 1QFY19 2QFY19 3QFY19 4QFY19 1QFY20 2QFY20
Source: SIDBI, Kotak Institutional Equities

Banks India
Exhibit 23: Steeper increase in NPL ratios for NBFCs and PSU Banks
Lender-wise NPL ratios, 2QFY17-2QFY19 (%)
Source: SIDBI, TransUnion CIBIL
Exhibit 24: The ‘Medium’ (Rs150-500 mn) segment accounts for a significant proportion of NPLs for
PSU banks
Lender-wise NPL ratios, 2QFY17-2QFY19 (%)
PSU Banks Private Banks NBFCs
30
29.3
24
17.8
18
12.3
12
8.1
5.5 6.2
6
6.1
4.0 3.9
0
Micro Small Medium
Source: SIDBI, TransUnion CIBIL

India Banks
Exhibit 25: Asset quality has deteriorated for most players

Lender-wise asset quality, March fiscal year-ends, 2QFY19-3QFY20 (%)
Rural Urban
2QFY19 3QFY19 1QFY20 2QFY20 3QFY20 2QFY19 3QFY19 1QFY20 2QFY20 3QFY20
PAR 1-30
NBFC-MFI 1.2 1.1 0.9 1.3 1.5 1.6 1.5 1.0 1.5 1.6
Banks 1.3 1.6 1.0 0.9 2.7 1.6 1.7 0.8 0.8 1.7
Others 1.4 2.1 1.1 1.3 1.4 2.0 2.1 1.5 1.7 2.0
SFB and aspirants 9.8 4.2 1.2 2.0 2.0 8.2 3.4 0.8 1.9 1.6
Industry 2.7 1.9 1.0 1.2 2.0 3.3 2.1 0.9 1.3 1.7
PAR 31-180
NBFC-MFI 0.9 0.8 0.9 1.1 1.7 1.0 0.9 1.0 1.2 1.8
Banks 0.6 0.6 0.6 0.8 1.2 0.7 0.7 0.5 0.7 1.1
Others 0.9 1.8 2.0 2.1 2.6 1.1 1.8 2.0 2.6 3.3
Industry 0.9 0.9 0.9 1.1 1.6 1.1 1.0 0.9 1.1 1.5
PAR 180+
NBFC-MFI 2.8 2.7 2.3 2.3 2.1 4.8 4.7 4.1 3.9 3.7
Banks 1.8 1.6 1.6 2.2 2.2 2.2 2.1 2.0 3.0 3.1
Others 3.8 3.5 2.7 3.4 3.6 5.5 5.2 4.6 5.3 5.5
Industry 4.0 3.7 3.1 3.3 3.2 7.3 6.7 5.8 6.0 5.8
Source: CrifHighmark, Kotak Institutional Equities
 Affordable housing: the pain of swift growth. Most affordable housing finance
companies (including banks) have expanded rapidly over FY2016-19, prior to slowing
down in FY2019-20. Supported by PMAY, the affordable housing segment market
witnessed a sharp rise in demand during the past few years. Larger banks and HFCs (like
HDFC, Gruh) focused on the formal salaried segment, while smaller HFCs/NBFCs started
lending to the underserved self-employed, cash salaried and daily wage earner segment
with limited or no credit history. Liquidity tightened as asset quality issues started to
emerge in select geographies and these players tightened credit norms and growth
slowed down from 2HFY19. NPLs however started to increase and GNPLs in affordable
housing increased to ~2.7% as of 1QFY20 from 2.1% in FY2018. Bounce rates in these
businesses tend to be relatively high at >10% and the customer cohort is relatively more
susceptible to an economic slowdown. Under such circumstances, we expect a rise in
delinquencies in the affordable housing segment through the intensity of pain will vary
across players. Additionally, a prolonged slowdown can reduce realization from asset sale
leading to higher LGDs (loss given default).
 CV loan delinquencies will rise. Weak freight rates observed post 2HFY20 has led to a
marginal rise in stress in CV loans for select financiers. A disruption in mining activities in
select states and weak infrastructure activities amplified the impact. CVs NPLs have
however not deteriorated sharply led by strong focus on collection by most players
(Exhibit 26). Barring STFC and AU SFB, most other vehicle financiers reported a marginal
qoq rise in auto NPLs driven by higher CV slippages. Stage 2 CV loans however tend to be
higher at ~15-25% for most players owing to the inherent nature of the customer
profile. As business disruptions increase due to Covid-19, we expect freight rates to
remain muted over the upcoming quarters. This will lead to a rise in CV delinquencies
from the 30+ buckets. The pain will however vary across companies. Financiers with a
higher share of lending to new fleet operators or small truck owners will likely see higher
slippages compared to others.

Banks India
Exhibit 26: NPLs have increased for most vehicle financiers driven by higher slippages from CVs
Auto sales, CV sales, AUM and GNPL across vehicle financiers, March fiscal year-ends, 2006-2019, 1QFY20-3QFY20
IGAAP IGAAP IGAAP IGAAP IGAAP IGAAP IGAAP IGAAP IGAAP IGAAP IGAAP IGAAP Ind-AS Ind-AS Ind-AS Ind-AS Ind-AS
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 1QFY20 2QFY20 3QFY20
Auto sales growth (%) 8.3 23.7 10.1 (4.9) 28.2 28.8 7.5 0.7 (9.4) 2.6 8.0 8.3 10.2 5.8 (16.6) (23.3) (17.4)
CV sales yoy
HCV 4.0 33.3 (1.5) (32.9) 34.1 32.2 8.0 (23.1) (25.2) 16.0 29.9 0.0 12.7 14.7 (16.5) (52.6) (38.5)
LCV 20.2 33.4 12.3 (7.0) 42.9 23.3 29.9 14.2 (17.7) (11.6) (0.0) 7.9 25.4 19.5 (5.1) (23.4) (4.7)
Overall 10.1 33.3 4.2 (21.4) 38.7 27.4 19.5 (1.9) (20.2) (2.9) 11.3 4.4 20.0 17.6 (29.2) (35.0) (17.2)
Tractor sales growth 15.8 21.1 (5.0) 1.0 31.6 19.8 11.3 (1.7) 20.2 (13.0) (10.6) 18.2 25.5 7.8 (12.4) (9.4) (6.0)
Player-wise analysis
AU Small Finance Bank
Wheels AUM yoy (%) 14 100 150 93 42 6 1 33 29 32 43 40 34 33
CV AUM yoy (%) 156 21 (3) (7) 20 23 23 43 43 40 34 29
GNPL (%) 2.0 1.9 1.3 0.5 0.8 1.3 3.5 3.0 1.2 1.2 2.0 2.1 2.3 2.3 2.2
Cholamandalam
Chola AUM yoy (%) 10 95 6 (13) 65 31 50 41 22 10 17 15 26 26 27 24 20
CV AUM yoy (%) 33 33 4 (3) 12 12 12 38 27 26 20 15
GNPL (%) 1.2 0.5 0.7 3.0 5.5 2.6 0.9 1.1 1.9 3.1 3.5 4.7 3.4 2.7 3.0 3.2 3.5
Vehicle GNPL (%) 0.7 2.0 3.7 3.7 4.2 2.0 1.7 2.2 2.3
Hinduja Leyland Finance
HLF AUM yoy (%) 61 50 41 37 32 23
CV AUM yoy (%) 6 1 54 40 28 28 28 36 28
GNPL (%) 1.1 2.4 3.3 3.6 3.5 4.2 5.1 4.7 4.4 4.5
30+ dpd (%) 22.0 13.6
Vehicle loans GNPL (%)- 90 dpd 5.9 5.7
Magma Fincorp
Magma AUM yoy (%) 45 72 6 16 15 17 26 35 10 9 (7) (11) (2) 8 9 (0) 1
CV AUM yoy (%) 15 18 (6) (5) (25) (22) (22) 32 30 36 16 13
GNPL (%) - - - - - 0.0 1.6 3.6 4.9 8.3 6.7 8.6 4.8 5.1 6.4 6.7
Mahindra Finance
MMFS AUM yoy (%) 51 25 12 11 21 34 42 35 29 11 8 14 13 27 22 22 20
CV AUM yoy (%) 55 47 41 (6) 2 23 23 22 63 65 55 27
GNPL (%) 5.5 7.6 8.7 6.4 4.0 3.1 3.0 4.4 5.9 8.0 9.0 9.6 6.1 7.4 7.2 7.6
Shriram Transport
STFC AUM yoy (%) 123 62 19 25 24 11 24 7 11 23 8 22 9 6 4 5
CV AUM yoy (%) 24 24 6 11 18 9 9 24 8 8 6 7
GNPL (%) 1.2 2.0 1.6 2.1 2.8 2.6 3.1 3.2 3.9 3.8 6.2 8.2 9.4 8.4 8.5 8.8 8.7
Sundaram Finance
Sundaram AUM yoy (%) 21 34 22 3 11 21 9 12 4 4 10 16 20 16 16 11 8
CV AUM yoy (%) 21 12 4 5 24 19 19 19 17 16 11 8
GNPL (%) 0.5 1.2 1.6 1.3 0.8 0.6 1.0 1.2 1.5 2.1 1.5 1.3 1.3 2.2 2.2 2.8
TMFL and TMFSL
Consolidated AUM yoy (%) 84 (5) (34) 58 22 6 (19) 37 (5) 14 41 4
TMFL 84 (5) (34) 58 22 6 (19) 37 (21) 15 40 7
TMFSL 7 48 (13)
Consolidated GNPL (%) 15.0 15.8 9.8 18.0 4.0
TMFL 15.0 15.8 9.8 9.8 4.7 2.9 5.7
TMFSL 47.2 1.4 1.0 3.3
Notes:
(1) NPLs increased for most companies in FY2016, FY2017 and FY2018 owing to change in NPL recognition norms from 180 dpd to 150 dpd, 120
dpd and finally 90 dpd.
Source: Company, SIAM, Kotak Institutional Equities
 Further rise in developer finance delinquencies. Amidst weak retail demand,

residential real estate sales will start to decline again (having started to revive over the
past few months). Most companies like LIC Housing, HDFC, etc. witnessed a rise in GNPLs
in the developer finance segment by 1-10% (Exhibit 27). Lower refinancing capability will
likely drive further rise in delinquencies for select projects.
Exhibit 27: GNPLs have increased in LAP and construction finance

Segment-wise NPL for HFCs, March fiscal year-ends, 2QFY19-3QFY20 (%)
2QFY19 3QFY19 4QFY19 1QFY20 2QFY20 3QFY20
HDFC
Individual 0.7 0.7 0.7 0.7 0.7 0.8
Non-individual 2.2 2.5 2.3 2.7 2.9 2.9
LICHF
Individual 0.8 0.8 0.9 1.0 1.1 1.5
LAP NA 1.4 1.6 2.2 2.4 3.9
Developer NA 6.5 7.0 10.8 14.8 14.1

India Banks
CONSUMER AND UNSECURED RETAIL LENDING: THE FALL?

Consumer loan and unsecured retail loans growth have slowed down over the past few quarters from peak
levels. An economic slowdown coupled with changes in consumer expenditure behavior post Covid-19 can
lead to a sharp fall in the demand for consumer and unsecured retail loans. Asset quality issues can drive a
spiral impact whereby lenders tighten underwriting norms, leading to a further decline in credit growth in
these segments. NBFCs have already shifted towards a higher share of small ticket personal loans. Credit
bureau checks indicate a gradual drop in consumer enquiries related to these products. These segments
supported a significant share of incremental loan growth for banks and NBFCs in FY2019. We expect a steep
drop in incremental disbursements in these product classes over the next few quarters.
Fall of unsecured retail credit?

We expect a sharp decline in unsecured retail credit and consumer loans on the (1)
slowdown in economy, (2) impact on Covid-19 leading to changes in consumer expenditure
preference and (3) slipover impact of the pandemic on job losses, higher defaults in other
loan products, etc. We have long argued that unsecured retail credit and consumer loans
will likely slowdown in FY2020-21E on the back of the economic slowdown and likely
tightening of credit under-writing standard by lenders on the back of rise in early warning
indicators. The ongoing pandemic amplifies the impact of the slowdown and can also create
a second order spiral impact on credit growth in these segments.
The immediate impact of the pandemic will result in consumers shifting expenditure
preferences and also moving towards higher savings, insurance products, liquidity in the
form of cash, etc. Some borrowers with multiple other loan accounts will focus on not
defaulting on these loans (post moratorium period). Given a significant share of non-prime
customers who were targeted by lenders in the past few quarters, one can expect a rise in
delinquencies from these customer cohorts. This will lead to lenders tightening credit
underwriting standards, whereby the second order impact of lower credit growth kicks in.
Major lenders like HDFC Bank, Bajaj Finance who have aggressively expanded in this
segment over the past few years will see a sharp drop in credit growth.
According to TransUnion CIBIL, prior to Covid-19, demand for consumer loans as measured
in terms of number of inquiries dropped to ~35% yoy, moderating from ~45% CAGR over
the past three years. The number of new loans booked by Bajaj Finance (yoy) has dropped
significantly in 3QFY20 indicating lower scope to penetrate markets (out of the total
organized furniture market, Bajaj has a penetration of ~8-10%, 15% for organized
smartphone sales and ~30% in other consumer durables). These indicate that overall
consumer and unsecured retail credit had started to moderate even prior to the crisis
(Exhibits 28 to 31).
As of March 20, 2020, unsecured retail credit and consumer loan enquiries had dropped 10-
29% week-on-week indicating a sharp drop in demand (Exhibit 32).

Banks India
Exhibit 28: Consumer loans have seen a shift towards unsecured lending; delinquencies have held up fairly well so far
Key metrics of major consumer lending products, March fiscal year-ends, 1QFY18-2QFY20 (Rs mn)
1QFY18 2QFY18 3QFY18 4QFY18 1QFY19 2QFY19 3QFY19 1QFY20 2QFY20 YoY (%)
Outstanding loan balances (Rs bn)
Home loans 12,928 14,292 15,222 15,225 16,269 17,339 17,825 19,028 19,073 10.0
Auto 2,703 3,103 3,474 3,293 3,602 3,972 4,078 4,175 4,381 10.3
Credit card 560 622 665 751 795 775 874 998 1,090 40.7
Personal loans 2,064 2,345 2,622 2,724 2,932 3,353 3,469 4,061 4,292 28.0
LAP 2,618 2,674 3,153 2,887 3,235 4,114 3,840 4,307 4,591 11.6
Total 20,874 23,036 25,136 24,880 26,833 29,553 30,086 32,569 33,427 13.1
Share of outstanding loan balances (%)
Home loans 61.9 62.0 60.6 61.2 60.6 58.7 59.2 58.4 57.1 NA
Auto 13.0 13.5 13.8 13.2 13.4 13.4 13.6 12.8 13.1 NA
Credit card 2.7 2.7 2.6 3.0 3.0 2.6 2.9 3.1 3.3 NA
Personal loans 9.9 10.2 10.4 10.9 10.9 11.3 11.5 12.5 12.8 NA
LAP 12.5 11.6 12.5 11.6 12.1 13.9 12.8 13.2 13.7 NA
Average balance per account (Rs)
Home loans 1,316,000 1,251,887 1,249,292 1,240,000 1,304,818 1,266,981 1,323,000 1,344,000 1,343,000 6.0
Auto 338,235 353,055 348,155 341,957 365,095 361,167 368,000 371,000 359,000 (0.6)
Credit card 19,064 22,308 22,505 23,035 22,795 22,600 23,000 24,000 24,500 8.4
Personal loans 186,547 197,729 211,144 195,482 207,341 210,648 216,000 198,000 182,000 (13.6)
LAP 2,099,804 2,224,249 2,210,695 2,114,286 2,145,963 2,155,319 2,067,000 2,085,000 2,026,000 (6.0)
Delinquency rate (30-179 dpd, %)
Home loans NA NA NA NA NA 5.5 NA NA 5.4 -14 bps
Auto NA NA NA NA NA 8.2 NA NA 7.8 -41 bps
Credit card NA NA NA NA NA 4.7 NA NA 4.9 21 bps
Personal loans NA NA NA NA NA 2.1 NA NA 2.2 10 bps
LAP NA NA NA NA NA 7.8 NA NA 8.4 59 bps
Delinquency rate (90-179 dpd, %)
Home loans 2.0 1.5 1.7 1.6 1.8 1.7 1.7 1.7 1.8 13 bps
Auto 2.9 3.2 3.9 2.8 2.8 3.3 2.9 2.7 3.1 -22 bps
Credit card 1.5 1.5 1.7 1.7 1.7 1.9 1.8 1.6 2.0 10 bps
Personal loans 0.7 0.5 0.7 0.5 0.6 0.6 0.6 0.6 0.6 -5 bps
LAP 3.7 2.3 2.9 2.7 2.9 3.2 3.4 3.6 3.8 52 bps
Source: CIBIL, Kotak Institutional Equities
Exhibit 29: Pace of addition of new to Bajaj Finance customers Exhibit 30: Continued decline in number of new loans booked
has declined significantly by Bajaj Finance
New to Bajaj Finance customers, March fiscal year-ends, 3QFY16- New loans booked, March fiscal year-ends, 3QFY18-3QFY20
3QFY20
New to Baja Finance customer (LHS) New loans booked (LHS) YoY (RHS)
(# mn) 59.6 (# mn)
54.5 54.7 (%) (%)
3.0 60 10 62.8 70
47.6
53.4
40.4 38.6 8 49.3 49.1 56
2.4 45
34.0 35.9
30.3 32.5
1.8 30 6 42
29.1
14.5
4 23.0 28
1.2 8.6 15
1.8 13
(2.1)
0.6 0 2 14
1.0 0.7 1.1 0.8 1.2 1.0 1.6 1.3 1.8 1.4 2.4 1.8 2.5 1.9 2.5 1.9 2.5 4.54 3.8 5.63 5.26 6.77 5.83 7.27 6.5 7.67
- -15 0 0
3QFY18
4QFY18
1QFY19
2QFY19
3QFY19
4QFY19
1QFY20
2QFY20
3QFY20
4QFY16
1QFY17
2QFY17
4QFY17
1QFY18
3QFY18
4QFY18
2QFY19
3QFY19
4QFY19
2QFY20
3QFY20
3QFY16
3QFY17
2QFY18
1QFY19
1QFY20


India Banks
Exhibit 31: Personal loan growth has started to moderate

Personal loans key characteristics, March fiscal year-ends, 4QFY17-2QFY20
4QFY17 1QFY18 2QFY18 3QFY18 4QFY18 1QFY19 2QFY19 3QFY19 1QFY20 2QFY20 YoY (%)
Number of accounts (mn) 11 11 12 12 14 14 16 16 21 24 48
Outstanding balance (Rs bn) 1,827 2,064 2,345 2,622 2,724 2,932 3,353 3,469 4,061 4,292 28
Account-level delinquency rate (90-179 dpd, %) 1.2 1.2 1.1 1.2 1.0 1.0 1.2 1.1 1.3 1.5 0.3
Balance-level delinquency rate (90-179 dpd, %) 0.7 0.7 0.5 0.7 0.5 0.6 0.6 0.6 0.6 0.6 (0.1)
Source: TransUnion CIBIL, Kotak Institutional Equities
Exhibit 32: Unsecured retail credit enquiries have declined

Change in daily enquiry volumes with TransUnion, March fiscal year-ends, March 20, 2020 (%)
Change compared to 13-Mar-2020 Change compared to 19-Mar-2020

(previous week, same day) (previous day)
Auto loans (new and used) (1.2) (7.7)
Housing loans (8.8) (5.8)
Property loans (16.0) (20.4)
Personal loans (10.0) (7.3)
Consumer loans (16.2) (7.7)
Credit cards (26.8) (16.7)
Two-wheeler loans (2.7) (4.2)
Others (11.6) (8.4)
Overall (13.0) (9.0)
Source: TransUnion CIBIL, Kotak Institutional Equities
Multiplier effect of deteriorating asset quality on unsecured retail and consumer

loans
The three major arguments in favor of an increase in delinquencies are: (1) disruption in cash
flows for select customer cohorts like self-employed or non-prime cash salaried borrowers,
(2) economic environment has weakened in the past year and Covid-19 will lead to a
prolonged slowdown and (3) second order impact related to job losses in select sectors post
the crisis. Financial institutions have indeed long argued that job losses in the system have
not been high to reflect this stress, we nevertheless have to point that financial institutions
lend to both salaried and non-salaried segments. The pain will at least be high in the non-
salaried segment.
Prior to the pandemic, select lenders had started to witness a rise in early bucket
delinquencies in the consumer loans and unsecured personal credit. Collection efficiencies
have dropped in consumer durables, lifestyle financing, digital product finance, etc. for Bajaj
Finance in 3QFY20, as discussed in the previous section. Additionally, the company reported
a rise in PAR-30 across most retail segments. Most companies will ramp up collection efforts,
delinquencies are expected to increase given the unsecured nature of the product and sharp
growth observed over FY2018-19.

Banks India
HOUSING FINANCE: STRESS IN AFFORDABLE HOUSING

Weak retail sentiment and prolonged impact of Covid-19 will likely lead to a drop in retail residential sales,
thereby driving a decline in housing loans. High inventory leading to lower new launches and a cautious
stance in developer financing has led to a decline in construction financing and it will likely decline further.
Affordable housing loans which cater to the underserved EWS, LIG and LIG segments, a high risk customer
cohort, will witness a sharp slowdown and asset quality woes. Larger players with relatively stronger balance
sheets and lenders with relatively higher shares of formal salaried customer or diversified asset mix
(geography, product, etc.) will likely face less stress compared to others.
Moderate slowdown in housing loans, sharper for affordable housing

The pace of growth in housing loans (non-premium non-affordable) will moderate over the
next few quarters as retail sentiment will be weak, leading to lower residential real estate
sales. Residential sales had started to pick pace over the past few months, driving a drop in
inventory (on a high base) (Exhibit 33). However, customer sentiment will likely change after
Covid-19, driving lower demand for housing credit. Additionally, the pace of new residential
launches is expected to decline, thereby further reducing the demand for housing loans
(Exhibit 34). A drop in home loan rates (~7.5 to 8% will be offered by most player post repo
cut) will however push demand to some extent.
Affordable housing financiers will face significant challenges to grow their book in an
economic downturn. A significant proportion of the customers targeted by the smaller or
standalone affordable housing finance companies comprise self-employed or cash salaried
customers whose cash flows will be impacted due to Covid-19. Most of these companies
had tightened credit underwriting standards, leading to a decline in the pace of growth in
FY2019-20. We expect a further drop in disbursements for most of these companies,
leading to a slowdown in AUM growth (Exhibit 35).
NBFCs/HFCs have seen a moderation in the pace of growth in retail home loans post the
IL&FS crisis, whereas banks have increased their pace of growth. NBFCs/HFCs have lost ~300
bps (un-adjusted for Gruh Merger with Bandhan Bank) market share in retail home loans to
~40% in 3QFY20. With the gradual slowdown in affordable housing and liquidity tightening
for wholesale focused HFCs, the share is expected to drop further. HDFC and LICHF are well
placed to capture incremental growth in this segment owing to liability-side advantages.
These players continue to be preferred by debt markets owing to their strong parentage.
HDFC’s home loan rates have been similar to other of premier banks like SBI.
Most financiers have been cautious in incremental LAP. GNPLs have increased the LAP
segment over the past few quarters for most companies and concerns over valuation of
underlying collateral have led to a decline in incremental LAP lending.
Lower residential launches and slowdown in overall real estate segment will lead to muted
growth in construction finance. HFCs/NBFCs increased the book at a sharp pace over
FY2015-18 but slowed thereafter. We expect growth in this segment to remain tepid.

India Banks
Exhibit 33: Residential real estate sales had started to pick up

Absorption trend, residential, Calendar year-ends, 2010-20 (mn sq. ft)
40
35
30
25
20
15
10
5
0
Dec-10
Dec-11
Dec-18
Dec-19
Dec-12
Dec-13
Dec-14
Dec-15
Dec-16
Dec-17
Jun-11
Jun-12
Jun-13
Jun-14
Jun-15
Jun-16
Jun-17
Jun-18
Jun-19
Exhibit 34: New residential launches muted

New launches trend, residential, Calendar year-ends, 2010–20 (mn sq. ft)

64
56
48
40
32
24
16
8
0
Dec-13
Dec-14
Dec-19
Dec-10
Dec-11
Dec-12
Dec-15
Dec-16
Dec-17
Dec-18
Jun-13
Jun-14
Jun-15
Jun-19
Jun-11
Jun-12
Jun-16
Jun-17
Jun-18

Banks India
Exhibit 35: Muted growth in disbursements for affordable housing finance companies in FY2019
Player-wise affordable housing AUM and disbursements, March fiscal year-ends, 2016–2019
AUM (Rs bn) Disbursements (Rs bn) AUM growth (%) Disbursements growth (%)
2016 2017 2018 2019 2016 2017 2018 2019 2016 2017 2018 2019 2016 2017 2018 2019
Aadhar 33 50 80 100 15 23 39 32 43 52 60 26 53 61 67 (18)
Aavas 17 27 41 59 11 14 21 27 99 60 51 46 96 32 47 30
Aptus 5 8 14 22 3 4 8 11 47 61 67 59 52 68 79 47
Magma Housing 21 18 18 24 9 5 6 11 12 (13) 1 34 (11) (46) 18 93
Manappuram Home Finance 1 3 4 5 2 5,744 141 21 38
Micro Housing Finance 3 4 5 6 1 1 2 - 38 27 28 13 46 30
CanFin 106 133 157 184 39 48 52 55 28 25 18 17 17 22 9 5
GIC Housing 79 93 112 131 25 28 36 35 17 21 16 10 31 (3)
Gruh 111 132 155 173 39 41 53 49 25 19 17 12 24 7 27 (6)
India Shelter Finance 4 5 8 12 78 37 46 47
Mahindra Rural Housing 33 48 62 80 16 21 28 26 55 48 30 29 57 36 32 (7)
Motital Oswal Housing Finance 21 41 49 44 18 25 14 3 486 98 17 (10) 405 37 (43) (80)
Muthoot Home Finance 0 4 15 19 11 7 1,300 232 31 (40)
Repco 77 89 99 110 29 26 28 31 28 16 10 12 31 (7) 6 10
Shubham Housing 6 8 11 13 6 9 36 26 33 21 37
Shriram Housing 13 18 18 18 8 10 8 8 73 39 1 3 58 22 (21) 0
Srg Housing 1 1 2 3 0 0 1 1 54 145 41 8 73 201 (13)
Sundaran BNP Paribas 75 77 84 91 17 18 26 24 0 2 9 8 (10) 5 43 (7)
Total of the above 606 769 946 1,120 228 270 345 346 51 27 23 18 50 18 28 0
Rise in stress in affordable housing

As discussed previously, we expect an increase in stress in the affordable housing segment.
A significant proportion of the customers are new-to-credit customers with limited or credit
history (Exhibit 36). Most standalone affordable financiers or smaller affordable housing
companies lend to the high risk self-employed or cash salaried segments. Disruption in daily
business activities due to Covid-19 will put incremental stress on the EMI payment capability
of these borrowers. The bounce rates in this business tends to be more than 10%,
indicating the inherent nature of the customer segment whose cash flows in most cases are
irregular. The nature of the job is mostly unorganized sector and a lockdown due to Covid-
19 can have significant impact of their employment opportunities. The full impact of the
pandemic on the overall business environment of select sectors is difficult to estimate,
however, we remain cautious of evolving stress in this segment.
The three-month moratorium period can provide some headroom. Companies have been
prudent in their LTVs (post PMAT subsidy, LTVs are low at 40-60%), thereby providing some
cushion.
NPLs are likely to increase, though the impact on companies will differ. For banks, the share
of affordable housing loans to their overall balance sheet size is negligible and as such
should not have much impact. Among NBFCs, larger players like HDFC, Aditya Birla Housing
Finance, LICHF, etc. are better placed to sway through the weak macro as they lend to the
relatively less risky formal salaried segment. Affordable housing companies who are at
relatively high risk include companies with (1) high geographic concentration (ex. Manipal
Housing Syndicate, Svatantra Micro Housing Finance), (2) higher share of self-employed
customers (ex. Aavas, Aptus), and (3) rural housing companies who lend to the bottom of
the pyramid customers (ex. Mahindra Rural Housing Finance, Srg Housing Finance).
Asset quality is expected to remain fairly robust in premium and non-affordable housing
segments. There could be a marginal increase in 30 dpd or 60 dpd buckets, but a strong
focus on collections and recoveries from SARFAESI will lead to lower LGDs.

India Banks
Exhibit 36: Share of self-employed customers is high for most companies

Occupation-wise AUM mix for affordable housing finance companies, March fiscal year-ends, 2017-2019
AUM mix (%)
2017 2018 2019 C
Salaried Self-employed Salaried Self-employed Salaried Self-employed
Aadhar 68 32 66 34
Aavas 36 64 36 64 35 65
Aptus 16 84 22 78
Magma Housing 33 67
Manappuram Home Finance 5 95 16 85
Micro Housing Finance 38 62 40 60
CanFin 75 25 73 27 71 29
GIC Housing 72 28 70 30 72 28
Gruh 59 41 59 41
India Shelter Finance 57 43 56 44 50 50
Motital Oswal Housing Finance 52 48 52 48
Muthoot Home Finance 57 43 61 39 61 39
Repco 40 60 43 57 46 54
Srg Housing 18 82 19 81
Notes:
(1) Data for Manappuram Home Finance for FY2018 is as of 2QFY18.
(2) Data for Micro Housing Finance is sanctions mix.
(3) FY2019 data for GIC Housing is as of 1QFY20.
(4) For India Shelter Finance, data for FY2019 is as of 1QFY20 and data for FY2017 is as of 1QFY18.
(5) For Muthoot Home Finance, data for FY2019 is as of 2QFY19 and data for FY2017 is as of 2QFY18.
Source: Company, Rating agencies, Kotak Institutional Equities
NPLs are expected to increase further in the LAP segment with a prolonged economic
slowdown (Exhibit 37). Disruption in business activities will further amplify the impact.
Lower residential sales and cash flow tightening due to lower refinancing capability will drive
rising delinquencies in the construction finance segment.
Exhibit 37: LAP delinquencies have increased

LAP delinquencies, March fiscal year-ends, 2QFY18-2QFY20
2QFY18 3QFY18 4QFY18 1QFY19 2QFY19 3QFY19 1QFY20 2QFY20 YoY (%)
Balance-level delinquency rate (30-179 dpd, %) NA NA NA NA 7.83 NA NA 8.42 0.59
Balance-level delinquency rate (90-179 dpd, %) 2.30 2.89 2.66 2.89 3.23 3.43 3.57 3.75 0.52
Source: TransUnion CIBIL

Banks India
AUTO LOANS MAY SLOW DOWN AS WELL

Auto volumes have been tepid in FY2019 across most segments (lowest in CVs), leading to muted growth in
auto loans. The absence of a visible stimulus in most segments, weak freight rates, weak retail demand, the
rise in prices owing to transition to BS-VI (~10 to 15% for CVs and ~5-10% for 2W) and muted rural sentiment
will drive muted growth in auto loans in FY2021E. CV AUM growth will drop at a steep pace, led by tepid
freight rates. Further disruption in infrastructure, mining, construction and e-commerce due to Covid-19 can
severely affect cash flows of borrowers and drive NPLs. The absence of strong rural demand alongside a sharp
rise in prices of 2W on transition to BS-VI will drive down volumes though rising finance penetration and
ticket sizes will support muted growth. High water reservoir levels and the expectation of normal monsoon
will push demand for tractors. Weak retail demand will continue to pressure PVs.
Another year of weak auto loan growth?

Our auto analyst expects overall auto volumes to remain muted in FY2021E. Tepid freight
rates and 10-15% increases in prices on transition to BS-VI will lead to a ~5-10% yoy
decline in CVs during FY2021E. A hike in average 2W prices and weak rural sentiment will
lead to muted 2W volumes. We are yet to bake in the full impact of Covid-19 on overall
auto volumes but one can expect a downward revision to our forecasts.
Amidst weak auto volumes, overall growth in auto loan growth will likely be muted in
FY2021E, similar to FY2020E,
Asset quality pain points across the board

The CV finance business tends to be cyclical in nature and has a direct relationship to
agricultural, industrial growth and overall infrastructure activity (like construction, mining
etc.). Apart from the slowdown in loan growth during down cycles, asset quality has
deteriorated for most key players during these phases. Apart from the customer profile, the
asset quality volatility is also driven by (1) responsiveness to early warning indicators (EWI),
(2) growth calibration and (3) collection processes. Most companies have calibrated growth
during the present downcycle, leading to a marginal deterioration in asset quality, however,
cash flows of most borrowers will be impacted due to Covid-19. Additionally, disruptions in
the SME segment can lead to second order impact on these borrowers. The impact will be
relatively high for first time buyers and small fleet operators. Stage 2 loans of CV financiers
like STFC is high at ~20% owing to the inherent nature of the customer segment.
Most vehicle financiers shifted to 90 dpd from 180 dpd GNPL recognition norms in a
staggered manner as illustrated in Exhibit 38. This has resulted in a rise in GNPLs by ~100-
500 bps across players showcasing a rise in NPLs on squeezing borrower’s repayment
tenure. A rough read suggests that the impact is higher on STFC, likely due to its focus on
first time users (FTUs) that are more vulnerable to vagaries in the CV cycle. Chola and
Sundaram focus on medium-sized fleet operators that are relatively better placed. Most of
these players have a high coverage ratio (overall ECL coverage of 1.9-5.3%) which provides
some cushion (Exhibit 39). 2W NPLs had started to improve for most players over the past
two quarters. However, we expect a marginal rise in delinquencies post Covid-19. Tractor
NPLs will most likely hold on the back of a strong Rabi crop. Water reservoir levels are high
and we expect agriculture output to be strong over the next 1H.

India Banks
Exhibit 38: ~150-200 bps increase in GNPLs loans on transition from one 150-90 dpd NPL recognition norm
GNPL across various players during various NPL recognition regimes, March fiscal year-ends, 2006-2019, 1QFY20-3QFY20 (%)
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 1QFY20 2QFY20 3QFY20
GNPL/gross stage-3 loans for Cholamandalam
GNPL (180 dpd, %) 1.2 0.5 0.7 3.0 5.5 2.6 0.9 1.1 1.9 2.4
GNPL (150 dpd, %) 3.1
GNPL (120 dpd, %) 3.5
GNPL (90 dpd, %) 4.3 4.7
Gross stage 3 (%) 3.4 2.7 3.0 3.2 3.5
GNPL/gross stage-3 loans for Magma
GNPL (180 dpd, %) 0.0 1.6 2.7 3.9 6.9
GNPL (150 dpd, %) 7.4
GNPL (120 dpd, %) 8.1 9.9 6.7
GNPL (90 dpd, %) 8.8 7.0
Gross stage 3 (%) 8.6 4.8 5.1 6.4 6.7
GNPL/gross stage-3 loans for MMFS
GNPL (180 dpd, %) - 5.5 7.6 8.7 6.4 4.0 3.1 3.0 4.4
GNPL (150 dpd, %) 5.9
GNPL (120 dpd, %) 8.0 9.0
GNPL (90 dpd, %) 8.5
Gross stage 3 (%) 9.6 6.1 7.4 7.2 7.6
GNPL/gross stage-3 loans for Shriram Transport Finance
GNPL (180 dpd, %) 1.2 2.0 1.6 2.1 2.8 2.6 3.1 3.2 3.9 3.8 4.3 4.6
GNPL (150 dpd, %)- adjusted for impact of merger 4.8
GNPL (150 dpd, %) 6.2
GNPL (120 dpd, %) 8.2 8-8.2
GNPL (90 dpd, %) 9.2 8.3
Gross stage 3 (%) 9.4 8.4 8.5 8.8 8.7
Gross stage 2 (%) 20.4
GNPL/gross stage-3 loans for Sundaram Finance
GNPL (180 dpd, %) - 0.5 1.2 1.6 1.3 0.8 0.6
GNPL (150 dpd, %)
GNPL (120 dpd, %) 1.0 1.2 1.5
GNPL (90 dpd, %) 2.1 1.5
Gross stage 3 (%) 1.3 1.3 2.2 2.2 2.8
Notes:
(1) STFC transitioned to 150 dpd from 180 dpd in 4QFY16; to 120 dpd from 150 dpd in 4QFY17 and to 90 dpd from 120 dpd in 4QFY 18.
(2) GNPL of 4.3% in FY2016 on 180 dpd basis does not take into account impact of merger of SEFCL with STFC (flat qoq).
(3) STFC's stage 2 loans assets have dropped to 20.4% in 3QFY20 from 21.1% in 3QFY19.
(4) Chola migrated to 150 dpd from 180 dpd in 4QFY15 and to 120 dpd from 150 dpd in 2QFY16 and to 90 dpd from 120 dpd in 4QFY17.
(5) MMFS migrated to 150 dpd from 180 dpd in 4QFY15 and to 135 dpd from 150 dpd in 1QFY16 and to 120 dpd from 135 dpd in 4QFY16 and to
90 dpd from 120 dpd in 1QFY18.
(6) Magma migrated to 120 dpd from 180 dpd in 1QFY16 and to 90 dpd from 120 dpd in 4QFY18.
(7) GNPLs increased 10 bps qoq in FY2017 on transition to 90 dpd for Chola.
(8) GNPLs dropped to 8% in 4QFY16 on 120 dpd from 10.1% on 135 dpd in 3QFY16 for MMFS.
Exhibit 39: Overall coverage declined on transition to Ind-AS

Coverage across companies, March fiscal year-ends, 2006-2019, 1QFY20-3QFY20 (%)
IGAAP Ind-AS
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 1QFY20 2QFY20 3QFY20
Coverage on stage 3/GNPL (%)
Chola 44 41 73 77 69 87 65 78 63 37 40 32 34 38 36 34 33
Magma 20 19 40 30 17 51 37 36 35 34
MMFS 51 57 63 72 86 86 78 66 59 61 62 62 34 19 25 20 23
STFC 20 56 67 71 56 86 76 79 80 70 69 34 34 32 32 32
Overall coverage (%)
Chola 4.7 6.2 4.7 3.1 3.3 3.6 4.1 5.3 5.3 2.0 1.7 1.7 1.8 1.9
Magma 4.5 5.8 5.9 4.8 7.8 7.0 3.6 3.7 4.2 4.2
MMFS 4.7 5.3 6.9 8.1 7.4 5.8 4.6 4.5 6.3 7.2 8.5 9.2 5.3 2.8 3.4 3.1 3.4
STFC 2.7 3.1 3.6 3.7 3.3 3.9 4.0 4.6 5.0 6.6 8.0 5.6 5.4 5.3 5.4 5.3
Note:
(1) Coverage on standard assets was 30 bps in FY2016, 35 bps in FY2017 and 25 bps prior to FY2016, for STFC.
(2) Coverage on standard assets was 30 bps in FY2016, 35 bps in FY2017 and 25 bps prior to FY2016, for STFC.
(3) Coverage on standard assets was 30 bps in FY2015, 40 bps in FY2016-17 and 25 bps prior to FY2014, for STFC.

Banks India
Exhibit 40: Large fleet operators dominate new CV financing Exhibit 41: NBFCs dominate new CV financing market
market Market share in new CV financing, March fiscal year-ends, 2017 (%)
Market share in new CV financing, March fiscal year-ends, 2017 (%)
First time Banks, 20

users/
buyers, 10
Small fleet
operators,
15 Large fleet
operators,
45
Medium NBFCs, 80
fleet
operators,
30
Source: Rating agencies

Source: Rating agencies

India Banks
GOLD LOANS MAY HOLD BETTER

Gold loans are essentially a play on underlying gold prices and as such may tend to be a better pure counter-
cyclical play. Rallies in gold prices tend to drive gold loans. Apart from strong AUM growth, yield expansion
and improvement in asset quality is associated with rallies in gold prices. Players like Muthoot Finance are
well placed to capitalize on incremental growth opportunities in this space.
Strong growth in gold price to drive gold loan growth

In a phase of rising gold prices, gold loan acceleration is driven initially by higher gold prices,
followed by tonnage growth, with a lag. Two likely reasons (1) benefits of expansion efforts
of the gold loan companies that may drive meaningful volume growth over time and (2)
retail behavior to increase gold monetization may see a lag.
Over the past 13 years, growth in gold loans has seen a strong linkage to movement in
growth prices. During the first gold price rally (FY2008-12), gold prices increased at 24-34%
yoy (barring FY2010 when gold price growth was relatively muted at 8% yoy) and growth in
gold loan loans for Muthoot and Manappuram was strong at 51-122% yoy and 48-188%
yoy, respectively. Similarly, gold loan growth for Muthoot and Manappuram was lower at
-16 to 12% yoy and -18 to 13% yoy, respectively, during FY2013-17 when growth in gold
prices was muted at -8 to 10% yoy. A strong recovery in gold prices during the past two
quarters (up 20% yoy and 21% yoy) has led to a sharp rise in disbursements (and hence
loan growth) for these two companies. Gold loan companies are essentially a play on gold
prices and as such are counter-cyclical plays on the overall economy.
Gold loan NBFCs have seen yield expansion during phases of rallies in gold prices (Exhibit
42). Collections and hence realization (in auctions) are relatively high during these periods,
which results in yield expansion. Additionally, the ability of a company to charge penal
interest is higher. Most customers repay their loans for fear of their gold being auctioned.
Exhibit 42: Yields expand during rally in gold prices

Key characteristics of gold loan companies, March fiscal year-ends, 2007-2019, 1QFY20-3QFY20
Rally in gold prices Drop in gold prices Rally in gold prices
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 1QFY20 2QFY20 3QFY20 1HFY20 9MFY20
YoY growth in gold prices (%)
Gold price yoy 10 29 24 8 27 34 10 (7) (8) 9 (0) 8 4 8 20 21 20 21
Muthoot Standalone
AUM (Rs bn) 14 22 33 73 157 247 260 219 234 244 273 291 342 358 357 385 357 385
YoY (%) 53 51 122 114 57 5 (16) 7 4 12 7 18 16 11 19 11 19
Gold weight (tons) 23 30 39 66 112 137 134 118 131 142 149 155 169 176 171 173 171 173
YoY (%) 30 30 69 70 22 (2) (12) 11 8 5 4 9 9 2 4 2 4
Key ratios (%)
Yield on AUM 19.9 22.1 20.2 19.9 22.4 21.1 20.4 18.8 20.1 21.9 22.0 21.3 20.9 23.5 24.6 22.5 22.8
NII/AUM 9.9 10.8 11.3 11.0 10.9 10.0 9.5 9.5 10.7 13.0 15.1 14.3 13.5 16.1 17.1 15.0 15.4
Cost-to-income 48.3 52.1 43.4 38.2 38.0 37.6 46.7 52.0 43.5 36.2 29.9 33.2 32.6 27.0 29.3 29.5 29.5
Cost-to-average AUM 5.1 5.9 5.0 4.2 4.2 3.8 4.5 5.1 4.8 4.8 4.7 4.9 4.5 4.4 5.1 4.5 4.7
Credit cost 0.0 0.0 0.1 0.3 0.2 0.3 0.2 0.2 0.7 1.1 0.8 0.1 0.0 0.3 0.7 0.2 0.3
Return ratios (%)
ROAAUM 3.5 3.6 4.3 4.3 4.4 4.0 3.3 3.0 3.4 4.6 6.3 6.2 6.1 9.6 8.7 7.9 7.9
ROE 29.7 33.9 48.1 51.5 41.9 29.3 19.0 14.3 15.1 19.4 24.8 22.4 21.7 33.7 29.2 27.2 27.0
Asset quality
GNPL/gross stage 3 (%) 0.5 0.3 0.6 2.0 1.9 2.2 2.9 2.1 4.4 2.7 3.2 3.4 2.5 3.4 2.5
Manappuram (Rs mn) Consolidated Standalone
Gold AUM (Rs mn) 4 6 10 26 75 115 99 82 92 101 111 117 130 133 152 161 152 161
YoY (%) 48 73 167 188 53 (14) (18) 13 9 10 5 10 7 20 29 20 29
Gold weight (tons) 22 53 66 51 46 53 60 61 64 68 68 72 74 72 74
YoY (%) 136 24 (22) (11) 17 12 3 5 5 4 7 11 7 11
Key ratios (%)
Yield on AUM 16.5 20.8 26.5 23.2 27.5 20.9 22.9 22.4 22.7 28.1 25.3 27.3 28.5 28.6 28.3 27.8 28.1
NII/AUM 13.4 15.8 18.9 16.7 16.2 9.8 11.5 12.4 13.5 18.7 18.3 19.1 19.3 19.1 19.2 18.9 19.1
Cost-to-income 46.4 49.8 42.6 44.8 44.3 63.9 64.1 60.3 58.6 41.6 48.9 48.4 45.3 40.2 39.2 43.3 41.9
Cost-to-average AUM 6.4 8.2 8.1 7.5 7.3 6.4 7.7 7.7 8.1 7.9 9.2 9.4 8.9 8.3 7.8 8.6 8.4
Credit cost 0.7 2.3 0.8 0.9 0.0 0.8 0.5 0.3 0.3 0.5 0.4 0.2 0.6 0.4 0.4 0.5 0.4
Return ratios
ROAAUM 4.4 3.9 6.7 5.5 6.2 1.9 2.5 3.1 3.5 6.8 6.0 6.4 6.7 9.4 8.5 8.0 8.2
ROE 34.2 23.2 30.8 22.0 27.5 8.6 9.2 10.6 12.6 24.0 19.3 19.3 19.8 28.8 27.0 24.6 25.3
Asset quality
GNPL (%) 1.1 1.2 1.2 1.0 2.0 0.7 0.5 0.7 0.6 0.5 0.6 0.5

Banks India
Asset quality likely to hold

Most gold finance companies have witnessed robust asset quality during rallies in gold
prices. Customers have tended to demonstrate better repayment behavior for fear of their
gold being auctioned by the company. Gold tends to a have a higher emotional attachment
and as such willingness to default is relatively low.

India Banks
APART FROM ASSET QUALITY, NIM LIKELY TO BE WEAK AS WELL

We would need to build a more subdued outlook for NIM across banks given the lower share of high margin
yielding segments.
Apart from the loan growth and credit costs, we would probably need to build a more
subdued outlook for NIM in the medium term. We shall build the hypothesis as we progress
over the next few weeks, taking into account incoming data and responses to the
underlying crisis by regulators, government measures to boost the economy and lenders
approach to their respective loan portfolios. It would be fair to assume that the NIM is most
likely to be subdued or lower than they have reported thus far. A steep decline in the repo
rate adds more pain given that the banks have to link their loans to external benchmark but
the positive news in this negative development is that the share of these loans are lower
(Exhibit 44). However, a few banks are likely to enjoy slightly higher NIM in the medium
term as the underlying loan book has a higher share of fixed rate loans and a declining
interest rate environment, especially in the shorter end, would help (Exhibit 43).
Exhibit 43: ~76% of bank loan books is floating

Share of fixed and floating rate loans, March fiscal year-ends, 3QFY20
Floating rate loans Fixed rate loans
100
15
24
32
80 40
60
40 85
76
68
60
20
-
Public Banks Private Banks Foreign Banks SCBs
Exhibit 44: Increasing share of external-benchmark-linked loans likely to impact margins with more repo rate cuts expected
Share of floating rate rupee loans of scheduled commercial banks by benchmark (%)
BPLR Base rate MCLR EBLR

2017 2018 2019 3QFY20 2017 2018 2019 3QFY20 2017 2018 2019 3QFY20 2017 2018 2019 3QFY20
Public Sector (14) 2.3 1.5 1.0 0.9 50.2 26.5 16.8 13.6 47.1 71.4 81.8 83.1 0.4 0.5 0.3 2.4
Private Sector (13) 1.4 0.6 0.4 0.3 48.5 19.2 10.6 7.6 49.4 76.7 85.0 81.2 0.7 3.4 4.1 10.9
Foreign (23) 1.1 0.7 0.4 0.3 24.1 12.5 5.8 4.4 61.2 59.1 61.6 51.8 13.6 27.8 32.2 43.6
SCBs (50) 2.0 1.3 0.8 0.7 49.4 24.4 14.9 11.8 48.0 72.7 82.4 82.1 0.6 1.7 1.8 5.4
Notes:
(1) EBLR: External benchmark linked lending rate
Source: RBI

Banks India
Exhibit 45: We expect margins to moderate from current levels for most banks
Net interest margin, March fiscal year-ends, 2016-2022E
2016 2017 2018 2019 2020E 2021E 2022E

PSU banks
BOB 1.9 2.1 2.3 2.6 3.2 2.8 2.9
Canara 1.9 1.8 2.2 2.4 2.2 2.7 2.3
PNB 2.5 2.3 2.1 2.4 2.3 3.0 2.7
SBI 2.8 2.7 2.6 2.7 2.9 3.1 3.2
Union 2.2 2.2 2.1 2.2 2.4 3.5 3.0
Old private banks
CUBK 3.5 3.7 4.0 3.9 3.8 3.9 3.8
FB 3.1 3.2 3.0 3.0 2.9 2.9 3.0
KVB 3.4 3.6 3.7 3.6 3.4 3.4 3.5
New private banks
Axis 3.6 3.5 3.1 3.2 3.3 3.5 3.5
Bandhan 6.5 9.8 8.3 9.1 8.2 7.5 6.9
DCB 3.7 3.9 3.8 3.6 3.6 3.7 3.8
HDFCB 4.4 4.4 4.4 4.4 4.3 4.1 3.9
ICICI 3.5 3.4 3.2 3.3 3.6 3.7 3.6
IndusInd 3.8 4.0 4.0 3.8 4.1 3.9 3.9
RBL 2.5 2.9 3.3 3.7 4.3 4.5 4.3
Yes 3.2 3.3 3.1 3.0 2.1 1.2 1.9
Small finance banks
AU SFB 12.2 10.1 6.9 5.4 5.2 5.3 4.9
Equitas 10.0 9.7 7.9 8.2 8.8 8.7 8.1
Ujjivan NA NA 10.1 10.0 10.3 10.3 10.1

India Banks
SLEW OF MEASURES BY RBI ADDRESSING THE COVID STRESS

The RBI unveiled a slew of measures to lower system-wide funding costs, enhance liquidity in the banking
sector and provide relief to stressed parts of the economy. The central bank acknowledged that global
economic activity has come to a near standstill and that, excluding agriculture, almost all other parts of the
domestic economy will be impacted, depending on the ‘intensity, spread and duration’ of the pandemic. The
lockdown and other likely far-reaching implications of the Covid-19 situation will have a significant impact on
near-term growth, margins and asset quality of banks and NBFCs. RBI’s measures will help ease the immediate
stress emanating from the crisis.
Exhibit 48: RBI undertook a slew of liquidity and regulatory measures to mitigate the stress from Covid-19
List of liquidity and regulatory related announcements made by the MPC
Liquidity measures
1) Introduction of Targeted LTRO (TLTRO) auctions of up to three-year tenor for a total amount of Rs1 tn at a floating rate linked to
the repo rate, with the liquidity availed under this to be deployed in CPs, investment-grade corporate bonds and NCDs
2) Banks shall be required to acquire up to 50% of their incremental holdings from primary market issuances and remaining 50%
TLTROs from secondary market, including from MFs and NBFCs
3) Investments made by banks under this facility will be classified as held to maturity (HTM) even in excess of 25% of total
investment permitted to be included in HTM
4) Exposures under this facility will also not be reckoned under the large exposure framework
1) Reduce the cash reserve ratio (CRR) of all banks by 100 bps to 3% of net demand and time liabilities (NDTL) for a year
CRR 2) Reduction to release liquidity worth Rs1.37 tn
3) Reduce the requirement of minimum daily CRR balance maintenance from 90% to 80% (available up to June 26, 2020)
1) Raising MSF to 3% of SLR from 2% in view of the exceptionally high volatility in domestic financial markets which can bring in
MSF phases of liquidity stress. This will remain applicable until June 30, 2020.
2) Allows banks to avail an additional Rs1.37 tn of liquidity under the LAF window in times of stress at the MSF rate
1) Widening the existing policy rate corridor from 50 bps to 65 bps
Policy rate corridor 2) Under the new corridor, the reverse repo rate under LAF would be 40 bps lower than the policy repo rate. The marginal standing
facility (MSF) rate would continue to be 25 bps above the policy repo rate
Regulatory measures
Permitting all lending institutions to allow a moratorium of three months on payment of installments for term loans outstanding as
Term Loans
on March 1, 2020 without asset classification downgrade
Permitting lending institutions to allow deferment of three months on payment of interest with respect to working capital facilities
Working Capital Facilities
without asset classification downgrade
Permitting lending institutions to recalculate drawing power by reducing margins and/or by reassessing the working capital cycle
Working Capital Financing for the borrowers In respect of working capital facilities sanctioned in the form of cash credit/overdraft without asset classification
downgrade
Net Stable Funding Ratio Deferring the implementation of net stable funding ratio by six months
Capital Conservation Buffer Deferring the implementation of last tranche of 0.625% of capital conservation buffer (CCB) by six months
Allowing banks which operate International Financial Services Centre (IFSC) Banking Units (IBUs) to participate in NDF market
Offshore NDF Rupee Market
through their branches in India, their foreign branches or through their IBUs.
Three-month moratorium on all loans

RBI has permitted all ‘lending institutions’ to allow a moratorium on payment of all
installments on term loans, including principal and interest repayments, bullet repayments,
EMIs and credit card dues falling due between March 1, 2020 and May 31, 2020. Interest
on the loans will accrue during the period and the tenor will be shifted by 3 months. With
respect to working capital facilities sanctioned in the form of cash credit/overdraft, RBI has
allowed the deferment of interest to May 31, 2020.
Further, to provide relief to stressed borrowers with working capital facilities, RBI has
permitted lending institutions to recalculate drawing power by reducing margins and/or by
reassessing the working capital cycle for borrowers in respect of working capital facilities
sanctioned in the form of cash credit/overdraft without an asset classification downgrade.

Banks India
Liquidity measures
RBI announced that liquidity measures would inject a total of Rs3.7 tn of liquidity through
(Rs1.37 tn each through CRR and MSF relaxations and Rs1 tn of TLTROs). The TLTROs will
likely ease the near freeze and sharp spike in yields seen recently in the CP/CD/corporate
bond space.
 Targeted long-term repo operations (TLTROs) of up to three-year tenor for a total

amount of Rs1 tn at a floating rate linked to the repo rate. The liquidity availed under this
by banks has to be deployed in CPs, investment-grade corporate bonds and NCDs (50%
in the primary market and 50% in the secondary market). The investments will be
classified as held-to-maturity (HTM), thereby reducing the risk of mark-to-market losses.
This will help with the availability of much-needed funds for NBFCs affected by the
moratorium and tightened credit markets.
 Relaxation of cash reserve ratio (CRR) by ~100 bps from 4% of net demand and time
liabilities (NDTL) to 3% for a period of one year starting March 28, 2010. This will free up
an additional ~Rs1.37 tn in the banking system for deployment. This relaxation will partly
help ease the margin pressure as ~1% of liabilities can be deployed for income
generating purposes. Further, the minimum daily CRR maintenance requirement reduces
to 80% from 90% for a period of three months, a dispensation to help operational
constraints during the lockdowns.
 Expansion of the marginal standing facility (MSF) limit to 3% from 2% of NDTL for
a period of three months. MSF is a facility through which banks can borrow funds from
RBI at the MSF rate (currently ~25 bps above the repo rate) against their SLR securities.
This will help with the short-term liquidity gap that may arise from the announced
moratorium on term loans.
 Widening of the policy rate corridor. The repo rate has been cut by ~75 bps to
~4.4%, and the reverse repo rate (the rate at which banks park excess liquidity with the
RBI) has been cut by 90 bps. This dis-incentivizes banks from parking excess liquidity with
RBI. With CD ratios of most banks currently at relatively high levels, this measure is likely
to be margin negative.

India Banks
Exhibit 49: Credit-deposit ratio for the banking sector is at ~72%

CD ratio for select banks, March fiscal year-ends, 2011 – 3QFY20 (%)
CD ratio (%)
2011 2012 2013 2014 2015 2016 2017 2018 2019 3QFY20
PSU banks under PCA
Central Bank of India 72 75 76 74 74 68 47 53 49 48
IDBI Bank 87 86 86 84 80 81 71 69 65 59
Indian Overseas Bank 77 79 79 77 70 72 66 61 60 63
UCO Bank 68 75 74 75 69 61 59 59 50 52
United Bank of India 69 71 68 59 61 58 52 48 50 51
Total 76 78 78 76 72 70 59 59 55 54
PSU banks
Andhra Bank 78 79 79 76 81 75 70 72 72 73
Bank of Baroda 75 75 69 70 69 67 64 72 73 73
Bank of India 71 78 76 78 76 70 68 66 65 64
Bank of Maharashtra 70 73 80 76 81 77 69 62 59 58
Canara Bank 72 71 68 72 70 68 69 73 71 68
Indian Bank 71 75 74 75 74 72 70 75 75 7
Oriental Bank of Commerce 69 72 73 72 71 71 72 66 68 74
Punjab and Sind Bank 71 73 73 68 74 70 68 65 70 69
Punjab National Bank 77 77 79 77 76 75 67 68 68 60
State Bank of India 80 82 85 86 82 83 72 71 75 71
Syndicate Bank 79 78 80 82 79 77 77 77 79 76
Union Bank of India 75 80 79 77 81 78 76 71 71 69
Total 76 78 78 78 77 76 70 71 72 67
PSU banks 76 78 78 78 76 75 69 69 70 65
Private banks
Axis Bank 75 77 78 82 87 95 90 97 90 93
City Union Bank 72 74 75 73 75 78 79 85 85 85
DCB Bank 76 83 79 79 83 87 82 85 83 86
Dhanalakshmi Bank 42 46 49 46 46 51 53 56 59 61
Federal Bank 74 77 77 73 72 73 75 82 82 82
HDFC Bank 77 81 83 86 85 89 86 83 89 88
ICICI Bank 96 99 99 102 107 103 95 91 90 89
IndusInd Bank 76 83 82 91 93 95 89 96 96 96
Jammu and Kashmir Bank 59 62 61 67 68 72 69 71 74 69
Karnataka Bank 63 66 70 70 69 67 65 75 80 77
Karur Vysya Bank 72 75 76 78 81 78 76 79 81 76
Kotak Mahindra Bank 141 138 130 121 118 104 106 107 91 91
Lakshmi Vilas Bank 72 70 73 68 73 77 78 77 69 63
RBL Bank 93 87 76 85 85 87 85 92 93 95
South Indian Bank 69 75 72 76 72 74 70 76 78 81
Yes Bank 75 77 70 75 83 88 93 101 106 102
Total 81 84 84 87 89 91 88 90 89 89
Overall sector 77 79 79 79 79 79 73 74 75 72

Banks India
INSURANCE: MIXED BAG

Life insurance companies have effectively diversified their product offering by adding protection and recently
traditional savings products, thereby adding more levers of growth. Insurance companies have been
grappling with two challenges as we exit FY2020E (1) changes in tax laws (removal of DDT) that will lead to a
higher effective tax rate for most large players and (2) rise in reinsurance rates that pose risk to VNB margins
of large players. We expect these players to optimize their product mix to reduce the impact of the above.
However, the current lockdown and weak capital markets will pressure ULIP volumes, thereby reducing the
operating leverage of large players and translating to pressure on VNB margins. COVID 2019 will likely
prompt higher sales in protection business - both in term and health policies.
Insurance: Health and term insurance will likely increase

Recent trends (Exhibit 50) indicate that individual APE growth has been strong at 19%
CAGR during FY2015-19 and 14% in 11MFY20 for private players driven by a continued
diversification of the product mix.
Exhibit 50: Protection mix has increased for most players in FY2020E
Individual APE, March fiscal year-ends, 2015-2019, 11MFY20
2015 2016 2017 2018 2019 Feb-19 Mar-19 Apr-19 May-19 Jun-19 Jul-19 Aug-19 Sep-19 Oct-19 Nov-19 Dec-19 Jan-20 Feb-20 11MFY19 11MFY20
Bajaj Allianz (22.6) (7.5) 40.9 38.3 24.7 33.2 64.1 (22.5) 38.0 36.4 39.9 28.0 24.6 35.5 53.6 4.2 20.7 23.6 16.7 24.8
Birla Sunlife (11.8) (7.7) 35.3 14.9 59.9 60.3 33.1 45.8 31.1 22.3 39.5 17.9 (8.9) (3.1) 62.8 (13.7) (3.3) (2.2) 68.6 10.4
Canara HSBC 17.9 35.2 38.5 33.5 11.9 18.3 33.5 (36.6) 77.4 20.6 27.5 2.9 20.1 11.2 38.5 48.9 13.7 (0.6) 7.7 19.2
HDFC Life 25.0 12.3 9.1 30.8 5.4 (6.1) 0.8 30.6 58.9 87.2 57.7 34.8 (19.7) (14.6) 43.2 46.2 11.5 29.0 6.4 28.4
ICICI Prudential Life 41.3 8.1 29.0 16.4 (4.9) 8.4 13.7 2.0 0.8 0.6 (1.3) (10.1) (6.6) 17.9 19.6 7.9 (4.8) (14.7) (7.2) 0.1
India First 5.5 38.1 82.3 42.9 18.3 23.2 50.3 15.0 40.7 8.1 33.4 14.5 56.2 10.2 64.1 63.9 0.1 42.6 13.0 31.9
Kotak 32.8 52.2 28.1 31.0 5.9 (0.8) 10.9 (12.5) 14.7 11.3 18.6 11.3 21.2 (4.2) 21.0 23.3 14.6 (1.1) 4.3 11.8
Max Life 10.2 8.0 25.5 21.8 20.7 26.7 15.2 27.7 23.1 20.1 48.2 28.1 2.2 2.6 16.7 22.9 15.1 0.9 22.3 16.8
Reliance Life 7.3 (25.6) (22.8) 5.4 20.5 17.8 (10.9) 50.0 10.6 (2.4) 17.2 (18.9) (9.5) 0.7 (0.8) 7.3 1.3 4.2 27.3 4.0
SBI Life 11.0 37.0 38.9 31.1 15.0 29.8 28.5 51.2 36.5 25.1 23.6 14.3 10.7 3.3 22.1 17.3 16.9 (4.9) 13.2 16.9
Star Union Daichi 18.6 (9.0) 64.4 (4.5) (1.9) 13.0 18.9 21.8 0.3 61.3 (24.6) 0.1 37.4 21.5 22.3 4.7 (2.1) (1.3) (5.9) 11.1
Private sector 15.8 14.0 26.6 24.3 12.5 16.2 18.5 18.4 27.0 23.8 21.8 11.2 2.5 3.8 26.9 17.2 10.1 4.0 11.3 14.1
LIC (26.3) 2.9 14.7 13.4 4.5 7.0 (0.5) 18.6 (2.6) (0.1) 10.4 17.7 (10.6) 6.2 103.9 12.8 98.5 (7.3) 5.6 23.5
Total (10.4) 8.3 20.7 19.3 9.0 12.2 9.7 18.5 12.5 13.3 16.9 13.9 (2.8) 4.9 60.0 15.6 45.8 (0.6) 8.9 18.0
Most insurance companies are well placed to capture incremental growth in health and term
insurance post Covid-19. However, there will be a marginal drop in ULIP and
endowment/non-par savings business.
 Health and term insurance will drive growth. Post Covid-19, policyholders will be
prompted to reduce under-insurance in term and health insurance. The sales pitch for
these products is likely to be more effective post Covid-19.
 Pressure on ULIPs. Weakness in capital markets will likely persist on the back of
uncertainties related to Covid-19. ULIPs are essentially a play on capital markets and have
declined sharply post FY2018, once the rally in markets started to decline. Additionally,
ULIP surrenders increased sharply, driving a drop in early bucket persistency for most
insurers. FY2021E will likely witness lower ULIP volumes and higher surrenders from this
segment. The share of ULIPs to overall APE will decline further for most insurers.
 Pricing pressure in protection business. Our discussion with insurance companies

suggests that most reinsurers have started to increase the pricing of protection policies.
Life insurers have started to pass the same to its customers, though it is yet to be fully
priced in. Weak retail sentiment on the back of Covid-19 and focus on growing the high-
yielding protection segment (individual protection and credit life) will likely deter
insurance companies from raising protection pricing sharply over the next few quarters.
Most insurers will be focused on garnering higher volumes during this phase. The share
of protection business has increased 10-550 bps for most life insurers in 9MFY20 (Exhibit
53).

India Banks
Exhibit 53: Protection mix has increased for most players in FY2020E
Protection mix, March fiscal year-ends, 1QFY19 onwards
Protection APE mix (%) YoY change (bps) Protection APE mix (%) YoY change (bps) Protection APE mix (%) YoY change (bps) Protection APE mix (%) YoY change (bps)
1QFY19 2QFY19 1QFY20 2QFY20 1QFY20 2QFY20 1HFY19 1HFY20 1HFY20 3QFY19 3QFY20 3QFY20 9MFY19 9MFY20 9MFY20
HDFC Life 18.2 14.8 17.8 15.7 (42) 85 16.2 16.7 50 17.3 16.8 (47) 16.6 16.7 13
ICICI Prudential Life 8.2 7.7 14.6 14.9 639 719 7.9 14.8 688 9.9 13.1 316 8.6 14.1 550
Max Life 16.0 12.0 15.0 13.3 (100) 130 13.6 14.0 40 6.9 14.0 706 11.0 14.0 300
SBI Life 4.5 5.9 11.2 7.1 668 124 5.4 8.8 336 7.3 6.8 (42) 4.1 6.4 230
 Persistency trends can decline. Shift in consumer preferences and high ULIP surrenders
can lead to marginal deterioration in persistency ratios. The impact will most likely be
higher in early buckets. Persistency trends of most insurers are higher than their internal
assumptions and as such should not have significant impact of EV. Persistency for most
companies has improved yoy in 9MFY20 (sluggishness on a qoq basis is attributed to
marginal weakness in ULIPs) (Exhibit 54).
Exhibit 54: Persistency has improved for most insurers (except ICICI Prudential Life)
Persistency (based on premium) for life insurers, March fiscal year-ends, 1QFY19-3QFY20 (%)
(%) 13th month 49th month

100
87 89 89 89 87 86 85 85
85 85 84 84
81 81 82 81 80
84 84 85 83 82 80 80 85 84 83 82
80
60
64 65 65 68 67 65 64 65 64 64 65 66 66 68 66 65
63 63 62 63 61
58 60 60 60
57 57 58
40
20
0
1QFY19
2QFY19
3QFY19
4QFY19
1QFY20
2QFY20
3QFY20
1QFY19
2QFY19
3QFY19
4QFY19
1QFY20
2QFY20
3QFY20
1QFY19
2QFY19
3QFY19
4QFY19
1QFY20
2QFY20
3QFY20
1QFY19
2QFY19
3QFY19
4QFY19
1QFY20
2QFY20
3QFY20
HDFC ICICI Max SBI
Notes:
(1) 3QFY20 data for Max Life refers to 8MFY20.

BUY
Lupin (LPC)
Pharmaceuticals MARCH 30, 2020
UPDATE
Sector view: Neutral
Nepexto receives positive CHMP opinion. LPC announced a positive CHMP opinion CMP (`): 548
for Nepexto (biosimilar Enbrel), LPC’s first biosimilar in the EU (partnered with MYL).
The development highlights the optionality in LPC’s pipeline, with potential US filing for Fair Value (`): 840
Neulasta in 2HFY21 likely to add to its biosimilars efforts, while potential approval of BSE-30: 29,816
ProAir in FY2021 will be a key catalyst for the inhalation pipeline. The recent share price
correction means that LPC valuations reflect only domestic segment valuations, with the
market ascribing no value to the US despite a strong pipeline build-out. BUY.
Lupin
Stock data Forecasts/valuations 2020E 2021E 2022E
52-week range (Rs) (high,low) 884-505 EPS (Rs) 19.0 33.9 48.3
Mcap (bn) (Rs/US$) 249/3.3 EPS growth (%) (9.6) 78.7 42.2
ADTV-3M (mn) (Rs/US$) 1,287/17 P/E (X) 28.9 16.2 11.4
Shareholding pattern (%) P/B (X) 1.8 1.6 1.5
Promoters 46.9 EV/EBITDA (X) 9.5 7.0 5.2
FIIs 24.7 RoE (%) 6.2 10.2 12.9
MFs/BFIs 8.3/6.1 Div. yield (%) 0.9 0.9 1.3
Price performance (%) 1M 3M 12M Sales (Rs bn) 155 173 197
Absolute (17) (29) (24) EBITDA (Rs bn) 24 32 42
Rel. to BSE-30 10 (1) (3) Net profits (Rs bn) 9 15 22
Nepexto receives positive CHMP opinion

LPC and MYL announced positive CHMP opinion recommending approval for Nepexto, LPC’s
biosimilar for Enbrel (etanercept). Following the CHMP opinion, we now expect the European
Commission to grant a centralized marketing authorization (MA) in May 2020. LPC had out-
licensed Nepexto to Mylan for EU (along with other markets) in June 2018, and will receive
50% profit share from the product. Nepexto will be the fourth Enbrel biosimilar to be launched
in the EU and will compete in a ~US$1.48 bn market, split as US$830 mn for the innovator
brand, US$485 mn for Biogen’s Benepali (first biosimilar), and ~US$80 mn sales for Sandoz’
Erelzi (second biosimilar). Despite the relatively benign competitive dynamics, we do not expect
meaningful near-term revenue or profit contribution from the product for LPC, given MYL’s
disappointing market share performance on its recent EU biosimilar launches (partnered with
BIOS), and expect peak sales of US$50-100 mn for MYL by FY2022/23, with LPC profit
contribution at US$20-40 mn from the product.
Limited impact of Covid-19 so far
At this point, we see limited impact from Covid-19 so far, with the lockdown impact on
manufacturing and logistics likely to be smoothened out over the coming few weeks, though,
we do see US FDA inspections for Somerset, Goa and Indore getting pushed back to 2HFY21.
We expect only a transient impact on domestic market performance with performance likely to
be normalized from 2QFY21. However, we do expect a negative hit on EM sales given cross
currency exposure to South Africa (~Rs6 bn revenues), as well as Brazil/Mexico (~Rs6 bn
revenues). However, we do see several levers to drive the EBITDA growth from FY2021,
including market share gains in levothyroxine, gradual loss reduction in Solosec, as well as
ProAir approval, with significant room to drive margin expansion through operating leverage. Chirag Talati, CFA
chirag.talati@kotak.com
Stock offers deep value - BUY Mumbai: +91-22-4336-0871
Valuations remain compelling with the stock now trading at ~5X FY2022 EV/EBITDA. At 15X Kumar Gaurav
EBITDA multiple on FY2022, domestic segment accounts for entire market cap, with no value kumar.g@kotak.com
Mumbai: +91-22-4336-0872
ascribed to the US. Nepexto approval underscores the significant optionality in the pipeline,
including the inhalation basket (Fostair in the EU, Spiriva in the US) as well as biosimilars
(Neulasta filing in FY2021). BUY with an unchanged fair value of Rs840/share, with following
catalysts key for stock price performance (1) re-inspection of Goa facility in 2HFY21, (2) market
share gains in levo, (3) progress in Solosec prescriptions, and (4) visibility on ProAir approval.

Mumbai: +91-22-4336-0000
Pharmaceuticals Lupin
Exhibit 1: Global biosimilars revenues

Calendar year-ends, 1QCY16-4QCY19
1QCY16 2QCY16 3QCY16 4QCY16 1QCY17 2QCY17 3QCY17 4QCY17 1QCY18 2QCY18 3QCY18 4QCY18 1QCY19 2QCY19 3QCY19 4QCY19
Inflectra/Remsima (Remicade, Pfizer)
Worldwide 36 45 49 61 78 94 112 135 145 158 166 173 138 153 155 179
USA 0 0 0 4 17 23 34 44 55 63 71 70 57 75 77 91
Developed Europe 33 42 45 51 54 64 64 79 75 80 79 84 71 66 65 71
Developed RoW 1 0 1 3 3 2 4 4 4 6 6 8 5 8 9 10
Emerging markets 2 2 3 4 4 5 11 7 11 9 10 10 4 6 5 6
Flixabi (Remicade, Biogen)

Worldwide 0 0 0 0 1 2 2 4 7 11 11 14 15 17 18 18
USA 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
RoW 0 0 0 0 1 2 2 4 7 11 11 14 15 17 18 18
Benepali (Enbrel, Biogen)

Worldwide 2 15 31 53 65 89 99 118 121 116 123 125 124 120 116 126
USA 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
RoW 2 15 31 53 65 89 99 118 121 116 123 125 124 120 116 126
Samsung profit share (BIIB reported) 0 -6 7 14 21 25 34 42 44
Udenyca (Pegfilgrastim, Coherus)

US 37 83 112 124
Basaglar (Lantus, Eli Lilly)

Worldwide 11 16 19 40 46 87 146 154 166 202 201 232 251 291 263 307
USA 0 0 0 16 22 60 115 114 127 157 157 182 198 232 202 244
RoW 11 16 19 24 24 27 31 39 39 45 44 50 53 59 61 64
Admelog (Lispro, Sanofi)

US 8 29 62 72 82 55 58
Imraldi (Humira, Biogen)

Worldwide 17 36 47 49 52
USA 0 0 0 0 0
RoW 17 36 47 49 52
Kanjinti
US 39 79
RoW 2 19 23 24 30 30 24
Mvasi
US 42 79
RoW 1 5
Amgevita
US 0 0 0 0 0 0
RoW 11 31 52 61 71
Source: Industry data, Companies
Exhibit 2: LPC expects to invite the US FDA for a re-inspection of Goa in 1QFY21
March fiscal year-ends, 2020-21E, (Rs mn)
Revenue
Business Last contribution Key pending
Unit name Operations inspected Status (%) products Comments
New facility, incremental filings for oral and
Unit 1 Nagpur Formulations Jan-20 2 observations 0-2 Injectables, orals injectables happening from this unit
Unit 1 Indore API, Formulations Feb-20 2 observations 10-15 Hormones (incl. levothyroxine), high potent products
Unit 2, Indore Formulations Jan-19 WL 8-10 Oral solids and ophthal
Unit 3 Indore Formulations Oct-18 EIR 4-5 Proair, Spiriva Derma and inhalation
Goa Formulations May-19 WL 30-35 Oral solids
Aurangabad Formulations May-19 EIR 5-8 Oral solids
Somerset Formulations Dec-18 WL 10-15 Oral, derma and controlled substance
Unit 1 Mandideep API, Formulations Dec-18 WL Cephlosporins, no incremental filings
Unit 2 Mandideep API Dec-18 EIR Cephlosporins API plant
Tarapur API Sep-19 WL Key API facility
Vizag API Jan-20 5 observations New API facility
Vadodara API Jul-20 EIR Key API facility
Source: Kotak Institutional Equities estimates

Lupin Pharmaceuticals
Exhibit 3: Lupin – Segmental revenues

March fiscal year-ends, 2014-2022E (Rs mn)
2014 2015 2016 2017 2018 2019 2020E 2021E 2022E

Domestic formulations 24,796 29,679 33,916 37,986 41,253 46,382 51,252 56,890 63,717
Export formulations 75,577 84,737 90,985 121,687 103,415 103,848 87,867 99,442 115,926
US 48,871 56,953 59,376 82,626 58,939 55,924 57,574 66,670 79,291
- Branded 4,887 4,980 2,941 6,439 4,645 1,196 1,566 2,837 3,916
- Generics 43,984 52,391 55,514 76,276 54,883 53,172 54,232 61,313 72,351
Japan 12,954 13,239 13,646 17,740 20,764 21,790 0 0 0
Europe 3,119 3,262 4,278 5,472 5,937 6,171 6,634 7,513 8,474
South Africa 3,800 4,218 3,956 4,644 5,314 5,735 5,850 6,435 7,078
RoW 6,333 7,065 9,729 11,205 12,461 12,125 16,369 18,824 21,083
Others 500 0 0 0 0 2,103 1,441 0 0
API 11,178 11,941 12,074 11,833 10,901 13,464 13,195 13,854 14,547
Other operating income 2,000 1,702 5,069 3,745 2,443 3,488 2,300 2,400 2,500
Total 112,866 127,699 142,085 174,943 158,042 167,182 154,614 172,586 196,690
% yoy growth
Domestic formulations 5 20 14 12 9 12 11 11 12
Export formulations 25 12 7 34 (15) 0 (15) 13 17
US 35 17 4 39 (29) (5) 3 16 19
- Branded (6) 2 (41) 119 (28) (74) 31 81 38
- Generics 42 19 6 37 (28) (3) 2 13 18
Japan (1) 2 3 30 17 5
Europe 32 5 31 28 8 4 8 13 13
South Africa 18 11 (6) 17 14 8 2 10 10
RoW 43 12 38 15 11 (3) 35 15 12
Others (91) (100) (31) (100)
API 18 7 1 (2) (8) 24 (2) 5 5
Other operating income 11 (15) 198 (26) (35) 43 (34) 4 4
Total 17.1 13.1 11.3 23.1 (9.7) 5.8 (7.5) 11.6 14.0
% of sales
Domestic formulations 22 23 24 22 26 28 33 33 32
Export formulations 67 66 64 70 65 62 57 58 59
US 43 45 42 47 37 33 37 39 40
- Branded 4 4 2 4 3 1 1 2 2
- Generics 39 41 39 44 35 32 35 36 37
Japan 11 10 10 10 13 13 0 0 0
Europe 3 3 3 3 4 4 4 4 4
South Africa 3 3 3 3 3 3 4 4 4
RoW 6 6 7 6 8 7 11 11 11
Others 0 0 0 0 0 1 1 0 0
API 10 9 8 7 7 8 9 8 7
Other operating income 2 1 4 2 2 2 1 1 1
Source: Kotak Institutional Equities, Company

Pharmaceuticals Lupin
Exhibit 4: Lupin - Profit and loss, balance sheet and cash model
March fiscal year-ends, 2014-2022E (Rs mn)
2014 2015 2016 2017 2018 2019 2020E 2021E 2022E
Net revenues 112,866 127,699 142,085 174,943 158,042 167,182 154,614 172,586 196,690
Gross profit 74,693 86,129 98,991 124,929 105,298 108,724 100,166 112,093 125,834
Staff costs (14,646) (17,473) (21,077) (28,495) (28,647) (31,513) (29,833) (31,921) (34,156)
R&D expenses (9,294) (10,998) (16,038) (23,101) (18,510) (15,731) (16,330) (16,200) (16,560)
Other expenses (20,724) (21,463) (24,341) (28,401) (26,665) (32,658) (29,770) (31,854) (33,446)
EBITDA 30,029 36,195 37,535 44,932 31,475 28,822 24,233 32,119 41,672
Depreciation & amortisation (2,610) (4,347) (4,635) (9,122) (10,859) (10,850) (11,438) (9,349) (10,069)
EBIT 27,419 31,848 32,900 35,810 20,616 17,972 12,794 22,770 31,603
Net interest (266) (98) (446) (1,525) (2,044) (3,078) (3,400) (2,047) (1,329)
Other income 1,165 2,397 1,877 1,147 (13,105) 240 (4,602) 3,250 3,250
Profit before tax 28,318 34,147 34,330 35,432 5,468 15,134 4,793 23,973 33,524
Tax & deferred Tax (9,622) (9,704) (11,536) (9,785) (2,885) (9,017) (11,488) (8,630) (11,734)
Less: minority interest (331) (412) (88) (72) (71) (71) (71) (71) (71)
Net Income reported 18,365 24,031 22,707 25,575 2,513 6,046 (6,766) 15,272 21,720
Net Income adjusted 18,365 24,031 22,707 25,575 17,156 9,446 8,544 15,272 21,720
EPS reported (Rs) 40.8 53.4 50.5 56.8 5.6 13.4 (15.0) 33.9 48.3
EPS adjusted (Rs) 40.8 53.4 50.5 56.8 38.1 21.0 19.0 33.9 48.3
Balance sheet
Equity 69,985 88,982 110,165 135,321 136,171 137,891 137,220 150,202 168,664
Total borrowings 5,533 4,710 71,193 79,521 68,763 82,219 68,219 33,219 13,219
Other liabilities 26,542 37,686 43,020 51,231 58,120 59,384 60,226 63,471 68,147
Total liabilities 32,075 42,396 114,213 130,752 126,882 141,603 128,446 96,690 81,367
Total liabilities and equity 102,060 131,377 224,378 266,073 263,054 279,494 265,666 246,892 250,030
Net fixed assets 36,597 49,442 116,677 131,660 129,602 127,264 82,183 78,834 74,765
Investments 4,459 3,612 10,564 14,884 11,357 13,694 9,640 9,640 9,640
Cash 9,739 21,372 8,379 28,123 16,429 30,971 72,602 47,655 40,589
Other current assets 51,265 56,951 89,411 91,406 105,667 107,565 101,241 110,763 125,036
Total assets 102,060 131,377 225,031 266,073 263,054 279,494 265,666 246,892 250,030
Cashflow statement
Operating profit before working capital 24,703 28,280 27,847 36,089 27,706 21,662 21,840 25,484 32,962
Tax paid (7,719) (9,436) (11,662) (11,490) (5,584) (9,394) (10,340) (7,767) (10,560)
Change in working capital (4,663) (949) (31,537) 5,059 (10,194) (5,002) 6,018 (7,140) (10,771)
Capital expenditure (5,286) (8,712) (11,750) (26,368) (15,534) (9,854) (7,000) (6,000) (6,000)
Free cash flow 14,753 18,619 (15,440) 14,780 1,978 6,806 20,857 12,344 16,192
Margins and ratios
Gross profit margin (%) 66.2 67.4 69.7 71.4 66.6 65.0 64.8 64.9 64.0
EBITDA margin (%) 26.6 28.3 26.4 25.7 19.9 17.2 15.7 18.6 21.2
Tax rate (%) 34.1 31.2 32.2 29.1 29.6 59.6 239.7 36.1 35.1
RoAE (%) 30.0 30.2 22.8 20.8 1.9 4.4 (4.9) 10.6 13.6
RoACE (%) 29.6 32.1 17.4 14.5 9.5 3.8 (11.1) 10.5 14.3
Source: Kotak Institutional Equities, Company

BUY
Thermax (TMX)
Capital Goods MARCH 30, 2020
UPDATE
Sector view: Neutral
The bitter truth, the long wait and opportunity to consolidate share. TMX’s CMP (`): 725
recent concall suggests a virtual shut-down of operations, constraints to restarting work Fair Value (`): 870
and a demand profile that may take long to stabilize. From a competitive perspective,
BSE-30: 29,816
we take comfort from (1) large cash position and commitment to prioritize cash over
revenues, (2) recent entry into new markets and (3) ability to scale-up execution as seen
over the past few quarters. We revise fair value to Rs870 from Rs1,140, retain BUY.
Thermax
Stock data Forecasts/valuations 2020E 2021E 2022E
52-week range (Rs) (high,low) 1,181-570 EPS (Rs) 24.4 28.9 36.0
Mcap (bn) (Rs/US$) 87/1.2 EPS growth (%) (33.9) 18.5 24.8
ADTV-3M (mn) (Rs/US$) 117/2 P/E (X) 29.8 25.1 20.1
Shareholding pattern (%) P/B (X) 2.6 2.4 2.2
Promoters 62.0 EV/EBITDA (X) 18.2 19.8 15.7
FIIs 7.6 RoE (%) 8.8 9.9 11.5
MFs/BFIs 15.9/1.9 Div. yield (%) 1.0 1.1 1.4
Price performance (%) 1M 3M 12M Sales (Rs bn) 58 55 63
Absolute (22) (32) (27) EBITDA (Rs bn) 5 4 5
Rel. to BSE-30 4 (5) (6) Net profits (Rs bn) 3 3 4
Bitter truth: normalization of execution unlikely in 1HFY20 for cash-conscious Thermax
Beyond select design-related work contracts and O&M contracts, TMX’s operations have come
to a standstill. So has the cash cycle. Rs5 bn of 4QFY20 execution would get deferred on
account of mobility issues related to movement of finished goods. Its Danish and Polish facilities
have restarted lately and operate at sub-normal utilization with utilization being negligible in
the Indonesian facilities. Beyond cash flow and mobility issues getting resolved (unlikely to
happen before May) pace of execution would then be determined by customers’ willingness to
fund projects and willingness of TMX’s workforce to work from a safety perspective. Thermax
would not use its treasury to pay suppliers and report revenues in the interim period.
The wait for demand to revive once end-customers move out of survival zone
TMX expects force majeure clauses to protect its current backlog. It however shared concerns
on the adjusted in demand for its products and services. These largely depend on new capacities
for products and services which remain uncertain as the end-customers would stay in survival
zone for some time. Consumption-oriented sectors may also take some time before considering
investing in capacities. Other sectors would take longer. As per Thermax, the impact for
geographies beyond India may be higher and more prolonged.
Lockdown may be an opportunity for Thermax to consolidate share and/or improve margin
Select large competitors such as ISGEC (similar top-line) and Walchandnagar Industries (small peer)
operate at low EBITDA margin and have seen elongation of their working capital cycle. 3-6
months of lockdown would further increase their leverage levels and would potentially lead to
less aggressive bidding by peers. Thermax is well placed in terms of its cash position (equivalent Aditya Mongia
to 6-8 months of fixed cost) and can benefit from reducing competitive intensity over time. aditya.mongia@kotak.com
Mumbai: +91-22-4336-0884
Lower estimates by 24% to incorporate weak order backlog and near-term ordering prospects Teena Virmani
teena.virmani@kotak.com
We cut our FY2022 estimates by 24%, driven by 15% cut in our FY2022 ordering estimates, Mumbai: +91-22-4336-0883
weakness in ordering in FY2021 and negative operating leverage. Weak current order backlog
and a potentially weak ordering in FY2021 will lead to a higher 19% cut in revenue estimates.
Negative operating leverage is driving the higher 24% cut in EPS estimate.

Mumbai: +91-22-4336-0000
Capital Goods Thermax
Key takeaways from recent conference call on Covid-19 impact
 Impact on supply chain. Thermax business was impacted much earlier than the
nationwide lockdown due to restrictions of movement near their key locations such as
Pune. The company has material worth Rs2.5-3 bn lying at ports and more than that was
under processing at factories which have been locked down. This is likely to have an
adverse impact on revenues and profits during 4QFY20.
 Financial performance is expected to be adversely impacted. All streams of revenues

including project, product and services have been impacted adversely due to the
lockdown and lack of manpower. Most clients had already scaled down operations
before the lockdown and now sites are not operational. Due to shutting down of
operations at client side too, service and O&M revenues are also going to be impacted
adversely for Thermax which otherwise has an O&M order book of Rs2 bn. However,
Thermax is confident of scaling up execution and service revenues once the situation
normalizes.
 International operations are impacted by lower utilization. With the spread of

coronavirus across various Europe and regions of Southeast Asia, Danstoker and Indonesian
facilities are operating at very low utilization. Closure of China unit was largely done with
remaining useful inventory and machinery shifted back to India during 3QFY20 itself.
 Demand scenario looks bleak in near term. Demand scenario has also turned weak as
government’s focus turns towards healthcare and infrastructure projects take a back seat.
Private capex recovery will also be subject to improving utilization levels which is not
expected for the next 2-3 quarters. In lieu of weaker demand, Thermax has curtailed its
capex plans for Sricity absorption chillers and Gujarat facility and expects to incur
incremental capex only on global demand improvement. However, the company expects
2HFY20 to witness recovery in terms of project execution as well as order inflow.
 Risk mitigation strategy. The company expects to be protected by force majeure

clauses as execution and product delivery gets impacted in the current scenario. The
company also continues to remain focused on working capital management, even if it
comes at the cost of revenues. Management has mentioned that they can also
incorporate temporary salary cuts if the current situation prevails for 3-6 months.
Exhibit 1: Thermax has limited growth in employee cost to 10% over FY2014-19; recently added to
employee base
Employee cost and employee count for Thermax (consolidated), March fiscal year-ends, 2010-19
Employee cost (LHS, Rs bn) Employee count (RHS, #)

10 5,000
4,016 4,110 4,046 4,047 4,106

3,920 3,872
8 3,631 3,664 4,000
3,488
7.7
7.0 7.1 6.9 7.0
6 6.6 3,000
6.1
5.6
4 4.6 2,000
3.3
2 1,000
0 -
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Thermax Capital Goods
Exhibit 2: ISGEC is the large listed peer to Thermax Exhibit 3: Thermax and Thyssenkrupp have cash to sustain six-
Revenues and EBITDA for Thermax and its peers, March fiscal year- month lock-down; ISGEC and Walchandnagar Industries would
end, 2019 (X) require increasing leverage
Net debt to EBITDA for Thermax and its peers, March fiscal year-end,
70 Revenues EBITDA 2019 (X)
60
60 end-FY2019 Proforma - assuming six months of nil revenues
51
6 5.2
50 4.0
4 2.6
40
1.3
2
30
0
20 13 (2) (0.3)
10 5 4 (4) (2.2)
3 1 1
- (6)
Walchandnagar
Thermax
ISGEC (TTM)
(8)
Thyssenkrupp
(6.7)
Industries
(10) (8.7)
Walchandnagar
Thermax
ISGEC (TTM)
Thyssenkrupp
Industries
Source: Companies, Kotak Institutional Equities
Source: Companies, Kotak Institutional Equities estimates
Exhibit 4: Change in estimates for Thermax, March fiscal year-ends, 2018-22E (Rs mn)
New estimates Old estimates Revision (%)

2018 2019 2020E 2021E 2022E 2020E 2021E 2022E 2020E 2021E 2022E
Order inflows 63,800 56,320 60,639 57,695 73,379 64,721 75,448 86,438 (6) (24) (15)
Net revenues 44,649 59,732 57,924 54,789 62,556 59,549 67,138 77,125 (3) (18) (19)
EBITDA 4,009 4,574 4,638 4,307 5,407 4,946 5,762 6,810 (6) (25) (21)
EBITDA margin (%) 9.0 7.7 8.0 7.9 8.6 8.3 8.6 8.8
Other income 1,164 1,499 1,146 1,404 1,452 1,146 1,529 1,776 — (8) (18)
PBT 4,220 5,010 4,518 4,454 5,560 4,825 6,033 7,287 (6) (26) (24)
PAT 2,321 4,150 2,743 3,251 4,059 2,968 4,404 5,320 (8) (26) (24)
EPS (Rs) 20.6 36.9 24.4 28.9 36.0 26.4 39.1 47.2 (8) (26) (24)
Growth (%)
Revenues (0) 34 (3) (5) 14 (0) 13 15
EBITDA (7) 14 1 (7) 26 8 17 18
PBT (7) 19 (10) (1) 25 (4) 25 21
PAT (4) 79 (34) 19 25 (28) 48 21

Exhibit 5: We expect weakness in execution and ordering in FY2021

Segmental revenues for Thermax, March fiscal year-ends, 2017-22E (Rs mn)
2017 2018 2019 2020E 2021E 2022E
Energy segment
Revenue 36,248 34,811 47,995 44,423 36,864 38,177
Growth (%) (15.8) (4.0) 37.9 (7.4) (17.0) 3.6
Order inflow 34,260 52,240 44,760 36,703 33,033 42,943
Growth (%) (2.4) 52.5 (14.3) (18.0) (10.0) 30.0
Order backlog 33,159 49,671 47,930 40,210 35,001 39,766
Growth (%) (5.7) 49.8 (3.5) (16.1) (13.0) 13.6
Bill to book ratio (%) 69.3 57.0 66.6 67.6 66.6 67.6
EBIT 3,229 2,834 3,218 2,801 2,140 2,598
EBIT Margin (%) 8.9 8.1 6.7 6.3 5.8 6.8
Environment segment
Revenue 6,997 6,906 8,283 9,196 12,835 18,234
Growth (%) (2.9) (1.3) 19.9 11.0 39.6 42.1
Order inflow 6,630 8,110 7,410 18,956 18,935 23,564
Growth (%) 19.7 22.3 (8.6) 155.8 (0.1) 24.4
Order backlog 5,731 6,860 5,250 15,010 21,110 26,440
Growth (%) (6.0) 19.7 (23.5) 185.9 40.6 25.2
EBIT 381 290 567 556 802 1,157
EBIT Margin (%) 5.4 4.2 6.8 6.0 6.2 6.3
Chemical segment
Revenue 3,319 3,593 4,151 4,981 5,729 6,874
Growth (%) 1.3 8.3 15.5 20.0 15.0 20.0
Order inflow 3,050 3,450 4,150 4,980 5,727 6,872
Growth (%) 5.9 13.1 20.3 20.0 15.0 20.0
Order backlog 379 359 520 519 517 515
Growth (%) NM (5.3) 45.0 (0.3) (0.3) (0.4)
EBIT 592 542 617 890 984 1,228
EBIT Margin (%) 17.8 15.1 14.9 17.9 17.2 17.9
Sum of Segments
Gross revenues 45,897 44,649 59,732 57,924 54,789 62,556
Growth (%) (12.8) (2.7) 33.8 (3.0) (5.4) 14.2
EBIT 4,473 4,349 5,153 4,645 4,582 5,687
Margin (%) 9.7 9.7 8.6 8.0 8.4 9.1
Order inflow 43,940 63,800 56,320 60,639 57,695 73,379
Growth (%) 1.0 45.2 (11.7) 7.7 (4.9) 27.2
Order backlog 39,268 56,890 53,700 55,739 56,628 66,721
Growth (%) (6.3) 44.9 (5.6) 3.8 1.6 17.8

Thermax Capital Goods
Exhibit 6: Consolidated balance sheet, profit model and cash flow statement of Thermax, March fiscal year -ends, 2012-22E (Rs mn)
2012 2013 2014 2015 2016 2017 2018 2019 2020E 2021E 2022E
Profit model
Total operating income 60,912 54,917 50,999 53,955 51,450 44,831 44,649 59,732 57,924 54,789 62,556
Total operating costs (54,993) (50,015) (46,626) (49,320) (47,158) (40,501) (40,639) (55,157) (53,286) (50,482) (57,149)
EBITDA 5,920 4,902 4,373 4,635 4,291 4,330 4,009 4,574 4,638 4,307 5,407
Other income 830 849 716 1,209 1,224 1,141 1,164 1,499 1,146 1,404 1,452
PBDIT 6,749 5,750 5,089 5,844 5,515 5,470 5,173 6,073 5,784 5,712 6,859
Financial charges (122) (165) (274) (820) (122) (97) (129) (143) (128) (128) (128)
Depreciation (663) (771) (922) (1,341) (722) (819) (824) (920) (1,139) (1,130) (1,171)
Pre-tax profit 5,965 4,814 3,893 3,684 4,671 4,554 4,220 5,010 4,518 4,454 5,560
Taxation (2,043) (1,773) (1,696) (1,708) (1,439) (1,560) (1,658) (849) (1,775) (1,203) (1,501)
Adjusted PAT 3,922 3,041 2,198 1,975 3,232 2,994 2,563 4,160 2,743 3,251 4,059
Minority interest/ Share of JVs PAT 114 161 262 616 (409) (586) (242) (11) — — —
Extraordinary items, net of tax — — — (494) — (178) — (895) — — —
Reported PAT 4,035 3,201 2,460 2,098 2,823 2,230 2,321 3,254 2,743 3,251 4,059
Balance sheet
Shareholders funds 16,293 18,687 20,383 21,464 24,162 25,376 27,147 30,143 31,911 34,033 36,702
Loan funds 2,708 4,231 7,610 6,165 1,954 1,357 2,337 2,403 2,403 2,403 2,403
Total sources of funds 20,850 24,793 30,250 29,195 26,270 26,908 29,649 32,645 34,412 36,535 39,203
Net block 8,441 8,727 15,265 14,314 7,124 7,050 8,505 12,788 13,149 13,519 13,847
CWIP 2,466 5,175 537 429 600 1,413 1,034 401 410 410 410
Net fixed assets 10,907 13,901 15,802 14,743 7,724 8,463 9,539 13,189 13,558 13,928 14,257
Investments 2,395 4,430 7,079 8,217 11,647 11,888 15,939 8,624 8,624 8,624 8,624
Cash balances 7,002 3,211 4,508 3,494 2,976 2,210 2,940 3,691 4,468 3,734 3,879
Net current assets excluding cash 188 2,861 2,317 1,850 2,719 3,194 150 4,922 5,542 8,029 10,223
Total application of funds 20,850 24,793 30,250 29,195 26,270 26,908 29,649 32,644 34,412 36,534 39,203
Growth (%)
Revenue growth 14.1 (9.8) (7.1) 5.8 (4.6) (12.9) (0.4) 33.8 (3.0) (5.4) 14.2
EBITDA growth 3.2 (17.2) (10.8) 6.0 (7.4) 0.9 (7.4) 14.1 1.4 (7.1) 25.5
Recurring PAT growth 4.0 (22.5) (27.7) (10.1) 63.6 (7.3) (14.4) 62.3 (34.1) 18.5 24.8
Key ratios (%)
Raw material / sales 63.1 60.4 56.1 58.2 53.3 50.5 52.6 55.9 54.9 54.9 54.9
Other expenses / sales 18.0 19.6 21.6 20.2 25.6 24.5 22.8 23.6 23.6 21.6 22.6
Employee expense / sales 9.2 11.1 13.8 13.1 12.8 15.3 15.6 12.8 13.5 15.6 13.9
EBITDA magin 9.7 8.9 8.6 8.6 8.3 9.7 9.0 7.7 8.0 7.9 8.6
PAT margin 6.4 5.5 4.3 3.7 6.3 6.7 5.7 7.0 4.7 5.9 6.5
RoE 27.4 18.3 12.6 12.4 12.4 9.7 8.8 14.5 8.8 9.9 11.5
RoCE 24.5 15.8 10.3 10.9 10.8 9.4 8.5 13.8 8.5 9.5 11.0
EPS (consol) (Rs) 35.8 28.4 21.8 23.0 25.1 21.4 20.6 36.9 24.4 28.9 36.0

APPENDIX: KEY SNIPPETS FROM THE RECENT OCT-DEC 2019 EDITION OF FIRESIDE MAGAZINE
New products and offering
 Unique integrated solutions for glass furnace – substitutes for an electrical chiller by
using heat dissipated from flue gases in glass furnace
 Introducing Thermax Cooling Solutions Limited - completes Thermax’s play in the

entire process cooling (business entered in 2017) cycle from heat generation to
dissipation, making it a one-stop solution provider in the utility space. CBG was till now in
industrial segment where they have gained share consistently.
 Urban revealed (initiative of the Channel Business group - in line with Thermax’s
strategic move of entering the commercial space with its energy and environment
portfolio.
Key orders
 Maiden contract for treated effluent water supply – won from Garware Polyester
Limited by TOESL, first waste water project under BOO mode for ten years. 110 KLD Zero
Liquid Discharge (ZLD) system to enable the customer to recycle reduce their dependence
on freshwater. TOESL guarantees committed delivery of quality treated effluent water
along with guaranteed uptime and performance of the equipment with committed
lifecycle cost.
 Repeat order for steam supply from the Marico Group – TOESL installed and
commissioned second boiler order under BOO. TOESL ensures committed delivery of
quality steam and treated effluent water for a period of 10 years. The utilities leveraged
for this solution comprised a 15 TPH boiler and 200 KLD water treatment plant.
 Chiller-Heater in the UAE - 600 TR chiller-heater has replaced the existing electrical
chiller at the Al Dhafra Paper Manufacturing Company LLC in the UAE. Thermax’s
installation has resulted in saving 4.81 million units of electricity annually. Beyond cold
water used to air condition, the hot water produced at 90°C is used as feed water for the
boilers, resulting in the reduction of heat required in the steam generation process
 First chiller from Sri City dispatched overseas – This was a repeat order for a 60 TR
low temperature hot water driven vapor absorption chiller from UBE Chemicals (Asia)
Public Company Limited in Thailand. Thermax’s chiller is helping the customer save
200,000 units of electricity.
Product improvements
 Combloc gets smarter - Combloc Optima boiler incorporates several automation

features to improve efficiency and ease of operation. Benefits of the Combloc series
include enhanced equipment efficiency, a greater level of automation and improved
safety apart from modularization and reduced site work.
Interview of Chief Digital Officer
 Digital journey – The CDO focused on the need to modernize (security, analytics-based
structure available for taking informed decisions, from divisional to functional approach).
The digital strategy has buy-in from executive council. Employees have been exposed to
automation through employee management portal, expense reimbursement portal. The
CDO commented, “My journey is towards building a paperless, connected organization
which enables a seamless flow of knowledge and equips our employees to understand
and help with each other’s businesses.”

INDIA
Economy
Credit Policy MARCH 27, 2020
UPDATE
BSE-30: 29,816
Pulling out all the stops. The RBI’s comprehensive policy will likely lower system-wide
funding costs, ease near-term financial stress, and provide financial relief to stressed
sectors. Given a moderating inflation trajectory, the MPC can further reduce rates by 50
bps in response to the further spread and impact of Covid-19. In case the Covid-19
spread extends well into 1HFY21, the government will have to step in with further sops
which may require more OMO purchases or even partial monetization of the deficit.
MPC surprises with bold moves; rates to come down
The MPC advanced its policy meeting and delivered a sharp repo rate cut of 75 bps (to 4.4%) QUICK NUMBERS
to tackle the stress emanating from the outbreak of Covid-19. It also, unexpectedly, widened its
policy corridor to 65 bps with the reverse repo rate now at 4% (90 bps cuts). Exhibit 1  MPC cuts the repo
summarizes the liquidity and regulatory measures announced. Bond yields and spreads will likely rate by 75 bps to
move lower—more so in the short to medium-end. Even as yields correct lower, the yield curve 4.4%
will likely continue to be steep with risks of fiscal slippages (around 2-2.5% of GDP) looming
large and will depend on the funding sources of the deficit.  RBI cuts CRR by 100
bps to 3% for a year
Liquidity push will stabilize credit markets
 Announces TLTROs
The RBI’s liquidity measures would inject around Rs3.7 tn of liquidity (Rs1.37 tn each through
of Rs1 tn for
CRR and MSF relaxations and Rs1 tn of TLTROs). The TLTROs will likely ease the near freeze and
smooth functioning
sharp spike in yields seen recently in the CP/CD/corporate bond space. However, the TLTRO
auctions need to be watched for cues whether enough banks are ready to take credit risk
of credit markets
through these investments. The first TLTRO auctions have seen bid-cover ratio of around 2.4.
Regulatory measures to ease financial burden across sectors
The RBI acknowledged that the global economic activity has come to a ‘near standstill’ and that
excluding agriculture, almost all other parts of the domestic economy will be impacted,
depending on the ‘intensity, spread and duration’ of the pandemic. In the absence of any major
cash flow during a lockdown, most sectors were at risk of failing to meet their obligations to
the financial system. In this context, the MPC’s announcement to permit all financial institutions
to allow a moratorium on term loans and a deferment on payment of interest in lieu of working
capital facilities would ease the financial stress building up in the economy. We believe that the
resultant cash flow mismatches will be bridged by the CRR and MSF dispensations.
More measures will be in the offing if Covid-19 situation does not improve
While these measures are unlikely to revive demand growth, they will likely improve market
sentiment by minimizing system-wide dislocations. The RBI has assured that it will do ‘whatever Suvodeep Rakshit
suvodeep.rakshit@kotak.com
is necessary’ to shield the economy from the impact of the pandemic. We see room for another Mumbai: +91-22-4336-0898
50 bps of rate cuts in case the impact of Covid-19 prolongs/intensifies. In such a scenario, the
government would have to provide more fiscal support which may then require further OMO Upasna Bhardwaj
upasna.bhardwaj@kotak.com
purchases and/or even RBI monetizing part of the deficit. We note that consolidated GFD/GDP Mumbai: +91-22-6166-0531
had shot up to 8.4% in FY2009 and 9.4% in FY2010 from 4.1% in FY2008 when the GFC
Avijit Puri
erupted. Currently, the consolidated GFD/GDP is around 7% of GDP. If the virus proliferates
avijit.puri@kotak.com
further, the government may be forced to ease further, pushing the consolidated GFD/GDP Mumbai: +91-22-6166 1547
further by 2-3%. We await clarity on the borrowing program which is likely to be announced
on March 30. Further, if financial market conditions worsen due to the Covid-19 impact, the
RBI will still have ammunition left such as direct buying of illiquid securities (or through SPVs)
and special windows for mutual funds/NBFCs among others to support the markets.
Kotak Economic Research

Mumbai: +91-22-4336-0000
For Private Circulation Only.

India Economy
Exhibit 1: MPC undertook a slew of liquidity and regulatory measure to mitigate the stress from Covid-19
List of liquidity and regulatory related announcements made by the MPC
Liquidity measures
1) Introduction of Targeted LTRO (TLTRO) auctions of up to three-year tenor for a total amount of Rs1 tn at a floating
rate linked to the repo rate, with the liquidity availed under this to be deployed in CPs, investment-grade corporate
bonds and NCDs
2) Banks shall be required to acquire up to 50% of their incremental holdings from primary market issuances and
TLTROs
remaining 50% from secondary market, including from MFs and NBFCs
3) Investments made by banks under this facility will be classified as held to maturity (HTM) even in excess of 25% of
total investment permitted to be included in HTM
4) Exposures under this facility will also not be reckoned under the large exposure framework
1) Reduce the cash reserve ratio (CRR) of all banks by 100 bps to 3% of net demand and time liabilities (NDTL) for a year
CRR 2) Reduction to release liquidity worth Rs1.37 tn
3) Reduce the requirement of minimum daily CRR balance maintenance from 90% to 80% (available up to June 26, 2020)
1) Raising MSF to 3% of SLR from 2% in view of the exceptionally high volatility in domestic financial markets which can
MSF bring in phases of liquidity stress. This will remain applicable until June 30, 2020.
2) Allows banks to avail an additional Rs1.37 tn of liquidity under the LAF window in times of stress at the MSF rate
1) Widening the existing policy rate corridor from 50 bps to 65 bps
Policy rate corridor 2) Under the new corridor, the reverse repo rate under LAF would be 40 bps lower than the policy repo rate. The
marginal standing facility (MSF) rate would continue to be 25 bps above the policy repo rate
Regulatory measures
Permitting all lending institutions to allow a moratorium of three months on payment of installments for term loans
Term Loans
outstanding as on March 1, 2020 without asset classification downgrade
Permitting lending institutions to allow deferment of three months on payment of interest with respect to working
Working Capital Facilities
capital facilities without asset classification downgrade
Permitting lending institutions to recalculate drawing power by reducing margins and/or by reassessing the working
Working Capital Financing capital cycle for the borrowers In respect of working capital facilities sanctioned in the form of cash credit/overdraft
without asset classification downgrade
Net Stable Funding Ratio Deferring the implementation of net stable funding ratio by six months
Capital Conservation Buffer Deferring the implementation of last tranche of 0.625% of capital conservation buffer (CCB) by six months
Allowing banks which operate International Financial Services Centre (IFSC) Banking Units (IBUs) to participate in NDF
Offshore NDF Rupee Market
market through their branches in India, their foreign branches or through their IBUs.
Source: RBI, Kotak Economics Research
66 KOTAK ECONOMIC RESEARCH

Kotak Institutional Equities: Valuation summary of KIE Universe stocks
67
Fair O/S ADVT

Price (Rs) Value Upside Mkt cap. shares EPS (Rs) EPS growth (%) P/E (X) EV/EBITDA (X) P/B (X) RoE (%) Dividend yield (%) 3mo
Company Rating 27-Mar-20 (Rs) (%) (Rs bn) (US$ bn) (mn) 2020E 2021E 2022E 2020E 2021E 2022E 2020E 2021E 2022E 2020E 2021E 2022E 2020E 2021E 2022E 2020E 2021E 2022E 2020E 2021E 2022E (US$ mn)
Automobiles & Components
Amara Raja Batteries ADD 455 780 71 78 1.0 171 40 44 50 39.9 11.8 13.3 12 10.3 9.1 6.5 5.5 4.6 2.0 1.8 1.5 18.9 18.5 18.2 2.2 2.4 2.8 7.0
Apollo Tyres ADD 83 180 118 47 0.6 572 10.2 10.3 14.9 (29.0) 1.3 44.4 8.1 8.0 5.5 5.3 4.9 3.7 0.5 0.4 0.4 5.7 5.6 7.7 3.6 3.6 3.6 6.8
Ashok Leyland BUY 43 100 131 127 1.7 2,936 2.1 2.3 6.4 (69.8) 9.4 178.5 20.6 18.8 6.8 10.1 8.4 3.9 1.5 1.4 1.2 7.3 7.6 19.2 1.5 1.6 4.4 25
Bajaj Auto BUY 2,053 3,100 51 594 8 289 172 170 200 12.3 (1.2) 17.5 11.9 12.1 10.3 8.0 7.5 5.8 2.6 2.3 2.0 22 20 21 5.7 3.3 3.9 22
Balkrishna Industries SELL 848 1,030 21 164 2.2 193 50 53 59 25.6 6.0 11.4 17.0 16.1 14.4 11.2 9.1 7.7 3.2 2.9 2.6 19.6 18.7 18.7 2.4 2.6 2.9 13.4
Bharat Forge SELL 264 365 38 123 1.6 466 13 16 22 (41.6) 21.6 40.4 20.4 16.8 11.9 11.3 9.8 7.7 2.2 2.0 1.8 10.9 12.4 15.8 2.1 2.3 2.3 9.7
CEAT REDUCE 734 960 31 30 0.4 40 59 63 81 (4.9) 8.1 28.8 12.5 11.6 9.0 7.5 7.1 6.1 1.0 0.9 0.9 8.3 8.4 10.0 1.6 1.6 1.6 1.4
Eicher Motors ADD 14,320 19,500 36 391 5.2 27 770 747 979 (5.6) (2.9) 31.0 18.6 19.2 14.6 13.9 13.1 10.3 4.4 3.8 3.1 26 21 23 0.2 — — 46
Endurance Technologies BUY 640 850 33 90 1.2 141 40 40 50 11.1 (1.6) 26.3 16 16.2 12.8 7.7 7.1 5.6 3.0 2.6 2.2 18.6 15.9 17.2 1.0 1.1 1.3 0.5
Escorts BUY 655 1,080 65 58 1.1 89 54 63 75 (1.6) 16.9 19.7 12.2 10.5 8.7 8.3 6.8 5.3 1.7 1.5 1.3 13.9 14.3 15.0 1.2 1.4 1.7 34
Exide Industries SELL 131 180 38 111 1.5 850 10.3 10.2 10.9 14.1 (0.7) 6.7 12.7 12.8 12.0 7.3 6.7 6.0 1.7 1.6 1.5 14.1 12.9 12.7 2.7 3.1 3.1 6.5
Hero Motocorp ADD 1,661 2,150 29 332 4.4 200 167 141 166 (1.2) (15.7) 17.4 9.9 11.8 10.0 5.8 6.7 5.4 2.3 2.2 2.0 25 18.9 21 5.5 5.5 6.0 28
Mahindra CIE Automotive ADD 64 150 136 24 0.3 378 9.4 11.0 12.7 (34.9) 16.1 15.7 6.7 5.8 5.0 3.8 3.4 2.6 0.5 0.5 0.4 8.0 8.6 9.1 — — — 0.4
Mahindra & Mahindra BUY 295 815 177 366 4.9 1,138 39 39 45 (18.0) 0.7 15.2 7.5 7.5 6.5 4.8 4.7 3.9 0.9 0.8 0.7 12.0 10.9 11.5 2.6 2.7 3.1 26
Maruti Suzuki SELL 4,646 5,800 25 1,403 18.7 302 203 234 296 (18.2) 14.9 27.0 23 20 16 11.5 9.0 6.5 2.8 2.5 2.2 12.7 13.3 15.2 1.1 1.3 1.6 83
Motherson Sumi Systems SELL 63 105 66 199 2.7 3,158 4.2 5.9 7.0 (16.9) 38.3 18.9 14.9 10.8 9.0 5.5 3.9 3.1 1.7 1.4 1.2 11.7 14.2 14.4 2.0 2.3 2.8 18.4
MRF SELL 56,371 62,000 10 239 3.2 4 2,523 2,915 3,674 (5.4) 15.5 26.0 22 19.3 15.3 9.1 8.3 6.5 2.0 1.8 1.6 9.4 9.9 11.2 0.1 0.1 0.1 8.8
Schaeffler India SELL 3,744 3,900 4 117 1.6 31 118 134 171 (18.3) 14.0 27.3 32 28 22 17.2 15.5 12.2 4.0 3.5 3.0 13.0 13.3 14.8 — — — 0.4
SKF REDUCE 1,480 1,950 32 73 1.0 49 66 79 95 0.5 20.4 19.4 22 19 16 15.7 12.9 10.2 3.8 3.2 2.8 16.7 17.2 17.6 0.8 0.8 1.0 0.5
Tata Motors BUY 71 215 204 254 3.1 3,598 (3.4) 7.7 18.1 36.3 325.1 134.5 NM 9.1 3.9 3.2 2.5 2.1 0.4 0.4 0.4 NM 4.5 9.7 — — — 108
Timken SELL 743 825 11 56 0.7 75 31 32 39 57.4 3.8 20.9 24 23 19 14.9 12.9 10.4 3.6 3.1 2.7 16.1 14.4 15.1 0.1 0.1 0.2 0.7
TVS Motor SELL 304 350 15 144 1.9 475 14.4 13.8 21.8 1.8 (3.8) 58.0 21 22 14 11.0 10.7 7.7 3.8 3.4 2.9 19.1 16.4 23 1.4 1.1 1.8 10.3
Varroc Engineering BUY 141 540 282 19 0.3 135 15 29 46 (54.0) 88.2 58.7 9.2 4.9 3.1 4.1 2.9 1.9 0.6 0.5 0.5 6.4 10.9 15.0 — — — 0.4
Automobiles & Components Neutral 5,041 67.1 (10.9) 19.8 34.8 16.8 14.0 10.4 6.5 5.4 4.3 1.7 1.6 1.4 10.4 11.2 13.6 2.0 1.8 2.1 459
Banks
AU Small Finance Bank SELL 522 625 20 159 2.1 302 24.4 28.5 36.2 86.7 17.0 27.0 21 18 14 — — — 3.6 3.0 2.5 19.0 17.1 18.2 0.0 — — 12.9
Axis Bank REDUCE 360 740 106 1,015 13.5 2,806 17.5 49 62 (3.9) 183.2 25.1 21 7.3 5.8 — — — 1.3 1.1 1.0 6.4 15.1 16.6 0.5 2.1 2.6 111
Bandhan Bank REDUCE 250 540 116 402 5.3 1,610 20.3 25.4 31.2 24.0 25.2 23.0 12.3 9.8 8.0 — — — 2.6 2.0 1.6 23.9 23 22 0.0 0.0 0.0 24
Bank of Baroda ADD 54 105 93 251 3.3 4,582 0.8 23.4 27 (50.0) 2,763.0 13.9 66 2.3 2.0 — — — 0.6 0.5 0.4 0.7 15.5 15.6 0.3 8.6 9.8 27
City Union Bank ADD 131 240 83 96 1.3 735 10.0 11.8 13.5 8.1 17.3 14.3 13 11.1 9.7 — — — 1.9 1.7 1.5 14.4 15.0 15.2 1.4 1.6 1.8 2.9
DCB Bank BUY 90 230 157 28 0.4 310 12.8 16.9 22.2 22.1 32.0 30.8 7.0 5.3 4.0 — — — 0.9 0.8 0.7 13.0 15.2 17.2 1.4 1.8 2.4 1.8
Equitas Holdings BUY 43 160 269 15 0.2 342 8.0 10.5 14.5 26.0 32.1 37.5 5.4 4.1 3.0 — — — 0.5 0.5 0.4 9.9 11.2 13.6 — — — 6.6
Federal Bank BUY 44 120 170 89 1.2 1,985 8.4 9.9 12.6 33.6 18.8 26.3 5.3 4.5 3.5 — — — 0.7 0.6 0.5 12.0 12.9 14.7 4.2 5.0 6.3 13.8
India Daily Summary - March 30, 2020

HDFC Bank BUY 904 1,050 16 4,959 66.0 5,447 48 50 56 24.5 4.3 10.5 19 18 16 — — — 2.9 2.6 2.3 16.5 15.2 14.9 1.0 1.1 1.2 168
ICICI Bank BUY 340 615 81 2,200 29.3 6,447 18.4 32 38 287.4 73.1 18.8 18 10.7 9.0 — — — 2.0 1.8 1.5 10.5 16.4 17.1 1.1 1.9 2.2 160
IndusInd Bank ADD 411 600 46 285 3.8 712 58 29 76 6.7 (51.2) 166.6 7 14.4 5.4 — — — 0.8 0.8 0.7 13.4 5.3 13.2 1.9 1.0 2.5 132
Karur Vysya Bank BUY 21 80 283 17 0.2 799 3.4 7 13 27.2 104.1 95.1 6 3.1 1.6 — — — 0.3 0.3 0.2 4.1 8.0 14.5 4.0 8.5 16.6 0.6
Punjab National Bank NR 33 — — 225 3.0 4,604 2 6 10 110.2 149.0 80.1 15 6.1 3.4 — — — 0.7 0.5 0.4 2.4 7.0 10.2 0.0 0.0 0.0 14.8
RBL Bank BUY 160 375 134 82 1.1 509 9.5 32 41 (53.3) 233.4 30.0 17 5.1 3.9 — — — 0.8 0.7 0.6 5.3 14.0 16.0 0.8 2.6 3.4 46
State Bank of India BUY 196 420 114 1,749 23.3 8,925 24 45 55 2,356.7 87.9 23.3 8 4.4 3.6 — — — 1.0 0.8 0.6 9.2 15.2 16.0 0.1 0.1 0.1 207
Ujjivan Financial Services BUY 170 490 189 21 0.3 121 26.9 34 44 117.0 24.9 31.6 6 5.0 3.8 — — — 0.9 0.8 0.7 15.7 17.0 19.3 1.8 2.5 3.5 8.3
Ujjivan Small Finance Bank SELL 29 45 57 50 0.7 1,714 2 3 3 48.2 33.3 26.9 14 10.5 8.3 — — — 1.7 1.6 1.4 15.1 14.9 16.7 1.4 1.9 2.4 0.0
Union Bank RS 29 — — 99 1.3 3,423 0 11 15 101.2 5,126.7 36.8 142 2.7 2.0 — — — 0.4 0.3 0.3 0.2 13.2 13.2 0.0 5.5 7.6 2.5
YES Bank RS 26 — (100) 331 4.4 12,546 (18.7) (3) 0 (352.2) 85.3 101.2 NM NM 770.3 — — — 4.4 14.1 6.9 NM NM 0.4 0.0 0.0 0.0 100
KOTAK INSTITUTIONAL EQUITIES RESEARCH
Banks Attractive 12,164 161.9 97.2 144.0 28.6 21 8.7 6.8 1.3 1.1 0.9 6.1 12.3 13.9 0.8 1.3 1.6 1,062
KOTAK ECONOMIC RESEARCH 67


Fair O/S ADVT
Building Products
Astral Poly Technik SELL 909 765 (16) 137 1.8 151 19.4 22 27 48.5 14.7 19.4 47 41 34 27.5 23.4 19.3 8.8 7.3 6.1 21 19.6 19.4 0.1 0.1 0.1 2.2
Building Products Cautious 137 1.8 49.5 14.7 19.4 47 41 34 27.5 23.4 19.3 8.8 7.3 6.1 18.8 17.9 17.8 0.1 0.1 0.1 2.2
Capital goods
ABB SELL 853 900 6 181 2.4 212 18 20 25 46.3 12.6 27.3 49 43 34 31.0 26.7 21.2 5.1 4.8 4.4 9.9 11.5 13.5 0.6 0.7 0.9 1.1
Ashoka Buildcon BUY 44 155 253 12 0.2 281 12.9 11.9 13.2 8.6 (7.9) 11.2 3.4 3.7 3.3 3.6 3.3 2.9 0.5 0.4 0.4 15.3 12.6 12.7 4.6 4.2 4.7 1.0
Bharat Electronics BUY 73 113 55 178 2.4 2,437 6.2 7.5 7.0 (20.2) 20.9 (6.9) 11.8 9.8 10.5 6.9 6.0 5.6 1.8 1.7 1.5 15.7 17.6 15.2 3.7 4.5 4.2 15.4
BHEL REDUCE 20 41 100 71 0.9 3,482 2.6 2.5 3.7 (25.0) (6.2) 51.0 7.8 8.3 5.5 1.9 1.4 1.3 0.2 0.2 0.2 2.9 2.7 4.0 6.3 5.4 7.3 9.7
Carborundum Universal ADD 208 345 66 39 0.5 189 13.7 16.3 19.0 4.7 19.2 16.1 15.2 12.7 11.0 9.2 7.3 6.1 2.1 1.9 1.7 14.4 15.6 16.3 2.0 2.4 2.7 0.4
Cochin Shipyard BUY 244 615 152 32 0.4 132 48 56 50 30.6 17.6 (10.8) 5.1 4.3 4.9 (0.9) (0.1) 1.3 0.9 0.7 0.7 17.7 18.3 14.6 4.9 5.7 5.6 1.7
Cummins India BUY 358 520 45 99 1.3 277 26 26 29 (0.2) (2.6) 12.2 13.6 14.0 12.4 12.9 12.9 11.4 2.3 2.1 2.0 17.2 15.8 16.8 3.7 3.6 4.0 7.4
Dilip Buildcon BUY 228 580 154 31 0.4 137 36 41 51 (35.6) 14.8 24.9 6.4 5.5 4.4 4.0 3.6 2.6 0.8 0.7 0.6 14.2 14.2 15.2 0.3 0.3 0.5 1.4
IRB Infrastructure BUY 54 154 184 19 0.3 351 22 16 16 (7.1) (29.8) 3.8 2.4 3.4 3.3 5.4 6.4 6.3 0.3 0.3 0.2 11.9 7.7 7.5 5.1 4.6 2.8 3.2
Kalpataru Power Transmission BUY 179 591 230 28 0.4 153 34 38 46 12.8 10.5 22.5 5.2 4.7 3.9 3.3 2.7 2.0 0.8 0.7 0.6 15.7 15.2 16.2 2.1 2.2 2.8 0.6
KEC International BUY 187 400 114 48 0.6 257 24.6 28 33 30.2 14.4 17.9 7.6 6.6 5.6 5.0 4.1 3.4 1.6 1.3 1.1 23 22 21 1.4 1.6 1.9 1.6
L&T BUY 837 1,270 52 1,175 15.6 1,403 69 62 79 12.0 (9.2) 26.6 12.2 13.4 10.6 14.5 13.0 11.3 1.9 1.6 1.5 16.6 13.3 14.8 1.3 4.5 2.9 67
Sadbhav Engineering BUY 30 137 362 5 0.1 172 7.2 11.7 13.6 (33.4) 61.1 16.3 4.1 2.5 2.2 4.0 2.1 1.7 0.2 0.2 0.2 5.9 9.0 9.6 — — — 0.7
Siemens SELL 1,044 1,200 15 372 4.9 356 35 40 46 14.1 15.2 13.9 30 26 23 20.0 17.5 15.1 3.8 3.4 3.1 13.1 13.8 14.3 0.9 1.1 1.2 9.4
Thermax BUY 761 870 14 91 1.2 113 24 29 36 (33.9) 18.5 24.8 31 26 21 19.1 20.8 16.5 19.1 20.8 16.5 8.8 9.9 11.5 0.9 1.1 1.3 1.6
Capital goods Neutral 2,381 31.7 2.7 (0.9) 19.5 12.9 13.0 10.9 1.6 1.4 1.3 12.3 10.9 12.0 1.7 3.3 2.7 1,062
Commercial & Professional Services
SIS REDUCE 432 870 102 63 0.8 75 37 41 48 27.5 11.9 16.0 11.8 10.5 9.1 12.8 10.8 9.2 2.2 1.8 1.5 19.9 18.8 18.5 0.8 0.9 1.0 0.5
TeamLease Services BUY 1,538 2,060 34 26 0.3 17 52 55 75 (8.6) 4.5 36.5 29 28 21 24.4 21.8 15.6 4.2 3.6 3.1 15.3 13.9 16.3 — — — 1.0
Commercial & Professional Services Cautious 90 1.2 16.2 10.1 20.8 25 22 18.5 14.7 12.7 10.4 4.2 3.6 3.1 17.1 16.1 16.5 0.3 0.3 0.4 1.5
Commodity Chemicals
Asian Paints REDUCE 1,604 1,825 14 1,539 20.5 959 28.9 34.2 40.5 28.5 18.2 18.3 55 47 40 35.1 30.6 26.3 14.4 12.9 11.5 27 29 31 0.9 1.1 1.3 44
Berger Paints SELL 486 430 (11) 472 6.3 971 7.5 8.6 10.2 46.6 14.6 19.1 65 56 47 41.8 35.6 30.1 16.4 14.1 12.1 27 27 28 0.6 0.7 0.8 10.2
Kansai Nerolac BUY 357 485 36 193 2.6 539 10.2 9.7 13.6 17.2 (4.5) 40.6 35 37 26 23.6 23.1 16.9 5.1 4.8 4.3 15.3 13.4 17.3 1.0 1.0 1.3 2.0
Tata Chemicals ADD 225 345 54 57 0.8 255 33.0 37.1 40.5 (23.1) 12.4 9.3 6.8 6.1 5.5 2.7 2.3 2.0 0.4 0.4 0.4 6.7 7.1 7.4 4.0 4.6 5.0 10.0
Commodity Chemicals Neutral 2,260 30.1 16.0 14.1 19.0 46 40 34 27.0 23.9 20.5 7.5 6.9 6.3 16.2 17.0 18.4 0.9 1.1 1.3 67
Construction Materials
ACC BUY 959 1,425 49 180 2.4 188 72.3 68.5 76.0 35.8 (5.3) 11.1 13.3 14.0 12.6 5.6 5.8 5.2 1.6 1.5 1.4 12.3 10.9 11.4 1.5 3.6 4.0 15.8
Ambuja Cements BUY 142 190 34 281 3.7 1,986 10.6 10.4 11.7 49.1 (1.7) 12.5 13.4 13.6 12.1 4.1 4.1 3.4 1.2 1.1 1.0 9.0 8.3 8.6 1.1 1.1 1.1 11.7
Dalmia Bharat BUY 504 1,000 99 97 1.3 192 17.2 11.4 30.2 8.6 (34.0) 165.0 29 44 16.7 5.5 5.5 4.0 0.9 0.9 0.8 3.1 2.0 5.1 — — — 1.8
Grasim Industries ADD 461 865 88 303 4.0 657 74.4 77.5 90.0 18.9 4.2 16.2 6.2 5.9 5.1 4.5 3.6 2.9 0.5 0.5 0.4 8.4 8.1 8.8 1.5 1.5 1.5 22
J K Cement BUY 932 1,500 61 72 1.0 77 82.3 78.6 115.5 141.3 (4.5) 46.9 11.3 11.9 8.1 7.4 7.0 5.5 2.2 1.9 1.6 21 17.3 21 1.1 1.1 1.1 1.8
JK Lakshmi Cement BUY 201 300 49 24 0.3 118 19.2 19.7 27.0 374.8 2.4 37.5 10.5 10.2 7.4 4.7 4.6 3.9 1.4 1.3 1.1 14.3 13.0 15.7 1.0 1.0 1.0 1.1
Orient Cement BUY 43 65 52 9 0.1 205 4.7 4.3 5.7 102.0 (8.9) 34.3 9.1 10.0 7.5 5.2 5.0 4.0 0.8 0.8 0.7 8.9 7.8 10.0 4.7 4.7 4.7 0.2
Shree Cement REDUCE 17,666 16,600 (6) 637 8.5 36 450.4 514.6 698.0 39.3 14.3 35.6 39 34 25 16.6 15.1 12.0 4.8 4.4 3.8 14.3 13.4 16.2 0.6 0.6 0.6 15.0
UltraTech Cement BUY 3,144 3,750 19 907 12.1 289 140.9 148.4 201.7 54.1 5.3 35.9 22 21 15.6 10.3 9.8 7.9 2.4 2.2 1.9 11.4 10.9 13.2 0.4 0.4 0.4 34
Construction Materials Cautious 2,511 33.4 41.6 2.6 26.6 16.4 16.0 12.6 6.9 6.2 5.1 1.5 1.4 1.3 9.4 8.9 10.3 0.8 0.9 0.9 103

68
Fair O/S ADVT
69
Consumer Durables & Apparel
Crompton Greaves Consumer SELL 193 210 9 121 1.6 627 7.1 8.4 9.5 19.1 18.3 13.6 27 23 20 17 14 12 8.5 6.8 5.5 35 33 30 1.3 1.3 0.0 4.0
Havells India SELL 511 520 2 320 4.3 625 13.2 17.1 20.4 4.8 29.4 19.8 39 30 25 24 19 15 6.8 6.0 5.3 18.5 21 22 0.9 1.2 1.4 16.7
Page Industries REDUCE 17,350 22,000 27 194 2.6 11 363 449 539 2.9 23.6 20.0 48 39 32 31 26 22 21.6 17.2 14.0 48 50 48 1.0 1.2 1.5 12.3
Polycab BUY 741 700 (6) 110 1.5 149 37 44 49 9.0 19.1 11.3 20 17.0 15.3 11 10 8 3.0 2.6 2.2 16.6 16.3 15.7 0.5 0.6 0.7 4.8
TCNS Clothing Co. ADD 356 770 117 22 0.3 65 9 12 16 (54.3) 31.7 26.0 38 29 23 9 7 6.0 3.3 2.9 2.5 9.2 10.7 11.9 2.4 3.4 3.5 0.2
Vardhman Textiles ADD 662 1,000 51 38 0.5 56 92 120 130 (28.9) 30.0 8.5 7.2 5.5 5.1 5.7 4.4 3.8 0.6 0.6 0.5 9.0 11.0 11.0 4.5 4.5 4.5 0.2
Voltas SELL 491 500 2 162 2.2 331 16.4 18.5 21.4 4.4 12.5 16.1 30 27 23 24 22 18 3.6 3.3 2.9 12.6 12.9 13.5 0.7 0.8 0.9 12.6
Whirlpool SELL 1,899 1,260 (34) 241 3.2 127 38 44 52 17.9 16.8 18.6 50 43 36 31 26 23 9.6 8.4 7.5 21 21 22 0.4 0.7 1.1 2.8
Consumer Durables & Apparel Cautious 1,208 16.1 0.1 22.2 32 26 22 19 16 14 5.0 4.4 15.7 17.0 17.4 0.9 1.1 54
Consumer Staples
Bajaj Consumer Care BUY 127 280 121 19 0.2 148 15.3 15.8 17.7 1.6 3.3 12.1 8.3 8.0 7.2 6.2 5.9 5.1 3.6 3.2 2.8 46 42 42 7.9 8.7 9.5 0.7
Britannia Industries REDUCE 2,529 2,900 15 608 8.1 240 59 68 79 22.7 14.3 16.2 43 37 32 32 28 24 13.4 10.9 9.0 32 32 30 0.8 1.1 1.3 19.3
Colgate-Palmolive (India) ADD 1,159 1,600 38 315 4.2 272 30 36 41 12.5 18.5 14.6 39 33 28 24.2 20.8 18.3 21.4 21.1 20.7 56 65 74 2.2 2.6 2.9 11.4
Dabur India REDUCE 423 440 4 747 9.9 1,766 9.5 11.0 12.0 16.8 15.5 9.7 45 39 35 37 32 28 11.6 10.4 9.4 28 28 28 1.1 1.3 1.5 16.2
GlaxoSmithKline Consumer RS 9,375 — — 394 5.2 42 297 315 365 27 6.0 15.9 32 30 26 27 25 21 8.3 7.3 6.3 28 26 26 1.2 1.4 1.5 3.0
Godrej Consumer Products BUY 499 615 23 511 6.8 1,022 15.2 16.6 20.0 5.0 9.1 20.4 33 30 25 23 21 17 6.0 5.5 4.9 19.8 19.1 21 1.3 1.5 1.7 14.0
Hindustan Unilever BUY 2,141 2,250 5 4,634 61.7 2,160 33 38 45 18.6 12.9 18.5 64 57 48 44 40 34 51.4 43.4 36.9 87 83 83 1.1 1.5 2.0 59
ITC BUY 163 300 84 2,006 26.7 12,300 11.9 12.6 13.9 17.0 5.9 10.1 13.7 13.0 11.8 9.1 8.6 7.7 3.1 2.9 2.7 21 22 23 4.0 5.5 6.1 61
Jyothy Laboratories ADD 100 170 71 37 0.5 367 5.8 6.5 7.4 4.7 11.9 13.0 17.0 15.2 13.5 11.9 10.7 9.4 2.6 2.5 2.3 15.8 16.7 17.8 3.5 4.0 4.5 0.8
Marico BUY 253 350 38 327 4.3 1,290 8.2 8.4 9.8 13.8 2.6 15.9 31 30 26 21 20 18 10.2 9.8 9.3 34 33 37 2.2 2.5 2.8 11.7
Nestle India SELL 15,109 14,000 (7) 1,457 19.4 96 204 238 278 22.6 16.6 16.6 74 63 54 51 44 38 75.4 61.3 50.5 70 107 102 2.3 1.3 1.5 23
Tata Consumer Products ADD 285 400 40 180 2.4 631 8.8 10.3 11.5 25.1 18.2 11.1 33 28 25 18 16 14 2.3 2.2 2.1 7.4 8.3 8.8 1.1 1.2 1.5 29
United Breweries ADD 905 1,430 58 239 3.2 264 17.9 25.5 32.6 (15.8) 42.2 27.8 50 35 28 26 19 16 6.7 5.7 4.8 14.0 17.4 18.9 0.2 0.4 0.5 7.5
United Spirits BUY 470 660 40 342 4.5 727 13.1 15.2 20.3 38.9 15.7 34.1 36 31 23 23 20 16 8.8 5.9 4.3 27 23 22 0.4 0.5 0.6 22
Varun Beverages BUY 567 870 53 164 2.2 289 16.2 16.6 32.6 51.9 2.2 96.2 35 34 17.4 14 13 9 4.9 4.3 3.5 17.6 13.3 22 0.1 0.2 0.4 3.0
Consumer Staples Cautious 11,979 159.4 17.6 10.1 15.7 35 32 27 24 22 19 9.7 8.7 7.8 28 28 29 1.7 2.1 2.5 281
Diversified Financials
Bajaj Finance REDUCE 2,542 3,850 51 1,530 20.4 599 101 135 163 46 33 21 25 18.8 15.6 — — — 4.5 3.7 3.1 23 22 22 0.4 0.5 0.6 121
Bajaj Finserv ADD 4,891 10,200 109 778 10.4 159 304 394 475 50 30 21 16.1 12.4 10.3 — — — 2.3 2.0 1.7 16.8 17.1 17.5 0.3 0.3 0.3 40
Cholamandalam ADD 169 375 122 137 1.8 820 17.3 22.9 25.5 14 32.3 11.5 9.8 7.4 6.6 — — — 1.7 1.4 1.2 19.2 19.9 18.7 1.1 1.5 1.7 9.7
HDFC BUY 1,754 2,200 25 3,037 40.4 1,721 107 69 78 88.2 (36) 14.0 16.4 25 22 — — — 3.4 3.2 3.0 22 13.0 13.8 2.3 1.5 1.7 130
IIFL Wealth REDUCE 960 1,200 25 84 1.1 85 34.7 45.6 66.8 (23) 31.4 46.5 28 21 14.4 — — — 2.8 2.7 2.6 10.1 13.0 18.4 2.7 3.1 4.5 1.0
L&T Finance Holdings REDUCE 53 115 117 106 1.4 1,999 9 13 16 (15.7) 35 27.8 5.6 4.2 3.3 — — — 0.7 0.6 0.5 13.2 15.7 17.4 2.4 2.7 3.1 15.6
LIC Housing Finance ADD 237 475 100 120 1.6 505 53.2 72.1 83.1 16 35.6 15.2 4.5 3.3 2.9 — — — 0.7 0.6 0.5 15.4 18.2 18.1 3.7 5.0 5.8 28

Mahindra & Mahindra Financial ADD 161 405 152 99 1.3 615 24.5 32.5 40.6 (3) 32.5 24.8 6.6 4.9 4.0 — — — 0.9 0.8 0.7 13.2 15.8 17.5 3.9 5.2 6.5 12.0
Muthoot Finance ADD 619 860 39 248 3.3 401 72 74 84 46.4 3 13.0 8.6 8.3 7.4 — — — 2.1 1.8 1.5 27 23 22 2.8 2.9 3.3 26
PNB Housing Finance NR 158 — — 27 0.4 169 66.9 77.6 88.6 (6) 16.0 14.2 2.4 2.0 1.8 — — — 0.3 0.3 0.3 14.1 14.6 14.8 4.7 5.4 6.2 5.8
Shriram City Union Finance BUY 765 1,975 158 51 0.7 66 171 191 214 14.0 12 12.0 4.5 4.0 3.6 — — — 0.7 0.6 0.6 16.4 15.9 15.6 2.8 3.2 3.5 0.2
Shriram Transport BUY 725 1,525 110 165 2.2 227 134.4 136.2 162.2 19 1.3 19.1 5.4 5.3 4.5 — — — 0.9 0.8 0.7 17.8 15.7 16.4 2.6 2.8 3.4 32
Diversified Financials Neutral 6,381 84.9 45.5 (0.2) 18.0 14.2 14.2 12.0 1.8 1.6 1.5 13.0 11.6 12.1 1.7 1.4 1.6 420



Fair O/S ADVT
Electric Utilities
CESC BUY 389 820 111 52 0.7 133 84 101 114 (7) 19.9 12.3 4.6 3.9 3.4 4.8 4.3 3.8 0.4 0.4 0.3 8.9 9.9 10.3 3.0 3.2 3.3 3.4
JSW Energy ADD 44 75 69 73 1.0 1,640 6.4 5.7 5.2 53 (10) (8.5) 7.0 7.8 8.5 4.2 3.5 2.7 0.6 0.5 0.5 8.5 7.0 6.0 — — — 0.8
NHPC ADD 19 27 39 195 2.6 10,045 3.4 3.4 3.7 34.3 2 6.8 5.7 5.6 5.3 5.4 5.8 5.3 0.6 0.6 0.5 10.8 10.5 10.6 8.8 7.9 8.6 4.3
NTPC BUY 83 160 93 821 10.9 9,895 12.3 14.3 15.5 9.4 16.8 7.9 6.8 5.8 5.4 8.4 7.2 5.8 0.7 0.7 0.6 10.9 11.8 11.7 4.4 5.2 5.6 28
Power Grid BUY 160 235 47 837 11.1 5,232 20.2 23 25 6 13.5 11.1 7.9 7.0 6.3 6.7 6.2 5.8 1.3 1.2 1.0 17.0 17.4 17.5 4.4 5.0 5.6 41
Tata Power BUY 34 60 77 92 1.2 2,705 3.6 4.8 6.7 71 32 40.7 9.4 7.1 5.1 6.9 6.5 5.9 0.5 0.5 0.4 5.7 7.0 9.1 — — — 6.6
Electric Utilities Attractive 2,070 27.5 12.2 13.5 9.9 7.1 6.2 5.7 0.8 0.7 0.7 11.4 11.9 12.1 4.5 4.9 5.4 84
Fertilizers & Agricultural Chemicals
Bayer Cropscience SELL 3,217 3,000 (7) 145 1.9 45 103.8 119.4 138.3 32.3 15.1 15.8 31 27 23 23 19 16 5.7 4.9 4.3 19.6 19.7 19.7 0.6 0.7 0.9 1.5
Dhanuka Agritech SELL 325 470 45 15 0.2 48 28.0 30.3 33.4 18.1 8.5 10.1 11.6 10.7 9.7 9.1 7.8 6.7 2.1 1.8 1.6 19.1 17.9 17.1 1.7 1.9 2.1 0.4
Godrej Agrovet SELL 313 470 50 60 0.8 192 11.8 16.4 19.9 2.9 39.2 21 27 19 16 15 11 9 2.7 2.4 2.1 10.5 13.3 14.3 1.1 1.3 1.6 1.4
Rallis India ADD 170 230 35 33 0.4 195 10.9 12.5 14.4 29.4 14.8 14.8 15.6 13.6 11.8 10.9 9.3 8.0 2.3 2.1 1.8 15.6 16.0 16.4 1.6 1.8 2.0 2.0
UPL SELL 322 510 58 246 3.3 765 28.6 40.1 45.8 51.3 40.2 14.1 11 8.0 7.0 7.0 5.8 5.0 1.5 1.3 1.2 14.2 17.8 17.9 2.5 3.5 4.0 27
Fertilizers & Agricultural Chemicals Attractive 649 8.6 39.0 32.2 15.6 17 13 11.3 9.5 7.9 6.8 2.5 2.2 1.9 14.5 16.8 17.0 1.4 1.9 2.2 36
Gas Utilities
GAIL (India) BUY 70 175 152 313 4.2 4,510 12.2 13.9 14.9 (12.4) 13.5 7.3 5.7 5.0 4.7 4.3 3.9 3.6 0.7 0.6 0.6 12.3 13.3 13.5 10.6 10.8 11.5 23
GSPL SELL 164 225 37 93 1.2 564 17.0 14.2 13.1 20.4 (16.1) (7.9) 9.7 11.5 12.5 3.9 4.2 4.1 1.4 1.3 1.2 15.4 11.5 9.7 1.5 1.3 1.6 2.1
Indraprastha Gas SELL 357 365 2 250 3.3 700 17.3 19.7 22.1 43.7 13.8 12.2 20.7 18.2 16.2 15.3 13.1 11.4 5.0 4.2 3.6 27 25 24 1.1 1.3 1.6 19.0
Mahanagar Gas ADD 815 1,300 60 80 1.1 99 76.8 84.0 89.4 36.7 9.4 6.5 10.6 9.7 9.1 6.6 5.8 5.1 2.9 2.5 2.2 29 27 25 4.1 4.6 5.5 14.8
Petronet LNG BUY 193 325 68 290 3.9 1,500 17.9 20.8 23.1 19.4 16.0 11.1 10.8 9.3 8.4 6.1 5.2 4.5 2.6 2.3 2.1 25 26 26 5.1 6.5 7.8 10.0
Gas Utilities Attractive 1,027 13.7 3.7 11.3 7.8 9.2 8.3 7.7 5.9 5.3 4.8 1.4 1.3 1.2 15.6 16.0 15.9 5.4 5.9 6.7 69
Health Care Services
Apollo Hospitals BUY 1,167 1,820 56 162 2.2 139 23.6 23 49 39 (2) 112 49.4 50.4 23.8 12.6 14.3 10.4 4.6 4.4 3.9 9.6 8.9 17.4 0.7 0.8 1.7 20
Aster DM Healthcare NR 93 — — 47 0.6 505 6.9 8.8 10.6 4 27.5 21 13.5 10.6 8.8 5.8 4.9 4.2 1.7 1.5 1.3 13.3 15.0 15.8 — — — 0.9
Dr Lal Pathlabs SELL 1,502 1,080 (28) 125 1.7 83 31.5 36.6 42.1 31.9 16.2 15.2 47.7 41.1 35.7 31.2 26.7 22.9 11.1 9.3 7.9 25 25 24 0.6 0.7 0.8 3.5
HCG BUY 76 190 150 7 0.1 85 (8.0) (5.4) (5.2) (130) 33 3 NM NM NM 7.5 6.3 5.6 1.3 1.4 1.6 NM NM NM — — — 0.1
Metropolis Healthcare ADD 1,373 1,230 (10) 69 0.9 50 31.3 30.4 42.1 30.8 (3.1) 39 43.8 45.2 32.6 27.4 27.2 20.6 13.5 11.3 9.2 34 27 31 0.7 0.7 0.9 1.7
Narayana Hrudayalaya BUY 238 380 60 49 0.6 204 4.0 3.0 10.6 37.6 (24) 250 59.7 78.6 22.4 15.6 16.3 9.5 4.2 4.0 3.4 7.3 5.2 16.2 — — — 3.0
Health Care Services Attractive 459 6.1 21 12 58 41.4 37.1 23.5 13.1 12.7 10.0 4.8 4.4 3.8 11.6 11.8 16.4 0.5 0.6 1.0 29
Hotels & Restaurants
Jubilant Foodworks ADD 1,414 1,900 34 187 2.5 132 27 38 52 12 42.1 36 52.6 37.0 27.3 18.9 15.0 12.0 15.1 11.3 8.6 28 35 36 0.4 0.7 1.1 28
Lemon Tree Hotels BUY 23 70 202 18 0.2 789 0.8 1.7 2.1 13 121 24 30.8 13.9 11.2 11.0 7.5 5.5 2.0 1.8 1.7 6.6 13.5 15.4 — 2.3 3.2 0.7
Hotels & Restaurants Attractive 205 2.7 12 54 34 49.3 32.0 24.0 17.0 12.9 10.1 9.4 7.7 6.2 19.1 24 26 0.4 0.9 1.3 29
Insurance
HDFC Life Insurance ADD 441 590 34 890 11.8 2,009 7.2 8.4 9.8 12.6 17.9 16.1 61.6 52.2 45 — — — 14.2 12.8 11.5 24 26 27 0.4 0.5 0.6 29
ICICI Lombard SELL 1,023 825 (19) 465 6.2 454 26.8 33.4 38.9 16 25 16 38.1 30.6 26 — — — 7.5 6.3 5.4 21 22 22 0.6 0.7 0.8 9.1
ICICI Prudential Life BUY 318 580 82 457 6.1 1,436 8.2 9.0 10.3 4 9.0 15.3 38.7 35.5 31 — — — 5.8 5.2 4.6 16.1 15.5 15.7 0.4 0.5 0.5 15.6
Max Financial Services ADD 408 550 35 110 1.5 417 6.9 9.9 14.4 275 44 45 59.5 41.3 28 — — — — — — 13.7 17.9 23 0.6 0.8 1.3 24
SBI Life Insurance ADD 603 1,010 68 603 8.0 1,000 13.7 16.1 17.7 3.5 17.5 9.4 43.9 37.4 34 — — — 7.0 6.1 5.3 17.1 17.4 16.5 0.4 0.4 0.5 12.3
Insurance Attractive 2,525 33.6 13.5 18.8 16.2 45.9 38.7 33 8.1 7.1 6.2 17.7 18.4 18.7 0.3 0.4 0.4 90

70
Fair O/S ADVT
71
Internet Software & Services
Info Edge SELL 2,050 2,470 20 251 3.3 122.0 31.0 39.7 48.7 20.0 28.0 22.7 66.2 51.7 42.1 55.4 41.6 33.4 9.5 8.4 7.4 15.3 17.3 18.7 0.4 0.5 0.6 12.4
Just Dial BUY 278 460 66 18 0.2 64.8 40.7 35.3 36.6 27.6 (13.4) 3.8 6.8 7.9 7.6 1.1 0.4 (0.7) 1.5 1.3 1.1 24 17.2 15.4 1.5 1.3 1.3 16.7
Internet Software & Services Attractive 269 3.6 23.0 11.0 16.6 41.9 37.8 32.4 34.4 29.1 24.5 7.0 6.1 5.4 16.6 16.2 16.5 0.5 0.5 0.6 29
IT Services
HCL Technologies ADD 431 520 21 1,169 15.6 2,702 39.7 35.9 39.7 8.4 (9.5) 10.4 10.9 12.0 10.9 6.7 7.0 6.3 2.4 2.1 2.0 24 18.7 18.8 3.6 3.6 5.6 34
Hexaware Technologies REDUCE 215 260 21 64 0.9 302 21.2 19.7 21.0 9.9 (7.0) 6.5 10.1 10.9 10.2 7.3 7.8 6.8 2.3 2.2 2.0 25 21 20 4.0 5.6 5.6 2.0
Infosys BUY 653 675 3 2,780 37.0 4,256 38.2 36.6 40.3 7.9 (4.1) 10.0 17.1 17.8 16.2 11.8 11.6 10.5 4.4 4.1 3.9 26 24 25 3.4 4.0 4.6 89
L&T Infotech ADD 1,394 1,625 17 243 3.2 175 83.5 81.4 101.7 (3) (2.6) 24.9 16.7 17.1 13.7 11.0 10.5 8.7 4.3 3.8 3.3 28 23 26 2.2 2.3 2.5 3.9
Mindtree REDUCE 826 725 (12) 136 1.8 165 38.7 46.3 53.0 (16) 20 15 21.4 17.8 15.6 11.7 10.1 8.7 4.1 3.5 3.1 19.1 21 21 3.6 1.7 1.9 13.4
Mphasis REDUCE 686 690 1 128 1.7 186 60.2 54.5 58.0 7 (9.4) 6.5 11.4 12.6 11.8 6.7 7.0 6.4 2.2 2.1 2.1 20 17.4 17.7 4.4 5.8 6.6 4.3
TCS REDUCE 1,825 1,740 (5) 6,846 91.1 3,752 86.4 84.4 92.8 4 (2.3) 9.9 21.1 21.6 19.7 15.0 14.9 13.4 7.1 6.5 5.9 34 31 31 3.3 3.2 3.6 96
Tech Mahindra BUY 504 680 35 439 5.8 880 47.1 45.1 53.1 (1.3) (4.3) 17.8 10.7 11.2 9.5 6.3 5.7 4.6 1.9 1.8 1.6 19.3 16.6 17.6 3.3 3.1 3.4 24
Wipro REDUCE 184 200 9 1,048 14.0 5,827 17.1 16.0 17.4 14.3 (6.6) 8.8 10.7 11.5 10.6 6.1 6.0 5.3 1.9 1.7 1.6 17.8 15.4 15.2 0.8 1.1 4.6 12.4
IT Services Cautious 12,853 171.1 3.9 (4.5) 10.6 16.6 17.4 15.7 11.2 11.1 10.0 4.2 3.8 3.5 26 22 22 3.1 3.3 4.1 280
Media
DB Corp. REDUCE 79 135 72 14 0.2 175 18.0 18.7 18.6 14.6 4.1 (0.5) 4.4 4.2 4.2 2.1 1.8 1.9 0.7 0.7 0.7 16.9 17.4 17.4 15.9 19.1 21.6 0.2
Jagran Prakashan REDUCE 45 60 33 13 0.2 296 8.7 9.9 10.7 (0.9) 14 NA 5.2 4.6 NA 1.8 1.7 NA 0.7 0.7 NA 13.7 15.4 16.7 20.0 20.0 20.0 0.4
PVR BUY 1,257 1,800 43 65 0.9 51 32.7 34.5 67.2 (24) 5 95 38.5 36.5 18.7 11.8 12.0 7.9 3.4 3.2 2.7 10.7 9.0 15.7 0.3 0.3 0.5 17.5
Sun TV Network REDUCE 287 525 83 113 1.5 394 37.8 41.4 43.8 4 9.5 5.7 7.6 6.9 6.6 4.9 4.3 3.8 1.9 1.7 1.6 26 26 25 7.0 7.8 8.5 15.8
Zee Entertainment Enterprises ADD 128 340 166 123 1.6 960 17.2 18.4 21.0 4.4 6.9 13.7 7.4 6.9 6.1 4.5 3.9 3.3 1.3 1.1 1.0 17.8 17.3 17.6 3.5 4.3 4.3 51
Media Attractive 327 4.4 3.5 8.1 12.6 8.4 7.8 6.9 4.9 4.4 3.8 1.5 1.4 1.3 18.2 18.1 18.6 5.3 6.0 6.4 84
Metals & Mining
Hindalco Industries BUY 92 250 173 206 2.7 2,224 22.1 24.9 28.1 (10.5) 12.6 13 4.1 3.7 3.3 3.9 3.4 2.9 0.3 0.3 0.3 8.2 8.6 8.9 1.3 1.3 1.3 22
Hindustan Zinc BUY 144 190 32 608 8.1 4,225 15.1 10.6 14.1 (20.1) (29.5) 33.1 9.6 13.6 10.2 5.1 6.6 5.0 1.8 1.8 1.8 18.8 13.2 17.6 10.5 7.4 9.8 1.7
Jindal Steel and Power BUY 89 205 131 91 1.2 1,016 2.7 26.2 22.0 259 855 (16) 32.4 3.4 4.0 5.7 3.8 3.7 0.3 0.3 0.2 0.9 7.8 6.1 — — — 44
JSW Steel ADD 151 270 78 366 4.9 2,402 8.7 16.7 28.8 (72.8) 93 72.4 17.5 9.1 5.3 7.3 5.9 4.3 1.0 0.9 0.8 5.8 10.4 16.1 2.8 2.8 2.8 28
National Aluminium Co. SELL 28 35 25 52 0.7 1,866 0.6 2.3 2.2 (92) 254 (3.0) 43.4 12.3 12.6 4.7 3.6 5.5 0.5 0.5 0.5 1.2 4.1 4.0 4.4 8.2 7.9 5.4
NMDC ADD 74 135 84 225 3.0 3,062 16.9 17.3 15.7 14.6 2.4 (9) 4.4 4.3 4.7 2.9 2.8 3.2 0.8 0.8 0.7 19.2 18.3 15.5 11.5 11.8 10.7 14.1
Tata Steel BUY 277 480 73 315 4.2 1,146 9.8 49.4 91.4 (89) 403 85 28.2 5.6 3.0 6.6 5.3 3.7 0.5 0.5 0.4 1.7 8.6 14.1 3.6 3.6 3.6 83
Vedanta BUY 64 175 175 237 3.2 3,717 10.4 17.7 20.1 (32) 71 13.5 6.2 3.6 3.2 4.6 3.9 3.6 0.4 0.4 0.4 6.2 10.7 12.3 28.2 28.2 28.2 32
Metals & Mining Attractive 2,100 27.9 (44.5) 46.5 29.1 8.8 6.0 4.6 5.3 4.5 3.8 0.6 0.6 0.6 7.2 9.9 12.0 8.7 8.0 8.5 42



Fair O/S ADVT
Oil, Gas & Consumable Fuels

BPCL BUY 279 490 76 605 8.0 1,967 23 34 36 (35.6) 45.0 4.9 11.9 8.2 7.8 7.7 6.3 5.9 1.4 1.3 1.2 12.2 16.5 16.0 5.1 6.3 6.6 47.0
Coal India BUY 132 280 113 812 10.8 6,163 28 30 28 0 6.6 (8.4) 4.6 4.4 4.8 3.7 3.0 3.0 2.5 2.1 1.8 58.7 51.4 40.8 11.4 15.2 15.2 33.6
HPCL BUY 170 250 47 259 3.5 1,524 23 26 26 (43.2) 16.9 0.2 7.5 6.5 6.4 8.0 8.1 8.2 0.9 0.8 0.7 11.8 12.9 12.0 5.3 6.2 6.2 16.7
IOCL BUY 77 130 69 724 9.6 9,181 9.5 15.2 15.5 (46.9) 59.7 2.0 8.1 5.0 4.9 4.6 4.0 3.9 0.6 0.6 0.6 7.9 12.1 11.8 6.7 9.9 10.1 29.8
Oil India BUY 78 110 42 84 1.1 1,084 22 9 14 (27) (57.3) 47.3 3.5 8.2 5.6 1.8 3.1 2.5 0.3 0.3 0.3 8.4 3.5 5.0 11.6 4.9 7.2 5.2
ONGC BUY 64 90 40 811 10.8 12,580 18 7 12 (24) (62.5) 81.2 3.6 9.6 5.3 2.3 3.5 2.7 0.3 0.3 0.3 9.2 3.3 5.8 10.9 4.3 7.4 34.7
Reliance Industries BUY 1,066 1,700 60 6,316 84.1 5,927 71 81 100 7.7 13.8 23.7 15.0 13.2 10.7 10.3 8.7 6.8 1.5 1.4 1.2 10.4 10.8 12.0 0.6 0.7 0.7 270.9
Oil, Gas & Consumable Fuels Attractive 9,610 127.9 (15.4) (0.6) 17.6 9.5 9.5 8.1 6.3 6.3 5.3 1.0 1.0 0.9 11.0 10.2 11.1 3.3 3.4 3.7 438.0
Pharmaceuticals
Aurobindo Pharma ADD 392 540 38 230 3.1 584 47 53 56 15.3 14 4.6 8.4 7.4 7.0 5.5 4.9 4.6 1.4 1.2 1.1 16.8 16.4 15.0 1.6 1.9 2.3 34.0
Biocon SELL 278 200 (28) 333 4.4 1,202 7.5 9.0 10.1 24 20 12.1 37 31 28 18.1 13.8 12.1 4.2 3.8 3.4 12.3 12.3 12.5 0.9 1.1 1.3 18.0
Cipla BUY 408 570 40 329 4.4 806 21.1 26 33 11.0 22 27 19 15.8 12.4 9.8 8.7 6.8 2.0 1.8 1.6 10.6 11.4 13.0 1.1 1.3 1.7 20.6
Dr Reddy's Laboratories REDUCE 2,917 2,800 (4) 485 6.5 166 110 139 185 11 26 32.6 26 21.0 15.8 11.8 11.1 8.5 3.2 2.8 2.5 12.0 13.4 15.5 0.7 0.8 1.1 35.0
Laurus Labs BUY 327 500 53 35 0.5 107 23.5 34.0 37 114.8 44 8 14 9.6 8.9 8.4 6.3 5.5 1.9 1.6 1.4 14.9 16.7 15.3 — — — 1.0
Lupin BUY 548 840 53 248 3.3 450 19 34 48 (9.6) 79 42 29 16 11.4 9.5 7.0 5.2 1.8 1.6 1.5 6.2 10.2 12.9 0.9 0.9 1.3 17.6
Sun Pharmaceuticals ADD 338 480 42 812 10.8 2,406 19.1 23.2 25 18.3 22 8 18 15 13.5 9.6 7.4 6.2 1.8 1.6 1.5 10.6 11.1 11.4 1.1 1.4 1.5 38.1
Torrent Pharmaceuticals ADD 1,860 2,250 21 315 4.2 169 55 69 86 113.0 25 26 34 27 22 15.4 12.9 11.0 6.0 5.3 4.5 17.7 19.4 20.9 1.3 1.4 1.5 10.7
Pharmaceuticals Neutral 2,786 37.1 18.3 25 18 20 16 13.8 10.2 8.4 7.0 2.3 2.0 1.8 11.3 12.6 13.2 1.0 1.2 1.5 175.0
Real Estate
Brigade Enterprises BUY 127 280 121 26 0.3 204 8.3 10 18 (29) 17 82 15.2 13.0 7.2 11.5 7.7 4.7 1.1 1.1 1.0 7.7 8.5 14.1 2.0 2.0 2.0 0.6
DLF BUY 139 230 66 343 4.6 2,475 4.5 6.9 10.6 (24) 51 54 31 20.2 13.1 28.8 32.7 19.2 0.9 0.9 0.9 3.2 4.6 6.8 1.4 1.4 1.4 27.6
Embassy Office Parks REIT ADD 374 450 20 288 3.8 772 11.9 15.5 18.2 151 30 18 31 24 20 17.6 14.5 13.0 1.3 1.4 1.5 4.1 5.6 6.9 6.2 8.0 9.2 1.8
Godrej Properties SELL 690 735 6 174 2.3 252 11.3 10.6 19.3 2.4 (7) 82.6 61 65 36 59.7 86.9 39.7 3.6 3.4 3.1 7.8 5.3 9.1 — — — 4.1
Oberoi Realty ADD 365 575 58 133 1.8 364 22 34 38 (4.0) 55.5 12 16.9 10.9 9.7 15.7 9.5 8.1 1.5 1.3 1.2 9.4 13.1 13.1 0.5 0.5 0.5 2.9
Prestige Estates Projects ADD 194 410 111 78 1.0 378 15.4 15.7 16 76.8 2 3 13 12 12.0 6.6 6.4 6.0 1.4 1.3 1.2 12.4 11.2 10.5 0.8 0.8 0.8 2.3
Sobha BUY 131 465 256 12 0.2 95 30 35 44 (5) 19.4 22.9 4.4 3.7 3.0 4.1 3.2 2.9 0.5 0.5 0.4 12.1 13.1 14.4 5.4 5.4 5.4 1.4
Sunteck Realty REDUCE 210 400 90 31 0.4 140 12.5 35.6 34 (22.7) 184 (6) 17 5.9 6.3 12.6 3.9 3.9 1.0 0.8 0.8 6.0 15.4 12.7 0.5 0.5 0.5 1.0
Real Estate Neutral 1,085 14.4 12.6 39.4 28.8 25 18 14.0 15.0 12.3 10.2 1.3 1.2 1.2 5.1 6.9 8.4 2.4 2.8 3.1 41.7
Retailing
Aditya Birla Fashion and Retail BUY 167 230 38 129 1.7 773 1.8 2.8 4.6 (57.5) 58.0 65.7 95 60 36 11.6 10.0 8.8 8.2 7.3 6.0 9.1 12.9 18.2 — — — 2.7
Avenue Supermarts SELL 2,080 1,400 (33) 1,347 17.9 626 22.0 28 36 52.1 25.9 29.8 95 75 58 61 47 36 18.4 14.8 11.8 21.7 21.9 22.7 — — — 34.1
Titan Company ADD 937 1,475 57 832 11.1 888 18.1 24 30 7.4 30.7 26.8 52 40 31 32 25 20 11.8 9.9 8.2 24.5 27.1 28.6 0.6 0.9 1.1 40.4
Retailing Cautious 2,308 30.7 14.7 30.0 30.2 74 57 44 38 30 24 14.7 12.1 9.9 19.9 21.3 22.6 0.2 0.3 0.4 77.2
Speciality Chemicals
Castrol India BUY 99 180 82 98 1.3 989 8.4 9.4 10.1 16.8 12.0 8.2 11.8 10.6 9.8 7.7 6.8 6.2 7.2 6.3 5.6 65.3 63.5 60.9 5.6 7.6 8.3 4.0
Pidilite Industries REDUCE 1,299 1,425 10 660 8.8 508 24.8 28 33 40.1 14.0 17.2 52 46 39 38 33 29 13.4 11.4 9.8 27.9 26.9 26.9 0.6 0.7 0.9 17.8
S H Kelkar and Company BUY 71 140 97 10 0.1 141 5.1 7.1 8.1 (16.0) 37.8 15.0 13.8 10.1 8.7 8.3 6.8 5.9 1.2 1.2 1.1 8.7 11.9 12.9 2.8 3.9 4.9 0.1
SRF ADD 2,727 3,900 43 157 2.1 57 144 174 207 28.6 21.2 18.8 19.0 15.7 13.2 12.2 9.9 8.3 3.1 2.7 2.3 18.1 18.4 18.6 0.5 0.6 0.7 14.1
Speciality Chemicals Neutral 925 12.3 27.7 16.0 15.1 31 27 23.2 20.6 17.6 15.2 7.7 6.6 5.7 24.8 24.7 24.4 1.2 1.5 1.7 36.0

72
Fair O/S ADVT
73
Telecommunication Services
Bharti Airtel BUY 449 600 34 2,449 32.6 5,455 (5.5) 6.0 13.5 NM NM NM NM 74.6 33.4 9.7 7.2 6.0 3.0 3.1 2.9 NM 4.1 9.0 0.9 1.3 1.3 116.1
Bharti Infratel BUY 157 185 18 290 3.9 1,850 15.3 15.7 17.8 16.9 2.4 13.1 10.2 10.0 8.8 5.0 4.6 4.1 1.9 1.9 1.8 19.0 18.8 20.9 6.2 7.7 8.7 24.4
Vodafone Idea RS 3 — — 92 1.2 28,736 (22.3) (4.0) (6.2) NM NM NM NM NM NM 18.9 9.3 8.5 0.4 0.8 (1.5) NM NM NM — — — 27
Tata Communications BUY 230 425 85 65 0.9 285 10.0 7.9 15.1 22.8 (21.2) 90.1 22.8 29.0 15.2 5.2 5.3 4.4 271.6 27.3 10.0 NM 171 96.1 3.3 3.3 3.3 0.7
Telecommunication Services Cautious 2,897 38.6 NM 64.9 47.3 NM NM NM 10.1 7.3 6.3 2.4 2.7 3.1 NM NM NM 1.4 1.9 2.0 168.2
Transportation
Adani Ports and SEZ BUY 251 470 87 511 6.8 2,032 25.1 25.3 28.7 25.8 0.8 13.5 10.0 9.9 8.7 9.3 8.1 6.9 2.0 1.7 1.5 20.2 18.5 18.1 6.2 1.8 2.0 19.0
Container Corp. BUY 309 400 29 188 2.5 609 16.6 19.3 24.3 1.5 16.5 26.0 19 16 13 9.5 8.3 6.5 1.8 1.7 1.6 9.7 10.9 12.9 0.8 2.7 3.4 8.1
Gateway Distriparks BUY 94 162 72 10 0.1 109 3.9 6.0 9.2 (42.8) 55.9 51.7 24.4 15.6 10.3 6.2 5.0 4.1 0.7 0.6 0.6 2.9 4.1 6.0 3.2 3.2 3.2 0.4
GMR Infrastructure BUY 16 30 89 96 1.3 6,036 (2.8) (0.9) (0.4) (13.2) 66.4 55.1 NM NM NM 13.5 10.9 12.7 (3.8) (9.6) (7.7) NM NM NM — — — 7.7
Gujarat Pipavav Port BUY 53 118 122 26 0.3 483 6.2 5.7 7.2 44.9 (8.2) 26.7 8.6 9.4 7.4 4.5 3.9 3.4 1.3 1.3 1.2 14.7 13.4 16.9 10.1 9.4 11.8 0.4
InterGlobe Aviation SELL 1,027 900 (12) 395 5.3 383 8.9 (16.4) 66.4 117.0 (285.5) 504.3 116 NM 15.5 4.9 5.9 — 5.2 5.7 — 4.7 NM NM — 0.0 0.6 32
Mahindra Logistics ADD 218 415 90 16 0.2 71 10.5 15.4 18.6 (16.4) 47.0 20.7 21 14 12 9.5 6.9 5.6 2.8 2.4 2.1 14.3 18.5 19.2 — — — 0.3
Transportation Attractive 1,242 16.5 26.8 5.6 85.4 24 23 12.2 8.5 7.9 5.2 2.7 2.4 2.5 11.3 10.7 20.5 2.9 1.4 1.8 67
KIE universe 87,488 1164.5 0.8 30.2 22.8 19 14.6 11.9 9.3 8.4 7.1 2.0 1.8 1.6 10.4 12.2 13.6 2.1 2.3 2.6
Notes:
(a) We have used adjusted book values for banking companies.
(b) 2020 means calendar year 2019, similarly for 2021 and 2022 for these particular companies.
(c) Exchange rate (Rs/US$)= 75.13


Disclosures
"Each of the analysts named below hereby certifies that, with respect to each subject company and its securities for which th e analyst is
responsible in this report, (1) all of the views expressed in this report accurately reflect his or her personal views about the subject companies
and securities, and (2) no part of his or her compensation was, is, or will be, directly or indirectly, related to the specific recommendations or
views expressed in this report: Chirag Talati, Kumar Gaurav, M.B. Mahesh, Nischint Chawathe, Dipanjan Ghosh, Venkat Madasu, Ashlesh
Sonje, Aditya Mongia, Teena Virmani, Suvodeep Rakshit, Upasna Bhardwaj, Avijit Puri, Anurag Singh."
Kotak Institutional Equities Research coverage universe

Distribution of ratings/investment banking relationships
Percentage of companies covered by Kotak Institutional
70%
Equities, within the specified category.
60%
Percentage of companies within each category for
which Kotak Institutional Equities and or its affiliates has
50%
provided investment banking services within the
previous 12 months.
40% * The above categories are defined as follows: Buy = We
expect this stock to deliver more than 15% returns over
29.7%
30% 27.7% the next 12 months; Add = We expect this stock to
22.3% deliver 5-15% returns over the next 12 months; Reduce
20.3% = We expect this stock to deliver -5-+5% returns over
20% the next 12 months; Sell = We expect this stock to deliver
less than -5% returns over the next 12 months. O ur
10% target prices are also on a 12-month horizon basis.
2.5% 2.5% 1.5% 1.0%
These ratings are used illustratively to comply with
applicable regulations. As of 31/12/2019 Kotak
0%
Institutional Equities Investment Research had
BUY ADD REDUCE SELL
investment ratings on 202 equity securities.
Source: Kotak Institutional Equities As of December 31, 2019
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 Fair Value estimates are also on a 12-month horizon basis.
Our Ratings System does not take into account short-term volatility in stock prices related to movements in the market. Hence, a particular Rating may not
strictly be in accordance with the Rating System at all times.
Other definitions
Coverage view. The coverage view represents each analyst’s overall fundamental outlook on the Sector. The coverage view will consist of one of the following
designations: Attractive, Neutral, Cautious.
Other ratings/identifiers
NR = Not Rated. The investment rating and fair value, 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 fair value, if any, for this stock, because there is not a sufficient
fundamental basis for determining an investment rating or fair value. The previous investment rating and fair value, 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.

Corporate Office Overseas Affiliates
Kotak Securities Ltd. Kotak Mahindra (UK) Ltd Kotak Mahindra Inc
27 BKC, Plot No. C-27, “G Block” 8th Floor, Portsoken House 369 Lexington Avenue
Bandra Kurla Complex, Bandra (E) 155-157 Minories 28th Floor, New York
Mumbai 400 051, India London EC3N 1LS NY 10017, USA
Tel: +91-22-43360000 Tel: +44-20-7977-6900 Tel:+1 212 600 8856
Copyright 2020 Kotak Institutional Equities (Kotak Securities Limited). All rights reserved.
1. Note that the research analysts contributing to this report may not be registered/qualified as research analysts with FINRA; and
2. Such research analysts may not be associated persons of Kotak Mahindra Inc and therefore, may not be subject to NASD Rule 2711 restrictions on communications with a subject
company, public appearances and trading securities held by a research analyst account.
3. Any U.S. recipients of the research who wish to effect transactions in any security covered by the report should do so with or through Kotak Mahindra Inc and (ii) any transactions in
the securities covered by the research by U.S. recipients must be effected only through Kotak Mahindra Inc at vinay.goenka@kotak.com.
This report is distributed in Singapore by Kotak Mahindra (UK) Limited (Singapore Branch) to institutional investors, accredited investors or expert investors only as defined under the
Securities and Futures Act. Recipients of this analysis / report are to contact Kotak Mahindra (UK) Limited (Singapore Branch) (16 Raffles Quay, #35-02/03, Hong Leong Building, Singapore
048581) in respect of any matters arising from, or in connection with, this analysis / report. Kotak Mahindra (UK) Limited (Singapore Branch) is regulated by the Monetary Authority of
Singapore.
Kotak Securities Limited and its affiliates are a full-service, integrated investment banking, investment management, brokerage and financing group. We along with our affiliates are
leading underwriter of securities and participants in virtually all securities trading markets in India. We and our affiliates have investment banking and other business relationships with a
significant percentage of the companies covered by our Investment Research Department. Our research professionals provide important input into our investment banking and other
business selection processes. Investors should assume that Kotak Securities Limited and/or its affiliates are seeking or will seek investment banking or other business from the company or
companies that are the subject of this material and that the research professionals who were involved in preparing this material may participate in the solicitation of such business. Our
research professionals are paid in part based on the profitability of Kotak Securities Limited, which include earnings from investment banking and other business. Kotak Securities Limited
generally prohibits its analysts, persons reporting to analysts, and members of their households from maintaining a financial interest in the securities or derivatives of any companies that
the analysts cover. Additionally, Kotak Securities Limited generally prohibits its analysts and persons reporting to analysts from serving as an officer, director, or advisory board member of
any companies that the analysts cover. Our salespeople, traders, and other professionals may provide oral or written market commentary or trading strategies to our clients that reflect
opinions that are contrary to the opinions expressed herein, and our proprietary trading and investing businesses may make investment decisions that are inconsistent with the
recommendations expressed herein.
In reviewing these materials, you should be aware that any or all of the foregoing, among other things, may give rise to real or potential conflicts of interest. Additionally, other important
information regarding our relationships with the company or companies that are the subject of this material is provided herein.
This material should not be construed as an offer to sell or the solicitation of an offer to buy any security in any jurisdiction where such an offer or solicitation would be ille gal. We are not
soliciting any action based on this material. It is for the general information of clients of Kotak Securities Limited. It does not constitute a personal recommendation or take into account the
particular investment objectives, financial situations, or needs of individual clients. Before acting on any advice or recommendation in this material, clients should consider whether it is
suitable for their particular circumstances and, if necessary, seek professional advice. The price and value of the investments referred to in this material and the income from them may go
down as well as up, and investors may realize losses on any investments. Past performance is not a guide for future performance, future returns are not guaranteed and a loss of original
capital may occur. Kotak Securities Limited does not provide tax advise to its clients, and all investors are strongly advised to consult with their tax advisers regarding any potential investment.
Certain transactions -including those involving futures, options, and other derivatives as well as non-investment-grade securities - give rise to substantial risk and are not suitable for all
investors. The material is based on information that we consider reliable, but we do not represent that it is accurate or complete, and it should not be relied on as such. Opinions
expressed are our current opinions as of the date appearing on this material only. We endeavor to update on a reasonable basis the information discussed in this material, but regulatory,
compliance, or other reasons may prevent us from doing so. We and our affiliates, officers, directors, and employees, including persons involved in the preparation or issuance of this
material, may from time to time have "long" or "short" positions in, act as principal in, and buy or sell the securities or derivatives thereof of companies mentioned herein. Kotak
Securities Limited and its non US affiliates may, to the extent permissible under applicable laws, have acted on or used this research to the extent that it relates to non US issuers, prior to
or immediately following its publication. Foreign currency denominated securities are subject to fluctuations in exchange rates that could have an adverse effect on the value or price of or
income derived from the investment. In addition, investors in securities such as ADRs, the value of which are influenced by f oreign currencies affectively assume currency risk. In addition
options involve risks and are not suitable for all investors. Please ensure that you have read and understood the current derivatives risk disclosure document befor e entering into any
derivative transactions.
Kotak Securities Limited established in 1994, is a subsidiary of Kotak Mahindra Bank Limited. Kotak Securities is one of India's largest brokerage and distribution house.
Kotak Securities Limited is a corporate trading and clearing member of Bombay Stock Exchange Limited (BSE), National Stock Ex change of India Limited (NSE), Metropolitan Stock
Exchange of India Limited (MSE), National Commodity and Derivatives Exchange (NCDEX) and Multi Commodity Exchange(MCX). Our businesses include stock broking, services rendered
in connection with distribution of primary market issues and financial products like mutual funds and fixed deposits, depository services and Portfolio Management.
Kotak Securities Limited is also a depository participant with National Securities Depository Limited (NSDL) and Central Depository Services (India) Limited (CDSL). Kotak Securities Limited
is also registered with Insurance Regulatory and Development Authority as Corporate Agent for Kotak Mahindra Old Mutual Life Insurance Limited and is also a Mutual Fund Advisor
registered with Association of Mutual Funds in India (AMFI). Kotak Securities Limited is registered as a Research Analyst under SEBI (Research Analyst) Regulations, 2014.
We hereby declare that our activities were neither suspended nor we have defaulted with any stock exchange authority with whom we are registered in last five years. However SEBI,
Exchanges and Depositories have conducted the routine inspection and based on their observations have issued advise letters or levied minor penalty on KSL for certain operational
deviations. We have not been debarred from doing business by any Stock Exchange / SEBI or any other authorities; nor has our certificate of registration been cancelled by SEBI at any point
of time.
We offer our research services to primarily institutional investors and their employees, directors, fund managers, advisors who are registered with us
Details of Associates are available on website i.e. www.kotak.com
Research Analyst has served as an officer, director or employee of subject company(ies): No
We or our associates may have received compensation from the subject company(ies) in the past 12 months.
We or our associates have managed or co-managed public offering of securities for the subject company(ies) in the past 12 months. YES. Visit our website for more details
We or our associates may have received compensation for investment banking or merchant banking or brokerage services from the subject company(ies) in the past 12 months. We or our
associates may have received any compensation for products or services other than investment banking or merchant banking or brokerage services from the subject company(ies) in the
past 12 months. We or our associates may have received compensation or other benefits from the subject company(ies) or third party in connection with the research report.
Our associates may have financial interest in the subject company(ies).
Research Analyst or his/her relative's financial interest in the subject company(ies): No
Kotak Securities Limited has financial interest in the subject company(ies) at the end of the month immediately preceding the date of publication of Research Report: YES
Nature of Financial interest: Holding equity shares or derivatives of the subject company.
Our associates may have actual/beneficial ownership of 1% or more securities of the subject company(ies) at the end of the month immediately preceding the date of publication of
Research Report.
Research Analyst or his/her relatives has actual/beneficial ownership of 1% or more securities of the subject company(ies) at the end of the month immediately preceding the date of
publication of Research Report: No
Kotak Securities Limited has actual/beneficial ownership of 1% or more securities of the subject company(ies) at the end of the month immediately preceding the date of publication of
Research Report: No
Subject company(ies) may have been client during twelve months preceding the date of distribution of the research report.
A graph of daily closing prices of securities is available at https://www.moneycontrol.com/india/stockpricequote/ and http://economictimes.indiatimes.com/markets/stocks/stock-quotes.
(Choose a company from the list on the browser and select the"three years" icon in the price chart).
Kotak Securities Limited. Registered Office: 27 BKC, C 27, G Block, Bandra Kurla Complex, Bandra (E), Mumbai 400051. CIN: U99999MH1994PLC134051, Telephone No.: +22
43360000, Fax No.: +22 67132430. Website: www.kotak.com / www.kotaksecurities.com. Correspondence Address: Infinity IT Park, Bldg. No 21, Opp. Film City Road, A K Vaidya Marg,
Malad (East), Mumbai 400097. Telephone No: 42856825. SEBI Registration No. INZ000200137(Member of NSE, BSE, MSE, MCX & NCDEX). Member Id: NSE-08081; BSE-673; MSE-1024;
MCX-56285; NCDEX-1262. AMFI ARN 0164, PMS INP000000258 and Research Analyst INH000000586. NSDL/CDSL: IN-DP-NSDL-23-97. Compliance Officer Details: Mr. Manoj Agarwal.
Call: 022 - 4285 8484, or Email: ks.compliance@kotak.com. Investments in securities market are subject to market risks, read all the related documents carefully before investing.
In case you require any clarification or have any concern, kindly write to us at below email ids:
Level 1: For Trading related queries, contact our customer service at ‘service.securities@kotak.com’ and for demat account related queries contact us at ks.demat@kotak.com or call us on:
Toll free numbers 18002099191 / 1860 266 9191
Level 2: If you do not receive a satisfactory response at Level 1 within 3 working days, you may write to us at ks.escalation @kotak.com or call us on 022-42858445 and if you feel you are
still unheard, write to our customer service HOD at ks.servicehead@kotak.com or call us on 022-42858208.
Level 3: If you still have not received a satisfactory response at Level 2 within 3 working days, you may contact our Complia nce Officer (Name: Mr. Manoj Agarwal) at
ks.compliance@kotak.com or call on 91- (022) 4285 8484.
Level 4 : If you have not received a satisfactory response at Level 3 within 7 working days, you may also approach Managing Director / CEO (Mr. Jaideep Hansraj) at ceo.ks@kotak.com or
call on 91-(022) 4285 8301.
First Cut notes published on this site are for information purposes only. They represent early notations and responses by analysts to recent events. Data in the notes may not have been
verified by us and investors should not act upon any data or views in these notes. Most First Cut notes, but not necessarily all, will be followed by final research reports on the subject.
There could be variance between the First cut note and the final research note on any subject, in which case the contents of the final research note would prevail. We accept no liability
for the contents of the First Cut Notes.

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INDIA DAILY

March 30, 2020 India 27-Mar 1-day 1-mo 3-mo

Contents Global/Regional indices

Strategy FTSE 5,510 (5.3) (16.3) (27.4)

Theme Report Cash (NSE+BSE) 613 533 441

27-Mar 1-day 1-mo 3-mo

26-Mar MTD CYTD

 Stock offers deep value - BUY Top movers

conscious Thermax DMART IN Equity 2,080 4.3 (10.5) 10.4

NEST IN Equity 15,109 1.3 (4.2) 1.7

ordering prospects EDEL IN Equity 35 5.0 (60.0) (69.2)

TTMT IN Equity 71 (0.1) (45.2) (61.5)

Kotak Institutional Equities Research

There are no major surprises in the daily indicators we track.

Kotak Institutional Equities Research

DAILY INDICATORS SHOW SLOWING OF ECONOMIC ACTIVITY

India Italy US Spain

Source: Johns Hopkins University, Kotak Institutional Equities

100,000 Hubei India

Source: Johns Hopkins University, Kotak Institutional Equities

Data shows a slowdown in economic activity

 Covid-19 mindshare. We also track the mindshare of Covid-19 in people’s minds. We

 Discretionary spending. We use visitors to websites like bookmyshow.com and

 Electricity consumption. If Covid-19 leads to a prolonged lockdown and temporary

Exhibit 5: Economic activity slows down

Indicator Direction Comments

Most cities showing signs of lower pollution in

Electricity consumption for several states is down

Large uptrend in Google searches for Coronavirus.

Both bookmyshow.com and makemytrip.com

Source: Kotak Institutional Equities

Source: TomTom.com, Kotak Institutional Equities

Source: TomTom.com, Kotak Institutional Equities

Source: TomTom.com, Kotak Institutional Equities

Source: TomTom.com, Kotak Institutional Equities

Exhibit 10: Vehicular pollution is lower in many cities

35 7D average Dec2019 - Feb2020 average

Source: aqicn.org, Central Board of Pollution Control, Kotak Institutional Equities

7D average Dec2019 - Feb2020 average

Source: aqicn.org, Central Board of Pollution Control, Kotak Institutional Equities

100 Google trend: Coronavirus

Source: Google trends, Kotak Institutional Equities

Source: alexa.com, Kotak Institutional Equities

Exhibit 14: Sharp fall in the relative ranking of bookmyshow.com

Source: alexa.com, Kotak Institutional Equities

Exhibit 15: Similar fall in the relative ranking of makemytrip.com

Source: alexa.com, Kotak Institutional Equities

Exhibit 16: No-show: box-office collections have fallen like a stone

1,200 Total Collection

Source: Box office mojo, Kotak Institutional Equities

600 Maharashtra 2019 Maharashtra 2020

Source: Central Electricity Regulatory Commission, Kotak Institutional Equities

Exhibit 18: Significantly lower (~40%) electricity consumption in Delhi

80 Delhi 2019 Delhi 2020

Source: Central Electricity Regulatory Commission, Kotak Institutional Equities

Exhibit 19: Relatively lower fall in electricity consumption in Andhra Pradesh

250 Andhra Pradesh 2019 Andhra Pradesh 2020

Source: Central Electricity Regulatory Commission, Kotak Institutional Equities

Exhibit 20: Electricity consumption in Karnataka is relatively stable

300 Karnataka 2019 Karnataka 2020

Source: Central Electricity Regulatory Commission, Kotak Institutional Equities

400 Tamil Nadu 2019 Tamil Nadu 2020

Source: Central Electricity Regulatory Commission, Kotak Institutional Equities